• Net Income: $8.5 million for Q1 2024.

• Adjusted EBITDA: $65.3 million for Q1 2024.

• Adjusted FFO per Share: $0.44, increased by 10% over the previous year.

• Same-Property RevPAR: Decreased by 1.5% overall; increased by 3.7% excluding Hyatt Regency Scottsdale.

• Hotel EBITDA: $70.7 million, down 8.5% from 2023.

• Hotel EBITDA Margin: Decreased by 228 basis points; 14 basis points decrease excluding Hyatt Regency Scottsdale.

• Group Room Revenues: Increased by 8.1% excluding Hyatt Regency Scottsdale.

• Capital Expenditure: $33.4 million invested in Q1 2024.

• Leverage Ratio: 5.2 times trailing 12 months net debt to EBITDA.

• Stock Repurchase: Approximately $6 million during Q1 2024.

• Full Year Guidance: Same property RevPAR expected to increase by 3.5% at the midpoint.

• Warning! GuruFocus has detected 6 Warning Sign with XHR.

Release Date: May 03, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Xenia Hotels & Resorts Inc reported a net income of $8.5 million and an adjusted EBITDA of $65.3 million for Q1 2024.

• Adjusted FFO per share increased by 10% over the previous year, primarily driven by significant share buybacks completed in 2023.

• Excluding Hyatt Regency Scottsdale, same-property RevPAR increased by 3.7%, driven by a 310 basis point increase in occupancy for these 31 hotels.

• The comprehensive renovation of Grand Bohemian Hotel Orlando and Canary Hotel Santa Barbara has been completed, showing positive revenue and earnings growth.

• The company continues to make progress on the transformational renovation and rebranding of Hyatt Regency Scottsdale, with key components like the new pool complex completed and receiving positive reviews.

Negative Points

• Same-property RevPAR for the 32-hotel portfolio decreased by 1.5% for the quarter.

• Adjusted EBITDA declined from the first quarter of 2023, primarily due to high performance in the previous year when Phoenix hosted the Super Bowl.

• First quarter same-property hotel EBITDA of $70.7 million was 8.5% below 2023 levels, with a hotel EBITDA margin decrease of 228 basis points.

• Leisure demand has largely stabilized but showed some retracement in more leisure-dependent assets and markets, particularly in Napa and Savannah.

• The ongoing renovations at Hyatt Regency Scottsdale are expected to continue disrupting revenue, with the majority of the remaining disruption projected during the second and third quarters of 2024.

Q & A Highlights

Q: Can you discuss the performance of the W Nashville in the quarter and its comparison to broader market expectations? A: (Barry Bloom - President, Chief Operating Officer) The W Nashville, despite a general softness in leisure demand noted in the market, is not primarily driven by leisure in Q1. The focus has been on improving penetration in corporate transient and group segments, which has been successful. The performance in Q1 aligns with our expectations, and we anticipate a clearer picture in Q2 and Q3, which are stronger periods for the market.

Q: Regarding capital allocation, how is the board considering value creation for shareholders, especially in terms of investment opportunities and returns? A: (Marcel Verbaas - Chairman of the Board, Chief Executive Officer) The focus is on balancing various capital allocation levers to drive shareholder value, including share buybacks and maintaining liquidity for potential acquisitions. The target is to achieve unlevered double-digit returns, adjusting for risk where necessary, especially considering higher interest rates.

Q: What are the booking trends and rate uplifts for Hyatt Scottsdale post-renovation, looking into 2025? A: (Barry Bloom - President, Chief Operating Officer) For Hyatt Scottsdale, the booking pace for room nights is as expected, with significant rate increases. The focus is on attracting high-end groups closer to project completion, with a clearer picture expected in another quarter.

Q: How is international travel expected to impact leisure demand in the summer, especially with currency fluctuations? A: (Aldo Martinez - Finance Manager) Despite currency changes, there is potential for increased international inbound travel, particularly in markets like Orlando and San Francisco. This is expected to bolster leisure business during the summer.

Q: Can you provide insights into the expected cadence of EBITDA impact from the Hyatt Scottsdale renovation, particularly any shifts affecting the first half of the year? A: (Marcel Verbaas - Chairman of the Board, Chief Executive Officer) The increased renovation disruption, particularly in Q2, is due to pulling forward some public space renovations to ensure timely project completion. This adjustment mainly affects leisure impact and is part of ensuring the project remains on schedule.

Q: What strategies are in place to address the slower recovery in markets like the Bay Area and Portland? A: (Marcel Verbaas - Chairman of the Board, Chief Executive Officer) Both markets are showing substantial demand recovery, driven by specific demand generators, including tech business in Santa Clara. Continuous improvement is expected as these markets capitalize on their recovery potential.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.