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Hello and welcome to the Xenia Hotels & Resorts Inc. Q2 2023 Earnings Conference Call. My name is Elliot and I'll be coordinating your call today. [Operator Instructions] I'll now like to hand over to Amanda Bryant, Vice President of Finance. The floor is yours. Please go ahead.

Thank you, Elliot and welcome to Xenia Hotels & Resorts second quarter 2023 earnings call and webcast. I'm here with Marcel Verbaas, our Chair and Chief Executive Officer; Barry Bloom, our President and Chief Operating Officer; and Atish Shah, our Executive Vice President and Chief Financial Officer. Marcel will begin with a discussion on our performance. Barry will follow with more details on operating trends and capital expenditure projects, and Atish will conclude today's remarks on our balance sheet and outlook for 2023. We will then open the call for Q&A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in our earnings release that we issued this morning along with the comments on this call are made only as of today August 2nd, 2023 and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find reconciliations of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in the earnings release which is available on the Investor Relations section of our website. The second quarter 2023 property-level portfolio information we will be speaking about today is on a same-property basis for all 32 hotels unless specified otherwise. An archive of this call will be available on our website for 90 days. I will now turn it over to Marcel to get started.

Thanks Amanda and good afternoon to everyone joining our call today. While overall results for the quarter were slightly below our expectations, the year is unfolding largely as we expected. Our demand segmentation mix continues to return towards pre-pandemic levels as leisure demand has started to normalize, while business transient and group demands continued to recover. And we are seeing good earnings contribution from our recently acquired hotels W Nashville and Hyatt Regency Portland at the Oregon Convention Center. For the quarter, we reported net income of $13.8 million; adjusted EBITDAre of $74.7 million; and adjusted FFO per share of $0.47 with all of these measures reflecting declines against outsized results in the second quarter of 2022. Same-property RevPAR in the quarter was $182.49, a modest decrease of 2% as compared to 2022 as a result of softer demand in a select number of our leisure-oriented properties, negative weather impacts at our California hotels and resorts, and impact from our ongoing renovations. Occupancy decreased 10 basis points as compared to the second quarter of 2022, while average daily rate decreased 1.8%. Excluding renovation impacts in the quarter at Grand Bohemian, Orlando; Hotel Monaco, Salt Lake City; and Hyatt Regency, Scottsdale, we estimate that same-property RevPAR would have been nearly flat compared to the second quarter of 2022. As compared to the second quarter of 2019, RevPAR for the 30 hotels we currently own that were open at that time was down 1.6% in the quarter. For these 30 hotels, which exclude Hyatt Regency, Portland and W Nashville, occupancy was roughly 11 points below 2019, while ADR was up 14.7%. Adjusted EBITDAre of $74.7 million reflected a decrease of $14 million or 15.7% compared to the second quarter of 2022. We attribute the vast majority of the $14 million decline in the quarter to lapping strong second quarter 2022 results due to the post-Omicron bounce in demand and unsustainably low operating expenses during that quarter. However, we estimate that renovation activity in the second quarter also contributed approximately $3 million of the $14 million year-over-year decline in the quarter. Hotel EBITDA margin on a same-property basis contracted 423 basis points compared to the second quarter of 2022, which was in line with our expectations. As compared to the second quarter of 2019, margins at the 30 hotels we currently own that were open at that time decreased 103 basis points. Recall that our portfolio benefited from a combination of very strong rate-driven RevPAR growth and expenses that were well below normalized levels in the second quarter of last year, which resulted in significant flow-through to the bottom line. Property expenses started normalizing in the third quarter of 2022, as many of our properties successfully filled open positions and resumed services. Now turning to our markets. In the second quarter, our properties experienced a wide range of comparable RevPAR results, with the weakest results in markets with significant renovation disruption; negative weather-related impacts such as our California markets; or with difficult year-over-year comparisons due to outsized levels of leisure demand last year such as Key West and Napa. The strongest growth was notably in markets where we owned properties that have historically been more dependent on corporate transient and group demand. Five of these markets reported double-digit RevPAR growth, including Houston, Portland, Philadelphia, Nashville and Atlanta, while Pittsburgh and San Francisco also experienced RevPAR growth in excess of 8%. Despite the significant variances in RevPAR results across all 22 markets and 32 properties, and the factors I mentioned earlier, overall results were nearly in line with our expectations. We remain very optimistic about our portfolio growth prospects and see meaningful opportunities for earnings growth in the years ahead through internal drivers such as continued recovery potential, stabilization of our recent acquisitions and several significant recent and ongoing capital expenditure projects, which Barry will touch upon later. As we've discussed on prior earnings calls, we have meaningful recovery potential in some of our larger group and business transient-focused hotels, mainly Marriott San Francisco Airport, Hyatt Regency Santa Clara, our two Dallas hotels and our three Houston hotels. In the second quarter, these seven hotels reported over 9% RevPAR growth on average as compared to 2022. However, RevPAR at these seven hotels was still approximately 15% below the second quarter of 2019 while EBITDA was still approximately 24% lower than the same period. Also our acquisitions have been accretive. Our two most recent acquisitions Hyatt Regency Portland at the Oregon Convention Center and W Nashville continued to ramp up nicely in the second quarter. Both properties grew RevPAR by double-digit percentages over the second quarter of 2022 as group business gained momentum. For 2023, group room revenue on the books at both properties is currently over 45% ahead of 2022 levels, driven by solid increases in both room nights and rate. Located adjacent to the Oregon Convention Center, the Hyatt Regency Portland continues to benefit from a combination of strong citywide and in-house group business and are successfully taking share from other group-focused hotels. W Nashville also benefited from strong group production in the quarter and is successfully building a solid base of group business to augment a rapidly growing base of business transient with local corporate accounts. Working closely with Marriott, the property is making good headway with respect to its overall revenue management strategy. The property is performing very well on the room side of the business in line with our underwriting with significant growth potential remaining on the food and beverage side. The hotel was under the leadership of a new general manager with significant experience with the W brand and large complex food and beverage operations and we remain optimistic about the future of this outstanding hotel. We continue to believe that Hyatt Regency Portland and W Nashville have the potential to contribute in excess of $20 million in combined annual EBITDA above their 2022 EBITDA contribution once both properties stabilize. Before I wrap up my comments, I'd like to highlight that despite uncertainty in the economy, the third quarter is off to an encouraging start with preliminary July same-property RevPAR up 1.5% as compared to July 2022, reflecting a modest improvement over the second quarter results, despite significant impact from our ongoing renovations. We estimate that July RevPAR for our portfolio, excluding Hyatt Regency Scottsdale, Grand Bohemian Orlando and Hotel Monaco Salt Lake City was up over 6% compared to last year highlighting both, the short-term impact of these renovations and the strong performance of the remainder of the portfolio during the month. At current levels and given meaningful long-term growth potential, we view Xenia shares as attractively valued in today's market environment. We have significantly improved the quality and diversification of the portfolio through over $3 billion in transaction activity since our listing in 2015, and we are continuing to invest capital expenditures that we believe will generate attractive returns. Meanwhile, we continue to balance this portfolio investment with returns to shareholders. Year-to-date, we have repurchased over 5 million shares of stock at an average price of $13.10 per share. At our current stock price our implied value is approximately $265,000 per key, which is significantly below replacement costs given the quality of our portfolio. I will now turn the call over to Barry as he will provide more detailed portfolio performance information and an update on our capital expenditure projects.

Thank you, Marcel. Good afternoon, everyone. As Marcel indicated in his remarks, the same-property leaders in terms of RevPAR growth in the quarter included many of the hotels in markets that have lagged over the past two years, supporting our view that the overall recovery has extended beyond leisure-oriented properties and the Sunbelt. As expected results in the second quarter reflected very challenging year ago growth comparisons along with renovation impact. The quarter began with occupancy of 70.6% in April with an ADR of $277.27, resulting in RevPAR $195.72, a 1.5% decline compared to April 2022. May occupancy was 68.5% with an ADR of $265.57 resulting in RevPAR of $181.90 virtually flat to 2022. The weakest month of the quarter was June largely owing to the start of our comprehensive renovation and repositioning of Hyatt Regency Scottsdale with occupancy of 66.8% an ADR of $254.38, resulting in RevPAR of $169.84, a 3.3% decline to June 2022. Absent the impact from renovations, we estimate same-property RevPAR in the second quarter would have been nearly flat to 2022. Similar to last quarter rate growth at our same-property portfolio moderated in the second quarter declining 1.8% as compared to the second quarter of 2022. By way of reminder, rate grew an astounding 21% in the second quarter of 2022 compared to the second quarter of 2021 for the 30 hotels in the same-property portfolio. On average rate declines at our leisure-oriented hotels in the second quarter exceeded that of our same-property portfolio as compared to the second quarter of 2022. Total rates of these properties remain well above 2019 levels. For instance rates in Key West and Napa were 43% and 36% above second quarter of 2019 levels, respectively. We also note that our hotels in Charleston and Savannah were not impacted to the same degree by the softening year-over-year and held up well with only very modest RevPAR declines. On a sequential basis, occupancy for the second quarter improved by 2.5 points compared to the first quarter, reflecting our commentary regarding continued opportunity for recovery particularly in the corporate segment. Business on Monday through Thursdays are still down nearly 14 points in occupancy from 2019 levels while weekend occupancies are down approximately 8%. The most notable improvements in occupancy in the quarter were in our corporate and group-focused markets with continued growth in business transient demand remaining solid. Business from the largest corporate accounts across our portfolio continues to improve year-to-date, but remains about 20% down from 2019 levels. We continue to benefit from healthy group production in all periods with pace being driven by increases in both room nights and rates. Including our two most recent acquisitions, Hyatt Regency Portland and W Nashville group room revenue on the books for 2023 is currently over 16% ahead of last year and about 6% of 2022 levels from the second half of 2023. If we exclude Hyatt Regency Scottsdale, where meeting space is mostly unavailable for the remainder of this year, our group pace for 2023 is up approximately 20% over 2022 levels and about 13% ahead of 2022 levels for the second half of 2023. We believe there is continued opportunity for further recovery in group business across our portfolio. Our current group revenue on the books for 2023 is about 6.5% behind 2019 levels, excluding Hyatt Regency Scottsdale. Now, turning to expenses and profit. Second quarter same-property hotel EBITDA was $79.4 million, a decrease of 14.4% on a total revenue decrease of 2% compared to the second quarter of 2022 resulting in 423 basis points of margin erosion. This decrease in hotel EBITDA margin for the quarter reflected the lapping of outsized second quarter 2022 results, coming out of the pandemic, when we had very strong pent-up demand, coupled with many hotels we're not operating at normalized staffing and service levels. Both rooms and food and beverage department margins decreased in the quarter, as compared to the second quarter of 2022, as expenses increased on lower revenue. One notable bright spot in the quarter was a 25% reduction in overtime expenses compared to the second quarter of 2022, as our operators have been better able to hire and more efficiently staff the properties. We are also pleased that AMG, property operations and energy expenses were stable at 4% to 5% increases over the second quarter of 2022. With respect to labor overall, recall that our operators successfully staffed up in the second half of last year to meet the strong recovery in demand. And over the last couple of quarters, they've been successful in matching overall levels of staffing to guest demand. Looking ahead to the second half of the year, we expect margin declines to moderate. Turning to CapEx. During the second quarter, we invested $22.4 million in portfolio improvements, bringing our year-to-date total to $34 million. In June, we commenced a $110 million comprehensive renovation and up-branding of the 491-room Hyatt Regency Scottsdale Resort & Spa at Gainey Ranch, with completion of all phases expected by the end of 2024. Working on the two-acre pool complex is now underway with the meeting facilities and guest room renovations expected to start later this year. Upon completion, the property will have five additional keys for a total of 496 rooms will be rebranded as a Grand Hyatt Resort. Also in the quarter, we completed the comprehensive guest room renovation at the Kimpton Canary Hotel, Santa Barbara that began in the fourth quarter of 2022. We also completed the renovation and reconfiguration of the premium suites, resulting in an addition of three keys at The Ritz-Carlton Denver. We have several other projects that remain ongoing. At the Grand Bohemian Hotel, Orlando, we completed the comprehensive renovation of public spaces, including meeting space, lobby, restaurant, bar, Starbucks and creation of a rooftop bar. A comprehensive renovation of the guest rooms began in the second quarter and is expected to be completed in the third quarter. At the Park Hyatt, Aviara Resort, we continue to work on a significant upgrade to the resort's spa and wellness amenities, which will be branded as a Miraval Life in Balance Spa and is now expected to open in phases during the third quarter of this year. And finally, at Kimpton Hotel, Monaco Salt Lake City, we began a comprehensive renovation of meeting space, restaurant, bar and guestrooms in the second quarter, that is expected to be completed in the third quarter. Our expectation for total capital expenditures this year has been revised slightly lower to a range of $120 million to $140 million. Of this amount, approximately $45 million will be spent at Hyatt Regency, Scottsdale, which is consistent with our initial guidance provided in early March. We're excited about the projects that we have underway and look forward to their completion. With that, I will turn the call over to Atish.

Thanks, Barry. I'll provide an update on our balance sheet and discuss our guidance. First, on our balance sheet. We fixed our remaining variable rate debt during the quarter. As such, all of our debt is currently fixed at a rate of approximately 5.5%. Our next debt maturity is about two years from now. We continue to have a fully undrawn line of credit that together with our unrestricted cash, translates to approximately $700 million of liquidity. During the quarter, we reduced our debt outstanding by about 2%, primarily by buying back $30 million of our senior notes. We repurchased our notes in the open market at a price that was approximately 1% below par. In addition, we continue to buyback our stock during and after the second quarter. We have approximately $97 million remaining on our repurchase authorization. We paid a $0.10 per share dividend in the second quarter. On an annualized basis, that reflects a yield of approximately 3%. It also reflects a payout ratio of about 40% of projected FAD based on the midpoint of our FFO guidance. Second, I'll turn to our full year outlook. Since we last provided guidance, we have lowered our expectation for RevPAR growth by 100 basis points to 5% at the midpoint. This reflects both slightly lower RevPAR in the second quarter, as well as slightly greater revenue displacement due to renovation disruption. As to adjusted EBITDAre, we have lowered the midpoint by $3 million to $254 million. The change is due to renovations being more impactful than previously estimated. More specifically, we have fine-tuned our estimates for renovation disruption now that we are further along with some of the projects and have commenced work in Scottsdale. We now expect the impact to RevPAR to be approximately 250 basis points, which is up from an expected 200 basis points a quarter ago. We expect the impact to adjusted EBITDAre to be about $18 million, which is up from our $15 million prior estimate. Our adjusted FFO guidance which is $168 million at the midpoint is unchanged from prior guidance. This is a result of the variance in adjusted EBITDAre being offset by lower interest expense and lower income tax expense. Our expectation for interest expense is $2 million lower and our expectation for income tax expense is $1 million lower than prior guidance. Our G&A expense guidance is unchanged. On a per share basis we expect FFO of $1.51 at the midpoint, which is up about $0.015 from prior guidance due to share repurchases over the last few months. As to our expected seasonality of earnings our percentage weighting of full year adjusted EBITDAre is as follows and this is by quarter. We expect the third quarter to be in the high teens percentage range and the fourth quarter to be in the mid-20% range. As to hotel EBITDA margin, we expect second half EBITDA margin to decline approximately 140 basis points versus last year. We estimate that second half hotel EBITDA margins would be up approximately 60 basis points versus last year but for the impact of revenue disruption due to renovations. I'd like to conclude by mentioning that the company continues to be favorably positioned with no near-term debt maturities or interest rate risk a high-quality portfolio and strong relationships with brands, managers, lenders and other industry participants. We're executing and on track on several potential high-value projects that we expect to drive strong growth in the years ahead. So with that we'll be happy to take your questions and we'll turn the call back over to Elliot to start our Q&A session.

[Operator Instructions] First question comes from Dori Kesten with Wells Fargo. Your line is open.

Thanks. Good morning. You noted that upside remains in the F&B side of the W Nashville. What's your new GM brought to the property to accelerate those changes?

I think the primary mission is really to relook at each of the outlets, who they've served historically, and really look at and develop a specific marketing plan for each outlet. That includes both looking at – I mean everything top to bottom. From what the menu offerings are in each outlet, what the staffing is in those outlets and most importantly, what the marketing and social media plan is for each of those outlets. I think each outlet is unique and each outlet needs and deserves its own specific marketing plan for the audience that it really intends to target. And that's what we've been working with him on over the last four weeks or so that he's been in place.

Okay. And for the five-or-so properties that either recently completed renovations or are soon to be completing, how should we think of their ramp and stabilization?

I think historically in the properties that have recently – or are finishing in the next few months here each of them has traditionally renovated very quickly. These are not brand name repositionings. These are high-quality renovations of existing product that we're generally leaders or near-leaders in their market. So we would expect a pretty quick ramp meaning a couple of quarters at most to get them back on track. They've not lost business permanently. And I think in each of the cases as we look at the product that we're delivering back to the market, the product is clearly better than where the properties were prior to renovation and should have a pretty easy time in terms of the ramp-up. The one that's a little unique because it's really additive is the Miraval Spa at Aviara, which we think introduces an entirely new market segment to that resort in terms of really positioning a portion of the property as being a true destination spa resort. So the growth of that and the ramp-up of that may take a little bit longer, than the more comprehensive top-to-bottom renovations at Canary in Santa Barbara, Monaco in Salt Lake City and Grand Bohemian Orlando.

And there's obviously, some specifics around each of these markets too. There are market dynamics that are impacting, what goes on in some of those markets as well. And as you can imagine, a couple of those particularly when you think about Santa Barbara, as we'll more of a leisure location where clearly there has been a little bit of softening of the leisure demand overall like, we've highlighted in our comments. But doing this renovation, the way we did it, positions us much better and stronger going forward to compete very effectively for the leisure demand in that market. Similarly, when you think about Salt Lake City, there have been some changes in the market there with a large Hyatt property opening up downtown that clearly impacts other assets around there. So again, there it might take a little longer to get back to where we were, not necessarily because of the renovation and how we position it, but more about some of the overall market dynamics. And again, we did this renovation to position ourselves much better and much more competitively going forward.

Perfect Thank you

We now turn to David Katz with Jefferies. Your line is open.

Hi, afternoon, everyone. Thanks for taking my questions. I wanted to just go back to the W Nashville, because it's important. Just I know you've, done some strategic shifting and rearranging and, so forth. Have your aspirations for it, changed in any way other than maybe perhaps pushing them out just a little bit? Any positive surprises? I know you've talked about it a bit so far, but I think it's worth going back to.

Yes. Thanks, David. Good afternoon. So to your point, I think when we look at our overall expectations, they really haven't changed. I think -- and you said this in your question, it may have delayed that stabilization by a year or so when we think about how quickly we get to that number. But I highlighted in my comments too, that we're very pleased with what's going on the room side. And in some ways, it has been a good positive surprise at how quickly we're getting to the RevPAR numbers, that we were hoping for on the room side. We've talked kind of numerous times really about some of the challenges that we've had on the food and beverage side. But we're really encouraged by the momentum, that the property will have going forward in being able to address those. So, overall, expectations really haven't changed there.

Understood. And look for the window that we look through let's say, the past three to four weeks, the economic outlook has changed and now we are landing softly, so it would seem. From your perspective, has there been any change in terms of opportunities for you to acquire or opportunities to divest? What's going on through your purview really over -- it feels like just the past 30 days or so.

Yes. So, it's interesting. And your description is appropriate there. It seems to have shifted very quickly, the mindset of doom and gloom to saying okay, the soft landing has happened. I think it's probably a little too early to declare total victory there, on the soft landing. I think we still have to see, how things play out over the next few months and quarters. But as we're seeing on the ground, we really haven't seen any drastic changes as it relates to the acquisition environment or any of those kind of things. Clearly, there is still -- we still have the same expectation, which is we are in a much higher interest rate environment than where we have previously been, which is going to create some potential opportunities, as it relates to acquisitions moving forward because certainly there are going to be people that are not going to be willing, or able to refinance out of some of their debt that they currently have in place. So, we do still believe that's going to be create opportunities going forward. And so our fundamental view on that hasn't changed. And as it relates to the business on the ground, we obviously, spoke about our results in July. And I certainly, wouldn't ascribe those results to all of a sudden the economic climate has changed. But we're certainly, encouraged by what we're seeing kind of short term and at least where the results for July came in.

Understood. Appreciate it. Thank you.

Our next question comes from Tyler Batory with Oppenheimer. Your line is now open

Hi, good morning. Thank you. Can we stick on July, for a second and just maybe talk about what caused that sequential improvement and kind of exing excluding the renovation impact.

Yeah. As there's -- you'll hear more from us on this going forward where we really will give you some data, including and excluding the renovation. Because clearly, the impacts from the Scottsdale renovation really started happening in June and that will continue throughout the process of us renovating and up-branding the property. So, when we looked at July as we mentioned we were -- and these are estimates based on what we saw from our daily numbers. We think we're up about 1.5% in RevPAR for the month. When you include the three properties under renovation which really were very significantly impacted in July we were up about 6% throughout the rest of the portfolio. And really, what we're seeing there is a bit of a continuation of the trends that we've been seeing, continued strengthening on the group side, continuing strengthening in some of those properties that we feel still have a lot of recovery potential. And then the leisure side of the business is a little bit more nuanced I guess. We're seeing some impact where things really aren't quite as frothy as they were last year and other properties that are still holding up fairly well. So a little bit of a continuation of what we saw in the second quarter with a really wide range of outcomes for our various hotels and clearly, with the three renovation properties on the bottom end of that spectrum. Now, the positive there as we look ahead is that, certainly, the impact from the Scottsdale renovation is going to continue and be fairly significant as we go through the rest of the year. But here by the end of the third quarter, we will be done with the Orlando renovation we'll be done with the Salt Lake City renovation. So the impact from those two renovations is going to be going away as we move forward here.

Okay. And my follow-up question is just more housekeeping-related on the renovations. I guess, why more renovation disruption than you expected originally? I mean, I think just more disruptive and taking longer to complete? I'm not sure, if anything what really changed there? And then just maybe remind us real quick on how you calculate and how you think about renovation disruption in providing that information?

Well, it's a couple of components. Clearly, as Atish pointed out in his comments we started the renovation at Scottsdale. So had a little bit more real-time info as we saw what happened in June and July. So certainly looked at our forecast for Scottsdale and adjusted that for the rest of the year. The renovation on Orlando for example has taken a little bit longer than we anticipated initially, so that adds a little bit to that as well. It is more just really a fine-tuning kind of seeing what we are currently seeing on the ground and adjusting that based on our forecast for the next couple quarters.

And the methodology is just...

I'll leave it there -- yeah sorry. Go ahead.

Yeah that's -- you got about the methodology and it's just with renovation versus without it's not lapping the prior year.

Which of course isn't an exact science but best efforts on our part to say what do we think the market would have done if we -- and what these hotels have done if we hadn't done the renovation. So that's really to Atish's point that's the way we look at the methodology.

Okay. Great. I appreciate that details. Thank you.

We now turn to Bill Crow with Raymond James. Your line is open.

Great. Good afternoon, guys. Anything -- well let me start on the expense side. Second quarter represent a good run rate. Have you baked in the entirety of the property insurance increase property taxes et cetera, or we still have a few more quarters to go before we kind of fully recognize the increases that have happened?

Hi, Bill thanks for the question. We are up about 25% in Property & Casualty insurance this year. We have a renewal that's late in the year. So the numbers that were in our initial guidance hold us through the large, large portion of the year at that level. And property taxes should be up in the high-teens percentage range. So year-to-date real estate tax and insurance were up 16%. And we expect that to be up about 20% for the full year at that line.

No. Anything in July, I mean, 6% ex the renovations is pretty strong, anything there that boosted the numbers, The Taylor Swift concert or anything like that that was unusual?

Well, Taylor Swift concerts we have in two markets that was, almost 100 basis points. So that was the only unusual thing. Other than that, it was a lot of ins and outs, as Marcel had just mentioned.

Yeah. Then one final one for me, I know JW Marriott just opened in downtown Dallas. Are you seeing any impact on reservations from that new competition? I know it's a newer hotel maybe a little bit different guest, but I wonder what you're seeing there.

No, not yet. It's a little different, a little smaller and probably too early to comment on whether we've actually seen any movement of guests out of either our hotels to that hotel. I mean we feel pretty good. A lot of our business in that market is very, very -- the corporate business is very, very geographic-specific. And so we -- the hotel intends to retain all of that business. It's really very, very backyard business.

Okay. Perfect. That's it for me. Thanks.

Our next question comes from Aryeh Klein with BMO. Your line is open.

Thanks and good afternoon. Maybe just following up on the renovations, can you update us just -- or let us know how you're thinking about the impact next year? And how we should be thinking about the headwinds from the renovation?

Yeah. We'll give you the same update, we've given you before which is we haven't given you an update on that yet, so, as you well know, but I appreciate the question. Now obviously we're getting deeper into the year here. And we're definitely turning our attention to analyzing that. We as you know, especially with the methodology that we're looking at as far as what do we think the hotel would have done with this renovation not happening versus what is happening, we just want to be able to collect some more data and really see how we do here over the next few months to have a much better sense for, how we think things are going to kind of stabilize and come back as we're completing these various components of the renovation that you know are kind of staged over the next 18 months. So we absolutely will as we get deeper into the year here put a finer point on that. And clearly we're going to have to look at it in both ways, which is, the disruption like we historically have looked at it and the way we just described it which is what would the property have done if we didn't do the renovation. But also looking at, are we actually going to do better than we did this year or worse than this year? Clearly at the beginning of the year we had very good business in Scottsdale. We had the Super Bowl at the beginning of the year which really aided the performance. So clearly the first couple of quarters of next year are going to be a tough comparison. But then, as we get deeper into the year, and we are completing some of the components of this renovation, I think we'll be much better positioned in the second half of next year than where we are in the second half of this year. So again, we'll certainly update you on that and expect to do so in the next quarter when we have a better sense of where we think things are lining up for next year.

Got it. And just a follow-up there, are you taking any group business for next year at the Grand Hyatt Scottsdale, or you're pushing any of that off to 2025?

No. There are components in the meeting space that stay in place and in inventory throughout renovation. It's just much, much smaller pieces of that inventory. So the opportunity to do a large-scale group is really reduced for the balance of the renovation.

Got it. And then…

But obviously, we'll have the benefit next year. Sorry, Aryeh. The only thing I was going to add to that is that obviously we'll have the benefit as we get into next year that after we complete the pool renovation which is obviously pretty disruptive and removes an amenity that people are clearly looking for. If we get that pool -- once we get that pool renovation behind us, once we get the state room renovation done in the way we're currently envisioning it, we're going to have a product to offer that's going to be much more appealing to those smaller groups that will be able to use the meeting space that we'll have available.

Thanks. And then, just maybe on the leisure side of things. Can you give us some more color on what you're seeing with the consumer? Is there less splurge or room upgrades that you're seeing? And then, in the markets that have maybe seen the most pressure like, the Florida Keys where do you think things level off or stabilize at from a RevPAR standpoint?

Yes. We -- when I think -- when we think about in particular the Key West and Napa properties, those are not really suite-dominant properties. They have very few suite opportunities. So we're not missing out on we're seeing people not upgrading to the suites, because they quite frankly have very few available. It's really more of a market demand issue and where we and -- where our hotels and the hotels were kind of able to set rate to drive the occupancies that the hotels want to achieve. So it's really more of a function of what the market is willing to bear across the entire market than it is about our specific hotels within the market. And certainly, the opportunity is there for the guests to pay a little less than they were paying before. Where it levels out, I think, we're still in the process of trying to understand that month-by-month. Even in Key West and Napa, you have seasonality and the guest changes over time. Certainly, the biggest premiums were achieved in -- for us in those properties in Q2. So, I think we'll start to see that gap moderate as we move through the year. Certainly, we don't see -- we see stabilization above the 2019 levels for sure. But is there -- could there be a little more softening in the near term? Certainly possible. But again every month is a little different every month. The hotels are doing more price discovery and trying to drive that right mix of occupancy and rate.

Got it. Thanks for the color.

Our next question comes from Michael Bellisario with Baird. Your line is open.

Thanks. Good afternoon everyone. First, I just have one follow-up on the renovations. Does having more disruption tell you anything about how the underlying market is performing or perhaps underperforming around your property?

Yes, I don't know that that was a direct correlation in this case. But certainly, there are some, because if you think about the fact that if the market is extremely frothy, they're not going to have much of a choice, but to stay at your hotel anyway that's being renovated. So, I think that's clearly in a property like Scottsdale, for example. As you're well aware the summer months are not a high occupancy period right for a market like that. So there's a lot of options for people to stay at different hotels. So, during those months we're clearly running at very low occupancies, because people aren't going to stay at a hotel that doesn't have a pool available and has all kind of hammering going on when there's other opportunities to stay. So, certainly in those months that's certainly the case. And your overall premise is appropriate to say that clearly in a very tight market you wouldn't see as much disruption. Now I wouldn't necessarily again ascribe that particularly to the situation that we're talking about though.

Got it. That's helpful. Just wanted some clarification there. And then switching gears just one for Atish on the repurchases that you guys did. How do you think about the different return profiles on buying back stock versus the notes repurchase you did? And then on the latter topic of the notes repurchases is maybe your repurchase there a read-through on how you are thinking about or how we should think -- you're thinking about that refinancing that's going to have to take place in two years there?

Yes. So I think we've taken a sort of a balanced approach with regard to share repurchases in general. I think when you look at the return profile for that versus on buying back debt, obviously, there's a different risk and certainty around each one of those. So, I think we look at those uses of capital, just like we look at renovation spending acquisition spending or anything else. So there's no set formula. I think it's a decision we're making kind of real time based on what we're seeing in the business other capital needs and uses -- potential uses of capital. So it's a bit more nuanced. With regard to the buyback, we certainly are mindful of that maturity in a couple of years. And chipping away at it in one way reduces that maturity. But frankly, we also think it's just a good use of capital given the coupon on that debt relative to the yield, we can generate on the cash and the fact that there aren't as many near-term opportunities at least with regard to acquisitions. So that's how we're thinking about that piece.

Helpful. Thank you.

[Operator Instructions] We now turn to Austin Wurschmidt with KeyBanc. Your line is open.

Great. Thanks and good afternoon. Ignoring renovation disruption for a moment, what does your back-half RevPAR growth and margin guidance assumed for just corporate and leisure demand trends? Meaning, are you assuming similar trends you saw in 2Q and in July? Any acceleration, or just a softer economic backdrop?

Well, I think on the RevPAR side, let's just talk about that first. What we saw in July in terms of the RevPAR growth in the portfolio, ex disruption and then the impact of disruption is more consistent with what we expect to see in the back half sort of mid single-digits type RevPAR growth and then with the impact of disruption closer to flattish maybe slightly positive. So that's kind of the RevPAR view. On the margin side, for the full year we had talked about the impact of renovations being about 100 basis points on margin and we continue to think that's about the right range. So that's kind of the big picture. And then maybe I'll turn it over to Barry, if you want to talk about leisure trends.

Yeah, absolutely. I mean, we certainly see the decline in leisure moderating, as we move deeper in the year and again, as we get away from kind of the second quarter peak leisure demand period in the portfolio. But we do see some continued softening in leisure, but that's more than offset by all of the other -- by the other two components of the business. We've talked about the strength and being both the group and the corporate transient. I think we have some -- I think we have realistic, but certainly increasing expectations for corporate demand recovering through the fall as people get back to business. We certainly saw that in the early part of Q1 and into Q2 on the corporate side, as being real strength. A little bit of softening that over the summer. But expect that to return as we get into the traditional fall travel season.

And we obviously talked about the group base as we currently have for the second half of the year, and that gives us confidence too that despite some of the softening in leisure that we are seeing this uptick in group sales that is absolutely materializing in the portfolio and some of the trends in corporate transient that Barry talked about.

That's helpful detail. And then just going back to the prior question. Do you view your debt or equity to be more attractive today?

Well, I think we view them both that both of them to be attractive. I mean, in the sense that we took advantage of repurchasing on both debt and equity. So, I don't know that I could give you -- I mean, they're just very different, right? So it's hard to compare them and say which one is more attractive given there are just very different risk profiles around each one.

This concludes our Q&A. I'll now hand back to Marcel Verbaas, Chair and CEO for closing remarks.

Thanks, Elliot, and thanks, everyone for joining today and thanks for your questions. Enjoy the rest of your summer and we look forward to speaking next quarter. Thanks.