Marcel Verbaas - President and CEO Barry Bloom - COO Atish Shah - CFO Lisa Ramey - VP of Finance.

William Crow - Raymond James Mark Savino - Morgan Stanley Whitney Stevenson - JMP Securities.

Good day. Welcome to the Xenia Hotels & Resorts First Quarter 2017 Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions]. After today’s presentation, there will be an opportunity to ask questions. [Operator Instructions]. Please note, this event is being recorded.

I would now like to turn the conference over to Ms. Lisa Ramey, Vice President of Finance. Please go ahead..

Thank you, Alison. Good afternoon, everyone, and welcome to the first quarter 2017 earnings call and webcast for Xenia Hotels & Resorts. I’m here with Marcel Verbaas, our President and Chief Executive Officer; Atish Shah, our Chief Financial Officer; and Barry Bloom, our Chief Operating Officer.

Marcel will begin with an overview of our first quarter results and details on portfolio improvements. Barry will follow with additional details on our quarterly performance as well as asset management initiatives for 2017. Atish will conclude our remarks with an overview of our balance sheet strength and an update on our full year guidance.

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 the earnings release that we issued earlier this morning, along with the comments on this call, are made only as of today, May 9, 2017, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold.

You can find a reconciliation of non-GAAP financial measures, net income and definitions of certain items referred to in our remarks in this morning's earnings release. An archive of this call will be available on our Web site for 90 days. With that, I'll turn it over to Marcel to get started..

Thanks, Lisa, and thank you all for joining our call today. Operationally, the quarter was eventful across our portfolio. From Super Bowl 51 in Houston, to the Presidential inauguration in Washington, DC, to the impact of the shift of the Easter holiday into the second quarter.

We were pleased with both top line and bottom line performance, as our portfolio performed above our expectations on both measures. During the quarter, we had net income attributable to common stockholders of $8.1 million. Our adjusted EBITDA was $59.1 million, and our adjusted FFO per share grew 2.3% to $0.44.

As we mentioned on our last call, our 2016 portfolio changes make a year-over-year adjusted EBITDA comparison challenging. However, mainly because of our recent balance sheet initiatives, we increased adjusted FFO per share despite the income loss from dispositions as compared to the first quarter of last year.

Our differentiated strategy of maintaining a broad market mix benefited our portfolio during the quarter, as we saw 2.7% same property RevPAR growth. Our hotels in two-thirds of our markets experienced RevPAR growth and eight of our markets boasted RevPAR growth of 5% or higher.

Five of these markets achieved double-digit percentage growth in the first quarter. January and February RevPAR were up 1.1% and 2.7%, respectively. While we anticipated that our portfolio would benefit from the Easter shift, several of our hotels exceeded our expectations, including each of our Houston-area hotels and the Fairmont in Dallas.

As a result, RevPAR for the month of March increased by 4% over last year. Our continued focus on expense controls resulted in same-property hotel EBITDA margin of 29.9% for the quarter, an increase of 68 basis points compared to last year for our 42-property portfolio.

This was aided by excellent food and beverage performance, particularly in catering and banquets, which was driven by strong group business during the quarter. In April, we completed the sale of the 122-room Courtyard Birmingham at UAB for a sale price of $30 million.

This represented an 11.4 times multiple on trailing 12-month EBITDA as of the end of the first quarter. We were pleased to be able to complete the sale of this select service asset at a healthy $246,000 per key. This disposition further exemplifies our strategy of increasing the quality of our portfolio through strategic transactions.

Virtually, all the hotels we have sold since our listing in early 2015 were in the bottom quartile of our portfolio in terms of EBITDA per key or RevPAR.

We have sold hotels in a range of markets for a multitude of reasons, including low demand growth prospects, supply concerns, CapEx needs, as well as arbitrage opportunities between public and private markets.

We have been pleased with the pricing and execution of our disposition since listing, which on average have been sold at an approximately 11 times trailing EBITDA multiple, unadjusted for substantial capital expenditures we avoided by completing these transactions. The disposition of the Courtyard at UAB was a milestone for us.

It was the 100th hotel we have sold since we started our portfolio transformation in 2010. The most significant portion of those occurred in 2014, when we sold a 52-property suburban select service portfolio at an opportune time and at attractive pricing.

Given the strength of our balance sheet, we believe we are in a unique position to create value across our platform and are actively evaluating potential acquisitions as one of those avenues.

We have a substantial amount of investment capacity resulting from our dispositions and balance sheet management, and we will look to be a buyer if we find the right opportunities. We remain focused on owning top assets in prime locations within our target markets, as we believe this strategy will help us as the lodging landscape evolves.

Ultimately, owning the right real estate is of the utmost importance in a dynamic industry where the consumer has many choices when it comes to booking channels and types of accommodations.

As we have previously highlighted, we have made significant strides over the last several years to upgrade the overall quality of our portfolio and we are extremely pleased with our progress to-date. Our current portfolio ranks in the top 25% of our peers for TripAdvisor rankings.

As of year-end, our total portfolio RevPAR and our average hotel EBITDA per key were $152.46 and $27,000, respectively, despite our exposure to gateway markets currently being relatively limited.

While these gateway markets generally average higher rates and thus increase portfolio RevPAR for companies with more significant exposure to those markets, we believe our metrics highlight the high quality of our assets in the markets where we operate. Our decision to exit or not invest in markets, such as New York, L.A.

and Miami, over the past few years has served us well as these markets have experienced significant supply increases and demand challenges during this part of the cycle.

We will continue to monitor a wide range of locations and adhere to our strategy of primarily investing in a balanced manner throughout the top 25 lodging markets and key leisure destinations.

Consistent with the profile of our acquisitions over the past six years, our primary focus will remain on premium full service and lifestyle hotels in the luxury and upper upscale segments.

We will look to continue to strengthen our portfolio by making timely investments in these target markets and disposing selectively of assets that do not meet our long-term investment criteria.

In addition to improvements in the portfolio via transactions, we are also deploying capital into our existing portfolio for cyclic renovations, as well as strategically for positioning purposes as outlined in our last call. During the first quarter, we completed the guest room renovations at the Andaz San Diego and the Bohemian Hotel Celebration.

In addition, we made good progress on the renovation at the Westin Galleria in Houston, and substantially completed the meeting space renovation at the Marriott San Francisco Airport Waterfront.

Our project management teams spent considerable time during the quarter on the designing and planning of our upcoming guest room renovations commencing during the second half of the year. Upon completion of these projects by mid-2018, over two-thirds of our portfolio will have been renovated or newly constructed since our listing in February of 2015.

We believe this positions us well from a competitive standpoint and provides us an opportunity for strong growth over the next several years. I will now turn quickly to our full year expectations.

We were pleased with our first quarter results but we understand that our performance was bolstered by a couple of one-time events and the timing of Easter, which will negatively impact the second quarter. There are additional holiday shifts in the second half of the year, which will challenge the third quarter, while benefiting the fourth quarter.

We have not seen material changes in our booking base to-date nor experienced any other significant changes in our expectations for the remainder of the year to revise our full year guidance beyond our first quarter outperformance and the sale of the Courtyard at UAB. As such, we have incorporated these items in our revised guidance.

But we have not made any changes to our forecast for the balance of the year. With that, I will now turn it over to Barry..

Thank you, Marcel. As a reminder, all of the portfolio information I will be speaking about is reported on a same-property basis for 42 hotels for the quarter-end.

As Marcel mentioned, our portfolio performance exceeded our expeditions for the quarter, largely due to the Super Bowl and Easter shift that benefited our Houston properties more than we anticipated. For first quarter 2017, our same-property RevPAR grew 2.7% comprised of 123 basis points of occupancy growth and a 1% increase in rate.

Our Houston area hotels, which make up about 10% of our rooms, experienced a stronger quarter with RevPAR up 2.2%. Our group business was up approximately 10% for the quarter compared to last year, with transient and contract business declining by approximately 60 basis points. Two major events impacted our results positively for the quarter.

The Presidential inauguration, which benefited our Hilton Garden Inn, Washington, DC Downtown and the Lorien Hotel in Alexandria, Virginia, and Super Bowl 51 in Houston, which had a very positive impact on our Westin Galleria and Oaks properties as well as the Woodlands Waterway Marriott, though in a less meaningful way.

Keep in mind that our Marriott San Francisco Airport Waterfront and Hyatt Regency Santa Clara similarly benefited from Super Bowl 50 last year.

As anticipated, our Q1 RevPAR growth will be offset somewhat by a weaker April with our overall portfolio RevPAR down approximately 4.5% for the month primarily due to the shift of Easter into April this year.

As opposed to the first quarter, the second quarter and remainder of the year will continue to be negatively impacted by the performance of our Houston assets. Excluding our Houston hotels, RevPAR for our portfolio was down approximately 3% in April, as our Houston hotels average RevPAR was down nearly 20%.

The magnitude of this decline was in line with our expectations, as the Galleria Hotels were particularly impacted by both the Easter shift and the extensive renovations taking place at the Westin Galleria.

However, we believe that our first quarter performance is indicative of the growth that our strong and diversified portfolio will be able to deliver in the future, as we complete our Westin renovation and enjoy the benefit of an ultimately recovering Houston market as a significant value driver within our portfolio.

Our top-performing markets during the quarter were Napa with RevPAR up 33% primarily due to the renovation of the Napa Valley Marriott last year, Salt Lake City up 19%, and Washington, DC, up 17%.

We continue to be pleased with the strong ramp up of both of our Autograph Collection Grand Bohemian Hotels in Birmingham, Alabama and Charleston, South Carolina, which were up 27% and 23%, respectively, for the quarter.

Our most challenged market this quarter was San Diego, down 26% due to anticipated disruption caused by our extensive guest room renovation. Other notable markets with RevPAR declines for the quarter included Austin, down 4% and Key West, down 3%.

We are pleased with our margin performance for the quarter, up 68 basis points with significant strength in food and beverage revenue and profit due primarily to the seasonal shifting group business, which drove strong banquet business as a direct result of an increasing group mix for the quarter. This particularly benefited our large group hotels.

Our EBITDA margin was somewhat muted by an increase in real estate taxes, which faced a tough comparison in the last year’s first quarter. But at the GOP level, margin improved 91 basis points. We continue to focus on continuity and planning for those aspects of the business that we do control.

We continue to be pleased with the momentum and results achieved through our property optimization process which was conducted at nine portfolio hotels last year and is scheduled to take place at 10 hotels this year. We expect the last year’s tops will enhance our bottom line by over $2 million, once all of our recommendations have been implemented.

We continue to find the best opportunities in labor productivity, food and beverage pricing and purchasing efficiencies through our internal portfolio initiatives team, which allows us to completely control this process and capture 100% of any process improvements.

As evidenced by our first quarter results of the property, we are beginning to realize the benefits of our substantial renovation of the Napa Valley Marriott, which take place primarily during the early part of 2016.

As a reminder, this $12 million project consisted of a complete guestroom and bathroom renovation, including 82 tub-to-shower conversions, corridor and meeting space renovation and a complete pool and outdoor function space transformation.

The market has reacted extremely well to the upgrade of this property, both in terms of leisure and group business. RevPAR for Q1 was up 24% compared to Q1 of 2015 prior to the renovation.

Our group pace for the second half of the year is up 50% over the same period last year, reflecting the significant enhancement and desirability of this hotel to the group market following its substantial renovation.

Before discussing our 2017 guestroom renovations, I would like to share some information regarding the successes that resulted from our historic major guestroom renovations.

Looking across our major guestroom renovation projects completed between March 2012 and February 2015, RevPAR increased on average 21.5% from the trailing 12 months prior to the renovation to the trailing 12 months calculated at the 15-month mark following the renovation.

Over the same period, our STR RevPAR Index increased an average of 7.5 points, highlighting the ability to significantly outperform our competitive sets following renovations of this magnitude and our success in identifying assets where capital expenditures result in superior returns.

Our two primary guestroom renovation projects that were taking place during the first quarter, the Andaz San Diego and the Westin Galleria in Houston, have been well executed. The 159-room Andaz San Diego has completed a comprehensive guestroom and corridor renovation, including new case goods, soft goods, flooring and mattresses.

The guestroom renovation of Westin Galleria, which will be completed in early third quarter, consists of a comprehensive guestroom and corridor renovation including case goods, soft goods, flooring, mattresses and televisions. Through this renovation, 358 bathrooms are being converted from bathtubs to showers.

We’re optimizing the suite mix which will reduce the size of the hotel by 18 keys. The creation of this new suite category will allow the hotel to compete more effectively in both the corporate and association group segments.

We have completed our planning for the next phase of our renovation of the Westin Galleria to include a complete lobby renovation with the addition of bar service and the transformation of the top floor of the hotel to include a concierge lounge, which has never been part of the hotel’s program, the relocation of the fitness center from a windowless room to a dramatic top floor space and revitalization of the hotel’s primary social catering space.

We expect these projects to commence in Q3 and be completed in the middle of Q4. We are confident that this revitalized hotel will return to its leadership position within the Galleria’s submarket following its renovation. As a reminder, we’re moving ahead with a similar guestroom renovation project at the Westin Oaks beginning in Q4.

Let me now turn the call over to Atish..

Thanks, Barry. I will discuss two topics this afternoon. First, I’ll discuss our financial profile and balance sheet. And second, I’ll discuss our revised outlook for 2017. First, our financial profile continues to be strong. We remain well poised to take advantage of opportunities as they arise.

Our leverage ratio, as reflected by net debt-to-EBITDA, was approximately 3.3 times as of quarter-end per our line of credit. We have no preferred equity or other senior capital on our balance sheet. Our current level of liquidity is strong as well. We have over $275 million of unrestricted cash and a fully undrawn $400 million line of credit.

We intend to use this liquidity to further address near-term debt maturities, invest in internal and external growth opportunities, or return capital to shareholders. As to our balance sheet, we continue to evolve it to support the company’s strategic goals.

We are focused on increasing our mix of fixed rate debt and increasing the duration of our debt. Year-to-date, we’ve swapped over $140 million of variable rate debt to fixed-rate debt. We’ve entered into a $115 million loan secured by the Marriott San Francisco Airport Waterfront Hotel and we prepaid $73 million of secured debt.

Pro forma for these transactions and including hedges, our fixed rate debt is now approximately 75% of our total debt. This is up from about 55% at the end of the first quarter of 2016. Over this time, we have also extended the weighted average duration of our debt by about 12 months to 4.8 years without including extension options.

As to the new financing, I want to take a moment to describe how it was successful. First, we achieved attractive execution with a best-in-class life company lender with whom this is our first borrowing.

Second, the Marriott SFO’s growth and cash flows and appreciation in value allowed us to generate more than double the proceeds as compared to the prior loan. The prior loan was in fact repaid 18 months ago. Third, the proceeds are approximately equivalent to our total capital investment in the asset inclusive of renovations.

We acquired the hotel from another lodging REIT for $108 million about five years ago. Overall, this new financing accentuates the value we have created since our acquisition. With regard to share repurchases, our activity has been lower this year than last year. We continue to believe that share repurchases are an attractive use of capital.

Our pace will vary from quarter-to-quarter depending on our capital needs. We have nearly $100 million remaining on our current authorization. And over time, we believe that this is a good tool to drive shareholder value. As to our outlook for 2017, it is consistent with the outlook we’ve provided in February, but for two items.

First, we made an upward revision or adjustment as a result of the stronger than expected first quarter. And second, we removed from our outlook the hotel that was sold in April. We now expect full year RevPAR to increase 25 basis points on the high end and decrease 175 basis points on the low end.

This 25-basis point change is due to our performance in the first quarter. For the full year, we expect that our hotels in Houston will have a RevPAR decline of 7% to 10%. This represents an 85 basis point negative impact to the full portfolio’s RevPAR for the year. This is an improvement relative to our outlook a couple of months ago.

The primary driver was first quarter performance. We are hopeful that the pace of deceleration in Houston is leveling off, but we don’t believe that sustained RevPAR increases occur until early to mid-2018. As to renovations, we expect revenue disruption from them to negatively impact our RevPAR by approximately 50 basis points.

This is consistent to prior expectation. Now there are several reasons we have confidence in our outlook. First, group revenue pace for 2017 was up 5% at the end of March. That’s relatively consistent to year-end 2016 when pace for this year was up 4%. Second, group revenue production in the first quarter for the year was up 8%.

In fact, over 80% of our 2017 group business is on the books. Recall about 30% of our room revenue is from group. Third, with regard to transient revenue pace as of the end of the first quarter, pace for May and June was up 2%. Keep in mind transient pace versus what is realized can vary given that this business is generally cancelable without penalty.

Fourth, year-to-date through April, which eliminates the impact of the shift in the timing of Easter, RevPAR is up 60 basis points. Excluding Houston, RevPAR is up 1.1% year-to-date. And that’s a good start to the year.

Fifth, while certain of our markets, particularly those with renovated or newly opened hotels, including Atlanta, Napa, Mountain Brook and Charleston, expect good results this year, we anticipate other markets including Houston, San Francisco, Philadelphia and Austin to continue to be challenging.

And in general, we expect new supply to increase about 2.5% in our market areas, that’s in line with the industry but slightly below most of our peers. Turning now to adjusted EBITDA. We expect it to be between $244 million and $258 million in 2017, which equates to a $3 million increase from prior guidance.

This reflects $5 million of better than expected earnings in the first quarter offset by $2 million as a result of the disposition. Moving ahead to adjusted FFO. We expect this to be between $198 million and $212 million in 2017.

This results in adjusted FFO per share of $1.85 to $1.98 based upon approximately 107 million weighted average shares outstanding. Our interest expense guidance is flat to prior guidance as we had anticipated the recent refinancings and paydowns in the guidance that we had provided in February.

And our capital expenditure guidance for the year is consistent with prior guidance as well. In conclusion, we are well poised for investing and allocating capital and we are confident in our outlook for the year. That concludes our prepared remarks. Allison, if we can take our first question that would be great..

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. Our first question will come from Bill Crow with Raymond James. Please go ahead..

Good morning all or good afternoon, I guess it is. A couple of questions from me. First of all, just digging in on the capital allocation a little bit more. We’ve heard from the broker community that maybe you have some select service assets out in the market.

And I’m curious whether your content getting smaller at this point, whether that would fund acquisitions? And if so, what does the pipeline look like or your appetite for share repurchases at current valuation levels?.

Thanks, I’ll take that Bill. We obviously do not comment on any kind of specific transactions until they may occur. So I will not confirm or deny any additional transactions until we get to that point.

What I’ll say in general is that we have indicated coming into the year and then what we’ll reiterate today is that we expect to be much more balanced in acquisitions and dispositions as we look at this year and would hope to be potentially a net acquirer more than we were a net seller previously.

So that hasn’t changed from our outlook at the beginning of the year. I highlighted during some of my prepared remarks, some of the changes that our portfolio has gone through.

And as you know, we’ve made very significant changes in the portfolio really over the last few years and including the very big portfolio transaction we did in '14 before our listing. So we clearly have moved in much more of a direction of owning luxury and upper upscale hotels and premium full service and lifestyle boutique segments.

That’s where our acquisitions have been taking place and that’s what you could expect from us going forward..

Yes, I appreciate that, Marcel. And you mentioned that you’ve avoided New York, L.A., Miami, I think those three markets you mentioned specifically.

Is there pressure on pricing yet and – or are we close to the point where you might be interested in going back and being a buyer in those markets?.

As you also know, Bill, and I think it’s good to point it out again, our approach is absolutely to be a balanced owner across top 25 larger markets in key leisure destinations. So we certainly don’t rule out at some point being more interested in getting into some of those markets that we’ve avoided over the last few years.

We just haven’t found the right entry point that we’ve been comfortable with. And as a matter of fact, we sold an asset in New York a few years ago. We do think that there could be some opportunities going forward.

We know there is a fair amount of product that will hit the market in L.A., people kind of trying to take advantage of the good trailing 12 with the quarter end issues probably.

We haven’t seen anything yet where we’re ready to come to a conclusion to say it is the right time to jump into those markets, but we’re going to continue to monitor those very closely as well..

One final question from me is, are you seeing broken deals out there or anything that’s distressed that might become more interesting to you?.

I would not say so. I think in general performance for assets even though the RevPAR growth might have been a little bit more muted recently, the overall performance of hotels has been strong. So we haven’t come across any deals where we’ve said, look, this is a really broken deal and it’s a real great opportunity, get in.

But when we look at acquisition opportunities, we’re clearly not just looking at situations where we think we’ll be coupon clippers. We like being able to utilize our asset management and our project management teams and really drive additional value, if there are some value-add opportunities.

But to really say look there’s broken deals out there, I can’t say that we’ve come across a lot of those..

Great. That’s helpful. Thank you..

Our next question will come from Thomas Allen of Morgan Stanley. Please go ahead..

Hi. Good afternoon, guys. It’s Mark Savino on for Thomas. You mentioned that group pace was up 5%. I think that’s a little better than the 4% you mentioned last quarter. And some of your peers have actually talked about group pace slowing over the last few months.

So just wondering if you can maybe give us a little bit more color as to what you’re seeing there and what drove that acceleration?.

Yes, sure, Mark. So correct, pace is up 5%. That’s pretty much all volume. Rates are flat actually. So we have seen an acceleration relative to the 4% and frankly that had to do with the production in the quarter. Production in the quarter was actually positive. I mentioned up 8% in terms of revenue booked versus the first quarter of last year.

And a lot of that was focused on second quarter where production was up 13% and the back half for production was up 20%. So we had a lot of activity at our hotels in the first quarter that’s translating into slightly better pace.

If you think about the markets that are strong from a group perspective, they include Atlanta, Salt Lake City, New Orleans, one of our hotels in Boston that’s offset a bit by San Francisco, Houston, one of our properties in Dallas and then Philadelphia, which has a very tough comparison.

So we are seeing, again, a little bit better outlook on the group side. And as I mentioned, the vast majority of our group business is on the books now for the year. So that’s a positive indicator..

That’s helpful. Thank you. And then just turning to Houston, wondering if you could give a little bit more color as to what you were seeing in terms of underlying trends in the first quarter, maybe stripping out Super Bowl and the Easter shift.

And it sounded like from your outlook commentary that you are a little bit more optimistic that things are turning there.

So maybe just if you could give a little bit more color as to what you’re seeing and what kind of gives you confidence that maybe the worst is behind us?.

Sure, Mark, happy to. Obviously, as we talked about Super Bowl and Easter shift were significant. So stripping them out, which we’ve obviously spent a lot of time looking at doesn’t necessarily get us to things that are indicative of long-term trends. But let me walk you through as we’ve done the last couple of quarters property-by-property.

Oaks and Galleria, certainly renovation disruption is probably the biggest part of the story there that was in Q1 and that work will continue until early in Q3. When you talk about tub to shower conversions, you’re really talking about having these rooms out of service for quite a bit of time and it’s very impactful to the overall operation.

In terms of the market and what we’ve seen in terms of our business development there, the consulting business which has been our historic bread and butter has been fairly slow to come back, really very slow to come back.

While we’re certainly seeing some signs of life throughout the market in both the Galleria and the Woodlands in terms of the oil services and energy producing companies, the consulting business has not come back in a similar type of manner yet.

Oaks and Galleria have also been impacted a little bit this year on citywides from some lessened compression from downtown that’s really been in part driven by the opening of the Marriott Marquis and just general softness in the market as well. Woodlands is a little different story so far this year.

They’ve been able to continue to fill group holes with high quality transient business that had not historically been able to stay at the hotel, and still we think the most desirable property in the submarket.

We are starting to see now nine months into – 9 and 12 months into the opening of new competitors, some stability in the market as it relates to the aggressiveness of those competitors and the ability for the market to fill on a night-by-night basis. Our comps do get a little bit easier beginning in late Q2, because of one hotel’s opened last year.

We’re obviously continuing to be very focused on our cost controls in the market. Our management teams have done a very good job there in terms of battening down the hatches. But to repeat what Atish had said, we really don’t view signs of significant year-over-year recovery there until earlier mid-2018..

Very helpful. Thank you..

Our next question will come from Whitney Stevenson of JMP Securities. Please go ahead..

Hi, everyone. Good afternoon. Going back to group a bit, could you maybe offer a bit of commentary on what you’re seeing in outside the room spending propensity and maybe the mix of corp.

versus association groups?.

Sure, Whitney. So what we’ve seen in that regard and obviously every hotel is different and it’s quite frankly tough to draw trends across the entire portfolio. But I think as I think through a number of the individual larger, more focused group assets, we certainly saw good food and beverage revenue in Q1.

Obviously, when your group business is up 10%, you’re going to see some pretty strong growth in food and beverage. The good news is that because of that group, a lot of that was on the banquet side as opposed to the restaurant side of the food and beverage business. So we were able to drive very good profit out of that, which you see in the numbers.

We continue to see some weakness in pick up on both group and association business.

The association business, again depending on the market, has shown – both markets, both association and group, has shown a little more stability this year than it did last year in terms of the volume of last minute cancellations and attendees not showing up and things like that.

But certainly as we talk in the meeting – with the meeting planner community, they are skittish about their attendance numbers going into programs. So I think it’s really too early to say that that trend has diminished across our broader portfolio..

Okay.

And then maybe on the acquisition topic kind of talking about the expectation of potentially doing more this year, could you give a bit of color about the performance of the Commonwealth relative to your acquisition underwriting?.

Sure. We talked about specifically last year how we came in within the range of the underwriting that we expected for '16. So the market has obviously changed a little bit from the time that we underwrote that acquisition since that was in the summer of '15 as a forward acquisition. We’ve been pleased with the performance of the asset so far.

As you know, it’s a really high end hotel luxury asset that has a lot of really great demand generators that drive that asset. So I’d say that so far it’s meeting our expectations as we outlined them when we initially spoke..

And ladies and gentlemen, I’m showing no further questions. So this will conclude our question-and-answer session. I would like to turn the conference back over to Marcel Verbaas for any closing remarks..

Thank you, Alison. Thank you everyone for joining us on our call today. As we pointed out, we’re pleased with our first quarter performance and are confident in our outlook for the year at this point. And we look forward to updating you next quarter. Thank you..

The conference has now concluded. Thank you for attending today’s presentation. You may now disconnect your lines..