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Hotel & Resorts

Xenia Motels and Resorts (XHR) This autumn 2021 Earnings Name Transcript


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Xenia Motels and Resorts ( XHR -3.24% )
This autumn 2021 Earnings Name
Mar 01, 2022, 1:00 p.m. ET

Contents:

  • Ready Remarks
  • Questions and Solutions
  • Name Individuals

Ready Remarks:

Operator

Howdy, and welcome to the Xenia Motels & Resorts fourth quarter and full yr 2021 earnings convention name. My identify is Alex, and I will be coordinating the decision at the moment. [Operator instructions] I’d now hand over to your host, Aldo Martinez, senior monetary analyst. Over to you, Aldo.

Unknown speaker

Thanks, Alex. Good afternoon, and welcome to Xenia Motels & Resort’s fourth quarter and full yr 2021 earnings name and webcast. I am right here with Marcel Verbaas, our chairman and chief government officer; Barry Bloom, our president, and chief working officer; and Atish Shah, our government vice chairman, and chief monetary officer. Marcel will start with a dialogue on trade fundamentals, our quarterly and annual efficiency, and an replace on our portfolio technique.

Barry will comply with with extra particulars about our working outcomes, latest working traits, and standing of our capital expenditure tasks. And Atish will conclude our remarks with an replace on our steadiness sheet. We are going to then open the decision for Q&A. Earlier than we get began, let me remind everybody that sure statements made on this name usually are not historic information and are thought-about forward-looking statements.

These statements are topic to quite a few dangers and uncertainties as described in our annual report on Type 10-Ok and different SEC filings, which might trigger our precise outcomes to vary materially from these expressed in or implied by our feedback. Ahead-looking statements within the earnings launch that we issued this morning, together with feedback on this name, are made solely as of at the moment, March 1st, 2022, and we undertake no obligation to publicly replace any of those forward-looking statements as precise occasions unfold. You will discover a reconciliation of our non-GAAP monetary measures to internet revenue and definitions of sure I referred to in our remarks on this morning’s earnings launch. The property stage portfolio info we’ll be talking about at the moment is on a same-property foundation for 33 lodges.

Subsequent to the sale of Resort Monaco Chicago in January, sure info is for present identical properties reflecting 32 lodges. An archive of this name will probably be accessible on our web site for 90 days. I’ll now flip it over to Marcel to get began.

Marcel VerbaasChairman and Chief Government Officer

Thanks, Aldo, and good afternoon to all of you becoming a member of our name at the moment. We’re happy to be sharing our fourth quarter and full yr 2021 outcomes with you at the moment in addition to some latest developments that we imagine to be very constructive for our progress outlook over the following a number of years. After a sluggish begin to 2021, trade fundamentals steadily improved because the yr progressed, significantly after our vaccine rollout accelerated within the second quarter, leisure demand elevated considerably, whereas company and group demand began recovering in a extra reasonable tempo. Regardless of the emergence of the delta variant over the summer season and the omicron variant post-Thanksgiving, we skilled an overt pattern in occupancy all year long.

And the hole to 2019 RevPAR diminished considerably as we completed out 2021. Importantly, we have been in a position to return to constructive adjusted EBITDAre in March, and we’re in a position to preserve and develop this constructive money movement by means of the rest of the yr. In the course of the fourth quarter, we reported a internet lack of $22.9 million. Adjusted EBITDAre and adjusted FFO per share every remained constructive at $48.9 million and $0.25, respectively.

We’re happy that 31 of our lodges and resorts achieved constructive wholesale EBITDA for the yr, which translated to adjusted EBITDAre of $108.1 million and adjusted FFO per share of $0.28. Our same-property portfolio generated a resort EBITDA margin of 27.2% for the quarter on account of a continued deal with value controls by our operators and advantages from actual property tax reductions and cancellation charges. Our same-property RevPAR for the fourth quarter was solely 17.5% beneath the identical interval in 2019, representing one other sequential enchancment over the primary three quarters of the yr once we skilled RevPAR declines of 63.3%, 38.6%, and 22.9% within the first, second, and third quarter, respectively. Common charges remained a value off, as our same-property ADR elevated 7.1% in comparison with the fourth quarter of 2019.

A powerful 25 of our lodges and resorts achieved ADRs that surpassed these reached throughout the identical quarter in 2019. The fourth quarter was our strongest quarter of the yr regardless of the tough seasonals in December and the early influence from the omicron variant. The 2 highest ADR and RevPAR months of 2021 have been each within the fourth quarter, with October being the strongest month of the yr and November not far behind. Impressively, ADRs for each month through the second half of the yr surpassed these achieved throughout the identical month in 2019.

The emergence of the omicron variant and ensuing spikes in constructive COVID-19 case counts all through the nation, doubled with the standard seasonal decline in leisure journey, brought on a slowdown in general demand in January. The company and group segments have been most importantly impacted, and we have been confronted with a significant variety of group cancellations and postponements. In consequence, our present same-property portfolio RevPAR in January was markedly decrease than we skilled in December, and RevPAR was roughly 37% beneath January 2019 RevPAR. This decline was considerably better than the roughly 8% decline we achieved in December, which was the smallest hole for the reason that starting of the pandemic.

Nonetheless, journey patterns have improved considerably over the previous a number of weeks as case counts have fallen dramatically, and proof is mounted of the brand new variant inflicting much less superior sickness and decrease percentages of hospitalizations and loss of life. Primarily based on our preliminary estimates, February RevPAR must be roughly $157, which represented roughly 19% decline versus a really robust February of 2019, with ADR up roughly 6% over 2019 ranges. The projected RevPAR for the month represents the best absolute RevPAR for the reason that onset of the pandemic, with each occupancy and ADR surpassing the degrees achieved in October. We’re inspired by these latest traits and our forward-looking traits and are optimistic a few robust restoration because the yr progresses.

We proceed to be bullish on our progress prospects within the years forward. We imagine that we now have many strategic benefits, together with our geographic footprint, the standard of our belongings and operators, our robust steadiness sheet, and a lot of embedded progress alternatives, a few of which we now have highlighted throughout earlier earnings calls and displays. We imagine that we’re within the early levels of a robust multi-year restoration for upper-upscale and luxurious lodges and resorts and that our firm is positioned properly to drive superior outcomes. Whereas we now have already benefited from our geographic diversification and deal with Sunbelt places through the earlier stage of the restoration, we proceed to have many alternatives for progress all through our portfolio, significantly as company and group demand recovers as we anticipate it would.

Now we have continued our deal with figuring out and executing inside progress alternatives, as we now have performed up to now with tasks similar to those we lately accomplished at Park Hyatt Aviara and Hyatt Regency Grand Cypress. For 2022, we’re planning to considerably enhance our capital expenditures over the diminished ranges of spend that we had in 2020 and 2021 once we responded to the influence of the pandemic by emphasizing liquidity and money preservation. Barry will present particulars on essentially the most important tasks we’re intending to finish work begins this yr in his remarks. We additionally stay optimistic in regards to the progress we anticipate to expertise on account of Hyatt Regency Portland, reaching stabilization over the following a number of years, as it’s primarily nonetheless a newly opened resort.

I’ll now flip to the transaction exercise we now have lately accomplished and the thrilling announcement we made this morning. In November, we accomplished the beforehand introduced sale of Marriott Charleston in West Virginia. And in January, we accomplished the sale of Resort Monaco Chicago, a transaction that we additionally introduced earlier than the tip of the yr. By way of these two tendencies, we exited two difficult markets with what we imagine to be robust working environments and tough path to get again to prior peaks.

We have been significantly happy with the pricing at an virtually 17 instances 2019 EBITDA a number of, we achieved on the opportunistic sale of Resort Monaco Chicago, which was owned one among solely two lodges in our same-property portfolio that had unfavourable resort EBITDA in 2021. Over the previous a number of quarters, we now have persistently maintained that we’d be opportunistic however affected person because it pertains to potential acquisitions. The announcement we made this morning relating to our settlement to accumulate W Nashville is reflective of our efforts throughout this time as we have been in a position to establish a possible acquisition that meets all of our funding standards, together with pricing that we imagine displays an acceptable danger/reward steadiness. We’re extraordinarily excited that we now have been in a position to attain an settlement to accumulate this excellent resort.

Nashville is among the most dynamic progress markets within the nation and has been a goal funding marketplace for us. We have been in a position to moved decisively as soon as we started conscious of the chance to accumulate the resort due to the robust steadiness sheet and liquidity we achieved and maintained by means of our latest steadiness sheet actions. We imagine this acquisition hits the bull’s eye because it pertains to our funding technique. Nashville is a high-growth prime 25 lodging markets, with important and rising year-round company and leisure demand.

Now we have in depth expertise with Marriott, managing a few of our most important belongings. And the resort a charge easy luxurious way of life resort that has many actually distinctive attributes and that we imagine is the very best resort available in the market. The resort opened just some months in the past and is extraordinarily properly designed to have the ability to cater to any demand phase, as evidenced by excellent visitor suggestions for the reason that October opening. In our view, this resort is in a category of its personal within the nationwide markets, significantly because it pertains to its rooms and suites product, its meals and beverage services, and its different facilities.

There are six meals and beverage venues in resort, together with two vacation spot eating places by famend Chef Andrew Carmellini. Moreover, the pool, rooftop, and out of doors leisure eating and assembly areas are unmatched in Nashville. And whereas this virtually $330 million acquisition is a big transaction for us, we’re snug with having this stage of focus in one of many strongest financial progress markets within the nation. Whereas provide additions in Nashville have been important over the previous decade, there are a variety of tasks will nonetheless be added by means of the provision over the following a number of years.

The market has been resilient, and demand and RevPAR progress has persistently outpaced provide progress, leading to one of many highest RevPAR CAGRs of any of the cloud watching markets. We strongly imagine that luxurious demand within the Nashville CBD West and submarket will proceed to expertise substantial progress within the years forward. And this distinctive luxurious way of life resort is the right embodiment of what the higher-end leisure and company clientele will search out as their vacation spot of selection available in the market. As we highlighted in our launch this morning, we anticipate W Nashville to be one of many main contributors in our portfolio within the years forward, with resort EBITDA reaching between $25 million and $30 million upon stabilization.

We’re thrilled to be including W to our secure Marriott manufacturers in our portfolio. Now we have lengthy and deep relationship with Marriott and are trying ahead to proudly owning a flagship W resort within the U.S. as Marriott evolves and refreshes the model. With important capital investments being made in lots of present Ws and thrilling new W lodges opening and in Marriott’s pipeline domestically and internationally, we’re optimistic about the way forward for the model and the contributions it would make to what’s an impressive resort from a bodily and site perspective.

With our asset administration experience and Marriott’s working prowess and model energy, we’re enthusiastic about what lies forward for W Nashville underneath our possession. Barry will now present further particulars on our fourth quarter efficiency, latest working traits, and the standing of our present and deliberate capital tasks.

Barry BloomPresident and Chief Working Officer

Thanks, Marcel, and good afternoon, everybody. Within the fourth quarter, our same-property portfolio occupancy was 56.4% and a mean day by day fee of $241.11, leading to RevPAR of $136.01. The fourth quarter marked the best-performing quarter in 2021, coming in at 7.1% greater in ADR and 17.5% beneath in RevPAR in comparison with the fourth quarter in 2019, and beating each different quarter in 2021 by way of occupancy, ADR, and RevPAR achieved. Regardless of some weaker-than-expected company and group enterprise associated to the delta variant, October and November have been each robust months, with occupancy coming in at 58.6% for every month, every second solely to the July peak of 59.2% for the yr.

October achieved the best ADR and RevPAR of any month in 2021 at $248.69 and $145.71, respectively, bolstered by 5 weekends, which allowed our lodges to seize further leisure demand. ADR in November was $238.05, leading to RevPAR of $139.45. In December, we started to see some anticipated moderation in occupancies through the month, pushed primarily by seasonal declines. Nonetheless, regardless of these slowdowns, December achieved an ADR of $235.92, or 15.2% greater than 2019, and RevPAR of $122.99, or simply 7.8% beneath the identical month in 2019.

In the course of the quarter, we had 6 lodges obtain occupancy above 75%, primarily in lodges which are leisure-focused and drive-to markets similar to Key West, Charleston, South Carolina, Savannah, Birmingham, and Napa, all of which proceed to indicate substantial power. We additionally had 25 lodges representing 74% of the portfolio and achieved greater ADRs within the fourth quarter of 2021 than they did within the fourth quarter of 2019. We commend our lodges and asset administration workforce on figuring out and pursuing alternatives to drive ADR and make the most of the patron who’s keen to pay a premium for high quality properties like ours and our centered efforts on activating on-site facilities. For the total yr, we had 5 lodges obtain better than 75% occupancy, once more, primarily on the identical lodges in our leisure-focused and drive-to markets.

We additionally had 15 lodges obtain greater ADRs in 2021 than they did in 2019. Group cancelations within the fourth quarter amounted to roughly $8.5 million of rooms income, which have been on the books for the fourth quarter of 2021, primarily associated to the delta variant. We acknowledged roughly $5 million in cancelation and attrition charges through the fourth quarter. Atish will focus on 2022 group tempo and the influence of group cancelations on account of the omicron variant on Q1 of 2022 in additional element shortly.

When it comes to revenue, all 33 of our same-property lodges achieved constructive resort EBITDA for the quarter, with 13 properties exceeding outcomes in comparison with the fourth quarter of 2019. 11 lodges achieved EBITDA margins better than 30% for the quarter, and 16 lodges generated EBITDA margins better than 2019. For the total yr, 16 lodges have been in a position to generate EBITDA margins of above 25% on account of environment friendly value controls and optimization of operations. Our properties underneath respective administration firms proceed to do a superb job in controlling margins.

For the fourth quarter, resort EBITDA was $54.1 million, a decline of 17.5% on a complete income decline of 18.5% in comparison with the fourth quarter of 2019, leading to resort EBITDA margin progress of 32 foundation factors to 27.2%. For the total yr, resort EBITDA declined 52.3% on a complete income decline of 39%, leading to a resort EBITDA margin of 21.7%, down roughly 600 foundation factors from 2019. Our lodges, due to the efforts of our operators, continued a tremendous job controlling bills whereas guaranteeing a high-quality visitor expertise. Within the fourth quarter, rooms bills declined by over 18% in comparison with 2019, whereas undistributed bills declined by 13.7%.

For the total yr, rooms bills declined by roughly 35%, whereas undistributed bills declined by roughly 26%. Inside the undistributed bills, whereas the best declines have been seen in A&G and gross sales and advertising, utilities bills declined by roughly 7.6% for the yr, associated partly to decrease occupancy ranges, but in addition on account of our lodges having change into extra environment friendly of their use of electrical energy and pure fuel, regardless of fee will increase in lots of markets. Our operators proceed their work in refining service fashions and staffing ranges. For the fourth quarter, whole worker compensation, as reported by our operators, declined by 21.5%, and for the total yr by 36.7%.

We at present estimate that wage charges throughout the portfolio, based mostly on our operators’ budgets, will enhance by roughly 5% in 2022 versus 2021. Leisure enterprise proceed to be robust all through the portfolio, with elevated reserving home windows for our hottest drive-to locations and resorts all through the primary and second quarter. Regardless of important success within the leisure phase, we be aware that occupancies for the yr of our three largest resorts, Park Hyatt Aviara, Hyatt Regency Scottsdale, and Hyatt Regency Grand Cypress, ran between 35% and 56% occupancy, leaving room for important upside at these lodges as high-rated and banquet-intensive group enterprise returns to those properties in 2022 and past. Regardless of the seasonally sluggish and omicron-impaired ranges of enterprise journey our portfolio skilled in January and early February, we’re now seeing a major pickup in company quantity accounts.

Enterprise journey has notably picked up in latest weeks, as evidenced by will increase in occupancy ranges on Monday, Tuesday, and Wednesday nights in addition to transient enterprise on the books to March. I’ll finish my remarks at the moment with a evaluate of our accomplished and upcoming main capital expenditure tasks. In the course of the fourth quarter and yr ended December 31, 2021, the corporate invested $12.7 million and $31.8 million, respectively. Within the fourth quarter, we accomplished the restaurant and foyer renovation at The Ritz-Carlton Pentagon Metropolis, which was accomplished in mid-October, and the event of the Regency Courtroom, a brand new 5,300 sq. foot out of doors social venue at Hyatt Regency Scottsdale that was accomplished in late November.

In the course of the fourth quarter, we made substantial progress on the renovation of the restaurant, foyer, and visitor rooms at Waldorf-Astoria Atlanta Buckhead. The restaurant lounge opened in mid-February, and we anticipate that the visitor rooms challenge will probably be accomplished later this month. In 2022, we estimate spending roughly $95 million on capital expenditure tasks. We proceed to be enthusiastic about two main tasks, which we speed up and make the most of present enterprise situations, which can primarily happen in 2022.

The primary is a complete renovation of Grand Bohemian Resort Orlando, together with visitor rooms with substantial tub-to-shower conversions, restaurant and bar, foyer, rooftop pool space, and assembly area, which can begin within the second quarter of 2022 and is predicted to be accomplished in phases, concluding within the second quarter of 2023. The second is a complete renovation of the Kimpton Canary Resort Santa Barbara, together with visitor rooms, restaurant and bar, rooftop, foyer, and assembly area, which lately commenced and is predicted to even be accomplished in phases, concluding within the first quarter of 2023. In 2022, we additionally plan to renovate the assembly area and convert the prevailing foyer bar to a Starbucks outlet at Fairmont Pittsburgh, renovate the assembly areas at Marriott Dallas Downtown and Royal Palms Resort & Spa, full toilet renovations at Marriott Woodlands Waterway Resort & Conference Middle, renovate the premium suites at The Ritz-Carlton Denver, together with the addition of three new guestroom keys, and begin planning and design for a complete renovation at Resort Monaco in Salt Lake Metropolis. As well as, we plan to begin work on a major improve to the spa and wellness parts at Park Hyatt Aviara, together with a complete renovation of present golf course, options which have been deferred through the preliminary renovation, however for which we now have even stronger conviction given the positioning and efficiency of the property.

Lastly, we proceed to deal with quite a few constructing infrastructure tasks to reinforce constructing resiliency and lengthen the helpful lifetime of our bodily buildings, along with specializing in a lot of environmentally sustainable tasks all through our portfolio. With that, I’ll flip the decision over to Atish.

Atish ShahGovernment Vice President and Chief Monetary Officer

OK. Thanks, Barry. I’ll present an replace on our steadiness sheet and a high-level outlook for 2022. Our steadiness sheet continues to be robust, with no debt maturities till 2024, important liquidity, practically all debt at present at swapped or mounted.

Swap to repair have been at mounted rates of interest and robust banking relationships, we’re in place to make the most of alternatives such because the W Nashville. Our liquidity, inclusive of obtainable money and our line of credit score, is at present roughly $950 million. In January, we paid off the $65 million mortgage mortgage on The Ritz-Carlton Pentagon Metropolis, thereby decreasing our value of debt to sub 5%. Trying forward, we intend to accumulate W Nashville with money available.

As we get additional into the yr and relying on different alternatives, we might entry the fairness of our debt markets to lift further capital or proceed to evolve our steadiness sheet. Equally, as enterprise rebounds and after exiting the covenant waiver interval, we might contemplate different instruments to drive shareholder return, similar to a quarterly dividend or share repurchase underneath our present board authorization. As to a high-level outlook for the yr, we now have a constructive view based mostly on the demand traits and reserving exercise that we’re seeing, because the transient demand, Barry talked about, strengthening company transient traits. Turning to group demand.

Our tempo info is as of the tip of January for our present same-property set. At the moment, room income tempo for 2022 was down 27% versus the place we have been in January of 2019, and that is for the total yr. For the primary quarter, the decline is larger than 40%. For the second and third quarters, we’re pacing down about 20%.

And for the fourth quarter, we’re pacing down about 10%. Specializing in simply room charges. For the total yr of 2022, we’re pacing up about 4%. For the second half particularly, room charges are pacing forward by over 9%.

As extra present group traits, group exercise for the rest of this yr continues to select up. Our lodges proceed to see near-term bookings, and we now have picked up over half the group income that canceled for the primary quarter of 2022, with most of that rebooking concentrated within the second quarter of 2022 and lesser quantity within the second half of ’22 and into ’23. Between cancellation revenue and rebookings, we anticipate to recapture many of the earnings from the group cancellations as a result of omicron variant. One factor to remember by way of evaluating 2022 to 2019 is that between the beginning of 2019 and now, we now have bought eight belongings, which contributed practically $55 million of resort EBITDA in 2019.

This info is additional damaged out by quarter within the historic present same-property tables in our earnings launch schedules. Shifting forward. Whereas we aren’t but prepared to supply 2022 earnings steering, we needed to supply some ideas on the cadence of earnings in addition to some estimates for gadgets which are extra underneath our management. As to the cadence of earnings that we anticipate in 2022 by way of resort EBITDA, we anticipate resort EBITDA weighting by quarter to be as follows: first quarter, about 20%; third quarter, about 25%; and every of the second and fourth quarters slightly below 30%.

That weighting is our present estimate, it assumes no change in financial situations or further variants of COVID-19. Turning to estimates for sure expense gadgets. As to money G&A expense, we anticipate it to be roughly $22 million. The rise to final yr displays greater wage and profit prices and the lapping of payroll tax credit.

As to curiosity expense, we anticipate it to be roughly $77 million, which is a lower of over 5% to final yr, reflecting adjustments in our steadiness sheet over the course of the final yr. As to capital expenditures, we anticipate them to be roughly $95 million to cowl the tasks that Barry mentioned. On W Nashville, assuming the acquisition closes by the tip of the primary quarter, we anticipate to generate between $13 million and $15 million of resort EBITDA throughout our possession interval in 2022 because the resort ramps up. To wrap up, every quarter of 2021 confirmed strengthening traits throughout our portfolio.

We completed 2021 on a excessive be aware, regardless of the emergence of COVID-19 variants. As in comparison with different high-end portfolios, we outperformed final yr on account of our favorable market and asset combine. We anticipate that momentum to proceed this yr because the restoration and fundamentals continues. Our properties are affiliated with among the finest manufacturers and managers, are in good situation, and have the product choices and facilities that vacationers are at present searching for.

As well as, our properties positioned in a number of Sunbelt markets, similar to Houston, Orlando, Phoenix, Atlanta, and San Diego, are nonetheless properly behind peak ranges of RevPAR and earnings, so there may be important room for earnings progress as company and group demand recovers and augments leisure demand. Along with our asset profile, the power of the steadiness sheet and our transactional experience provides us confidence that we may be energetic members within the multi-year lodging upcycle, which we imagine is simply getting began. And with that, I am going to flip the decision again over to our operator, Alex, for our Q&A session.

Questions & Solutions:

Operator

[Operator instructions] Our first query for at the moment comes from David Katz of Jefferies. David, your line is now open.

David KatzJefferies — Analyst

Good afternoon, everybody. Thanks for taking my questions. I apologize if I missed it, however with respect to this Nashville resort, was this a marketed deal? And I am curious what commentary you may need about what marketed offers are trying like today? And what — how you’ll type of perhaps 1 to 10 or qualitatively gauge the competitors for marketed offers?

Marcel VerbaasChairman and Chief Government Officer

Yeah. Thanks, David. Good afternoon. This was really not a broadly marketed deal.

It was not listed with a dealer. So if you would name it — historically, you’ll name it an off-market deal, which it actually was. We do know that there have been sure different potential consumers that have been trying on the transaction. And from that standpoint, it is — most likely was a aggressive course of, however with a really restricted group of potential consumers that have been taking a look at it.

And I talked in my ready remarks a bit bit about us with the ability to soar in with lots of conviction round this explicit alternative. And we actually imagine that is the rationale why we needed to go together with this transaction. It was actually being very decisive, with the ability to transfer rapidly and get a deal performed with this — what we imagine is an exceptional resort.

David KatzJefferies — Analyst

All proper. And if you take a look at it, it seems to be like — sorry, go forward.

Marcel VerbaasChairman and Chief Government Officer

Sorry, David. The query on form of what the method for marketed properties. Hear, it is clearly nonetheless a really aggressive course of if you’re taking a look at offers which are being brokered. And we felt very lucky to really discover a chance like this the place we might actually separate ourselves from the pack by being — as the scale — the room of this transaction.

David KatzJefferies — Analyst

All proper. Understood. And so once we take a look at a resort like this, is there — what — is there worth that you could add to it over time from an working perspective? Or is that this simply positioning in a terrific market with a brand-new asset and the tide type of carries its worth alongside?

Marcel VerbaasChairman and Chief Government Officer

Yeah. Nice query. We predict it is a mixture of each, actually. We do assume that — we talked rather a lot within the feedback about and within the launch this morning in regards to the positioning of Nashville as a market.

And we actually imagine that there is a basic shift happening within the nation so far as what are essentially the most dynamic markets and the place do you need to be for the long run. So from that perspective, we expect that is form of a bull’s eye location for us the place we need to be invested for the long run. However we actually are also very enthusiastic about the truth that it is a property that is managed by a model that we now have a really, very lengthy relationship with and a really deep relationship with, and the place we are able to mainly get in considerably on the floor stage and asset handle actually coming from the beginning on this asset with Marriott. And we imagine there’s rather a lot that we are able to deliver to the desk by means of our experience that may assist this property be much more profitable over time.

David KatzJefferies — Analyst

Understood. I am going to give any person else an opportunity and are available again round. Thanks very a lot.

Marcel VerbaasChairman and Chief Government Officer

Thanks, David.

Operator

Thanks. Our subsequent query comes from Invoice Crow of Raymond James. Invoice, your line is now open. Sorry, Invoice, I am not receiving any audio might guarantee your unmuted, please.

Sorry, Invoice, I am nonetheless not receiving any audio–

Invoice CrowRaymond James — Analyst

Yep. Yep. Are you able to hear me now?

Operator

Apologies. Go forward.

Invoice CrowRaymond James — Analyst

Yep. OK. Nice. Atish, let’s begin with you.

The $5 million of cancellation charges obtained within the fourth quarter, what would the margins have been had that enterprise really proven up?

Atish ShahGovernment Vice President and Chief Monetary Officer

Yeah. Nicely, the cancellation charge revenue was about $2.5 million greater than the fourth quarter of ’19, so it did profit margin by over 100 foundation factors. I imply it is onerous to provide the precise variety of what it could have been had the enterprise confirmed up. However that provides you a way of what the influence was within the fourth quarter.

Curiously, for the total yr, cancellation and attritions charges weren’t that a lot forward of the place they have been in ’19 of $1.5 million for the total yr. So it was simply type of the timing of once we received these cancellation and attrition charges in comparison with ’19.

Invoice CrowRaymond James — Analyst

And the way a lot have you ever — or do you anticipate accumulating within the first quarter in cancellation charges? And I assume that is in your quarterly cadence that you simply talked about?

Atish ShahGovernment Vice President and Chief Monetary Officer

Yeah. It would not be practically as a lot as that. I imply I haven’t got estimate for that at this level, however a decrease quantity. I feel what you noticed within the fourth quarter is, frankly, cancellation charges that got here in from omicron, however most likely some leftover cancellations, no less than from delta, actually, as properly.

So that is what drove the quantity and the timing final yr. I feel that may reasonable as we go into this yr.

Invoice CrowRaymond James — Analyst

Yeah. OK. If I might simply ask on the W acquisition, the way you all get snug with the W model? As a result of clearly, it has been — we have — lots of us have had questions on it during the last 10-plus years. And so when you might reply that.

And the way you consider completely financing that acquisition?

Marcel VerbaasChairman and Chief Government Officer

Yeah. I am going to take the primary a part of that query, Invoice. From our perspective, in the beginning, we take a look at this typical asset location, proper? When — and when you take a look at what this resort is, it could possibly be actually many issues from form of a luxurious way of life perspective. And we expect that even with out W standing by itself, it is only a phenomenal asset that may drive lots of demand.

Now on prime of it, we do assume that W is de facto additive to this asset, significantly with among the refreshing and evolving that Marriott is at present doing with the model. Should you take a look at — and I feel I’ve talked a bit bit about it a bit bit in my feedback. Should you take a look at the amount of cash that is going into sure W belongings proper now which are being refreshed, there may be very important capital funding going into a few of these belongings. There actually are nonetheless some belongings that have to form of be introduced as much as the following era, however there are also some actually phenomenal belongings within the U.S.

And this resort solely helps to raise the W model right here within the U.S. It’s a flagship resort, actually, when you consider what W goes to be going ahead. And you then see among the lodges which have opened up internationally as properly and what Marriott is doing with the model general on a worldwide perspective, I feel that there is lots of constructive momentum there that we’ll be benefiting from.

Atish ShahGovernment Vice President and Chief Monetary Officer

On the finance query, Invoice, as we have talked about, our plan is to fund this with all money. And whereas I feel this could be a horny candidate for secured financing sooner or later, I am unsure that we’re essentially able to begin with doing something like that proper now. I imply, as you take a look at our steadiness sheet, a couple of years in the past, we had 8 lodges which have secured financing on them. Now we now have 4.

We have actually been energetic members on the general public debt facet by way of high-yield cash that we have raised and albeit, are happy with that instrument that we are able to proceed to make the most of. So I feel my feedback have been about usually elevating fairness or debt capital sooner or later. I feel that applies right here as properly. However we haven’t any particular plans with regard to this asset or this transaction at this level.

Invoice CrowRaymond James — Analyst

All proper. Thanks, all. Admire it.

Operator

Thanks. Our subsequent query comes from Austin Wurschmidt of KeyBanc. Austin, your line is now open.

Austin WurschmidtKeyBanc Capital Markets — Analyst

Nice. Thanks and good afternoon. Simply going again and revisiting the acquisition, actually is smart from lots of — checks lots of containers. So I suppose simply how do you get snug with the worth per key? And whereas I do know it only recently opened, I think some portion of the development prices may need been baked pre-pandemic.

So inquisitive about your ideas the way it stacks up the worth tag versus your estimate of substitute value at the moment? After which are you able to additionally simply communicate to how conservatively you underwrote to get to that type of mid-8% yield on the midpoint?

Marcel VerbaasChairman and Chief Government Officer

Positive. Thanks, Austin. From a value per key perspective, I imply, we actually acknowledge that for the nationwide market, it is a quantity that is greater than what you are seeing lately available in the market. However as you additionally know, there may be a lot constructive momentum happening in these markets.

And there is a lot financial progress available in the market that I am fairly satisfied that we’ll not be the best value per key transaction for a really very long time on this market. There are particular different issues which are occurring there that I feel will probably be near the place we’re on this value per key. One factor to essentially bear in mind about this asset actually is that you simply’re not simply shopping for 346 resort rooms right here. You are shopping for a really important revenue stream coming off of the F&B services and really excessive margin kind of income that is coming in for these services due to lots of the beverage primarily coming in as properly.

So when you consider form of all in what you are shopping for right here, you are shopping for a really enticing money movement stream that’s going by means of all these completely different venues going ahead. We clearly — this isn’t one thing that is — that the place we simply determined, hey, let’s put money into Nashville proper now. We have appeared on the markets for a lot of years. We have underwritten variety of belongings within the markets.

So that is actually form of a end result of taking a look at numerous belongings right here for a really very long time. And we’re extraordinarily snug that we’re, in our thoughts, shopping for the very best resort on this market that is going to have the very best operational upside going ahead. Because it pertains to form of evaluating it to growth prices, that is additionally a challenge that has taken an extended variety of years to really come collectively. So even eager about what’s a possible developer revenue as we might personal this deal, development prices have gone up very considerably over the previous couple of years, as you recognize, and proceed to develop very considerably.

You consider foundation that they could have had in the long run can be very, very completely different at the moment. So there are only a lot of issues that we’re form of in a delicate view for the place growth value versus worth. We really feel from a price perspective, this resort is totally price it, particularly if you take a look at not solely the place it sits within the markets, however when you additionally evaluate it to the premise for lodges and different — it is even robust to name it different markets — comparable markets as a result of there usually are not many markets which are seeing the expansion that Nashville is seeing. However when you evaluate it to a few of these different markets, we really feel actually good about being right here and what the risk-reward is of this funding versus the place we might have invested in smaller lodges.

And I am going to simply add one factor, which is we have talked to you a large number over the previous couple of quarters about form of being affected person and ready for the best acquisition alternative. And this actually is as we checked out it as a result of if we did not purchase this resort at this stage, another person would have. And we would have probably paid much more for it. And it is most likely the one resort that we have checked out within the final two years that if we’d have seen one among our friends come out with an announcement on this, we’d have been very upset and jealous versus different offers that we have seen.

So we really feel actually good about the place we’re with this asset and what it’ll do for us going ahead.

Austin WurschmidtKeyBanc Capital Markets — Analyst

Yeah. That is very useful. After which — so on the subject of the underwritten yield within the mid-8s, I suppose we’re on this like transitional interval of resort demand with the backdrop of excessive inflation. It has been useful to ADR and margins.

And these potential working efficiencies popping out of the pandemic that get mentioned by many within the trade, so are you able to simply give us a way of what you form of underwrote towards from an ADR margin perspective? Is it form of the brand new paradigm? Or have been you a bit bit extra conservative, I suppose, to get to the vary of outcomes for resort EBITDA?

Marcel VerbaasChairman and Chief Government Officer

Yeah. That is a terrific query. And I am going to reply your query particularly because it pertains to among the underwriting that we did on this. What I additionally need to level out is that you simply introduced up — the way in which you requested your query, you introduced up the truth that we’re form of on this new atmosphere and the brand new paradigm form of post-COVID, and that’s one other of ingredient that we simply actually like about this resort.

As a lot as everybody desires leisure demand, it is a resort that is going to utterly profit very strongly from the leisure demand that exist in Nashville that’s actually very robust available in the market. However it additionally will cater very properly to each group and company demand that comes into that market. So in our thoughts, you get form of the very best of each worlds since you personal a terrific city resort. However in some methods, you may form of view it as an city resort, significantly with the facilities that this resort has.

When you consider all of the area that is within the resort, all of the out of doors area, from a eating perspective, from a gathering perspective, the pool space is one thing that’s completely unmatched within the nationwide space. So we expect it actually performs very properly to what the present shopper is searching for, particularly when you consider the leisure traveler that’s searching for the sort of asset. So we expect that it is — from that standpoint, we view it as a safer and higher guess than if we have been going someplace that was simply 100% pushed by leisure and the place you are probably shopping for at form of peak of the market with a few of these belongings. Because it pertains to how we underwrote it particularly, I am going to simply begin form of the place we’re once we get to stabilization.

We anticipate this to be over $300 in RevPAR upon stabilization. And we anticipate the combination between meals and beverage income and rooms income to be pretty balanced. So we expect that meals and beverage income goes to be someplace in the identical zip code as what the rooms earnings will probably be. And on the margin facet, we’re underwriting it to in regards to the low 30s margin, which compares to our portfolio that was at about 28% going into COVID.

We predict this may do some bit higher. And we additionally notice the EBITDA alternatives of this resort. And our underwriting will probably be throwing off. It is primarily much more than double the EBITDA alternatives that we had in our portfolio going into COVID.

So we expect that it’s extremely accretive from lots of completely different standpoints.

Austin WurschmidtKeyBanc Capital Markets — Analyst

That is lots of nice element. Thanks.

Operator

Thanks. Our subsequent query comes from Michael Bellisario of Baird. Michael, the road is now open.

Michael BellisarioBaird — Analyst

Simply type of yet one more follow-up on the transaction entrance. I do know you have not closed the Nashville deal but, however perhaps going ahead, how are you eager about capital allocation by way of perhaps an elevated want to promote one other property, partially again fund what you are shopping for now? Simply any up to date ideas on purchase versus sale on a go-forward foundation can be useful.

Marcel VerbaasChairman and Chief Government Officer

Thanks, Michael. We talked about this, you hear me mainly say the identical factor each different quarter on that is that we’re at all times going to be trying to improve the portfolio we discover. And we’re continually form of analyzing potential further tendencies, particularly once we’re making — having to make some selections about further capital investments that we’d need to make into some belongings. I would not say that this acquisition is essentially going to vary the way in which we take a look at a few of these potential tendencies, however you might actually anticipate us to proceed to be — to take a look at these further capital investments fairly critically and see if there are some alternatives to perhaps harvest some worth from some belongings.

However I feel they are going to be extra across the margin, most likely some smaller belongings within the portfolio to the extent that we’re taking a look at that within the brief time period versus any form of significant seismic shifts which are occurring due to tendencies.

Michael BellisarioBaird — Analyst

Received it. That is useful. After which simply switching gears, perhaps one for Barry. Hyatt lately — they introduced class adjustments for lots of their lodges.

Two of your three highest EBITDA-producing lodges final yr are shifting up one class. Are you able to assist us perceive what which means for demand, EBITDA traits, and type of loyalty redemptions and bookings at these lodges this yr in comparison with if these adjustments hadn’t occurred on the loyalty entrance?

Barry BloomPresident and Chief Working Officer

Yeah. Positive. I imply, as you recognize, the manufacturers transfer these items round rather a lot year-to-year. I feel we have been fairly happy with the few properties that truly received up category-ed, Grand Cypress and Key West, as a result of every of these was form of the chief in that market and have been fairly frankly, in our view, underpriced on a redemption foundation.

So together with these elevated redemption ranges, our base redemption stage strikes up as properly. That is not — though that is probably not whereby our thoughts, form of the upside comes subsequent yr. Subsequent yr, the upside — we received into Key West this yr rather a lot given the excessive occupancy, however Grand Cypress nonetheless had a comparatively low occupancy, and we redeemed lots of rooms on the base fee. We’re already seeing in February and March many, many nights the place we’re attending to the upper stairstep ranges the place we get redemptions based mostly on a share of ADR.

So there have been actually no negatives from our perspective from Hyatt’s strikes, and there have been even some behind-the-scenes issues associated to only due to the numerous fee will increase in Aviara yr over yr, or yr over 2019, given the renovation the place we’ll have a better base discount fee there as properly. So all constructive from our perspective.

Michael BellisarioBaird — Analyst

And if you discuss in regards to the charges being greater, is that merely only a perform of 1Q ’22 to date being simply significantly better than 1Q ’21, given we have been nonetheless ramping up then? Or do you anticipate that to be true all year long for the opposite three quarters?

Barry BloomPresident and Chief Working Officer

Should you take a look at Grand Cypress form of operating within the mid-50s final yr, we didn’t have lots of compression dates. We can have much more compression dates this yr, and that is what I am referring to that we have seen in February and March. And we proceed to see that as we did final yr at Hyatt Regency Scottsdale.

Michael BellisarioBaird — Analyst

That is useful. Thanks.

Operator

Thanks. [Operator instructions] Our subsequent query comes from Thomas Allen of Morgan Stanley. Thomas, your line is now open.

Thomas AllenMorgan Stanley — Analyst

Thanks. Two extra questions on Nashville. The primary, when do you anticipate to get to the $25 million to $30 million of stabilized EBITDA? The second, do you personal every other properties which are about half room income versus different income? And form of how do you consider underwriting these sorts of belongings versus others?

Marcel VerbaasChairman and Chief Government Officer

Sure, Thomas. I imply, clearly, stabilization is — the way in which we take a look at it’s strongly within the form of three to 4 years out. It might occur a bit bit faster, however that is the way in which we underwrote it. In order it pertains to different properties that had form of comparable combine, we — Royal Palms, for instance, clearly, a smaller resort, however that is a bit bit much less on the rooms facet really than it’s on the meals and beverage facet.

In order that’s one instance. When you consider — you may take a look at it from two sides. I imply, clearly, you need to ensure you keep related on the F&B facet, and that is to make it possible for it is a good, sustainable money movement mannequin. However that is not essentially too completely different from the rooms facet as a result of as you all know, it is a capital-intensive enterprise, perhaps fall behind with the room product, you are going to finally need to make further funding in that, too.

Because it pertains to F&B, it is actually about the place are your places? What are your services? How related are they within the market? And we expect that these explicit venues are essentially the most related they probably could possibly be in a location like Nashville. So a part of when you consider the worth per key, for instance, I imply, it is clearly very completely different from taking a look at doing a choose service deal which are getting all the way down to $500,000 a key, and all you are getting is form of the room product. I imply we now have a greater rooms product than just about something in that market, and we now have essentially the most related F&B venues there that we expect actually if you form of add that each one collectively, you are actually not simply shopping for rooms at $950 a key. I imply you are actually shopping for a really substantial income stream from either side that we expect may be very useful and helps you really fill your rooms.

The truth that you may have these actually related F&B venues helps you fill these rooms. The truth that you may have the very best pool available in the market helps you fill the rooms. The truth that you may have the very best pool or the very best rooftop in that market, these are all components why persons are going to need to keep at this resort, whether or not they’re there for leisure or whether or not they’re there for any form of company cause.

Thomas AllenMorgan Stanley — Analyst

After which only a follow-up. Once we have been at [Inaudible] a few month in the past, one of many key themes was the manufacturers actually needed to begin to implement model requirements and like model necessities and a few of that stuff once more. The place do you assume we’re in that trajectory? The place do you assume we’re going? How do you are feeling about that form of the model commonplace implementation proper now?

Barry BloomPresident and Chief Working Officer

Hey, Thomas. That is Barry. I feel that, clearly, from their perspective, they need to have a extra unified product. It is actually, from their perspective, one of many methods to — for them to take care of among the challenges that they add on the visitor satisfaction facet.

So I feel they’re actually all taking a look at how one can finest roll — nonetheless decide what these requirements are and the way finest to roll them out. However I feel it’ll be longer than shorter, no less than by way of the way in which we take into consideration the enterprise. And I feel because it pertains to our portfolio, I feel we’re not terribly afraid or involved about what these is likely to be. As we have talked about for a very long time, we have been very aggressive in getting our services and operations again as shut as we are able to to pre-pandemic ranges, even in instances the place we’re operating low occupancies, that having eating places open, the place acceptable, I feel it is actually been the best factor to do.

And I feel that reveals, in This autumn, for instance, in our important meals and beverage revenues. I feel when you consider it from the model perspective, I feel they actually are taking and can take, as they develop these requirements, a way more affordable and balanced method maybe than it had earlier than. And I feel they are going to find yourself with extra versatile approaches by way of not each full-service model ex-hotel needs to be open for lunch. I feel homeowners are going to have the ability to proceed the dialogue that they — each model is welcome that the homeowners have participated in during the last two years now by way of serving to information them towards these selections.

Thomas AllenMorgan Stanley — Analyst

Useful. Thanks.

Operator

Thanks. Our ultimate query for at the moment comes from Tyler Batory from Janney. Tyler, your line is now open.

Jonathan JenkinsJanney Montgomery Scott — Analyst

That is Jonathan on Tyler. First one for me, and I do know it is perhaps tough to phase all the things up, however the fee power within the quarter, is that each one coming from leisure? Or is there some company or group in there impacting positively or negatively? And may you present any coloration in your expectation for charges as we transfer by means of ’22?

Barry BloomPresident and Chief Working Officer

Positive. Let’s discuss This autumn 2021. And clearly, leisure was nonetheless a major piece for us, significantly in December. However I feel a part of the story that perhaps has not been advised as properly for us, and we imagine throughout the trade as properly, was there was lots of excellent high quality group enterprise in October and November.

Whereas a few of it received misplaced on account of delta, the enterprise that we did have in our lodges was very high-quality group enterprise, each in fee and by way of banquet spend per occupied room. In order that was positively a pattern. Once more, quantity company was the place the weak spot was, each by way of form of demand in addition to by way of fee. Speaking about 2022, Atish touched on in his remarks form of group fee and group reserving tempo and significantly power in group fee trying on the latter half of 2022 in comparison with 2018 going into 2019.

However once more, the place we sit at the moment by way of the near-term transient demand, we really feel excellent about March and now even into April by way of what we’re seeing by way of each continued power in leisure demand in addition to some notable pickup by way of quantity company demand as properly.

Jonathan JenkinsJanney Montgomery Scott — Analyst

OK. Very useful. After which perhaps for Marcel, I am curious if the capex information, which is actually again to pre-pandemic ranges. Is {that a} vote of confidence within the tempo of restoration this yr and eager to place the portfolio for the restoration? Or is there simply seeing catch-up capex in there that you simply really feel snug addressing now that you simply’re in a extremely strong liquidity place?

Marcel VerbaasChairman and Chief Government Officer

Yeah. It is not a lot money out as it’s extra form of the primary a part of your query, which is we clearly do believe within the restoration, the place we’re proper now. We actually scaled again our spend rather a lot in 2020 and 2021. And I feel I discussed it in my feedback that we clearly have been very centered on preserving money, preserving liquidity, growing liquidity.

We actually have extra confidence round the place issues are going and the way issues are recovering now. So there actually are some things that Barry highlighted the place we did push these again a bit bit from prior years, however lots of the place spend actually is, is on the kind of renovations the place we expect we’ll drive some actual ROI, and significantly the 2 larger ones that Barry talked about, being Orlando and Santa Barbara. These are two tasks that we now have very excessive hopes for a way we are able to spend that cash on this now to be actually well-positioned because the restoration actually takes maintain.

Jonathan JenkinsJanney Montgomery Scott — Analyst

Thanks for all the colours. That is all for me.

Operator

Now we have no additional questions for at the moment, so I’ll hand again to chairman and CEO, Marcel Verbaas, for any closing remarks.

Marcel VerbaasChairman and Chief Government Officer

Thanks. Thanks, everybody, for becoming a member of us at the moment. I do know it has been an extended earnings season for a lot of of you. We’re excited clearly about the place we’re with the corporate, how we carried out within the fourth quarter, and definitely extraordinarily excited in regards to the W Nashville acquisition.

And we’re enthusiastic about what this yr goes to deliver for us. So we stay up for persevering with our dialogue and chatting with you because the yr progresses.

Operator

[Operator signoff]

Length: 59 minutes

Name members:

Unknown speaker

Marcel VerbaasChairman and Chief Government Officer

Barry BloomPresident and Chief Working Officer

Atish ShahGovernment Vice President and Chief Monetary Officer

David KatzJefferies — Analyst

Invoice CrowRaymond James — Analyst

Austin WurschmidtKeyBanc Capital Markets — Analyst

Michael BellisarioBaird — Analyst

Thomas AllenMorgan Stanley — Analyst

Jonathan JenkinsJanney Montgomery Scott — Analyst

Extra XHR evaluation

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