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DATE
Tuesday, Nov. 3, 2026
CALL PARTICIPANTS
- Director of Finance - Aldo Martinez
- Chairman and Chief Executive Officer - Marcel Verbaas
- President and Chief Operating Officer - Barry A. N. Bloom
- Executive Vice President and Chief Financial Officer - Atish D. Shah
TAKEAWAYS
- Net Loss -- $2.7 million, or $0.03 per diluted share, compared to a net loss of $13.7 million in the third quarter of 2025.
- Adjusted EBITDAre -- $53.2 million, representing a 26% increase driven by strong top-line performance and margin expansion.
- Same-Property RevPAR -- $184.75, a 12.5% increase resulting from balanced gains in occupancy and average daily rate.
- Same-Property Hotel EBITDA Margin -- 22.9%, representing an expansion of 295 basis points over the prior year.
- 2026 RevPAR Guidance -- 7.75% to 8.25%, an increase of 250 basis points at the midpoint compared to the guidance provided after the second quarter.
- 2026 Adjusted EBITDAre Guidance -- $278 million to $284 million, reflecting a $21 million increase from the company's initial full-year outlook.
- 2026 Adjusted FFO Guidance -- $2.08 to $2.14 per diluted share, which at the midpoint represents approximately 20% growth versus last year.
- Group Room Revenue -- 16.2% growth, driven by an 11% increase in room night volume and strong banquet and catering activity.
- Food and Beverage Revenue -- 15% increase, supported by rebounding group business and out-of-room profitability improvements.
- October RevPAR Performance -- 8% estimated increase, continuing the demand trends observed in the third quarter.
- Total Debt -- Approximately $1.4 billion at quarter end, with a weighted average interest rate of 5.55% and 75% of debt at fixed rates.
- Total Liquidity -- $661 million, consisting of $161 million in available cash and a fully undrawn $500 million revolving credit facility.
- Asset Dispositions -- $11 million from the July sale of the 85-room Kimpton RiverPlace Hotel, representing a 19.4x multiple on trailing 12-month hotel EBITDA.
- Capital Expenditures -- $16.4 million invested during the quarter, with a revised full-year projection of $70 million to $75 million.
- 2027 Group Room Revenue Pace -- 4% decline compared to the same period last year, primarily due to second-half comparisons against special events.
- 2027 Supply Growth -- Less than 80 basis points weighted across the portfolio, with no supply growth expected in 40% of market tracks.
- Grand Hyatt Scottsdale EBITDA -- Projected to ramp from the low-$30 million range in 2026 to the high-$30 million range in 2027.
- Weekday RevPAR -- 12.6% growth, with midweek occupancy on Tuesdays and Wednesdays averaging 76.3%.
- G&A Expense -- Approximately $26 million for the full year, an increase of $1 million due to higher incentive compensation expense.
- Leverage Ratio -- 4.4x net debt to EBITDA at quarter end, down from 5.2x at the end of 2025.
- Debt Maturity -- $102 million Marriott San Francisco Airport mortgage loan due early in the second quarter of 2027, which the company intends to pay off with existing liquidity.
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RISKS
- Shah stated, "we estimated that in 2027, we will have a 50-basis-point RevPAR headwind and a $3 million EBITDA headwind compared to 2026," due to the impact of lapping one-time special events.
- Shah noted that group room revenue pace for 2027 was "down 4% compared to the same time last year," with the decline concentrated in the second half of the year.
SUMMARY
Xenia Hotels & Resorts, Inc. (NYSE:XHR) reported third quarter results that surpassed management expectations due to strengthening group and corporate transient demand across its luxury and upper-upscale portfolio. The company reported a net loss of $2.7 million for the quarter while achieving a 26% increase in adjusted EBITDAre and nearly 300 basis points of hotel EBITDA margin expansion. Management raised full-year 2026 guidance for the third consecutive time, citing strong performance in September and an estimated 8% RevPAR increase in October. Strategic focus remains on capital reinvestment and maintaining a flexible balance sheet, with plans to pay off maturing debt in early 2027 to leave 28 of 29 properties free of property-level debt.
- Chairman and CEO Marcel Verbaas stated, "Our results have exceeded our expectations throughout the year," leading to significant projected increases in adjusted EBITDAre and adjusted FFO.
- CFO Atish Shah noted that midweek demand remains a recovery opportunity as Tuesday and Wednesday occupancy is still 7 percentage points behind 2019 levels.
- The company completed the renaming of four Marriott Autograph Collection hotels in September and October 2026 to better emphasize the distinctive character of their local markets.
- Management expects weighted supply growth in its markets to remain muted at less than 80 basis points in 2027.
- Renovations at Andaz Napa and The Ritz-Carlton, Denver are scheduled to begin in December 2026, timed during lower demand periods to minimize operational disruption.
- Grand Hyatt Scottsdale is tracking toward stabilization with management projecting EBITDA to increase from the low-$30 million range this year to the high-$30 million range in 2027.
INDUSTRY GLOSSARY
- ADR: Average Daily Rate, a measure of the average realized room rental per day.
- ATM Offering Program: At-The-Market offering program, a type of equity offering where a company can sell shares directly into the secondary market.
- Bps: Basis points, a unit of measure for interest rates and other percentages in finance, where 100 basis points equal 1 percentage point.
- BT: Business Transient, travel for business purposes that is not part of a group booking.
- EBITDAre: Earnings Before Interest, Taxes, Depreciation, and Amortization for Real Estate, a performance measure used by REITs.
- FFO: Funds From Operations, a measure used by REITs to define cash flow from their operations.
- NOLs: Net Operating Losses, tax attributes that can be used to offset future taxable income.
- REIT: Real Estate Investment Trust, a company that owns, operates, or finances income-producing real estate.
- RevPAR: Revenue Per Available Room, calculated by multiplying a hotel's ADR by its occupancy rate.
- Total RevPAR: Total Revenue Per Available Room, which includes room revenue plus food, beverage, and other ancillary spending.
Full Conference Call Transcript
Operator: Hello, everyone. Thank you for joining us, and welcome to Xenia Hotels and Resorts Q3 26 Earnings Conference Call. To withdraw your question, press 1 again. I will now hand the conference over to Aldo Martinez, Director of Finance. Aldo? Please go ahead.
Aldo Martinez: Thank you, Marina, and welcome to Xenia Hotels and Resorts third quarter 26 earnings call and webcast. I am here with Marcel Verbaas, our chairman and chief executive officer, Barry A. N. Bloom, our president and chief operating officer and Atish D. Shah, executive vice president and chief financial officer. Marcel will begin with a discussion on our performance. Barry will follow with more details on operating trends and capital expenditure projects. Atish will conclude today's remarks on our balance sheet and outlook. We will then open up the call for Q&A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts, are considered forward looking statements.
These statements are subject to numerous risks and uncertainties as this 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 this morning, along with the comments on this call, are made only as of today 11/03/2026, and we undertake no obligation to publicly update any of these forward looking statements as actual events unfold. You can find the reconciliation of non GAAP financial measures to net income as well as definitions of certain items referred to in our remarks in our third quarter earnings release.
Which is available on the Investor Relations section of our website. The property level information we will be speaking about today is on a same property basis for all 29 hotels unless specified otherwise. An archive of this call will be available on our website for 90 days. I will now turn it over to Marcel to get started.
Marcel Verbaas: Thanks, Aldo, and good afternoon, everyone. Our portfolio delivered an outstanding third quarter. With results that substantially exceeded the expectations we outlined on our second quarter earnings call at the end of July. Group demand was very strong, as anticipated. Grew significantly compared to the softer demand we experienced in the third quarter of last year. Additionally, corporate transient demands continue to strengthen. Demands from the higher end leisure customer remained resilient. Importantly, the strong top line performance carried through to the bottom line, with nearly 300 basis points of hotel EBITDA margin expansion compared to the same period last year. On a GAAP basis, this morning, we reported a net loss of $2.7 million for the quarter.
Adjusted EBITDAre was $53.2 million increase of 26%. And adjusted FFO per share was $0.36. Up almost 57% from the same quarter last year. The significant growth reflects both the strength of our operating results and the benefit of a lower share count following the significant share repurchases we completed last year. Same property RevPAR for our 29 hotel portfolio was a $184.75. An increase of 12.5% compared to the third quarter of 25. After a second quarter in which our RevPAR growth came entirely from rate, this quarter's gains were well balanced between occupancy and average daily rate. Which we view as a healthy sign of broadening demands across the portfolio.
While certain markets in our portfolio benefit us from event driven demand in July, including the FIFA World Cup at America 250, It is noteworthy that August and September delivered strong RevPAR gains as well. With September 16.8% RevPAR increase leading the quarter. Diving into our markets, in the third quarter, 21 of our 22 markets experienced RevPAR increases, with 13 of those achieving double digit growth versus the third quarter of 25. Philadelphia, which benefited from several large events, the portfolio with RevPAR up 34.5%. Followed by New Orleans at 29%, and San Diego and Salt Lake City each also up in excess of 20%. Pittsburgh, Santa Clara, Dallas, and Orlando also had very strong results during the quarter.
With each of those markets up between 16%, 18%. As we anticipated when we last reported, second quarter's GAAP between same property RevPAR and total RevPAR growth which was driven by lower contributions from group demands, did not continue into the third quarter. Same property total RevPAR growth of 12.7% for the third quarter exceeded our 12.5% RevPAR growth. As group demands and banquet and catering revenue increased meaningfully compared to last year. In a number of markets, healthy group business drove even greater growth in total RevPAR. Most notably in San Diego, up more than 26%, and in Houston, up nearly 17%. As our Houston hotels lapped a softer period last year.
Looking ahead, we do expect that RevPAR growth for the portfolio will now exceed total RevPAR growth for full year 2026. As reflected by our updated guidance for both metrics. This is a result of much stronger RevPAR growth than we previously projected. Well as the mix of our RevPAR growth. Rather than any softening and out of room spend. Transient demands, carries less ancillary revenues than group business, has been much stronger than we previously anticipated. And a significant portion of our RevPAR growth has been fueled by increases in ADR. Third quarter same property hotel EBITDA of $60.2 million was 29.3% above the same period in 2025.
And same property hotel EBITDA margin was 22.9%, increase of nearly 300 basis points. The balanced growth in occupancy and rate during the quarter allowed our hotels to leverage their fixed cost. While the rebounding group business drove a significant improvement in out of room profitability. Our operators can continue to do an excellent job managing costs we continue to work closely with them to manage expenses where possible. Barry will provide additional detail on our property level results during his remarks. Turning to our capital expenditure projects. Now expect that we will spend $70 million to $75 million on property improvements during the year. With 2 significant renovations scheduled to begin next month.
At Andaz Napa, the first phase of a comprehensive renovation of guest rooms and corridors will commence. And at the Ritz Carlton Denver, will be upgrading the guest rooms corridors, and meeting space. Barry will also provide more color on all of our completed and ongoing capital projects. As we have done throughout the history of the company, we will continue to evaluate opportunities to enhance the quality of our portfolio and drive adjusted FFO growth. Whether through reinvestment in our existing hotels, acquisitions, or dispositions. Sale of the 85-room Kimpton River Place Hotel in Portland that we discussed on our second quarter earnings call is an example of these disciplined capital allocation decisions.
As a reminder, we sold the hotel in July for $11 million. Represented a 19.4x multiple on trailing 12 month hotel EBITDA. Allowed us to exit an asset that faced substantial near term capital needs. Amid an uncertain outlook for earnings growth. Given our strong third quarter and our expectations for the remainder of the year, we are meaningfully raising our full year 2026 outlook. We now expect same property RevPAR growth of 7.75% to 8.25% an increase of 250 basis points at the midpoint. Compared to the guidance we provided after the second quarter. We expect full year same property total RevPAR growth of 7% to 7.5%.
An increase of 150 basis points at the midpoints compared to prior guidance. These increases in expected full year revenues coupled with improved margin performance, are driving significant projected increases in adjusted EBITDAre adjusted FFO per share as well. Atish will walk through our updated guidance in more detail. 2026 is shaping up to be an exceptional year for Xenia. Our results have exceeded our expect. Expectations throughout the year. We have raised our earnings outlook 3 quarters in a row. The fourth quarter is off to another promising start. We estimate the same property RevPAR during the month of October increased approximately 8% compared to last year.
The significant RevPAR increases during the important months of September and October were driven by both group and corporate transient demand. Which is encouraging as we look ahead to next year. The recent investments we have made in our portfolio continue to pay off. Highlighted by Grand Hyatt Scottsdale continuing with successful path towards stabilization at a significantly higher hotel EBITDA level than its prior peak. We own a high quality portfolio of luxury and upper upscale hotels in markets with limited supply. We continue to maintain a strong and flexible balance sheet and we have a proven track record of prudent capital allocation leading to value creation for our shareholders.
We are proud of what our team and our operating partners have accomplished over the past several years, and we are more confident than ever in the long term earnings potential of our portfolio. Barry will now provide more detail on our operating results capital projects.
Barry A. N. Bloom: Thank you, Marcel. Good afternoon, everyone. Our same property portfolio generated third quarter RevPAR of $184.75 up 12.5% from a year ago. Unlike last quarter, when growth was entirely rate driven, third quarter gains were more balanced with occupancy rising 380 basis points to 70% and average daily rate increasing 6.4% to $264 when compared to the same period in 2025. Strong out of room spend lifted total RevPAR of $325.71, up 12.7% for the quarter. Which as Marcel mentioned, represents a strong rebound after a more subdued second quarter primarily as a result of our group business mix.
We are pleased to report that for the third quarter, 26 of 29 hotels grew RevPAR when compared to the third quarter of 25. With 14 of those achieving double digit percentage increases during the period. Our top performing hotels in the quarter were Kimpton Hotel Palomar Philadelphia, RevPAR rose 34.5%. Lowe's, New Orleans, up 29%, Park Hyatt Aviara up 28.5%, Marriott Woodlands Waterway up 23.9%, Kimpton Hotel Monaco Salt Lake City at Hyatt Regency Grand Cypress each up nearly 21%. RevPAR at Fairmont Pittsburgh, Regency Santa Clara Marriott Dallas downtown and Kimpton Canary Santa Barbara each grew in mid to high teens percentages while Grand Hyatt Scottsdale continued its ramp towards stabilization. With RevPAR up 12.5% at the resort.
Only 3 of our hotels experienced RevPAR weakness compared to the third quarter of 25, including Andaz Savannah, down 4.5%, Hotel Oriel in Savannah down 1.3% and Andaz San Diego flat versus last year's third quarter. By month for the third quarter, July same property RevPAR was $180.40 an 11.7% increase over last year. With 367 basis points of occupancy gain and a 5.8% higher rate. August came in at $167.24, up 8.6% with rate up 6.3%.
September was a standout month finishing at $207.33, up 16.8% as occupancy climbed 641 basis points to 73.5% and rate grew 6.6% to $282.26 Group business was a clear driver of our results in the quarter, Same property group room revenue increased 16.2% compared to the third quarter of 25. Driven primarily by volume, with group room nights up approximately 11%. That represents our strongest quarter of group growth this year. This is despite the relative softness in group experience in our World Cup markets during July, but reflective of the shift of both Jewish holidays to September with both falling on weekends this year.
The increase in group volume also carried through to banquet and catering revenue, which was a primary driver of our 15% growth in food and beverage revenue for the quarter. Satish will provide more color on group pace for the fourth quarter and 2027, in his remarks. Day of week trends were solid in the third quarter with RevPAR growing every night of the week. Across all segments weekday RevPAR, Sunday through Thursday, grew 12.6%, while weekend RevPAR, Friday and Saturday, grew nearly 12%. Midweek occupancy was particularly strong driven by both group and transient with Tuesday and Wednesday occupancy averaging 76.3%. up 470 basis points from last year.
That additional demand created opportunities for meaningful rate compression, with Tuesday and Wednesday ADR up 7.9%. And RevPAR up 14.9%. Now turning to expenses and profit Third quarter same property total revenue grew 12.7% year over year, outpacing total operating expense growth of 8.5%. As a result, hotel EBITDA of $60.2 million was up 29.3% versus 2025. Additionally, hotel EBITDA margins saw 295 basis points of margin expansion, climbing to 22.9% versus the third quarter of 25. Within the operating departments, rooms revenue grew 12.5%, while rooms expense rose only 6.6%.
With rooms expense per occupied room up less than 1% as occupancy increased by 4 points Food and beverage was a standout in the quarter with F&B revenue up 15% against expense growth of 10.3%. Driven by increased banquet and catering revenues and strong group demand. Reflecting an uptick in growth compared to both last quarter the third quarter of last year. Other operating departments, including SPA, parking, and golf, grew 15.5% in the quarter, miscellaneous income declined 5% primarily due to lower cancellation and attrition revenue. Undistributed departments continue to be well controlled with expenses rising 7% in the third quarter, well below revenue growth.
On a same property basis, A&G expenses increased 10.2% primarily driven by revenue related costs including credit card commissions. Sales and marketing and repairs and maintenance grew more modest 3.9%, 2.1% respectively. Utilities, however, increased nearly 14% driven by higher occupancy several markets with extreme weather conditions, and a use salary reclassification of Gulf water expenses to this line item in 2026. Turning to CapEx, during the third quarter we invested $16.4 million in portfolio improvements, brings our total for the year to $47 million We now expect full year capital expenditures of between $70 million and $75 million a reduction of $5 million at the high end of our prior range.
At Royal Palms Resort and Spa, completed the renovation of the guest rooms and corridors in the 68-room Monte Vista Building. The renovation of T. Cook's restaurant, Additionally, in the third quarter, we performed work and continued planning minor guest room upgrades at 3 hotels, which are expected to be completed in 2026 or in the first quarter of 27 based on hotel occupancy. As well as planning and or execution of mechanical systems and infrastructure upgrades at 9 hotels. 2 significant renovations this year are still on track to begin next month.
At Andaz Napa, the first phase of a comprehensive renovation of guest rooms and corridors covering about half of the hotel's 141 rooms completion expected in the first quarter of next year. As a reminder, the second phase will begin in the fourth quarter of 27. At The Ritz Carlton Denver, next month we will begin a renovation of guest rooms, corridors, and meeting space. We completion expected in early Marcel. Both projects are timed for lower demand periods to minimize disruption. Turning to our 4 Marriott Autograph Collection hotels, our hotels in Orlando and Savannah transitioned to their new names on September 1, followed by our hotels in Charleston and Mountain Brook on October 1.
The Orlando hotel is now named Hotel Bowdoin The Savannah hotel is now Hotel Oriel. The Charleston Hotel is now Hotel Emeline. Mountain Brook is now The Lytle Park Hotel. As a reminder, the hotels remain part of Marriott's Autograph Collection and the new identities reinforce the collection's emphasis on distinctive properties capture the character of their local markets We made minor investments in these properties as part of the renaming have also rebranded the primary restaurants and bars in both Orlando, and Charleston. As with the management transition to Davidson earlier this year, renaming were completed with no meaningful disruption to hotel operations, we look forward to the benefits of these repositionings under Davidson's management.
With that, I will turn the call over to Atish.
Atish D. Shah: Thanks, Barry. I will provide an update on our balance sheet while through our updated guidance and provide some early thoughts on 2027. First, our balance sheet continues to be a source of strength. At quarter end, we had approximately $1.4 billion in outstanding debt. Approximately 3 quarters of which was at fixed interest rates. Our weighted average interest rate at quarter end was 5.55%. Our leverage ratio is calculated under our credit facility was approximately 4.4x trailing 12 month net debt to EBITDA down from 5.2 times at the end of 25. Over time, we expect our leverage ratio to achieve our long term target of sub-4x net debt to EBITDA.
As a reminder, we have no preferred equity or senior capital. Our debt maturities continue to be well laddered, a weighted average duration of 2.6 years at quarter end. The only debt maturity next year is the Marriott San Francisco Airport mortgage loan, which we intend to pay off with existing liquidity early in the second quarter. At that time, 28 of our 29 hotels will be free of property level debt. As to liquidity, we ended the third quarter with $161 million in available cash, excluding restricted cash, $500 million revolving line of credit continues to remain fully undrawn. Therefore, total liquidity at quarter end was $661 million.
As previously reported, our Board authorized a third quarter dividend of $0.14 per share Our dividend continues to reflect the use of NOLs. Which while we prioritize the uses of capital that we believe drive the most shareholder value, including investments in our existing portfolio. We did not repurchase or issue any shares during the quarter. We have $97.5 million remaining on our buyback authorization and $200 million of capacity under our ATM offering program. Now turning to our updated 2026 outlook. Beginning with RevPAR, Our RevPAR growth is now expected to be 8% at the midpoint This represents a 250 basis point increase prior guidance and 500 basis points above our initial 2026 guidance.
Increase captures both the strength of the third quarter and a more favorable view of the fourth quarter. Our full year midpoint implies RevPAR growth of roughly 7% for the fourth quarter which is supported by our estimated October RevPAR growth of approximately 8%. On total RevPAR growth, our midpoint is now 7.25%. is 150 basis points higher than prior guidance. As to hotel EBITDA margin, we now anticipate full year expansion of approximately 120 basis points. You will recall that we started the year expecting margin to decline slightly. Cost per occupied room is running up about 2.5% year to date, versus the roughly 3% we had expected when the year began.
As adjusted EBITDAre, have both raised and tightened our range. Now expect to earn $281 million at the midpoint an increase of $8 million from last quarter and an increase of $21 million our initial 2026 outlook. Adjusted FFO per diluted share is expected to be between $2.08 and $2.14 Lastly, we now project $26 million of full year G&A expense an increase of approximately $1 million due to higher incentive compensation expense. Full year income tax expense moves the opposite way and is projected to be $1 million, down from $2 million per prior guidance. For the full year 2026, at the midpoint of our guidance, we expect adjusted FFO per share to grow about 20% versus last year.
From a free cash flow perspective, after capital expenditures and before dividend, we expect over 45% growth versus 2025. On a per share basis, we expect about $1.30 of free cash flow. This equates to a free cash flow yield of over 6% based on our current share price. And again, that is after capital expenditures and before dividends. Looking ahead to 2027, we would like to provide some initial thoughts While it is still early, there are a handful of points we can share. First, on business transient demand, which is the biggest slice of the pie at about 40% of our overall room revenue mix.
We are expecting the momentum we experienced this fall to continue into next year. We expect midweek demand to continue recovering as we are still nearly 7 points behind 2019 occupancy across Tuesday and Wednesday nights, with larger gaps on Mondays and Thursdays. Our operators are conducting corporate rate negotiations now, and we are hopeful for healthy revenue increases from this segment. We expect return to office and a healthy overall labor market to continue benefiting corporate transient demand. Second, as to group demand, which reflects about 35% of our room revenue mix, While group an important part of our mix, we are coming off a couple of very strong years of growth.
By way of reminder, in 2025, glupulin revenue increased about 13% And year to date through September of this year, it increased another 9%. As we look forward, we expect more normalized growth. As of the end of the third quarter, about half of our 2027 group room revenue was definite, is generally in line with our historical pattern. Group room revenue pace for 2027 was down 4% compared to the same time last year. The decline is all second half related, First half group pace is roughly flat, which is important given that it is seasonally stronger half for our portfolio, given Sundal orientation.
Our hotel operating teams are focused on filling the current gaps for the second half of 27. And based on early budget discussions, we are expecting that they will do so in the months ahead. Another point to keep in mind is at this time last year, we had a approximately $2 million of FIFA related group business that was canceled ahead of the term Adjusting for those FIFA blocks, our group pace for the first half of next year would be slightly positive versus flat. Looking across our group markets, the largest gains in 27 group pace are at both our resorts in the Phoenix/Scottsdale area, the Marriott SFO, and each of our hotels in Houston and Orlando.
These gains are being driven primarily by in house group business. Rather than big citywide conventions. The largest declines are concentrated in a few markets that are lapping special events, such as the Super Bowl, FIFA World Cup, or America 250. As well as some soft citywide calendars in markets such as Portland. Third, moving ahead to leisure demand, which drives about 25% of our overall room revenue mix. Our assets in key leisure destinations continue to be well positioned to capture the high end leisure travel few of our leisure focused hotels have meaningful gaps to 2019 occupancy levels. We expect our drive to leisure hotels to continue to fare well from domestic theater markets.
Fourth, new hotel supply continues to be muted. Across our markets, we expect weighted supply growth to be less than 80 basis points in 2027. Following approximately 1% growth in 2026. Across our 29 hotels, almost 40% are in market tracks with no supply growth expected. Next year. Fifth, we are expecting Grand Hyatt Scottsdale hotel EBITDA to continue ramping from a low-$30 million EBITDA range in 2026 to the high-$30 million EBITDA range in 2027. We also expect the F&B improvements at W and the renaming and relaunching for autograph collection hotels to provide incremental year over year growth. Lastly, we want to provide some initial thoughts on the year over year comparison.
Due to this year's special events, we estimated that in 2027, we will have a 50-basis-point RevPAR headwind and a $3 million EBITDA headwind compared to 2026. The impact will be spread across the first 3 quarters of 27. We believe the continued recovery in transient can more than offset this tough comparison. And as we look ahead to 2027, do not expect renovations to generate incremental disruption relative to the amount of disruption expected. This year. In closing, our high quality portfolio positions us well for meaningful earnings growth. Over the next few years, we expect demand to further improve and pricing power to increase. Given the low supply growth backdrop.
The operating leverage of our hotels coupled with the financial leverage of the company, are expected to drive continued growth in earnings and cash flow per share in the years ahead. And with that, we will turn the call back over to Marina to begin our Q and A session.
Operator: We will now begin the question and answer session. Please limit yourself to 1 question and 1 follow-up. If you would like to ask a question please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q and A roster. Your first question comes from the line of David Katz with Jefferies. Your line is open. Please go ahead.
David Katz: Hi. Afternoon, everyone. Thanks for taking my question. All seems to be frankly, moving along quite well. I mean, with a bit of a noisy year, bit of some noise in 2027. I just wonder like, what your appetite and what the opportunity set looks like for you to maybe start playing offense and acquire your next meaningful asset?
Marcel Verbaas: Good afternoon, David. Thanks for the question. Yeah. As you pointed out, I am very pleased with performance this year. And that is been, you know, somewhat reflected in the stock price kind of moving up moving up throughout the year too. Which does make acquisitions a bit more feasible as potential capital allocation decision for us. We talked about over the last couple of quarters it does seem like the opportunity set is probably a little bit better than it has been over the last couple of years. We certainly are looking at potential acquisitions and digging into some ways to potentially pay off. Play offense going 2027. But nothing imminent at this point.
You know, we are obviously staying very diligent in the way that we are reviewing those various opportunities, and we will continue to look at that in line with any other capital allocation decisions we have coming up, which obviously includes some of the paying down of the debts that Atish talked about. And some additional investments into our existing portfolio.
David Katz: Got it. And thank you for that. And as my follow-up, you know, we spend a decent amount of time talking with investors about relationships, you know, with the brands, generally speaking. Not naming names. And over the years, it has seemed as though those are conversations that are always a thing. But they become a bit more of a topic among us these days. And I would love your take on whether what we are hearing today is normal course conversations that always go on or are they just a bit more intense with respect to things like fee structures and loyalty programs, etcetera? Thanks.
Marcel Verbaas: Well, in general, I would say that, we have talked about this before. I mean, we from our perspective speaking, just for us, it is hard to speak for everyone in the industry, but We have very good relationships with the varied brand. Various brand companies. We believe strongly in the value that brands bring to a portfolio like ours, particularly with the type of assets that we own. And there are always conversations going on with stakeholders to make sure that we improve the outlook and growth for a portfolio like ours.
So we, from our side, welcome those discussions and appreciate the fact that the brands are clearly focused too on making sure that the business model works from an ownership perspective.
David Katz: Okay. Thank you.
Operator: Your next question comes from the line of Michael Bellisario with Baird. Your line is open. Please go ahead.
Michael Bellisario: Thanks. Good afternoon, everyone. First question, just so I dig into the group comments. Atish, that you provided. Any stats that you guys can give just on certain markets have more normal comparisons and not being affected by special events or onetime impacts. Just trying to get a better understanding of what the underlying run rate is, ex some of these onetime items that were such big benefits this year.
Atish D. Shah: Yes. Thanks for the question, Michael. So I think if you back out FIFA, as I mentioned, we are down slightly for the full year. And really, it is more a story of first half versus second half. You know, the first half for us actually looks flattish, slightly positive. You can back out at FIFA box that canceled. The second half is down. And frankly, we have got some time to fill in that second half, as I had mentioned. We are about half booked in terms of group business for the full year next year, but second half is about a third booked with 2 thirds left to book. So still plenty of you know, time there.
You know, some of our bigger assets that have done so well over the last couple of years are hanging in there, particularly again, for the first half. And we see some opportunity in some of the markets that I mentioned, like Portland, some of the World Cup markets, Santa Clara, that had the Super Bowl last year. Or sorry, this year. Dallas, Aviara. So some opportunities there for sure, in the second half.
Michael Bellisario: Got it. Understood. And then just switching gears on Scottsdale, I guess, maybe also related to group 2, But just any update on the performance trajectory there? I get the numbers you gave for your expectation for 2027, but any incremental color or learnings from meeting planners? I guess, at this point, do you think the stabilized earnings base at hotel is higher today than it was, say, 12 months ago, given the underlying performance there? Thank you.
Marcel Verbaas: Yeah. A big picture, Michael, I think we are we are on track. We continue to be on track with where we thought we would be. You know, getting to the low $30 millions this year like we have talked about, so that is obviously highly encouraging. We are still seeing good growth going into next year. Booking base is still very good there. So Atish mentioned current expectation, and this is early because we are still going through the budgeting process, is getting to that high $30 millions next year. We still believe we will get to the low $40 millions as a stabilized level like we have talked about before.
And I think part of it is really that strength that we have seen on the group side that has been very encouraging. Because we have talked about this a little bit over the last couple quarters. The backdrop on the leisure side was a little bit more than probably what we would have expected, you know, 18 months ago, 24 months ago. But it really has been kind of filled in by very robust group contribution. So it is all really playing out the way we were hoping it would. So we are we are very pleased with how it looks like we are tracking towards stabilization.
Operator: Your next question comes from the line of Ari Klein with BMO Capital Markets. Your line is open. Please go ahead.
Ari Klein: Obviously, a lot of positive trends out there. Just curious from your perspective, what is really been the biggest delta or upside delta versus your expectations? Is it largely BT related? Is it on the pricing side? Just curious your thoughts there.
Marcel Verbaas: Yeah. I think it is been every segment to some extent. So clearly, we came into the year with a with a very robust group pace. And generally, as the year goes along, you see some of that kind of abating as the year goes on because you do not have a lot of open periods anymore to book. And then things of that nature. But it held up very well in the periods that we thought would be very strong. So the third quarter, we knew was always setting up very nicely compared to where we were last year certainly. And that is all held up very nicely.
I think the biggest upside really has come from the transient side, though. You know, the type of business that you cannot forecast too far out. that is where really the positive surprise has come from. Particularly on the corporate transient side. That has been very robust getting into September and October and driving really a lot of that upside that we are reflecting in the updated guidance.
Barry A. N. Bloom: I think we have seen a meaningful increase, Ari, in compression dates, and that is been driven in part by the good group base I think when you look at it as both Atish and I mentioned, kinda that the Tuesday, Wednesday pattern is really been very, very strong and has provided for a lot of compression on rate. On those nights in many markets and in particular some of markets where you had not been seeing that over the last few years. So. Which are some of our biggest commercial demand driven markets like Santa Clara, San Francisco, Houston, Dallas, I think that is really been a.
Probably something that the piece that we had not forecasted at the start of the year. We certainly hoped for it. But we are very pleased to see that come through.
Ari Klein: Thanks. And then maybe just on Nashville, you know, RevPAR growth, how total RevPAR growth there, but by a little bit. You know, I know you made some F&B changes there. Can you just update us on kind of how that is been progressing and how you are thinking about maybe upside potential there in 2027?
Barry A. N. Bloom: Yeah. I think coming out of the renovation relaunching of the restaurants in as early. Really by early Q2 of this year. I think we are seeing the kind of cadence and progression and growth in the outlets that we had expected to see. Keep in mind, it is 4 outlets all with new names, all with new concepts, and all affiliated with José Andrés. But we are seeing, I think, continue both week over week and month over month. Growth in those outlets in a way that we would have expected the progression to be.
We have always counted on there, I think, was the ability of those restaurants to be a driver of both in all segments of demand. So I first, I think we have seen that in leisure demand that leisure guests are more likely to stay there because they have this choice of world class outlets with a world class celebrity chef whose design the menus for those outlets. I think it is also part of what we have seen in really strong successor this year in the negotiated corporate market where we.
The number of accounts we have picked up that are new, I think is partly related to the hotel itself and the rooms, I think partly related to the opportunities that frequent business traveler has to stay in the hotel for great dining experiences. And then I think the piece we still yet to see and I think is part of what we view as upside for 2027, is the opportunity to really tie group into that and really using a lot of those outlets as private dining spaces for buyouts, both at lunch and dinner.
The hotel is relatively light on meeting space, So I think the ability to provide a really unique experiences in banquets for lunch and dinner within the confines of those and utilizing those menus is 1 of the pieces we think we still have a lot of upside to grow into.
Marcel Verbaas: Yeah. From a financial standpoint, Ari, it is it is obviously early days. Right? And we have talked about this as we talked about rolling this out. To open up 4 new venues all at the same time. there is obviously a lot of heavy lifting on the property's part. So there is certainly some growing pains as you go through that. So it is really optimizing each of those operations. Also optimizing staffing levels, hours, you know, those kind of things. So this is definitely not a 2026 story as it relates to kind of the cash flow impact.
Is really something that is over time needs to start building and where we hope to see really, you know, becoming very fruitful as we go through the next several years.
Ari Klein: Thank you.
Operator: Your next question comes from the line of Chris Darling with Green Street. Your line is open. Please go ahead.
Chris Darling: Thanks. Good afternoon. You posted some pretty encouraging results in markets like Pittsburgh, Philly, New Orleans. These are all some markets where you have a pretty significant amount of operating leverage. And so with that in mind, it would be helpful if you could elaborate on the positive outcome this quarter, but also how you see performance trending in those markets on a go forward basis?
Marcel Verbaas: Yeah. Specifically to the markets you mentioned. So New Orleans, to be fair, came off a very weak base in the third quarter of last year. it is it is obviously an asset that is still operating at a RevPAR level that is pretty significantly below where you see the rest of our portfolio. So we look at that probably not as much as a you know, a driver for us going forward. Markets like Pittsburgh and Philadelphia have been, you know, highly encouraging for us. We have definitely seen we talked about the benefit that we saw in Philadelphia from some of the onetime events.
Clearly, we did have the All Star Game, America 250, World Cup, you know, some things that really did help the market and the property. But overall, there seems to be some really good positive momentum in the Philadelphia markets as opposed to what we saw over the last several years. And, you know, Pittsburgh has, you know, been a really steady performer for us, and has continued to benefit from both playing in know, kind of the leisure entertainment business, but also on the corporate transient side. With big corporate accounts that just really have come back to the office there over the last you know, really over the last few months even.
So we continue to see some really good benefits, you know, from both the leisure and the corporate transient side in that market.
Chris Darling: Understood. Thanks for those thoughts. And then, Atish, in your prepared remarks around the sustainability of BT demand in the next year, I want to say you mentioned a 7 point occupancy gap between levels and, you know, sort of a run rate for BT. Could you maybe elaborate on that point if I had that right and maybe talk about where the opportunity might be greater across your market profile?
Atish D. Shah: Yeah. Why do not I start on that 1, Barry? Can add to it as well. Yeah. The point I was specifically referring to was really about midweek demand where we still have 700 basis points or 7 occupancy points. In to make up relative to where we were on those nights, Tuesday, Wednesday, 39. So pretty gap. Pretty big gap there, and really what I am speaking to there is, frankly, the potential for continued recovery. Then on Mondays and Thursdays, the gap is larger.
So, you know, despite the fact that we have had a really good year of growth in BT, there is a lot more opportunity, and we think over time, that we will continue to normalize and BT will return to prior levels. Certainly, of the things we are seeing both in terms of growth in the economy, trends on return to office, some of the trends on the corporate negotiated side, healthy overall labor market, all those things I think, will contribute to benefiting and there is still a lot of potential just to get back in terms of where we were before.
So that is that is really how we think about BT evolving here over the next couple of years. Certainly a case where there is quite a bit of potential yet remaining for recovery.
Chris Darling: Appreciate it. Yeah.
Operator: If you would like to ask a question, please press 1 to raise your hand. Your next question comes from the line of Jamie Feldman with Wells Fargo. Your line is open. Please go ahead.
Analyst: Hi. This is Connor on with Jamie. Thank you for taking my question. Maybe staying on the corporate transient and the strength there. Are more hotels getting to the point of selling midweek enough to push rate? And is this backdrop showing up in the corporate rate negotiations that you are having for 2027?
Barry A. N. Bloom: For sure, it is showing up in current months. And a big part, I think, of the rate opportunity that we have been able to achieve has been because occupancy is definitely getting more compressed in mid midweek and particularly on Tuesdays and Wednesdays. How that translates to our managers being able to get higher pricing out of the largest volume accounts for 2027. it is still a little too early in the RFP season for us to know definitively. But certainly, historically, they have not had they have not done as well as I think we and other owners would like in terms of pushing rates for the largest negotiated accounts out there.
What we are doing, particularly as we look at this fourth quarter of 26 and look at 2027, is really encouraging our hotels to find opportunities that may be better than the large scale negotiated corporate accounts. Other words, taking more group midweek that may be driving a little lower rate, but driving some substantially improved food and beverage contributions, and really making sure that they. That where they are able to price and where they have accounts around dynamic pricing, working with revenue management systems to really drive rate on those nights where they are where they have compression.
Atish D. Shah: Yeah. The only thing I will add Thank you. And only thing I will add is compression nights for up. For us, we are up about 10% in the quarter and are running up in the kinda mid to high teens percent year over year. Year to date. So that story, which is not just PT oriented, but more broad, but that was a big piece. and 1 of the reasons why not only are you seeing, you know, absolute rate increases, but mix shift that is driving rate increases, you know, as we take more of the retail rack type rates as opposed to lower rate of business across a variety of days of the week, including midweek.
Thank you. Appreciate the color. And maybe with Napa and the ren starting later this year, can you walk us through the EBITDA displacement we should think about for 2027? And whether that is mostly a first quarter event or extends further into the year? Yes. In terms of EBITDA displacement, we talked about roughly the same level of displacement as this year, so $1 million And that $1 million will be more in the first quarter and then a little bit related to some other smaller projects later in the year. So really not a big number overall. You know, for our size company and size portfolio.
So really, the point being that, you know, beyond really the couple projects we talked about, we do not have much in the way of major projects that would be overly disruptive. Thank you.
Operator: There are no further questions at this time. I will now turn the call back to Marcel Verbaas for closing remarks.
Marcel Verbaas: Thanks, Maria. Thanks everyone for joining us today. Obviously, very pleased with our performance in the third quarter. And the outlook for the remainder of this year. We continue to feel we are very well positioned for growth going forward. And we look forward to seeing many of you at the NAREIT conference, in the next several weeks. and we will look forward to reporting again, early in 2027.
Operator: This concludes today's call. Thank you for attending. You may now disconnect.
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