Host Hotels & Resorts (NASDAQ:HST) Q3 2026 Earnings Call

0:00 Thank you and good morning, everyone. Before we begin, please note that many of the comments made today are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information such as FFO, adjusted EBITDA RE, and comparable hotel level results. You can find this information together with reconciliations to the most directly comparable GAAP information in yesterday's earnings press release, in our 8-K filed with the SEC, and in the supplemental financial information on our website at hosthotels.com.

0:59 The operational results discussed today refer to our 73 hotel comparable hotel portfolio in 2026. The comparable hotel portfolio excludes the Don Cesar and Alila Ventana Big Sur, which was closed for over 30 days due to a wildfire evacuation mandate. The comparable hotel portfolio also excludes the One Hotel Brooklyn Bridge and Renaissance Dallas at Plano Legacy West Hotel, which were acquired in the fourth quarter. With me on today's call are Jim Risoleo, President and Chief Executive Officer, and Sourav Ghosh, Executive Vice President and Chief Financial Officer.

1:46 With that, I would like to turn the call over to Jim.

1:50 Thank you, Jaime, and thanks to everyone for joining us this morning. We continue to outperform our expectations in the third quarter, building on strong operating and financial results in the first half of 2026. In the third quarter, we delivered adjusted EBITRE of $347 million, an increase of 8.8% over last year, an adjusted FFO per share of 39 cents, which was up 11.4% compared to the third quarter of 2025. Year-to-date compared to 2025, adjusted EBITDA RE and adjusted FFO per share were up 6.5% and 8.3% respectively.

2:38 Comparable hotel REVPAR improved 8.8% compared to the third quarter of 2025 and Comparable Hotel Total Repar improved 7.3%, driven by rate growth, strong leisure, group and business transient demand, and higher food and beverage revenues. Comparable Hotel Evening Margin increased 90 basis points year-over-year to 25.2% as rate growth more than offset higher wage expense. Repar growth in the third quarter meaningfully exceeded our expectations. with broad-based strength across markets and business mix. In fact, 23 of our 24 domestic markets delivered increases in comparable hotel rep part in the quarter.

3:28 Growth was driven by leisure transient fostered by special events, group demand pickup, and improving business transient demand. Looking at World Cup performance, We estimate that the event contributed approximately 100 basis points of red part growth in the third quarter. For the full year, the World Cup contributed approximately 70 basis points of gross red part growth, which is consistent with our prior expectation. Turning to business mix, transient revenue grew by approximately 12%, the strongest growth since early 2023. accounting for more than 80% of the room revenue increase in the third quarter.

4:13 Growth was driven by both rate and occupancy, unlike the first half of the year, which was primarily rate driven. We saw particularly strong transient performance in Maui, Washington, D.C., San Francisco, and New York. Turning to Maui, strong demand drove rep part growth of nearly 14%. and total Red Park growth of 12%, despite weather-related disruptions. In fact, Maui accounted for more than two-thirds of our resort Red Park growth in the quarter. We now expect our Maui properties to generate approximately $122 million of the EBITDA in 2026, a $2 million increase over our prior guidance.

4:59 While Maui outperformed our expectations, Storms in Hawaii impacted third quarter comparable hotel red part growth by 25 basis points and full year comparable hotel red part growth by 40 basis points. Including the Kona Lo storm earlier this year, we estimate Hawaii weather events will impact full year EBITDA by approximately $10 million, of which $7 million is attributable to Maui. Turning to business transient. Revenue was up 9% in the third quarter, led by both room night and rate growth. Importantly, business transient room night growth was up in the mid-single digits, an encouraging sign of building momentum for the segment going forward.

5:47 Group room revenue for the quarter was up 5% year over year, driven by short-term bookings and corporate groups. Our definite group room nights on the books increased to $4 million for 2026. In full year 2026, total group revenue pace is up 6% to the same time last year, with the fourth quarter pacing up nearly 10%. Turning to ancillary spending, food and beverage revenue grew 6%, spa revenue grew 2%, and golf revenue grew 4%. Continued growth in ancillary spending underscores the strength of the affluent consumer and the benefits of our strategic portfolio investments in recent years.

6:35 On the capital allocation front, yesterday we announced the acquisition of the leasehold interest in the 195-room One Hotel Brooklyn Bridge for $202 million in cash. The property has 82 years remaining on the ground lease with a government nonprofit lessor. The purchase price represents a 10.2 times EBITDA multiple and an approximately 8.2% cap rate based on estimated 2026 results. The property is expected to rank among our top 10 assets with estimated total rev par of $1,130 RevPar of $615 and EBITDA per key of approximately $100,000, further enhancing the quality of our portfolio.

7:29 The One Hotel Brooklyn Bridge was the first new build for One Hotels, and it sits on an irreplaceable piece of property on the East River along the Riverfront Park and adjacent to the Brooklyn Bridge. Opened in 2017, The hotel is a LEED Gold Certified luxury property with Manhattan skyline views and 195 oversized rooms, including 29 suites. The hotel has 12,000 square feet of meeting space, multiple food and beverage outlets, a 10 treatment room, Bamford Wellness Bus, a fitness center, underground parking, and a rooftop pool. The property also features Barbudo Brooklyn.

8:15 The restaurant concept from James Beard award-winning chef, Jonathan Waxman. The hotel benefits from convenient Manhattan access, strong Brooklyn demand drivers, and significant barriers to new supply. The acquisition expands our luxury presence in New York into a new sub market and further strengthens our relationship with the One Hotel brand. Brooklyn has emerged as an extension of Manhattan, with high-end dining and retail, a growing technology hub, and a significant concentration of fashion and entertainment companies. We also announced the acquisition of a fee-simple interest in the 308-room Renaissance Stalus at Plano Legacy West Hotel for approximately $172 million in cash.

9:08 The purchase price represents an 11.2 times EBITDA multiple and an approximately 7.9% cap rate based on estimated 2026 results. The property is expected to rank among our top 25 assets on a total rev par and EBITDA per key basis based on estimated full year 2026 results with expected total rev par of $380, rev par of $200 and EBITDA per key of approximately $50,000. further enhancing the geographic diversification of our portfolio. The acquisition establishes host presence in the high-growth Dallas-Fort Worth market through a uniquely positioned asset in the Plano Frisco Submarket.

9:57 The Renaissance Plano features 16 suites, 35,000 square feet of meeting space, multiple food and beverage outlets, an outdoor pool, a fitness center, and an attached parking garage. As the only hotel within Legacy West, a premier 240-acre mixed-use development anchored by major corporations, Class A offices, luxury residences, and high-end retail, the hotel benefits from strong business, transient corporate group, and social demand. With more than 75 Forbes Global 2000 companies in the area, The submarket is well positioned to benefit from continued corporate relocations and planned entertainment district development.

10:45 Together, these acquisitions add two high-quality assets that attracted pricing, expand our presence in key growth markets, and enhance the quality, performance, and geographic diversification of our portfolio. They reflect our disciplined approach to capital allocation and our commitment to generating long-term shareholder value. Taken together, the blended 10.7 times EBITDA multiple for these two acquisitions is more than one term below the recent trading multiple of our shares and substantially completes the reallocation of proceeds from the four season sales earlier this year. Additionally, the acquisitions are immediately accretive to earnings and are expected to generate $6 million of EBITDA during our 2026 ownership period, which is included in our adjusted EBITDA RE and FFO guidance.

11:43 Compared with the interest income we would have earned on the cash invested, the combined acquisitions are expected to contribute approximately $4 million of incremental adjusted EBITDA RE. Turning to portfolio reinvestment. As of the third quarter, the Hyatt Transformational Capital Program is approximately 90% complete and on track for completion by the end of this year. The final asset in the program, the Manchester Grand Hyatt San Diego, is expected to be substantially completed by year end. We also made additional progress on the second Marriott Transformational Capital Program. which is approximately 50% complete and is tracking on time and under budget.

12:32 Renovations at the Ritz-Carlton Naples Tiburon and the guest room renovation phase at the New Orleans Marriott are complete. The Westin Kierlin and the Ritz-Carlton Marina Del Rey are currently under renovation. In the third quarter, we received $7 million of operating guarantees related to our transformational capital programs. We expect approximately $19 million in operating profit guarantees from our two transformational capital programs in 2026, which is expected to offset most of the EBITDA disruption at those properties. Looking at other ROI projects, we completed the final phase of the Four Seasons branded condo development at the Walt Disney World Resort during the second quarter on time and within budget.

13:25 To date, We have closed on 29 of the 40 units, including 21 of 31 mid-rise units and 8 of 9 villas. We expect approximately $18 million of EBITDA in 2026, with $5 million expected to be recognized in 2027. For 2026, our capital expenditure guidance range is approximately $550 to $600 million. This includes approximately $255 to $280 million of investment focused on redevelopment, repositioning, and ROI projects, as well as $10 to $15 million of property damage reconstruction associated with the Konolo Rainstorm in Hawaii.

14:13 We expect $2 million of remediation costs associated with the Hawaii storms this year and an additional $10 million of restoration spending in 2027, with insurance substantially covering losses above our deductible. In addition to our capital expenditure investments this year, we spent approximately $17 million to close out the condo development at the Four Seasons Orlando. Our continued portfolio reinvestment remains a key differentiator. and we believe it is a driver of host outperformance. Once the second Marriott Transformational Capital Program is completed in 2029, we expect to have invested approximately $2 billion in comprehensive renovations across 34 hotels that are projected to generate more than 60% of our 2026 hotel EBITDA.

15:13 At the 21 properties where post-renovation performance has stabilized, Redpar index share has increased by nearly nine points on average, demonstrating the meaningful value created by our disciplined capital allocation strategy. Turning to our outlook for the full year, we once again outperformed our expectations in the third quarter. As a result of our strong performance year to date and improved expectations for the fourth quarter, we are increasing our comparable hotel Redpar and total REVPAR guidance estimates to approximately 6.75% and 6% respectively. We are also increasing our adjusted EBITDA RE guidance to $1,865,000,000 representing a $35,000,000 or 2% improvement.

16:11 Sourav will discuss the assumptions behind these updated estimates in more detail. Building on our outperformance in 2025, we have continued to exceed expectations throughout 2026. Since issuing our initial full-year guidance in February, we have increased our rep part expectations by 400 basis points and our adjusted EBITDA RE expectations by $95 million. Looking ahead to 2027, we remain optimistic about the travel outlook. supported by a favorable demand environment, the strength of the high-end consumer, continued growth in business travel, and historically low supply growth across our markets and chain scales.

17:00 We also expect to benefit from several host-specific tailwinds, including incremental EBITDA from our recent acquisitions, a healthy 2027 total group revenue pace of 6% compared to the same time last year, Continue recoveries in Maui and San Francisco, the ramp up of our transformational capital projects in the Phoenician villas, moderating labor cost growth, and lower property insurance expense. With a high quality portfolio, an investment grade balance sheet, and a proven track record of execution, Host is well positioned to build on our outperformance and deliver compelling long-term value for our shareholders.

17:46 With that, I will now turn the call over to Sourav.

17:50 Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our third quarter operations, our financial results, our updated 2026 guidance, and our balance sheet. Starting with total revenue trends, REVPAR growth outpaced total REVPAR as outsized rates coupled with more than two points of occupancy growth boosted room revenue growth beyond ancillary revenue growth. Comparable hotel, food, and beverage revenue for the quarter grew 6% led by banquet and catering revenue growth. Banquet and catering revenue increased 8% driven by 6% growth in banquet and catering contribution per group room night and increases in group room night volume.

18:38 Banquet growth was broad-based across both hotel types and markets. Restaurant and bar revenue grew 5% in the quarter, driven by our resorts in Maui and Oahu, despite impacts from weather. In addition, we had a particularly strong quarter at the Orlando World Central Marriott. Golf revenue grew 4% and spa revenue grew 2%, driven by our resorts in Naples and Maui, despite impacts from an unusually hot summer in Phoenix and renovations at the Hyatt Regency Coconut Point. Shifting to business mix, transient revenue grew approximately 12% compared to the third quarter of 2025, reflecting broad-based strength in both rates and room nights. Momentum remained strong throughout the quarter, supported by event-driven compression, pricing strength, business transient growth, and holiday outperformance.

19:37 Maui, Washington, DC, San Francisco, and New York generated more than half of the transient room revenue increase. Resort REFPA grew 6% in the quarter, driven by rate growth, despite approximately 600 basis points of renovation impacts. Hawaii led resort performance with double-digit transient REFPA growth at all four of our resorts in Maui and Oahu. These results continue to underscore the strength of high-end demand. Looking at recent holidays, revenue for the 4th of July and Labor Day weekend grew 27% and 10% respectively. Looking forward, transient revenue pace for the total portfolio is up 24% for Thanksgiving week compared to the same time last year, and the festive period is up 14%.

20:32 In all cases, recent holiday results and upcoming holiday transient pace are driven by broad-based trends across the portfolio. Business transient revenue was up 9% to the third quarter of 2025, driven by a 5% increase in room nights. San Francisco and Washington, D.C. generated over 40% of the growth during the quarter. San Francisco's growth was led by technology demand, while D.C. benefited from both corporate and federal government travel. The growth in business transient room nights this quarter highlights the continued recovery in demand with additional upside as volume builds toward 2019 levels.

21:19 Turning to group, revenue was up 5% year over year. Growth was driven by rate alongside modest room night growth. Corporate groups accounted for nearly 90% of the group revenue increase within the quarter for the quarter group room nights up 26%. Short-term bookings range from technology companies in San Francisco to consulting firms in Washington, DC. For full year 2026, we have 4 million definite group room nights on the books, representing a nearly 6% increase since the second quarter. As Jim mentioned, total group revenue pace is up 6% year over year, with particularly strong fourth quarter pace in San Diego, San Francisco, Maui, Miami, New Orleans, and Oahu.

22:11 Looking ahead, our 2027 total group revenue pace is also 6% ahead of the same time last year, driven by rate, room nights, and strong bankers contribution. 2027 group revenue pace is led by our properties in Phoenix, Washington, DC, New York, and Orlando. Turning to margins, Comfortable hotel EBITDA margin expanded by 90 basis points year-over-year to 25.2% as rate growth more than offset higher wage expense. Substantially lower food costs and improved food and beverage productivity also helped offset these cost pressures. As we would expect with higher occupancy, total expenses grew approximately 6% in the third quarter. However, total expenses per occupied room were only up 3%, reflecting our continued work with operators to control costs at the property level.

23:15 Turning to our outlook for 2026, as Jim mentioned, we are increasing our comparable hotel rev par and total rev par guidance estimates as a result of our outperformance year to date and improved expectations for the fourth quarter. Two thirds of the increase in our guidance reflect our strong third quarter results, while the remaining third reflects improved expectations for the fourth quarter. We now expect comparable hotel rev par and total rev par to grow approximately 6.75% and 6%, respectively, compared to 2025. For the fourth quarter, we expect high single-digit rev par growth and improvement from our prior guidance supported in part by estimated RevProc growth of 6.5% in October.

24:08 Our guidance assumes a stable operating environment with the continuation of the trends we saw through the first three quarters of the year, including rate-driven leisure transient strength, favorable group booking pace, and improving business transient demand. We expect a comparable hotel EBITDA margin of approximately 30% up 30 basis points from the midpoint of our prior guidance and 80 basis points above 2025. This performance reflects continued productivity gains achieved with our operators and the benefits of our capital allocation decisions over the past several years. For the fourth quarter, we expect comparable hotel EBITDA margin expansion year over year as rate growth more than offsets higher wage expense.

24:58 For the full year, We continue to expect wage rates to increase approximately 5%, which comprises approximately 50% of our total comparable hotel operating expenses. Our 2026 Full Year Adjusted EBITDA RE Guidance is $1,865,000,000. This represents a $35,000,000 or 2% improvement over our prior guidance midpoint driven by outperformance in the third quarter and improved expectations for the fourth quarter. Our adjusted EBITDA RE Guidance Midpoint includes estimated EBITDA of $31 million from operations of the Don Cesar, $11 million from Alila Ventana Big Sur, and $6 million from the One Hotel Brooklyn Bridge and Renaissance Plano, which were acquired in the fourth quarter.

25:53 All four properties are excluded from our 2026 comparable hotel portfolio in the third quarter. Guidance also includes approximately $7 million of business interruption proceeds related to Hurricanes Helene and Milton, which we received in the first quarter. We also expect to receive business interruption proceeds related to the recent Kona low rainstorm in Hawaii and the wildfire in California, but the timing and amount remain uncertain. Turning to our balance sheet, Subsequent to quarter end, we recast our $2.5 billion credit facility, extending the revolver and term loans through 2031 and 2032. We also expanded the accordion to $1.25 billion and achieved total reductions of 12.5 basis points on revolver draws, 15 basis points on the term loans, and 5 basis points on the facility fee. reflecting both a reset of the pricing grid to current market levels and a new leverage-based pricing benefit.

27:03 Following the recast, our debt has a weighted average maturity of 5.2 years and a weighted average interest rate of 4.8%. Adjusting cash for recent acquisitions and the October dividend, we have $2.6 billion of available liquidity, including $157 million of FF&E reserves and $1.5 billion of revolver capacity with an adjusted leverage ratio of 2.3 times. This balance sheet strength provides meaningful flexibility to pursue capital allocation opportunities and continue driving out performance. In October, we paid a quarterly cash dividend of 20 cents per share.

27:48 As always, any future dividends are subject to approval by the company's board of directors. In closing, our strong year-to-date performance, recent acquisitions, continued portfolio investment, and investment-grade balance sheet reinforce our ability to drive durable earnings growth. Looking ahead, the 2027 tailwinds Jim outlined, including incremental contributions from our acquisitions and capital projects, healthy group pace, market recoveries, business transient demand growth, and moderating expense growth, position host to build on this momentum, return capital to shareholders, and compound shareholder value over the long term. With that, we are happy to take your questions.

28:35 To allow time for as many participants as possible, please limit yourself to one question. We will now begin the question and answer session. Please limit yourself to one question. If you would like to ask a question, please press star 1 to raise your hand. To withdraw your question, press star 1 again. We ask that you pick up your handset when asking a question 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&A roster. Your first question comes from the line of Michael Bellisario with Baird. Your line is now open.

29:19 Thanks. Good morning, everyone. Good morning. Good morning. Just a question maybe for Sourav here that you can chime in to. Can you dig into and sort of remind us on margins and flow-throughs? That's where we've been getting the most questions lately. Just some of the dynamics between 3Q and 4Q in terms of seasonality, fixed versus variable expenses. and then any impacts, good or bad, that it might have impacted flow through for either period.

29:47 Thanks. Sure, Mike. So let me start off by saying that we are absolutely thrilled with the 90 basis points margin expansion that we saw in the third quarter. As we said in the prepared remarks, our total expense per occupied room grew only 3%. And that's important because when you look at the third quarter, We had 210 basis points of occupancy growth, which if you look at prior quarters, we had less than a point of occupancy growth. So when you have occupancy growth, obviously you have variable expenses that come with occupancy growth, so that flows through at a lower percentage. On top of that, I'll remind everybody, as we've said all along, third quarter is always our weakest quarter. When you look at the nominal dollars and you look at nominal ADR, it is like $40 or so lower than every other quarter. In addition to that, it is the lowest banquet and catering contribution dollar. So when you look at both the banquet and catering perspective as well as the nominal rate, the overall margin is meaningfully lower in the third quarter. And that's the seasonal piece of it, as you rightly pointed out. and that is true every single year. It is always a weakest quarter.

31:06 So when you have a very low margin to get a 38% year-over-year flow through for the third quarter is exceptional given where the growth came from. So when you move on to the fourth quarter, our margin will go up by about call it five points or so from the 25 to say somewhere around 30 based on the implied midpoint. That effectively will drive a much higher flow through and the flow through for the fourth quarter in the implied guidance is closer to 50%. So this is just a function of what we are getting each single quarter based on seasonality on the nominal dollar piece, coupled with the fact that we had occupancy growth in the third quarter. So you have to look where the growth is coming from in each quarter and the respective flow through. Every quarter is not the same and Q3 being our weakest quarter, The 38% year flow through is exceptional and so is the 90 basis points margin expansion.

32:08 Appreciate that. Thank you. Your next question comes from the line of David Katz with Jefferies. Your line is now open.

32:20 Morning. Thanks for taking my question. You've given some pretty good detail with respect to 2027. I wanted to maybe see if we couldn't go a step farther. You know, there's obviously a fair amount of, you know, tailwinds that are out there. You know, what do we need to see, right, in order for 27 to be a year of growth? Is that going to necessarily going to require some robust rev par growth for the market overall? You know, do you think you can sort of get there with the tools and the levers that you have, you know, as we sit here today? Obviously not asking for specific guidance.

33:05 Thank you.

33:07 Yeah, as you know, Dave, we'll give you guidance in February on a more specific basis. And, you know, we really like the way we are set up for 2027. Starting with our group revenue pace up 6%, which we think is a good place to be as we go into the year. We're going to continue to have tailwinds in San Francisco and Maui. San Francisco is definitely back. We had a terrific quarter in San Francisco this past third quarter. Maui is forecasted to contribute $122 million of EBITDA, full-year EBITDA, notwithstanding the impacts of the Kona Low Rainstorm and two hurricanes that caused a significant amount of business disruption.

34:05 So we feel good about how we're set up in those two markets. Sourav mentioned Festive Pace, which carries over into January. That's feeling really good as well. I think it's about 14% year-over-year. And importantly, we will be bringing a number of our premier assets back online. HCCP, the Hyatt Transformational Capital Program will be done. The last asset to come online is the Grand Hyatt, Manchester Grand Hyatt in San Diego. It's a 1,600-room hotel. The Phoenician Villas will have a full-year run rate, which they haven't had before.

34:53 And some of the Marriott Transformational Capital Program assets will be coming back online as well. So when you take those specific tailwinds to host, we feel really good about how things are set up. One of the really encouraging things that we saw happen in Q3 was the growth in business transient room nights. You know, BT room nights are still down about 24% relative to where they were in 2019 pre-pandemic. So the fact that we saw business transient revenue go up 9% with over 5% of that being driven by room nights is very encouraging. And we've looked out for the balance of this year to Demand360 and a couple of other sources for this year, and what the forecasts are looking like for 2027.

35:51 And it's all very positive. I mean, we are anticipating a pickup, continued pickup in business transients. And lastly, the affluent consumer. I mean, we continue to see a Spending at our properties, you know, the properties are renovated and people are coming, they're spending a lot of money. When they get there, they're spending out of room as well. Golf revenues are up, spa revenues are up, outlet revenues are up. And we don't see that slowing down by any means. We're very optimistic with the setup we have for 27th.

36:31 Appreciate the help. Thank you. Your next question comes from the line of Chris Warwonka with Deutsche Bank. Your line is now open.

36:45 Hey, good morning, guys. Thanks for the question. Jim, I guess maybe to follow up on your recent comments about the BT, have you seen any change in booking windows or things like that on BT? It sounds like Q3 was a lot stronger than you initially thought, and you kind of had July in the bank when you reported. Looking at things like September, is this more BP or is this more groups kind of going above their blocks on whether it's rooms or F&B? Just trying to get a sense as to how the quarter evolved and also your outlook for BP and whether the windows have changed much.

37:25 Thanks. Yeah, sure, Chris. I mean, the booking window is still relatively short term. We saw a strong pickup in BT last in the month of August. And, you know, it was led by San Francisco and Washington, D.C. And I don't think the booking patterns have really changed at all from prior.

37:51 And I'll add, you know, the first time we actually saw BT room night growth, we had mentioned it was really the month of March. It was in Q1, and then we thought that would continue That's a sort of stabilized from year-over-year risk basis. We didn't really see meaningful growth into April, May, June. But then you also had the special event impact. So at that point in time, we didn't see significant BT pickup. Then in July, BT room nights went up by about 2.5%. And then August went up close to 8.5%. And then September, 4%. So we have seen now... Multiple months of BT room night growth. And as Jim mentioned, particularly for the third quarter, 40% of that growth really came from San Francisco and D.C.

38:42 But we are seeing that growth in every single market, particularly on the tech side, the financial sectors and consulting. So it is encouraging to see that and all expectation is that momentum continues into next year.

38:58 One final data point on that, Chris, is if you look at some of the airline commentary, Delta in particular, on their call, they reported double-digit corporate sales growth and, quote, no cracks in the system. So I think there are some other sources out there that would validate what we're seeing. Great. Thanks, guys. Your next question comes from the line of Smedes Rose with Citi. Your line is now open.

39:28 Hi, thanks. I wanted to maybe switch gears a little bit and ask you about your acquisitions that you've recently completed. Maybe you could just talk a little bit about the sourcing of each of those deals and kind of just generally your assessment of potentially other opportunities and sort of the transaction environment overall.

39:55 Sure, Smith. We're really delighted to be able to complete these two acquisitions. I think that they fill out the portfolio nicely. They further enhance our geographic diversification. I'll talk about Plano first. You've heard me talk in the past about Plano. Our desire to invest in the Dallas market. And this is the place that you want to invest if you're going into the Dallas market as all the businesses are moving north. They're moving to Uptown and Plano and Frisco. And this asset is an incredible piece of real estate.

40:43 It has 35,000 square feet of meeting space. It will contribute $50,000 per key in EBITDA this year. It will be one of our top 25 assets. The asset was owned by a lender. It was somewhat of a distressed deal. It was marketed by one of the brokerage firms, but we were able to really bring our resources to bear and get ahead of the process. Meet some deadlines that were put out there by the ownership group to give us an opportunity to move quickly and take the transaction down. So the complex where the property is located, it consists of a 240-acre park.

41:35 And I mentioned in my prepared remarks that 75 Forbes 2000 companies are located there, as well as a lot of high-end retail. F&B Activities, and Luxury Residential. So we're really excited about that. It fits into the portfolio really well. The One Hotel Brooklyn Bridge, that's our fourth One Hotel. That was a direct negotiated deal with Starwood. We are delighted to add that property to the portfolio, particularly in that location in Brooklyn. It's the first purpose-built W Hotel. It opened in 2017, as did the Renaissance.

42:22 So they are both new and fresh and no near-term capital needed for either property as well. Brooklyn Bridge has multiple F&B outlets. It's got 12,000 square feet of meeting space. A Banford Spa, Jonathan Waxman has Barbuda on the ground level. You may recall that we have Jonathan Waxman in our One Hotel Central Park in Jams. That's his concept as well. And that asset's going to contribute $100,000 per key in EBITDA. So these are two really solid acquisitions that round out the portfolio nicely. It's nice to be the owner of choice, the buyer of choice.

43:10 We have the ability to get in, analyze a deal quickly, meet deadlines, move fast, and the fact that we are on hotel number four now with Sarwood and the One Hotel brand I think says a lot. With respect to deploying additional capital this year, We certainly are looking at opportunities in the marketplace. Some are marketed opportunities and not that much, I would say, that is, quote, purely being marketed today is exciting and of interest. But we're working on some off-market opportunities as well.

43:55 And I'm optimistic that we're going to be able to talk about at least one other transaction over the next 60 to 90 days. We are sourcing deals with the overarching goal of creating shareholder value as these two did with a combined even a multiple of 10.7 times and with an eye toward Maintaining Geographic Diversification. Thank you. Your next question comes from the line of Dwayne Fenigworth with Evercore. Your line is now open.

44:40 Hi, this is Peter. I'm for Dwayne. Thanks for taking the question. Just on the occupancy growth in the quarter, could you just kind of compare that between, you know, maybe Monday, Tuesday nights versus Friday, Saturday nights and And as you look forward into 4Q and into 2027 budgeting, what's kind of the opportunity set of rate versus occupancy? And, you know, what does your instinct tell you on where the industry or where your portfolio will see more growth next year? Thanks.

45:14 Yeah, sure. The occupancy growth that we saw in the third quarter was a mix of both leisure transient as well as business transient. So we did see midweek growth in a meaningful way. And then we did see some weekend off growth as well, particularly at the resort properties. So there's a combination of both, but as Jim mentioned earlier, BT room nights grew over 5%. So BT definitely drove a lot of that occupancy. In terms of what we think will happen next year, as Jim mentioned earlier, we feel pretty good about business transient Thank you so much for joining us. continue demand growth, particularly from BT.

46:25 Additionally, when we talked about our group pace for next year, our total group revenue pace, that is a combination of both AUC and rate. So we will see some AUC possibly from group as well. So it'll be a combination and hopefully momentum as we get in next year on the business transient side. Your next question comes from the line of Logan Epstein with Wolf Research. Your line is now open.

46:54 Yeah, thanks for taking the question and good morning. Just one of the drivers you talked about in 27 was the continued recovery in Maui and San Francisco. Just curious if you could expand on the potential magnitude there and maybe talk about how current pace is trending across both markets and especially focusing on maybe how pace is trending in the first quarter given were lapping the Super Bowl in San Francisco. Thanks.

47:22 Yeah, PACE for San Francisco is in right now for total group revenue PACE is just shy of, I would say, mid-single digits. So low to mid-single digits range. Similar for Maui as it stands right now. But in terms of overall potential, I mean, we obviously do not have budgets from our operators yet and are not in a position to provide any Thank you very much. Overall, we saw more growth this year than even what we were expecting, and we expect that to continue into next year. And I would say the same for San Francisco.

48:22 It's not only the group pace, but also the BT growth, which is going to have a meaningful impact for San Francisco in 2027.

48:33 Logan, for Q4, I can talk about Q4. We have numbers for the balance of this year. The red par forecast for Maui is 15% for the fourth quarter. For San Francisco, a stat there that might be helpful for you is the quarter four group pace is 14%. So quarter three red par for San Fran was 9%. So it's very healthy recovery in both markets. Your next question comes from the line of Chris Darling with Green Street. Your line is now open.

49:17 Thanks. Good morning. Going back to the transaction market, it seems like the focus right now is on deploying your dry powder. But given the favorable fundamental backdrop, is there also an opportunity to accelerate sales of properties that may not be long-term holds for the portfolio?

49:36 Well, Chris, as we've talked many times in the past, We are always looking at opportunities to continue to improve the overall quality of the In the transaction space right now, notwithstanding where interest rates are trending, but I think the fundamental operating backdrop combined with really extremely low to no levels of supply makes it a good time to be a buyer and to be a seller for those assets that we don't want to own for the long term.

50:40 Fair enough. Thank you. Your next question comes from the line of Rich Hightower with Barclays. Your line is now open.

50:50 Hey, good morning, guys. I was hoping you could help us understand maybe as we think about the World Cup comp in 27, what that remixing looks like from a rate, total revenue and occupancy, you know, all the different moving pieces. Does it essentially just kind of backfill business that didn't happen in 26 and was replaced by World Cup, or is there some fundamentally better or worse way to think about sort of June, July next year? Thanks.

51:21 Hey, Rich. So just to level set, World Cup impact this year was 70 basis points for gross basis and about 50 bps on a net basis. And when you think about sort of the total EBITDA impact that Thank you very much. Group Pace is being set up, as well as what we are seeing in terms of transient pace, as Jim mentioned earlier, into next year. So we're pretty confident in terms of being able to bridge that gap during that special event.

52:21 Good. Thanks. Your next question comes from the line of Michael Hirsch with J.P. Morgan. Your line is now open.

52:27 Hi there, and thank you for taking my question. Regarding your comment on How long do you expect that supply tailwind to last? If you could also touch on the new construction environment here. And maybe, you know, could you speak to any new supply looking out to 2028 or 2029 in your key markets?

52:55 Sure. I think the, you know, the supply setup is as favorable to hotel owners as it's ever been. Coming out of the pandemic, developers were more in a position to manage through the assets that they owned. Now we have seen construction costs have escalated in a meaningful way, combined with where the interest rate market is. is where the debt market is. It's difficult to make certainly assets that would be competitive with hotels that we own pencil.

53:46 And as you look out to say even 28, Michael, it takes a long time to build a full service hotel, an upper upscale property. It takes years. I mean, you have to go through Design, acquire a site, go through design, go through permitting, and then you're looking at probably a minimum 24-month construction period. There's a lot of demands on the construction industry today, given the build-out of data centers. It's expensive. Labor is not that easy to find. For all those reasons, that gives us optimism that the supply picture is going to remain in check for the foreseeable future.

54:33 And I'll add the in-construction pipeline is still 31% below pre-pandemic levels. Your next question comes from the line of James Feldman with Wells Fargo. Your line is now open. Hi, thank you. This is Connor on with Jamie. Maybe looking at 3Q performance relative to what you expected going into the quarter, Which markets surprised you most, the upside and downside, and anything you'd call out on underlying drivers in those markets?

55:06 Yeah, I would say San Francisco and D.C. certainly surprised us to the upside, driven by the business trends and growth that we saw in those two markets. I mean, we were expecting growth, certainly, but there was outsized growth. And our leisure markets, the resort markets, continue to outperform. So we had expected the growth. We didn't expect as much growth, particularly in September, which we were pleasantly surprised by. I mean, we did have a group in San Francisco, I believe it was the Salesforce group that moved from October into September, that also helped performance. So overall, I would say it really was the business transient piece and the occupancy growth that we saw in the third quarter, which we were surprised by.

55:53 Because thus far, we haven't seen as much demand growth. It was more all coming from rate. Thank you. We have reached the end of the Q&A session. I will now turn the call back to Jim Risoleo for closing remarks.

56:12 Thank you again for joining us. We always appreciate the opportunity to discuss our results with you, and we look forward to seeing many of you at upcoming conferences. This concludes today's call. Thank you for attending. You may now disconnect.