Host Hotels & Resorts, Inc. (HST) Q3 2026 Earnings Call Transcript

Jaime N. Marcus: 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. In addition, on today's call, we will discuss certain non-GAAP financial information, as FFO, adjusted EBITDAre 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 @hosthotels.com. 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 1 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 James F. Risoleo, president and chief executive officer and Sourav Ghosh, executive vice president and chief financial officer. With that, I would like to turn the call over to Jim.

James F. Risoleo: Thank you, Jaime. 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 EBITDAre of $347 million an increase of 8.8% over last year. And adjusted FFO per share of $0.39. Which was up 11.4% compared to the third quarter of 2025. Year-to-date, compared to 2025, adjusted EBITDAre and adjusted FFO per share were up 6.5% and 8.3% respectively. Comparable hotel RevPAR improved 8.8% compared to the third quarter of 2025 and comparable hotel total RevPAR improved 7.3% driven by rate growth, strong leisure, group, and business transient demand, higher food and beverage revenues. Comparable hotel EBITDA margin increased 90 basis points year over year to 25.2% as rate growth more than offset higher wage expense. RevPAR 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 RevPAR in the quarter. Growth was driven by leisure transient, bolstered 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 RevPAR growth in the third quarter. For the full year, the World Cup contributed For the full year, the World Cup contributed approximately 70 basis points of gross RevPAR 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. 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 DC, San Francisco, and New York. Turning to Maui, Strong demand drove RevPAR growth of nearly 14%, and total RevPAR growth of 12% despite weather related disruptions. In fact, Maui accounted for more than 2 thirds of our resort RevPAR growth in the quarter. We now expect our Maui properties to generate approximately $122 million of EBITDA in 2026. A $2 million increase over our prior guidance. While Maui outperformed our expectations, storms in Hawaii impacted third quarter comparable hotel RevPAR growth by 25 basis points and full year comparable hotel RevPAR growth by 40 basis points. Including the Kona low 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. 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. On the capital allocation front, yesterday, we announced the acquisition of the leasehold interest in the 195 room, 1 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 10.2x 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 RevPAR of $1.13 thousand RevPAR of $615, and EBITDA per key of approximately $100 thousand. Further enhancing the quality of our portfolio. The 1 Hotel Brooklyn Bridge was the first new build for 1 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 thousand square feet of meeting space, multiple food and beverage outlets, a 10-treatment-room, Bamford wellness spa, a fitness center, underground parking, and a rooftop pool. The property also features Barbuda, Brooklyn. 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 submarket and further strengthens our relationship with the 1 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 the 308 room Renaissance Dallas at Plano Legacy West Hotel for approximately $172 million in cash. The purchase price represents an 11.2x EBITDA 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 RevPAR and EBITDA per key basis based on estimated full year 2026 results. With expected total RevPAR of $380 RevPAR of $200, and EBITDA per key of approximately $50 thousand. Further enhancing the geographic diversification of our portfolio. The acquisition establishes Host's presence in the high growth Dallas Fort Worth market, through a uniquely positioned asset in the Plano Frisco submarket. The Renaissance Plano features 16 suites, 35 thousand 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 2,000 companies in the area, the submarket is well positioned to benefit from continued corporate relocations and planned entertainment district development. Together, these acquisitions add 2 high quality assets at attractive 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 10.7x EBITDA multiple for these 2 acquisitions is more than 1 turn below the recent trading multiple of our shares. And substantially completes the reallocation of proceeds from the 4 Seasons 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 EBITDAre and FFO guidance. 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 EBITDAre. 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. Renovations at the Ritz Carlton Naples, Tiburon, guest room renovation phase at the New Orleans Marriott are complete. The Westin Kearland 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 2 transformational capital programs in 2026, which are expected to offset most of the EBITDA disruption at those properties. Looking at other ROI projects. We completed the final phase of the 4 Seasons branded condo development at the Walt Disney World Resort during the second quarter on time and within budget. 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 million to $600 million This includes approximately $255 million to $280 million of investment focused on redevelopment repositioning, and ROI projects as well as $10 million to $15 million of property damage reconstruction associated with the Kona low rainstorm in Hawaii. 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 4 Seasons Orlando. Our continued portfolio reinvestment remains a key differentiator. And we believe it is a driver of host outperformance. Once the second Marriott transformation 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 2,026 hotel EBITDA. At the 21 properties where post renovation performance has stabilized, RevPAR index share has increased by nearly 9 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 RevPAR and total RevPAR guidance estimates to approximately 6.756%, respectively. We are also increasing our adjusted EBITDAre guidance to $1.865 billion, representing a $35 million or 2% improvement. 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 RevPAR expectations by 400 basis points and our adjusted EBITDAre expectations $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. 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, continued 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, and 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. With that, will now turn the call over to Sourav.

Sourav Ghosh: 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 2 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. Banker 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 Center 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 changing growth, and holiday outperformance. Maui, Washington DC, San Francisco, and New York generated more than half of the transient room revenue increase. 6% in the quarter driven by rate growth despite approximately 600 basis points of renovation impacts. Hawaii led resort performance with double digit transient RevPAR growth at all 4 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 July 4 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%. In all cases, recent holiday results and upcoming holiday transient pace are driven by broad based strength 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 DC generated over 40% of the growth during the quarter. San Francisco's growth was led by technology demand while DC 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. 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. 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 banquets contribution. 2027 group revenue pace is led by our properties in Phoenix, Washington DC, New York, and Orlando. Turning to margins, Comparable 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 improve 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. Turning to our outlook for 2026. As Jim mentioned, we are increasing our comparable hotel RevPAR and total RevPAR guidance estimates. As a result of our outperformance year to date and improved expectations for the fourth quarter. 2 thirds of the increase in our guidance reflects our strong third quarter results while the remaining third reflects improved expectations for the fourth quarter. We now expect comparable hotel RevPAR and total RevPAR to grow approximately 6.75% and 6%, respectively, compared to 2025. For the fourth quarter, we expect high single digit RevPAR growth an improvement from our prior guidance supported in part by estimated RevPAR growth of 6.5% in October. Our guidance assumes a stable operating environment with the continuation of the trends we saw through the first 3 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. 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 EBITDAre guidance is $1.865 billion, This represents a $35 million or 2% improvement over our prior guidance midpoint driven by outperformance in the third quarter and improved expectations for the fourth quarter. Our adjusted EBITDAre guidance midpoint includes estimated EBITDA of $31 million from operations at the Don Cesar, $11 million from Alila Ventana Big Sur, and $6 million from the 1 Hotel Brooklyn Bridge and Renaissance Plano, which were acquired in the fourth quarter. All 4 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 base pricing benefit. 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 and E reserves and $1.5 billion of revolver capacity with an adjusted leverage ratio of 2.3x. This balance sheet strength provides meaningful flexibility to pursue capital allocation opportunities and continue driving outperformance. In October, we paid a quarterly cash $0.20 per share. 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.

Operator: To allow time for as many participants as possible, please limit yourself to 1 question. We will now begin the question and answer session. Please limit yourself to 1 question. 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 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. First question comes from the line of Michael Bellisario with Baird. Your line is now open.

Michael Bellisario: Thanks. Good morning, everyone.

James F. Risoleo: Morning, Mike.

Sourav Ghosh: Question for Good morning.

Michael Bellisario: Just a question maybe for Sourav here. But Jim can chime in too. Could you dig into and sort of remind us on margins and flow throughs? that is where we have been getting the most questions lately, just some of the dynamics between Q3 and Q4 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? Thanks.

Sourav Ghosh: 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. Are as we said in the prepared remarks, our total expense per occupied room grew only 3% that is 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 will remind everybody, as we have 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 is the CBO piece of it, as you rightly pointed out. And that is true every single year. It is always a weakest quarter. 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 you know, will go up by about call it 5 points or so from the 25 to say somewhere around 30 based on the implied midpoint. That effectively 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 we. 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 over year flow through is exceptional and so was the 90 basis points margin expansion.

Michael Bellisario: Appreciate that. Thank you.

Operator: Your next question comes from the line of David Katz with Jefferies. Your line is now open.

David Katz: You have given some pretty good detail with respect to 2027. I wanted to maybe see if we can go a step farther. You know, there. there is there is obviously a fair amount of you know, tailwinds that are out there. You know, what visit. What do we need to see right, in order for 2027 to be a year of growth? Is that going to necessarily gonna require some robust RevPAR growth for the market overall? 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. Thank you.

James F. Risoleo: Yeah. As you know, David, we will. We will 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 are going to have continue to have tailwinds in know, San Francisco and Maui. San Francisco is definitely back and, you know, had a terrific quarter, in San Francisco this past third quarter. You know, Maui is forecasted to contribute a $122 million of EBITDA, full year EBITDA, notwithstanding the impacts of the Kona low rainstorm and 2 hurricanes that caused a significant amount of business disruption. So you know, feel good about how we are set up in those 2 markets. You know, Saurabh mentioned festive pace. Which carries over into January. That is a feeling really good as well. I think it is about 14%. Year over year. And, importantly, you know, we will be bringing a number of our premier assets back online. HTCP, the Hyatt Transracial Capital Program will be done. The last asset to come online is Grand Hyatt. Manchester Grand Hyatt in San Diego. it is a 1.6 thousand-room, hotel. The Venetian villas will have a full year run rate, which they have not had before. And some of the Marriott transformational capital program assets will be coming back online as well. So we. When you when you take those specific tailwinds to host that, we feel really good about how things are set up. 1 of the really encouraging things, that, we saw happen in Q3 was the growth in business transient room nights. you know, 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 have looked out, for the balance of this year to Demand 63 and a couple of other sources for this year and you know, what they. What the forecasts are looking like for 2027, and it is all it is all very positive. I mean, it. You know, we are anticipating a pickup continued pickup in business transient. So and lastly, you know, the affluent consumer. I mean, you know, we continue to see you know, spending at our properties. You know, the properties are renovated, and people are coming. They are spending a lot of money. When they get there, they are they are spending, out of room as well. Golf revenues are up. Spa revenues are up. Outlet revenues are up. And we do not see that slowing down by any means. We are very optimistic with the with the setup we have for 27.

David Katz: Appreciate the help. Thank you.

Operator: Your next question comes from the line of Chris Woronka with Deutsche Bank. Your line is now open.

Chris Woronka: Hey. Good morning, guys. Jim, I guess maybe to follow-up on your very recent comments about the BT. You seen any change in booking windows or things like that on BT? Sounds like Q3 was a lot stronger than you initially thought. You kind of had Julie in the bank when you reported. So looking at things like September, I mean, is this is this more BT, or is this more groups kind of going above their. The blocks on what. Whether it is rooms or F&B? Just trying to get a sense as to how kinda how the quarter evolved and also your outlook for BT and whether the windows have changed much. Thanks.

James F. Risoleo: Yeah. Sure, Chris. I mean, the booking window is still relatively short term. Saw a strong pickup in BT in the month of August, and, you know, it was led by San Francisco and Washington DC. And I do not think the booking patterns have really changed at all from prior.

Sourav Ghosh: And, I will 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 is a sort of stabilized from year over year risk basis. We did not really see meaningful growth into April, May, June. But then you also had the special event impact. So at that point in time, we did not see significant, BT pickup. Then in Julie, 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, you know, particularly for the third quarter, 40% of that growth really came from San Francisco, and, DC. 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.

James F. Risoleo: 1 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 are seeing.

Chris Woronka: Great. Thanks, guys.

Operator: Your next question comes from the line of Smedes Rose with Citi. Your line is now open.

Smedes Rose: Hi. Thanks. I wanted to, maybe switch gears a little bit and you about your acquisitions that you have 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?

James F. Risoleo: Sure, Smedes. Well, you know, we are really delighted to be able to complete these 2 acquisitions. I think that they feel out the portfolio nicely. They further enhance our geographic diversification. I will talk about Plano first. You have heard me talk in the past about our desire to invest in the Dallas market. And this is the place that you want to invest if you are going into the Dallas market as all the businesses are moving north. They are moving to Uptown and Plano and Frisco. And this asset is a incredible piece of real estate. You know, it has 35 thousand square feet of meeting space. It will contribute $50 thousand per key in EBITDA this year. It will be 1 of our top-25 assets. The asset was, owned by a lender. It was a somewhat of a distressed deal. It was marketed by 1 of the brokerage firms, but, we were able to really, you know, bring our resources to bear and, get ahead of, of the process. And you know, 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, you know, the complex where the property is located, it consists of a 240-acre park And I mentioned in my prepared remarks that 75 Forbes 2,000 companies are located there as well as a lot of high end retail you know, F and B activities and luxury residential. So we are really excited about that. It fits into the portfolio really well. You know, the 1 Hotel Brooklyn Bridge, that is our 4th 1 hotel That was a direct negotiated deal with Starwood. You know, we are delighted to have had that property to the portfolio, particularly in that location in Brooklyn. it is the first purpose-built W Hotel. It opened in 2017 as did the Renaissance. So they are both new and fresh. And no near term capital needed for either property. As well. Brooklyn Bridge, has multiple F and B outlets. it is got 12 thousand square feet of meeting space. A Bamford spa, Jonathan Waxman, has Barbuda on the ground level. You may recall that we have, Jonathan Waxman in our 1 hotel Central Park in JAMS. that is his concept as well. And that asset's gonna contribute a $100 thousand per key in EBITDA. These are 2 really solid acquisitions that, that round out the portfolio nicely. You know, it is nice to be the owner of choice. You know, the buyer of choice. We have the ability to get in, analyze a deal quickly, you know, meet deadlines, move fast, and, you know, the fact that we are on hotel No. 4 now with Starwood, in the 1 hotel brand, I think, says a lot. With respect to deploying additional capital this year, We certainly are looking at opportunities in the marketplace You know, some are marketed opportunities, and you know, not that much, I would say, that is, quote, purely being marketed today is exciting and of interest. But we are working on some off market opportunities as well and I. I am optimistic that we are gonna be able to talk about another trans. At least 1 other transaction over the next you know, call it 60 to 90 days. And, we are we are sourcing deals with the overarching goal of creating shareholder value as these 2 did with a combined EBITDA multiple of 10.7x. And with an eye toward maintaining geographic diversification.

Smedes Rose: Thank you.

Operator: Your next question comes from the line of Duane Pfennigwerth with Evercore. Your line is now open.

Analyst: Now. Hi. This is Peter on for Duane Thanks for taking the question. Just on the occupancy growth in the quarter, could you just kind of compare that between maybe Monday, Tuesday nights versus Friday, Saturday nights and as you look forward into Q4 and into 2027 budgeting, what is 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.

Sourav Ghosh: 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 op growth as well, particularly at the resort properties. So it was 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, you know, we feel pretty good about business transient growth and the momentum that we have seen over the past couple of months. So we. And you look at right now, we have about a 7-point occupancy gap relative to pre pandemic. So that is that has come down. It used to be an 8-point occupancy gap. There certainly is room to make up that occupancy. Next year. But we have also seen pricing power. So I think we will see a combination of both as we go into next year, but certainly expecting a continued demand growth, particularly from BT. Additionally, when you, we talked about our group pace for next year, our total group revenue pace, that is a combination of both AUC and RACE. So we will see some AUC possibly from group as well. So it will be a combination, and, hopefully, momentum as we get into next year on the business transient side.

Operator: Next question comes from the line of Logan Epstein with Wolfe Research. Your line is now open.

Logan Epstein: Yeah. Thanks for taking the question, and good morning. Just 1 of the drivers you talked about in 2027 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 we are lapping the Super Bowl in San Francisco? Thanks.

Sourav Ghosh: Yeah. Pace for San Francisco is in right now 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 I am not in a position to provide any specific numbers. But our expectation is that Maui and San Francisco have meaningful tailwinds for next year particularly given the fact when you think about sort of our guide for Maui, this year, we had a $120 million is what we are guiding to in terms of EBITDA. For 2026, and that is despite the impact from the Kona low storms and the other storms that touched Hawaii. So overall, we saw more growth this year than even what we were expecting, and we expect that to continue into next year. I would say the same for San Francisco. it is not only the group pace, but also the BT growth which is gonna have a meaningful impact for San Francisco in 2027. Yeah.

James F. Risoleo: Logan, for Q4, just that, you know, I can talk about Q4. We have numbers. For the balance of this year. The RevPAR forecast for Maui is 15% for the fourth quarter. For San Francisco, a stat there that might be helpful for you is the quarter 4 group pace is 14%. So quarter 3 RevPAR for Sam. Fran was 9%. So it is a. it is very healthy recovery in both markets.

Operator: Your next question comes from the line of Chris Darling with Green Street. Your line is now open.

Chris Darling: Thanks. Good morning. Going back to the transaction market, it seems like the focus right now is on the 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?

James F. Risoleo: Well, Chris, as, we have talked many times in the past, we are always looking, at opportunities to continue to improve the overall quality of the portfolio. And you know, we test the market from time to time. And, you know, we are testing the market as sit here and speak today, but, we have nothing, to talk about right now. On the, on the disposition front. So there does seem to be, you know, some pretty good momentum out there in the in the transaction space right now, notwithstanding, you know, where interest rates are, trending. But I think the fundamental operating backdrop combined with really, you know, 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 do not want to own for the long term.

Chris Darling: Fair enough. Thank you.

Operator: Your next question comes from the line of Richard Hightower with Barclays. Your line is now open.

Richard Hightower: Hey. Good morning, guys. I was hoping you could help us 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 kinda backfill business that did not happen in 2026? And was replaced by World Cup? Or is there some you know, fundamentally better or worse way to think about sort of June, Julie next year? Thanks.

Sourav Ghosh: Hey, Richard. 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. When you think about sort of the total EBITDA impact that somewhere in the neighborhood of $15 million to $17 million of EBITDA impact, In the grand scheme of things, it is not a very big dollar amount that we need to make up. Group pace is already pretty strong, especially when we look at the, the second quarter for next year. And that obviously is because we had World Cup business during that time, and there was not incremental group. It was mostly transient. During the World Cup. So we feel very good with the way 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 are pretty confident in terms of being able to bridge that gap during that special event. Good.

Richard Hightower: Thanks.

Operator: Your next question comes from the line of Michael Hirsch with JPMorgan. Your line is now open.

Analyst: Hi there, and thank you for taking my question. Regarding your comment on low supply growth, 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?

James F. Risoleo: Sure. I think the, you know, the supply setup is as favorable to hotel owners as it is ever been. You know, coming out of the pandemic, you know, people who were, developers were you know, more in a position to manage through the assets that they owned. And now we have seen costs escalate. Construction costs have escalated in a in a meaningful way combined with where the interest rate market is, where the debt market is. it is it is difficult to make certainly, you know, assets that would be competitive with hotels that we own, pencil. And, you know, as you look out to, say, even 28, Michael, it is it takes a long time to, to build a full service, hotel, an upper upscale property. It takes years. I mean, you have to go through you know, design, acquire a site, go design, go through permitting, and then you are looking at probably, you know, minimum 24 months construction period. So you know, they. there is a lot of demands on the construction industry today. Given the build out of data centers. it is expensive. Labor is not that easy to find. And, you know, for all those reasons, that, that gives us optimism that this SPI picture is going to remain in check for the foreseeable future.

Sourav Ghosh: Yeah. And I will add the in construction pipeline. it is still 31% below pre pandemic levels.

Operator: Next question comes from the line of James Feldman with Wells Fargo. Your line is now open.

Analyst: Hi. Thank you. This is Connor on for Julie. Maybe looking at Q3 performance relative to what you expected going into the quarter, which markets surprised you most to the upside and downside, and anything you would call out on underlying drivers in those markets?

Sourav Ghosh: Yeah. I would say San Francisco and DC, certainly surprised us to the upside driven by the business transient growth that we saw in those, 2 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 did not 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 we were surprised by, Because thus far, we had not seen as much demand growth. It was more all coming from rate.

Analyst: Thank you.

Operator: We have reached the end of the Q&A session. I will now turn the call back to James F. Risoleo for closing remarks.

James F. Risoleo: 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.

Operator: This concludes today's call. Thank you for attending. You may now disconnect.