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Host Hotels & Resorts, Inc. (HST) Q4 2022 Earnings Call Transcript

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Host Hotels & Resorts, Inc. (HST) Q4 2022 Earnings Conference Call February 16, 2023 10:00 AM ET

Corporate Participants

Jaime Marcus - SVP, Investor Relations

Jim Risoleo - President and Chief Executive Officer

Sourav Ghosh - EVP and Chief Financial Officer

Conference Call Participants

Smedes Rose - Citigroup

Anthony Powell - Barclays

David Katz - Jefferies

Chris Darling - Green Street

Chris Woronka - Deutsche Bank

Duane Pfennigwerth - Evercore ISI

Ari Klein - BMO

Robin Farley - UBS

Jay Kornreich - SMBC

Floris van Dijkum - Compass Point

Operator

Good morning, and invited to nan Host Hotels & Resorts Fourth Quarter 2022 Earnings Conference Call. Today's convention is being recorded. At this time, I would for illustration to move nan telephone complete to Jamie Marcus, Senior Vice President of Investor Relations.

Jamie Marcus

Thank you and bully morning, everyone.

Before we begin, please statement that galore of nan comments made coming are considered to beryllium forward-looking statements nether Federal Securities Laws. As described successful our filings pinch nan SEC, these statements are taxable to galore risks and uncertainties that could origin early results to disagree from those expressed and we are not obligated to publically update aliases revise these forward-looking statements.

In addition, connected today's call, we will talk definite non-GAAP financial accusation specified arsenic FFO, adjusted EBITDAre, and hotel-level results. You tin find this accusation together pinch reconciliations to nan astir straight comparable GAAP accusation successful yesterday's net property merchandise and our 8-K revenge pinch nan SEC, and successful nan supplemental financial accusation connected our website astatine hosthotels.com.

With maine connected today's telephone are Jim Risoleo, President and Chief Executive Officer and Sourav Ghosh, Executive Vice President and Chief Financial Officer.

With that, I would for illustration to move nan telephone complete to Jim.

Jim Risoleo

Thank you, Jamie. And acknowledgment to everyone for joining america this morning.

We ended nan twelvemonth pinch beardown operating improvements crossed our portfolio driven by continued complaint strength. For nan afloat twelvemonth 2022, we delivered adjusted EBITDAre of 1.498 billion, each owned edifice EBITDA of $1.573 cardinal successful each owned edifice RevPAR of $196, which helped america execute nan high-end of our afloat twelvemonth 2022 guidance range.

During nan 4th quarter, we delivered adjusted EBITDAre of $364 cardinal and adjusted FFO per stock of $0.44. Our each owned edifice EBITDA of $373 cardinal successful nan 4th fourth was 5% supra 2019, driven by complaint spot retired of room revenues, and disbursal efficiencies resulting from operating improvements.

All owned edifice RevPAR for nan 4th fourth was astir $197, a 60-basis constituent betterment complete nan 4th fourth of 2019. As a reminder, 4th fourth operations were impacted by Hurricane Ian, yet RevPAR each owned edifice EBITDA and EBITDA margins, though exceeded 2019 levels for nan 3rd consecutive 4th since nan onset of nan pandemic. All owned edifice revenues successful nan 4th fourth were up 1.1% complete nan 4th fourth of 2019. While each owned edifice operating expenses were down 40 ground points.

In summation to delivering beardown operating improvements complete nan people of 2022, we continued to beryllium recognized arsenic a world leader successful firm responsibility. While we activity toward achieving our 2025 biology and societal targets, we introduced our 2050 imagination of becoming a nett affirmative company, which is elaborate successful our 2022 Corporate Responsibility Report. We now person a full of 10 LEED certified properties, including 3 LEED Gold hotels, positive our firm headquarters.

In addition, we were named to nan Dow Jones Sustainability Index World which recognizes world sustainability leaders crossed each industries for nan 4th consecutive year, and we were included successful nan DJSI North America for nan sixth consecutive year. Additionally, we were erstwhile again included among nan world's astir sustainable companies successful S&P's Global Sustainability Yearbook and named 1 of America's astir responsible companies by Newsweek.

Subsequent to quarter-end, we amended and restated our existing $2.5 cardinal in installments installation to further heighten nan spot and elasticity of our equilibrium sheet. The statement reflects nary summation successful pricing and incorporates our manufacture starring committedness to ESG by adding incentives linked to portfolio sustainability initiatives, including Green Building Certifications and Renewable Energy Consumption.

On nan superior allocation front, during nan 4th quarter, we repurchased 1.7 cardinal shares astatine an mean value of $15.93 per stock done our communal stock repurchase program, bringing our full repurchases for nan 4th to $27 million. We person astir $973 cardinal remaining capacity nether nan repurchase program. While macroeconomic headwinds proceed to predominate nan headlines, we stay optimistic astir nan authorities of recreation for respective reasons.

First, though leisure rates are moderating, they stay good supra 2019 levels. For context, transient rates astatine our resorts were 52% supra 2019 successful nan 4th quarter, compared to 64% successful nan 3rd quarter. Second, successful nan 4th quarter, we booked 400,000 group rooms for 2023. In full group gross gait is down only 70 ground points to nan aforesaid clip 2019. Third, while business transient request has been uneven, gross driven by this conception improved 440 ground points compared to 2019 connected a quarterly sequential basis.

Small and medium-sized businesses are driving nan business transient recovery, and they correspond a larger stock of our firm request today. According to American Express Global Business Travel, transactions by this conception reached 80% of pre-pandemic levels successful nan 3rd quarter.

Our caller acquisitions continued to lend to our outperformance and are substantially up of our underwriting expectations. Based connected afloat twelvemonth 2022 results, moreover up from nan 7 hotels we acquired successful 2021 put america astatine nan bottom-end of our targeted scope of 10x to 12x EBITDA, good up of our scheme stabilization period.

Looking backmost connected our transaction activity since 2018, we person acquired $3.5 cardinal of assets astatine a 13.7x EBITDA aggregate and dispose of $4.9 cardinal of assets astatine 17x EBITDA multiple, including $954 cardinal of estimated foregone superior expenditures.

It is worthy noting that this quarter, we moved nan 2017 comparison of our each owned edifice results from 2019 to 2022, arsenic our 2022 results bespeak much normalized operations. Comparing each owned edifice 2022 results for our existent portfolio to 2017. We person accrued nan RevPAR of our assets by 9%, [indiscernible] by 15%, nan EBITDA per cardinal by 31% and avoided sizeable business disruption associated pinch superior projects.

Moving backmost to 4th fourth operations and starting pinch nan hurricane update, we estimate that Hurricane Ian impacted our 4th fourth RevPAR maturation by 220 ground points, our adjusted EBITDAre by $15 cardinal and our each owned edifice EBITDA separator by 40 ground points. On a afloat twelvemonth ground that translates to an each owned edifice RevPAR effect of 60 ground points and each owned edifice EBITDA effect of $18 cardinal and an each owned edifice EBITDA separator effect of 10 ground points.

As a reminder, nan Hyatt Regency coconut constituent opened successful November, and we expect to reopen nan remaining excavation accommodation successful Water Park successful June. The Ritz-Carlton, Naples remains closed, and we are targeting a phased reopening strategy opening this summer. Reconstruction astatine nan Ritz-Carlton will heighten nan resilience of nan spot by elevating captious equipment, introducing barren flood-proofing measures and replacing awesome instrumentality pinch much businesslike machinery.

In addition, while nan edifice is closed, we are avoiding early disruption by executing planned superior projects that would person different impacted operations. While we are still evaluating nan full financial impacts of nan storm, we presently estimate nan full spot harm and remediation costs for each impacted properties successful Florida to beryllium betwixt $200 cardinal and $220 million. We are insured for $325 cardinal per sanction windstorm pinch a $15 cardinal deductible resulting successful imaginable security betterment of astir $310 cardinal for covered costs. Based connected our existent reopening plans for Ritz-Carlton, Naples, we judge our security sum is capable to screen substantially each nan spot harm arsenic good arsenic nan near-term nonaccomplishment of business. Thus acold this year, we person received astir $50 cardinal of security proceeds related to our plans.

Continuing pinch 4th fourth results. Transient gross was up 60 ground points compared to nan 4th fourth of 2019 pinch beardown complaint increases making up for nan measurement shortfall resulting from little business transient demand, ray cancellations during nan holidays, colder upwind successful Florida and hurricane displacement astatine Hyatt Coconut Point and Ritz-Carlton, Naples.

Revenue maturation was driven by Orlando, Phoenix and Hawaii, which offset declines successful San Francisco and nan Florida Gulf Coast. Our edifice properties proceed to outperform pinch 13% transient complaint maturation complete 2021. In nan 4th quarter, we had 6 resorts pinch transient rates supra $1,000 led by nan Four Seasons Jackson Hole astatine complete $2,200 and nan Four Seasons Orlando astatine adjacent to $2,000.

Turning to Group. This is nan 2nd consecutive 4th group gross exceeded 2019 driven by 10% complaint growth. In nan 4th quarter, our hotels sold 954,000 group rooms, bringing our full group room nights sold for 2022 to $3.8 million, which represents astir 84% of 2019 existent group room nights. Total group gross for 2022 was down conscionable 11% to 2019 arsenic 6% complaint maturation and [indiscernible] publication helped to offset little demand.

In 2023, we presently person 2.9 cardinal definite group room nights connected nan books which represents 80% of afloat twelvemonth 2022 group room nights. This compares to 71% connected nan books astatine nan aforesaid clip past twelvemonth for 2022, representing a 9-point improvement. Group complaint connected nan books for 2023 is up astir 6% to nan aforesaid clip past year, a 140-basis constituent summation since nan 3rd quarter. In addition, group gross gait is up astir 17% to nan aforesaid clip past year. We are very encouraged by nan ample group guidelines we person connected nan books, peculiarly fixed short-term booking trends.

Sourav will talk much operational item successful our 2023 outlook successful a fewer minutes. In summation to delivering operational improvements, we proceed to execute connected our 3 strategical objectives each of which are aimed astatine elevating nan EBITDA maturation floor plan of our portfolio. As a reminder, our objectives see redefining nan edifice operating exemplary pinch our managers, gaining marketplace stock astatine hotels done broad innovations, and strategically allocating superior to improvement ROI projects.

As it relates to our first strategical objective, it is important to statement that we person achieved nan bulk of nan $100 cardinal to $150 cardinal of disbursal savings associated pinch redefining nan operating model. In bid to execute nan high-end of nan range, we will request to get backmost to 2019 business volumes and arsenic of nan 4th quarter, occupancy was still 10 points beneath nan 4th fourth of 2019.

Turning to portfolio reinvestment. Our 2023 superior expenditure guidance scope is $600 cardinal to $725 million, which reflects astir $275 cardinal of finance for redevelopment, repositioning successful ROI projects. The projects see a transformational renewal of nan Fairmont Kea Lani. The Phoenician Canyon Suites filler description and completing building of nan building description , guestroom renewal and lobby translator astatine Ritz-Carlton, Naples, which was delayed by Hurricane Ian.

To-date, we person completed 14 retired of 16 assets successful our Marriott transformational superior program, and we will complete nan San Diego Marriott Marquis by nan extremity of this month. The last property, nan Washington Marriott and Metro Center is underway, and we expect it to beryllium completed successful May. It is worthy noting that existent 2022 superior expenditures came successful astatine nan low-end of our guidance range. As such, nan midpoint of our 2023 scope is $160 cardinal higher than past year, which is driven by carryover superior and an estimated $100 cardinal to $125 cardinal of superior expenditures related to hurricane restoration work, which we expect to beryllium reimbursed by security claims.

To reason my remarks, we are highly proud of nan results we achieved successful 2022, and we are assured that nan value of our portfolio, our expertise to reinvest successful our assets and our wall equilibrium expanse will let america to proceed our beardown capacity successful 2023.

With that, I will now move nan telephone complete to Sourav.

Sourav Ghosh

Thank you, Jim, and bully morning, everyone.

Building connected Jim's comments, I will spell into item connected our 4th fourth operations afloat twelvemonth 2023 guidance and our equilibrium sheet.

Starting pinch business mix, wide transient gross was up 60 ground points to nan 4th fourth of 2019, driven by a 22% complaint growth. Thanksgiving and nan festive play saw RevPAR maturation of 5% and 6% complete 2019, respectively, driven by complaint maturation of complete 30% for some periods. Despite impacts from formation cancellations and acold upwind successful Florida during nan festive season, occupancy continued to summation sequentially this holiday.

Looking ahead, holidays successful nan first 4th of 2023 are shaping up well. Martin Luther King Junior play achieved a gross that was 22% supra past year, driven by occupancy. Peasants' Day and Spring Break some person gross gait up of 2022. Business transient gross was down 18% to nan 4th fourth of 2019, driven by 2% complaint growth. This is simply a meaningful betterment from nan commencement of 2022 erstwhile business transient gross was down 48% to nan first 4th of 2019. As we person discussed previously, properties are targeting precocious single-digit business transient complaint maturation successful 2023.

During nan 4th quarter, business transient request was successful statement pinch pre-pandemic monthly seasonality and was driven by San Francisco, Washington D.C. and New York, pinch New York conscionable 5% down 2019.

Turning to group. This marks nan 2nd 4th nan gross has surpassed 2019 levels. Group room revenues were 2% supra nan 4th fourth of 2019 driven by 10% complaint growth. While wide group room request was down 8% to 2019, properties successful New York and Phoenix achieved group request supra 2019 levels.

The short-term booking inclination continued pinch successful nan quarter, for nan 4th group rooms sold up 21% complete nan 4th fourth of 2019. The mostly of nan rooms booked were successful Washington D.C., San Diego, San Francisco and New York. Corporate Group gross was up 6% successful nan quarter, surpassing 2019 for nan 2nd 4th successful a row, driven by a 14% complaint increase. Our capacity was driven by hotels successful Orlando, Phoenix, Maui, New York and New Orleans. All 3 months successful nan 4th had firm group gross up of 2019 driven by complaint and gross was up substantially astatine some normal and edifice properties.

Association Group gross was down 16% successful nan 4th fourth compared to 2019 contempt complaint maturation of complete 7%. The gross diminution was driven by measurement losses successful San Francisco, Boston and New Orleans. However, San Diego, New York and Phoenix had relation group request up of 2019 levels. While relation gross was down successful nan 4th quarter, we saw meaningful pickup successful booking activity for early years successful nan period of December.

Additionally, rates compared to 2019 improved sequentially each period successful nan 4th from up 3% successful October to up 15% successful December. Wrapping up connected groups pinch social, military, educational, belief and fraternal aliases SMERF groups, gross was up 29% complete 2019 driven arsenic by a 14% summation successful rooms sold and a 13% summation successful rate. Sports teams and weddings drove increases successful Washington D.C., Los Angeles and New Orleans.

Shifting gears to margins and expenses, our 4th fourth each owned edifice EBITDA separator came successful astatine 29.5%, which is 110 ground points amended than nan 4th fourth of 2019. We property nan separator description to beardown rates and accrued out-of-room revenues, mixed pinch operating exemplary disbursal efficiencies contempt nan truth that Hurricane Ian negatively impacted margins by 40 ground points successful nan 4th quarter. As expected, nan separator spread to 2019 narrowed comparative to anterior quarters owed to continued inflationary pressures and much normalized staffing levels astatine our hotels.

Our efforts to redefine nan operating exemplary proceed to output affirmative results moreover pinch occupancy still meaningfully beneath 2019 levels and elevated unit connected costs rates which ended nan twelvemonth up 5% connected a year-over-year basis.

As elaborate successful our net release, moving forward, we will cease position of each owned edifice results and return to a comparable position for our edifice level results. We judge this will supply investors pinch amended knowing of underlying maturation trends for our existent portfolio without impacts from properties that knowledgeable closures lasting one-month aliases longer owed to renovations aliases spot damage. We person removed Hyatt Regency Coconut Point and nan Ritz-Carlton, Naples from our comparable operations successful our afloat twelvemonth 2023 forecast owed to closures caused by Hurricane Ian.

Turning to our outlook for 2023. Current macroeconomic headwinds and nan imaginable for an economical slowdown are competing pinch nan separator recovery. That said, we proceed to beryllium optimistic astir nan early of travel. Our capacity this twelvemonth will dangle connected our expertise to support precocious rated business astatine our resorts and nan continued betterment of group, business transient and world inbound travel.

Given nan important macroeconomic uncertainty successful nan 2nd half of 2023, we person provided a wider guidance scope than normal, which assumes a slowdown successful nan 2nd half of nan year. The low-end contemplates a terrible slowdown, while nan high-end assumes a mild one.

For nan first quarter, we expect RevPAR maturation to beryllium betwixt 24% and 27% arsenic a consequence of easier comparisons owed to Omicron, which is expected to bolster afloat twelvemonth growth. For nan remaining 3 quarters, we expect year-over-year RevPAR changes to beryllium down low-single digits astatine nan low-end of our guidance scope to up low-single digits astatine nan high-end of our range.

Looking up to caller trends, preliminary January comparable edifice RevPAR is expected to beryllium astir $184, a 67% summation complete January 2022 and a 3.5% summation complete January 2019. Taken together, for nan afloat year, we expect comparable RevPAR maturation of betwixt 2% and 8% complete 2022. Additionally, staffing levels are person to unchangeable and edifice operating costs are expected to summation successful comparison to 2022.

As a result, we expect comparable EBITDA margins to beryllium down 360 ground points year-over-year astatine nan low-end of our guidance to down 210 ground points astatine nan high-end. Though, we expect comparable edifice EBITDA margins to beryllium down year-over-year, we expect margins successful 2023 to beryllium only somewhat down to 2019 contempt lagging occupancy and 4 years of inflationary pressures. This reflects our efforts to toggle shape nan portfolio and germinate nan edifice operating model. It is peculiarly awesome erstwhile you see that our full disbursal CAGR since 2019 is only 1.1% versus nan halfway CPI CAGR of 4.1%.

The separator diminution year-over-year is driven by person to stable, staffing levels astatine our hotels, higher inferior and security expenses, little attrition and cancellation fees, which totaled astir $100 cardinal successful 2022 and occupancy beneath 2019 levels. As we noted passim past year, 2022 margins were not sustainable, peculiarly erstwhile you see nan constricted services provided astatine galore of our hotels successful nan first half of nan year, nan staffing lag and nan elevated inflationary pressures.

At nan midpoint of our guidance range, we expect comparable RevPAR maturation of 5% compared to 2022, a comparable edifice EBITDA separator of 29% and afloat twelvemonth adjusted EBITDAre of $1.460 billion. Our 2023 afloat twelvemonth adjusted EBITDAre includes an expected $11 cardinal publication from Hyatt Coconut Point and nan Ritz-Carlton, Naples which are excluded from our comparable edifice set. The pre-hurricane estimated publication from these 2 hotels, including nan New Tower astatine Naples was expected to beryllium an further $71 cardinal successful 2023. It is important to statement that we person not included nan business interruption proceeds from Hurricane Ian successful our 2023 guidance.

In 2023, we expect costs rates to summation 5%. In nan aggregate, from 2019 done 2023, we expect costs rates and utilities to summation 20% and security to summation astir 100%. In 2023, we besides expect attrition and cancellation fees to revert to humanities levels.

For context, successful 2019, region and benefits comprise astir 50% of our full comparable expenses, utilities and security comprised astir 5%, attrition and cancellation fees were $50 million, and occupancy is still 10 points beneath 2019 arsenic of nan 4th fourth of 2022.

Turning to our equilibrium expanse and liquidity position. Our weighted mean maturity is 5.2 years astatine a weighted mean liking complaint of 4.4%, and we person nary important maturities until April 2024. As of today's call, we person $2.4 cardinal successful full disposable liquidity, which includes $200 cardinal of FF&E reserves and afloat readiness of our $1.5 cardinal in installments facility. We ended 2022 astatine 2.4x nett leverage. And since our past call, some S&P and Fitch person revised our issuer outlooks to affirmative from stable.

Wrapping up, successful January, we paid a quarterly rate dividend of $0.32 per share, which included a $0.20 typical dividend. The Board of Directors authorized a regular quarterly rate dividend of $0.12 connected our communal banal to beryllium paid connected April 17, 2023, to stockholders of grounds arsenic of March 31, 2023. All early dividends are taxable to support by nan company's Board of Directors though we expect to beryllium capable to support our quarterly dividend astatine a sustainable level, taking into information imaginable macroeconomic factors.

To conclude, we judge our portfolio, our equilibrium expanse and our squad are good positioned to proceed outperforming, and we will proceed to beryllium strategical successful nan existent macroeconomic environment.

With that, we would beryllium happy to return your questions. To guarantee we person clip to reside arsenic galore questions arsenic possible, please limit yourself to 1 question.

Question-and-Answer Session

Operator

[Operator Instructions]. Our first mobility is coming from Smedes Rose pinch Citigroup. Please spell ahead.

SmedesRose

I admit you guys are providing a scope for nan twelvemonth that incorporates a wide scope of macroeconomic outlook. And I'm conscionable curious, what are you specifically seeing successful your business, if anything, that would propose a slowdown successful nan backmost half of nan year, either connected nan group broadside aliases what benignant of visibility you have?

Jim Risoleo

At this constituent successful time, we're not seeing immoderate signs of weakness successful immoderate business segment. Our group gait is performing exceptionally well. I mean, 2022, we ended up, I deliberation pinch 3.8 cardinal group room nights astatine nan extremity of nan twelvemonth which was 84% of 2019 actual. Rate was up 6% successful 2019. 2023, we're very encouraged astir really group is group up. We person 2.9 cardinal definite room nights connected nan books that's a 400,000-room nighttime summation since 4th three. That equates to 80% of 2022 existent room nights. At nan aforesaid clip past year, we were astatine 71%. So we picked up 9 points and nan different really encouraging point is that full group gross gait is up, I think, 17% to nan aforesaid clip past year.

So group is really group up well. And if you spell backmost and look astatine really we're group up comparative to 2019, we're only down 70 ground points successful full gross pace. So nan short-term quality of nan bookings is expected to continue. And arsenic a consequence of nan coagulated guidelines that we person connected nan books, we're encouraged pinch really group will apt execute this year. So nary denotation of immoderate slowdown there. I deliberation your different mobility was related to business transient.

We proceed to spot improvements successful BT. I deliberation BT is going to germinate complete time. BT room nights were down successful 4th 4, I think, astir 20% to 4th 4 of 2019, but we saw a pickup successful bookings from Q3 astir 500 ground points. So business transient gross was down 18% owed to an betterment successful rate. Again, bought up from wherever we were successful Q3, truthful typical corporate, nan encouraging portion connected nan business transient broadside is we expect to spot precocious single-digit complaint increases that is going to hold.

In January, very beardown months for business transient demand. It was nan champion successful nan period for-the-month pickup by our apical accounts. So nary signs of weakness successful nan business transient beforehand astatine all. And 1 point I would constituent out, I deliberation Sourav mentioned it successful his comments, very encouraging that New York City is only 5% beneath wherever it was successful 2019. So nary signs of weakness. We felt it was prudent to springiness a range, fixed nan uncertainty connected nan macroeconomic beforehand that exists today.

Operator

Our adjacent mobility is coming from Anthony Powell pinch Barclays. Please spell ahead.

Anthony Powell

Just a follow-up to that anterior question. I mean, if you were to build a bottoms-up guidance scope for 2Q done 4Q, I conjecture really galore percent points would you beryllium adding to that midpoint? And what does that connote alternatively for a theoretical separator diminution this twelvemonth fixed what imaginable higher RevPAR.

Sourav Ghosh

Anthony, truthful fto maine commencement disconnected by saying benignant of what I said successful my prepared remarks is, nan 2nd half of nan twelvemonth for america successful our guidance assumes immoderate benignant of a slowdown, whether it's astatine nan low-end, which would beryllium a terrible slowdown complete nan high-end, which is simply a mild slowdown. And our midpoint is efficaciously a mean slowdown. The measurement we are reasoning astir it erstwhile you look astatine our guidance is nan 2nd half. I'll benignant of spell done each segment.

From a group perspective, we are assuming that nan 2nd half will only spot astir half nan group room nights prime up successful nan year, for nan twelvemonth compared to 2022. And arsenic you whitethorn recall, 2022 had meaningful successful nan twelvemonth for nan twelvemonth pickup. And arsenic I said successful my prepared remarks, successful nan 4th fourth alone, we had 21% much pickup successful nan 4th for nan quarter. So successful different words, nan anticipation is if location is simply a slowdown, you would person little successful nan twelvemonth for nan twelvemonth pickup. That's connected nan group side. The rates, obviously, successful nan group sides are locked in, truthful that's a positive.

On nan transient side, we expect that 2nd half to beryllium somewhat flattish. So pinch leisure rates being somewhat up driven by our downturn successful normal hotels, but our resorts somewhat level to possibly somewhat down depending connected nan market. So overall, transient rates and occupancy to beryllium astir flattish for nan 2nd half. And truthful erstwhile you really deliberation astir our guidance for nan afloat year, our occupancy ends up being up a mates of points and complaint efficaciously flattish again, each this is tied to nan midpoint.

When you deliberation astir benignant of our separator capacity quarter-by-quarter, reality is nan distribution of EBITDA that we saw successful 2019 is going to beryllium very -- but we are expecting very akin successful 2023. So successful '19, we had, I think, it was astir 27% aliases truthful of our EBITDA came from Q1, astir $29 cardinal from Q2, 20% successful Q3 and 24% from Q4. Very akin benignant of cadence is what we are expecting from 2023.

Operator

Our adjacent mobility is coming from David Katz pinch Jefferies.

David Katz

Jim, I wanted to spell backmost to thing you touched connected successful your remark and conscionable to make judge we're clear astir it. You talked astir immoderate of nan hotels you bought that are, I deliberation you said presently tally complaint successful astir 10x aliases 12x EBITDA based connected benignant of what you paid. Could you conscionable spell backmost to those circumstances and talk astir if we recovered ourselves astatine a 2019 normalized situation were those multiples aliases headdress rates would be.

Jim Risoleo

Well, we don't expect to get backmost to 2019 levels of complaint aliases capacity astatine these properties, David. We are very assured that nan complaint group nan hotels are capable to complaint coming for nan astir part, sustainable. There mightiness beryllium a small spot of a pullback. But we did connection erstwhile we bought each spot what nan EBITDA aggregate was based connected 2019 numbers and what nan headdress complaint was. And I can't show you really pleased we are pinch nan capacity of these properties complete nan past respective years. So we consciousness very assured that we're going to beryllium capable to adjacent to support nan existent rates that we're getting coming taxable to location being a very terrible downturn that's affecting nan consumer. We're conscionable not seeing it today.

Operator

Our adjacent mobility is coming from Chris Darling pinch Green Street.

Chris Darling

Can you supply an update connected '23 group gait crossed immoderate of your larger group focused markets. So reasoning specifically astir San Francisco, New York, Orlando and past possibly immoderate different information points that mightiness beryllium adjuvant arsenic well.

Sourav Ghosh

Sure. So successful position of group gait immoderate of our larger markets, what's trending really well. And I would say, for illustration efficaciously what we person connected nan books for 2023, complete 50% are from markets which are San Diego, Orlando, D.C., San Antonio and San Francisco. So immoderate we person connected nan book for 2023, complete 50% are from those markets. And erstwhile we're looking astatine benignant of citywide data, we are astatine astir 80% of 2019 levels that it relates to citywide and nan markets that are supra that period are Boston, San Antonio, San Diego, Atlanta, Chicago and nan ones which are benignant of beneath that period are Philadelphia, Seattle and surely San Francisco and I would opportunity New Orleans.

Operator

Our adjacent mobility is coming from Chris Woronka pinch Deutsche Bank.

Chris Woronka

Jim, it's a spot of a hypothetical question, but obviously, there's a batch of talk astir getting backmost to anterior aliases possibly not highest occupancy levels, but still having a batch of occupancy to retrieve pinch group and a small spot of corporate. But that pinch nan operation effect that whitethorn travel astatine nan costly rate.

So nan mobility would be, I cognize you don't lick for immoderate 1 metric is it reasonable to deliberation that immoderate of nan much price-sensitive business and opaque business, things for illustration that, you person your operators fundamentally intentionally support that retired of nan business arsenic we spell guardant and that we are structurally little arc but higher rate. Is that a decent measurement to deliberation astir it?

Jim Risoleo

Chris, I'd opportunity it a small differently. It's easy to bargain occupancy successful definite markets astatine definite hotels. We don't deliberation that's nan correct gross guidance strategy. We judge that fixed nan flow-through you get to EBITDA from complaint increases comparative to occupancy increases, which is astir 80% -- 60% for rate, 40% for occupancy that each dollar successful complaint is worthy much money. We proceed to spot occupancy evolve, but we're going to proceed to clasp complaint astatine precocious levels and proceed to summation rates.

I deliberation we're encouraged, successful particular, by group complaint that we've been capable to execute that's locked successful pinch definites connected nan books, up sequentially quarter-over-quarter and for 2023 looking beautiful affirmative for america arsenic good arsenic nan maturation successful business transient complaint arsenic well.

So nan full group gross gait for 2023 is up 17% astatine nan aforesaid clip past twelvemonth and down only 70 ground points to 2019. That's very encouraging to us. So that's nan strategy that we intend to employment going forward. And we are successful favour arsenic a wide connection of cutting complaint to bargain occupancy.

Operator

Our adjacent mobility is coming from Duane Pfennigwerth pinch Evercore ISI.

Duane Pfennigwerth

If we spell backmost successful clip to nan structural separator betterment commentary, your position of nan world whitethorn beryllium backmost successful Q3 of past year, what has been nan biggest alteration aliases biggest astonishment since that time? Obviously, Naples has immoderate lingering impact. But for example, has nan capable complaint connected unfastened position amazed you since nan fall. And past possibly conscionable arsenic a follow-up, while I person you, has your guardant visibility into 2Q changed year-over-year? Maybe you could opposition wherever you guidelines coming connected 2Q versus this clip past twelvemonth and what nan rates connected those guardant bookings look like?

Sourav Ghosh

Sure. So I'll commencement pinch nan 2nd half of your mobility first. In position of rates, we consciousness very bully astir nan rates into Q2 and nan remainder of nan year, what we person connected nan books. And arsenic Jim mentioned, our group complaint is up 6%. We expect business transient rates to beryllium up successful nan precocious azygous digits. In position of existent demand, it is still very short-term booking. And that goes to my remarks of benignant of nan short-term pickup that we are expecting. We saw successful nan 4th quarter, meaningful successful nan 4th for nan 4th pickup that seems to continue. So while we do person a meaningful magnitude of group connected nan books, we are still expecting a important magnitude of pickup successful nan first 4th for nan first 4th and nan aforesaid point successful nan 2nd quarter.

So from a visibility standpoint, I wouldn't opportunity it's incremental, possibly somewhat much incremental comparative to nan 4th quarter. As it relates to our operating exemplary changes, what I do want to constituent retired is we person said nan $100 cardinal to $150 cardinal of savings comparative to 2019. Those disbursal savings, we person achieved a bulk of those savings. And frankly, nan equilibrium of it is really going to beryllium driven by occupancy coming back. We are still, arsenic Jim mentioned, 10 points disconnected of 2019 from an occupancy perspective. And I would opportunity pinch each constituent of occupancy gain, that would equate to astir 30 to 40 bps of separator gain. So that is beautiful meaningful erstwhile you deliberation astir it.

So if we get backmost to benignant of '19 occupancy levels, you're looking astatine anyplace from 300 to 400 ground points of separator improvement. And 1 of nan things I would for illustration to item is erstwhile you look astatine our expenses, specifically to $100 cardinal to $150 cardinal and you comparison that really to 2019, our F&B revenues are down for 2023 to nan midpoint comparative to '19, 1.5%, but our expenses are really down 2%. So it shows that each nan operating exemplary changes and a large portion of it was successful nutrient and beverage has made a immense difference.

Sales and trading disbursal comparative to '19 for 2023, again, to nan midpoint, we'll beryllium down little than 1%. So again, erstwhile you're comparing benignant of nan separator capacity to '19, it really tells nan story. And for illustration I said, we'll beryllium only somewhat down astatine nan midpoint. And of course, astatine nan higher extremity of nan guidance, we'd really beryllium supra 2019.

Operator

Our adjacent mobility is coming from Ari Klein pinch BMO.

Ari Klein

Maybe pursuing up connected nan separator question. What's nan wherewithal to trim expenses if nan macro is simply a small spot much difficult than you expect fixed immoderate of nan labour challenges that we've had complete nan past mates of years.

Sourav Ghosh

Sorry, I was connected mute. Apologies. So I'm assuming you're talking astir what if immoderate benignant of a pullback we tin person if location is simply a slowdown successful nan 2nd half. And nan reality is, I deliberation we now person a playbook going done COVID arsenic to what would request to hap if location is slow down, and that is really a payoff section by department. So we consciousness very assured that if location is simply a slowdown, nan changes that we would really person to make if we are successful that situation? And whether that's modifying hours of operations aliases driving efficiencies successful immoderate azygous department. So we are going to beryllium good prepared for that.

Ari Klein

Got it. And past conscionable connected nan equilibrium sheet. Can you update america connected your privilege and really you're reasoning astir acquisitions, dispositions and underwriting and admittedly much uncertain macro?

Jim Risoleo

Sure. As we beryllium present today, we are successful a very beardown position. And fixed nan equilibrium expanse that we have, group beryllium good positioned sloppy of what happens complete nan people of nan year. As you spot from our CapEx guidance this year, we're going to proceed to put successful our portfolio. Just a constituent of reference complete nan people of 2020 done 2022, we invested $1.5 cardinal successful our assets, which is really a distinguishing facet that sets america isolated from different lodging REITs.

We're good positioned to outperform going forward, and we will proceed to prosecute ROI projects specified arsenic a complete translator Fairmont Kea Lani and description astatine nan Canyon Suites arsenic nan Phoenician and nan completion of our repositioning a caller building astatine nan Ritz-Carlton successful Naples. So we will proceed to look for opportunities to deploy superior successful our assets. Those underwrite mostly to debased to mid cash-on-cash returns, unlevered cash-on-cash returns. So we deliberation that's a very bully spot to free capital.

On nan acquisition front, location are a number of properties successful nan marketplace correct now that we are evaluating. I would conscionable opportunity that nan bid-ask dispersed hasn't travel to nan mediate yet. So for nan near-term, we're not anticipating, erstwhile I opportunity near-term talking astir nan adjacent 60 to 90 days. I'm not anticipating acquiring immoderate assets that could change. I'll conscionable constituent retired that nan Four Seasons Jackson Hole was astir a 30-day process for america which puts america successful a really beardown position because we are nan only subordinate retired location that tin really do a meaningful transaction of our cash.

As we beryllium backmost and look astatine really nan twelvemonth mightiness germinate a search each nan CMBS indebtedness maturities for 2023, 2024. We will spot if definite owners are successful a position wherever they're going to person to waste nan asset, conscionable fixed nan existent liking complaint situation comparative to wherever nan situation was erstwhile they put their existent indebtedness financing successful spot and nan truth that their plus is apt to request a important CapEx because they haven't been capable to put complete nan people of nan pandemic. And I deliberation you could spot america arsenic nan twelvemonth evolves assuming distress presents itself, investing crossed markets that are different than markets that we invested successful 2021 and 2022.

Operator

Our adjacent mobility is coming from Robin Farley pinch UBS.

Robin Farley

I was really going to inquire you astir your acquisition plans. And I deliberation you answered astir of that mobility already. But I'm benignant of intrigued by your past remark astir investing successful different markets than you did successful nan past 2 years. And conscionable wondering if that intends much benignant of alternatively than edifice markets aliases benignant of what that mightiness mean? And then, if I could conscionable inquire a clarification. When you were talking astir your gross pace, group gross gait being down astir 70 bps successful 2018, I conjecture rate, it sounds for illustration it's up precocious azygous digits. So a number of group nights -- are you anticipating being down astir that benignant of precocious single-digit complaint comparative to '19?

In different words, conscionable funny what you're factoring into guidance successful position of erstwhile group you deliberation mightiness make a afloat betterment successful position of room nights and transient nights arsenic well. Thanks.

Jim Risoleo

Sure, Robin. I'll return nan portion of your mobility related to nan finance market. I deliberation arsenic you deliberation astir really we person been deploying superior complete nan past six years aliases so, everything we've done has been to elevate nan EBITDA maturation floor plan of nan company. And erstwhile I opportunity that we're going to beryllium open-minded and look astatine different markets, it's really transaction limited and whether aliases not we deliberation we tin create worth and what we tin do pinch nan underlying EBITDA maturation of that plus going forward. So I said differently, I don't deliberation there's a marketplace successful nan state that has a reddish statement done it, taxable to each of nan underwriting criteria that we employment erstwhile we measure a peculiar hotel. Sourav, do you want to touch guidelines connected nan group?

Sourav Ghosh

Sure. Robin, connected nan group side, yes, you're right. It's efficaciously connected nan group room nights. We are pacing successful benignant of nan precocious azygous digits beneath 2019. The anticipation correct now astatine nan midpoint, again, we would get to astir about 90% of our group room nighttime levels comparative to '19. But of course, remember, for illustration I said, that assumes that we only prime up efficaciously half nan magnitude of group room nights successful nan twelvemonth for nan twelvemonth for nan 2nd half.

Operator

[Operator Instructions]. Our adjacent mobility is coming from Jay Kornreich pinch SMBC.

Jay Kornreich

As it looks for illustration nan 2023 outlook you provided excludes immoderate publication from nan Hurricane Ian impacted hotels. I judge you mentioned a $71 cardinal EBITDA shortfall I'm curious, arsenic we spot those assets coming backmost online passim 2023, if that provides an upside opportunity to nan guidance range. And if there's thing other you person your oculus connected too nan imaginable recession that get amazed to nan upside aliases I conjecture nan downside.

Jim Risoleo

Well, Jay, I deliberation it's important to really item that nan assets affected by Hurricane Ian were anticipated to make $82 cardinal successful EBITDA successful 2023. We person $11 cardinal successful our guidance to nan midpoint. So there's a $71 cardinal spread that is purely related to hurricane disruption. We person not assumed immoderate business interruption proceeds hitting our guidance. So if we were to get business interruption proceeds complete nan people of 2023, that is upside going forward.

So we deliberation that is apt to hap later successful 2023 and into 2024. But I do want to constituent retired that nan $71 cardinal is simply a important magnitude of EBITDA that is going to effect 1 year. It's conscionable this twelvemonth because we're very excited astir nan capacity of nan Ritz-Carlton for afloat twelvemonth 2024. The spot will beryllium wholly transformed. The caller building will beryllium open. We've added 24 rooms [indiscernible] accrued nan suite count of that plus and made a number of different enhancements. So 1 twelvemonth of disruption from Hurricane Ian has costs america a important magnitude for 2023.

Jay Kornreich

Thanks. Maybe conscionable to explain that nan $11 cardinal that you expect successful 2023, could that beryllium looked astatine arsenic a blimpish estimate? Or is that what you expect moreover arsenic some hotels unfastened up during nan year?

Jim Risoleo

I deliberation it's what we expect astatine this constituent successful time.

Operator

Our adjacent mobility is coming from Floris van Dijkum pinch Compass Point.

Floris van Dijkum

A small spot of a mixed connection here. Obviously, you've sewage group gait ahead, very beardown results nan past quarter. If I look RevPAR expectations successful nan first 4th are up, telephone it, 24% to 27%, telephone it, 25%, beautiful beardown yet. If we were to see your business interruption insurance, which, again, you person that security presumably, you're going to get that $71 cardinal of missing EBITDA from Naples. You're looking astatine level EBITDA maturation based connected your consensus. Can you possibly supply immoderate benignant of humanities discourse wherever occupancy successful your portfolio is trending higher connected a longer-term ground and your rate, and your margins are down, aliases your EBITDA is going down.

Sourav Ghosh

Sorry, are you asking historically? If you've seen occupancy spell up and margins spell down, I deliberation nan measurement to deliberation astir it, Floris, arsenic benignant of I person said, comparative to '19, right? Actually, if we spot occupancy spell up, we would really expect separator capacity to amended from wherever nan occupancy stands arsenic of today. I deliberation that's wherever nan upside is. The reality is, we don't person visibility into nan 2nd half of nan year. Therefore, our assumptions are I think, reasonable astatine this clip pinch nan information that we person disposable correct now.

And erstwhile you look astatine nan top-end of nan guidance, actually, nan margins are up comparative to '19. So it really depends connected wherever things style up for nan 2nd half and what benignant of successful nan twelvemonth for nan twelvemonth pickup we spot successful group. And then, you person to remember, business finance benignant of non-residential fixed investment, you're looking astatine only a 70-basis points maturation for nan year. So what we tin expect, it's very difficult to foretell astatine this constituent for nan 2nd half. It's our guidance scope is based connected nan champion disposable information we person today.

Jim Risoleo

Yes, Floris. The 1 point I would adhd is, complete nan people of 2022, for nan 2nd and 3rd 4th call, we were very clear that nan separator capacity we were seeing was not sustainable. And it wasn't sustainable for a batch of reasons. We were not astatine optimal staffing levels. We had a number of hotels wherever afloat services were not being offered to customers. Restaurants were closed, nine lounges were closed, and we consciousness that nan due comparison for margins is 2019.

And successful 2019 levels, moreover down 10 ground points we're only down 57 ground points successful margin. And conscionable to reiterate, we person seen a 4.1% ostentation successful CAGR, a CPI CAGR, and our expenses person only gone up 1.1%. So we really consciousness that we're positioned very well. And arsenic Sourav pointed out, each constituent of occupancy that we get is going to equate to 30 to 40 ground points of separator improvement.

Operator

At this time, I will manus it backmost to Mr. Risoleo for immoderate closing comments you wish to make.

Jim Risoleo

Thank you very much. I would for illustration to convey everyone for joining america connected our 4th fourth telephone today. We admit nan opportunity to talk our quarterly results pinch you, and we look guardant to gathering pinch galore of you successful nan coming weeks and months. Thank you for your continued support and person a awesome day.

Operator

Thank you. This does reason today's conference. You whitethorn disconnect your lines astatine this clip and person a awesome day. And we convey you for your participation.

Editor: Naga



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