Apple Hospitality (APLE) Earnings Transcript

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Date

Tuesday, Feb. 24, 2026 at 11:00 a.m. ET

Call participants

• Chief Executive Officer — Justin G. Knight
• Chief Financial Officer — Elizabeth S. Perkins

Takeaways

• Comparable Hotels RevPAR -- $118 for the full year, down 1.6% due to lower government and business travel demand.
• Comparable Hotels RevPAR (Q4) -- $107, a decrease of 2.6%, reflecting continued headwinds in certain markets.
• ADR (Annual) -- $159, nearly flat with only a 10 basis point decrease, indicating stable pricing power despite softer occupancy.
• Occupancy (Annual) -- 74%, falling 1.6 percentage points, with weakness concentrated in government and weekday business segments.
• Comparable Hotels Adjusted Hotel EBITDA -- $474,000,000 for the year and $99,000,000 for the quarter, each down 8.6% on lower top-line growth and higher fixed costs.
• Comparable Hotels EBITDA Margin -- 34.3% for the year and 31.1% for the quarter, down 190 and 210 basis points respectively.
• Comparable Hotels Total Revenue -- $1,400,000,000 for the year, a decline of 2.1%.
• Adjusted EBITDAre -- $444,000,000 for full year, down 5.1%.
• MFFO (Funds from Operations) -- $361,000,000, or $1.52 per share for the year; per-share FFO fell 5.6% from the prior year.
• Channel Mix (Q4) -- Brand.com stayed flat at 40%; OTA bookings increased 1.1 percentage points to 14%; property direct grew 0.7 points to 25%; GDS bookings fell 0.8 points to 16%.
• Segmentation Mix (Q4) -- Government bookings dropped by 1 percentage point to 4%; corporate/local negotiated declined 1.5 points to 16%; group mix grew 1.3 points to 15%.
• Expense Management -- Variable hotel expenses rose 0.5% (Q4), with fixed expenses up 7% for the year; payroll per occupied room rose 3% to $41 for the year.
• Asset Sales and Share Repurchases -- Disposed of seven hotels for $73,000,000 and repurchased 4,600,000 shares for $58,000,000, with a 6.5-turn spread in EBITDA multiple following capital investment adjustments.
• Acquisitions -- Completed two acquisitions (Homewood Suites Tampa Brandon and Motto by Hilton Nashville Downtown) using 1031 exchanges, with no further acquisitions planned for 2026.
• CapEx -- Capital expenditures totaled $88,000,000 for the year, consistent with a 5%-6% historical annual spend as a percentage of revenue.
• Portfolio Supply Exposure -- 59% of hotels have no new upper upscale, upscale, or upper midscale competitive supply within five miles as of year end.
• Debt and Liquidity -- $1,500,000,000 total debt outstanding (3.4x trailing EBITDA), 64% fixed or hedged; $9,000,000 in cash and $587,000,000 available on revolver.
• Distributions -- Paid $1.01 per share for the year ($0.96 annualized regular rate), a yield of 7.8% based on recent price.
• Marriott Manager Transition -- Converted 13 Marriott-managed hotels to franchise/third-party management to reduce costs and improve marketability for potential dispositions.
• 2026 Guidance -- Expects RevPAR change between negative 1% and positive 1%; EBITDA margin 32.4%-33.4%; adjusted EBITDAre $424,000,000-$447,000,000; expense growth assumption of 3% total, or 2% CPOR.

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Risks

• Comparable hotels RevPAR and adjusted hotel EBITDA both declined, with management explicitly citing “pullback in government travel” and policy-related disruption as contributing factors.
• Ongoing partial government shutdown and policy uncertainty are expected to continue to create demand risk, with guidance reflecting “a measured base case scenario.”
• Fixed expenses grew 7% year over year, and management views fixed expense inflation as an “expected headwind.”
• Q1 2026 RevPAR is pressured by “challenging comps related to wildfire recovery related business” and incremental weather disruption, lowering the initial outlook for growth.

Summary

Large transactions in 2025 included the sale of seven hotels and strategic share buybacks, reflecting a tactical response to public-private valuation gaps. Management consolidated 13 Marriott-managed assets under third-party management to unlock operational synergies and potential disposition flexibility. New portfolio supply exposure remains low, but market-level performance highlights significant RevPAR variability across assets. Management is guiding to flat RevPAR and stable margins, while excluding unannounced transactions and share-based compensation from adjusted EBITDA and MFFO metrics starting in 2026. Liquidity remains robust with debt maturities well staggered and extensive revolver capacity, supporting future opportunistic actions.

• Property-level initiatives delivered higher group mix and mitigated some government demand losses, as reflected in both segmentation trends and stable ADR.
• Acquisitions funded by 1031 exchanges offset part of asset sales, and recent additions such as Motto by Hilton Nashville Downtown are “ramping nicely.”
• Management expects any material benefit from FIFA World Cup 2026 to accrue late in Q2, with limited impact included in base guidance due to short booking windows.
• The reclassification of share-based compensation in 2026 financial metrics aligns reporting with both internal credit facility covenants and peer REIT practices.
• Individual asset sales remain favored over portfolio deals due to pricing advantages for local owner-operators, as stated by management.

Industry glossary

• RevPAR: Revenue per available room, calculated as total room revenue divided by total available rooms; key measure of hotel performance.
• ADR: Average daily rate, the mean revenue earned for an occupied room per day.
• Adjusted EBITDAre: Adjusted earnings before interest, taxes, depreciation, amortization, and real estate gains/losses; a standardized measure for REIT operating performance.
• MFFO: Modified funds from operations; an industry measure reflecting cash generated by a REIT, adjusted for certain non-cash and non-recurring items.
• CPOR: Cost per occupied room; measures operating efficiency at the property level.
• BAR: Best available rate; a hotel pricing segment representing unrestricted, publicly available rates.
• GDS: Global distribution system; a booking channel commonly used for corporate and travel agency reservations.
• 1031 Exchange: A tax-deferred transaction allowing real estate investors to reinvest proceeds from a property sale into a similar asset to defer capital gains taxes.

Full Conference Call Transcript

This morning, Justin G. Knight, our Chief Executive Officer, and Elizabeth S. Perkins, our Chief Financial Officer, will provide an overview of our results for the fourth quarter and full year 2025 and an operational outlook for 2026. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to Justin.

Justin G. Knight: Good morning, and thank you for joining us today for our fourth quarter and full year 2025 earnings call. Against the challenging backdrop in 2025, our corporate management and hotel teams skillfully executed against strategic initiatives to maximize operating performance, manage expenses, capitalize on dislocations in the stock market, optimize our existing portfolio, enhance our growth profile, and position the Company to maximize shareholder value through outperformance in the years ahead. Our portfolio of efficient, high quality hotels is broadly diversified across 84 markets, with exposure to a variety of demand generators.

During the year, leisure travel remained strong across our hotel portfolio while policy uncertainty and a pullback in government travel impacted midweek demand, temporarily disrupting the steady improvement in midweek occupancy that characterized much of 2024. Our asset management and hotel teams adjusted strategy to optimize the mix of business at our hotels as demand trends shifted, in many cases layering on additional group business to bolster market share and strengthen overall performance.

Portfolio performance. Through the successful navigation of changes in government dependent demand, combined with continued strength in leisure travel, we achieved comparable hotels RevPAR of $118 for the full year 2025, down 1.6% to the prior year. Based on preliminary results, comparable hotels RevPAR declined by approximately 1.5% in January 2026 as compared to January 2025, primarily as a result of challenging comps related to wildfire recovery related business, which benefited a number of our California hotels last year, and the presidential inauguration, which benefited our hotels in the Washington, D.C. area. Winter storms also weighed on January and early February results but occupancies have improved meaningfully with recent weeks showing significant year-over-year growth.

Together with our management teams, we remain focused on ensuring that we are growing market share and prudently managing expenses to maximize the profitability of our hotels. Variable expense growth for our portfolio has moderated, with higher growth in fixed costs during 2025 largely coming as a result of challenging year-over-year comparisons. We achieved comparable hotels EBITDA of $99,000,000 for the quarter and $474,000,000 for the year, resulting in an industry leading comparable hotels EBITDA margin of 31.1% for the quarter and 34.3% for the year.

In January, we successfully completed the transition of our 13 Marriott-managed hotels to franchise, consolidating management with third-party management companies, who were in most instances already operating hotels for us in market, in order to realize incremental operational synergies. We are confident these transitions, together with the select number of additional market level management consolidations, will further drive operating performance at our hotels. In the case of the Marriott-managed assets, the transition away from brand management will also provide us with additional flexibility and increase the marketability of the hotels in the future, as we consider select dispositions.

The Marriott transitions aligned with Marriott’s publicly stated goal to drive incremental efficiencies in their own business and we appreciate their willingness to work with us in pursuit of a mutually beneficial outcome.

Our disciplined approach to capital allocation has been a hallmark of our strategy throughout our history, balancing both near and long term allocation decisions to capitalize on existing opportunities while securing the long term relevance, stability, and performance of our portfolio and maximizing value for our shareholders. While our long-term goal is to grow our portfolio, our stock has traded at an implied discount to values we can achieve in private transactions for much of the past year.

We prudently capitalized on the disconnect by selectively selling assets and redeploying proceeds into the purchase of our own stock, preserving our balance sheet to safeguard against potential macroeconomic volatility, and to protect our ability to act quickly on future accretive acquisitions opportunities. During the year, we sold seven hotels for a combined gross sales price of approximately $73,000,000 and repurchased 4,600,000 common shares for a total of approximately $58,000,000. Shares repurchased during 2025 were priced at around a 2.4 turn spread to dispositions completed during the year, and around a 6.5 turn EBITDA multiple spread after taking into consideration brand mandated capital investments.

Our team has done a tremendous job pursuing opportunistic asset sales that further optimize our portfolio concentration, help to manage portfolio CapEx needs, and free capital for accretive redeployment at a meaningful spread. Pricing for the individual hotels varies. However, as a group, the seven hotels we sold in 2025 traded at a 6.5% blended cap rate, or a 12.4x EBITDA multiple before CapEx and a 4.9% cap rate, or 16.5x EBITDA multiple after taking into consideration the estimated $24,000,000 in anticipated capital improvements.

We were able to use 1031 exchanges to reinvest gains on hotel sales, redeploying proceeds into the acquisition of the Homewood Suites Tampa Brandon, which sits adjacent to our Embassy Suites in market, and the Motto by Hilton Nashville Downtown, which we acquired in late December upon completion of construction. Recent acquisitions have performed well despite headwinds in several markets. The Embassy in Madison, Wisconsin saw meaningful year-over-year improvement as the hotel completed its first full year of operations. And the AC Hotel in Washington, D.C., which was also purchased in 2024, produced full year RevPAR of $205 and a 43% house profit margin despite the meaningful pullback in government travel and a weaker convention calendar.

Four of the six hotels we purchased in 2023 achieved yields in excess of 10% last year, including our SpringHill Suites in Las Vegas, despite meaningful declines in the performance of that market due to lower inbound foreign travel and a weaker convention calendar. The Nashville Motto is ramping nicely, and we continue to have forward commitments for two future hotel development projects, which are currently in early stages, including a dual brand AC and Residence Inn located adjacent to our SpringHill Suites in Las Vegas and an AC in Anchorage, Alaska. The AC in Anchorage has broken ground and is expected to be delivered in late 2027.

Construction has not yet begun on the two Vegas hotels, though current expectations are for the AC and Residence Inn to be completed sometime in 2028. We do not currently have any pending acquisitions slated for 2026.

Through all phases of the economic cycle, we seek to create value for our shareholders by driving incremental earnings per share through accretive transactions that enhance the quality and competitiveness of our existing portfolio and ensure that we are well positioned for future outperformance. We will continue to adjust tactical capital allocation strategy to account for changing market conditions and to act on opportunities at optimal times in the cycle to maximize total returns for our shareholders.

In the near term, we anticipate that we will continue to pursue select asset dispositions where we can redeploy proceeds at a multiple spread, while at the same time managing future CapEx needs, and fine tuning the distribution of our portfolio to increase exposure to potentially higher growth markets.

Disciplined reinvestment in our portfolio is another key component of our strategy and ensures that our hotels maintain competitive positioning within their respective markets and present guests with a value proposition that enables our hotels to drive incremental rate. Our historical annual CapEx spend has been between 5–6% of total revenue, which is a significant differentiator for us relative to our full service peers. Combined with higher margin, the lower CapEx obligation enables us to produce meaningfully more free cash from operations which we then use to fund shareholder distributions and strategic investments.

Our experienced capital investments team leverages our scale ownership to reduce costs, maximize the value of reinvested dollars, and minimize revenue displacement by optimally scheduling projects during periods of seasonally lower demand. For the year ended December 31, capital expenditures totaled approximately $88,000,000. For 2026, we expect to reinvest. Hotel will happen as it reaches the end of its current franchise term, with the determination to change brands informed by competitive supply dynamics within the market and brand incentives. The hotel will continue to operate as a Residence Inn through the renovation returns for our investors.

During the fourth quarter, we paid distributions totaling approximately $57,000,000, or $0.24 per common share, and for the full year, we paid distributions totaling approximately $240,000,000, or $1.01 per share. Based on Friday’s closing stock price, our annualized regular monthly cash distribution of $0.96 per share represents an annual yield of approximately 7.8%. Together with our Board of Directors, we will continue to monitor our distribution rates and timing relative to the performance of our hotels and other potential uses of capital.

Historically, low supply growth continues to materially reduce the overall risk profile of our portfolio, limiting potential downside and enhancing potential upside as lodging demand strengthens. At year end, nearly 59% of our hotels did not have any new upper upscale, upscale, or upper midscale product under construction within a five mile radius.

Throughout our 26-year history in the lodging industry, we have refined our strategy, intentionally choosing to invest in high quality hotels that appeal to a broad set of business and leisure customers, diversifying our portfolio across markets and demand generators, maintaining a strong and flexible balance sheet with low leverage, strategically reinvesting in our hotels, and closely aligning our efforts with the associates and management teams who operate our hotels. In 2025, we skillfully executed strategic initiatives to further maximize operating performance, capitalize on dislocations in the stock market, optimize our existing portfolio, enhance our growth profile, and position the Company for outperformance in the years ahead.

Travel demand for our portfolio has remained resilient, further reinforcing the merits of our underlying strategy. Our guidance for 2026 calls for comparable hotels RevPAR to be flat at the midpoint, which generally aligns with STR forecast for our chain scales. We believe that this represents a measured base case scenario for our portfolio, with early summer potentially benefiting from incremental leisure travel related to the FIFA World Cup 2026, and easier comparisons to periods adversely impacted by cuts in government spending, tariff announcements, and the government shutdown in late 2025. We acknowledge that this guidance could ultimately prove conservative.

With January and February being seasonally lower occupancy months, it is early in the year for us to identify with conviction trends for either business or leisure travel. And as we saw last year, the possibility of policy related demand disruption is real. We are, however, optimistic about the setup for the year and feel we are well positioned regardless of how things play out in the broader economy. We remain confident in the long-term outlook for the hospitality industry, the strength of our portfolio specifically, and our ability to drive profitability and maximize long-term value for our shareholders.

It is now my pleasure to turn the call over to Liz for additional details on our balance sheet, financial performance during the quarter and outlook for the remainder of the year. Thank you, Justin, and good morning.

Elizabeth S. Perkins: While the travel industry faced several macroeconomic headwinds in 2025, we are generally pleased with the performance and resilience of our portfolio. Comparable hotels total revenue was $319,000,000 for the quarter, and $1,400,000,000 for the full year 2025, down approximately 2.1% to the same periods of 2024. Comparable hotels adjusted hotel EBITDA was approximately $99,000,000 for the quarter, and $474,000,000 for the year, down approximately 8.6% as compared to the same periods of 2024. Fourth quarter comparable hotels’ RevPAR was $107, down 2.6%. ADR was $152, down 90 basis points, and occupancy was 70%, down 1.7% as compared to the fourth quarter 2024. For the year ended 12/31/2025, comparable hotels’ RevPAR was $118, down 1.6%.

ADR was $159, down only 10 basis points, and occupancy was 74%, down 1.6% to 2024. Our portfolio continues to outperform the industry, where STR reports RevPAR of $100 and average occupancy of 62% for 2025, highlighting the relative strength of our portfolio demand despite year-over-year disruption. Our teams have done a tremendous job adjusting to reoptimize the mix of business at our hotels where there were meaningful shifts in government and other demand segments, as well as maximizing revenue around special events to strengthen market share and performance for our overall portfolio.

Market performance varied significantly during the quarter, with a mix of strong RevPAR gains in several markets and ongoing headwinds impacting others due to demand shifts and challenging year-over-year comparisons. Our team remains focused on hotel and market specific strategies as well as operational execution to maximize performance. Top RevPAR performing hotels during the quarter as compared to the same period last year included our Embassy Suites in Anchorage, Alaska, which was up almost 42%, our Homewood Suites in Tukwila, Washington, which was up 33%, our Courtyard in Franklin, Tennessee, which was up almost 22%, and our Residence Inn in Renton, Washington, which was up over 21% as the hotel lapsed Boeing strikes in 2024.

Other top performers included our Manassas Residence Inn, St. Louis Hampton Inn, and Nashville Airport TownePlace Suites. Hotels with significant year-over-year RevPAR declines for the quarter included our San Bernardino Residence Inn, our Arlington Hampton Inn & Suites, our Panama City TownePlace Suites, our Huntsville Hampton Inn & Suites, and our Orlando SpringHill and Fairfield Inn & Suites, which benefited from Hurricane Milton business during 2024.

Based on preliminary results for the month of January 2026, comparable hotel RevPAR declined by approximately 1.5% as compared to January 2025. Impacted by travel disruption related to winter weather, challenging comps related to wildfire recovery related business, and the presidential inauguration last year, as well as ramp from our Nashville Motto, which opened at the December. Performance has improved in February, bringing comparable RevPAR growth slightly positive year to date. Turning back to the fourth quarter, weekday occupancy was down 140 basis points and weekend occupancy was down only 50 basis points as compared to the same period last year.

Encouragingly, occupancy growth turned positive in December, with weekday occupancy up 10 basis points after being down around 2% in October and November, and weekend occupancy was up 90 after being down around 1% in October and November. ADR declines were more pronounced on weekdays, down 1% for the quarter while weekend ADR was essentially flat. As previously mentioned, following a pullback in October and November due to travel disruption related to the government shutdown, we began to see improvement in December.

Highlighting same store room night channel mix for the quarter, brand.com bookings were flat year over year at 40%, OTA bookings were up 110 basis points to 14%, property direct was up 70 basis points at 25%, and GDS bookings were down 80 basis points to 16%. Looking at fourth quarter same store segmentation, BAR was around flat at 33% of our occupancy mix, other discounts grew 30 basis points to 31% of mix, corporate and local negotiated declined 150 basis points to 16% of our mix, and government declined 100 basis points to 4% of our mix. Group business mix improved 130 basis points to 15%.

Our fourth quarter channel mix and segmentation trends highlight the relative strength of our leisure consumer, the pullback in government and other business transient as a result of the government shutdown, and our team’s ability to reoptimize and grow property direct and group business where available. We continued to see growth in other revenues, which were up 5% on a comparable basis during the quarter and up 6% year to date, driven primarily by parking revenue and cancellation fees.

Turning to expenses. Comparable hotels total hotel expenses increased by only 1% in the fourth quarter and 1.9% for the year as compared to the same periods of last year, or 2.5% and 3.3% on a CPOR basis. On a same store basis, total hotel expenses increased by only 1% for both the fourth quarter and full year. Total payroll per occupied room for our same store hotels was $43 for the quarter, up 3.5% to the fourth quarter 2024, and $41 for the full year, up 3% versus full year 2024.

Our managers continue to achieve reductions in contract labor, which decreased during the quarter to 7% of total same store wages, down 120 basis points or 14% versus the same period in 2024. Comparable hotels variable hotel expenses increased only 0.5% in the fourth quarter, or 1.9% on a per occupied room basis. Cost control efforts amid occupancy softness kept expense growth muted, with only 80 basis points of comparable operating expense growth, 30 basis points of hotel administrative expense, and flat sales and marketing expenses. Comparable utilities and repair and maintenance expense grew slightly higher at 2% and fixed expenses remained an expected headwind at 7% growth.

Our comparable hotels adjusted hotel EBITDA margin was strong at 31.1% for the fourth quarter and 34.3% for the year, down 210 basis points and 190 basis points as compared to the same periods of 2024. Adjusted EBITDAre was approximately $93,000,000 for the quarter, and $444,000,000 for the full year, down approximately 3.6% and 5.1% as compared to the same periods of 2024. MFFO for the quarter was approximately $73,000,000 or $0.31 per share, down 3.1% on a per share basis as compared to the fourth quarter 2024. For the full year 2025, MFFO was approximately $361,000,000 or $1.52 per share, down 5.6% on a per share basis as compared to 2024.

Looking at our balance sheet, as of 12/31/2025, we had approximately $1,500,000,000 of total outstanding debt, approximately 3.4 times our trailing twelve months EBITDA, with a weighted average interest rate of 4.7%. At quarter end, our weighted average debt maturities were approximately three years. We had cash on hand of approximately $9,000,000, availability under our revolving credit facility of $587,000,000, and approximately 64% of our total debt outstanding was fixed or hedged. The number of unencumbered hotels in our portfolio as of December 31 was 207.

As previously disclosed, in July, we entered into a new $385,000,000 term loan with a maturity date of 07/31/2030, enabling us to stagger our maturities as we approach a recast of our main credit facility in the coming months.

Turning to our outlook for 2026, provided in yesterday’s press release, for the full year, we expect net income to be between $133,000,000 and $160,000,000, comparable hotels RevPAR change to be between negative 1% and positive 1%, comparable hotels adjusted hotel EBITDA margin to be between 32.4–33.4%, and adjusted EBITDAre to be between $424,000,000 and $447,000,000. We have assumed, for purposes of guidance, that total hotel expenses will increase by approximately 3% at the midpoint, which is 2% on a CPOR basis.

Effective 01/01/2026, the Company will begin excluding from the calculation of adjusted EBITDA and MFFO the expense recorded for share-based compensation, as it represents a noncash transaction, and the add back to net income is consistent with the calculation of adjusted EBITDA for the Company’s financial covenant ratios under its credit facilities and is consistent with the presentation of other public lodging REITs.

As Justin mentioned earlier, this outlook aligns with STR forecast for our chain scales, and we believe represents a measured base case scenario for our portfolio, with early summer potentially benefiting from incremental leisure travel related to FIFA World Cup 2026 and easier comparisons to periods adversely by cuts in government spending, tariff announcements, and the government shutdown in late 2025, we acknowledge that this guidance could ultimately prove conservative. Our outlook is based on our current view, which is limited and does not take into account any unanticipated developments in our business or changes in the operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions.

Trends early in the year are always difficult to extrapolate, but we are encouraged by recent improvement in midweek occupancies and GDS bookings. While uncertainty remains elevated and the possibility of policy related demand disruption continues, including the ongoing partial government shutdown, we believe our experience, discipline, and agility will enable us to adapt dynamically to maximize profitability. We remain confident in our team’s ability to successfully navigate shifting market conditions. The strength of our differentiated portfolio has proven resilient across economic cycles, allowing us to preserve equity value in challenging environments and position ourselves to capitalize on emerging opportunities. While we have faced economic headwinds this year, favorable supply-demand dynamics persist.

Our recent capital allocation decisions and portfolio adjustments have enhanced our portfolio positioning and performance, and our solid balance sheet continues to provide us with stability and meaningful flexibility to pursue accretive opportunities in the future. Importantly, we remain focused on the long term and committed to executing our strategy with discipline and patience, ensuring our portfolio is well positioned to deliver growth and value creation for shareholders over time. That concludes our prepared remarks, and we will now open the call for questions. Thank you. We will now be conducting a question and answer session. A confirmation tone will indicate your line is in the question queue.

For participants using speaker equipment, it may be difficult to hear instructions; please ensure your handset is picked up. And again, that is star one if you would like to ask a question.

Operator: And our first question will come from Jack Armstrong with Wells Fargo.

Jack Armstrong: Hey, good morning. Thanks for taking the question. What would you say was the total drag on RevPAR in 2025 from Liberation Day and the government shutdown? And how much of that do you expect to come back as a benefit in 2026?

Elizabeth S. Perkins: Good morning, Jack. It is a good question. I think, as we have progressed through the year, and reported on government being pulled back and related business, whether it be government adjacent that we can identify or general BT related to some uncertainty. You know, we have been clear it is hard to quantify completely. If you look at room nights for government on a same store basis, for the full year, they were down about 12%. And negotiated was down five to 6%. Which really that trend did not start until Doge and certainly ebbed and flowed throughout the year, ending the year down a little bit more with the government shutdown.

So I would say, if you think about it from that perspective and you assume a good portion of that could come back, the total of those could be about a point in occupancy. But, you know, some of that from a 3% for the full year.

Jack Armstrong: Yes. On a comparable basis at the midpoint, you are just under 3% for variable expenses, about 2.7%. And then fixed is just under 5%, so four and a half or so, for fixed expenses at the midpoint.

Elizabeth S. Perkins: Okay. Great. Thank you.

Operator: And our next question comes from Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt: Liz, just you discussed all the moving pieces related to the outlook this year from some of the policy related disruption that went on last year, as well as the event-driven demand coming this year. I am just wondering if the RevPAR growth guidance assumes any volatility. And if you could just kind of maybe provide some of the cadence of how you are thinking about the quarters or first half versus back half of this year? Thanks.

Elizabeth S. Perkins: It is a good question. I think as we think about FIFA World Cup, to the extent we get benefit from that, that would occur probably mostly in late second quarter. You know, we provided in our prepared remarks as well as in the press release last night that, you know, not much of that, if any, is contemplated at the midpoint of our guidance range. You know, it is a little early to know how that might materialize, so we are optimistic about the potential.

So if you think about cadence sort of outside of the guidance range, I would say the end of the second quarter is when we are anticipating for our hotels where we see the most benefit, way the matches are lining up. As we think about the midpoint of guidance, and what was assumed in guidance, you know, moving throughout the year, the cadence is fairly flat in the middle of the year, and then a slight decrease in the first quarter because of the California wildfire comp to last year where we experienced the most benefit. And certainly the weather that we have experienced so far year to date has had some impact too.

And then the fourth quarter, certainly, we would have a little bit more of an increase due to the government shutdown last year. So highest growth in the fourth quarter, weakest quarter first quarter.

Austin Wurschmidt: That is helpful. And then, you know, you did reference you were kind of forced to shift the business mix throughout the year given all the things we just discussed last year. How are you approaching this year with respect to business mix versus last year? And just the potential benefit that could have on ADR from remixing that business you know, last year. Thank you.

Elizabeth S. Perkins: We have actually been incredibly pleased with our team’s ability to bring group into the hotels at attractive rates. And I think as we move forward this year, we expect those efforts to continue. Direct sales to group within market. Ideally, we see improvement in government business, which helps to fill in the gaps, but certainly, benefiting from the efforts of our property level teams in going out and seeking business to replace that was no longer available during the government shutdown. So our expectation would be relative to years prior to last year, know, potentially slightly less government, slightly more group but we will see how the year plays out.

I think what we have demonstrated is that we have a team at our hotels that has the ability to act on existing demand in market. And we have product that is versatile and appeals to a broad variety of potential customers. Thanks for the time.

Austin Wurschmidt: Thanks, Austin.

Operator: Moving on to Ari Klein with BMO Capital Markets.

Ari Klein: Thanks, and good morning. Just going back to the RevPAR outlook, curious just at the high end of the range, that incorporating the fact that comps are getting easier and some of the event tailwinds that you talked about? And then 2025 was characterized more so by weaker occupancy than ADR growth. Is that your assumption for how 2026 will play out as well? Thanks.

Elizabeth S. Perkins: It is a good question. Yes. I mean, I think at the midpoint of guidance, we assumed little impact or benefit from the special events that may happen this year or a return to some of the business we were missing. As you move higher up the range and hopefully beyond the range, it would anticipate some growth in occupancy as we lap those comps, more so than rate. Though, I think that some of the special events to the extent they materialize should provide some rate opportunity as well.

Ari Klein: K. Thank you. And then, Justin, maybe talk a little bit about just what you are seeing as far as the transaction market is concerned? Are you more focused on dispositions at this juncture? Just any color there would be helpful. Thank you.

Justin G. Knight: Yeah. Absolutely. Incredibly pleased with our team’s ability to execute last year, specifically on dispositions. I highlighted numbers during my prepared remarks, but their ability to execute at the multiples they were able to execute gave us a tremendous amount of flexibility to redeploy at spread multiples, which we think will meaningfully benefit us. I highlighted in my prepared remarks that at this point in time, we do not have any acquisitions under contract or currently contemplated for this year. A lot can change as we move through the year, and I think we have demonstrated an ability to be nimble and to adjust strategy based on existing opportunities.

But today, the environment looks very similar to the environment that we experienced last year. And, I think in the near term, it is safe to assume that we will be focused on select dispositions where we have confidence we can redeploy proceeds into higher producing opportunities. And, I think, certainly, at current levels, we see our shares as being attractively priced.

Ari Klein: Thank you.

Operator: I am sorry. And moving on to Rich Hightower with Barclays.

Rich Hightower: Hey. Good morning, guys. Thanks for taking the questions here. I think you mentioned in the prepared comments that occupancy for sort of midweek transient business got a little bit better in December. And maybe just if we could dig into your outlook specifically for that segment in 2026, better or worse? What trends are you seeing sort of within the core corporate transient group of customers.

Elizabeth S. Perkins: Good morning, Rich. So I think we were encouraged, especially post government shutdown, that we saw a return to midweek occupancy in December with some slight growth midweek. I mean, it was a little better than flat. And I think as we crossed over into the New Year, we have had a noisy year-to-date run here with weather, especially. We have seen signs of, especially in February, signs of good midweek occupancy growth, so we are encouraged there. As we look at segmentation, we will have more data as we round out current months, and we will string together a trend.

It is a little early because we have had some stops and starts with weather to get too excited about the clean week, thinking that there could be some pent-up demand. But what we are seeing is encouraging from a midweek occupancy perspective. We believe that translates to business transient, or the cause of that is business transient, whether it comes through the negotiated segment or not. And one of the reasons that I highlighted in my prepared remarks, we are seeing an improvement in GDS bookings, which is business oriented.

So some positive signs, but as we looked forward and as we contemplated guidance given the stops and starts and, I say every year, on this call at this time that it is just a really difficult time to extrapolate the full year and what we from a business transient standpoint. I think we are a little gun shy because we were seeing slow and steady business transient growth up until the announcement of Doge and those cuts, and that is really when that trend pulled back. Once we see that pick back up and continue, we will get optimistic.

I think one of the things that is important is what Justin mentioned earlier, which is the broad diversification from a demand standpoint that our properties attract, and that the team has done a really good job finding additional business in market, and we will continue to do that whether it is midweek occupancy coming through transient and it is business oriented or whether it is group that we are able to put on the books at attractive rates and then drive incremental retail. So the team continues to be really focused. We do believe there is room to grow from a standpoint. It is the trend we are looking for.

It is just a little too early to get excited about the recent things we have seen. But we are happy that, despite some of the weather, that people have gotten out, and we have seen some improvement here in February.

Rich Hightower: Okay. That is helpful, Liz. And then, my second question, I guess, since we are putting a spotlight on it this quarter, we all noticed that share-based comp is gonna go up ‘26 versus ‘25. So maybe just help us understand the mechanical calculation of how that gets put together every year, if you do not mind.

Elizabeth S. Perkins: Absolutely. So, the mechanics of how we are approaching our total G&A, which would be now corporate expense in the share-based compensation line items, combined is the same. We start the year at target compensation, and then we adjust throughout the year based on how we are performing in third-party estimates from a total return and relative return metric standpoint. And so we are recalibrating to target-based compensation at the beginning of the year like we do. Last year, we underperformed, and so G&A expense, including share-based compensation, was much lower than target. So that is the disconnect between last year and where we are guiding this year at the midpoint.

Rich Hightower: I see. So that there is flexibility throughout the year depending on performance.

Elizabeth S. Perkins: Yes. So that could change in other words? Okay. Got it. It will likely change. As we move through the year. Meaningfully. If you go back and look at the prior year, the delta is less significant.

Rich Hightower: Got it. Thank you, guys.

Operator: Michael Bellisario with Baird has our next question.

Michael Bellisario: Thanks. Good morning, everyone.

Elizabeth S. Perkins: Good morning, Mike.

Michael Bellisario: I just wanna go back to guidance. Can you, just on the expense front here, can you help us bridge the changes in the same store comp pool? I think New York is having a big impact on the headline growth rate as I think that is a very low margin property. And then also, how was Nashville impacting growth rates and margins in ‘26? Any kind of clarification there as sort of, like, the true comp for comp number would be helpful.

Elizabeth S. Perkins: Yes. Okay. So there is a lot of noise, especially since and thank you for highlighting. I did not include it in my prepared remarks, we are adding Hotel 57 back to the comparable set so that creates some noise. It is a lower margin asset, and so normalizing 2025 comparable for 57 would have a 40 basis point impact on 2025 margin. So that is one thing to note. When you look at same store total growth at the midpoint, that is actually 1.6%. The additional increase comes from adding Hotel 57 back in, and then, of course, we have Tampa that is off, not part of the same store set that we bought earlier last year.

So that is impacting total growth rates, but same store is 1.6%, which is something we are proud of, especially given the top line at the midpoint. You know, we are getting some benefit from not having brand conferences in 2026, which we had in 2025. There also have been some fee reductions for the brands, and we will benefit from that. That is probably a net benefit of all three of those things combined $5,000,000.

Michael Bellisario: Got it. That is helpful. And then similarly just on the manager changes, I know previously you sort of touched on qualitative expectations, but is there any lift explicitly included in your outlook now for 2026?

Justin G. Knight: Not really at this point. And I think we continue to feel good about how the transitions will materialize, remembering that there are some incremental costs in the beginning of any manager transition. Our base case expectations are that we would be offsetting transition costs through more efficient operations as we move through the year, with the primary benefit of the transactions being realized in future years. I think that is, as is the remainder of our guidance, a reasonable base case or a measured base case. As we interact with management at those properties, their expectations for how they might perform are meaningfully higher.

Michael Bellisario: Helpful. That is all for me. Thank you.

Operator: And as a reminder, if you would like to ask a question, please press star one. And we will go next to Jay Kornreich with Cantor Fitzgerald.

Jay Kornreich: Hi. Thanks. I just wanted to ask as we move closer to the World Cup, which is tough to pencil. How are you guys thinking about, I guess, just the potential upside to your portfolio either from people attending the games, maybe international travelers extending vacations between games? And what would you estimate as the booking window before the games actually begin?

Justin G. Knight: A lot of good questions there. I want to clarify. We are incredibly excited about the potential for incremental business and incremental travel related to the World Cup. Our team, both at our corporate office and our management teams, are intently focused on working to ensure that we maximize the opportunity, which means layering the appropriate business into the hotels, taking group where appropriate and early bookings, and then blocking rooms to maximize rate as we get closer to the games.

The booking window is still short, and so I think a significant part of the reason that, at the midpoint of guidance, we are not reflecting the optimism we have about the potential business is because from our perspective, it is too soon to tell. As we get closer and are in a better position with more business on the books, we will also be in a better position to quantify the actual impact. I think as we have had discussions with our property teams and as we have thought more broadly about how things might play out, we anticipate that this could be a meaningful driver of incremental business as we move through the year.

We just are not yet, based on business that we have on the books, in a position to give you a really good estimate.

Jay Kornreich: Okay. That is it for me. Thank you.

Operator: Our next question comes from Kenneth G. Billingsley with Compass Point.

Kenneth G. Billingsley: Good morning. Thanks for taking my questions here. Two of them here. Is that one on EBITDA growth? So you have expressed a lot of conservatism on the call with regard to growth expectations, revenue being below lower than expense growth guidance. How much is that conservatism impacting your EBITDA guidance, which is lower than last year? How much of it is your conservatism versus just the fewer hotels that are in the comps?

Elizabeth S. Perkins: You know, a portion of it will be that we sold assets last year. Though, you know, we also were adding Zamato and Hotel 57 back into the pool of assets. So I think for the most part, it is revenue driven, and it is top line driven. But, certainly, there are some puts and takes with hotels sold and, again, the new property as well.

Kenneth G. Billingsley: Okay. Thank you. And then on the Marriott franchise transition, I think it is 13 of them. You mentioned is how do you expect improved returns by doing that transition? Can you talk about where you see that opportunity? And then the other part is does it make them more marketable assets by having them under the franchise agreement?

Justin G. Knight: So to answer the second part of your question first, it makes them infinitely more marketable. We have tremendous amount of flexibility to sell at this point those assets unencumbered by management, which meaningfully increases the potential buyer pool. And, even assuming operations remain constant in terms of net income produced by the assets, we see an ability to the extent we were to sell any of these assets to unlock significant value. Outside of that, I think there are two primary drivers of the that we anticipate for incremental profitability from these assets.

The first is that we are, in most cases, consolidating management within markets with management companies that we already have operating in market, which we believe will drive cost savings both on the formerly Marriott-managed assets as well as our other assets in market as we share expenses and build presence with specific management companies in those markets. And then outside of that, Marriott from an efficiency standpoint, that has not been one of their strengths, especially as they work to deploy themselves against the types of assets that we own, and so we also anticipate meaningful reductions in overhead allocations to the properties, which will support a stronger bottom line.

I think outside of that, we expect that our managers will bring increased focus and attention to the properties which has potential to drive incremental top line results, meaning stronger rate and occupancy of the hotels. But our primary underwriting was on the cost side and easily justified the transition just through anticipated cost savings.

Kenneth G. Billingsley: K. Thank you.

Operator: And moving on to Chris Darling with Green Street.

Chris Darling: Thanks. Good morning. Justin, in the prepared remarks, I want to say you said that 59% of your hotels have no new construction within, I believe, five mile radius. I think back over the last couple of years, I think that number has sort of consistently gone higher, although sequentially it looks like it went lower this quarter. Wondering if you could dig in a little bit, anything idiosyncratic driving that change, and maybe just a broad overview of what you are seeing in the supply backdrop would be helpful.

Justin G. Knight: Absolutely. So from a supply standpoint, we continue to feel incredibly good about the picture. And I have highlighted on past calls and continue to believe that it meaningfully changes the risk profile of our portfolio, reducing downside risk and improving upside potential as the demand picture improves. Some of the subtle adjustments are nuanced and driven by changes to our overall portfolio. So when you look at the assets that we have been selling and the types of markets that we have been selling out of, those are, in some instances, lower supply markets, and the net result has been shrinking the total number of assets, increasing our concentration in some individual markets.

And so, on the margin, the difference that you are seeing between the number we reported last and the number now has as much to do with kind of subtle shifts in our portfolio as it does change in outlook or incremental supply. I think what we have historically been accustomed to in terms of supply growth in our markets is meaningfully greater exposure than we have now. And given the dynamics that continue to exist between construction costs and profitability, we see a meaningful impediment to increased supply growth for the foreseeable future.

Chris Darling: Okay. That makes sense. Helpful to hear sort of the nuance there. As a follow-up, if we circle back to the capital allocation discussion, what is the level of appetite you are seeing among private buyers for portfolio deals these days? Or is it safe to say, you know, one-off deals still represent best execution?

Justin G. Knight: You know, we, and I have commented in the past. Our team continues to probe the market with various size potential portfolio transactions. To date, we continue to see more attractive pricing for individual assets. I think that potentially shifts as we see industry numbers improve more universally. As investors in order for us to achieve portfolio premiums, generally speaking, investors need to see an industry level trend that would advantage them from buying in scale. And what we are finding more often is that we are able to maximize value by creating the story around an individual asset, for often, a local owner-operator that has ties to the individual market and ability to bring incremental efficiencies to the property.

So I think based on our track record over a more extended period of time, I think we have demonstrated an ability to pivot as we see changes in the overall marketplace. For the near term, my expectations are that we will be likely transacting on individual assets, but we will continue to probe and look for other opportunities.

Chris Darling: Alright. Understood. Appreciate the time.

Operator: And this now concludes our question and answer session. I would like to turn the floor back over to Justin Knight for closing comments.

Justin G. Knight: We appreciate you taking the time to join with us this morning and are excited about the year ahead of us. As always, I hope that as you are traveling, you will take the opportunity to stay with us at one of our hotels, and we look forward to providing you with updates as we continue through the year.

Operator: Ladies and gentlemen, thank you for your participation. This does conclude today’s teleconference. You may disconnect your lines and have a wonderful day.

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