Summit Hotel (INN) Q1 2026 Earnings Transcript

Image source: The Motley Fool.

Date

Friday, May 1, 2026 at 12 p.m. ET

Call participants

• President and Chief Executive Officer — Jonathan P. Stanner
• [CFO Title Not Provided] — [CFO Name Not Stated in Transcript]

Need a quote from a Motley Fool analyst? Email pr@fool.com

Takeaways

• Pro Forma RevPAR -- Increased 0.2% year over year, driven exclusively by average daily rate growth.
• March RevPAR -- Grew 4.1%, driven by a 5.6% increase in average rate, offsetting declines in January and February.
• Negotiated Segment RevPAR -- Increased 3% for the quarter and 10% in March, reflecting accelerating business transient demand.
• Urban Market March Performance -- Achieved double-digit RevPAR growth in twelve markets, including Baltimore, Charlotte, Cleveland, Miami, Pittsburgh, San Francisco, and Washington, D.C.
• Headwinds Impacting Q1 RevPAR -- About 140 basis points of drag due to difficult event comparisons, government demand weakness, winter storm Fern, and civil unrest in Minneapolis, mainly affecting January and February.
• Q2 Revenue Pace -- Trending approximately 4% above the same period last year, driven by a favorable event calendar and exposure to the 2026 FIFA World Cup.
• Government-Related Demand -- Declined 12% year over year in Q1, but March increased 3%, with Q2 government pace trending up mid single digits; government demand comprises 5%-7% of total mix.
• Asset Sale Activity -- Closed sale of Hilton Garden Inn Longview, TX for $12.3 million at a 6.8% cap rate; entered agreement to sell two Dallas Arlington South hotels for $19 million at a 5% cap, expected to close in Q3; proceeds to be used for liquidity, leverage reduction, share repurchase, and property maintenance.
• Share Repurchases -- Repurchased 1.4 million shares for $6 million in Q1; since 2025 program launch, repurchased 5 million shares (4% of total outstanding) at $4.26 average price; $29 million capacity remains.
• Adjusted EBITDA -- Reported $44.2 million for the quarter.
• Adjusted FFO -- Reported $25.5 million, or $0.21 per share, for the quarter.
• San Francisco Hotels -- RevPAR grew 27% in Q1, benefitting from major events and a strong citywide calendar.
• South Florida Hotels -- RevPAR exceeded 14% growth, with average daily rate up 9% and Oceanside Fort Lauderdale Beach driving outsized gains post-renovation.
• Oceanside Fort Lauderdale Beach -- Realized first quarter revenue and EBITDA growth of 5,690%, with food and beverage revenues growing fourfold and additional momentum expected in Q2.
• Non-Rooms Revenue -- Increased 10% year over year, led by food and beverage, marketplace sales, parking, and amenity fees.
• Pro Forma Operating Expenses -- Increased 3.6% year over year, primarily from wage adjustments, payroll taxes, and internal staffing shift; contract labor costs declined 6% and turnover dropped 1,300 basis points.
• Capital Expenditures -- Invested $12 million consolidated ($9 million pro rata) in Q1; full-year 2026 pro rata capex projected at $55 million to $65 million, mostly in 2H.
• Debt Refi and Maturities -- Fully repaid $288 million 1.5% convertible notes in February using $275 million term loan and revolver; no maturities until 2028; ~50% of debt fixed (over 60% including preferred equity), with average maturity of nearly 3.5 years.
• Dividend -- Quarterly dividend declared at $0.08 per share; annualized yield of 6.4% and modest payout ratio to trailing twelve-month AFFO.
• Full-Year Guidance Update -- Raised 2026 RevPAR growth outlook to 0.5%-3%, adjusted EBITDA $170 million-$181 million, and adjusted FFO $0.75-$0.85 per share.
• Expense and Margin Outlook -- Expects ~3% nominal expense growth and hotel EBITDA margins flat to down 75 bps in 2026, with 25 bps of property tax headwind.
• Interest and Preferred Distribution Outlook -- Pro rata interest expense expected at $58 million-$62 million, preferred distributions at $18.5 million for 2026.
• Guidance Assumptions -- Outlook excludes additional acquisitions, dispositions, share repurchases, or capital markets activity for remainder of year; assumes current portfolio composition including hotels under contract for sale.
• GIC Joint Venture Fee Income -- Covers about 15% of annual pro rata cash corporate G&A expense, excluding promotes.
• Direct Booking Channel Share -- Approximately 70% of portfolio bookings are via direct channels, with brand.com platforms and loyalty programs showing sustained strength.
• Oneira Expansion Performance -- Outperformed internal expectations for the first quarter, supported by growth in Austin and Fredericksburg.

Summary

Management indicated that event-driven demand, especially related to the upcoming FIFA World Cup and U.S. 250th anniversary celebrations, is supporting elevated revenue pacing in several key markets. The capital allocation strategy continues to emphasize optimizing portfolio quality, funding renovations, and reducing leverage, with minimal external acquisition or financing activity planned for the balance of the year. Significant operating leverage is being maintained despite cost pressures, as demonstrated by declining contract labor percentages and employee turnover, enabling continued investment in direct channels and property enhancements.

• Q2 revenue pacing is skewed toward June due to event-related demand, with management clarifying that in-the-month-for-the-month acceleration has reversed negative trends observed in 2025.
• Growth in higher-rated retail and negotiated channels has shifted full-year RevPAR growth mix to favor rate over occupancy, refining previous guidance splits.
• Asset sales are strategically timed, with the Arlington sale structured to retain World Cup-related revenue before disposition occurs in the third quarter.
• Government segment recovery is modest, but broader market performance remains the primary driver for year-over-year improvement according to management.
• Recent property redevelopments, notably at Oceanside Fort Lauderdale Beach and Oneira, are surpassing underwriting and supporting substantial revenue and EBITDA gains.

Industry glossary

• RevPAR: Revenue per available room, calculated as total room revenue divided by the number of available rooms, a key metric for hotel operating performance.
• FFO: Funds from operations; net income adjusted for real estate–specific items such as depreciation and gains/losses on property sales, commonly used for REIT earnings comparisons.
• Adjusted EBITDA: Earnings before interest, taxes, depreciation, amortization, and certain adjustments; provides a normalized view of operating profitability.
• Pro rata: Denotes the company’s proportionate share (by ownership interest) across joint ventures or consolidated entities.
• Cap rate: Capitalization rate, calculated as net operating income divided by property value, a metric used to evaluate investment returns on real estate assets.
• Direct bookings: Reservations made directly with the hotel or through affiliated brand channels, excluding third-party online travel agencies.

Full Conference Call Transcript

Jonathan P. Stanner: Thank you, Kevin, and good morning, everyone. Thank you for joining us today for our first quarter 2026 earnings conference call. We are pleased with our first quarter financial results, which were driven by a meaningful sequential improvement in operating fundamentals throughout the quarter. RevPAR in our pro forma portfolio inflected positive in the first quarter, increasing 20 basis points year over year, which exceeded expectations communicated during our fourth quarter 2025 earnings call by over 200 basis points. Importantly, operating strength was broad based across the portfolio, particularly in March, with growth in multiple high-rated demand segments driving increases in average rates and RevPARs in many of our markets. Operating fundamentals improved each month as the quarter progressed.

While RevPAR declined in January and February, those declines were more than offset by 4.1% RevPAR growth in March, which was driven by a robust 5.6% increase in average rate. We were especially encouraged with March results, which represented a relatively clean calendar comparison for our portfolio. Despite the lingering government shutdown and highly publicized TSA wait times, we believe March trends are more indicative of the underlying demand strength in our business and have been pleased to see these trends continue in April.

While demand strength and pricing power were broad based across our portfolio, our best performing demand segments were our highest rated segments, which allowed us to yield out a portion of lower rated business, in a reversal of the prevailing pricing trends we experienced for most of last year. In particular, the ongoing recovery in business transient travel is driving better midweek performance, as RevPAR growth increased 3% for the quarter and 10% in March in our negotiated segment. This helped drive double-digit RevPAR growth in a dozen of our markets in March, including urban-centric markets such as Baltimore, Charlotte, Cleveland, Miami, Pittsburgh, San Francisco, and Washington, D.C.

As a reminder, we expected our first quarter to be the most challenging of the year given multiple headwinds faced in our portfolio, notably a difficult Super Bowl comparison in New Orleans where we own six hotels, and continued weakness in government demand, with Doge-related travel cuts not lapping year-over-year comparisons until the March time frame. In addition, disruption related to winter storm Fern and civil unrest in Minneapolis further reduced first quarter reported RevPAR growth. In total, these events created an approximately 140 basis point headwind to our first quarter RevPAR growth, most significantly in January and February.

Our outlook for the remainder of the year has improved, driven by strengthening demand trends that have persisted into the second quarter. We are also approaching what is expected to be a robust summer of special events–driven demand. We expect April RevPAR to increase approximately 3.5%, and our second quarter revenue pace is currently trending approximately 4% ahead of the same time last year. Pace trends in June are particularly strong, supported by a favorable event calendar highlighted by our significant exposure to major demand catalysts, including the 2026 FIFA World Cup, where we have exposure to six U.S. host markets representing approximately one third of our total room count and 44 scheduled matches.

In addition, we expect strong incremental demand from the U.S. 250th anniversary celebrations in Boston, Washington, D.C., and Baltimore, as well as several other major summer travel and event-driven demand drivers. As we have discussed on previous calls, government and government-related demand has been a significant headwind for our portfolio since the creation of Doge in the quarter of last year, and the lapping of these comparisons is expected to improve our year-over-year growth rates going forward. While first quarter government-related demand declined 12% year over year, this represented a meaningful improvement from the 20%+ declines we experienced through most of 2025. Encouragingly, March government revenue increased approximately 3%.

Our outlook for this demand segment has improved, demonstrated by second quarter government pace currently trending up mid single digits. Government demand represents approximately 5% to 7% of our total guest room and revenue mix, and we believe this could serve as a potential modest tailwind to our year-over-year growth rate in the last three quarters of the year. Given our strong first quarter results and our improved outlook for the remainder of the year, we have increased the guidance ranges for our key operating and financial metrics, which were outlined in our earnings release yesterday.

[CFO name] will provide more details on our updated guidance ranges later in the call, but we believe the revised ranges strike the appropriate balance of reflecting a more positive outlook while acknowledging that our most meaningful quarters are still ahead and macro and geopolitical uncertainty persists. While near-term performance trends are driving our improved outlook, longer-term lodging fundamentals suggest an improved demand environment has the potential to create an extended period of attractive top-line growth. More specifically, supply growth remains meaningfully below historical averages, and still elevated construction and financing costs create an impediment to a meaningful near-term reacceleration in construction starts. In addition, consumer prioritization of travel and experiences remains paramount, which has driven resilient leisure demand.

And finally, improved industry demand has increasingly been driven by the ongoing recovery and acceleration of business travel, which uniquely benefits our urban-centric portfolio. We believe these dynamics create a favorable operating environment as we move through the balance of 2026 and beyond. From a capital allocation standpoint, in the first quarter, we successfully closed on the previously announced sale of the 122-room Hilton Garden Inn in Longview, Texas, a noncore asset owned in our joint venture with GIC. The hotel was sold for $12.3 million, representing a 6.8% capitalization rate based on trailing twelve-month net operating income after consideration of foregone near-term capital expenditures.

In April, we entered into an agreement to sell our wholly owned Courtyard and Residence Inn Dallas Arlington South hotels for a combined sale price of $19 million. The two hotels total 199 guestrooms, and the transaction reflects a 5% capitalization rate based on trailing twelve-month NOI after factoring in near-term capital expenditures that we would otherwise have been required to fund. We expect the Arlington transaction to close in the third quarter, which will allow us to capture the demand generated from the FIFA matches in the market.

These dispositions are consistent with our ongoing strategy to selectively recycle capital out of lower growth assets, reduce future capital requirements, and enhance the overall quality and growth profile of our portfolio. Proceeds from asset sales support our broader capital allocation priorities, including enhancing liquidity, reducing leverage, repurchasing shares, and maintaining the physical condition of our portfolio. During the first quarter, we remained active under our share repurchase program, repurchasing 1.4 million common shares for an aggregate purchase price of $6 million, or a weighted average price of approximately $4.17 per share. As of 03/31/2026, we had approximately $29 million of remaining capacity under the program.

Since launching the program in 2025, we have repurchased approximately 5 million shares, representing roughly 4% of total shares outstanding, at an average price of $4.26 per share. We believe these repurchases represent an attractive use of capital and reflect our continued confidence in the intrinsic value of the portfolio and the long-term earnings power of the business. In summary, we are encouraged by the start to the year and remain optimistic about the improved outlook for our industry broadly and our company specifically.

While the operating environment remains dynamic, the breadth of demand improvement we are seeing across the portfolio combined with favorable industry supply conditions reinforces our confidence in Summit Hotel Properties, Inc.’s ability to outperform as fundamentals strengthen. Our priorities are unchanged. We remain intensely focused on optimizing profitability at the property level, prudently allocating capital, and continuing to strengthen the balance sheet. We believe this disciplined approach, supported by our high-quality portfolio and efficient operating model, positions Summit Hotel Properties, Inc. to create meaningful long-term value for shareholders. With that, I will turn the call over to [CFO name] to discuss our financial results for the quarter in more detail.

Unknown Speaker: Thanks, and good morning, everyone. First quarter pro forma RevPAR increased 0.2% year over year. Driven exclusively by growth in average daily rate. Strength in rate was a primary theme of the first quarter, as nearly all segments generated positive growth year over year. In particular, the retail and negotiated segments, our clearest indicators of higher-rated leisure and business transient demand, delivered first quarter RevPAR growth of 78% respectively, driven by strong rate performance. Furthermore, the retail and negotiated segments experienced sequential improvement across each month of the quarter, culminating with March RevPAR growth of 1,160%, respectively. Finally, as Jonathan mentioned, government-related demand within our qualified segment inflected positively during the first quarter, with March RevPAR increasing approximately 3%.

Due to the relative strength of the company’s first quarter operating results, RevPAR index increased to 116% of fair share. Driven by these positive RevPAR trends and strong cost controls, first quarter operating results materialized above expectations outlined during our February earnings call. For the first quarter, adjusted EBITDA was $44.2 million and adjusted FFO was $25.5 million, or $0.21 per share. Several core markets delivered strong first quarter results, including continued strength in San Francisco and South Florida. In San Francisco, where the company owns three hotels, the market benefited from a strong citywide calendar and several high-impact demand events, including the JPMorgan Healthcare Conference in January, Super Bowl in February, and RSA in March.

Our hotels performed exceptionally well during these peak periods, capitalizing on compression nights to drive strong top-line performance, resulting in RevPAR increasing 27% in the quarter. Looking ahead, we expect this momentum to continue in the second quarter, particularly June, supported by a strong convention and special events calendar, including several major technology conferences, Pride, and the start of the World Cup and related fan activities. In South Florida, our Miami and Fort Lauderdale hotels delivered a strong first quarter performance, with RevPAR growth exceeding 14% driven by a 9% increase in average daily rate.

In Miami, operating results were supported by peak season demand and several high-impact January events, including the NHL Winter Classic and the College Football National Championship, and a more condensed spring break calendar due to the shift of the Easter holiday to the first weekend in April. Our South Florida portfolio continues to benefit from the highly successful repositioning of the Oceanside Fort Lauderdale Beach. The hotel generated first quarter revenue and EBITDA growth of 5,690%, respectively, as the renovated rooms product and expanded food and beverage amenities appeal to both tourists and locals alike.

Group demand also continues to accelerate at the Oceanside, given the property’s location adjacent to the Fort Lauderdale Aquatic and Diving Center, which is also home to the International Swimming Hall of Fame. Looking forward, we expect continued strong demand in the second quarter for South Florida. Our AC and Element Hotels, located across from Brickell City Center, are ideally situated for visitors attending the World Cup fan festival at Bayfront Park in Downtown Miami during June and July. In Fort Lauderdale, the Oceanside is pacing 12% ahead of second quarter 2025 as the property continues to ramp post-renovation.

Non-rooms revenue increased 10% year over year in the first quarter across the company’s portfolio, reflecting continued progress in our efforts to capture a greater share of the customer’s discretionary spend. Food and beverage revenue was again a meaningful contributor, supported by the reconcepted restaurant and bar offerings at the Oceanside Fort Lauderdale Beach, enhanced breakfast programming at select hotels, and continued focus on driving higher beverage and outlet sales. In particular, food and beverage revenues at the Oceanside Fort Lauderdale Beach experienced a fourfold increase year over year and drove the majority of the company’s overall increase in food and beverage sales.

We also realized healthy growth in other ancillary categories, including marketplace sales, parking income, and resort amenity fees. These revenue streams remain an important component of our broader operating strategy, and we believe there is additional opportunity to build on this momentum throughout 2026. Pro forma operating expenses increased 3.6% year over year in the first quarter, reflecting continued discipline across the portfolio despite ongoing cost pressures. Increases in the quarter were primarily driven by merit-based wage adjustments as well as payroll taxes and employee benefits, which is a result of our strategic shift to internal staffing.

Stability in the labor pool is best evidenced by the continued reduction in contract labor, for which nominal costs declined 6% versus first quarter 2025. Contract labor now represents 9% of our total labor pool, which is approaching pre-pandemic levels. Furthermore, employee turnover is also in line with pre-pandemic levels, declining 1,300 basis points from the prior year period. For the full year 2026, we expect nominal expense growth of approximately 3%. From a capital expenditure perspective, in the first quarter, we invested $12 billion across our portfolio on a consolidated basis and $9 million on a pro rata basis.

Ongoing and recently completed renovations include the Dallas Downtown Hampton Inn and Suites, Grapevine TownePlace Suites, the Scottsdale Courtyard, Tucson Homewood Suites, and our Mesa Hyatt Place. For the full year 2026, the company expects pro rata capital expenditures to range from $55 million to $65 million, the majority of which will be incurred in the second half of the year. Turning to the balance sheet, during the first quarter, we fully repaid our $288 million 1.5% convertible senior notes that matured in mid-February utilizing our $275 million delayed draw term loan and corporate revolver. Pro forma for this refinancing, we have no debt maturities until 2028.

When accounting for our swap portfolio, approximately 50% of our pro rata share of debt is fixed. Including the company’s Series E, Series F, and Series Z preferred equity within our capital structure, we are over 60% fixed on a pro rata basis. With ample liquidity and an average length of maturity of nearly three and a half years, we believe the company is well positioned to navigate any potential near-term volatility while also pursuing value creation opportunities. On 04/23/2026, our board of directors declared a quarterly common dividend of $0.08 per share, representing a dividend yield of approximately 6.4% based on the annualized dividend of $0.32 per share.

The current dividend continues to represent a modest payout ratio relative to our trailing twelve-month AFFO. The company continues to prioritize striking an appropriate balance between returning capital to shareholders, investing in our portfolio, reducing corporate leverage, and maintaining liquidity for future growth opportunities. Included in our earnings release last evening, we updated full-year guidance for key 2026 operating metrics, as well as certain nonoperational assumptions. Our outlook is based on the 94 lodging assets owned as of 03/31/2026, including the Courtyard and Residence Inn, Dallas Arlington South, which are currently under contract for sale and expected to close in the third quarter.

Our current range includes $0.5 million of hotel EBITDA for the remainder of the year that would be foregone upon closing of the sale. For the full year, we have increased our RevPAR growth outlook to 0.5% to 3%, which translates to adjusted EBITDA of $170 million to $181 million, and adjusted FFO of $0.75 to $0.85 per share. Based on our RevPAR growth outlook of 0.5% to 3%, and nominal expense growth of approximately 3%, we expect full-year 2026 hotel EBITDA margins to range from flat to down 75 basis points, which includes approximately 25 basis points of headwinds from higher property taxes.

We expect pro rata interest expense, excluding the amortization of deferred financing costs, to be $58 million to $62 million, and preferred distributions, including the Series A, Series F, and Series Z securities, to be $18.5 million. Our outlook does not assume any additional acquisitions, dispositions, share repurchases, or capital markets activity for the balance of the year. Finally, the GIC joint venture results in net fee income payable to Summit Hotel Properties, Inc. covering approximately 15% of annual pro rata cash corporate G&A expense, excluding any promote distributions Summit Hotel Properties, Inc. may earn during the year. We will now open the call for questions.

Operator: Thank you. And as a reminder, to ask a question, please press 11. The first question comes from Austin Wurschmidt with KeyBanc Capital Markets. Your line is now open.

Austin Wurschmidt: John, you had mentioned May is pacing up, I think, 4%. Based on what you have seen in March and April, how much degradation have you seen in pace this far out as you get closer to realization? And then can you compare that to what you saw last year where, if I recall, you lost a little bit of pace as you got closer through the month versus what you actually realized? Thanks.

Jonathan P. Stanner: Good morning, Austin. First, to clarify what we said in the prepared remarks, our second quarter pace is trending up about 4%. We expect April to finish up around 3.5%. Looking at the monthly cadence for the second quarter, May is at a lower pace than we are experiencing in both April and June, and June pace is way up given our expectations for the World Cup. Over the last 30 to 60 days, we have seen an acceleration in-the-month-for-the-month, and that is a reversal from the trends we saw last year. I would expect our June pace, which is trending up high teens year over year at this point, to normalize as we get into the month.

We are not yet in the traditional booking window for June, but we do have a fair amount on the books specifically related to the World Cup, so we would expect that to normalize. The broader takeaway is that what we have seen in the month for the month, and even within the last couple of weeks of the month, has been a meaningful acceleration from our expectations. You saw that in March—most of our Q1 outperformance was related to March—and we have seen those trends continue through April.

Austin Wurschmidt: That is helpful. As you think about that pacing and what could be realized in the second quarter—certainly tracking above the high end of the full-year guidance range—how should we think about cadence and any implied deceleration in the back half? And given the firming up in midweek higher-rated business, how does that compare to what you underwrote looking into the back half? Thanks.

Jonathan P. Stanner: We clearly outperformed our expectations for the first quarter; we finished modestly positive but closer to flat. Our expectation was always that the second and third quarters would be the highest growth rates of the year, and that outlook has not changed. We remain constructive on the second and third quarters. Some of that is driven by strength in World Cup markets, but our outlook is definitely more constructive today for the balance of the year than it was when we reported sixty days ago.

Operator: Thank you. The next question will come from Michael Bellisario with Baird. Your line is open.

Michael Bellisario: Hi, everyone. Good morning. Two parts here. In terms of the pickup in demand you have seen: first, how would you separate BT versus leisure trends? And second, any quantifiable share gains you might have seen from rebookings from Mexico during the peak spring break travel period? Thanks.

Jonathan P. Stanner: The biggest takeaway from the quarter is that strength was fairly broad based, and what you saw was rate-driven RevPAR growth in the quarter and more specifically in March. That reflects our ability to either yield out lower-rated business or drive incremental occupancy in higher-rated channels—predominantly our premium-rated retail channels and our negotiated channel. We saw our best growth rates midweek in the negotiated segment. First quarter RevPAR in the negotiated segment was up 8% and was up double that in March. Our urban markets were up 6% in March, so there is no question we saw strong midweek BT-driven demand throughout the quarter, particularly in March. Leisure was also good.

In South Florida and Scottsdale, we outperformed our expectations going into the quarter. There was likely some benefit from the disruption in Mexico in March, predominantly in our South Florida and Scottsdale markets, and it helped us in March. But many of the trends we saw in March have continued into April, and we do not expect that to create any difficult comparison or distortion in demand patterns going forward.

Michael Bellisario: One follow-up. 1Q was more rate than occupancy, with some impacts affecting demand. How should we think about 2Q and beyond in terms of the mix between rate growth and occupancy growth?

Jonathan P. Stanner: We expect the vast majority of our RevPAR growth going forward to be rate driven. The first quarter trends have continued through April, and our expectation is that the majority, if not all, of our RevPAR growth in April will be rate driven. When we gave initial guidance, we expected roughly a 60/40 rate versus occupancy split. That has thankfully shifted to be predominantly rate-driven growth for the remainder of the year, which should have better flow-through to the bottom line.

Operator: The next question will come from Chris Woronka with Deutsche Bank. Your line is open.

Chris Woronka: Good morning. Thanks for taking the questions. On direct bookings, where do those stand for your portfolio? And do you think new and expanded branded credit cards are helping drive direct bookings on the leisure side? Then I have a follow-up. Thanks.

Jonathan P. Stanner: We have continued to grow our share of direct bookings—approximately plus or minus 70% for the full portfolio. That reflects our high-quality hotels in good locations affiliated with strong brand distribution channels. We saw a step-up, particularly in brand.com channels, in the first quarter, continuing trends we have seen coming out of the pandemic, with last year being a mild exception when there was greater reliance on some OTA channels. Those brand distribution platforms and loyalty programs are powerful, and we are driving the majority of our business through those channels.

Chris Woronka: Along those same lines, I know you do not have many resorts with Hyatt, but Hyatt recently went through another points adjustment. Is that having any impact on you? I think it was meant to be more owner friendly. And on the Hyatt breakfast program that has gone through iterations—any update on whether you are getting bottom-line help from those changes?

Jonathan P. Stanner: We do not have a ton of Hyatt properties that are high redemption generally—Orlando being an exception where we get a fair amount of redemption, and Orlando has been a very strong market, particularly near the new Universal development. Generally, brand redemption programs have been trending in a more owner-friendly way over the last several quarters, and we hope that continues. Specifically related to breakfast, we were part of some of the pilot on the charge-to-breakfast at Hyatt Place. Overall, it was a positive experience for us. It is property-by-property and market specific, but generally it has been modestly positive to the bottom line.

Operator: Thank you. The next question will come from Logan Shane Epstein with Wolfe Research. Your line is open.

Logan Shane Epstein: Maybe diving into the government segment, you noted sequential improvement into March with it inflecting positive. What drove that—any specific markets, or was it broad based? And a follow-up: can you quantify the potential impact given it was down 20% for a number of quarters in 2025, and what is embedded for the rest of the year?

Jonathan P. Stanner: We have talked for a while about how our comps would ease as we got into March and April and lapped the Doge comparison from the first quarter of last year, and that played out. Government revenue was down about 12% year over year in Q1, after trending down 20% to 25% for most of last year, with the exception of October when we saw incremental reductions in demand related to the government shutdown. In March, government-related revenue was up 3%. For the second quarter, government pace is trending up mid single digits year over year.

It is a relatively small demand segment, so these are smaller numbers, but this is modestly more positive than we expected coming into the year. In terms of markets, we saw some lift in places like Tucson and had a really strong quarter in Washington, D.C., some of which was government-related or adjacent business. It is fairly broad based, and our expectations are modestly more constructive than when we started the year.

Logan Shane Epstein: A follow-up on a different note. Given we now have about three quarters of operations at the Oneira expansion, how is that performing relative to initial underwriting?

Jonathan P. Stanner: We have done really well there and had a nice beat to our internal budgets and expectations in the first quarter. It is a wonderful asset that benefits from growth in Austin and tremendous growth in Fredericksburg. There have been several high-end products announced in that area—a Waldorf Astoria and an Aman—so submarket growth has been terrific, which has helped performance. We have a unique, compelling offering, and the original thesis and expansion thesis have both played out. First quarter results were meaningfully above expectations.

Operator: I am showing no further questions at this time. I will now turn the call back over to Jonathan for closing remarks.

Jonathan P. Stanner: Thank you all for joining us today. We look forward to seeing many of you on the conference circuit over the next several weeks. Thank you again, and we hope you have a nice weekend.

Operator: This concludes today’s conference call. Thank you for participating, and you may now disconnect.

This article is a transcript of this conference call produced for The Motley Fool. While we strive for our Foolish Best, there may be errors, omissions, or inaccuracies in this transcript. Parts of this article were created using Large Language Models (LLMs) based on The Motley Fool's insights and investing approach. It has been reviewed by our AI quality control systems. Since LLMs cannot (currently) own stocks, it has no positions in any of the stocks mentioned. As with all our articles, The Motley Fool does not assume any responsibility for your use of this content, and we strongly encourage you to do your own research, including listening to the call yourself and reading the company's SEC filings. Please see our Terms and Conditions for additional details, including our Obligatory Capitalized Disclaimers of Liability.

The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.