Prepared remarks
Hello, everyone, and welcome to the Xenia Hotels & Resorts, Inc. Q1 2025 Earnings Conference Call. My name is Carla, and I will be coordinating your call today. I would now like to hand you over to Aldo Martinez, Manager Finance, to begin. Please go ahead when you're ready.
Thank you, Carla and welcome to Xenia Hotels & Resorts first quarter 2025 earnings call and webcast. I'm here with Marcel Verbaas, our Chair and Chief Executive Officer; Barry Bloom, our President and Chief Operating Officer; and Atish Shah, our Executive Vice President and Chief Financial Officer. Marcel will begin with a discussion on our performance and recent transactions. Barry will follow with more details on operating trends and capital expenditure projects. And Atish will conclude today's remarks on our balance sheet and outlook. We will then open the call for Q&A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on Form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments.
Forward-looking statements in the earnings release that we issued this morning along with the comments on this call are made only as of today, May 2nd, 2025, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in our first quarter earnings release, which is available on the Investor Relations section of our website. The property-level information we'll be speaking about today is on a same-property basis for all 31 hotels unless specified otherwise. An archive of this call will be available on our website for 90 days. I will now turn it over to Marcel to get started.
Thanks Aldo and good afternoon everyone. We are pleased with our first quarter results, which gave us a strong start to the year. For the first quarter of 2025, we reported net income of $15.6 million, adjusted EBITDAre of $72.9 million, and adjusted FFO per share of $0.51. RevPAR grew by 6.3% as compared to the first quarter of 2024, which exceeded our expectations and led to nearly 12% growth in adjusted EBITDAre and nearly 16% growth in adjusted FFO per share. First quarter same-property RevPAR for our 31-hotel portfolio was $188.73, with occupancy increasing by 180 basis points and ADR increasing by 3.6% compared to the same period last year. The initial ramp-up at Grand Hyatt Scottsdale after the substantial completion of its transformative renovation was a significant driver of this strong performance. However, the portfolio also benefited from meaningful RevPAR growth in a number of our other markets, with one-third of our assets achieving double-digit percentage RevPAR growth and several others achieving high single-digit percentage RevPAR growth.
There were several puts and takes that impacted our portfolio during the quarter. On the positive side of the ledger, our hotels in the Washington, D.C. and New Orleans markets benefited from the Presidential inauguration and the Super Bowl in January and February, respectively. Also, March results were aided by the shift in the timing of the Easter holiday, which fell on March 31st in 2024, causing softness in demand during the last week of the month last year. Conversely, we also experienced a few headwinds during the first quarter. Most significantly, January results were negatively impacted by unusually strong winter storms in several of our Sunbelt locations, particularly in Texas. A common theme throughout the portfolio was the fact that strong group business and recovering demand from some of the largest corporate accounts drove RevPAR gains. This is a continuation of the trends we experienced in 2024 and consistent with our expectations as we started the year.
We came into the year with very strong group revenue pace, and this was realized in the first quarter. On a same-property basis, first quarter hotel EBITDA of $79.3 million was 10.5% above 2024 levels, and hotel EBITDA margin increased 42 basis points. We continue to be pleased with our operators' efforts to control expenses as the impact of wage growth and other inflationary pressures continue to impact operating margins. On our last quarterly earnings call, we expressed our excitement about the substantial completion of the Grand Hyatt Scottsdale transformative renovation and up-branding, including the significantly expanded and upgraded Arizona Ballroom that opened to groups in mid-January. Customer feedback on the relaunch resort continues to be outstanding and group production has been strong. RevPAR grew by approximately 60% during the first quarter compared to the same quarter last year, which was consistent with our expectations despite overall transient demand in the Phoenix, Scottsdale market being a bit softer this year.
Group revenue on the books for the remainder of the year has continued to grow, with our group revenue pace for 2025 now exceeding group revenues actualized in 2019, our project underwriting base year. As of the end of the first quarter, over 80% of our expected group room revenue for the balance of the year was definite. We completed two transactions over the last two months that we believe reflect prudent capital allocation. In March, we took advantage of a unique opportunity to acquire the fee simple interest in the land underlying our Hyatt Regency from the city of Santa Clara. Through this $25 million purchase, we have improved our optionality and flexibility for this hotel and eliminated risk due to a potentially significant ground rent escalation in the near-term. The ground lease provides for both percentage rent tied to revenues that could increase substantially over time as well as a fair market value rent adjustment in the relatively near future.
After this transaction, we now own fee simple interest in all but one of our hotels, and those have very limited exposure to ground lease expiration or rent escalation. On the disposition side, in April, we sold Fairmont Dallas for $111 million, avoiding a constantly disruptive near-term renovation and further improving the quality of the portfolio. We strongly believe that existing cash flow levels were not sustainable without a significant renovation due to the deteriorating physical condition of this 56-year-old hotel, guest expectations for our luxury hotel, and the upcoming closing and renovation of the Dallas Convention Center, which we expect to negatively impact this group-focused hotel in the near and medium term. We estimate the near-term capital expenditures of approximately $80 million would have been required to maintain and improve the hotel's competitive positioning. This extensive potential renovation would have been highly disruptive to the hotel's operations and EBITDA and carries a significant amount of execution risk.
With the amount of capital reinvestment that would have been required, the EBITDA disrupted during the renovation, and the expected time it would have taken to reach stabilization post-renovation, we believe that the sale of the hotel was a superior capital allocation decision for the company. The Fairmont Dallas investment was a very successful one. We acquired the hotel for $69 million in 2011. The hotel generated strong cash flow during most of our period of ownership, which in combination with our net sale proceeds resulted in an unlevered IRR of 11.3% for this investment. It is especially strong, considering the impact of the pandemic on cash flow in 2020 and 2021. I would like to thank our team for their hard work in getting both transactions across the finish line in a challenging market environment. Despite the heightened macroeconomic uncertainty over the past two months and the resulting concerns about consumer spending, we have not yet seen a significant impact on our portfolio of results.
Based on preliminary results, we estimate that our 30-hotel same-property portfolio, which now excludes Fairmont Dallas, grew RevPAR by approximately 3.4% in April as compared to last year despite the negative impact of the Easter timing shift on the results for the month. Notwithstanding our positive year-to-date results, we have reflected the potential negative impact of this uncertain macroeconomic environment in our outlook for the remainder of the year. Atish will discuss our adjustments to full year guidance, which incorporate both the impact of our recently completed transactions as well as modestly greater downside risk to portfolio performance for the balance of the year. We have taken decisive action to reduce our capital expenditures this year in response to the headwinds created by the potential macroeconomic impact, including tariffs on goods sourced internationally. We are also reducing our G&A expenses and continue to work with our hotel operators to be even more disciplined in managing property-level expenses.
Regarding capital expenditures, we now expect to spend between $75 million and $85 million on property improvements during the year, a reduction of $25 million compared to our previous guidance. This is partially the result of avoiding capital expenditures that were planned at Fairmont Dallas in 2025. Additionally, we have elected to defer and modify some projects as we further refine and analyze scope costs and ROI expectations for these potential investments. Barry will provide additional details on the $32.4 million we invested during the first quarter and the latest on projects planned for 2025. Although our portfolio is not immune to the pressures created by a potential slowdown in consumer spending and overall economic activity, we believe that we will benefit this year from the fact that all of our high-quality branded hotels and resorts are in the luxury and upper upscale segments and cater to customers that may be more resilient than those in the lower quality segments.
We also believe that our geographic diversification and Sunbelt focus will once again benefit us as our exposure to inbound international demand and government business is limited. We believe that we are well positioned to weather various economic environments with a curated portfolio, strong balance sheet, and experienced management team, and we continue to expect that our high-quality branded portfolio will show meaningful growth and appreciation in the years ahead. Reflecting this view, we increased our quarterly dividend by 17%, and we repurchased 2.7% of our outstanding shares during the first quarter. I will now turn the call over to Barry to provide more details on our operating results and our capital projects.
Thank you, Marcel and good afternoon everyone. For the first quarter, our 31 same-property portfolio RevPAR was $188.73 based on occupancy of 69.3% and an average daily rate of $272.41, an increase of 6.3% as compared to the first quarter in 2024. Properties achieving double-digit RevPAR growth as compared to the first quarter of 2024 included; Grand Hyatt Scottsdale with RevPAR up 60.9%; Ritz-Carlton Pentagon City up 22.6%; Renaissance Atlanta Waverly up 21.4%; Kimpton Canary Hotel Santa Barbara up 20.4%; Loews New Orleans up 18%; Ritz-Carlton Denver up 17.2%; Kimpton Hotel Palomar Philadelphia up 15%; W Nashville up 14%; and Park Hyatt Aviara Resort and Waldorf Astoria Atlanta Buckhead each up over 12%. Growth at these properties represents a mixture of special events as in the case of Ritz-Carlton Pentagon City and Loews New Orleans and generally stronger group and corporate demand across the portfolio as the recovery continues.
Strong high single-digit RevPAR growth was experienced at the Fairmont Pittsburgh, Marriott San Francisco Airport, and Grand Bohemian Charleston. The Houston market was softer than Q1 of 2024 as a result of several winter storms which impacted travel to the region. Looking at each month of the quarter, January RevPAR was $158.39, up 2.1% to January 2024 with occupancy down 20 basis points and ADR of 2.4%. February RevPAR was $202.60, up 12.6% compared to February 2024 with occupancy up 4.9 points and ADR up 5%. And March RevPAR was $206.52, up 4.5% compared to March 2024 with occupancy up 1 point and ADR up 3.2%. Group business was a standout during the quarter with both February and March group rooms revenue up over 15%, reflecting ongoing strength in group business that is expected to continue throughout the year. Overall for the quarter, group room nights were up 6.6% with ADR up 4.1%.
Business from the largest corporate accounts across our portfolio grew significantly during the quarter, up approximately 15% compared to the first quarter of 2024, but still remains significantly behind 2019 levels. Business levels grew significantly for each night of the week during the quarter compared to the first quarter of 2024. Occupancies grew by 2.1 points on weekdays and 1 point on weekends with ADR growth of 3.5% on weekdays and 3.4% on weekends. Leisure business during the quarter continued to vary at the large resorts across the portfolio, with significant increases in leisure business at Park Hyatt Aviara and, of course, Grand Hyatt Scottsdale. While leisure business at Hyatt Regency Grand Cypress was a bit softer, it was offset by a significant increase in group business. At our smaller leisure-focused hotels, leisure business grew with Kimpton Canary Santa Barbara, Hyatt Centric Key West, and Bohemian Savannah, while Grand Bohemian Charleston, Royal Palms, Andaz Napa and Andaz Savannah experienced occupancy declines compared to the first quarter of last year.
At Grand Hyatt Scottsdale, the completion of guest-facing areas, including the expansion of the Arizona Ballroom in mid-January, marked the successful completion of this project. From a guest satisfaction perspective, the hotel has been incredibly well received with TripAdvisor metrics significantly outscoring the hotel's competitive set and some of the highest internal guest satisfaction scores in the resort's history. RevPAR performance was in line with our expectations as the hotel worked to fill anticipated gaps in group business, with transient business in a softer Scottsdale luxury market. Across the property, food and beverage revenue for the quarter was nearly equal to 2019, reflecting an excellent start, given the ramp-up of the new ballroom. Banquet and catering contributions were terrific with revenue per group room night up over 60% compared to 2019, reflecting the quality group business and additional meeting space.
The new La Zozonna restaurant, reimagined Grand Vista Bar, and significantly expanded pool food and beverage offerings all performed exceptionally well versus our expectations. Now, turning to expenses and profits. First quarter same-property hotel EBITDA was $79.3 million, an increase of 10.5%, driven by a total revenue increase of 8.9% compared to the first quarter of 2024, resulting in 42 basis points of margin improvement. We continue to be pleased with the improvement in our operators' ability to manage expenses in what continues to be a challenging operating environment as occupancy improves. For the 31 same-property portfolio, food and beverage revenues increased 13.4% in the quarter as a result of approximately 14% growth in both outlets and banquets. Other operating department income, including parking, spa, and golf revenues grew by 14% as well. Rooms expenses were well controlled, increasing 2.5% on a per occupied room basis while F&B profit margin improved by 145 basis points.
AMG and sales and marketing expenses each grew approximately 7% during the quarter as a result of the higher business levels and higher loyalty program costs. Property operations and maintenance expenses grew by 5.8% due primarily to higher labor costs, while energy expenses across the portfolio grew at just 1.6% due to success from our significant infrastructure investments and despite significant winter storms in the Sunbelt. Finally, turning to CapEx. During the first quarter, we invested $32.4 million in portfolio improvements, which included CapEx related to the substantial completion of the transformative renovation and up-branding of the Grand Hyatt Scottsdale. During the first quarter, we completed the expansion of the Arizona Ballroom and the renovation of certain premium suites and casitas at Grand Hyatt Scottsdale. Certain exterior projects, including a parking lot renovation, are expected to be completed by the end of this summer.
We are continuing with the process of reevaluating all of the capital projects initially planned for 2025 in light of tariffs, which may have a significant impact on the cost of goods purchased from sources outside of the United States. As Marcel mentioned earlier, we've already taken decisive action on some previously planned projects, which include deferring the guestroom renovation at Andaz Napa and Ritz-Carlton Denver planned to begin in the fourth quarter of 2025. We plan to continue to select upgrades to guestrooms and public areas at a number of properties, including Fairmont Pittsburgh, Renaissance Plano Waverly, Marriott San Francisco Airport, Marriott Dallas Downtown, Hyatt Centric Key West, Hyatt Regency Santa Clara, Grand Bohemian Mountain Brook, Grand Bohemian Charleston, and Kimpton River Place. These projects will be performed based on hotel seasonality and expected to result in minimal disruption.
In addition, we expect to perform infrastructure and facade upgrades at approximately eight hotels throughout the remainder of this year. As a result of the sale of Fairmont Dallas, we've reduced our budget for infrastructure projects for this year.
Thanks, Barry. I will provide an update on two topics, our balance sheet and 2025 guidance. First, our balance sheet continues to be strong. We have an appealing mix of debt and a good maturity profile. As to our interest rate exposure, our debt is about three-quarters fixed and one-quarter floating rate, which is an appropriate balance based on our portfolio and strategy as well as the potential for lower interest rates in the future. We have no significant debt maturities until late 2028, with only one property-level mortgage maturing in each of 2026 and 2027. Together, these two mortgage loans represent about 10% of our overall debt. At quarter end and pro forma for the sale of Fairmont Dallas, our leverage ratio was 5.4 times trailing 12-month net debt to EBITDA. As a reminder, our long-term leverage target is a net debt-to-EBITDA ratio in the low 3 to low 4 times range. As to current liquidity, it is roughly $715 million, reflecting both a $500 million undrawn line of credit as well as proceeds received from the sale of Fairmont Dallas last month.
During the quarter, we repurchased about $36 million of stock at an average price of $13.09. This activity retired a meaningful 2.7% of our outstanding shares as of year-end 2024. We continue to evaluate share buybacks relative to other uses of capital, considering the implied cap rate, the implied per key value, our invested capital in our portfolio, our NAV, and our overall outlook on the business. During the quarter, we upped our quarterly dividend by approximately 17% to $0.14 per share. Our yield is nearly 5% on an annualized basis, assuming this level of dividend is maintained. Turning next to our current 2025 guidance that we issued this morning. We have lowered our expectations for full year RevPAR growth by approximately 50 basis points at the midpoint. While the top end of our guidance range is unchanged, the bottom end was lowered by 100 basis points. This wider range reflects an increased level of macroeconomic uncertainty since we first provided guidance for 2025.
Our midpoint of 4.5% RevPAR growth is driven by Grand Hyatt Scottsdale, which reflects two-thirds of our expected growth or 3% out of 4.5%. This 300 basis point boost is consistent with what we've indicated a couple of months ago. Our forecasted full year RevPAR growth for the rest of the portfolio has moderated from up 2% to up 1.5% at the midpoint. Based on performance through April, our implied RevPAR growth guidance for the balance of the year is approximately 1% to 7% or approximately 3.75% at the midpoint. Again, this reflects a wide range of outcomes possible, given policy and other impacts to economic growth. We continue to believe that RevPAR growth will be driven more by occupancy than rate this year. In addition, we expect strong non-rooms revenue growth, which is, in fact, what we saw in the first quarter. At the midpoint, 50 basis points in lower RevPAR translates to approximately $3 million of lower expected EBITDA.
This change is partially offset by $1 million in lower expected cash G&A expense for the full year to net $2 million in lower full year EBITDA. To complete the walk, the transactions we completed in March and April further reduced EBITDA by a net $4 million. Therefore, the cut to prior adjusted EBITDAre guidance is approximately $6 million at the midpoint. As to adjusted EBITDAre weighting by quarter, the weighting in the first quarter was nearly 30% of the full year. The second quarter is expected to be just under 30%. The third quarter is expected to be just under 20%, and the fourth quarter is expected to be approximately 25%. Turning now to our margin outlook. We currently expect hotel EBITDA margin to increase 50 basis points for the balance of the year. This compares to our prior expectations of flat margin for the full year. The main driver of our improved margin outlook is better expense management as we and our operators focus on the parts of the business that we can control.
Secondarily, and to a much lesser degree, the sale of Fairmont Dallas also helps our balance of the year margin outlook. Turning ahead to group room revenue pace for our 30 hotels. Our group pace continues to be healthy and a bright spot. As of the end of the first quarter, group pace for the balance of the year is up approximately 22%. Excluding Scottsdale, it is up 13%, again for the balance of the year. Narrowing further, if we look at just the second half, group pace is up 30%, and excluding Scottsdale, it is up 20%. Group production is also tracking well, first quarter group room revenue production – and again, these numbers exclude Scottsdale, for the balance of the year is up 15% from the first quarter of last year. This gain comes despite less availability remaining this year versus last year, given our already higher group pace going into this year. We have not seen any pickup in cancellations or any outsized group attrition to-date.
As to the other components of our outlook, we expect slightly higher interest expense and slightly lower income tax expense, which offset each other. Finally, our adjusted FFO per diluted share forecast is down about 1% at the midpoint or $0.02. This change is driven by the impact of transactions and lower revenue expectations offset by recent share repurchase activity. We expect adjusted FFO per diluted share of $1.62 or slightly ahead of last year. We continue to believe in the strong merits of our top quality portfolio that is diversified across the best brands, desirable locations, and multiple demand drivers. We view our balance sheet strength as an advantage. Given our size and orientation, we expect to be opportunistic in the years ahead in order to create long-term shareholder value. And we look forward to many years of growth ahead as the supply-demand balance shifts to better benefit owners of high-end lodging real estate. With that, we will turn the call back over to Carla to begin our question-and-answer session.
Questions and answers
Thank you. We will now begin the question-and-answer session. Our first question comes from Austin Wurschmidt with KeyBanc Capital.
Hey, it's Josh Friedland on for Austin. Just wondering, have group booking trends evolved in response to the current uncertainty? Have you seen any increase in cancellations or are groups in more of a wait-and-see mode right now?
Thanks Josh. So, in terms of group booking activity, as I mentioned, production in the first quarter was quite healthy and positive relative to the first quarter of last year, and that's for the balance of this year compared to the balance of 2024. So, we feel good about kind of the production and the latest numbers we have on production. And I would say as I mentioned earlier, no uptick in cancellations or attrition. Really nothing to reflect any slowdown on the group side. But we're obviously watching that very, very closely, and we'll continue to do so in the weeks ahead.
Okay, that's helpful. And have you seen any meaningful impact from lower international inbound travel thus far? And which of your markets are most exposed to international inbound?
Yes, it has been relatively limited. Our portfolio is situated in locations where we are not very reliant on international visitors. Markets like Orlando and Phoenix do attract some Canadian visitors, especially at the start of the year, but we have noticed some softness in the leisure segment. We've previously discussed Orlando, and we believe that with the upcoming opening of the Epic Universe Park, many people may be postponing their leisure trips to the area. Our properties in Orlando and Phoenix do not rely heavily on international business. However, a softer market can create a ripple effect. Overall, a very small percentage of our business comes from international visitors, so we haven't detected any significant impact in that regard.
All right. Thanks for the time.
And the next question comes from Michael Bellisario with Baird.
Thanks. Good afternoon everyone. I just want to ask on Santa Clara. Maybe could you give us some background on the process? I mean, who approached whom, and I guess, sort of bigger picture, just why now? And then you mentioned optionality. I assume that means either renovate or sell or maybe there's a third option in there, too. Maybe just help us think about how you're evaluating that decision now. And what would push you one way or the other?
Sure. It's – like I mentioned, we essentially bought it from the city of Santa Clara. So, it's a situation where we kind of had a unique opportunity to buy it because the city had decided to market the parcel essentially. So, given some of the things I talked about as far as both future rent escalations and then, obviously, fair market value adjustments that was going to happen, this ground lease was potentially going to be much more expensive for us in the future. So, this is the type of process that, as you can imagine, you're dealing with a municipal entity. It's not something that happens in one night. It's actually something that took a long time to kind of come to fruition and to finally close as we did in March. So, as it relates to kind of the valuation, now clearly, it's not just a matter of looking at what the current going-in cap rate of that is. It's really looking at eliminating that risk on the rent escalation and eliminating the potential expiration risk.
So, longer term, the reason why we say it creates additional optionality, the reality is just that an asset is much more valuable as a fee simple asset than if it was a ground lease that could have some major escalations in its rent. So, it just creates more long-term optionality for us. I wouldn't say that don't read into that, that there is anything short-term that we're necessarily doing there. We're doing some relatively minor upgrades to the rooms that Barry was talking about. But in the short term, there's really nothing there to think about. It's more about kind of that long-term optionality and just increasing the value of the asset.
Got it. Understood. And then just for Barry on CapEx, maybe just on the couple of projects that you're deferring or pushing out. I guess, is the plan to reevaluate that later this year and do those next year? And then how do you think about weighing sort of the impact on returns and relative RevPAR index of those properties by deciding not to spend the CapEx or the relative positioning within the respective markets? Any context there would be helpful. Thanks.
Thank you, Mike, for the question. We will be continually assessing the situation. We have an in-house project management team, which provides us valuable insights about current circumstances. At this time, as we consider launching projects for this year, we are uncertain about both the products and the tariff levels we may face. Therefore, we need to pause and keep evaluating. This decision partly stems from our analysis of the condition of our assets and the possibility of deferring renovations for some time. We recognize the risks of proceeding with these projects now, especially given tariff levels that could render them unprofitable. Additionally, we are cautious about committing to decisions that may not be fixed in our future planning. We are diligently reviewing the situation every few weeks, assessing when it might be appropriate to proceed, while also considering the unique seasonality of each asset and the limited opportunities we have for complete renovations of guest rooms.
Makes sense. Thank you.
The next question comes from Ari Klein with BMO Capital Markets.
Thanks and good afternoon. Can you maybe give a little bit of color on what you're seeing more recently from a leisure standpoint and any behavioral changes that you're seeing? And then what's implied for the leisure segment within the full year guide? Thank you.
Ari, it's interesting. In my commentary, I mentioned some properties that are performing well and others that aren't as successful in attracting leisure guests. The performance really differs by market and depends on competitive positioning within those markets. We haven't observed a significant trend across the portfolio in terms of leisure, whether in the smaller leisure-focused properties that traditionally rely on drive-thru business, or in the larger hotels that tend to cater to business during the week but attract leisure guests on the weekends. It's been challenging to identify any overarching trend, as it varies significantly from property to property and market to market, often influenced by economics, local market conditions, or specific property factors.
And I'd just add on to the second part of your question as to guidance and what we've thought about leisure sort of for the balance of the year is a slight decline, low single-digit kind of percentage decline in RevPAR at our leisure assets overall. As you recall, we talked about 3.75% for the balance of the year. And I would say group would be the highest contributor to that RevPAR growth, followed by business transient and leisure kind of lagging. So, that's kind of how we shake out based on demand driver.
Thanks. And then maybe on group. Obviously, 2025 is an incredibly strong year for you. Anything you can share on 2026 and what that's beginning to look like? And then maybe more specifically in Scottsdale, how are group bookings shaping up there for future years?
I think it's still too early to discuss 2026. As you know, we don't rely heavily on convention center-driven business. Our primary focus is on shorter-term corporate and association business. I can say that due to our success in booking 2025, our sales teams are particularly focused on 2026. While they always keep an eye on future dates, the relative completion of 2025 bookings has drawn more attention and created more opportunities for 2026 earlier than in previous years.
Production in Scottsdale remains robust, with group rates significantly higher compared to 2019. Our first quarter production has seen a substantial increase in both rate and volume compared to 2019. Marcel mentioned that our group business is over 75% to 80% confirmed, so we are optimistic about our group performance and how it aligns with our goal of achieving EBITDA in the low $20 million range for this asset this year.
Thank you.
Our next question comes from Jack Armstrong with Wells Fargo.
Hey, good afternoon. Thanks for taking the question. What are you seeing in terms of mix shift in your group business? A lot of your peers have pointed to the government business falling off pretty sharply in March before kind of getting to a stabilized level in April and then a broader shift towards association business throughout the portfolio. Are you seeing similar trends in your portfolio or are things played out differently for you guys?
Our portfolio is structured somewhat differently than that of some peers. Generally, we have less citywide and government business, with a majority of our focus on corporate groups first and associations second. While we may not have experienced the same level of booked business into 2025 as some peers, we continue to see strong lead volume and are building pipelines in the corporate and association sectors for 2025. In the corporate segment, the funnel remains substantial, although there has been a slight slowdown in transaction times as corporate groups take longer to approve and finalize contract signings.
Okay, great. That's really helpful. And then just jumping back to capital projects. I know you talked about seasonality at these hotels and the decision to defer. Would it be fair to assume that these projects are going to get done in 2026 if we end up in a more normal macro environment by the end of the year and the relative disruption would be a little bit higher in 2026?
Yes. At this point, obviously, it's relatively likely that we'll pump by about a year and then do them kind of towards the end of next year. But it is going to really be dependent on the things we talked about as far as really potentially adjusting some of the scopes in these projects. Clearly, hopefully, there'll be some more certainty over the next few months as far as where tariffs ultimately will settle out, and that might drive some decisions as far as where you're sourcing some materials and what the impact on the cost would be and how you kind of reevaluate again the scope and what you do exactly to still make it make sense from an ROI perspective. Another aspect of that is obviously that there is a lot of uncertainty on the macroeconomic side. So, it really depends on kind of what happens a little bit deeper into the year or two as far as what we're seeing kind of throughout the portfolio and in those markets specifically. And we'll continue to kind of evaluate the ROI on those projects to make sure that we still believe that next year might be the right time to actually do those projects.
Yes, the only thing I'd add is with regard to disruption, your question for that for next year, I mean those projects that we've decided to postpone were not going to be highly disruptive this year. So, at least with regard to those projects, we wouldn't expect, if we did those start those projects at the end of next year, that they would be highly disruptive. And the other piece is obviously selling Fairmont Dallas. I mean, that, if we had held that, we would have a large-scale renovation to do at some point in the near future. That would have been very disruptive. So, that minimizes overall disruption significantly over the next few years relative to having continued to own that property.
And that was clearly was Barry's point about the seasonality on those assets is that whether we do it this year or we do it next year. If you kind of do it in that same timeframe, no matter what kind of deals or overall market conditions are, even if the market conditions are stronger, we're still doing it at a time that historically, and we've owned these assets for a pretty long time at this point so we have a very good sense of what the right time frames are to do these types of projects where we're really going to very much limited disruption. Whenever it happens, obviously not this year, but if we decided to do it next year, then we're still not viewing it as disruptive to the guest experience or EBITDA.
Okay, really helpful. And what portion of that $25 million reduction in CapEx guidance is related to the Fairmont?
It's a little north of $10 million. There was a good amount of infrastructure work that was planned for the property in the event that we weren't going to be selling this asset this year. Clearly, this is a project that we've been working on for a while and did a lot of analysis really over the last couple of years as far as what would be the appropriate level of renovation to potentially do at this asset versus a potential sale. So, we obviously decided to go down the path of potential sale process, and we're very pleased with how that played out and being able to get the value that we did for the asset. For us, it became a very clear capital allocation decision to say, let's sell the asset as opposed to doing these really highly disruptive renovations. But that being said, we obviously had to plan for potentially doing work there this year that will have to be done regardless of whether you were doing a significant renovation or not. So, there was a good amount of infrastructure work that was going to have to happen there. And we obviously were able to avoid that now by doing this sale as well.
All really helpful color. Thank you.
Thanks Carla. Thanks everyone for joining us today. I know it's been a busy few days with lodging companies reporting. We were glad to be able to do this update today. We obviously had a great first quarter. I think we're well-positioned for the remainder of this year no matter what economic circumstances we'll be dealing with, and we look forward to seeing many of you over the next few months.
Thank you, everyone. That does conclude today's call. Have a great day. You may now disconnect.