管理層發言
Greetings, and welcome to the Apple Hospitality REIT's Third Quarter 2025 Earnings Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce Kelly Clarke, Vice President of Investor Relations. Thank you. You may begin.
Thank you, and good morning. Welcome to Apple Hospitality REIT's Third Quarter 2025 Earnings Call. Today's call will be based on the earnings release and Form 10-Q, which we distributed and filed yesterday afternoon. Before we begin, please note that today's call may include forward-looking statements as defined by federal securities laws. These forward-looking statements are based on current views and assumptions, and as a result, are subject to numerous risks, uncertainties, and the outcome of future events that could cause actual results, performance, or achievements to materially differ from those expressed, projected, or implied. Any such forward-looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2024 annual report on Form 10-K and speak only as of today. The company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law.
In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the company, please visit applehospitalityreit.com. This morning, Justin Knight, our Chief Executive Officer; and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the third quarter 2025 and an operational outlook for the rest of the year. 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.
Good morning, and thank you for joining us today for our third quarter 2025 earnings call. While the fundamentals of our business remain strong with supply growth continuing to be well below historical norms and overall demand proving resilient, policy uncertainty, expense pressure, and a continued pullback in government travel all weighed on operating performance during the quarter for our portfolio and for the industry broadly. With many of these factors outside of our control, we have focused with our management teams on ensuring that we are growing market share and managing expenses to maximize the profitability of our hotels. From a capital allocation standpoint, we continue to see an opportunity to take advantage of the current disconnect between public and private market valuations by selectively selling assets and redeploying proceeds to buy our own stock. At the same time, we are leaning into future investments that we feel will ensure our portfolio's continued relevancy and allow us to achieve strong results for years to come.
Together with our management companies, our asset and revenue management teams have done a tremendous job shifting the mix of business at our hotels to strengthen market share and tactically adjust to changing demand trends, driven in part by the pullback in government travel. Transient leisure demand for our portfolio remained resilient during the quarter, and our property teams have successfully targeted group business, which has helped to offset slightly softer midweek business transient. For the quarter, we achieved comparable hotel occupancy of 76%, down 1.2%; ADR of $163, down only 0.6%; and RevPAR of $124, down 1.8%. Impacted by the recent government shutdown, comparable hotels RevPAR was approximately 3% lower in October 2025 versus October 2024 based on preliminary performance data. The hotel teams have also been diligent in their efforts to mitigate cost pressures and operate as efficiently as possible while delivering the high level of service and quality our guests expect.
As a result of these efforts, variable expense growth for our portfolio has moderated, with a higher growth in fixed costs largely coming as a result of challenging year-over-year comparisons. Though slightly down versus the prior year, our portfolio continues to produce industry-leading margins with comparable hotels EBITDA margin of 35.2% for the quarter. In addition to the day-to-day efforts with our management teams to maximize the performance of our hotels through the implementation of systems and effective management practices, we also look for structural ways to drive overall performance. Over the coming months, we will be transitioning our Marriott-managed hotels to franchise and consolidating management in these markets with existing third-party management companies to realize incremental operational synergies. We are confident these transitions, together with a select number of additional market-level management consolidations will help to 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 in the future as we consider select dispositions. The Marriott transitions align 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. We have always been disciplined in our approach to capital allocation, balancing both near- and long-term allocation decisions to capitalize on existing opportunities while securing the long-term relevance, stability, and performance of our platform. Through all phases of the economic cycle, we seek transactions that enhance the quality and competitiveness of our existing portfolio, drive earnings per share, create value for our shareholders, and ensure we are well-positioned for future outperformance.
In the current environment, we have strategically executed select dispositions and forward commitments on new development to manage our near-term CapEx needs and to ensure we are exposed to markets with strong growth profiles. At the same time, we have been able to take advantage of near-term opportunities that exist because of the disconnect in public and private market valuations, using proceeds from dispositions and cash from operations to fund share repurchases. We will continue to adjust our 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. Since the beginning of this year, we have completed the sale of 3 hotels for a total combined sales price of $37 million, including our full-service Houston Marriott, which we sold during the third quarter for $16 million.
We currently have 4 hotels under contract for sale for a total combined sales price of approximately $36 million, including the previously announced pending sale of our Hampton and Homewood Suites in Clovis, California, as well as the contracted sale of our Hampton and Homewood Suites in Cedar Rapids, Iowa. We anticipate closing on the sale of these hotels during the fourth quarter of this year. While the overall transaction market continues to be challenging, we have successfully executed on select asset sales and ways to continue to optimize our portfolio concentration, manage CapEx, and free capital, which we have been able to accretively redeploy at a meaningful spread. Pricing for the individual hotels varies; however, as a group, the 3 hotels we sold this year, together with the 2 Globus hotels and the 2 Cedar Rapids hotels will trade at a 6.2% blended cap rate or a 12.8x EBITDA multiple before CapEx, and a 4.7% cap rate or a 17.1x EBITDA multiple after taking into consideration the estimated $24 million in capital improvements.
Proceeds from these well-timed dispositions have been used primarily to fund share repurchases. Since the beginning of the year through October, we have repurchased approximately 3.8 million of our shares at a weighted average market purchase price of approximately $12.73 per share for an aggregate purchase price of approximately $48 million. Shares repurchased year-to-date have been priced around a 3-turn spread to recent dispositions and around a 7-turn EBITDA multiple spread after taking into consideration estimated capital improvements. While our long-term goal is to grow our portfolio, when our stock trades at an implied discount to values we can achieve in private market transactions as it has for the past several months, we will opportunistically sell assets and redeploy proceeds primarily into additional share repurchases, preserving our balance sheet so that at the appropriate time in the cycle, we can act quickly on attractive acquisition opportunities.
Since May of last year, we have invested nearly $83 million in our own shares. In June of this year, we acquired the Homewood Suites Tampa-Brandon for approximately $19 million, and we are on track to acquire the Motto Nashville Downtown, which is nearing completion of construction in December of this year for a total of approximately $98 million. While it is still several months out, we will also be converting our Residence Inn-Seattle Lake Union to a Homewood Suites beginning in the fourth quarter of next year. The transition will happen as the hotel reaches the end of its current franchise term with the determination to change brands being informed by competitive supply within the market and brand incentives. Upon conversion, the hotel will be one of only two Homewood Suites in the downtown Seattle market. The hotel will continue to operate as Residence Inn through the renovation and conversion, which will be completed during the second quarter of 2027.
This hotel sits on incredibly valuable real estate, and we are excited about the opportunity to reintroduce it under a new flag. While our primary near-term focus has been on dispositions and share repurchases, we entered into agreements for the development of 3 hotels during the quarter, each located in a key dynamic market that will further enhance our portfolio positioning in the years to come. We entered into a fixed price forward purchase contract for the purchase of an AC hotel to be developed in Anchorage, Alaska with an anticipated 160 rooms for a total of approximately $66 million. Anchorage has consistently been one of our top-performing markets with both strong leisure and business demand driving overall performance. While early in the development process, the hotel is expected to open in the fourth quarter of 2027. Also during the quarter, we entered into a fixed price forward purchase contract with a third-party developer to develop a dual-branded property that will include an AC Hotel and a Residence Inn in Las Vegas, Nevada on the land we own adjacent to our SpringHill Suites Las Vegas Convention Center for a total of approximately $144 million.
It is our expectation that the hotel will be completed and open for business in the second quarter of 2028. The AC Hotel is expected to have 237 guestrooms and the Residence Inn is expected to have 160 guestrooms. The Las Vegas market continues to expand as a top destination for sports, entertainment, and conventions. And while recent market performance has been negatively impacted by lower international inbound travel, we have strong conviction in the future growth and long-term viability of this dynamic business-friendly market and are excited to expand our presence there. Since the onset of the pandemic, we have completed approximately $354 million in hotel sales with an additional $36 million under contract and expected to close in the coming months. These sales represent a blended cap rate prior to taking into consideration estimated CapEx of approximately 5% and a 4% cap rate after CapEx and have allowed us to forego significant renovation expenditures in markets where we see limited upside, preserving capital for higher-yielding investments.
Over the same period, we have invested more than $1 billion in acquisitions and purchased 6.9 million shares of our own stock while maintaining the strength of our balance sheet. These transactions have further enhanced our already well-positioned portfolio by lowering the average age, lifting overall portfolio performance, helping to manage near-term CapEx needs, increasing exposure to high-growth markets and positioning us to continue to benefit from economic and demographic trends. Consistent reinvestment in our portfolio is a key component of our strategy and ensures that our hotels maintain their strong value proposition for our customers. Our experienced team is focused on leveraging our scale ownership to control costs, maximize impact on reinvested dollars and optimally schedule projects during periods of seasonally lower demand to minimize revenue displacement. Our ability to renovate our hotels efficiently is a meaningful differentiator, which combined with effective portfolio management helps us to achieve consistent strong returns for our investors over time.
During the nine months ended September 30, capital expenditures were approximately $50 million. And for the year, we expect to reinvest between $80 million and $90 million in our hotels with major renovations at approximately 20 of our hotels. Supported by strong cash flow from our portfolio of hotels, we continue to pay an attractive dividend, which is meaningfully additive to total returns for our investors. During the third quarter, we paid distributions totaling approximately $57 million or $0.24 per common 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 8.6%. Together with our Board of Directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital. Although macroeconomic uncertainty has continued to weigh on year-over-year growth and fueled capital market volatility, travel demand for our portfolio has remained resilient, further reinforcing the merits of our underlying strategy, and we are confident we remain well-positioned to drive profitability and maximize long-term value for our shareholders.
63% of our hotels do not have any new upper upscale, upscale, or upper mid-scale product under construction within a 5-mile radius. This historically low rate of supply growth is unique to this cycle, and we believe materially improves the overall risk profile of our portfolio by reducing potential downside while enhancing potential upside as lodging demand strengthens. Our hotels, which are broadly diversified across markets and demand generators, operate efficiently and produce strong cash flow while simultaneously providing guests traveling on both business and leisure with a compelling value proposition. We have historically outperformed during extended periods of economic uncertainty, and we believe we are well-positioned for upside should we see reacceleration in broader economic growth. While we are early into our budget process for 2026, we are encouraged by airline and hotel brand commentary related to improvements they are seeing in demand as well as lapping the pullback in government demand we have seen this year.
And with hotels in each of the U.S. markets that will host the 2026 FIFA World Cup, we are well-positioned to take advantage of additional demand created by the events. Throughout our 25-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, reinvesting in our hotels, and closely aligning efforts with associates and management teams who operate our hotels. Our differentiated strategy has been tested and proven across multiple economic cycles. With the strength of our broadly diversified portfolio, the overall resilience of our business, our low leverage and the depth of our team, I am confident we are well-positioned to drive profitability and maximize long-term value for our shareholders in any macroeconomic environment. 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. While the travel industry has faced macroeconomic headwinds this year, we are generally pleased with the overall performance and resilience of our portfolio. Comparable hotels total revenue was $365 million for the quarter and $1.1 billion year-to-date through September, both down approximately 1% to the same periods of 2024. Comparable hotels adjusted hotel EBITDA was approximately $129 million for the quarter and $375 million year-to-date through September, down approximately 7% and 6% as compared to the same periods of 2024, respectively. Third quarter comparable hotels RevPAR was $124, down 1.8%. ADR was $163, down only 60 basis points, and occupancy was 76%, down 1.2% as compared to the third quarter 2024. For the 9 months ended September 30, comparable hotels RevPAR was $122, down 1.4%. ADR was $161, up 10 basis points, and occupancy was 75%, down 1.4% to the same period of 2024.
Our portfolio continues to outperform the industry where STR reports RevPAR of $102, ADR of $160 and average occupancy of 63% for the first 9 months of the year, highlighting the relative strength of our portfolio demand despite year-over-year declines. Our teams have done a tremendous job adjusting strategy 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. July was the strongest month of the quarter with comparable hotels RevPAR growth of 1%, while August and September turned negative as anticipated, with September impacted by the unfavorable calendar shift of Rosh Hashanah from October into September. Even with the pullback in August and September, we are generally pleased with the performance of our portfolio and the resilience of travel broadly despite elevated macroeconomic uncertainty and the pullback in government travel specifically.
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-performing hotels during the quarter included our South Bend Residence Inn and Fairfield Inn & Suites, both with RevPAR gains over 20%; our Richmond Marriott saw RevPAR increase almost 17% year-over-year during the quarter. And other top performers included our Denton Homewood Suites, Lafayette SpringHill Suites, Mettawa Residence Inn, Boca Raton Hilton Garden Inn, Salt Lake City Residence Inn and our Austin Round Rock Homewood Suites. Hotels with significant year-over-year RevPAR declines included our Arlington Hampton Inn & Suites, Houston Park Row Residence Inn, Austin Fairfield Inn & Suites, Tucson Town Place Suites, San Bernardino Residence Inn, and our Phoenix Homewood Suites.
Based on preliminary results for the month of October, comparable hotels RevPAR declined by approximately 3% as compared to October 2024, which was impacted by incremental pullback in government demand as a result of the government shutdown, which began on October 1. While we expect the shutdown to continue to weigh on demand until the government reopens, we are optimistic that we will benefit from the near-term pent-up demand upon reopening. Turning back to the third quarter. Weekday and occupancy trends softened as the quarter progressed, together driving overall portfolio occupancy declines. For the quarter, weekend occupancy was strong at 81%, but declined 120 basis points, slightly outperforming weekday occupancy, which declined 160 basis points. Weekend ADR was approximately flat for the quarter, turning negative in September after being positive in July and August, while weekday ADR was softer, declining 80 basis points for the quarter and contributing to overall RevPAR declines.
Highlighting same-store room night channel mix, brand.com bookings were up 110 basis points year-over-year at 40%; OTA bookings were up 70 basis points to 13%; property direct was down 120 basis points at 23%; and GDS bookings were down 20 basis points to 17%. Looking at third quarter same-store segmentation, bar was up 40 basis points at 33% of our occupancy mix; other discounts grew 30 basis points to 29%; corporate and local negotiated declined 70 basis points to 17% of our mix; and government declined 40 basis points to 5.2% of mix. Group business mix improved 50 basis points to 15% and continues to be a focus area for our property teams in response to demand shifts in other segments. We continue to see growth in other revenues, which were up 4% 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 1.7% in the third quarter and 2.2% year-to-date through September as compared to the same periods of last year or 2.9% and 3.6% on a CPOR basis. On a same-store basis, total hotel expenses increased by only 1.5% for both the third quarter and year-to-date through September. Total payroll per occupied room for our same-store hotels was $40 for the quarter, up less than 2% to the third quarter of 2024, an improvement compared to first quarter growth of 4% and second quarter growth of 3%. We continue to achieve reductions in contract labor, which decreased during the quarter to 7% of total wages, down 140 basis points or 16% versus the same period in 2024. Comparable hotels' variable hotel expenses increased by only 0.7% in the third quarter or 2% on a per occupied room basis. Occupancy declines and cost control efforts resulted in rooms expense decline of 1% versus third quarter of 2024, driven by same-store rooms wages decline of 0.8%.
Comparable hotel administrative and repair and maintenance costs grew slightly higher at just under 4% and 3%, respectively, while sales and marketing expense as well as utilities were more muted at just 1% growth. Consistent with the first and second quarters, fixed expense growth remained elevated, growing 12% in the third quarter, driven by increases in real estate taxes in several markets as well as general liability insurance premium increases. Despite the softer top line, our comparable hotels adjusted hotel EBITDA margin was strong at 35.2% for the third quarter as well as year-to-date through September, down 200 basis points and 190 basis points as compared to the same period of 2024, respectively. Adjusted EBITDAre was approximately $122 million for the quarter and $350 million year-to-date through September, both down approximately 5% as compared to the same periods of 2024. MFFO for the quarter was approximately $100 million or $0.42 per share, down approximately 7% on a per share basis as compared to the third quarter 2024.
Year-to-date through September, MFFO was approximately $288 million or $1.21 per share, down 6% on a per share basis as compared to the same period of 2024. Looking at our balance sheet. As of September 30, 2025, we had approximately $1.5 billion of total outstanding debt, approximately 3.3x our trailing 12 months EBITDA with a weighted average interest rate of 4.8%. At quarter end, our weighted average debt maturities were approximately 3 years. We had cash on hand of approximately $50 million; availability under our revolving credit facility of approximately $648 million; and approximately 68% of our total debt outstanding was fixed or hedged. Subsequent to the end of the third quarter, we repaid in full one secured mortgage loan associated with 2 of our hotels for a total of approximately $29 million, bringing the number of unencumbered hotels in our portfolio as of October 31 to 210.
As previously disclosed, in July, we entered into a new unsecured $385 million term loan with a maturity date of July 31, 2030, enabling us to stagger our maturities as we approach our main credit facility in the coming months. Turning to our updated outlook for 2025 provided in yesterday's press release. The adjustments made to full-year guidance reflect performance year-to-date as well as the potential negative impact of prolonged economic uncertainty and the government shutdown on the remainder of the year. For the full year, we expect net income to be between $162 million and $175 million, comparable hotels RevPAR change to be between negative 2% and negative 1%, comparable hotels adjusted hotel EBITDA margin to be between 33.9% and 34.5%, and adjusted EBITDAre to be between $435 million and $444 million. As compared to the midpoint of previously provided 2025 guidance, we are decreasing comparable hotels RevPAR change by 100 basis points while increasing comparable hotels adjusted hotel EBITDA margin by 20 basis points and increasing adjusted EBITDAre by approximately $300,000 as a result of strong cost control measures year-to-date, a more favorable general liability insurance renewal than anticipated, and lower G&A expense.
We have assumed for purposes of guidance that total hotel expenses will increase by approximately 2.1% at the midpoint, which is 3.4% on a CPOR basis. We continue to assume these increases are driven primarily by higher growth rates for certain fixed expenses, including real estate taxes and general liability insurance than those experienced last year. This outlook is based on our current view 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. While economic uncertainty remains elevated and the ongoing government shutdown continues to weigh on government demand and travel more broadly, we remain confident in our team's ability to successfully navigate shifting market conditions. Our experience, discipline, and agility enable us to adapt dynamically, maximize profitability and capture value through opportunistic transactions.
The strength of our differentiated strategy 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 driven shareholder value, and our solid balance sheet continues to provide meaningful flexibility. Importantly, we remain focused on the long term. Despite near-term volatility, we are committed to executing our strategy with discipline and patience, ensuring our portfolio is well-positioned to deliver growth and value creation over time. That concludes our prepared remarks, and we'll now open the call for questions.
分析師問答
The first question comes from Cooper Clark with Wells Fargo.
On expense reductions, curious how your full-time employee count has shifted over the quarter and how much of that is driving some of the cost improvements? And then any color on some of the momentum and cost improvements into 2026 would also be great.
Absolutely. So for wages and payroll overall, in my prepared remarks, I shared some improvement for the quarter, and that is largely driven by managing labor in a way where we are adjusting to the top line from an occupancy decline perspective. And so while we have seen less wage pressure year-over-year in hourly associates, really, it is an improvement from an FTE perspective relative to top line performance. And as we think about that relative to both Q4 and going forward, I think we just want to emphasize the efficiency of our hotels in general. A select service asset can be managed with very few FTEs. And as the top line adjusts both up and down, we have some flexibility with FTE counts. And so we were able to materialize some of that benefit in the third quarter and anticipate that whether we're seeing increases or decreases in occupancy that we'll be able to manage overall labor expenses well going forward.
Great. And then on the acquisition front, it seems like some of the newer additions you're making to the portfolio with the 2 new AC hotels are shifting your portfolio on a relative basis to a higher chain scale. Wondering if this is just where you're seeing the best opportunity or if this represents a slight shift in portfolio strategy longer term?
From a chain scale perspective, AC is positioned in the upscale segment. Its operating model is similar to other hotels within this category. Our focus on the AC brand, in terms of acquisitions and development, is largely based on the model's efficiency and our capacity to achieve strong margins with this brand. We have discovered that, particularly in markets with higher rates, this hotel brand competes effectively with higher chain scale products while maintaining a more efficient operating model. This efficiency enables us to convert a larger portion of top line revenue into bottom line profit.
Next question, Austin Wurschmidt with KeyBanc Capital Markets.
I just was curious, Liz, going back to the guidance change, how much of the change would you attribute to the government shutdown directly or indirectly? And historically, how quickly does that demand typically return once the government reopens and things are operating a little bit more normal course?
Yes, I’d be happy to provide more details. First, let me give some context regarding our perspective on the government impact in October, especially as we concluded the third quarter. It’s important to note that the fourth quarter was our strongest for RevPAR growth last year, increasing by 2.8% on a comparable basis, partly due to Hurricanes Helene and Milton. Specifically, October last year saw a 4% increase, which presents some challenging comparisons for us. As we analyze the performance in August and September, we need to keep in mind that some of the figures may relate to those comparisons, particularly in September and non-repeat business. Moreover, as we finished August and September, we noticed that transient demand softened as the third quarter concluded. While it’s difficult to pinpoint exact figures, we believe there was a decline in transient demand even before the government shutdown.
We had projected a decrease of around 2% for August and September, while we actually saw a decline of just over 3% due to the weakening transient business. This translated to approximately a 120 basis point drop from our earlier expectations for those months compared to our final results. When we factor in the 330 basis point adjustment we made for the fourth quarter midpoint, we estimate that about a third of that revision stems from fundamental changes entering the fourth quarter, with two-thirds related to the government shutdown. However, it’s essential to remember that both the fundamentals and the government shutdown are occurring against a backdrop of tough year-over-year comparisons as we evaluate current performance.
And then the second part of your question, historically, so going back and fortunately or unfortunately, we do have a comparison time period. As we look at the last government shutdown, we did see a meaningful pickup in business following the shutdown, implying, we think that there was some business pent-up during that period of time that didn't materialize upon coming out of the shutdown.
That's helpful. I guess where is the government segment as a percent of your business over the last month or so when you saw the disruption versus, I think you were in the 5% to 7% range historically? And any changes in terms of your exposure or strategy around government business, just given the volatility that you've seen over the past year?
That's an interesting question. When considering government involvement over the long term and based on our history in this sector, it has typically provided stability to our portfolio. What we're experiencing this year is quite unique. Regarding the latter part of your question, it highlights one of the reasons we strongly advocate for diversification, both geographically and within individual markets. This ensures we have a wide range of demand, preventing significant fluctuations caused by a decline in any one segment. Last year, the government segment accounted for 5.5% of our occupancy mix, and I noted in my prepared remarks for the third quarter that we were at 5.2% for the last quarter. However, it fell to just under 4% in October, showing the impact of the shutdown.
Next question, Aryeh Klein with BMO Capital Markets.
Justin, I was hoping you could talk a little bit more about the strategy of doing more of these development deals versus maybe acquisitions where there's a bit more of a track record. And what type of returns are you targeting? And maybe how you're balancing the acquisitions with share repurchases, which were maybe a little lighter in the quarter?
Absolutely. There’s a lot to cover, so please bear with me. As I mentioned earlier, we’re trying to find a balance between capitalizing on the short-term opportunities in asset sales and stock buybacks while also ensuring the long-term sustainability of our portfolio, which includes considerations like age, market positioning, and product types. Part of your question referred to our experience with development deals, which historically have accounted for about 25% to 30% of our total acquisitions. We have considerable experience in this area. When we think about capital allocation and target returns for future development projects, we use an average weighted cost of capital that reflects a longer period. We anticipate that by the time we deliver those assets in about 2 to 3 years, our cost of capital position will improve. The timeline for these acquisitions does not hinder us from actively buying back our stock.
I’ve previously mentioned that we intend to fund share repurchases primarily through sale proceeds. So far, our share repurchases have surpassed completed sale transactions. Additionally, we have four more assets under contract that have yet to sell, and we expect to use the proceeds from those transactions, especially if we are trading near our current values, to conduct more share repurchases. To sum up, we plan to remain active in both areas—seizing short-term opportunities to increase shareholder value through selective sales and share buybacks, while also committing to development deals that will ensure our portfolio stays relevant and positioned for strong returns over time.
If I could follow up, is there a limit to the number of these deals you can handle at once? You're almost finished with the Motto, and now you'll have these three. Should we expect more in the next year or two before these deliveries, or is this it for the near term?
Given the scale of these developments, it's generally been our intent to have no more than 1 or 2 close in any given year. I think from our perspective, that gives us the maximum amount of flexibility from an ability to close on those assets. And barring a really exceptional deal, I would anticipate that as we look at out years with '27 and '28, this would represent the entirety of the forward commitments we were likely to make. Any additional commitments would likely be for assets anticipated to be delivered further out.
Next question, Ken Billingsley with Compass Point.
All right. Hopefully, I got the mute button working this time. Can you hear me?
We can hear you.
Excellent. I have two questions. One is about expenses, and I'd like clarification on something you mentioned earlier. The savings in G&A expenses have been quite significant in '25. Is any of this temporary due to management decisions, and should we expect them to rise again? Or can we anticipate this level of savings to continue? Additionally, could you explain the Marriott shift plan and the expected expense savings? I’m not sure I fully understood that part.
Okay. I'll start with G&A, and then we can pivot to the Marriott transitions. So from a G&A expense perspective, that is really tied primarily to the executive compensation incentive plan. And as such, it's really correlated to how we're performing from an operating metrics perspective, but largely relative and total shareholder return driven. So it resets every year. So it will fluctuate every year. This year, the way we've been trending year-to-date, that's what's providing the decline as we look to the revised guidance and as you look year-over-year.
And then from a Marriott managed transition standpoint, as I highlighted in my prepared remarks, it is our intent over the coming months to transition our Marriott-managed hotels to franchise, entering into long-term franchise agreements with Marriott for those hotels and consolidating management with existing third-party management partners that we're working with already in those same markets. That consolidation is anticipated to unlock incremental value, both in terms of near-term cash flow from the individual assets and over the longer term, to the extent we pursue a sales transaction with any of those assets. As I highlighted, that the transition aligns with Marriott's strategy to improve and enhance the efficiency of their organization, and we think provides us with an excellent opportunity to further drive operating performance for those hotels.
And then lastly, on the Las Vegas market, I mean I know this is a few years out, but I mean, some talk about it being weaker. Can you discuss the decision to put 2 more there at this time?
Certainly. I think it's important to highlight in the beginning that despite the pullback in that market, we're currently yielding 10% on a trailing 12-month basis on the SpringHill Suites that we purchased in market. Our hotel has outperformed the market more broadly in part because we target a slightly different piece of business. We have historically owned hotels in the Vegas market and understand that because of the demand drivers in that market, it tends to be slightly more volatile than other markets where we have ownership in our portfolio. That said, we believe, as I highlighted in my prepared remarks, in the long-term trajectory of the market based on continued investment in meaningful demand drivers, which are more diverse than they have been historically. And given our location in market immediately adjacent to the recently expanded convention center, we see that being a meaningful driver for long-term value in this complex of hotels.
I think when we purchased the SpringHill Suites, we acquired with it adjacent land, which is where these hotels will be built. They will be connected to the SpringHill Suites. And so when we think about operating efficiencies, we will have an ability using the same manager for all 3 hotels to drive really strong bottom line numbers for the hotels. And again, I think as we think about both additions and subtractions from our portfolio and look to prune and plan, we're taking a long-term view and see our presence in Vegas as a meaningful differentiator from our publicly traded peers and a potential driver for long-term value.
Next question, Michael Bellisario with Baird.
I have a first question regarding CapEx and disruption. First, can you provide insights on the Seattle Lake Union project? Are there any unexpected costs associated with it? Additionally, how should we anticipate earnings disruption next year, considering the hotel is quite substantial in its earnings contribution? Also, for the 13 Marriott-managed hotels, could you explain what the typical disruption looks like when transitioning a management company?
Both very good questions. When we think about the Residence Inn, because it was coming up on end of franchise, we anticipated that we would be renovating the hotel regardless of whether or not we transition brand. And so the renovation-related disruption, I think, would have been the same regardless of whether or not we had kept it within that same brand family. I think as we looked at options in that market, and I highlighted this in my prepared remarks, we looked at competitive supply and recognized quickly that Marriott had significantly greater presence in the market than Hilton, more than double. And given the strength of both reward systems, we saw value in repositioning the hotel to another flag. Certainly, there should not be a read-through as to our feelings related to the Residence Inn brand or other Marriott brands as indicated by the recently signed development deals. We continue to feel very strongly that those are incredibly powerful brands.
Our decision in this market was driven largely by the competitive supply picture and facilitated, frankly, by brand incentives, which helped to sweeten the deal. As we think about disruption for that particular property, we anticipate some outsized disruption as we transition from one reservation system to another, because it's an extended stay property with a higher percentage of direct sales than a typical hotel, we hope to mitigate a portion of that. And I think certainly, we'll be in a position to report back as we work through that process, remembering again that we've given a lot of advance notice to this group and that, that transaction still happens sometime in the future. Speaking to the other properties, the transition we anticipate there will be much less disruptive. And in fact, we have, from time to time, as you know, transitioned assets from one management company to another in an effort to drive incremental performance from those hotels, especially to the extent we're able to consolidate management within individual markets and leverage that combined presence to reduce staff and to combine sales efforts in a way that really drives incremental profitability.
Because we have a lot of experience with that, I think we feel good about our ability to drive incremental value in the short term. That, combined with the fact that we will be transitioning the hotels for most of the hotels, during the slowest period of the year from an overall occupancy standpoint, we see those transitions as going smoothly and positioning us to drive near-term incremental efficiencies from an operational standpoint. Beyond that, the transition to franchise unlocks incremental flexibility as we think about potential transactions down the road. And so we saw it as a win-win-win with Marriott being able to achieve some incremental efficiencies from an operational standpoint on their side, us gaining operational efficiencies near term as we combine management in individual markets and then long term, unlocking incremental value to the extent we pursue a sale of the assets.
Good. Understood. And then a follow-up for Liz. I think you mentioned 3.4% cost per occupied room this year at the midpoint. Just early look into next year, how should we think about cost per occupied room, at least the growth rate relative to this year? Any puts or takes to consider? That's it for me.
So I think it's a little bit early for us to give definitive guidance from an expense growth perspective given where we are in the budgeting process. And as Justin mentioned, we have several things we're working through, which we ultimately believe will go smoothly and will put us in a better position, but could have some short-term impact. So if we remove that from the equation, I think we have seen in many areas, expenses moderate as we've moved through the year and feel like the team has done a very, very good job given the top line flexing and maximizing cost savings and maximizing profitability as we think about the bottom line. We've outperformed our expectations, and we certainly hope that we'll be able to carry some of that through as we think about next year.
Next question comes from Chris Darling with Green Street.
So just a quick follow-up on the Las Vegas development deal. Would you expect any revenue synergies just being next to the convention center with a larger footprint over time?
Absolutely. And especially, I think our team was incredibly thoughtful in the selection of brands such that we could, from a sales perspective, present a very versatile total product with an ability to house larger groups spread among the 3 brands in ways that drive their overall stay experience. But certainly believe that having the combined assets there meaningfully better positions us from a sales standpoint as well as providing us with incremental ability to drive operational efficiencies on brands that, quite frankly, are already leading brands from a margin production standpoint. Thank you for joining us today. We continue to be excited about near- and long-term opportunities for our portfolio and hope, as always, that as you have an opportunity to travel, you'll take the opportunity to stay with us in one of our hotels. I know over the coming weeks and months, we'll have an opportunity to meet with many of you, and we look forward to seeing you in person and answering any further questions you might have.
This concludes today's teleconference. You may disconnect your lines at this time, and thank you for your participation.