管理層發言
Hello, everyone. Thank you for joining us, and welcome to Xenia Hotels & Resorts Q2 2026 Earnings Conference Call. After today's prepared remarks, we will host a Q&A session. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. I will now hand the conference over to Aldo Martinez, Director of Finance. Aldo, please go ahead.
Thank you, Jen. And welcome to Xenia Hotels & Resorts second quarter 2026 earnings call and webcast. I am here with Marcel Verbaas, our Chairman 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. 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 up 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, July 30, 2026, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find the reconciliation of non-GAAP financial measures to net income, and definitions of certain items referred to in our remarks, in our second quarter earnings release which is available on the Investor Relations section of our website. The property-level information we will be speaking about today is on a same-property basis for all 30 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 to report another quarter of solid operating performance, with RevPAR, adjusted EBITDAre, and adjusted FFO per share modestly exceeding our expectations from when we last reported in May. Same-property RevPAR for the quarter was $206.54, an increase of 5.6% compared to the same period last year, driven entirely by rate. Same-property ADR was up 5.7% year-over-year, while occupancy held essentially flat. On a GAAP basis, we reported a net loss attributable to common stockholders for the quarter of $19.3 million, a result of a noncash impairment charge related to the sale of Kimpton RiverPlace Hotel, which I will touch on later in my remarks. Adjusted EBITDAre for the quarter was $78.1 million, about $1 million ahead of the expectations we set when we reported first quarter results. Adjusted FFO per share for the second quarter was $0.61, a 7% increase compared to the second quarter of last year, due to our positive operating results and a lower share count after significant share repurchases at a very attractive price in 2025. Our same-property total RevPAR grew 3.3% in the quarter, trailing our same-property RevPAR growth of 5.6%. Food and beverage and other revenues grew only modestly in the second quarter. This modest growth in non-room revenues was largely a result of more subdued group demand in the quarter, which faced a tough comparison to last year, and our RevPAR growth for the quarter consisting entirely of ADR growth. We expect to see more robust growth in non-room revenues again for the remainder of the year. Both our group rooms revenue pace and our banquet and catering pace are quite strong for the third and fourth quarters, which has been reflected in our updated full year guidance. The transient segments led RevPAR growth in the quarter, bolstered by the unique demand dynamics from the FIFA World Cup. Transient same-property RevPAR growth of 6.9% outpaced group RevPAR growth of 3.4% for the quarter. We had anticipated that the second quarter would be our weakest from a group perspective on a year-over-year basis, particularly after FIFA released a number of large room blocks as the World Cup approached. Despite the slower growth in group RevPAR in the second quarter, it is worth noting that group business continued to build on the 15.6% group rooms revenue growth we experienced in the second quarter of 2025. Group base for the second half of the year strengthened during the quarter, and we continue to see no signs of pullback from the higher-end consumer, which gives us continued confidence in the health of demand across our portfolio. June was the strongest RevPAR growth month of the quarter. Some of this was bolstered by the FIFA World Cup, as games were played in six of our markets. Our same-property portfolio achieved nearly 9% growth in daily rate in June versus the same month last year. While the World Cup certainly provided compression and rate growth around game days, the overall positive impact on our portfolio was limited. Group business in most of our World Cup markets was weaker, not only because of the FIFA room blocks issue, but also a hesitancy from other potential customers to book in those markets during and around the time of the event. While transient demand filled the gap, this came at the expense of out-of-room spend that had been very strong in prior quarters. As a result, most of our large group-focused hotels and World Cup markets relatively underperformed. Some of our transient-focused smaller hotels with exposure to the games posted strong results. RevPAR strength for the quarter as a whole was broad-based from a market perspective, with Philadelphia leading our portfolio with same-property RevPAR growth of 22%, followed by Salt Lake City at 13.1%, Phoenix at 12.7%, and Birmingham at 12.2%. We also saw healthy high-single-digit to double-digit percentage RevPAR increases in several other markets, including Santa Clara, Washington, D.C., and San Diego. Performance in Phoenix continues to be aided by the successful ramp at Grand Hyatt Scottsdale Resort & Spa, which is tracking favorably towards stabilization. The year is shaping up to be the strongest group year in the resort's history, while group pace for future periods remains encouraging as well. Turning to margins, same-property hotel EBITDA margin was 28.7% in the second quarter, down 65 basis points from a year ago. The lapping of approximately $1.5 million in real estate tax refunds that we received during the second quarter of 2025 and an increase in expenses during the startup phase of the food and beverage repositioning at W Nashville were the most significant reasons for our margin decline for the quarter. We remain focused on the expense levers within our control and continue to work with our operators to manage discretionary spending appropriately. To capital projects, we continue to reinvest in our portfolio during the quarter. We have two significant renovations set to begin in the fourth quarter: the first phase of a two-phase comprehensive renovation of guest rooms and corridors at Andaz Napa, and a renovation of guest rooms, corridors, and meeting space at The Ritz-Carlton Denver. Both of these renovation projects reflect our ongoing commitment to protecting and growing the long-term value of our portfolio. Given the timing of these renovations during lower demand periods in Napa and Denver, we expect limited cash flow disruption from these projects this year. Barry will provide additional details on all of our capital projects during his remarks. On the transaction front, last week we completed the sale of the 85-room Kimpton RiverPlace Hotel in Portland, Oregon for $11 million, or approximately $129,000 per key. The $11 million sale price represented a 19.4x multiple on hotel EBITDA and a 2% capitalization rate on net operating income for the trailing 12 months ended June 30, 2026. RiverPlace was an asset that we acquired in 2015 in a three-property portfolio transaction. While the hotel performed well historically, it significantly underperformed in the last few years due to market challenges, its location becoming less desirable, and new competitive supply additions. The hotel contributed minimal hotel EBITDA and was facing substantial near-term capital expenditure requirements and a challenging outlook over the next several years. We continue to maintain exposure to the recovering Portland market through the ownership of our 600-room Hyatt Regency Portland, which benefits from its location adjacent to the Oregon Convention Center near the Moda Center. The overall transaction environment appears to be a bit more robust than it has been over the past several years. We continue to evaluate opportunities to further enhance the quality of our portfolio and drive superior FFO growth through both external and internal drivers. Throughout the history of our company, we have been active on both the disposition and acquisition fronts in an effort to achieve these objectives, and we expect to take advantage of similar opportunities when they arise in the years ahead. We will remain prudent in our evaluation of these opportunities, and we will continue to focus on maintaining a strong and flexible balance sheet to support our capital allocation decisions. Looking ahead, given the strength of our performance in the first half of the year, continued favorable market conditions, and a very strong group demand outlook for the second half of the year, we are raising the midpoint of our current full-year 2026 adjusted EBITDAre guidance by $7 million. Atish will walk through all of our updated 2026 guidance items in more detail during his remarks. In closing, we continue to see encouraging trends into the third quarter, which gives us confidence in our improved outlook for the remainder of the year. The third quarter is off to a very strong start, as we estimate that July RevPAR growth for our same-property portfolio, which now excludes Kimpton RiverPlace Hotel, will be approximately 10% compared to the same period last year, with both leisure and group demand contributing to this increase. We believe that our high-quality portfolio continues to be well positioned to take advantage of a low-supply-growth environment and a positive backdrop in all segments of hotel demand, especially at the higher end. We have experienced strength in both transient and group demand this year, and future indicators continue to support our expectation that our portfolio is poised for meaningful growth during the remainder of this year and the years ahead. With that, I will turn the call over to Barry to walk through our operating results and capital expenditure projects in more detail.
Thank you, Marcel. Good afternoon, everyone. For the second quarter, our 30-hotel same-property portfolio RevPAR was $206.54, an increase of 5.6% compared to the second quarter of 2025, with growth entirely rate-driven. Based on occupancy of 72.3%, flat with last year, and an average daily rate of $285.71, up 5.7%. As Marcel mentioned, the second quarter saw an anticipated shift in non-room spend with same-property total RevPAR of $366.17, an increase of 3.3% compared to last year's second quarter. This modest growth in non-room spend reflects a shift in mix related to an increase in transient demand and an anticipated mix of association versus corporate group demand resulting in a difficult comparison to the same quarter last year. Looking at the quarter compared to 2025 on a same-property basis, April RevPAR was $219.74, up 6%, and May RevPAR was $199.78, up 2.6%. June was the strongest performing month in terms of growth, with RevPAR of $200.32, up 8.6% with occupancy relatively flat. Nineteen of our 22 markets posted positive RevPAR growth for the quarter. The Palomar Philadelphia led our portfolio with same-property RevPAR growth of 22%, while Monaco Salt Lake City followed at 13.1%. Our Phoenix properties grew at a combined 12.7%. We also saw double-digit percentage growth at Grand Bohemian Mountain Brook of 12.2%, Park Hyatt Aviara up 11.3%, and Hyatt Regency Santa Clara up 11.1%. The Ritz-Carlton Pentagon City was up 8.4%. The Ritz-Carlton Denver and Fairmont Pittsburgh also posted healthy growth of 7.2% and 7.1%, respectively. Growth was fairly balanced on day-of-week trends in the quarter. For all segments on the same-property basis, weekday RevPAR, Sunday through Thursday, was up 5.9% while weekend RevPAR, Friday and Saturday, was up 5.2%. Rate growth was broad-based and well balanced across every day of the week, ranging from just under 5% on Thursdays to nearly 7% on Mondays. On the expense side, total same-property hotel operating expenses were $211 million for the quarter, an increase of 4.2% outpacing our 3.3% revenue growth, resulting in 65 basis points of margin decline, with the largest single factor being the lapping of a significant real estate tax credit in the second quarter of last year. Looking at the individual components, rooms expense grew 4% on a per-occupied-room basis, while food and beverage expenses grew 3.3%, greater than the 1% growth in food and beverage revenue, which impacted F&B profitability. This was a direct result of a 1.5% increase in less profitable outlet business and a 1.1% decline in typically more profitable banquet business. Miscellaneous income declined nearly 12% due primarily to less cancellation and attrition revenue compared to last year, but is expected to balance itself out over the course of the full year. G&A expenses grew approximately 7.9% for the quarter, due in large part to higher credit card commissions related to the higher transient mix. Sales and marketing expenses continue to be well controlled and were nearly flat to last year. Property operations and maintenance expenses declined just over 1% for the quarter, while energy expenses increased nearly 11% due primarily to significant increases in gas and water expenses, offset by a more moderate 4% increase in electricity due in part to efficiencies from our ongoing refurbishment and replacement of chillers at many of our properties. Same-property EBITDA was $84.9 million for the quarter, an increase of 1% and a margin of 28.7%. Turning to CapEx, we invested $15.4 million in portfolio improvements during the second quarter, bringing our year-to-date total to $30.6 million. During the second quarter, we finalized planning at Royal Palms Resort and Spa: the renovation of guest rooms and corridors in the 68-room Montavista building and a renovation of T. Cook's restaurant, which will take place during the third quarter. Additional ongoing upgrades across the portfolio include upgrading mechanical systems at eight hotels and ongoing minor improvements to guest rooms at three hotels. Looking ahead to the fourth quarter, we have two significant renovations scheduled to begin, both of which are currently on track. We will perform the first phase of a two-phase comprehensive room renovation of corridors and guestrooms at Andaz Napa and a renovation of guestrooms, corridors, and meeting space at The Ritz-Carlton Denver. We continue to expect full year capital expenditures of between $70 million to $80 million, unchanged from our prior guidance. Before I conclude, I want to provide an update on our four Autograph Collection hotels. These four hotels have been strong performers, and we are in the midst of further strengthening them by evolving their individual names and positioning to better tie to their local markets. The hotels will continue to maintain their Autograph Collection branding, but the new names and positioning will better fit Autograph Collection's philosophy of each hotel being distinctive, in part by capturing the local essence of each market in which they reside. The first step of this effort began earlier this year when we transitioned property management to Davidson Hotel Group. That transition went smoothly with no disruption to hotel performance. In the next few months we will be renaming these four unique properties. As with the management transition, we do not anticipate any meaningful disruption of hotel operations and look forward to even stronger performance from each of these hotels under Davidson's management as they continue to be part of Marriott's Autograph Collection. With that, I will turn the call over to Atish.
Thank you, Barry. I will provide an update on our balance sheet, touch on the second quarter versus our prior expectations, and then walk through our updated 2026 guidance. At quarter end, we had approximately $1.4 billion of outstanding debt, with approximately three-quarters of our debt at fixed interest rates. Our weighted average interest rate at quarter end was about 5.5%. Our leverage ratio as calculated under our credit facility was approximately 4.8 times trailing-12-month net debt to EBITDA. Over time, we expect our leverage ratio to achieve our long-term target of sub-4x net debt to EBITDA. As a reminder, we have no preferred equity or senior capital. During the quarter, we further resized the Andaz Napa mortgage loan by paying it down by approximately $5 million ahead of the hotel's planned renovation which is scheduled to begin next quarter. Approximately 7% of our debt matures next year, with our most significant maturities in 2029 and 2030. We continue to believe our capital structure is a source of strength given we have a mostly unencumbered asset base, a low, laddered maturity profile, and a strong syndicate of banking partners. At quarter end, available cash was $112 million, and our $500 million revolving line of credit was fully undrawn, which resulted in total liquidity of $612 million. We did not repurchase or issue any shares during the quarter. We have $97.5 million remaining on our buyback authorization, and $200 million of capacity under our ATM offering program. We paid a second quarter dividend of $0.14 per share. If annualized, this reflects an approximate 2.5% yield on our share price. We continue to balance dividend level with the utilization of significant COVID-era NOLs. We also continue to prioritize ways in which we can drive shareholder value such as reinvestments in our existing assets or share repurchases. As a reminder, in 2025 we finished the Grand Hyatt Scottsdale project which we are benefiting from now. As we wrap that up, we turned more aggressively to share repurchases, buying approximately 9% of our outstanding shares last year at a sub-$13 weighted-average price per share. Moving ahead to the second quarter relative to prior expectations, just two points to frame the discussion ahead on guidance. First, as Marcel mentioned, second quarter results came in slightly ahead of our expectations with better RevPAR and EBITDA margin than expected, resulting in a $1 million beat to the adjusted EBITDAre implied by the quarterly weighting that we had previously indicated. Second, as to our expectation for event-driven demand this year, we had previously guided to a range of 25 to 50 basis points of RevPAR growth due to special events. Our current estimate is that event-driven demand materialized at the low end of that range, and the mix of business being more transient than group did not provide as much of a total revenue lift as had been anticipated. Turning next to our 2026 guidance, we have raised our full year adjusted EBITDAre guidance by $7 million to $273 million at the midpoint. The $7 million increase to adjusted EBITDAre guidance is on top of the $6 million increase we made last quarter. Our adjusted EBITDAre expectation has moved up approximately 2.5% since last quarter, or 5% since we initially provided full year guidance in February. As to the weighting by quarter for the remainder of the year, we expect to earn in the high-teens percentage range of full year adjusted EBITDAre in the third quarter and just under a quarter of full year adjusted EBITDAre in the fourth quarter. As to RevPAR growth, we have increased the midpoint by 150 basis points to 5.5%. A couple of things give us confidence in our outlook. First, group room revenue pace for the second half was up 12% at the end of June versus the year prior. That reflects a 300-basis-point increase from where it stood a quarter ago. The pace increase is 80% demand-driven and 20% rate-driven. This higher pace reflects strong production in the second quarter with group room revenue production up over 25% for the back half of this year compared to production in the second quarter of 2025 for the back half of 2025. We have more than three-quarters of our expected second half group business already booked. Second, we continue to see strong transient demand reflected both by results at our more transient-oriented hotels and overall transient pace. Based on our July projected RevPAR, several of our transient-oriented hotels, excluding those that benefited from special events, showed strong year-over-year gains. Those properties include our hotels in Salt Lake City, Pittsburgh, and Downtown Orlando. As to transient pace, at the end of June it was up in the high-single-digit percentage range for both August and September. Turning next to our expectation for total RevPAR, we have increased our total RevPAR growth guidance by 75 basis points to 5.75% at the midpoint. The variance in growth of RevPAR versus total RevPAR reflects second quarter transient versus group mix. None of our other guidance assumptions have changed. Guidance for interest expense, G&A expense, income tax expense, and capital expenditures are all the same as a quarter ago. We expect adjusted FFO per diluted share of $2.02 at the midpoint, which is an increase of $0.08 at the midpoint. That expectation reflects about 15% growth in FFO per share relative to 2025. In closing, our high-quality, well-located portfolio of luxury and upper-upscale hotels affiliated with strong brands and managers makes us well positioned for growth, particularly given the supply backdrop and fundamentals. We will now open the call for questions. Jen, may we please start the Q&A session?
分析師問答
Of course. We will now begin the Q&A session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally please remember to unmute your device. Please standby while we compile the Q&A roster. Your first question comes from the line of Chris Darling with Green Street. Chris, your line is open. Please go ahead.
Hi. Thanks for taking the question. Marcel, hoping you could talk a little bit more about what you are seeing in the transactions these days, both maybe from a pricing perspective, but also in terms of depth of the bidding pool, and anything else that has caught your eye?
Yeah, sure. Thanks for the question, Chris. Like I said in my prepared remarks, I do think we are seeing a slightly more robust transaction market than we have seen over the past several years. Some of that obviously has to do with the fact that we are overall as an industry seeing some pretty good sustained growth over the last couple quarters. I think that creates an environment where it becomes a little bit easier for buyers and sellers to potentially find each other and end up with pricing that could work on both sides. It is obviously a little bit easier to look at a property that you can point a little bit more easily towards growth over the next several years, which gives you more confidence about completing a transaction and may end up getting to pricing that makes more sense for a seller in that situation. So overall, I think we are just seeing a little bit more robust markets. It certainly allows us to build the pipeline a little bit more than what we have seen over the last several years and dig a little bit deeper into some of those opportunities.
Yeah, that is helpful. And maybe a question for Barry here, but as it relates to expense growth, you spoke about some of the moving pieces this quarter and how that may have been a bit of a headwind in the second quarter. How should we be thinking about OpEx per-occupied-room on a go-forward basis for the portfolio, both second half of the year and then sort of on a run-rate basis?
I think on a per-occupied-room basis, things are overall relatively normalized in that we are seeing per-occupied-room growth in the 3% to 4% range. That is tempered, obviously, and varies by quarter given how much occupancy growth there is. So this quarter, we had flat occupancy, and the overall expense levels were a little bit higher than we would have hoped for. I think embedded in the guidance and forecast is that we are going to drive a little more occupancy over prior year in Q3 and Q4, and that should help make, or certainly assist in, on a per-occupied-room basis, the expense levels being toward the lower end of that range.
Your next question comes from the line of David Katz with Jefferies. David, your line is open. Please go ahead.
Thanks very much for taking my question. Appreciate all the detail. You have done a very solid job with your existing portfolio. History suggests otherwise, but is the prospect of any corporate M&A on or off the table?
Well, as we have talked about in the past, corporate M&A is really driven by what the overall environment looks like from potential buyer and seller interest. We have focused very much on continuously upgrading the portfolio, making it as robust against potential challenges and positioning it well for future FFO growth through continuous upgrades and making sure it is an attractive portfolio from all perspectives. As Atish pointed out, we have grown FFO pretty significantly over the past several years, and on a day-to-day basis we are doing all the things that we think will drive value for the portfolio over time for the benefit of all of our shareholders. What you have seen in the overall transaction environment is that you are still not seeing a lot of large portfolio transactions pursued on the buy or sell side, and there has been more focus on individual properties or smaller portfolios overall. I do not have an expectation of that significantly changing in the near term.
Understood. And just in a different direction, the conversation around fee structures and owner consternation over certain aspects of fee costs and fee streams: I would love whatever shareable perspective you may have about that issue and whether we are spending more time and attention to it than it deserves, or if it is really a thing?
From an ownership perspective, we look for ways to grow value in a portfolio, and that includes every element of operations. It is extremely important for us to make sure we keep our expenses under control and that the growth in expenses over time is managed. Especially in today's environment, we want to make sure we have the right channels in place and the opportunity to drive as much on the sales side as possible at the lowest acquisition cost. There has been pressure for owners to bring down costs and increase flow-through to the bottom line, and we are focused on every aspect of that. It is not unusual that owners review these elements to ensure we are acting in the best interests of our shareholders.
Your next question comes from the line of Michael Bellisario with Baird. Michael, your line is open. Please go ahead.
Thanks. Good afternoon, everyone. I want to focus on the second half group pace commentary in two parts here. One, where are you seeing that pickup in terms of markets? And two, how does that pickup maybe change operator confidence or pricing strategies into the back half of the year?
Good questions, Mike. The strength is pretty broad-based. The pickup was a few hundred basis points from a quarter ago, and the production was pretty evenly distributed between third quarter and fourth quarter and across a variety of markets. Group has been a source of strength for us now, particularly last year and this year, so seeing this momentum has been quite positive for us.
I would emphasize that it is very broad-based across almost all of our properties. How properties maximize rate with group depends on where the holes are. If there are holes in places where a market is compressed but our hotel has not yet put a group in, we will be able to capture that group at a very high rate. Conversely, in markets where we have very good group pace, the holes are often hard-to-fill pockets, so while we may continue to fill more group room nights, particularly in periods around holidays prevalent in Q3 and Q4, we may or may not achieve significant rate growth on those compared to the overall rate platform. The puzzle for each property is how best to do that and how to drive overall RevPAR.
Got it. That is helpful. And then just a follow-up on capital allocation. Do you think about the funding sources for any potential deals? And then for things that are in your pipeline, how have underwritten returns or seller expectations changed over the last 90 days? Thank you.
In terms of funding deals, we have a healthy amount of liquidity and a leverage ratio that is above our target but still sub-5x, so there is capacity. We would look to existing resources and potentially additional dispositions over time as ways to fund acquisitions.
Regarding the pipeline and expectations, we are seeing a little more activity, which gives a bit more color on where pricing could be. I would not say seller expectations have dramatically changed over the last 60 to 90 days; it is hard to point to any individual transactions that illustrate a major shift. There is a bit more optimism about lodging fundamentals overall and growth seen over recent quarters, which provides a backdrop for more productivity on the transaction side.
Your next question comes from the line of Austin Wurschmidt with KeyBanc Capital Markets. Austin, your line is open. Please go ahead.
Thanks. Good afternoon, everyone. You had referenced that the transient pace for August and September was tracked in the high-single-digit range as of the end of June. Can you give us a sense of how that has materialized looking 60 to 90 days out? Have you seen things continue to strengthen, or have you given some of that back?
Transient pace does move around a bit and is not always the best direct indicator, but it has strengthened and is moving in the right direction. It reflects the actual results we are seeing. If you look at what our transient pace was going into July and how July came out, it is a good indicator. It is one of many data points we use to think about guidance. I would view it in that context. We have a healthy level of confidence in the outlook, and transient is one piece of it alongside group demand.
Very helpful. And then with respect to the guidance revision, can you talk a little bit about the contribution from the Grand Hyatt Scottsdale? I think initially at the outset of the year, you had that hotel contributing toward the low-$30 million range. What is the new given? It seems like things are trending well there.
We are a smidge higher and still in the low-$30 million range; around $32 million, so we are in the range we talked about before. Grand Hyatt Scottsdale is tracking really well, but the guidance revision has as much to do with the rest of the portfolio and what we are seeing more broadly.
A reminder, if you would like to ask a question, please press 1 to raise your hand. To withdraw your question, press 1 again. Again, your next question comes from the line of Ari Klein with BMO Capital Markets. Ari, your line is open. Please go ahead.
Thank you and good afternoon. Barry, I think you mentioned some hesitancy among groups in the second quarter around World Cup markets. Curious what that looked like outside of World Cup markets? And is some of the strength in group pace you are seeing in the second half of the year related to maybe a shift in where the group ended up coming in? And for 2027, how is that shaping up for group or growth tailwinds in general?
I mentioned we saw some pullback in group around the World Cup markets because groups were hesitant to book in those markets during the event, and there were FIFA room blocks issues. Some of the softness in the second quarter was not just related to the World Cup. May had always shaped up to be one of our weaker group months from a growth perspective; we had a particularly strong second quarter last year on the group side, and it was hard to replicate some of that. We had some holes in various properties in May that never really filled. So we saw some weaker group specifically in the World Cup markets around the event, but also some broader softness in May across the portfolio. The quarter was expected to be the weakest group quarter, and the second half has always looked strong. What is particularly encouraging is that we saw group production pick up in the second quarter and strengthen into the second half.
To add, the strength we are seeing is pretty broad-based across the portfolio, not simply a shift of groups from one market to another. We are seeing genuinely increased group bookings across many properties and markets, which is encouraging for our overall pace and outlook.
So whether that is shifting, it sounds like it is broad-based on the portfolio rather than just groups moving around due to World Cup timing. Thanks. And on the Autograph Collection name changes and Davidson shift, is there anything meaningful you expect to come out of it that you can quantify?
It is hard to quantify in the near term. Our expectations are more mid- to longer-term: bringing Davidson in as a management company we've worked with successfully and rebranding the hotels so each has a unique identity local to its marketplace while remaining part of the Autograph Collection. We think that will ultimately drive revenue through stronger local connections, special events programming, and enhanced marketing. Davidson's ability to sell these repositioned hotels and help us on cost control should produce benefits over time. These properties have done very well for us; we just see an opportunity to enhance them and drive more from them going forward.
Next question comes from the line of Jack Armstrong with Wells Fargo. Jack, your line is open. Please go ahead.
Hey. Good afternoon, and thanks for taking the question. Given the strength in your shares this year, can you talk a bit about your preferred use of incremental capital at this point and how you might rank acquisitions, ROI CapEx, and deleveraging?
Thanks, Jack. Atish spoke about this earlier. We have been pleased with the elevated CapEx spending over the last few years, particularly the Grand Hyatt Scottsdale project. After that capital cycle, we used more capital for share repurchases in 2025 at what we believed were attractive prices. With the stock price moved up, it becomes more interesting to consider acquisitions and external growth as part of the capital allocation decision going forward. Historically we take a balanced approach—transactions, share repurchases, deploying capital into assets—and we will continue to evaluate opportunities case by case. If we find an opportunity that drives external growth, it becomes more likely we'll pursue it than it was several years ago.
To add, historically we've used a balanced approach to grow value. Over the last couple of years, some tools were more desirable in terms of value accretion, so we stepped on the gas for share repurchases. Now it is more opportunistic and case-by-case; we will toggle between those levers as we have historically done. In terms of valuation, we currently trade at $350,000 per key with a portfolio cap rate in the mid-sevens and a hotel EBITDA multiple south of 11x. Even after appreciation, we still trade within a reasonable historic range and there remains a gap between where we trade and NAV, both our internal NAV and recent external NAV estimates. That context is helpful as you think about how we regard the stock and capital allocation decisions.
Really helpful there. Then just one follow-up. Can you talk about what you are seeing in the Nashville market and when we should expect to see the incremental EBITDA from the F&B CapEx you put in at W?
We are pleased with how smoothly the transition went and the look and feel of the restaurants after the work. Initial reviews in the local market have been great. Two of the outlets are run by Marriott and two by José Andrés Group, and each has had success connecting to the local community. When you open four outlets around the same time, each comes online at a different pace based on its demand generators. Our team has worked with both Marriott and José Andrés Group to drive revenue into those outlets. Where an outlet may not have gotten exactly the start we expected, we spent time working with local influencers and social media marketing and have seen immediate returns. We always forecasted this year to be a ramp year for food and beverage operations. Looking ahead to 2027, we expect to reach the contribution levels we model for the restaurants and, more importantly, the hotel-side benefit from these outlets. We've seen strong interest in private events and group leads wanting to leverage the José Andrés outlets, and on the leisure side we have creative packages around dining experiences. So we expect the full benefits to be realized more meaningfully into 2027.
I would add that part of the pressure on margins in the second quarter was related to higher expenses from the food and beverage operations as they start up and scale. As revenues build, we expect the operations to get to the appropriate margins. More importantly, there will be a halo effect for the property overall that will help room profitability over the next several years. This is not solely a one-year story; it will take a couple of years for the full benefits to accrue.
There are no further questions at this time. I will now turn the call back to Marcel Verbaas, Chairman and CEO, for closing remarks.
Thank you, Jen. Thanks, everyone, for joining us today. I hope everyone enjoys the rest of their summer and I look forward to speaking with you again over the next several months and to what we expect will be a very promising second half of the year. Thank you.
This concludes today's call. Thank you for attending. You may now disconnect.