Xenia Hotels & Resorts, Inc. (NYSE:XHR) Q3 2025 Earnings Call Transcript

Xenia Hotels & Resorts, Inc. (NYSE:XHR) Q3 2025 Earnings Call Transcript October 31, 2025

Xenia Hotels & Resorts, Inc. beats earnings expectations. Reported EPS is $0.23, expectations were $0.045.

Operator: Hello, and welcome everyone to the Xenia Hotels & Resorts, Inc. Q3 2025 Earnings Conference Call. My name is Becky, and I will be your operator today. During the presentation, you can register a question by pressing star followed by one on your keypad. If you change your mind, please press star followed by two. I will now hand over to your host, Aldo Martinez, Manager of Finance, to begin. Please go ahead.

Aldo Martinez: Thank you, Becky. And welcome to Xenia Hotels & Resorts, Inc.’s third quarter 2025 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 for Q&A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are 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 such forward-looking statements.

The earnings release that we issued this morning, along with the comments on this call, are made only as of today, October 31, 2025, and we are under 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 third 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 ninety days. I will now turn it over to Marcel to get started.

Marcel Verbaas: Thanks, Aldo. Good morning, everyone. As we reported this morning, our third quarter performance generally met the expectations we outlined during our second quarter earnings call. The lodging industry continues to experience a challenging operating environment, particularly as it relates to leisure demand, which generally is a significant driver in the third quarter for our portfolio and the industry overall. However, despite these macro challenges, we continue to benefit from the high-end positioning of our portfolio as well as unique internal growth drivers such as the continued ramp of Grand Hyatt’s Resort. We also continue to benefit from strong group demand throughout, which was evident again in September and thus far in the fourth quarter.

We expect group demand to remain strong as we look ahead to next year, which is supported by robust group room revenues already on the books for our portfolio for 2026. Turning to our third quarter financial results, for the third quarter of 2025, we reported a net loss of $13.7 million, Adjusted EBITDAre of $42.2 million, and adjusted FFO per share of 23¢, which was a decrease of 8% compared to the same quarter last year. Our same-property RevPAR for the quarter was essentially flat for our 30-hotel portfolio compared to the same period in 2024, with an occupancy decrease of 100 basis points offset by a 1.6% increase in average daily rate. The Houston market, in particular, was a drag on portfolio performance as the market and our hotels faced tough comparisons due to a short-term demand lift from the aftermath of a hurricane in the third quarter of last year.

Additionally, given the seasonality of the various demand segments in our portfolio, group demand, which has been the strongest segment this year, was not as big of a driver for our third quarter as it was in the first half of the year and as we expect to see again in the fourth quarter. Despite these challenges, when excluding our Houston assets, same-property RevPAR increased by 0.9%, which was largely driven by significant year-over-year growth at Grand Hyatt Scottsdale as the resort continues its ramp towards stabilization. In addition to the strong growth in Scottsdale during the third quarter, we experienced double-digit percentage RevPAR growth in Santa Clara, Birmingham, and other markets. Despite the relatively muted performance in the third quarter, we are pleased that for the first nine months of the year, our same-property portfolio achieved a 3.7% increase in RevPAR driven by 80 basis points higher occupancy and a 2.4% increase in average daily rate when compared to the same period in 2024.

This outperformance was again mostly fueled by the recently renovated and up-branded Grand Hyatt Scottsdale Resort during the early phase of its path towards stabilization. As it continues to perform in line with our underwriting expectations, we continue to be excited about the impact of our stronger group positioning this year, and particularly the associated increase in banquet and catering revenues. As a result of a significant increase in food and beverage revenue, our third quarter same-property total RevPAR increased by 3.7% in the third quarter as compared to last year, despite our RevPAR being flat year over year. This third quarter increase was again mainly driven by Grand Hyatt Scottsdale. For the first nine months of the year, the impact of increased food and beverage revenues was even greater, as same-property total RevPAR increased by 8.5%.

Our strong group base for the fourth quarter and for 2026 gives us optimism that we will be able to continue to experience outsized total RevPAR gains in the quarters ahead. Third quarter same-property Hotel EBITDA of $47 million was 0.7% above 2024 levels, and hotel EBITDA margin decreased 60 basis points. Excluding Grand Hyatt Scottsdale, third quarter EBITDA decreased 7.8% and hotel EBITDA margins decreased 160 basis points. For the first nine months of the year, same-property hotel EBITDA of $205.4 million increased by 12.6% above 2024 levels, and hotel EBITDA margin increased 101 basis points. Excluding Grand Hyatt Scottsdale, year-to-date EBITDA increased 3.9% and hotel EBITDA margin was essentially flat. We remain pleased with our operators’ efforts to control expenses in a continued inflationary environment.

Turning to our capital expenditure projects, we now project that we will spend approximately $90 million on property improvements during the year, which is a $10 million increase compared to the midpoint from our prior CapEx guidance. This increase is due to two factors. First, the anticipated completion of some additional capital projects that were originally planned for various properties, as we have been able to mitigate the impact of any potential tariff-related cost increases. And second, the cost we will be incurring in 2025 for a comprehensive reconcepting of the food and beverage operations at W Nashville. Even with this increase, we still anticipate spending approximately $50 million less on capital expenditures in 2025 than we projected at the beginning of the year.

We are extremely excited about the upcoming relaunch of the food and beverage venues at W Nashville that we announced in our release this morning. We extensively evaluated several options to increase the appeal of the food and beverage outlets and hotel, which could drive incremental F&B revenues and further enhance the desirability of the hotel for all demand segments. After completing this thorough process, we are pleased to have reached an agreement with Jose Andres Group, under which Jose Andres Group will operate and/or license essentially all of the food and beverage outlets at the hotel. We believe the combination of the operational and marketing expertise of Marriott and Jose Andres Group will drive incremental revenues and hotel EBITDA and make the hotel an even more exciting destination.

We will be making an additional capital investment of approximately $9 million to effectuate this change. However, given the already outstanding physical condition and quality of the hotel’s existing venues, this capital will be largely spent on FF&E and branding elements as well as kitchen equipment and back-of-the-house improvements. We are projecting that the relaunch of the F&B outlets will add between $3 million and $5 million to hotel EBITDA upon stabilization through increases in food and beverage and room revenues, which we believe should result in the hotel’s generating in excess of $20 million of hotel EBITDA in the next few years. Barry will provide additional details on this exciting W Nashville F&B relaunch during his remarks. As we look ahead to the remainder of the year, we remain cautious in our near-term outlook, which is reflected by slightly reduced expectations for the fourth quarter.

For the full year, we now expect a same-property RevPAR increase of 4% and adjusted EBITDAre of $254 million at the midpoint of our updated full-year guidance. Atish will provide additional details on these modest adjustments to guidance during his remarks. As has been the case for most of the year, group business continues to be a driver of our RevPAR growth, with leisure softening a bit this year, as we had anticipated, while business transient continues to improve gradually. We saw a continuation of this trend again in October. We are encouraged by the approximately 5.8% RevPAR growth that we project our same-property portfolio will achieve in October, which represents a meaningful improvement over our portfolio’s third-quarter performance.

With a strong overall group base for the fourth quarter, we again anticipate significant growth in food and beverage revenues during the quarter as well. Looking ahead to 2026, we believe that Grand Hyatt Scottsdale will continue to ramp in consistent with our underwriting, and we expect group demand across the portfolio to be robust and drive outsized non-room revenue growth. We continue to believe strongly in the long-term growth prospects for our well-located, diversified, and high-quality portfolio in 2026 and beyond. Barry will now provide more details on our third-quarter operating results, the W Nashville Food and Beverage relaunch, and our other capital projects.

Barry Bloom: Thank you, Marcel. Good morning, everyone. For the third quarter, our same-property portfolio revenue was $164.5 million, flat to the third quarter of 2024, based on occupancy of 66.3% at an average daily rate of $248.09. Strength in non-room spend, particularly banquet revenues, resulted in total RevPAR of $289.76 for the quarter and $329.60 for the year to date, an increase of 3.7% and 8.5% respectively when compared to the same period in 2024. Excluding Grand Hyatt Scottsdale, RevPAR was $167.87, a decrease of 2.6% as compared to 2024. This reflected a decrease of 289 basis points in occupancy for the period and an increase of 1.5% in average daily rate as compared to the third quarter of 2024. Our top-performing hotels for the quarter were Grand Hyatt Scottsdale with RevPAR up 27%, Andaz Savannah up 15.3%, Waldorf Astoria Atlanta Buckhead nearly 14%, Grand Bohemian Hotel Mountain Brook up 13.2%, Hyatt Regency Santa Clara up 12%, Renaissance Atlanta Waverly up 12.5%, Grand Bohemian Hotel Orlando nearly 9%, Bohemian Hotel Savannah Riverfront up 8.3%, and the Ritz-Carlton Pentagon City up nearly 6%.

Strength in group business and continued improvement in corporate demand was the driver behind success in most of these properties. Hotels that experienced RevPAR weakness compared to 2024 included Loews New Orleans, all three Houston hotels, Marriott Dallas Downtown, Hyatt Centric Key West, and Kimpton Hotel Palomar Philadelphia. New Orleans suffered from a lack of convention center activity relative to last year, and the Houston hotels were challenged by a comparison to a significant amount of business related to Hurricane Barry that they captured last year. General leisure softness and the return of inventory that was offline last summer impacted us. Looking at each month of the quarter compared to 2024, July RevPAR was $161.98, down 1.7%.

August RevPAR was $154.43, down 1.5%. And September RevPAR was $177.52, a 3% increase. Excluding Grand Hyatt Scottsdale, compared to last year, business declined in July and August, largely due to the weakness in the Houston market and softer leisure demand overall. Performance in September significantly improved as we got out of the leisure-heavy summer months and saw strong group business as well as a significant increase in corporate travel. Business from our largest corporate accounts was modestly down in Q3, with declines in both July and August, but saw an even increase in September as compared to Q3 of 2024. Business from the largest volume accounts continued to be down meaningfully from 2019, but has continued to grow throughout the year.

Group business continues to be a bright spot across the portfolio despite the seasonal shift from corporate to association-related group, resulting in the lowest quarterly group growth for the year. In the third quarter, excluding Grand Hyatt Scottsdale, group room revenues were virtually flat compared to the third quarter of last year, due to modest declines in both July and August, while September was more in line with the trends we have seen throughout the year, approximately 5%. Food and beverage revenue from banquets declined slightly during the quarter compared to last year as a result of a mix of events. Now turning to expenses and profit. Third quarter same-property total revenue increased 3.8% compared to 2024. Hotel EBITDA margin decreased by 60 basis points, resulting in hotel EBITDA of nearly $47 million, an increase of 0.7%.

For the year to date, hotel EBITDA increased 12.6% with margin improvement of 101 basis points compared to the same period in 2024. Since Grand Hyatt Scottsdale was undergoing its transformative renovation last year, the following P&L analysis is presented for the remainder of the same-property portfolio. Compared to last year, hotel EBITDA for the quarter was $46.7 million, a decrease of 7.8% on a total revenue decrease of 0.7%, resulting in a margin decline of 160 basis points. However, we are pleased with the ability of our hotel’s management teams to control expenses in light of softer revenue. Rooms department expenses increased by 1.5% on a 2.6% decline in revenue. Food and beverage growth was muted at 0.4% with expense growth of 0.8%.

Other operating department income, including spa, parking, and golf revenues, was up 6.6%. Miscellaneous income was up 7.8%, resulting in a total RevPAR decline of just 0.7%. In the undistributed department, expenses in A&G and sales and marketing were well controlled. A&G increased by 1.5% compared to last year, while sales and marketing expenses grew by 2%, continuing the moderating trend we have experienced over the past several quarters. Property operations and utilities expenses were up 2.6% and 0.5% respectively. Turning to CapEx, during the third quarter, we invested $19.9 million in portfolio improvements, which brings our total for the year to $70.7 million. These amounts are inclusive of capital expenditures related to the completion of the transformative renovation at Grand Hyatt Scottsdale.

We completed improvements in the building facade and parking lot during the third quarter, which now mark the full completion of this transformational renovation. During the third quarter, we made significant progress on select upgrades to guest rooms at several properties, including Renaissance Plano Waverly, Marriott San Francisco Airport, Hyatt Centric Key West, Hyatt Regency Santa Clara, Grand Bohemian Hotel Mountain Brook, and Grand Bohemian Hotel Charleston. This work, which is expected to be substantially complete by year-end, is being done during periods of lower occupancy, particularly over the holiday season. We are continuing to make significant infrastructure upgrades at 10 hotels this year, including facade waterproofing, pillow replacements, elevator and escalator modernization projects, and fire alarm system upgrades.

As business levels allow, the majority of this work will be completed in the fourth quarter or early 2026. In the fourth quarter, we will begin work on a limited guestroom renovation at Marriott Pittsburgh, which will be completed in the first quarter of 2026, and a renovation of the M Club at Marriott Dallas Downtown, which we expect to be completed in early 2026. During the third quarter, we entered into agreements with Jose Andres Group, also known as JAG, pursuant to which JAG will operate and/or license substantially all of the food and beverage outlets at W Nashville. JAG is the restaurant management arm of Jose Andres, a globally acclaimed chef, restaurateur, and media personality that operates nearly 40 restaurants, bars, and lounges across the country and the globe, including several at prominent lodging properties.

We believe this comprehensive relationship will leverage the superb physical attributes of the hotel to create unique destination dining venues, and the beverage program will include proven JAG concepts such as Zaytinya, an Eastern Mediterranean concept that will serve lunch and dinner, Bar Mar, a coastal seafood and premium meat concept that will be open for dinner, and Butterfly, a high-energy rooftop bar with a Mexican-inspired menu. In addition, there will be a completely new pool experience that will feature an expanded bar, upgraded food offerings, and refreshed outdoor spaces. Modifications will be made to the existing living room, which will become the breakfast venue while continuing to serve as the hotel’s lobby bar, featuring a revised menu of unique cocktails and food options.

In addition, the hotel will offer premium Jose Andres Group-designed banquet and catering menus, which will complement existing offerings in order to enhance group experiences and drive incremental food and beverage revenue. Modifications to the venues will begin in the fourth quarter in a staggered approach intended to minimize disruption, and all venues are expected to be completed by the first half of 2026. Our in-house project management team will provide direction and oversight to the renovation process, which gives us significant confidence in achieving on-time project completion and the ability to stay within our budget. We are incredibly excited about this relationship and the repositioning of the F&B outlets at W Nashville. With that, I will turn the call over to Atish.

Atish Shah: Thanks, Barry. I will provide an update on our balance sheet, discuss our guidance, and provide some additional context. At quarter-end, we had approximately $1.4 billion of debt outstanding, of which 25% was at a variable rate. Our weighted average interest rate was 4.2%, and our leverage, including preferred equity, was 4.5 times net debt to EBITDA. Our debt maturities continue to be well-laddered with a weighted average duration of 3.5 years at quarter-end. We have one mortgage loan that matures next March, and we intend to pay it off ahead of maturity with available cash. A quarterly dividend of 14¢ per share was declared, which reflects our target payout ratio of approximately 50% of adjusted FFO. Year to date, we have repurchased 1.8 million shares of common stock at a weighted average price of $12.66 per share, representing 6.6% of our outstanding shares at the beginning of this year.

We have $34.1 million of remaining capacity under our share repurchase authorization. We continue to believe that our shares are trading at a significant discount to the value of our assets. Turning to our 2025 guidance, we will start with our RevPAR guidance, which we have reduced by 50 basis points at the midpoint due to a 4% point reduction expected in the fourth quarter. We continue to expect full-year RevPAR growth of 4% to 5%. Our adjusted EBITDAre guidance for the full year is now $254 million at the midpoint, which reflects the change in RevPAR guidance, partially offset by continued strong cost controls. Our adjusted FFO per diluted share guidance at the midpoint is now $1.01 versus $1.03 previously, which reflects the $2 million decrease in full-year adjusted EBITDAre.

Our current adjusted FFO per share guidance is 4% higher than our initial guidance at the beginning of the year and 8% higher than our 2024 results. Looking ahead to 2026, we would like to provide some initial thoughts. First, by way of reminder, about 35% of our group room nights for 2026 are already on the books as of September, and about 50% of our group’s revenue for 2026 was definite. 2026 revenue production was healthy in the third quarter, and during the quarter, we gained 5% more group pace for 2026. We anticipate strong citywide convention demand in several markets, including Pittsburgh, which is expected to be one of the world’s top five citywide convention markets. Our group outlook reflects our focus on high-quality group business and food-focused amenities, which we believe will help us capture additional market share.

As a result, we expect another strong year for group business in 2026. On the leisure side, we expect demand to temper, and most of our markets are expected to be more stable. Grand Hyatt Scottsdale, by way of underwriting, was expected to achieve full-year property-level hotel EBITDA of $20 million in 2026. We will now open for questions. If you would like to ask a question, please press star followed by one on your telephone keypad now. For any reason you would like to remove yourself from the queue, please press star followed by two. When preparing to ask your question, please ensure your device is unmuted.

Operator: Our first question comes from Michael Bellisario from Baird. Your line is now open. Please go ahead.

Michael Bellisario: Thanks for the morning, everyone. First question for you, Atish. On the dividend, I know you mentioned that you are paying out less than your target. But maybe just where is the current payout this year going to land in terms of where you see that your tax?

Q&A Session

Atish Shah: Well, I do not have that exact number right now, but I will say that we are targeting a payout ratio of approximately 50% of adjusted FFO.

Michael Bellisario: Second question probably for Barry, just on the group outlook commentary. How much of the pace increase for next year is price versus volume? And then just in terms of production, what type of accounts, what type of groups are booking, and what are you hearing from meeting planners today? Thank you.

Barry Bloom: Yeah. The setup for next year, obviously, as Atish mentioned, is really good. It is quite strong. It is a little more volume-driven, but rate growth is good. I mean, better rate growth than we have seen in the last year or two. So it is a very, very nice setup. On the group side, we are continuing to see a little bit of a shift from corporate business back to more normalized association business within the portfolio, particularly at the largest resorts. And I guess if you look back, right, we were really coming out of COVID, corporate was wanting to meet every day, and they were ready to fill in. Association was slower in rebooking, but we are seeing that come through now. I think that is part of what you saw in our mix in Q3, where corporate had kind of filled the gap the last couple of years. That is where we are first starting to see the shift back to the more normal relative ratios of association versus corporate.

Operator: Our next question comes from Jack Armstrong from Wells Fargo. Your line is now open. Please go ahead.

Jack Armstrong: Hey. Good morning. Thanks for taking the question. Could you break out what the impact of the government shutdown has been, if any, on the portfolio? And with the uncertainty there, how confident are you feeling in the full-year RevPAR guidance?

Atish Shah: Well, thus far, it has been fairly limited within our portfolio. We have spoken before about the fact that we are not heavily dependent on government business. Obviously, we continue to check with all of our properties to see if we are seeing any particular impact. There have been a few cancellations, but it has been relatively minimal thus far. So I think if you contrast our portfolio with some of the peers, our business is probably a little bit more limited. Now, if there is a prolonged shutdown that is causing more issues as it relates to air traffic control and people being more concerned about being able to travel and those types of things, then obviously it could impact us as well. So far, we are not assuming any very significant impact from the government shutdown over the next few months, and that is really based on the situation as we see it today.

Jack Armstrong: Helpful. Thank you. And could you maybe provide an update for us on what you are seeing in transaction markets? And also what your level of interest is in trying to get some more dispositions done over the next year?

Atish Shah: Yeah. Sure. I mean, it seems like, contrasting it to where things were maybe six to twelve months ago, it does seem like there are some more hotel transactions coming to market. It does seem like there is a little bit more volume that the broker community is seeing. And as it relates to us, I mean, obviously, we are still looking at the various ways we can allocate capital, and given our cost of capital at this point, especially with how attractive our own portfolio looks, share buybacks probably look more attractive than acquisitions at this point. I would not expect us to be really active on the acquisition side here in the very near future. I think a lot of that has to do with what happens in the private markets.

If there is maybe a little bit more softness, if you will, and prices are coming down a little bit, then they come a little bit closer to what we view to be something that is a good use of capital for us. But I do not foresee that here really in the very short term. As it relates to dispositions, we will continue to look at what we have always done, which is to see if it makes sense to continue to refine the portfolio slightly, especially when it comes to assets that may need some additional capital where we do not feel the appropriate ROI might be achievable. So we will continue to evaluate that. I would not expect any wholesale changes, but certainly could see another disposition or two over the next twelve to eighteen months as we continue to fine-tune and review our portfolio.

Jack Armstrong: Really helpful. Thanks for the call.

Operator: Thank you. Our next question comes from David Katz from Jefferies. Your line is now open. Please go ahead.

Operator: David, your line is now open. Please ensure you are not muted.

Operator: We are not getting any audio, so we will move on to our next question from Ari Klein from BMO Capital Markets. Your line is now open. Please go ahead.

Ari Klein: Thank you and good morning. What is contributing to the somewhat softer expectation for Q4, and are you seeing that play out this quarter? Is this broad-based?

Atish Shah: Yeah. Thanks, Ari, for that question. So with regard to the fourth quarter, it is more on the transient side. And really, it is not any particular market. In the third quarter, part of the reduction in our guidance for the full year is obviously also attributable to the fact that we brought our RevPAR down slightly in the fourth quarter. And that is what got us down essentially 50 basis points at the midpoint. Some of that was due to some of the additional weakness that we saw in Houston, a little bit in excess of what we anticipated. The reason why we still got to our numbers meeting our expectations was because we saw some greater strength on the non-room spend, which really got us back to the total RevPAR number that was more closely matching what we were expecting in the third quarter.

Ari Klein: And then maybe just on the changes at the W Nashville, I guess that piece while you mentioned the $3 to $5 million of EBITDA from the changes, and I think I heard you mention that from that now you expect the hotel to generate in the $20 million range or the original underwriting?

Atish Shah: Yeah. Sure. I mean, obviously, it is going to take a couple of years to get to that stabilized number. As I pointed out and Barry kind of spoke about in his comments too, we really anticipate this to help drive not just the F&B revenues but also just make the hotel a more desirable location overall. Even today, as you point out, I mean, clearly, we have given it time here. We have worked kind of with Marriott to try to optimize operations and jointly with them worked on coming to a solution that we believe is going to be very attractive for the hotel over the next few years. So I think that is something that is going to take a little bit of time to stabilize here. We have essentially been running in the mid-teens of EBITDA over the last few years.

So clearly, we were looking for ways to drive what we think this hotel can produce for us over the next few years. We have, to your point, tempered our expectations from where we started on underwriting since we are not close to those numbers that you quoted yet. We do think that this will give us that additional lift of $3 to $5 million as a result of this effort over the next several years. And what is still going on in the Nashville market overall, obviously, is we are still going through some stabilization in the market with the support that we are getting from the high-end supply that was added over the last several years that is still getting absorbed into the market. So over the next several years, we expect to see a bump coming from the changes that we are doing here, but also with the market kind of improving and stabilizing.

It has been a tougher leisure year, especially in that market as well. So we expect that to get better over the next several years. We are obviously not saying we are going to put a ceiling on where we think earnings can go here, but just realistically, looking at where earnings have been over the last several years, what we think the F&B will do to help the operations there, we have set our expectations for the next several years. We expect kind of north of that $20 million, and hopefully, we will grow from there. And that is a great asset. It is a great market. Still a lot of positives as far as what is going on in the market. So we continue to have high hopes for how ultimately this property will go.

Ari Klein: Thanks for all the color. Appreciate it.

Operator: Our next question comes from David Katz from Jefferies. Your line is now open. Please go ahead.

David Katz: Good morning. Thank you for taking my call. Just on leisure, we have obviously been hearing about some of the weakness in leisure. In your opinion, from your perspective, is it travelers who are choosing not to travel, to defer travel? Are they balking at price and perhaps trading down? What would you classify as the source of the weakness as far as leisure?

Marcel Verbaas: Well, with kind of a global comment on it, I think when we looked at the setup for this year, and I am sure you recall when we spoke at the beginning of the year, our expectation was really kind of the way it has played out for every segment, which was strong group business this year. We did expect business transient to kind of slowly keep recovering, and we did expect some softness in leisure compared to prior years as there is still this normalization that was kind of going on from these kind of outsized levels of leisure travel that we saw over the last few years. So I would say that it has not changed that much from what our initial expectations were. I think what you have seen overall is that there has always been a lot of discussion this year about consumer spending overall, about consumer spending on travel.

There has been, it appears to have been, clearly more in the lower segments that have been impacted more significantly than the higher segments like where we play. So it has not been quite as severe on the higher end. But we are still dealing with a lot of uncertainty in the market, various economic factors, obviously. Dealing with the fact that international outbound is still greater than international inbound. Also, alternative travel that is obviously available for people, whether it is cruises or other things. So I think all of those things kind of play into it. Now that being said, and I think Atish brought this up in his comments, as we look ahead to next year and going a little bit more granular as it relates to us, I think that we are still seeing a very similar setup on the group side.

We have got a really good group base going into next year. Business transient is subject to some of the macroeconomic issues, obviously, whether that continues to kind of gradually improve, but that is still our expectation at this point. And we do think that leisure probably has found more of a footing in our portfolio where some of these markets are more stable, and where we do think that we could hopefully see some growth on that again going into next year. And I will just kind of leave it at that. That is our view of what we are seeing happening in the market at this point.

Operator: As a reminder, if you wish to ask a question on today’s call, please press star followed by one on your telephone keypad. Our next question comes from Austin Wurschmidt from KeyBanc Capital Markets. Your line is now open. Please go ahead.

Austin Wurschmidt: Thanks. Good morning, everyone. Barry, you had commented that business from your large corporate accounts was up significantly in September. I guess first, any markets you would call out as seeing sort of an outsized increase? And then second, is the pace of that improvement still less than you may have expected, given that Atish made some comments about just expectations being pulled back on both the business and the leisure side?

Barry Bloom: I think in terms of strength, no doubt, Northern California, particularly Santa Clara, is seeing significant corporate growth. I mean, I think we all know what is kind of going on in tech. We are positioned both for tech as well as specifically within some of the specific AI-driven accounts or those that are maybe either direct or indirectly focused on that. We have seen some other markets where we have seen good quality corporate demand. We see it in some of the smaller markets like Pittsburgh, DC, where our Ritz-Carlton Pentagon City is a little bit outside of the direct government business. So with the strong accounts we have in Pentagon City, we are seeing it in Atlanta. So markets like that are kind of traditionally strong business markets, and that is where we have seen the strength in corporate demand this year.

In terms of across the portfolio, it continues to improve every month. I think relative to expectations, overall, it is probably where we want it to be. There are still some markets that ebb and flow, I think, particularly based on seasonality. Part of, in addition to the impact from Hurricane Barry in Houston, we did see a little bit of soft corporate demand in the quarter than we expected in both Houston and Dallas. But again, we feel like that segment clearly is growing. We are particularly getting where we are starting to continue to sell out more to thin lines and nights, which is also great because not only does it drive volume, but it enables the hotel to really drive compression on those nights. We certainly see that continuing next year.

Austin Wurschmidt: And then just going back to leisure demand, Marcel, you provided a lot of good detail in the earlier question. But I guess at a high level, would you still expect leisure to lag the overall portfolio in 2026, or could the demand normalization provide a little bit better pricing power and maybe be a little more on par with what you are seeing in just the transient segment overall?

Marcel Verbaas: Yeah. I think we could. I think, you know, Atish pointed it out too, we have seen some stabilization in some of the more leisure-oriented markets. Clearly, we expect group to be the leading segment for us as it relates to growth. The group side is very strong. Grand Hyatt Scottsdale has a lot to do with that too, as it continues to ramp and build a greater group base at that property, obviously, but even throughout the rest of the portfolio. As Atish pointed out, we have a very, very strong group base for next year as it relates to the segments. The group will continue to lead, and I do think that we could see certainly a scenario where leisure and business transient are more on par as it relates to what kind of growth we can see out of those sectors.

Austin Wurschmidt: Very helpful. Thank you, everyone.

Operator: We currently have no further questions, so I will hand it back to Marcel Verbaas for closing remarks.

Marcel Verbaas: Thanks, Becky. Thanks, everyone, for joining us today. We appreciate your interest in the company and the opportunity to share our results for the third quarter and what we believe is a good setup going into next year. We have a strong portfolio and believe we will continue to see the benefits from that going forward. I hope everyone has a great Halloween.

Operator: This concludes today’s call. Thank you for joining. You may now disconnect your line.