Yahoo Finance

Jonathan Bortz

Thanks, Ray. As Ray indicated, the underlying performance in our portfolio was strong in January and February, but it softened in March.
In January and February, it seemed clear to us that overall industry demand had realigned with GDP and overall economic growth, a trend that began in October last year.
In addition, business change and travel continued to recover as more companies pushed employees back to the office.
Leisure demand in our portfolio was healthy during the quarter, showing growth in weekend demand at our resorts and at our urban properties, and group remained resilient throughout our portfolio.
The softening in demand we saw in March appeared to be highly correlated to the doge activities driving federal government layoffs, a spending freeze, and elimination of non-essential government travel, along with a negative reaction by Canadians.
We experienced some government group and government related conference cancellations. With most of it occurring outside of DC. We also saw a very significant slowdown in government transient bookings nationwide.
We estimate that government and government-related group and transient travel make up about 3% to 5% of total demand in our portfolio and throughout the industry. So while the overall impact is marginal, It's still likely created a 1% to 2% drag on demand.
It was this softening that pulled our RevPAR results down to the bottom of our Outlook range. It was healthy out of room spending that kept us in the middle of the total RevPAR range.
Non-room revenues accounted for over 38% of total revenues in Q1, an increase from just under 37% a year ago. Our efforts to grow non-room revenues and profits through our transformational redevelopments continue to bear fruit.
Los Angeles had an especially tough quarter as expected. The fires and the aftermath significantly reduced demand from both leisure and business travelers group and transient.
Displaced homeowners and first responders provided only a very brief lift during the week of the fires and only a minor benefit thereafter.
RevPAR for our nine West Los Angeles properties declined 23.4% in Q1, with occupancy down 18% and rate down 6.5%. While the Hyatt Centric innovation contributed modestly to the negative impact, the vast majority was directly related to the fires.
All 9 of our LA properties had negative RevPAR, and they represented 7 of our 8 worst performing properties in the quarter. EBITDA for our LA properties declined by $5.7 million or 72.6% compared to last year. A very challenging quarter and quite a drag on the entire portfolio.
Yet not quite as bad as we were forecasting. Business and leisure travelers to LA have been gradually returning as we've moved further away from the fires and the initial misperceptions about widespread damage to LA and its amenities and visitor attractions.
We're still forecasting a negative EBITDA impact in the second quarter, but the good news is we now expect it to be around $1.5 million or about $1 million less severe than we forecasted 60 days ago.
However, we do expect some lingering price competition through the summer that could modestly pressure results in the third quarter. Outside of LA, portfolio performance was strong in the quarter.
13 properties achieved double digit RevPAR growth led by many of our recently redeveloped properties including Viceroy DC, Estancia La Jolla, L'Auberge Del Mar, Harbor Court in San Francisco, Chaminade Resort and Spa, and 1 hotel, San Francisco, which just continues to gain share.
We continue to be watchful of signs that would indicate a further slowdown in demand. So far, we haven't seen an increase in group cancellations or attrition outside of government or government-related groups and government transit.
We also haven't seen a pullback in out of room spending. Nor have we seen any increased caution among groups that are actively meeting.
However, we have begun to see a few concerning signs, including a slowdown in group leads for the second half of the year, a longer lag in contract execution.
And more caution among some meeting planners in committing to future events, particularly in the second half of the year.
Given today's high level of economic uncertainty, there's every reason to remain cautious about the second half. Unless there's a quick resolution to the current trade disputes, it's not unreasonable to expect further economic slowing, which could pressure demand for meetings and hotel rooms.
Well, 60 days ago, we weren't forecasting a reversal of the outbound inbound international travel imbalance. We also weren't forecast forecasting it would get worse.
Unfortunately, US government provided statistics show that the unfavorable balance worsened in March as outbound travel continued to grow while inbound international travel declined by 10% compared to last year.
A reversal from the monthly improvement in international inbound travelers that has consistently occurred since the end of the pandemic.
Given the anger and dissatisfaction around the world with the US government's proposed tariff and trade policies, it's reasonable to assume some continuing negative impact to inbound international travel this year. But perhaps not as bad as the initial reaction in March.
When we look at our group and total revenue pays for the rest of the year, we continue to be ahead of last year for the second and fourth quarters, but our revenue pa for Q3 is now flat.
Specifically, group pays for the balance of the year is ahead 0.3% in rooms, 2.5% in ADR, and 2.8% in group revenue. Total pace for the balance of the year, in other words, group and transient combined, is ahead by 5.1% in room nights, down by 0.8% in rate, and up by 4.3% in revenue.
Our nominal revenue pa on the books for the balance of the year declined by $3.7 million since last quarter, though was largely due to LA. We were expecting our nominal revenue pace to increase over the course of the year. But unfortunately that was not the case during the first quarter. We believe this reflects greater caution on the part of industry customers and is a reason to be more cautious about the second half of the year.
Ray mentioned that we saw some stabilization of the softening in April. I'm not sure that applies to the industry, but for our portfolio, we had a good setup for April with a very strong convention calendar in San Francisco. Continuing healthy demand recovery in Portland and Chicago. A good Boston and a much less bad Los Angeles.
Our preliminary numbers for April RevPAR point to an approximate 3.5% gain over last year, with that growth number being closer to 5.7% without Los Angeles.
These favorable preliminary results were achieved despite the negative holiday shift and continue to show the upside from both our redeveloped portfolio and markets like San Francisco, Portland, and Chicago, which are now outperforming due to a slower recovery in prior years.
So with April's numbers, Q2 is off to a good start. However, May and June don't look as favorable at this time. Before I move to our revised outlook, I wanted to provide a little more perspective on our intense and as Ray described, our team's relentless focus on creating ongoing operating efficiencies within our portfolio.
These efforts primarily accounted for the Hotel EBITDA be in Q1. This effort is all inclusive. Every major and minor expense category is under the microscope.
Within our portfolio and at every one of our hotels and resorts, our teams are subjecting every expense item to scrutiny, utilizing our extensive proprietary best practices database, an excruciatingly detailed benchmarking effort. And a mentality and approach that every expense item can be reduced through these widespread efficiency efforts.
Working collaboratively with our operators, our teams are rebidding all third party product and service contracts. We're reducing or eliminating expenses where returns are insufficient.
We're improving labor management with new technologies to organize staff and schedule our property associates most efficiently. We're maximizing our procurement processes.
We're exhaustively challenging real estate tax assessments. We're implementing physical and operational improvements to reduce risks related to hotel associate and guest accidents.
We're investing in energy efficiency and property resiliency projects to reduce energy and utility costs, and we're making significant investments in physical improvements to mitigate future losses from hurricanes, atmospheric rivers, fires, and other natural disasters.
We're auditing and revising property operating procedures to reduce energy and utility consumption. We're clustering more operating teams where possible to reduce costs. We're leaving no stone unturned. The success of these initiatives clearly showed in our first quarter performance.
Our teams deserve a tremendous amount of credit for the results they've delivered so far. We applaud them for their thoughtful and relentless efforts, which continue.
Now, let me move on to our outlook. As we indicated in our press release, we're slightly reducing the top end of our full year outlook while lowering and widening the low end of our revenue, EBITDA, and FFO assumptions.
These adjustments shouldn't come as a surprise. These changes are in response to broad-based expectations for a continued economic slowdown driven by the sharp rise in uncertainty created over the past 60 days stemming from changes in government policy proposals, activities, and rhetoric.
Key economic indicators, including consumer confidence, business confidence, and investment and spending forecasts have all substantially declined in the last few months. Whether actual spending follows these declines remains to be seen.
Our expectation is that our operating results for the first half of the year are likely to be within the outlook range we provided 60 days ago with Q1 beating and Q2 likely achieving towards the lower end, but on a combined basis achieving somewhere in the middle of our original guidance.
It's the second half of the year that we're lowering in response to the mounting uncertainty regarding the economy and increased expectations for a slowdown along with reduced government and international inbound demand and early indications of a lack of pickup and bookings for the second half of the year, particularly the third quarter.
Our updated outlook demonstrates a cautious approach to navigating what we expect to be a tougher economic environment, especially the second half of '25, given the increased uncertainty.
Our experience gained in prior cycles suggests that heightened uncertainty around major economic policies often leads to a pause or a reduction in spending and investment, including for travel. The midpoint of our revised guidance for the year continues to reflect our expectation of the most likely outcome.
If trade policy issues are favorably resolved in the next couple of months, we believe the economy could rebound quickly, putting the upper end of our range well within reach.
The good news is there's no current financial crisis or problematic structural issue at this time. The economy entered this year in a very strong position with full employment, accelerating corporate profits, and the consumer in good financial shape.
Reaching the bottom of our outlook range on the other hand, would likely require a more meaningful slowdown and maybe even a mild recession.
That downside case implies that same property RevPAR would have to be at the low end of our range for Q2, then decline an average of 3% year over year in the second half. We hope this level of detail helps to frame the range of possible outcomes as we move through the year.
To wrap up, we believe strongly that our intense focus on generating operating efficiencies, our disciplined commitment to driving revenue every which way we can, our team's deep cyclical experience, and the benefits from the substantial investments we've made to upgrade and transform the vast majority of our portfolio put us in a great position to outperform and drive long-term value.
We're generating substantial free cash flow, and if conditions should deteriorate further, we certainly have the flexibility, the liquidity, and the experience to adapt quickly.
So that completes our remarks today. We'd now be happy to take your questions.
So, Christine, you may proceed with the Q&A.

Question and Answer Session

Operator

(Operator Instructions)
Jay Kornreich, Wedbush.

Jay Kornreich

Hi, thanks. Good morning. I was just starting off as you commented that the first half of the year outlook largely stayed intact after a strong first quarter with the downward revision coming mostly in the second half.
So I know you made some comments on this, but can you just further dive into the second half impact something you're already seeing in the bookings, that slowed down as you commented in the group demand, or is it mostly really just related to the potential impact should a mild recession occur?

Jonathan Bortz

Yeah, it's really, it's related to two things. First, mostly related to the potential for a pullback in demand from all the segments in response to an economic slowdown if it should occur.
It also is, of course, some response, as our, as we mentioned about Q2 being at the lower end of our original expectations. It is in response to reduced government travel, government-related travel.
And less international inbound travel overall. And while those are small segments, again, one or two points off of demand at the end of the day is really where we thought the full year would be in terms of being up one or two points of demand. So that's really part of it, but for the second half, it really is all about the potential for downturn based upon this increased uncertainty that that we're seeing in the economy and with government policies.

Jay Kornreich

All right, thank you, and then just maybe as one follow up just, looking at the business trends and customer which in the first quarter you had some, positive upside. Are you already seeing corporates being more hesitant in spending and travel and that's, potentially a big leg that could come down or so far, is that segment so far trending positively and could hold up maybe better than what you're already seeing in some of the government and international pullback.

Jonathan Bortz

Yeah, so far we're not seeing a downturn in BT. I think it certainly varies by industry group, we have some groups like financial, banking, technology that are up. There's some other industries that are down, so, but in total, I would tell you that we haven't seen a decline in BT really in any of our markets around the country. And so far it's holding up. Now, if you read first quarter transcripts of, Fortune 500 companies, and I guess you can use AI today to look for the word travel.
I think you're going to find, numerous comments from companies saying, given all this uncertainty, we're looking at reducing costs, being more efficient. Including travel, or discretionary travel, or they might call it non-essential travel, although I don't, I think all travel is essential, but so it shouldn't be surprising if it does decline over the course of the year until we see a turnaround in the uncertainty side of the policies, but so far we haven't seen anything.

Jay Kornreich

Okay, understood. Thank you.

Operator

Smedes Rose, Citi.

Smedes Rose

Hi, thanks. I just wanted to ask you on the tariff stuff besides just sort of the broader weakening of the macro economy, is there anything kind of hotel specific that you would expect to see costs go up either on the food side or kind of hard goods? I'm just not really familiar with kind of where all that stuff comes from.
And would you expect that to have some sort of negative impact?

Jonathan Bortz

Yeah, so, there, there's no doubt it's going to have an impact on new construction, on renovation projects. Most FF&E, is made outside of the country.
Almost all lighting, electrical, is made outside of the country, outside of the US, so we certainly would expect some impacts in those categories, there are consumables, operating supplies and things, some of which come from outside of the country.
Interestingly, from what we understand from a vendor who we use at most of our hotels, a lot of the sustainable operating supplies are not made in the US, they're made outside of the US. So we would expect some kind of impact from them again, all depending upon. What happens with these tariffs, and how much of that flows through the price increases or flows through to shortages or supply chain issues. So we haven't seen anything yet, anything material yet, but it's early, right? I mean, this was all just announced less than 30 days ago.

Raymond Martz

Yeah and it's me and we're not, we don't just sit there and take it. So for example, some of the food that we're importing those costs go up for the tariffs or whatever it is, our teams look at different menu items, how do we price things differently or do things differently. So when we have these actions coming in, they adjust, they're very nimble, and they've done as we saw the first quarter, done a great job adjusting in a very short period of time.

Smedes Rose

Okay, and then I just wanted to ask you mentioned government or government adjacent demand at kind of 3% to 5%. For your portfolio, is that concentrated in any particular market or is that pretty sort of spread evenly across your hotels?

Jonathan Bortz

Well, it spread all over the country. I guess that the heavier concentrations would be in Washington DC and in San Diego.
Now San Diego tends to be dominated more by defense and military, which from what we understand is less impacted overall, but a lot of the sort of government related has to do with healthcare, NIH sponsorship or university research sponsorship, and that tends to be all over the country, not in any particular market, particularly when they have conferences and group meetings.
Okay, thank you.
Thank you.

Operator

Floris van Dijkum, Compass Research.

Floris van Dijkum

Hey, good morning, guys. Jon, maybe if you could comment on the transaction markets and also your ability to given that the share price weakness, you bought back a little bit of stock, can investors expect more of these share repurchases going forward?

Thomas Fisher

Yeah, of course, this. Is Tom in terms of the transaction market, I think just given some of the comments we made in terms of the uncertainty into the second half of the year, I think -- the sentiment is turned from risk on to risk off.
Nobody really wants to kind of go to investment committee today and say we've got this until there's a little more clarity in terms of where operating fundamentals are going to be. So I think it's still a functioning market. I'm just not sure how constructive it is, currently, but I think for the most part people are going to be more in the wait and see mode. And if we can get, resolution to this in the course of the next 30, 60, 90 days, I think we'll see a pretty active pickup during the latter half of the year.

Raymond Martz

And then employers and you're questioning the buybacks, we'll evaluate, the macro, how the conditions are and uses of the capital, and as we were, we did buy back some shares in the first quarter, but we'll evaluate what's going on with the macro.
We, even with the revised outlook, our free cap is well over $100 million a year, and that's after CapEx. We don't have any to pay dividends. We have a lot of flexibility and we're building greater cash reserves. Now some of that is to address the convertible notes that will mature at the end of next year.
But with the free cash flow and all that, we'll allows us to be a little more flexible. So we'll evaluate what's happening with the macro and make the decisions, but we don't make, we don't commit to any sort of, numbers at this time.

Floris van Dijkum

Thanks, Ray.

Operator

Shaun Kelley, Bank of America.

Shaun Kelley

Hi, good morning, everyone. Thanks for taking my question. Two for me first of all, you kind of already talked about some of the DC exposure, I think, to Speed's question, but Jon, could you just give us a little bit of thought of sort of the Washington DC submarket? Obviously the hotel industry kind of revolves around this and so far in just pure reported RevPAR terms we haven't seen the step function that correlates with the sort of types of numbers we've heard and again you're not the only one to call out a step function of government demand as it relates to.
The broader travel industry, I know a couple of the airlines have the same, so you have a square that just like what's supporting DC right now and is this sort of just a delayed thing and, just a little bit more color on kind of how that market's doing all right, but we are, seeing this kind of big step function down and in government demand.

Jonathan Bortz

Yeah, sure, so. Well, I wish I could bring clarity to what's going on in Washington DC, but I'm not trained for that. In terms of the lodging market, there's a lot of cross currents, Sean, there, there's some positives, and we had a quite a few positives going into the year. We had a change of administration which is typically positive for demand in the market.
We have the first year of a of a new President's term, which tends to be a very active legislative year, which is positive for travel, typically in the market.
You also compare against next year later in the year where there's no election, which tends to be a very positive comparison. For the year we have, the federal government workers, those who haven't been fired or laid off or in limbo, who've been ordered and have gone back to the office, and we see that here in DC and traffic being almost back to normal or back to where it was sort of pre-pandemic in the marketplace.
We have a lot more congressional days on the calendar this year than we had last year. That of course brings a lot of weekday demand into the market.
We expect there to be more protests. There's a lot of political cross currents, obviously, that's good for the market, and we have a decent convention calendar this year until the fourth quarter where it's softer, but we have the benefit of the no election which would offset it. It's like the first quarter. We actually had a soft convention calendar in the first quarter, but the inauguration and activities around that and the new government offset that in the first quarter, so.
And then I guess the last thing is we have a lot of people from governments around the country coming to Washington, and there's all these trade agreements to be negotiated that's bringing people here.
There's a lot of people here coming to meet with the President and the new administration, so from around the world. And so there's a whole bunch of positive cross currents. In addition to the negative impact from freezing government travel, eliminating non-essential travel, or, a lot of government-related cancellations, so that, hopefully that's helpful in explaining sort of the positive side of things that are happening here, in addition to the negative things that that we read a lot about.

Shaun Kelley

Yeah, that's super helpful. And then just as a short follow up, kind of curious on the and I'm not meaning to split hairs here, but just since we're all living by every sort of incremental data point right now, the April commentary sounded great.
You said May and June a little bit. After Easter's thrown a wrench into like a lot of the way that I think we are trying to look at, comps and modeling and everything and so it's been really hard to read the underlying trend. So what do you kind of chalk that that change up to maybe if you could, a sense of the magnitude of deceleration that you're seeing, that'd be helpful. Thanks.

Jonathan Bortz

Yeah, I mean, it's not a deceleration. It has more to do again with the setup of the way the conventions work. So I'll give you an example in San Francisco, RSA, which is the big computer security, cybersecurity, citywide that happens there every year. Last year was in May. It moved to the last four days of April this year. So San Francisco gets a huge lift in April, great setup, and, but May gets challenged. Now, May actually has a decent year over year calendar, but it's not as healthy as this large city-wide. It's a few sort of small to medium sized citywide.
So that's an example. The set up, the way the conventions fall year over year, those things have an impact on this sort of month to month comparison. And then we, and that has an impact on the pace that we look at, where our May pace is a little bit softer, our June pace gets a little better again, in the portfolio. We'll see if that holds up. Between now and then. So it's not something we're seeing in trends, again, it has more to do in particular with our portfolios set up and the markets we're in and the individual properties that we're in.

Shaun Kelley

Thanks so much. Great call today.

Jonathan Bortz

Yeah, thank you.

Operator

Duane Pfennigwerth, Evercore ISI.

Duane Pfennigwerth

Hey, thanks. Sorry we're juggling multiple calls today, but how do you think about the recovery curve in LA and what will be the leading indicators for that market to fix itself?

Jonathan Bortz

Yeah, so I mean the, it's a simple answer. The leading indicators of the bookings, and where they're coming from, are they coming from our traditional industry groups and travelers? Is it coming from the entertainment industry? Is there increasing production, in TV, film, commercials? Are the music folks continuing to come and coming back? Where they come in and practice for three weeks before they go out on tour, in LA is the fashion industry demand returning, are the companies in Silicon Beach, the tech companies and the and the entertainment and Social platform companies, are they back to their normal travel policies and so, and what we've heard from them, we talked about this last quarter was their expectation that by March, April, and maybe at the latest, they'd be back to normal travel. And it is what we're seeing. So the pace of pick up, the interesting thing about LA.
There, there's not a lot of citywide. There's certainly not a lot of citywide downtown to begin with, but there are not many of those that even impact, West LA. We have a few major events like the Milken Institute event that I think is later this month. Or maybe it's in early June, I forget where it is this year, that impacts the West LA market because of that volume. But what we've seen, [Dwayne], is we've seen most of that business, rebook, and so it's a very short-term market, but we were in a bit of a hole for Q2 in terms of the starting pace and so we're still going to be off. In two, but each month gets better.
The pace of pickup is back to where we were, so we're really, it's really just that where we're starting each month that that has put us in the negative holes and that sort of start position, the booking pace, is less bad as each month goes by, so. So all of those things are the things that we look at, but really it's the feedback from our clients and not just the words, but are they booking? And we see it really quickly in that market because it's so short term.

Duane Pfennigwerth

Thank thanks for that and then just I don't know if there's any good way to measure this, but you know what is drive to demand in your portfolio and how and how might that be changing, just, how do you think about it, what percent of your mix is drive to and how might that be changing? Thank you.

Jonathan Bortz

Yeah, I mean,, I'd love to be able to tell you we know how to measure it, but we don't ask people how they got there, and we don't have data for that, in our markets. I would say, obviously our, for the most part, all of our resorts are drive to. That's a conscious effort on our part. Strategically, it's not to say, properties in the Caribbean or in Hawaii or other fly to destinations aren't attractive.
We've just chosen not to be there for different reasons, but all of our properties are drive to and even some of the major markets like San Diego is a good example. It's a huge drive to market from LA, from Arizona, Phoenix, Las Vegas, in the summertime in particular when things get really hot in those markets, a lot of folks just drive into San Diego.
So we see a lot of leisure business that's drive to in a market like that. Our Santa Cruz, business is almost all drive to. For our, Chamberlain resort, our Same-Property E again is almost all drive to, and we do know that from which are the groups that are there, where their offices. It doesn't mean they don't have some people coming from outside of the market, but the business demand generator is usually in or near the market being regional.
Newport Harbor Island Resort in in Newport. It's a mix of drive to and fly to. Providence is easy to get in and out of, or even Boston, but it's a big drive to market from New York, as you probably know. So, and we do tend to benefit when folks are making decisions about how they spend their money and do they want to save a little bit, but maybe still take a vacation. The drive to markets do tend to benefit. Now again, we tend to be in the upper end of the socioeconomic customer, so they're a little less impacted by downturns typically, but those that are, we get benefits from the fact that they're drive to.

Raymond Martz

And [Dwayne], this is a perfect indicator, but at our resorts in Q1, our parking revenue is up over 10%. Compared to overall, 7% revenue gain for the quarter. Now that could be a function of also of revising parking agreements and those sort of things, but it does indicate we get both fly to and drive-2. It's encouraging. That's why it's helpful in downturns, the drive-2 component if some people trade down if they're not flying out to Europe and they're staying domestically. Thank you.

Duane Pfennigwerth

Thank you.

Operator

Dori Kesten, Wells Fargo.

Dori Kesten

Great, thank you. I appreciate all the details focused on expenses. Can you just talk more about where you think there's still the most used, where you're, just in case you do get to pull back on the top line and the back half and expenses can be even more helpful.

Jonathan Bortz

Yeah, I mean, I think it's pretty comprehensive across the entire expense line item categories, as it relates to the efficiency, and the cost reductions that come through that. I think when it comes to. Sort of the hunkering down reaction that our industry loves to call these contingency plans, of course.
We have level A, B, C, and D at all of our, at all of our properties, and we always look at them and say, well, the A ones, we should be doing those all the time.
It's not a contingency plan. It's a better way to operate the property, and then we start getting into B C&D, and we, as we get deeper into it tends to be deeper people cuts. It's. It's about how do we get the same amount done with fewer people, basically people working harder and smarter, as things get tougher, more cross training, utilization, less staffing of hourlies and having managers pick up shifts. Which is not a permanent solution, but it's a temporary solution when you have a relatively short six month, nine month, a year drop in volumes. So, but, when things get tougher, the hunker down tends to be more people.

Dori Kesten

Okay, thank you for that. And then, as you think about the potential tariff impacts on CapEx, how do you think about maybe changing some of your strategies in terms of areas you want to invest or maybe even more importantly, as you think about the competition or assets you've had your eyes on, do you think this is going to change, competitors' appetite to invest and open up more opportunities for you on the investment side, or are we just not there yet?

Jonathan Bortz

So two things. First of all, in terms of our capital, the good news is over the last five years we went through this massive comprehensive redevelopment within our portfolio of pretty much all of our assets and so outside of the potential conversion of Paradise Point to Margaritaville. All of our major projects are done. We don't have any major platform or, portfolio programs at this time that the capital that we, I mean, and we just completed really the last of them, which was not originally planned, but the brand change, and renovation of what's now the Hyatt Centric Delfina Santa Monica.
So we're really done with the need to go out and buy FF&E and do major renovation projects through the portfolio. Most of where we're spending capital relates to infrastructure. Most of that is not impacted by tariffs. It's, material supplied in the US.
So I don't, we haven't really heard of much impact at all from any of those projects that have moved forward. We do have major equipment sometimes on occasion it's made outside of the US, but a lot of it is made here in the US. So whether that's HVAC equipment, and then we have other ROI projects, many of which relate to sustainability and reducing consumption.
Some of that comes from outside of the US. LED bulbs and things like that in many cases come from outside the US, as do some of those fixtures. But again, we haven't seen any change in those costs yet. I suppose, Ray, any of the solar projects we've been looking at could get affected based upon these tariffs on solar.

Raymond Martz

It could fortunately for some of those solar projects we bought ahead of the tariffs, so we have some of that in storage, but. Yeah, some of those areas could put a crimp on it, but look, I think the bigger picture is, look, there's a lot of focus right now on the macro and anxiety around what's happening or not happening with demand, but longer term this should make replacement costs and construction costs go up, which further pushes the new supply growth down. It's already very low. I know most people aren't focused on that right now. But over the next three to five years, it's going to continue to put pressure on new supply growth, which is great on our ownership side. Maybe not so much if you're a developer, if you're a brand, but for our side, that's great in a lot of our markets.

Jonathan Bortz

And I think to your comment about do we change the way we're allocating capital and will this create opportunities for acquisition? I think, for now where we're going to put capital is going to relate to buying our stock back because we can buy our existing assets back at a way bigger discount and much greater value creation than anything we could buy on the market today.

Raymond Martz

And there's no tariffs on buybacks.

Jonathan Bortz

And there's no tariffs on buybacks.

Dori Kesten

Okay, because what you say, you never know, could change.

Jonathan Bortz

Exactly. We don't want to give anybody any ideas.

Dori Kesten

That's right. All right, thank you very much.

Operator

Gregory Miller, Truist.

Gregory Miller

Thanks. Good morning, everyone. I'd like to ask a question in a similar context to [Dwayne's] question. And speaking about your drive to resorts, what are your current expectations for summer performance and maybe specifically for the resorts that have stabilized operations or pretty close to that stabilization, do you expect that you're going to have positive rooms around par year every year this summer? Thanks.

Jonathan Bortz

Yeah, I'd love to be able to answer that. I think we, there's just too much uncertainty now and a lot of our, particularly our leisure business in the summer, Greg, is very short term booked, so particularly at the margin, right? So you get a lot of repeat business and some people plan ahead, but you get a lot of people who decide spur of the moment, or within a week or two or a few days of when they want to take a vacation.
So it's too early to tell and most, I mean the vast majority of our resorts are going to benefit from their redevelopments. We don't really have many that are stable at this point in time in terms of the resort category, maybe a Paradise Point. At this point, but all the others benefiting from more recent redevelopments. So it's just too early to forecast, what the summer leisure business is going to look like.

Gregory Miller

Okay, understood. Maybe just switching to a different topic. You're speaking about potential labor reductions and operating efficiency efforts.
If for anything that's guest facing and playing a little bit of a devil's advocate here, how are you preventing guest satisfaction scores or your rate positioning not being negatively impacted by your efforts?

Jonathan Bortz

Yeah, so that's a big focus of ours is when we, before we implement things in the portfolio, we're always looking at what impact will this have on the customer experience and as we're particularly with our independent hotels, but really all of our properties, including a lot of our major branded properties which tend to be lifestyle focused, we are focused on the experience that the customer gets. And that's a big part of the transformations and redevelopments and amenities and reconnecting that we've done.
So we don't want to do anything that the customer cares about. There are often things the customer doesn't care about, doesn't want to pay for, that, either a brand or maybe things that might have been done in the past where the customers interests and have changed. And then -- and those we would make changes on and be open to making changes on, but most of what we're talking about has to do with efficiency, not changing the service. We're constantly monitoring the customer reviews.
Our rankings of customer satisfaction have gone up consistently every year since the pandemic before the pandemic. That's a high focus of ours. As well. So, customers are quick to tell you when they're unhappy. And so if we do something that creates unhappiness, we're going to reverse it pretty quickly assuming we think it's going to have an impact on business.

Gregory Miller

Thank you, Jon.

Jonathan Bortz

Thank you, Greg.

Operator

Ari Klein, BMO Capital Markets.

Ari Klein

Thanks and good morning. Jon, I think we previously talked a little bit about seeing some price consciousness on the part of higher-end consumers curious, if you're seeing that now and how you'd expect that to play out, particularly as it relates to maybe rates moving through the rest of the year.

Jonathan Bortz

Yeah, I mean, clearly if you look at our portfolio, our gains have primarily been through occupancy, not as much through rate. I think that's a result of two things. One is mix, where the occupancies, the additional occupancies coming from within the portfolio. We've talked about that in previous calls, and then two, yes, sensitivity on the part of the customer.
Waiting to buy when things are on sale or discount or special offerings, we TRY to do value add offerings in most of our properties versus just discounting, but, sometimes you we have to do discounting, to drive a marginal occupancy and given the spend that goes on in our properties, we've determined that in in almost all cases within our portfolio today. Occupancy is as profitable as rate is within our portfolio because of all the additional spend that, that's been added, and that occurs through all the amenities that we've added in our property.
So that tends to be the way we're focused on it and. It's not all about just price, but yes, there we've been seeing price sensitivity really since '22, particularly when people decided that they didn't want to pay that extra money for suites or for view rooms and so we're always balancing what those premiums are for those premium rooms.

Ari Klein

Thanks, and then maybe just going back to the and the impact curious how you think about that market longer term and if you've used there have changed in it anyway.

Jonathan Bortz

I'm not sure I follow that question. Shoot it to me again.

Ari Klein

On DC, does what's happening with those change your longer term views on that market and how much exposure you'd want to have that?

Jonathan Bortz

It really doesn't, it's -- again, as I mentioned, there are a lot of good things going on in DC. DC is very resilient, has been over the decades. I've lived through, many Presidents who came in to make cuts and some who were successful and some who are not, and government growth itself hasn't been the driving force behind DC's growth over the last probably 20 years.
I mean the size of the government workforce here hasn't increased over that period of time. It's really all the private industry and of course business that does serve government that chooses to try to co-locate in the market and particularly in Northern Virginia or Maryland. So I don't think our view on DC changes and I think. This administration has, four years left and we'll move on to the next one who may have a completely different viewpoint.

Ari Klein

Thank you.

Operator

Chris Darling, Green Street.

Chris Darling

Thanks. Good morning. Jon, your framing of government and government adjacent exposure earlier in the call was helpful. Can you do the same for international travel, and then what are you seeing in the bookings data for international? How does that kind of compare with sort of the tough outcome in March and where do you think the portfolio might be more or less at risk going forward?

Jonathan Bortz

Yeah, I mean, I Again, I think our industry doesn't do a great job with our own data in terms of where the customer comes from, because a lot of times if an international traveller books their business and they do it through a US travel agent and they don't show up as an international inbound. So frankly, we're a little more forced to look at anecdotal information and then look at the government data when it comes out on a monthly basis. And the good news at least about the government data is it's a lot more timely than it used to be. It's only about one month behind from a time perspective. It used to be six or nine months or some crazy amount of time, so. I think, there, there're likely with some impact from the Easter shift that hit March hard.
We'll see what April look looks like and see how much of that reverses and I think in my comments, I mentioned I don't think, it's likely to continue at the sort of down 10% that March was. On a year over year basis, but frankly, we don't know.
We're going to have to wait and see. You're talking about human behavior and reaction to, government policies and rhetoric and things being said, and so we just have to wait and see. We've heard from some of our conferences that people have had a hard time getting visas to come in for some of these conferences, that it's taking longer, they're not getting their visas or they're getting them a day or two before the conference, which makes it hard for people to plan, and commit to traveling. We've been talking to the administration as an industry about trying to speed that up since that's an export, if you will, it's great for people to come to this country and spend money and we want them to feel welcome to do that. So we're trying to help push to create that environment, but clearly that's not the environment that is the perception right now on the part of travelers, so.
A lot of uncertainty, the impact is probably more in the urban markets than it would be in our resort markets, and it's probably, The East Coast markets and Florida, that would be the ones most impacted at this point. A lot of the Asian travel has already been slow to recover, doesn't seem to be being impacted by the policies and rhetoric as much as European and Canadian travel. We're not in New York, which is obviously the biggest international market in the United States, and so the rest of our markets tend to be down in the mid-single digits, maybe DC in the upper single digits.

Raymond Martz

And, Chris, I think it's also important to look at the other side of that ledger is the outbound from the US travelers, which is up, way above where it was pre-COVID.
And with the concerns around the macro and all that and some people may be staying close to home and drive to. That could be a benefit of some of the slowdown where there's more US travelers staying domestically and vacationing here versus going out to, Paris for the Olympics and going to Japan and Europe, which we've seen a lot of. So there's other side of the two, I think it's more to look at both sides of the equation when we speak the international demand.

Jonathan Bortz

And I think that look, the dollar has softened over and come down over the last month or two. That would normally be helpful to inbound international and would normally be hurtful for outbound. So we, we'll see what impact the dollar has as well, on that on that imbalance.

Chris Darling

Got it. Yeah, that's all helpful commentary. Appreciate it. Maybe on just a more positive note real quick, I think I heard you say that Key West enjoyed positive RevPAR growth in the quarter. One of your peers, I think, reported a decline in Key West. Curious, how your performance compared to the market there and maybe, perhaps what you did right or what went right for you.

Jonathan Bortz

Well, we, it's really two things. One is we, we're benefiting from significant investment dollars that we put into the southernmost resort and marker in upgrading both of them, and so we're gaining share in the market on the market, that's number one . Number two is I think from a strategy perspective or we TRY to get out in front of what we expected to be some slowdown. In demand, and so we put more business on the books further out, and that's been helpful.

Chris Darling

Got it. Thank you for the time.

Jonathan Bortz

Yeah, thanks Chris.

Operator

We have reached the end of the question and answer session. Mr. Bortz, I'd like to turn the floor back over to you for closing comments.

Jonathan Bortz

Thanks everybody for those who are still there. We appreciate you taking the time. We know it's a busy day with lots of calls. We look forward to updating you in 90 days and hopefully we'll have more clarity at that point in time. In the meantime, I hope you'll have a nice summer and we'll talk to you in late July. Thank you.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation and have a wonderful day.