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Sean Mahoney

Thanks, Leslie. To start, our comparable numbers include our 94 hotels owned at the end of the first quarter and exclude the Courtyard Atlanta Buckhead, which was sold during the quarter. Our reported corporate adjusted EBITDA and FFO include operating results from all sold and acquired hotels during RLJ's ownership period.
We are pleased to report solid first quarter operating results which demonstrated the resiliency of our high quality urban centric portfolio. Our first quarter occupancy was 69.1%. Average daily rate was $204.31 and RevFAR was $141.23 achieving RevPAR growth of 1.6%. Which was driven by a 2.1% increase in ADR, slightly offset by a 0.5% decline in occupancy.
Overall, our RevPAR growth remained healthy in urban markets such as Washington DC and New Orleans, which benefited from special events during the quarter. A number of our urban markets achieved strong RevPAR growth during the first quarter, including San Jose at 14.1%. Houston CBD at 9.9%, Philadelphia at 26.4%, Pittsburgh at 12.6%, and Louisville at 10.3%.
We saw growth in all of our segments with group being the strongest, which saw demand increase by 9%, leading to 10% revenue growth above the first quarter of 2024. Total revenue growth was 1.2% and benefited from 3.8% growth in out of room spend.
As discussed, operating trends began to soften in March with RevPAR down 1.3%. Looking ahead, we expect March operating trends to continue throughout the second quarter, and preliminary April web bar is forecasted to decline between 1% and 2% from the prior year.
Turning to the current operating cost environment, as we expected, our operating cost growth rates continued to moderate during the first quarter. Total hotel operating cost growth was only 2.9%, which underscores the benefits of our portfolio construct and our initiatives to manage our operating expenses. The first quarter growth represents over 100 basis point improvement from the fourth quarter growth rate.
Our team is diligently working to identify and execute incremental cost containment initiatives to minimize operating cost growth in response to current macroeconomic uncertainty.
During the first quarter, our portfolio achieved Hotel EBITDA a of $85.3 million representing a $3 million dollar contraction from 2024 and Hotel EBITDA margin of 26.1%. The year-over-year, Hotel EBITDA comparability was impacted by $2.5 million of one-time COVID and other credits recorded last year, and there being one less day in the current quarter due to leap year.
Excluding these items, our portfolio would have achieved Hotel EBITDA growth during the quarter. Further, we were pleased with our operating margin performance, which was only 124 basis points lower than the first quarter of 2024.
Turning to the bottom line, our first quarter adjusted EBITDA was $77.6 million and adjusted FFO per diluted share was $0.31. We have maintained a strong balance sheet in liquidity and have continued to actively manage our balance sheet to create additional flexibility and further lower our cost of capital.
Early in the second quarter, we proactively addressed our 2025 and early 2026 debt maturities. Including entering into a new $300 million term loan to refinance a $200 million term loan with an initial maturity in early 2026 and use the excess proceeds to fully repay the remaining $100 million outstanding on our line of credit.
The new $300 million term loan matures in 2030, inclusive of extension options. In addition, early in the second quarter, we exercised the final extensions on two mortgage loans of $96 million and $0.85 million dollars respectively.
The execution of these transactions is a testament to our strong lender relationships and favorable credit profile. We currently have a well-positioned balance sheet with $600 million available under our undrawn corporate revolver. A current weighted average maturity of nearly four years, 86 of our 94 hotels unencumbered by debt. An attractive weighted average interest rate of 4.5%. And almost 75% of debt either fixed or hedged.
As it relates to our liquidity, we ended the first quarter with over $0.8 billion of liquidity and $2.2 billion of debt. With respect to capital allocation, as we have demonstrated in the past, we intend to invest in projects to unlock the embedded value within our portfolio while also remaining committed to returning capital to shareholders through both share repurchases and dividends.
So far during 2025 we've been active under our $250 million share repurchase program by successfully recycling 100% of the proceeds from a non-core disposition to repurchase approximately 2.7 million shares for $24.3 million at an average price of $8.91 per share.
At the end of April, our board approved a new one year, $250 million share or purchase program, which will provide us with an additional tool to take advantage of future volatility in the capital markets to repurchase shares.
Additionally, our quarterly dividend of $0.15 per share is well covered and supported by our free cash flow. We will continue making prudent capital allocation decisions to both provide stability and to position our portfolio to drive growth during the entire lodging cycle while monitoring the financing markets to identify additional opportunities to improve the lattering of our debt maturities, reduce our weighted average cost of debt, and increase balance sheet flexibility.
Turning to our outlook, I would now like to provide additional color on the assumptions underlying our updated outlook. As Leslie mentioned, forecasting visibility remains low. The midpoint of our revised outlook assumes that current operating trends persist throughout the balance of the year.
If the economic backdrop changes from our current guidance assumptions, we will update our guidance ranges accordingly. For 2025, we now expect comparable RevPAR growth to range between 1% and up 1%.
Comparable Hotel EBITDA between $365.5 million and $395.5 million. Corporate adjusted EBITDA between $332.5 million and $362.5 million and adjusted FFO per diluted share to be between $1.38 and $1.58 which incorporates shares or purchased to date but no additional repurchases.
Our outlook assumes no additional acquisitions, dispositions, or refinancings. We continue to estimate 2025 ROJ capital expenditures will be in the range of $80 million to $100 million. Cash G&A will be in the range of $34 million to $35 million and net interest expense will be in the range of $94 million to $96 million. We also expect total revenue growth will continue to outpace RevPAR growth due to continued success in our initiatives to drive out of room spend.
Finally, please refer to the supplemental information which will include comparable 2025 and 2024 quarterly and annual operating results for our '94 hotel portfolio.
Thank you, and this concludes our prepared remarks. We will now open the line for Q&A operator.

Question and Answer Session

Operator

(Operator Instructions)
Michael Bellisario, Baird.

Michael Bellisario

Thanks. Good morning, everyone.
Leslie, just on your fundamental comments, I want to focus there first. I think you mentioned trends are holding. I think that's the word you used. Maybe you can just zoom in on what you saw in April and then how did April and March actualize relative to your initial expectations?

Leslie Hale

So I would say, Mike, let me start with the latter part of your question and then kind of go to the former part. I would say that, April, as we said on the last earnings call, was going to be slightly positive. I'm sorry, I'm talking about March. March, we said that it was going to be slightly positive, and it came out negative 1.3 is what we articulated. And then we gave the estimate in Sean's prepared remarks from one to two down in April.
April was originally expected to be positive. It was supposed to be the strongest month within the second quarter, which is second quarter, as we mentioned, was going to be our weakest quarter. I think in terms of the actual trends, that we all knew that March was going to see Easter move into April, so therefore spring break is going to be elongated, so we saw less compression there towards the back end of the month as well known, government adjacent demand softened, so we saw that and that's carried into April as well.
So BUT that is outside of government travel, did hold and surprisingly, even though demand was down in March, we saw rate was plus one in March as well. So, rate integrity continued as well and we're hopeful that we'll see some of that in April as well.

Michael Bellisario

Understood, helpful. And then Sean free on the balance sheet, can you maybe give us sort of a lay of the land of all the different pockets of capital, that are available to you, maybe what's the appetite from your bank group, where's high yield at today and then what you're seeing in the mortgage market too?

Sean Mahoney

Sure thanks, Mike. I think on the, I'll start with the bank group which we just upsized a term loan with the bank group and so I think that market continues to improve. There's capacity for sort of the top-quality sponsors that we would fall into. So, I think that.
That market continues to be strong and favorable because it tends to be the longest viewed market, within the financing markets. On the high yield, what we've seen is, during some of the more chaotic moments over the last month or so, essentially issuances stopped within high yield.
And the implied valuation of those that that had high yield bonds or the discounts widened. What we've seen is a lot of that is sort of has come back, not all the way to earlier in the year, but a lot of that risk has sort of been priced out as there's been better headlines.
So you know you would expect, net, the incremental cost of a high yield today for a like to like is probably somewhere between 50 basis points and 75 basis points wider today than it would have been before some of the some of the noise. And then lastly on the secure financing, I think what we've seen is that the secure financing continues to be active. CMBS specifically.
I think that tends to be a more fickle market that as underwriting becomes a little more difficult, due to uncertainty that market will react and will likely react through higher going in debt yields required maybe than before, but net, the CMBS market, continues to function.
And I think Mike, to your question, I think that's also, why the refinancing that we did in this quarter, being opportunistic about addressing some of our 2026 maturities, we feel very good about in terms of being proactive and opportunistic there because of the movement and the and the sources that Sean talked about.

Michael Bellisario

That's all helpful. Thank you and showing good luck to you on the other side.

Sean Mahoney

Tyler Batory, Oppenheimer.

Tyler Batory

Thank you. Good morning. So, I wanted to follow up a little bit more on the fundamental outlook and what you're seeing right now, and it looks like March, April. Both months missed your initial expectations. So can you talk a little bit about, what specifically drove that?
And then we look forward this year the midpoint of the guide assumes that trends hold from where they are right now. I guess unpack this a little bit more in terms of what gives you confidence that that that's going to be the case. Is there anything that you're seeing today, you know that that makes you think that the trends won't deteriorate further from here?

Leslie Hale

Yeah, so let me sort of talk a little bit about that in sequence. I think in terms of what we saw, look, our change in, our guidance is being driven by what we're seeing, the softness in the government and government related demand and slowing on international. It's also the lack of visibility and the continued uncertainty that persists.
And you talked about sort of April and March. I mean, given April and March were at the height of the level of uncertainty and so the impact that those two months took again March being down 1.3% in April it projected to be down between 1% and 2%. And so those are the things that sort of drove, our perspective in changing our range as it relates to the range itself, clearly, when I think about key assumptions, we assume that the step down in government and government adjacent demand and international remains and persists throughout the year.
And then your question about confidence, I think the reality of it is that we can only tell you what we can see now. The booking window is short and so we are projecting based on the current outlook for group to Remain, BT, and leisure outside of government to stay stable relative to what we see today, but the reality of it is that, where we end up in the range is going to be driven by the economic backdrop, right?
And so and that's going to be influenced also by the fact of how much, what's the duration and the level of uncertainty that persists. It's very reasonable to assume that if the uncertainty persists that it's going to affect, business investment, it's going to affect consumer confidence, and all of those things will have an impact on travel.
So that's going to dictate where we end in the range, but you know we can only give a range based upon what we see today.

Sean Mahoney

And then drilling it down a little bit, the back half of the year our guidance assumes RevPAR growth at the high end of about 1% at the low end down 2%, so roughly down a point at midpoint. But for the back half of the year, we think the RevPAR is flat, right? So that would imply that we expect the second quarter because of the what we articulated last quarter on difficult comps and things like that which Leslie can sort of walk through.
But you know we expect the second quarter to be the weakest quarter of the year and rev part will likely be negative in the second quarter as we've shown you know with the April stats thus far. But our back half of the year, while, with the cadence is similar to what we expect to be in the year, it's just, we're now expecting flat versus up a couple of basis points of RevPAR.

Tyler Batory

Okay, very helpful and just to follow up on this commentary, I mean you mentioned the booking window being short a couple of times, can you kind of quantify where that stands right now, and then have you seen any pick up in in in cancellations as well the past the past couple of weeks?

Leslie Hale

So yeah, I mean I would say that historically, just giving you one data point is that our zero to seven day booking window was about 51% prior to the increase in uncertainty. Since that time, it's roughly about 58% from zero to seven days, so that's one data point in terms of defining the booking window, what I would say though is we kind of look across all the segments, the booking window is shortened.
When you talked about, group, we mentioned that our pace is holding, but the things that we're going to be watching in addition to our cancellations of ticking, we're going to be looking at attendance, we're going to be looking at lead volume and conversions.
I think on the BT side we talked about how strong our midweek trends were, so we're going to be watching midweek to see who's still traveling and SMEs and national counts are still producing for us. And then on the leisure side, we're going to be watching consumer confidence because that's going to play a major role, as we kind of think about on Ford and as it relates to government demand, we'll be watching the headlines, in terms of what's incremental or not relative to on the government demand.

Tyler Batory

Okay, all right, that, that's great detail. Also want to wish Sean all the best to go birds.

Operator

Austin Wurschmidt, KeyBanc Capital Markets.

Austin Wurschmidt

Great, thanks. Good morning, everyone. You had referenced the recovery in Northern California is gaining momentum. I'm just hoping you could expand on that comment and whether it's been sort of a step change in performance more recently or just more of the gradual move higher and just kind of the, if the increased confidence I guess on that continuation is really around kind of the citywide calendar for this year?

Leslie Hale

Yeah, thanks. There's been, it's a number of things that that we're seeing as net positive on the momentum side. You mentioned the citywides for sure are playing a key role, but also just the headlines, positive headlines that are coming out of Northern California related to the good press that's gotten around and got around the NBA All-Stars, the new mayor has been focused on safety and cleanliness. The office absorption, as well as sort of tech demand. Surprisingly for us, the Valley, our assets that are in Silicon Valley were up 11%, in the first quarter.
So that's another data point that from a momentum perspective that we've been looking at.

Sean Mahoney

And I'll add a little bit of color on Mosconi. So, when you think about the yea-over-year increase, the largest increases will be in Q2 and Q4. Q4 is primarily because Salesforce moves into Q4. But more importantly, when we look at the calendar, it's where the pattern is. Austin, you've got Friday, Saturday, Sunday, that's exactly where you want conventions. Happen in CBD because you typically have a little bit more BT demand and that's about 70% to 100% up on those three nights.
And then speaking to BT, the back to office is real, you've got Google, Salesforce, Amazon, all having people ride shares up when you look at [Bart], and then when we look at the type of conventions that are coming in, it's encouraging that we've seen corporate. RevPAR and then an example of AI, everybody's always trying to understand what's happening. If you look at the last three years, there was a conference called Data Bricks and in 2023 it had like [1.4000] on peak night. In '24 it had 4.5, and now in '25, another 6,000 peak night.
So what's happening in AI, there's more and more people wanting to participate in those events and be around it, and you're seeing the actual offices and companies put platforms together which is stirring travel significantly in Silicon Valley like we talked about with Nvidia and some of the companies out there that are really exploring new platforms around AI. So hopefully that helps you with a little bit of the character of what's happening in San Francisco.

Austin Wurschmidt

Yeah, a lot of great detail in there. I appreciate it, and, just wanted to pivot then a little bit on the disposition and curious sort of when you started exploring the sale and went under contract for that deal and what sort of the appetite is for additional sales, you highlighted that you put the proceeds from the sale and the share buybacks and just what the thought process is on continuing to move down that path?

Leslie Hale

Sure, I would say to answer your question, this is a transaction that we had, under contract before the elevated uncertainty started to take place, Austin, I would say that in general what we're seeing today on the transaction side is that the uncertainty has cast a shadow on the transaction markets and deals that are under contract seem to be moving towards closing.
But that anything is not under contract is really sort of in a pause, wait and see environment. It's really hard, I think, for buyers to be constructive in this in this environment. So while we're open, I don't think that the market is really there's a lot of activity to be had, relative to incremental transactions at this moment in time.
We obviously expect that as clarity improves that the transaction market would improve, as well in terms of, capital allocation clearly given this backdrop that buybacks remain, very attractive as you mentioned this quarter, we recycled the disposition proceeds into buybacks, and this allowed us to do it on a leverage neutral basis and we continue to see buybacks as a priority. We also were, advanced our conversions, this quarter, and as we mentioned in our prepared remarks, the three most recent conversions generated RevPAR growth of 34%.
Our natural assets, which is in the final stages of conversion, was plus 16% this quarter, and so we've been advancing those as well. And additionally, we obviously further strengthen our balance sheet, and you know our balance sheet is what's going to give us the optionality to be able to pivot, as the economic backdrop unfolds, and you know so we'll continue to monitor that. But as we sit here today with this backdrop, buybacks remain attractive.

Austin Wurschmidt

Thanks for all the details.

Operator

Chris Woronka, Deutsche Bank.

Chris Woronka

Hey, good morning, everyone, and, Sean, congratulations on, yeah, really impressive career. I appreciate all the interactions and guidance over the years. So, thanks for that and good luck, thanks.
Sure, so a question, I was hoping to kind of zoom in a little bit on your or your, I guess what we call select service, assets, we used to call limited service. Are you seeing any, irrational behavior there yet in any isolated markets in terms of rate cutting and secondarily to that?
Do you have any supply concerns, mostly again on that select serve as we continue to kind of hear about the brands doing more conversions which I know is not supplied, but in some markets it's more competitive supply. So just any thoughts on that on those?

Leslie Hale

Yeah, I mean just to sort of frame for our portfolio is urban centric and you know we are brick and mortar, not stick built, assets across our portfolio, so I would sort of characterize it.
From a relative basis, but we are not seeing, rate, degradation in any meaningful way, as we've mentioned, our first quarter, results that were driven by rate and even in March when we saw softness rate was pushing forward on that side. And some of the other limited-service stuff that's being built doesn't really sort of compete with where we're at. It's not being built in the markets where we're at as well.
And so from our perspective, as we've mentioned before, urban markets are going to benefit from the supply imbalance and particularly, in this particular cycle, and so we're not really sort of seeing that that supply that you made reference to really compete against the assets that we have today.

Chris Woronka

Okay, thanks, Leslie, very clear. And then, just as a follow up, you guys, obviously the repositioning has been a big part of the story. They've, I think, done really well relative to expectations. Looking forward, is there any thought just given the uncertainty with tariffs and we don't know how long to last? Is there any less appetite to look at things that are more of a deep dive renovation right now? Is that something you kind of have to table or are you still willing to look at those as they come up?

Sean Mahoney

Yeah Chris, great question.
Now, I think the, our balance sheet provides us with the ability, to look at all things and liquidity we have. And so, I don't think that that that that's really going to impact it. I mean, obviously the returns have been have been unbelievable on the on the conversions and the repositionings and so that that's a form of capital that you know we're happy to allocate to on tariffs specifically, listen, we've got a great in-house design and construction team that's been actively managing through the impact, it's worth noting the tariffs situation is dynamic.
Because we haven't had a final resolution announced in many countries, but that being said, our team has done a line by line assessment of what the impact would be, assuming that that whatever was announced comes into place. And so, you know we have a team that really drills down. Drilling down a little further, FF&E is the only part of the CapEx that is related. It would be impacted rather by the tariffs that's roughly historically 40% of renovation costs.
As part of COVID, we diversified away from countries that were that would be impacted by the tariffs, not. The tariffs but because we wanted to diversify our distribution channels. And so today only about 10% of our FF&E comes from China. That's down from 40% pre-COVID and so I think we've done a good job through our in-house design and construction team of diversifying away from the risks.

Chris Woronka

Okay, great. Thanks. I appreciate all that color.

Operator

Chris Darling, GreenStreet.

Chris Darling

Thanks. Good morning. I'd like to dive a little bit deeper on the group segment. I'm curious what you're seeing in terms of new bookings both for future years and in the year for the year, and then maybe if you could dive a little bit deeper in terms of the experience in March and April specifically.

Thomas Bardenett

Good morning, Chris.
So let me start by helicoptering up in regards to the for the full year first and I'll dive into the more current trends. So right now, we're still at about 102% when we look at our group pace for the full year, which we have about 77% on the books in regard to what our expectations are for the year. So that's a healthy amount. And we're also seeing, as Leslie mentioned, rate integrity in the group market. If you think about RLJ Compact full service, Urban Select Service, the bulk of our business is usually anywhere from 10 to 30 rooms where it's about 65& to 70% of our business.
And so when Leslie refers to small group, we think about smerf groups, corporate groups. At our meeting in a shorter period of time and that's where we've seen the booking window, even get shorter when you think about that.
And then if we look at city wise, we do get compression in the urban markets where we have that, but we don't typically participate in the bulk of our hotels in those blocks what we saw most recently though is the cancellations that occurred were primarily in the months of March and April, a little bit in the Q2, and that was primarily around the government segments.
And when you think about some of those cancellations that occurred, it was either, research related that maybe was not going to have funding when you had some of the Government cancellations that occurred. It was related to either NIH or things that were on the books that were a little concerned based on the volatility, and those have kind of subsided.
So we're seeing that kind of stabilize in that arena on the group side and then same thing on the government transient when you think about adjacency companies that might have travel or group related to that. So, the other thing I would mention about group though. We're seeing in the first quarter, the F&B spend has been very healthy.
You know what we found was banquets, room rental, AV, all were increasing. We even, unfortunately had to, benefit from cancellations where our attrition we collected on a lot of the group cancellations, but we did see that actually improve our F&B margin by about 250 basis points. And then out of room span when you have group come in, typically also benefits in regard to those other areas that are on the P&L. So that gives you a little bit of temperature of what's happening in the group segment.

Chris Darling

Alright, thanks Tom. That's helpful and actually maybe sticking with you for my second question just going back to NorCal, curious if you could tell us, how full your '24 EBITDA finished relative to pre-COVID as well as what the margin profile looks like. And the reason I ask is I'm just trying to get a sense of what the upside potential is, for that region should some of the positive momentum sort of continue over the next quarters and years here?

Sean Mahoney

Yeah, Chris, I'll hop in there. So, the EBITDA in '24 relative to 19 was, in the high 30s percentage of 2019 levels. And so that incremental 60% plus really represents, the potential upside there. While you know Tom could talk about where we think San Francisco is going to end up, we're not Pollyannaish on it, but clearly there is tremendous upside from that portion of our portfolio as the recent results have shown.

Thomas Bardenett

Yeah. So, we spent a lot of time, as you can imagine, Chris, in San Francisco, we just most recently had an opportunity to meet with SF Travel.
So when you think about the future, a couple of things are encouraging. Number one, when you look at the booking window and pace for '26 and '27, they are similar to what I would say when you add definite and tentative. To what you're seeing in '25, and those are main events that are happening are going to be Super Bowl, World Cup, some of the events that we're talking about, that new leadership at SF Travel is starting to look at more regional meetings versus the big events.
And so that's kind of helping on the self-contained, which is a shorter booking window as well. So, we're encouraged that it's moving in the right direction. Then we talked about, back to office AI. We're seeing more leases and subleases around companies that are investing venture capital money, so we're encouraged that the type of companies that are moving into San Francisco want to have a footprint there because that's where all the tech jobs are and the Talent to be able to produce opportunities for future, platforms.
I think it's also important on your question in reference to '24 to recognize that the citywide calendar last year was really weak and the citywide calendar this year is up 70% on a relative basis. So, I think it's important from a from a metric perspective.

Chris Darling

Got it. I appreciate the comments, all really helpful and Sean, congratulations and best of luck.

Operator

(Operator Instructions)
Floris van Dijkum, Compass Point.

Floris van Dijkum

Thanks for taking my question. Leslie, I know you said the transaction market is going to be a little spotty with this kind of environment. Maybe can you talk, how many other assets, do you have in the market right now currently, or would you be willing to, look to sell for year end?

Leslie Hale

Yeah, I don't think we have, a programmatic approach to selling. We've been more opportunistic. In this climate, I think you have to be the types of assets that are capable of getting done are ones where they're smaller, that they have an owner or operator or the asset has some level of strategic benefit.
So in the case of the asset that we recently sold, the buyer had, a strong presence in Atlanta, and that asset was really important to them. And so when there's opportunities to transact, it really has some qualitative cadence around that course is what I would say.
And I would say we have, one other asset that we're looking at, today, and we'll see, whether or not you know that transacts. But as I mentioned before, assets that are not under contract today are generally less likely to close just given the backdrop and sellers, buyer's ability to be constructive in today's climate.

Floris van Dijkum

Thanks and yeah I'd like to wish Sean his the best, in his future endeavors as well. Sean, it was, it's been a pleasure over the last year talking with you.

Operator

Thank you, ladies and gentlemen, that conclude our question-and-answer session. I'll turn the floor back to Ms. Hale for any final comments.

Leslie Hale

Thank you everybody for joining us today. We look forward to seeing many of you over the next coming conferences over the next few months. Before I close out the call, I want to take the opportunity on behalf of the entire RLJ team to recognize Sean, who is going to be retiring after spending almost seven years here at RLJ, but more importantly, 20 years in the industry.
This is his final call and he and I were counting this morning somewhere near 100, but I want to sincerely thank him for his partnership and significant contributions to our company over his tenure here. He's been a great colleague, and we wish him well and the very best in happiness as he spends more time with his family in the next chapter of his life.

Sean Mahoney

Thanks, Leslie. I just want to take a moment to express my gratitude to both Leslie, the RLJ team, as well as the board for the last seven years. Thanks would have worked along such a great team and partners and as well as the shareholders over my 30 plus year career, and thanks for the trust and support, and I'm confident that the team is set up for great and future success.

Operator

This concludes today's conference call. You may disconnect your lines at this time. Thank you for your participation.