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Jonathan Bortz

Thanks, Ray, and thanks to all of you who've joined us today. I'd like to provide additional insight and perspective into last year's performance and our outlook for 2025, both for the lodging industry and for Pebblebrook.
As a reminder, at the start of last year, we forecasted industry RevPAR growth at 0% to 2%, though many prognosticators were significantly more optimistic. The final result was a modest 1.8% growth with a notable 3.6% surge in Q4. So why did the industry underperform most of the higher forecasts?
We believe it primarily had to do with the issue of normalization. Our 2024 forecast stems from our belief that post-pandemic demand behaviors had not yet fully normalized. We expected a prolonged adjustment period with limited demand growth.
Between April 2023 and September 2024, industry demand remained flat which is unique in history for a period with GDP growth in the mid to upper-2s. However, by Q4 2024, we observed more typical demand behavior as evidenced by a 2.2% increase in demand, more in line with GDP growth and historical norms.
This trend continued in January 2025 with demand up another 1.7%, reinforcing our view that industry demand is once again more closely tracking economic growth. In 2024, business group and transient travel continued to recover, and leisure demand returned to urban centers that are providing safer environments and vibrant cultural, sporting and entertainment attractions.
By late 2024, we saw early signs of renewed leisure travel growth industry-wide, further supporting our view that consumer travel behaviors have normalized. While some of the Q4 improvement may have been a post-election boost from reduced uncertainty surrounding the election, we believe the primary driver was the renewed link between industry demand and economic growth.
For Pebblebrook in 2024, we saw continued recovery at our urban properties with demand growth coming from business group and transient as well as leisure travelers returning to the cities. However, challenges in three key markets, San Francisco, Los Angeles and Portland muted our overall performance.
In 2024, San Francisco suffered from a weak convention calendar. Los Angeles grappled with the lingering effects of the 2023 entertainment industry strikes and Portland struggled with intense quality of life issues and the slow implementation of policies to improve the city, which finally occurred later in the year, offering some optimism for 2025 and beyond.
As Ray indicated, our overall performance was enhanced by excellent performance and many of our recently redeveloped and repositioned properties where we've invested over $0.5 billion in recent years.
These properties are still ramping up with significant RevPAR share gains expected over the next few years, along with non-room revenue growth due to the re-merchandis and amenity additions made at these properties. As detailed in our updated investor presentation, we anticipate continued upside from these strategic investments.
Let me provide a few performance examples. Embassy Suites San Diego Downtown gained over 330 basis points of RevPAR share since its last stabilized pre-development year in 2018, and all of the gains were in 2024. The Westin San Diego Gaslamp quarter has gained 1,570 basis points since its 2019 renovation, including continued improvements in 2024.
Both the Embassy Suites and Westin Gaslamp are now considered stabilized following their redevelopments, and we account for them that way within the EBITDA bridge in our investor presentation. [One Hotel] San Francisco transformed in mid 2022 and has gained over 4,485 basis points of RevPAR share since 2019, its last stabilized year prior to its redevelopment and brand conversion, and that includes 970 basis points in 2024.
We expect further share gains this year and likely next year as well. Year over year in January, the one gained 870 basis points of RevPAR share. Chaminade resort, which we don't think is stabilized yet, though we conservatively treat it as stabilized in our EBIDTA bridge has gained 1,150 basis points of RevPAR share since 2018, including 700 basis points in 2024 as we really get going and driving significantly more group to this unique resort.
Harbor Court in San Francisco has gained 900 basis points from its last stabilized year in 2019, all of which was achieved in 2024. Many of our other more recent developments and repositionings have also gained share. For example, Estancia Hotel & Spa in La Jolla is already outperforming its pre-construction 2022 levels by over 350 basis points, despite some disruption from redevelopment in 2024.
We're expecting large gains in RevPAR share at Estancia this year, along with significant gains in non-room revenues as we added multiple outlets, event lawns and a completely redeveloped full complex. We continue to be very excited about the major investments we've made over the last few years covering a large portion of our portfolio, and we're confident in achieving the RevPAR share gains that will drive the conservative EBITDA upside which is detailed in our investor presentation.
Now looking ahead to 2025, we expect industry hotel demand will revert to its normal historical connection with economic growth. With GDP projected to grow 2% to 2.5%, we're forecasting industry demand growth of [1.75% to 2.25%] and limited supply growth of well under 1%. That should lead to an occupancy increase of about 1% to 1.5%.
We expect industry RevPAR to grow 1% to 3% in 2025 with more ADR growth represented at the higher end of the range and with potential upside in the second half of the year if revenue managers gain more confidence in pricing.
Our industry forecast assumes no progress in reducing the current domestic outbound to international inbound imbalance, which currently contrasts with pre-pandemic norms when international inbound was stronger than domestic outbound travel.
We should note that we're increasingly cautious about the potential for a negative economic impact from the plethora of domestic policy announcements and threats from the current administration. While we were quite optimistic just a month ago due to the overall optimism expressed by businesses and much of the public following the election.
Some of that enthusiasm seems to be waning as concerns increase about extensive talk of tariffs, government firings, mass deportations and significant reductions in federal spending, including many spending freezes already put into place. Most of these items are not business friendly. Without these very significant concerns, we would be much more positive and confident in our 2025 outlook.
For Pebblebrook, the LA wildfires have created a tough start to 2025. Past disasters like these wildfires often bring longer term business opportunities for the affected areas. However, they tend to primarily benefit the lower priced hotels and submarkets.
Our West Los Angeles properties, which fall into the upper upscale and luxury categories have not yet seen increased demand. While other parts of the vast LA market have benefited from evacuees, first responders and early cleanup efforts, our West LA submarkets, which are higher priced have not.
That said, we believe significant new demand will emerge as extensive rebuilding commences over the next few years. Additional demand drivers for LA include the NBA All-Star Game and World Cup Games in 2026, the Super Bowl in 2027 and of course the long build up to the 2028 Summer Olympics.
The fires caused significant group and transient cancellations and led to a very substantial slowdown in bookings at our properties. While we're seeing some recent recovery and pick up, booking volumes are not yet back to normal at our LA properties. February has been weaker than January, though March is showing improvement.
Frustratingly, despite outreach from the hotel and business communities, local LA leaders, including the mayor have not publicly encouraged business and leisure travelers to return to LA. The fires affected two major residential neighborhoods, not commercial or tourist areas, and all major attractions remain open and unaffected.
All the reasons to go to LA continue to exist and are undamaged. The sun is out, the air is as clear as it normally is, and the beaches are beautiful. Of course, the silver lining here is that our comps for next year will be much easier.
The negative start to 2025 for our LA properties is disappointing given our expectations that this would be a recovery year for LA following the entertainment strikes and slow return of production last year. We're currently estimating a $9 million to $12 million impact to room's revenue with $6.5 million to $8.5 million of that occurring in the first quarter.
Total revenue is projected to take a $12 million to $16 million dollar hit with $8.5 million to $11 million in the first quarter. This translates to a 115 basis point drag on full year RevPAR growth and 100 basis point impact to total RevPAR.
For the first quarter, we estimate a 380 basis point impact on RevPAR and 320 basis points to total RevPAR. As a result of these forecasted revenue declines, we've reduced hotel EBITDA by $9 million for the full year, with a $6.5 million impact in the first quarter.
Outside of LA, our other markets are well positioned, led by San Francisco and Washington DC. San Francisco's convention calendar is up nearly 70% in room nights to last year with business transient group and leisure travel all continuing to recover.
DC has already benefited from the inauguration, and we'll continue to improve from a very active congressional schedule and government transition. We expect our resorts to lead the way in our portfolio's performance in 2025 as group pace at our resorts is well ahead of 2024.
For the total portfolio, group room night page is up 3.8%, group ADR is ahead by 1.8%, and group revenues are beating last year by 5.7%. Transient pace is also ahead, up 8.3% in revenue and total combined pace is ahead a healthy 6.9% in total revenues on the books.
And our overall pickup trends are providing further support for our optimism. They've improved as booking patterns and timing have finally normalized. The total in the quarter -- for the quarter pickup in our portfolio turned positive in Q4 and excluding LA, it was again very positive in January.
So if the economy remains resilient and continues on a solid growth path, we should see our nominal pace advantage grow over the course of the year instead of the opposite behavior and result last year. I also want to highlight the great success we've achieved in improving our operating efficiencies throughout our portfolio through a very intense ongoing collaboration with our operators.
We continue to find new and more efficient ways to operate our properties, yet we're not sacrificing service levels. Our customer satisfaction scores and rankings increased again in 2024, and they're up significantly compared to pre-pandemic.
Our success in increasing productivity and efficiencies has resulted from the full implementation of our best practices, rigorous auditing of those implementations, extensive detailed benchmarking, and better use of technology focused on eliminating waste, overstaffing, and reducing energy and utility consumption, kind of Pebblebrooks doge, if you will.
And those efforts include testing new technologies based on AI, robotics, sensors and predictive analytics. Curator and its team have been instrumental in helping us analyze and implement these innovations and do it at favorable pricing. We've also intensified efforts to reduce costs such as workers' compensation, general liability and property and casualty insurance.
We're actively mitigating risk and reducing costs through targeted property investments and operational improvements. As a result of all these extensive efforts, total expense growth in 2025 is forecasted at 4.1% at the midpoint of our outlook.
However, this figure is inflated by the absence of the $10 million of real estate and municipal tax credits received last year.
Adjusted for this, total hotel expenses are forecasted to grow just 3.1% at the midpoint of our outlook. This is despite inflationary pressures on wages and benefits, energy and property and casualty insurance, as well as the increased costs typically associated with higher occupancy and expanded food and beverage operations and volumes.
We're extremely proud of our team's efforts to drive efficiencies and reduce costs in 2024. With a continued relentless focus on streamlining operations, we're confident in achieving further improvements in 2025.
In addition, our disciplined approach to managing our balance sheet and maturities ensures that we remain well positioned to deliver strong returns for our shareholders while maintaining one of the lowest overall costs of total debt capital in the lodging REIT sector.
As reflected in our song selection today, we've faced many challenges from Mother Earth, but we're adapting and improving, and we believe we're in a good place for 2025 despite these impacts.
We're looking forward to a great year this year and in the years ahead when we expect to gain the full benefit of a very favorable environment, including a growing economy, reconnected demand growth, and little to no supply growth in our markets, as well as substantial organic growth driven by the hundreds of millions of dollars we've thoughtfully invested into our portfolio. Investments which are poised to generate significant further upside this year and at least through 2027.
So that concludes our remarks today, and we'd be very happy to take your questions. So Donna, you may proceed with the Q&A.

Question and Answer Session

Operator

(Operator Instructions) Dori Kesten, Wells Fargo.

Dori Kesten

Thanks. Good morning, guys. Can you dig into your expectations for the outsized out-of-room spend growth in '25 and just what your managers are seeing in discussions with groups on their anticipated spend and then just differences that you'd expect generally for transient spend at your urban versus resort properties.

Jonathan Bortz

Sure. I mean, of course, when you look at our total RevPAR growth outlook, it's higher than our RevPAR growth outlook. So we do continue to expect that out-of-room spend will increase at a rate that's greater than our RevPAR growth rate. That's really in all areas of non-room revenues. It includes food and beverage. It includes parking. It includes resort and other guest amenity fees at our properties.
It's in other areas like spa, it's at our club in LaPlaya where spend continues to go up on a per member and a per guest perspective. So I mean what we're hearing from clients is primarily positive. They continue to spend more.
Now, sometimes they book at a lower number, but when they come in they spend more, and I think that's just a cautious approach from a contractual perspective, but in general we're seeing very healthy out-of-room spend, and we're seeing those trends continue.

Operator

Duane Pfennigwerth, Evercore ISI.

Duane Pfennigwerth

Hey. Good morning. Thanks. I wondered if we could zoom in a little bit on the DC market. Obviously, you have some assets there, but you're also in the market and have been in the market for a long time.
We've just been getting more questions on government exposure and of course DC is only a part of that exposure potentially. Can you speak to just generally demand drivers around a change of administration and what the overall vibe is right now?

Jonathan Bortz

Well, a lot of us know a lot of people who work for the government here, and I'd say that the general emotional mood is very high anxiety. I think it's kind of like a Mel Brooks movie. People are very nervous. People are getting all sorts of confusing communications. People are getting fired. They're getting rehired back. They're getting fired again. It's all over the board.
So I think from a mood perspective that explains the general mood. Now, mood and perception are often different than reality. So there's a number of very positive things happening in DC related to demand drivers for hotels.
The first is we had an inauguration. I'm sure it was the largest one we ever had, and as a result of that, the results were very favorable and certainly added to the outlook for our first quarter. Changing government always helps, particularly when there's a congressional change because it means the flipping of the committees like in the senate.
And so, associations, companies, businesses, they come to Washington, they stay here, they meet with their representatives, the new committee heads, the people who are legislating and leading the legislative effort. They meet with people in the different cabinet departments.
And so, it gets very active and in a year that is first year after elections, it tends to be the most active because it's when the most legislating goes on in that first year when there's that election mandate, if you will. The additional thing that's happening in the market is that folks have been for the most part ordered to come back to the office and work.
And that's very favorable for both the downtown in terms of activity levels. It's very good for the restaurants. It's terrific for service providers, and it's good for the hotels because it means more meetings downtown with people who are actually working again in their offices.
So DC right now, we've forecast it as along with San Francisco as our top-two urban markets for the year, and we do expect that to play out that well -- that way. I mean, I've been in DC since 1986, not always in the hotel business, but in the real estate business and we've gone through periods where our government has shrunk and the city continues to grow.
And so, a lot of people go from the public sector to the private sector, which is often very healthy for economic growth. And I guess the one other thing to mention that does go along with the change in administration is that a lot of people moved to Washington to work in the new administration.
And they have visitors and sometimes they're staying in hotels because they're commuting back and forth, et cetera. So a lot of positive demand drivers. The one negative I would mention is the freezes in government spending or typically don't help when it comes to government meetings.
And so, we have seen through the portfolio, not necessarily in DC at this point, but elsewhere where there are meetings related to government, I know one DEI meeting as an example that got canceled, but there's a little of that we should expect because when government freezings happen, they can't move forward with new contracts.

Raymond Martz

And Duane just to provide some context about the amount of government demand we have at our DC hotels, it's only about in the mid single-digits kind of an area that's direct government business. It may be indirect to people coming in to see the government so that could be larger. Clearly, DC is the base for the federal government, but when it comes to spending reductions, the federal government is in every state.
So this is not something that's just isolated to Washington DC, although it's probably a larger impact, but it is in every market. So it is a broader thing, and we're all waiting to see how this plays out.

Operator

Jay Kornreich, Wedbush Securities.

Jay Kornreich

Hi. Good morning. Thanks. You mentioned in your comments that you anticipate no further material leisure rate deceleration in 2025. So I was just wondering if you can expand on that comment. So what do you see that gives you more confidence on the leisure side? And is there any possibility for leisure rate to even be up by the end of the year?

Jonathan Bortz

Yeah. I mean, it's through our 13 properties. We have some that will be up this year. We have some that will probably be down a little bit this year, and we have others in the sort of flat, up a little, down a little territory.
So I think right now our expectation is, we gain meaningful occupancy in our resorts this year and flat to maybe a little bit of growth in rate depending upon how the year plays out, particularly the second half of the year. I mean, what gives us confidence is what's on the books and how that looks from a rate perspective, it's encouraging.
The resorts that have been redeveloped, which are many of them are charging more. They're growing group rates at the same time that they're attracting more leisure to the properties because we've added a lot of amenities. So the biggest confidence that we get is from what business is on the books and what rates we're picking up at within the portfolio.

Jay Kornreich

Okay. I appreciate that. And then just one other, looking for Los Angeles and the impact that's happened in the portfolio which you outlined in guidance, do you feel like that properly de-risked or is there any further impact that that could have? And on the vice versa side of that, as the year progresses and maybe transient demand comes back in with some relief customers, is there opportunities for upside in that market?

Jonathan Bortz

Yeah. So I'd start out by telling you we don't have experience with the impact of fires on a medium to long-term basis. I don't know many people who do in terms of hitting major metropolitan areas. I think Hawaii is the closest thing we can come to and there were a lot of governmental mandates that occurred in Hawaii because of the loss of housing and jobs on such a small island that really stretched it out.
I think our best guess, Jay, which is what we put together and I would tell you it's not conservative. It's not aggressive. It's really our honest best guess at how we think the impact is going to wind down over the first half of the year.
We've not forecasted anything for the second half. There certainly could be an impact. Again, it's unknowable and unpredictable at this point. We think it'll be less. The current trends continue to be positive. Our operators have gone out and made a lot of outreach to their regular customers, and there are a lot of those in the LA markets in the recording industry, in the entertainment industry, in the fashion industry, in the financial industry, in the tech industry.
And the feedback that we've gotten is people stopped travel into the market when the fires began in that first week, and some have returned to normal. Some are in the process of setting a date, whether it's sometime in March, in some cases in April for their return of regular travel. And that's for both group and leisure.
I mean, originally, we saw a recording in the movie, in the music industry that was put on hold. We saw hesitancy around some of the awards shows. We saw this continuing safety approach based upon the dramatization of this view that maybe the fires were still happening, that it impacted half of LA, that the smoke was terrible, that there were things in the air that you didn't want to breathe.
And frankly, that went away after the first couple of weeks. So folks have been very hesitant in returning their travel, but saying that in the last two weeks, we've seen a significant pick up in normal travel and to your -- which is very encouraging.
And to the second part of your question, Jay, I think there will be lots of vendors, service providers, government that will be coming to the market for the cleanup and the rebuilding efforts. Again, most of them are going to stay outside of our markets because our markets are higher priced.
I mean, we don't take a lot of per diem business typically because it's much lower than our average rates, but it should create significant compression in the market at some point when that activity level really begins to become substantial.
And as it relates to certainly the people who live in the palisades anecdotally, and I know quite a few of them, they've already rented apartments or condos, or they've gone to live in their second homes. Those in Altadena, I think are probably struggling more and are utilizing the hotel stock, particularly at the mid to lower end. And I think that will go on for a while until there's alternative affordable housing for folks from that neighborhood. Is that helpful?

Jay Kornreich

Yeah. Very helpful. Thanks for all the cover.

Operator

Michael Bellisario, Baird.

Michael Bellisario

Good morning, everyone. Jon, just first question for you, just on some of the expense cuts and efficiencies, is there maybe a dollar amount for '24 that you think you achieved? And then could you provide us with some more on property examples of things you've done or planned to do in '25?

Jonathan Bortz

So there is no dollar amount. The target is continuous and relentless efficiency efforts. There's a lot of opportunity within the portfolio on the food and beverage side to make that more efficient. There are lots of opportunities on the insurance side, which will be a multi-year effort related to improvements we're making at the properties to reduce guest and associate injuries and reduce the impact of those speed the return of people back to work to minimize and mitigate losses.
We're using some predictive technologies that will improve and shrink the number of water main breaks and pipe breaks that occur in our hotels, technologies that monitor, I don't understand it, I guess it has to do with the vibrations or something that occur as a pipe weakens over time because those pipe breaks tend to be significant impact when they happen.
So it's cross training, Mike, in the portfolio. It's testing more technologies. We are utilizing more remote and mobile check-in. We think that will continue to lead to further reductions in overall staffing levels. A part of it is just being efficient, using appropriate labor management technology that exists.
But if you put garbage in, you get garbage out. So making sure everyone at the properties who use it, who need to use it are well trained in it, understand what information they need to put in in order to get the most efficient result. And so, when we talk about best practices, it's a lot of things like that. There's also a lot of investments we're making with an effort to reduce utility consumption, whether it's electricity, natural gas, water.
We have some very significant improvements going on to make toilets more efficient, to reduce, I guess, the ongoing leaks that occur in toilets of them being constantly refilled. It's lots of little things, but they all add up to very substantial numbers. And Ray, maybe there's a couple that you can mention.

Raymond Martz

Yeah. Look, like Jon indicated, there's many things. It's not just one or two things, but I think that's great. I think our hotel teams and our asset managers know with the expenses that have increased the last several years. We all have to operate differently and fortunately, we have really good hotel teams that are open and receptive to how to operate differently in rethinking all that.
And that allows you know more efficiency, different staffing plans, different use of labor and technology that really frankly wasn't available four or five years ago. So we're really encouraged. We don't want to show all of our secret thoughts here because that's what I think we can do a little differently.
And then also, we alluded to this in the script, the Curator programs are really helpful to us because they can do a lot of R&D and research. They've found plenty of programs that don't work, and they can kick those out, but they find ones that do work.
So that allows us with our asset managers focus on the properties. We have another team that's focused on these areas. So we feel really good about it, and we can expect to have more savings and efficiency in '25 and beyond.

Jonathan Bortz

And I think one of the things that's helpful for us is with 12 or 13 different operators, we see 12 or 13 different operating models and different ways our operators approach everything and part of what we've created with Curator is we have a very extensive, very detailed benchmarking system.
And so, our asset managers are pulling every month, benchmarking against different sets of properties that are relevant, looking all the way down to every single line item within every major category of expense and trying to understand is there an -- if one property is doing it less expensively, is there something there that can be learned and rolled out through the rest of the portfolio.
And that has been extremely helpful this past year in terms of -- a lot of the staffing models that our different operators use in our portfolio in order to create increased productivity.

Michael Bellisario

Understood. That's helpful. And then just follow up from me on an unrelated topic, but on the disposition front, with the latest and greatest there in terms of your efforts to transact and maybe get some things across the finish line in 2025. And I asked that in the context of your short-term incentives for '25 that dispositions are at the top of the list. Thanks.

Thomas Fisher

Yeah. Mike, this is Tom. Good morning. Listen, we're going to continue to be opportunistic and if it makes sense. I mean, obviously, the transaction market has the same continuation from like '23 into '24 in terms of, I think, high investor engagement and interest but little conviction. I think that's shifting.
You've got some ingredients that make it a little more functioning. I mean, you have more debt availability. I think debts found it (inaudible) certainly with more players and more availability, better pricing. We've seen a compression spreads over the last year. And so, I think investors can underwrite debt with some confidence.
And I think as you've heard today, the operating fundamentals are more predictable and people can, I think, underwrite as well that typically leads to higher investor conviction and I think if we get this trend of the reconnection of industry demand with GDP, certainly over the fourth quarter last year and into the first quarter this year, I think people are going to take notice of that and become more active and more bullish.
The question's going to be to the other point is maybe some of the uncertainty around some of the administration policies is that going to slow things down for another 30, 60 or 90 days. So listen, we're going to continue to be active, continue to have a number of discussions, and when we have something to announce, we'll certainly announce it.

Operator

Gregory Miller, Truist Securities.

Gregory Miller

Thank you. Good morning. I'd like to ask about San Francisco. Certainly, there have been many developments in recent months, including changes to local leadership. Could you provide your latest views on the market beyond convention citywide?
Perhaps if you can speak to what you're seeing in the streetscape changes implemented by the new mayor or the Board of supervisors, tourism promotional efforts or other factors that are top of mind for you. Thanks.

Jonathan Bortz

Sure. So I'd say pretty much in all regards, things are improving in San Francisco from a quality-of-life perspective, from a policy perspective, from an optimism perspective. I think there's a lot of momentum now. I think we'll look back and say 2023 was the trough in maybe for the city, although I could argue that the trough from a quality-of-life perspective was probably '21 or '22, but -- because I think things had already gotten significantly better in the market.
The city's in the process of rebuilding the police force. The Board of supervisors is much more moderate than it was prior to the last two elections. We have arguably a more moderate mayor, although I think the last one, Mayor Breed came around and was pretty moderate. We have a business-friendly mayor.
We had our first business tax reduction. I think somebody told me in 80 years in San Francisco that passed in the last election. And if you look at some of the other categories, we've started to see positive office absorption in the market. There's been a break in office values, and they've started to trade, albeit very opportunistically for the buyer community from a pricing perspective.
We're seeing all segments of demand increase. There are many, many back to the office mandates that have been implemented and noticed on the ground, both from a food service and other service participants in the marketplace. We've seen it at our hotels in terms of increased in-house group demand.
The sporting activities and music activities are active in the market, and we're getting the benefit of that on weekends. And if you walk the city, I mean, again, outside of one district for which there's no reason to go into it, the city looks clean. You don't see any more homeless there than you do in most any other city today.
They're working hard on providing services to those folks in need. So they don't need to live on the street. So I think we're very, very positive that it will be one of our two best urban markets this year along with DC. And we expect it to be in the mid to high-single digits in terms of RevPAR growth this year. So we think the city's turned. There's a new leader of travel.
We spent significant time with her. We're very high on her. She's already made a difference. San Francisco's attracting conventions again, new conventions. Microsoft Ignite is coming the week before Thanksgiving. That was a huge conference in Chicago last year, in the latter part of the year.
They've attracted fancy foods back from Las Vegas. They attracted Snowflake back from Las Vegas, and there's other new bookings and some return bookings for future years. And when you look at the convention pace, and I know you said outside of the convention, but I don't want to exclude the future beyond '25.
The pace right now has significantly increased over the last six months for out years, including '26, '27 and '28. So we think the convention room night demand is going to continue to go up in each subsequent year based upon where they are from a pace perspective.

Raymond Martz

And Greg, just to support our confidence is supported by the numbers in our San Francisco hotels, the pace each quarter room nights are up double-digits each quarter versus last year. That does mean we're going to end up double digits up, but it is off a strong convention calendar or returned to office by a lot of companies in San Francisco. AI, which we know San Francisco is the center of what's going on in AI right now, saw positive momentum which supports our confidence.

Jonathan Bortz

And that's group and transient. It's not just group.

Operator

Ari Klein, BMO Capital Markets.

Ari Klein

Thanks. Good morning. Maybe just going back to the LA market, if you -- even before the wildfires, 2024 was very challenging year, and I think EBITDA in '24, 55% below the 2016 peak. I guess I'm just curious what's your long-term view on that market and how comfortable are you with your overall exposure there. Thanks.

Jonathan Bortz

Sure. So I think LA is the second largest city in America. It has a huge and expansive industry base. It has great weather. It has great amenities. I mean, LA literally sits on the beach practically. I think we continue to be big believers in the city like San Francisco a couple of years ago, LA has some challenges, some are self-inflicted. Others are from a very aggressive labor movement in the city.
And LA is one of the later government policy or it's moving slower in transitioning to a more moderate policy perspective than San Francisco has. And so, it's going to take some time for the policies to change, but there's an incredible base of business that is serviced in LA.
People are still moving to LA despite what you might otherwise hear, and you've got some really big events coming over the next three years that will be extremely helpful on top of the significant additional demand that's going to come as a result of the cleanup and rebuilding efforts for these two major neighborhoods in LA.
So it's not without its challenges. There's little to no new construction in the market. There won't be any for quite some time. The economics just aren't supportable, and that will pave the way for a substantial recovery from, as you describe it, a pretty big hole in terms of pullback from where it was in '19.
And in fact, further from where it peaked in 2016. So I'd say the industry is not healthy today from a business model perspective, but there's opportunity, but we also need some better business policies in the market.

Ari Klein

When you compare maybe San Francisco and LA, which of those two markets do you feel better about? I guess, over the medium term because it sounds like there's a lot of, maybe more near-term optimism on San Francisco om that recovery.

Jonathan Bortz

Yeah. I mean, I think it's maybe a little bit -- it's a little bit more predictable in San Francisco right now, although if you ask anybody six months ago, nobody would have said that. So it's a fairly small amount of time. We draw from a convention calendar last year and it had a big negative impact on the market.
I mean, the hole is deeper in San Francisco compared to historical performance than it is in Los Angeles. And so, I don't want to pick one. I think we're comfortable owning in both markets. I think if we were a buyer, which we're not today because we can buy our existing portfolio back at such a big discount.
But if we were allocating capital outside of our company, we'd be a buyer in these two markets because the values at this point are low as indicated by the values on a per key basis included in our NAV analysis, and if you compare that to the historical NAVs, you're going to see that both of those markets have been written down very significantly to today's values.

Operator

Floris van Dijkum, Compass Point.

Floris van Dijkum

Morning, guys. My question to you, obviously, you had another gut punch here in LA with the fires. You put out a bridge that basically tells you that you think you're going to get to $442 million of EBITDA. And if I look at your 2019, which is by the way that bridge implies 19% growth. If I look at your 2019 EBITDA, you had $436 million of hotel EBITDA. You're still [$65 million].
What's the conditions that you need obviously outside of the one-off events like the hurricanes in Florida and the fire in LA that you think you would need to get to those levels and how quickly can you get there? And is there a scenario where we can get beyond that EBITDA that you've laid out in your bridge?

Jonathan Bortz

Sure. So Floris, I think the base need is for continued -- consistent economic growth. I think if we live in an economy with a couple of percent plus of GDP growth, we're going to see somewhere close to that in demand growth. We've got probably four or five more years in our markets at a minimum where there will be little to no supply growth.
And so, we'll see occupancy rise and we're going to see rates rise and that can happen very quickly. They can accelerate very quickly as demand grows and revenue managers and owners and operators become much more confident in the demand environment.
So when you don't have to fight your neighbor to grow, you can price accordingly. And so, if you look at history, I mean, we could be in mid to upper single-digits of overall RevPAR growth by next year, and certainly that could increase into the high single-digits out into '27 and '28.
In our view, it's not a matter of -- it is a matter of when, but you know when does matter because expenses keep growing every year. So we've got to grow revenues faster and then there's a huge amount of operating leverage in the business and in our case we have for us a meaningful amount of financial leverage as well which will flow through.
So we feel pretty good about achieving those numbers over the next three years or so. And it's really based upon a need for a continued economic growth environment.

Operator

Chris Darling, Green Street.

Chris Darling

Hey. Thanks. Good morning. Jon, to the extent you're successful in closing any dispositions this year, how are you thinking about use of proceeds, especially with the convertible note maturity date approaching in the next couple of years?
And then secondly, is there a scenario here where maybe you look to sell assets in some of your stronger urban markets, potentially even some of your resort hotels? I'd imagine the liquidity profile there is much superior relative to some of your West Coast markets.

Jonathan Bortz

Yeah. So we're going to flip your multi question around the room, but I'll start and as it relates to what will we do with the capital, we'll decide at the time based upon what the world looks like. But if it looks like today, which is the most confidence we have from a visibility perspective. We use a significant amount of that capital to buy our stock back.
It's trading at a more than 50% discount to the midpoint of our NAV range. We would expect to be selling our individual assets within their NAV ranges respectfully, and that is our historical performance. It's what we've achieved in the past. And then we'll use the rest to pay down debt that relates to the loss of that EBITDA. And so, we want to make sure we remain at least leverage neutral and potentially slightly continue to improve the leverage profile.

Raymond Martz

And Chris, as relates to the convert, so we provided an updated slide in our new investor presentation on the balance sheet just to provide a little more color into some ways what we're thinking about addressing that.
So look, in addition to potential dispositions and the proceeds from that, we have right now, just as a reminder, over $200 million of cash. Our free cash flow, this is after real CapEx, not a [cad] number. We should be averaging well over $100 million a year in the next few years. So depending on how we use for stock buybacks and those sort of things.
You're looking at $400 million-plus or minus of cash. So that really brings the potential refinancing of the convert down to that $350 million to $400 million range which we can look at a convert. We can look at term loans, we can look at high yield, which we're in the market. So we have a lot of options at our disposal and we're going to look at what's best at the time.
What's hardest for us right now is the convert is a really good coupon right now, [$175 million]. It's hard to beat that anywhere. So we like to hold on and take advantage of that because it helps with our cash flow, but it's not something that we are overly concerned about.
Again, you've seen the improvements in the portfolio over the last couple of years, how much leverage has come down in our access to other sources of debt. So it's not something that we think is a huge concern that you should be worried about, but at least we provide all the options and some good roadmap there in our investor deck.

Jonathan Bortz

And Ray didn't mention, we have a $650 million unused line -- by the way. So there's a lot of options there. We plan these things well in advance as shown over our 15 year history here at Pebblebrook. And we've never put ourselves in the box, and that won't happen here either.

Chris Darling

All very helpful thoughts. I guess just to follow up on the last part of my admittedly multi-part question, but any thoughts on potentially selling in some of those markets where maybe the liquidity profile is a little bit more conducive to effectuating some sales?

Thomas Fisher

Yeah. We continue to discuss internally what makes sense within our portfolio and what that would mean in terms of the remaining portfolio. I think one of the challenges that we have just as it relates to resorts in general is we've invested a lot capital in those resorts and a number of the resorts are not yet stabilized, which makes it a little harder.
We'd like to achieve those returns, and we think the value might be greater than yesterday, but if someone's willing to think about that and pay up today, that's something we can evaluate.

Operator

Thank you. At this time, I'd like to turn the floor back over to Mr. Bortz for closing comments.

Jonathan Bortz

Hey, thanks everybody for participating. We'll see many of you down at the conferences down in Orlando and in Hollywood, Florida. And we look forward to updating you on our progress this year in another 60 days. So thanks again.

Operator

Ladies and gentlemen, thank you for your participation. This concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.