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Robert Springer

Thanks, Bryan. During 2024, we invested $157 million into our portfolio as we had multiple capital initiatives underway. The majority of these projects have recently or soon will be wrapping up, and we look forward to the earnings benefit they will now provide.
As we have shared with you last quarter, we are nearing completion on a room's renovation and lobby refresh at the Wailea Beach Resort and have been performing the work around peak periods to minimize displacement. As part of the scope, we are combining a few rooms to create four residential style oceanfront villa units with a kitchen, generous living area, and the ability to sell them in multiple configurations ranging from one to four bedrooms.
While the first two have just come online, early feedback has been great, and they are already allowing the hotel to better compete with its luxury neighbors and win higher quality group business.
As Brian noted earlier, we have made substantial progress in Miami, where construction is winding down and the resort is preparing to welcome guests as we work through the final steps in the cumbersome inspection and approval process. We are very pleased with the finished product and the degree of transformation we have achieved at this property.
We have teams in the hotel now completing training and preparation work, and we look forward to opening the resort in a few weeks. While our total capital investment in 2025 will moderate back to more normalized levels, we will still have some important value creating initiatives underway.
In San Antonio, we will be renovating the meeting space starting in the third quarter, which should wrap up by the end of the year. While the hotel is in great shape, a refresh of the median areas will better align them with the already renovated guest rooms and allow our sales teams to market a more cohesive product and drive more group business.
In San Diego, we are in the planning stages for a renovation of the meeting space at our Hilton Bayfront. While we are still finalizing the details, we would not expect it to begin until late in the fourth quarter. Overall, the level of investment we have planned for the coming year will result in less earnings disruption than in the last two years, and we will instead get the benefit of the work we have already wrapped up or soon will be completing.
As Bryan alluded to earlier, the transaction market in 2024 was not as robust as we had hoped, but we continue to seek out opportunities to drive further growth by recycling capital and deploying our considerable investment capacity. We look forward to updating you on our progress as the year progresses.
With that, I'll turn it over to Aaron. Please go ahead.

Aaron Reyes

Thanks, Robert. Our earnings results for the fourth quarter came in ahead of expectations, as stronger ancillary revenue, better expense management across the portfolio, and savings at the corporate level served as a tailwind to inline room's revenue growth.
Full year EBITDA was $230 million and FFO was $0.80 per diluted share, both of which were at the high end of our previously provided guidance ranges. Prior to the end of the quarter, we fully drew our recently arranged $100 million term loan and utilized most of the proceeds to repay the mortgage on the JW Marriott, New Orleans. Following this refinancing, all of our debt is unsecured, and our balance sheet provides significant flexibility.
Inclusive of our extension options, we don't have any debt maturities until 2026. As at the end of the year, we had nearly $180 million of total cash and cash equivalents, including our restricted cash and we retain full capacity on our credit facility which, together with our cash, equates to nearly $700 million of total liquidity.
Our net debt and preferred equity to trailing EBITDA stood at 4.3 times as of year-end, and we expect this will continue to moderate downward as we move through the year and realize the growth in our earnings. In fact, based on the midpoint of our 2025 guidance, our net leverage would be only 3.9 times, which further illustrates the strength and increasing capacity of our balance sheet.
Included in our earnings release this morning are the details of our initial outlet for 2025. Based on what we see today, we expect that our total portfolio of RevPAR growth will range from 7% to 10% as compared to 2024. Our strong top line growth is a direct result of the multiple investments we have made within our portfolio.
The debut of Andaz Miami Beach is expected to add nearly 4 points of growth this year. But even if we exclude this resort, our remaining portfolio RevPAR is still projected to grow a healthy 3% to 6%. We estimate that full year adjusted EBITDAre will range from $245 million to $270 million and our adjusted FFO per diluted share will range from $0.86 to $0.98. At the midpoint, this reflects annual growth of 12% and 15%, respectively.
While we expect the distribution of quarterly growth for the industry will be more balanced in 2025 than what was initially expected for 2024, we will have some portfolio-specific considerations that will influence the cadence of our overall growth.
For the total portfolio, we expect that RevPAR growth for the first quarter will be in the area of 3% to 5% before increasing to approximately a double-digit range for the balance of the year as we benefit from the opening of Andaz Miami Beach and experience the easier comparison in Q3 and Q4 from the impact of the strike in San Diego. This would generally translate into EBITDA distribution of approximately 21% to 22% in the first quarter, approximately 30% in the second quarter with the remaining balance spread more or less evenly across the 3rd and 4th quarters.
In the 2025 Outlook section of our press release, we have included the key assumptions that support our full year guidance numbers. Our projections assume that Andaz comes online in mid-March and contributes $8 million to $9 million of EBITDA in 2025. Given the change in timing for the project, we incurred less pre-opening costs in 2024 than initially projected and now expect that some of these items will be incurred in 2025.
Following the redeployment of the Boston Park Plaza sale proceeds last spring and the change in deposit rates, we expect to generate less interest income on our cash balances in 2025 than we earned in 2024.
As Robert noted, our capital investment activity for this year will be lower than our run rate in recent years and is expected to be in the range of $80 million to $100 million. Based on this level of investment and the nature of the projects we have planned, we will have meaningfully less earnings disruption in 2025 relative to what we experienced in the last couple of years.
Now shifting to our return of capital, for the first quarter, our Board of Directors has declared a $0.09 per share quarterly common dividend and has also declared the routine distributions for our series H&I preferred securities. While we retain ample capacity for additional capital return, the full year outlook that was discussed earlier does not assume the impact of any additional share repurchase activity.
And with that, we can now open the call to questions. So that we are able to speak with as many participants as possible, we ask that you please limit yourself to one question.
Operator, please go ahead.

Question and Answer Session

Operator

(Operator Instructions) Duane Pfennigwerth, Evercore ISI.

Duane Pfennigwerth

Hey, thanks. Good morning. Just wonder if you could speak to the underlying demand segment assumptions within the 7% to 10% RevPAR guide or maybe you want to think about that, X the Andaz contribution? But how are you thinking about leisure growth, group contribution, and BT within that 7% to 10%?

Bryan Giglia

Sure, so looking at the RevPAR guidance for this year, it's based on the feedback we get from our hotels and what our hotels are seeing at this point. So when you look at the different segments, it assumes that group continues to be very solid. We're pacing above 10% for the year. So from a group standpoint, a continuation of very solid performance.
From a business transient standpoint, continued strength and slight improvement in certain markets, but more of a continuation of what we were seeing at the end of last year. And then the leisure is expecting to see roughly what we were seeing last year with maybe a little bit of pick up in the third and fourth quarter in Maui. And so when you look at that and you put all that together, if you ask, well, where is the potential risk or upside in the 2025 guidance?
It really comes down to the leisure segment, and in multiple markets whether it would be Maui with recovery and slower-than-anticipated recovery, but still seeing and when we saw a very good festive season last year to see some additional recovery, but not back to where we were in Maui. And back-end loaded, to see some of this advertising and promotion, some of it, that really -- to catch.
And then other markets, maybe like Orlando too where we have a new park opening and if leisure were to pick up there, that would be some upside for us. When you back out Andaz and you back out the Long Beach lift, there are some individual assets that are growing pretty strongly in the portfolio and then there are others that are more closely aligned with the sector growth.
And so from a cost standpoint, I think that that allows us to really focus on costs and if we see additional revenue or additional pickup, then that should flow pretty well.

Duane Pfennigwerth

Okay, I'll keep it there. Thank you for the thoughts.

Operator

Smedes Rose, Citi.

Smedes Rose

Hi, thanks. I wanted to ask you, could you just share with us what the pace of wages and benefits increases were in '24 at the hotel or in the property level and kind of where you are expecting those to pace in 2025?

Bryan Giglia

Yeah, good morning, Smedes. So we've always said historically that wages and benefits have kind of been oscillating between 4% and 6%. Last year we were in the, call it, the mid-4s. There were several collective bargaining agreements that were settled last year in our markets and San Diego being one of them.
And so that's in San Francisco also. So that's something that -- typically, what happens is that they tend to be front-end loaded and so that first year, the wages will be more than what will be the average wage over the life of the agreement. So if you look at that 4 to 6 range, we'll be closer to the higher end of that in '25. So definitely a step up from '24, and then we will moderate back down to '26 and '27 to get to below that and then bring that average back down to where we historically have been in the, call it 4% or 5% range.

Smedes Rose

Okay, thank you.

Operator

Dori Kesten, Wells Fargo.

Dori Kesten

Thanks. Good morning. I believe you said this year the Andaz EBITDA would be about $8 million to $9 million. How are you thinking about the ramp in '26 for that asset?

Bryan Giglia

Morning, Dori. So looking at the ramp and the ramp for '25 and then going into '26 and ultimately in the '27, the ramp will start off in the, probably around the 20% in March and then as we look into Q2, Q3, probably around the 50%-ish occupancy getting into the high season in the fourth quarter where we should be in the in the 70s.
Then looking into next year, when you look at the seasonality of Miami Beach, January and February are very big months. And so if we are looking at, call it $8 million to $9 million of EBITDA this year, next year we should easily double that EBITDA for '25 -- I'm sorry, '26, and then as we get into the '27 reach closer to that stabilization into the high 20s.

Operator

Michael Bellisario, Baird.

Michael Bellisario

Morning, guys. Just want to go over the Napa assets again, I know you've touched them too much in the prepared remarks, but maybe give us an update on how the operational improvements that you're employing there are tracking against plan and then what's embedded in the '25 guide for these hotels? Presumably you're assuming -- you'll realize top and bottom line growth at these assets in '25? Thanks.

Bryan Giglia

Sure, so looking at '24 and all this information is available in our supplemental, we have good EBITDA growth at both hotels as we implemented the plan that we had on the cost side and the plan that we had on the group side knowing that the transient occupancy is going to be more tied to outbound travel and also the health and the San Francisco Bay Area market.
So we had, between the two hotels, a little over $3 million of EBITDA gross on a percentage basis, that's pretty strong. And that came from a combination of continuing to get each hotel closer to its what we believe is the optimal group mix, that's in the mid-60s at Montage and in the mid-40s and in the Four Seasons and we're getting closer to that, but still probably several points of occupancy away to get to that goal.
So when you see the numbers for '25, you'll see that the group room nights or room nights in general are up, rate was down a little bit, ancillary spends still in the 900-ish range for montage and over 1,000 at Four Seasons. And so being able to yield out that group customer, and so that went very well and we're pretty much on target for where we want to be there.
On the cost side, that process started at the Montage and then followed at the Four Seasons. We were able to get about a little over $1 million of cost out of the Montage while maintaining a very high customer satisfaction ratings. So we were able to change process without changing the impact to the guests. Four Seasons, it was a little bit below that million, but we have additional work to do and that's in process now. And again, the same impact on groups -- on guest satisfaction.
When we look into '25, we do look at continuing to build that group base. An increase in leisure or a surprise in leisure this year is definitely upside at these hotels, will be upside at these hotels and given where we have the cost model set now, additional occupancy will flow meaningfully to the bottom line. Even without that and not banking on that growth yet, we still are anticipating another couple million dollars of EBITDA growth at each of these hotels this year.

Michael Bellisario

Very helpful, thank you.

Operator

Chris Darling, Green Street.

Chris Darling

Bryan, going back to the recovery in Maui, can you frame what's embedded in the low and high end of your guidance range for this year?

Bryan Giglia

Yeah, what we are expecting is that we continue to have solid group. This year, our pace is up. We have -- just to give you a context of the different segments in Maui, we have about 35,000 group room nights as our target for this year and in 2019, we ran at about 37,000. So from a group perspective, that demand remains strong, maybe a little bit less incentive group than there was before, but we're pretty happy with where the group business is.
From a leisure standpoint, we expect a little bit of a lift in the second half of the year, but if you look in for those very familiar with the island or for those that have just been to the island and can see is that part of the leisure increase is going to be -- it's going to be more of a step function. [Kannopolis] is now just getting back to an operating base where they can -- they're taking group and transient customers and any sort of temporary living or any other things are out of that market now.
And so that -- Kannopolis has to get its base of business back which will then result in additional airline lift which will then help on the ticket prices and get more people onto the island which will bring more people into Wailea. And so our expectation is that that's going to take a little bit of time and maybe we see a little bit of that this year.
And so again, if there is spring break and summer, additional travel to the island and that picks up, then that would be an excess of where our -- definitely our midpoint but maybe even some of our top end of our range, too.

Operator

Chris Woronka, Deutsche Bank.

Chris Woronka

Hey, good morning, guys. Thanks for taking the question. I was hoping we could talk a little bit about your Renaissance in Orlando. You guys had good success converting a couple of other renaissances you had in the portfolio. I know you sold a few others.
This hotel, it's kind of a little bit lower RevPAR versus your average, a little bit lower margin. I don't see it kind of on the '25 capital plan. Is there something to do there longer term? Or is i, maybe a little bit more -- or anything you could tell us on that? Thanks.

Bryan Giglia

Yeah, sure, good morning, Chris. What we have found through our two investments and one being a little bit more seasoned than the other, is that rebranding definitely does work depending on the type of hotel and the guests you're going after. And we've always said that our Renaissance hotels have done very well with group customers and maybe not as well with the transient customer.
When you look at what happened with transient in DC in '24, we went from comparing it back to the last clean year would be 19, but we had an occupancy index at the end of '24 for the full year of 113 compared to a transient occupancy index of 89 and 19 with a rate of 117 index compared to a 106.
Group, we also saw pickup not quite as much, but we went from 125 RevPAR to 119 split between occupancy and rates. So there, you're saying it absolutely increased our transient occupancy, a better transient customer at a higher rate, which resulted in very solid EBITDA growth.
In Long Beach, where Q4 was just the first quarter of true ramp, and we're starting to see that now. But when we look at our transient occupancy index in January compared to '22, which was which was a decent year before the renovation, we went from a 73 now to an 82 in January of this year, and our rate index has increased from 95 to 106, so we're starting to see that tradeoff now of being able to go after the higher rated Marriott customer.
It also helps to have a product for both DC and Long Beach that is superior to its competitive set. When we look at Orlando, Orlando has always been a fantastic group hotel. It has a lot of meeting space and a huge atrium that can serve as meeting space or feeding space also. And so we've always done very well there and because of its location in between the two parks, maybe not as strong on the transient side.
Now this year we do have a new park opening, 1.5, 2 miles away, which is much closer than the other parks. So now we're much more proximate, including being proximate to the convention center, so that should help the hotel and then if we look at that and we think that there is the ability to get a better transient customer at a better transient rate, then we will do what we've done in the past and work with our partners over at Marriott and try to figure out.
If there is a brand available, because remember it's not just what you want to do, it's also what's available in the market, and we would definitely look at that as far as tier observation, the '25 CapEx is definitely coming down back to normalized amount, so it's not in the plan for '25, but it could definitely be something that we're looking at exploring and maybe if it makes sense, maybe something for down the road.

Operator

Floris van Dijkum, Compass Point.

Floris van Dijkum

Hey, Bryan, thanks. I have a big picture question. You guys are a relatively easy company to understand because you've got 15 hotels. Your top 3 hotels generate over 50% of EBITDA. You're obviously -- and as I think we'll supplant your Boston hotel once it's stabilized.
As you think about your portfolio construction, ideally in three years' time, how do you see that concentration? Would you like to have fewer hotels that are more meaningful, or would you like to have more hotels or sort of diversify your income, or are you broadly pretty happy with what you have today?

Bryan Giglia

Morning, Floris. No, it's a very interesting question, and I think the way we look at the portfolio and one of our main focuses in our strategy is to recycle capital and 2024 was a challenging year to do that. We were able to pick our spot and early in the year, get a really good transaction done that we're very happy with and very happy with what it's going to look like for the next several years in San Antonio.
The year turned for the industry as the year moved on, and being a relatively smaller company with an incredible balance sheet and great liquidity, we're able to pivot really quickly and take advantage of opportunities and buy back our shares when that makes more sense than acquiring. And the transaction market at that time really was not -- there wasn't a lot happening other than maybe some very large transactions.
And I think as we saw the expectations at the beginning of the year and where things ended up at the end of the year, we're happy that we that we didn't try to stretch to a transaction because it would have been a mistake and chances are the earnings of the hotel would have been much lower at the end of the year than what we would have thought. And so we made the right capital allocation decision at that time.
In a more functioning transaction environment, which I think we are either getting to or we're rapidly approaching, I think the debt side of the world is very supportive of transactions. I think that there's some economic uncertainty that makes things a little bit more difficult, but I think that there's more alignment in operations this year. In that environment, we're going to want to churn a portion of our portfolio. We're going to want to take some wins and get returns on assets that we've invested in and that we're happy with.
And more importantly, our ability to value add going forward is going to be limited or would require major outlays that would take a lot of capital or take a lot of time or a lot of disruption which we have to be aware of with a portfolio our size. And so going forward, we would like to accelerate recycling capital, and if that -- I think that that means that we would be at a minimum the same size, but we have some very large assets and at the end of the day if we could take a large asset and turn it into two assets, then I think that gives us a little bit more mass which, helps take some of the concentration out of the portfolio, too.
At the end of the day though, we're not afraid of concentration, especially if it's in fantastic locations. So I think to answer your question, yes, we would want to recycle more, and that's something that we think we should be doing on an ongoing basis. And given the market and the cost of capital, that makes sense. That's what we'll look to do.

Floris van Dijkum

Thanks. Just perhaps a slight -- with that, you've obviously had the wildfires in Maui, you've had the strike in in San Diego. That probably makes those hotels less able to be recycled because they're both have depressed EBITDA levels relative to the peak. Should we view you as recycling other assets as a result of that later on this year?

Bryan Giglia

I mean, look, we are always in conversations. We're capital allocators, so we're always talking to people about different hotels in our portfolio and different hotels in their portfolio all the time. While Maui is on a recovery on the leisure side, Wailea has still has done very well, and EBITDA is still at or above 19 levels and maybe not as high as it was in '22, but we think we can get a path back to there.
That's a phenomenal and very valuable and very scarce piece of real estate. And so I think that the value of Wailea hotel stock is probably maybe a little bit less volatile than other things, so I wouldn't say that that would preclude. Maui is like, that's just -- it's still a very liquid asset.
San Diego will bounce back and we're giving the majority of that EBITDA back this year and it's a phenomenal location next to the convention center. It's a very efficient hotel. I think all of our hotels are always up for evaluation, and I don't see anything being off the table.

Floris van Dijkum

Thank you.

Operator

Patrick Scholes, Truist Securities.

Patrick Scholes

Just wanted to sneak a question in at the end here. What are you baking in to the midpoint of your guidance as far as total expense growth? Thank you.

Bryan Giglia

Very sneaky, Patrick. We've mentioned it before. For total expense growth, we're in the kind of 4%, 4.5% range, a little bit higher on the (technical difficulty) and then other big-ticket expenses, real estate taxes are easing a bit. Insurance, we have renewal halfway through the year, so we still get the benefit of that coming down from last year and our portfolio was pretty well located and it's done pretty well so we don't think that our renewal will be anything more than the average this year.
I think maybe utilities are a little bit higher, but I think when you mix all that together we're 4% to 4.5%.

Patrick Scholes

Okay, that was it. Thank you.

Operator

There are no further questions at this time. I will now turn the call back over to Bryan Giglia for final closing remarks. Please go ahead.

Bryan Giglia

We want to thank everyone for their time and interest in the company, and we look forward to meeting with many of you at upcoming conferences and many of you at the upcoming property tour of the Andaz Miami Beach, which we're very excited to show you. Thank you.

Operator

Ladies and gentlemen, that concludes your conference call. We thank you for participating and ask that you please disconnect your lines.