Greetings. And welcome to Pebblebrook Hotel Trust First Quarter Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Raymond Martz, Chief Financial Officer. Please go ahead.

Thank you, Brock. Good morning, everyone. And welcome to our first quarter 2017 earnings call and webcast. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer. But before we start, a quick reminder that many of our statements today are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties, as described in our 10-K for 2016 and our other SEC filings, and future results could differ materially from those implied by our comments. Forward-looking statements that we make today are effective only as of today, April 28, 2017, and we undertake no duty to update them later. You can find our SEC reports and our earnings release, which contain reconciliations of the non-GAAP financial measures we use on our website at pebblebrookhotels.com. Okay. So 2017 has begun as we expected and we have a lot to cover this morning. So let’s get started. Our first quarter performance was in line with our overall expectation. Same property RevPAR declined 2.9%, which was towards the upper end of our outlook of down 2.5% to down 4.5%. Our RevPAR decline was driven by a 3.4% reduction in occupancy, which was partly offset by a 0.5% increase in ADR. Our first quarter results, particularly our occupancy were significantly impacted by several ongoing renovations during the quarter, excluding the negative impact of the renovations at Revere Boston Common, Palomar, Beverly Hills and Tuscan Fisherman’s Wharf. Our RevPAR would have been 330 basis points better in the first quarter or a growth rate of 40 basis points. Our performance in the quarter was lead by Monica DC, which benefited from the inauguration and Women’s March in January, as well as more political activity in general. In addition, our Union Station Nashville Hotel generated strong results following…

Thanks, Ray. So, the most interesting thing about the start of 2017 is that it’s coming pretty much as expected. While there’s been a great deal of enthusiasm about the prospects for a much better economic environment due to the changes in government, we’ve yet to see any benefits in the travel industry. Most economic statistics have been improving since last fall, such as employment growth, corporate profits and consumer confidence. But other ones that also correlate with the travel industry such as business investment and airline employment have yet to improve. Assumingly see some improvements in these statistics, history tells us we should ultimately see improvements in travel demand, but nothing yet. For the quarter, industry demand was up 2.8%, a nice increase compared to Q4 and 2016’s 1.7%. However, it was nothing to get excited about, because the quarter’s numbers were enhanced by the inauguration and Women’s March in DC, and the movement of the holidays from March to April. Industry supply growth picked up to 1.9%, so with ADR increasing 2.5%, RevPAR grew 3.4%. If we remove Washington DC from the industry numbers, RevPAR growth would have been 36 basis points less for the industry or around 3% and the holiday shift also positively impacted Q1 and we’ll see that with weaker April numbers for the industry. Leisure travel continue to see healthy growth and business travel continue to be soft, but seemingly stable. For Pebblebrook, we had numerous headwinds in the quarter, all of which we are -- were previously communicated in detail. Our RevPAR decline of 2.9% was in the upper end of our outlook range. It was negatively impacted by the tough comparisons to a strong Q1 last year, which benefited from Super Bowl in San Francisco and Porter Ranch in LA, two issues…

Thank you, sir. [Operator Instructions] Our first question today comes from Rich Hightower of Evercore. Please go ahead.

Hey. Good morning, guys.

Good morning.

Good morning.

So, I want to talk about share repurchases, I think, that’s the biggest headlines from the quarter. Jon, it sounds like, I mean, you guys have talked about this for several quarters, it sounds like, you needed to see two things in order to execute on the repurchase authorization, you needed to see some stability in underlying trends, as well as, of course, the large discount to NAV, your view of NAV and versus where the shares are trading, if you could talk about those two elements and which one played a bigger role in the decision to execute this quarter, I think, that would be very interesting.

Sure. So, I mean, we have talked about this previously. I’d say that, clearly, the first one plays the more important role, which is the discount between the stock price and our view of our NAV, which we continue to prove out through sales at or above the range that our NAV has been calculated on. I think, the -- I don’t think we would have executed had we been in a worsening environment, but I am not sure I want to provide too much optimism that we saw some improvement in the operating environment. I think we didn’t see it get worse and we would view that as making us feel comfortable, more comfortable with the repurchases, but I don’t think it was a trigger factor, Rich.

Okay. Thanks. And then, I guess, a bigger point here. You’ve also made reference in the past on the share repurchase decision to your view of the cycle and where things are in a broader sense. Did that play a role here at all or we sort of putting aside what the next three-year to five-year outlook sort of looks like and it’s really just more of a point in time calculation it sounds like?

Well, I would say, there is no doubt that our plan, which involves the disposition of somewhere between now almost $600 million and $1 billion as much precipitated by where we are in the cycle and the fact that we are later in the cycle, yes. We are not predicting the cycle ends tomorrow or this year or next year, but we are late and therefore, when we look at risk and return, we feel much more comfortable in disposition mode taking advantage of what our continuing attractive valuations for our assets. And then, the added benefit is the ability to arbitrage the disconnect between the public markets, which don’t want to give us credit, I am sure for many different reasons, the underlying value of the assets and so we’re taking advantage of that by buying our stock back.

All right. Thanks, Jon.

The next question comes from Shaun Kelley of Bank of America. Please go ahead.

Hi. Good morning, guys, and thanks for taking my question. So, Jon, maybe to follow-up on the M&A side a little bit. And so, what we see now there from some other people is, in the lodging REIT spaces that they’re starting to look more proactively at acquisitions, you on the other hand to the last point are actually looking at buybacks relative to kind of where you think your portfolio is worth. So can you just tell us about what you’re seeing out there on the opportunity to purchase, and I mean, how those sort of -- it’s kind of implied, but how those line up with the value that you’re seeing in your own stock right now?

Yeah. So, I mean, we’re not in the acquisition mode. We’re not out there actively pursuing acquisitions. So we have a little less insight into one might be going on actively in the bid process for assets that are for sale. What I can tell you is, if you look at assets that have traded whether it’s The W in Hollywood. The two properties in Seattle, that LaSalle sold property, the property that Harsha bought in Seattle. You’re continuing to see in the major gateway markets, strong demand from multiple bidders at low cap rates and high price per key and high EBITDA multiple values. So that, at this point in the cycle, that’s why we find that attractive, and on that basis we’ve initiated sales. So, I think, compared to last year, Shaun, there’s probably, I mean, what we’ve been told and what we see, there is probably more buyers both from private equity and as you mentioned, the REITs, as well as foreign capital that continues to acquire in the U.S. and values have held up. I think there are fewer good quality assets on the market, which is a positive for our efforts to sell, but there is plenty of commodity product out there. So, those who are buying more typical branded managed properties, there’s a lot of choices.

Great. Thanks for that. And then, just as my follow-up, as we think a little bit about the RevPAR guidance, sticking with basically flat for the year, obviously, we now know sort of the expectation for the first half, its implying some sort of low single-digit growth in the second half. In your portfolio, can you help us just think through the plus and minuses in the second half with San Fran still being a drag, is that going to be the tailwind from renovations at property specific things or are there some markets that you’re looking for an uptick in?

Well, I mean, we have market share gains throughout the portfolio from the redevelopments that we’ve had in prior years and we expect that to be somewhere in the 100 basis point of 200 basis point range. That’s obviously stunted initially in the first and second quarters, but the worst being the biggest headwinds by the renovation impact, which is minimal in the second half of the year for us and was more substantial last year, so the comparisons are a little easier. And then, of course, we don’t have Super Bowl comparison, we don’t have Porter Ranch comparisons to deal with in the second half of the year and if you look at Q1 for us, and you take out all of the headwinds, you get to plus 300 basis point RevPAR growth in terms of what the rest of the portfolio is doing. So, I don’t think we have a more positive view of the economy or the industry or built into our numbers in the second half of the year. I think it’s more a function of the math and the specific headwinds and/or tailwinds that we have through the portfolio. As it relates to San Francisco, it does get better or less worse after Q2, which we think will be the worst quarter with May and June being the worst months of the year. We expect those months are likely double-digit negative in the market.

Thank you very much.

Sure.

The next question is from Stephen Grambling of Goldman Sachs. Please go ahead.

Hey. Good morning. Thanks for taking the question.

Sure.

Just on booking trends, I would just love to get your thoughts on your group of booking position for the remainder of the year, how 2018 is shaping up and maybe any color you have on cancellations or in the quarter trends, and how they evolve from 4Q to 1Q? Thanks.

Sure. So, I’ll take the really easy one first, which is cancellations. We haven’t seen any change in cancellations or attrition in the portfolio. It continues to be pretty small and isolated to pharmaceuticals that don’t have a drug or somebody have just changes their minds, maybe somebody is getting better or whatever and cancels a meeting. So we haven’t seen any change overall. No trend there that’s negative. No trend that’s positive. The second thing relates to our booking pace. We think it’s really important to look at group and transient together. I will give you both pieces, but we’re obviously down in group, particularly driven by San Francisco, which is a quarter of our portfolio. So for the remainder of the year, group room nights are down 6.5%. Transient room nights are up 16.2% and that -- some of that is strategy that’s taking crew, which is where we put crew in transient, international crew or it’s taking some tour groups like we did in San Francisco or it’s getting more transient on the books to build the base, that would have otherwise been there, had group been healthy in the markets. So in total rooms are up 4.4%. ADR is down. So group ADR is down 2.5%. Transient ADR is down 5.1%. Again that’s influenced by the crew business that we’ve taken and some -- and advanced transient that we put on the books at lower rates to get that base. Total ADR is down 3.5%. And then revenue in total is up 0.7% with group down 8.8% and transient up 10.3%, so...

That’s helpful. And maybe -- go ahead.

Yeah. So I was just going to say, it’s consistent with our outlook for the year of minus 1% to plus 1%.

That’s helpful. And then as a follow-up, maybe I think in past you’ve provided a supply outlook over the next couple of years, looking at your markets specifically, have you seen any change in that cadence or any other color you could provide there?

Yeah. So, that’s a good question, because this does -- it does move primarily because opening dates get pushed back, which is the trend we continue to see. So for us interestingly on a weighted market supply growth basis, I think we had talked about expecting to be around 2.9% or 3%. We’re now looking at 2.7% for our portfolio. We’re looking at 2.1% to 2.4% for the industry. So we’re a little bit higher in ‘17 but not as much as we were before. Now that’s pushing back some openings to later into ‘17 that impact ‘18, so right now weighted market supply for us for ‘18 is at 4%, which is up a little bit from where we were before and then it comes down in ‘19, right now we’re looking for it to be somewhere between 2.5% and 3%. So, it’s pretty consistent with what we think. Now, what’s going to happen, which as we think the industry is more likely to peak in the growth rate in ‘19, we think urban and our markets are likely to peak in ‘18.

That’s very helpful color. I’ll turn back in the queue. Thanks so much.

Thanks.

The next question comes from Wes Golladay of RBC Capital Markets. Please go ahead.

Hey. Good morning, guys. Now sticking kind of with the push out the hotel supply and you already mentioned that you might -- you had to go out to other markets to get labor for The Tuscan. Is there any risk that the Moscone convention renovation will be shut down a little longer than anticipated?

Well, there is all -- there is always risk for that, Wes. I mean the original plans of completing it in late ‘18 did not involve closing two to three buildings for two quarters. So they did that in reaction to the delays occurring in their construction work, which I don’t know how much of that was labor as much as it was that they, because they kept interrupting work for the -- to accommodate the business. I think it had, it was more difficult to get ramped up each time and yeah, maybe they lost first to other properties. I’m sure that was the case. But as a big public works project with probably the highest wages in the marketplace, I suspect they’re one of the first choice for labor in the marketplace. So it certainly could be delayed again. I tend to think they figured it out. But God knows we shouldn’t -- we should never depend upon the public sector to deliver on time.

Got you. And then we look at G&A for next year...

Hey. Hey, Wes.

Yeah.

Just -- and the thing I’d add, I mean, we’ve seen that in the bookings in the fourth quarter of ‘18 where some groups like AGU, which comes -- typically comes every year, but decided to leave for two years, ‘17 and ‘18. They didn’t want to take the chance. So while the centers supposed to be done before the fourth quarter starts, they made a decision as probably you would to go somewhere else and come back in ‘19.

Oh! Yeah. That makes sense to buy not a bigger deal. Now looking at G&A for your company, I know you might have some third-party costs associated with your large repositioning program. Can you comment on how much that could come down next year on G&A, now with the full year guidance just but the stuff that’s tied to your comprehensive renovation program because of that -- preopening, I guess.

Yeah. Some of the preopening, I don’t think it will be a significant number that just tend to pop around. We’ll have more preopening this year than because of the renovations and will go down. But if you figure, I mean, it’s less than $1 million. It’s not significant number, so pretty insignificant on an annual basis.

Okay. Thanks a lot guys.

The next question comes from Anthony Powell of Barclays. Please go ahead.

Hi. Good morning, everyone. The bulk of the asset sales have been in New York so far, now that you are done there. Do you have any other geographic goals in your asset sales program or do you expect sales to be more opportunistic?

Yeah. So, I mean, if we had more assets in New York, we will be selling more. But we don’t, I mean, we have sold in Miami, which was a great sale and frankly turns out in retrospectively great timing. We sold in Hollywood as well. We sold a piece of land in Boston. I mean, they’ll continue to be driven by our views of markets as well in the intermediate term, as well as if that’s different from our long-term view and it will be opportunistic as well. So, and I think, as we’ve indicated before there is -- again there is assets we look at, that are not hotel assets that ultimately we’d like to split off from the portfolio and sell.

Got it. Thanks. And then moving onto your customer mix, it seems that there is a growing mix of leisure in the hotels with corporate flat or down. Does that should give you any cost savings opportunities throughout your portfolio?

Not really, I mean, the business guest and the leisure guest, they cost about the same. And perhaps there is some minor -- actually if you go to leisure its likely your distribution costs are a little bit higher than what they are for the business customer. But otherwise, I mean, I think, that’s immaterial as is the shift Anthony. There isn’t any big shift. Leisure is a little bit stronger. It’s probably leading to little higher occupancies on the weekends, which just overall is helpful.

All right. That’s it from me. Thank you.

Thanks.

The next question is from Jeff Donnelly of Wells Fargo Securities. Please go ahead.

Good morning, guys. Just Jon, in San Francisco, as we’ve now kind of rolled into April and May, which were, I guess, considered to be some of the worst times, if you will, during the Moscone closing. I’m just curious what you’re seeing in the submarket performance within San Francisco. Has that played out as you’ve sort of thought?

Well, it’s a little noisy right now, Jeff, because there are -- on a relative basis there is a greater percentage of assets under renovation in the Wharf versus Union Square. So occupancies are down a little bit more because of lack of availability. But otherwise, I’d I tell you, the first quarter was -- but for Super Bowl a pretty decent quarter in San Francisco, while convention room nights room nights were down what 65,000 room nights, something like that…

In Q1.

… in Q1, a good bit of that was Super Bowl. So, the market overall performed pretty much in line, and I think, the submarkets performed in line with what we would expect. As we move into Q2 and Q3 where there is really a big difference, on a year-over-year basis, we would expect the Wharf to do better than the Union Square properties that we have as an example and that’s what we forecasted.

And is it your sense from the feedback you get in that market that those big group has, which are probably the source of future pricing power or pricing, I’ll call it wars or competitiveness. Do you think they have generated enough in-house group to kind of release some of that pressure or is it too difficult to tell?

I don’t think they generated enough, Jeff. So, I think, there will be pricing pressure and that’s what we’ve been forecasting, and that’s what we think we’ll begin to see particularly in May and June.

Okay. And...

And Jeff, the one thing I would say is, I mean, we’re almost through April, I would say April played out pretty much per our forecast in San Francisco.

That’s too slow. You’ve made several comments on this call about being a seller of assets, I’m just curious how do you sort of weigh that decision of selling assets and repurchasing shares versus putting incremental spending into renovation programs, do you see much spending in your future beyond 2017, I know there is always something to be doing, but I guess, I’m curious, do you think you’ll undertake more optional programs as we go forward?

Well, with the programs this year, we’re pretty much done with all the transformation and redevelopments envisioned when we bought all of the assets in the portfolio. So we’re really into the normal course for the most part -- most of what we’d be doing within the portfolio would be your typical five-year or seven-year soft good modifications in your guest rooms and in your lobby, et cetera, which are pretty non-disruptive and for -- in our case, probably, half or less the amount of capital going into the portfolio, so, fairly minimal disruption on an ongoing basis. So, none of it’s being impacted by this environment. The redevelopments as we’ve detailed in our presentation, investor presentation and in prior calls. I mean we’re typically underwriting to 10% to 15% stabilized EBITDA yields and we’ve -- as we’ve said before, we’ve continued to believe those are attractive, particularly considering the alternative of leaving properties in need of capital losing share because of it and the alternative gap being quite large.

Okay. Thanks. And just one last one, I’m curious, because you do weigh the sort of wholesale analysis on your assets. How do you guys think about EBITDA growth or even just asset value growth in the coming years as an input to those analyses? I know every asset is different, but I wasn’t sure if there was some broad stuff you could kind of share with us?

Well, theoretically cap rate should go up and values should come down as cycle ages, particularly in the latter part. My experience has been, we generally don’t see that, because of capital flows. Capital tends to get more generous as the cycle goes on. And so that’s what’s creating, what we think is these attractive opportunities to sell assets at values that probably don’t reflect asset performance over the following five years. Because I would have a hard time -- we would have a hard underwriting an acquisition and doing a five-year IRR, Jeff, without putting a recession in there. And if you put a recession, you’re not going to buy anything, which is basically where we are. So as it relates to our portfolio, I mean, it will vary by market, but we have a lot of tailwinds in the portfolio from the redevelopments and the share that we’re going to gain at -- throughout the portfolio with assets that have been redeveloped over the last few years including this year. So that’s clearly going to add to values, as well as EBITDA growth within the portfolio.

Okay. Thanks guys.

Your next question is from Jim Sullivan of BTIG. Please go ahead.

Thank you. Jon you gave us a great deal of granularity on the sources of comparative weakness in the portfolio in the first half of this year, obviously a lot of that will bounce back materially a year from today. And what I would like you to go into a little more detail on if you would, as you -- as the completion -- as the work gets completed at Moscone and I know that we have to put a quotation marks around that given the potential for delays and as we get near the end of that work, I’m just curious as you, if you could walk through the -- maybe the progression by quarter in ‘18 and by that, I mean, in the San Francisco market generally, in your portfolio, you’re going to have significant upside as given the completion of renovations. And then the Moscone Convention Center, I know doesn’t come along until the very end of the year in full in ‘19, looks great, but as you go through ‘18, it will be improving. So I wonder if you could just give us a little more detail as you think about that on a quarterly basis for ‘18?

Well, I think the thing to focus on in particular is that the negative impact this year from the items that are transitory and the numbers were ascribing to that. So when you look at San Francisco, I mean, we provided the impact in the first quarter related to both Super Bowl, which was holding back us and the market, as well as Tuscan, which had a very material impact overall in the portfolio. I mean Tuscan was about a 120 basis points for the whole portfolio. In Q2, it’s another 100 basis points for the portfolio and for Q2 for Moscone, we’ve ascribed about 250 basis points to the impact for us overall and for Q3 we think it’s in the same range maybe marginally less in Q3. So those are pretty big numbers. That’s the impact on our portfolio not on our San Francisco RevPAR. And when you add to that, the ramp up of Zeppelin, the continuing ramp up of Zephyr, the ramp up of Tuscan, that should -- those not only should get back to neutral, they should be additive overall for the portfolio.

Now in terms of the Moscone in 2018, you’ve talked about Q2 and Q3 ‘17 is being the worst quarters and the work, in full not being completed in the Q4. But over the course of say Q2 and Q3 in ‘18, what details if any can you provide in terms of what part of the Moscone comes back on and the impact it will have on convention bookings generally?

Sure. So I mean when we look at the year, which is I think it’s up 75,000 rooms or something, it’s actually down in the first quarter and slightly it’s down 40,000 rooms, it’s down or is that flat, Ray in Q4?

It was down also in Q4.

Yeah. Down a little bit in Q4, up in Q2 and Q3 significantly, 50,000 plus in each of Q2 and Q3, which obviously aligns with the fact that those buildings, while still being renovated, they will not be closed or at least that’s the plan right now, they won’t be closed. So Q1 is the more difficult comparison. Although I can tell you that, JPMorgan healthcare punches lay above its weight and right now it looks like it’s going to be even bigger with higher rates again in January of next year. So my sense census is that the more challenging quarter of all is probably Q4 and maybe they can book into that, if they really look like they’re going to be done. I doubt it will be anything from the city-wide perspective but might be some small business.

Okay. And then final question for me, just in terms of any additional dispositions, you’ve clearly been kind of doubling down on your bet on the West Coast, and I think, it’s fair to say, you have a lot of confidence in those markets going forward on in medium to long-term basis. And can you tell us -- are you considering selling any assets on the West Coast?

Yeah. I mean, we would consider selling anything that we have, Jim. So certainly from an opportunistic perspective, everything is on the table. From an actual voluntary initiative, I would say, what we would choose to sell would be -- would include some assets on the West Coast but would be much more limited.

Okay. Very good. Thank you.

The next question is from Bill Crow of Raymond James. Please go ahead.

Good morning, guys. Wrapping the couple of topics together, Jon, you noted that you don’t have any hotels left with the redevelopment opportunities, you’ve got a stabilized portfolio, which is kind of unlike you and your value driven approach through the year. So I’m just curious whether that causes you to get more aggressive with asset sales, when do you would stop selling assets? You talked about more buyers than sellers, few quality assets out there, the pricing is still so high, you’re still selling, trading in at a big discount to NAV. So where do you hit the stop button and do you really want to manage a company with no big redevelopment opportunities left?

Yeah. So as it relates to the redevelopment side, yeah. I mean, kind of I’ve never had a problem. We’ve had plenty of periods during the cycle while I was at LaSalle where we weren’t buying and we weren’t redeveloping within the portfolio. That’s just part of the cyclical discipline that we found to be helpful over the course of my career in the hotel business. And as it relates to the size, I mean, we’ve talked in the past about, there is a size where we would get too small, both frankly for G&A load, as well as, perhaps, from an investment perspective. I don’t -- on an equity market value basis. I think it has more to do with the equity market value than it does the enterprise value or the number of assets. So, part of this plan is intended to create value for the shareholders that ultimately gets attributed into the stock price, which would maintain or increase the equity market value even to the extent that we sell assets. So I don’t think we have any problem at part -- during parts of the cycle to be disciplined and patient and run the business for multiple cycles, which is what a public company has been created for.

Okay. And finally from me, Jon, is it fair to say that given your desire to get debt-to-EBITDA down below 4, that any future share repurchases are going to be dependent upon additional asset dispositions, is that fair?

Yeah. I think that’s fair. We’ve said we don’t -- we want to maintain debt-to-EBITDA below 4 and any stock repurchases would be out of proceeds and would be on a leverage neutral basis.

Great. That’s it from me. Thank you.

Thanks, Bill.

The next question is from Lukas Hartwich of Green Street Advisors. Please go ahead.

Thanks. So corporate profits are growing again, I’m just curious, if you’re hearing anything different in terms of tone or conversations you’re having with your corporate customers?

Yeah. Not really. They seem a little happier, particularly the financial services folks, the banks, but we haven’t seen them travelling more and they certainly haven’t changed policies at this point in time. So while everybody seems happier because their stock portfolios are doing better and their underlying companies are making more money, it hasn’t translated into increased travel yet.

That’s helpful. And I guess over your career, you’ve probably seen a handful of this kind of cyclical points in the cycle and I’m just curious is this normal, do you expect a certain lag until you expect to see corporate customers start to translate that optimism into more booking activity?

Yeah. So, historically, it’s funny at different points of the cycle, we’ve been a lagging indicator and we’re a leading indicator. I mean I think coming out of downturn, we tend to be a leading indicator, right. People get back on the road to generate activity when they feel a little more confidence and then the actual improvement in the economy comes about. I think late in the cycle, we tend to be a follower and driven more by the ongoing economic trend. So, historically, we would say, there is a two quarter to three quarter maybe four quarter lag, when you’ve gone through a profit recession -- when -- but before businesses gain enough confidence to get more active in both travel and spending more money. And I think the business investment side is a good indicator of where -- the lack of improvement in travel. We haven’t seen an improvement in business investment. And if there was that increased confidence in growth, it would be coming through there and it would be coming through on business travel. So, I think, if we see an uptick in that we would be even more encouraged, which is in accordance with the comments we made earlier.

Great. And then, RevPAR, it sounds like would have been flattish without the renovations. Do you have what that number would be without the impact from Super Bowl, Porter Ranch that kind of the one-time event?

Yeah. I think the total was 620 basis points.

Yeah. 620 basis points.

Okay. Great. That’s it from me. Thanks guys.

Thanks, Lukas.

[Operator Instructions] Our next question comes from Tyler Batory of Janney Capital Markets. Please go ahead.

Great. Thanks for taking my question. So big picture Jon, I mean, when you look at the underperformance of the urban markets, really the upper-upscale hotels as well across the industry, obviously a variety of issues driving that. Have you noticed any shift of consumer preferences maybe towards select service properties and maybe away from the core downtime markets. And then when you look ahead, is your expectation that urban upper upscale will start to outperform again once the supply peaks so maybe not until after 2018?

Yeah. So, good question, Tyler. There are a lot of variables. So, it’s hard to have an opinion about how they all come together, but these are the ones we’d be focused on and that would influence urban outperforming again. One is clearly business travel. It has a bigger impact on the major cities, the urban markets than it does on the suburban markets, which are more dominated by leisure travel than the urban markets are. Number two, the dollar, global travel -- global growth. And we have to introduce a second variable here into the equation for international travel beyond the dollar and global growth, which is -- what are we doing here in the United States from a policy perspective on inbound travel of visas and immigration. And are we creating a positive environment, which was done in the last 10 years to encourage and be welcoming or are we going to -- are we creating a negative vibe, an environment where, since 80% of travel on a global basis is discretionary, people outside of the U.S. can choose to go somewhere else if they think it’s a hassle to come to the United States. So and if they think we don’t want them. So that’s an additional variable into the equation and obviously international travel is a bigger impact on the urban and major gateway markets than it is on the suburban and the secondary markets. The other question and so those are the big variables for urban, outside of supply, which as I indicated and you repeated, we do believe that urban supply on a relative basis becomes more positive in ‘19 versus ‘18 across the country, obviously, it’s different by market. As it relates to consumer trends, we’ve always found that new. We’ll displace some customers who’ve been going to old, whether it’s new full service or new select service. And I think the introduction of select service into the urban markets, which has accelerated over the last five years. It gives customers more choices, where full service in many cases providing a restaurant isn’t that important to the customer, because there is 200 restaurants within five blocks. So I don’t think that negatively impacts the urban trend. I think it will negatively impact properties that don’t maintain themselves in the market in order to compete with new product, whether it’s select service or it’s full service.

Great.

And I don’t think we’ve seen any shift from the urban core to suburban markets, any city will have movement within the urban market to pull neighborhood, cities evolve, they get gentrified and you get restaurants and retail and residential in new neighborhoods, and yes, there will be people if a hotel is build, who will stay in those, like they would stay in the urban core if you will.

Okay. Very helpful. Thanks for the detail.

Yeah.

Ladies and gentlemen, we have reached the end of the question-and-answer session. I would like to turn the call back over to Jon Bortz for closing remarks.

Thank you all for participating. We look forward in 90 days to give you an update and hopefully some more positive news as it relates to trends. Thank you.

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