Greetings, and welcome to the Pebblebrook Hotel Trust Fourth Quarter Earnings Call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone requires operator assistance during the conference, as a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, Co-President and Chief Financial Officer. Thank you. You may begin.

Thank you, Donna, and good morning, everyone. Welcome to our fourth quarter and full year 2024 earnings call. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer, and Thomas C. Fisher, our Co-President and Chief Investment Officer. Before we begin, I'd like to remind everyone that today's comments are effective only for today, February 27, 2025, and our comments may include forward-looking statements, which are subject to risks and uncertainties. Please refer to our SEC filings for a thorough discussion of these risk factors and visit our website for detailed reconciliations of any non-GAAP financial measures. During the call, we have a lot to cover this morning, so let's dive right into our financial results. We are pleased to report that our fourth quarter and year-end 2024 results significantly outperformed our outlook, driven by strong performance from our resort portfolio and continued momentum at our recently redeveloped properties. For the full year, same-property total RevPAR increased 2.1%, driven by gains across both urban and resort properties along with stronger out-of-room spending. Adjusted EBITDA rose 0.8% to $352 to $359.2 million, exceeding the midpoint of our outlook by $11.2 million. Adjusted FFO per diluted share grew 5% to $1.68, surpassing our outlook midpoint by $0.09. Focusing on the fourth quarter, same-property total RevPAR increased 1.8%, propelled by 4% growth at our resorts and 0.7% increases at our urban hotels. These results include a 190 basis point negative impact from two named storms in Florida and the brand conversion and renovation at our Hyatt Centric in Santa Monica. Excluding these disruptions, same-property total RevPAR growth for the fourth quarter would have been closer to 3.7%. Adjusted EBITDA for the quarter reached $62.7 million, exceeding our expectations due to stronger hotel performance, particularly at our California resorts and our recently redeveloped properties. Results also benefited from $5.4 million in business interruption proceeds from the final insurance settlement for Hurricane Ian. These BI proceeds were not assumed in our prior outlook. Portfolio-wide increases in business group, corporate transient, and leisure demand fueled our growth in Q4. Same-property resort occupancy jumped 3.7% to 65% despite storm-related impacts in Florida. Weekday occupancy surged 4.4 points, reflecting the continued rebound in business group demand, while weekend occupancy increased a healthy 2 points on improving leisure travel. Our California resorts led the way, with occupancy gaining 6.6 percentage points and RevPAR climbing 8.8%. We are very pleased to see that this momentum in both group demand and leisure at our resorts is carrying into 2025. The key driver of this encouraging growth was a 15% increase in business group demand at our resorts. While business groups often book at lower ADR than weekend leisure travelers, their total revenue contribution, particularly in food and beverage, which grew 7% in Q4, plays a vital role in driving EBITDA growth. This growing mix of business groups drives increased profitability across our resort portfolio.

At our urban properties in Q4, occupancy rose 2.9 percentage points to 68.1%, supported by solid group and transient demand growth, plus improving weekend leisure business similar to what we saw at our resorts. For the full year, resort occupancy gained 2.9 percentage points to 69.9%, led by a 4.4-point increase at our California resorts. Our urban occupancy rose 2.6 points to 71.3%. Notably, San Diego, our second-largest market by EBITDA, climbed 6.9 points, while San Francisco and Chicago each improved 2.8 points. Boston, our largest market, gained 2.4 points. Portland also began showing signs of recovery, gaining 1.6 points for the year. Notably, in the second half of the year, our two downtown Portland properties experienced an average occupancy increase of more than 9 points. Same-property resort revenue grew 4.3% in Q4, despite the storm-related disruptions, outpacing the 0.7% growth at our urban properties. Urban performance remained constrained by the ongoing headwinds in San Francisco, Los Angeles, and Portland. Excluding these three markets, same-property urban RevPAR for Q4 and same-property total revenues would have increased 5.7%. For the full year, resort total revenues rose 1.2%, while urban properties posted a 3.1% gain. However, adjusting for the challenges in San Francisco, LA, and Portland, same-property urban total revenue growth would have been a robust 7.7%, underscoring the strength of our portfolio outside these lagging markets. Looking ahead to 2025, we believe the normalization of resort rates has largely run its course. After a 9.3% decline in 2023 and a 4.7% decline in 2024, resort rates remained 33% above 2019, and we do not expect any further meaningful rate declines at our resorts this year. Same-property non-room revenues also remained healthy, increasing 3.4% in Q4 and 3.3% for the full year. Food and beverage revenues alone grew 4.1% in Q4 and 3.5% for the year, reflecting continued strong out-of-room spending by both business and leisure travelers, supported by increased business group demand. Our redeveloped properties completed in 2023, including Hilton Gaslamp, Margaritaville Gaslamp, Southernmost Resort, Jekyll Island Club Resort, and Viceroy Santa Monica, delivered strong results. Q4 occupancy for these properties rose 4.7 percentage points, RevPAR increased 3.8%, and market share expanded by 274 basis points. For the full year, these properties saw a 10.7-point occupancy gain, an 11.3% RevPAR surge, and EBITDA growth of over 20%, delivering an impressive 1,100 basis point market share gain.

Turning to market segmentation, Q4 group room nights rose 2.8%, while transient room nights grew 5.6%, with group representing about 26% of total room revenue. Group mix rose 60 basis points year-over-year for the full year to 25.6%, primarily reflecting stronger business group demand trends at both our resorts and urban properties. Our intense focus on operational efficiencies and cost controls resulted in a same-property hotel expense increase before fixed costs of just 3.1% in Q4. While same-property occupancy increased 4.8%, we lowered our cost per occupied room by 1.7%. Same-property hotel EBITDA for Q4 was $4 million below Q4 2023, reflecting several one-time costs from the new labor agreements in several urban markets, along with the impact of the Florida storms, the Hyatt Centric brand conversion, and renovation. Excluding these factors, hotel EBITDA would have increased year-over-year. For the full year, same-property expenses before fixed costs grew by just 2.7%. On a per-occupied room basis, hotel expenses declined by 1.5%. As a result, same-property hotel EBITDA exceeded 2023 by $3 million. Our relentless focus on operating efficiency is key to mitigating wage pressures and other inflationary cost pressures. Please note that in 2024, we received about $10 million in real estate tax and municipal tax credits. Additional real estate tax credits are not assumed in our 2025 outlook, creating a roughly 100 basis point headwind to our 2025 expense growth rate. While we remain optimistic about securing additional tax credits through ongoing appeals, the timing remains uncertain and unpredictable.

On the capital investment front, we invested $91 million in 2024, marking the completion of our multiyear $525 million portfolio-wide redevelopment program. Early returns from these recent investments have been extremely encouraging. Jon will discuss some of these during his remarks. In 2025, our capital investments are projected at $65 million to $75 million, reflecting our portfolio's excellent condition and reduced need for additional capital. We expect a similar capital investment level in 2026, excluding the potential of Paradise Point Resort redevelopment and conversion in San Diego into a Margaritaville Resort, which remains in the review and approval process with the California Coastal Commission. At LaPlaya Beach Resort, we made tremendous progress in repairing and restoring the resort following Hurricanes Elaine and Milton. The pool complex opened in December, and the upper floors of the 79-room beach house opened in mid-January. The remaining 20 ground floor guest rooms are expected to be substantially completed in Q2 2025, pending regulatory approval and supply chain timelines. All repair and restoration costs are covered by insurance, net of deductibles. It's worth pointing out that we made significant improvements as part of the rebuilding of LaPlaya following Hurricane Ian to significantly strengthen the property against future storms. In the aftermath of Hurricanes Elaine and Milton, we experienced reduced downtime, far less damage, and a much more efficient restoration process. Building on this success, we plan to make additional upgrades this year to further fortify LaPlaya and enhance its resilience against future storms. Looking ahead to 2025, BI proceeds from the recent Hurricanes Elaine and Milton will be substantially lower than those received for Hurricane Ian, creating an earnings headwind. For context, in 2024, LaPlaya generated $19 million in hotel EBITDA plus $23.8 million in BI proceeds, totaling $42.8 million in adjusted EBITDA. Our 2025…

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, which 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 at many of our recently redeveloped and repositioned properties, where we've invested over half a billion dollars 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 remerchandising 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…

We do ask that you please limit yourself to one question. Again, that's star one to register a question at this time. Today's first question is coming from Dori Kesten of Wells Fargo. Please go ahead.

Thanks. Good morning, guys. Can you dig into your expectations for the outsized out-of-room spend growth in 2025 and just, you know, 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.

Sure. I mean, we, of course, as 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 and 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.

Okay. Thank you. The next question is coming from Duane Pfennigwerth of Evercore ISI. Please go ahead.

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?

Well, a lot of us know a lot of people who work for the government here, and I'd say that the general emotional mode 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, you know, 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 the 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, you know, 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, very active, and in a year that is the 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 sort of 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…

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

Thank you.

Thanks, Duane.

Thank you. The next question is coming from Jay Kornreich of Wedbush Securities. Please go ahead.

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

Yeah. I mean, through our thirteen 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, you know, up a little, down a little territory. So I think right now our expectation is, you know, 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. 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.

Okay. I appreciate that. And then just one other, you know, looking for the intel in Los Angeles and the impact it had on the portfolio, which you outlined in guidance. Do you feel like that's, you know, properly derisked, 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 out again with social relief customers, is there opportunity for, you know, upside in that market?

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 and how we think the impact's gonna 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, the financial industry, in the tech industry, and, you know, 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, you know, sometime in March, in some cases in April, for their return of regular travel. So, and that's for both group and leisure. I mean, originally, we saw a recording in the music industry that was put on hold. We saw hesitancy around some of the awards shows. We saw, you know, this sort of continuing safety…

Yeah. Very helpful. Thanks for all the color.

Sure.

Thank you. The next question is coming from Michael Bellisario of Baird. Please go ahead.

Good morning, everyone. John, just first question for you. Just on some of the expense cuts and efficiencies, is there maybe a dollar amount for 2024 that you think you achieved? And then could you provide us with some more sort of on-property examples of things you've done or plan to do in 2025?

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, you know, 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. Part of it is just being efficient using appropriate labor management technology that exists. But it's, you know, if you put garbage in, you get garbage out. So making sure everyone in the properties 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 want to mention.

Yeah. Look, Mike, as John indicated, there's many things. It's not just one or two things, but I think what's great, I think our hotel teams or asset managers know with the expenses that have increased 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 efficiencies, different staffing plans, different use of labor, and technology that, really frankly wasn't available, you know, four or five years ago. So we're really encouraged. We don't want to share all of our secret sauce here because that's what I think what we can do a little differently. And also, and we alluded to this in the script, the curator program is really helpful to us, but they can do a lot of R&D and research. They found quite plenty of programs that don't work, and you kick those out, but they find ones that do work. That allows us, while our asset managers focus on properties, we have another team that's focused on these areas. So feel really good about it, and we can expect to have more savings and efficiencies in 2025 and beyond. And I think one of the things that's helpful for us is with twelve or thirteen different operators, we see twelve or thirteen 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 offer 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.

Understood. That's helpful. And then just follow-up for me on an unrelated topic, but on the disposition front, what's 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 ask that in the context of your short-term incentives for 2025 that dispositions are at the top of the list. Thanks.

Yeah, Mike. This is Tom. Good morning. Listen. We're gonna continue to be opportunistic. And if it makes sense, I mean, obviously, the transaction market, you know, had kind of the same continuation from late 2023 into 2024 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 debt sounded explained. With more players, more availability, you know, better pricing. 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 kinda heard today, you know, 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, you know, industry demand with GDP, you know, certainly over the fourth quarter last year and into the first quarter this year, I think people are gonna take notice of that and become more active and more bullish. The question is gonna be to the other point is, you know, maybe some of the uncertainty around some of the administration policies is that gonna slow things down for another thirty, sixty, or ninety days? So listen. We're gonna continue to be active, continue to have a number of discussions, and you'll, you know, when we have something to announce, we'll certainly announce it.

Understood. Thank you.

Thanks, Mike.

Thank you. The next question is coming from Gregory Miller of Trellis Securities. Please go ahead.

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 citywides? 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.

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, you know, the trough in maybe for the city, although I could argue that the trough from a quality of life perspective was probably 2021 or 2022. But because I think things have gotten 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 eighty years in San Francisco that passed in the last election. And if you look at some of the other categories, we 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…

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 gonna end up double digits up, but it is supportive of a strong convention calendar or return 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, swap positive momentum to support our confidence. And that's group and transient. Yep. It's not just group.

I appreciate the thorough response from you both. Thanks.

Sure. Thanks, Greg.

Thank you. The next question is coming from Ari Klein of BMO Capital Markets. Please go ahead.

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

Sure. So I think, you know, LA's what, 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 gonna 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'll be extremely helpful on top of the significant additional demand that's gonna 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'll 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 2019. 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.

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, you know, maybe more near-term optimism on San Francisco and that would hurt it.

Yeah. I mean, I think it's maybe a little bit more predictable in San Francisco right now. Although, if you ask anybody, you know, six months ago, nobody would have said that. So it's a fairly small amount of time. You know, we dropped 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, you know, if we were a buyer, 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 gonna see that both of those markets have been written down very significantly to today's values.

Okay. Thanks, Ari. Now, maybe the next question?

Sure. The next question is coming from Floris van Dijkum with Compass Point. Please go ahead.

Morning, guys. My question to you, obviously, you had another, you know, gut punch here in LA with the fires. You put out a bridge that basically tells you that, you know, you think you're gonna 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?

Sure. So, Floris, I think, you know, the base need is for continued economic consistent economic growth. I think if we live in an economy with a couple of percent plus of GDP growth, we're gonna see, you know, 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 gonna see rates rise. And that can happen very quickly. They can accelerate very, very quickly. As demand grows and revenue managers and owners and operators become much more confident in the demand environment. So, you know, 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 2027 and 2028. So in our view, it's not a matter of if, it is a matter of when. But, you know, when does matter because expenses keep growing every year. So we've gotta grow revenues faster, and then there's a huge amount of operating leverage in the business, and in our case, we have, you know, 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, you know, three years or so. And it's really based upon a need for continued economic growth environment.

Okay, Sean.

Thank you. Our final question today is going to be coming from Chris Darling of Green Street. Please go ahead.

Hey. Thanks. Good morning. John, 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, you know, 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, you know, much superior relative to some of your, you know, West Coast markets.

Yeah. So we're gonna flip your multi-question around the room, but I'll start. And as it relates to what will we do with the capital, you know, 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 respectively, 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.

Yeah. And, Chris, as it relates to the convert, so we provided an updated slide in our new investor presentation on the balance sheet. Just provide a little more color into some ways what we're thinking about addressing that. So look, in addition to potentially the dispositions and the proceeds from that, we have right now, just as a reminder, over $200 million of cash. Our free cash flow, and 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 know, you're looking at $400 million plus or minus of available cash. That really brings the potential refinancing of the convert down to that, you know, $350, $400 million range. 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 gonna look at what's best at the time. What's hardest for us right now is the convert has a really, really good coupon right now, 1.75%. It's hard to beat that anywhere. So we like to hold on and take advantage of that. It's because it's showing up to our cash flow, but not something that we are overly concerned about. Again, you've seen the improvements in the portfolio in the last couple of years, how much leverage down. In our excess other sources of debt. So it's not something that we think is a huge concern. You should be worried about, but at least we provide all the options and some good road map there in our investor deck.

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

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

Yeah. We continue to discuss internally, you know, 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 of 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, you know, the value might be greater yesterday, but if someone's willing to think about that and pay us today, that's something we can evaluate.

Understood. Appreciate the time. Thank you.

Thank you, Chris.

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

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 sixty days. So thanks again.

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