Good morning and welcome to Xenia Hotels & Resorts, Inc. First Quarter Earnings Conference Call and Webcast. All participants will be in listen-only mode. [Operator Instructions] After today's presentation, there will be an opportunity to ask questions. [Operator Instructions] Please note this event is being recorded. I would now like to turn the conference over to Ms. Lisa Ramey, Vice President, Finance. Please go ahead, ma'am.

Thank you, Keith. Good morning everyone and welcome to the first quarter 2016 earnings call and Webcast for Xenia Hotels & Resorts. I'm here with Marcel Verbaas, our President and Chief Executive Officer; Atish Shah, our Chief Financial Officer; and Barry Bloom, our Chief Operating Officer. Marcel will begin with an update on some of our recent initiatives followed by a discussion of our first quarter results and some recent capital investment activities. Atish will follow with additional details on our operating performance, recent capital markets activity, an update on our balance sheet and discussion in order to provide 2016 guidance. Barry will conclude our remarks with more information on our market performance. We will then open up the call for Q&A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties, as described in our annual report on form 10-K and other SEC filings, which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued earlier this morning, along with comments on this call, are made only as of today, May 11, 2016, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of non-GAAP financial measures referred to in our remarks in this morning's earnings release. An archive of this call will be available on our Web-site for 90 days. With that, I'll turn it over to Marcel to get started.

Thank you, Lisa, and thank you everyone for joining our first quarter call. I'd like to begin by welcoming Atish Shah, our new Chief Financial Officer, who joined us in April and brings a depth of experience to our executive team. We are excited to have Atish on our team, and Barry and I look forward to working closely with him as we continue to execute on our strategic plans. We are extremely pleased with the progress we have made on many initiatives that we have previously outlined, and we believe that the addition of Atish is another positive step in our evolution. We continue to be focused on smart capital allocation. During 2016, we have executed well on many fronts. We have been active in dispositions, acquired a great hotel in Boston, repurchased over $55 million of our stock and increased our dividend by 20%. Our dividend yield is now approximately 7%. Let me now discuss our recent disposition activity. Since October, we have sold four hotels. We sold these assets for a total price of $258 million. This price represents a combined multiple of 11.7x 2015 EBITDA. The weighted average RevPAR of these hotels was approximately 20% below the remainder of our portfolio. The EBITDA per key was more than 35% below the remainder of our portfolio. Each disposition has been consistent with our previously announced plan to selectively dispose off and harvest value from lower quality assets in the portfolio that no longer fit our target criteria. Additionally, each would have required significant near-term capital investments, which we did not believe to be a prudent use of our capital. Instead, we've chosen to monetize these assets and strengthen our balance sheet and aggressively repurchase shares as we believe we trade at a compelling value. We believe each…

Great. Thanks, Marcel, and good morning. I'm delighted to be a part of the Xenia team and look forward to helping lead the Company in the months and years ahead. I've known Marcel for over a decade and I'm excited to now be working with him. Barry and I first met each other about 20 years ago here in Orlando and I got to know him better over the last five years. I look forward to partnering with him and growing our business as well. I'd like to cover four topics during my prepared remarks. First, I will expand on the market color that Marcel provided. Second, I will summarize our quarterly financial results. Third, I will discuss our balance sheet and capital allocation. And lastly, I will provide our outlook for the full year. Turning to my first topic, during the first quarter RevPAR results came in generally as expected. RevPAR grew in each of January and February but declined in March. Overall, top line results were in line with our internal expectations. In terms of market performance, our California hotels led the way. Our hotels in San Diego and Santa Clara, each had strong RevPAR growth. RevPAR for these hotels increased approximately 14% and 8% respectively. And our hotel at SFO, the Marriott SFO, continues to ramp up post renovation and repositioning. RevPAR increased over 50% as it was helped by an easier comparison to last year. On the weaker end of our portfolio were our hotels located in Houston. At these hotels, RevPAR declined over 13%. We had a few other markets which also had a weak quarter, including Chicago, Denver, Pittsburgh and Fort Worth. The combination of the shift in the timing of Easter, lower city-wide convention demand and some pockets of new supply affected hotels…

Thanks Atish. It's great having you onboard. As both Marcel and Atish indicated, I'll be providing further detail and insight into our market and property level performance in the first quarter. All of the portfolio information I'll be speaking about is reported on a same-store basis for 47 hotels this quarter. Overall, 15 of our 31 markets had positive RevPAR growth including San Francisco, Santa Clara, San Diego, Philadelphia, Washington DC, Orlando, Atlanta, Honolulu, Baltimore and Dallas. In Boston, we are pleased with the 96 room expansion of the Hotel Commonwealth [indiscernible] received in the market with outstanding room [indiscernible] and meeting space, and the hotel is outperforming our expectations. Our two recently developed projects in Charleston, South Carolina and Mountain Brook, Alabama are well underway with their ramp-ups and are performing quite well within their competitive markets. While 16 of our markets experienced RevPAR declines, our portfolio overall gained nearly 3 points of market share relative to their respective competitive sets, [indiscernible] the strength of our properties within their markets even during periods of relative weakness. Our markets that were particularly challenged include Pittsburgh, Houston, Charleston, West Virginia, Fort Worth, Denver, Chicago and St. Louis. It is important to again note that January and February performed closely in line with our expectations, up 3.3% and 2.3% respectively. But most of the challenges occurring in March drove RevPAR down 2.3% primarily due to timing of Easter and softer group business. As noted, April was a particularly strong month with RevPAR growth of approximately 5%. The magnitude of the RevPAR declines in a number of our markets put pressure on hotel EBITDA margins for the quarter, with declines in March erasing positive margin expansion we achieved in January and February. Looking at the quarter, there were two primary factors that led…

[Operator Instructions] The first question comes from Thomas Allen with Morgan Stanley.

Your April RevPAR of [indiscernible] was obviously a good acceleration. Can you just help us think about the seasonality throughout the year, talk about May and June and then maybe some of the seasonality the third versus the fourth quarter would be helpful too?

This is Marcel. As we noted in our call, obviously the first quarter is kind of the seasonally weakest quarter for us in our portfolio and that's why on our last call we clearly talked about our expectation for Q1 as it related to the rest of the year. As it relates to the remainder of the year, we are off to obviously a strong start in April. And when we look at kind of throughout the year, we look at relatively balanced performance for the rest of the year frankly. We are seeing some easier comparisons in Houston that we talked about later in the year, particularly because our assets in Houston held up particularly well in the early part of last year and we really didn't start seeing the falloff until later in the year. So those comparisons will get a little bit easier. But obviously we had a little bit of tailwinds in the first quarter that I talked about as it related to what we are seeing from our Northern California assets. So in general, long-winded answer but relatively balanced for the remainder of the year.

That's helpful. And then moving on to Houston, if I remember correctly, I tracked down your second, third and fourth quarter 2015 RevPAR growth, but can you remind us what your first quarter 2015 RevPAR growth was? And then just in terms of the performance of that market, how you're thinking about Woodlands versus Galleria? Woodlands obviously has new supply coming to the market. So, on your 9% to 13% guidance for the year and your 13% performance in the first quarter, can you just talk a little bit about Woodlands versus Galleria?

Sure. When you asked about Q1, were you asking for portfolio overall or…

No, just Houston in 1Q 2015.

We can look that up. I don't have that right on my fingertips right now frankly. Like I said, just kind of directionally, our first quarter held up pretty well for both assets. And I think I've spoken about this before that the Woodlands actually held up fairly well throughout the year last year. The Galleria market actually held up for us pretty well in the first part of last year, particularly in Q1, and we didn't start seeing the effect of really what was going on in that market as we started entering Q2 and the remainder of the year. So we were in Q1, just looking at this now, we were actually fairly flat last year and didn't really start seeing the drop-offs until later in the year. So when we think about, you asked about kind of the difference between Galleria and Woodlands, and why don't I turn it over to Barry and Barry can speak about it in a little bit more detail.

Sure. Thanks Marcel. As you know, we've had the opportunity to increase group particularly at the Oaks in Galleria, and it's been a part of our strategy really from the time we acquired the hotel. We are still trying – so we expect overall, over the course of the entire year, we expect Galleria to somewhat outperform the Woodlands. At the Woodlands, we're learning every day about the impact of the new competition, really how to address it. Obviously we knew about it, but as we move into the year and we see how they are adjusting rate strategies day by day, what they are doing to garner business, it's been I think as challenging as we thought it would be. But overall for the year, I think our expectation continues to be that Galleria for us will not have as severe decline as Woodlands, although they are relatively close to each other.

The next question comes from Jeff Donnelly with Wells Fargo.

I got on a little late, so I apologize if I missed this in your remarks, but Marcel, just I guess maybe specifically on dispositions, at this point with Houston, is your preference to really kind of ride out that target and look for better days down the road or would you at some point contemplate selling assets in that market?

Specifically to Houston, our view of our assets particularly in that market is that we are relocated into two best submarkets that you can be in, in that market. Being in the Woodlands and being in the Galleria we think longer-term are the right places to be in that market and we like our assets a lot within those specific markets. And we've spoken a little bit before about what our view is for the Galleria assets particularly where we're going to take advantage of some of the lower levels of business that we currently have there and accelerate the renovation a bit from what our previous plans were. So that's why we spoke about doing the Galleria later this year, and then followed by the Oaks building the following year. So our current view of that is that at some point, and hopefully sooner rather than later, but it's obviously tough to forecast, that Houston will become a tailwind for our portfolio. So we don't think that as we sit here today, that's an exit of the market today, the kind of valuations you would get in the market today would be the right approach and we think that longer-term these assets could be good drivers for our portfolio.

Looking into your crystal ball, I know it's difficult, but when do you think Houston hits that inflection point or maybe [indiscernible] just not necessarily improved but maybe sort of the deceleration or the decline in RevPAR beginning to see, do you think it's later this year when you begin to see sort of the anniversary to some of the big drops in oil prices and [indiscernible] changes?

As we said here today, we obviously outlined what our view is for this year, and we certainly see challenges throughout the year this year. We are optimistic that we would see some stabilization in 2017. Clearly we will have some disruption that comes with the renovation that we will do at the Westin Galleria buildings, but generally we're certainly hoping for a bit more stabilization as we go into next year and growth coming out of that.

And can you talk, just because you guys have recently sold one or two assets, can you talk a little bit about maybe what you learned from that process and maybe how the transaction markets changed a little bit in the last six months in terms of maybe just the depth of the buyer market and how they are pricing assets?

Yes. For each asset that we sold there, the story has been a little bit different based on the type of asset that we are selling and particularly the type of market that we are selling. The Hyatt Regency Orange County, when we sold that late last year, we knew it would attract a little bit more attention from foreign capital particularly and what we saw primarily there was a real interest from Asian buyers which ended up being a pretty robust process for us. The additional hotels that we have sold over the last few months, DoubleTree DC was kind of a reverse enquiry frankly. It was a situation where we had thought about potentially selling the hotel. We have re-looked at a wholesale analysis and looked at the upcoming capital investment that would be necessary to kind of potentially reposition that hotel, and with the reverse enquiry we got there, clearly there was sufficient amount of interest in doing something with a hotel that had those kind of characteristics. The other assets we have sold, it's been a little bit more of a mix of people that are kind of reasonable owner-operators, fund buyers with relatively experienced sponsors looking at these types of opportunities. So, we actually think that it's been relatively stable for the type of asset that we sold, and clearly when we were in the early part of the year when there was a little bit more concern still about financing markets as well, it may not have been quite as robust as what you saw previously, but we've still been happy with the process that we've been able to run for these dispositions.

That's great. And just maybe one last question for Atish. First off, welcome aboard. I was curious, in the guidance for this year, do you have a rough estimate of [indiscernible] renovation disruption that might be in your 2016 numbers, either in RevPAR or EBITDA when I think about 2017 numbers and how that might sort of comp against each other going forward?

That's a good question. I mean to be honest with you, it's not a big factor this year because the renovations we have scheduled are kind of very oriented towards the final couple of months of the year, at least with regard to rooms renovation. So it's not a big headwind for us this year, and we have favorability this year relative to last given the Marriott SFO renovation is completed. So order of magnitude, probably 10 or 20 bps, in that range.

The next question comes from Whitney Stevenson with JMP Securities.

I appreciate the details from Atish on what you are seeing in the group segment, but I was wondering if you could talk a bit more about your performance broken out by trends and level of visibility you're seeing by customer segment, thinking particularly about corporate transient?

It's Barry. I'll take that question. Interestingly and certainly different than what you may have heard from others is in Q1, our transient business was actually up more than our group business was, and a lot of that has to do with kind of the group mix in our hotels in Q1 and particularly the month of March where with Easter shift our hotels tend to book group business a little more regional in nature. So without that business in March, they relied heavily on some discounted transient strategies to try to fill those rooms, whether in the corporate segment or in the leisure segment. I think looking forward we have some very strong group pace for the year and I think that group pace may show ultimately that transient revenue and transient demand were not able to accommodate as much of it because we had a strategy of grouping up a little bit for this year. But we have not seen – it's very much market by market, some markets we have seen decline in transient demand, obviously in markets like Houston, markets like other oil-impacted markets and energy impacted markets including Pittsburgh, Charleston, West Virginia and Denver, we have certainly seen that in our hotels. We have a lot of markets where corporate transient has grown strong this year, and some of it is case-by-case basis depending on the strategy we put in place at the hotels. In some cases we made decisions to push out some volume corporate this has historically been in the hotel in favor of more premium priced business, and some of that has not come to fruition where we thought, and we'll revisit that throughout the year and we'll certainly look at that as we look into our pricing and segmentation for 2017.

Okay, great. And then you were very clear about your leverage targets at this point in the cycle. Can you maybe talk similarly about targets for a dividend payout ratio as a percent of AFFO per share? Even with the bump, you're still pretty comfortably under 50%.

Yes, we are very comfortable. Obviously our Board took a look at both our cash flow forecast and our payout ratio and taxable income frankly going forward. So we feel that even with this increase to your point, we are still very conservative on our payout ratio, sub-60% as you noted, and conservative compared to the peers. So we are happy with the current payout ratio, where it stands, and obviously our Board will continue to evaluate that going forward.

The next question comes from Brian Dobson with Nomura.

Atish, congratulations. We are very happy to see you over there. So quick question. Since your new role, do you think you can articulate your view on share repurchases, and I guess given the multiple where the stock is trading and the dividend yield, would you consider ramping that up through the year?

I can talk a little bit about my views but it's important to note that it's a Board authorization that we are operating under and the Board authorized up to $100 million of share repurchase before I arrived. So where we are executing is reflective of really a balanced approach. I think obviously we've had several asset sales, as Marcel described, since October. Rough amount of equity out of those asset sales was $150 million. We have bought in $55 million of stock. He described kind of the multiple on the dispositions, and as you pointed out, the multiple on our stock is obviously a lot lower than that. So, our view is that that activity generated strong shareholder returns. It's attractive. It's compelling. I think we're going to take a balanced approach depending on really where the stock is at, what we're seeing in terms of our transaction pipeline. So it's really something we visit often and we'll modulate based on kind of what we are seeing both in terms of transaction activity and where the stock is trading.

All right, thank you, and I'm looking forward to seeing you all at our conference next week.

Thank you. And as there are no more questions at the present time, I would like to return the call to Marcel Verbaas for any closing comments.

Thanks. Thank you again for joining our first quarter earnings call. We appreciate your interest in Xenia and we look forward to seeing those of you attending our Investor Day next week.

Thank you. The conference is now concluded. Thank you for attending today's presentation. You may now disconnect.