Xenia Hotels & Resorts Inc (XHR) 2016 Q1 法說會逐字稿

Good morning, and welcome to the Xenia Hotels and Resorts, Inc. first-quarter earnings conference call and webcast.

(Operator Instructions)

Please note, this event is being recorded. I would now like to turn the conference over to Ms. Lisa Ramey, Vice President of Finance. Please go ahead.

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 on our revised 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 and 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 the 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 website 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 zestful 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 11.7 times 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 of 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 have chosen to monetize these assets, to strengthen our balance sheet, and aggressively repurchase shares, as we believe we trade at a compelling value. We believe each of these transactions creates long-term shareholder value.

Both our asset management initiatives and strategic portfolio changes resulted in total portfolio RevPAR increasing by 3.1% as owned for the first quarter. We expect our total portfolio RevPAR to increase meaningfully this year, due to our projected same-property RevPAR growth of 2% to 4%, as well as the impact of our recent acquisitions and development projects, and our recent dispositions, which had an average RevPAR significantly below the balance of our portfolio.

I would now like to provide a brief update on the lodging industry overall. US RevPAR was up 2.7% in the first quarter. This increase was composed of 3.2% ADR growth, and a 30 basis point decline in occupancy. While we have certainly seen some slowdown in RevPAR growth, it should be noted that the quarter was meaningfully impacted by the shift of Easter into March this year.

As it relates to our portfolio, the first quarter was unique, with various headwinds and tailwinds impacting different parts of our portfolio. Included in the headwinds were items such as the Easter holiday shift, tough year-over-year comparisons for our Houston hotels, and the fact that the first quarter is seemingly weak for our portfolio, as it is composed today.

On the flip side, we certainly benefited from tailwinds at our Marriott San Francisco Airport an Hyatt Regency Santa Clara, as a result of the renovation disruption we experienced in the first quarter of last year, and the Super Bowl taking place in Santa Clara this year. Our first-quarter same-property RevPAR grew 0.9% year over year, comprised of a 2.9% increase in rate, and a 140 basis point decline in occupancy. The fact that our portfolio was able to achieve this performance in a quarter we expected to be challenging, coupled with the approximately 5% same-property RevPAR growth we achieved in April, gives us confidence in our stated outlook for the year.

Excluding our Houston area hotels, which remain challenged due to the impact of low energy prices on demand, as well as significant supply additions in the markets, our same-property RevPAR grew 3% in the first quarter, and 6% in April. Despite some of the challenges affecting our portfolio, I am pleased to note that our hotels performed well in their respective competitive sets, as we increased our RevPAR index by nearly 3 points in the first quarter.

As we expected, adjusted EBITDA declined slightly to $62.6 million, down 3.4% to last year. Adjusted FFO per share declined by $0.02 to $0.43 per share, which is partially attributable to an increase in income taxes year over year, as well as the change in portfolio composition from last year. Our same-property hotel EBITDA margin declined 71 basis points to 29.9%, largely driven by a subset of hotels that experienced significant declines of RevPAR compared to 2015. Barry will provide additional detail on this later during the call.

Now, on to the portfolio changes we have made year to date. In mid January, we closed on the acquisition of the Hotel Commonwealth in Boston. We are pleased with the operating performance of the hotel during the quarter and the quality of the new wing, with 96 additional guest rooms, and an additional 7,000 square feet of meeting space. The hotel exceeded our expectations during the first quarter, both in terms of RevPAR and margins, and we are expecting strong performance during the remainder of the year.

As a reminder, the Hotel Commonwealth is not included in our same-property results, since the significant rooms addition skews the year-over-year comparisons. As we also discussed last quarter, in February we sold the Hilton Gainesville, thus allowing us to exit a tertiary market where we did not see appropriate long-term growth potential, or the ability to generate a sufficient return on required capital investment.

Now turning to some of our more recent activities. In April we sold the DoubleTree Washington DC for $65 million, representing a 15.7 times multiple on actual 2015 EBITDA. While we believe in the strength of Washington DC in the longer term, the sale of the hotel allowed us to harvest value from a lower-quality asset, by monetizing a portion of the upside of a potential repositioning of the hotel, without taking the operational and financial risk required by various significant renovation.

Most recently, we sold the Embassy Suites Hunt Valley, located in a suburb of Baltimore, for $20 million. This represented an 8.4 times multiple on 2015 EBITDA. In addition to the sale proceeds we retained a $1.3 million balance in the capital expenditure reserve accounts. We continue to evaluate a number of additional potential dispositions, and we'll provide an update on the progress when appropriate.

We are proud of the quality level of our portfolio, and believe that our recent acquisitions and dispositions have further improved an already excellent and diversified portfolio that is well maintained and located in strong lodging markets. There are a number of capital investment activities scheduled for this year, that will further enhance our position in the hotels' respective markets.

First of these projects is the extensive renovation at the Marriott Napa Valley Hotel and Spa. We have finished the guest room renovation in 189 of the rooms, completing the north wing. The remaining guest room and bathroom renovations in the south wing will be completed this month. The pool and outdoor function space transformation is on schedule to be completed in the second quarter, as is the meeting room and pre-function space renovation.

Additionally, we completed the bar renovation and construction of a new spa at the Hyatt Key West during the first quarter. The spa relocation created an opportunity for us to add two guest rooms to this hotel, our highest RevPAR hotel, in early May. The hotel will also receive a guest room renovation later in the year, upon which it will be rebranded as a Hyatt Centric hotel.

Finally, during the quarter, we began ballroom and meeting room renovation at the Renaissance Waverly Atlanta. This renovation will be phased throughout the year, in an effort to limit the disruption, as this is our largest group hotel.

We have several other significant projects scheduled for the second half of the year, including guest room renovations at the Westin Galleria Houston and the Andaz San Diego. As always, we are conducting each of our renovations during periods of lower demand, in order to limit disruption when possible.

I will now turn it over to Atish to provide additional market color, an update on our balance sheet activities, and details on our revised 2016 guidance.

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 for him. Barry and I first met each other about 20 years ago here in Orlando, and I have gotten 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 citywide convention demand, and some pockets of new supply, negatively impacted hotels in these markets. Our outlook for these hotels anticipates better RevPAR performance for the remainder of the year as the convention calendar improves, new supply is absorbed, and we enter the better months for transient travel.

Moving ahead to my second topic for this morning, our financial results. Adjusted FFO per share declined approximately 4% year over year, due largely to an increase in our income tax expense. Excluding a non-recurring income tax expense item related to our spin in 2015, the increase in the quarter was approximately $1.5 million. The variance is largely due to net operating loss carry forwards, which were used to reduce our TRS taxable income in 2015, but have been fully utilized.

As to G&A expense in the quarter, it increased approximately $3.6 million. Excluding the impact of non-recurring management transition, severance, and stock compensation expenses, our G&A expense increased nearly 13%, reflecting increased staffing post-spin. For the full year, we expect a similar level of increase. Following this year, we anticipate our G&A expense growth to be in the low- to mid-single-digit percentage range on an annual run rate basis.

Moving ahead to the next topic, our balance sheet and capital allocation. As to our balance sheet, it continues to be very healthy. It has been bolstered by recent dispositions.

We continue to believe our leverage level provides us with ample flexibility. It also makes sense for our asset profile. As of today, our leverage ratio is approximately 3.5 times net debt to 2016 EBITDA, using current guidance. This is pro forma for sales that have been recently completed.

As to our mix of fixed and floating rate debt, we are at approximately 55% fixed rate debt. Again, we believe this to be an appropriate balance for our asset mix and exposure. Overall, our weighted average cost of borrowing is an attractive 3.5%. We also have a well-laddered maturity profile.

As of quarter end, we had sufficient liquidity, with approximately $235 million of cash, of which approximately $75 million was restricted. Our $400 million line of credit is undrawn and fully available. This level of liquidity gives us flexibility to have a balanced approach to capital allocation.

As to balance sheet activity during the quarter, we completed the funding of $125 million, seven-year term loan. We also closed one new loan at the Hotel Palomar Philadelphia, and one refinancing at the Grand Bohemian Hotel in Orlando. The total of these two property loans is approximately $120 million.

We have two additional single-property debt maturities in late 2016. We believe these maturities will be an area of opportunity for us, as our current interest rate on these two loans is in the mid-5% range. We are currently evaluating a range of financing options, with a preference towards growing our mix of unsecured debt. We will provide an update about this during our next quarterly call.

As to capital allocation, we continue to have a balanced approach. Our view is that leverage levels at this part of the cycle should be in the 3.25 to 3.75 times range. We are comfortably within that range. We also continue to believe that we can create additional value for shareholders through the return of capital.

We have repurchased over $55 million of stock year to date, at an attractive price. This activity represents a net reduction in share count of over 3% since the beginning of the year. We have approximately $45 million remaining in repurchase authorization. In addition to this return of capital, our recurring dividend has a yield of approximately 7%, as Marcel mentioned.

Turning to my next and final topic, our outlook for 2016. We continue to be confident in a 2% to 4% full-year RevPAR growth range. Our confidence is due to the following reasons:

First, our first quarter performance was in the range of what we had expected. Second, our group revenue pace is up in the mid-single-digit percentage range for the full year. This has stayed steady over the last several months.

As a reminder, our revenue mix is about 30% group. Among our major group producing hotels, our strongest markets in terms of group revenue pace includes San Francisco, Dallas, Houston and Denver.

Third, we anticipate our recently renovated hotels to continue to ramp up nicely. These hotels included the Marriott SFO, Hyatt Regency at Santa Clara, and the Marriott Napa Valley. Fourth, as it relates to Houston, the comparisons start getting easier as the year progresses.

In terms of adjusted EBITDA, our expectation is to generate in the range of $297 million to $311 million, which is approximately $6 million lower than prior guidance, solely due to our two recent dispositions. Our adjusted FFO range is now $243 million to $257 million, which is $4 million lower than prior guidance.

After adjusting for the impact of recent dispositions this reflects an improvement of $2 million. This improvement is due to lower expected income tax expense, as we fine tuned our estimates for the year. Overall, we continue to be confident in our approach to the business, as well as the outlook for our hotels.

I'll turn it over to Barry to conclude our remarks with some key points about our operating performance.

Thanks, Atish. It's great having you on board. As both Marcel and Atish indicated, I will 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 has been well received in the market, with outstanding room products 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, highlighting the strength of our properties within their markets, even during periods of relative weakness. Our markets 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, with most of the challenges occurring in March, drove RevPAR down 2.3%, primarily due to the 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 to our hotel EBITDA margin decrease of 71 basis points.

By far, the largest impact was from management fees, which impacted EBITDA margin by 41 basis points due to seasonality baked into the structure of many of incentive management fee structures, and the lack of incentive fee at our Marriott SFO in the first quarter of 2015. These increases were anticipated for the quarter, and will correct themselves over the course of the entire year.

At the gross operating profit, or GOP level, our properties were able to maintain a margin decline of 30 basis points, reflecting a number of cost containment measures put in place at our individual properties. In our hotels with poor RevPAR performance, lessening expenses to match a temporary revenue decline proved to be challenging, particularly in the last two weeks of March.

Looking at some of our other departments, food and beverage revenue showed a slight decline, due primarily to softer occupancies in several of our lifestyle hotels with normally strong restaurant operations, as well as lower levels of group business in several of our key group hotels. The softer group business results and weaker levels of banquet and catering business, as compared to last year. Again, these declines were seen primarily in the month of March, and have rebounded in April.

Many of our properties have benefited from softer energy prices, and from a mild winter, as reflected in the decline in Q1 utilities expense of 4.7%. Our unique property optimization process continues to find additional revenue and expense opportunities across our portfolio. Thus far this year our internal POP team has conducted in-depth reviews at the Marriott San Francisco Airport, our three newly-acquired Kimpton hotels, and the Hotel Commonwealth, and have identified over $1.1 million in ongoing net revenue and cost enhancements, implemented in conjunction with our management teams.

Our asset management team continues to focus on revenue management strategies with all of our operators, to ensure that not only are our hotels maximizing revenues, but that during market declines, we are focused on good forecasting and ensuring that expenses are being flexed, if and as market declines occur, even if they are short term in nature. This quarter, we also announced a significant addition to our asset management team. Tom Brennan, previously SVP of Asset Management with the JBG Companies, with prior asset management experience with several hotel REITs, has joined us as Senior Vice President of Asset Management, with direct responsibility for leadership of our core asset management team. We look forward to Tom's contributions as we move forward.

With that, we have concluded our prepared remarks. Operator, we are ready to open the call up to Q&A.

(Operator Instructions)

And the first question comes from Thomas Allen with Morgan Stanley.

So your April RevPAR of 5% was obviously a good acceleration. Can you just help us think about the seasonality for the rest of the year, both talk about May and June, and then maybe some of the seasonality of the third versus the fourth quarter would be helpful, too. Thanks.

Good morning, Thomas. This is Marcel.

Yes. As you noted, and as we noted on our call, obviously the first quarter is seasonally the weakest quarter for us in our portfolio, and that's why on our last call, we clearly talked about our expectation for a Q1 as it related to the rest of the quarter, rest of the year, I'm sorry. As it relates to the remainder of the year, we're off to obviously a strong start in April, and when we look at the quarter, throughout the year, we'd look at relatively balanced performance for the rest of the year, frankly.

We're seeing some easier comparisons, and use, and as we talked about later in the year, particularly because our assets in use held up particularly well. So in the early part of last year, and we really didn't start seeing the fall-off 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're seeing from our Northern California assets. So in general, a 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. Can you remind us what your first-quarter 2015 RevPAR growth was?

And then just in terms of the performance of the market, how are you thinking about Woodlands versus Galleria? Woodlands obviously has new supply coming into 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?

Thanks.

Sure. When you asked about Q1, were you asking for a portfolio overall, or were you specifically --

No, just Houston 1Q, 2015.

We can look that up. I don't have that right at my fingertips right now, frankly. We -- like I said, just 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 then didn't really start seeing the drop-offs until later in the year.

So when we think about -- you asked about the difference between Galleria and Woodlands and why don't I turn it over to Barry, and Barry can speak about that in a little bit more detail?

Sure. Thanks, Marcel.

As you know, we've had the opportunity to increase group, particularly at The Oaks and Galleria, and that has been a part of our strategy really from the time we acquired the hotel. We're still trying -- so we expect overall, over the course of the entire year, we expect Galleria to somewhat outperform The Woodlands.

We're still -- at The Woodlands we're learning everyday about the impact of the new competition, and really how to address it. Obviously we knew about it, but as we move into the year and we see how they're adjusting rate strategies day by day, what they're 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.

Okay. Helpful. Thank you.

Thank you. And 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, specifically on dispositions, at this point with Houston, is your preference really to ride out that market and look for better days down the road, or would you at some point contemplate selling assets in that market?

Specifically to Houston, in our view of our assets, particularly in that market, is that we are really located in the two best sub-markets 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, 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.

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 then 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, at 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 deflection point? Maybe if you could just, not necessarily improve, but maybe the deceleration, or the declines in RevPAR begin to cease. Do you think it's later this year when you begin to see the anniversaries in some of the big drops in oil prices and job changes?

Yes. As we sit here today, we have obviously outlined what our view is for this year, and we certainly see challenges throughout the year this year. We're 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 Weston Galleria buildings. But generally, we're certainly hoping for a bit more stabilization as we go into next year and growth coming out of there.

Can you talk, just because you have recently sold one or two assets, can you talk a little bit about what you learned from that process, and how the transaction and markets change a little bit in the last six months, in terms of just the depths of the buyer market, and how they're pricing assets?

Yes. For each asset that we have sold there, the story has been a little bit different based on the type of asset that we're selling, particularly the type of market that we're selling. The Hyatt Regency Orange County one we sold 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've sold over the last few months, DoubleTree DC was a reverse inquiry, frankly. It was a situation where we had thought about potentially selling the hotel, we had really looked at a wholesale analysis and looked at the upcoming capital investment that would be necessary to potentially reposition that hotel, and with the reverse inquiry we got, there clearly was a sufficient amount of interest in doing something with the hotel that had those characteristics.

The other assets we've sold, it's been a little bit more of a mix of people that are regional owner/operators, fund buyers, relatively experienced bouncers looking at these opportunities. So we actually think 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 have still been happy with the process that we've been able to run for these dispositions

That's great. Maybe one last question, for Atish. First off, welcome aboard.

Thanks.

I was curious in the guidance for this year, do you have a rough estimate of the renovation disruption that might be in your 2016 numbers, either in RevPAR or in EBITDA? Just trying to think about 2017 numbers and how that might comp against each other as we roll forward?

That's a good question. To be honest with you, it's not a big factor this year because the renovations we have scheduled are very oriented towards the final couple months of the year, at least with regard to rooms renovations. 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.

Okay. Great. Thank you.

Thank you. And the next question comes from Whitney Stevenson with JMP Securities.

Appreciate the detail from Atish on what you're 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.

Whitney, it's Barry. I'll take that. 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 the group mix in our hotels in Q1, and particularly the month of March, where with the Easter shift, our hotels tend to book groupings 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 the 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've not seen -- it's very much market by market. Some markets, we've seen a 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've certainly seen that in our hotels.

We have a lot of markets where corporate transient has grown strong this year, and some of it's a case-by-case business depending on the strategy we put in place at the hotels, and in some cases, we've made decisions to push out some volume corporate that has historically been in the hotel, in favor or more premium price business and some of that has not come to fruition the way 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 target 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're 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 with -- even with this increase, to your point, we're still very conservative on our payout ratio sub-60%, as you notice. And conservative, compared to the peers. We're happy with the current payout ratio where it stands, and then obviously our Board will continue to evaluate that going forward.

Okay. Great. Thank you.

Thank you. And the next question comes from Brian Dobson with Nomura.

Atish, congratulations. We're very happy to see you over there.

Great.

So quick question.

Since you're new in role, do you think you can articulate your view on share repurchases? And given the multiple where the stock's trading and the dividend yield, would you consider ramping that up through the year?

Well, yes, I can talk a little bit about my views, but, it's important to note that it's a Board authorization that we're operating under, and the Board authorized up to $100 million of share repurchase, before I arrived. So, where we're 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've bought in $55 million of stock. He described the multiple on the dispositions, and as you pointed out, the multiple on the sale on our stock is obviously a lot lower than that.

So our view is 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 really -- it's really something we visit often, and we'll modulate, based on what we're seeing, both in terms of transaction activity and where the stock is trading.

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

Absolutely.

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.