DiamondRock Hospitality Company (NYSE:DRH) Q1 2024 Earnings Call Transcript

DiamondRock Hospitality Company (NYSE:DRH) Q1 2024 Earnings Call Transcript May 3, 2024

DiamondRock Hospitality Company isn’t one of the 30 most popular stocks among hedge funds at the end of the third quarter (see the details here).

Operator: Good day, and thank you for standing by. Welcome to the DiamondRock Hospitality Company’s First Quarter 2024 Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers’ presentation, there will be a question-and-answer session. [Operator Instructions] Please be advised that today’s conference is being recorded. I would now like to hand the conference over to your speaker today, Briony Quinn, Executive Vice President and Chief Financial Officer. Please go ahead.

Briony Quinn : Thank you, Michelle. Good morning, everyone. Welcome to DiamondRock’s first quarter 2024 earnings call and webcast. Joining me today are Jeff Donnelly, our Chief Executive Officer; and Justin Leonard, our President and Chief Operating Officer. Before we begin, let me remind everyone that many of our comments today are not historical facts and are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ materially from what we discuss today. In addition on today’s call, we will discuss certain non-GAAP financial information. A reconciliation of this information to the most directly comparable GAAP financial measure can be found in our earnings press release. With that, I’m pleased to turn the call over to Jeff.

Jeff Donnelly: Good morning, and thank you for joining us. Before we discuss our first quarter results, I’d like to briefly highlight the leadership and organizational changes we announced last month. As you saw from today’s earnings release, DiamondRock’s strong performance is continuing into 2024. Our new leadership appointments and organizational structure position us to build on the momentum we are seeing. We have outstanding talent across the organization and we are now able to tap into that talent in a deeper way. I am honored to lead DiamondRock as CEO and excited by the opportunity to leverage my experience in this new role. Justin’s promotion to President underscores both his contributions to DiamondRock and his deep industry expertise.

For those of you who haven’t had the chance to meet Justin, he is perhaps the sharpest and most talented hotel investment professional I’ve met and I’m proud he’s on our team. In addition to continuing his responsibilities as Chief Operating Officer, Justin will be assuming responsibilities for transactions as well. As the Company’s Treasurer and Chief Accounting Officer, Briony has been a trusted partner to me, a leader in the organization and she has excelled in each of her finance and accounting positions over her 17-year career at DiamondRock. To me, Briony is the ideal choice for the company’s next Chief Financial Officer. With the opportunity to leverage all this experience in new ways and establish a more simplified organizational structure than we had with our previous six member executive team, we can expedite decision-making in a more opportunistic and dynamic investment world and accelerate performance and value creation.

In short, DiamondRock was great before this transition and with it, we will be even better. Our goal is to drive superior long-term total shareholder return. To do this, we will maintain our investment focus primarily on lifestyle resort and urban hotels, no different than we have in the past. We will continue to mine our network of independent owners to unearth unique destination resorts, but we are equally in favor of uncovering attractive urban market opportunities with growth potential. We will be more deliberate in harvesting capital from slower growth, capital-intensive assets, and recycling proceeds into higher return investments such as share repurchases, internal ROI projects, or new investments. Value creation is our magnetic north.

It is important to me that I personally recognize Mark and Troy as we make this shift. Their individual contributions established DiamondRock as an industry leader and Mark was instrumental in assembling the independent board and team we have today. All of us at DiamondRock wish them both the absolute best in their future endeavors. Before I turn to our first quarter results, I want to recognize the teams at three of our hotels recognized by the Michelin Guide: Cavallo Point, who earned a Michelin 2 key rating, The Gwen, who earned a Michelin 1 key rating and the Shorebreak Huntington Beach. These are rare honors. Just 80 hotels received 1 key status and only 33 achieved 2 key status. DiamondRock was among the few winners of multiple keys. Okay, let’s get into Q1.

Overall, the leisure segment proved a little softer than expected due to inflation, the pressure of higher interest rates, and an uncertain economic picture. Group demand remains strong with first-quarter group sales production steady versus last year. RevPAR declined 0.4% in the quarter compared to the prior year. This was slightly weaker than our original expectation from a little softness of top-line at the resorts. Despite the small RevPAR decline, total revenues increased 3.8% on strong food and beverage performance from the increased group activity. Total expenses increased a little over 6%, driven in large part by group banquet volumes that were up 24% over Q1 last year. While those revenues drove a significant increase to both food and beverage margin and overall portfolio profit, the growth in food and beverage revenue does drive higher headline expense growth and overall margin erosion given that food and beverage is a less profitable part of our business than rooms.

That segmentation shift to group was most evident at three of our largest hotels in the quarter, Chicago Marriott, Westin Boston, and Westin Fort Lauderdale where expenses grew over 15% due to an increased segmentation shift to group with great food and beverage spend. If we exclude these three hotels, our overall expense growth increased just 3.4%. Overall expense growth is highly dependent on revenue mix with increases in food and beverage driving higher overall expense growth. Given our significant increase in group pace year-over-year, we expect the corresponding group spend in food and beverage will keep our expense run rate at around 5% for the remainder of the year. Turning to resorts. First quarter is a critical season for our resorts.

The resort segment contributed approximately 45% of first quarter total revenue, but 60% of hotel adjusted EBITDA. As we said in the last call, the first quarter would be the toughest quarter for our resorts. RevPAR in the resort segment declined 4% from the prior year, which was a little weaker than our original expectation due to a 7.6% RevPAR decline at our highest-rated luxury resorts versus nearly flat for our lifestyle resorts. Favorably, our outside-of-the-room outlet spend performed very well, driving a total revenue increase at the resorts of 0.4%. Despite a shift to lower-margin F&B revenues, we were still able to manage expense growth down to 4.1% in the quarter. The Florida Keys were a highlight with collective RevPAR up 6.6% in the quarter consistent with the growth for this Trio in Q4 ’23.

The Lodge at Sonoma experienced a 28% RevPAR decline, pushing EBITDA $1 million below last year. Excluding this one hotel, our resort segment RevPAR would have been 110 basis points better. As we discussed in the last earnings call, the wine country market was very weak this quarter, but we underperformed in Sonoma because we faced a particularly difficult Q1 ’23 comparison. We had less throughput on the books for the quarter and our revenue management strategy was simply too aggressive for the setup. The market is stabilizing, the team has course-corrected it and we have seen our recent results return to in-line market performance. The Hythe in Vail was also behind our expectation due to lower visitation owing to what is best described as lumpier snowfall patterns, more ski destinations available than in the prior season as well as a drop off in loyalty redemption nights.

RevPAR was down 9% and hotel-adjusted EBITDA was $1 million behind first quarter 2023. Encouragingly, our group pace on the books for the rest of 2024 at this hotel is up over 30% compared to last year. A note on redemptions, loyalty redemptions at our resorts were down 23% from prior year and 40% from 2022. The sharp reduction in redemptions means there’s a larger number of room nights to fill and sometimes that means turning to OTAs or other less profitable channels. Looking ahead, we believe our resorts are positioned to deliver better results in the second half of 2024. The difficult comparisons in South Florida and the Keys have been lapped and we expect the remaining resort markets will follow suit by the end of the year. We recognize high interest rates and inflation are placing pressure on consumer spending, but these same pressures should drive incremental preference for domestic travel over international travel and drive to destinations over fly to destinations.

Based on the latest airless data, there was a 12% year-to-date increase in total international arrivals into our markets versus 2023 and the loyalty redemptions data could foreshadow fewer outbounds for international destinations. Turning to our urban portfolio, first quarter RevPAR increased 2%, group room nights increased 10.7%, and the strong accompanying out-of-room spend pushed total revenue growth up 6.8%. Business transient revenue increased 9.4%, but BT is still 23% behind 2019. Expenses were higher than expected owing mainly to the staffing increases that accompany the increases in banquet revenues. Overall, EBITDA at our urban hotels was up 3.1%. The Dagny in Boston continued to outperform pro forma. Last year’s renovation has placed the Dagny as the top three hotel in the entire Boston market on TripAdvisor compared to number 56 in the market prior to renovation.

This has been a well-executed transformation by the team at DiamondRock and the hotel, and we are elated to see the follow-through in performance. The Westin Seaport, also in Boston, delivered 17% RevPAR growth in the quarter, increasing total revenues $3 million over the prior year. Our 1,200-room Chicago Marriott had an excellent quarter with RevPAR, up 7.4%, and total RevPAR up 24.8%. Group room nights were up 50% over last year with the banquet contribution per group room up 10%. The net result was a better than 100% increase in EBITDA and 313 basis point improvement in margin. Downtown Washington, D.C. turned a corner and we are seeing market improvement, albeit from a depressed level. At our Westin, RevPAR increased just shy of 3% in the quarter, but total revenue increased over 11% on the improvement in group activity.

Accordingly, EBITDA was almost $0.5 million better than last year. We are most positive on the group outlook for 2024. We believe our strong volume of business on the books is a competitive advantage. At the end of the quarter, we had 85% of our budgeted full-year group revenue on the books, representing a 14% increase over the same point in 2023. Looking at the quarterly breakdown, our group revenue was up 10% in Q1 and pace is up approximately 5% in Q2 and over 15% in the third and fourth quarters. Looking at just our big box hotels, our group pace for 2024 is up 16% or about 200 basis points better than our total portfolio. The most notable performers are our Renaissance Worthington up 32%, the Hythe up over 25%, Chicago Marriott up 22%, the Westin Fort Lauderdale up 19%, and Washington D.C. up 15%.

Looking ahead to next year, at the end of Q1, our big box room night pace for 2025 is flat with 2024 with time to go. Let me turn the floor over to Briony to talk about financial highlights and our revised guidance. Briony?

Briony Quinn: Thanks, Jeff. As Jeff mentioned previously, top-line results were slightly below our original expectation, but we were nonetheless able to achieve our original expectation of $0.17 of FFO per share. Although first-quarter RevPAR declined slightly, total revenues increased 3.8% on an 11% increase on food and beverage income driven by the strong group contribution in the quarter, which exceeded our expectations. Approximately 65% of the incremental F&B revenues above our expectation flowed to gross operating profit. Gross operating profit was up nearly 1% compared to 2023, which was slightly behind our expectation. Food and beverage profits and support cost savings all but offset the decline in rooms department profit.

Comparable hotel adjusted EBITDA was $61.4 million or approximately $2 million below the prior year on a 169 basis point decline in margin. Corporate G&A costs were $8.9 million, which were approximately $700,000 higher than we originally expected due to the announcement in the first quarter of our general counsel’s intention to retire on June 30. This required us to accelerate the compensation expense of his outstanding equity awards during the quarter. Unlike severance costs, we do not add back retirement expenses to our G&A. Turning to our 2024 guidance. Let me start with the changes to our G&A outlook. Earlier in the year, we provided guidance of $33 million to $34 million for full-year corporate expenses. We expect the net savings from the leadership realignment will reduce our 2024 G&A by nearly $4 million.

The result is a reduced corporate expense outlook of $29.5 million to $30.5 million for 2024. We are raising our 2024 adjusted EBITDA guidance range to $270 million to $290 million with a midpoint that is $5 million higher than the prior guidance range in large part due to the G&A cost savings, but also our confidence in our group pace. Our adjusted FFO per share guidance is increased by $0.01 per share at the midpoint. A higher for longer interest rate outlook has shifted the prospect of rate cuts to much later in the year increasing our interest expense outlook to $65 million to $66 million from prior guidance of $61 million to $63 million. Additionally, we are comfortable with the current Q2 consensus estimates for adjusted EBITDA and adjusted FFO per share.

Turning to capital allocation. There were no acquisitions or dispositions during the quarter and we did not repurchase any shares. We continue to explore dispositions, the proceeds of which can fund share repurchases, internal ROI projects, or external growth. Maximizing shareholder value is the singular focus of our capital allocation strategy. We remain committed to having a flexible balance sheet. Our leverage is conservative as demonstrated by the low net debt to EBITDA ratio of 3.9 times trailing four quarter results. Our liquidity is strong with $120 million of corporate cash, $108 million of hotel-level cash, and an undrawn $400 million revolver. We have a $73 million CMBS loan on our Courtyard Midtown East maturing in early August. It is our current expectation that we will repay this mortgage with cash on hand at maturity.

If the capital markets cooperate, we may look to a larger corporate financing transaction in the near future to address our remaining mortgage maturities through 2025. With that, let me turn the floor back to Jeff.

Jeff Donnelly: Thanks, Briony. I want to conclude with a few points before Justin, Briony and I answer your questions. First, I mentioned at the onset that our investment strategy remains unchanged, but I believe our execution will be more analytical and our actions more deliberate. To borrow a term from my partner, Justin, that means we will work to manufacture core product, ideally with limited capital intensity. To us, competitive auctions for a brand-managed big-box hotel is not the path to success and the investment community has limited patience for big-ticket, highly disruptive renovations. Instead, we want to select situations where our capital and creativity can unlock value that will drive long-term outperformance.

Similarly, we will be thoughtful about how and when we elect to dispose of assets. Proceeds will be recycled to the uses we believe create the most value at the time, whether that is a new investment, share repurchases, or internal ROI project. Concerning the transaction market, activity was down 35% in the first quarter, which is off of a 53% decline last year. It is still early, but we are starting to hear of a little more product trickling into what I’ll call the shadow pipeline. To the extent interest rates remain higher for longer, it’s likely we see more distressed owners bring product to the market, or transactions may emerge where the path to ownership may require a little extra creativity. We continue to have success with our ROI projects.

The Dagny Boston, which was converted in the third quarter of last year, continues to outperform our expectations as it ramps to its full potential. The Hilton Burlington will convert this summer to the Hotel Champlain, a lifestyle curio hotel with a specialty restaurant led by a James Beard-nominated chef. In the Florida Keys, we are making progress on building a small marina with a high ROI at Tranquility Bay and we expect to complete a new bar at Havana Cabana in Key West this summer that we anticipate will generate over $1 million a year in revenue at a 25% margin on a $1.5 million cost. We are moving ahead on expanding the room count at The Landing Resort in Lake Tahoe by 20%, which is expected to be completed in 2025. Finally, we are also moving ahead with integrating the Orchards Inn into our luxury L’Auberge de Sedona Hotel through an upgraded room product and a new shared cliffside pool and bar.

We believe once completed, this will be a strong financial performer for us. In conclusion, DiamondRock is well-positioned to continue our top-tier performance in the sector. We believe our group bookings and market footprint position us well to outperform in 2024. Our substantial group revenue on the books provides a significant level of embedded growth, and we are optimistic our resort properties will see momentum return over the remainder of the year. ROI projects will add incremental growth in the next 12 to 24 months as projects such as the Dagny are completed in ramp. In conclusion, we really like our setup and we are singularly focused on accelerating and enhancing our earnings growth. At this time, we would like to open it up to any of your questions.

Operator: Thank you [Operator Instructions] And our first question is going to come from the line of Dori Kesten with Wells Fargo. Your line is open. Please go ahead.

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Q&A Session

Dori Kesten: By your last comments, Jeff, is it fair to say that DiamondRock will likely be more active recycling capital going forward than you have been previously?

Jeff Donnelly : No mandate — good morning, Dori. I would say we’re under no mandate to necessarily be more acquisitive or more focused on sales, I think, but we are trying to be more thoughtful I would say about and I use the word deliberate in my remarks about the assets that we hold and the assets that we acquire. So I think in the next 24 to 36 months, as we’ve said in prior calls that we do intend to look to dispose of assets and recycle that capital, but I wouldn’t presume from that, that there’s any sort of mandate on us to be moving quicker.

Dori Kesten: Okay. And if you were providing total RevPAR guidance, where would that be today and how has that changed since your initial guide? And I apologize if I missed it. Did you say what April RevPAR was?

Jeff Donnelly : On the total RevPAR question, we made the comment at the beginning of the year that our comparable room RevPAR growth is about 2% to 4% and we thought that our including out-of-room spend, you would add about 50 to 75 basis points to that and that view really hasn’t changed. What was the second question? I apologize. April RevPAR is right now trending about flattish.

Operator: And our next question is going to come from the line of Austin Wurschmidt with KeyBanc Capital Markets.

Austin Wurschmidt: Just wanted to start off a little bit on resorts and some of the leisure-oriented assets. I mean, the ADRs for this bucket of hotels has clearly been under a little bit of pressure here now for around a year, a little over a year. I’m just wondering if you think we’re at a point where we could begin to see that stabilize or even increase. Just curious what sort of the outlook looks like from a booking perspective and how we should be thinking about rate for that pool of assets.

Justin Leonard: Thanks, Austin. It’s Justin. So we’ve seen a little bit of weakness, I would say, over the last 60 days versus the first 60 days of the year, but nothing to be too concerned about. I think one thing to note is we are sort of shifting segmentation throughout the portfolio, not just on the urban side, but also on the resort side. And I think portfolio-wide for us, we do have a bit of a discount between group rate and transient rate. So some of what you’re seeing from a rate deterioration perspective is not necessarily a rate fall-off, but it’s actually just a segmentation shift away from transient into resort and that’s intentional. We’re trying to build base given some of the weakness we saw at the end of last year. And the hope is as we continue to group up some of these hotels and make them smaller and require less transient demand that we’ll be able to see some more rate stability and compress transient rate.

Austin Wurschmidt: When do you lap some of the you mentioned that loyalty redemption nights are down? When do you start to lap some of the comps there and see the mix on a more comparable basis year-over-year with the strategy you’re currently pursuing with group?

Justin Leonard: Just from a redemption perspective solely candidly probably be a better question for Marriott. I wish they had a little bit more disclosure about what the point balance is that they hold kind of from a global perspective. But we have seen a continued deterioration of that balance into our hotels over the course of the last two years. And so we’re optimistic. Hopefully, by the time we get to summer, we’ll start to see some stability, but it has been a bigger slide and a longer slide than we would have expected.

Austin Wurschmidt: Okay. That’s helpful. And then just last one for me. You mentioned the shadow pipeline in the transaction market building, Jeff, but capital markets remain challenging. You alluded to using some cash to maybe repay a mortgage later this year. I guess, I’m curious if you guys are starting to build a pipeline of potential dispositions to kind of prepare for any opportunities that emerge and has the strategy on which assets to sell and when changed versus maybe what the previous executive team had flagged for potential sale?

Jeff Donnelly : Yes. I mean, Justin and I can both speak to this. I think when we think about dispositions, it’s trying to be and I keep using the word a little more deliberate rather than maybe trying to be reacting to the situations that are in the market is to be a little bit planned around our dispositions and making sure that we’re positioning assets to be in their best position for sale. So, yes, there are assets and some that we’ve discussed in prior calls that really I think we think of as either noncore or we think are less likely to return to their prior piece that at some point we would like to move away from. But there’s no mandate that we have to do that just to be clear. In the next few quarters, we’re trying to be opportunistic about it as we move ahead.

Operator: And our next question is going to come from the line of Duane Pfennigwerth with Evercore ISI.

Duane Pfennigwerth: Firstly, congratulations to the team on the new roles. Jeff, it’s important for sell side analysts to find higher and better uses. So congrats to the team.

Jeff Donnelly : Thank you, Duane. I’m starting to get the flag.

Duane Pfennigwerth: Thank you. We are waiting for you. Can you talk a little bit about some of the pitches maybe you did not swing at over the past few years or what types of pitches you’d be more willing to swing at with the new streamlined org structure?

Jeff Donnelly : It’s a good question. I mean, there’s always going to be situations that we’ve looked at acquisitions or disposition opportunities that weren’t pursued. I don’t know. I think going forward, we’re just going to try to be thoughtful about, and this is an often used line about sort of skating to where the puck is going as opposed to where the puck was. And that’s, I guess, how I think about it. I think there’s oftentimes when I look at the lodging REIT industry over the last two, three decades, I find that there always tended to be a little bit of groupthink in terms of the markets that got crowded around the same time. And oftentimes, when everyone’s buying in one place is frankly where I wish we were selling at that time.

So, I couldn’t give you a specific example, but when I think forward and I borrowed a term from Justin where I do like the idea of manufacturing core assets, meaning that we want to be doing things today that will become core product in the future, because that’s really how you can create value.

Duane Pfennigwerth: Appreciate those thoughts and certainly don’t want to lock you into quarterly guidance. But could you expand a little bit on how you see the comps for May and June relative to the April flattish commentary?

Justin Leonard: Duane, I think it’s predominantly driven by what our group outlook is and we knew that April was going to be our toughest month from a group perspective. And so I think coming out of April flat given where we stood from a group pace perspective and that’s probably our worst month of the year on a year-over-year basis. I think we’re pretty optimistic that we’ll see continued growth from that flat range for the last two months of the quarter because we’re in a much better position just in group pay. So assuming we see the same type of transient booking trends, we should see that sort of 300 basis point escalation from what we saw in April on RevPAR.

Operator: And our next question is going to come from the line of Anthony Powell with Barclays.

Anthony Powell: Hi, good morning and congrats everyone on the role. I wanted to dig in a bit more on the redemption comments, which I think are interesting and important. In terms of points per room night, I noticed myself that the points required to redeem have gone up. So is that kind of a driving issue there? And also, how much control do you have as an owner on the whole points per night, I guess, values?

Jeff Donnelly : I’ll have Justin speak to that. He’s pretty intimately involved with it.

Justin Leonard: I think the way I sort of think about it is, as these programs have evolved, they’re not just the accumulations are not just about hotel stay. In a lot of ways, they’ve really become more focused on the credit card spend. And so, in the middle of the pandemic, you had a lot of people that were spending on their credit cards generating these large point balances, while not traveling and not utilizing them. So I think part of what we’re seeing is just a continued burn-off of that accumulation that happened during the pandemic and that’s why we saw a big uptick as the sort of revenge travel started two years ago. We’ve seen a fall-off since that point, as opposed to just the increase in the points required. There is some of that as well.

I think as occupancies returned, the brands have reoriented their programs in order to try and not run those programs at a loss on an annual basis. And so there’s been a significant uptick as rates have risen to that number of points required to get into the hotels. In terms of our control, I would say fairly little. We have the ability to lobby for changes to the programs, but they are a bit of a black box in terms of where the point totals are set.

Jeff Donnelly : Yes. And I would chime in that I think that’s one of the reasons why we’ve liked some of these independent more destination resort locations where I think we’re a little more in control of our own future at those properties.

Anthony Powell: And maybe one more broad picture on, I guess, asset mix. Group has done well over the past couple of years and looks good over the next couple of years. I know there’s been discussion in the past about reducing your group exposure. So maybe can you just discuss what your approach to the group is as a percent of your hotel deck?

Jeff Donnelly : We’re roughly about a third group, right now, give or take. And I don’t think there’s a there’s not an intention on our part to reduce that, meaning like exit group assets, if I heard you correctly. It does provide stability to our portfolio. We do like that business. I think it’s all about making sure that we have assets that are well positioned to excel at being good group houses. But yes, if I heard your question correctly, we’re happy with that concentration in our portfolio.

Anthony Powell: So like properties like Chicago Marriott are now kind of still core as opposed to maybe potential asset sale?

Jeff Donnelly : I wouldn’t necessarily say that like Chicago Marriott per se or any of those assets are core. I’m just saying that I think we’re not trying to exit the group segment. I think we talked about in the past that Chicago Marriott for us is it’s actually a terrific property. It’s very well located. It’s very well run. I think we questioned whether or not it sort of fits with the rest of our portfolio. So that’s really been our thinking on Chicago Marriott.

Operator: Our next question is going to come from the line of Smedes Rose with Citi.

Smedes Rose: Hi, congratulations and to each of you on the new roles. I wanted to just ask a little bit, you kept your RevPAR outlook 2% to 4% unchanged, but it sounds like things were lighter than expected in the first quarter. You mentioned a little bit of color around the second quarter. So what do you need to see to get to the high end of that range? It sounds like group is kind of locked in. So is it more business transient or is it more leisure? Like what would need to happen?

Jeff Donnelly : I think it’s a combination of factors, Smedes. I think we have very strong group pace. Of course, that can come at or above depending on how in the year, for the year group is shaping up. And obviously, there’s the risks to the downside are obvious both in leisure and in group. I think to get to the high end, we would have to see our group continue to come in very strong with less attrition and fewer cancellations and leisure to have a more pronounced ramp probably. But we’re not expecting anything too dramatic in the back half of the year for leisure.

Smedes Rose: And then for leisure, it sounds like it was the sort of the higher end of your kind of leisure customer that came in weaker than expected. Is it I mean, are you hearing or seeing anything that just would suggest like just an overall economic pullback or do you think it’s more of a sort of a comp issue?

Jeff Donnelly : I think in our case, it’s a little bit more of a comp issue, frankly, because we’re not of the size that we necessarily have a lens that’s so broad that we’re able to make that type of a determination. And the two examples I called out in my remarks, I mean, one, Sonoma seemed to be very asset specific as is the case with Vail. Those two in particular really were the source of the majority of the weakness for what we would call our luxury resort group. So I don’t think there’s necessarily a very specific trend impacting though I’m aware that there are concerns in the broader economy that I’m sure affect people’s purchases at some level. I don’t think it was solely driven by that.

Operator: Our next question is going to come from the line of Dany Asad with Bank of America. Your line is open. Please go ahead.