Jeff Donnelly : Yes. I mean, I’ll take the tax and insurance side. That’s the easy answer. I would say there’s really no concerns that we have there. I mean, tax increases can surprise you just as tax rebates can, but none that we really have today that I would say are pretty particularly notable to our portfolio that we think will cause any sort of major disruption or headwind. I don’t know. Do you want to talk about labor?
Justin Leonard: Yes. I think wages have definitely at least the rate of growth seems to have cooled a little bit. I feel definitely above kind of prior run rate pre-pandemic, but nothing like what we saw over the course of the last 24 months. I think we were encouraged to see that sort of per-hour worked wage rate inflationary rate kind of creep down towards the 3%, 3.5% in the first quarter. We obviously, as Jeff mentioned, added a lot more hours work just given that shift to food and beverage and the number of hours that are required to deliver that product. But I think that was encouraging. I think the one thing that maybe caused a little concern for us is just we continue to see growth and benefits specifically in health and welfare that I think everyone sees it in an operating business that those costs continue to run at high-single-digit numbers on a year-over-year basis.
Stephen Grambling: Maybe one unrelated follow-up. I just want to make sure I understood you correctly. I think that you made some comments in terms of being more deliberate, in terms of transactions. But have you had any like unsolicited inbounds on assets at this point because you were referencing being maybe more offensive rather than reacting?
Jeff Donnelly : Yes. We have had no unsolicited requests for any of our assets in the last few months that I can think of. There’s lots of times that you do get those requests just for your benefit, but you really have to assess the quality of the buyer beyond just their pricing in terms as well.
Operator: And our next question is going to come from the line of Chris Woronka with Deutsche Bank. Your line is open. Please go ahead.
Chris Woronka: So, Jeff, I guess, are you guys seeing any increase in the level of what I would call churn on reservations at your hotels? I mean, I think we’ve heard that kind of more in the select serve world, which you’re not in, but that there’s just more churn, there’s cancellations and booking windows are actually shortening a little bit. Is there anything like that going on in your portfolio whether it’s a market or a segment?
Jeff Donnelly : No. I mean, I think in the aggregate, I’d say, no. We probably have seen maybe a little bit more in a couple of selective places. But candidly, we’ve been very focused on base building. And so for example, in addition to a group, we’ve really been leaning into advanced prepay, which gives us some insurance against that race to the bottom when we have those clients that are in the hotel that are sticky and can’t effectively cancel and rebook. It gives us just a little bit more ability to keep rates high without sort of flushing through the entire reservations deck in a hotel on a given date. So, I would say in the aggregate, we really haven’t seen a change to cancellation policy in the short-term on a per booking basis.
Chris Woronka: Okay. And then just kind of going back to the, I guess, the new, I don’t call it new revamped acquisition strategy perhaps. Does that should we take away that that could imply more chunkier assets? And you guys have obviously done a lot of smaller assets and I know there’s good returns at those, but there’s also probably some friction costs. Is that kind of a theme that we should look for or would we not necessarily conclude that?
Jeff Donnelly : Yeah, I mean, I would say and I’m being a little funny when I say this. We’d like to buy assets that are bigger than $30 million. That’s actually, it’s not new. I mean, we’ve always aimed for larger assets. I would say, generally speaking, I think given a company of our size, we’ve shied away from transactions that start to get into that $300 million, $400 million, $500 million range just because they create a little bit of a concentration issue for us. And sometimes we’re not going to be the most competitive buyer given the risk that presents to our portfolio versus what it does to perhaps one of our peers or one of the private equity firms who might be more comfortable stretching there. But I think in the past, we’ve always kind of thought of our sweet spot as sort of that $50 million to $150 million range.
So there is certainly an efficiency to putting capital into those assets. And we understand that people want assets to be needle-moving. So I think, I can’t tell you that we won’t buy or won’t come across something that’s sort of smaller and interesting, but I think our preference is to be a little more efficient in how we put our capital.
Operator: Our next question is going to come from the line of Bill Crow with Raymond James.
Bill Crow: Justin, I wanted to start with you. Is there any read-through on changes in the amount of points that are being redeemed up or down at any given time to the health of the consumers or do consumers lean more on points redemptions when times get tougher?
Justin Leonard: I think you’d find, Bill, maybe not surprised that the consumer is actually pretty smart about it. I mean, I think they have sort of an idea in their mind about what the value of the points are and use them when they see there’s a perceived value. I don’t think it’s just the consumer that has no ability to vacation unless they use points. I think a lot of times people look at them as just another form of currency and you really look at them relative to the ADR. And so I’m not sure if that necessarily changes pricing decision, it just more maybe reallocates their decision to different markets based on their perceived value.
Bill Crow: Jeff, I know you and this is a topic that I think has surfaced three or four times already this morning, but, you asked but didn’t answer the question about how big box hotels might or might not fit into your portfolio. And I want to give you a chance to answer that question. I think that’s what a lot of people are asking. Is that really the difference between maybe your philosophy and Mark’s prior philosophy?
Jeff Donnelly : I don’t think there’s necessarily a difference there. I guess, I made a comment in my opening remarks about maybe not pursuing sort of the big box brand managed hotels. Really what I was meaning by that is, I think there’s a tendency historically in the sector to buy sort of a, the fully renovated it doesn’t necessarily have to be brand managed, but the fully renovated hotel and then argue that it’s somehow worth more than what someone just paid. I think we’re trying to find situations where we can create that value. And whether it’s through a renovation, it’s through repositioning or Franklin being smart about identifying assets that we’re able to buy at attractive discounts in the marketplace because perhaps the owner is under some moment of distress, so they don’t see something that we see in the market or conversely, it’s a market that we think is going to be improving becoming a little more mainstream and more core.
Bill Crow: And then finally for me, any indication that hotel worker turnover is calming down a little bit?
Justin Leonard: Yes. I mean, I think we definitely see that in a portfolio. But one way we see it is a continued shift away from contract. And that’s really we kind of gauge what the turnover is sort of looking at the number of hours we have that are coming in through contract labor as opposed to full time. And we have sort of a desired intent to bring more of our employees in-house. We just think it helps us from a productivity perspective and helps build more loyalty and goodwill in the box. And we definitely saw a bit of that shift in the first quarter. So I think that’s really probably the best indication I have of less turnover that we’re not having to backfill with contract labor hours that we’re actually shifting more of those hours worked towards the manager’s direct employees.
Operator: And our last question is going to come from the line of Floris van Dijkum with Compass Point LLC. Your line is open. Please go ahead.
Floris van Dijkum: Just a follow-up question for me. Jeff, maybe if you could talk a little bit about your vision for branded versus unbranded. The discussion on redemption points, obviously, very interesting. It can be really good if you get high occupancy and you get these and you use the redemptions to fill and create that compression and get maximum revenues. But as you think about DiamondRock’s portfolio in three years time. It sounds like you’re probably more tempted to have more unbranded where you’re more in control of the revenue. Maybe if you can talk or maybe I’m interpreting that incorrectly. Maybe if you can talk a little bit about your vision on branded versus unbranded going forward and how that shapes the portfolio?
Jeff Donnelly : I would say, to me, like the decision to brand is really just a choice. At the end of the day, I’m not necessarily pro-brand or anti-brand. I think it’s one where it’s just a choice for an owner about whether or not we can maximize our returns and being realistic around the costs that are being associated with the brands. I think there’s real benefits that they can deliver to you on the top line, but there are effective costs as well through the expense structure and, of course, on the capital side. And I think they’re important to consider. I think one area where you would probably see us maybe if I cut that the answer a little differently is we likely remain more unencumbered or not brand-managed. I think we feel like we appreciate the flexibility of having independent management from the brands.
And I think we feel like we have more success from that standpoint. But we do have a lot of branded hotels in our portfolio, predominantly franchised, and I think we’re very happy with them. So I don’t think there’s any desire to necessarily move away from those. I think it ultimately, as I said, really just comes down to a choice for each asset.
Operator: And I’m showing no further questions at this time. And I would like to hand the conference back to CEO, Jeff Donnelly, for closing remarks.
Jeff Donnelly: Well, thank you everybody for joining us today. I appreciate all the questions and we look forward to speaking with you next quarter.
Operator: This concludes today’s conference call. Thank you for participating. You may now disconnect.
