Mark Brugger: I think it’s going to be a base building exercise over a couple of years of building market awareness. We have put some contract business, which I think got on really sort of a rate parity basis will supplant probably slightly in excess of the amount that we were getting from redemption out of the Hilton system. And we’ve got a significant amount of volume out of that system, but the rate wasn’t actually that great on an annual basis. So we’ve really sort of traded like-for-like there with some contract business, which is a more consistent base throughout 12 months. And now we’re just in the process of establishing a name for the hotel with a lot of our local partners on the BT side, which we’ve seen some encouraging results on.
And I think we’re up about 60% in group for the Dagny specifically. It’s not a huge group hotel, unlike the Westin that we have in Boston. But we’ve seen some good inroads with the renovated product from some of our local corporate customers.
Duane Pfennigwerth: Appreciate. Thanks.
Operator: Thank you. And our next question coming from the line of Dori Kesten with Wells Fargo Securities. Your line is open.
Dori Kesten: Thanks. I believe you said that Q3 expenses were up 1.5% with flat revenues and now looking into 2024, there are some expense tailwinds. Are you able to give just any more detail on what the potential run rate could be as we’re looking into 2024?
Mark Brugger: Hi, Dori. This is Mark. We’re not really giving 2024 guidance, but we are seeing expenses, particularly on comparisons to fully staffed hotels, better food cost. I think a number of the labor initiatives we put in are also helping our productivity per room. So as you saw sequentially, the expenses have come down substantially on a year-over-year basis. That’s a trend ex some uncontrollables like property tax that we expect to continue the year and hopefully, as we move into 2024, the comparisons continue to get better. But we do anticipate that we’ll have higher banquet revenues in 2024 from the strength of our group book. So there will be some associated expense as we layer the banquet back into 2024 as well.
Dori Kesten: Okay. And what’s the quick math on Q4 margins based on your comment that you’re comfortable with that?
Briony Quinn: Yes. That’s a good question, Dori. I guess I would explain it this way. Year-to-date, I think our margins for hotel adjusted EBITDA quarter-by-quarter are down about 200 basis points year-over-year versus 2022. The fourth quarter will have a bit larger dip, because as you recall, we have the tax in Chicago or the tax relief in Chicago, that’s not going to repeat. So that’s about a 240 basis point benefit to last year. We’re not going to have this year. And then beyond that, you have the insured — property tax insurance renewal this year, which is about a 75 basis point drag and then I mentioned the expenditure on something like the Westin landing [ph] and some other small items are about a 40 basis point drag. So if you think of it as sort of adding that on top of the 200 basis point change we’ve seen before, you’re probably something close to almost the 500 basis point differential versus the margins that we did in the fourth quarter of 2022.
Dori Kesten: Okay. And then you mentioned testing the market on dispositions. Should we assume that that’s going to be primarily in urban markets? And then I guess, second, is it a good time yet to test pricing on larger boxes?
Briony Quinn: So we generally don’t like to talk too much about pending dispositions, because we always assume that the potential buyers are listening these calls as well. But I will say the assets that we are testing the market on are all urban assets, so that’s a correct assumption. I think it’s really deals below $100 million, where there seems to be more liquidity and volume, the bigger deal is just because of where the debt markets are and kind of the more difficult large loan market that exists today, it’s just hard to get those deals done.
Dori Kesten: All right. Thanks.
Operator: Thank you. One moment for our next question. And our next question coming from the line of Chris Woronka with Deutsche Bank. Your line is open.
Chris Woronka: Hey, good morning, guys. Thanks for all the details so far. Mark, I guess, one of your friends recently sold a hotel in Boston, I think they’re going to convert to Hilton. Is there any — as you look out a couple of years, is that a net positive? And that does it hurt you at all given you have — you recently converted your Hilton, slightly different neighborhood and then you have the Westin which I don’t know what the longer-term plans there are. So can you give us any color on any impact from that?
Mark Brugger: Sure. One, it’s — I thought a good cap rate, and that’s a good, I think that’s a good comp to have in the marketplace for assets in Boston. So I thought that was a favorable read through. On the Hilton branding, one of the reasons we want independent is we have a seven day a week kind of location that lends itself because of the kind of consistent demand in our location in Dagny. And it avoided the — what would have been a problem at Hilton has decided to put another Hilton brand on 1,000 rooms, not too far away from our hotel. So I think in a lot of ways, it vindicates our decision to not be exposed to new Hilton supply within this market. So we feel good about our decision. We feel good about the prospects of the Dagny. It had a very good August, which was ahead of our original anticipated pace. September looked good and for given just on underwriting. So we feel really good about that.
Chris Woronka: Okay. I appreciate that, Mark. And then I really just want to follow-up on a couple of quick ones from the prepared comments. One is corporate transient I think a pretty good comment about pricing. Questionnaires, are there any volume guarantees associated with those maybe relative to 2019? And then the second part of it is I think you talked about some cost comps being easier, especially you mentioned insurance there. I guess that caught me a little bit by surprise given what we’re seeing. Is that because you have insurance for next year locked in? Or you’re just more optimistic in general?
Mark Brugger: Well, taking this in reverse order, then property insurance, our renewal is April 1, so we’re locked in until April 1. I think that’s what we’re trying to convey in the prepared remarks is that we know what our costs will be through that. And we had a substantial increase last year. Hopefully, the market will be more accommodating when we get to April, but we’ll see when we get there. On the BT, I think the surveys that I’ve seen come back from the largest special corporates is that they intend to travel more in 2024 than they did in 2023 at this time. That’s helpful. Most of our BT special corporates don’t have minimum guarantees but we’re taking some comfort from the fact that they are — the initial surveys indicate that they are intending to travel more than the restricted levels that they’re at 2023. But we don’t expect a rapid reacceleration of BT as we move into 2024 and certainly not the way we’re engineering the mix is at our hotels.
Chris Woronka: Okay. Super helpful. Thanks, guys.
Mark Brugger: Thank you.
Operator: Thank you. And our next question coming from the line of Floris Van Dijkum with Compass Point. Your line is open.
