So I think you need to understand what’s happening in the demand channels. You have to be very proactive and anticipatory in the way you said your revenue strategy is particularly midweek group, and I think we’ve done an excellent job on it so far, and I think we’re trying to stay ahead of the curve as we move into 2024 on the shifting patterns as the new normal is established.
Dany Asad: Thank you very much.
Operator: Thank you. And our next question coming from the line of Bill Crow with Raymond James. Your line is open.
Bill Crow: Hey, good morning. Jeff, let me start with you and recognizing you’re still rolling up budgets, but also recognizing that you opened the subject of 2024 expenses and margins in your prepared remarks. So let me frame it this way. One of your peers recently suggested that in order to achieve flat EBITDA margins next year, they need about 4% RevPAR growth. Is there any reason to think that DiamondRock will be materially different than that one way or the other.
Jeff Donnelly: I think we have some sort of unique factors going on for us because I mentioned, like with the Dagny that’s going to be coming on and adding some significant EBITDA that ramps back up. I think for a portfolio that’s maybe a little more static if you will. I think that’s probably in the vicinity. It’s going to vary, of course, portfolio to portfolio, but I think that’s probably sort of a good industry note.
Bill Crow: Great. Thanks for answering that. Mark, maybe a subtle question here. But when we look at leisure, is it normalizing? Or is the consumer weakening?
Mark Brugger: Well, it’s hard to extinguish this too. I think it’s — we’re seeing normalization. We’re not seeing — maybe it’s some consumer weakening, but we’re not seeing that. We’re seeing the share of wallet still be significant. We’re seeing people spend on experiences versus things. To state they’re cutting back their material purchases before they’re cutting back their travel expenses. But it’s hard to always pull out exactly what’s driving the behavior. But people are traveling. I think we’ll see a pretty robust holiday season as we come up here. So we’re relatively optimistic. But clearly, things have settled into new patterns in 2023.
Bill Crow: Thanks. Appreciate it. Thank you, guys.
Operator: And our next question coming from the line of Chris Darling with Green Street. Your line is open
Chris Darling: Thanks. Good morning. Mark, can you touch on what’s been pretty strong fundamental performance in New York City and how sustainable that might be going forward? And then is it fair to suggest that New York is one of those rare markets where values might actually be up in recent months despite the movement in the tenure?
Mark Brugger: Yes. So I guess I’ll speak on — yes, a couple of kind of detailed questions there. So I think of values, the interest in New York City from investors is always high. I mean it’s a market that always gets international and everyone’s attention. So I think New York continues — you could see increase in value. People believe in the thesis in New York, and it’s always been active on investors kind of a global scale investor appetite. Fundamentals are good. You have a lot of positive things happening there. Most notably, you’ve had a lot of supply get taken out and converted to other uses. The 1,000-room Roosevelt getting converted to migrant housing and other big properties getting taken out permanently for student housing, other uses.
That’s been very helpful. You have the M1 rezoning going forward, which will take out the ability to build nonunion hotels, generally after 2026. That’s going to be a nice catalyst, of course, most recently, we’ve had the change in the laws around Airbnb, which has taken out significant number of available units through that channel. So there’s a lot of reasons to do before — in New York. I’d say the other one is that the type of industry in New York, the financials have probably been the single most aggressive industry in making sure people return to work four or five days a week. You juxtapose that with a tech-centric market like Seattle or San Francisco, those industries have kind of lagged on the return to office stats, which has kind of suppressed the ability to get the transient coming into those markets.
So I think there’s a lot of reasons to be constructive on New York. We certainly are. I think we’ll be constructive as we set our budgets for 2024 there as well. So that feels good.
Chris Darling: And any commentary you would have on the investment sales market in New York or?
Mark Brugger: There has been some recent trades, particularly smaller select service hotels and at the high end that have gone off. Again, I think, the feedback from the brokers that we talk to that participate in this process is there was fairly — fairly robust demand for those offerings. I think people are interested in that market, as I mentioned. And New York is one of those markets you will always get the international and high net worth individuals interested in. So I think it’s a constructive market for dispositions.
Chris Darling: Fair enough. Appreciate the thoughts.
Mark Brugger: Thank you, Chris.
Operator: Thank you. Our next question coming from the line of Mike Bellisario with Baird. Your line is open.
Mike Bellisario: Thanks. Good morning, everyone.
Mark Brugger: Hi, Mike.
Mike Bellisario: Just first on the monthly cadence. Just was September really the main driver of 3Q upside versus your expectations? And then can you provide any color on what you saw in October, particularly relative to what you thought the month was going to look like?
Mark Brugger: Yes. So September did come in a little better than we anticipated. We gave our expectations about two months ago. So September was the kind of the variable and that came in a little better portion the resorts that we had forecasted. October is a strong month. It will be the strongest month of the fourth quarter for us. The way group laid out their major markets was particularly focused on October. So we were at or ahead of our expectations for October. We don’t expect November, December to have the same group strength. So they probably won’t be adds on a comp basis as strong as October was. But so far so good this quarter.
Mike Bellisario: Got it. Helpful. Thank you for that. And then just switching gears a little bit. The Hersha transaction was announced in late August after your last conference call. So maybe, one, can you provide any updated view on what private equity groups are looking for? What you’re hearing from them? And then how that trend maybe shapes or changes your view on relative value in next steps for you looking ahead?
Mark Brugger: Well, I would say the Hersha transaction had a positive read through and that they had substantial interest from a number of high-quality, very capable private equity firms. So the depth of the bidding there, I think, was very encouraging. And the debt they were able to secure, I think, was also very encouraging. It was significant that fairly good competition for the debt and the pricing looks like it’s going to be on a relative basis, fairly attractive. So I think all that are positive read-throughs. Does that change our outlook? I don’t know that it changes our outlook. I think private equity is still interested, but it doesn’t feel like this is the moment in time when they’re particularly leaning in to get super aggressive on pricing for public REITs. I think based on where we are with the Fed and the concern of slower economy, I would imagine that the middle of next year is probably going to be a more robust time for PE firms to lean in.
