Tom Baltimore: Yes, it’s a fair point. I don’t think you can deny that the yen has certainly weakened. I mean if you think back to 2019, I think it was around $110 per U.S. dollar. And today, obviously, it’s about $155 plus or minus, and then there’s some fuel surcharges. So, it’s clearly a long gating the recovery of the Japanese traveler. We had about — if you think back to pre-pandemic, it’s about 1.5 million visitors from Japan. That’s been pretty consistent for probably the last 25 years, plus or minus. 2023, I think, was about 600,000. So, you’re about 65% down. This year, forecast is about 850,000 to 900,000, a huge credit to our operators and our asset management team. We’ve really worked hard to have less reliance, while we’re still really anxious and waiting for the Japanese travel to come back to pre-pandemic levels, we can certainly be a little more selective and certainly yield the transient a little more efficiently than perhaps we were able to do in the past.
And as I noted earlier, the Japanese traveler revenue coming from the Japanese traveler is only about 3.5% down from the traditional level of 18% to 20%. So — we see that as really a tailwind, a future tailwind and continued growth. But despite that, we’re trending towards perhaps our third record year in a row in terms of overall performance. And as you know, we’re — I think last year, total EBITDA of those two assets approaching in that $240 million to $250 million. So if you’re going to bet anywhere, we think betting Hawaii is a solid bet. And as you know, given the constraints on new supply, certainly among the lowest, if not the lowest in any market in the U.S., Continental or outside.
David Katz: Understood. And as my follow-up, I just wanted to touch on the cost of labor, if I may. I hope that feedback is coming on my side, and you can hear me okay.
Tom Baltimore: Yes. We can hear you fine.
David Katz: Okay. Right. Okay. Great. So, there’s been — there’s obviously been, over the past, call it, 6 to 12 months a lot of labor union activity, which I think is sort of a relevant dynamic. Are you expecting or factoring in further costs as a result of some of what at least gives the appearance of being out there?
Tom Baltimore: Yes. It’s a fair question. And as you can appreciate, we’re not going to negotiate, obviously, publicly on the recorded line. I would just say this, that we’ve got about 60% of our business that associates are certainly contractually obligated to a CBA, we enjoy very strong relationships. We have always been able to work through those. Obviously, we do that primarily through the operators, largely Hilton, but not exclusively Hilton. And we’re confident that in this environment, I don’t think anybody wants protracted strikes or ongoing battles, particularly when our industry suffered through much — so much during the pandemic. And so, we — when you think through it, we are cautiously optimistic and have we built in some cost to account for overall budget. As Sean outlined earlier on the earlier question that we got for sure. But we’re not overly alarmed David, in — and I would encourage listeners to not be overly concerned about it.
David Katz: I hope you appreciate the context of the question.
Tom Baltimore: Fair question.
Operator: Next question comes from the line of Stephen Grambling with Morgan Stanley. Please go ahead.
Stephen Grambling: As a response to your first question from Anthony, as you look out at the positioning of the portfolio and take into consideration the upside that you’ve been seeing, from the success of renovations, but also taking into consideration changing demand dynamics, does that change how you’re evaluating deploying into the portfolio or even redefining core versus non-core assets?
Tom Baltimore: Yes. That’s a great question. And the answer is yes. We’re constantly going through and looking at the portfolio and we’ve done that. Again, as I said earlier, we’ve sold or disposed of 42 assets. And the vast majority of that were non-core, couple we were in a minority position at a small joint venture. I think about San Diego as an example where we ended up selling our interest there to Sunstone. We didn’t want to be in a 25% interest. But we constantly look at the portfolio and we look at really where we’re making money and where we think there’s huge upside. Obviously, we believe that there’s huge upside in Hawaii and hence, the investments that we’ve made and the others that we’re contemplating.
We obviously feel the same way about Key West, and we’re seeing the results there. If you think about Orlando, Orlando and what we’ve done there, and I think people forget, you’ve got about 45 million visitors into Vegas. Obviously, you’ve got the entertainment and gaming piece, but you actually have 75 million visitors into Orlando. You’ve got the Epic Universal, $5 billion, hundreds of acres in a new park opening next year. You’ve got Disney coming out now and talking about $60 billion that they’re looking to invest over the next 10 years. And we see all of that are real tailwinds and real benefit, plus you’ve got a top five, top seven convention center in Orlando as well. So, we use those markets as examples, where we’re certainly investing in assets that we own, and we’re not looking to add new assets necessarily in those markets, but we’re certainly investing in the ones that we have, and we see considerable upside.
And compare that to paying a 15x multiple for an asset versus investing in our portfolio where we can generate mid-teens unlevered returns. And we’re trading at a sub-10 EBITDA multiple. I mean, the math is pretty simple, and we think the benefit to shareholders is pretty strong, and we will continue to use that kind of discipline and thought process as we move forward.
Stephen Grambling: Maybe as an unrelated follow-up. It seems like there’s a lot of concern around the leisure consumer. And you touched on this a bunch, but maybe to ask the question in a different way, what are the things that you would be looking out for to try to assess whether there is some underlying pressure or deterioration in the leisure consumer in particular?
Tom Baltimore: Yes. I think you can’t look at a one size fits all, Stephen. I think if you — if — there’s no doubt that those at the lower end of the socioeconomic framework are struggling the most, and you’re seeing it. You’re seeing it in all the credit metrics. You’re seeing it in their spending patterns and — but as you think about our customer base and that upper middle class, more fluent incomes over 150,000 plus or minus that consumer is still resilient. And another stat to look at is look at personal savings. I mean, I think last quarter, it was about $775 million. I think this quarter, it’s down to about $670 million, plus or minus and about 3.2% of disposable income. So, the consumer is still healthy.
