David Katz : We’ve been hearing obviously, from peers and other sources, right, that there isn’t a lot to buy in the market these days. And it sounds like you have what to buy. What is your assessment of the market at the moment? Is there a bid-ask spread issue? Underwriting conviction should be better, I would think, but I’d love to hear yours.
Thomas Baltimore: Yes. I would open. David, it’s great to talk with you, first of all. But I think also, keep in mind that uncertainty is the enemy of decision-making. I think part of what we’re all waiting for, we believe the Fed tightening cycle is over. I think we all expect that at some point, whether you’re in three reductions this year in interest rates? Or is the Fed funds rate or is it 4, 5 or 6. I certainly think people are looking for that to rerate and certainly would expect, obviously, the debt markets to continue to open up. Banks are got their own regulatory challenges, but there’s certainly plenty of private capital, private credit capital in particular out there. So deals are getting done, albeit at a slower pace.
But I think in the second half of the year, you’ll begin as we get better visibility, you’ll begin to see that open up. There are a lot of people out there who believe that there’s going to be tremendous distress. I think you’ll see, in my view, probably more of that on the office side that I think you’ll see on the lodging side, and there’ll be some assets that need to be recapitalized. But this is not the GFC and what we saw back in that period of time. And we’ll continue to be thoughtful. We’ll continue to reinvest in our portfolio. Again, we think we can generate higher yields there. And if the gap remains between our share price and NAV, we’ll recycle capital and buy back shares. I mean we’re definitely not going to look to raise equity in this environment right now given where we’re trading.
And we’re hoping that our continued outperformance will get noticed and that we’ll see — begin to see that rating in our stock price.
Operator: Our next question is from Bill Crow with Raymond James.
William Crow: The two W hotels in Chicago, I’m interested in because W seems like they’re really trying to rebuild the brand, and it’s a very different product type than the traditional Ws. Do you have any immediate plans to either kind of reinvest in those properties or divest those properties?
Thomas Baltimore: Yes, it’s a great question, Bill. Look, we know, obviously, given the work that Marriott is doing that they’re trying to reinvent, if you will, and I think to elevate the W brand, and we certainly support that. We’re not sure that either of those assets are what we would call as pure Ws as we move forward. And we are actually in discussions about repositioning. And we think a soft brand play may make the most sense there. And I’ll stop there. But we are carefully exploring our options and ways to create more value with those two well-located assets.
William Crow: Great. And then the other one I wanted to ask you about was I look forward to your event down in Orlando. I’m wondering what the one or two things you’re hoping the Street takes away from that event?
Thomas Baltimore: Yes, it’s a great question. I could not be prouder Bill, when you see just the magnitude of the work done and the complete transformation of not only adding 100,000 square feet over suspended over water for the Signia ballroom, but then to see the event lawn and to see, obviously, the additional ballroom that we added adjacent to the Waldorf and now the ability to be able to layer in groups and accommodate multiple groups and to have a few hundred thousand square feet of meeting space there, and a renovated golf course. That complete experience and to have really a world-class resort, 350 acres. And Bill, you’ve heard me say this before. I mean, we’re right next to the Four Seasons, which is a fabulous asset, best in the market.
I’m not sure what was paid for it, $1.3 million, $1.4 million a key. We’re trading at $250,000 a key, maybe slightly above that. I think we’re a pretty good value. So I think that’s something else I’d like and hope that shareholders take away, but we hope you can join us, and we look forward to seeing you.
Operator: Our next question is from Chris Darling with Green Street Advisors.
Chris Darling: I just have one follow-up question on guidance. When I look at what’s implied by the 2024 outlook, I calculate expense growth for the year between 5.5% and 6% at the low and high end, which is just a $10 million range, it looks like. Can you help me understand what gives you confidence in projecting that relatively tight range of outcomes?
Sean Dell’Orto: I think it’s a matter of, as you think through going — just the various ins and outs that happen when you think about elevated growth on the high end with room production as well as out-of-room production versus kind of the other side of it. I think ultimately, you’re going to cut expenses as well as you lower revenues. And ultimately, so I think we get generally comfortable with it. I don’t not sure quite that much of a range. But I think certainly, I think feel pretty good about our guidance. I mean it is at the higher end of 5% nominally. When you think about the adjustments for the fact that we’re lapping, we’re adding a bunch of expenses because we’re reopening Casa this year relative to last year as well as lapping some of the things that we had to our benefit in Q3, which are one-time in nature or ultimately a prior year tax appeal in Chicago, it’s about 100 basis points lower, call it, high 4s when you think about kind of — kind of a more run rate kind of growth prospect.
Operator: And our final question is from Keegan Carl with Wolfe Research.
Keegan Carl : Just one for me. Just wondering if we could kind of dive in a little bit more to your expected contribution from Hawaii in the first quarter of the year and then full year ’24. It would be really helpful.
Sean Dell’Orto: Well, I think as Tom noted, it’s kind of lower single digits for Hawaii. It’s really broken out. I mean, Hawaiian Village is, I would say, is more kind of in line with the portfolio performance. If you kind of adjust for the disruption we expect in the back part of the year, it’s really Waikoloa that has paces down 30-plus percent for the year. And so we expect kind of a negative growth pattern for that, like mid-single digits down. But certainly, it’s a drag towards Hawaii overall as a market. That said, I think — and I think it’s probably back half of the year, it’s more we see the group down for Waikoloa on top of disruption. So I think we certainly expect that it’s better performance in the first half of the year.
