Jon Bortz: Yes. I think that’s — it depends what revenue growth we see. We’re going to need to see 4% plus revenue growth, I think, to get to flat margins next year, and we’re going to need to be higher than that. Now we have some tailwinds related to the fact that we had a significant disruption this year and lost revenues, and that will help provide a tailwind for that growth rate next year. And then it will depend upon how much share we gain next year through the investments we’ve made and then, of course, what the macro environment looks like.
Bill Crow: Yes. Okay. Thanks for the time. Appreciate it.
Jon Bortz: Yes. Thanks Bill.
Operator: Thank you. The next question is coming from Floris van Dijkum of Compass Point. Please go ahead.
Floris van Dijkum: Thanks. Good morning, guys. Appreciate taking my question. So I know we can get bogged down in the minutia of insurance, and it’s an important aspect and same thing with the property taxes. But as I’m just thinking about this bigger picture, you guys have invested nearly $300 million of revenue-enhancing investment capital into your portfolio to upgrade and enhance your portfolio over the last couple of years. There have been obviously — and a big chunk of that has actually been invested since last year. You haven’t had the benefits of any of that and you’ve had the detraction of, call it, $12 million to $13 million of renovation disruption this year in terms of EBITDA. Again, what I’m trying to get at is to get a run rate for adjusted EBITDA going forward that should be significantly despite all these concerns about margins, et cetera, you should theoretically have, call it, $30 million to $40 million maybe even $50 million higher EBITDA than what you had this year.
If I just do the math on the capital that you’ve invested in your portfolio and next year sort of being a first full year of stabilized or putting earnings, if you will. Maybe if you can talk a little bit about the run rate of — or earnings power of your portfolio going forward?
Jon Bortz: Yes. I mean, I think that’s what we’ve tried to lay out in our investor presentation in some of our prior calls for is that there’s significant upside. Now some of that – some of the share gains from the investments we’ve made have occurred. But others, as we’ve shown in the investor presentation with the bridge that we have are in the future, that will be next year, that will be the year after. That will be the year after that and probably some in the year after that. These major repositionings tend to take three to four years. And — they — we gained share more quickly in good years and strong years and otherwise takes longer if the environment is flatter. So there’s significant upside from the investments we’ve made.
The dollars are out the door. We — that impacts our balance sheet, obviously. And that’s — the good part is the investments have already been made. And as you say, the investment side, the return side is still to come. And so it’s hard for us to lay out exactly what that looks like from a timing perspective. And we haven’t even started our process with our property teams about what next year looks like. But we do have a good pace going into next year. We’re encouraged that the macro side is at least any slowdown has been deferred. Who knows, maybe it gets eliminated, but I think more likely deferred or softer So we’re — you can tell we’re a little cautious, given the macro environment. But when we get through this overhang of when is the recession coming or when is the slowdown going to be here.
I think we’re going to be more confident about the timing of when we’re going to see the significant returns from those dollars that have been invested. But definitely next year, we have the tailwind of not having all that disruption within the portfolio.
Floris van Dijkum: And Jon, if I can maybe just follow up on that typically, the returns that you would expect to get from this revenue-enhancing CapEx would be minimum of 10%. I mean, what historically, what’s the range been in terms of that — the returns on that investment on a stabilized basis?
Jon Bortz: Yes. On a stabilized basis, we tend to get to 10% plus depending upon the extensiveness of the – of the redevelopment. Generally, the larger the redevelopment, the higher the returns on those. And look, it’s not perfect in terms of every property, some end up being lower, some end up being higher. Some of that gets impacted by the market and competition, et cetera. But we’ve averaged out at 10% plus.
Floris van Dijkum: Thanks.
Operator: Thank you. The next question is coming from Ari Klein of BMO Capital Markets. Please go ahead.
Ari Klein: Thank you and good morning. Maybe just following up on the expense question, when you look across the portfolio, are you still seeing cost savings opportunities out there given all the streamlining that’s already been done in since COVID? And then just on the insurance side, aside from the rate increases, has your coverage changed in any kind of meaningful way?
Jon Bortz: So on your first question, Ari, the effort to be more efficient is continuous. I’ve been in the business in the hotel business since 1984 and over the course of that lengthy period we’ve continued to find efficiencies every year within our portfolio and I think the industry generally has as well. We operate these properties with far fewer people today than we did 10 years ago and way, way fewer than 15 or 20 years ago. And we think that’s going to continue, as technology continues to develop, as the industry begins to adopt, uses that come out from AI. See, I got that in there, AI, AI. But we do think there’s, opportunities in a number of areas. And yes, it’s a continuous effort within the portfolio. Curator which has 100 hotels today has over 100 Vendor Partner Agreements, Master Service Agreements, which have also helped to bring down our costs in our portfolio by millions and millions of dollars on an annual basis.
