Apple Hospitality REIT (APLE) Q1 2026 earnings call transcript

Thank you. You may begin. Good morning, and welcome to Apple Hospitality Re-First Quarter 2026 Earnings Call. Today's call will be based on the earnings release in Form 10Q, which we distributed and filed yesterday afternoon. Before we begin, please note that today's call may include four-looking statements as defined by federal securities laws. These four-looking statements are based on current views and assumptions, and as a result, are subject to numerous risks, uncertainties, and the outcome of future events that could cause actual results, performance, or achievements to materially differ from those expressed, projected, or implied.

Any such four-looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2025 annual report on Form 10K, and speak only as of today. The company undertakes no obligation to publicly update or revise any four-looking statements, except as required by law. In addition, non-GAT measures of performance will be discussed during this call.

Reconciliations of those measures to GAT measures and definitions of certain items referred to in our remarks are included in yesterday's earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the company, please visit AppleHospitalityRead. com. This morning, Justin Knight, our Chief Executive Officer, and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the first quarter, 2026, and an operational outlook for the remainder of the year.

Unless otherwise stated, all changes in performance metrics refer to year-over-year changes for the comparable period. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to Justin.

Good morning, and thank you for joining us today for our first quarter, 2026 earnings call. We are pleased to report a strong start to the year, with comparable hotels' rep-park growth of more than 2%, despite challenging year-over-year comparisons to the first quarter of 2025.

Underscoring the strength of the quarter, approximately two-thirds of our hotels delivered rep-park growth, and on a same-store basis, rep-park grew nearly 3% with margin expansion.

The efficient operating model of our hotels combined with our prudent management of expenses enabled us to deliver meaningful flow-through of top-line improvements to bottom-line performance, resulting in growth across comparable hotels adjusted hotel EBITDA, adjusted EBITDA RE, and modified funds from operations.

Demand momentum has continued into the second quarter. Preliminary reports for the month of April indicate comparable hotels' rep-park growth of over 4%, supported by continued strength and demand, and the benefit of favorable year-over-year comparisons related to the negative effects of doge, liberation day, and the resulting general macroeconomic uncertainty.

While the ongoing conflict in the Middle East and its effects on global energy markets adds to an uncertain geopolitical and economic backdrop, our broadly diversified room-focused portfolio continues to demonstrate demand resilience.

Improving occupancy and forward-booking trends give us confidence heading into the summer months. Reflecting our year-to-date outperformance, we are raising our full-year rep-park guidance on 100 basis points to 1% at the midpoint. The revised range maintains a measured view of the year ahead, and we believe it could ultimately prove conservative. Transient demand has been stronger than anticipated. Early summer performance may benefit from incremental leisure travel tied to the FIFA World Cup, and we are beginning to lap periods negatively affected by reduced government spending, tariff-related disruption, and last year's government shutdown.

Taking together, these factors represent potential upside not fully reflected in our updated outlook. Discipline capital allocation has been central to our success over decades in the lodging industry.

We prudently balanced near and long-term investment decisions to capitalize on current opportunities while positioning for the future. Over time, this approach is designed to deliver compelling total returns to our shareholders through durable earnings growth and long-term capital appreciation.

In April of this year, we completed the sale of our Hampton Inn and Suites in Rochester, Minnesota, for approximately $9 million. The sales price represents a 5% cap rate or 14.5 times EBITDA multiple before CAPEX, and a 4% cap rate for 19.6 times EBITDA multiple after taking into consideration and estimated $3 million in anticipated capital improvements.

We continue to see opportunities to selectively prune our portfolio through transactions that enable us to reinvest proceeds in ways that enhance returns for our shareholders.

Recent acquisitions have performed well, despite headwinds in several markets. The Embassy Suites in Madison, Wisconsin, saw meaningful improvement as the hotel completed its first full year of operations.

The AC Hotel in Washington, D. C. , also acquired in 2024, produced full year 2025 webpar of $205 and a 43% house profit margin. Solid results given the meaningful pullback in government travel and weaker convention calendar last year.

The Nashville motto, which recently received Hilton's New Build of the Year award for the motto brand, continues to ramp well with average webpar approaching $200 over recent weeks.

And the Homewood Suite's Tampa Brandon, acquired last year, continues to produce strong yields in advance of full renovation and repositioning plan this summer.

Turning to out-year commitments, we continue to have forward contracts for two projects in early stages of development. An AC in Anchorage, Alaska, and a dual-brand AC in Resinson, located adjacent to our Spring Hill suites in Las Vegas.

The AC in Anchorage has broken ground and is expected to be delivered in late 2027. Construction has not yet begun on the Las Vegas project. The dual-brand AC and Resinson are currently expected to be completed in the second quarter of 2028. The current transaction environment does not yet support a creative opportunities relative to our cost of capital. And we do not currently have any agreements for acquisitions in 2026.

Consistent with our disciplined approach, we remain actively engaged in the transaction market, evaluating potential hotel acquisitions relative to other uses of capital with a focus on maximizing long-term value for our shareholders. As we have continuously demonstrated over the years, the flexibility of our balance sheet and our reputation for strong execution puts us in a position to act quickly when market conditions shift to be more favorable.

We also continue to strategically reinvest in our portfolio, ensuring that our hotels remain competitive within their respective markets and maintain a strong value proposition for our guests.

For the full year, we expect to reinvest between 80 and 90 million dollars, including major renovations planned at 21 hotels. The scale of our portfolio, efficient design of our room's focus to hotels, and our experience in-house project management team enable us to maintain our assets with average annual cap extent of approximately 6% of revenues, significantly lower than full-service portfolios.

Combined with stronger operating margins, this efficiency translates into substantial free cash flow from operations, which we use to fund shareholder distributions and strategic investments. For the quarter capital expenditures totaled approximately 27.5 million dollars.

Supported by strong cash flow from our diverse portfolio of hotels, we continue to return capital to shareholders through attractive monthly distributions, which contribute to total returns.

During the first quarter, we paid distributions totaling approximately 57 million dollars or 24 cents per common share. Based on Friday's closing stock price, our annualized regular monthly cash distribution of 96 cents per share represents an annual yield of approximately 7.2%. Together with our Board of Directors, we will continue to evaluate these distributions in the context of portfolio performance, capital needs, and other creative opportunities to create long-term shareholder value.

Throughout our 26-year history in the lodging industry, we have refined our strategy with intention. We invest in high-quality hotels that appeal to a broad set of business and leisure customers. We diversify our portfolio across markets and demand generators. We maintain a strong and flexible balance sheet with low leverage. We reinvest strategically in our portfolio, and we work closely with the experience management teams who operate our hotels.

We own one of the largest, most diverse portfolios of upscale rooms to focus hotels in the United States. 216 hotels with almost 30,000 guest rooms diversified across 83 markets in 37 states and the District of Columbia. Travel demand for our portfolios remained resilient with meaningful growth in recent months, reinforcing the merits of our strategy.

We continue to believe that historically low supply growths from new hotel construction in our markets materially reduces the overall risk profile of our portfolio, limits potential downside and enhances potential upside. At quarter end, 57% of our hotels did not have any new upper upscale or upper mid-scale product under construction within a five-mile radius.

We have confidence in the outlook for the hospitality industry and in the strength and positioning of our portfolio. As we look ahead, we will continue to focus on the things within our control. Operational execution, discipline capital allocation, and an uncompromising commitment to integrity. Above all, we are committed to creating lasting value for our shareholders. It is now my pleasure to turn the call over to Liz for additional details on our balance sheet, financial performance during the quarter, and outlook for the remainder of the year.

Thank you, Justin, and good morning. The first quarter was a strong start to the year, with our portfolio demonstrating the durability of our operating model. We are especially pleased with our performance relative to initial expectations that Q1 would be our weakest quarter in the year. With a strong finish to February and acceleration into March, we ended the quarter with rev-park roads exceeding the high end of our initial full-year guidance range.

For the quarter, comparable hotels rev-par was $115, up 2.2%. ADR was $157, up 0.1%, and occupancy was 73%, an increase of 2.1%. Performance improved as we moved through the quarter. In January, comparable hotels rev-par was down 1.6%, reflecting a challenging comparison to the same period last year, nearly half of which was attributable to wildfire-related recovery business in early 2025. Excluding our California hotels that saw benefit, first quarter rev-par grew 3%. In February, comparable hotels rev-par increased by 1.5%, supported by strengthening business and leisure demand despite some weather disruptions.

March performance was particularly noteworthy, with comparable hotels rev-par growth of 5.8%. Well ahead of expectations and indicative of broad-based demand strength across the portfolio, extending beyond the early effects of policy-driven demand headwinds experienced last year.

For the quarter, comparable hotels' total revenue was up 4.3% to $337 million, supported by continued strength and other revenues, which were up 10%. The efficient operating models in our hotels combined with disciplined expense management drove strong flow-through from top-line growth to bottom-line results. For the quarter, we delivered comparable hotels' adjusted hotel EBITDA of $108 million, up 3.6%. And an adjusted hotel EBITDA margin of 32.2%, a reduction of just 20 basis points.

Results reflect the ongoing ramp of our recently opened motto Nashville Downtown and the seasonal impact of Hotel 57, both of which weighed on overall comparable hotels' results.

On a same-store basis, which excludes the impact of the motto Nashville Downtown, the transition of Hotel 57, and are recently acquired Homewood Sweet's Tampa Brandon, rev-par grew by 2.8% for the quarter. Same-store total revenue grew 3.1%, supported by continued strength and non-room revenues, which grew 6% in the quarter.

Strong top-line growth, combined with disciplined cost management, drove same-store adjusted hotel EBITDA growth of 4.2% and 30 basis points of adjusted hotel EBITDA margin expansion. These bottom-line results are especially encouraging, given the ADR headwinds we face during the quarter, and the disruption and transition expenses associated with converting our Marriott managed hotels to franchise.

As we move into seasonally higher occupancy months, stabilize recently-transitioned hotels, and see greater contribution from rate growth, we would expect even stronger flow-through to the bottom line.

As highlighted in January, we completed the transition of our 13 Marriott managed hotels to franchise, consolidating management with third-party management companies, who in most instances were already operating hotels for us in market, enabling us to realize incremental operational synergies. While still early, we are encouraged by the initial results and remain confident these transitions, together with a select number of additional market-level management consolidations, will further drive operating performance for our portfolio.

The transition also provides us with additional flexibility and enhances the market ability of these hotels as we evaluate select dispositions in the future.

The broad-based strength across our portfolio was noteworthy during the quarter. As Justin highlighted, approximately two-thirds of our hotels delivered rev-park growth year-over-year. Despite several markets having challenging comparisons, including wildfire-related recovery business benefiting our California hotels in early 2025 and the inauguration in DC. This reflects both the diversification of our portfolio and our teams' continued focus on hotel and market-level execution.

Several of our markets stood out as top rev-par performers in the quarter. Pittsburgh grew 23%, benefiting from multiple sporting events and a strong convention calendar.

Alaska grew 21%, driven by a strong leisure-demanded market further aided by incremental crew business. Seattle grew 18% with the return of Boeing production business and additional project-related business at a nearby shipyard. Palm Beach grew 16%, continuing to flourish with both strong leisure and business-transient demand. And Memphis grew 14%, capturing incremental medical, personnel, and airline crew business amid increased in-government demand in market.

Based on preliminary results for the month of April, comparable hotels rev-par increased by over 4%. Despite the ongoing benefit in 2025 from the wildfire recovery business in Southern California, we continue to see broad demand strength across our portfolio and additionally benefited from favorable comparisons over a challenging April 2025, which experienced disruption from government policy-related announcements.

Turning back to the first quarter, weekday occupancy was up 170 basis points and weekend occupancy was up 270 basis points. Week A occupancy followed the same monthly pattern as overall results, down 200 basis points in January, up 200 basis points in February, and up over 400 basis points in March.

Weekend occupancy was positive throughout the quarter, up 100 basis points in January, 200 basis points in February, and nearly 500 basis points in March.

ADR trends also strengthened as we moved through the quarter. After negative ADR growth in January and February, weekday ADR turned positive in March, up 1.4%, finishing the quarter up 30 basis points.

Weekend ADR was up 3.5% in March and up 70 basis points for the quarter, a meaningful positive inflection that contributed to the broader rev-par game, excluding our LA and DC markets, which faced challenging comparisons year-over-year related to wildfire recovery and inauguration business, both weekday and weekend ADR grew over 1% for the quarter, indicative of our ability to drive rate growth alongside occupancy in our portfolio.

Looking at same-store room night channel mix, the quarter illustrated improvement in transient trends. Brand. com remained our largest channel at 39% of room night, up 40 basis points year-over-year, while OTA bookings were up 170 basis points to 13% of mix. Property direct declined 90 basis points to 26%, and GDS bookings declined 90 basis points to 18%.

Turning to segmentation, transient trends improved each month, while group business remained strong and provided a strong base that helped us grow overall occupancy. Our led the way with impressive room night growth, particularly in February and March, growing 120 basis points to 34% of our occupancy mix in the first quarter. Other discounts were more steady, declining 50 basis points to 27% of mix.

Corporate and local negotiated declined 130 basis points to 17% of mix, but showed steady improvement throughout the quarter and contributed to overall March results. Government grew 20 basis points to 6% of mix, largely driven by comparisons to disruptions in March 2025. Group business mix improved 30 basis points to 17%.

Turning to expenses, same-store hotels, total-hotel expenses grew 2.6% in the quarter, down slightly to last year on a CPOR basis.

Expense discipline was a meaningful contributor to a margin performance in the quarter. Same-store variable hotel expense per occupied room grew just 0.3% year over year. Total payroll per occupied room was $43 up just 1%. We also continued to see reduced reliance on contract labor, which fell to under 7% of total same-store wages, a decline of 80 basis points or 7% year over year.

Non-payroll variable expenses declined 10 basis points on a per occupied room basis and fixed same-store hotel expenses declined 1.5%, driven by a favorable property insurance comparison and property tax appeal. For the quarter, we achieved adjusted EBA. RE of approximately $101 million, up 2.2%, an MSFO of approximately $80 million, or 34 cents per share, up 1.9% and 3% respectively.

Turning to our balance sheet, as of March 31, 2026, we had approximately $1.6 billion of total debt outstanding. Approximately 3.4 times our trailing 12 months EBA does, with a weighted average interest rate of 4.6%, and a weighted average maturity of approximately 3 years.

At quarter end, approximately 63% of our total debt was fixed or hedged. We had approximately $8 million of cash on hand, and $559 million of availability under our revolving credit facility, providing meaningful liquidity. At the end of the first quarter, we had 207 unencumbered hotels in our portfolio.

Conversations are ongoing with our unsecured lenders regarding the schedule of debt maturities for this year, and we are confident we are well positioned to address those maturities on attractive terms.

Building on our strong first quarter, we are raising our full year outlook. Consistent with the measured approach we took when we initiated guidance, we have continued to be thoughtful in our expectations for the balance of the year, recognizing the economic and geopolitical uncertainty and the broader environment while remaining confident in the underlying strength of our portfolio. For the full year, we expect net income to be between $143 million and $169 million.

Comparable hotels repar change to be between 0% and 2%. Comparable hotels adjust the hotel EBITDA margin to be between 32.9% and 33.9%. And adjusted EBITDA RE to be between $436 million and $458 million. We have assumed for purposes of guidance that total hotel expenses will increase by approximately 3% at the midpoint, which is 2% on a CPOR basis.

We remain confident in our operating model and the ability to manage expenses and are pleased to share we achieved a favorable property insurance renewal last month, which will generate incremental monthly savings compared to our initial expectations.

As a reminder, effective January 1st, 2026, the company began excluding from the calculation of adjusted EBITDA and MSFO, the expense recorded for share-based compensation. As it represents the non-cash transaction, and the add back to net income is consistent with the calculation of adjusted EBITDA for the company's financial covenant ratios under its credit facilities and consistent with the presentation of other public lodging rates.

Demand for our broadly diversified room-focused hotels have proven resilient. With recent stronger than anticipated transient demand, early summer potentially benefiting from incremental leisure travel related to the FIFA World Cup, and easier comparisons to periods adversely impacted by cuts in government spending, tariff announcements, and the government shutdown in 2025, we acknowledge that our revised guidance could continue to prove conservative.

Our outlook is based on our current view, which is limited and does not take into account any unanticipated developments in our business or changes in the operating environment, nor does it take into account any unannounced hotel acquisitions or dispositions.

Recent improvements in occupancy and booking trends highlight the resiliency of travel demand overall and the strength of demand for our hotels specifically. Our recent capital allocation decisions and portfolio adjustments have enhanced our portfolio positioning and performance. And our solid balance sheet continues to provide us with stability and meaningful flexibility to pursue a creative opportunities in the future.

We are confident with the experience, discipline, and agility of our teams, the broad consumer appeal of our portfolio, and the strength and flexibility of our balance sheet, we are well positioned to successfully navigate changing market conditions and capitalize on emerging opportunities to deliver growth and maximize total returns for shareholders over time. That concludes our prepared remarks, and we'll now open the call for questions.

That's a good question. And, you know, I think generally as we think about guidance, you know, we are looking at the most recent trends and speaking to the impact of, you know, ADR headwinds from last year, impacting our margin performance in the quarter. And as we, you know, lap those comps from last year, specifically related to the LA wildfires, we anticipate we'll be able to drive more rate.

You know, that is not entirely built into the guide. You know, when we look to revise guidance for Q1, we given how close in proximity it was to when we reported at year end and the fact that we're still early in the year, you know, took a more measured approach and really, you know, for the most part, exclusively incorporated the out performance of Q1 and some improvement in April as well. And so, you know, the balance between occupancy and ADR for the remainder of the year as far as guidance goes at the midpoint is still a split very similar to what we had anticipated at the beginning of the year. But should trends continue?

And should we continue to see more broad based demand improvement? We do anticipate as we lap those comps and ability to drive rate as we've demonstrated if you exclude those comparisons from even actual results through Q1 and into April.

Sure. We are not currently seeing significant price sensitivity with our customers as Liz highlighted in her prepared remarks. As we moved through the quarter, we were able to grow both occupancy and rate. And the primary weight on overall ADR growth for the portfolio was, you know, that the year of year comps with both the inauguration, which is a high rate event in DC and wildfires, which drove rates in the LA area.

You know, I think as we look forward to the remainder of the year, as Liz highlighted, you know, we've, we've taken a very conservative approach to guidance for the remainder of the year. And really what's implied there is very limited growth, either in occupancy or in rate. And we recognize that that is counter to our most recent experience and likely, you know, conservative.

You know, as we think about how things play out to the remainder of the year, we will be moving shortly into higher occupancy months and anticipate that growth during those months will come increasingly from rate, which will drive incremental margins. And really given the price point for our hotels and perceived value associated with them, we don't anticipate, you know, absent a meaningful pullback in demand broadly speaking. You know, any, any challenges related to our ability to drive rate on the margin.

We're certainly encouraged by the improvement in government demand that we've seen as, you know, we lapped the most or the earliest comps from last year from the impact of Doge and Liberation Day. So we are, you know, hopeful that we'll see that continue remembering, too, that as we, you know, move into higher occupancy months, should there be broader base demand or special event compression, we could choose to yield that out, which could make some of our year-over-year comparisons, you know, hard to, you know, hard to draw meaningful conclusions from if we choose to yield it out. But at this point, given where occupancy levels were for the first quarter, particularly, you know, March and then April, we were able to take incremental government demand and solve, you know, improvement around 13%.

And from a mixed perspective, approached, you know, around 6%. So encouraged from a government perspective. As we moved through the year, you know, we did see government steadily improve. And when I say that the decline year-over-year decreased as we moved into the summer months, and then, of course, increased when we had the government shut down in the fourth quarter. And so I think that the comp says, you know, we move throughout the year. We'll be a little bit fluid, but again, encouraged initially by seeing that improvement in group.

Yeah. And remembering again when we issued guidance in the beginning, we anticipated that first quarter would be our most difficult quarter and that we would see improved performance after that. And certainly, incredibly pleased with how we performed in the first quarter. And our current guidance does not include potential upside from World Cup, though we have seen strong bookings, especially in some of our smaller markets, which we do anticipate will be incremental to, you know, the strong demand trends that we're already seeing.

You know, it's difficult to determine specifically what's driving demand in markets outside of markets that will, you know, benefit from FIFA games.

That said, when we look at current bookings, a very small percentage of our current bookings are international. That's consistent with past experience. The bulk of what we have on the books now is domestic. And we continue to anticipate that would be a primary driver. Should we see as we get nearer to the games an uptick in international bookings, that would be incremental.

Thanks, Jay.

I mean, very, very consistent with one, Justin said, you know, as we look forward, you know, we are beginning to see, we typically look 90 days out or, you know, sort of rely more on what's closer in than, you know, further out. And within the 90 day window, you're starting to see, you know, certainly some impact from the advanced bookings around World Cup, which is positive. And, you know, as we, even as we enter June, you know, thinking about May outside of the calendar shift, you know, that looks positive as well. So, you know, from a forward booking perspective, we are continuing to see, you know, improvements around occupancy and rate as we look forward.

Absolutely. I think that markets have been supportive of transactions for some time. With improving fundamentals, we are beginning to see more interest in the space. And, you know, I think for some time, there has been a lot of product on the market that would be attractive to us. The challenge has been a meaningful gap between seller expectations and, you know, what we would be willing to pay.

We've spoken about this in the past, but our acquisitions model runs a comparative analysis to alternative uses of capital, including share repurchases. And as we look at the environment today and pricing for individual assets relative to the implied value or implied multiple in our stock. Our stock still screens better. You know, I think as we think about an environment where we would get more aggressive from an acquisition standpoint, it would be an environment where that reverses. And that could happen either as a result of continued improvement in our share price or, you know, a reduction in expectations from sellers and the most likely scenario is a combination of both.

And as I highlighted in my prepared remarks, given our history in the space, you know, and the flexibility that we have with our balance sheet as the environment shifts were poised to move very quickly.

Okay, I'll answer the first part. Related to the property insurance renewal, what we assumed beginning in the second quarter through the end of the year with about a $900,000 improvement to the to the forward guidance for the last three quarters. So that's a little less than half of the incremental bottom line impact outside of truing up here today. The other portion comes through, you know, April, April improvement on the top line and blow through there.

And then from, you know, from an expense perspective, you know, we've, we've guided to, you know, how the properties have been operating from a cost control perspective. We've gotten very granular from an individual line item perspective. And, you know, believe that, you know, what we've provided is a good run rate. Now, certainly if the environment was to shift and a cost line item or something was to materialize differently than what we've anticipated, that could potentially impact, you know, how we thought about expenses. But we've had, we've got had a good trend of very good cross controls and seen some improvement on the property insurance line for, you know, several years now. And outside of, you know, the fixed cost real estate tax comps from last year have seen some good appeals and, you know, some steady run rates there too.

So we're encouraged about, you know, what we've seen from an expense management perspective and that certainly factored in here.

Certainly. And, you know, I think for clarification, we've spoken to this at some length in the past, but work continually a market, both underwriting potential acquisitions and testing potential dispositions. And, you know, since, well, over the past several years, we've tested the market with both individual assets and portfolios. Looking to gauge pricing and have executed where we've been able to achieve pricing that's most attractive to us relative to alternative uses for proceeds from those sales.

You know, I think in any environment, we also from time to time, we see them bounce. I can tell you as we test the market today, we're generally seeing an increased number of potential buyers, so increased interest with a large number of people signing confidentiality agreements, seeking data for the individual assets. And really, I think absent the war, you know, where the conflict in the Middle East and fears related to, you know, potential impact on energy prices, we would be seen an even more active market with, you know, buyers interested in assets.

Should we continue to see growth industry wide and specific to our portfolio, like we have year to date, my expectation is that the market would get meaningfully more active with buyers, you know, beginning to stretch for individual assets. And in that environment, you know, we have in our portfolio prioritized assets for potential sale and could act quickly, you know, on that side, as well as, you know, get more aggressive from an acquisition side.

I would say yes, you know, where we have been executing or successful in executing over the past, you know, several months, maybe even couple of years has been primarily with local owner operators who have the capacity to drive, you know, incremental margins because of their presence in market and lower operating cost operating model. Those buyers have tended not to be cap rate bidders.

Instead, you know, they're looking more closely at value relative to replacement costs and bidding, you know, based on a revenue multiple, which is, you know, a very different type of buyer and pricing process and has enabled us to sell at relatively low cap rates and redeploy at a meaningful spread, either into our stock or into additional assets.

As the market becomes more active, we would anticipate and are beginning to see signs of increased interest from first smaller private equity shops with dedicated hotel practice. And then, you know, certainly to the extent we're able to sustain the momentum industry wide that we've seen recently, our expectation is that that would broaden to some of the larger players as well.

Generally, you know, and it's not unique to Pittsburgh. I think we were encouraged about how many markets performed relative to our initial expectations. So I think general demand was stronger in many markets and certainly Pittsburgh performed well relative to expectations as well. Yeah, but when you look across our portfolio and Liz highlighted a number of markets where we saw strong double digit growth for Anchorage, which had an amazing year last year to again move double digits in the first quarter was equally equally surprised us to the positive. So, you know, I think the demand strength across our portfolio was much stronger than we anticipated through the first quarter. And as Liz highlighted has carried forward into April.

I think early indications are positive on that front.

You know, it's interesting and we've been fortunate in our ability to find deals that meet our underwriting criteria. But I'll tell you as we look across, you know, the country and as we evaluate development takeouts, the same factors that are limiting new supply in our markets make underwriting development difficult. Meaning, you know, I think in most markets, cost of construction had increased faster than fundamentals for hotels. Have improved.

And, you know, as a result, there are very few markets where development pencils. Broadly speaking, that said, you know, I think our appetite for new development has always been limited, meaning, you know, we have generally targeted, you know, within $100 million a year of new development acquisitions. And so, you know, should we consider additional development projects, we would be looking beyond 2028 to future years and we don't currently have any deals pending in that area or that regard.

You know, I think as we think about capital allocation opportunities in the near term, you know, we continue to be focused on the existing assets and our shares. And, you know, in answer to an earlier question, I highlighted how we evaluate those, given that the forward commitments really are a long ways out. We have a tremendous amount of flexibility in the near term to allocate capital to a creative opportunities.

And then, you know, I think to fund those acquisitions as they are completed. Remembering again, the structure of our development deals is such that the developer carries the project on their balance sheet, and then our only cash outlay is at the time of completion.

I will let Liz work on the second piece. We are, we are very pleased with our progress in the transition as Liz highlighted in her prepared remarks. There were transition related expenses. And, you know, I think we were somewhat disappointed with sales efforts. You know, by the prior Marriott, by prior Marriott management immediately prior to our takeover of the properties that said the new managers have come in and move quickly.

And really establish themselves in the properties in a way that we think will drive positive results this year. The 13 assets because of their location, a portion of them are meaningful. A number of them are in California markets that are higher rated markets.

And we may have to get back to you with the exact person. And, yeah, I'll have to pull it for you.

Absolutely.

We appreciate you joining us for our first quarter earnings call. We're incredibly pleased with the way our portfolio performed during the first quarter and excited about carrying that momentum through the remainder of the year. As always, as you travel, we hope you'll take an opportunity to stay with us in one of our hotels and we look forward to meeting with many of you as we begin interacting at some of the upcoming conferences.

Thank you.