Day and thank you for standing by. Welcome to the DiamondRock Hospitality Company Second Quarter 2025 Earnings Conference Call. At this time, all participants are in a listen-only mode. Please be advised that today's conference is being recorded. After the speaker's presentation, there will be a question-and-answer session. To ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press staar one one again. I would now like to hand the conference over to your speaker today, Briony Quinn, Chief Financial Officer. Morning everyone, and welcome to DiamondRock Hospitality Company's Second Quarter 2025 Earnings Call and Webcast. Joining me today is Jeff Donnelly, our Chief Executive Officer, and Justin Leonard, our President and Chief Operating Officer. Before we begin, let me remind everyone that many of our comments today are not historical facts and are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ materially from what we discuss today. In addition, on today's call, we will discuss certain non-GAAP financial information. A reconciliation of this information to the most directly comparable GAAP financial measure can be found in our earnings press release. Comparable RevPAR growth in the second quarter was 0.1%, driven by a 1.1% increase in rate and an 80 basis point decline in occupancy. RevPAR was negatively impacted by approximately 50 basis points due to our ongoing conversion of the Orchards Inn in Sedona to the Cliffs at L’Auberge. Total RevPAR growth was 1.1% as a result of a 4.2% increase in out-of-room revenues per occupied room, a notable acceleration from the first quarter and exceeding our expectations. In fact, out-of-room spend reached a new quarterly high of $160/ occupied room. During the quarter, the portfolio's group room revenue increased 0.8%, business transient revenue increased 4.2%, and leisure transient revenue declined 1.6%. Food and beverage was a bright spot in the quarter, both on the top and bottom line. F&B revenues increased 3.1% with gains in both banquets and catering and outlets. While we were pleased with top-line performance, we are even more proud of the flow-through. F&B profit increased over 6%, or twice that of the revenue growth, and margins increased 105 basis points. Our asset management team has worked hard to re-engineer menu pricing, reconsider portion sizes, and refine outlet operating hours to maximize productivity. Turning to overall expenses, we are incredibly proud of how our operators managed costs this quarter. Excluding a larger-than-expected property tax increase in Chicago, our operating expenses increased only 0.7% on 1.1% revenue growth, with wages and benefits increasing 3.1%. Factoring in the portfolio's full 2.6% expense growth, hotel EBITDA margins contracted 97 basis points. However, excluding the Chicago tax increase, margins would have increased 30 basis points. Corporate adjusted EBITDA was $90.5 million and adjusted FFO per share was $0.35. Finally, free cash flow per share for the trailing twelve months calculated as adjusted FFO less CapEx increased approximately 4.5% to $0.63/ share. I'll now highlight the results of our urban hotels and our resorts for the quarter. Our urban portfolio, which accounts for just over 60% of our EBITDA growth, achieved 3% RevPAR growth in the quarter. April was the strongest month with 4.6% growth. However, with increased uncertainty stemming from DOGE and tariff announcements, we saw the pace of RevPAR gains slow to 1.6% by June. Nevertheless, rate growth held steady at approximately 2.5% over the quarter. The strongest RevPAR growth in the quarter was achieved by our hotels in San Francisco, San Diego, New York, Boston, and Chicago. Total RevPAR growth at our urban hotels was 100 basis points stronger than RevPAR growth, with Food and Beverage Revenue up over 5%. Total Expenses in our urban portfolio increased 5.7%. However, excluding the property tax increase in Chicago, total expense growth was just 2.5%, implying margin growth of approximately 95 basis points vs the 104 basis point decline reported. In our resort portfolio, comparable RevPAR declined 6.3% and total RevPAR declined 3.9%. The opening of the redeveloped Orchards Inn in Sedona, now known as the Cliffs at L’Auberge, was delayed by twelve weeks while we waited for the city to issue a certificate of occupancy and thus weighed on the resort portfolio performance. Excluding the Cliffs, our resorts' comparable RevPAR and total RevPAR declined 4.7% and 2.7% respectively. Similar to the urban portfolio, we saw softer performance in our resorts subsequent to April. However, out-of-room spend was less impacted than RevPAR in each month of the quarter. Our resorts in Florida experienced a 4.1% RevPAR decline, an improvement from the decline reported in Q1. Out-of-room spend per occupied room increased an impressive 6.7%, resulting in a total RevPAR decline of just 0.6%. Tight cost controls translated to nearly flat hotel EBITDA margins for these resorts. As a reminder, our Florida resorts experienced an early demand recovery coming out of the pandemic and therefore experienced larger labor cost gains at that time before settling into the lower, more stable increases experienced today. Outside of Florida, resort RevPAR performance varied. Chico and Sonoma were up in the mid-single- digits. However, the Vail was down 23% as it benefited from a large in-house group last year. Looking into the third quarter, we expect our total portfolio RevPAR to decline in the low single digits and that expense growth will remain low. Group room revenues across the portfolio increased 0.8%, with rates up 3.3% and room nights down 2.5%. When we entered the year, our group pace for 2025 was up approximately 1%, coming off the strongest group revenue in our company's history. We have been highlighting for several quarters now that our success in the second half of 2024 would present difficult comparisons for the same period in 2025. As of August 1, our group revenue pace for 2025 is still up approximately 1%, but what you can't see is the re-acceleration we have delivered from a 20 basis point deficit just one month ago, created by post-Liberation Day pressures. Our group lead volumes improved throughout Q2, an encouraging statement about underlying demand. However, our conversion rate has yet to re-accelerate, highlighting the continued reticence to commit in an uncertain environment. We are pleased that our hotels have a strong setup for 2026, with group revenue pace currently up 12%. As a reminder, group typically accounts for approximately 30% of our portfolio's revenue. Turning to the balance sheet, in July, we successfully refinanced, upsized, and extended the maturities under our senior unsecured credit facility, increasing its size to $1.5 billion from $1.2 billion, with our pricing grid unchanged. Following the repayment of mortgages on the Worthington Renaissance and Hotel Cleo in May and July, respectively, we have one remaining mortgage on the Westin Boston Seaport, which we intend to prepay in early September with the incremental proceeds from our new credit facility. At that time, we will have no assets encumbered by secured debt, no debt maturities until 2029, including our extension options, and all of our debt will be prepayable at any time without cost or penalty. We greatly appreciate the unwavering support of our lending partners throughout this process. We have declared or paid a quarterly common dividend of $0.08/ share to date this year, and depending on our 2025 taxable income, may declare an additional stub dividend for the fourth quarter. Once again this quarter, we took advantage of the disconnect in our share price and repurchased just under 1.7 million common shares at an average price of $7.46. Since the end of the quarter, we have continued to repurchase shares, resulting in 3.6 million shares repurchased year to date for $27.3 million at a cap rate of just under 10%. We have $146.8 million of capacity remaining on our share repurchase authorization and continue to view repurchases as one of our best uses of capital in this environment. With that, I'll turn the call over to Jeff. Thanks, Briony, and thank you all for joining us this morning. Before I begin today, I want to take a moment to congratulate our team and our founder and Chairman, Bill McCarten, on DiamondRock 's 20th anniversary, which we celebrated in June. I am grateful for the energy and passion our people bring to DiamondRock, and I am genuinely honored to work with this best-in-class team. I want to focus my comments today on how we intend to drive outsized free cash flow per share growth over the medium term, the current transaction environment, our ROI projects, near-term value creation opportunities, and lastly, the building blocks of our 2025 outlook. We believe REITs that drive among the strongest earnings and free cash flow per share growth should be rewarded with leading total shareholder returns. Yes, lodging is more volatile than other property sectors that benefit from long-term leases that can mask their underlying volatility, but that does not mean we cannot strive for competitive per share growth on average over time. To achieve this end, the following is what you should expect from DiamondRock: recycling out of low free cash flow yield hotels into higher yielding investments, capitalizing on opportunities to dispose of assets where buyers see greater value than we do, reinvesting in our assets when and where outsized ROIs exist, not just outsized RevPAR growth, thoughtfully stretching the renovation lifecycle, especially when asset quality and operating performance do not warrant refreshment, and reinvesting in ourselves through share repurchases when a valuation disconnect exists. As you'll remember, historically we have spent 20% less per key on capital expenditures. The age and condition of our portfolio has and should continue to benefit our CapEx decision, giving us a relative advantage. In office or retail properties, outsized tenant allowances can be employed to drive premium rents, but that does not mean it is always a sensible use of capital to do so. Similarly, RevPAR and EBITDA too can be arguably bought through excess capital investment. Earlier, Briony shared our free cash flow per share results. I encourage folks to incorporate after CapEx metrics into your valuation framework to understand whether stewards are earning an appropriate return on your capital. With respect to the transaction environment, not much has changed since our last call. There continues to be interesting acquisition opportunities. However, sellers generally remain unpressured and patient. Over the last few months, our underwriting has leaned toward group and leisure-oriented resorts as well as distressed urban properties. Asking cap rates on these resorts range from 7%- 9%, but after upfront capital and property tax resets are realistically 100 basis points- 150 basis points tighter. Higher-end irreplaceable resorts are often marketed with 5%- 6% asking cap rates. In urban markets, newer high-performing assets are asking 7% cap rates, whereas older assets requiring capital are asking 9% cap rates. Again, after initial CapEx, the going in yields can be 100 basis points- 150 basis points lower. In all of these cases, pricing is at a premium to where we currently trade. Accordingly, our best use of capital has been and continues to be repurchasing our shares at just under a 10% cap rate and funding our ROI project in Sedona, which we expect to achieve a greater than 10% stabilized yield. We continue to work on asset dispositions. Our timeline was negatively impacted by repercussions of recent federal policy changes. Nevertheless, we remain focused on accretive recycling opportunities. While we do not typically put a timeframe on such transactions, we expect to be more active over the next 12 months- 24 months than we have been historically. Turning to our internal investment projects, last year we had six hotels with staggered renovations throughout the year, and this year we have four, again staggered to minimize renovation disruption. The hotels under renovation last year provided solid revenue and EBITDA tailwinds for our portfolio this year, and we again look forward to a tailwind in 2026 from this year's renovations. The largest tailwind and most meaningful with respect to the value of the hotel is the roughly $25 million renovation and integration of the Orchards Inn, now known as the Cliffs, into L’Auberge de Sedona. With stunning views of the Red Rocks, the renovated rooms have been exceptionally well received by guests. The two resorts will be fully integrated in late Q3, with the new hillside pool, bar area, and event space completed at that time. Despite the elevated revenue disruption from waiting for a certificate of occupancy, transient and group bookings are now accelerating. Wedding revenues at the Cliffs in this partial year are expected to more than double the full year of 2024. The Cliffs alone should drive a 25 basis points- 50 basis point tailwind to RevPAR growth in 2026. We remain quite comfortable this ROI project will achieve a 10% yield on cost upon stabilization. It is our view that renovations and repositionings with a compact scope and timeline, such as Sedona or the Dagny in Boston, are the most suitable for a public company. You should not expect us to undertake large multi-year repositionings. As for future value creation opportunities in the portfolio, our single largest opportunity to add rooms is on our more than 700 acres at Chico Hot Springs in Montana. Down the road, there are potential oceanfront residential development opportunities in Destin as well as Fort Lauderdale. Moreover, three of our franchise agreements expire between 2025 and 2027. This rare occurrence represents an opportunity to create shareholder value with little to no material capital expenditure, either through a reflagging, deflagging, or even sale. The largest among the three is the nearly 800-room Westin Boston Seaport District, with an agreement set to expire in December 2026. We look forward to updating you as that process unfolds. Before wrapping up with our 2025 guidance, I'd like to provide some context around our portfolio as we sit in an operating environment that has been and is expected to continue to benefit higher-end portfolios. When compared to our full-service peers, we have the second highest annual occupancy, the second highest percentage of rooms with ADRs over $300/ night, the second highest hotel EBITDA margin with the highest rooms and F&B margins this quarter, a year-to-date RevPAR index of 115, and 40% of our hotels enjoy top five TripAdvisor ranking. Now, these results were achieved with the lowest GNA per hotel, almost 40% below average, while spending 20% less per key on capex than our peers. Expense and capital efficiency are just as critical as top-line performance. Now to our outlook. In broad strokes, our crystal ball is by no means clear, but it does feel incrementally less cloudy than it did just three months ago. The pace of federal policy shifts over the last several months have likely peaked and should moderate into midterm elections. While these shifts have been highly disruptive and we've experienced their incremental impact on performance thus far, they have had relatively less impact on our corporate and more affluent leisure customers. We have seen this in the improving group lead volumes throughout Q2 in our higher-end portfolio, an acceleration in our 2025 and 2026 group pace in the last month, continued strength in out-of-room spend for both transient and group guests, and flat demand in July after several months of downward pressure. I'll emphasize it is early, but our operating results and forward bookings indicate we are possibly entering a more stable operating environment than we were experiencing just three months ago. We are maintaining our full-year outlook for RevPAR growth of negative 1% to plus 1%, but we are encouraged by the increased out-of-room spending trends we experienced in Q2 and early Q3. We now expect total RevPAR growth to outperform RevPAR growth by 50 basis points in 2025, an increase from our prior assumption of inline performance. For the third quarter, we expect RevPAR to be down in the low single-dig its with the toughest comparisons in August. We expect our 2025 corporate adjusted EBITDA to be in the range of $275 million- $295 million, up $2.5 million at the midpoint, and adjusted FFO per share to be in the range of $0.96- $1.06, up $0.01 at the midpoint. Our projected capital expenditures are unchanged at $85 million- $95 million. Our 2025 guidance does not assume we redeem our 8.25% preferred shares, which can be redeemed on or after August 31. Our guidance does not assume the repurchase of additional common shares, which are currently at an implied 9.7% cap rate, although our upsized credit facility has provided us with the liquidity to do so should we so choose. Thank you for your time this morning, and we'll be happy to answer your questions. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. One moment for questions. Our first question comes from Smedes Rose with Citi. You may proceed. Morning, Smedes. Hi, good morning. Jeff, I wanted to ask you about something you said in your prepared remarks and the release about stabilization at the higher end of the portfolio. Could you just talk about, were you talking about specific properties? Were you talking about guests within your overall portfolio that you would deem higher end that are spending more? Could you just sort of flesh that out a little bit? Sure. Sorry for any confusion. The quote I had in the release was really referring to our portfolio on hold. We were speaking to demand no longer being as soft as we were seeing in recent months. Effectively, we are moving towards stabilization. Bottom line, it was meant to be a comment speaking about fundamentals improving from sort of a softer point in time. Okay. I wanted to ask you, you just mentioned for the third quarter low single-digit RevPAR declines. I think that's kind of a theme we've seen across the industry as we kind of wrap up second quarter. Just for you guys specifically, are you seeing it across the board? Is there a particular weakness in leisure? Could you just talk about what's sort of driving the decline? Sure, Smede, it's Justin. I think we've been pretty consistent about Q3 weakness from the beginning of the year. We had a phenomenal Q3 last year, particularly the DNC in Chicago. It was kind of a one-time anomalous event that makes for a difficult comp for the company. I think that's really what's driving our Q3 weakness. It's not necessarily a change in trend line. I just think particularly in August, we have a bit of a group pace deficiency given some outsized events that happened last year that are non-recurring. Okay. I mean, just looking at the results last year for the Chicago Marriott, it looks like it was pretty much in line with the prior year of 2023. I'm just wondering what did they vote? I mean, is it just a more difficult comp for both years? I think Boston also has a bit of a difficult comp, but just to give you an example, in August, I think the Chicago Marriott did over 50% group last year. That's just not a typical group component in a month like August for that hotel, at a rate that was significantly in excess of what we typically achieve in August, just attributable to the Democratic National Convention. I think that in particular is the one thing that proves a difficult comp for us. Thank you. Thank you. Our next question comes from Cooper Clark with Wells Fargo. You may proceed. Hey, thanks for taking the question. Appreciate your earlier comments on share buybacks, and it seems like you still got some room left within your leverage target, but curious how to think about the continued buybacks with respect to addressing the preferred after it becomes redeemable later this month. Good morning and thank you. Certainly, share buybacks are an attractive use of capital. It's something that at this point, where we're trading today, I think it's still sort of a high 9% cap rate, close to a 10% cap rate. It is very appealing. We certainly look at the opportunity to repurchase the preferred. That's not in our guidance for the rest of the year. It's something that we'll continue to weigh as we frankly move through the quarter and the year end as to what the best use of capital is. I think we have a lot of flexibility to pursue attractive options across the board. Great, thanks. Just as a quick follow-up, could you provide an update on the Sedona repositioning? Curious if you can provide any update on expected performance at the hotel and how rates on forward bookings there are trending for Q4? Yeah, it's still early. I mean, the hotel has really kind of gotten to a point where it's really just begun marketing itself. When you think about Q4, it's not traditionally like what I will call in season for Sedona. You know, typically it's more of a spring and fall season, but the booking pace that I was looking at yesterday was actually pretty encouraging. When you look at just the Cliffs building, you know, we're getting group business in Q4, which is historically a period of time that we would not be getting that type of business. I think a lot of that has to do with this renovation. Also, when you look at the rates year- over- year, they were up $150- $200 over the prior year. It does seem like it's very early days, but it's working out as we were expecting. Great, thank you very much. Thank you. Our next question comes from Austin Wurschmidt with KeyBanc Capital Markets. You may proceed. Thanks, and good morning everybody. You had referenced that you'd started to see kind of the group pace pick up here over the last month and sort of closing the gap from the negative 20 basis points to +1 over the back half of the year. Which segments of the business are really driving that? Is it Urban Resort? Is it, you know, a little bit due to the opening in Sedona? I was wondering if you typically see lead volume improve before kind of the conversions to booked business increase in kind of these types of periods and just that shorter booking window overall. Thanks. I mean, this is Jeff. I will say on the first part of your question, a lot of the improvement in the group booking pace revenue for the year is really going to be in the urban side. Some of our resorts might have a small group component, but maybe not so much that it's going to carry the weight for the entire portfolio. I think it's just the success we've had on some of the short-term group, which candidly still has been more difficult to get some conversions. I don't know, Justin, do you have any thoughts on? I think from a short-term perspective too, we're a little bit more optimistic about Q4, just given that we don't have an election on a year-over-year basis. There's a couple more weeks of availability that were kind of off the table last year, just from a group booking perspective, that we have the ability to sell into in the short term. I got it. Could you just frame up how much of a drag, you know, group has been on portfolio RevPAR growth this year? While I know the group pace for 2026 doesn't necessarily equate to what you'll actualize, is there any way to frame up what the magnitude of that swing could be? Which markets in 2026 are really driving the uplift? Thanks. I was going to say I'm not sure if group is necessarily a drag. Certainly, business transient in the most recent quarter has been one of the bright spots, I would say. I think when you think to the back half of the year, our group pace is relatively flattish, I think, on a year-over-year basis. Thus far it hasn't really been a drag. It's for reasons we mentioned. It's because of that DNC convention and anniversary in Q3. I would say largely it kind of creates the challenges on group in the back half of the year for us. That's been known, that's not new news, I would tell you. That's kind of been known for effectively 12 months since we had the good results last year. With respect to 2026, what are the big drivers of that? Oh, for our pace in 2026? I think Boston is probably our best market from a year-over-year growth perspective. If they've got a phenomenal citywide calendar in 2026, I think it's really the biggest driver from a portfolio-wide perspective. Yeah, our group revenue pace continues to be pretty strong for next year. I think it's low double- digits. Thank you. Thank you. Our next question comes from Chris Woronka with Deutsche Bank. You may proceed. Hey, good morning guys. Thanks for the questions. Morning, Jeff. On the leisure side, I think you mentioned a little while ago in the prepared comments, Jeff, that resorts were, you know, one area where you were focusing on potential acquisitions at the right price. If you guys study the impact of cruise, I think there's some concern out there that the hotel industry, particularly resorts, is kind of in this secular trend of losing some business to the cruise line industry. I'm curious as to whether you guys believe that or if you've done any work on that and if that would potentially shape your decision. Yeah, it's a good question. I would tell you that it's always difficult because, you know, it's not like cruise line passengers call us and tell us that they wouldn't come. It's hard to definitively know. I think some of it has to deal with the price point of hotel that you're going after and maybe in some ways regionally where it is, you know, that it would be more of a cruise line customer. It's certainly something that we think about, you know, whether or not cruise is gaining share or not. Again, it's hard to isolate it to one thing because it depends on the type of property. I mean, Lake Austin, for example, which is a very high-end spa product, I don't know if it necessarily competes directly with a cruise line customer. It just sort of relates to where you're getting your market from. It's something we do think about. Certainly in the Keys, I think you see more maybe direct competition. Yeah, okay, makes sense. Thanks, Jeff. There's a follow-up on costs. I think we're hearing certainly from you guys and from others, there appears to be a little bit of letup in the pressure, especially on wages. I know there's always going to be little nuances or maybe big nuances with property taxes and insurance. Overall, would you say you're more or less encouraged than you were three or six months ago on the direction of pressure on especially wages? Yeah, I mean, I think this most recent quarter, taking out the Chicago property tax, our expenses, I believe Briony mentioned, were up about 70 basis points. I think 3% growth in labor costs. I think, if I'm not mistaken, our wages were up about 2%, I think it was. Yeah, I think it's been a little bit better than we expected. I can't speak to what peers have seen, but I do think one of the advantages we've had is that when you think about our portfolio over the last few years, we do have a little bit more leisure exposure. I think those are the assets and markets that recovered earlier in the pandemic. We were bringing back staff and actually raising wages to bring people back to the hotel. I feel like some of the urban markets, which maybe have seen their demand recover later in this cycle, you probably have some markets like, for example, West Coast markets that might still be recovering their group demand. They're still staffing up, and you're still probably learning what your true labor costs are. It would be my sense as to why our cost exposure on labor maybe is proving a little bit better than average. Yeah, that makes sense. Great. Thanks, Jeff. Thanks. Thank you. Our next question comes from Duane Pfennigwerth with Evercore ISI. You may proceed. Hey, thanks. Morning. Happy Friday. Jeff, you have really good perspective on the lodging industry and industry macro, and certainly wouldn't be asking you for guidance at this point. As you look further out, what would you view as the kind of key drivers of acceleration in industry RevPAR? Is your base case we are still kind of chopping around at these flattest levels next year? I hope we're not. I'd like to believe that some of the uncertainty that I think has been looming around the economy, which in my opinion kind of stifles the private fixed investment, which tends to be one of the biggest drivers of RevPAR over time. I think companies are being encouraged to reinvest domestically. Even that aside, I think if we have sort of less turmoil on the political front, that maybe gives companies a little more confidence, those things will improve or create an improved situation next year where maybe you'll see a little bit more fixed investment. At the same time, lodging really has no supply in the pipeline. It's just not a concern. I'd like to believe that we'll see RevPAR be accelerating next year. Thank you. Specifically to this big refi you just did, which will unencumber some properties from mortgage debt, can you talk a little bit about what kind of flexibility this provides? Is it operational flexibility or transactional flexibility or something else? Yeah, Duane, I would say it's a little bit of both, right? It does provide us, having our properties unencumbered by secured debt allows us a lot of operational flexibility to make decisions at the property that don't get bogged down by needing a lender consent. I guess on the transaction front, right now, all of our debt is completely prepayable at our option with no penalty. That's another advantage. Yeah. One last point I would make, Duane, is that, you know, effectively all of our debt now is really at market. There's no, I'll call it, headwind to our FFO and cash flow around debt resetting and rolling up to where market is to the extent you had sort of pre-pandemic or pandemic level debt. Thank you. Thanks. Thank you. Our next question comes from Daniel Hogan with Baird. You may proceed. Hi, good morning. Thanks, Don. Quickly on the out-of-room spend, is this level of growth then sustainable into 2026? Is there any reason for confidence behind that? You talk a bit about the pricing power on the out-of-room spend, maybe breaking out price vs volume that's baked into this growth. Yeah, I would say it's sort of too early to say for 2026. We're just beginning our budgeting process. I think it's a function of how group shapes up for next year and how that drives banqueting and catering. Groups had a nice run. Don't read into that that it won't continue to do well. I think your group mix has something to do with that as well as just how is the leisure customer also performing. I'm optimistic that can hold, but there's nothing yet that I have conviction to say one way or the other. As far as the price vs volume, I candidly don't have a great answer for you for that. I do think it's probably skewed maybe a bit more towards price because some of the out-of-room spend certainly is in F&B where it can be rethinking our menus, whether it's pricing, whether it's portion control, but it's also non-food and beverage items like parking or amenity fees and whatnot. I don't have a great answer for you on the breakout, but my instinct is it's probably a little bit more on price. Okay, and then following up, do you have any info on the growth just for the out-of-room spend on F&B, non-F&B, banqueting, catering, parking? Is the growth being driven across the board or just, I guess, your growth metrics? I was going to say, I think this quarter, like the growth that we've seen has been pretty broad-based. I mean, both from group business and sort of leisure transient business. That means that really it's something that we're seeing in both urban hotels and, you know, more traditional resort hotels. Okay, great. Thank you very much. Thanks. Thank you. Our next question comes from Chris Darling with Green Street. You may proceed. Hey, thanks. Good morning. Jeff, you mentioned an intention to more actively pursue asset sales over the next, call it, 1-2 years. Can you talk about how you balance the arbitrage opportunity on the one hand relative to the reality of being a smaller cap REIT and some of the efficiency concerns that might come with that? Is that in any way a governor on your willingness to shrink, you know, relative to alternatives, recycling capital into new acquisitions, anything like that? Yeah, that's a good question. I think we occasionally get that question of how do you balance that. I would say there certainly are other companies in our sector that are smaller than us. Ironically, some of them have better valuations than us, which is a bit of a head-scratcher for me. Ultimately, I think if there's a disconnect, meaning that we get too small, there are other forces that can solve that for you. It's something we consider, but I would say it's not something we lose sleep over in trying to do the right thing at the end of the day. Okay, that's fair enough. That's it for me. Thank you. Thanks. Thank you. Our next question comes from Floris van Dijkum with Ladenburg. You may proceed. Hey, guys, thanks for taking my question. Jeff, I wanted to hear your thoughts more big picture. You know, as you want to be judged by the market, should the market look at DiamondRock in terms of growth and adjusted EBITDA, or should investors look at the growth in FFO per share? What are the key, what are the things that you think people should be focusing on, and what are people misconstruing about the company? I think it's just more of a comment that I make about, you know, the sector, and that's why I referenced some of the other property types, Floris, is that I think at the end of the day, if, you know, any one of the people on this call owned this company entirely or any company entirely, you'd be more focused on how much you personally bring to the bottom line rather than some, you know, sort of the top of the income statement metrics. I understand that the industry uses EBITDA, both public and private, for valuing assets, but I think if you were a private investor, you were much more cognizant of the capital you're spending to drive that. I think the way that, you know, Wall Street sometimes just focuses more on RevPAR and EBITDA unfortunately ignores some of the capital that goes in to drive those results, and there's a balance. I think you want to be, you know, sort of investing appropriately rather than just necessarily overspending. I'm not saying it's necessarily one metric vs the other, but I think you have to keep an eye on that capex. Whether it's an EBITDA after capex or it's an FFO after capex, like a free cash flow per share, I think it has merit to look at as part of a valuation framework. Thanks. Maybe if you guys could talk a little bit about the Chico opportunity, what do you think you can do? How much capital could you spend there, and what are sort of perspective returns? Is it still too early at this point? It's still too early at this point. It's just that we have a substantial amount of land there that, you know, whether it could be, I think it's like residential developments, not that we would do that per se, but, you know, there's opportunities that you could sell off land for that, or it could be add keys there. As I mentioned, that land is substantial enough, and if you've seen it, there's ways that you could add rooms and make it part of the existing property, but you could also make something entirely different. To be clear, I don't think we necessarily want to be hotel developers, but that's something where you could do, you know, whether it's glamping or something that's more modular, there's opportunities. That's something that we're thinking about. It's not at the point now where I could give you sort of specific numbers or returns, but it's certainly an interesting opportunity given, I would say, sort of the ease of maybe building out there. Presumably, the returns would have to be well in excess of 10% in order for you to justify putting capital into that, right? Yeah, or it's higher. Higher certainty, it's, off the cuff, I would tell you that I would not expect that to be materially larger than like the work that we've done at Sedona, for example, or the Dagny. Great. Thanks, Jeff. Thanks. Thank you. As a reminder, to ask a question, please press star one one on your telephone. Our next question comes from Ken Billingsley with Compass Point Research and Trading. You may proceed. Good morning. I wanted to ask a question on—I think we lost you. Can you hear me? Nope, sorry, I lost you there for a second. All right. Great. My question is just on group with being 30% of revenue, and I would expect competition in the industry going after group and trying to get it to accelerate for them is going to be high. Can you talk about how, like an unbranded portfolio vs the branded or maybe have rewards? How do you market and how are you guys going after and grabbing that group business in what will likely be a more competitive environment? Yeah, I guess it just sort of depends on the asset. For example, like Cavallo Point in Sausalito, that's an example where the type of customer going after during the week can be sort of small group meetings looking for an offsite. It's the 30- 50- 70 person meeting that's maybe for sort of tech companies, and they're not inclined to want to go into downtown San Francisco right now. I would say it really depends on the situation because at the other end of the spectrum, you have a 1,200 room Chicago Marriott where you're hosting more of an association business, and Marriott is excellent at that type of marketing and sales. I think the reality of our portfolio is our large hotels are predominantly brand-encumbered, and we do rely to some extent on that brand lead channel for a large amount of our group business. I think, as Jeff mentioned, on the smaller side, especially as you sort of tilt into the luxury segment, customers are looking for a differentiated experience and don't necessarily want to have a high-dollar event at something that carries a brand tagline. I think that's where we've definitely seen some success in places like Cavallo, Sedona, Henderson Beach, where people are looking for a differentiated experience. As Jeff mentioned, 1,200 rooms in Chicago or 800 rooms in Boston are more traditional convention-type experiences, and we do have a brand umbrella to sit on top of those assets. Okay. We've got to look at the group markets that you're actually looking for and actually separate those out from the hotels, and that's allowing you to target, is it targeting maybe smaller groups that would not fit in in parole? Yeah, I think that that's certainly the direction on most of our independents, which tend to be smaller in size and higher ADR. I mean, a lot of the success we've had is going after small corporate meetings, exec teams, offsites that are high dollar, but also very highly rated. You had said some regulations regarding some disposition plans that regulations impacted some of your disposition plans. Are there any hurdles still impacting plans on certain assets? I mean, not necessarily. I would say some of the challenges were that we are down the road on some transactions that I think would have aided dispositions. To have the credit markets, you know, had a lot of volatility in pricing in April, and certainly the property tax increase in Chicago, they were all things that sort of weighed against the ability to kind of do what we wanted to do there in that time. Plus, there was also the concern around taxation on foreign investment into the U.S. There's a lot of foreign funds from Europe and from Canada that invest in the U.S., and just put a pause on that. It's not so much that you lose someone from a foreign country, it's that even domestic investors begin to think that they have sort of an upper hand, and it just makes it a little more challenging environment to negotiate or feel like you're negotiating from strength. Great. I appreciate you taking my questions. Thanks. Thank you. I would now like to turn the call back over to Jeff Donnelly for any closing remarks. No, no closing remarks. Hope everyone has a good summer. Thanks. Thank you. This concludes the conference. Thank you for your participation. You may now disconnect.