Good day, and thank you for standing by. Welcome to the DiamondRock Hospitality Company Fourth Quarter 2025 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker's presentation, there will be a question-and-answer session. To ask a question during the session, you will need to press star one one on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. I would now like to hand the conference over to your speaker today, Briony R. Quinn, Executive Vice President and Chief Financial Officer. Please go ahead. Good morning, everyone, and welcome to DiamondRock Fourth 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. We are pleased to report that we finished 2025 ahead of our most recent guidance estimates. For the full year 2025, we delivered corporate Adjusted EBITDA of $297.6 million and Adjusted FFO per share of $1.08. Our free cash flow per share, defined as Adjusted FFO less CapEx, was $0.69, a 6% increase over 2024 and a 22% increase since 2023. Full year comparable total RevPAR grew 1.2%. Comparable hotel Adjusted EBITDA grew 1.1%. Turning to the fourth quarter, corporate Adjusted EBITDA was $71.9 million, and Adjusted FFO per share was $0.27. Comparable RevPAR declined 30 basis points in the quarter, slightly exceeding our expectations. The fourth quarter represented our most difficult comparison of the year, with RevPAR growth of 5.4% in the fourth quarter of 2024. Against that backdrop and the impact of the federal government shutdown in the quarter, we are certainly pleased with the portfolio's performance. Occupancy declined 130 basis points year-over-year, while ADR increased 1.6%. By segment, business transient revenue led the quarter with 2.5% growth, while group revenue declined 1% and leisure transient revenue declined 2.5%. We are particularly proud of the results achieved by our recently renovated assets, including The Cliffs at L'Auberge, now fully integrated into L'Auberge de Sedona, and the Kimpton Hotel Palomar Phoenix. Our hotels in Destin, the Greater San Francisco market, New York, and Denver delivered standout results. Out-of-room spend proved more resilient than we anticipated. Total RevPAR increased 0.6%, representing a 90 basis point outperformance relative to RevPAR. This strength was concentrated in our resort portfolio, where out-of-room revenue per occupied room increased nearly 7%, the strongest quarterly growth of the year. Notably, out-of-room revenue per occupied room at our resorts accelerated sequentially throughout 2025, from 4% growth in the first quarter to nearly 7% growth in the fourth quarter. Food and beverage was a bright spot again for the third consecutive quarter. Food and beverage revenues increased 1.4%, with banquets and catering up over 2% and outlets up 0.5%. Food and beverage margins expanded by 120 basis points, aided by just a 50 basis point increase in labor costs. In practical terms, Food and beverage profits increased by over 5% on just 1.4% revenue growth. Additional contributors to out-of-room revenue growth included spa, parking, and destination fees, each of which increased in the mid to high single digits, partially offset by slightly lower attrition and cancellation fees. Turning to portfolio segmentation, our urban portfolio, which accounts for 62% of annual EBITDA, delivered 0.3% RevPAR and total RevPAR growth in the fourth quarter. November was the softest month of the quarter, when the impact of the federal government shutdown was most pronounced. The strongest RevPAR growth among our urban hotels was achieved by the Hotel Emblem San Francisco, the Denver Courtyard, Kimpton Palomar Phoenix, and Courtyard Fifth Avenue, all of which posted double-digit gains. At our resorts, RevPAR declined 1.8%, while total RevPAR increased 1.1%. We remain optimistic about the trajectory of our resorts in aggregate, as the fourth quarter experienced the lowest year-over-year RevPAR decline among all the quarters. In fact, resort RevPAR would have been positive, but for the renovation displacement at Havana Cabana and below average snowfall in Vail, which impacted The Hythe. During our third quarter call, we noted the material spread in RevPAR growth achieved between properties with rates over 300 versus those under $300. In the fourth quarter, that spread widened with a 580 basis point spread in RevPAR growth between the two rate groups and a 1,230 basis point spread in EBITDA growth. On the expense side, total hotel operating expenses declined 0.5% in the quarter, resulting in an 82 basis point expansion in hotel EBITDA margin. This margin improvement was the largest quarterly gain this year, yet it was on our lowest total RevPAR improvement of the year. Wages and benefits, which represent nearly half of total expenses, increased just 0.6% in the quarter, reflecting continued productivity gains. This is a testament to our asset management team working closely with our operators to ensure we right-size expenses for this operating environment. Before turning to the balance sheet, I will make a few comments on our group segment. Group room revenues declined 1.1% in the quarter, with rates up 2.6%, but room nights down 3.6%. The federal government shutdown disrupted our typical cadence of short-term group pickups in November, contributing to the fourth quarter demand headwind. Looking to 2026, we enter this year with $149 million of group room revenue on the books. This is the same as 2025, which was a peak for DiamondRock. We expect more in the year for the year pickup from a greater volume of tentatives and leads. Although cancellations from East Coast winter storms in January and February, limited snowfall in our ski markets, and a slower start to the year in Chicago have put downward pressure on our first quarter pace, we are confident we'll see improving prospect conversion to firm group business. Turning to the balance sheet, on December 31st, we redeemed our Series A redeemable preferred shares, utilizing cash on hand. Net of lower interest income, that capital allocation decision will generate a $0.03 tailwind to our FFO per share in 2026. Following the amendment of our senior unsecured credit facility in July, repayment of our last piece of outstanding property-level debt in September, and the redemption of our preferred shares, DiamondRock's capital structure is exceptionally simple. We have three fully pre-payable term loans, are not encumbered by secured debt, have no joint ventures or off-balance sheet encumbrances, and with extension options, we have no debt maturities until 2029. Inclusive of interest rate swaps, 70% of our debt is floating rate, which we believe is appropriate in order to take advantage of the declining interest rate environment. We paid a common dividend of $0.08 per share in each quarter of 2025, and a sub-dividend of $0.04 per share in the fourth quarter, equating to an annual FFO per share payout of 33%. Our payout% is below our historic levels as we continue to utilize our net operating losses to offset our taxable income in line with our capital allocation strategy. For 2026, we expect to declare quarterly dividends of $0.09 per share, with the potential for a fourth quarter sub-dividend, depending on full year results. In 2025, we utilized our free cash flow to repurchase 4.8 million common shares at an average price of $7.72 per share, and an implied cap rate of 10% on consensus estimates. We continue to review share repurchases as a highly attractive use of capital in this environment. I'll wrap up my comments with our 2026 guidance. We expect 2026 RevPAR growth of 1%-3% and total RevPAR growth 25 basis points higher. We expect Adjusted EBITDA to be in the range of $287 million-$302 million, and FFO per share to be in the range of $1.09-$1.16. In addition, we expect to spend $80 million-$90 million on capital expenditures this year, which Jeff will detail in his remarks. Based upon the midpoint of our guidance, this would imply a 4% increase in our free cash flow per share in 2026. The first quarter will be our toughest comparison of the year, and we expect first quarter RevPAR to be essentially flat to 2025. Taking this into account and the weighting of special events in the second and third quarters, you should expect our first quarter 2026 EBITDA and FFO as a percentage of the full year, to be below the percentage we realized in 2025. With that, I'll turn the call over to Jeff. Thanks, Briony, thank you all for joining us this morning. On Wednesday, the company announced that our Chairman, Bill McCarten, will not be standing for re-election and will retire from the board in late April at the conclusion of his term. Bill founded DiamondRock almost 22 years ago, served as our first Chief Executive Officer, and has provided the steady, thoughtful leadership this company needed throughout its evolution. His judgment, perspective, and commitment to doing what is right for shareholders have left an enduring mark on DiamondRock, and he will be deeply missed by all of us. With Bill's retirement, the board has selected Bruce D. Wardinski to serve as DiamondRock's next Chairman. Bruce has been a member of our board since 2013, and for most of his tenure, he has served as our Lead Independent Director. He has a deep understanding of the lodging industry and brings a history of creating value for shareholders across the numerous companies he has led and later sold. I have worked closely with Bruce for many years and look forward to partnering with him as we continue to execute our strategy and create long-term value for our shareholders. 2025 was an exciting year for DiamondRock. We celebrated our 20th year as a publicly traded REIT. We achieved a company record FFO per share of $1.08. Our shares outperformed the peer average by over 1,300 basis points. Those results reflect the hard work and discipline of the DiamondRock team and our partners. I am proud of what we have all accomplished together. Less than 2 years ago, we introduced DiamondRock 2.0, with a simple but deliberate strategy: Drive outsized free cash flow per share growth. Total shareholder returns will follow. That playbook works across other sectors. We believe lodging should be no different. The lodging REIT sector is inherently more complex than other real estate classes. Between owner, operator, often franchisor, and sometimes ground lessor, there can be many cooks in the kitchen. We believe it's important to remember who owns the kitchen. We are the stewards of your capital. We take that role very seriously. Disciplined capital allocation is our most important responsibility, for it is the foundation of total shareholder returns. We invest capital into our assets when underwriting supports appropriate risk-adjusted returns, we acquire assets when they enhance free cash flow per share. We sell assets when their ability to be additive to our free cash flow per share growth is at risk, or when a buyer's view of materially exceeds that of our own. Discipline matters on all three fronts. Accordingly, today I will present to you our five-year capital expenditure program and update you on our intentions to recycle capital within the portfolio in 2026. First, let's talk about the CapEx program. We believe our capital expenditure program is a key distinction and a critical reason we are a free cash flow per share growth story and not a short-term RevPAR headline story. What distinguishes our intentional approach is the stability of our well-planned spending and an appropriate level of total investment. These two key differentiators increase certainty for shareholders, generate solid risk-djusted returns, and supports our hotels' outsized RevPAR index scores and strong EBITDA margins. Over the next five years, our CapEx program will annually equate to 7%-9% of total revenues. Not 10%-11%, which is the peer average, and certainly not the mid-teens several have been spending, but 7%-9% or about $80 million-$100 million per year for the next five years. In absolute dollars, the difference in the capital we are spending versus what we would be spending at the peer average rate is cumulatively over $100 million or $0.50 per share. That is not an amount we are underinvesting; rather, that is the increment we do not believe provides an appropriate risk-adjusted return and therefore will be redirected to where we see superior returns. As fiduciaries of your capital and shareholders ourselves, that is paramount to us. We expect to undertake four to five meaningful renovation projects annually, and the remainder of the portfolio will benefit from more focused improvements. To be clear, our portfolio is improved steadily and thoughtfully every year to support or enhance competitive positioning. Consistent with the past, improvements are managed to maintain earnings disruptions to about $2 million-$4 million per year. You will hear us say repeatedly, as owner, we are best positioned to determine the optimal balance between operating performance, capital expenditure, magnitude and timing, and value creation. We believe DiamondRock has found that right balance. Through the experience and integrated work of our in-house design and construction team and asset managers, we have determined that our hotels, on average, do not require full renovations on the rigid seven-year cycle. Each asset's value, age, relative performance, profitability, prior renovation quality, and the care provided by our operating partners all matter. When renovations are determined to be the best course forward, cost discipline is paramount. Every improvement is evaluated through its impact on productivity and profitability, and every fixture and finish is scrutinized for cost, durability, and necessity. Our Kimpton Palomar Phoenix is a clear example of an appropriately timed and right-sized renovation. The hotel was nine years old when we undertook its first renovation in 2025. It was well built, well maintained by our determination, its competitive positioning within the downtown market would be enhanced through investing just over $20,000 per key. We completed the renovation in the third quarter. By the fourth quarter, EBITDA had increased nearly 20%, with a 15-point gain in RevPAR index by December. That is the balance of an appropriate capital investment and resulting operating performance gain at work. This does not mean we shy away from ROI projects. To the contrary, we believe ROI projects can be among the very best risk-adjusted use of capital to drive long-term earnings growth, provided returns are conservatively underwritten and time to stabilization is defendable. ROI projects are included in our five-year CapEx plan. We are excited about what is ahead. Our next project will likely commence in 2027. We will share more in the coming quarters. Our projects are appropriately scaled. We prefer to hit singles and doubles because, as in baseball, getting on base is far more important to winning than striking out, chasing the occasional home run on a riskier, large, complicated, multi-year project. That philosophy is reflected in our most recently completed ROI project at L'Auberge. We hosted the majority of our covering analysts in early December. We're thrilled to show off the integration of the two properties into one unified luxury resort, a new elevated pool and F&B experience, and expanded event space overlooking Sedona's iconic Red Rocks. In its first quarter subsequent to the completion of the renovation, L'Auberge delivered 15% RevPAR growth and over 25% EBITDA growth, reflecting its top-line tailwinds and efficiency gains of operating as a single integrated resort. It is still early. Results are ahead of our expectations, based on booking pace, we remain comfortable the product will achieve at least a 10% yield on cost at stabilization. On to capital recycling. The transaction market is showing signs of improvement. Higher quality single assets and portfolios are coming to market. Buyer and seller expectations are moving towards a more rational equilibrium, debt capital is available at attractive pricing. The acquisition strategy of DiamondRock 2.0 is straightforward. We are looking for situations where we believe we have the fundamental backdrop and asset level flexibility to create value. Basis is critical. In an AI-enabled economy, we expect demand will increasingly favor assets that deliver authenticity, emotional connection, and differentiated experiences with irreplaceable travel. We prefer supply-constrained markets. We prefer to avoid ground leases because asset value transfers to the ground lessor, like a leak in a boat. We prefer to partner with independent operators and lean into situations where our best-in-class asset managers can meaningfully drive free cash flow growth. We have nothing to report at this time, we remain active underwriters as our team is always cultivating opportunities through our extensive network of independent owners. That said, it is increasingly likely that DiamondRock will be a net seller of hotels in 2026. Early last year, we were engaged in active discussions around the potential disposition of several DiamondRock properties, largely driven by inbound interest. The uncertainty introduced by Liberation Day understandably paused many of those conversations. Over the past six months, however, most of those discussions have resumed. To be clear, we do not expect every asset under review will be sold, nor do we feel any pressure to sell. The breadth of interest has been wide, spanning both smaller and larger assets across urban and resort markets. We will only transact when doing so advances our strategy to drive incremental value through increasing free cash flow per share over the medium to long term. Our shares currently trade over a 9% implied cap rate. At this time, we believe our shares are the best use for recycled capital. Turning to our view on 2026, multiple forces are aligning in our favor. We should benefit from easier year-over-year comps following Liberation Day and the 43-day federal government shutdown in 2025, as well as a holiday calendar that is more favorable for incremental business and leisure travel. Our portfolio is well-positioned in markets expected to participate meaningfully in the country's 250th anniversary celebrations and aligns closely with FIFA's World Cup games, incrementally so as the tournament progresses. In addition, we expect to benefit from outsized renovation tailwinds from L'Auberge de Sedona, Havana Cabana, and Kimpton Palomar Phoenix, while not experiencing material renovation disruption in 2026. Finally, our higher-end portfolio continues to benefit from the resilient spending patterns of affluent customers who have experienced disproportionate wealth gains in recent years and remain avid travelers. Spring break demand is developing favorably, supported by solid rate growth across a broad range of our urban and resort hotels. With respect to FIFA World Cup and July Fourth bookings, we have some early observations. For World Cup, we are seeing impressive rate growth in our host markets. It is still very early. We will have more clarity on pace by our next earnings call, as most transient bookings are likely to occur 30 to 60 days out. Turning to the 250th anniversary of the United States on July Fourth, rates for the holiday weekend are 20% higher than last year. While major urban markets such as Boston and New York are typically top of mind for these celebrations, the strength we are seeing today is actually coming from our resort portfolio. We view 2026 as an exciting time for our hotels. We have provided a RevPAR and total RevPAR outlook that we deem to be appropriate and measured, given the inherent uncertainty of the macroeconomic environment. As we think about our guidance, greater confidence lies in what we can control, converting top-line performance into FFO per share and free cash flow per share growth. We do that through disciplined expense management aligned with the demand environment, a balance sheet positioned to benefit from declining interest rates through floating rate debt exposure, and a highly disciplined capital expenditure program. In 2025, with just 0.4% RevPAR growth, our FFO per share increased 4%, and our free cash flow per share increased 6%. Said differently, our FFO per share margin was over 350 basis points better than our full-service peers in 2025. Based upon the midpoint of the guidance Briony provided earlier, in 2026, we expect our RevPAR to increase 2% and our FFO and free cash flow per share to increase approximately 4%. We were among the very few full-service lodging REITs in 2025 to deliver free cash flow per share in excess of 2018. We view the relative TSR performance of our shares in 2025 as a validation of our strategy. With continued discipline and execution, we believe the momentum we built in 2025 is repeatable in 2026. Momentum matters because at DiamondRock, we believe excellence compounds. Thank you for your time this morning, and we are happy to answer your questions. As a reminder, to ask a question, please press star one on your telephone and wait for your name to be announced. To withdraw your question, please press star one again. In the interest of time, we ask that you please limit yourself to one question and one follow-up. You may then rejoin the queue. Please stand by while we compile the Q&A roster. Our first question comes from Smedes Rose with Citi. Your line is open. Morning, Smedes. Hi. Thanks. Good morning. Good morning. Thanks for those opening remarks. That was helpful. I wanted to ask you maybe a little bit more about your thoughts around the pace of labor and benefits, just overall wages in 2026 at the property level. I don't know if you can share anything about how you're thinking specifically about your New York exposure, given the upcoming contracts in the midyear. Yep. Good morning, Smedes. Our guidance, the midpoint of our guidance implies that labor costs will be up around 3% next year. That's inclusive of, as you mentioned, the contract renewal in New York. We have three limited service hotels in New York, and that represents about 7% of our overall labor costs. That will provide a little bit of pressure in the back half of the year. As a reminder, this year, our labor costs were up a little over 1%, essentially flat in our resorts and up about two and a half in our urban portfolio. Yeah. A lot of the Okay. in labor for us is real, is really coming from productivity. I think while we're continuing to, you know, try to find incremental ways where we can get less hour work throughout the portfolio, I think, we found a lot of probably some of the lowest hanging fruit. That's why we think our guide, in terms of total labor cost, is probably going to increase this year. Okay. Thank you. Then I just wanted to ask you, Briony, I guess, from your remarks about first quarter RevPAR, it sounds like that might be the weakest for the year. It's kind of in line with what we're hearing from a lot of other companies. Anything you can provide on sort of the cadence of earnings through second through fourth quarters? Yeah, you're right. First quarter will be our toughest for the reasons I mentioned in my remarks. I think when we think through the remainder of the quarters, our group pace is sort of weighted between the growth in second and fourth quarter. We have a little bit of a headwind in the third quarter with respect to our group pace, but we think obviously transient should more than offset that in the third quarter, given the special events that are happening. All right. Thank you, guys. Appreciate it. Thanks, Smedes. Thank you. Our next question comes from Cooper Clark with Wells Fargo. Your line is open. Great, thanks for taking the question, and I appreciate that the Westin Seaport earnings impact may be more of a 2027 event, but just curious how we should be thinking about that franchise expiration this year within the context of some of your prepared remarks, and what possible outcomes are on the table that we should be considering? Sure, Cooper. I think, you know, we still haven't come to, you know, a finalized contractual deal on that. We have been pleased with the level of interest that we've gotten from multiple brands and frankly, the flexibility around both contract term, stabilized fees and termination clauses. I think as we continue to work through that, we'll keep everybody apprised. We think we have a pretty interesting option on the table that we're sort of working towards finalizing. Okay, great. I appreciate the color on the World Cup and recognize it remains early with respect to the 30-60-day window you spoke to in the prepared remarks. Just curious if you could provide some additional color on the RevPAR lift currently embedded in guide from World Cup demand, and what you're seeing kind of quarter to date on the World Cup as it relates to some of the rate strength you spoke to, group booking trends or maybe markets or specific assets where you're already seeing an outsized impact? Yeah, I would say that the amount that's been embedded in our guide is about 20 basis points when we look at, you know, how we structured our 2026 guidance. I would say that, you know, what we're seeing at the market level is there is decent strength in the rates. You're just not seeing the volume of room nights come into play yet. It's still early, and that's why we think that you'll begin to see some acceleration when you're about 30- 60 days out from the event. I'd love to give you more color, but at this point in time, you know, that's what we're seeing through our hotels. Great. Thank you. Appreciate it. Thank you. Our next question comes from Michael Bellisario with Baird. Your line is open. Thanks. Good morning, everyone. Could you dig into the out-of-room spend of performance a little bit more? I guess sort of two parts. Just one, why shouldn't you be able to do more than 25 basis points on total RevPAR above RevPAR? Sort of related to that, any update on whether you're still in a group-up strategy and if you're seeing any change in booking windows for either group, and transient? Thank you. I mean, I think, Mike, we're cautiously optimistic we can continue to move the needle, but I think it's also just partly run rate, right? I mean, we look at sort of what the run rate of out-of-group spend has been. You know, it's not that we're saying that's necessarily going to accelerate, but if, you know, sort of the underlying RevPAR accelerates relative to what we saw last year and that stays stable, then the margin contracts. Mm-hmm. Anything on group up and booking window? In terms of the booking window for groups? I mean, I think last year, frankly, was a bit of a struggle thanks to Liberation Day. You didn't see as much conversion of leads into, you know, firm contracts. I'm optimistic that as we move through this year, we'll see a little bit of a recovery there. When you look at our sort of leads and tentatives for this year versus last year, we're up about 10%. You know, I'm encouraged that we'll continue to see good growth on the group side. Yeah, I think that's right, 'cause we really saw, as you might imagine, a pretty significant drop-off in leads when we got to April of last year. As we progress through the year, we think those stats will continue to get better just in terms of the margin of, you know, lead volume over the same time last year. Thank you. Our next question comes from Chris Woronka with Deutsche Bank. Your line is open. Hey, good morning, guys. Thanks for taking the questions. first of all, you know, Jeff, you've, you know, you've talked about some, I guess, DiamondRock specific wins on kind of CapEx, and part of that is, you know, working with your brand partners. I'm curious as to whether you have kind of any, what you might have on the agenda for 2026 in that sense, and whether, you know, it continues to skew a little bit more towards, you know, more smarter CapEx, or whether maybe there might be some operational things that you're hoping to accomplish with them as well. Thanks. I mean, it's a couple of fronts, Chris. I would say that, you know, as Justin mentioned, as it relates to, like, the Westin Seaport, for example, I think there's a, you know, situation that you won't see the results of that in 2026, but I think in 2027, I think we're optimistic that if we're able to, you know, bring that deal to conclusion, I think it will be beneficial to that hotel, and I think it could be felt by DiamondRock overall next year. You know, so those... I think those wins certainly are out there, but they don't happen, you know, necessarily as frequently. We have a lot of control over our hotels at the operating level, just because, you know, they are largely third-party managed. I think that's throughout the year. I would say, on the CapEx side is probably where we have those sort of larger success because, you know, the brands, whether they're franchised or managed, they do have standards for what they want their hotels to be like. I think that's where we really distinguish ourselves versus the marketplace, and just, you know, really value engineering those and making sure that the expenditures that we make are sort of appropriate for each hotel and not necessarily the same for all hotels, if that makes sense. Does that help? Yes, that's super helpful. Thanks, Jeff. As a follow-up, can you maybe share with us what might be embedded in your guidance for kind of ramp up of recently completed renovations? I guess, you know, Sedona, I think Phoenix, maybe even Havana Cabana. Is there any lift, you know, much lift expected this year? As we think to 2027, do you think the potential lift from things you're finishing in 2026 is, you know, more or less than what you're the lift you're getting this year in 2026? Yeah, I mean, really, the one that we've called out is Sedona. It's about 25-50 basis points in the year for RevPAR growth. There will be some benefit, I don't have a specific number for you, but for Havana Cabana in the fourth quarter, because we ended up accelerating some work at that property that we had anticipated in future years, and just taking advantage of the opportunity of the softness that, you know, we were seeing in Florida during the summer to do some of that work in third quarter and fourth quarter, that you can see it in the disruption of the property's EBITDA. We had probably 60% of the rooms out of service in that period of time, so there will be some recovery, excuse me, of that EBITDA as we get into the back half of this year, right? I apologize. I don't have a specific percentage for you, but I think it'll be $1 million or $2 million, my guess. I think that's right. We sort of scheduled out our 2026 renovation projects to kind of line up with the timing of the projects we did in 2025. If you think about sort of the year-over-year, some of that disruption that we'll have in 2026 might sort of offset some of the gains that we had from headwinds from 2025. Okay, very good. Makes sense. Thanks. Thanks, Jeff. Thanks, Briony. Thank you. Our next question comes from Duane Pfennigwerth with Evercore ISI. Your line is open. Hey, good morning. Thank you. Your commentary on the transaction markets is encouraging. It sounds like you're much more, maybe more optimistic on the sell side, but maybe neutral on the buy side. Correct me if that premise is wrong. I just wondered, in terms of acquisitions, is that a function of the quality of what's on the market or pricing? It's a good question. I think it's a fair characterization. I think, you know, we're more inclined to be sellers at this time. I just think the reason for the neutrality, I guess, on acquisitions, is that right now our shares look to be a better investment than the options that we see out there. I think a lot of the deals that are coming to the market, and this is very early on, in the last, you know, say, two to three weeks, they tend to skew towards very large luxury assets. From a ticket price and, you know, size and pricing, it's just. Doesn't necessarily align with what we chase, but I think it's a type of asset that's gonna end up, you know, setting some favorable comparisons in the marketplace, and I think begin to, you know, provide the market with some visibility in where asset prices are. That's helpful. Then just maybe you could play back just the payoff of the preferreds? You know, what are the net impacts to the P&L and cash flow? As you look at your capital structure, it feels pretty clean at this point. Is there anything left to kind of, you know, higher cost to pay down that would compete favorably with buyback? Thank you. No, no big pieces of capital out there that are, you know, competing with buyback. I would say, you know, one of the reasons that we looked at it, and Briony can give you some of the pieces that drive the earnings impact that we see from this. One of the reasons that we looked at that is that was an opportunity to invest, you know, almost $120 million at effectively an 8.25% yield. You know, share repurchases were certainly competitive with that, but the ability to get that much stock in such a short period of time can be difficult. This was one where we thought it cleaned up our balance sheet a little bit more, and it was an efficient use of just, you know, removing a costly piece of capital. When you offset, we obviously had some significant cash balances that we held for a portion of the year last year. When you offset sort of the lower interest income in 26 with the benefit of paying off our preferreds, it provides about a $0.03 tailwind to FFO per share this year. Okay, thank you. Thanks, Ryan. Thank you. Our next question comes from Austin Wurschmidt with KeyBanc Capital Markets. Your line is open. Thanks, good morning, everybody. Jeff, just going back to your comments specifically about the improving kind of, you know, debt capital availability and cost, thought that was particularly interesting given sort of the varying size of hotels you've discussed, you know, selling, you know, on prior calls. I guess, does that comment really open the door for potential, you know, larger sales this year? You know, just given, you know, the maturity profile, I think you said nothing coming due until 2029 or so, you know, what is sort of the intended use of proceeds, you know, and how much really do you think you can do from a share repurchase perspective? Thanks. Yeah, that's, it's a thoughtful question. I would say that, you know, I think it's beneficial that you are getting some declines in rates, but also, I think lenders are... We're early days, but, you know, beginning to get a little more aggressive on proceeds. That's what I think is gonna be beneficial because if you look in the last year or two when interest rates were more volatile and frankly, a little bit higher, it was hard to get some spread between your borrowing cost and, you know, the ultimate price that someone was purchasing at. Now that you're getting some of that spread, I think it's, you know, providing some positive leverage to investors out there, and that's what I think is gonna be helpful, provided there aren't any other unforeseen macroeconomic events, to maybe facilitating some dispositions. As I mentioned, I think our shares are appealing right now. It depends on the size of the disposition. I think if something was very large, you know, again, it depends on pricing and what have you, but I think our inclination is to lean into share repurchases. It's something that you have to make a determinant, you know, at that time. I appreciate the thoughts there. Just going back to The Cliffs at L'Auberge, you've talked about this 25-50 basis points, you know, tailwind this year. Can you just remind us, is that just getting back the disruption that you saw at that hotel last year? And then, you know, in the spirit of, you know, flow-through being more impactful, what does that imply from a hotel EBITDA perspective in terms of, you know, what was lost last year, but, you know, what you anticipate to get back in 2026? Thanks. Yeah, I was going to say, like, we look at that as an investment that will ultimately provide, you know, sort of north of a 10%, you know, unlevered yield on our investment. The idea is that, you know, when it stabilizes, call it, you know, two, three years from completion, that we will earn, you know, more EBITDA than we were earning before. It wasn't just an investment to sort of disrupt and then recoup what we had just lost. I don't have off the top of my head the. Yeah, I think round numbers, we went about $1 million in EBITDA backwards last year, and I think, you know, and from an independent resort perspective, it usually is a multi-year stabilization process. My guess is we get two to three of that back this year. We'll see, you know, one to two of incremental and then kind of continued progression along that trend line for a few years. Mm-hmm. Just following back, if I can squeeze in one more related. You know, that hotel had a pretty material, you know, outperformance. I think it was in 2022, certainly a unique period of time. Is it possible from a, you know, stretch goal perspective that you could get back to that level with some of the efficiency gains as well as ADR upside that you've highlighted? Yeah. I think that's certainly possible. I would. It's hard to appreciate unless you're standing there, but I think that because those two hotels, they were adjacent, but you know, fairly different in their quality level, that I think now unifying them, it really opens up the opportunity for that hotel down the road to sort of, you know, bring in more group events and different types of guests than it had before because of its increased scale. Thanks for the time. Thanks. Thank you. As a reminder, to ask a question, please press star one one on your telephone. Again, that is star one one to ask a question. Our next question comes from Rich Hightower with Barclays. Your line is open. Hey, good morning, guys. Hey, Rich. I got a little nervous thinking ahead in star one. Jeff, I wanna go back to your thoughtful ruminations on CapEx and where it sort of fits into the longer-term plans for DiamondRock. I think, you know, even going back prior to COVID, you know, you think about why hotel REIT stocks, you know, generally never went up over long periods of time. I think CapEx is a big part of that. Now that you've sort of rethought what that strategy should be for the company, I mean, what do you think a sustainable, absent, you know, major macro disruption, sort of return on equity profile should be for a hotel REIT? How do you expect to get there? You mean like a levered return on equity? A levered return on equity, yeah. Cash flow return to equity owners in the company. The way we framed it to our Board, and maybe I'm not precisely answering your question, but I think the responsibility that we have in order to outperform is that we need to be, you know, effectively surpassing what I was calling sort of the growth and the yield, like FFO growth and dividend yield combined is sort of a loose proxy of total return. We have to be beating the broader equity REIT average, probably about 200 basis points, you know, as a sector, in order for people to feel that there's a reason to be looking at lodging vis-a-vis other sectors. You know, and I think if you look over periods of time, you know, probably at any of the... like yours or any other of the, I'll call it, comp sheets out there, I think a lot of the equity REITs, you know, historically are providing sort of a 6%-9% sort of combination of FFO growth and dividend yield. I think we have to be, you know, above that range as a, as an industry, and for us within it, you know, leading that, in order to be attracting capital. No, I think, I think that's helpful. I guess maybe just to follow up on one element there. Briony, you mentioned, you know, you've still got some NOLs to burn off before increasing the dividend payout. What does that schedule look like? When do you sort of revert to a, I guess, a more normalized payout ratio? Yeah. I mean, the goal is to sort of spread those NOLs out as long as we possibly can. That's sort of the trajectory of being able to sort of steadily increase our dividend over time versus maximizing our NOLs over the next year or two, and then having to, you know, have this big spike in a dividend payout. I would anticipate, given our strategy, that it'll probably take another three to four years before we fully burn off those NOLs. All right, great. Thank you. Uh. Thanks, Ed. Thank you. Our next question comes from Chris Darling with Green Street. Your line is open. Thanks. Good morning. Jeff, you spoke about the bifurcation in consumer trends, how that's been benefiting DiamondRock as well as other high-end owners. What's your forward-looking view as it relates to this dynamic? Do you think that relative strength at the high end will persist for the foreseeable future, or do you envision more of a broad-based recovery unfolding throughout the industry? Yeah, I would say it's you know, I think, you know, when you look at it's hard to base it upon just our portfolio, because in the grand scheme of things, we have 35 assets. We're not representing a huge swath of the economy. I do feel like that affluent consumer is gonna continue to be a spender. My sense is that, you know, despite the volatility in the stock market, there's been a lot of wealth created, and I don't see that disappearing very quickly. I think there's been some other headwinds on the economy, in terms of, like, international inbound travel, that necessarily won't change on a dime. I think if you think over the next two, three years, I'm hard-pressed to see how, you know, it continues to erode. I'd like to think that that sort of more well-heeled traveler will continue to improve. The lower level, we don't have as great visibility on, candidly. I think there's certainly a lot of pressure on consumers. I think that's where, you know, politicians, you know, certainly seem to be more intently focused. It's, you know, honestly, it's like that's a little outside my pay grade to predict easily, but I'd like to believe that there are some tailwinds there down the road. Okay. It's helpful thoughts. Then, you know, maybe just more broadly, can you speak on the state of business transient travel, how that segment has sort of progressed and your expectations for the coming year? Maybe within that answer, you could touch on government travel, specifically, whether you see that segment as a tailwind or a headwind this year. Yeah, like BT, I think, you know, late last year, we were seeing sort of mid-single digit growth. I think our expectation for BT is somewhere around that level. You know, so it feels like it's holding in fairly well and delivering sort of consistent growth. On the government side, we don't do a tremendous amount of government business. It's very, very low, single digit contribution. I don't know, Justin, if you have anything else to add on those two? Yeah, I mean, I would say the two, in some cases, depending on the markets, are somewhat intertwined, right? We actually see, you know, if you go to, like, a San Diego, you'll see a drop-off in BT during the government shutdown period, because a lot of that business is government contract related. We're hopeful with a little bit more normal kind of, you know, yeah, a little more stability in our government and kind of government budget process that, you know, some of the BT falloff we saw last year, that sort of averaged us down to that mid-single digits will abate, and, you know, we'll be able to continue at that trend line or better. All right. I appreciate the time. That's it for me. Thanks, Chris. Thank you. Our next question comes from Patrick Scholes with Truist Securities. Your line is open. Great. Good morning, everyone. Hey, how you doing? I'm doing well, thank you. Jeff, regarding your five-year plan for lower CapEx, I'm curious, I assume you've probably run it by your property managers or franchisors, if so, any difference in the type of feedback that you're getting or pushback, say, versus the major brands versus the independents in your portfolio for that lower level of CapEx? Thank you. I guess I would say that, you know, when you think about the hotels, I mean, you know, if they're independent, we don't really have to run it by anybody. That's what we want. Okay, fair. It doesn't matter. I mean, now, that said, you know, we do have folks managing those hotels, and we always want their feedback on whether or not we're spending appropriately. You know, as it relates to franchise or manage, I don't know, Justin, if you wanna chime in, but, you know, we do look at brand standards, but, you know, you see those, they're guidelines effectively, and you're trying to manage to timing the expenditure and the magnitude, and as I talked about in remarks, like, you know, emulating the design standard, but you don't have to do it precisely with, you know, the exact nightstand or the exact lamp that they want. There's ways that you can sort of value engineer that and sort of deliver the refined experience that they were looking for, but, you know, do it more cost effectively rather than just strictly following their literal blueprint, if you will. Okay, I just curious, you know, if any of the major brands gave you a, you don't have to list them by name, any particular difficult time. Obviously, you know, sometimes in this industry, we know there's different different interests of different parties. I'm just curious about that, thank you. No, I just, I would say they're always happy when you're offering to spend more. Yeah, I think we're just focused on, you know, being treated equitably amongst the entire spectrum of owners. I think in today's world, especially as the transaction volume has fallen off and there are a lot less change of control PIPs being executed, I think historically, given the public companies aren't single asset levered typically and have a lot of capital, there often is more focus, or reliance upon them to, you know, maybe renovate in a greater amount or, you know, in sort of quicker succession than what the private owners do. I think we're just sort of focused on, you know, being a franchisee like everyone else in the universe and sort of doing things on a similar cadence to the overall hotel investment market. Okay, maybe a little more granular, just a follow-up question. You know, maybe just a specific, say, real-world, real hotel example of, you know, if you were investing 6% versus 10 or 11 previously. You know, what might be a real example of, hey, this is something that if we were at that prior level of CapEx, we would have done. Today, we don't think we need to do it. Yeah, something specific. Thank you. Trying to think if, like, Palomar in Phoenix would be an example. Yeah, I think it really goes down candidly into the minutiae of like, you know. Yeah ... to coming in and saying, "We're doing a rooms renovation. We're essentially gonna start over and replace everything." You know, I think Phoenix is a good example where we kind of looked at corridor carpet as an example and said, "Oh, we don't really feel like this needs to come out." Existing wall vinyl in the rooms aesthetically, you know, works with what we're doing. I think, you know, maybe one piece of furniture we kept. It's, you know, it's not really kind of carte blanche throughout the portfolio, but I think it's really just assessing what's the utility of the existing stock and making sure that we're only touching the things that need to be touched, as opposed to just holistically changing everything every time we go in and do a renovation. Great. No, I think what you're doing here is great, as far as, you know, being really on top of cost and everything. Thank you. Thank you. Thank you. I'm showing no further questions at this time. I would now like to turn it back to Jeff Donnelly for closing remarks. Thanks, folks. We look forward to seeing you all on the road, and we'll be certainly meeting with many of you at the Citigroup Real Estate Conference next week. Safe travels. This concludes today's conference call. Thank you for participating. You may now disconnect.