Q4 2023 Apple Hospitality REIT Inc Earnings Call

Participants

Kelly Clarke; Vice President - Investor Relations; Apple Hospitality REIT Inc

Justin Knight; Chief Executive Officer & Director; Apple Hospitality REIT Inc

Liz Perkins; Senior Vice President & Chief Financial Officer; Apple Hospitality REIT Inc

Michael Bellisario; Analyst; Robert W. Baird & Co. Incorporated

Austin Wurschmidt; Analyst; KeyBanc Capital Markets Inc.

Dori Kesten; Analyst; Wells Fargo Securities, LLC

Anthony Powell; Analyst; Barclays Bank PLC

Floris Van Dijkum; Analyst; Compass Point Research & Trading, LLC

Bryan Maher; Analyst; B. Riley Securities, Inc.

Jonathan Jenkins; Analyst; Oppenheimer & Co. Inc.

Michael Herring; Analyst; Green Street Advisors

Presentation

Operator

Greetings, and welcome to the Apple Hospitality Group fourth quarter and full year 2023 earnings call. (Operator Instructions) As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kelly Clarke, Vice President, Investor Relations for Apple Hospitality REIT. Thank you. You may begin.

Kelly Clarke

Thank you and good morning. Welcome to Apple Hospitality REIT fourth quarter and full year 2023 earnings call. Today's call will be based on the earnings release and Form 10-K, which we distributed and filed yesterday afternoon.
Before we begin, please note that today's call may include forward-looking statements as defined by federal securities laws. These forward-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 forward-looking statements are qualified by the risk factors described in our filings with the SEC, including in our 2023 Annual Report on Form 10-K and speak only as of today. The company undertakes no obligation to publicly update or revise any forward-looking statements except as required by law.
In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP 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 applehospitalityreit.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 fourth quarter and full year 2023 and an operational outlook for 2024. 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.

Justin Knight

Good morning, and thank you for joining us today. We are pleased to report another year of strong operating performance, portfolio growth, and total returns for our shareholders. During the year, operating fundamentals continued to strengthened, and we thoughtfully grow our portfolio with the acquisition of six hotels, enhance the quality of our hotels through capital improvement projects, provided our shareholders with attractive distribution and positioned our balance sheet for continued growth by raising net proceeds of $216 million through our ATM program.
Our accomplishments in 2023 and our outperformance since the onset of the pandemic are testament to the merits of our strategy of owning a diversified portfolio of rooms, focus hotels with broad consumer appeal while maintaining financial flexibility with low leverage and speak to the strength of the brands and management companies we worked with and the due diligent efforts of our experienced team with resilient leisure demand and steady improvements in business travel.
We are pleased to report comparable hotels RevPAR growth of more than 2% for the fourth quarter and 7% for the full year 2023 as compared to the same periods of 2022, primarily driven by increases in comparable hotels, ADR of nearly 3% and 5%, respectively. Comparable hotels occupancy for the fourth quarter 2023 was essentially flat to the fourth quarter of 2022 and for the year was up approximately 2% as compared to 2022.
Comparable hotels adjusted hotel EBITDA was $104 million for the quarter and $500 million for the year, down 2% and up 5%, respectively, as compared to the same periods of 2022. Our portfolio continues to perform ahead of pre-pandemic levels, with comparable hotels RevPAR up approximately 8% relative to both the fourth quarter and full year [2019], despite continued opportunity to rebuild occupancy especially midweek.
Comparable hotels adjusted hotel EBITDA was up approximately 6% and 7% for the fourth quarter and full year 2019, respectively. Based on preliminary results, January comparable hotels occupancy increased just over 1% year over year and ADR grew over 2%. Overall, travel trends remained favorable with operating results continuing to be bolstered by limited near-term supply growth we anticipate that we will be in a position to more meaningfully grow rate as we move through the first quarter and into a seasonally stronger occupancy month.
Our revenue and asset management teams continue to leverage our scale, ownership of rooms, focus, hotels and our unparalleled access to performance data to benchmark and share best practices across third party management companies to drive strong margins despite continued inflationary and wage pressures. We are fortunate to be partnered with some of the best operators in the industry who monitor real-time performance and focus on-site efforts to maximize profitability to our hotels without sacrificing service, cleanliness, maintenance or overall guest satisfaction.
Through disciplined cost controls, we achieved comparable hotels adjusted hotel EBITDA margin of 32.9% for the quarter despite lower RevPAR growth and 36.4% for the full year. Supported by our strong operating performance, we continued to provide investors with strong dividend yield.
We paid distributions totaling $0.24 per common share during the fourth quarter and $1.04 per common share during the year for a total of approximately $238 million. Based on Wednesday's closing price, our annualized regular monthly cash distribution of $0.96 per share represents an annual yield of approximately 6%. Together with our Board of Directors, we will continue to monitor our distribution rate and timing relative to the performance of our hotels and other potential uses of capital.
During the fourth quarter, we sold approximately 12.8 million shares under our ATM program at a weighted average market sales price of approximately $17.05 per common share and received net proceeds of approximately $216 million. The $17.05 per share represents a 12.6 times multiple on 2023 EBITDA just under a turn and a half spread to the combined multiple for the five hotels we acquired in the fourth quarter.
The proceeds were used to fund acquisitions and to reset our balance sheet position us to be active in market and to continue to pursue accretive opportunities. In 2023, we acquired a total of six hotels and an associated parking deck for a total of approximately $290 million.
As previously announced, in June, we acquired the Courtyard Cleveland University Circle for $31 million. In October, we acquired the Courtyard and Hyatt House Salt Lake City downtown together with a corresponding parking garage for a combined total of $91.5 million. We also acquired the residence in Seattle South Renton in October for $55.5 million. In November, we purchased the Embassy Suites South Jordan Salt Lake City for a total of approximately $37 million. And in December, we acquired the SpringHill Suites, Las Vegas Convention Center for $75 million.
We are pleased to expand and enhance our presence within these business-friendly markets that have seen significant economic growth and positive demographic trends in recent years these markets are home to a wide variety of business group and leisure demand generators from healthcare, universities, technology, and manufacturing to outdoor recreation, professional sporting events and world renowned entertainment to hotels complement our existing portfolio and reflect our proven investment strategy.
The combined purchase price for the recently acquired hotels represents a blended cap rate of just over 8% on 2023 year end financials after an industry standard 4% FF&E reserve and an 11.3 times multiple on 2023 combined hotel EBITDA.
We believe each of these assets is well-positioned within its respective market and has embedded upside that will enable it to be a meaningful contributor to our overall portfolio performance. We continue to have two hotels under contract for purchase that are currently under development and Embassy Suites in downtown Madison, Wisconsin for approximately $79 million and a motto in downtown Nashville for approximately $98 million.
We anticipate acquiring the Madison Embassy in mid 2024 and the Nashville Motel in late 2025, both following completion of construction. Our patience over the past several years has positioned us to be active in a market with limited competition where we can secure high-quality assets at pricing that meets our internal underwriting criteria.
Consistent with the strategy we articulated on past calls, we were able to fund a portion of our recent activity utilizing our ATM with equity issued at a spread to specific-targeted acquisitions, positioning us to generate incremental value for our existing shareholders of our reset our balance sheet, we are exceptionally well positioned to pursue additional accretive opportunities, and we continue to actively underwrite a number of potential acquisitions that could further enhance our unique and scalable platform and contribute to long-term shareholder return.
As has been the case, historically, our acquisitions focus continues to be on high quality branded rooms, focus hotels in urban, high-density, suburban and developing markets, supported by a broad variety of business and leisure demand drivers through our scale. Ownership of these hotels broadly diversified across markets and demand generators.
We have unparalleled access to performance market and brand data, which we believe enhances the underlying strength of our due diligence efforts, combined with our tremendous transaction experience our available balance sheet capacity and our deep industry relationships. We believe we continue to be well positioned relative to competitors in the current market environment and are optimistic that we will continue to be net acquirers in the coming months.
We also actively seek opportunities to refine our portfolio and optimize our capital reinvestment program by disposing of older assets in lower growth markets. Earlier this month, we sold a Hampton Inn and Homewood suites located in Rogers, Arkansas for a combined total of $33.5 million. We anticipate a portion of the proceeds from the sale of these two hotels will be used to complete a [1031 exchange], which will result in the deferral of taxable gains of approximately $15 million.
The sales price represents an all in 8.6% cap rate on 2023 year-end financials, assuming $5.4 million or approximately 22,000 per key and PIP-related capital improvements. Since the onset of the pandemic, we have strategically transacted in ways that have refined and grown our portfolio. We have completed approximately $287 million in hotel sales and have invested approximately $848 million in new acquisitions while maintaining the strength of our balance sheet.
These transactions have lowered the average age of our portfolio, increased revenue per available room and margins help to manage near term CapEx needs and positioned us to continue to benefit from near-term economic and demographic trends. We also continued to reinvest in our existing portfolio to ensure our hotels remain competitive in their respective markets and are positioned to command premium rates.
Over the past year, we invested approximately $77 million in capital expenditures. And in 2024, we expect to spend between $75 million and $85 million with major renovations at approximately 20 of our hotels. As we look ahead, the fundamentals of our business remain favorable, with continued strength in demand and limited new supply.
As of year end, over half of our hotels did not have any new upper upscale upscale or upper mid-scale product under construction within a five mile radius, providing us with the ability to meaningfully benefit from incremental demand and positively impacting the overall risk profile of our portfolio by both reducing potential downside and enhancing the upside impact from variability in lodging demand.
Over the past several years, we have demonstrated the value of a scaled investment and a broadly diversified portfolio of rooms focus hotels with low leverage. We are confident that this same strategy will continue to enable us to drive strong performance for shareholders in the coming year and over time, our hotels are franchised with industry-leading brands managed by some of the best management companies in the industry and provide a strong value proposition with broad consumer appeal.
Underlying the strength of our portfolio is a consistent reinvestment and effective portfolio management strategy and a dedicated corporate team with extensive industry experience as we move further into 2024. We are optimistic about the trajectory of our industry and our portfolio specifically, it is now my pleasure to turn the call over to Liz for additional detail on our balance sheet financial performance during the quarter and the annual guidance.

Liz Perkins

Thank you, Justin, and good morning. We are pleased to report another strong quarter for our portfolio of hotels. Comparable hotels total revenue was $315 million for the quarter and $1.4 billion for the year, up 3% and 7% as compared to the same periods of 2022, respectively.
Continued strength in leisure demand and recovery in business travel during the quarter enabled us to achieve comparable hotels RevPAR of [$105 and $116, up 2% and 7%] as compared to the same periods of 2022, with ADR of [$151 and $157, up 3% and 5%] with occupancy of [70% and 74%, essentially flat and up 2%] to fourth quarter and full year 2022, respectively.
Looking day-over-day, leisure travel was resilient during the quarter with weekend occupancies stable compared to the fourth quarter of 2022, with continued improvement in business travel. We anticipate leisure demand will remain stable through 2024 and that most of our growth in occupancy will come from continued improvement in weekday demand, which while elevated relative to the prior year remains meaningfully below pre-pandemic levels.
Same-store room night channel mix remains relatively stable in the quarter, with brand.com bookings at 40%, OTA bookings at 13%, Property direct at 25%, and GDS bookings at 16%. Our channel mix continues to highlight the power of our brands and the strength of our property direct sales efforts that our properties maintain in the field.
Fourth quarter same-store segmentation was largely consistent with the third quarter far remained strong at 33%. Other discounts remains seasonally elevated at 30%. Group continued to make up 14% of our mix, almost 200 basis points higher than the same period in 2019. And the negotiated segment was 17% of our mix in line with the same period in 2022, but still lower than 2019, which we believe represents opportunity for continued upside.
Turning to expenses, total payroll per occupied room for our same-store hotels was under $41 for the quarter, up slightly to the third quarter 2023 and up 7% to the fourth quarter 2022. Contract labor remained stable at roughly 10% of wages during the quarter, a 13% improvement compared to the fourth quarter of 2022.
While we expect year-over-year growth in total payroll to moderate in 2024, given more stabilized operations in 2023, we anticipate that higher wages for full and part-time employees and higher utilization of contract labor will continue to result in elevated cost per occupied room relative to pre-pandemic levels. We achieved comparable hotels adjusted hotel EBITDA of approximately $104 million during the quarter and $500 million for the full year, down 2% and up 5% to the same periods of 2022, respectively.
Comparable hotels adjusted hotel EBITDA margin was 32.9% for the quarter and 36.4% for the year, down 160 basis points and 90 basis points to the same periods of 2022, respectively. As we have stated on past calls, our ability to maintain and potentially grow margin will be largely conditioned on our ability to grow rates, though with more manageable inflation numbers and hotels appropriately staffed.
We expect near-term growth in operating expenses to moderate relative to the significant increases we saw over the past year. Adjusted EBITDA range for the fourth quarter was $91 million and for the year was $437 million, up 1% and 6% to the same periods of 2022, respectively. And FFO for the quarter was $72 million and for the year was $367 million, down 3% and up 4% as compared to the same period of 2022, respectively.
Looking at our balance sheet, as of December 31, 2023, we had approximately $1.4 billion in total outstanding debt net of cash, approximately 3.1 times our trailing 12 months EBITDA with a weighted average interest rate of 4.3%.
Total outstanding debt, excluding unamortized debt issuance costs and fair value adjustments was comprised of approximately $283 million in property-level debt secured by 15 hotels and approximately $1.1 billion outstanding on our unsecured credit facility.
At year end, our weighted average debt maturities were just under four years. We had cash on hand of approximately $10 million and availability under our revolving credit facility of approximately $650 million and approximately 89% of our total debt outstanding was fixed or hedged.
As of December 31, we had approximately $105 million of debt maturing in the next 12 months, consisting of [one $85 million term loan and a mortgage loan of approximately to $20 million]. We plan to pay for these upcoming debt maturities using funds from operations, borrowing under our revolving credit facility and/or new financing.
Acquisitions completed during the fourth quarter were funded using cash on hand availability under our revolving credit facility and net proceeds from the sale of shares under our ATM program. As Justin highlighted in his remarks, during the quarter, we sold approximately 12.8 million shares under our ATM program at a weighted average sales price of approximately $17.05 per share and received aggregate gross proceeds of approximately $219 million and proceeds net of offering costs of approximately $216 million.
As of year end, we had approximately $5 million remaining under our ATM program and are in process with our Board and agents to reauthorize and extend our ATM program. We anticipate public filings related to the program to be filed filed later today.
With the successful capital raise during the quarter, we were able to grow our portfolio with the acquisition of five attractive high quality hotels while maintaining full availability on our revolving credit facility to pursue additional accretive opportunities.
Turning to our outlook for 2024 provided in yesterday's press release. For the full year, we expect net income to be between $191 million and $217 million, comparable hotels RevPAR change to be between 2% and 4%. Comparable hotels adjusted hotel EBITDA margin to be between 34.6% and 35.6% and adjusted EBITDAre to be between $452 million and $474 million.
While our asset management and hotel teams are working diligently to mitigate cost pressures, we have assumed for purposes of guidance that hotel operating costs will increase by approximately 5% at the midpoint. This outlook is based on our current view 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.
The high end of our full year range reflects relatively steady macro economic conditions through 2024, with continued strength in leisure demand and improvement in business transient. The low end of our range reflects more modest lodging demand growth with a slight pullback in leisure demand offset by continued improvement in business transient and group.
It should be noted that because of calendar shifts with the Easter holiday and more challenging year-over-year comparisons, driven by the 2023 Super Bowl in Phoenix, where we have meaningful meaningful portfolio concentration. We anticipate first quarter performance for our portfolio to be below the low end of our range with performance improving as we move into higher occupancy months in the second and third quarters as we begin 2024. We are pleased with our performance and confident we are well positioned for the year.
Our recent acquisitions activity has enabled us to drive incremental value for shareholders despite challenges in the operating environment, which continue to put pressure on margin. Implied modified funds from operations are up on a per share basis year over year at the midpoint and higher of our guidance range.
Our differentiated strategy has proven resilient through economic cycles. Our balance sheet is strong with ample liquidity, which we will continue to use opportunistically to pursue accretive transactions. Our assets are in good condition with consistent capital investments, ensuring that we maintain a competitive advantage over other product in our market.
And we believe the fundamental fundamentals of our business are sound with favorable supply dynamics, allowing us to benefit from incremental demand. Our team will continue to work to maximize the performance of our existing assets and pursue external growth where we can achieve favorable pricing. That concludes our prepared remarks. Justin and I will now be happy to answer any questions that you have for us this morning.

Question and Answer Session

Operator

(Operator Instructions) Michael Bellisario, Baird.

Michael Bellisario

Thanks. Good morning, everyone. Two questions for you, but first on capital allocation, and I know you mentioned it briefly in your prepared remarks. But again, maybe big picture, remind us of your math on kind of how and when you think about equity issuance and then also your targeted returns when underwriting acquisitions? And then sort of separately on the same topic, just regarding the dispositions, should we view those as one-off sales? Or do you have more older in need of CapEx hotels in the portfolio that you might look to sell at least over the near term?

Justin Knight

So to answer your first question, when looking to issue equity or to fund acquisitions, we're mindful of the spread and look to issue equity only when we have confidence that we can drive incremental value for our existing shareholders.
I highlighted in my prepared remarks and the spread investment and the specific to all of the assets that we acquired in the fourth quarter. But we've also released some specifics to the Vegas asset, which if you remember was acquired at a [10, 7 multiple on trailing EBITDA] through November of last year, that hotel has continued to do exceptionally well.
And as is the case with the majority of the assets that we acquired. Our expectation is that they will continue to produce our growth rates in excess of our portfolio average. Importantly, on the acquisitions, when we look at acquisitions from the beginning of the pandemic, and we've been looking to continue to position the portfolio for outperformance and making adjustments on the margin.
And this will feed into our response to your second question. But on average, looking at it all of our acquisitions activity and from the beginning of the pandemic, on average, the hotels that we've acquired were 10 years younger, produce $21 higher RevPAR and drove 5% higher margin. So when you look at the evolution of our portfolio over time, we're continuing to keep it fresh and through acquisitions.
I mean then that's supplemented through dispositions activity. And the two hotels that we sold were on average at just over 20 years old and both in need of significant and franchise renovations, which is what drove the higher per key renovation dollars that I quoted in my prepared remarks.
And in terms of quantity of assets that fit that category within our portfolio, we think there's a manageable amount and it's our expectation that we'll continue to be opportunistic and we're continually exploring market conditions and the conditions are such today that there's a reasonable amount of competition that we can generate around some of the smaller, lower priced assets within our portfolio, and we'll continue to transact where that makes sense and we are on the two assets.
We drove some meaningful gains of our hold period and the hotels have done incredibly well. But when we looked at the market and our positioning relative to significant new supply that was coming online. We felt we would be best served by taking our chips off the table and reinvest it elsewhere, and we'll continue to do that proactively where we see opportunities within our portfolio.

Michael Bellisario

Got it. That's very helpful. And then just one quick follow-up just on the guidance. Thinking about the high end of RevPAR of 4%. Maybe what what needs to happen? What do you need to see in terms of pickup? Is it really just midweek business travel? Trying to understand what needs to happen to achieve that high end. Thank you.

Liz Perkins

To achieve the high end, we'll need to see. And really throughout the guidance range, we're assuming continued recovery and BT. But I guess more strength and continued opportunity maybe on the leisure side, I think in general, our assumption is BT will grow and leisure we'll remain stable on the high end. I think you you would not have as much potential pullback in leisure making up a continued strength there and some and BT recovery.

Michael Bellisario

Thank you.

Operator

Austin Wurschmidt, KeyBanc Capital Markets.

Austin Wurschmidt

Thanks, and good morning, everybody. Justin, you highlighted an ability to push rate more meaningfully into kind of the seasonally stronger months. And I'm just curious how much pricing power do you think you have today on what segments is going to be? The primary drivers? Sounds like midweek, maybe BT, but if you could confirm that, that would be helpful. And then how does occupancy play into managing kind of the rate versus occupancy on as you see things strengthen into the middle and early to middle part of the year.

Justin Knight

So starting with the last part of your question, we see rate tied very closely to occupancy. So as we compress the hotel as we fill the hotels, we were able to more aggressively price incremental rooms and our teams strategically, we work to fill hotels with base business and such that they can they can meaningfully drive rate as we continue to fill the hotels in terms of where we think the opportunity exists.
I guess, to the greatest extent, and certainly you highlighted the opportunity we have midweek. And when we look at where we're running relative to pre-pandemic levels from an occupancy standpoint, and we're pleased with the progress we've made over the past year, but certainly believe we have continued opportunity both from an occupancy standpoint and rate standpoint with business transient.
I cruised and I'm at midweek at other midweek segments like government, I think we're pleased with how we progressed through the fourth quarter, which is one of our weaker occupancy quarters and yet we were still able to to move rate.
And even into January, I think we highlighted, which is also one of our weaker occupancy months and we were able to move rate in January. And as we move into February, we'll have more challenging comps just given our concentration in Phoenix and the Super Bowl having been in Phoenix last year. And certainly we're happy with the performance of Vegas, but we only have one asset in that market. And so there will be some trade-off as we look at February.
But as we move into March, I'm excluding the calendar shift related to the Easter holiday and then move specifically into that the second and third quarter, we're optimistic based on how business is shaping up and negotiated rates have moved.
And I think as we continue to build occupancy we'll be able to yield out some of our lower rated negotiated accounts. And then we're pleased with movement that we've seen in government per diems and within our group segment as well and believe that as we progress through the year, we'll be able to maximize performance in those segments to drive rate more meaningfully.

Austin Wurschmidt

So is it fair to say that guidance assumes a 50-50 split between ADR growth and occupancy?

Liz Perkins

At the midpoint, probably weighted more heavily to ADR, but some occupancy growth because really as just the mental into that incremental occupancy and compression midweek, but that should help us drive rate.

Austin Wurschmidt

Understood. And then just on maybe Liz, on expenses, what's really holding back from driving agency utilization lower seems like job growth has been pretty strong. I know it's just an overall industry phenomenon, but what do you think you need to see to really see that next leg down in agency utilization?

Liz Perkins

And that's a really good question where I think the teams are working really, really hard to continue to leverage in-house labor where where markets allow for. I think that while he does there has been some improvement sort of nationally, I think it's really market dependent. And there are some markets where we have higher occupancies and look that have always relied on contract labor. And in today's environment, you unfortunately have to rely on and even more.
So I think, you know, the efforts that the teams have made to bring labor more labor in-house and to really put themselves in a position where and we have flexibility and we're maximizing the use of contract labor where if occupancies are seasonally lower, we can use less contract labor, and we're not having to flex to restrict in-house labor hours. I think we're benefiting from it from that standpoint.
On the culture side, but I think it's going to be slow and steady. I mean, if we'd we'd like to see some, you know, more immigration reform. I don't know if we'll see that in the near term. But but that would certainly be more helpful. And I do think that anecdotally, although it's been slower than we like, we continue to hear that availability is easier and easier, but it's just it's at a slower slower pace to normal C-band than we might like.

Austin Wurschmidt

That's all for me. Thanks for the time.

Operator

Dori Kesten, Wells Fargo.

Dori Kesten

Thanks, good morning. For some of the assets that you acquired in '23, what was the difference between the trailing 12 EBITDA multiple and what you underwrote for the [full over 12]?

Justin Knight

We haven't provided that yet. We have provided guidance for the entire portfolio and on average our expectations for the newly acquired assets and we are at the high end or exceeding the high end of the range that we have provided. And as I highlighted in response to one of the earlier questions, and we're intentional in targeting hotels that we think will lift the portfolio from a growth standpoint.
And you know, have have been on average leaning into markets that have benefited from recent economic and demographic shifts. And I think if you look at our activity over the past year, we're pleased with how the hotels have done subsequent to our acquisition. And certainly I'm optimistic about how they'll perform near term and over the long term for us.

Dori Kesten

Okay. And then you noted a 1.5 turn spread and where you issued equity versus where you acquired in Q4 based on the assets you noted you're underwriting today and where you're trading today. Is that 1.5 turn around the same or has it come in?

Justin Knight

And so based on where we're trading to day, I mean, certainly that impacts the multiple for the company overall and the assets have have on average performed better than they did on a trailing basis. See you have kind of some shifts that would impact the math on that. But again, when we look at where we issue, we were able to lock in pricing at that higher multiple, which puts us in a position that drive incremental value through the acquisitions and the fact that they continue to perform incredibly well, we think it's advantageous to us.

Dori Kesten

No, sorry, I meant the assets that you're underwriting today. If there's --

Justin Knight

Pricing today, oh sorry, a mix. So when we look at what we've acquired recently and we were able in the fourth quarter to take advantage, especially on larger assets of the lack of availability of financing, which put us in a position to have a meaningful meaningfully competitive advantage for assets that required larger levels of financing. And we think that that continues to exist.
And so we're optimistic about our ability to continue to acquire assets in and around that. That price range certainly in pricing varies by asset, and we're not at a point in the cycle where there are sufficient transactions to drive kind of at a constant market clearing price and assets are being priced individually. And I think we'll continue to transact where where we see the greatest ability to drive value.
I think you can expect on a go-forward basis that from a quality standpoint, we will be pursuing assets of similar quality and to the extent our financing continues to be a challenge for our competitors, you can expect us to pursue those assets, which are most. It's challenging for our competitors to acquire and then to pivot as the market becomes more fluid as we move into the year. I think generally speaking, expectations are that we will see more transactions in '24 than we did in '23.
And certainly when we look at refinancings that are coming due and incremental pressure from the brands around capital improvements that there is adequate catalyst to drive more motivated sellers to market and certainly continues to be significant interest on the buy-side.

Dori Kesten

And then one last one. There's a pretty large difference between consensus G&A and what you're guiding for the year. Liz, can you give us a little teach-in on on how G&A set at the beginning of the year? And then I guess just how like relative share price performance versus guidance changes can shift that as the year goes on?

Liz Perkins

Absolutely. So at the beginning of the year, the way that we've historically approached it, you know now because I keep getting that question, we definitely reevaluate each time that guidance, but we typically set guidance at the target on your target compensation. So at the midpoint of compensation and that aligns with the midpoint of guidance now because so much of both the executive team and the internal team here, compensation is tied to how our stock performs on a relative and total return basis that can fluctuate throughout the year.
And so and depending on how we perform, we will begin accruing based on how we're performing from a total relative shareholder return perspective. And as we rounded out last year and even updated guidance for time with the Q3, really, we had a run-up at the end of the year which impacted actual for 2023 and you resetting it for this year. We're at the midpoint and a could increase if we perform well. And it should align on generally speaking, we have how we're performing operationally as well.

Dori Kesten

Okay. Thank you.

Operator

Anthony Powell, Barclays.

Anthony Powell

Hi, good morning. I guess in terms of organic growth, have you started to track I guess the mid-scale properties under construction in the markets? I'm asking because there's a lot of energy around a lot of the mid-scale brands that compete with larger brands have introduced. And so I'm curious if you believe those properties may eventually creep up and prices start to compete with your property.

Justin Knight

We have. So our internal modeling allows us to add or subtract different segments and to look at the potential impact of supply in a number of different ways. And while there has been a significant amount of talk about the potential for mid-scale development, when we add midscale and look at the potential impact on our portfolio, it moves the needle very slightly on the margin, but keeps us right at and around 50% exposure.
So slightly higher, but still not meaningfully higher than than the larger and the way we've historically looked at it. We will continue to monitor that and there's some and then make adjustments to the extent we begin to see more meaningful impact from them from mid-scale development. But to date, there's been a lot of talk, but very few projects have began construction, at least in the markets where we have ownership.

Anthony Powell

Got it. Okay. And then maybe on acquisitions in terms of where do you want to buy? I mean, you bought in a lot of the Western states with a high population growth, business-friendly areas, you also did some deals in markets like Portland, Oregon that were a bit more Florida recover. Looking forward, you do more of those more urban property deals, that markets that are a bit more challenging at pricing? Or are you going to focus mainly on kind of high growth Sunbelt kind of Western states that you've been doing so well, and Mr.

Justin Knight

I think you can expect us to to look at all markets and to invest where we think pricing is appropriate to the potential upside. Importantly, the Portland, Oregon asset was acquired as part of a portfolio with two Fort Worth assets. And on a combined basis, we got comfortable with the growth profile and we have done incredibly well on that portfolio transaction overall, certainly, Portland, Oregon has been slower to rebound and the returns that we've gotten to date on that asset are slightly lower than what we've gotten on average.
But combined with the two Fort Worth assets which have performed at or near the high end of returns that we've gotten for all of our acquisitions together, we feel really good about that transaction and about our price of entry into that market. You know, as we begin to see more of the urban markets that have been slower to recovery begin to turn a corner I think we will look opportunistically to invest where pricing is appropriate.
And I think part of the beauty of our model is it's our it design an intention to be broadly diversified. And so we are taking a broad view on underwriting assets in all markets and looking for opportunities where pricing we're able to achieve matches the upside potential for the assets within those markets.

Anthony Powell

Okay. Thank you.

Operator

Floris Van Dijkum, Compass Point.

Floris Van Dijkum

Hey, guys, thanks for taking my question. Justin maybe can you talk a little bit about the amount of CMBS maturities in the select service segment this year? And and what kind of opportunity set that could provide to your company?

Justin Knight

Yeah, certainly, we watch that closely and we subscribe to a number of lists that provide us with asset level detail on maturing loans. And I think it's important to note before I fully answer on that. This is a trend that has happened in the past, and I think it's the industry has a tendency to over anticipate on the total number of transactions that are driven by it. And that said, the dynamics are slightly different this time with interest rates being meaningfully higher than where most of these assets were originally financed.
And then we already have experience with maturing loans and forcing assets to market in ways that have enabled us to transact at a very attractive purchase prices for us. And so I think as I've highlighted for some time now for the foreseeable future, we believe that refinancings and really the capital investments required as part of those refinancings with loan coverage, I mean higher interest rates being primary drivers and then continued pressure from the brands around capital improvements to be meaningful drivers or motivators for potential sellers to bring assets to market.
And when we think about the need to bridge a bid-ask spread that's existed and suppressed total transaction volume, we think that those two things will increasingly be catalysts and pushing increased transaction volume. And certainly, we're optimistic creating those two factors will create meaningfully greater opportunities for us as well.

Floris Van Dijkum

And then maybe my thought, so by the way, in your view of the what's the total volume of the of the maturities in '24 or what percentage do you think would be appropriate for you guys. I guess that's what I was trying to get at.

Justin Knight

Historically, we haven't given specific targets and because assets coming to market or can vary in quality and attractiveness to us based on price. And I think when we look at total transaction volume over the past couple of years and correlate that with maturing financing, we're coming to a point where we should see significant increases in both that they are somewhat correlated and we see that being a meaningful driver for transactions going forward.

Floris Van Dijkum

And maybe my follow-up is on Vegas and I like that transaction. Maybe if you can talk about the rationale for getting into Vegas there, not many have hotel rates anyway that that are active in that market to a lot of obviously casino rights. But if you could talk a little bit about why you think this is good for Apple and also talk about the the opportunity set and how you can expand in that market?

Justin Knight

Absolutely. So Vegas is a market that we've liked for some time now. And given that the majority of rooms in Vegas are associated with casinos that there are limited opportunities to invest and in rooms focus, hotels that fit our overall investment thesis and know are a good fit for the profile of our portfolio. And we have historically owned assets in Vegas, we owned a full-service Marriott Hotel and a Residence Inn hotel that we sold before the great financial crisis.
And so we have a significant amount of experience in markets and Vegas is unique in that it generates It generates its own demand and that demand takes many different forms of we found that there is significant demand for hotel rooms that are not associated with casinos and especially given proximity of this hotel, which is very similar to the hotels that we owned earlier relative to the convention center.
We found we can do incredibly well in market, and we were incredibly excited about and the SpringHill Suites specifically and what we highlighted in our press release and haven't had an opportunity necessarily to discuss at the hotel came with planned and that enables us to potentially develop up to 500 additional rooms. And we are in the process of currently exploring an opportunity to develop on that site. The purchase price for the site is included in the purchase price that we've quoted.
And so it's not incremental and certainly given the scarcity of land and available opportunities for development in the Heart of Vegas with our close proximity to the convention center, we think we have something very special there. I think it's reasonable to expect in the first in the near future that we'll have something to say. We'll have more to say on that and but certainly excited to be there. I'm incredibly pleased with how the hotel has performed for us to date. And if you look at projections for the Vegas market, they're incredibly favorable.
And I think interestingly as we look at leisure specifically and how leisure trends have transitioned. Vegas is on the winning side of those transitions right now and certainly benefited early in the year from the Super Bowl, but even outside of the Super Bowl week and has continued to produce incredibly strong numbers for us year over year and I think we feel we'll be meaningfully additive to the performance of our portfolio overall.

Floris Van Dijkum

Thanks, Justin.

Operator

Bryan Maher, B. Riley Securities.

Bryan Maher

Thank you and good morning. Just two for me. Most of mine have been asked and answered, but on when you're looking at trading out of properties, and I know you've discussed trading out of older properties and creating kind of a newer younger portfolio. But what considerations do you take with respect to kind of business unfriendly states you know, where taxes or laws might make it increasingly difficult to do business there. Is that working into your consideration as well?

Justin Knight

It's certainly a factor we consider. And interestingly, when we look at them at our portfolio. By and large, we're indexed towards business friendly state. And I'd say certainly we're continually looking at our Chicago presence, which is mostly outside of the city and submarkets have performed differently from each other. But overall, that's been an area of the country that's been slower to rebound.
And outside of that, we're generally happy with our concentration and the performance of our assets overall and really am what we're looking to optimize around and his ability to drive rate relative to potential cost increases.
And I think when we underwrite markets, we underwrite them very differently, depending on the dynamics there, both as we're looking to acquire new hotels and as we're assessing our existing portfolio for potential dispositions and I think it's reasonable to expect that we will continue to explore opportunities and pursue opportunities have to shift the mix such that we're moving the needle from an overall performance standpoint.
And Liz and I both in our prepared remarks, highlighted challenges with margins and one of the ways and in addition to the efforts of our management companies and our asset management team to address those concerns.
One of the ways that we can more holistically address those concerns is to adjust the mix of our portfolio. And I highlighted in response to one of the earlier questions. We've been purposeful in pursuing assets in markets where we can drive higher margins, which lead to greater profitability for our investors.

Bryan Maher

I think that kind of segues well into my second question, which is you talked a lot about the expense pressures and inflationary and wages in particular. But can you maybe or maybe better for Liz, some kind of address the impact of property tax increases, maybe insurance increases, which we hear about repeatedly and and how much of a pressure is that? And do you think that will mitigate?

Liz Perkins

And it's a good question. So in our guidance for 2024, we have assumed a higher growth rate around property taxes, insurance and other. So more your fixed cost than your variable crop cost. And we hope that and you know, we're conservative there, but we had we've had a good a decent run with property taxes, and I think prudent to assume that we could have some increases there in the property insurance, the market's still tough and hopefully not as tough as last year.
We're hearing more positive things I think the market isn't quite quite as challenging as last year, but but still still a harder market than we'd like. And so we've anticipated, you know, strong double digit increases on fixed cost expenses in the guidance range you cuts across across the scenarios. We are from a variable cost standpoint, you're lapping ourselves 2023. When you look backwards it should be a more stable comp year for 2024. That said, really being able to overcome continued expense increases, even more moderate will require RevPAR growth.

Bryan Maher

Okay. Thank you.

Operator

Tyler Batory, Oppenheimer & Company.

Jonathan Jenkins

Good morning. This is Jonathan on for Tyler. Thanks for taking our questions. First one for me. Just to clarify a clarification question on the guidance, probably for Liz, helpful commentary on the high end of the range. But maybe conversely, on the low end, is that assuming flat BT and stable leisure? Or does that low range still assume some level of recovery in BT?

Justin Knight

I still assume some continued improvement in BT, and that's what we're seeing. I mean, really, even as we crossed over into January, we've seen and we gave you an indication of where January ended up, which was an improvement from from a RevPAR increase perspective to December where that really came from was leisure hanging in there, but recovery and midweek occupancies, which we believe are related to business travel recovery. And so I think throughout the range we anticipate continued improvement midweek related to business transient.

Jonathan Jenkins

Okay, great. Thank you for the detail there. And then switching gears, appreciate all the commentary on acquisitions, Justin, so far in light of that outlook for this year on picking up acquisition activity? Any additional color on how you're thinking about new development acquisitions? And I guess with the anticipated acquisition there of those two developments that are that are under contract to do more of these deals kind of makes sense for you going forward.

Justin Knight

Certainly, we continue to underwrite and I highlighted in response to them as one of the earlier questions, we are currently exploring an opportunity to build on the land adjacent to the Vegas asset that we recently acquired and the same challenges that are keeping supply growth low for the industry overall and impact our underwriting. It's expensive to build hotels. And while we feel we have partnered with developers who have and a competitive advantage in that arena and are able to to deliver assets at attractive pricing for us.
And there are very few markets where the underwriting makes sense, and we're incredibly optimistic about the two projects that we have. I'm currently under contract, and they're super well located in markets that we think will be very strong for us long term. And I think it's reasonable to expect that in the near term, we could add one or two more to that group, but a way it's challenging. I think in the near term, while we will be active in underwriting, both new development deals and existing assets. It's more likely or it's likely that the majority of the transactions we complete over the next year or so will be are around existing assets.

Jonathan Jenkins

Okay. Very helpful. Thank you for all the color. That's all for me.

Operator

Michael Herring, Green Street.

Michael Herring

Thanks. Good morning. Just a quick one on the Las Vegas acquisition again. Can you just talk about whether or not the union labor agreements in the market are impacting that hotel and how that's impacting your underwriting there entering in the market?

Justin Knight

Absolutely. So in a market where there's significant union activity that impacts pricing for labor within the market. And so I think relative to other markets and labor is more expensive in that market for us to pay. That said, it's a market that also is positioned to drive higher rates. And so when we look at the margin profile, we feel very comfortable with that. And we are.
But we look at cost of labor in markets and the union activity in the market is only one factor that impacts on those costs. The bigger factor in those markets is availability. And I'm and I think we have effectively underwritten assets. And by looking at all of the assets we have acquired recently in a way that we feel very comfortable with better long-term profitability.

Michael Herring

And just one other on I know you just update us a little bit on the purchase contracts, but I'm just curious if the supply-demand dynamics in those markets have changed at all or if yes, if that's changed at all in the last six months or so and if you're still feeling pretty good about.

Justin Knight

And in our markets overall or in the markets very recently acquired assets?

Michael Herring

And that's certainly for the ones that are under contract in Madison and Nashville. How much there have changed at all?

Justin Knight

Now they've remained relatively constant. I think Nashville is a market that's seen significant supply growth. We knew that going in and I think our selection of a site within within National reflected on our view of potential exposure that that supply has been coming down in most markets. And we spent a lot of time talking about Vegas on this call and Vegas is actually a market that has very little supply coming online near term and across the board. And we feel very good about supply.
And when we look at the overall trend for our portfolio. Again, looking at a 5 mile radius to the assets that we owned, the supply picture has become increasingly favorable over time and not less so and that's even taking into consideration the new acquisitions, which in some cases have been in markets that have performed incredibly well and that as a result, more attractive for new developments.

Michael Herring

Got it. That's helpful. Thank you.

Operator

Thank you. That concludes our question-and-answer session. I'll turn the floor back to Mr. Knight for any final call.

Justin Knight

Thank you, and thanks, for spending time with us this morning. We appreciate your questions and your continued interest in our company. As always, as you have the opportunity travel, we hope you'll take the opportunity to stay with us in one of our hotels. And we look forward to meeting with many of you here in the near future at conferences or in individual meetings.

Operator

Thank you. This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.