Summit Hotel Properties Q3 2026 Earnings Call Transcript

Summit Hotel Properties (NYSE:INN) reported third-quarter financial results on Wednesday. The transcript from the company’s third-quarter earnings call has been provided below.

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Summary

Summit Hotel Properties reported a strong third quarter, with a 7.2% year-over-year increase in RevPAR driven by a 5.3% rise in average daily rate and a 1.8% increase in occupancy.

The company achieved a 14.4% increase in hotel EBITDA, resulting in nearly 200 basis points of margin expansion. Adjusted FFO increased by 18% to $0.20 per share.

Summit Hotel Properties raised its full-year guidance and now expects pro forma RevPAR growth of 3.5% to 4.5%, while also increasing its adjusted EBITDAre and FFO per share forecasts.

The company continues to strengthen its balance sheet by reducing borrowing costs and enhancing liquidity, with approximately $350 million in total liquidity and no debt maturities until 2028.

Summit Hotel Properties completed the sale of non-core assets, generating $19 million, and is actively evaluating further opportunities for asset recycling and potential acquisitions.

Management highlighted strong urban market performance, particularly in midweek demand, and expects the positive operating trends to continue into 2027.

New executive leadership appointments were announced, with Mike Nieves as CFO and Adam Waddell as COO, positioning the company for future strategic growth.

Full Transcript

OPERATOR

Good day, and thank you for standing by. Welcome to the Summit Hotel Properties third quarter 2026 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 11 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 11 again.

Please be advised that today’s conference is being recorded. I would like to hand the conference over to our first speaker today, Kevin Meloda, Senior Vice President of Finance. Please go ahead.

Kevin Meloda (Senior Vice President of Finance)

Thank you, operator, and good morning. I am joined today by Summit Hotel Properties President and Chief Executive Officer John Stanner, Adam Waddell, Executive Vice President and Chief Operating Officer, and Mike Nieves, Executive Vice President and Chief Financial Officer. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our SEC filings.

Forward-looking statements that we make today are effective as of today, November 4, 2026, and we undertake no duty to update them later. You can find copies of our SEC filings and the earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call, on our website at www.shpreit.com. Please welcome Summit Hotel Properties President and Chief Executive Officer John Stanter.

Jonathan Stanner (President and Chief Executive Officer)

Thank you, Kevin, and good morning, everyone. Thank you for joining us today for our third quarter 2026 earnings conference call. On today’s call, we will discuss our outstanding third quarter results and our improved outlook for the remainder of the year that together are driving another increase to our full-year guidance ranges. We will also highlight the continued progress we have made strengthening our balance sheet, reducing borrowing costs, increasing liquidity, and enhancing capacity for future growth.

Operating fundamentals accelerated meaningfully in the third quarter, exceeding our expectations as pro forma RevPAR increased 7.2% year over year, driven by a 5.3% increase in average daily rate and a 1.8% increase in occupancy. Top-line growth accelerated from the strong results we delivered in the second quarter as both rate growth and occupancy gains expanded sequentially, highlighted by a quarter-best 11% RevPAR growth in September. Hotel EBITDA in our pro forma portfolio increased a robust 14.4% in the third quarter, resulting in nearly 200 basis points of margin expansion as rate-driven RevPAR growth and ongoing strong cost controls drove exceptional profitability growth and nearly 60% EBITDA flow-through. Adjusted EBITDAre increased 12% to $43.9 million and adjusted FFO increased to $24.2 million, or $0.20 per share, in the third quarter, an 18% increase over the third quarter of last year.

We are particularly encouraged by the continued breadth of strong performance across the vast majority of our markets and demand segments, led by midweek demand and urban markets. Our highest-rated demand segments continue to be our best-performing segments. Retail RevPAR in our pro forma portfolio increased approximately 15% in the quarter, driven by double-digit growth each month, as our hotels continued to meaningfully outperform their competitive sets in both occupancy and rate.

Corporate negotiated RevPAR, our best proxy for pure business transient demand, increased 8.3% in the quarter, driven by 17% growth in urban markets. Our hotels are consistently capturing a premium share of corporate negotiated demand, which we attribute to the quality of our assets and the effectiveness of our revenue strategy. teams. Group RevPAR increased 14.4% through both rate and occupancy gains, with group room-night mix continuing to expand as a share of our total business. All three months of the quarter achieved double-digit group RevPAR growth, led by Charlotte, Indianapolis, Dallas–Fort Worth, Oklahoma City, Pittsburgh, Atlanta, and Washington, D.C. The accelerating recovery in business travel continues to be a primary driver of our portfolio’s growth and is facilitating a profitable remixing of occupancy, particularly midweek.

Weekday RevPAR increased nearly 8% in the third quarter, driven by broad-based strength across our highest-rated demand segments. Weekday retail RevPAR increased nearly 14% in the third quarter, and weekday negotiated RevPAR increased by over 8% year over year. Weekday group RevPAR was particularly impressive, increasing by over 15% in each of the three months of the quarter. This dynamic is creating segment and channel remixing opportunities for our revenue strategy teams, resulting in the best pricing environment we have experienced since prior to the pandemic. More importantly, it reflects compression-driven pricing power that generates the strongest flow-through to hotel profitability.

This has been particularly beneficial to our urban-centric portfolio, as RevPAR in our urban markets increased over 11% in the third quarter, the best of any location type for the second quarter in a row, led by Pittsburgh, Washington, D.C., Atlanta, Indianapolis, Dallas, Oklahoma City, San Francisco, New Orleans, and San Jose, all of which had RevPAR growth exceeding 15% for the quarter. ADR increased over 9% in our urban portfolio in the third quarter, driving a 26% increase in hotel EBITDA, highlighting not only the strong pricing power embedded in our urban hotels but also our ability to continue to effectively manage costs to drive tremendous bottom-line growth. As a reminder, our urban portfolio comprises approximately half of our total rooms and hotel EBITDA, and the accelerating momentum in this location type bodes well for our future growth.

Encouragingly, RevPAR momentum built through the quarter. July RevPAR increased over 6%, reflecting solid underlying demand as well as some residual benefit from World Cup activity in our host markets during the early weeks of the month. Consistent with our second quarter results, RevPAR growth in July was primarily rate-driven. August RevPAR growth was approximately 4%, and September was the standout month of the quarter with RevPAR growth increasing over 11%, driving a 15% increase in hotel EBITDA.

We view the acceleration of demand growth in September across multiple segments and markets as particularly encouraging, supporting the durability of the favorable operating trends currently driving our business. While FIFA demand provided another lift as expected during the quarter, it was less of a driver of our results than in the second quarter. We estimate World Cup–related demand added 80 to 90 basis points of RevPAR growth for the quarter, roughly half of the impact we benefited from in the second quarter.

July RevPAR in our World Cup markets increased 11%, led by Miami, Dallas, and San Jose, with pricing power particularly strong over the quarter in semifinal games. For the full year, we estimate that the event will contribute approximately 60 to 70 basis points to our full-year RevPAR growth. We also gained another 110 basis points of market share relative to our competitive sets in the third quarter, as our pro forma RevPAR index was 116 for the quarter, exceeding the portfolio’s typical pre-pandemic peak levels of between 113 and 115. Notably, RevPAR index in our NCI portfolio achieved the highest level of our ownership period at 125, representing a nearly 6% gain in market share year over year. These consistent share gains reflect the quality of our assets, our strategic investment renovations, and the effectiveness of our operating teams.

Non-rooms revenue, which increased approximately 11% in the third quarter, continues to support strong overall top-line growth, driving a pro forma total revenue increase of 7.7% to $185.3 million in the quarter. As I mentioned, we achieved nearly 60% flow-through to hotel EBITDA in the third quarter as our operating teams did a tremendous job managing expenses. Total pro forma hotel operating expenses increased by just over 3% on a per-occupied-room basis during the third quarter, well below our rate of revenue growth.

Total labor costs increased by approximately 5.5% year over year, with salaries and wages increasing approximately 3% and the balance driven primarily by higher incentive compensation associated with improved hotel-level performance. Portfolio-wide turnover remains stable and well below the elevated levels we experienced in prior years, and our hotels are operating with approximately 18% fewer FTEs per property compared to 2019, a structural productivity gain that continues to be a benefit of our highly efficient operating model.

For the full year, we expect hotel operating expenses to increase by approximately 4%. Year to date through September 30, pro forma RevPAR increased 4%, driven by a 4.5% increase in average daily rate, and pro forma hotel EBITDA increased 6% with margins expanding 40 basis points. Adjusted EBITDAre increased 5.7% to $142.9 million, and adjusted FFO increased to $0.70 per diluted share, representing a 6.1% increase compared to the same period last year.

We continue to make meaningful progress strengthening the balance sheet, reducing borrowing costs, and enhancing liquidity. During the quarter we amended our $200 million term loan facility and $275 million delayed-draw term loan facility to conform pricing and other material terms with our recently amended $650 million senior credit facility. Based on our leverage as of September 30, these amendments resulted in a 20-basis-point reduction in the applicable interest rate on those facilities.

In addition, our ongoing deleveraging of the balance sheet has resulted in the reduction of our trailing twelve-month leverage ratio and an additional 15-basis-point reduction in the interest rate spread across $675 million of term loan debt and our corporate revolver. These spread reductions are expected to generate annual interest expense savings of approximately $2.4 million. We also continue to successfully sell non-core assets and recycle capital. During the quarter we completed the previously announced sale of our wholly owned 103‑guest‑room Courtyard and 96‑guest‑room Residence Inn in Dallas Arlington South for a combined sale price of $19 million. The sale price represented a 5.9% capitalization rate based on trailing twelve-month net operating income through June 30, 2026, and after consideration of approximately $7.6 million of foregone near-term capital expenditures at the two hotels.

As we discussed last quarter, we strategically retained ownership of those hotels through the FIFA demand window before closing the transaction, which allowed us to capture the benefit of robust event-driven demand in the Arlington submarket prior to disposition. Since 2023, the company has sold 15 hotels for a combined sale price of approximately $219 million at a blended capitalization rate of approximately 4.7%, inclusive of an estimated $68 million of foregone capital needs.

The combined RevPAR for the sold hotels was $86, which is an approximate 30% discount to our current pro forma portfolio. We will continue to evaluate additional opportunities to recycle capital out of lower-growth assets with outsized capital needs and redeploy proceeds to strengthen the balance sheet, increase liquidity, and enhance the quality of the portfolio. The overall health of our balance sheet remains strong. We currently have approximately $350 million in total liquidity, with nothing outstanding on our revolving credit facility and no debt maturities until 2028. Approximately 50% of our pro rata share of debt is fixed through interest rate derivative agreements, and including our three series of preferred stock, we are over 60% fixed on a pro rata basis. This combination of liquidity, manageable leverage, and an extended maturity profile positions the company well going forward.

On October 27, 2026, our Board of Directors declared a quarterly common dividend of $0.08 per share, representing an annualized dividend yield of approximately 4.5% based on the November 2 closing stock price. The Board also declared the regular quarterly dividends on our Series E, Series F, and Series Z preferred securities. The current common dividend continues to represent a modest AFFO payout ratio and reflects our ongoing objective of balancing shareholder returns with reinvestments in our portfolio and balance sheet discipline.

Turning to our outlook for the remainder of the year, in our earnings press release yesterday, we increased our full-year guidance ranges for RevPAR growth, adjusted EBITDAre, adjusted FFO, and adjusted FFO per share. For the full year, we now expect pro forma RevPAR growth of 3.5% to 4.5%, an increase of 150 basis points at the midpoint of the range; adjusted EBITDAre of $181 million to $186 million; adjusted FFO of $102.5 million to $107.5 million; and FFO per share of $0.85 to $0.89. The increase in our guidance ranges reflects both our outstanding third quarter results and the continued improvement we are seeing in operating trends. The midpoint of our adjusted EBITDAre range is increasing by $5 million, and the midpoint of our adjusted FFO range is increasing by $0.05 per share, or over 6%, from our prior guidance range.

This is the second consecutive quarter we’ve raised our full-year outlook, and combined with our guidance increase last quarter, the midpoint of our adjusted EBITDA and adjusted FFO per share ranges have increased 5.5% and 10%, respectively, since the beginning of the year. Operating trends have continued to trend positively into the fourth quarter, as preliminary October RevPAR growth finished at approximately 5.5% in our pro forma portfolio, and fourth quarter pace is up approximately 5% over last year. For the full year, we now expect pro forma hotel EBITDA margins to expand 25 to 50 basis points, driven by the strong rate-driven revenue growth and continued cost discipline. We expect pro rata interest expense, excluding the amortization of deferred financing costs, to be approximately $60 million and preferred distributions, including the Series E, F, and Z securities, to be $18.5 million.

There are no additional acquisitions, dispositions, share repurchases, or capital markets activities assumed in the company’s full-year outlook beyond those already reflected as of November 3, 2026. Our guidance range for full year 2026 pro rata capital expenditures remains $55 million to $65 million. Current activity includes comprehensive renovations at our Hyatt Place Phoenix–Mesa, Hyatt House Orlando–Universal, Courtyard Atlanta–Decatur, and Residence Inn Cleveland.

We plan to commence renovations at three other hotels later this quarter and previously completed renovations at three hotels earlier this year. Looking forward, I want to share some initial thoughts on how we are thinking about the lodging environment in 2027. The operating trends we’ve experienced throughout 2026—highlighted by strengthening business transient demand, accelerating midweek compression in our urban markets, broad-based growth across our highest-rated demand segments, and continued group momentum—are trends we believe are durable and will carry into next year.

Urban markets in particular continue to outperform, and we see that momentum continuing into 2027 across many of our urban markets, supported by strong convention calendars in Minneapolis, Cleveland, Phoenix, San Francisco, Chicago, Orlando, and Washington, D.C. While we recognize that year-over-year comparisons will be modestly more challenging in certain markets given the special event–driven tailwinds we experienced this year, the breadth and depth of demand across our portfolio gives us conviction that the fundamental recovery and acceleration of pricing and demand trends remains firmly intact.

New hotel supply is expected to remain well below historical averages in 2027, which should continue to support pricing power across the vast majority of our markets. On the cost side, we remain focused on disciplined expense management and expect to maintain the operating efficiencies our teams have built over the last several years, facilitated by our asset‑efficient operating models. Overall, we are optimistic about the operating environment next year and expect a continuation of many of the trends that have driven our strong results in 2026.

Before I open the call up for questions, I want to take a moment and highlight two important leadership appointments we announced last week. We are thrilled to welcome Mike Nieves to Summit Hotel Properties as our new Executive Vice President and Chief Financial Officer. Mike brings a wealth of financial expertise and capital markets experience across the real estate, hospitality, and entertainment sectors, most recently serving as Senior Vice President and Treasurer at Penn Entertainment.

Mike will have the opportunity to meet many of you at NAREIT later this month. I also want to congratulate Adam Waddell on his well-deserved promotion to Executive Vice President and Chief Operating Officer. Many of you know Adam, and he has been instrumental to Summit Hotel Properties’ success over his 18-year tenure with the company, leading our asset management and revenue strategy teams as well as overseeing the company’s investment activities.

These two appointments round out our executive leadership team, and I am thrilled to partner with them going forward. In summary, we are encouraged by the accelerating operating trends and our outstanding third quarter financial results. We believe the long-term outlook for the lodging industry is profoundly positive, as new hotel supply is expected to remain well below historical averages for several more years. Consumer prioritization of travel and experiences provides the secular tailwind that we expect to persist, and corporate profits continue to grow at historically strong rates.

The ongoing recovery in business travel is increasingly benefiting our urban-centric portfolio, evidenced by the midweek compression and pricing power we experienced throughout the third quarter. We believe these dynamics support continued top-line growth and margin expansion through the balance of 2026 and beyond. With a strengthened balance sheet, a high-quality portfolio, and accelerating operating momentum, we believe Summit Hotel Properties is exceptionally well positioned to deliver strong shareholder returns going forward.

And with that, operator, we’d be happy to open the line for questions.

OPERATOR

Thank you. At this time we’ll conduct a question-and-answer session. As a reminder, to ask a question, you will need to press star-1-1 on your telephone and wait for your name to be announced. To withdraw your question, please press star-1-1 again. Please stand by while we compile the Q&A roster. And our first question comes from the line of Austin Werschmidt of KeyBanc Capital Markets. Your line is now open.

Austin Werschmidt (Analyst)

Thanks. Good morning, everyone. John, you know you’ve talked a good bit this year about how ADR growth has been the primary driver of RevPAR, benefiting from that ability to remix the business and really drive flow-through. Can you talk about how much of that remixing opportunity remains, and any segments that you see occupancy upside to layer on to the ADR growth opportunity that you’ve capitalized on this year?

Jonathan Stanner (President and Chief Executive Officer)

Yeah, thanks, Austin, and good morning. I think as we look at it, a lot of where our growth came from, specifically in the second and third quarters, were midweek urban markets, and a lot of it is BT-driven demand. And as strong as those demand patterns have been the last couple of quarters, we do still think there’s plenty of room to run there. If you look industry-wide, and our portfolio is no different, we’re still running pretty meaningful discounts to peak occupancies prior to the pandemic. And obviously there’s been very little supply growth. So I think there is still more opportunity, particularly midweek in some of those higher-rated segments, to continue to drive occupancy, continue to shift our occupancy mix to more higher-rated demand—particularly retail, negotiated, and group demand—and drive better rate growth and profitability flow-through as a result.

Austin Werschmidt (Analyst)

I appreciate the answer there. And then on the capital recycling front—you touched on it a little bit—but it looks like you’ve got some assets held for sale. Can you talk just high level about how those are proceeding and then just planned use of proceeds?

Jonathan Stanner (President and Chief Executive Officer)

Yeah, sure. We do have three assets that are held for sale, as you’ll see in our 10-Q. We’re not far enough along in that process to talk specifics about the assets and the metrics. But I think consistent with what you’ve seen from us over really the past couple of years is we’ve tried to be very disciplined around recycling assets—recycling capital out of older assets, assets that we just don’t think have the same growth profile or risk-adjusted return profile—where we can otherwise redeploy the proceeds.

And it’s resulted in us being able to deleverage the balance sheet. We’ve enhanced liquidity pretty meaningfully. These sales would add to that liquidity, and we think it gives us flexibility to evaluate future growth opportunities and I think ultimately will improve the overall quality of the portfolio.

Austin Werschmidt (Analyst)

Are you seeing opportunities out there start to become more available and sort of at a pricing level where bid-ask kind of makes sense between buyers and sellers?

Jonathan Stanner (President and Chief Executive Officer)

We do. I think that this is becoming an increasingly interesting time to look at acquisitions. We’ve always felt like the first catalyst for more transaction activity has been better fundamentals, and we’ve obviously seen that now for the last six or seven months. And I think naturally that’s going to facilitate more sellers coming to market. We’re certainly active underwriting a number of assets. I think the combination of fairly compelling yield profiles and a lack in supply does make this an interesting window for us to continue to evaluate opportunities to add to our portfolio and overall enhance the portfolio.

Austin Werschmidt (Analyst)

Thanks for the time this morning.

Jonathan Stanner (President and Chief Executive Officer)

Thanks, Austin.

OPERATOR

Thank you. One moment for our next question. Our next question comes from the line of Logan Epstein of Wolfe Research. Your line is now open.

Logan Epstein (Analyst)

Thanks for taking the question. Maybe one on the fourth-quarter implied RevPAR growth. Just curious if you can talk about both occupancy and rate growth in the third quarter—just what the expectation is for the decomposition of RevPAR growth in the fourth quarter—and maybe how that trended in the five-and-a-half October number that you gave.

Jonathan Stanner (President and Chief Executive Officer)

Yeah, good morning, Logan. As you saw, in the third quarter our 7% plus RevPAR growth—about 6% was rate growth. The remaining of that was occupancy growth. We’ve obviously had much more rate-driven RevPAR growth this year than occupancy-driven, and our expectation is for that to continue into the fourth quarter—the majority of our RevPAR growth we do expect to be rate growth. Obviously we view that very favorably given it has better flow-through to the bottom line.

Logan Epstein (Analyst)

Got it. Thank you. And one more—appreciate the thoughts earlier in the prepared remarks about the RevPAR index share gains across the broader portfolio. I was just curious if you can give an update on the Courtyard Oceanside in Fort Lauderdale—just how that’s been performing post-renovation last year, and if you can give an idea of what the RevPAR index there was pre-renovation versus today as we head into the high season in a few months.

Jonathan Stanner (President and Chief Executive Officer)

Sure. Yeah. Look, we’ve been incredibly pleased with the performance of Oceanside coming out of the renovation. We’re ahead of where we’ve underwritten. We’re still lapping some of the renovation comps in the public spaces, but from a rooms perspective, we’re up meaningfully year over year. Our index is increasing. I think maybe even more importantly than just the overall market share index has been our ability to drive very profitable out-of-room spend.

We’ve implemented an amenity fee there that’s flowing through at a very high level and creating meaningful incremental NOI growth. And then all of the work we’ve done out on the deck overlooking the ocean and in the interior F&B spaces—we’re driving significantly more F&B revenue and ultimately profitability there. So all in all, this was, as expected, a very high-ROI renovation for us.

Logan Epstein (Analyst)

Got it. Thank you for the time, and congrats Mike and Adam. That’s it for me.

Jonathan Stanner (President and Chief Executive Officer)

Thanks, Logan.

OPERATOR

Thank you. One moment for our next question. Our next question comes from the line of RJ Milligan of Raymond James. Your line is now open.

RJ Milligan (Analyst)

Hey, good morning, guys. John, some pretty encouraging comments about 2027 in terms of top-line growth demand. Maybe you could just give some color on how you expect expenses to trend—4% up so far this year—and where you see that trending in ’27.

Jonathan Stanner (President and Chief Executive Officer)

Yes. Look, I think we feel like we’re in pretty good shape and we’re in a pretty stable environment from an expense perspective. The 4% increase this year really just reflects really strong underlying revenue growth, and there is a portion of our expense base that is purely variable. So as we see better rate growth and better revenue growth across the business, our expenses are growing a little bit higher, but in the third quarter we grew expenses about 3% on a per occupied room basis.

That does continue to feel like the right run rate for us. We obviously are benefiting meaningfully from the efficiencies of our operating model. We’re running these hotels with about 20% fewer FTEs than we did pre-pandemic. A lot of those efficiencies we think are now structural, and they should persist into next year. So we think in and around this kind of 3% per occupied room basis range is the right run rate from an expense perspective.

RJ Milligan (Analyst)

That’s helpful. And I guess bigger picture—and John, this might be a little early just given the election last night—but obviously there’s a little room left on the government-related demands, but you’ve also had some benefit from the AI and data center build-out. And I’m just curious, post the election results, how you think about those two demand drivers as we go into next year.

Jonathan Stanner (President and Chief Executive Officer)

Yeah, well there’s definitely a lot of room left from a government perspective. We’re obviously lapping the government shutdown comp in October and the first parts of November, so we’re seeing very solid growth in government, and we really have seen decent growth in that segment in both the second and third quarter of this year, and we expect that to continue into the first quarter. We’re still well below previous peak levels—below 2024 levels—in government travel, so we do think that there is more room to run from that perspective.

The other segment that really hasn’t recovered at all is international inbound travel, which I think is probably more of a long-term recovery. But there’s obviously a lot of room to run from an international demand perspective without question. We’ve been beneficiaries of the meaningful amounts of capital that’s going into AI infrastructure spending, data center spending, et cetera. I think so much of that spending is already in progress, so as you said, it’s a little early to prognosticate how that will change.

But at this point we see the near-term implications continuing to be very positive for the portfolio, given so much of that spending is already underway.

RJ Milligan (Analyst)

Great. That’s helpful. Thanks, guys.

Jonathan Stanner (President and Chief Executive Officer)

Perfect. Thanks, RJ.

OPERATOR

Thank you. One moment for our next question. Our next question comes from the line of Chris Woronka of Deutsche Bank. Your line is now open.

Chris Woronka (Analyst)

Hey, good morning, guys. Thanks for taking the questions. I wanted to ask, as we see Hyatt opening more of the new extended-stay brand Studios and also more of the Select—whether it’s conversions of current Hyatt brands or other brands—are you guys seeing any impact, positive or negative, in your—I think you have 16 Hyatt in the portfolio? Are you seeing any impact when a new Hyatt brand comes into place? Just asking from the standpoint of, is the distribution system deep enough at this point to kind of hold up both properties in a market?

And then I have a follow-up. Thanks.

Jonathan Stanner (President and Chief Executive Officer)

Sure. Yeah. Good morning, Chris. I think the simple answer is we’re not, but mostly because what’s opened hasn’t been in markets where we have existing Hyatt exposure. And I think that was frankly part of the thesis of both Studios and Select—finding these markets where there wasn’t existing Hyatt exposure or product and becoming kind of the anchor Hyatt in some of those smaller, more tertiary or secondary markets. And so most of our Hyatts are in more primary urban markets, and so we really haven’t seen any of that new product come in and have any type of negative effect on the Hyatt portfolio that we own today.

Chris Woronka (Analyst)

Okay, that’s great to hear. And then the follow-up is, I don’t know if you guys have ever really constructed like an internal estimate of NAV—and thinking probably more about it from the construction or replacement cost side of things, not necessarily from where you think the market might be. Have you done that internally? And maybe if you have, how has it changed the last couple years? I think we continue to see development costs rising across the board.

So just kind of curious if you’ve thought about where your portfolio might land on that. Thanks.

Jonathan Stanner (President and Chief Executive Officer)

Yeah, sure. We definitely take a view on that. It’s not something that we typically discuss publicly. I think certainly from a replacement cost perspective, the implied stock value is significantly below the cost it would take to replace the portfolio today. And as you alluded to, construction costs are probably up 40 plus percent from where they were prior to the pandemic. So it’s part of the reason you’re seeing very little supply growth across the industry—it’s far more expensive to build.

And until the last six or seven months, you haven’t seen a ton of growth in operating cash flows to keep pace with accelerating construction costs. And so I think at a minimum it’s safe to say that where the stock trades today is well below what a reasonable replacement cost would look like for the portfolio.

Chris Woronka (Analyst)

Okay, very good. Appreciate all the insights. Thanks, guys.

Jonathan Stanner (President and Chief Executive Officer)

Thanks, Chris.

OPERATOR

Our next question comes from the line of Michael Bellisario of Baird. Your line is now open.

Jonathan Stanner (President and Chief Executive Officer)

Yes, sure. Look, we’ve spent a lot of time trying to assess what the run rate was, particularly over the summer months when we were getting some level of lift from World Cup. And obviously we spent a lot of time trying to normalize for that in June and July. I think when you look at going all the way back to kind of the middle of March through the end of October, even ex some of the special events and even if we try to adjust for some of the favorable holiday shift in calendar comparisons through the year, I still do believe that the industry and the business is running kind of mid-single digits. In some months, that’s been a little bit higher from a growth rate perspective. It’s too early for us to really quantify how we think that’s going to play into 2027.

But I will say, or maybe reiterate, kind of what we said in the prepared remarks is we do view a lot of the underlying trends—the strength in midweek, the strength in urban markets, the strength in our premium-rated demand segments—those trends we view as durable and we do expect many of them to persist into 2027. So we feel very good about the outlook. Obviously we talked a little bit about what we’re seeing early here in the fourth quarter with October finishing in at around 5.5% and our pace continues to look quite strong into the fourth quarter. So there’s no question we’re well beyond this being kind of special-event driven. This is really strong underlying fundamental demand growth across a broad swath of our markets in many of our demand segments.

Kevin Meloda (Senior Vice President of Finance)

Sure. Look, I think again we’re in the process of going through our budget and our planning for next year right now. So it’d be premature for us to give an exact number, but I think we feel like we’re at about an appropriate run rate. You know, if you look at our ’25 and ’26 CapEx spending, they’re pretty well on top of each other. We’re spending a little bit less this year, but I think in and around this level is the right run rate for us to think about going into next year.

OPERATOR

Thank you. This concludes the question-and-answer session. I’ll now turn it back to Jonathan Stanner for closing remarks.

Jonathan Stanner (President and Chief Executive Officer)

Great. Well, thank you all for joining us today. We’ll look forward to seeing many of you in Atlanta in a couple of weeks for Nareit. Hope you all have a wonderful day. Thank you.

OPERATOR

Thank you for your participation in today’s conference. This concludes the program. You may now disconnect.

Disclaimer: This transcript is provided for informational purposes only. While we strive for accuracy, there may be errors or omissions in this automated transcription. For official company statements and financial information, please refer to the company’s SEC filings and official press releases. Corporate participants’ and analysts’ statements reflect their views as of the date of this call and are subject to change without notice.