RLJ Lodging Trust 2026年第三季法說會：RevPAR成長9.7%，上調財測指引

重點摘要

• 可比 RevPAR 年增 9.7% 至 153 美元，主要受 ADR 成長 6.4% 至 203 美元，以及住房率上升 230 個基點至 75.4% 所帶動。
• 飯店 EBITDA 成長 17.5% 至 9,390 萬美元，飯店 EBITDA 利潤率擴大 190 個基點至 26.5%。稀釋後每股調整後 FFO 成長 25.9% 至 0.34 美元。
• 商務散客營收成長 15%，其中包括 ADR 成長 13% 與需求成長 2%。休閒與團體營收各成長 10%。
• 管理階層將 2026 年可比 RevPAR 成長預期上調至 5.75%-6.25%，並將公司調整後 EBITDA 指引上調至 3.52 億至 3.58 億美元。
• RLJ 以 1.1 億美元出售 7 家芝加哥中途機場飯店，相當於 2026 年預估 EBITDA 的 14 倍，若計入必要資本支出則為 16 倍。
• 管理階層預期商務差旅動能、有限的新增供給、品牌轉換與城市需求將支撐 2027 年持續成長，同時也承認地緣政治的不確定性。

關鍵財務數據

可比數據涵蓋第三季末持有的 91 家飯店。列報的公司調整後 EBITDA 及調整後 FFO 包含 RLJ 持有期間已售出的飯店。

業務與營運表現

城市型飯店以 10% 的 RevPAR 成長領跑本季，共有 11 個市場呈現兩位數成長。北加州 RevPAR 本季成長超過 13%，年初至今成長逾 16%。管理階層將該地區的亮眼表現歸因於 AI 相關的企業投資、全市性大型活動、商務差旅以及休閒需求的改善。

其他 RevPAR 實現兩位數成長的市場包括華盛頓特區、匹茲堡、奧斯汀、紐約市、洛杉磯及坦帕。未舉辦世界盃賽事的市場創造了近 12% 的 RevPAR 成長，而管理階層估計該賽事對全年 RevPAR 成長的貢獻約為 45 個基點。儘管 Dreamforce 移至 9 月舉行，10 月初步 RevPAR 仍成長 6%。

商務散客是需求最強勁的客群。繼前兩季各成長 10% 之後，本季營收成長 15%。華盛頓特區的商務散客營收成長 53%，奧斯汀成長 24%，北加州成長 22%，紐約成長 19%。平日 RevPAR 成長 9.9%，整體投資組合的高需求吃緊夜增加 15%。

休閒營收成長 10%，受 ADR 成長 8% 及需求成長 2% 的支撐。團體營收在房晚數成長帶動下亦成長 10%。第四季團體預訂進度在季內改善 500 個基點，而 2027 年團體預訂進度則呈現中個位數的領先成長。

RLJ 已完成的 8 項品牌轉換創造了 12% 的 RevPAR 成長與 18% 的 EBITDA 成長。2025 年完成的重大改裝翻新帶來 26% 的 RevPAR 成長，並使 EBITDA 成長超過一倍。公司已在奇威斯特萬楓套房飯店 (Fairfield Inn & Suites Key West) 展開實體翻新工程，該飯店將加入 Margaritaville 品牌；同時也啟動了波士頓燈塔山溫德姆飯店 (Wyndham Boston Beacon Hill) 的改裝工程，準備將其轉換為希爾頓 Tapestry 精選系列 (Tapestry Collection)。兩家飯店均計劃於 2027 年重新開幕。

管理階層指引

可比 RevPAR 成長指引的中位數提高 200 個基點。公司調整後 EBITDA 指引的中位數增加 900 萬美元，反映出第三季較隱含指引改善 650 萬美元，以及第四季展望增加 250 萬美元。

該展望假設除已完成的交易外，不再進行額外的收購、處分或資產負債表操作。管理階層表示，預期當前正面的營運趨勢將持續至年底。

展望 2027 年，管理階層指出華盛頓特區、波士頓與聖地牙哥的會展排程更為強勁；北加州動能持續；品牌轉換與翻新工程的貢獻；以及常態性的大型賽事活動。其中包括在洛杉磯舉辦的超級盃 (Super Bowl)、華盛頓特區的 NFL 選秀、芝加哥的 MLB 明星賽，以及鳳凰城的 NBA 明星賽。上述為管理階層的預期，而非正式的 2027 年財務指引。

風險與關注焦點

• 管理階層坦言地緣政治的不確定性仍在持續，並表示將密切監控需求狀況。
• 團體預訂期仍然偏短，儘管第三季的季內需求超出了公司預期。
• 儘管能源成本較第二季有所緩和，但仍處於高位。
• 管理階層討論了在升息環境下，將償還債務作為現金的一種潛在用途。
• 翻新改裝可能會干擾營運，但管理階層表示波士頓與奇威斯特專案的施工時間規劃旨在盡可能降低衝擊。

分析師問答重點

利潤轉化率與定價能力：管理階層將更強勁的利潤率表現歸因於商務差旅加速回溫、週中客房吃緊程度提升、住宿時間延長、折扣減少，以及減少對高成本 OTA 通路的依賴。GDS 預訂量增加 10%，同時亦有更多需求轉向品牌官網。

商務差旅的後續成長空間：週一至週三的住房率仍比 2019 年水準低約 6 個百分點。管理階層表示，商務散客房價目前比團體房價低 12%-15%，而歷史上通常享有 12%-15% 的溢價，這顯示房價與客源結構仍有進一步提升的空間，但並未預測會完全恢復到以往的溢價水準。

資本配置：RLJ 表示，出售芝加哥中途機場飯店的收益可用於支援飯店品牌轉換、收購、股票回購或償還債務。任何資金配置都必須符合公司提高每股 FFO 與每股自由現金流的目標。該筆交易包含 2,000 萬美元的賣方融資，償還期限為三年，利率為高個位數。

品牌轉換儲備項目：受限於加盟合約到期時間以及避免對整體投資組合營運造成過度干擾，管理階層維持每年約進行兩項品牌轉換的目標。預計波士頓物業在穩定營運後的 EBITDA 將比翻新前水準高出 40%，並表示新增轉換資本的預期報酬率將超過 40%。

AI 在飯店營運中的應用：管理階層表示，品牌方正致力於保護成本較低的直銷通路，而業主與營運商則在測試將 AI 應用於人力排班、營業時間規劃與工作流程自動化。公司並未針對這些措施提供具體的利潤率量化目標。

完整電話會議逐字稿

---

完整財報電話會議逐字稿

管理層陳述

Operator

Greetings, and welcome to the RLJ Lodging Trust Third Quarter 2026 Earnings Conference Call. [Operator Instructions] Please note, this conference is being recorded. I would now like to turn the conference over to your host, John Paul Austin, Director of Investor Relations.

Thank you, sir. You may begin.

John Paul Austin

Thank you, operator. Good afternoon, and welcome to RLJ Lodging Trust's 2026 Third Quarter Earnings Call. On today's call, Leslie Hale, our President and Chief Executive Officer, will discuss key highlights for the quarter. Nikhil Bhalla, our Chief Financial Officer, will discuss the company's financial results. Tom Bardenett, our Chief Operating Officer, will also be available for Q&A.

Forward-looking statements made on this call are subject to numerous risks and uncertainties that may lead the company's actual results to differ materially from what has been communicated. Factors that may impact the results of the company can be found in the company's 10-Q and other reports filed with the SEC. The company undertakes no obligation to update forward-looking statements.

Also, as we discuss certain non-GAAP measures, it may be helpful to review the reconciliations to GAAP located in our press release. Finally, please refer to the schedule of supplemental information, which includes pro forma operating results for our current hotel portfolio. I'll now turn the call over to Leslie.

Leslie D. Hale

Thanks, John Paul. Good afternoon, everyone, and thank you for joining us. We had a very strong quarter, achieving results that exceeded our expectations across every metric. The strength of the operating momentum we saw was broad-based and accelerated from the second quarter, with business travel leading the way, as it continues to benefit from healthy corporate profits and a growing economy. The acceleration we are seeing in business travel reflects a step change in the momentum we have been highlighting since last year, and we are pleased to see this strength persisting into the fourth quarter. Overall, the positive trends across all segments of demand, including sustained strength in leisure and group, continue to disproportionately benefit urban markets. Our results reflect the favorable positioning of our urban-centric portfolio, which has allowed us to outperform the broader industry all year.

During the third quarter, we delivered robust RevPAR growth that outperformed the industry by 260 basis points. We generated another quarter of solid growth in our nonroom revenues. We achieved strong bottom line flow-through, which drove significant margin expansion and our EBITDA to increase at twice the pace of revenues. Our completed conversions and high-impact renovations once again delivered robust RevPAR and EBITDA growth. Additionally, we made progress towards our next phase of conversions, which will further expand our lifestyle orientation and EBITDA growth, and we opportunistically sold a small portfolio of assets at an accretive multiple.

Our year-to-date results demonstrates our portfolio's ability to capture the accelerating resurgence in urban markets in addition to the strong lift from our conversions and renovations. The combination of our favorable footprint and our embedded growth catalyst gives us confidence in our ability to continue delivering strong bottom line growth. With respect to our third quarter operating results, our RevPAR grew by a robust 9.7%, driven by increases in both demand and rate, with each month of the quarter exceeding our expectations. Demand grew within every segment, driving occupancy growth of 230 basis points. The strong and consistent demand dynamics we have seen throughout this year are giving our operators further confidence to increase rates, allowing us to achieve ADR growth of 6.4% during the quarter.

Several of our markets benefited from hosting World Cup matches, and we continue to estimate approximately 45 basis points of overall contribution from the tournament to our full year RevPAR growth. That said, our outperformance extended well beyond the World Cup with our non-World Cup markets achieving RevPAR growth of nearly 12%. This positive momentum carried into October, which achieved preliminary RevPAR growth of 6%, even with the shift of Dreamforce into September, further underscoring the sustainability of the trends we saw during the third quarter.

Our urban markets continue to lead our performance, achieving RevPAR growth of 10%, with 11 markets delivering double-digit RevPAR growth. Our largest market, Northern California, grew RevPAR by more than 13%. Year-to-date, RevPAR for our Northern California market is up by more than 16%. More importantly, our EBITDA in this market is up 63% over the last 2 years with meaningful upside remaining. Performance in this market continues to be underpinned by the expansion of the AI industry, which is fueling corporate investment, citywide activity and business travel against the backdrop of an improving local environment that's attracting more leisure activity. We continue to believe in the multiyear growth trajectory for Northern California as the epicenter of the broader AI boom that is driving the next phase of economic growth.

Other top-performing markets that delivered double-digit growth include Washington, D.C., Pittsburgh, Austin, New York City, Los Angeles and Tampa. And even with the robust performance of our urban markets year-to-date, there remains plenty of room to run. As it relates to segmentation, significantly higher transient revenue drove much of this quarter's improvement and the mix within transient shifted in a way that allowed us to optimize dynamic pricing. Business transient was once again our strongest segment with revenues increasing by 15% during the third quarter, driven by a robust 13% increase in ADR, along with a 2% increase in demand. We saw double-digit BT revenue growth in each month of the quarter and healthy BT trends across all of our markets. The consistency and the breadth of the growth in business travel is illustrating the sustained momentum we have been seeing build throughout this year with our 15% revenue growth following the 10% growth we achieved in each of the prior 2 quarters.

This robust business travel demand is being supported by a healthy economy with elevated levels of business investment. The nature of this investment is generating demand with a longer average length of stay, which our portfolio is well positioned to capture as reflected in our occupancy gains. We continue to see strong activity across a wide array of industries such as tech, consulting, defense, energy and health care, including both large corporations as well as small- and medium-sized businesses. This is reflected in our improving midweek demand, which drove a 15% increase in compression nights during the quarter, creating the backdrop for pricing power. With this dynamic still building, we believe we are in the early phases of a broader BT expansion.

Regarding leisure, our leisure revenues grew 10% during the quarter, driven by an 8% increase in ADR and a 2% increase in demand. While our footprint benefited from the World Cup gains during the quarter, leisure revenues grew at an equally strong pace in our non-World Cup markets, underscoring the diversified leisure demand drivers within our urban portfolio. The strength in leisure persisted throughout the quarter, in particular in September, with revenues generating 16% as the timing of Labor Day extended the summer travel season. Our hotels and live work-play locations continue to capture robust urban leisure demand as travelers increasingly prioritize travel around sports, concerts, dining and other entertainment experiences found in our vibrant city centers.

Our group segment also achieved strong results with revenues increasing 10% during the quarter, led by significant growth in room nights. This demand provided us with a strong base of business, allowing us to drive higher rates in our transient segment. While the booking window remains short, in-the-quarter, for-the-quarter demand materialized ahead of our expectations, and we were pleased to see our group pace for the fourth quarter improve by 500 basis points during the third quarter.

We are also encouraged by the increasing share of corporate group within our overall group mix, which has positive implications for both ADR and out-of-room spend. The strength across each of our demand segments continues to translate into healthy nonroom revenues, which grew nearly 7% during the quarter, reflecting the significant returns generated by our investments through our conversions, renovations and ROI initiatives. In aggregate, our robust top line growth, combined with our lean operating model and our disciplined cost control efforts translated into a nearly 18% increase in our EBITDA and 190 basis points of margin expansion for the quarter.

Turning to capital allocation. The investments we have made in our portfolio over the past several years are continuing to drive meaningful incremental growth. During the third quarter, our 8 completed conversions, including our most recent conversion in Pittsburgh, achieved RevPAR growth of 12% and EBITDA growth of 18% and our high-impact renovations that we completed last year achieved RevPAR growth of 26% and more than doubled EBITDA. We also advanced our conversions in Boston and Key West.

Subsequent to quarter end, we commenced the physical renovation at the Fairfield Inn & Suites Key West, which will join the Margaritaville family. And we are initiating the physical renovations at the Wyndham Boston Beacon Hill, which is slated to join Hilton's Tapestry Collection, with both projects on track to relaunch in 2027. The relaunch of these 2 assets next year will further enhance the lifestyle orientation of our portfolio and provide incremental growth. More broadly, the success we have achieved through our conversion strategy to date gives us conviction to pursue additional conversions as we continue to expand our pipeline, targeting 2 conversions per year.

We also remained active on the disposition front, opportunistically divesting assets on an accretive basis. In mid-October, we sold a portfolio of 7 assets near the Chicago Midway Airport for $110 million, representing an attractive multiple of 14x 2026 forecasted EBITDA or 16x including required capital expenditures. This sale allows us to reposition our Chicago exposure to align with our focus on harder demand locations while increasing the lifestyle orientation of our portfolio, which now represents roughly half of our total EBITDA. Overall, our strong liquidity and flexible balance sheet positions us to pursue a range of options to further drive long-term growth, enhancing shareholder returns.

Now turning to our outlook for the balance of the year. Demand continues to be supported by a favorable macro backdrop, including healthy corporate earnings and elevated levels of business investment, which is fueling sustained momentum in business travel, and we believe our urban-centric portfolio is well positioned to remain a beneficiary. As such, we are raising our full year guidance to reflect our third quarter outperformance, the strong operating results seen in October and our expectations that positive trends should carry into the remainder of the year. That said, we acknowledge that a degree of geopolitical uncertainty persists, and we will continue to monitor demand closely.

Looking ahead, we believe we are in the early phases of a multiyear cycle, with 2026 marking the first time in many years that lodging fundamentals converge in a way that drives occupancy higher, creates greater compression and yields true pricing power. As we look beyond 2026, we believe the positive momentum we are seeing is sustainable, supported by durable demand drivers. All of this is occurring as the backdrop of an extended period of muted supply growth, creating a favorable setup across all demand segments, in particular for business travel, and fueling the continued resurgence in urban markets.

While 2026 saw very strong growth, we believe the building blocks are in place for growth to continue in 2027, further supported by a positive holiday calendar. For RLJ, our portfolio will also have strong convention calendars in several of our markets, including D.C., Boston and San Diego, continuing momentum in Northern California and the ongoing ramp from our completed conversions and renovations, along with the relaunch of our Boston and Key West conversions.

Additionally, given our concentration in urban locations, strong entertainment demand drivers, we will continue to benefit from the annual rotation of recurring major events within our footprint in 2027, including the Super Bowl in Los Angeles, the NFL Draft in Washington, D.C., the Major League Baseball All-Star game in Chicago, the NBA All-Star game in Phoenix as well as pre-Olympic activities in Southern California, unique events such as the Star Wars 50th anniversary in L.A. Collectively, this positive setup is reflected in our group pace, which is tracking ahead by mid-single digits for next year. Overall, with our embedded growth catalysts and a strong balance sheet that provides significant optionality, we believe our portfolio is well positioned to continue delivering strong relative performance in 2027 and beyond.

With that, I will turn the call over to Nikhil.

Nikhil Bhalla

Thanks, Leslie. To start, our comparable numbers include our 91 hotels owned at the end of the third quarter. Our reported corporate adjusted EBITDA and adjusted FFO include operating results from all sold hotels during RLJ's ownership period. Our third quarter results came in well ahead of our expectations and once again meaningfully outperformed the industry. Comparable RevPAR of $153 grew 9.7% versus the prior year, driven by an increase of 6.4% in average daily rate to $203, along with a 230 basis point increase in occupancy to 75.4%.

Each month delivered RevPAR growth ahead of our expectations, with July up 13%; August, which we expected to be flat, up 4.2%; and September up 11.5%. As Leslie mentioned, our urban markets continue to lead our performance, benefiting especially from widespread BT strength with a number of these markets achieving double-digit BT revenue growth, including D.C. at 53%, Austin at 24%, Northern California at 22% and New York at 19%. Strong growth in BT was also evident in our weekday RevPAR growth of 9.9% during the quarter, with Tuesday through Thursday seeing double-digit RevPAR growth.

In addition to strong BT, our urban markets also benefited from robust urban leisure, with revenues growing by 10.3%. Strengthening urban leisure growth led our weekend RevPAR in urban markets to achieve nearly 10% growth. Strong demand in both BT and corporate group throughout the quarter also drove healthy nonroom revenues, which were up 6.5%, our fourth consecutive quarter of high single-digit growth. This performance reflects the value created from our investments in ROI initiatives with an emphasis on improving food and beverage margins, maximizing the productivity of underutilized spaces and adding new ancillary revenue streams through our renovation and conversion initiatives.

Turning to operating expenses. Our strong top line performance, combined with our disciplined approach to controlling expenses, allowed for strong flow of nearly 50% to the bottom line, demonstrating the benefits of our lean operating model. During the third quarter, total cost per occupied room increased by approximately 3%, in line with our expectations.

Drilling down further into hotel operating expenses, variable costs such as commissions and fees increased in line with revenues. And while energy costs remained elevated, they moderated from the second quarter. Partially offsetting these increases, our fixed costs were slightly lower relative to the prior year, benefiting from the successful renewal of our insurance program last year as well as the success from our property tax appeals.

We delivered hotel EBITDA of $93.9 million during the third quarter, representing an increase of $14 million, or 17.5% over the prior year, which is nearly 2x the increase in our revenues. Hotel EBITDA margins were 26.5%, expanding by 190 basis points over the prior year. These results translated to adjusted EBITDA of $85 million and adjusted FFO per diluted share of $0.34, representing increases of 17.3% and 25.9%, respectively, over the prior year.

Turning to our balance sheet. As of the third quarter, we had $2.2 billion of debt and no maturities due until 2029. Overall, our balance sheet remains well positioned with strong liquidity of over $1 billion as of quarter's end, including $600 million of undrawn capacity on our corporate revolver, 91% of hotels unencumbered by debt and approximately 70% of our debt either fixed or hedged at the end of the third quarter.

With respect to capital allocation, subsequent to the end of the quarter, we opportunistically sold our Chicago Midway campus of 7 hotels for $110 million to an owner-operator. Our strong liquidity provides us with significant optionality with respect to capital allocation opportunities, including continuing to unlock the embedded growth in our portfolio through our transformative conversions. We remain committed to enhancing shareholder returns through our well-covered quarterly dividend of $0.15 per share and we'll continue to allocate capital strategically to enhance portfolio growth while maintaining balance sheet strength and financial flexibility.

Turning to our full year outlook. Our updated guidance reflects our strong third quarter outperformance and our improved outlook for the fourth quarter, which assumes continuation of the positive operating trends we are currently seeing through year-end as well as the sale of 7 Chicago Midway hotels. For 2026, we now expect comparable RevPAR growth to range between 5.75% and 6.25%, an increase of 200 basis points at the midpoint, comparable hotel EBITDA to range between $377 million and $383 million, corporate adjusted EBITDA to range between $352 million and $358 million, a $9 million increase from our prior outlook at the midpoint, which reflects the $6.5 million third quarter beat relative to our implied guidance and a raise to our fourth quarter outlook by an additional $2.5 million and adjusted FFO per diluted share to be between $1.47 and $1.51.

Our outlook assumes no additional acquisitions, dispositions or balance sheet activity beyond what has been completed to date. We continue to estimate capital expenditures will be in the range of $80 million to $90 million. Cash G&A will be in the range of $34.5 million to $35.5 million and expect net interest expense will be in the range of $101 million to $103 million. Finally, please refer to our press release from last evening for additional details on our outlook and to our schedule of supplemental information, which will include 2026 and 2025 quarterly operating results for our comparable hotel portfolio.

Thank you, and this concludes our prepared remarks. We will now open the line for Q&A. Operator?

Operator

[Operator Instructions] Our first question comes from the line of Austin Wurschmidt with KeyBanc.

分析師問答

Austin Wurschmidt

Just you guys hit a lot about -- hit on a lot about the flow-through this quarter and how it improved significantly versus recent quarters despite there being a mix of ADR and occupancy growth driving RevPAR. What really changed this quarter? And do you think you can sustain that improved flow-through to the extent that fundamentals do remain strong?

Leslie D. Hale

Yes. I would say, Austin, what changed was really what I talked about in our prepared remarks in terms of this being the first time in a long time where fundamentals have really converged. As you think about the building blocks here, we've had a consistent strength in group demand, which has remained healthy, but it's giving us a base of occupancy. And now we have true compression building. And so we've seen transient demand really accelerate.

Now leisure demand has remained relatively stable and growing, but BT is seeing meaningful acceleration sequentially. We've seen the pace of growth in business travel and demand. We've seen it in the Form of weekday trends, midweek trends as well. The length of stay has expanded. And all of those things are happening against limited new supply. So it's creating compression on Monday, Tuesday, Wednesday, and we've seen our compression go up 15%. When you have that kind of compression in demand, you're able to have true pricing power.

And so in a post-COVID world, we had already decoupled rate and occupancy. But what we've been able to do is to have less discounting, less promotion, less OTA channel. And we've seen a remix within transient to more dynamic pricing. All of this is happening while you have your highest-rated customer business traveler coming back. And so that's really allowed us to drive the rate side while still seeing an increase in occupancy, which has clearly helped the flow through to the bottom line. We do believe, as we mentioned in the prepared remarks, this is sustainable, particularly given the economic backdrop that we are seeing from a business investment and corporate profit perspective.

Austin Wurschmidt

So I guess you said I think group pace is up mid-single digit for next year. Does that just set the stage for this to continue? And how much of a mix shift opportunity is there remaining in that midweek business transient segment?

Leslie D. Hale

Yes. I think that the building blocks for 2027 are set. We think that the momentum we've seen and the positive fundamentals in terms of how they're converging, we think that will carryforward and that we can continue to see the compression that we've seen. I'll let Tom talk about what he's seeing on a midweek trend perspective.

Thomas Bardenett

Yes. So if you compare to our occupancy, which is where Leslie started the conversation, we're still about 6 percentage points off of 2019 on Monday, Tuesday, Wednesday. So even with the growth that we're having in BT, which was 10%, 10% and 15% if you look at this past quarter, we know that the accounts that are coming back, Austin, whether it's tech or energy, aerospace and even the consultants, the fact that we're getting length of stay that Monday, Tuesday, Wednesday and growth both on demand and rate, we think there's a lot of room in the tank to continue to have that.

Group sets the pace to your point. And even in our largest assets that have leading indicators and Leslie talked about some of the markets whether they're either citywide or self-contained, we're in a good position coming out of the gate for '27 based on those 2 dynamics. And then the last thing I would say, because of the channel mix, we're seeing more people book through GDS, which is great because you don't have to pay a commission on that. You have more people going to brand.com; again, less commissions. And we're controlling that Tuesday, Wednesday because of that length of stay and compression dates, less OTA channels midweek. So I think we're in a good spot coming out of '26, and I'll let Leslie recap one more item.

Leslie D. Hale

Yes. I think that -- just to put a number on Tom's point about GDS, our GDS is up 10%. I think the other note to add on to the numbers that Tom gave is to look at it from a rate perspective as well, I've said this before that historically, business travel rate was above group. Historically, it's somewhere between 12% to 15% above group. Today, it sits 12% to 15% below group. That's a 30 basis point swing. I'm not suggesting that BT will get back to its historical relationship in terms of being ahead. But what I am saying is there is room to grow there from that relationship perspective.

And remember, your group traveler is your BT traveler. Our corporate group represents 50% of all of our group. And so they're already paying this rate. It's already in the market, and we're just chasing that. And so those are the things that give us confidence in terms of remixing both from a rate perspective and a demand perspective.

Operator

Our next question comes from the line of Michael Bellisario with Baird.

Michael Bellisario

Leslie, big picture for me. Just obviously, there's some onetime benefits from last year in today's numbers. So maybe could you just give us your best guess of what you think the underlying or go-forward run rate is for the portfolio and where you maybe think some upside or downside might actualize next year?

Leslie D. Hale

Yes. Mike, in terms of onetime events, I think clearly, everybody expected World Cup to perform and drive our performance. But when we actually look at our portfolio performance ex World Cup, our non-World Cup markets were up 12%. And we believe that demonstrates the broad-based nature of the strength that we're seeing that is beyond onetime events. And we've seen it in other metrics as well. Keep in mind that the momentum carried into September. And our leisure -- overall September was up 11%. Our leisure in September was up 16%. And that's post World Cup. And we really think that's a function of our footprint, a function of the demand we're seeing and a number of factors. Obviously, Labor Day was in there as well. But the general point is that the strength we're seeing across the fundamentals are well beyond onetime special events.

Thomas Bardenett

And if you think about our footprint, Mike, when you think about the special events, because of our size and our scale and the smile of America where many of these events rotate, Leslie referred to a few of the items that are critical in regards to big events, Super Bowl, NFL Draft, things that are now really becoming entertainment venues. And then I think because of L.A. having pre-Olympics and some action even before 2028, it gives us confidence that we got a good footprint to be able to take advantage of those special events so they don't become anomalies.

Michael Bellisario

And then just one more for me, on the out-of-room spend. Are you seeing the same demand and pricing lift that you've been seeing on the room side? And that's all for me.

Leslie D. Hale

Yes. On the out-of-room spend, I would say, we're very pleased with the fact that we've seen high-single-digit out-of-room spend for the last 4 quarters. And it's really a function of not only the demand side, but also our strategy around F&B being very thoughtful. We continue to see demand from outside the hotel relative to the F&B outlets that we have created. We're excited about what we're doing in Pittsburgh, Boston and Key West, which are going to continue the themes that we think into next year. And also just parking continues to be a bright light for us as well.

Thomas Bardenett

And the only thing I would add to Leslie's comments, we've put a lot of time and energy on the renovations and enhancing our markets really appealing to the grab-and-go consumer trends, and that was up 16%. So we feel like those are great ROI initiatives where people are taking advantage of that before they depart or upon a late arrival. And then as Leslie stated on the corporate group side, we're seeing that benefit the banquets department, whether it's banquets, outlets, lounge because that corporate customer tends to spend a little bit more on their stay versus, let's say, a leisure customer. And so corporate really drives that group side, and that is healthy when we start to see those type of activities because that typically is your more profitable food and beverage that Leslie referred to.

Operator

Our next question comes from the line of [ Sidney Rome ] with Barclays.

Unknown Analyst

Could you walk us through how the $20 million seller note financing came together in its basic terms like rate and maturity? And then with the Midway cash proceeds, I think you're at about $500 million of cash on the balance sheet. So how are you thinking about the right level of cash for the business? And would paying down some of the higher cost term loans or buying back some of your preferred be on the table?

Nikhil Bhalla

[ Sidney ], this is Nikhil. Thanks for the question. On your first question here on the $20 million seller financing, so it's a 3-year payback period. And obviously, it's structured in a way that there's accelerated payback to us. In terms of rates on the seller financing, it's an attractive rate. It's a high-single-digit rate on this financing.

Leslie D. Hale

And then I would say on the capital allocation side, [ Sidney ], in terms of the proceeds, we view the capital that we just raised within the context of our broader framework for capital allocation. Our objective clearly is to maximize value for shareholders, and we measure that primarily with growing FFO and free cash flow per share. Our liquidity position gives us tremendous flexibility and real optionality. And so as we intend to use these proceeds, we're going to do it in a very disciplined way, and we're going to evaluate optionality with thinking about every dollar that we use, whether it is to convert a hotel that we already own, to acquire a new hotel, to return capital to shareholders through buybacks or to strengthen our balance sheet, like you said, in terms of paying down potential debt in a higher rising interest rate environment. All of the use of cash flow must raise FFO per share in order to earn our investment.

So, yes, you mentioned we do have ample liquidity. We're going to deploy it in a very disciplined way. We believe that we have tremendous optionality that's provided by our balance sheet. And we've demonstrated the ability to unlock embedded value within our portfolio through our transformative conversions, while at the same time, remaining committed to returning capital to shareholders through dividends and share buybacks. Our conversions have performed exceptionally well. They're up double digit, both on the top line and bottom line this quarter and we're going to continue to execute on our pipeline.

We'll also consider acquisitions if they meet our underwriting criteria and return requirements while at the same time driving value creation. We'll also look at further strengthening our balance sheet by potentially paying down some debt in a rising interest rate environment. I think the key takeaway here is that all of these tools are available to us, and we are going to exercise them under the right conditions. They're not mutually exclusive. And on a relative basis, they have different benefits under different market conditions. We believe that the market is improving, which is providing some potential interesting opportunities, but we're going to stay disciplined and focus on driving free cash flow for our shareholders this year and next year as we deploy the capital.

Operator

Our next question comes from the line of Gregory Miller with Truist.

Gregory Miller

I'd like to start asking a question about corporate negotiated rates. And I know we're probably early in the process for 2027, but just curious to get your initial thoughts about whether you think hoteliers may be too aggressive in rate setting or perhaps too timid, just given the improvement in BT this year and ADR growth.

Thomas Bardenett

Greg, this is Tom. A couple of things. First and foremost, if you think about the last few years, we've really taken the stance, and this is brand as well as management companies, to try to move more and more people to dynamic pricing because then when you're in an up cycle, the ability to drive bar in retail is pretty significant. As an example of that, our retail segment grew 13.8% this particular quarter, and that is considerably up from a mix standpoint that now is in the low 30s versus high 20s. So that's a big shift in regards to how you think about negotiating rates when it comes down to national corporations and even local accounts in your backyard.

The second thing that I would say is when you look at rates for year-over-year, we typically will listen to the tea leaves in regards to are you going to have more demand or not. And that sets the stage in regards to if they're going to have more demand and you have compression nights that is increasing significantly. I think Leslie referred to 15%. That's a great opportunity for you to force that Tuesday, Wednesday into a longer period of time. And that's helping us because if we can pick up a Monday or a Thursday on that or price ourselves appropriately on Tuesday, Wednesday, that helps you on the dynamic pricing as well as your ability to negotiate rates based on demand.

So I feel that we're going into 2027 in a great position because we're seeing it happen right now. And therefore, we're going to continue to push to try to see increasing average rates. It is early, though. This is the beginning of the RFP season, but the fact that at GBTA people were talking about more demand, and we think that's because of what's happening in AI and many different segments of our corporate business, as I mentioned to you earlier, whether it's tech, energy, aerospace, consultants, all are traveling more. And that's what we need to take advantage of when we go into 2027.

Gregory Miller

Thanks, Tom. This question may -- my follow-up may also go to you. I'm curious if you could provide the latest state of the union as it relates to AI impact to hotel operations. And if you could provide an update on your progress at the hotel level. And maybe as a side question, are you more or less encouraged about the opportunities just given that there's a lot of hype today and more recently, some third-party hoteliers that suggest that AI can lead to perhaps 300 bps or more of hotel margin upside over the next five years?

Thomas Bardenett

Wouldn't that be great? I would say we are looking at all avenues. And there's -- let me break it down for you to simplify it. There's brands, there's management companies and there's owners. And everybody has a different role in this process. The brands are really focused on making sure that search continues to go through brand.com, and that's where they're spending a lot of time and energy talking to that consumer because you have 295 million members, 275 million members between Marriott and Hilton. As you know we carry a lot of the premium brands. That's where we need to make sure we're protecting distribution and continuing to go to the channels that cost less. So their focus is on that.

The management companies and the ownership groups are really focused on the middle of the P&L. To your point about the bps and the opportunity there, those are tactics like labor management efficiency, scheduling, hours of operations. Taking all these data insights in regards to how to build a better mousetrap to help the field really operate in an environment that's going to enhance productivity. And when we can do that, we also believe that we can provide better service.

When you think about things that happen on a regular basis, we can automate those low-value activities so we can allow the teams to really focus on higher revenues and better service, which will ultimately mean you can have a guest that wants to come back and feels good about their stay. And so those are the areas that we're seeing that are really actionable intelligence versus artificial. And I think we're leaning in heavily on beta tests, opportunities to really go after those 300 basis points that you mentioned because that's going to be the critical part because we think the revenue picture is in a good spot. Now we just need to make sure we're bringing it to the bottom line.

Operator

Our next question comes from the line of Jamie Feldman with Wells Fargo.

Unknown Analyst

You have [ Connor ] on with Jamie here. Maybe returning to the conversions topic. And I think you've spoken to about 2 to 3 a year. Maybe beyond Boston and Key West, how are you thinking about the next candidates? And are franchise expirations driving that timing again?

Leslie D. Hale

Yes. We've said that we are targeting 2 conversions per year. And when we look at our pipeline, we're going to be on that cadence. And we think about it, to your point that you raised, ones that are arising as a result of franchise expiration or other opportunities before the franchise expires where we can renegotiate early to make adjustments out of those brands. But it's about two per year. We're on that cadence, and we don't see that -- any need to change that at this point in time.

Unknown Analyst

And I think last year, you mentioned 4Q benefited from a favorable insurance renewal. How is this year's renewal shaping up? And how should we think about taxes and insurance as a piece of 2027 fixed cost?

Nikhil Bhalla

This is Nikhil, [ Connor ]. What I would say is we're in the middle of our negotiations at the moment on the insurance part. So there's not much I can say other than just to say that I think the environment is still very, very positive. We'll update you when we get to our fourth quarter earnings call. And with respect to the real estate tax environment, again, we'll have more color at the time when we have our call next quarter.

Operator

Our next question comes from the line of Logan Epstein with Wolfe Research.

Logan Epstein

You mentioned in the prepared remarks that you're seeing an increased corporate group in your demand mix. Just curious if you can talk about any specific industries that you're seeing there drive that across the portfolio.

Thomas Bardenett

Yes, happy to. Logan, what we're finding is because of the way our footprint is set up, we deal with a lot of small groups somewhere between 10 and 15 nights peak night. And so the type of corporate groups that are attracted to us are the same type of companies that are traveling on the BT side. So it's a lot of regional sales meetings, product launches. With AI, we're actually finding that software is getting implemented in health care, universities. There's a variety of reasons why people are traveling on the group side that are project related. And so that gives you an idea of why we think length of stay is up because they're going in and they have to be there for a few days.

It's your typical groups that we have seen. What we like about those groups on the corporate side is that's where we see the additional F&B spend. AV, room rental as an example of that. We had some nice lift, which goes back to the nonroom revenue, where we had AV up about 20%, room rental up about 12%. Those are good signs that it's healthy corporate group because they're not afraid that they have to put some money against those initiatives because they're going to be there for 2, 3 days. So it's a variety of things, but I'm very encouraged that corporate continues to grow in our overall category when it comes to group.

Logan Epstein

Maybe a follow-up to prior questions and comments in the prepared remarks. As we sit here today and see the recovery in business transient demand, just curious if you can talk about where that midweek occupancy sits today versus prior peak levels. And maybe what markets you expect are best positioned to grow from here? That's all for me.

Thomas Bardenett

Yes. So a couple of things. I'll talk about where it sits. But I think even more importantly is, as we talked about, where we're getting our RevPAR growth. Our Tuesday, Wednesdays were in the 12% to 13% and 11% on those 2 nights. And so the growth is happening midweek. In addition to that length of stay that we're getting a nice growth on Sunday, Monday and in addition to that Thursday because of the length of stay, a little bit less growth than we are on Tuesday, Wednesday, but that's where the pricing power that Leslie is referring to.

When we talk about occupancy, I referred to earlier, we're at around 91% of [ '19 ] on Mondays, 92% on Tuesday, Wednesday. So when you think about pure occupancy for the whole portfolio, we're about 6 percentage points off, but midweek is where the most room in the tank is, where weekends were closer in the 97%, 96% on the occupancy side, and we all know average rate is significantly up when it comes to leisure and weekends based on entertainment and all the events. Leslie, do you want to add something to that?

Leslie D. Hale

Yes. In addition to just the broader compression we saw across our portfolio, just to support Tom's comments, the compression growth on Monday, Tuesday and Wednesday was up 20%. So the portfolio was up 15%, but with those 3 nights, it was up 20%.

Operator

Our next question comes from the line of Floris Van Dijkum with Ladenburg Thalmann.

Floris Gerbrand Van Dijkum

Leslie, you made a comment in the beginning, which I find fascinating and maybe I wanted to see if you could expand on that a little bit. You talked about the relationship historically between RevPAR growth and GDP growth and how you see that now is starting to reassert itself. Maybe if you could touch on what the historical -- particularly in low supply environment, I suppose this is an environment we're in right now, and it doesn't look like that's going to change anytime soon -- Maybe talk about what the historical -- or maybe touch on the historical RLJ RevPAR growth relative to GDP growth in 2 prior low supply environments and...

Leslie D. Hale

Sorry, no problem. So the comment I made was the convergence of fundamentals in terms of having group demand be as strong as it is, while also transient demand was accelerating with leisure travel continuing to be stable growth and with BT accelerating. Those are the fundamentals that are helping us drive overall pricing power and the overall fundamentals that we've seen this year, which we think can continue. We are seeing -- starting to see that RevPAR growth and GDP growth continue to converge back to historical trends. And I'll give -- I'll let our historian give you some data points.

Nikhil Bhalla

Floris, thanks for the question. It's a good one because when you go back in history and you look at GDP and RevPAR correlation, obviously, it's been very tight. I think what you saw from 2015 or 2017 through 2019 was that supply growth was so great that it masked the real growth in RevPAR growth that would have taken place along with GDP growth. And so the current environment is actually a really good one where now you're starting to see, as Leslie pointed out, some demand converge with GDP growth, but no supply. So clearly, that's a good outcome, and that's a good positive environment to be in and augurs well for RevPAR growth going forward.

Leslie D. Hale

And I think it's that relationship between all the convergence of the fundamentals -- pricing power, low supply -- that give us comfort and confidence about the trends carrying forward.

Floris Gerbrand Van Dijkum

Maybe my follow-up question. I like the sale of the Midway portfolio at, call it, a 7.2% EBITDA yield. That gives you presumably significantly more capital that you can reinvest into conversions that are doing 15%-plus. I think historically, you said in the past, it was 40% on some of those conversion returns. Maybe if you talk about one of the things could you consider accelerating your conversions?

And I guess it depends a little bit on the timing of some of these brand agreements or franchise agreements as well. But because they would map significantly -- it would appear to be deleveraging to do more of these kinds of investments at north of 15% IRR, particularly when you're funding it with 7% sales. If you can talk about that a little bit.

Leslie D. Hale

Yes. Well, first of all, thank you for recognizing the value that we've been able to unlock in our transformative conversions. And I would say that, Floris, what we are doing, what we have done is increase our pipeline. I think that we'll still stick with the cadence of probably 2 per year, just given the limitations around the franchise expirations, but also just making sure that we don't become a disruption story. We've been very thoughtful about managing that. You've seen the compound growth. We're now up to 8 conversions. We're going to be adding 2 more next year. We think that's the right cadence. And you've seen the quarter-over-quarter growth that the pool of assets have generated. But what we have done is expanded our pipeline. And looking at our own portfolio, there are other optionality that we have that now we've increased the number of assets that we see going forward that are candidates for conversion.

Thomas Bardenett

And the one last thing I would add is when you talk about nonroom revenue, all those conversions and even the renovations that we have, we find the nooks and crannies to be able to drive those ROI initiatives. And that helps us to feel confident we can continue to sustain nonroom revenue growth because our footprint is very different when you think about lifestyle and what you're trying to do to appeal to that consumer.

Floris Gerbrand Van Dijkum

Have you ever quantified the renovation or conversion for the Wyndham and Boston?

Nikhil Bhalla

We have. And we've given a stat before. We've said that we expect our EBITDA on a stabilized basis to be 40% higher than prerenovation levels.

Operator

Does that complete your question?

Floris Gerbrand Van Dijkum

Yes. Actually -- but the total conversion cost is that -- you haven't given that presumably, right? Or we can back into that, assuming a 20% return on the investment?

Nikhil Bhalla

The return is actually far greater than that overall, Floris. And we've given the CapEx number to you and all the investments that we've included in that number.

Leslie D. Hale

So we expect high double-digit returns, similar on the incremental capital that we've done before, north of 40% returns on this deal as we've done before, which is what's driving the EBITDA number that Nikhil gave you.

Operator

Our next question comes from the line of Chris Woronka with Deutsche Bank.

Chris Woronka

So a lot of focus on AI in different ways. And my question relates to if there's a way to isolate maybe the upside you've seen year-to-date in specific regions or hotels. And the nature of the question is we're not exactly sure where things are going. We had an election and there's -- the market is a little bit concerned today anyway about less AI and data centers and things. So question is, do you feel like in those markets in specific hotels, if you look back a couple of years ago, is the demand pool big enough to offset if a little bit of the AI demand comes out, do you worry that there's enough of backup to not see a meaningful drop off? And then I have a follow-up.

Thomas Bardenett

Yes. On the demand front, I would say there's a lot of oars in the water outside of just AI. But I do appreciate your question because I think there's a significant amount of demand that's related to AI as well. And it really is market by market when you start to get into those conversations, Chris. I feel that when we looked at that broad-based demand where you see a lot of markets going double digits in Q3, that's a lot more than AI travel, number one. You're going to see a lot of different reasons why people are traveling. And it's around those industries that are thriving around corporate profits, not just AI.

So I understand your comment about data centers, but data centers typically don't produce a lot of demand when I have a data center next to my hotel. But what I would say is what people are investing around corporations, there's a race out there to continue because if you don't invest, you're behind. And what we're finding is the opportunities for platforms to really try to drive that productivity and efficiencies everybody is using a different form to be able to try to become more efficient as an individual, as an employee. And what we're finding is if we can do that for our employees at the property level, that's where the real magic will pay off.

Leslie D. Hale

Yes. And I think you have to decouple what's happening in the stock market from the reality of using it on the ground. You can't afford to get behind your AI investment as your competitors move forward. So the use of the tool versus the valuation side is different, and I would decouple that.

Chris Woronka

Okay. Yes, fair enough, Leslie and Tom. And the follow-up is you guys have done a lot of conversions now, and you have more on the -- some more in the pipeline. You have a lot of soft brands. And so as you convert -- and this is more maybe converting from straight brand to soft brand, which you've done a few of -- are we at a place yet where you have material cumulative savings on things like brand fee? Because I know that the cost -- the fee structure is a little bit different even if you're just franchising soft versus hard brands. So is there any way to quantify like what you've seen cumulatively or how much opportunity is left if you do more, if that makes sense?

Yes. It's a great question because a lot of times, when you're going from a hard brand to a lifestyle brand, I'll give you a perfect example, Chris. As you know, we just converted our Renaissance to an Autograph in Pittsburgh. We just were up there last week because we held our Board meeting there. And it was a great opportunity to show what we can do with square footage by when you're trying to track yourself to a higher-rated customer. First and foremost, we definitely feel like we know that you're chasing the rate that's in the market when you're moving up and that consumer is looking for still maybe a collection or a bespoke experience versus maybe a hard brand experience. So that's the goal, number one, is we're trying to change the mix, go after a higher-rated customer and provide an environment within the hotel to add revenues.

When you think about the cost, there's not that much difference in regards to a hard brand versus a lifestyle brand. The difference is how much revenue you're generating to bring that down and the ROI initiatives that ultimately can make you more profitable. So when you think about Marriott and Hilton and Hyatt within those hard brands and other brands, there is on the way in, as you guys know, there's key money in the ramp because the brands believe that when there's conversions and they're growing their nug, that's going to allow them to continue to grow their pipeline. So that's where the real savings is in the early stages. But the revenue is what you're chasing to try to drive more profitability, Chris.

Leslie D. Hale

Yes. what we've always talked about as we talk about these conversions is that we're always chasing a rate that's already in the market, remixing the customer as a result of where we're taking the brand conversion. So that's the primary driver of that. Such as the case in our Mandalay Beach, we're chasing a rate that was already in the market, but we also changed the cost structure of the hotel by moving away from the Embassy Suites brand, which had the F&B where we had to give it away for free. Now we charge for the F&B. So it's restructuring both the standpoint of top line, but also looking at the operations and offerings that the hotels have as well.

Operator

Our next question comes from the line of Chris Darling with Green Street.

Chris Darling

A couple of quick ones for me. First, as it relates to the conversions that are underway in Boston and Key West, it sounded like you don't expect much in the way of RevPAR or EBITDA disruption in 2027. Am I correct in thinking about it that way?

Thomas Bardenett

Well, our timing is everything Chris. When we think about these 2 per year, we try to line it up for the least disruptive. For instance, we really want to make sure that we're launching in season for Margaritaville because that's where you get the highest rates in Key West. So we feel good that we are on a path to be able to take advantage of that, number one.

Number two, Boston in the wintertime is your best time to do the renovation. And when Leslie talked about the citywide, we feel good because Q3 and Q4 is where the citywide calendar is the most beneficial. So when we have the disruption before we launch into the Tapestry by Hilton brand, that is going to be minimized based on the timing of when we're doing the renovation. So you're accurate in regards to how we think about trying to minimize that. So we take full advantage of the market that's really going to be solid in the back half of the year.

Leslie D. Hale

And the thing I would add to that, the benefit of having a house design and construction group, our ability to be laser-focused on minimizing the disruption is much easier for us because our design and construction group sits right next to our asset management group. And so we're able to look at the optimal windows, look at if there's any demand drivers that are coming in that we need to start and stop for. And so we've gotten really proficient at managing that.

Chris Darling

And then going back to the portfolio sale, obviously, an attractive multiple for RLJ. Can you unpack the transaction just a little bit further? I'm really trying to understand some of the rationale and underwriting from the buyer's perspective and the extent to which they may see upside to in-place EBITDA.

Leslie D. Hale

Yes. First of all, we're very pleased with the execution of this transaction. I think the Midway market was a steady submarket for us. But based on the direction of the submarket demand drivers and the overall general dynamics of the cost pressures in Chicago, we didn't believe that this was a portfolio of assets that we should put incremental capital in or hold for much longer. And we were very strategic and thoughtful about when we brought this to market and sold against a strong convention calendar for Chicago. So we're thoughtful about the timing.

We were also thoughtful about our approach of identifying a buyer. We used a sharpshooter approach and identified a regional buyer who was looking to expand and so brought some strategic perspective to Chicago because he was already in that market. And that allowed us to optimize the pricing, both from the standpoint of the time when we brought it to the market as well as our approach to identifying the right buyer.

Operator

We have no further questions at this time. Ms. Hale, I'd like to turn the floor back over to you for closing comments.

Leslie D. Hale

Well, thank you, everybody, for joining the call. We look forward to seeing many of you at NAREIT.

Operator

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.