Executive Summary / Key Takeaways

• Strategic Portfolio Refinement Drives Value: Xenia Hotels & Resorts (XHR) is actively curating a high-quality portfolio of luxury and upper upscale hotels, evidenced by strategic dispositions like Fairmont Dallas and the land acquisition for Hyatt Regency Santa Clara, enhancing long-term asset value and flexibility.
• Grand Hyatt Scottsdale Leads Growth: The transformative renovation and up-branding of Grand Hyatt Scottsdale is a significant internal growth driver, contributing substantially to RevPAR and EBITDA growth in 2025 and expected to reach over $20 million in Hotel EBITDA by 2026.
• Robust Group Demand & F&B Outperformance: Strong group business continues to be a bright spot, driving outsized food and beverage revenue growth across the portfolio, a trend expected to persist into 2026.
• Disciplined Capital Allocation & Shareholder Returns: XHR demonstrates a commitment to shareholder value through disciplined capital expenditure management, share repurchases, and a consistent dividend policy, reflecting confidence in its underlying asset value.
• Cautious Outlook Amid Macroeconomic Headwinds: While Q3 2025 performance met expectations, management maintains a cautious near-term outlook due to macroeconomic uncertainties and softening leisure demand, reflected in slightly adjusted full-year 2025 guidance.

The Curated Advantage: Xenia's Strategic Blueprint in Luxury Lodging

Xenia Hotels & Resorts, Inc. (NYSE:XHR) operates as a self-advised and self-administered Real Estate Investment Trust (REIT), strategically investing in uniquely positioned luxury and upper upscale hotels and resorts across the top 25 lodging markets and key leisure destinations in the United States. The company's core business model revolves around owning these high-value properties, while day-to-day operations are expertly managed by third-party independent contractors under leading brands such as Marriott (MAR), Hyatt (H), Kimpton, Fairmont, Loews (L), Hilton (HLT), and The Kessler Collection. This asset-light operational approach allows XHR to maintain REIT qualification and focus on strategic asset management, capital allocation, and portfolio optimization.

XHR's competitive positioning is rooted in its focus on the resilient luxury and upper upscale segments, catering to a customer base that tends to be less impacted by economic fluctuations compared to lower-tier lodging segments. While direct quantitative market share figures for all niche competitors are challenging to ascertain, XHR's strategic emphasis on premium branding and resort expertise enables it to effectively compete with larger rivals like Host Hotels & Resorts , Pebblebrook Hotel Trust , Sunstone Hotel Investors , and RLJ Lodging Trust . XHR's portfolio, comprising 30 hotels and resorts with 8,868 rooms across 14 states as of September 30, 2025, is designed to capture demand in diverse markets, from urban centers to key leisure destinations.

The company's "technological differentiation" as a REIT is not found in proprietary software or hardware development, but rather in its sophisticated approach to asset management and its strategic leveraging of advanced technological infrastructures provided by its brand partners. XHR benefits significantly from the cutting-edge reservation systems, loyalty programs, property management platforms, and digital marketing tools offered by its affiliated brands. This strategic reliance on industry-leading brand technology enhances XHR's revenue management capabilities, optimizes guest acquisition, and streamlines operational efficiency across its portfolio. Furthermore, XHR's in-house project management and analytical teams utilize data-driven insights to inform capital allocation, renovation strategies, and portfolio optimization decisions, effectively employing analytical rigor as a core differentiator in its asset management approach. This allows for targeted investments, such as the W Nashville F&B reconcepting, which is an operational innovation aimed at enhancing guest experience and driving incremental revenue.

XHR's history is marked by a consistent strategy of portfolio enhancement. In 2011, the company acquired the Fairmont Dallas for $69 million, an asset it would later strategically divest. A pivotal moment in XHR's recent history was the transformative, $150 million renovation and up-branding of the Hyatt Regency Scottsdale Resort and Spa at Gainey Ranch. This extensive project, which included a significantly expanded Arizona ballroom, culminated in the property's relaunch as the Grand Hyatt Scottsdale Resort on November 1, 2024. This investment is a cornerstone of XHR's current growth thesis, with the resort now ramping up operations and expected to deliver substantial returns.

Financial Performance and Strategic Capital Allocation

Xenia's financial performance in 2025 reflects both the benefits of its strategic initiatives and the broader macroeconomic environment. For the nine months ended September 30, 2025, total revenues increased 4.6% to $812.9 million, up from $777.2 million in the prior year period. This growth was primarily driven by a significant 10.9% increase in food and beverage revenues to $284.7 million, and a 12.9% rise in other revenues to $75.7 million. Rooms revenues, however, saw a slight decrease of 0.2% to $452.6 million, largely due to the impact of strategic dispositions.

The company's operational effectiveness is evident in its Segment Hotel EBITDA, which increased 9.0% to $210.9 million for the nine months ended September 30, 2025, with the Segment Hotel EBITDA Margin improving by 100 basis points to 25.90%. For the third quarter of 2025, XHR reported a net loss of $13.7 million, Adjusted EBITDAre of $42.2 million, and adjusted FFO per share of $0.23. While same-property RevPAR for the quarter was essentially flat, total RevPAR increased by 3.7% due to strong non-room spend, particularly banquet revenues, driven by the Grand Hyatt Scottsdale.

XHR's liquidity position remains robust, with $188.2 million in consolidated cash and cash equivalents and $80.7 million in restricted cash and escrows as of September 30, 2025. The company's $500 million Revolving Credit Facility was undrawn, providing substantial available liquidity. Total debt stood at $1.42 billion with a weighted-average interest rate of 5.63%, and approximately 25% of this debt is at a variable rate. Debt maturities are well-laddered, with a weighted average duration of 3.5 years, and the company plans to pay off a mortgage loan maturing in March 2026 with cash on hand.

Strategic capital allocation has been a hallmark of XHR's recent activity. In March 2025, the company acquired the fee simple interest in the land underlying its Hyatt Regency Santa Clara for $25.4 million. This move eliminated the risk of significant future ground rent escalations and enhanced the long-term value and flexibility of the asset. Following this, in April 2025, XHR divested the 545-room Fairmont Dallas for $111 million, realizing a $40 million gain and an unlevered IRR of 11.3% over its 14-year hold period. This disposition strategically avoided an estimated $80 million in near-term capital expenditures and potential operational disruption from a necessary renovation.

Capital expenditures for 2025 are projected at approximately $90 million, an increase of $10 million from prior guidance, primarily due to additional capital projects and the reconcepting of food and beverage operations at W Nashville. Despite this increase, the revised CapEx is still about $50 million less than initially projected at the beginning of the year, reflecting disciplined spending in response to potential macroeconomic impacts, including tariffs on imported goods.

Competitive Dynamics and Strategic Initiatives

XHR operates in a competitive landscape alongside other luxury and upper upscale hotel REITs. Compared to Host Hotels & Resorts (HST), XHR's strength lies in its focused portfolio of uniquely positioned luxury and leisure-oriented resorts, potentially fostering stronger customer loyalty in experiential segments. However, HST's larger scale may offer a more resilient cost structure and broader market presence. Against Pebblebrook Hotel Trust (PEB), XHR differentiates through its emphasis on resort-style luxury, potentially leading to more premium experiences, while PEB might exhibit greater agility in urban market adaptations. Sunstone Hotel Investors (SHO) and RLJ Lodging Trust (RLJ) also compete in similar segments, with SHO focusing on balanced growth and RLJ on opportunistic investments. XHR's strategic brand partnerships and internal asset management expertise provide a competitive moat, enabling it to leverage global distribution systems and loyalty programs effectively.

A significant strategic initiative is the planned relaunch of the food and beverage venues at W Nashville, in partnership with the Jose Andres Group (JAG). This collaboration, involving an additional capital investment of approximately $9 million, is projected to add between $3 million and $5 million to hotel EBITDA upon stabilization, with the hotel aiming to generate in excess of $20 million of hotel EBITDA in the next few years. This initiative is expected to create unique destination dining venues and enhance the hotel's overall desirability.

Outlook and Risk Assessment

Xenia's outlook for the remainder of 2025 and into 2026 is shaped by a blend of cautious optimism and strategic focus. For the full year 2025, the company expects same-property RevPAR to increase by 4% at the midpoint, a slight reduction from previous guidance due to a softer fourth-quarter outlook. Adjusted EBITDAre is projected at $254 million, and adjusted FFO per diluted share at $1.01, reflecting the RevPAR adjustment and continued cost controls.

Looking ahead to 2026, the Grand Hyatt Scottsdale is expected to continue its ramp-up, consistent with underwriting, and group demand across the portfolio is anticipated to remain robust, driving outsized non-room revenue growth. Approximately 35% of XHR's group room nights for 2026 were already on the books as of September 2025, with about 50% of group revenue definite. Management anticipates strong citywide convention demand in several markets, including Pittsburgh. Leisure demand is expected to temper but stabilize in most markets, potentially aligning with business transient growth.

Despite these positive internal drivers, XHR acknowledges ongoing macroeconomic uncertainties, including inflationary pressures, changing interest rates, and potential recessions. The lodging industry continues to face a challenging operating environment, particularly concerning leisure demand. While XHR's high-end portfolio is generally more resilient, a prolonged economic downturn could impact consumer spending on travel. Geographic concentration in markets like Orlando, San Diego, and Houston also presents a risk, as adverse changes in these regions could negatively affect operating results. The company is also exposed to interest rate risk, with a 1% change in variable rate debt impacting future earnings and cash flows by approximately $3.3 million per annum.

Conclusion

Xenia Hotels & Resorts is executing a clear and disciplined strategy to enhance shareholder value through active portfolio management, targeted capital investments, and operational excellence. The successful transformation of Grand Hyatt Scottsdale and the strategic disposition of Fairmont Dallas underscore management's commitment to optimizing its asset base. While the broader lodging industry faces macroeconomic headwinds and a softening in leisure demand, XHR's focus on luxury and upper upscale segments, coupled with robust group business and strategic F&B initiatives like the W Nashville relaunch, positions it for continued growth. The company's strong balance sheet, disciplined capital allocation, and ongoing share repurchase program further reinforce its investment thesis. As XHR continues to leverage its brand partnerships and internal analytical capabilities, it is well-positioned to capitalize on the long-term growth prospects of the high-end lodging market, driving appreciation and sustainable cash flow for investors.