Xenia Hotels & Resorts Delivers Resilient Q1 2025 Results Amid Macroeconomic Crosscurrents
15min read Xenia Hotels & Resorts (XHR) reported a robust Q1 2025 performance, marked by strong RevPAR growth and strategic capital reallocations, even as the company tempered its full-year outlook in response to lingering economic uncertainties. The quarter’s results, released on May 2, 2025, underscored Xenia’s focus on high-quality assets, operational discipline, and portfolio diversification.
Financial Highlights: Growth Anchored by Strategic Initiatives
Xenia’s Q1 2025 net income rose to $15.6 million, while adjusted EBITDAre jumped 12% year-over-year to $72.9 million. Adjusted FFO per share hit $0.51, a 16% increase, reflecting the strength of its luxury and upper-upscale portfolio. Same-property RevPAR climbed 6.3% to $188.73, driven by:
- A 180-basis-point occupancy gain to 69.3%
- A 3.6% ADR increase to $272.41
The standout performance came from the Grand Hyatt Scottsdale, which saw a 60% RevPAR surge after a major renovation expanded its Arizona Ballroom and upgraded suites. Group business there surged, though transient demand in Scottsdale softened—a reminder of the challenges in balancing strategic investments with market dynamics.
Operational Strengths and Challenges
Xenia’s success hinged on group demand, which grew 6.6% in room nights and 4.1% in ADR, contributing over 15% revenue growth in February and March. Corporate bookings, still recovering from pandemic lows, rose 15% year-over-year. By April, 80% of 2025 group revenue was already booked, exceeding 2019 levels.
However, geographic volatility emerged:
- Washington, D.C. (Ritz-Carlton Pentagon City) and New Orleans (Loews New Orleans) thrived during the presidential inauguration and Super Bowl, respectively.
- Winter storms in Texas and Houston’s soft January performance dented RevPAR by 2%.
- Leisure demand was mixed: While properties like Park Hyatt Aviara and Grand Hyatt Scottsdale saw gains, Hyatt Regency Grand Cypress and Andaz Napa lagged.
Strategic Transactions: Prudent Capital Allocation
Xenia executed two major moves to bolster long-term flexibility:
1. Acquisition of Hyatt Regency Santa Clara Land: For $25 million, Xenia bought the fee-simple land to eliminate ground-lease risks (e.g., fair market value adjustments). This leaves only one hotel with a ground lease.
2. Sale of Fairmont Dallas: Sold for $111 million to avoid an $80 million renovation and declining cash flows. The hotel delivered an 11.3% unlevered IRR since its 2011 purchase.
Cost Controls and Margin Expansion
Despite rising labor and energy costs, Xenia’s hotel EBITDA rose 10.5% to $79.3 million, with margins improving 42 basis points. Key drivers:
- Food and beverage revenue jumped 13.4%, with margins expanding 145 basis points due to banquet and catering demand.
- Energy costs rose just 1.6%, thanks to infrastructure investments that offset winter storm impacts.
2025 Outlook: Caution Amid Resilience
Xenia adjusted its full-year guidance to reflect macroeconomic risks:
- RevPAR growth trimmed to a 4.5% midpoint, with Grand Hyatt Scottsdale contributing 3 percentage points.
- EBITDAre lowered by $6 million at the midpoint due to transaction impacts and moderated revenue expectations.
- Margins expected to improve 50 basis points to 6.2%, aided by cost discipline and the Fairmont Dallas sale.
The company also raised its dividend 17% to $0.14 per share and repurchased $36 million of shares (2.7% of outstanding shares), leveraging its $715 million liquidity cushion (including a $500 million undrawn credit line).
Risk Factors and Defensive Positioning
Xenia’s portfolio remains well-positioned to navigate economic uncertainty:
- Geographic focus: Heavy exposure to Sunbelt markets (e.g., Scottsdale, Dallas, Orlando) and limited reliance on international or government demand.
- Asset quality: Luxury/upper-upscale hotels, which historically show stronger resilience in downturns.
Conclusion: A Resilient Play with Room for Caution
Xenia’s Q1 2025 results highlight its ability to execute on strategic initiatives while maintaining operational discipline. The Grand Hyatt Scottsdale’s success and group demand’s resilience provide optimism, but macroeconomic risks—particularly potential leisure demand slowdowns—warrant vigilance.
Investors should note:
- Valuation: At a current P/FFO of ~7.5x, XHR trades at a discount to peers, reflecting its cautious guidance and levered balance sheet (5.4x net debt/EBITDA).
- Dividend yield: Over 5% after the recent hike, supported by a strong liquidity position.
- Execution risks: Deferred CapEx projects (e.g., Andaz Napa renovations) may delay growth opportunities if economic conditions deteriorate.
While XHR’s adjusted FFO per share guidance of $1.62 suggests modest growth over 2024, its defensive positioning and shareholder-friendly policies make it a compelling play for investors seeking stability in the lodging sector. The key question remains: Can group demand and cost controls offset potential leisure softness? Q2’s results, particularly in post-Easter markets, will provide critical clues.
In the near term, XHR’s stock could face pressure as macro risks weigh on REITs broadly. However, its balance sheet strength and strategic moves—like the Santa Clara acquisition—position it to capitalize on opportunities as the cycle evolves. For now, Xenia’s results are a reminder that even in uncertain times, disciplined execution can deliver results.
