Executives: Jay Shah – Chief Executive Officer Neil Shah – President and Chief Operating Officer Ashish Parikh – Chief Financial Officer Greg Costa – Manager of Investor

Relations
Analysts: Shaun Kelley – Bank of America Anthony Powell – Barclays Jeff Donnelly – Wells Fargo Bryan Maher – Riley FBR Bill Crow – Raymond James Chris Woronka – Deutsche Bank Michael Bellisario –

Baird
Operator: Good day. And welcome to the Hersha Hospitality Q4 2017 Conference Call and Webcast. As a reminder, ladies and gentlemen, today's call is being recorded. At this time, I’d like to turn the call over to Greg Costa, Manager of Investor Relations. Please go ahead Sir.

Greg Costa: Thank you, Lauren and good morning to everyone joining us today. Welcome to the Hersha Hospitality Trust full year and fourth quarter 2017 conference call. Today's call will be based on the full year and fourth quarter 2017 earnings release, which was distributed yesterday afternoon. Prior to proceeding, I’d like to remind everyone that today’s conference call may contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause the company's actual results, performance or financial position to be materially different from any future results, performance or financial position.

These factors are detailed within the company's press release as well as within the company’s filings with the SEC. With that, it is now my pleasure to turn the call over to Mr. Neil H. Shah, Hersha Hospitality Trust’s President and Chief Operating Officer. Neil, you may begin.

Neil Shah: Thank you, Greg. And good morning and thank you for joining us on today’s call. Joining me this morning are Jay H. Shah, our Chief Executive Officer; and Ashish Parikh, our Chief Financial Officer. The fourth quarter comprised of various market tailwinds that resulted in robust operating performance for our portfolio.

From a macroeconomic perspective, the underlying drivers for domestic economic growth continued their upward momentum during the period. Improving labor markets, a stronger group and convention calendar and overhaul of our tax system and higher consumer and government spending drove U.S. RevPAR to grow 4.2% in the fourth quarter. Our portfolio of hotels also gained share in the fourth quarter. During the fourth quarter our comparable portfolio delivered 6% RevPAR growth.

The fourth quarter was our best comparable RevPAR growth performance in eight quarters and translated into strong cash flow generation through margin growth, which increased 110 basis points. Faced with decelerating fundamental environment in the lodging sector in 2015, we began a transformative recycling of our portfolio. We sold older mature hotels and reinvested gains in younger, higher quality hotels in the higher growth markets with a greater opportunity to drive EBITDA growth in the coming years. We executed the sales very well selling nearly $1 billion of hotels for an average of 15 times EBITDA multiple or a 6% cap rate. We reinvested the proceeds in new acquisitions, made capital investments to reposition our existing portfolio and bought back a meaningful amount of our stock.

We will return to capital allocation later, Ash and my remark, but as we review our portfolio and some market performance, I will highlight the performance of our most recent acquisitions. Their performance to date provides early testament to the value creation of our recycling effort. So, let's begin with their South Florida portfolio, which reported 22.5% RevPAR growth in the fourth quarter. Four of Hersha's six hotels opened shortly after Hurricane Irma and have experienced a boost in property operations, since their reopening. While the portfolio received an influx of occupancy related – to Hurricane relief, we do believe that this quarter's operational results are the first indication of a resurgence of the Miami lodging market.

Our optimism is supported by recovery in business and social groups that avoided Miami due to the Zika in 2017. Also supported by less new supply, a weakening dollar, strong leisure and corporate travel trends and continued upside from disruption in the Caribbean and Puerto Rico. Our most recent acquisition in Miami, the Ritz-Carlton Coconut Grove was our highest growth assets, as we achieved nearly 30% RevPAR growth and 470 basis points of EBITDA margin growth. The residents in Coconut Grove located directly behind the Ritz achieved 24.5% RevPAR and 330 basis points of EBITDA margin growth. The Blue Moon and Winter Haven hotels on Miami Beach also recorded double digit RevPAR growth and meaningful margin growth.

We are very excited to reopen the Cadillac Hotel and Beach Club on Miami Beach and the Parrot Key Resort on Key West in the second quarter of this year. These two hotels are among the largest hotels in our portfolio and we have missed their EBITDA contribution throughout the fourth quarter of 2017. They will remain under construction through the first quarter and into the second quarter of this year. But these transformative projects and our existing Miami portfolio are positioned for substantial growth in the back half of 2018 as the convention center reopens in Miami Beach and the Key West market stabilizes. Boston was our best performing portfolio outside of South Florida, registering RevPAR growth of 10.4%, 730 basis points above the market.

We continue to benefit from ramp up at our most recent acquisition in Boston, the Envoy Hotel, which registered RevPAR growth of 18.7% and EBITDA margin growth of over 1000 basis points. We acquired the hotel two years ago with high expectations for our ability to drive meaningful rate, margin and loyalty from this exceptionally located property in the heart of Boston's Seaport Innovation District. Since acquiring the hotel, we've been able to increase RevPAR by over 15% and EBITDA by over 25%. The Boston portfolio also benefited from strong performance at the Boxer Hotel and the Courtyard, Brookline, we saw a nice rebound in the fourth quarter. As the hotel delivered 9.1% and 7.5% RevPAR growth respectively.

HT’s Philadelphia portfolio rallied from a challenging operating environment in the third quarter, faced with a difficult comp when the city hosted the Democratic National Convention in 2016. The portfolio generated 9.8% RevPAR growth during the fourth quarter; led by our recent acquisition of the Philadelphia Weston, which grew RevPAR by 9.8% to reach $187.12, aided primarily by ADR growth of nearly 8%. The Rittenhouse is also an outperformer and delivered 8.3% RevPAR growth and 220 basis points of EBITDA margin growth during the quarter. We're in the midst of significant renovations at the Rittenhouse and the Hampton in Philadelphia, which will moderate results in the first quarter. But we expect strong performance from our Philadelphia portfolio in the back half of 2018 and look forward to robust convention calendars in the coming years.

Another market that rebounded in the fourth quarter was our Washington D.C. portfolio. We generated 5.3% RevPAR growth supported by an occupancy increase of 473 basis points to reach 82.3%. Transient demands notably from the government increased activity on Capitol Hill surrounding tax reform. Additionally, government demand also grew in November with Congress in session for much of the month compared to their absence last year due to the Presidential Election.

Citywide pace is also stronger for the fourth quarter compared to 2016. D.C. will be tougher in the first quarter with the inauguration comp, but there are some signs of reacceleration in 2018 from increased activity on the Hill and increased defense budget and infrastructure spending. On the West Coast, our portfolio consists of eight hotels from Seattle to San Diego. We reported RevPAR growth of 3.3% driven by 1.9% ADR increase to $208.09.

The best performing asset in the fourth quarter was the Sanctuary Beach Resort. Since acquiring the resort in 2016, we've been remixing the business, attracting more mid-week corporate business and enhancing our restaurants, bar and event space. In the fourth quarter, the Sanctuary Beach Resort increased RevPAR by 13%, aided by 446 basis point occupancy increase to 86%. In Santa Monica, we saw continued success at the recently acquired Ambrose Hotel, which grew RevPAR by 11.2%. During the quarter, the Ambrose is able to take advantage of mid-week business trends in demand in Santa Monica, while also benefiting from the increase of leisure travel to the area during the onset of the winter months.

Our independent hotels are truly unique, small hotels and exceptional locations within vibrant business and leisure destinations. For 2018, we've been able to move locally negotiated rates by 7% and expect strong corporate activity at this hotel for the foreseeable future. We're located among some of the leading gaming and entertainment related technology businesses and Oracle’s cloud computing headquarters is within close proximity of the Ambrose. We also saw strong corporate activity at our Sunnyvale properties in the fourth quarter and we continue to capture market share there. The Courtyard Sunnyvale and the TownePlace Suites Sunnyvale generated 11.1% RevPAR growth and 10% RevPAR growth respectively versus 5.6% for the market.

We acquired the TPS in the fall of 2015 and then the Courtyard in late 2016. Neither hotel required significant capital expenditures that at the time we believe sub-market fundamentals and our operational advantage could drive strong EBITDA growth. Since acquiring the hotels, we have moved margins by several hundred basis points and grown RevPAR well above market levels. The Courtyard Sunnyvale ended 2017 at a $257 ADR and the TownePlace of $221 ADR and both very close to 50% margins, our kind of hotels. Lastly at the Pan Pacific in Seattle, 8.2% RevPAR growth for the fourth quarter was primarily driven by an ADR increase of 3.5%.

Occupancy for the quarter also rose 332 basis points, as we hosted a large Amazon Group and we were able to layer in significant locally negotiated rate business around the holidays. We've achieved significant ADR growth since acquiring the Pan Pacific, growing over 8% in each quarter since acquiring the hotel in the second quarter of 2017. Hersha has implemented a rate oriented revenue management strategy, compressing with locally negotiated corporate rates and capturing the high ADR of bar and consortia guests. Since taking ownership, HT also redesigned the labor model to achieve year-over-year savings and continues to see significant margin expansion opportunities as the hotel stabilizes. In 2017, the Pan Pacific saw over 1000 basis points of EBITDA margin growth and 14.3% RevPAR growth, 900 basis points above the Seattle market and 500 basis points above the competitive set.

Our New York City portfolio experienced 3.1% RevPAR growth during the fourth quarter, aided by ADR growth of 0.8% and increased occupancy 207 basis points to 94.2%. Our Sheraton and Hilton Garden Inn JFK airport assets, drove this outperformance, growing RevPAR by 15.7% and 13.8%, respectively. We were able to improve ADR and occupancy through a shift of mix from transient to group, while also winning new airline crew business. Our seven high quality Manhattan properties registered 1.6% RevPAR growth to $266 during the fourth quarter and contributed $10.6 million of EBITDA to our portfolio. Hersha’s segmented clusters outperform the Manhattan market in 14 of the previous 16 quarters, as a result of a young, well located and purpose built hotel portfolio in line with today's tastes and preferences.

However, as we've discussed in the past without meaningful ADR growth, it is hard to avoid margin erosion in the face of increased labor costs. While, the overall operating environment in New York remains challenging, demand continues to meet new supply coming into the market. Demand for the city is actually on the rise with forecasted growth for 2018 and 2019 at 6.2% and 5.1% respectively. We are forecasting supply growth of less than 3% for 2018. If you look back to pre-recession levels for New York City when demand outpaced supply on an annual basis.

It led to significant RevPAR growth to the market. From 2003 to 2007 RevPAR grew at a compounded annual growth rate of 16.9%, aided by 13% annual growth rate in ADR. Now we are not there yet, but we do believe we are well positioned and expect to grow RevPAR more meaningful in 2018 and to record margin growth for the first time in several years in Manhattan. So, we had a very strong quarter across the board, performance was exceptionally strong in Miami, but ex South Florida, our RevPAR was up 5% and we recognized 70 basis points of margin growth. In the fourth quarter, we outperformed the star set for each and every one of our markets by an average of over 200 basis points.

We do believe that this performance is a function of our best in class asset management team, strong alignment with our operators and our commitment to thoughtful, longer range capital allocation decisions. As noisy and disruptive as capital recycling has been it ultimately produces exceptional results. In the fourth quarter, we were also able to repurchase $30.4 million of stock at an average price of $17.60. We consider opportunities to purchase our existing portfolio at a 20% to 30% discount to private market values very attractive. But we balanced buybacks with ROI oriented investments and leverage levels in our existing portfolio.

Ash will touch on CapEx and the balance sheet in his remarks. But we do remain committed to returning value to shareholders in spite of a tepid growth environment. Since our 2014 peak, we have returned approximately $220 million to shareholders through dividend. Our dividend remains one of the most well covered in our sector. Inclusive of our fourth quarter and first quarter buybacks, we have now repurchased $232.3 million in common shares, representing 21.8% of our float.

Following several years of well timed dispositions, calculated acquisitions and ROI generating renovations, our collection of hotels is uniquely in tune with the tastes and preferences of today's traveler. Following a resurgent quarter and leading indicators for continued economic growth in 2018, we remained confident in the value of our portfolio, the markets where we are focused and the overall EBITDA growth profile of our assets. With that, let me turn it over to Ash for a deeper dive in the margins, CapEx, the balance sheet and our 2018 outlook before we open it up for questions.

Ashish Parikh: Thank you, Neil and good morning. Our comparable portfolio realized EBITDA margin growth of 110 basis points during the fourth quarter, our best performance for 2017.

EBITDA margin growth was driven by performance at our South Florida, Boston, Washington D.C. and Philadelphia Hotel. Demand from hurricane related to [indiscernible] supported margin growth in South Florida. And we also saw an increase of leisure and business travel in the Miami market, a leading indicator of things to come in that region for 2018 and beyond. Boston was aided by continued ramp up at the Envoy.

With the addition of our Winter Igloos at the rooftop bar, as well as, increased occupancy on weekend and higher F&B profitability. Washington D.C. saw an uptick in EBITDA margins due to cost control measures enacted throughout the year. Lastly, EBITDA margins at our Philadelphia assets were primarily driven by declining OTA restoration fees and commissions, with the implementation of our revenue management strategies at the newly acquired Philadelphia Westin. We continue to work closely with our operating partners to implement expense control and revenue management strategies.

During this period of increasing wages and somewhat muted ADR growth in 2017, we rolled out cost containment plans across the entire portfolio. And our franchise operating model allows a significant flexibility to adjust purchasing strategies and staffing models while quickly adapting to changing market conditions. Regarding our balance sheet, 67% of the company's consolidated debt is fixed and has a weighted average interest rate of approximately 3.85%. In addition, the weighted average life-to-maturity on our debt is 4.2 years and we have no significant debt maturities until 2020. We continue to target debt-to-EBITDA in the range of 4x to 5x and are comfortable with our fixed charge coverage and leverage target, given our portfolio’s growth trajectory, cash flow profile and coverage metric.

The resiliency of our cash flow affords us confidence in regards to our current dividend payout ratio. We continue to be within the range of our targeted dividend payout of 50% of FFO, despite the closure of two of our largest assets along with over $200 million in assets sales during the past year. With the reopening of these assets and the continued stabilization of our new acquisitions and the strength of our existing portfolio, we are very confident in our ability to not only sustain, but to potentially issue a special dividend in future years. Shifting over to capital expenditures. We spend approximately $24.3 million and $57.1 million in CapEx and development projects during the fourth quarter and full year 2017 respectively.

In 2017 and 2018 we have and continue to remain focused on several meaningful capital projects. That position the portfolio for significant growth. At our Cadillac Hotel in Beach Club major redevelopment is ongoing. Transforming the property from a Courtyard into an Autograph Collection Hotel. Full renovation of the bathrooms, guest rooms and corridors are in progress at the Cadillac Tower.

In addition, public space conversion plan includes remodeling the lobby, business center, doubling the meeting space and bringing in the new F&B operator for the restaurant and bar. Renovations are currently on schedule and the property is anticipated to open during the second quarter. In Key West, the Parrot Key Hotel and Resort, experienced limited structural damage as a result of Hurricane Irma, however, water penetration required extensive remediation and has taken the property offline. In response, we accelerated our planned renovations to repair and enhance the asset. Updates to the Parrot Key include upgrading the lobby, pool bar and restaurants along with renovating the bathrooms and repairing landscaping and exterior damage.

The property is also slated for reopening during the second quarter. In addition to the transformation of the Cadillac in Miami and the acceleration of planned renovations at the Parrot Key, we are adding 28 keys [ph] at our Hyatt House, White Plains, New York. We are also updating the rooms at the Rittenhouse as well as upgrading the guest rooms and fitness areas at the Hampton in Philadelphia and St. Gregory in Washington D.C. we are confident these projects along with our significant renovations in 2017 will lead to meaningful EBITDA growth in 2019 and 2020.

We anticipated spending between $68 million and $72 million in capital expenditures in 2018 and this amount is evenly split between lifecycle and ROI projects. These expenditures are what we estimate to spend excluding any proceeds received by our insurance claims on the South Florida assets for remediation work. I'm going to transition to our full year and first quarter guidance for 2018. In addition to our earnings release yesterday we also announced the sale of the Holiday Inn Express in Chester, New York and the Hyatt House in Gaithersburg, Maryland. And EBITDA loss from those assets of approximately $1.6 million is built into our guidance for 2018.

As a reminder, we also sold three Hyatt House assets in Scottsdale and the Bay Area for $130.5 million in June of 2017. That contributed $3.5 million of EBITDA during the first quarter of 2017. In addition to these transactions, we recently refinanced the debt on seven assets in Manhattan. Owned in an existing joint venture with Cindat Capital Management. Our ability to refinance the debt on this portfolio of New York assets, speaks volumes through the strength of the debt market and overall finance abilities of the quality assets in our portfolio.

With lower EBITDA compared to when we sold the assets and the more challenging operating environment in New York, we increased the financing proceeds, lowered the weighted average cost of borrowing, increased the duration of our debt and entered into a capital structure that provides the joint venture significantly more financial flexibility. This refinancing also allowed us to full redeem $43.2 million of our 9% preferred equity in the joint venture thereby reducing our exposure to these assets in New York. We initially sold this portfolio for $580 million or $533,000 for Key in April 2016. In total, we have generated $490 million from the sale and subsequent financing and still retain a 30% interest in our seven asset joint venture. Our guidance builds in the loss of approximately $3.9 million of unconsolidated joint venture FFO for 2018 from the liquidation of our preferred equity in this joint venture.

Building off of a very strong fourth quarter, we remain encouraged by our 2018 operating results to date, as we are seeing strong fundamentals in the majority of our core markets including South Florida, New York City, Boston and the West Coast where we are seeing mid single digit RevPAR through February. This helps to offset some of the decline in RevPAR growth from our Washington D.C. cluster, which is facing a difficult comparison from the Presidential Inauguration, as well as, decreased transient demand so far this year from the recent government shutdown. At our Philadelphia cluster, we are renovating the Rittenhouse and the Hampton in Philadelphia during the first quarter, also leading to subdued RevPAR growth in this market. We presented our detailed 2018 guidance in the earnings release published yesterday.

This guidance, which is based on the company's current view of operating in economic fundamentals, includes the transactions I mentioned previously, which in total account for approximately $9 million of EBITDA loss for 2018, as well as, the closures of the Cadillac and Parrot Key, which generated approximately $8.6 million of EBITDA for the first two quarters of 2017. At their peak generated close to $11 million of EBITDA during the first two quarters of the year. We have also included our RevPAR in current ranges for the first quarter to guide through the transactions and renovations affecting the quarter’s results. In addition to the closures that I just discussed, anomalous transactions affecting our Q1 comparison include the asset sales in addition to losses of approximately $1.6 million in our Washington D.C. portfolio from the inauguration that are impacting margins by approximately 100 basis points during the quarter and renovation related losses of approximately $2.5 million impacting margins by approximately 150 basis points during the quarter.

These transactions more than offset the positive contribution from our asset acquisitions in 2017 during the first quarter. With the forecasted opening of Autograph Miami Beach and the Parrot Key Resort during the second quarter of 2018 and the completion of all of our renovation work. We anticipate significantly stronger EBITDA production for the portfolio in the back half of 2018. I will not go into detail on all the numbers presented in our earnings release, but a few of the highlights includes comparable portfolio RevPAR growth of 1% to 3%. FFO per diluted share of $1.89 to $2.07 per share and EBITDA to be in the range of $159 million to $167 million.

From EBITDA margin perspective, we are forecasting margins to range from minus 50 basis points to positive 50 basis points for 2018. So, this is concludes my portion of the call. I think we can now proceed to Q&A, where Jay, Neil and I are happy to address any questions that you may have. Operator?

Operator: [Operator Instructions] We'll take our first question from Shaun Kelley with Bank of America.

Shaun Kelley: Hey, good morning guys.

Thanks for all the detailed comments. Ashish or Jay, maybe you could talk a little bit about just saw your outlook by sub-market, right, so we've got the overall RevPAR guidance. But there you know it sounds like you're probably anticipating seeing some really good growth out of South Florida as we move through 2018. So, could you just give us your kind of thoughts given how concentrated you are for kind of the big five markets that you operate in. Thanks.

Jay Shah: This is Jay, I can take that. Are you kind of referring to just looking at the first quarter, right?

Shaun Kelley: Well, I was really more referring to the year Jay, but we can do both. More just overview for the kind of for the year. Like there's a lot of moving pieces in the first quarter and I think Ashish just touched on some of the bit.

Jay Shah: Okay, well, yeah, in fact, I can kind of go through that general outlooks, I’ll give you some ranges of what we're expecting for the year.

I can give you more color market-by-market if necessary. But in New York, generally, we're looking to be a throughout 2018 in New York to be north of 4%, that's the outlook that we have. That’s going to be a pretty healthy increase over to 2017. West Coast is still looking very strong. We're seeing some pretty decent transient demand of state strong.

I think we're going to get some good corporate pick up out there and our peak season was strong there. Operators and our asset management team is expecting about in the mid-5s on the West Coast. D.C. has a difficult comp in the first quarter as we've all talked about, but we think the second, third and fourth quarter are pretty strong in the 4 to 4.5 to 5 range for the remaining three quarters outside of the first quarter. But all that being said, the downdraft from the first quarter is probably going to leave Washington relatively flat.

Philadelphia, we've got some disruption the first quarter and the year generally is not going to be making up for that. So, there we’d expect to be between 0% and 1% growth there. Boston we're thinking that pace and group and continued ramp up at Envoy is going to produce somewhere north of 4%. And South Florida for the full year adding back Cadillac and Parrot Key around mid-year is going to be mid 5s.

Shaun Kelley: Great.

The other thing I wanted to ask about was the supply growth, so it sounds like and Jay, I joined a couple of minutes late, so if you touched on this, I apologize for making you repeat. But it sounds like you've got a very small or in supplies maybe favorable relative to its elevated levels last couple of years at least in 2018. But what's your outlook for 2019, there is a competitor or peer yesterday who sort of hinted that 2018 might be a little bit of a downdraft, but that was partially because of the delay, so 2019 was going to look bigger. But curious I mean, your markets are quite concentrated, so what are you expecting for kind of 2019?

Jay Shah: Yeah and Neil referred to this in his prepared remarks, a little bit without going into much detail. But generally, the way we look at it and let me just start with 2018 first.

LA, Boston, San Diego, Manhattan, Philadelphia and South Florida, they're all going to be showing a good amount of supply growth. I think the good news in those markets and I think this is how we tend to view these things is; A, the demand growth is outpacing supply growth in all of those markets. And at the end of the day, we see that as the real governor for RevPAR growth and for our share growth because that leads me to my second point is, B, it's very, very location specific in these markets. A; the assets need to be very competitive and B, where the assets are located will drive varied results relative to the overall market growth. So, in all of those markets we are far less concerned in 2018 because demand is outpacing supply, generally and we believe that we're going to be in very, very competitive position with our hotels in those markets.

Seattle and Silicon Valley, San Jose market area has sort of a negative supply/demand dynamic going on. But even again in Seattle, we have one hotel in Seattle and we believe that is extremely well located. Most of the supply in Seattle is coming around the downtown area and the Convention Center area of Pan Pacific that we own there is very, very prominently located in South Lake Union on the block that Amazon is located and the Bill and Melinda Gates Foundation and a lot of significant growth demand drivers there. In Sunnyvale again, I think for us our location makes it feel a lot more comfortable with the supply/demand imbalance there. Our two hotels are both branded and located at the corner of Camino Real and Mathilda, so it's sort of ground zero in Sunnyvale.

I think a lot of the new supply that’s coming into those markets is a mile or 2 or 3 miles outside of that central location and it's a little more focused on different industrial and office parks. And so they don't have the access to the variety demand generators that we do. Some of these supply, I think that a lot of the forecasters are suggesting for 2018, will probably move into 2019. I think similar dynamics will apply there as well, as we continue to see encouraging indicators for general corporate demand growth. We would expect that the demand should continue to outpace supply in those markets.

I think also with rising interest rates, some of these projects may be pushed even beyond 2019 as people reconsider whether their projects are going to pencil.

Operator: Our next question comes from Anthony Powell with Barclays.

Anthony Powell: Hi, good morning guys. In the release you mentioned that you’re seeing more international travel to South Florida, which is a kind of a different picture for international than for other companies. Could you talk more about that? And also kind of talk about international inbound travel generally for your portfolio?

Neil Shah: Yeah, Anthony, this is Neil.

In South Florida, what we're seeing is you know there's still early to say that we’re having any kind of meaningful acceleration in international demand all around the country. You look at various data and most of the data is pretty kind of old data when you looking in assignment data and things. But as you look market-by-market there are some good stories out there and Miami is one of them. A lot of the international travel in Miami was dominated by Latin America for many years and that's significantly decelerated after 2015 due to the strong dollar, one. Two, due to domestic issues in Brazil, Argentina, Venezuela and other countries.

That dynamic has stabilized a bit and we have seen increases in inbound travel from Argentina and Brazil. Colombia is kind of made up for Venezuela. So, we're seeing it's not anywhere back to kind of 2014/15 levels. But we are seeing some growth in Latin American travel in Miami. We're also seeing increasing number of new non-stop flights into Miami from various other countries.

I think we mentioned last quarter how the Netherlands across 2017 has become one of the largest demand generators of inbound countries when it used to not be even in the top 10 list. But that was the result of inbound flights. Similarly, there's increasing flights and there's some talk about Asian flights coming into Miami as well. So, we're seeing some good positive momentum there. The weakening dollar will help that over time.

As we look into other markets for inbound international travel you know there's clearly been a decline in travel from Great Britain. There's clearly been some kind of you know maybe some kind of Trump effect from people feeling welcome from even other countries. Whatever shock there might have been from that, I think we've already felt it. And so it's hard to imagine it getting any worse than with the weakening dollar, we would suspect that it gets better. In New York, in particular, where we have a lot of international event.

We’ve very proactively across the last couple of years reduced our reliance on international travel. I think we've been mentioning this on calls for the last couple of years that it's not because we were predicting any kind of change in the international demand pattern there was because we were – the international traveler in New York has traditionally been a very price sensitive traveler and we have been trying to remix our inventory to higher paying guests, who are – where things are a little bit more predictable. So, in New York City which is a market that hasn't really strengthened significantly on rate yet, we have been grouping up a little bit more and taking the social and government groups and some crews even at the airport to reduce our reliance on international demand in that marketplace. So, I think it's too early to say it’s clearly accelerating, but it feels like it's firming up.

Anthony Powell: Got it.

Thank you. And just on your lever is I believe you said your targeted ratio is 4 times to 5 times. I think you’re north of 7 now based on your 2018 EBITDA guidance and you’re continuing to buy back shares. So, how do you plan to get the levers down say to your target levels?

Ashish Parikh: Anthony, you know, the leverage level is elevated right now due to the share buybacks, as well as, some of the asset sales and the redemption of the preferred interest that leads to a loss of EBITDA. We do think that when you look at the stabilization of the portfolio, the addition of two assets in South Florida, we should be able to generate $50 million of free cash flow starting in 2019 that can be used to pay down leverage or to you know purchase acquisitions, if there is sub-market for that that works for us that will decrease the EBITDA profile.

So, our plan is look this isn't going to be a bullet where we do something radical and get it down to 4 times to 5 times, but over the next few years, we do see a pathway to doing that.

Operator: Our next question comes from Jeff Donnelly with Wells Fargo.

Jeff Donnelly: Good morning guys. I actually just wanted to follow-up to your answer on Shaun’s question about supply. Do you think that the optimism around a reacceleration in room demands could lead to a reacceleration in construction starts or construction financing availability? Or do you feel the appetite out there for hotel starts feels, I guess, post peak.

Neil Shah: They, Jeff, I can get it started, this is Neil. I think one of the limiting factors that one of the most significant limiting factors has been construction financing and that remains very tight. We haven't seen any noticeable shift in construction financing appetite, which really kind of dried up at least in major urban markets across 2017. So, we haven't seen a major shift there. But what we have seen is a lot more challenging kind of construction pricing and so we believe that that is going to be the big limiting factor across the next year or two.

In markets around the country there is still a lot of construction going on in multi-family, in office in some markets. And with the infrastructure spending bill and some concerns even around immigration and the labor force for construction, what we're finding in cities like Miami in particular, there's just there where there's a big appetite in cities like Miami, there's a lot of developers around, but they're just not able to pencil hotel transactions right now. So, we think that it does feel very post peek from a lender’s perspective. And from a developer's perspective, the construction costs make it very difficult to build anywhere close to market values for assets today.

Jeff Donnelly: Thanks.

That's helpful and maybe just switch gears on acquisitions that you’ve undertaken in the last few years, you guys have certainly been aggressive at recycling capital. I was wondering if you could maybe give us a little bit of a post-op on how some of the more noteworthy acquisitions have fared versus the original underwriting because a lot of them were about sort of a ramping story, specifically I'm sort of thinking of the Ritz, Georgetown, the Ambrose, the Envoy. Is there any color you can kind of give us around what original underwriting was and what you thought you'd be at this point and how those assets are faring?

Jay Shah: Sure. Jeff, were you on the call earlier today?

Jeff Donnelly: I got on a little late as well, I've got some challenges to handling.

Jay Shah: Okay, just to save you know the transcript will at least highlight the performance on many of our recent acquisitions as we went through the markets.

If you look at, one way to think of it, and not just repeat all of that is, we look at our recent – we've been looking at our portfolio and thinking of, how to express kind of this ramp up to the investment community. And I think it's showing up in our overall portfolio numbers. But if you just take the most recent acquisitions we've made, there's six assets that are our most recent acquisitions. They've grown RevPAR in the last 12 months by about 6%. So, meaningfully higher than our existing portfolio and they also had a couple of hundred basis points of margin growth.

So, they are on business plan. We're feeling very good about each of them. They’re you know these were assets that we were purchasing between 5% and 7% cap rate or more recently an 8% percent cap rate at the Westin. And assets that we felt that we could stabilize, but closer to a double digit or a 9% to 10% on levered yield. It's a two year to three year kind of process.

We're about a year or two into it and its working. We've moved the EBITDA at the Envoy by about 25%, since acquiring the hotel. We feel that at nearly every one of our acquisitions, I think the most challenging ones in the last couple of years, as we look back have been Washington D.C. and Ritz Georgetown. We did not suspect that there would be so much of an impact on Middle Eastern travel and what we've been experiencing in D.C.

So, that is the only one of our list that’s probably isn't hitting our 2017 expectations right now. We expect that to turn into 2018/2018 and on the Ritz Georgetown actually we're in the midst of securing approvals for a major expansion of our meeting space there. So, we feel good about the real estate value, if not 2017 EBITDA. But as we go across this year and we have more 12 months trailing history on each asset, Jeff, we are going to make a concerted effort to lay that out for the investment community. And I hope that answer at least suffices for now.

Jeff Donnelly: Yeah, that's terrific and I’ll circle back obviously to the earlier part of the call. Thank you.

Operator: Our next question comes from Bryan Maher with Riley FBR.

Bryan Maher: Yes, good morning. Just a quick question on the two South Florida assets, the Cadillac and the Parrot Key, you said that they expect to reopen in the second quarter.

Do you have any color as to whether it’d be earlier in the quarter, end of the quarter, should we just model mid-way through the quarter? How should we think about that because it's not an insignificant number?

Jay Shah: The construction projects have a lot of uncertainty to them. Our expectation is for the Parrot Key Hotel to be very close to the end of the quarter, so I wouldn’t model anything for the second quarter. On the Cadillac, our expectation currently is the early part of the second quarter. You'll note that that is a shift from last quarter when we were planning for end of first quarter opening, it’s now looking like an early second quarter. But Miami Beach is a very difficult place to develop hotels, it’s a very tough environment with permitting and just getting everything finalized.

So, there is some risk to that. I would say model a month of income in the second quarter.

Operator: Our next our next question comes from Michael Bellisario with Baird.

Michael Bellisario: Just one kind of follow-up on the asset sale front, maybe that process for the two smaller assets you just sold. But did the attractive pricing you got on those two deals make you think harder about moving even more assets, kind of in the context of also repurchasing stock ramp [ph] more capacity for that?

Jay Shah: Yeah, these two hotels, they were unique opportunities of the Hyatt Place, Gaithersburg was purchased by an assisted living developer, developer of assisted living facilities.

And so they were able to view this purchased less on a cap rate and more on replacement value and the market’s attractiveness for their product type. And so it was a exceptional result. The Holiday Inn Express Chester was a kind of was more down the fairway owner operator buying the hotel on a good cash-on-cash yield. We're always in the market, both on acquisitions and dispositions. We do have several assets that people are enquiring about right now, that we're discussing with folks.

But we feel like we've taken care of most of the dispositions that there's a real kind of motivation to sell, where there's upcoming capital requirements, where there's a clearly declining market or new supply coming in somewhere. So, everything else that we have in our portfolio, it would be opportunistic sales. And as we look out across the year how likely, do we think we will be opportunistic, probably one or two assets. Not a meaningful amount of EBITDA but we imagine we may sell one or two assets. We're not seeing that much on the acquisitions pipeline right now that is compelling us to move more quickly.

I think if there were much better acquisition opportunities, our portfolio is extremely attractive and extremely liquid and we could absolutely transact to acquire other hotels. If we became more concerned about leverage or the overall environment, we could sell more hotels to just have more cash on hand. But right now we feel very good about the EBITDA growth profile of the assets that are in the portfolio today.

Michael Bellisario: That's helpful. And then just kind of on the same buyback topic, kind of what do you guys think from your seats the market is missing in terms of valuation.

And how do you get investors onboard that that 20% to 30%, NAV discount, you guys talk about is real and then it will close over time.

Jay Shah: Michael, I think one major catalyst side I think for HT is the reopening of the Parrot Key Resort and the Cadillac Hotel & Beach Club, these are two very big assets. That are going to be extremely productive for the portfolio as Ash mentioned in his prepared remarks, the first two quarters of the year when these two hotels are out back in 2015, these two assets produced $11.6 million of EBITDA in those first couple of quarters. We’re now repositioning these hotels up and so these are very productive assets, represent 10%, 15% of our EBITDA. And those being out will have – has probably made it more difficult for investors to see the benefits of our recycling story and the ramp up that’s embedded in our portfolio.

So, I think it also requires just some fewer puts and takes. I think we probably would have gotten there a little bit earlier without the hurricane, at least a quarter earlier. We could have been able to demonstrate some of this churn. But it takes in the public market, especially with a focused, lean company like ours, you take on $1 billion of recycling and it’s choppy and it's choppy for investors and the research community. But as you know, we have a lot of conviction in it.

We’ve bought back over 20% of the stock. We buy, as a company, we buy personally and we make sales of individual assets well above where we trade. And so, I think we're patient, we don't need to raise equity capital and so we’re patient. But we do believe that 2000 – as the year goes on, some momentum will build. As we get into the third and fourth quarter, I think people will see that 2019 and 2020 will line up for very significant growth.

As we look at this portfolio, imagine this portfolio producing $200 million, $205 million of EBITDA without any additional acquisitions. Whether that takes 18 months or 24 months, we're not sure at this point, that depends a bit on the market. But we just have to do it on a quarterly basis, show the growth and help you bridge it.

Ashish Parikh: Hey Michael, let me add to that. Just when you look at also some data points from our sales as Neil had mentioned, over the last couple of years, we sold at about 6 cap 15 times multiple that includes our New York portfolio.

So, when we look at private market values, the last two that we sold were clearly a very, very low cap rate. But when you look at what we’ve sold its really the lower quartile of our portfolio was sold for a 6 cap at 15 times. That built in New York, so I think that there is clearly a disconnect between public market and private market when it comes to our portfolio. Hopefully that helps bridge the gap when someone looks at these data points.

Operator: [Operator Instructions] We'll take our next question from Bill Crow with Raymond James.

Bill Crow: Good morning guys. Just a quick question on The Philadelphia Westin. Real good results there, I think it was all ADR are driven or mostly ADR driven. Just curious if that's just a market strength or whether you’ve kind of implemented a new asset management philosophy of that hotel? Is that something that that you work on when you acquire other hotels?

Jay Shah: This is Jay. Certainly the market did okay in the fourth quarter there, but I think the outperformance of The Philadelphia Westin was driven very much by three things in the main.

First of all, a channel mix yield management was a big focus for us and it was a big part of our business plan and thesis as went into that hotel. We reduced our reliance OTA's there very, very significantly. Replaced OTA with some consortia, have been driving a lot more direct sales and group bookings there. And have been, you know we're not prescribers of the heads and beds strategy, we really do try to optimize RevPARs in order drive the best EBITDA we can. I think some of that discipline really – or some great results in the fourth quarter and that's going to continue.

We see some pretty good ramp there. There was a lot of opportunity in that regard. Secondly, you know the hotel in order to drive preference and loyalty, we have increased service levels there without necessarily driving more cost and there’s just really encouraging operators to focus on service delivery, which we believe is going to help us drive a lot more social business on the weekends, which has been a weak point for that hotel. It has some great meeting space and has the opportunity to do great amount of social and banquet and catering there. So, really elevating the service levels, I think was a very good catch for us.

Then thirdly, we’re continuing to focus on cost controls there. This was probably the smallest opportunity at the hotel, but we were able to focus on just more efficient staffing models, and how we look at procurement and operating supplies. And how that can be right-sized and normalized and made as efficient as possible. So, I think it's really those three elements that are driving the results in the fourth quarter there. I think it's going to be something that we're going to remain focused on.

It's our business plan; I think it'll bear even more fruit in the coming year.

Bill Crow: In that hotel in particular, are you seeing any impact from the Marriott-Starwood merger we're hearing that maybe there's some negative impact on some of the Starwood assets?

Jay Shah: I think in this case you go market-by-market, portfolio-by-portfolio and it could be positive or negative. In this case, we think of it as a real positive. This becomes the Westin is the only Marriot related property in the heart of kind of the financial district of Philadelphia. The big Marriot is at the Convention Center and the airport, most of the select service properties around City Hall.

But right in the kind of the heart of the Philadelphia's Innovation District in the Comcast area, this is the only Marriot product. So, I think that there's some benefit from loyal Marriot guests now staying at our hotel. I think the other significant benefit is OTA commissions. We have moved from a much less reliance on OTAs. We thought of that as one of the big opportunities at this hotel because we consider it to be exceptionally located and a premium opportunity that didn't need to have as much OTA.

But we all need to use a little bit of OTA to move RevPAR at times and the Marriot Expedia rates are lower and they're coming down pretty quickly. We think that there may be even further Marriot cost reductions on guests stay programs and things across the next year or two. So, we feel like net-net the Marriot merger has been a positive for the Westin.

Operator: Our next question comes from Chris Woronka with Deutsche Bank.

Chris Woronka: Hey, good morning guys.

I wanted to zoom in on costs for a second, if we could. And just kind of maybe give us a little bit of a rewind in terms of how 2017 played out versus your initial expectations? Then as we look towards 2018 and understand your guidance on RevPAR margins. But what are some of the moving parts in there? Given that you don't have the union exposure, what are some of the things that could change unexpectedly in some of the markets throughout the year? Thanks.

Neil Shah: We think 2017 and 2018 are pretty similar in that you know we saw minimum wage increases in almost all of our markets in 2017 and some of that does go away in a market like Boston, not going to see another minimum wage increase this year. But in places like New York, LA and Seattle, we do get up to $15 starting next year.

So, there is going to be continued wage pressure. We're looking at our early wages going up more in the 4% to 5% range, where our salaried and managerial kind of keeping it closer to 3% along with doing more with the employees that we have. So, trying to keep our overall wage growth in that 3% to 4% type of range overall. So, all of these minimum wage increases are mandated. We don't think that the labor market shifts dramatically, it's already very tight.

I think it remains tight and that's built into our guidance.

Chris Woronka: Okay. Very good. Thanks.

Operator: It appears there are no further questions at this time.

I'd like to turn the conference back to management for any additional or closing remarks.

Neil Shah: Well, with no more questions, we would like to take a moment to thank you for your time this busy morning. As always feel free to call Jay, Ash or I with any further questions. Thank you.

Operator: This concludes today's conference.

Thank you for your participation. You may now disconnect.