Greetings, and welcome to the Pebblebrook Hotel Trust fourth quarter and year-end earnings conference call. At this time, all participants are on a listen-only mode. A question-and-answer session will follow the formal presentation. If you would like to ask a question, please press star one on your telephone keypad. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Raymond Martz, Chief Financial Officer. Thank you, sir. Please go ahead.
Thank you, Donna, and good morning, everyone. Welcome to our fourth quarter 2021 earnings call and webcast. Joining me today is Jon E. Bortz, our Chairman and Chief Executive Officer. Before we start, a reminder that many of our comments today are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our SEC filings, and future results could differ materially from those implied by our comments. Forward-looking statements that we make today are effective only as of today, February 23rd, 2022, and we undertake no duty to update them later. We'll discuss non-GAAP financial measures during today's call. We provide reconciliations of these non-GAAP financial measures on our website at pebblebrookhotels.com. While 2021 was another challenging year for the hotel industry and Pebblebrook, we made significant progress on our road to recovery.
We thank our hotel teams and operating partners for their hard work, sacrifices, and creativity over the last two years. Our portfolio continues to benefit from their tremendous efforts as we enter the recovery and growth phase following the pandemic. For 2021, our same property hotel revenues increased by over $280 million, or 65% versus 2020, with hotel EBITDA at a positive $132.1 million. This marked a tremendous improvement from 2020 when our hotel EBITDA was negative $27.5 million. Our adjusted EBITDA finished at $88.3 million, compared with negative $69.7 million in 2020. Again, considerable progress from a year ago. While we still have much work ahead, we believe we have considerable upside to come.
Adjusted FFO per share ended 2021 at a - $0.32, a substantial improvement from 2020 at - $1.46 per share. During the second half of 2021, we generated positive adjusted FFO of $0.22 per share, illustrating a trajectory of rapid improvement and growth that started this past summer. On the investment side, we are very active. We completed over $270 million of asset sales comprising two hotels in San Francisco and one in Manhattan. We invested these proceeds and more into $492 million of acquisitions across four leisure-focused resorts with significant upside opportunities. We are excited about the many operating, remerchandising, and redevelopment opportunities at all four of these properties. On the capital side, we raised more than $740 million in 2021, increasing our liquidity and acquisition capacity.
We replaced $250 million of preferred equity with less expensive preferreds, saving $1.8 million annually in preferred dividends. In addition, we extended over $1 billion of debt maturities, further enhancing our liquidity and eliminating any significant debt maturities until late 2023. At year-end 2021, we had $730 million of liquidity, including $92 million of cash on hand and nothing drawn on our $650 million unsecured credit facility. Turning briefly to our fourth quarter results, same property total revenues of $245.4 million were 29% below the comparable period in 2019, marking our best quarter versus 2019 since the pandemic. This strength was driven by continued robust demand at our resorts and further improvements in business travel, both group and transient.
Total revenues at our resorts climbed to a level 11% higher than 2019's fourth quarter, primarily due to dramatically higher room rates, which are up a whopping 43% to 2019. Our urban hotels continue to show further improvement with same property revenues down 44% in the fourth quarter versus 2019, the best performing quarter since the pandemic. Most encouraging were the trends we saw in December throughout the portfolio, despite the negative impacts of Omicron. Same property total revenues in December were down just 18% compared with December 2019, the best monthly performance since the pandemic, with same property ADR up 20% and same property hotel EBITDA down just 9% compared with December 2019.
ADR for our urban hotels recovered by the end of December 2021 to be ahead of December 2019 by 1.9%. Our monthly same property ADR exceeded the comparable month in 2019 in four of the last six months in 2021, despite the disruption caused by the Delta and Omicron variants. This highlights the increased ability of our portfolio to surpass 2019's ADR throughout 2022, earlier than we thought possible just a few months ago. We are increasingly confident we will reach 2019 hotel EBITDA levels later in 2022. These trends are encouraging. However, these improved expectations assume no additional significant waves of the pandemic. Our ADR gains in Q4 compared with Q4 2019 were impressive at many of our properties.
L'Auberge Del Mar was up 70% or $273. Marker Key West was up 53% or $179. Southernmost Beach Resort was up 48% or $177. LaPlaya Beach & Golf Resort was up 38% or $143. Each of these resorts have been renovated recently. At our new acquisitions, ADR was up 42% or $110 at Margaritaville Hollywood Beach Resort, and up more than 36% or $77 at Jekyll Island Club Resort. Even with these healthy increases in room rates and food and beverage pricing, the feedback from customer reviews has improved at our properties, indicating a favorable price to value relationship. Since the start of 2021, our portfolio-wide Tripadvisor rankings have improved by an average of eight spots.
This demonstrates that despite higher prices, our guests appreciate even more the enhanced quality and experiences from our renovations and the excellent service that our hotel-level employees are providing. We thank our hotel teams and asset managers for this progress in what has been a challenging labor environment. In the fourth quarter, our best performing properties included two of our recent acquisitions, Margaritaville Hollywood Beach Resort, which increased hotel EBITDA by over 225% versus 2019, and Jekyll Island Club Resort increased hotel EBITDA by more than 145%. Our recently transformed San Diego Mission Bay Resort and the recently renovated L'Auberge Del Mar, both more than doubled their EBITDA compared with fourth quarter 2019. In terms of markets, we continue to see healthy recoveries in Los Angeles, San Diego, Boston, and Philly.
Our weakest markets continue to be San Francisco, Washington, D.C., Seattle, and Chicago. These trends are continuing into 2022. On the operating expense side, despite the cost pressures most businesses are experiencing, we remain encouraged that our new operating models have made our hotels more efficient and more profitable as we climb back to pre-pandemic levels of demand and revenues. Labor challenges have significantly receded, and many of our properties are now well situated from a staffing perspective. The high quality nature of our properties affords the staff at our properties the ability to earn market-leading wages and benefits, which gives our teams the ability to attract the best quality associates. The combination of cross-training, technology, and clustering of our management teams in markets with multiple properties managed by the same operator has provided significant permanent cost savings on an ongoing basis.
With an ability to raise prices, we feel like we are in good shape to offset future inflationary cost increases. We remain confident that we have eliminated 100-200 basis points of expenses at our hotels from our wide array of operating improvements in our operating model. Shifting to Q1 2022 operating and demand trends, we estimate that the Omicron variant significantly reduced revenues in January and February, both due to group and transit cancellations, and a material slowdown in new bookings, especially in January and early February, and especially in business travel. In late December, the J.P. Morgan Healthcare Conference in San Francisco, which was to be held in early January, was unfortunately canceled and went virtual, costing our portfolio over $6 million in total revenues.
Unfortunately, the vast majority of citywides and group meetings scheduled in Q1 that were canceled throughout our portfolio have been or are rebooking into Q2 or later in 2022, and have done so at higher rates. This indicates corporations and other businesses are in desire and need to hold their meetings in person. January same-property total RevPAR was down an estimated 43.8% versus January 2019. This was a very challenging month. However, we are encouraged about the rapid improvement we're seeing for February and March. We think same-property total RevPAR for Q1 could come within one or two points of Q4 as compared to the same quarter in 2019, despite the significant impact from Omicron in January and February.
We currently expect March to return to the recovery trajectory that we were experiencing before Omicron, and we're already seeing a significant acceleration in business travel bookings for March and beyond. This is expected to result in Q1 same-property total revenue or RevPAR down 30%-35% to 2019, with same-property hotel EBITDA between $25 million and $35 million and adjusted EBITDA between $14 million and $19 million. We are forecasting a Q1 adjusted FFO per diluted share loss of $0.11-$0.15, which compares favorably to 2021's Q4 adjusted FFO of -$0.42 per share. We expect the first quarter to be the only negative FFO quarter for the year as we expect to return to profitability again in Q2 and for the balance of 2022.
This is the first time since the pandemic that we're confident enough to provide a quarterly outlook, indicating our increased comfort level with the visibility and stability in near term operating trends. Of course, these assumptions assume no additional outbreaks from the pandemic. Please note that starting in Q1, we will be adding back the amortization of non-cash stock compensation to both our adjusted EBITDA and adjusted FFO results for the current year and for the comparable period last year. We are making this change since most of the hotel REITs and all of the hotel C corps report their EBITDA and FFO in this manner. This change will make us more comparable with industry practice. Shifting to our capital improvement program, during 2021, we completed $83.8 million in capital investments and redevelopment projects.
This includes six significant renovation and remerchandising projects, representing $53.4 million of the capital we invested in 2021. Since 2018, we've invested approximately $350 million into redevelopment and transformation projects at 25 different properties. We expect these projects to generate 10% or better returns as demand returns and performance stabilizes over the next two to three years. For 2022, we have $100 million-$120 million of capital investments planned, of which $80 million accounts for the major redevelopments and smaller ROI projects. In 2022, we'll have eight significant renovations and redevelopment projects either underway or starting later this year, including the transformations of Hotel Vitale to 1 Hotel San Francisco, Grafton on Sunset to Hotel Ziggy, our next Unofficial Z Collection hotel, and Solamar to Margaritaville Hotel San Diego Gaslamp Quarter.
Major repositions at our newly acquired Jekyll Island Club Resort and Estancia La Jolla Hotel & Spa in La Jolla will start later this year, as will long overdue major renovations and upgrading of the Hilton San Diego Gaslamp Quarter, and the second and final phase of repositioning Viceroy Santa Monica. Finally, whenever governmental approvals come through, the transformation of Paradise Point Resort & Spa to Paradise Point in Margaritaville Island Resort, San Diego. We're very excited about these projects and expect they will drive significant EBITDA growth and value creation. With that, I would now like to turn the call over to Jon. Jon?
Thanks, Ray. I'm gonna try to be reasonably brief and pointed so that we can get to the Q&A. Demand has firmed since the January pullback. Business travel, which took a break in January from a material recovery in the fourth quarter, is noticeably improving. Citywide and larger business group meetings are happening. Group lead volume, site tours, and bookings have increased substantially in the last few weeks. Most groups that canceled for January and February have rebooked and done so at higher rates. February is turning out to be much better than we expected just a few weeks ago, particularly the second half of the month. We expect same -property revenues to be down between 25% and 28% versus 2019. Pickup in March has accelerated in just the last two weeks.
Both holiday weekends in February turned out well, and Super Bowl in L.A. for us added $3 million-$4 million as we achieved around 90% occupancy of our 1,786 West L.A. rooms at a rate of around $800 per night for four nights. Our revenue management teams did a terrific job. We're seeing a significant increase in business transient and group travel as Omicron recedes and masking and vaccine mandates are relaxed or eliminated. We believe there is significant pent-up business demand to aid a continuing robust level of leisure demand, and there is currently little to no price sensitivity from either leisure or business customers. We're very optimistic about an accelerating recovery in business travel over the next three to four months, and we're already seeing it for March and April.
We're extremely excited about the potential growth in occupancy and rate, in particular, over the next few years. There will be limited new supply over the next three to four years in our industry, particularly in cities and resort markets, and that will provide a great long runway for occupancy and rate growth. Hotel starts are at low levels and will be for at least another year. Rooms under construction are declining, and development costs have climbed dramatically in the last two years. Any large new hotel development, like urban high-rise hotels or resorts, are now taking 36-42 months to complete from shovel in the ground. Replacement costs have climbed dramatically from pre-pandemic levels, up 25%-35% and 20%+ in 2021 alone. Urban and resort land costs have also climbed significantly.
After a great deal of research and effort, we estimate that our portfolio's replacement costs have increased to between $700,000-$750,000 per key. When we look at performance in our portfolio, our resorts continue to lead the way. Our resorts, particularly those in the Southeast, are on pace to far exceed their EBITDA in 2019. For Q4, those Southeast resorts exceeded Q4 2019 by $8 million or 61%. All 11 resorts combined are on pace to achieve a trailing twelve-month same-property EBITDA by the end of Q1 of approximately $150 million. That's up $32 million or 27% from 2019.
Combined EBITDA from all 11 resorts in Q4 exceeded Q4 2019 by $11.2 million or 54%, with ADR up $109 or 43%, and RevPAR climbing $37 higher or 20%. We continue to be very focused on taking advantage of pricing power and a lack of pricing resistance. Not just for rooms, but for F&B, banquets and catering, parking, resort fees, and service and administrative charges. This will help us get back to 2019 bottom line numbers sooner, though we clearly still have a ways to go. July 2021 was the first month we exceeded 2019 rates. Q4 2021 was the first quarter we exceeded 2019 rates.
Now we're increasingly confident 2022 will be the first full year we'll exceed 2019 rates, even as we regain occupancy from business travel throughout the year. In Q1, January is estimated to have beaten 2019 same-property ADR by over $25 and over 10%. February ADR is on track to exceed 2019 by approximately $50 or 20%, with about $16 or 7 points of it due to Super Bowl. March is looking like it could also exceed 2019 by 10% or more. Our acquisitions have far exceeded our underwriting, and the annualized 2021 returns were terrific. A 7.2% NOI yield for Margaritaville, an 8% NOI yield for Jekyll Island Club Resort, and 3.4% for Estancia La Jolla, which we acquired on December 1.
When we look at the trailing twelve months through Q1 this year, we're forecasting Margaritaville at 8.4%, Jekyll at 8%, and Estancia at 4.6%. This is all before any physical improvements, but it does include benefits from operating changes we've already implemented with our operators. As Ray said, we've invested almost $350 million in transformational redevelopments and major renovations in 24 properties since 2018, including 16 properties acquired through the LaSalle transaction in late 2018. This is a big deal and was a lot of work. The increased performance from these projects will substantially increase our performance over the next few years, and we're already seeing it at our resorts where we've seen demand recover.
In addition to these major projects, we also have numerous smaller ROI projects throughout the portfolio, such as converting the pool on the rooftop of Revere in Boston to additional indoor-outdoor event space and adding a resort pool to Chaminade Resort in the Santa Cruz Mountains to continue the transformation of this former conference center to a more amenity-focused leisure and group destination. We're adding a new leased restaurant at Mondrian in West Hollywood, completing the property's recent $19.5 million redevelopment to return it to its former glory on Sunset Boulevard. We're undertaking a comprehensive rooms renovation at Viceroy Santa Monica to complete a $115,000 per key or $19.5 million repositioning of this iconic luxury urban resort. We're also adding five keys at Le Méridien Delfina Santa Monica, creating them out of unused storage rooms and offices.
There are two major multi-year projects we've been working on now for several years, and both involve the master planning of significant unused acreage at former conference centers, Skamania Lodge in the Columbia River Gorge and Chaminade Resort in Santa Cruz. With the incredible success of the outdoor pavilion and six tree houses we added at Skamania in the last five years, and the trend of consumers looking for increasingly experiential lodging alternatives, we believe we have the potential to add as much as a couple hundred units of alternative lodging at both properties, including tree houses, glamping, spaces for luxury RVs, cabins, villas, farmhouses, and additional outdoor activities.
This year at Skamania, as the first step in this master plan, with a $10 million-$12 million investment, we expect to commence adding three more tree houses, five luxury glamping units, a multi-bedroom villa, and a large outdoor pavilion that will host additional business and social events adjacent to our recently completed and already very popular 18-hole putting course. I'm sure you can tell we're feeling some good vibrations. Now we'd like to move to the Q&A portion of our call. Donna, you may now proceed.
Thank you. Ladies and gentlemen, the floor is now open for questions. If you would like to ask a question, please press star one on your telephone keypad at this time. A confirmation tone will indicate your line is in the question queue. You may press star two if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. In the interest of time, we do ask that you please limit yourself to one question and one follow-up. Again, that is star one to register a question at this time. Our first question today is coming from Greg Miller of Truist. Please go ahead.
Thanks. Good morning.
Yes.
I'd like to start off asking about San Francisco as investors remain focused on your exposure there. Jon, I learned yesterday evening that you're with Park Hotels CEO Tom Baltimore, meeting with city leaders. Could you share your latest views on the hotel market and your portfolio there?
Sure. Hey, thanks, Greg. Yeah, Tom Baltimore and I went out to San Francisco in mid-December for a meeting arranged by the California Hotel & Lodging Association. We met with the mayor, and we met with the chief of police, and we met with the head of economic development for San Francisco, had a lot of conversations both before and after that.
I went into the meeting extremely skeptical, with a concern that, you know, the focus, the sort of rejuvenated focus by the mayor, related more to the issue of the smash and grabs that took place, the sort of mass smash and grabs that took place in Union Square in early December, and concerned that they were not really focused on the issues that had been increasing over really the last five years or so related to the quality of life on the streets in San Francisco. I would say that both Tom and I, but I won't speak for Tom, but I think we walked away, all of us who were at the meeting thinking, there.
I guess maybe a little like AA, Alcoholics Anonymous, that the first step in solving your problem is recognizing that you have a problem. I think we walked away not only thinking that they'd made the first step and that the mayor was highly focused on fixing San Francisco and turning around the deterioration that had taken place in the last five years in the environment there, but that they understood the issues and had the courage to take some bold steps. I was particularly impressed that I would say the mayor kind of said she'd had enough, and I think she got that message, frankly, from the local population, where people were fed up and had enough.
You know, the city was perhaps could be defined as maybe a little like Gotham City in the Batman comics and movies. Two weeks later, she came out and announced the state of emergency for the Tenderloin District in order to sort of have a freer set of hands to make changes both from mental health assistance to deal with the drug issues and to deal with the crime issues in policing so that her hands weren't tied by sort of local bureaucratic administrative rules. Two weeks later, she came out with a supplemental budget request for additional police, which she had made in the original budget, but which had been reduced by the Board of Supervisors.
I think she gets it, and I think the police chief, who is short-handed, certainly gets it and has become even more active as a result of this state of emergency she announced in the Tenderloin District. I think the politics are changing in the market, in the city. I mean, people really have had enough. They're expressing that. I think that hopefully leads to approval of the additional funding for additional police by the Board of Supervisors, which is a vote, I think, that comes up in the next few weeks. Certainly we're advocating for that. The business community is, as well as the local population. You've seen a change in sort of the politics, the beginning of a change in the politics.
You had three progressive members of the San Francisco Board of Education who were recalled in a vote in San Francisco. Very, very encouraging. Then, there were enough signatures gained to put the district attorney to vote on a recall in June. We're very encouraged by the change of attitude. There's significant dollars out there that are in the budget for mental health, for homelessness. Additional dollars for policing will help. It's gonna take a while to get back to where we were. It took a while for the city to get to where it is right now. We think the underlying economy is so strong. I mean, there were almost 100 IPOs. I think there were 95 IPOs through direct listings, IPOs or SPACs in the Bay Area last year.
10% of the IPOs in the country were in the Bay Area. I think 40%-50% of the venture capital money went into the Bay Area, including San Francisco last year. The continuing growth of the technology industries and all the industries that are incorporating technology and the ultimate beauty of the city and the weather, really, as I said last quarter, make us feel like it's a great place to be long term, provided they fix their issues which we're encouraged about the direction at this point and the first steps in that direction.
I wouldn't bet against the city, and I think we feel very good about the recovery there, which has started to happen in a more robust way, particularly as businesses go back to the office in the market and particularly as they've eliminated most of the restrictions from COVID in the marketplace. We're pretty encouraged, but it's going to take a while, and San Francisco will be a slower-to-recover market, as will a few of our other markets like Seattle and Chicago and even D.C., which of course has the strength of the federal government here, who in many cases has yet to come back to the office. Hopefully that helps, Greg.
Thanks, Jon. It does. I think it was very helpful for all of us to get an update. Switching gears on my follow-up question, I thought I'd ask you about the margin discussion that was in your prepared remarks and related to ADR growth. The significant room rate growth that you have spoken to for several quarters is clearly materializing. I did sense from the prepared remarks that the 100-200 basis point margin gains above pre-pandemic levels appear to be driven more from operating savings, not from the profit flow from room rate gains. Maybe you could correct me if I'm wrong.
For those of us who are trying to model the puts and takes, could you provide your latest insights in how we should balance out top line growth, particularly from room rates, with your long-term profit expectations?
Sure. It's probably one of the most complicated questions there is because, of course, the whole idea of talking about margins compared to 2019, it's a moving target, right? With a lot of variables that are moving around, including inflationary increases in costs, increases in wages, and then the pricing increases that we've been able to take in all different products and services, including in room rates at this point. I think what we're trying to get across as it relates to costs, because none of us know what the future is going to bring and what kind of price increases we will ultimately achieve over the next few years and what the cost increases are going to be over that period of time.
What we do know is we took, I think, between 100 and 200 basis points of cost permanently out of the operating models of our hotels. What does that mean? It means, you know, the clustering that we did probably took 50 basis points or more, that sort of collecting the executive teams and in some cases even middle management across two or more properties managed by the same operator in a market have had big reductions.
I mean, one example in Boston, we've clustered, if you will, The Westin Copley Place and the W in that market under one executive team, and in many cases, one set of middle managers now, and we believe it took out $1 million of costs permanently, so long as we own the properties, out of operating those two properties on a combined basis. We have that throughout our portfolio, some of which we started doing pre-pandemic, but the annualized nature of those cost reductions had not yet been fully achieved. We've gone deeper into the executive teams because where we started was sort of GMs and maybe directors of sales and marketing.
We've moved to revenue management, engineering, finance, accounting, HR, food and beverage in many of these markets. It's allowed us to hire better quality people, and it's allowed us to take costs permanently out of the operating structure. Cross-training that we've been doing within the portfolio, which increases the skills of our staff, allows them to climb the career ladder, make more money over time, and allows us to be more efficient in the staff that we hire at any particular moment or that we need. Particularly in seasonally slow periods where we have a much greater ability to flex now because we have more staff that's cross-trained, including managers in the portfolio.
You take the combination of that and you include the benefits of technology, the removal of a lot of collateral materials, the elimination of services that we've now looked back on where we got fat when things were good and looked at them and said, "You know what? There wasn't an ROI on this expenditure." We permanently eliminated it. That's what we mean by improving the operating model by 100-200 basis points of revenues. It's cost taken out of the system. Where margins go, gosh, in any given year, I mean, I can't imagine how hard it is for you to model. It's very hard for us because it's very hard for us. I would say, obviously, we know that that rate flows better than occupancy
I mean, we think rate growth maybe at 75% and occupancy growth at about 65% or even 60%, depending upon the property. Frankly, bigger rate growth even more, right? If a $100 increase as a percent at the same percentage is way more valuable than the same percentage off a rate that's much lower, because it's just able to absorb more cost increases. We've been modeling on a sequential basis. We've talked about this in the last couple of quarters. You could see in January where we went negative in hotel EBITDA that you know, there's a certain level of fixed costs, and we've been bringing back costs as we've been anticipating this acceleration in the recovery on a post-Omicron and Delta basis.
We've been bringing back those additional sales and banquet and catering people and managers and conference service managers within the portfolio and that has a negative impact on negative revenues like January, but will ultimately have a very positive impact on our ability to drive revenues higher throughout the portfolio and ultimately better bottom line. I can't really help you with sort of overall margins as we move forward. I do think if this is a reasonably normal length of macro economic growth cycle, we will peak at both higher margins and more importantly, higher profit per key at the peak of this next cycle versus where we were in the last cycle, which also peaked higher than the cycle before, which also peaked higher than the cycle before that.
Yeah. Greg, just to add to Jon's comment, our focus is really more as you think about your modeling, not on the margin side, but the hotel EBITDA side. How do we grow EBITDA? Sure, we're confident we can eliminate 100-200 basis points from our operating model, but that's from a bottom-up buildup approach versus a top-down approach. We really look at it more in the hotel EBITDA. How do we expand that? The margins are a function of the revenues and expenses. That's not what's driving it. It's how do we you know grow that? How do we remerchandise the underutilized space? What can we do to add additional rooms or other restaurants in there?
Because that ultimately grows EBITDA, which is ultimately what's the biggest focus for us, not the ultimate margin that's a result of that.
Those are all very fair points. I appreciate the detailed responses, especially on these complex topics. Thanks.
Hey, thanks, Greg.
Thank you. Our next question is coming from Bill Crow of Raymond James. Please go ahead.
Good morning, guys. Got one for Ray and one for Tom, assuming Tom's in the room. Ray, Jon earlier brought up the topic of resort fees, and I'm just curious if you could tell us the total of resort fee income in 2021, how that compared to 2019, how you kind of think about the growth in resort fees going forward. I guess how important is resort fees and the growth of resort fees and the margins of growth fees to you achieving that goal of 100-200 basis points of higher margins this cycle?
The anything resort-related to resort or guest amenity fees has nothing to do with the 100-200 basis points. That's separate. Overall, it's you know, it's an important part of overall the revenues. But again, we're a little bit different as you look at a lot of our properties, we have a host of other different amenities and services and that, so that's part of what we look at the guest amenity fees and driving all, you know, all that side, and there are expenses certainly associated with that as well. It's a host of different areas there. But we don't necessarily get into the specific details of providing that.
I think what's a positive is we're seeing the brands become more you know receptive to this. Between Marriott and others, they're being more open to having this. This is becoming more standard throughout the industry, which I think will be a good sign as we enter this new cycle here.
It's become more accepted, perhaps grudgingly, but certainly more accepted by the customer. The customer is getting value. I think. Look, we can't speak for others, but at our properties, you know, we try to create these in a way where there's 4x or 5x worth of value for every dollar of that guest amenity fee, whether it's in a resort market or it's an urban property or sort of an urban resort property, like properties we have in Santa Monica and in West L.A., where the pool complex is an important part of the amenities being provided.
Jon, were resort fees 20% of your total revenue last year? Or do you have a number and maybe a comparison to 2019?
No. We don't split out those revenues just like we don't split out a lot of the different revenues. It's an important component, but it is a relatively small percentage of overall revenues. I think, Bill, it may be in the 3%-4% range of revenues.
Okay. Tom, one of the comments we get from investors is that there's pretty good clarity on what's going on in Sun Belt resort market trades, but very little activity so far in urban markets. Just wondering, you know, what you're seeing from a prospective buyer perspective, I guess, and you being a prospective seller of some urban assets and you know, what's going on with valuations and interest level on the more typical urban assets side.
Yeah. Well, thank you, Bill, and good morning. I think clearly there is becoming a transition and a pivot from the investor universe where obviously it was all about leisure destinations and resorts over the course of the last 12-18 months. The conversations that I'm having directly with investors and with brokers is that that still remains, you know, a very critical piece for people, but obviously you're looking at kind of COVID premium pricing for those assets. I think people are looking at where are the markets' supply demand dynamics in terms of the urban markets where we can get in. There's kind of been, I don't want to say it's necessarily a contrarian shift, but there's a lot of capital out there that's chasing deals.
They're looking at it for where can they get the best risk-adjusted returns, and they're turning to the cities because I think that they think that maybe the worst is behind us and there's a little more optimism. Maybe it's not called distress, but there's certainly some opportunity in terms of a basis play from where the urban markets have been to where the potential upside is now. We're seeing from a number of the private equity funds and a number of other high net worths that transition to urban. There's not enough data points, so I would say the conviction level is emerging. But we'll see more and more what I'll say pipeline in the urban markets coming through over the course of the year.
Bill, where the urban markets are a little different than the resort and Sun Belt markets are, the urban markets are still a challenge to obtain debt. It is still much more difficult in a lot of these urban CBD locations to get a deep lending pool for helping the transaction. Look, there's a lot of capital out there, so a lot of these PE buyers who maybe could be buying with all cash, that's one thing, but if you need financing to get the transaction, it certainly works in the resort and Sun Belt states. Plenty of lenders out there to provide bids there at reasonable spreads.
Once you start getting to urban side, it thins out pretty quickly and you're left with a lot of debt funds, and those terms are more onerous, and it's a lot more expensive.
Great. Appreciate the color, guys. Thanks.
Thanks, Bill.
Thank you. Our next question is coming from Smedes Rose of Citigroup. Please go ahead.
Hi. Thanks. I just wanted to ask you what you are seeing and doing on the housekeeping side, because I think that's a fairly large piece of expenses. Maybe you could talk about what you're doing at non-branded hotels and kind of what the message has been at branded hotels. It seems to me, like you said, a little bit inconsistent on the branded side. I'm just wondering if you're seeing that or what you're hearing on that side.
Yeah. I think generally, first of all, I think at our higher end properties, any of the luxury properties, any of the resorts that have pretty healthy rates, we have full services back. In fact, they've been back for quite a bit. A customer who's paying, you know, $500 or $800 or $1,000 or more is looking for that service while they're there, and we're providing it. Things like, you know, interestingly, people talked about the demise of room service. Room service came back with the pandemic at our properties. Now it came back in many cases in a different form. It was a little bit more like a typical delivery.
Although, again, even at the luxury properties like LaPlaya, we brought back. In fact, I don't know that we ever eliminated, you know, regular room service. What we've been trying to do, Smedes, is gear the services for what the customer wants and what they're willing to pay for. I think the brands have some standards. The brands are not all the same. Some have taken an opt-in approach for service during your stay. Some have taken an opt-out approach. Sometimes it varies by city and market as well. I think it is not surprising. It is perhaps a little bit more confusing when you're looking at the brand properties.
I think in our portfolio, I think we've done a really good job of gearing the service towards the customer desires, and I think it's evidenced by by the Tripadvisor reviews that we get and the fact that pretty consistently across our portfolio, I think Ray mentioned, you know, we've climbed eight spots in our portfolio, which is pretty significant on average, with many properties climbing significantly more than that. It is a little bit all over the board. Again, I think when we think back to the earlier question of costs and margins, if you will, you know, we've not been under the impression that on an exhausted basis, those services wouldn't come back. We fully expected them to come back in better quality properties.
I think in sort of the midscale and down, I'm not sure it does come back. We don't really have properties in those categories. In sort of between luxury and midscale, so you get to upscale or upper upscale, I think it's gonna vary by the market, by rate, and by the property.
Okay, that was it from us. Thank you. Appreciate it.
All right. Thanks, Smedes.
Thanks, Smedes.
Thank you. Our next question is coming from Michael Bellisario of Baird. Please go ahead.
Thanks. Good morning, everyone.
Morning.
I guess sort of two-part question. One, I assume your $30-$35 per share NAV, that still holds, but my kind of real question and follow-up to that is, hey, relative to your replacement cost estimate, how do you triangulate that $700,000-$750,000 key number versus what's implied by your, maybe estimate, call it mid- to high-500s? Kind of really what I'm asking is what does replacement cost tell you, and then how does that drive your view of value?
Sure. So Mike, as it relates to the NAV range, yes, you'll notice we didn't change it. We do think it's probably a little light right now, particularly on the leisure-oriented properties, given not only where the cash flows have moved, but where the transaction market has continued to move and follow that cash flow. But two, we'd like to get a little bit more, to use your word, triangulation, a little more data on the urban market transactions. Of course, we've had a few on our side, but we think the market has moved in the last three to four months.
Particularly, we think it'll move even further over the next couple of months as we see this, what we think will be a fairly rapid acceleration in the recovery of business travel in particular over the next couple of months. So, from that perspective, I think if anything, we might be a little light, but we hope we'll be able to feel comfortable updating it next quarter. As it relates to what does the replacement cost mean, it sort of means what it. The way we think about it is it has a lot to do with the protection from new supply in a particular market. Now, keep in mind, people don't have to provide the same properties in that market.
If you're providing select service into an urban market, it's not relevant to giving you protection on the full service side because those rooms will still be competitive. On the other hand, the fact that these costs have gone up by 25%-35%, interestingly, in some markets, the cost of select service is now equivalent to where full service was pre-pandemic. I think we think of it as a big positive for the space, both in terms of protection of new supply and also ultimately the way people look at values in the transaction market compared to, you know, what can I buy something for on a price per pound basis versus what does it cost to recreate that product if it's worthy of being recreated.
That's helpful. Thank you.
Thanks, Mike.
Thank you. Our next question is coming from Floris van Dijkum of Compass Point. Please go ahead.
Thanks for taking my question, guys. Just getting back on the NAV question a little bit more. Clearly there, you know, there's been a lot more comfort from investors on the resort side and I guess from some private equity guys on the select service side. How sustainable is the rise in resort values in your view, and what can we expect, you know, to happen to the growth in values there. Is that going to plateau in your view. Or it will continue to go up if you're able to continue to push the rates there?
I mean, I think there's so many things going on, right, Floris? I mean, just even by the nature of your question, there's a lot of variables that are moving around. I mean, we'll give you our perspective, but again, it's only our perspective. It certainly factors into how we view values and, you know, risk return, risk-adjusted return perspective, and how that drives what we buy and what we sell. I think from an underlying operating perspective, I think we feel that certainly a significant part of the growth in and recovery in cash flows in resorts and leisure-focused properties, some of it is a structural repricing. Pricing doesn't, outside of economic recessions, it doesn't often turn down.
Often in economic recessions, if it does turn down, it doesn't turn down much. There are some unique variables here, and it's really hard to measure some of the compression that's happening because of a lack of alternatives or alternatives that have been eliminated for some period of time. There have been a lot of gains made in the leisure-focused side, the resort side, related to. You look at our properties in terms of quality, I mean, there's I think we said a third of our gains related to rate have been share gain in rate. That's permanent. That's a reflection of the investments that we've made over the last four years in the resorts. Every one of these resorts has been you know, materially renovated or, in many cases, repositioned up within the portfolio.
For us, we think most of it sticks, not all of it. We still have inflation, we still have growth that's happening. When we look at this year, we didn't go into the year with a lot of sort of past generational rates on the books, which caused the rates last year to be sort of below market, if you will, sort of like retail would be. We had non-market rates on the books, going into the year, and that really. Our rates would have been higher but for that, given what the customers have been willing to pay. It's not the case for this year.
We didn't have a lot of business on the books, but perhaps for a couple of properties we bought, like Jekyll and like Estancia, where there was significant group business on the books and even transient business on the books at sort of prior lower rates. We'll roll through that over the course of the year, and we'll still have significant increases moving into 2023 because we've brought those rates, if you will, up to market. I think in the overall market in general, I think values are gonna follow cash flow. I think what's happened is your cap rates are higher than they were pre-pandemic on those cash flows. And they can be.
You know, if these luxury resorts were trading at 5%-5.5% caps pre-pandemic on forward numbers or even on trailing numbers, you're probably looking at something that's more in the 6.5%-7.5% range in the current market. I think that's a reflection of sort of risk associated with some of this rate or perhaps the growth rate beyond 2022, maybe to be more muted than some of the other you know, segments of properties. I don't know. That's sort of the way we've been thinking about it. I think the market probably seems to be thinking about it the same way.
As Ray said, certainly as it relates to private capital, some of the values get influenced by the availability of financing, which is more heavily weighted to properties with cash flow versus those that haven't seen their cash flows recover as significantly.
Thanks, Jon. Maybe one quick follow-up. Does that mean that you're gonna be allocating more capital towards resorts? You have been doing that and pivot more away from the urban markets? Or will you know, try to, you know, be sort of counter and potentially do the opposite? How do you think about that?
We've simplified sort of that thinking and because we're purely a risk, a return adjusted investor. You know, we have our views of what risks are and what returns should be for those risks by type of property, by market, but we focus on individual properties. No different than when people look to buy stocks, the values of those underlying assets have an impact on what we ultimately buy. Let's wait and see how other people value those risks and returns. Do they have similar views of those risks, the returns that are required?
As it relates to us, Floris, you know, we've said this consistently. We tend to be more focused on properties where we can change the property, where we can upgrade it, we can reposition it, both operationally and physically and create value beyond sort of looking at things like a commodity, which are not the kind of assets we buy anyway.
Thanks, Jon. I appreciate it.
Thanks, Floris.
Thank you. Our next question is coming from Shaun Kelley of Bank of America. Please go ahead.
Hey, everyone. Thanks for putting me on. Yeah, Ray, Jon, I just want to ask a little bit about what you're seeing on business rates versus leisure rates. I think your comments have been pretty clear on the broad rate environment, what you've been able to get there. But can you just give us any color there about like, you know, what you're seeing maybe on forward pricing, the one relative to the other, and how strong is the mix positive as you typically get business rate back now? Or, you know, is it more. I mean, I think we know it's about filling in the midweek gaps, but sort of trying to figure out what that pricing does to overall mix. Thanks.
Yeah, it's a really good question, and it's all a moving target, right? What we've been seeing, Shaun, is we've and we talked about this a little bit last quarter and the quarter before that. We're seeing a recovery in all rates, all segments, whether it's a business transient, whether it's group, whether it's leisure. When we look at our urban properties, we've seen rates continue to recover and I think as we might have mentioned in the call, but to reiterate, you know, when we got to December, which gets influenced by the last week of the year, but was a really strong two weeks of business travel, you know, we saw our weekly urban rates end up at almost 2% higher than December 2019.
That was coming from in October, which is a pretty good business month as well, even better than December, which was down 11.5%. When we look at just weekday, again, we're trying to isolate the best we can from the sort of the anecdotal stuff and look at the data. When we look at weekday ADR for our urban properties, it went from down 15.7% in October to down 4.6% in December. Now again, you know, there are weekdays during the holiday week, and that helps, but it's pretty continuous. When we look at these by quarter, every quarter has improved from a rate perspective in each of its markets, whether it's San Francisco or it's South Florida, they're just doing so at a different pace.
All the rates are climbing at this point, which is why we're so bullish, if you will, on where we think pricing is going. Frankly, we've been saying this for over a year now as it relates to pricing. We have even more confidence today as we see business transient pricing rise, as we see group get rebooked and get booked at higher rates than in 2019 and then versus last year. We continue to see leisure rates increase as well.
That's perfect, Jon. Then the follow-up would be sort of same ilk over President's Day weekend. I mean, any signs of, let's call it, rate fatigue on the part of the consumer? I think your numbers have continued to be very consistently strong, but just anything at the very margin that suggests that, you know, wherever you're pushing isn't sticking or that, you know, the service levels are, you know, required to reach those rates or are changing materially.
Just sort of want to get a sense of the vibe out there, you know, because we know these rate increases have been substantial and obviously when you're getting the numbers that you talked about, you know, I mean, obviously it was Super Bowl, but you know, the $800 number sticks in my head. There is a different customer in the building. They're expecting a different level of service. Just, you know, yeah, what's your thought there coming out of President's Day?
Yeah, I mean, President's Day was a blowout from really all perspectives. I mean, rate was up significantly. I mean, we, you know, published the weekly numbers. The weekend numbers were huge. It came with occupancy. If you check back in those numbers, I mean, we saw if there's fatigue, Shaun, there's still enough of the well-off willing to spend customer to fill our hotels that are charging those rates. I think we ran 69.9% for the whole portfolio over Saturday night. I think we ran in the 60s for both Friday and Sunday night. Then the rates were, you know, pretty strong.
They were not as strong as New Year's, and pre-President's Day isn't traditionally as strong as well, but they were really healthy, particularly when you consider that sort of Omicron was still an impact on demand, as was Valentine's Day, and then still being impacted by Omicron on demand the weekend before.
Which also means, Shaun, if you haven't booked spring break yet, you really should. I have a bunch of resorts I'd love to host you at.
I don't get a lot right in my life, but I booked spring break 14 months ago because I saw this coming.
Well, you're one of those below market customers that we'll be just happy if you cancel.
Yeah, exactly. You're waiting for me to cancel. I get it. Thank you, guys.
Thank you. Our next question is coming from Rich Hightower of Evercore ISI. Please go ahead.
Hey, good morning, guys. Thanks for squeezing me in here.
Morning, Rich.
Just a quick one on the guidance, and I commend you guys for putting a stake in the ground, at least in terms of the first quarter. You know, just given. If I look at adjusted EBITDA, you know, there's a $5 million range from top to bottom, you know, the small dollar amount, but large in percentage terms. If I think we've got, you know, five or six weeks left in the quarter here, what factors would cause you to, you know, hit the low end versus the high -end, or even materially underperform or materially outperform the range that you've given? Just trying to understand the landscape that we're all sort of, you know, playing on here.
Yeah. It's a really good question. I would say from a, you know, as we talk to our property teams, it's really hard for them to manage the business right now because it's moving so much. I mean, you know, you go from a period where we ran 33% or 34% in January to running close to 50% in February and maybe in the upper 50s to 60% in March. You get these weeks and weekends that are up and down pretty dramatically, way different than pre-pandemic. There's a lot of things going on. We're adding staff back at our properties. We may or may not be able to hire those people when we think we're going to hire them, so it impacts our costs.
We don't know how much spend is going to be. We've got a lot of groups. We don't know how much they're going to spend, how much more they're going to spend, how many people call out for COVID, how much overtime we have to run. It's a very difficult environment to forecast the overall business. I mean, revenues are hard enough. Expenses are even harder right now. We're doing our best to estimate what we think flow is going to be, and it sort of goes back to the comment, Rich, I made earlier about I can't imagine how hard it. It's even harder for you all, and we know that's incredibly hard because it's really hard for us right now to forecast. Because there are just so many moving pieces, and unpredictable pieces, even on a weekly basis.
We're doing our best. We took a shot at outlook. We gave a wide range just because we have so many variables that are moving around. Honestly, we've never been through a pandemic before, so we don't have any history to look back on.
Okay. Either way, that's helpful. Thank you.
Yep.
Thank you. Our next question is coming from Anthony Powell of Barclays. Please go ahead.
Hi, guys. This is Allison on here for Anthony.
Oh.
You talked about urban transaction values and Sunbelt and resort. What are you seeing regarding trends for urban hotels in the Sunbelt? We've seen more transactions in markets like Austin and you previously were in Atlanta. Could you build up more exposure here this year? Thanks.
Yeah. I mean, listen, the Sun Belt is certainly the flavor of the day. I mean, I think when you look at some of the demographics and, you know, certainly the headlines, I think that people have looked at markets like Charleston, like Savannah, like Austin. Certainly a lot of that investment activity. I think they're also, you know, you also kind of follow what's happened just in terms of easing of restrictions and flexibility and businesses are open from that perspective. I think they'll continue to be an attraction to those markets, but I also think that there's probably a feeling of is there a maxing out of those markets.
Therefore, I think there's going to be a pivoting towards maybe some of the more traditional markets or other markets, you know, in the Midwest or in the Northeast or on the West Coast, where, as we said before, as it relates to replacement costs, maybe there's kind of a better feeling as it relates to a discount to replacement cost as opposed to potentially paying off in those markets given how competitive it's been. I think just so you understand how we think about it, I mean, the Sunbelt markets are certainly part of the group of markets that we're evaluating and looking at assets to potentially purchase. Traditionally, the challenge of some of those markets is that there just aren't any supply constraints in those markets.
While you have continuing population migration and business migration into the Sunbelt, which has been going on for, you know, over a hundred years at this point, the challenge has always been that values don't rise as much in those markets and don't have the potential to go up as much because supply more quickly traditionally has come into those markets. We look at that from a risk perspective, and that's part of the evaluation, Allison. Yes, we may end up buying in those markets, but it'll be because we find an asset that probably we can do something with in terms of repositioning it and where we think there are some kind of supply constraints or protection.
When we went into Nashville and we bought the Union Station Hotel Nashville, we felt like it had some kind of a moat because it was an incredibly unique asset in that marketplace. While we subsequently sold it in the summer of 2020, it would be that kind of asset, I think, where it's more unique than a typical, maybe a typical branded property in a market.
Thanks for the time.
Thanks.
Thanks, Allison.
Thank you. Our last question for today will be coming from Chris Darling of Green Street. Please go ahead.
Thanks. Good morning. Just a quick one from me. In going back to the ROI projects that you highlighted earlier, which they all sound very promising, I see that several are taking place at hotels subject to a ground lease. With that in mind, I was hoping you could just help me understand how you think about allocating capital in those instances and, you know, when it may or may not make sense to do so.
Sure. It depends how long the remaining ground lease is, the number of years left on it, and also who the owner of the ground is. We have a lot of ground leases. Frankly, most of our ground leases are with governmental authorities, whether it's the GSA, whether it's the City of San Diego, whether it's the National Park Service, at The Argonaut, et cetera. Traditionally what we've done is many of those are limited in terms of the term they can have at any point in time. Some of those markets, as an example, are limited to 49 years.
Traditionally, when those ground leases get to a point where we feel like we're getting near a point where a buyer couldn't finance them, we'll go back to the governmental authority, typically alongside of a renovation, and we'll get an extension. That has happened at a number of the properties that we own, that we've owned when I was at LaSalle, that we continue to own, and that's the history of properties like that in many of the markets. I gave you an example before. We bought Jekyll Island. Every property of every kind on Jekyll Island is on a ground lease with the Jekyll Island Authority, which is owned by the State of Georgia.
They extended every ground lease in that market, whether it was for Jekyll Island Club, whether it was for any of the other hotels on the island, whether it was for the retail, whether it was for the restaurants or the residential units that are all on the island. They were all extended, and they were all extended by the same amount of term. We're really conscious when we look at assets and then when we invest additionally in those assets to buy assets where we believe there is either a very extensive term, so we're gonna get the value back for the investment that we make and the return on that value, or two, there is an extension that is highly likely to happen because that is the normal process with those ground leases.
Got it. Thank you.
Thanks, Chris.
Thank you.
Thanks, Chris.
This brings us to the end of our question -and -answer session. I would like to turn the floor back over to Mr. Bortz for closing comments.
Hey, Donna. Thanks very much for overseeing our call. Thanks everybody for participating. We look forward to updating you about our first quarter, and that's just 60 days away. We'll continue to provide those monthly updates that we established during the pandemic.
Ladies and gentlemen, thank you for your participation and interest in Pebblebrook Hotel Trust. You may disconnect your line to log off the webcast at this time, and enjoy the rest of your day.