XHR Q3 2025: Group Pace Up Mid-Teens, Offsetting Leisure Drag as Portfolio Repositions
Group demand and non-room revenue expansion kept Zinnia Hotels & Resorts (XHR) on track despite a muted leisure segment and tough market comps. Capital allocation is increasingly focused on high-ROI renovations and food & beverage repositioning, with the W Nashville relaunch signaling a shift toward experiential differentiation. 2026 visibility is strong, with group pace and stabilized assets driving cautious optimism for outsized total revenue growth.
Summary
- Group Demand Momentum: Robust group booking pace for 2026 underpins revenue visibility and margin stability.
- Operational Repositioning: High-profile renovation and food & beverage initiatives target incremental EBITDA and asset differentiation.
- Capital Deployment Discipline: Share buybacks and targeted CapEx reflect a focus on intrinsic value and cash flow optimization.
Performance Analysis
XHR’s third quarter results reflected a portfolio navigating significant demand shifts, with group and non-room revenues providing ballast against soft leisure and challenging year-over-year comps, especially in Houston. Same-property RevPAR (revenue per available room) was flat, masking underlying volatility: occupancy fell 100 basis points, but average daily rate increased 1.6%. Excluding Houston, RevPAR rose 2.9%, driven by the Grand Hyatt Scottsdale’s post-renovation ramp and double-digit gains in select markets like Atlanta and Santa Clara.
Non-room revenue, especially food and beverage (F&B), was a standout: total RevPAR increased 3.7% YoY, with group-driven banquet and catering spend offsetting room revenue softness. Hotel EBITDA margin declined 60 basis points, but disciplined cost controls and out-of-room spend mitigated margin erosion. Year-to-date, same-property hotel EBITDA rose 12.6%, with margin up 101 basis points, underscoring the impact of recent asset upgrades and operational discipline.
- Houston Drag: Hurricane Beryl’s 2024 demand spike created a tough comp, depressing portfolio-level RevPAR and EBITDA in Q3.
- Grand Hyatt Scottsdale Outperformance: RevPAR up over 270%, anchoring portfolio growth and validating renovation ROI.
- F&B Revenue Mix: Banquet and catering revenues drove total RevPAR gains, highlighting the importance of group and event business in the current environment.
Operationally, expense discipline remained evident in rooms, F&B, and administrative costs, balancing inflationary pressures and flat top-line growth. Portfolio-wide, capex intensity rose as management accelerated high-return projects, notably the W Nashville F&B overhaul.
Executive Commentary
"We continue to benefit from the high-end positioning of our portfolio, as well as unique internal growth drivers, such as the continued ramp of Grand Hyatt Scottsdale Resort. We also continue to benefit from strong group demand throughout the portfolio, which was evident again in September and thus far in the fourth quarter."
Marcel Verbas, Chair and Chief Executive Officer
"Our leverage ratio was approximately five times trailing 12-month net debt to EBITDA. We expect our leverage ratio to further decline as Grand Hyatt Scottsdale continues to stabilize over the next two years. Our $500 million revolver remained undrawn. Therefore, total liquidity was $688 million."
Atish Shah, Executive Vice President and Chief Financial Officer
Strategic Positioning
1. Group Business as a Growth Engine
Group demand now represents about 35% of XHR’s mix, and is tracking up mid-teens for 2026, with “definite” bookings already at 50% of next year’s group room revenue. Citywide conventions and large events (Super Bowl, World Cup) in key markets are expected to further compress demand and support rate integrity. This segment’s resilience is central to XHR’s margin and revenue outlook.
2. Asset Repositioning and Experiential F&B
Capital is being deployed into high-impact renovations and F&B repositioning, notably through the W Nashville partnership with Jose Andres Group. Management projects $3–$5 million incremental hotel EBITDA upon stabilization from this initiative, which is designed to transform the property’s destination appeal and group competitiveness. The Grand Hyatt Scottsdale’s performance post-renovation further affirms the ROI of targeted upgrades.
3. Capital Allocation: Buybacks and Disciplined CapEx
With $83.8 million in YTD share repurchases and $134.1 million in remaining authorization, management is signaling a preference for returning capital to shareholders over new acquisitions in the current market. CapEx guidance was raised to $90 million for 2025, but remains $15 million below original projections, reflecting both project acceleration and cost mitigation efforts amid tariff volatility.
4. Portfolio Optimization and Transaction Market Stance
XHR continues to fine-tune its portfolio, with disposition activity focused on assets requiring outsized capital with limited ROI. While acquisition appetite remains low given cost of capital and private market pricing, management remains opportunistic should valuations become more attractive.
5. Margin Management Amid Demand Normalization
Expense control in rooms, F&B, and G&A remains a priority, with hotel management teams moderating cost increases despite inflation and flat revenue. Margin gains are being driven by non-room revenue growth and improved mix, even as leisure demand normalizes from pandemic highs.
Key Considerations
XHR’s Q3 reveals a portfolio in transition, balancing leisure normalization with group-driven growth and asset repositioning. The following factors will shape near-term and 2026 performance:
- Group Booking Visibility: Double-digit group pace for 2026 provides a buffer against transient volatility and supports forward revenue confidence.
- Leisure Normalization Impact: Leisure demand has stabilized, but remains below prior years, with some risk of further weakness if macro headwinds persist.
- Asset-Specific ROI: The Grand Hyatt Scottsdale and W Nashville F&B relaunch are critical to delivering outsized EBITDA growth and validating capital deployment strategy.
- Cost and CapEx Discipline: Expense management and targeted CapEx are key levers for margin preservation in a flat-to-moderate top-line growth environment.
Risks
Leisure demand softness and macroeconomic uncertainty could weigh on transient revenue, especially if consumer sentiment weakens further. Execution risk around large-scale renovations and F&B repositioning (W Nashville) is elevated, with the timing and magnitude of incremental EBITDA gains subject to market absorption and operational ramp. Interest rate volatility and potential travel disruptions (such as a prolonged government shutdown) could also impact results, though XHR’s limited government exposure offers some insulation.
Forward Outlook
For Q4 2025, XHR guided to:
- RevPAR growth at a reduced midpoint, reflecting softer transient demand and normalization of leisure.
- Continued strength in group bookings, with group pace up 12% for November and December.
For full-year 2025, management maintained guidance:
- RevPAR growth of 4% at midpoint, with Grand Hyatt Scottsdale contributing 300 of 400 basis points.
- Adjusted EBITDA RE of $254 million and FFO per share of $1.72, both slightly down from prior guidance but above initial year projections.
Management highlighted:
- Robust group pace and non-room revenue as key drivers for Q4 and into 2026.
- Grand Hyatt Scottsdale’s continued ramp and W Nashville’s F&B relaunch as 2026 growth catalysts.
Takeaways
XHR’s earnings call underscores a strategic pivot toward group demand, asset-level ROI, and capital discipline.
- Group Demand as Shock Absorber: Double-digit group pace for 2026 is expected to offset leisure normalization and support margin stability.
- Asset Repositioning Drives Intrinsic Value: Targeted renovations and F&B partnerships are designed to unlock incremental EBITDA and differentiate the portfolio.
- Capital Allocation Remains Shareholder-Focused: Buybacks and selective CapEx signal a commitment to intrinsic value and cash flow optimization over external growth.
Conclusion
XHR’s Q3 2025 results reflect a portfolio balancing near-term leisure softness with robust group demand and targeted asset repositioning. Management’s focus on capital discipline, margin management, and experiential upgrades positions the company to capitalize on a favorable group demand setup and incremental EBITDA growth in 2026.
Industry Read-Through
Group demand strength and non-room revenue resiliency are emerging as critical levers across the upper-upscale and luxury lodging sector, with citywide events and experiential F&B partnerships increasingly differentiating top-performing portfolios. Leisure normalization and inflation-driven cost pressures remain sector-wide headwinds, but operators with strong group visibility and the ability to deploy capital into high-ROI asset upgrades are best positioned for margin stability and long-term value creation. Peers heavily reliant on transient leisure or lacking asset flexibility may face greater volatility as demand patterns reset post-pandemic.