Braemar Hotels & Resorts Inc. (New York Stock Exchange:Bohai Huami) First Quarter 2023 Earnings Conference Call May 3, 2023 at 11:00 AM ET
Company participants
Jordan Jennings - Investor Relations
Richard Stockton - Chairman and Chief Executive Officer
Deric Eubanks - Chief Financial Officer
Christopher Nixon - Executive Vice President and Head of Asset Management
Participants in the video conference
Michael Bellisario - Baird
Chris Woronka – Deutsche Bank
Bryan Maher - B. Riley Securities
Tyler Bathory-Oppenheimer
operator
greeting. Welcome to the Braemar Hotels & Resorts, Inc. Conference Call. Results for the first quarter of 2023. All participants are currently in listen-only mode. The formal presentation will be followed by a question-and-answer session. [Operator Instructions] Please note that this meeting is being recorded.
I now turn the conference over to your host, Jordan Jennings, Director of Investor Relations. You can start now.
jordana jennings
Good morning, and welcome to today's conference call to review Braemar Hotels & Resorts' first quarter 2023 results and update you on developments. Today, Richard Stockton, President and Chief Executive Officer, will take the call. Deric Eubanks, Chief Financial Officer; Chris Nixon, Executive Vice President and Head of Asset Management. The results and announcement of the live conference call were shared in a press release yesterday.
You are also reminded that some of the statements and assumptions made in this conference call contain or are based on forward-looking information and are made pursuant to the safety provisions of the federal securities laws. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks that could cause actual results to differ materially from anticipated results. These factors are discussed further in the company's filings with the Securities and Exchange Commission.
forward-looking statementThe content contained in this conference call is current only as of the date of this conference call, and the company undertakes no obligation to publicly update or correct them. Statements made in this auction do not constitute an offer to sell our products or an offer to buy securities. The title will be given byThrough our registration statement and prospectus, available at www.sec.gov.
Additionally, certain terms used in this solicitation are non-GAAP amounts consistent with the Company's earnings release and accompanying forms or statements filed with U.S. Securities on Form 8-K on May 7, 2023 The Trading Commission may also be available on the company website www.bhrreit.com. Each listener is encouraged to consider the arrangements provided in the earnings announcement and all other information contained in the announcement. Additionally, unless otherwise stated, all benchmark results discussed in this auction compare the first quarter ended March 31, 2023 with the first quarter ended March 31, 2022.
I will now turn the call over to Richard Stockton. Please go ahead, Richard.
Richard Stockton
Good morning, and welcome to our first quarter 2023 earnings conference call. Let me start by outlining our business and updating our portfolio. Deric will then provide an overview of our financial performance and Chris will provide an update on asset management. Next, we will open a question-and-answer session.
There are some key themes for today's discussion. First, we are pleased with the continued momentum at our city hotels, which delivered strong growth again this quarter, with comparable hotel EBITDA increasing by $9.2 million in the first quarter compared to the previous quarter. Second, in the first quarter, we completed the capital raising of a non-traded preferred stock offering. As we said, this offering strengthens our capital position, allowing us to attack at an attractive point in the cycle. Third, we're pleased to see that the 3 hotels we've acquired during this cycle have performed extremely well beyond our initial guarantees. Fourth, we continue to work hard to implement and work towards our 2023 refinancing plan. Finally, as we have said before, it is worth reiterating that Braemark's management team has lived through many financial cycles. We are executing on our long-term strategy and remain well positioned to take advantage of related growth opportunities.
Going back to our quarterly results. I am pleased to report that despite the turbulent macro environment, Braemar delivered solid first quarter results. Our hotel comparable EBITDA for the first quarter of 2023 was $72.8 million, driven by the continued strong performance of our resort properties and, as previously mentioned, the continued momentum and strong growth of our urban hotels. Additionally, looking at the RevPAR across all hotels in the portfolio, RevPAR increased approximately 8% in Q1 2023 compared to Q1 2022.
Let's take a closer look at our premier luxury portfolio. Many of our properties are located in attractive leisure markets with high barriers to entry. Ten of our 16 hotels are considered resorts and are able to benefit from continued leisure demand. We are pleased to report that our portfolio of luxury resorts continued to outperform during the quarter and achieve consolidated EBITDA of $64 million in early 2023. In terms of our urban assets, we had solid results in the first quarter and showed strong growth in the eighth quarter. In fact, we generated $9 million in comparable hotel EBITDA, with all six hotels in the city reporting positive hotel EBITDA.
We are very encouraged by the continued development and growth of urban hotels as demand rapidly returns to our cities. This recovery continues to be driven by short-lived corporate trends, with recent strong demand from conglomerates. Overall, our city hotel portfolio is in a solid position and as our first quarter results demonstrate, we remain confident that our city hotel portfolio will help drive our next phase of portfolio growth.
Next, we're very excited about the recent acquisition of True North's Four Seasons Resorts Scottsdale, which exceeded our expectations and resulted in a 25% year-over-year RevPAR increase. As you may recall, the 210-room luxury resort was acquired in early December 2022 for cash, with no common stock issued to finance the acquisition. From a strategic standpoint, as shown by our first quarter results, this is an excellent addition to our portfolio and fits perfectly with our strategy of having high RevPAR luxury hotels and resorts.
Four Season Scottsdale had a RevPAR of $749, an occupancy rate of 53%, and an ADR of $1,403. Our second addition last year, the Ritz-Carlton Reserve Rate Beach, also performed well. During the quarter, the Ritz-Carlton Reserve for Rotter Beach had a RevPAR of $1,753 and an ADR of $3,115, assuming an occupancy rate of 56%. The Ritz-Carlton, Dorado Beach achieved a return on cost of 8.6% over the past 12 months, while Four Seasons Scottsdale achieved a return on cost of 7.4%. I'm pleased to note that these luxury properties are well ahead of our insurance and looking at the balance sheet for the year, we remain very excited about the prospects for these properties.
Given our capital position, Braemar's balance sheet remains healthy and we continue to emphasize balance sheet flexibility. To this end, we established a 2023 refinancing plan in the first quarter to further strengthen the attractive maturity schedule. In April, we completed mortgage deferrals for the Ritz-Carlton Sarasota and Hotel Yountville. Both loans have been extended for an additional 6 months beyond their original due dates, with an option to extend for an additional 1 month. We are also working with our lenders to refinance a mortgage secured by Barestone Hotel and Spa with a final maturity date of August 2023. This is a very low leverage loan and we don't anticipate any issues extending or refinancing it.
Then, on investor relations, we continue to actively meet with investors to communicate our strategy and highlight the attractiveness of investing in Braemar. We plan to continue touring, attending investor conferences and one-on-one meetings. We also hope to meet some of you at NAREIT in June.
Looking ahead, 2023 is off to a good start and we are pleased to see Group growth of 28% year-on-year. Our unique portfolio focus on the luxury sector, including properties in the leisure and urban markets, provides us with a solid foundation for strong performance in the short and long term, as leisure demand remains strong and business travel and group travel continue to grow and accelerate. We have a stellar portfolio of listed hotels with solid liquidity and an attractive debt-funded balance sheet.
I will now turn the call over to Deric for a more detailed review of our financial situation.
Derek Eubanks
Thank you, Richard. For the quarter, we reported net income attributable to common stockholders of $3.2 million, or $0.05 per diluted share, and AFFO, $0.44 per diluted share. Adjusted EBITDAre for the quarter was $66.1 million, up 34% from the same period last year. We ended the quarter with total assets of $2.4 billion. We have $1.3 billion in loans, $49 million of which is our partners' interest on the Capital Hilton and Hilton La Jolla Torrey Pines loans. The average interest rate on all our consolidated loans is 6.3%, subject to an interest rate cap.
Based on current LIBOR and SOFR levels and their respective interest rate caps, approximately 74% of the company's debt is largely stable and approximately 26% is largely unstable. At the end of the first quarter, our net debt to total assets ratio was approximately 37.1%.
We ended the quarter with cash and cash equivalents of $281.5 million and restricted cash of $63.1 million. The vast majority of this restricted cash consists of reserve accounts held by lenders and trustees. We also owed $19.1 million to third-party hotel managers at the end of the quarter. This is primarily cash held by one of our brand managers, which can also be used to cover hotel operating expenses.
On the dividend front, we announced in December a substantial increase in the company's quarterly common stock dividend to $0.05 per share, or $0.20 per diluted share on an annualized basis. Based on yesterday's share price, this equates to an annualized return of around 5.3%. The board also approved the company's dividend policy through 2023. The company expects to pay a quarterly dividend of $0.05 per share in 2023, or $0.20 per share annualized.
Demonstrating our strong belief and contributing to our strategy and commitment to create long-term shareholder value, we also announced a share repurchase program of up to $25 million in December. During the first quarter, we completed our $25 million share repurchase program, purchasing 5.4 million shares at an average price of $4.60 per share. In capital markets, we closed the quarter with a $98 million mortgage extension on the 276-room Ritz-Carlton, Sarasota. The loan is extended for a further six months beyond the original April 2023 maturity date, with an option to extend for a further six months. After the deferment, the Ritz-Carlton Sarasota loan will have an interest rate of SOFR plus 2.65%, then will revert to SOFR plus 3.5% on June 1, 2023, with a maturity date of October 4, 2023.
We also completed a $51 million mortgage extension for the 80-room Yountville Hotel. The loan is extended for an additional six months beyond the original maturity date of May 2023, with an option to extend for a further six months. After the extension, the Yountville hotel loan rate is SOFR plus 2.55%, which will reset to SOFR plus 3.5% on July 1, 2023. As a result of this extension, we purchased a SOFR rate capped at 5.25% with a maturity date of November 10, 2023
As of March 31, 2023, our portfolio comprised 16 hotels with 3,957 net rooms. Our current shareholding total is 72.8 million fully diluted shares, comprising 66 million common shares and 6.9 million common shares.
This concludes our financial analysis. I'd now like to turn it over to Chris to discuss our asset management activities for the quarter.
christopher nixon
Thanks, Derek. For the quarter, comparable RevPAR for our portfolio increased 8% year-over-year to $369. This RevPAR was approximately 27% higher than the national average for luxury chain size, reflecting the high quality of our product portfolio. I want to take the time to highlight how our team has leveraged Urban Renewal, building a foundation around team needs and implementing successful initiatives in our recently acquired properties.
Our municipal assets continue to benefit from accelerated growth in market demand. For our urban properties, total comparable hotel revenue in the first quarter was up 62% compared to the same period last year. This growth was driven by our largest hotel, the Capital Hilton, which experienced a 126% increase in RevPAR from the year-ago period. This achievement is notable for a few reasons: First, hotels have been undergoing major room renovations for most of the first quarter. Second, hotels outperformed the market by 73% in RevPAR growth. We attribute this success to our partnership with refurbisher Premier, our successful implementation of a stealth refurbishment program that minimizes replacements, and our overall revenue optimization strategy, which has identified market weakness and aggressively focused on to build the foundation of the Group's business.
The emphasis on growing the fundamentals of our Group hotel business and our return to large-scale events and conferences resulted in a 57% increase in our Group Room Revenue in the first quarter compared to the same period last year. Comparable group room rates were up 8% compared to the first quarter of last year. We also saw good signs of group bookings in the first quarter, with bookings for all future dates up 16% compared to the first quarter of last year. Our group revenue (defined as revenue from booking group rooms during a quarter at some point in the same quarter) is high. We started the quarter with approximately $18.5 million in group book revenue and ended the quarter with approximately $26 million. Based on lodging bookings for the same quarter, this represented a 41% increase in group gross room revenue for the quarter. This compares with growth of just 6% last year.
While we're excited about the progress we're making with long-term group bookings, we plan to leverage our strengths in the current short-term booking environment to maximize our pricing strategy. All of these efforts and more contribute to the overall success of the portfolio in the first quarter of 2023. It's worth noting how successful the first quarter was in terms of hotel performance, with four of our properties delivering record hotel EBITDA in the first quarter, including our two most recent acquisitions, The Ritz-Carlton Reserve, Doral Multi Beach Hotel and Four Seasons Hotel Scottsdale.
During the acquisition process, our team developed a detailed acquisition plan for each hotel, including strategic opportunities to improve financial performance and profitability. For the Ritz-Carlton Reserve Dorado Beach, our team focused on projects that would attract immediate attention, including increasing food and beverage outlet prices, optimizing our cabin rental program, streamlining our digital marketing efforts, and implementing upsell and upsell programs.
Our four seasons in Scottsdale have seen similarly successful initiatives, and also benefited from demand sources during Super Bowl weekend, which generated over $3.2 million in room revenue over four days. This represents a 427% year-over-year growth in room revenue over the same period.
In terms of equity investments, we have invested heavily in our portfolio over the past few years to enhance our competitive advantage. These investments uniquely position our portfolio to capitalize on the pent-up demand we are currently seeing in the market. As previously mentioned, we are currently renovating the rooms at the Capital Hilton. Later this year, we plan to begin guest room renovations at the Bardessono Hotel & Spa, Hotel Yountville and Ritz-Carlton Lake Tahoe. We also plan to begin renovating the meeting space at Park Hyatt Beaver Creek, the spa at The Ritz-Carlton Sarasota and The Ritz-Carlton Lake Tahoe, and add a lobby retail store at The Ritz-Carlton Lake Tahoe . In 2023, we expect capital expenditures of $70 million to $80 million.
Finally, I want to emphasize how optimistic we are about the future of this portfolio. As I mentioned before, our municipal assets are very popular. The Group's business continues to show tremendous growth and many of our hotels continue to break EBITDA records for hotels in their category. We are already taking new initiatives to further enrich our product portfolio. Some of these include extensive property renovations, development of unused land and significant additions such as the recent acquisition of 3 keys to Park Hyatt B Recreek in January 2023. With these new initiatives, we believe the portfolio will continue to work.
Richard Stockton
Thanks, Chris. Overall, we continue to be pleased with the trends we are seeing in our hotels, driven by strong leisure demand for our luxury resorts and continued revitalization of our urban properties. We see a clear path to further growth in financial performance going forward. With our strong balance sheet and top-notch portfolio in the public hotel REIT market, we are well positioned for further growth. We look forward to keeping you informed of our progress in the coming quarters. This concludes our prepared remarks and we are now calling for questions and answers.
question Time
operator
Thanks. During this time, we will hold a question and answer session. [Operator Instructions] Our first question comes from Michael Bellisario's conversation with Baird. Moving on to your question.
Michael Bellisario
Thanks. Good morning, every body.
Richard Stockton
Good morning.
Michael Bellisario
Just the first issue of Deric. Can you talk about the discussions you've had with your lenders regarding these recent deferments? What do they even ask for? what are you looking for? Or secondly, where are you in the process? Before all the banking turmoil kicks in, I imagine this will derail a more complex refinancing or deferment plan involving two existing loans and a third coming soon?
Derek Eubanks
Yes. Thanks, Mike. In fact, the banking problems or crises that made the headlines did not spill over into our world. So what you're seeing has nothing to do with what we're doing in terms of refinancing. We're in a unique position because our last three maturities this year were all real estate mortgages from the same lender. So what we've done there is we've done some short-term deferrals, which give us a lot of flexibility, but we're also looking at more comprehensive financing at the corporate level where we can use those assets as a basis for borrowing, access to future With the use of credit, you have greater flexibility in this regard.
I think the market, though -- look, none of the hotel debt market is attractive right now, that space is more attractive than hotel mortgages right now. Ideally, this will be where we hope to end up at some point. We'll know when that happens. But these extensions give us the flexibility and the time we need to work on this, what I call more full corporate-style financing.
So we're delighted that the expansion is complete. These assets and the spreads on these loans can actually be replicated in today's mortgage market. So we're happy to do it our way.
Richard Stockton
Yes. Let me add that historically we've only dealt with large banks that are financial centers, yes systemically important banks. Most of our loans come from BAML, the second largest bank in the United States. So we avoided that volatility altogether and exited lending to small and mid-sized regional banks. So we feel very confident about our balance sheet and what we need to do going forward, there shouldn't be too much growth.
Michael Bellisario
I understand. And then my follow-up on the transaction side is a little bit related to my first question, but maybe you've partially answered that, Richard. Do you see an opportunity there? Or is there any reason to be more cautious or hold off until you figure out what you're going to do with the upcoming refinancing on the balance sheet side? Or do you see them as two different ways independent of each other?
Richard Stockton
No, I think you hit the nail on the head. We want to restructure our liabilities to minimize the cost of debt, Derek said. And without knowing exactly where that will work out, it's unlikely we'll be forced to make any acquisitions before they happen. That said, the buyout game is a long game, right? So there you are -- even now, we're still having an active conversation about the opportunity because it's often months, if not years.
So usually among the assets that we're looking at, yes, it's the more exclusive luxury assets. These are not commodities, are they? You decide this month, we want to buy X hotels. So we're still looking. I'm not going to comment on the acquisition market that we're finding sellers, frankly, are still a little unrealistic in terms of pricing, right?
I have four and five hats on my desk, I'm just laughing, right? Because of it - it's unrealistic. So here we are, looking. We may also have to wait for this new weighted average cost of capital to stabilize and for some sellers to be more realistic about their asset values.
Michael Bellisario
Auxiliary. Thank you so much.
operator
Our next question comes from the line of Chris Woronka from Deutsche Bank. Moving on to your question.
Christopher Woronka
Good morning guys. Thank you for your question. So I think first of all about Richard, regardless of the debt situation of these hotels. I mean, do you think Chicago and those two autographs are still core to the long-term portfolio?
Richard Stockton
Yes, that's a good question. Good morning, Chris. No, I think absolutely. I believe there is more room for action on each of these elements. In the case of Sofitel, we had a small dispute with the manager that lasted several years. We picked a place that seemed to be in our favor and we saw an improvement in the performance of that asset and the management team. So we're still taking the time to develop and capitalize on the long-term potential of this asset.
As far as these two autographs go, maybe it's a little personal for me, but I'm pretty excited about these fitments. I think the quality of these properties has improved very, very significantly since they became yards four years ago. And I think we still have time to develop the potential of these assets.
christopher nixon
Yes. No - I'll just add one more thing. As we convert and renovate these hotels in late 2019 and 2020, we haven't realized the benefits of the upper floors. So we're very excited about that. I think looking at our Noary hotel in Philadelphia, it's way ahead of the market, and we attribute that to the brand and some of the strategies we've put in place there.
I think when you look at Clancy's in San Francisco, we've been through the worst of that market and now it's in a major recovery phase with a very high trajectory and very strong year-over-year growth. We're starting to see encouraging signs of Citywides' return to the market. They had two very successful Citywides, American Social Oncology and [indistinguishable] and then JPMorgan was canceled last year and came back.
Yes, we saw a lot of value-add opportunities when looking at this property. We've added some meeting space in the hotel that we didn't know about. It has a brand new gym. So we're excited and feel like both properties have a significant runway in front of us that we haven't realized yet.
Christopher Woronka
OK Outstanding. Appreciate all the details. And then, I don't know, Richard or Chris, you can take us quickly -- I know you have a lot of, I think, excess real estate opportunities. You talked about the development potential, or I think you can sell them at any time, I think we're talking Scottsdale and Beverly Hills or some places in Sarasota. Can you tell us briefly how you're progressing on some of these things and what you want to do or want to do next year?
Richard Stockton
Yes yes for sure. So we have something different than what you asked for. First, we have three development lots in our portfolio, and then we have a couple of condos in Beverly Hills available for mid-term lease. So - I'll start with the apartment.
We have five apartments with a minimum stay of 30 days. We therefore assess whether it is a good time to sell one or more of these to owner tenants. Unfortunately, we are still in a period of very high mortgage rates, which may weaken the housing market a bit. So it might make sense to wait for this trajectory to reverse in anticipation of the inevitable Fed rollback we've been waiting for the next, many, many months. But that's -- in the end they're going to get paid.
Speaking of development plots, there are three in total. That's why we own 3.5 acres at The Ritz-Carlton, Lake Tahoe. For Plaster County, we are in the advanced stages of getting permits to build 18 row homes there. We hope to open a sales center by the end of the year so we can sell them before the ski season. So the project was a huge success. The idea is that there will be a construction window in the area when the window opens next May and construction and grading will take place when the window opens. So excited.
As for -- this is the first developer pack. The second development site is the Ritz-Carlton Sarasota where we are developing plans for 50 branded single family homes. We're pretty advanced in the planning of the concept and will probably have a budget for that in the second half of the year. But that's something we might start doing in late 2024 or 2025. Obtaining the necessary permits takes a long time.
Finally, in the early stages of evaluating the nearly 6-acre site in Four Seasons Scottsdale. We have a commercial area there that allows us to make extra hotel keys. We don't think the hotel is suitable. So building additional apartments there might be an option. There is also a fairly strong market for additional spa and wellness activities and facilities. Well, here's what we're working on.
We inherited the design around this from the vendor. The four seasons are also very engaging. Yes, we have some momentum behind this initiative. But I would say that since we don't have a final concept design yet, it's not too sure yet. Here we are.
Christopher Woronka
Yes. Very nice and helpful. Thank you, Richard.
operator
Our next question comes from the line of Bryan Maher from B. Riley Securities. Moving on to your question.
Brian Macella
Yes. Good morning. Kind of going back to the refinancing you've done and your comment about moving to a more comprehensive solution -- there's been a change in Braemar's strategy from sort of a non-recourse mortgage similar to what Ashford Trust has been doing to a more comprehensive approach . When you think about the past where you preferred floating rate debt over fixed rate debt, we keep hearing that everyone should buy these deferment limits and what you get. How do you think about the cost of those caps in deciding between floating rate debt versus fixed rate debt?
Derek Eubanks
Yes. Thanks, Brian. It's Derich. So the first question on changing strategy. I mean, I wouldn't say it's a big change in strategy, but before the pandemic, we had a corporate loan at Braemar, we took that loan, we actually converted it into a term, And then we paid it off with the bonds we issued. So it's kind of back to where we were pre-COVID.
So no major changes in strategy. I think we will continue to use a combination of real estate mortgages and corporate debt at Braemar. As you know, Braemar has a slightly lower leverage strategy than the Ashford Trust you mentioned. So we think it makes sense to use more of the mix in terms of the money we're using at Braemar.
So in terms of cap and cap cost and how we take that into account when we look at fixed rate financing versus floating rate financing. You are right, we prefer floating rate financing. We do this for many reasons. Now, of course, we're in a period where if you're a variable rate borrower, you're going to see rates go up, we put caps in place, those caps are in effect, but rates go up, rates go down.
We believe that hotel profitability will rise and fall as the economy recovers, which is a natural trade-off for our business. We also like the flexibility of floating rate debt versus fixed rate debt. So there are a number of reasons why we're focusing on floating rate financing. I think you'll still see how we mix. Now we have a mixture. I think we will continue to mix in the future. So I don't think we'll be 100% one way or the other. If you look at the forward rate curve, you can see that rates are going to drop significantly over the next few years.
So now is not an ideal time to lock in fixed-rate debt. Having said that, I think you'll see us do both. And I wouldn't say we wouldn't choose fixed rate loans right now because the variable rate market isn't very attractive. So there are many factors that come into play when we make these decisions.
Of course, the maximum cost is very volatile. Variety. They can range from very, very cheap to very, very expensive. This is how we now use hats that used to be a little more expensive. That's my opinion.
Brian Macella
OK Just a change on the acquisition side. Richard, I hear you talking about laughing at some of those four and five hats, and we agree. But in terms of how right the forecasters are, we can see -- I don't want to talk about the tsunami, but the sheer number of large properties that couldn't get financed or struggled to get financed this year. There's an option to reopen or start a new unregistered The preferred question to use this 8% to 8.5% of the money, or should you be able to find something worth flipping in terms of value?
Richard Stockton
Yes, Brian, thanks for taking the question. It is always possible to apply for a new issue of non-traded preferred stock. Since we've done this in the past, it will likely be done relatively quickly, within a few months.
With the costs you mentioned, I think if we're going to do it, we want to do it at a lower cost than the startup cost, we've learned from our friends in the broker-dealer community that the retail market is more sensitive to interest rates than the institutional The market is a little lower, so maybe we can do that.
That said, another thing that we look at very carefully is our capital structure. About 25% of our current capital structure is preferred stock, is that enough? Personally, I think so, at least for now.
So I hear we might be looking for some good opportunities in the future. We'll definitely be watching. Rest assured that we can quickly enter this market should the opportunity arise.
Brian Macella
OK Thanks.
operator
[Operator Instructions] Our next question comes from Tyler Batory's conversation with Oppenheimer. Moving on to your question.
Tyler Bathory
Hello. Good morning. Thank you for answering my question. A few notes on portfolio trends and what you're seeing there. Can you talk a little bit about April, maybe compared to margin? There are concerns about slowing demand, especially for high-end customers, or possibly even a reduction in pricing power. So, are you interested in what you see in real time? Also, how do you feel about bookings for the remainder of the second quarter?
christopher nixon
Yes. Thanks for your question, Taylor. This is Chris. I'll take it. We largely see a continuation and continuation of the trends that we experienced in the first quarter. Our city hotels continue to perform well. Compared to last year, their pace is very good. Our centers continue to stabilize. We see many of these trends moving forward.
I think Richard mentioned in his comments that the pace of the group has been very strong throughout the year. We're very excited about it. We see a huge upside in short-term group bookings. So that pace for the full year is well ahead of last year, and we're seeing continued strength in the short term, which is a very good sign.
BT is getting better and better. It shows no signs of slowing down. I think some of the comparisons will come into play when we look at the second quarter. This wallet does very well in March and April 2022. Immediately after exiting from Omicron, there was a lot of demand. The stunning hotels in this portfolio are where people want to be. Last March and April, we saw a huge increase in bookings.
There will also be some tax irregularities. Last April, we conducted an important tax assessment that will be included in the comparison. So we had some tough comparisons as we looked ahead to the second quarter. However, having said that, the business and the trends that we're seeing are still very, very favorable.
From a margin standpoint, we're happy with our portfolio margins. ADR at our luxury resorts was 50% higher than pre-COVID levels. And with that comes very, very high expectations from consumers. So we're excited to continue to operate more efficiently as a portfolio as a whole. In the first quarter, our division's expenses were down 5% compared to last year. We believe we will be able to move forward with many improvements.
Overall, it's a continuation of what we've seen, cities will continue to be strong, resorts will continue to stabilize, segments and transients will continue to improve.
Richard Stockton
Yes. I just want to add, Chris. As we built this lineup, one of the unique things about our portfolio was that we recovered much faster than our peers. We're here -- I think we're at least a year ahead of the recovery, which means we had a great year last year. This lets us say they create difficult compositions. But it's hard to feel like we should punish ourselves for that, right, because we've had such a good year.
So I look at things like profitability versus cost, right, how profitable our assets are, how our cash flow generation is, and it's very, very strong. We started posting this information in our company presentation and continue to do so. So we have a very solid base of what I call steady demand for vacation leisure properties and a growing urban segment that puts us in a good position to generate a lot of excess cash flow.
Tyler Bathory
OK Continue with some comments. I'm particularly interested in the EBITDA margin issue. I mean, how did the margins compare to budget and expectations in the first quarter? When we look at the 2022 results, do you think it makes sense for 2023 to be at the same level? Or are you generally looking at 2022, maybe an added bonus given that interest rates are so high, maybe earlier in the year, do you have a full workforce base at some of your properties?
christopher nixon
Yes. That's a great question, Taylor. So our EBITDA margin was down 11 basis points from last year and there's some momentum. Compared to the previous year, ADRs decreased by 8%. If you look at our revenue mix, our foodservice revenue grew 16% last year and our room revenue grew 8%.
For example, food and beverage revenue typically has much lower profit margins than rooms. So there are several dynamics affecting it. And then from a property tax standpoint, we've had a huge win. So February 2023 at our Sofitel Chicago, they filed for a 2022 tax deduction of over $2 million. That certainly helped and helped our bottom line.
As I mentioned, there's going to be some hype on the EBITDA margin because of the big tax cut we've implemented in the second quarter of 2022. But overall, in our view, our business is more efficient. We've seen an increase in productivity in hotels.
When we look at the EBITDA margin last year, I think what's going on across the portfolio will play a role. Many of our city's lowest RevPAR hotels are growing significantly, while our highest RevPAR hotels are stabilizing. Thus, its weighted effect could be a reduction in RevPAR for the overall portfolio, possibly a reduction in ADR, as these weights change based on changes in the composition of the portfolio.
Here are some of the challenges with this particular portfolio that arise every year. However, we are well ahead of pre-Covid levels and 2019 EBITDA and room margins. So I think there will be some noise when we shoot the quarterback. But overall, we're very happy with the way we work, the efficiency of the hotel, the way we hire and run the hotel.
Richard Stockton
Yes. And Taylor, I should add. We've heard people comment on the impact of COVID on your work patterns, work structures, and more. I agree with the belief that we've found 100 to 200 basis points of sustained margin improvement. That's how we think about business development.
We are operating more than 10% fewer FTEs than we were pre-pandemic. I'd say we're basically fully staffed. I mean, we might add a few more people, but it's really more like a contract job that can turn into a full-time job, saving even more money.
So I think in terms of the lessons of COVID, I think we're in a better position. In the long run, this will benefit shareholders.
Tyler Bathory
OK Some other follow-up questions. City improvement, city [hard to perceive] nice to see. I mean, is it driven by leisure? Is it a business trip? Is it midweek? And then I'm particularly interested in your thoughts on San Francisco, there seem to be a lot of different headlines about the outlook for San Francisco real estate, tech layoffs in general, regional banking issues, etc. I'm curious, what's your take on San Francisco and what's the outlook for this year and the next few years?
christopher nixon
Yes Taylor, I can add some color. So overall, what we're seeing in our city's hotels -- that is, the improvement is significant. We grew 60% year-over-year, that's really across the board. However, the lion's share of the recovery has been temporary for the group and the company. With our portfolio and the size of our portfolio, it's really market by market.
In Philadelphia, our Noary Hotel outperformed due to its access to one of the largest customers in the market, Comcast. They get a decent business output out of it. The Cap Hilton is undergoing renovations, and March was actually the second-highest revenue month in the hotel's history thanks to strong team production. Our team went out and actively sought independent in-house teams and really built a strong team foundation to ride out the softer times in the market.
It's actually a little bit specific to the market. We did a lot of mixing at the Sofitel in Chicago. We got rid of some wholesalers because we saw a lot of group demand. I think the team at this hotel has 15,000 nights a year. We see a strong corporate alliance. This allows us to merge with some lower-end businesses. That's all the parts.
Specifically, in San Francisco, our Clancy Hotel, while down 22% in 2019, was down over 70% last year. Therefore, the market continues to lag. But again, we're seeing very strong signs of year-over-year recovery. I mentioned the production across the city, which was very strong in the first quarter. We're also seeing huge signs of business output, especially in consulting and financial services. Technology is definitely behind. We see -- these big bills come with some relief travel results. But we remain optimistic about what we're seeing at our one-of-a-kind hotel in San Francisco.
Tyler Bathory
OK And then I think the last thing, share repurchases, you bought back some shares here in the first quarter, you use this order. I mean any thoughts on expanding or adding to it in the future? I mean, how does the acquisition fit in, so how do you feel about the equity?
Richard Stockton
Yes Taylor, good question. We always evaluate it. We always evaluate. This is clearly a board decision. Well - all I can tell you is that we will continue to investigate it. I think it's enough to say that we're very disappointed with the multiples we're currently finding in our stock. This is a very attractive investment. We see it.
As we said before, it's a battle of conflicting priorities, right, because if we do an acquisition, we increase our leverage and reduce our market cap. However, this is a fair question and we will continue to evaluate whether to initiate another share repurchase.
Tyler Bathory
OK It's all mine Thank you very much for the details.
operator
We've closed the questions and meetings. I will now turn the call back over to management for closing remarks.
Richard Stockton
Thank you all for joining our first quarter earnings conference call. We look forward to speaking with you on our next call and hope to see many of you at the NAREIT conference in New York in June. Have a great day today.
operator
That concludes today's meeting, and you may hang up at this time. Thank you for your participation.