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Chesapeake Lodging Trust  (NYSE:CHSP)
Q4 2018 Earnings Conference Call
Feb. 21, 2019, 5:00 p.m. ET

Contents:

Prepared Remarks:

Operator

Good evening, my name is Michelle, and I will be your conference operator today. At this time, I would like to welcome everyone to the Chesapeake Lodging Trust Fourth Quarter Earnings call. All lines have been placed in mute to prevent any background noise. After the speaker's remarks, there will be a question-and-answers session. (Operator Instructions)

Thank you, Mr. Douglas Vicari, you may begin your conference.

Douglas W. Vicari -- Executive Vice President and Chief Financial Officer

Thank you, Michelle. Good afternoon and welcome to the Chesapeake Lodging Trust fourth quarter 2018 earnings call. This is Doug Vicari, Executive Vice President and CFO of Chesapeake, also on the call this afternoon are Jim Francis, our President and CEO; and Graham Wootten, our Chief Accounting Officer.

As is our custom, I'll begin with a brief overview of our quarter, including a review of our consolidated results, our summary hotel operating performance, our financial position and an update on our 2019 outlook. After I conclude my commentary, Jim will provide greater detail on the performance of our hotel portfolio. He'll also provide some general thoughts on macro industry trends and more specifics regarding our outlook for our hotel performance in 2019.

As a reminder, any statements we make this afternoon about future results and performance or plans and objectives are all forward-looking. Actual results may vary as a result of factors, risks and uncertainties, over which we have no control. And with that behind us, let me now begin with a brief review of our highlights and consolidated results for the quarter.

So for the fourth quarter of 2018, we reported total revenue of $142.5 million and net income available to common shareholders of $13.2 million or $0.22 per diluted. Our adjusted corporate EBITDA was $39.9 million, and our adjusted FFO was $31.8 million or $0.54 per diluted share. For the full year 2018, we reported total revenue of $597.2 million, net income available to common shareholders of $97 million or $1.62 per diluted share. Our adjusted corporate EBITDA was $174.6 million, and our adjusted FFO was $139.2 million or $2.34 per diluted share.

Let me now briefly review some of our key operating statistics for the quarter and the full year. So for the fourth quarter, our total portfolio of 20-hotels produced a RevPAR of $184.26, that represents an increase of 3.7% versus the prior year. Our occupancy for the period was 82.3% that increased by 160 basis points over last year, while our average daily rate was $223.86, that's an increase of 1.7% versus prior periods.

These top line trends resulted in adjusted hotel EBITDA of $44.3 million and our adjusted hotel EBITDA margin was 31.1%, that's 110 basis point improvement versus the prior year. For the full year, our portfolio of 20-hotels produced a RevPAR of $195.37, that represents an increase of 4.3% versus the prior year. Our occupancy for the full year was a very strong 85.5%, that's an increase of 240 basis points versus the prior period, while our average daily rate was $228.58, that represents a 1.4% increase versus prior periods.

These top line trends resulted in adjusted hotel EBITDA of $190.6 million and our adjusted hotel EBITDA margin at the end of the year was 32.4%, that's an 80 basis point improvement versus the prior year. Overall, operating results for the quarter came in near to high-end of our RevPAR guidance range of 2% to 4% that we provided to the market in early November. We are pleased with the results for the quarter, as we benefited from our successful real estate tax appeal in Chicago helping our flow through in our margins. In addition to this positive result, we had strong performance in several key markets including San Diego, Boston, San Francisco and New York.

Offsetting the the positive performance was softness in LA and Seattle, due primarily to renovation activity, continued operating issues in Chicago and soft convention calendar in Orleans. In total, we are pleased with the results for the quarter and feel we are positioned as we begin 2019. The general overall theme of stable lodging fundamentals remains in place and is reflected in our outlook provided in our release today. Jim will provide much more detailed information on our recent hotel performance and our outlook in his commentary in a few moments.

Moving on to the balance sheet. We ended 2018 with $71.3 million of cash, we have $31.6 million of restricted cash and $751.4 million of long-term debt. Our leverage ratio at the year-end was 31.1%, our fixed-covered charge was 3.33 times, and our debt-to-EBITDA ratio was 4 times. Our average weighted cost of debt is now 3.9%, our average length to debt maturity is approximately 4.2 years. And again, we've seen improvement in the balance sheet during the course of the year and we feel our balance sheet is well positioned at this point in the lodging cycle.

Let me now spend a couple of minutes reflecting and updating you on our 2019 outlook. Today, we're providing the markets with our full year outlook for the year -- for 2019 as well as providing our outlook for the first quarter of 2019. So for the full year 2019, our RevPAR range for our 20-hotel portfolio is an increase of 1.5% to 3.5% versus the prior year. We expect these revenue trends to generate adjusted corporate EBITDA, ranging from $174.8 million to $181.8 million. And our AFFO available to common shareholders will range for the full year from $2.35 to $2.45 per diluted share.

For the first quarter of 2019, our RevPAR range for the 20-hotel portfolio is an increase of 1% to 3% versus the prior year. These revenue trends will generate adjusted corporate EBITDA ranging between $30.4 million and $31.9 million, and our AFFO available to common shareholders will range from $0.41 to $0.44 per diluted share. Please note these numbers assume no acquisitions, dispositions or financing transactions.

Our outlook for our portfolio for 2019 reflects strong performance in our important San Francisco market. As you know we generate over 25% of our EBITDA on this market and with our hotels now fully renovated, we expect to benefit greatly from the completion of the expanded Moscone Convention Center. Despite the strength of the San Francisco market, we are challenged by weaker citywide convention calendars in some key markets including Boston, Chicago and DC, as well as some renovation disruptions early in the year.

Let me now turn the call over to Jim to provide more color and detail on our outlook for 2019, as well as provide a brief review of our fourth quarter performance. Jim?

James L. Francis -- President and Chief Executive Officer

Thanks, Doug. While the fourth quarter is behind us at this point I want to spend a few minutes to highlight our very strong operating results. As Doug mentioned, RevPAR growth for the portfolio was 3.7% which is above the midpoint of our guidance range. And this included the negative impact from the Adagio and Checkers renovations in the quarter, which reduced RevPAR growth by roundly 120 basis points.

EBITDA margins for the quarter ended at 31.1%, which was an increase of 110 basis points year-over-year and was above our guidance range. Our growth was partially driven by a successful real estate tax settlement in Chicago, but also negatively impacted by 40 basis points from our renovations. Our asset management team continued to manage expenses very tightly in the quarter with operating expenses above GOP up less than 3% year-over-year and on a POR basis up roundly 1%. This solid execution improved our GOP margin by 30 basis points to finish at 41.5%.

In particular, I want to highlight our continued efforts to control labor costs, our single largest operating expense. We were able to further reengineer our operating models and despite wage pressures occurring across virtually all markets, held overall labor expense increases below 2.5%. While labor pressures continue and will be more visible in 2019, we are very pleased with the results of these efforts all year long.

October results were very strong and better than expected with RevPAR increasing 7.9%, November results were notably soft group month were roundly in line with expectations with RevPAR declining 2%, and December results were modestly above expectations with RevPAR up 4.2%. Our strongest markets for the quarter included San Diego up over 20% in RevPAR, San Francisco up almost 8%, led by the JW, Boston up almost 6%, New York City up over 7%, Miami up over 3% and Denver up almost 2.5%.

On the negative side, LA was down 5% which was negatively impacted by the Checkers renovation, New Orleans was down roundly 6% with a weak citywide calendar, Seattle was down 6.5% with some renovation impact in the quarter, DC was down 5% and Chicago was down a little over 2% in the quarter. As we set our sights on 2019, we see no sign of an imminent recession and we do expect economic growth to continue albeit at a moderated pace.

The labor markets are very healthy, the consumer is strong, credit conditions are still accommodating and the yield curve while flat has not inverted. Certainly there is noise from the government shutdown and the trade issues with China, that negatively impacted economic activity, but overall, we see the economy as solid for 2019 and we expect GDP growth in the 2.25% to 2.5% range.

That all said, we believe it's prudent to set a conservative expectations to start the year. For 2019, as Doug mentioned, we're forecasting RevPAR growth in the 1.5% to 3.5% range. This guidance does include the negative renovation impact in the first four months of the year from our three room renovations, which are under way at Checkers, Mission Bay and Seattle. These three projects are forecasted to negatively impact our full year RevPAR growth by approximately 50 basis points to 60 basis points, and our EBITDA by approximately $2 million, and our margins by 20 basis points to 25 basis points for the year.

We're forecasting Q1 RevPAR in the 1% to 3% range and 2019 is off to a solid start with RevPAR in January, up 2.3% in February is tracking north of 3%. This range includes an approximate 200 basis points negative impact on RevPAR from our three renovation projects which are concentrated in the first quarter of the year. As well our margins are negatively impacted by 80 basis points and EBITDA by $1.75 million in the quarter from these projects. I will note that for our three renovations, each of the projects are on schedule, we see no reason that they will not be substantially completed on time in late March for Checkers and Seattle, in late April for Hyatt Mission Bay.

Well, it's way too early to discuss expectations for 2020 in any detail, I would note that the citywide room nights generated by the convention centers at most of our major markets are generally rebounding from 2019, including Boston, Chicago, DC, LA, Miami and San Diego. Furthermore, group bookings are improving for 2020 at some of the properties impacted by the Marriott sales force reorganization, notably Chicago City Center and Le Meridien New Orleans, as well as the Denver Hilton, where we were impacted in the group segment by the change in brand this past year. Our group pace for 2020 is up in the low double-digits, while this growth and pace will moderate over time we're off to a strong start as we look at 2020.

Now let me provide a little more color by market in regards to our thoughts for 2019. San Francisco is our largest market, we have over 25% of our EBITDA in San Francisco in 2019. As we all know with the renovated and expanded Moscone Center, reopening and limited supply growth San Francisco be the strongest domestic lodging market in 2019 by a very wide margin.

All four of our properties are fully renovated and in excellent condition. We expect RevPAR growth to be in the 7.5% to 8.5% range for the year. In Boston citywides are down in 2019 and there has been some supply increases. We expect our two hotels to generate RevPAR growth in the 1% range In Chicago, 2019 is expected to be a challenging year with citywide down in the impacts from new hotel supply. For full year 2019, we expect RevPAR growth to be flat to slightly down for our two hotels. We are seeing some signs of stronger group bookings for City Center and we expect City Center to outperform Lakeshore.

In Miami at our Royal Palm hotel, the $620 million renovation of the 1.4 million square foot convention center was completed in Q4. And our group pace is up significantly as we entered the year with both internal and convention business, this group demand allows us to better yield the leisure guest customers. We expect RevPAR growth in the 2% range at our hotel. In New Orleans, there are modest supply increases and citywides are a bit softer in 2019, but the major events of Mardi Gras with the later date and Jazz Fest with an extra day are more favorable to us this year. We expect RevPAR growth in the 1% to 2% range for our two hotels.

In Denver, as you are aware, we're now entering our second full year as a Hilton branded hotel and are excited with the traction we gained in 2018. Early in the fourth quarter, we made our final management changes at the hotel and now have seasoned Hilton Executives in key positions that understand the Hilton yield management systems in the commercial sales engine, as we continue to ramp up under this new brand, we expect RevPAR growth in the 2% to 3% range this year in Denver.

Our LA area properties include the Hilton Checkers and the Ace Hotel and Theater for 2019, and including the previously discussed renovation impact at the Hilton Checkers, we expect RevPAR to be down in the 2% range. In San Diego, including the renovation impact at the Hyatt Mission Bay, we expect RevPAR growth in 2019 to be roundly flat to slightly down for the year. Of note, when we complete the Mission Bay renovation project in April, we'll add nine new guest rooms to the hotel inventory.

In Chesapeake's smaller markets, we expect Seattle RevPAR to be down roundly 2% in 2019 with the negative impact in Q1 from our soft goods renovation. And in DC we expect RevPAR to be up in the 2% range for the year, as we've navigated through the federal government shutdown early in the year. And finally in New York with supply growth modestly slowing, we expect RevPAR growth in the 1% to 2% for our two hotels.

While the industry operating environment continues to have challenges, we expect 2019 to be a solid year for our portfolio. And we are cautiously optimistic that there is upside to this guidance. We expect that our well located portfolio with over 25% of our EBITDA on San Francisco will outperform its competitors. We remain sharply focused on cost controls, despite meaningful cost pressures in some areas. As well, we have continually reinvested capital in our portfolio and it's in great shape with very minimal future CapEx needs and that's minimal operating disruptions. Over the long-term, we believe our footprint and EBITDA concentration are one of the strongest in our industry.

With that, we will open it up for questions.

Questions and Answers:

Operator

(Operator Instructions) Your first question comes from the line of Austin Wurschmidt. Your line is open.

Austin Wurschmidt -- KeyBanc Capital Markets Inc. -- Analyst

Hi, good evening. It -- correct me if I'm wrong, it looks as though you guys bought back a modest amount of shares during the quarter, and just curious given your available dry powder. What held you back from buying back more shares? And If so, could you just kind of talk about how you think about buybacks relative to either NAV or some other valuation metric as to where you find the price attractive?

Douglas W. Vicari -- Executive Vice President and Chief Financial Officer

Austin, let me just correct you there, we did not buyback any shares, that's really just the math on share vesting, we had performance shares and we had time-based shares vesting at the end of the year, so there was no buyback.

Austin Wurschmidt -- KeyBanc Capital Markets Inc. -- Analyst

Okay, appreciate your correction there.

James L. Francis -- President and Chief Executive Officer

As far as looking forward certainly, we look at valuation in a lot of different ways. But I would say, most importantly, we certainly look at NAV as the best barometer of viewing how to allocate capital as far as the share buyback. As we continue to generate a stronger balance sheet and have proceeds available, that's something we'll consider and continue to evaluate, given where we were in the quarter, as Doug mentioned, we didn't buy any shares back, we'll continue to look at it. I mean I don't want to -- I'm not going to quote exactly what we think internally our NAV is, but there is certainly projections out there, it's something we'll continue to evaluate.

Douglas W. Vicari -- Executive Vice President and Chief Financial Officer

Yeah, and also we have ...

Austin Wurschmidt -- KeyBanc Capital Markets Inc. -- Analyst

Okay. And just to be clear I was referencing what was in the 10-K at 132,000 shares at $0.24, $0.36 (ph) under the total number of shares purchased, so?

James L. Francis -- President and Chief Executive Officer

Yeah, OK.

Graham J. Wootten -- Senior Vice President, Chief Accounting Officer and Secretary

Austin, this is Graham. Just to clarify, those were not shares bought in the open market, executives as it relates to vesting of shares have the right and as all lodging REITs do to in terms of the tax liability, they can basically sell share that we were vesting back to the company. So that's really what that is, that's just to cover the tax liability on the shares, those were not bought in the open market.

James L. Francis -- President and Chief Executive Officer

But I think your questions -- a good question and I would just say we're open to buying back shares, and we'll continue to evaluate that with our Board, particularly as our balance sheet has gotten stronger.

Douglas W. Vicari -- Executive Vice President and Chief Financial Officer

I mean Austin sitting with cash and I mean at this point, I think we have three options, right, we can sit with cash and collect interest income, we can potentially buyback shares and that's a exercise that we would continue to look at. And then again redeploying capital in markets that would make sense for us, but knowing that cap rates are tight and the market right now is a difficult acquisition environment for a public REIT. So we're always going to evaluate those options and in the near-term I guess with some excess cash coming out Santa Barbara, we're basically just sitting with the cash on the balance sheet and continuing to evaluate opportunities that we may have.

Austin Wurschmidt -- KeyBanc Capital Markets Inc. -- Analyst

Got it. Thanks for the thoughts there. And then separately, Jim, clearly seems to be some optimism this year that the guidance is conservative. I was just curious if there are any specific markets versus the RevPAR growth you outlined by each market where you kind of see the most upside versus your initial guide?

James L. Francis -- President and Chief Executive Officer

Well, I think there is a few that were -- I don't want to use the word bullish, but we are optimistic about. And I think certainly I think Denver is again -- and I'm not commenting so much on the overall market as I am commenting in our performance of our hotel. We did have some slippage last year in Denver, relative to our expectations with the Hilton conversion. And so -- and by the way, Hilton has been great to work with and we're very positive on the conversion, but it just takes a little more time, particularly that's our largest hotel from a room count perspective and by far our largest group house.

And it just takes some time to get the sales engine going and all that working as well as a new yield revenue management system. So I'm optimistic about Denver, I'm optimistic about Miami, relative to expectations and I'm optimistic about New York as well. And -- so I think there's some potential positive upsides in San Francisco, of course it's very strong, but that's in our guidance.

Austin Wurschmidt -- KeyBanc Capital Markets Inc. -- Analyst

Appreciate that. And then last one for me, just curious of the update, as it relates to the W Lakeshore, anything you can share there as far as the value creation initiatives?

James L. Francis -- President and Chief Executive Officer

I can't get into details. What I can say is that one of the avenues we were going down did not work out last fall. And we are working on another avenue as we speak and I hope at the next quarterly call, I will have a concrete announcement to make. This path we're going down now, I would just say as a much shorter timeline to it than what we were talking about last year.

Lakeshore is a difficult asset for us, out of our 20-hotels it is the most difficult asset for us from a performance perspective. I think that's a combination of quite a few things, it's the market overall, it's the marquee opening and how that has impacted some of the larger Marriott boxes in particularly in that area of town. And certainly the sales force, reorganization and yield management -- new yield management system at Marriott has hurt that hotel more than others. And so, we are working hard on it, it's our number one priority from an asset management perspective and hopefully I'll have something to tell you in the next quarter.

Austin Wurschmidt -- KeyBanc Capital Markets Inc. -- Analyst

Great. Thank you guys for the thoughts.

James L. Francis -- President and Chief Executive Officer

Thank you.

Operator

Your next question comes from the line of Chris Woronka. Your line is open.

Chris Woronka -- Deutsche Bank -- Analyst

Hey, good afternoon guys. Jim, I think you mentioned in your comments that the labor increases are going be a little bit more visible this year. I'm guessing maybe you were referencing at least in part the reset in San Francisco. But can you kind of talk about -- expand maybe a little bit upon that comment. And also what are some of the offsets you're seeing to kind of protect margins? I don't know if it's all OTA related or Marriott Starwood synergies or maybe you can give us a little color there. Thank you.

James L. Francis -- President and Chief Executive Officer

So, yeah, I mean the labor is -- certainly there is labor pressures pretty much across the Board, though there are more -- a little bit more significant on the West Coast in general. And we certainly want to and need to keep our associates up with market rates and that's important to us, and it certainly keep our workforce appropriately compensated. So by market, I would just say, certainly the West Coast has been hit, New York got hit some, though we have soft smaller hotels and without a lot of F&B. And we're talking about overall labor in the portfolio this year, probably in the high 3% range as far as year-over-year change and some of that is a little bit, I wouldn't call it catch up but just to some extent we've kept the labor pressures at Bay pretty well over the last year or two. And so there is a little bit of, I don't call one time, but to some extent I guess I'd call it a little bit of a catch-up there.

As far as offsets to that, I mean, again, we continue to reengineer and staff a little bit better. We continue to have certainly fees like OTA fees are down, some of the technology and reservation fees are down a little bit, maybe a little synergy in the Marriott Starwood synergies, but I'm not sure I see it quite as aggressively as host does. And I can't remember what they quoted, but it was relatively aggressive, I thought margin improvement from Jazz, Starwood and Marriott synergies. That said, remember, we don't have many Marriott managed properties, right. So while we're branded Marriott, we have a lot of franchise deals which wouldn't be impacted necessarily as much by the synergies. But we are seeing some efficiencies there.

So overall, we're still able, I think to manage expenses in a pretty tight range. But for this year in particular, yes, labor is certainly more of a cost pressure.

Chris Woronka -- Deutsche Bank -- Analyst

Okay, great. And then want to ask on the Group's, understood San Francisco is going to be pretty strong. You mentioned several your other markets are down, but looking better next year. Is that kind of a -- is it an odd-even year phenomenon? Or is it just -- there is a shift maybe this year? And then the strength in groups is -- in a lot of markets you're not in or, do you know ...

James L. Francis -- President and Chief Executive Officer

Well, I mean I think the strength -- I don't, again I'm not -- we're not in Vegas or Orlando, and so I don't have the stats on that. Certainly, San Francisco is off the charts as we know which has sucked up some of the other markets. Chicago is typically a cycle and it's just an half year, Boston is down this year, but comes back next year. So I would suppose it's a variety of reasons around the different markets. But certainly those markets in general are down yet they either, most of them rebound going into 2020.

Chris Woronka -- Deutsche Bank -- Analyst

Okay, great. And just want to follow-up on the transaction market, I guess. And are there any markets where maybe without naming specifics, but are you -- have you gotten warm on any deals? I mean, are there any markets or specific assets where you can maybe take a different view and kind of get something to pencil.

James L. Francis -- President and Chief Executive Officer

We have -- there is -- we've looked at a lot of deals in the last call at 12 months or so, and we've gotten fairly warm on a couple. But on a percentage basis as far as the percentage of deals we look at, I would have to say it's a relatively low percent. I won't comment on the specific markets, there are a couple of markets in particular that we are looking at a little harder. I do think -- I still think, we need to be relatively conservative in our underwriting projections. I mean the expectations that we have out there and everyone seeing for this year, excluding San Francisco is relatively modest top line growth with expense pressures.

So underwriting any meaningful margin improvement, I think would not be a good way to go, unless it's some kind of property that can be the court fix, because it's been mismanaged, though I would say this latter part of the cycle it's hard to find those. But there are -- the answer to your question, there are a few -- a couple of markets and I don't want to say which ones, but that we're looking a little closer at, there's some certainly some probability we'll get a deal done or two this year, but there's nothing imminent right at this moment.

Chris Woronka -- Deutsche Bank -- Analyst

Okay, great. Thanks, Jim.

Operator

Your next question comes from the line of Wes Golladay. Your line is open.

Wesley Golladay -- RBC Capital Markets -- Analyst

Hi guys. What are your investment plans as far as capital spending this year? And you have been able to control the labor cost, do you have any efficiency projects you're working on?

James L. Francis -- President and Chief Executive Officer

Well, let me, Doug will tell you on the capital side, which I think is roundly $30 million total with probably about $10 million of that coming from the corporate balance sheet and $20 million coming from FF&E reserves way. So from an owner fund and perspective, we're talking about a de minimis amount for the year of about $10 million. From a labor efficiency perspective, again, there's nothing that I can point to as a savior, we're doing some kind of program or system across a bunch of properties to save money. I don't have any -- we don't have any projects in that arena. We just continue to work property-by-property at our staff, both at department head levels and management levels, as well as hourly staff, refining F&B offerings a little bit, those kinds of things and just continue to work at it.

Douglas W. Vicari -- Executive Vice President and Chief Financial Officer

Yeah, Wes, the only thing I will add to that is just that, as we look at the requirements we have this year and even next year, there's going to be very little volatility meaning, we have some disruption in the first quarter this year, but as we look at the projects over the next couple of years, spending should be somewhat consistent and again, I think compared to our peers, right now, I think that we just don't have a lot of headwinds and tailwinds coming off renovations, which I think is a positive.

Wesley Golladay -- RBC Capital Markets -- Analyst

Yeah, and I agree with that. And then want to go back to that comment about the citywide, just being a little off this year. Is there any way you can give us like, it was like 50 basis point impact for the overall guide, is it a 100 basis points as we look to model for next year.

James L. Francis -- President and Chief Executive Officer

I would have to do a little bit of calculating on that. I mean I would -- without having that analysis done, I hesitate a little bit to comment on that. Certainly, I would think the citywides, if you look across Boston and Chicago, in particular, where we have a decent amount of EBITDA in kind of normalize that, that's -- I would think that would impact the portfolio, probably 50 basis points or something on the year, if you kind of think about that -- those group rooms coming back as we look into to 2020. I mean, the other thing is we are gaining some traction, we did have some fall off by the Marriott sales reorganization. We are gaining some traction in 2020 and beyond with some of those hotels such as Le Meridien New Orleans, Chicago City Center In particular, which will impact 2020 to some extent and beyond that.

Wesley Golladay -- RBC Capital Markets -- Analyst

And last one for me. When you look at the supply picture next year, how does that look versus this year? Just maybe in total supply and then maybe some disruptive supply, I think there are some out there in Denver and Seattle, does that get better next year? Any comment there.

James L. Francis -- President and Chief Executive Officer

So on a weighted average basis. Yeah, on a kind of a weighted average basis across our portfolio in looking at the markets and kind of weighted on an EBITDA basis, supply tapers a little bit next year and then tapers again a little bit in 2020, but it's still kind of in the 3% to 4% range. You had to get specific to Denver, you had the Gaylord opening, out at the -- out near the airport, which is impacting citywide business in Denver. But that said, I'm very positive on Denver because of the traction we're gaining with Hilton and we're the only full service Hilton and Denver and the CBD of Denver. And so despite Gaylord opening and under the Marriott brands, we're are doing -- I think we're going to do quite well in Denver.

So -- but yeah, in Denver, there's still some supply coming, but not the big disruptive supply of -- like Gaylord, you still have some little bit more supply coming in Seattle and LA. In total it tapers off probably 100 basis points next year versus this year.

Wesley Golladay -- RBC Capital Markets -- Analyst

Okay, thanks a lot.

Operator

Your next question comes from the line of Michael Bellisario. Your line is open.

Michael Bellisario -- Robert W. Baird -- Analyst

Good afternoon, guys.

James L. Francis -- President and Chief Executive Officer

Hey, Mike.

Michael Bellisario -- Robert W. Baird -- Analyst

Just want to go back to San Francisco and your 7.5% to 8.5% range that you mentioned. How much of that is market share gains from recent renovations versus kind of your overall view of market growth? And then, how should we think about the split between occupancy and ADR in that 7.5%, 8.5% range you have?

James L. Francis -- President and Chief Executive Officer

Sure. I mean, you've got -- you had some -- you're getting some market share gain back, as you look out throughout the year at Adagio, the second half of the year, as we had renovations last year. So on a weighted basis, if you look at a portfolio of four hotels, we're -- we still ran very high occupancies in '18, we'll probably gain roundly 200 basis points across -- on an average across the four hotels on '19 versus '18 and then the rest of it is average rate.

So are we above market because of the renovation certainly at Adagio we are, the other hotel -- I mean JW continues to gain a little bit of share from the renovation in the prior year, but it's mainly Adagio from a market share perspective. So out of 7.5% to 8.5%, what we say the mark, if we come in at the higher end of that range, is that 100 basis points higher than overall market? Yeah, maybe I mean I'll have a calculator to do the math, but that's probably about right.

Michael Bellisario -- Robert W. Baird -- Analyst

Got it. As you think about the longer-term view in San Francisco, have you or your operators hear any pushback on pricing and other markets being more competitive for groups or corporations, other concerns in the market, as you think about a three to five year view there with how strong San Francisco has been and how much further it can go?

James L. Francis -- President and Chief Executive Officer

Yeah, now I mean, we certainly haven't at this point. We know that citywides are going to be down a little bit next year in San Francisco. Just because this is an unbelievable year, but not down meaningfully. And as far as pricing goes, I think no, I think we're fine certainly a more meaningful supply comes into the market than we're expecting that could ultimately impact pricing as it has in other markets. But no -- and of course, we're not suggesting that you're going to get 8%, 8.5% RevPAR growth compounded out. But we believe San Francisco is priced -- still priced competitively and we'll have a -- be a very healthy lodging market over the next several years.

Michael Bellisario -- Robert W. Baird -- Analyst

Got it. And then just switching gears just back to renovations beyond the three that you guys have in the first quarter. What -- if you think about over the next 12 months to 15 months, what's next on the docket in terms of bigger projects that you might have?

Douglas W. Vicari -- Executive Vice President and Chief Financial Officer

We've got some small stuff going like I mean, at the end of this year, we'll have the three or four projects running through the first quarter into April this year. On the back half of the year, we'll do a little work at City Center, we'll do a little work in New York at the Hyatt Place and the French Quarter W as well. And beyond that as we go into next year, I mean it's probably maybe a couple of hotels that are going to require some room updates and some soft good renovations. But it's going to be relatively de minimis as we move through. So we'll complete the three or four that are ongoing, probably by the end of April. And then on the back half of the year, we'll start to kick-in with some of the other renovations. But like I said, the volatility there is the important factor that it really shouldn't be significantly disruptive as we kind of plan out the year and then move into next year.

Michael Bellisario -- Robert W. Baird -- Analyst

Got it. That's helpful. That's all for me. Thank you.

James L. Francis -- President and Chief Executive Officer

Okay. Thanks, Mike.

Operator

(Operator Instructions) Your next question comes from the line of Tyler Batory. Your line is open.

Tyler Batory -- Janney Montgomery Scott -- Analyst

Hey guys, thanks for taking my questions.

James L. Francis -- President and Chief Executive Officer

Sure.

Tyler Batory -- Janney Montgomery Scott -- Analyst

So I wanted to ask a little bit on the demand side of things. Curious, I know it's still early in the year, but what are you seeing on the corporate side, any change versus what you saw at second half of 2018?

James L. Francis -- President and Chief Executive Officer

No, I mean, it's steady, no -- the summary answer is, no, not really seen any change, it's steady business, overall in the portfolio cost corporate business, occupancies and number of room nights sold will be about the same. And again, I think it's -- for most -- for a lot of 2019, it's a tale of two cities, right, it's San Francisco and then as everybody else. That said, within the everybody else, we do have some positives I think in, like I said Denver and Miami, I think we'd do well. And we do have some positives just because of the softness we had with the Marriott sales force reorganization. So again, I don't want to overstate the case, but there are some positive tailwinds if you will, that aren't necessarily market related, but they're more related to our portfolio or our assets. But I would say overall demand is consistent, I mean it's stable.

Tyler Batory -- Janney Montgomery Scott -- Analyst

Okay, that's helpful. And then I want to follow-up on the Marriott sales force reorganization. Have you guys pretty much completely moved past that or is there anything -- impact that into 2019?

James L. Francis -- President and Chief Executive Officer

Well, I would say this, I mean, certainly the reorganization is done and behind us, so people are in place systems are in place, all the processes are in place. That said, have we lost momentum and we acknowledged that last year in a couple of hotels, particularly in Chicago and actually Marriott manages the Le Meridien New Orleans for us, and those hotels lost momentum. And it takes time to kind of reprime the pump, if you will from a group sales perspective in particular.

That said, we are seeing strides at the -- in those hotels, particularly City Center and Le Meridien, where business is being put on the books. Some in the year for the year and some a year 2020, 2021 kind of business as well. And so, when I say lingering impact, I guess whatever lingering impact there is to the sales side and as far as revenues go for 2000 -- for this year, all of that is backed into our guidance. And so yes, there is a little bit of lingering impact, but it's all in the guidance.

Tyler Batory -- Janney Montgomery Scott -- Analyst

Okay, got it. That's helpful. And the last question for me, Jim, any updated thoughts on asset sales? I'm curious if you have any updated thinking as far as how you think about balancing potential sales with what you think is the ideal size for your portfolio?

James L. Francis -- President and Chief Executive Officer

Sure. I mean I think -- we're certainly kicking around the idea of a couple asset sales, because from our perspective right or wrong, but we think we're right, it's relatively attractive pricing out there to sell assets into, that said we are smaller in size and we have to be aware of our size, and of course aware of our size relative to dividend coverage and those kinds of things. We'll not impact the dividend, it's solid and we'll continue to be there. So either, we have to be able -- if we sell anything of size, we have to be able to redeploy the capital in another EBITDA producing asset or buyback shares to some extent.

Certainly, we can park some cash at least for a while on the balance sheet, but I wouldn't want to park hundreds and hundreds of millions of dollars on the balance sheet. So it's an attractive market from a seller's perspective I think. And so, as we go through the year, we're going to -- we're continuing to evaluate that, but we are thinking about it as far as asset sales. And again, we're not talking about huge numbers, I'm not suggesting, we're going to sell half the portfolio, but you could see us trim another asset or two over time.

Tyler Batory -- Janney Montgomery Scott -- Analyst

Okay. Really good guys. Thank you.

Douglas W. Vicari -- Executive Vice President and Chief Financial Officer

Thanks, Tyler.

Operator

And there are no further questions at this time over the phone. Presenters, you may continue.

James L. Francis -- President and Chief Executive Officer

All right. Well thank you, Michelle, again, we just want to thank everybody for being on the call today and we are obviously here tonight and tomorrow for any follow-up. So don't hesitate, if there is any follow-up questions. Thank you.

Operator

And this concludes today's conference call. Thank you all for participating. You may now disconnect.

Duration: 44 minutes

Call participants:

Douglas W. Vicari -- Executive Vice President and Chief Financial Officer

James L. Francis -- President and Chief Executive Officer

Austin Wurschmidt -- KeyBanc Capital Markets Inc. -- Analyst

Graham J. Wootten -- Senior Vice President, Chief Accounting Officer and Secretary

Chris Woronka -- Deutsche Bank -- Analyst

Wesley Golladay -- RBC Capital Markets -- Analyst

Michael Bellisario -- Robert W. Baird -- Analyst

Tyler Batory -- Janney Montgomery Scott -- Analyst

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