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Pebblebrook Hotel Trust (NYSE:PEB)
Q4 2019 Earnings Call
Feb 21, 2020, 9:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Pebblebrook Hotel Trust Fourth Quarter and Year-End Earnings Conference Call. [Operator Instructions] It is now my pleasure to introduce your host, Ray Martz, Chief Financial Officer. Thank you. You may begin.

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Thank you, Donna, and good morning, everyone. And thank you for joining us today. With me this morning is Jon Bortz, our Chairman and Chief Executive Officer.

But before we start, a quick 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 10-K for 2019 and our other SEC filings, and future results can differ materially from those implied by our comments today. Forward-looking statements that we make today are effective only as of today, February 21, 2020, and we undertake no duty to update them later.

You can find our SEC reports and earnings release, which contain reconciliations of the non-GAAP financial measures we use, on our website at pebblebrookhotels.com.

Okay, 2019 marked our 10th year as a public company, and we want to take a moment to thank our shareholders, as well as our hotel and financial partners for their strong support over the last 10 years, Not only have we achieved a lot over the last 10 years, we successfully moved the ball forward in many areas in 2019, following our corporate acquisition in late 2018. And on an operating basis, we outperformed the industry for the year.

In 2019, total same property RevPAR increased by 1.9%, adjusted EBITDA increased 87.8% and adjusted FFO per share increased by 7.3% to $2.63 per share, all of which were ahead of our expectations. Since November 2018, we also completed $1.33 billion of asset sales, comprising 13 hotels at very attractive valuations, with another $331 million of sales expected to be completed later this quarter. We also successfully completed 12 operator and brand transitions and invested $162.8 million of capital into our hotels, putting us in great position to continue to outperform.

Following the $5.1 billion corporate acquisition that we completed in November 2018, we successfully integrated the two portfolios, including all IT, business intelligence and accounting systems, and corporate employees, and we combined our offices into one location in September, all with no disruption.

During 2019, we also announced our first formalized ESG report, highlighting the benefits of more than $13 [Phonetic] million of environmentally focused capital investments across the portfolio over the last several years that helped the overall environment and our local communities. This has allowed our hotel portfolio to reduce greenhouse gas emissions by 24%, energy intensity by 12% and water intensity and usage by 5% even with increasing occupancy levels across our portfolio. Our entire team is proud of the great work we've done and the additional environmental and social responsibility opportunities we identified for the future.

Turning to the highlights of our fourth quarter, same property total RevPAR increased 2.8%, exceeding our outlook, and same property RevPAR increased 2%, which was at the top end of our 0% to 2% outlook and outperformed the industry's 0.7% increase and the urban market's 0.3% decline. Adjusted EBITDA came in at $100.1 million, beating the top end of our outlook by $1.9 million. Adjusted FFO per share finished at $0.54 per share, exceeding our outlook of $0.49 to $0.52 per share.

Our better than expected performance during the fourth quarter was driven primarily by healthy business and leisure travel demand, which strengthened as the quarter progressed, reversing the trends that we saw during the third quarter, which was encouraging. For our markets, San Francisco, South Florida, Philadelphia and Chicago were our strongest markets. Our weaker markets in the quarter were San Diego, due to a softer convention calendar compared with the prior year, along with Seattle and Portland, which was mostly due to supply increases.

In terms of monthly RevPAR, we saw a 2.7% decline in October, a 7% increase in November with the help of a very healthy convention calendar in San Francisco, and a strong 4% increase in December.

In the quarter, our San Francisco hotels generated a RevPAR increase of 13.5%, which achieved growth rates well above the San Francisco market tracks gain of 10.5%. San Francisco benefited from a strong convention calendar, as well as a shift to Dreamforce into November this year from September last year. Our Key West hotels generated a RevPAR increase of 7.1%, which was above the Key West market track gain of 6.6%. And our Naples resort produced a RevPAR increase of 9.9%. Our Chicago hotels grew RevPAR 3.3%, far outpacing the Chicago CBD's decline of 2.2%.

Our under-performing markets were the ones we expected. Our Seattle hotels experienced a 2.8% RevPAR decline due to a 7.5% increase in supply, even with a 9.2% demand increase in the market. The Seattle downtown track had a 2% decline, still struggling to absorb the 1,200-room convention hotel added to the market in late 2018. Our Portland hotels experienced a 2.7% RevPAR decline in the quarter, slightly better than the 3.7% decline in the Portland downtown track, which was impacted by a 4.1% increase -- supply increase that more than offset a strong 3.4% increase in demand. Our San Diego hotels experienced in 8.1% RevPAR decline, better than the San Diego market track decline of 10.4%, even with our Westin and Embassy Suites being under renovation as the city had a weak convention calendar compared with the prior year.

Our portfolio on a relative basis outperformed our comparable combined STR market tracks, generating a RevPAR increase of 2% versus 0.7% for the market tracks. We also had approximately 55 basis points of negative impact to RevPAR from renovations during the quarter, plus 125 basis points of negative impact from the hotels that recently transitioned to new management companies. This combined 180 basis point impact to RevPAR in the fourth quarter was largely in our forecast and serves to underlying the potential future outperformance of our hotels. Our hotels gained approximately 100 basis points of market share for the quarter. Again, this demonstrates significant success from our prior redevelopments, even with the disruption from renovations and manager transitions across the portfolio.

For the year, we gained approximately 60 basis points of penetration on a portfolio basis, despite a 125 basis points of negative impact from renovations, brand manager transitions and other market-specific events during the year. This outperformance versus our markets is driven mainly by the ramp-up of our recently renovated hotels and continued implementation of our best practices and other initiatives, all of which allowed us to outperform the urban markets during 2019 by over 100 basis points, and we expect that this trend of outperformance will continue into 2020 and beyond.

As a reminder, our fourth quarter RevPAR and hotel EBITDA results are same property for our ownership period and include all of the hotels we owned as of December 31, 2019, except the Topaz, which was sold in November, and the Donovan Hotel, which was closed on November 17 for a major renovation and redevelopment and is expected to reopen in the second quarter.

Overall for the quarter, transient revenue, which makes up about 74% of our total portfolio room revenues, declined 1% compared to the prior year. Transient ADR declined by 2.2% in the quarter. Declines in transient demand were probably driven by our hotels in Downtown San Diego, where we started the renovations at Western Gaslamp and Embassy Suites Downtown. On a positive note, group revenues increased 9.4% in the quarter, with room nights rising 6.4% and ADR increasing by 2.7%. This was primarily due to a healthy convention calendar in San Francisco.

Fourth quarter same property hotel EBITDA was $109 million, exceeding the top end of our outlook by $1.2 million and a 1.4% increase over the prior-year period. Adjusted EBITDA was $100.1 million, exceeding the top end of our outlook by $1.9 million due to the better than expected hotel EBITDA growth, combined with savings in corporate G&A expenses. Adjusted FFO per share was $0.54 per share, above our outlook range of $0.49 to $0.52 per share due to the adjusted EBITDA beat and interest expense savings.

As we look to 2020, our RevPAR outlook for the portfolio assumes a range of down 1% to up 1%, which is also where we believe the US hotel industry will perform in 2020. However, other than what we've already experienced and incorporated, this does not include any material impact from the coronavirus, which at this time is unknowable and not able to be forecasted.

Our 2020 same property RevPAR outlook incorporates approximately 90 basis points of estimated negative impact from our 2020 renovations and planned manager and brand transitions, which is slightly less than our estimate of 110 basis points of impact from both factors in 2019. We expect the first quarter to be the weakest quarter on a year-over-year RevPAR basis with a decrease of 1% to 4%, with the largest impact from renovations and operator transitions forecasted at 265 basis points in the quarter.

Our portfolio experienced same property RevPAR growth of 0.7% in January, despite substantial renovation impact, and we're on target for a 6% to 7% RevPAR decline in February, mainly due to renovation disruptions, as well as a weaker convention calendar in San Francisco, compared to a record-breaking quarter in San Francisco last year.

Shifting now to our capital reinvestment programs, during 2019, we invested $162.8 million in our portfolio, completing major renovations at several hotels, including W Boston, Mondrian Los Angeles, Sofitel Philadelphia and Skamania Lodge. For 2020, we anticipate investing an additional $165 million to $185 million, just slightly higher than last year, and it includes eight major redevelopments. Jon will provide detail on the on the scope of these renovations and transformations later in the call.

Turning to our balance sheet, assuming the $331 million of sales of the InterCon Buckhead and Sofitel DC are completed later this quarter and assuming net proceeds are used to reduce debt, our debt to EBITDA ratio should be around 4.4 times, our debt to enterprise ratio will be around 29% and our fixed charge ratio will be about 3 times. Our weighted average cost of debt is 3.5% with 77% of fixed interest rates.

Finally, based on our current share price of $24.64, we traded at an implied 7.6% NOI cap rate based on 2019 actual results, which is a 35% plus discount to the implied midpoint of our NAV. We also provide a healthy 6.2% dividend yield.

And with that, I would now like to turn the call over to Jon to provide more insight on the new Pebblebrook Hotel Trust. Jon?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Thanks Ray. As Ray noted, the fourth quarter turned out better than we expected. The rate of demand growth improved from the third quarter in both business and leisure transient, even with the challenging October. We also saw some improvement in ADR growth in the last two months of the year, which we also just saw in the STR industry results for January. Perhaps, eliminating or reducing trade tensions and uncertainties was the trigger for increased confidence and the improvements in the last three months. Unfortunately, with the emergence of the coronavirus and its impact on travel, we won't know whether this was the beginning of a positive trend or just a few good months.

For 2019, industry RevPAR growth softened from the year before, ending the year just below the low end of our original industry outlook of 1% to 3%. But as we forecasted, the urban and top 25 markets continued to underperform the industry. In the case of 2019, the urban market segment underperformed by the 100 basis points we had estimated at the beginning of the year, and the top 25 markets underperformed by 110 basis points. Supply growth for the industry remained constant at 2% growth, while supply in the urban markets increased 3.2%, representing the primary reason for the underperformance of the urban markets.

For Pebblebrook, for the year, our RevPAR growth significantly outperformed the urban markets as we originally expected, and we outperformed the industry by 30 basis points, which was a little better than our forecast. The successful ramp-up of numerous properties that we've redeveloped over the last few years was a key factor in this outperformance.

With the exception of the unpredictable impact from the evolving coronavirus situation, we expect to continue to outperform the urban markets and perform in line or better than the industry due to the benefits from the major redevelopment projects we completed last year and those under way now. This is reflected in our outlook for 2020. We believe industry RevPAR is likely to range between down 1% and up 1%, with urban underperforming by around 100 basis points.

For Pebblebrook, we believe our same property RevPAR growth will again outperform urban by 100 basis points and perform in line with the industry. All of these outlooks exclude any impact from the coronavirus. We also expect same property non-room revenues to grow about 100 basis points higher than our same property RevPAR. Also, keep in mind that room revenues should grow about 110 basis points higher than RevPAR in the first quarter due to the extra day from leap year and about 27 basis points higher for the year. Our same property RevPAR and room revenue outlooks also take into account 90 basis points of impact from renovations and operator and brand transitions.

As of the beginning of February, overall revenue on the books from group and transient for the year is supportive of our outlook and pacing ahead by 1.1%, with room nights up 1.7% and ADR pacing down slightly at minus 0.6%. Group pace is slightly down, but it's up excluding San Francisco, which has a tough comparison to last year's record year. Boston, Chicago, South Florida, Philadelphia, LA and Portland are all currently pacing nicely ahead of last year's revenue on the books for the year.

In arriving at our same property EBITDA outlook, we're forecasting same property expenses to increase in a range of 2.2% at the low end to 3.2% at the high end and 2.7% at the midpoint. These modest increases are achieved due to the success of our portfoliowide initiatives and implementation of our best practices, and they're despite combined wage and benefit increases in the 4% to 5% range and continuing higher-than-inflationary increases in customer acquisition costs, including loyalty costs, insurance, real estate taxes and technology. As a result, we're forecasting same property EBITDA to decline between 2.8% and 5.6% with the midpoint at minus 4.2%. This coincides with same property room revenue and RevPAR growth rates of 0.3% and 0% at the midpoint respectively, and same property expenses growing at 2.7% at the midpoint.

Now, I'd like to turn our focus to the four areas where we're going to create value for our shareholders in the years ahead, regardless of the economic environment. Those four areas being our major hotel and resort redevelopments and transformations, the completion of our strategic disposition plan, our portfoliowide initiatives, and branding.

As we explained last quarter, we identified 16 properties within the acquired portfolio that we determined will benefit from substantial investment through repositioning them to a higher competitive level, improving the guest experience and driving very attractive returns. With our most recent announcements, we've now disclosed the vast majority of the operator and brand changes we determined where needed to position our properties to maximize performance following redevelopment. The vast majority of these have occurred and are now behind us with less disruptive transitional performance and better overall performance ahead of us.

To date, of the 16 major projects we discussed last quarter, we've commenced or completed construction on eight of them. The Donovan Hotel, which will become the seventh hotel in The Unofficial Z Collection, following the completion of its $25 million repositioning and its reopening in the second quarter of this year as the reimagined Hotel Zena.

Mason & Rook, which will join the luxury Viceroy collection, following an $8 million upgrade, which is expected to be completed by mid-year 2020. The first phase of the $23 million repositioning of the 162-key Viceroy Santa Monica to be completed by the end of the second quarter. This consists of $10.5 million in Phase 1 to reinvigorate this property's reputation as one of the most iconic luxury lifestyle hotels in the highly supply constrained Santa Monica market. We'll do it through a complete redo of all of its public areas inside and out, as well as creating value by adding seven keys.

We also have the $12.5 million repositioning of Le Parc in West Hollywood through a comprehensive renovation of this entire all-suite hotel, with completion scheduled by the end of Q2. The repositioning of Chaminade Resort & Spa in Santa Cruz, following the completion of a $9 million upgrading of the property's vast indoor and outdoor public areas and meeting and event venues, with completion early in the second quarter.

The $11 million second and last phase of an overall $32 million redevelopment of the former Hilton San Diego Resort, which is being reinvented as an independent luxury resort under its new name, San Diego Mission Bay Resort. The property has already been renamed, and we expect to finish the property's transformation by the middle of the second quarter.

$5 million luxury repositioning of the 96-room Marker Key West, which is now complete. And finally, a $12 million transformation of the 189-room Villa Florence to commence in the third quarter with completion late in the fourth quarter, at which time, the hotel will be renamed and reconcepted as The Baybury San Francisco.

Combined, these eight major redevelopments represent an investment of $93 million with a forecasted increase in EBITDA upon stabilization of over $10 million. All of these projects should be complete this year with ramp-up beginning next year.

The remaining eight projects, all of which constitute 2021 completions, include a $37 million redevelopment of San Diego Paradise Point Resort into a Margaritaville Island Resort; the just announced $25 million repositioning and reinvention of Hotel Vitale in San Francisco as the eco-conscious luxury 1 Hotel San Francisco that John Travolta and Olivia Newton-John were winding [Phonetic] for in our hold music; the repositioning of the already luxurious L'Auberge Del Mar through a $10 million investment to drive higher rates and higher food and beverage profitability; a $20 million redevelopment of the Southernmost Resort in Key West, which is similar to our repositioning project at LaPlaya that has been so successful; the $20 million recreation of Marker San Francisco as our eighth Unofficial Z Collection hotel; our just announced transformation of Hotel Solamar to a Margaritaville resort hotel through a $20 million redevelopment; a $5 million redevelopment and reconcepting of Grafton on Sunset in West Hollywood; and finally, a $20 million redevelopment of an as yet unannounced property in the portfolio.

These eight 2021 projects, coupled with the $12 million second phase of the repositioning of Viceroy Santa Monica, some of which are scheduled to commence in this year's fourth quarter, total $169 million of investment and are currently forecasted to deliver an EBITDA yield of 10% or more in total upon stabilization in 2023 or 2024.

All told, we are currently forecasting that these 16 major repositioning projects will represent a total investment of just over $262 million with an expected 10% EBITDA yield on investment in total upon stabilization.

Next, I'd like to turn to make a few comments about the progress on our strategic disposition plan. As you're aware, we recently announced a contract to sell the InterContinental Buckhead and Sofitel Washington DC for $331 million. The buyer of the two hotels has significant hard money down. And assuming the sale closes, we will have sold 15 hotels for a total of $1,664 million at a combined NOI cap rate of 5.6% and a combined EBITDA multiple of 15.3 times 2018 operating numbers, all since we closed on our corporate acquisition at the end of November 2018.

Our sales metrics are clean and do not add in required capital by the buyers, even though most of the properties sold need very significant capital. Of these sales, two are from the Pebblebrook legacy portfolio and 13 are from the acquired portfolio. The NOI cap rate on the $1.426 billion of acquired properties sold or being sold equals 5.4% and the EBITDA multiple equals 15.8 times. As a reminder, we acquired the entire company with all corporate and property transaction costs at a 5.9% NOI cap rate. So our sales of these less desirable properties have certainly been accretive to value.

Our total disposition target for 2020 is $375 million, including the two properties currently under contract. We continue to work through preparing retail for sale from potentially four hotels for gross proceeds of up to $150 million by legally separating the retail from the hotel portion prior to offering the real estate for sale. We expect these sales to occur at various times over the course of the next 24 months or so. And while it's likely that there will be a few additional hotel sales over the course of the next 12 to 24 months, our outlook for this year does not include any further hotel sales beyond those already announced.

Next, I want to provide a quick update on our progress on our portfoliowide initiatives. These are really important. We continue to make significant progress on maximizing the opportunity to recontract many products and services that we and our operators purchase within our portfolio. We've now contracted for over $7 million of annual run rate savings within the portfolio and have identified another $3 million of savings that should get finalized in the next two quarters. This would bring us to our $10 million of targeted annualized savings a little earlier than the end of the year, which was our original forecast. But we're not stopping there. We believe there are significant additional savings that we can achieve through portfoliowide initiatives, and our team will continue to work toward these additional savings.

In addition to the $10 million of annualized savings, either already contracted for, in-process or identified, there is approximately $3 million of annualized savings in process from the creation of seven separate pods, involving 16 different hotels, utilizing the same operator in the same market, in many cases, within a block or two. Over half of these additional podding and portfoliowide initiative savings are reflected in our 2020 outlook, with the remaining portion expected to benefit 2021.

These $13 million of total annual savings should create over $200 million of real estate value for our portfolio through the improved bottom line performance of our hotels. This opportunity to create value was made possible by the significant economies of scale we achieved through the portfolio acquisition and our creative and relentless efforts to reap the value of all of the benefits available from creating the largest owner of lifestyle hotels and resorts in the United States.

Finally, I want to briefly touch on the branding opportunities within our portfolio and the potential to create significant value from branding in the longer term. As we previously discussed, we've been working on bringing all of the Z hotels that were separately developed by us over the last seven years under a proprietary experiential brand called The Unofficial Z Collection. We recently completed our branding work with an expert third-party branding firm for The Unofficial Z Collection and will spend the better part of this year rolling out the brand to the existing portfolio of seven Z hotels, including Hotel Zena, which will open in the second quarter in Washington DC.

Coinciding with the opening of Hotel Zena, we're planning to launch our Unofficial Z Collection website, which will explain and demonstrate the brand's ethos and the individual personalities of each of the Z hotels. After Marker San Francisco is fully renovated and becomes the eighth hotel in the Collection, we'll connect it with the rest of the Zs, as well as the Collection's website. This will allow us to begin to connect all of these hotels together in the eyes of the customer, as well as start to gain recognition of this unique experiential brand out there in the hotel industry.

In addition, we've begun work on a second proprietary brand that will be broader in scale and ultimately incorporate the Unofficial Z Collection as part of it. This broader brand will initially be created by incorporating all of the completely independent and unencumbered lifestyle hotels and resorts in our portfolio, which today total 26 hotels and resorts. This includes our Z Collection hotels. We believe this base of unique lifestyle experiential hotels and resorts, all clustered between the 4 and 4.5 star quality levels, is rare outside of the major brands and offers a very significant opportunity down the road to create substantial value for Pebblebrook shareholders. We look forward to providing you with more information on our plans and our progress throughout the year.

To wrap up, we believe that regardless of the economic environment we find ourselves in over the next few years, we have a significant number of substantial organic value-creation opportunities within our new combined company that we've identified and we're actively executing on. Not only are most of these opportunities unique to Pebblebrook, but they fall squarely within our core expertise, having successfully executed on these types of value-creation opportunities over the last 20 years.

So that completes our remarks. Donna, we'd be pleased to answer whatever questions that our callers might have.

Questions and Answers:

Operator

[Operator Instructions] Our first question is coming from Rich Hightower of Evercore ISI. Please go ahead.

Rich Hightower -- Evercore ISI -- Analyst

Hi, good morning, guys.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Good morning, Rich.

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Good morning, Rich.

Rich Hightower -- Evercore ISI -- Analyst

I just wanted to dig in quickly to the inflection point in corporate transient that you described and others have described kind of from November through the early part of January. And Jon, I know you mentioned maybe some trade war headlines and Brexit resolution maybe contributed to that. But was there anything maybe more tangible that you guys saw in certain hotels or in certain markets that you can really ascribe to sort of the pickup there? And given that you're predominantly a transient portfolio, do you think you guys would be in a position to see if that is indeed a trend once we kind of get out of maybe some of the coronavirus impact in the near term? Would you guys be in a position to sort of call that earlier than most, you think?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Well, it's a good question. I don't know that our portfolio is big and broad enough across the US to be the ones who can call it. But we do analyze in detail the industry data that Smith Travel puts out and particularly focus on the weekday, weekend business and the occupancy levels on a year-over-year basis. And in addition to the more shorter-term positive pickup trends we saw over that three-month period from November through January, when you look through and focus on the weekday business across the industry, you clearly see an improvement overall after October in business transient. You had demand up in November 2.7% or 2.8%. You had demand for weekday business in December up in the 1.8%, 1.9% range. And then, in January, it even got a little stronger. And I think January is probably a cleaner comparison month when you think about November and December and probably benefits that were received in the industry from the holiday shifts which fell better. But occupancy weekday in January was up 0.9%, which means weekday demand was up close to 3%. And so, that's clearly an acceleration. Again, maybe some of that was due to better weather and fewer impacts from weather in what might traditionally be a weather-impacted month in January. But clearly, there was a positive trend -- positive results going on in January.

Rich Hightower -- Evercore ISI -- Analyst

Okay, that's helpful. And then, maybe just on the asset disposition side of things, I know, in the past, you've mentioned that private equity and high net worth, I think, have tended to be the predominant buyer pools for what you guys have been selling. So, most of that's been one-off assets for the most part. Where do you peg demand for maybe portfolio trades among that same group at this point in time? If you had any insight there?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah, that's a little tougher because we don't really have -- we didn't really have any portfolios out on the market and we don't see many other than -- or in the select service side out in the market. But one of the things that was interesting about the sale of the InterContinental and the Sofitel is, we have those actually listed separately and they were being sold separately on a different task, and we had an institutional buyer come in, who had an interest in both, who actually indicated they had a much stronger interest in both than they had in any -- in either of the individual properties, meaning that they were more focused on getting more capital out to high-quality assets in good markets than just getting it out on a piecemeal basis, and they ultimately pre-empted the process. So that's one anecdotal piece of information, but it certainly indicates that what we believe, which is, for good-quality assets in good markets, there is a lot of capital out there.

Rich Hightower -- Evercore ISI -- Analyst

Perfect. Thank you, Jon.

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Thanks Rich.

Operator

Thank you. Our next question is coming from Smedes Rose of Citi. Please go ahead.

Smedes Rose -- Citibank -- Analyst

I just wanted to ask you a couple of questions about your projects, I guess, the scope of investment increases into 2021. So just in terms of, I guess, more sort of pronounced or stabilized earnings growth, that's more of a 2022 event, given that, I assume, you have disruption in 2021 with these projects as well?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah, Smedes, we would expect a similar level of disruption in 2021, again, give or take a couple of million dollars, as is the case -- as we're forecasting for this year, which is all of about $1 million different than last year. So all should continue to be about the same and the total investment dollars should be about the same as well next year. Even though the number for the projects looks higher, some of those projects start in the fourth quarter of this year, have a little bit of impact, which is built into our numbers. And of course, there is a lot of pre-start dollars that go out related to not only soft costs but deposits and orders for FF&E well in advance of when they would be installed in the 2021 projects. So we think it's pretty smooth between '19, '20 and '21 in total dollars out, again, give or take $10 million or $20 million and in disruption. But yeah, stabilization and the largest amount of unimpacted ramp-up would occur in 2022.

Smedes Rose -- Citibank -- Analyst

Okay. And then, I just wanted to ask you, on another call, there was a comment that 2020 would be kind of seen as a year for peak wage and benefit increases. And I was just wondering, do you see that as well? Or do you have any thoughts around that?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

They might have some specific circumstances within their portfolio. I think it's hard to gauge. It's interesting that we noted a 4% to 5% increase in the combined wage and benefit. That's our forecast for this year, being mitigated in elsewhere, particularly through our efforts. But it comes off a base of increases that are generally in the 2.5% to 3% range for much of -- or the majority of the portfolio. The difference is that benefits are going up at 5% to 7%. You're seeing some minimum wage increases that continue to clip along in numerous cities and states, which again only impacts a small portion of our employees, and often it's the tipped employees. There's is not something specifically provided in the legislation that's different as there has been historically for tipped employees, and then, a few markets where the wage and benefit combo is driven by the contractual union increases, which have fallen again in the 4% to at most 5% annual range, and then a few markets like a Nashville where there's so much new supply being added with new supply driving up wages and benefit rates, start rates because of their need to hire folks in a very tightly constrained labor market. So you put that together, and that's how we get to that 4% to 5% range. It's hard to know whether those are going to abate moving forward. It really depends upon what goes on in the economy.

Smedes Rose -- Citibank -- Analyst

Okay. All right. Thank you very much.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Thanks Smedes.

Operator

Thank you. Our next question is coming from Aryeh Klein of BMO Capital Markets. Please go ahead.

Aryeh Klein -- BMO Capital Markets -- Analyst

Thanks. There had been a number of management transitions over the last year or so. Are you comfortable with where you're at right now? Or do you think there is still more to come? And how do you think that headwind evolves maybe over the next year or so?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah. So, Aryeh, the ones that we have planned are mostly complete. So, we have a transition that will take place at Vitale as it becomes the 1. And we have the folks who manage the 1 Hotels, the Starwood Hotel Group will come in and manage that. So we have that transition. We have a few brand transitions, if you will, within the portfolio. We've probably felt most of that impact or it's built into our numbers for this year. And then, it's always possible -- I mean, if we have performance that we just are unsatisfied with on an ongoing basis and we don't think an operator can turn things around for really structural reasons related to their organization, we'll make changes in the future. But in terms of what's planned, we're for the most part through the major impact. And in fact, this year, the impact, we believe, is less than what it was last year, and we think that will decline again next year.

Aryeh Klein -- BMO Capital Markets -- Analyst

Okay. And then, on the branding side, with The Unofficial Z, how would you expect that to ultimately translate into performance at those hotels? And is there any incremental investments that are needed as that rebranding or branding kind of ramps?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah. So, there is some incremental investment we're going to make in the portfolio to make what was individually created hotels into hotels that all share the ethos that we've determined is what's underlying the Unofficial Z Collection. So we've already gone through the properties with our designers and project managers. We'll have some work, relatively minor, through the portfolio. We haven't scoped out the full amount of the investment. But I would say, at most, in the portfolio, it's a couple of million dollars in total, spread about six of the existing hotels, so pretty minor. And ultimately, I think, connecting them in the eyes of the customer will begin to bring a little bit of business across the portfolio that we don't see today, and a little bit of business, particularly from the group side, where we have some really unique meeting and event venues within the portfolio. And I think providing them as a group and showing them all together is going to be stronger than showing them individually. So I think ultimately, it's going to lead to more business and cross-business. But I don't want to overstate it. A brand of seven or a brand of eight isn't going to drive a lot of business outside of what each of the property teams is going to drive by themselves.

Aryeh Klein -- BMO Capital Markets -- Analyst

Great, thank you.

Operator

Thank you. Our next question is coming from Anthony Powell of Barclays. Please go ahead.

Anthony Powell -- Barclays Capital Inc. -- Analyst

Hi, good morning, guys. I wanted to focus more on some of these brand kind of announcements and commentary. First, on loyalty costs, you'd mentioned before that you're seeing growing royalty costs in the portfolio. It seems like you are not seeing any kind of RevPAR index benefit. How has the benefit of loyalty program changed over time? And do you see them as less valuable than you did before?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah, I think what we've been seeing, and you hear this from the brand companies, is that they have fairly dramatic increases in the number of members of their loyalty programs. And if you think about that, if you're -- in many cases, these are people who stay one or two times a year who book through other channels perhaps, or book direct but never join the program, and with an aggressive push to get them to join. Well, what it means is, we've taken business that we weren't paying the loyalty percentage on, which might be 4% to 5%, and we've turned it into business that we are now paying loyalty costs on. So generally speaking through our portfolio, we're seeing an increase in the number of customers as a percentage of our total business of our major branded properties that are loyalty members, which means we pay more into the program. And I think we commented last year, I would say, for the most part, maybe we were just unlucky, but we lost a lot of redemption business that's clearly gone to others, primarily Starwood business that went over to Marriott properties because there were more choices for what had been a more limited inventory of Starwood properties.

And then, if you think about what the other benefit of these branding -- these loyalty -- big brand loyalty programs, if you take a customer who is paying full price once or twice a year and they join, and now, they get a 3% to 5% discount depending on the day, we're also having an impact on our average ADR. So there are positives that offset some of this stuff. But on the distribution cost side, we and most everyone in the industry have been seeing significant increases in customer acquisition costs at a much faster pace than inflation. So I don't -- I'm not here to say they're not valuable programs. All we're stating is that the costs have been going up much faster than inflation. We don't think we're getting it back in revenue at this point.

Anthony Powell -- Barclays Capital Inc. -- Analyst

Got it. Thanks. And on your commentary on kind of the larger independent lifestyle brand of, I believe, 26 hotels, obviously, there have been a lot of brand transactions over the past three years, but they tended to involve management as well. I'm guessing this larger brand will not involve management, given you have a third-party manager. So could you just talk through what kind of value creation you think that could result from this kind of larger brand effort you're not pursuing?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah. So I think, again, we don't want to get ahead of ourselves and promise something that doesn't turn out to result. But I think it's giving us optionality in a number of areas. One, I think a brand of 26 versus a brand of eight begins to provide some value across the brand ultimately to each of the properties in the brand. I think the second thing it does is, it provides, as we make acquisitions, another opportunity to grow that brand. And third, there potentially is opportunity based upon the scale of that entity to bring others in, whether it's through license arrangements or through affiliations ultimately to grow that brand. And so, what ultimate value there is to that would ultimately get determined by others, if at some point, we decided it was something we wanted to monetize.

But I do think -- if you think about the major brand companies across the world, their growth is all about unit growth. And in order to get more unit growth over time, they're going to need more brands. And the brands that are generally more difficult for them to grow and create on their own are the kind of -- it's the kind of brands that we're talking about creating, whether it's the ones that have uniqueness across the portfolio. And so, we do think ultimately, there will be significant value for the brand, scale and the creative nature of them of the collection, as opposed to just some management fees that, in many cases, often go away after these acquisitions occur.

Anthony Powell -- Barclays Capital Inc. -- Analyst

All right. All very interesting. Thank you.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah, thanks Anthony.

Operator

Thank you. Our next question is coming from Shaun Kelley of Bank of America Merrill Lynch, please go ahead.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Thanks. Good morning, everyone. Jon, that loyalty commentary was interesting. That was one of my questions. So, the other thing I had was just to look at the -- the urban side has continued to be sort of a little bit of a different supply curve than what we see across the nation broadly. And you guys, from all your experience in these markets, have pretty good insight on what that supply curve looks like. So the two-part question is, one, kind of any sense of peak activity, just either as things get delayed or construction costs move up across the broader urban set, and then, kind of how does that trend broadly? And then, probably more importantly, for Pebblebrook portfolio, as you look out to kind of '21, '22, any sight line that -- I think the number you called out was 3.2% -- that that number starts to come down?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah, good question, Shaun. We actually think we're at the peak for urban at this point, and it's on the way down. And so, for us, when we look at what we think will -- we think supply growth will be next year on a weighted average basis in our portfolio, we see that pretty close to 2% versus the 3.2% it ran last year, and for us, likely to run in the 3% range this year and also in that range for the industry. So we do think it's beginning to peak that it's -- it will be on the way down as we go across this year. There obviously has been a significant stretching out of the time it takes to build and deliver. And during that period, we've seen a decline in urban starts.

And so, while you can look at what's under construction, frankly, for the whole industry and see it inching up over the last 18 months, the deliveries have really peaked. And there is more under construction only because it's taking longer for a property to go from beginning to completion and because starts have declined. And we expect that to accelerate because what we've seen obviously over the last three to four years is, we've seen no increase in bottom lines on average in the industry, but we have seen 20% to 30% or more increases in cost to deliver through the increase in development costs. And so the yield, the ability to deliver an attractive yield has gone down dramatically on new development. And so, we think it's turned. We think we're going to see it next year in our portfolio. We think the disadvantage of additional supply growth in the urban markets disappears by next year and then begins to look even more attractive than the industry where you're seeing more development in the suburban markets now than in the urban markets.

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

And Shaun, I'll also add to that, construction financing is also getting more difficult to obtain, and it's really being more provided by a lot of these more local banks rather than larger banks, although if it's a convention center hotel, that's a different story. But look at New York, the number of defaults are already starting to rise on loans, and that should put a big pause for a lot of construction lenders out there who are thinking about issuing a new commitment. When you see those headlines of the defaults rising, that certainly [Phonetic] puts a pause and helps abate supply growth.

Rich Hightower -- Evercore ISI -- Analyst

And I do think it's the mezz players that are going to be taking the hits where they thought they had a comfortable position ultimately with 20% or 25% equity above them. And I think the challenges in a number of these markets like a New York, like a Chicago, where your operating leverage is really driving down your bottom lines is, as revenue is at best flat if not declining with expenses going up, I think you're going to be reading more and more about folks taking pretty big hits in the mezz positions. Again, not necessarily the construction lenders who maybe have been down in the 45% to 50% area of cost, but it's the capital above that that's at risk.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Thank you very much. That's a very good color. And I guess the follow-up would just be, when specifically did you see that starts number peak? I'm sure that's kind of a time series data point. Was that sometime in -- within the last year, in the last couple of months? That's a helpful data point.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Really, back in '18.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Back in '18, OK. So you're sort of already seeing some of the lag to deliver in that kind of 2.5 years, so it's what put you out to kind of next year?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Correct.

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

Great. Thank you very much.

Operator

Thank you. Our next question is coming from Bill Crow of Raymond James. Please go ahead.

William Crow -- Raymond James -- Analyst

Good morning. Jon, a couple of questions. The first one, does the push to get all the repositionings done by the end of next year say anything about your view toward 2021 or maybe 2022?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

No, it doesn't say a thing about it. It basically says there are significant attractive returns from these investments. It's the best place to allocate capital today. And the sooner we get them done, the quicker we get those returns. And in a number of cases, these are properties that need to be redeveloped. And if we don't put the capital in, there are going to continue to lose share.

William Crow -- Raymond James -- Analyst

Okay. And on the rebranding, Jon, why is a Solamar better as a Margaritaville than it is a Z Collection? And on the Vitale, I've known you for a long time and I don't think you've ever had a big desire to have 5 diamonds or stars or lucky charms or whatever they are, and it feels like this is more luxury than you have previously experienced.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Sure. So as it relates to Margaritaville, I think we feel like there is more power to that brand in San Diego based upon the customer base that is convention and leisure than a Z Collection, which is much stronger -- would be much stronger with corporate business, which you see more in the other markets where the Z Collection is in. So a market where we are lacking that base of major corporate accounts probably isn't the best place for a Z Collection. So Margaritaville really fills the void for that leisure customer and the convention goer who is looking for that sort of chilled resort-type experience in a downtown location.

As it relates to the 1, I think the fascinating thing about 1 is, it's a 5 diamond product in the eye of the customer, a luxury product in the eye of the customer, but the cost base of operations is 4. It's a lot like the W, except I would say, it's being executed extremely well today and it's very successful with the customer base. And so, we have other properties like that where we provide a 5 diamond physical experience but a 4 diamond level of services, but we get 5 diamond rates, and 1 would fall into that category.

William Crow -- Raymond James -- Analyst

All right. And then just a housekeeping question. Given the pending sale of the InterCon, I assume that's taken out of your first quarter RevPAR growth guidance. What would it be if it was in, given the lapping of the Super Bowl?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

I don't know. We can get back to you on that, Bill.

William Crow -- Raymond James -- Analyst

All right. Thanks guys.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

All right, thanks.

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

And Bill, just a follow-up. So InterCon, if we included that for January and February, it's about $3 million, $3.1 million of EBITDA, and in March, it's about $1.7 million.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah, I don't think that's what he was looking for. He [Phonetic] was looking for RevPAR impact.

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

He will pull [Phonetic] that in terms of impact to earnings.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Next question?

Operator

Thank you. Our next question is coming from Michael Bellisario of Robert W Baird. Please go ahead.

Michael Bellisario -- Robert W. Baird and Co. -- Analyst

Good morning, everyone.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Good morning.

Michael Bellisario -- Robert W. Baird and Co. -- Analyst

Just on the Marriott-Starwood disruption that you guys experienced last year, have all those issues been resolved in your eyes? And then, kind of what's the step-up that you're embedding in 2020 guidance?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah. Many of them have resolved, one way or another. I think, as it relates to the group sales issues, I think we're in pretty good shape everywhere, except for San Diego, where we continue to have issues with group sales. We're very far behind this year. And I know, Marriott is working furiously to improve the performance of that cluster sales group, and I don't think we're alone in that group in experiencing issues.

I think as it relates to redemptions, unfortunately, I think we just got the shaft at the end of the day that our properties were disadvantaged by the combination. Marriott has done a very good job working with our teams to replace that business with other business, but that redemption business is not going to come back. It's now subject to different customer behavior because the customers have more choices. So I think we're pretty much behind us with most of it, other than the San Diego group sales issue, which I think is unfortunately going to disadvantage our property this year in that market for the better part of the year.

Michael Bellisario -- Robert W. Baird and Co. -- Analyst

That's helpful. Thank you.

Operator

Thank you. Our next question is coming from Jim Sullivan of BTIG. Please go ahead.

James Sullivan -- BTIG -- Analyst

Thank you. Jon, just a follow-up on your discussion about branding. One thing that's interesting and going through your most recent presentation is, how much higher the EBITDA margin is for the Z Collection than the rest of the portfolio. I guess it helps to be in San Francisco. And as you expand the Collection into new markets, I'm just curious whether that differential in EBITA margin that's been running, I think, at 40% versus like 32% for the portfolio, how you view that differential going forward? Do we expect that spread to moderate? And is it because -- is it the San Francisco share of the Z Collection that's driving that? Or is it everything else that you've been talking about?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah, I'd love to be a great sales pitch to say all we have to do is turn something into a Z and it goes from 32% to 40%. Unfortunately, that -- we couldn't make that case. I think there is some benefit. Three of them are sold together by Viceroy. They're marketed together. I think that's a good indication of the benefit of connecting them together, that's Zelos, Zetta and Zeppelin. They're also all within about five blocks of each other in the Union Square SoMa market. I think some of the benefit is specific to those properties. Two or three of them don't have food and beverage operated by us, thereby [Phonetic] their third-party independent restaurants and they also do the banquet. But I think part of it is related to how we've approached the food and beverage at those properties in terms of creating unique venues that drive a lot more food and beverage, drive a lot more event business that the restaurant can be successful, very successful with that help and which we get significant room rental revenues. Our room rental at this tiny little Hotel Zelos, which has two board rooms and a restaurant with a patio, was over $800,000 last year. And so, the ability to drive that through the creation of unique spaces, whether they're Zs or others, but they are -- in many cases, they are a part of the ethos of the Z Collection and where we do think there is a competitive opportunity. So there's some of each, Jim, at the end of the day, that is a result of the benefit. Some of it is property-specific, some of it is specific to what the ethos is for the Z Collection, and some of it is the market being -- San Francisco being a better market.

James Sullivan -- BTIG -- Analyst

And some of it, of course you mentioned, the clustering, the ability to cluster operations to some extent. So as we see the -- you expand into DC -- and of course, you've opened a Z Collection in Portland, the Zags, and we assume there's going to be [Indecipherable] up there. Just curious whether we would -- whether you anticipate clustering more Z Collection assets in these markets as you enter them? Is that part -- it's certainly a customer focus that you mentioned earlier. But is that also part of the strategic plan for expanding the brand?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yes.

James Sullivan -- BTIG -- Analyst

Okay. And then, finally from me, you've talked about the issues with the Westin brand over a couple of years. And I know, there was a prior question that talked about whether you thought you were through the worst of it. Looking through the portfolio and the CAGRs on the EBITDA on, say, a trailing three-year basis, I don't think -- I think the Westin Michigan Avenue is probably the weakest asset. Can you just talk to us about your plans for that asset? And to what extent do you think you can -- you're going to be able to reverse that tide?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah. So it's a very complicated asset. I think the challenges there have more to do with the dynamics of the market, the location of the property and where it's historically has -- how it's created a segmentation and driven its business. I think its location as one of the furthest hotels away from the convention centers has progressively been an increasing problem, and the replacement of that business is really the key to the success of that property and how to drive other business there, and that's what we've been working with Marriott on in terms of improving the performance. It also was disadvantaged by the Marriott-Starwood merger and the removal of the sales teams from the property and into a cluster there. We think that's doing much better today, but perhaps not quite as well as it would have had the team still been at the property.

And then finally, we ultimately have some flexibility here with overall real estate use with a management agreement that's up to, I think, the end of '26. And so, we're putting a lot of time and effort, working with third parties on what are the creative alternatives, what are the alternative uses, if any, for this property versus what it is today, whether it's in hotels and maybe it's dual branding, which can be easily done because of the way the physical property works, or are there alternate uses that might be better. And then finally, we have a while -- small amount of retail. It's very high-priced, high-rent retail on North Michigan Avenue that ultimately we're looking at separating that out and selling that separately.

James Sullivan -- BTIG -- Analyst

Okay. And then quickly, a final question from me in terms of the balance sheet. Asset sale proceeds are being used to reduce debt, lower-coupon debt as opposed to higher-coupon preferred. And if you could just talk about how you guys are prioritizing the use of proceeds and what your target is now for net debt?

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Sure. We'll look at each of the options, depending on what our view of the world is. So we have two series of preferreds that are redeemable. We have also debt that we can pay down. We're getting our long-term target for leverages in the -- the debt to EBITDA ratio in the 4 to 4.25 level. After the sales of these InterCon and Sofitel, that will put us, as we noted in the call, around 4 times. So we're in that range now. So we'll evaluate what's the best use. And the other use of proceeds, in addition to reducing some leverage, could also be stock buybacks. So we'll also look at each of those. But we'll be opportunistic, looking at it and we'll -- as we make progress here in the sales.

James Sullivan -- BTIG -- Analyst

Okay, good. Thank you.

Operator

Thank you. Our next question is coming from Neil Malkin of Capital One Securities. Please go ahead.

Neil Malkin -- Capital One Securities, Inc. -- Analyst

Hey, thanks guys. This call has gone on for a while, so I'm just going to do two questions like you asked. So the last slew of dispositions has really been focused or concentrated in the DC market. I'm just wondering if there is a reason or rationale behind that? Is it a tell of kind of your view of that market? And then -- or does it have to do with particular buyer sets that have just been very active there?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah, so it definitely has to do with our long-term view of the market. We still are a fan of the market longer term, but we wanted to reduce our share of our portfolio in that market. And so, that's where you've seen quite a few of the dispositions within the portfolio. You are also seeing us completely redevelop two properties in the market. So we do continue to believe in the market. We think there is opportunity, and particularly for certain types of assets, but we also think that it's probably a little bit more of a slow grower over the next 5 or 10 years than perhaps some of the other markets we're focused on.

Neil Malkin -- Capital One Securities, Inc. -- Analyst

Yeah, that's helpful. I imagine it's a supply issue. And then...

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

That's part of it, yeah.

Neil Malkin -- Capital One Securities, Inc. -- Analyst

Yeah. The last one I have is, when you -- you're obviously putting a lot of capital to work over the next 24 months. Maybe if you could just run through sort of how you get comfort in those returns or yields, the 10%, because if you think about it, the hotels that are proximate to that hotel, if their rates aren't really going up, it's hard for you to say, OK, well, our ADRs are going up like 8% or whatever. Is it that you are comfortable with the corporate meeting planners and they're such a large contributor to that? Or their increase is such a large amount that the potential minimal lift from the leisure customer sort of averages it out there? If you could just kind of go over that because it does involve a fair amount of risk, just given the large amount of capital you're putting to work. So what gives you comfort in those returns?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

So, Neil, we've been doing this for almost 20 years. And so, one of the things that gives us comfort is our experience in analyzing the market and analyzing the customer base of the market and understanding, if we make investments and we do certain things to improve the properties that we can create a product that will drive, in many cases, a whole new set of customers to come to the hotel. So if you're taking a property that's 3.5 diamonds and you're making it a 4 or a 4.5 diamond property, in most cases, we have to go out and find all new customers, whether it's meetings, whether it's transient, whether it's leisure, whether it's business.

And our comfort comes from understanding the market overall, who would our new competitors be in the market. It's not about raising the rate on the customers you have today. It's about saying, look, we're going to, in many cases, abandon the customers that we have today. We're going to go find the customers who are paying these kinds of rates for this higher-quality product with higher-quality services than what's been provided in the past. So we go through and we look at the market, we look at those competitive sets, we look at the performance of their rates and their occupancies and their RevPARs, and we say, this is where we think we can get to. In total, we can be competitive because we're creating a competitive product in a competitive location. And if we get those revenues and we get this food and beverage revenue, because of the creative nature of the product we're providing, then we can deliver the returns that warrant those capital investments. And that's pretty much the process that we go through. It's very scientific at the end of the day.

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

And Neil, also, we provide historically all of our hotel EBITDAs by property since our period of ownership and traces [Phonetic] back to 2010. So you can look there at Zetta, Zephyr, Zeppelin, a lot of these redevelopments we've done, we've invested meaningful amounts of capital and how we're repositioning the properties and what -- how it's benefiting the bottom line. So we've the track record there to look at too.

Neil Malkin -- Capital One Securities, Inc. -- Analyst

Appreciate that. Thanks guys.

Operator

Thank you. Our next question is coming from Gregory Miller of SunTrust Robinson Humphrey. Please go ahead.

Gregory J. Miller -- SunTrust Robinson Humphrey -- Analyst

Good morning, Jon, Ray. I am curious about what's going to happen to the ostrich of Villa Florence. I do you have a more serious question on the San Francisco for you. I figured someone might ask about the decision of Oracle moving its OpenWorld conference from San Francisco to Las Vegas at least through 2022. So I'll take the lead on asking the question. You have been vocal in the past years on earnings calls about defending the San Francisco market. And I'm curious how you interpret Oracle's decision and what they claimed as expensive rooms and poor street conditions and deciding to move to Las Vegas.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Sure. So obviously, we know what we've read and what they stated which was those two reasons you just mentioned. It's hard to take issue with the street condition comment, and I think the city is moving in the right direction. But I think they have a long way to go to make a dramatic impact on improving that. There is also a lot of self-help going on within the market in the business improvement districts where we have a lot of together -- the businesses are banded together and are providing cleaning services and security services, etc. in and around our neighborhoods.

But I think that where I might take some issue, I don't think San Francisco -- and particularly for the Oracle conference, I don't really think they have unusually high hotel rates, and I know that the hotel community has been working with Oracle on rates over the last few years. So, you can go to just about any other market other than Las Vegas, any of the major markets, and the convention rates for a convention of that size are pretty similar across the country. So I do take issue with that. I also think there is perhaps -- and I'd be speculating here, but this is a citywide conference that has had declining participation over the last five years. And competing with an ever-expanding Salesforce conference and VMware conference, both of which are in the fall, both of which draw similar participants, exhibitors and attendees, and so perhaps part of the decision making, even though they didn't say it, was because they need a new venue. They're not doing well competitively with two other competing conferences.

So there is a lot of work to do in San Francisco related to the cleanup of the city, the understanding of many about how important it is for local businesses to be successful. There is more collaboration that's needed by government with the business community that's working very hard to create better conditions in the city. And perhaps the Oracle move is a bit of a slap in the face that maybe it wake some people up. And you know what, maybe there will need to be another slap in the face before folks really wake up. So hard for us to know, but the city is very successful because it's a -- it draws a lot of people. There is a lot of attendees, and these associations they depend on the revenue. And so you can move your conference for whatever reason you want, but if people don't want to go to the city that you're having it in, you're not going to make as much money.

Gregory J. Miller -- SunTrust Robinson Humphrey -- Analyst

Thanks for the excellent insight there. I want to ask a quick follow-up question on Hotel Zena. This hotel is likely have some very clear thematics and potentially politics from what I've read. And I'm curious how you came to the decision of creating the Zena thematic. And relatedly, as a future Z, could a hotel like this or other Zs end up becoming their own sub-brands in other markets. From what I've read so far, I could potentially see this concept for Zena taking off elsewhere.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah. So, to be clear, there is no political statement being made [Technical Issues] the narrative is not an activist message. The narrative is a celebration of the success of women, the empowerment of women, the quality of women and the fight for those things to achieve what should come naturally over centuries around the world. And so, it's not a political message. It's not a movement. That's not really what we're geared at. But we are about celebrating, and we think it's time to celebrate those things and really look at things in a positive way. And doing it in DC, hard to think of a better place to launch it. And could there be other hotels within the Z Collection that have a similar narrative? There certainly could be.

Gregory J. Miller -- SunTrust Robinson Humphrey -- Analyst

Thanks. I appreciate the clarification on that, and appreciate all of the answers to the questions.

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Okay. Thanks Greg.

Operator

Thank you. Our next question is coming from Wes Golladay of RBC Capital Markets. Please go ahead.

Wes Golladay -- RBC Capital Markets -- Analyst

Good morning, guys. Looking at the coronavirus, has this changed the way you do the revenue management? And then, you mentioned the guidance being not including the coronavirus. But have you put a known cancellation such as Facebook in there?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Yeah, of course, we have. We've estimated what we think that impact is going to be in the first quarter and specifically in March, and we've built in other cancellations that are for later periods during the year, of which we've had some. So all of that is built in. Of course, we are changing the way -- we're making modifications to the way we revenue manage where we're over-selling more in our hotels with the expectation that there are more cancellations, that there's more attrition, that there's more competition on a near-term basis near arrival [Phonetic]. So, yes, we are making lots of different changes and have been for the better part of a month now within our portfolio.

Wes Golladay -- RBC Capital Markets -- Analyst

Okay. And then you -- you have guidance for an $82 million gain from dispositions. Will there have to be a special dividend, or can you mitigate that?

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

So we'll be evaluating that between the two sales. The taxable gain between InterCon and Sofitel is over -- about $160 million, so clearly, well in excess of $1 a share. So we'll evaluate. We have means to look at a variety of deduction and so forth as the year transpires. But there's a fairly good chance that some type of special dividend could be needed. But we'll see as the year progresses.

Wes Golladay -- RBC Capital Markets -- Analyst

Okay. And then one quick follow-up to Neil's earlier question, looking about the potential returns. When you do these big redevelopments, are you trying to get lost share -- recapture the lost RevPAR index? Are you looking to move the hotels into a higher comp set, as a broad generalization?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

As a broad generalization, we're moving the hotels into a higher set.

Wes Golladay -- RBC Capital Markets -- Analyst

Okay, thanks a lot guys.

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Thank you, Wes.

Operator

Thank you. We're showing time for one last question today. Our last question will be coming from Lukas Hartwich of Green Street Advisors. Please go ahead.

Lukas Hartwich -- Green Street Advisors -- Analyst

Thanks. I just have one. In terms of your dispositions, and this is probably a mix, but how are buyers approaching these acquisitions? Are they planning on making major changes in terms of capital spend or operator? Or are they viewing these more as stabilized assets?

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Well, I think, there is a wide range, as you indicated. I can give you a few of them. I would say, in many cases, there is significant capital going in. So, in some cases, it involves changing the brand and operator, so the Liaison and becoming a Yotel, pad [Phonetic] or pod or not sure exactly what it's becoming. We have -- I think the Topaz was sold. It's becoming a select service hotel with a lot of work being done to add -- subdivide the suites to make a lot more keys. There's some properties that were sold with Kimpton as operator where Kimpton has been kept in. There is a property in Boston that was sold with a piece of land next to it where they're adding 77 keys and public areas to the property, and we understand, renovating the existing tower. Obviously, the InterCon and the Sofitel, those are long-term encumbered from a brand and operator perspective. So there are no changes being made to those two. So it's a pretty diverse set of outcomes, Lukas, at the end of the day. I think the important part is, outside of those two, the InterCon and the Sofitel, the flexibility of being completely unencumbered provides a broader base of buyers, a deeper base of buyers and more strategic buyers and has provided higher multiples and lower cap rate, so higher value for those assets because of the flexibility.

Lukas Hartwich -- Green Street Advisors -- Analyst

Great, thank you.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Thanks very much, Lukas.

Operator

Thank you. At this time, I'd like to turn the floor back over to Mr. Bortz for closing comments.

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Well, if anybody is still there, thanks very much for participating. We look forward to updating you in April. And for many of you, we look forward to seeing you at the Raymond James and the Citi conferences and the Wells Fargo conference over the next month.

Operator

[Operating Closing Remarks]

Duration: 87 minutes

Call participants:

Raymond D. Martz -- Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Jon E. Bortz -- Chairman of the Board, President and Chief Executive Officer

Rich Hightower -- Evercore ISI -- Analyst

Smedes Rose -- Citibank -- Analyst

Aryeh Klein -- BMO Capital Markets -- Analyst

Anthony Powell -- Barclays Capital Inc. -- Analyst

Shaun Kelley -- Bank of America Merrill Lynch -- Analyst

William Crow -- Raymond James -- Analyst

Michael Bellisario -- Robert W. Baird and Co. -- Analyst

James Sullivan -- BTIG -- Analyst

Neil Malkin -- Capital One Securities, Inc. -- Analyst

Gregory J. Miller -- SunTrust Robinson Humphrey -- Analyst

Wes Golladay -- RBC Capital Markets -- Analyst

Lukas Hartwich -- Green Street Advisors -- Analyst

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