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Xenia Hotels and Resorts (NYSE:XHR)
Q4 2020 Earnings Call
Mar 01, 2021, 1:00 p.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:


Operator

Good day, and welcome to the Xenia Hotels and Resorts fourth quarter and full-year 2020 results conference call. [Operator instructions] Please note, this event is being recorded. I would now like to turn the conference over to Cameron Frosch, senior analyst, finance. Please go ahead.

Cameron Frosch -- Senior Analyst, Finance

Thank you, Andrew. Good afternoon and welcome to Xenia Hotels and Resorts fourth quarter and full-year 2020 earnings call and webcast. I'm here with Marcel Verbaas, our chairman, and chief executive officer; Barry Bloom, our president, and chief operating officer; and Atish Shah, our executive vice president, and chief financial officer. Marcel will begin with the discussion of our operating results and our 2020 achievements.

Barry will follow with more details about fourth quarter and full-year 2020 results and details on our capital expenditure projects. Atish will conclude our remarks with a review of our balance sheet and outlook. We will then open the call for Q&A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements.

These statements are subject to numerous risks and uncertainties as described in our annual report, on Form 10-K, and other SEC filings which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements in the earnings release that we issued this morning along with the comments on this call are made only as of today March 1, 2021, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find the reconciliation of non-GAAP financial measures to net income and definitions of certain items referred to in our remarks in this morning's earnings release. An archive of this call will be available on our website for 90 days.

I will now turn it over to Marcel to get started.

Marcel Verbaas -- Chairman and Chief Executive Officer

Thanks, Cameron, and good afternoon to all of you joining our call today. Clearly, 2020 was an incredibly challenging year and one that we will not forget anytime soon. As soon as the pandemic began to unfold, lodging demand collapsed. While the lodging industry continues to struggle due to the pandemic, we feel we have weathered the worst of this downturn and we believe that Xenia is well-positioned for future growth.

Similar to the third quarter, we saw encouraging levels of leisure event during the fourth quarter. October occupancy was the high watermark since the beginning of the pandemic, after which we experienced a slight slowdown in November and December as a result of seasonality in demand and more significant restrictions that were enacted as COVID cases increased in many markets. Corporate trends and group demands continue to be limited as it was throughout the upper upscale and luxury segments across the U.S. Our results for the quarter were reflective of the weak overall industry fundamentals.

During the quarter, we had net income attributable to common stockholders of $24.3 million which was aided by gains on the dispositions we completed during the quarter. Adjusted EBITDAre was negative $10.1 million and adjusted FFO per share was negative $0.24. Encouragingly, our same property portfolio of 34 hotels, the achieved hotel EBITDA of only negative $2.9 million, a substantial improvement over the preceding two quarters during which a significant number of our properties were initially closed and then methodically reopened. All of our 34 same property assets were open during the quarter.

With only Hyatt Regency Portland remaining closed, 94% of our total room count has been and continues to be open for business. Out of these 34 properties, 13 were able to achieve positive hotel EBITDA for the quarter, driven by excellent cost controls, thereby reducing our cash burn and limiting our operating losses compared to prior quarters. For the full-year 2020, we had a net loss of $163.3 million, our adjusted EBITDAre was negative $51.7 million, and our adjusted FFO per share was negative $0.82. Despite the difficult operating conditions and most of our properties being closed for some portion of the year, 40% of our properties achieve positive hotel EBITDA for the full year.

The pillars of our company strategy were evident in the way we responded to the crisis in 2020. I would like to highlight these pillars again and review how they provided the company utility as we've weathered the worst demand shock the lodging industry has ever experienced. The first pillar of our strategy is a transaction-oriented mindset with a focus on diversification, quality, and portfolio enhancements. Since well before our public listing in February of 2015 and continually so since that time, we have transformed our portfolio through transactions and we were able to continue doing so in 2020.

Early in the year, we had nine properties under contract to be sold including our Kimpton portfolio, Renaissance Austin Hotel, and Renaissance Atlanta Waverly. While none of these sales closed as agreed upon, we successfully retained approximately $29 million of deposits. Though initially disappointed that these transactions did not close, we pivoted quickly to evaluate different avenues to enhance the company's balance sheet and liquidity while keeping a firm gaze on the potential future growth profile for the company. With the experienced team we have in place, we complete the four dispositions totaling almost $400 million.

The sale of Renaissance Boston to a different buyer at a discount to its pre-pandemic valuation was reflective of its nature as a heavily group-dependent hotel with significant near-term capital needs as we expect that to have a difficult road back to prior peak performance. The combined sale price for the three other hotels we sold, Residence Inn Cambridge, Marriott Napa, and Hotel Commonwealth represented an 11 times multiple on 2019 hotel EBITDA, an outstanding result considering market conditions. We believe that this pricing represents a minimal discount to pre-COVID valuations, particularly given specific market and property dynamics impacting these assets. Since the approximately six years since our listing, we have transformed our portfolio by selling 26 hotels for approximately $1.5 billion and acquiring 13 hotels for approximately the same amount, representing just over $500 million in average annual transaction volume.

As a result of our robust transaction activity over the past several years, our portfolio now consists entirely of luxury and upper-upscale hotels and resorts, compared to approximately 75% at listing. We have selectively acquired high-quality assets and primarily top 25 markets and key leader destinations and decisively sold assets that we believed had limited upside and or significant capital expenditure needs with highly uncertain ROIs. We feel that this has enhanced the company's growth outlook considerably. One of the outcomes of our transaction strategy is that we have significant -- significant exposure to Sunbelt locations where we believe demand growth and a more benign expense environment will aid our recovery.

We also owned properties in a variety of key leader and drive-to destinations as this has been an important part of our investment strategy throughout our history. We believe that markets such as Orlando, San Diego, Savannah, Key West, The Birmingham, Scottsdale, and Napa are set at a quicker ramp-up to stabilization as the current environments and we have seen a glimpse of this in the early days of the recovery. Our geographic exposure and diversity, as well as the appeal of our assets in different demand segments certainly benefited us in 2020 as we were able to reopen our properties in a more expeditious manner than many of our peers during the year. Our initial and sustained occupancy levels have allowed us to reduce our losses significantly from the periods when a substantial portion of our properties were temporarily shut.

Now turning to the second pillar of our strategy, an emphasis on a strong and flexible balance sheet. Coming into this crisis, we, fortunately, were well-positioned with a strong balance sheet and manageable debt maturities. Faced with the crisis created by the pandemic, our team put significant time and energy into preserving balance sheet. These actions included mending our debt agreements and raising $500 million through the issuance of senior notes.

We addressed our near-term maturities and now have no debt maturities until 2023. Also, at year-end, we had approximately $750 million in total liquidity, compared to approximately $450 million in total liquidity at the year-end 2019. Our team has always put an emphasis on balance sheet health, and as a result, we've maintained our financial flexibility allowing for growth in the years ahead. Lastly, the third pillar of our strategy is to have aggressive asset management initiatives and leveraging relationships with both brands and managers.

We have some of the strongest relationships in the industry with the best brand and third-party management companies, with a particular emphasis on our relationships with Marriott and IHG. As we think about our deep and long-standing relationship with Marriott, I would be remiss to not mention how deeply saddened we are about the loss of Arne Sorenson. As many in the industry have already have said, Arnie was not only an outstanding leader and business partner -- partner, he was a remarkable man. He was a friend and mentor to many.

While we mourn Arne's passing, we know that Marriott is in good hands. We congratulate Tony Capuano in his appointment as CEO and Stephanie Linnartz on her promotion to president. We look forward to continuing our strong relationship with Tony, Stephanie, and the Marriott team. We believe that being aligned with best-in-class brands that provide a relevant brand's promise to consumers is a significant advantage for a company due to the key attributes they offer, especially when market conditions like today's environment exist.

These advantages include superior revenue channels, proven guest loyalty programs, the quick rollout of formal brand -- branded cleanliness programs, strength of marketing and advertising platforms, significant technology investments to quickly implement mobile check-in and other initiatives, and innovative changes to operating models and ancillary fee structures. In the early days of the pandemic, we formulated an aggressive action plan to help mitigate its impact on the company. Having strong and experienced asset managers allow us to make swift, well-informed, and smart decisions. Our asset management initiatives and the expertise of the companies operating our assets allowed us to preserve company value with an emphasis on cost control initiatives which has been a particular strength of our company throughout the years.

Looking back on the decisions we've made around closing and reopening our properties, we believe strongly that the right decisions were made allowing us to minimize losses and prepare for the recovery. In addition to our asset management expertise, we have a highly experienced product management group that has been instrumental in us investing prudently and effectively into our portfolio. Over the past four years, we have invested well over $300 million in capital projects on hotels that we currently own. These projects include a 16 full guest room renovations for 48% of our rooms.

In addition, we added and or renovated large portions of meeting and public space throughout the portfolio. Through a com -- combination of recent transactions and capital expenditures, we have significant revenue growth opportunities. We developed a new 25,000-square-foot ballroom and 32,000 square feet of pre-function and support space at Hyatt Regency Grand Cypress in 2019. In addition, last year, we've renovated the pre-existing ballroom and meeting space.

The resort now features 100,000 square feet of brand new, state-of-the-art flexible meeting space -- space which will serve the property well as group business demand recovers over the next few years. Additionally, and as Barry will discuss, we have now largely completed the exciting transformational renovation at Park Hyatt Aviara Golf Club and Spa. We remain very bullish on the long-term growth prospects for many of the other hotels and resorts we acquired in recent years. We certainly expect to build a potential acquisition pipeline, and also be an active acquirer during the next upcycle if appealing opportunities present themselves as we have successfully done in prior cycles.

However. we are incredibly pleased to have been able to acquire a number of tremendous properties at attractive valuations over the past few years to help fuel our revenue and earnings growth in the years ahead. In addition to Hyatt Regency Grand Cypress and Park Hyatt Aviara, this includes high-quality assets such as Hyatt Regency Scottsdale, Royal Palace Resort, Fairmont Pittsburg, Ritz-Carlton Denver, Ritz-Carlton Pentagon City, and Waldorf-Astoria Buckhead. We believe that our asset management oversight and well-executed renovation projects will allow us to fully capture competitive growth opportunities.

The same principle applies to Hyatt Regency Portland as well. It is an outstanding property that we acquired at a very attractive basis in late 2019. We look forward to reopening the hotel as demand warrants, as we remain strong believers in its long-term potential. Overall, we expect our portfolio to adapt very well during the recovery and as our business evolves.

We believe we are poised to outperform relative to others coming out of this downturn. The pandemic has in many ways serve as an economic reset for many industries including the lodging industry. Our industry has been forced to adapt and we expect that overall better expense environment in the future along with less supply growth than what was anticipated before the pandemic in a majority of our markets. To conclude my remarks, I am pleased with how our team and our operators' teams have persevered in the face of adversity.

I would like to again thank them for their agility and resilience throughout the year and their continued dedication to the health and safety of guests and our operators' employees at our hotels and resorts. I will now turn the call over to Barry.

Barry Bloom -- President and Chief Operating Officer

Thank you, Marcel. I will be discussing our property performance for the fourth quarter, our continued success in operating our hotels in this difficult environment, and an update on our recent and upcoming capital expenditures. On the same-property basis for the quarter, occupancy was 27.8% in average daily rate of one $182.64 resulting in RevPAR of $50.82. This same-property basis includes 34 of the 35 hotels owned as of quarter-end which excludes Hyatt Regency Portland.

These 34 hotels were fully operational throughout the entire quarter. This reflects a decline in RevPAR of 68.5% as a result of the 45-point decrease in occupancy and a 17.5% decrease in rate compared to the same time last year. RevPAR was down 66.1% in October, 71.6% in November, and 68.3% in December. For the following operating metrics, I'll be referring to our 34 same-property hotels.

These metrics are based on the number of day -- days individual properties were open and operating. Since Q2 near the start of the COVID pandemic when we performed the rigorous hotel-by-hotel analysis and made the hard decision to temporarily suspend operations at the majority of our hotels to year-end, our hotels achieved 28.5% occupancy and an average daily rate of $169.60 resulting in RevPAR of $48.41. While the absolute amounts continue to remain unprecedented, we were pleased overall with our portfolio's performance as our hotels exceeded our anticipated performance levels through the fall and holiday season. October's occupancy was 33.8% and an ADR $192.82 hit significantly by the 18-day buy-up at major league baseball at Park Hyatt Aviara.

As a result, November saw a decline in occupancy to 25.9% and an ADR of $176.71. December occupancy declined over November to 23.7% with a slight decline in rate to $174.37, a strong performance over the holiday weeks was not enough to offset seasonal softness in early December and increased travel restrictions in California and other locations throughout the month. Currently estimate that for the month of January, our 34 open and operating hotels will perform in line with our expectations running approximately 24.5% occupancy and an ADR of $170.41. With February expected to achieve significantly better performance of approximately 33% occupancy with an ADR of approximately $183, reflecting significant leisure demand over the President's Day weekend along with continued improvement across all segments.

As we've done over the past few quarters, we want to share with you some of the items we continue to track closely as business and consumer confidence shift from week to week. Overall, we continue to see strong performance in the portfolio from our drive to leisure market hotels and our resort hotels. In 17 hotels, representing half of the portfolio achieved 30% or greater occupancy for the quarter including six that exceeded 50%. These included properties in Birmingham, Charleston South Carolina, Key West, Alexandria, and both of our hotels in Savannah.

As I mentioned, our California hotels were impacted during the quarter as curfews, travel advisories, quarantines, and stay-at-home orders impacted our various markets from late November through late January. As mentioned last quarter, our customer mix continues to evolve. Despite in many cases as the results of the Q4 challenges in California, there is now little doubt that there continues to be pent-up leisure demand that we saw in February and that we expect to continue on an ongoing basis as vaccination availability continues to increase. All of our hotels, especially boutique hotels resorts became experts in creative uses of social media platforms.

One of the ways we track this is by looking at our hotel's collective Instagram followers which were up 32% over the past year. Booking windows for leisure segment, particularly in our larger properties, started to expand from March and April as consumers are learning that booking early ensures them a room at the most desirable hotels in a given market. We expect this trend to continue and when combined with the component of business that has a very short booking window, will afford many of our hotels with the opportunity to yield higher rates on later booking business. We expect March occupancy in our three largest resorts to collectively grow at least 10 occupancy points over February levels with strong increases in ADR as well.

On the corporate transient side, we continue to see improvement in volume particularly from regional firms where employees have returned to their offices and are excited about being back on the road calling on customers. However, the length of stay in this segment is extended due in part to corporate travelers combining business and leisure trips. Our portfolio, given its significant Sunbelt orientation, has certainly been aided by this phenomenon. On the group side, our hotels continue to enjoy business in 2021 from professional sports teams including NHL, NBA, MLS, and LPGA-related business reflecting a continuation of our significant success in the fourth quarter with MLB, NFL, and PGA Tour lead the business.

Our hotels are hosting smaller association and corporate meetings on a regular basis and we are building significantly -- or increase for business for the second half of 2021 and for 2022. We're pleased to note that since the end of Q3 2020, our group nights on the books for the second half of 2021 have increased by approximately 35%. Our team, -- we hope that the end of cancellations outnumbering new bookings. We continue to see group demands from youth dance, pageants, sporting events, and we are fortunate to have a portfolio which is not overly reliant on citywide conventions due to our specific retail locations and markets.

Wedding and social business continues to be strong in our boutique hotels and resorts as many events originally scheduled for 2020 are now taking place, albeit with fewer attendees. Our hotels and their sales teams have all the tools in place to aggressively pursue and capture this business, which often has a virtual component in addition to the in-person event. Our outdoor venues with a total of over 400,000 square feet across our three resorts in Orlando, Scottsdale, and San Diego are seeing unprecedented demand as are our unique rooftop and other outdoor spaces across the portfolio. About 90% of our properties are equipped with food and beverage urban space, all of which is being utilized in unprecedented levels.

As we and our management companies continue operating in this new environment, we're refining the balance between services offered and cost structure. These efforts have supported and continue expanding EBITDA profile with 13 of our hotels representing over one-third of our portfolio generating positive hotel EBITDA for the quarter. This largely attract the higher occupancy hotels that I referenced earlier and include hotels in Birmingham, Key West, Charleston, South Carolina, and in both our hotels in the Savannah from our high occupancy list, as well as hotels in San Diego, Houston, Atlanta, Phoenix, Orlando, Napa, Salt Lake City, and Santa Barbara. I would now like to turn to a review of our capital projects completed last year.

In 2020, we spent $69 million on capital projects, including $11 million in the fourth quarter. And our largest project, the transformation of Park Hyatt Aviara, we have completed virtually all of this transformational renovation. As a reminder, we reopened the resort on September 30. During the fourth quarter, we completed the renovation and additions to the pool area and water amenities, including the addition of dueling water slides and an innovative splash pad, as well as the creation of six freestanding cabanas.

Existing specialty restaurant, formerly a dinner-only outlet, was transformed into a new three-meal dining concept featuring Baja California-inspired cuisine, while the existing breakfast-only outlet was turned into a highly functional meeting space. The renovation of the golf clubhouse, including a new restaurant concept, is on track to be completed later this month. As mentioned last quarter, we're excited that Richard Blais, a renowned celebrity chef and former Top Chef: All-Stars winner, with a strong San Diego and national presence, was spearheading this innovative outlet named Ember & Rye. The effectiveness of the design, quality of construction, and the new flow throughout the resort have each exceeded our expectations and we continue to believe that it's extremely well-positioned to capture precisely the type and quality of business for which it has been created and which we envisioned when we acquired it at the end of 2018.

Equally important, we completed the project within budget. The total had a cost of approximately $51 million. Reception -- receptions from leisure guests and response to the meeting planning community will continue to be outstanding. Each of these audiences has been accepting with the new revenue structure we have put in place.

The increased rates we are achieving better reflect the resort's five-star and five-diamond status, outstanding level of service, and transparent physical atmosphere that is now comparable to the best resorts along the California coast. In the second half of the year, we completed the guest room renovation of Marriott Woodlands Waterway Hotel and Convention Center and the renovation of the existing ballroom and meeting space at Hyatt Regency Grand Cypress. In 2021, we currently estimate spending approximately $40 million on capital expenditures. Several of these projects were originally scheduled for 2020 and were deferred.

We now intend to move forward with them in the second and third quarters given the strong return profiles. These include the development of the Regency court, a new outdoor social venue at Hyatt Regency Scottsdale, and a restaurant lobby renovation at Ritz-Carlton Pentagon City. We expect to renovate and reposition the restaurant lobby at Waldorf Astoria Atlanta Buckhead in the fourth quarter. In addition, planning work is under way on three significant rooms renovations and one significant resort pool area renovation, which could begin as early as the fourth quarter, depending on business conditions.

Our in-house project management team continues to oversee the design, planning, and construction of these projects. In addition, we plan to continue ongoing building systems and infrastructure work, accomplishing significant projects across 15 properties in 2021. With that, I will turn the call over to Atish.

Atish Shah -- Executive Vice President and Chief Financial Officer

Thank you, Barry. I will cover three topics today. First, I'll provide an update on our liquidity and balance sheet. Second, I will discuss our monthly cash burn.

And lastly, I'll provide some thoughts on our business outlook as we look forward. Starting with our liquidity and balance sheet. Having balance sheet strength is always been a key focus for the company. Through the variety of actions we undertook last year, we further enhanced our balance sheet.

As mentioned before, we have no near-term debt maturities. We diversified the balance sheet by adding high yield debt to our mix. Now, we have this tool available as another source of debt capital for future growth. Having amended our corporate credit agreements three times over the last year, we enhanced our relationships with existing lenders.

We are confident in our ability to work with them going forward. We have approximately $710 million of current liquidity, which represents years of runway at current business levels. Turning to my next topic, our monthly cash burn. During the fourth quarter, our average monthly cash burn was lower than expected.

Recall that our expectations for average monthly cash burn was in the $13.5 million range at the end of October when we reported the third-quarter earnings. We estimate that our fourth-quarter average monthly cash burns was approximately $9.5 million, inclusive of debt service and cash G&A expense. Toning down a bit, we estimate that our average monthly cash burn at the hotel level was approximately $2 million in the fourth quarter. These cash burn figures exclude capital expenditures.

And in addition, these figures reflect formalizing the timing of certain expenses. We estimate that the forward dispositions reduced our cash burn by several million dollars during the fourth quarter. A portion of that reduction reflects our estimate of what hotel level cash burn would have been had we not sold those properties in the third quarter. And a portion reflects lower debt service as a result of using sales proceeds to pay down debt.

Looking ahead, we expect the first-quarter average monthly cash burn to be higher than it was in the fourth quarter. We expect a greater hotel EBITDA loss in the first quarter as compared to the fourth quarter. This is due to restrictions on activity in certain states during the winter, as well as lower levels of leisure demand during the first half of the first quarter. By the second quarter, we expect cash burn to moderate.

With 34 of our 35 properties open and operating, we are poised to capture demand as it increases. As for the 35th hotel, Hyatt Regency Portland, it's expected to recommence operations in the second quarter. The exact timing is subject to our assessment of whether we are economically better off by refinancing operations. Moving ahead to my final topic, I would like to offer some thoughts on the year ahead.

We are increasingly optimistic about the second half of the year based on the rollout of the vaccines and the continued downward trend in COVID cases. We expect more business resume activity. We expect portfolio hotel EBITDA to be positive by mid-year. There may be months in which we have positive hotel EBITDA prior to then as we did in October of 2020.

But I think it will likely take until mid-year to be more consistently positive in terms of monthly portfolio hotel EBITDA. We expect our corporate profit measures to follow. And as such, we expect that the [Inaudible] would be positive by the third quarter. We did not provide earnings guidance in our release issued this morning but expect to provide it once we have more clarity on fundamentals and trends within the industry.

We did, however, provide guidance on certain -- certain corporate expenses that are more within our control. I will now discuss each of these three items. First, as to cash G&A expense, recall that during 2020, we reduced this expense by about 25% from what we had anticipated at the beginning of the year. For 2021, we expect to keep it approximately in line with 2020 levels.

We are forecasting approximately $19 million. Second, we expect cash interest expense to be approximately $68 million. This estimate is a step up from last year reflecting the same in dollars issuance. As for capital expenditures, we have already discussed the $40 million of anticipated projects.

We expect one-quarter of this spend to be in the first half and three-quarters to be in the back half of the year. Both the outlay and the timing could change based on market conditions, meaning we could advance or push projects. In closing, over the last 12 months, we preserved value, enhanced liquidity, and positioned the company for the future. We remain focused on creating value over the long term.

And with that, we will turn the call back over to Andrew for our Q&A session.

Questions & Answers:


Operator

We will now begin the question-and-answer session. [Operator instructions] At this time, we will pause momentarily to assemble our roster. The first question comes from David Katz with Jefferies. Please go ahead.

David Katz -- Jefferies -- Analyst

Hi. Good afternoon, everyone. Thanks for all of your detail. We -- we appreciate it.

Look, I -- what I -- what I would like to do. I mean we are a bit on in this earnings cycle, and we've heard so much positive commentary around the back half of this year and the optimism for it, as well as next year. And we'd like to try and put it in context, right, and -- and be balanced about it. Can you just put a little bit more sort of substance or detail around the back half of this year and early next year in terms of bookings and how we might evaluate their sincerity as best we can today?

Barry Bloom -- President and Chief Operating Officer

Sure, David. So one of the things that give us a good bit of optimism actually for the back half in terms of group is what we're seeing on -- on the rate side. And in fact, sitting here today, our group rate on the books for the back half of 2021 is actually higher than -- than it was for 2019. So I think in -- in light of what we've been through, we view that as a pretty remarkable statistic.

And what I can tell you is that as new bookings are being made, we're not seeing the ultra-competitive price environment that you might have thought we would see given that groups have a lot of options and a lot of hotels with availability for them. And I think part of that is that the groups that are booking right now are a lot of rebookings. So it's groups that maybe didn't move right away, but now know they want it. They canceled their program, now they know they want to have it.

So they re -- they've chosen their hotel and they want to rebook at that hotel. And we're also seeing a lot of groups that I think are getting a lot of confidence around just where they want to be. And so as opposed to a market like Orlando where we might have seen historically a group come and look at four or five or a half dozen hotels, we're seeing them look at a couple of hotels. And I think that's certainly changed the rate profile.

From an absolute standpoint in terms of where -- what would be nicer on the books, they're -- they're down and they're down fairly significantly. We're -- we're looking at group pace to -- to what we had the same time last year for 2020. The back half down around the 40% level. But given our particular portfolio, we do not -- most of the large majority of the group that's in our portfolio is corporate-driven.

It's not citywide-driven, and it's not necessarily large association-driven. It's exactly the kind of business that we would expect to book short term, and what we're seeing in terms of how that's grown over time has been significant. I made a comment in the prepared remarks that from the end of Q3 to the end of Q4, we saw back half 2021 bookings increased by 35%. We think that's significant.

And we've certainly seen that trend continue in January and February, and hope to report an even stronger profile as it relates to that metric by the end of Q1.

David Katz -- Jefferies -- Analyst

Right. And if I may sort of follow up. I know there's been so much discussion about creating efficiencies and cutting costs. I heard someone adopt the expression recently about a lifestyle change rather than just being on a diet.

How -- how -- how confident and, Barry, I'm guessing this is right up your alley, are you that this is going to be -- a lot of this will be a lifestyle change, not just a diet?

Barry Bloom -- President and Chief Operating Officer

I -- I think there is -- there's no -- I think that's actually a great -- great analogy, particularly as -- as we've seen. All of us have seen friends and family, some of them whose physical presence reacted well to COVID, and some of whose didn't in terms of the number of snacks they had while they were working from home. So I think that's a really appropriate analogy. I would have to give credit to -- to the author.

But I -- if -- but it -- but when you -- there's no doubt that we will come out of this when we're fully stabilized at with a lower expense structure in place. How the cadence to get to that, I think that's going to be really interesting. And -- and one of the things that -- that we look at really every day in the portfolio is what are the FTEs in the hotel? What business are they serving? How is that going to step up month over month as -- as hotels in the portfolio go from 30 to 40 to 52? In some cases, in our portfolio, are now 70%, 80% 90%. I can see we're seeing in some hotels.

And are we able to maintain that level of employment if business does not maintain at those levels? And that -- that's going to create a huge thing challenge I think if -- if there are any peaks and valleys to -- to how business kind of unfolds. And when you look at potentially depending on the market's softer seasonal months, in some case, that may be May, in some cases, that may be -- so it'd be interesting to see how that happens. I think -- but I do think a lifestyle change is -- is what we've gone through, and we have figured out how to combine services in the hotels, have people do more, have working managers rather than just managing managers. And -- and we certainly have a tremendous amount of respect and admiration for our managers in the hotels that -- that are working shifts.

How long we can perpetuate that I think is going to depend in part on how rapidly business comes back. We feel very good about the expense structure when we come out of this obviously. And -- and I think it -- both in terms of number of bodies, but as well in terms of the -- what we're doing and the services we're providing. Having said that, we are very focused on making sure that particularly in our upper-upscale luxury hotels that we are providing service that protects one.

Because we have a fundamental belief that one of the reasons why many of our hotels are doing well and why we're being our concept is because we have a restaurant open where other hotels may not, and that's driving guest business right now. For us, that may not be profitable in the traditional sense, but we know that we're driving additional room revenue because we're offering service and amenities that other hotels in our competitive markets may not be.

David Katz -- Jefferies -- Analyst

Perfect. Thank you very much.

Operator

The next question comes from Michael Bellisario with Baird. Please go ahead.

Michael Bellisario -- Baird -- Analyst

Good afternoon, everyone.

Marcel Verbaas -- Chairman and Chief Executive Officer

Good afternoon.

Michael Bellisario -- Baird -- Analyst

Barry, just one more for you on the group front. Could you maybe give us a sense of where the bookings are actually occurring and -- and how your -- and how some of your bigger assets are actually performing? Do you see any differentiation? And -- and I know you mentioned Orlando, but -- but Houston versus Portland, which is still close, then maybe Santa Clara that's a little bit more impacted from a fundamental perspective. Any other color there would be helpful.

Barry Bloom -- President and Chief Operating Officer

Sure. It's actually interesting, and that the -- for the most part, if you look at the entire year of -- of 2021, the -- there is not a huge amount of differentiation in the performance among the hotels. They're all -- many of them -- like most of them are down relatively the same amounts. And that's true even as we look out into Q3 and Q4.

There are a few pockets of hotels that are down a little less, but there is there's -- there's not, in the case of our portfolio right now, meaningful trends in markets that are doing better booking than -- than others. And that actually gives us a lot of confidence because, again, going back to the -- the way I answered the question for -- for David, is that our port -- our group portfolio and our group ho -- there are hotels that do group -- primarily book corporate group, that's by far the largest segment. So we would not -- so the fact that we're not seeing much differentiation at among hotels actually told us that's likely to be, in fact, true and consistent. And what we're seeing in terms of new leads and new bookings from that segment has also been relatively spread evenly through the portfolio.

Obviously, not on a case-by-case basis, right? [Inaudible] looking at different hotels in the portfolio, but they -- but we are seeing kind of consistency to the portfolio, both in terms of where we are and in terms of where we think we're going.

Marcel Verbaas -- Chairman and Chief Executive Officer

I think that has a little bit to do, too, with when you think about the geography of our portfolio and the exposure that we have to certain markets that are probably not behaving too terribly differently from each other. If we owned significant group hotels in markets like -- like New York, Chicago, some of the -- some of the markets that you -- that you can think of that are pro -- probably going to be a little bit close -- going to take a little longer to -- to get back to to the stabilization. I think it would see much more of a disparity in -- in what we're throughout the portfolio. So I think it has to do a lot with our exposure to as we talked about some locations, a lot of this kind of drives to these new locations and just have -- have a little bit more homogeneous within the [Inaudible].

Michael Bellisario -- Baird -- Analyst

Right. Got it. That's -- that's helpful, and then just one more from me on the capital allocation and capital deployment front. I think -- I think you said you hoped to be in acquire as the cycle progresses.

What's your latest thinking on maybe when you'll be able to put money to work in, and then how are you thinking about the different sources of capital that are available to you today?

Marcel Verbaas -- Chairman and Chief Executive Officer

Yeah sure. You know, obviously, we have a good amount of liquidity available to us today. We -- as we did it kind of throughout this pandemic. I mean, we're obviously looking at managing to various scenarios and various ways of how things stabilize and how quickly things stabilize.

So, I would say that's our continued immediate focus, obviously, remains on the operations of our hotels getting to breakeven, hopefully getting cash flow positive as a -- as a company sooner rather than later. And clearly, we have been very active throughout various cycles throughout our history as you know very well. So -- so, it's something that we will absolutely look at, you know, we'll be looking to be an active participant to the extent of the next op cycle -- provide some interesting acquisition opportunities. And, I think, that there are various levers we can pull to have the type of liquidity available to most of what needs to be an action required.

And that being said, you know, we highlighted this a little bit in my comments, there certainly don't appear to be a tremendous number of assets out there on the markets that are A, very appealing, great strategic fit; and B, would come at a price that we would view as, you know, at this kind of price, if you will. There just isn't that much of that kind of stuff out there. I think you've certainly, through some of the -- some of the rumors potential deals that are currently out there, you're seeing dense pricing for -- for attractive hotels remain, you know, remain pretty aggressive, frankly. So, I don't think there's any need for us to be, you know, overly jumpy as it relates to acquisitions.

So, I think, we can sit back, we can see what kind of comes our way as we started building a pipeline coming out of this. But we feel really good about not having said on our end for the last couple years and really continue to transform the portfolio and -- and have a portfolio now where there still are a lot of better growth opportunities within the assets that we've got on us, you know, say, three to four years.

Michael Bellisario -- Baird -- Analyst

Thank you very much.

Operator

The next question comes from Thomas Allen with Morgan Stanley. Please go ahead.

Thomas Allen -- Morgan Stanley -- Analyst

Thanks. Just following up on the last question. How are you thinking about dispositions right now?

Marcel Verbaas -- Chairman and Chief Executive Officer

That's not similar to how we've always rated dispositions which is, you know, we'll continue to look very closely or where we think -- think of value for assets or harbors where we think long-term growth potential is for a particular -- particular asset and we will continue to, you know, to be very diligent in the way that we're evaluating both our existing properties within our portfolio and potential additions out there in the market. So, that means, you know, particularly when there are some -- some bigger capex needs coming upwards for some of our assets, we'll take a very close look in whether think that there's a good enough market out there, potentially an asset as opposed to making an additional investment if we don't feel like the right kind of ROI is available by doing that project. So, I would say that we've -- we've obviously done a lot of heavy lifting in the way that we transformed our portfolio. And I see a lot of growth potential within our portfolio even with some of those assets where we do think that we might be doing some capex projects over the next few years.

So, you know, at this point, I'd say that it's a, you know, a little bit more around the margin as we sit here today with some additional dispositions than we probably did.

Thomas Allen -- Morgan Stanley -- Analyst

All right. Thanks, Marcel. And then, just your commentary around thinking through 2021 and the comments that you're kind of increasingly optimistic about getting to positive EBITDA or positive free cash flow by 3Q. It sounds a little bit more optimistic than peers where I feel like mostly committed to like the second half of '21 improvement.

Was that on purpose? Like is -- is that -- do you feel like it's been your portfolio is better positioned to turn profitable before peers or, you know, other things that drive you that? And -- and might as well kind of come off more -- more optimistic. Thank you.

Barry Bloom -- President and Chief Operating Officer

Thanks, Thomas. It's a good question. You know, to be frank with you, I -- I don't think we kind of went through exactly what it appears we're saying. I mean, our -- our view is that we've got some momentum and traction on booking activity so that's a positive.

And then, just looking at the portfolio, you know, as we pointed out, you know, the markets were very strong, a lot of these Sunbelt markets, you know, seem to be doing better. So, I think, that's -- that performance and expectation that we have is -- is relative to overseeing the business and are a mix of geographic locations. So, that's really what's important. Marcel, do you have anything to add on it?

Marcel Verbaas -- Chairman and Chief Executive Officer

Yeah. I'll just add two and then I think Atish, you know, highlighted these various comments too. You know, we certainly could foresee some woes coming up where we think we will have -- we will be breaking even where it may not be structurally yet as a little bit later in the year. So, we saw that, obviously, in a month like October that was, you know, positive hotel EBITDA.

So, maybe a look at where we finished the quarter -- the fourth quarter where it's, you know, negative hotel EBITDA of less than $3 million for the 34 hotels in our state property portfolio. We're obviously not tremendously far off from getting to a point where we can envision a breakeven EBITDA at that level. So -- so, I do view some of the momentum that we have to the strategic point that lead us to believe that, you know, as we -- we kind of enter the second half of the year there that we will have the opportunity to get to that level.

Thomas Allen -- Morgan Stanley -- Analyst

All right. Thank you.

Operator

The next question comes from Bryan Maher of B. Riley FBR. Please go ahead.

Bryan Maher -- B. Riley FBR -- Analyst

Good afternoon. Maybe for Marcel and Barry. You guys have been at this for a long time and, you know, The Wall Street Journal wrote a piece, I think was early December, suggesting a permanent impairment of business travel to the tune of 20% or 30%. What are your thoughts on that? Is that a bit of a stretch? Do you think there's some truth to that? Do you think the Zoom environment is going to hedge the, you know, business travel by some degree? Can -- can you expand upon that?

Marcel Verbaas -- Chairman and Chief Executive Officer

Sure. I'll -- I'll start it off and then I'll let Barry jump in because he's got even, you know, more experience than I do. And I think your question is really -- so, yeah, the way -- the way we view it -- I've, you know, from my personal perspective, I -- I think that sounds particularly excessive. I don't believe that there is much of a fundamental shift that we'll see in the business.

There's certainly, you know, shorter-term, there are some -- there are some challenges to overcome as far as people getting back out on the road. But I think a lot of that is being driven by way to see the offices in my environment improving, you know, people getting back to the office, working together. And, I think -- and I'll steal a little bit of Barry's thunder because I know it's something that we talked about a lot and that he brings up a lot is the fact that there's going to be no greater push for people discard traveling again besides when they see their competitor traveling and meeting customers and -- and being out on the road again. So, I -- I do not believe that we're going to see a truly fundamental long-term shift.

Now, could there be situations where people are saying, you know, look, I -- do I really want to take this trip because I might just get on the Zoom call with someone? You know, I think, there will be some of that. There is other things there will be a play too such as, what is the long -- what are the long-term ramifications of maybe some more working from home environments versus going to an office? So, that -- those that actually create more travel for people having to travel to their home offices if they don't live in the place anymore where their -- where their job is really based. I think, there is a lot of ins and outs and pluses and minuses that are just, as you sit here today, are truly kind of impossible to predict. But I -- I'm not a believer that there's going to be just as a fundamental real negative shock to -- to what business travel looks like over time.

Bryan Maher -- B. Riley FBR -- Analyst

Yeah. Thank you.

Operator

The next question comes from Aryeh Klein with BMO Capital Markets. Please go ahead.

Aryeh Klein -- BMO Capital Markets -- Analyst

Thank you. You know, maybe -- maybe on the capex front. Can you expand, you know, how you think about spending over the next few -- few years? Have there been significant deferrals and are there a handful of potential ROI opportunities that you're looking at beyond -- beyond the ones that you've highlighted for 2021?

Barry Bloom -- President and Chief Operating Officer

Sure. Last -- last year we came into the year with a budget about $120 million and cut back to, over the course of the year, the ultimate spending of $69 million. We had always expected 2021 to be a little bit lighter year in terms of capex knowing how good to shape the portfolio was in. And -- and really the projects that I mentioned were all things that would have been either executed or in the plan or deep into the planning stages in '20 -- for 2021.

One of the things -- when we -- we are very rigorous and one of the great benefits of having our in-house project management team is -- is how much do we put around our five-year planning process. We're constantly looking at the next five years what projects make sense, what can we afford, what -- what are the returns going to be on those projects. And then, as we went through that -- that -- that process this year, I think, we were again pretty pleased with what the portfolio was and not feeling as there was a lot of urgencies to spend to do a lot of projects in 2021. But there were projects that we thought have some substantial returns.

We are, this year, as part of our overall planning and strategy, going back and doing some deep dives on some of the assets we've had that have been in the portfolio for more extended period of time and really looking at all the things that we can do to those assets. Is it from a physical perspective or from a brand and management perspective to considerably change those assets? So, to the extent, we identify opportunities there. Those are things that were in some cases we have placed forward for them in the five-year plan, in some cases we don't. But those are things that could provide and -- and retriggered the plan.

I think we've talked for -- for quite a while kind of about a -- of a normalized run rate on the portfolio and so that a little larger size. We've talked about a normalized run rate and capex around the $60 million level and have kind of tried to -- in our five-year plan balance to that. So, when was last year was a little over that issue, maybe a little bit under that. But we think that's the right dollars to keep the portfolio in -- in really good shape and do the projects that we need to do to keep the properties both fresh from a guest perspective, but also, as I mentioned, make sure that we're spending dollars which we've always done a very good job of in terms of back of the house infrastructure building systems spending as well.

Marcel Verbaas -- Chairman and Chief Executive Officer

And one of the -- and not that I want to necessarily put a rosy spin on anything related to the pandemic, because obviously there are all the negatives that came out of the pandemic and it's a -- it's a big hole that the whole industry is trying to work its way out of. But one of the -- the silver linings as it relates to the capex piece, particularly for us, is that it allowed us to almost falls a little bit again and to look very closely at our entire portfolio and say, you know, where do we think the appropriate money is to be spent in the next few years. And that it really goes to the point of Barry was making as it relates to some of those assets that have been in the portfolio a little bit longer to see. Say, you know, when do we want to do this? How -- how deeply do we want to do some of these renovations? And to -- to do a lot of planning around some of those things.

I'd also say that the four assets that we sold universally they were going to be requiring some pretty significant capex in the coming years. So, there is actually a fair amount of capex that we're avoiding as a result of having sold those core assets as well.

Aryeh Klein -- BMO Capital Markets -- Analyst

Got it. Thanks for that. And then, maybe just looking at your portfolio from the supply growth standpoint in your major markets. Do you have any sense of how that may have changed pre and post COVID?

Atish Shah -- Executive Vice President and Chief Financial Officer

Yeah. Sure, Aryeh. So, you know, the pre-COVID weighted supply for 2020 was 2.7% and it was 3.6% for 2021. Post-COVID at year-end '20 -- 2020, supply growth came in at about 1.6% and is at 3.2% for 2021.

So, a couple of reasons in our view on why that came down. One, selling the assets we did help lower that a bit. Secondly, would be delays and -- and cancellations of projects. We would expect that the 2021 number will continue to come down during the course of the year and as projects continue to get pushed out and obviously not much is being added, in a way, of new supply for, you know, '21, '22, and beyond at this date.

So, from a supply growth perspective, I think, we're likely in a much better position than we were a couple of years ago and we'll reap the benefits of that over the next several years. And it's a combination of really what's happened and how that's changed. You know, the ability for projects to get done in terms of financing as well as -- as well as our shifting of the portfolio to just better markets for growth through our transaction actually.

Aryeh Klein -- BMO Capital Markets -- Analyst

Thanks for the color.

Atish Shah -- Executive Vice President and Chief Financial Officer

You're welcome.

Operator

[Operator instructions] The next question comes from Austin Wurschmidt with KeyBanc. Please go ahead.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Hi. Good afternoon, everybody. So, Marcel, you've -- you've referenced the Sunbelt exposure, you know, is really an outcome of the dispositions you've done and, you know, you highlighted that some of these markets are going to ramp quicker than the overall portfolio. And so, when you kind of overlay the market view, you know, with the -- the first pillar, you know, the transaction-oriented mindset particularly the diversification piece.

How does that affect your view on -- on how you allocate, you know, the next, you know, next dollars either on the capex side or acquisitions for that matter moving forward versus sort of broad -- broadening your -- your geographic exposure?

Marcel Verbaas -- Chairman and Chief Executive Officer

Yes. Great question, Austin. And obviously, we -- we continue to say and we're a firm believer as long-term as we will primarily be investing in, you know, top 25 U.S. lodging markets key leader destinations.

And, you know, an outgrowth of what our strategy has been over the -- over the past few years has been exactly what type of exposure that we -- that were -- that we currently have in the portfolio. We think that, as we've always done, we're -- we always have a very open mind to potential acquisitions and -- and I've always wanted to cast a little bit wider lens than particularly what you saw a few years ago from a lot of our peers, which was a little bit, you know, narrower focus on -- on the smaller set of markets which was to us also provided a much smaller set of acquisition obviously. So -- so, we're going to continue to kind of have this wider lens and continue to look at a lot of different markets. We -- we like the characteristics of a lot of other markets that we're concentrated in because of the things I mentioned in the long-term demand characteristics.

Certainly, a little bit more of a benign expense environment. So, I think, that's -- that's where our primary focus will remain. That doesn't mean that's, you know, that -- that it will come a time where you say, look, there are just these great acquisition opportunities. Because it's -- it's obviously going to be driven by -- by the supply of potential deals are out there.

What -- what happens with pricing and, you know, we think that there is just a great return to be made on a market where we currently don't have a lot of exposure, and we're not going to shy away from that so. So -- so, it's -- it's really a long-winded way of saying, look, we're going to be -- we're going to be opportunistic. We're going to keep an eye really on the same kind of characteristics that we've always liked which is not an overreliance on one particular demand segment, having a good level of leisure exposure in our portfolio, and -- and just look at where the opportunities will come our way.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

I appreciate that. And then just -- there's been a lot hit on the group side, but I'm just curious as these groups rebook and -- and others sort of look to get, you know, bookings on the calendar. Any change in -- in the F&B side and -- and level of spend or types of items that are willing to spend on today? And then, I'd also be curious, you know, specifically on the Hyatt Regency Portland, if you could give an idea of what the group bookings do or even the convention calendar look like in that market, just given some of the challenges -- challenges it's -- it's facing?

Barry Bloom -- President and Chief Operating Officer

Sure. Let me -- let me talk about food and beverage group spend. So, it's interesting what -- where groups are meeting today. We're seeing very good food-beverage contributions but the hotels are having to work differently to figure out how to deliver that, right? So, you know, it's the question of are -- is the group and is the hotel, and it varies, you know, willing to do a buffet, which -- which obviously is lower cost more efficient versus doing something plated.

We continue to see a lot of groups particularly if it's not their big meal, you know, doing, wanting more box lunches and things like that. So, it's been -- it's been a little bit different certainly depending on the market you're seeing. You know, some groups are doing that might have done cocktail parties are not doing those where they do before. So, it's going to be a slow comeback, I think, to get back to the good food and beverage spend that we've seen historically.

And again, that does vary a lot market by market. Right? I mean, in -- in California other than one of our hotels we're still not able to do indoor dining. So, that -- that obviously has a big impact on what we're able to -- to offer a group and how we're able to offer it.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Got it. And then, just as it relates to the -- the Hyatt Regency Portland. If you can give an idea of what, you know, the group calendar and the convention calendar looks like for that market? I appreciate it.

Barry Bloom -- President and Chief Operating Officer

Yeah. So, the market as a whole, the overall market when you look at city lights and windows of which we are -- we'll be the most likely beneficiary of those in the back half of the year, the numbers are significantly greater in terms of definite events on the books than they ever had it. So, we're keeping a very careful eye on those and when those windows show up and -- and making sure that those are actually good piece of business for us. The -- the -- the very first time that kind of changes.

So, I mentioned the entire back half, and really every month to back half, you start seeing some real transition into that starting in June. So, when we talk about having an eye to reopening the hotel in -- in Q2, that's really what we're focused on. Right now, you know, the number of citywide -- there were some citywide on the books for the first quarter and early second quarter that kind of went away on us so that's why we're keeping a careful eye on it. But it's part of what gives us of, again, a lot of long-term confidence in the hotel and certainly, in the market as a whole, we still think what we need is a great convention alternative for -- for Paci -- for Pacific Northwest business and giving Seattle a real run for its money now that it has a dedicated convention center hotel in Portland.

But also we think from the entire West Coast, in California in particular, Portland can serve as in much lower-cost alternative for those groups to California-driven convention and you have a terrific airport in Portland continues -- continues rank on one of the best airports in the country with a significant Alaska Airline hub. And as Alaska has extended its reach beyond their traditional West Coast to a lot more East Coast destinations, that opens up a lot of opportunities for a larger city like Portland.

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Great. Appreciate it. Thank you.

Operator

The next question comes from Tyler Bator with Janney Capital Markets. Please go ahead.

Unknown speaker

Hi, good afternoon. This is Jonathan on for Tyler. Thanks for filling us in. One quick one on international demand.

Do you have any sense as to when that demand will return and how much of a headwind is that for markets that are more tilted toward international?

Barry Bloom -- President and Chief Operating Officer

We're pretty fortunate. We have, I mean, we have a very low percentage of international travel in our portfolio overall, given that we are had relatively low exposure to major gateway cities. We have seen significant international business at our Western Oaks and Gallery in Houston but the South American and Central American travelers are traveling. And when they do travel, Houston, in general, and the Galleria Mall, in particular, is a shopping destination is a very tricky decision.

We've done quite well there. Our other hotels that traditionally had a fairly large component of international businesses are near San Francisco airport and we are starting to see international flights, international crew business come back and that's probably the best indication of when. If you're curious when the business will come back, we're keeping a very careful eye on the international flights, international crew business, in particular at that hotel as a marker for when international -- the international traveler will be making inbound business.

Unknown speaker

OK. I appreciate all the details. That's all for me. Thank you.

Operator

This concludes our question-and-answer session. I would like to turn the conference back over to Marcel Verbaas for any closing remarks.

Marcel Verbaas -- Chairman and Chief Executive Officer

Thanks, Andrew. Thanks -- thanks for the -- thank you, everyone, again for joining us on our call today. Now we are at the end of earning season so I appreciate everyone's attention and insightful questions. Certainly, there's some light at the end of the tunnel with vaccinations increasing and -- and business appears to be, you know, slowly rebuilding particularly on the leisure side, obviously.

And we look forward to updating you again in the quarters ahead. So, thanks again for joining us today.

Operator

[Operator signoff]

Duration: 70 minutes

Call participants:

Cameron Frosch -- Senior Analyst, Finance

Marcel Verbaas -- Chairman and Chief Executive Officer

Barry Bloom -- President and Chief Operating Officer

Atish Shah -- Executive Vice President and Chief Financial Officer

David Katz -- Jefferies -- Analyst

Michael Bellisario -- Baird -- Analyst

Thomas Allen -- Morgan Stanley -- Analyst

Bryan Maher -- B. Riley FBR -- Analyst

Aryeh Klein -- BMO Capital Markets -- Analyst

Austin Wurschmidt -- KeyBanc Capital Markets -- Analyst

Unknown speaker

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