where repar declined 9.9% amid weak government-related travel demand and significant property level leadership transitions which are now largely complete. Overall, urban repar increased 4.1% but urban total repar increased only 0.8% and urban hotel EBITDA declined 1%. The strong performance in San Francisco and Los Angeles was offset by weaker convention calendars and banquet and catering revenue in San Diego and Boston along with continued government-related weakness in Washington, D.C. The result was a shift from group to transient demand, which is worth a closer look. Portfolio-wide, the quarter was transient-led. Transient revenue was up nearly 10% on a 7% increase in ADR, concentrated in higher rate channels. Group revenue declined approximately 2%, while corporate group revenue was essentially flat. Importantly, the group's softness reflected the conventional rotation, not corporate demand pullback. That mix also helps explain the gap between the portfolio's 6.5% rep part growth and 4.7% total rep part growth. Out of room revenues grew 1.7%. Urban, banquet, and catering revenue declined approximately 20%, concentrated primarily where the citywide calendars were weakest and where World Cup matches scared off groups. By contrast, resort food and beverage revenue grew nearly 11% with banquet and catering revenue increasing more than 16% on a resort occupancy growth of 310 basis points. Where group and transient customers showed up, they kept spending and spending a lot. Looking at how the quarter developed, April started well with rep bar rising 6%. May was the softest month as we flagged last quarter up roughly 2% on later convention calendars. June then accelerated sharply, with rep are up nearly 12%, driven by an ADR increase of 14%. I can see actually dipped slightly, so June was entirely a pricing story. World Cup increased rep are modestly in June and in the quarter, but reduced non-root revenues. Jon will discuss the overall World Cup impact in more detail in his comments. So that's the revenue story. The earnings story is how effectively our teams turn that revenue into profits. and they did another great job. They converted 4.8% total revenue growth into 7.1% same property hotel EBITDA growth with same property total expenses increasing just 3.8% and margins expanding 67 basis points to 30.6%. The discipline shows up across the P&L. Rooms expense grew at less than half the pace of rooms revenue, increasing only 3.1% even as occupancy climbed 130 basis points and room revenue grew 6.6%. Energy expenses were also well contained, up 2.7% for the quarter and flat year to date, reflecting the benefit of our energy reduction and sustainability initiatives. On a per occupied room basis, total expenses increased just 2%, highlighting our team's continued positive results from our ongoing intense We also completed our property insurance renewal on June 1st at premiums approximately 27% below last year, or $6 million lower, which was better than we anticipated, and a nice tailwind through next May. A more favorable insurance market helped, but so did a disciplined program design and the capital we've invested to harden weather-exposed assets. Now let's turn to capital allocation, the parlor quarter you won't find in any same property statistic. Despite losing approximately $5 million of hotel EBITDA from hotels we sold and compared it against $3.2 million of prior year business interruption income, adjusted EBITDA declined less than 1% and adjusted FFO dollars were essentially flat. A 4% decrease in diluted share count lifted adjusted FFO per share 4.6% while retained free cash flow per share after dividends increased nearly 25%. This is what disciplined capital allocation should accomplish. Per share earnings and cash flow growing faster than company earnings despite asset sales. On the investment side, we invested $12.5 million in the portfolio during the quarter and remain on track for $65 to $75 million for the full year. This lower capital requirement converts more of our earnings into retained free cash flow for debt reduction and opportunistic repurchases of our common and preferred chairs. During the quarter, we sold the Chamberlain West Hollywood Hotel for 43.5 million and used 26.1 million of the proceeds to retire 33.7 million in preferred chairs at a 23% discount. That single transaction generated approximately 7.6 million of immediate value accretion and eliminated over 2 million of annual preferred distributions. And over the last eight months, we have sold three hotels for just shy of 160 million and an aggregate 15.4 times even the multiple and a 4.6% NOI cap rate. These sales, as the ones before, continue to validate the portfolio's private market value. The value creation playbook is simple. Sell hotels at higher private market values and use the proceeds to reduce debt, and buyback common preferred securities at prices below their underlying value. During the first half, we repurchased 0.9 million common shares at an average price of $13.62 and retired 1.5 million preferred shares at an average 23% discount to liquidation preference. Our balance sheet also continues to improve. Net debt, the trailing 12-month corporate EBITDA, declined to 5.3 times from 5.5 times at the end of Q1 and 5.9 times at the end of 2025. We ended the quarter with $270 million of cash, $641 million of revolver availability and $90 million of delayed draw term capacity or a total of $1 billion of liquidity. The remaining $350 million of the 2026 convertible notes are fully funded through existing cash, expected free cash flow and term loan capacity and we have no other debt maturities until 2028. Stepping back, The first half demonstrates two forms of compounding. Operating leverage of the hotels and disciplined capital allocation at the corporate level. Same property hotel revenues increased 7.2%. Same property hotel even grew 14.5%. Adjusted FFO per share improved 23.8%. And free cash flow per share surged 69% to $0.76 or $87.8 million. Each layer amplified the one before. and with that, I'd like to turn the call over to Jon for more color on current demand trends, event related business, our markets and the outlook for the balance of 2026. Jon.

Thanks Ray. Since Ray covered our second quarter performance in detail, I thought I'd step back and provide a more high level view of both the industry and Pebble Brook. So let's start with the industry's performance in the second quarter. As a reminder, The industry setup was very favorable in Q2. Benefits we expected from better holiday calendar, a uniquely active major events calendar, and the reconnection between GDP growth and industry demand growth, they all occurred in the second quarter. Going into the quarter, our concern revolved around the potential for geopolitical or policy events that would negatively impact the economy and travel. Fortunately, the conflict in the Middle East and constantly changing trade policies have not yet had a negative impact on the economy or U.S. travel in general so far this year. As a result, industry demand growth was healthy in the quarter and with little new supply being added, occupancies rose and ADR growth accelerated due to the better setup, more compression days, less price sensitivity by higher-end customers in particular, all of which led to more pricing confidence. All of the major hotel demand segments remained favorable. Group, corporate transient, and leisure travel all grew weekdays and weekends alike. We even saw the international travel balance improve in June. Inbound travel turned positive for the first time in quite a while presumably helped by World Cup visitors while outbound travel declined. Both sides of that provide benefits for U.S. hotels, more foreign visitors coming in and more Americans staying home. For Pebble Brook, as Ray described in detail, we saw the same industry benefits in Q2 and more, even though we had soft convention calendars in a number of our major markets. During the second quarter, in the quarter for the quarter pickup was very strong, exceeding last year by $8.4 million. We haven't seen any increase in group cancellations or attrition, and attendance levels for group meetings have been more predictable than last year. We continue to watch for signs of weakening, but pickup in and for the month, quarter and Yir has remained favorable. World Cup delivered a modest benefit to room revenues. We estimate an increase of between $1.5 and $2.5 million, or roughly 60 to 100 basis points for the quarter in RevPAR. The incremental World Cup demand was largely offset by corporate group and transient business that stayed away due to higher rates and many booking restrictions. So the net room benefit came primarily from rate, not occupancy. This also explains the slight June occupancy dip Ray mentioned. The change in mix from group to transient, unfortunately, also had a negative impact on food and beverage revenues in our match markets, particularly banquet and catering, which declined on a year-over-year basis and offset much of the room revenue gained. In total, we estimate the net benefit to Hotel Ibiza from World Cup was between $500,000 and $1 million, a relatively minor benefit overall, but a benefit nonetheless. Turning back to the industry outlook, with a strong economy that remains resilient and with corporate profit growth at high levels and accelerating, There are fundamental reasons to be encouraged about positive industry trends continuing in the second half of this year. However, we remain concerned about potential negative impacts from the protracted and widening Middle East conflict, policy changes and geopolitical instability, and the real possibility of another potential government shutdown this fall. Given the strong operating performance in Q2 and with July continuing that trend, we're increasing our industry rep part growth outlook to a range of 3.5% to 4.5%. As we look out beyond this year, we believe we're at the beginning of a strong multi-year up cycle for the hotel industry. I think we can now confidently forecast that supply should remain very limited through most of the rest of this decade. We're at the beginning of a major multi-year capital investment cycle related to both AI and the reshoring of manufacturing. And we have another huge business investment cycle right behind this one with the creation and build out of the robotics industry. We also expect very significant and growing benefits from the massive wealth that has been created over the last 15 years for both investors and employees and from the largest transfer of wealth in global history as the baby boomers begin to pass on the wealth they've amassed. We believe the prospects for healthy multi-year demand growth have never been stronger or clearer in the last 30 years, nor has supply growth been so limited at the same time. These are incredibly positive multi-year fundamentals. The multi-year setup is very good, just like this year's setup was very good. Of course, a lot of things could still go wrong, as they did last year. Before turning to our Q3 and updated full-year outlook, I want to spend a few minutes on why we're increasingly constructive about 2027 and the broader multi-year setup. For 2027, we believe these strong demand and supply fundamentals should outweigh any headwinds related to difficult comparisons to this year's numbers. There are a number of reasons for this view. First, we expect the economy to remain strong and potentially accelerate as business capital investments ramp further next year and corporate profit growth remains at high levels. Second, We believe the wealth effect will provide a growing positive impact on spending and travel. Third, while we have a strong holiday calendar this year, it's just as favorable in 2027. In addition, while the industry benefited meaningfully in June and early July from World Cup and America 250, we expect demand to materially outpace supply next year, which will drive occupancies higher creating more compression and greater pricing power throughout 2027, which should more than offset the loss of this year's event-related benefits. And finally, we ultimately expect the international inbound-outbound travel imbalance to reverse, and it could occur next year if the positive experiences foreign travelers had at the World Cup and traveling throughout the U.S., and the very favorable media coverage of the World Cup activities translate as they normally do into increased future travel to the host country. A more positive impression of the US compared to all the previous negative media about our country should help increase travel to the US from abroad. For Pebble Brook in 2027, We should continue to see significant growth from the recoveries in our urban markets led by San Francisco and Los Angeles coupled with more favorable convention calendars in San Diego and Boston that are expected to significantly improve the performance of those markets next year. We also have a number of significant events next year including the Super Bowl moving from San Francisco to Los Angeles NCAA men's basketball regional finals in LA, the NFL draft in Washington DC, the Star Wars 50th anniversary celebration in LA, the Major League Baseball All-Star Game in Chicago, and a significant amount of expected pre-Olympic travel into LA. We should also see further upside from our redeveloped properties as they gain additional share and finally, our resorts should benefit from the ongoing K-shaped economy and the growing wealth of the higher-end consumer. While the Super Bowl won't be in San Francisco next year, we continue to expect strong RevPAR growth in the city as city-wides continue to return, albeit at lower rates than the Super Bowl, and corporate transient travel should grow significantly at higher rates as corporate growth in San Francisco continues to boom. We also expect leisure travel to see further increases as the impression of the city's environment has turned positive over the last year and the city has been a showcase this year during major events. Turning back to this year, Q3 is off to a great start with July proving to be stronger than we expected. Short-term pickup has surprised to the upside, and we think this indicates that summer vacation travel is starting strong, continuing the positive leisure trends from Q2. Having July 4th fall on a Saturday provided a big lift to our portfolio overall, and probably a much bigger lift than the weekend-related America 250 events. Group pace for the third quarter is also favorable. Corporate travel growth remains strong, and leisure travel is accelerating and allowing us to average higher prices through less discounting, fewer promotions, and reduced use of lower-priced wholesale channels. Based on preliminary results through the 25th, July RevPAR is on pace to grow between 7% and 8% over last year. However, we're not prepared to extrapolate July's unusually strong short-term pickup across the entire quarter. Our Q3 range preserves a prudent allowance for shorter booking windows, potential macroeconomic and policy-related volatility, and the impact of geopolitical events. For Q3, our outlook assumes same-property RevPAR growth of 1% to 3%, same property hotel EBITDA of $100.5 million to $104.5 million, adjusted EBITDA of $92.5 million to $96.5 million, and adjusted FFO per share of 48 to 52 cents. When we look at our pace for the second half of the year, as of the end of June, room revenues were pacing ahead of same time last year by 5.5%, which is a total of $10.7 million. About 80% of this revenue pace advantage is being driven by transient, with the remaining 20% in group. If pickup for the second half of the year equals last year's pickup, it would translate to REVPAR growth equal to roughly 2.4% in the second half. To put these numbers in perspective, our current nominal PACE advantage is in line with the high end of our implied REVPAR growth outlook for the second half of the year. So if pickup in the second half runs ahead of last year, then we would exceed our outlook by the higher pickup. Recall that last year, with everything that happened, we lost PACE advantage as the year progressed and finished down for the year in room revenue. Speaking of our outlook, we're raising our full-year outlook to reflect the second quarter outperformance while maintaining our prior assumptions for the second half. With the increased outlook, we're now forecasting same-property REVPAR growth for the year of 4.5% to 5.5%, an increase of 125 basis points at the midpoint. We're also forecasting same-property EBITDA growth of 8.2% to 10.5%, with the midpoint at 9.3%, a healthy increase for the year and a material step-up from our prior outlook. These increases translate into an adjusted FFO outlook of $1.69 to $1.76 per diluted share, an increase of 8 cents at the midpoint, with a similar increase in our free cash flow outlook. As I indicated earlier, but worth repeating, current trends remain favorable, but booking windows remain short and the geopolitical policy and macroeconomic environment remains uncertain. We're encouraged by the industry trends we've been seeing, but we're not yet comfortable assuming visibility we don't yet have. We'll continue to take the year one quarter at a time. and if there's no material impact from geopolitical policy or other macroeconomic events, then we should keep performing favorably to our outlook just as we have in the first half. With a terrific first half behind us and a positive setup in the second half, we remain very excited about the full year for Pebble Brook. Now we just need the rest of the year to cooperate by providing a more stable environment. So with that, we'd now be happy to take your questions. Christine, if you wouldn't mind, please proceed with the Q&A.

Thank you. We will now be conducting a question and answer session. In fairness to all callers, we ask that all questioners limit themselves to one question. If you have additional questions, you may re-queue and those will be addressed, time permitting. If you would like to ask a question, please press star 1 on your telephone keypad. A confirmation tone will indicate your line is in the question queue. You may press star 2 if you would like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question comes from the line of Dwayne Fenningworth with Evercore ISI. Please proceed with your question.

Hey, thanks for that and congrats on these results. I just wondered if you could speak a little bit more to the drivers of the better pickup that you have seen and you're continuing to see. Is that primarily leisure transient, or are there other drivers to that better pickup, which feels like the key assumption for the back half?

Thanks, Duane. The drivers have been fairly broad, but I'd say clearly led by the transient side. and it would be both corporate transient in terms of in the month, for the month, in the quarter, for the quarter pickup and it would be leisure transient. And so from a demand side, those are the primary drivers, group stability and group attendance and predictability and group attendance and spend are also positive. I think the other driver of potential revenue growth which is what we've been seeing increasingly and we saw it in Q2 and we saw it in resorts in San Francisco is an ability to drive pricing higher through increased pricing through increased premiums on premium rooms no different than the airlines as an example through using less promotions and discounting and looking at our mix and using channels, trying to drive business more through the higher rated channels and being less focused on some of the lower rated channels. So it's fairly comprehensive in terms of what we've seen in the drivers and what we hope will continue in the second half of the year. Thank you.

Our next question comes from the line of Smedes Rose with Citi. Please receive your question.

Hi, thank you. I'm just wondering, you provided a lot of detail around the operating outlook, which sounds relatively positive, and I get that you're somewhat tempered. I was just wondering if you could speak to what you're seeing in the transactions market. Is that, it seems like it's kind of picking up from what we're hearing, but curious as to what you guys are seeing.

Yes, this is Tom. You know, listen, it continues to be more constructive. you know obviously we expected that in terms of the improving fund fund operating fundamentals you know as we stated previously you know capital follows performance we're seeing more transactions we're seeing larger transactions we're seeing more investor depth and you know performance is leading to more investor conviction so you have all the ingredients I think you have increasing operating fundamentals you have more investor conviction, you have more trades which I think is giving more confidence to other investors to participate. You have the debt markets that continue to remain attractive both in terms of availability as well as pricing. And so I think overall it's set up for a more active, although I would tell you that it's somewhat bifurcated that it continues to kind of trend towards the luxury type assets and the resort type assets, and then assets where markets have significant growth that investors can underwrite.

Great. Thank you.

Our next question comes from the line of Gregory Miller with Truist. Please proceed with your question.

Thank you. Good morning. I'd like to ask about international inbound. As you discussed, the World Cup provided a lot of positive publicity for international audiences. Do you find that the local convention and visitors bureaus are taking advantage of this opportunity to promote their cities in a different way, given the goodwill?

That's a good question, Greg. I mean, we've had a lot of conversations with you know folks like SF Travel as an example or the San Diego Authority and we've seen them increasingly as the years gone on they have increasingly put more money into the international side and more effort into the international side including sales trips that they've been making and I'll give you an example most recently and I think you know they were pretty hesitant at the beginning of the year and as we've as we started to see the imbalance sort of flatten out as the years gone on and then turn positive in June like SF Travel has a fairly major marketing effort going on in Canada right now and with a view that maybe the Canadians are ready to come back. They love our country. They were here. Many of them were here for World Cup. The Canadian team did well and they had a positive experience like other World Cup travelers and I think that word of mouth that goes back to those countries is viewed as a positive catalyst and a positive opportunity. And so we are seeing, I can't speak for all of them, but I know those two markets as an example, San Francisco and San Diego are putting more time, effort and money into wooing international inbound back to their markets.

Great. Thank you, Jon.

Our next question comes from the line of Ari Klein with BMO Capital Markets. Please proceed with your question.

Thanks and good morning. I guess when we look at first half rep part growth, what do you think the underlying growth is versus the 8.8% year-to-date that was reported if adjusted for the World Cup and maybe some of the other unique tailwinds like calendar shifts? And is that the right way to think about 2027 in that the events that we had this year versus next year kind of met each other out from a tailwind standpoint.

Thank you. Well, it's a great question and a tough question because as we've talked about historically, people don't always tell you why they're coming. And so I think what we've been seeing is a very broad-based increase in demand in all the segments except for international inbound which again perhaps finally improved a little bit in June. It seems like demand growth is tracking in the one and a half to two percent range I think from an underlying perspective on a year-over-year basis and looking at the Q2 GDP report preliminary that came out this morning, it was right at 1.5%. And so I think, as we've talked about in the past, I think demand growth is likely to track reasonably closely to GDP growth, and that's what we've been seeing so far this year. I think that what changes in these kinds of up cycles is what happens with rate. and I think what we were talking about in the call was that the increased rate that came through World Cup is likely to be more than offset by increasing rate as a result of improving overall industry fundamentals and our own improving fundamentals within our portfolio. I think some of that is comes from the competitive framework. When the pie is getting bigger, it's easier to price with more confidence. You don't have to worry about the only way to grow is to take business from my competitor, which is the environment we've been living in the last two to three years. And it does take time for that confidence level to improve. and that's what we've started to see. So I think from an underlying demand perspective, I think it's going to continue to track GDP. We know where supply is going to be. I mean, it's going to be well south of 1% and right now it's running less than half a percent on a net basis. So I think that's the fundamental setup that's good and what will vary is how quickly do we increase confidence? How quickly do the compression nights increase? That'll vary by market based upon what's going on in any individual market. And how does it change the behavior in terms of the mix that we have, shifting that mix from discounted channels, which we went deep into to build occupancy in the last few years, and coming out of that and pushing less of that and pushing more of the higher-rated channels. So, Ray, I don't know if you have anything to add to that, but that's kind of the way we think about what's going on.

And, Ari, clearly there are a lot of benefits this year. And, look, our portfolio benefited from the Super Bowl in San Francisco, which we talked about. But we also had some headwinds this year. Take San Diego. San Diego, year-to-date, Repar is negative. and that's because of a very weak convention calendar. We have 120,000 less convention room nights in San Diego year-to-date than we did last year. But that reverses in 27 and Boston also improves. So although we have some benefits from some of the calendar items, we also had a bunch of headwinds. I know right now World Cup is getting a lot of attention with the demand and it certainly helped some of the markets in the U.S. and helped U.S. as a whole. We talked about it's more marginal. But as we get to talk about 27 and the setup, We feel really good because some of these headwinds will turn into tailwinds for us in several of our markets. Thank you.

Thanks, Lauren.

Our next question comes to the line of Rich Hightower with Barclays. Please proceed with your question.

Hey, good morning, guys. I want to dig into the kind of upside from redevelopments and some of the resort properties that are still on the, on the path to recovery. So, you know, I didn't get a chance to compare sort of the before and after between the latest investor deck and kind of what came before, but does anything about sort of 2Q's strength and what, you know, what's still very clearly, you know, optimism about the second half and beyond, did that change the underlying sort of recovery trajectory from, you know, recent redevelopment and then how much of that recovery path is predicated on macro and kind of basic demand drivers versus let's say property level execution.

Thanks. Sure. So I think the benefit that we saw from less sensitivity to price increases in the second quarter applied pretty much throughout the portfolio and our redeveloped properties were able to take advantage of that. And part of the upside that has remained in those properties comes from both rate and occupancy share gain. And so we're seeing them, particularly Newport, Estancia as examples, continuing to increase their share in the market. not to a stabilized place yet, but there's certainly, it's always easier to gain share when things are good, Rich, than when it's difficult. No different than the conversation, the discussion I was just having about when the pie's getting bigger, it's always easier to increase pricing. And so I don't know that the pace of the gain has accelerated in a material way in terms of recovery of the next four to six million of redevelopment. But I do think we were encouraged by what we saw in the second quarter throughout all of the resorts and that would include the properties that we redeveloped. So, you know, we're very encouraged by the progress they're making. As you know, outside of the redevelopment, the bridge that we laid out really doesn't include increases in performance at the resort level. And it wasn't meant to. It wasn't meant to say resorts wouldn't improve. It meant to say that's going to be more macro related. And I think overall, back to your question of execution, we always have varying levels of execution within our portfolio. We highlighted some challenges in D.C. in our properties there with leadership changes that have happened. And as it relates to the resorts, I mean, execution does matter. We have great execution right now going on at most of the properties, particularly Newport and Estancia, within the portfolio. And we still have work to do at Jekyll Island, even though were encouraged by the pace of further out group bookings at that property.

And Rich, this provides more context, which I'm sure you look at post-printing season when your life gets a little more manageable here. But, you know, we talked about Estancia and Newport because those are the most recent redevelopments and that's on track for those projects getting their ROIs. And we still have, we identified $6 million of upside from those projects. but just as a reminder, the projects that we started back in 2018, 2019, which these things are multi-year, this is where we invested $270 million of capital. We generated over $40 million of ROI from those projects. So we just want to make sure to underscore that these are real achievements that we're gaining. That's why we are even as grown and as Jon pointed out, what we really don't include is really the further upside we're experiencing in our resorts, but that again led the portfolio this quarter. We're really excited about it. We provide a lot of good detail and presentation, encourage you to look at it. We feel confident about it, and the results have proven itself.

All right. Thanks, guys. Thank you.

Our next question comes from the line of RJ Milligan with Raymond James. Please proceed with your question.

Hey, good morning, guys. So along the same lines as some of the questions that have already been asked, but, you know, Jon, obviously a good problem to have. You mentioned difficult comps for next year. highlighted some of the drivers for Red Park growth in 2027 for the industry and then some specific drivers for Pebble Brook. I think you guys are trending about 300 basis points ahead of the industry in terms of Red Park growth so far this year. Given the puts and takes for Pebble Brook next year and the difficult comps, how do you expect that spread to trend in 2027?

Well, another good question and another difficult one. The 300 is not a long-term achievable spread, and historically I think we've run anywhere from 50 to 100 basis points better than the industry overall. And I think the... Early on, we tend to do better for a number of reasons. Sometimes the markets we've been in have been hit harder, like this one. So the recovery in San Francisco, the recovery in LA, and the recoveries in Portland and Chicago examples, they're coming from very low levels. So there's a lot to regain in those markets. The fires, God, let's hope we don't have more of them, although it seems to be an increasing issue around the world. We see what's going on in Europe. Some of the fires going on in the Midwest here. Fortunately, we're not seeing that in Southern California at this point in time, but it's going to be a future part of life. But that's an easy comparison for the first half for L.A., and that's part of that. that higher 300 basis points than maybe what's normal on a go-forward basis. So I do think we should run 50 to 100 basis points higher. I think having Super Bowl in LA in 27 will be helpful. And actually, there's a lot of things going on in LA next year, fortunately, which should help with the recovery there. And then, of course, we have the Olympics in 28, which should be a very major lift. in that market. And then in 29, we're going to have a little bit of a hangover from LA. And we don't have a clear enough view into all of our other markets into 29 right now to see if they would offset that. But that's where I would say that the Olympics will be a more difficult one in terms of comparisons to overcome.

Our next question comes from the line of Jamie Feldman with Wells Fargo. Please proceed with your question.

Great. Thanks for taking the question. So you achieve REVS PAR about 350 basis points above the high end of your guide in 2Q, but expenses were still within your original guidance range for the quarter. Can you talk about how you were able to achieve that favorable flow through and how we should be thinking about further expense improvements into the back half of the year?

Sure, sure, Jamie. Well, it's something we're really proud of. Our hotel teams and our asset managers, and I know we talk about it each quarter, and it's not just talk, it's results. We're excited at the fact that we're able to keep these expenses at much lower levels. It's multiples. Through our efficiency studies, we are fewer FTEs on a per-occupied room basis than we did pre-COVID. There's a lot of factors there. We're using technology more. We're using other areas that are certainly better. So that's how we're able to, you know, have our product by cost growing less than inflation, you know, 2%. And then we'll start getting additional benefits on savings like property insurance and other areas. So you shouldn't assume that we're going to have that same, you know, expense growth each quarter. There's all other factors that could go on, but we feel good about it. And it does show that at these even lower revenue growth levels, we're still able to push margins and expand. So we feel that this is multi-year. We're just scratching the surface in a lot of these initiatives. And we feel good about it. But again, we think our hotel teams, our asset managers, they're doing a heck of a job finding more efficiencies every day.

Thank you. Thanks, Jamie.

Our next question comes from the line of Flores Van Dijkum with Ladenburg Thalmann. Please proceed with your question.

Hey, guys. Morning. John, you mentioned something about reducing Pebble Brook's reliance on discounted channels. Presumably, you're talking about OTAs. Maybe if you could just remind us what the historical percentage of your demand came from OTAs, where that is now, and is there a difference in urban versus resorts in terms of the reliance on OTAs. I'm thinking in particular, you've got this massive potential upside in occupancy ramps still in urban. I would imagine you probably are maybe more reliant on OTAs to help fill that. But if you can give us a little bit of color on that, that'd be great.

Sure. I'm going to talk in general, Ray. I'll leave Ray to talk about the OTA percentages. I think in general when we talk about fewer discount channels, it goes well beyond the OTAs. It has to do with wholesale channels that we use where you're selling, where you're giving them a lower, I'd say highly discounted rate, maybe up to 25 or 30%. and they're filling it with small to medium-sized tour groups, as an example, through wholesale channels. And it involves some other channels, crew in many cases. Not all cases is it lower rated, but in some cases it can be very low-rated. we tend to pick crew up in a down cycle and we tend to slowly reduce our crew as the cycle improves and the other demand channels pick up so those would be some other areas and then as it relates to resort and urban we tend to do more discounting and OTA use at our urban properties than we do, our independent urban properties in particular, than we do at our independent resorts. Ray, if you want to talk about the general numbers.

Yeah, so for us on a general basis in our transient side, we have about 25% of our mix here comes from the OTAs. With our brands, that's lower, about 12 to 13%. Our urban lifestyle hotels, that's in about color, about the 20 to 30% level. and then our resorts are in the 20% to 23% level. So it's a lower level there because the resorts tend to be a little more unique buying experience. People rely less on the OTAs and actually we have a high number of direct bookings for the resort side because of the premium resorts and experiences. So we'll continue to push that whether it's technology and look at that. I know there's a lot of efforts going on there between all the LOMs and making our hotels appear better which our teams are working on. but it's something we manage and all of our teams do. But just to be clear, all OTA business isn't negative. OTA business positioned in a proper manner and proper time can be a benefit. It's just when a hotel team relies too much on the OTAs and find the direct business or other channels, that's when it's more of a challenge. So you really have to take each property on a case-by-case basis and not say any OTA business is negative. I know that maybe brands have a different perspective of that because of their focus. But for us, we're about what's the net rep are and business being generated and OTAs are part of the mix. Thanks.

Our next question comes from the line of Chris Darling with Green Street. Please proceed with your question.

Thank you. Good morning. Jon, I hope you could elaborate on just your broad capital allocation priorities, given the meaningful run-up in your share price this year. I appreciate you still traded a discount relative to the internal estimate of NAV, but that gap has narrowed pretty substantially. So just wondering if your thinking may have evolved.

Sure. Well, our capital allocation strategy is focused on two things. It's creating value for the shareholders and driving growth in cash flow per share. Presumably those two are linked over the long term. So while the arbitrage opportunity has clearly for the moment gone down, The way we look at it is there continues to be a significant discount as we sell assets within the NAV range and we have continued to do that using those proceeds opportunistically at the right time to buy our stock back, to buy our preferred securities back at a material discount, to pay down debt related to the EBITDA that we're selling. I think those all continue to be the best use of our capital. I don't think we're ready, prepared, or frankly it's not the right use of capital to be out buying new assets because we can buy our existing assets at a much more significant discount than the market values. So while the arbitrage opportunity has shrunk for now, Keep in mind that NAV, as an example, it's not static. As operating performance improves, we would expect these values to go up over time, and then we'll see how the stock performs. And as we all know, the stocks tend to be on kind of a random walk in the near term. So I don't think our allocation strategies have changed at all. but we have to sharpen our pencils because the arbitrage opportunity is not as significant as it was a few months ago.

Understood. Thank you for the time.

Thank you, Chris.

Our next question comes from the line of Jack Armstrong with Wells Fargo. Please proceed with your question.

Hey, good morning, and thanks for taking the follow-up from our team. Can you take us through some of the moving pieces that brought you to Rave, your NAV estimate, and spend some time talking about how closing the discount to your NAV is changing the way you're thinking about allocating incremental capital once we get through the convert in December?

Sure, Jack. Yes, we updated our NAV presentation. The overall gross value did not change. but some individual markets did. For example, resorts went up just because what we're seeing in the transaction market as Tom alluded to earlier is very constructive and pricing continues to be healthy there. We took down a couple... And operating performance continued to go up as evidenced by our quarter and how strong the resort segment has been and continues to be. Some markets in San Francisco were also brought up just because of... again the performance of that market. You've seen some trades in there which also helps affirm the values. A couple of markets we took down were Washington DC because of the performance, Los Angeles a nudge as well as Boston and San Diego. But overall the gross values did not change on that side. What did change is we have more cash, we have less preferred through the buybacks and we have less shares through the buybacks. So what really moved is on that side of it we moved the overall value up and that's what our NAD went from 2350 last quarter up to 2450. And as we know, we'll continue, we look at this pretty frequently and we'll see what it entails going forward. And then the capital allocation decision, we just responded to that question there. So as Jon said, we'll continue to be opportunistic and disciplined here as we have. but certainly having the free cash flow that we have in place provides us with a lot of flexibility to pull a lot of levers, whichever is opportunistic at the time. Really helpful. Thank you. Thanks, Jack.

We have reached the end of the question and answer session. Mr. Bortz, I'd like to turn the floor back over to you for closing comments.

Well, thanks, everybody, for participating. Good luck the rest of the quarter. I hope you have great summers, and we'll be back to update you again on our performance come October, and I know we'll see many of you between now and then. Thanks so much.

Ladies and gentlemen, this does conclude today's teleconference. You may disconnect your lines at this time. Thank you for your participation, and have a wonderful day.