Q1 2020 Earnings Call
[music].
Good day and welcome to be extended stay America first quarter earnings call.
Today's conference is being recorded at this time I would like to turn the conference over to Mr., Robert Blum Investor Relations. Please go ahead.
Good morning, and welcome to extended stay America, its first quarter 2020 conference call.
The first quarter earnings release, and accompanying presentation are available on the Investor Relations portion of a website at <unk> Dot Com, which you can access directly at www dot about state Dot com.
He company presentation, a couple of minutes late on recent trends in comparison to recent industry segment results. Joining me on the call. This morning, Burns, our Chief Executive Officer, Brian The Chief Financial Officer.
<unk> prepared remarks by burst and Brian there will be a question answer session.
Before we begin I'd like to remind you that door discussions today will contain forward looking statements, including its got sort of our 2020 I went for certain items and expectations regarding it could that 19 pandemic.
He may differ materially from the indicated they could statement.
He didnt made today.
Today.
It's difficult actual results to differ from doesn't imply that the forward looking statements are discussed in our form 10-K filed with the FCC.
There were 26.
Good morning, <unk> form 10-Q filed yesterday evening with yet BC.
In addition on today's call will reference certain non-GAAP measures more information regarding these non-GAAP measures, including reconciliations to comparable GAAP measures.
We did in the earnings release importance in Q filed yesterday evening with yet you see.
I did our decision, making as we seek to keep everyone safe, while we continue to operate the business and maintain nearly full employment levels.
Our hotel associates are truly on the front lines, we've asked a great deal done and they really deliver.
Develop new operating procedures enhance cleaning protocols and modified our amenities to ensure that are gaps in our staff remain safe.
Further modified our labor model to adapt to a lower occupancy environment at some of our properties.
It's the pandemic hit in mid March they've only been a couple of weeks when our brand wide occupancy dip below 60%.
You're certainly not immune from the impact of the depressed demands environment, but we can tear very favorably to an overall industry occupancy levels of 20% during that same time period.
Even leave at our occupancy levels and Red Park performance relatively industry in our concepts clearly demonstrates the resiliency of our business model under highly distressed market conditions.
Since the pandemic hit in earnest and mid March and through the end of April.
Overall industry rent part declined by approximately 80%.
Par for the mid scale and economy segments declined by 65% and 45% respectively.
By contrast extended say America reported a brand wide right par decline of 35% during the same time period.
Performance is equally as impressive when compared to our local concepts.
Are comfortable system wide web <unk> index for the first quarter increased by 12% to a record 107.
In the month at March <unk> index increased by 32% to a very strong 122.
It's March progressed, each week, so progressively higher wrap party that scores.
In April have preliminary results versus how competitive sets show or index for the month was over 150.
Well this index score highlights the company strong operating efforts and are more resilient business model in the face of covert 19 compared to broader lodging industry scores of this magnitude are highly unusual and the company's index for will certainly moderate has the U.S. economy recovers.
Our first quarter 2020 earnings presentation posted on there I. Our website has more recent results or you have say compared to the industry.
Compared to other mid priced extended stay hotels.
We're not surprised by this out performance as we said during our last earnings call them late February.
Attended stay America is very different from traditional transmitting plans and those differences have never been more parents to make our today.
We serve guests with different needs our product in our business model are uniquely suited to extend it say guess.
Inner sales and marketing engine is focused on delivering guest who are properties that are working on long term projects.
Search for temporary housing and guess that are navigating through life's transmissions.
Indepth demand drivers change, we have the ability to adapt to the environment and access different cups drummer segments. If there were expertise and extended stay revenue management and local sales.
Working in partnership with our property level operating teams across the system, our field sales revenue management cheese leverage extensive local market knowledge.
Liver guess with extended stay accommodation needs to our properties.
Success can extend it say business because often the various local effort.
We have to boots on the grounds for men.
Our product and our poor customer base of course, it's also watson's ribs current environment.
Hotels are generally located in suburban in height way locations, which are convenient for customers that drive rather than fly.
Virtually no exposure to traditional group business segment that was essentially evaporated and may take a very long time to recover.
One of our sweet has a full kitchen.
Which is of course essential environment, where you can't dine out.
And we've even increased our free wife, I speaks to allow us to more effectively work remotely are complete school projects from the comfort of the room.
Of course, despite our continued strong relative rep par performance, we're not immune to week revenue requirement, we've taken fruity steps to trim expenses.
Or variable labor model nationally reduces labor hours in this environment, particularly as our customer mix is shifted in favor of long term guess with less housekeeping requirements.
Across the brand we have temporarily removed our grabbing code breakfast implemented every other week housekeeping rather than a weekly service for a long term guess <unk>.
These brand wide actions, both reduced costs and provide for a safer environment on property for our staff and guess.
In addition for those hotels and market so that didn't particularly hard hat you tightened their labor model for hotels operating we'll talk to put two levels below 50 per cent and tightened once again for a handful of hotels that are operating below 35%.
D vaccines have resulted in the temporary for alone approximately 2% of our fuel associates, the majority of which were part time.
We have not for a load of course separate any of our fuel based management.
And we believe the continuity of our business in the continuity of our management cheese is a significant competitive advantage.
And our Charlotte's support center here produced operating expenses and 2020 by approximately 10 million, including a temporary 20% reduction salaries for our senior management team in a 20% reduction retainer fees for our boards of directors.
He's overhead reductions are quite modest in comparison to the actions taken by are interesting peers.
However, we continue to operate at 100% about properties across the country.
And while it was proven to calibrate our corporate spending to affect the current environment.
It's important to emphasize that we do not expect any of these reductions.
Back to our ability to compete once travel restrictions debate.
Normally from deductions impacts our capacity to execute a longer term objectives.
In fact, we continue to upgrade talent until critical positions that will help us navigate the current crisis position us for recovery and execute long-term fans.
During these uncertain times were also served by our strong balance sheet.
Ended the quarter with more than $700 million in cash in our balance sheet. After we fully drew out revolvers as a precautionary measure in March or dead as long dated with no significant maturity from so 2024, and our company packaged with like.
We have trim non gets facing capital expenditures further for.
Significant renovation investment further preserve liquidity.
Breindel provide further details and our liquidity position.
And the financial impact of Coca 19, or balance sheet, just a few minutes.
As I noted earlier are distinct business model, because not only a source of shareholder value in times of stress, but also a source of value creation during better times.
The World change two months ago I've been asked by investors. It's my perspective has changed in our longer term business strategy that I first described during our February earnings call.
<unk> the current environment to serve to solidify my confidence in our future direction.
The ability to create value for shareholders.
Because you may recall in February highlighted four pillars for shareholder value creation into coming years.
Burst no strong opportunity to improve core operations and drive more extended stay demand into our hotels.
Truly maximize the value of our core business.
Leverage our expertise can be extended stay segment.
Second despite the recent just location with financial markets, we have a valuable real estate folder and will continue to seek a creative assets sale transactions.
Particularly for certain assets that can yell the higher value through alternatives uses.
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In the process of implementing an asset like ran across strategy.
Focused on franchise development.
And finally, all our immediate priority is to ensure adequate liquidity strong cash flow generation characteristics of this business have not changed and neither has our commitment to appropriately return excess cash so to our investors.
Oh now turned to each of these initiatives in some more detail.
First we are squarely focused on improving the operating performance over assets and we have multiple lovers that we are pointing to achieve this goal.
If anything the covert 19 pandemic has accelerated our transition to a true extended stay brand.
As I highlighted earlier every area of the company is now focused on driving extended stay demand and serving customers that are good match for our product and are operating model.
One of a few benefits of our current circumstances is that the pandemic has added urgency to the entire organization to achieve this transition.
That affects nearly 80 per cent of our recent revenue is now coming from various extended stay customer segments.
Two proximately, 63% pre cope with 19.
I mean sales and marketing perspective, we have a number of initiatives underway to enhance our proprietary distribution channels to deliver the white customers to our properties.
Our sales and marketing objective is simple.
No grand or system in the country will be better generating extended stay business then extended stay in there.
In addition to delivering the right customers who are properties were also making strong progress on improving the guests experience.
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<unk> five seats and ensuring that each room, it's inspected for quality by the general manager before new guess checks and.
And as soon as travel restrictions debate ready to launch a comprehensive quality assurance program to increase the consistency of our product and <unk> and to ensure that we deliver what is most important too I guess.
And we were of course cognizant that the world has changed and customers and and now demand a higher level shorts that both the property and the room, they're checking into will be healthy and clean.
You were taking further steps now to formalize enhance cleaning procedures can brand. This program to clearly communicate this going going commitment to our guess.
Second pillar of our value creation strategy, securing our real estate Cozzone. We believe there are multiple opportunities to realize value from our portfolio and highly attractive multiples.
And while the current environment makes transactions more challenging we're still working towards completing several sales. This year at very crude prices and we have a pipeline of additional opportunities.
Unfortunately, all the transactions here now considering with Counterparties that have non launching uses for the properties and continued access to capital.
We'll keep you posted on our progress throughout the year.
Third.
Committed to growing extended stay America brand to an asset like franchising strategy.
We are working through the remainder of our on balance sheet corporate development program. This year and we expect to open 73 properties to bring 2020, if the remainder opening 2021.
We have successfully delivered our prototype or newly built extended stay America hotel on time, and one budget and achieved early operating results confirming or underwriting projections.
Having successfully proven to new prototype.
Turning our attention to franchise growth I believe the performance of our brand during this pandemic highlight the value of our franchise offering.
Oh, the debt markets for new hotels development are currently disrupted.
This will be temporary and we will have a strong competitive advantage as a franchise or for extended stay product and a couple of years.
The final tiller strong capital returns for investors.
Well those returns in 2020 will not need our prior expectations as we strike reserve liquidity. During this time of events uncertainty once the business environment normalized.
You remain committed to returning excess capital of the shareholders.
We had planned on posting an investor day in early summer to discuss our long term strategy in more detail.
The effects of the pandemic, it's unknown duration unanticipated levels of senior management attention to dress tend to mimic issues have delayed our plans.
Once we gained some better visibility into the near term environment, we look forward to the opportunity to host in the best from day.
<unk> further details on our long term plans.
I'd like to wrap up on a cautiously optimistic no.
You can see as increase the last three weeks.
We're hopeful that the country begins to reopen that business was slowly returned to normal.
Lower oil prices. We believe will also help these to man for our hotels has their gets typically drive to our locations.
Companies will also be looking to a ton of my time to travel expense.
And we have limited business from you know production locations.
We also have quality essay was able to reach prior peak occupancy from the great recession that 2008 in 2010 lots of the industry in an additional five years to reach its prior peak occupancy levels.
And we believe that we are now and a better financial position with a more experienced hotel management team.
Oh this pandemic pose a significant risk E.S.A. you industry in our country I'm confident that will continue to be successful navigating this environment and ultimately we got stronger company once and comes through it.
Oh now turn the call over to Brian to discuss our first quarter financial results.
Balance sheet and provide more details on the impact of Coke in 19.
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After a strong starts at a year through Feb riff part slowed throughout the month of marks the code at 19 crisis deep.
With the sharpest drops from a prior week coming immediately following various stay at home orders by states.
Comparable system wide ref par during the first quarter of 2020 declined 5.8% compared to the first quarter of 2019 after being approximately 2.6% through February.
Decline in Red part was driven by a 6.5% decrease in rate, partially offset by a 60 basis point increase in occupancy.
Or extended stay business significantly out performed with revenue from devastating week or longer increasing approximately 3%.
Translate revenue declined 17% and the first quarter.
Overall, I read par index increase 12% to one of seven in the quarter.
In the month of March or extended stay business declined approximately 5% primarily from guests staying seven to 29 nights, while our transit 126 night business declined 41.8%.
The strong showing from our core extended stay guests allowed us to increase our read part index in March by 32% to approximately 122.
A preliminary April comparable system wide rough part declined to approximately 35%, but occupancy holding just above 60%.
The first two weeks of April represented the weakest occupancy mothers during this pandemic.
It is point and we have seen improvement since then but last week's occupancy running approximately 65%.
A preliminary where F.R. indexing April increased to 155 more than 60% increase over April 29th.
The biggest declines in our revenue in the first quarter came from a drop in no T.A. guests, which still 16% nearly all of this in March.
We also saw declines in revenue from property direct from the global distribution system.
Only offsetting those declines were increased revenue from our website extended stay America duck.
And our call centre, because we drove increased revenue from our core extended stay guest.
Hotel operating margin two point 440 basis points in the first quarter to 45.7%.
The decrease in hotel operating margin was driven by decreased comfortable system wide Red Clark increase payroll extensions increased maintenance expense and an increased an allowance for non yes non payment.
Actually offset by lower razor reservation expense due to a decrease in O.T.A. business.
Total comparable company hotel property expense increased 3.6% from the first quarter of 2019.
Clients, 2.4% during the month March.
Corporate overhead expense, excluding sharebased compensation and transaction costs increased $2 million to $22.8 million during the first quarter.
Overhead expense for the quarter included approximately $1 million in leadership transition expense.
Just leave it on the first quarter was $97.7 million compared to 116.3 million and the same period and 2019.
The decline in adjusted either dogs, primarily driven by the decline and comparable system wide repertoire.
Increase property labor expense.
Interest expense during the quarter increase like $3.1 million to $32.7 million due to increased debt outstanding partially offset by a lower level where ray.
Income taxes during the first quarter declined $5.0 million to $1.1 million driven by lower pretax income.
Income taxes for the sole you're 2020 will be heavily dependent on the company's earnings for the end of the year.
Due to the recently passed cares act the company's total taxes for the full year could range from a large refund potentially as high as tens of millions of dollars to a very modest amount of taxes owed.
It the C. Corporation has a long said 2020, we expect to be able to carry back a portion of federal taxes paid into prior five years and apply higher prior your rates to any such teary ducks.
And he S.H. hospitality daycares x. create significantly more depreciation deductions.
Potential to reduce our reached pre tax income.
Due to the wide range of potential outcomes for taxes in 2020, we will not be providing an estimated range of 2020 tax liability at this time.
Adjusted if that flow per diluted paired shared declined 13.9 per cent in the first quarter to 31 sends compared to 36 cents and the same period in 2019.
The decline was driven by a decline and comparable system wide rough bar and an increase in property level labor expense, partially offset by a decline in income tax extents and reduced diluted paired shares outstanding.
Yeah and income during the first quarter decreased 72.4%.
$7.8 million.
[noise] decreased submit income was driven by a decline and comparable system like <unk>.
An increase in comparable hotel operating expenses.
Increase depreciation expense that interest expense, partially offset by a decrease in income tax expense.
Adjusted paired share income per diluted paired share the first quarter decreased to seven cents per diluted parents here from 16 cents in the same period as last year.
Decrease during the quarter was primarily due to the same aforementioned items for adjusted F.F. up.
Out of an abundance of caution the company drew down it's 50 million dollar revolver had extended stay in America, Inc.
And it's 350 million dollar revolver N.E.S.H. hospitality hitting in the middle of March.
Or total debt outstanding at the end of the first quarter was approximately $3.1 billion, while our cash balance totaled approximately $725 million.
<unk> 15 million and restricted cash.
Do the draws on our <unk>. We currently expect our full your interest expense to fall within a range of 135 million to $145 million.
We have no significant maturities until September of 2024, and our dentist Covenant light <unk>.
Stress tends to their balance sheet under a wide variety of scenarios and believe we had ample liquidity to withstand an extended period sharply reduced aggregate lodging demand and he will continue to take measures to shore up our balance sheet.
Reached an agreement to amend the companies that corporations 50 million dollar credit facility and to suspend the quarterly tested leverage covenant from Q2, 2022 Q1 2021.
From the second quarter of 2021 through the fourth quarter of 2021.
The leverage coming to calculation will be modified to use annualized consolidated either.
Opposed to trailing 12 month, even though.
The Amendment also allows for the corporation to borrow up to $150 million from D.S.H. read through an inner company loan facility.
During before quarter waiver period. The company has agreed to maintain minimum liquidity of $150 million.
Willing to cheer repurchases and dividend payments from the Corporation.
Improving our liquidity and balance sheet, it's one of the company's highest priorities, including taking advantage of appropriately applicable provisions of the cares Act and other relief legislation.
Viewing expense and payment terms and decreasing or capital helpless.
Capital expenditures in the first quarter total $54.6 million, including $8.9 million for renovation capital $20 million for development and land acquisition costs.
Previously, we had guided $210 million to $240 million and capital expenditures for 2020.
Updated expectation for capital expenditures is now a range of $160 million to $190 million a decrease it's $50 million at the midpoint.
It's updated expectation includes a reduction in non guest facing capital expenditures reduction in renovation complex and a slight reduction in new build construction.
As most of our new build hotels will well underway and the recently completed new hotels are performing well despite the difficult environment.
Continuous planned with the opening up the majority of the new hotels sites.
As a reminder, after we complete these hotels in process in the first half of 2021.
We expect to give you an account predominantly if not exclusively for franchise growth rather than from on balance sheet development.
Or tunnel pipelines stood at 73 hotels at the end of the first quarter as we opened one hotel and a franchise he converted one hotel.
Additionally, the first new build franchise hotel opened in Virginia. This week and the company opened another who knew hotel last week, just outside of Hilton Head South Carolina.
We did not expect the pipeline to begin to increase again until the financing market improves general red par levels begin to increase but we remain active in discussions with current and potential franchise eats.
Yesterday, the board of E.S.H. hospitality incorporated declared a cash dividend at one cent prepared sphere pebble on June 4th 2022 shareholders of record as it may 21st 2020.
Due to the sharp declines in revenues and the uncertainty as to the length and the severity of this crisis management of the boards that may be extremely tough decision to temporarily reduce our dividend.
Order to preserve liquidity and to preserve optionality at such time, it's the operating environment improves.
S.H. hospitality both to continue to ensure it meets its requirements, including distribution to shareholders of at least 90% of its pretax income.
Once business trends are more normalized the boards will again review the company's dividend.
We intend for capital returns to shareholders and death holders to remain a very important part of the S.A. story.
During the first quarter, we repurchase 2.2 million paired shares for approximately $31 million.
The company has not repurchased any parents years since the first half in February and does not intend to repurchase any paired shares until the business environment is somewhat normalized.
Our current total outstanding remaining authorization for parents share repurchase is $101.1 million.
Due to the uncertain nature of the current environment. We are unable to provide updated guidance on most operating metrics for 2020.
As I mentioned, a few minutes ago.
We've experienced year over year declines in weekly comparable system wide Ref bar the last three weeks into low to mid 30% range moderately higher than the first half of April.
Occupancy, which had fallen to the high 50 per cents in early April has increased over 65% in recent days.
That's part year to date is down approximately 14%.
Yesterday.
Operator, let's now going to questions.
Thank you <unk> a question answer session keys miniature except one question on one side of crashed into that.
Team to ask the question.
You must ask the question at this time T. signal Bank Pissing stacked one on your telephone keypad T. said sure they need some send your telephone I switched often I your signal to me chocolate Mint again <unk> one to ask the question.
I guess the moments to die for an opportunity to thing that's the question.
And we can take our first question some high carcass.
Please go ahead.
Morning, everybody.
My first question is related to daily Caspar aren't if you can give us a sense of what that is running now and is not fully loaded does that also and who.
Cap x. expense thanks.
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Thanks, who wants to know give you some some general guidance on the clean and turned it over to blind. Some details you know first of all of them food. We are thinks we're <unk>.
Pointing very good shape.
In the market for any rescue junk don't offerings or anything like that.
We did so we can all down there with all those.
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$725 million unconscionable <unk> here today.
We have you know one obviously in November.
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<unk> stress tests and.
And you feel like really very.
Good position, we have ample would clearly be if current conditions Francis for very long period of time and our current.
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Feel good about it.
Some words.
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Very good morning, Yeah.
We look at the Casper and you you know, especially trying to project the Casper and you have to make some assumptions about.
Ah web card, where it's going and while we had seen.
Sequential improvement in Redcar each of the last several weeks.
You just use april's level of breath par as a baseline.
With our current staffing Ah.
Our current levels of overhead and our current Catholics plans, which I think is you know include a plans to continue ground up development until once a year from today.
We follow those plans in place we have enough cash to less about four years.
Obviously, if we saw April levels of rough par persist for some period of time worth we saw the improvements begin to slide back toward what we saw earlier in April.
We do have the ability to pull some letters of some kind of effects on some overhead at some other items and so we believe we could get pretty close to.
Cast or neutral if needs be.
So would that imply burn rate of around 15 million a month.
Yeah, that's right yeah, probably so we are interest payments are do twice per year, and so that is a little won't be put on an annual lies basis that's about right.
Okay.
It's good to do the math right <unk> second question you guys talk about your customer mix changing into way more traditional extended stay customer I'm not sure I I've been doing this a while I'm not sure what that what that means I'm guessing it's less of them.
Mixing transients, but who are these customers where they coming from maybe a little bit of color on on your.
Where the customer base is going.
Sure you're happy to be so you don't think if we.
When the pandemic.
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Of our visitors come transmit customers and things like evaporated and quickly.
<unk> so that we felt I think we acted very very quickly.
Towards airport standards customers.
That happened.
There are multiple numbers that we can pull in terms of fines and <unk> customers <unk> you know we did see cyclones.
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The white collar I.T. professors things were travel anymore. So one of the corporate extended state.
Business evaporated as well so.
What we found was you know we resorted to me into pockets of demand <unk> in new pockets.
And then before emerging we made.
Some very early on moves to read and cynical or their field sales revenue management operations tunes on the goal.
Extended stay young customers to our hotels.
And we're going to pull together degree so even with the corporate reduction to see what's in project work to do you have quite a what constructions. It's been very strong warehouses and distribution is very soon.
Medical bills <unk>.
<unk> from trends in hotels, because the fact that <unk>.
I think that that's going to be had been differentiated bring food.
You're probably not going to the tune into one arm in anytime soon.
And the fact that you know the customer can control hoots, they experienced I've stayed with us.
You know primarily through the kitchen.
Kitchen offered.
It'll be a little differentiator <unk> you know, we've gotten a lot of new accounts.
And you know we're.
The.
Working on sustainability of of these customers.
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Residential business.
Happens it was no.
Making now take our next question something Cats Jeffries teams go ahead.
Hi, Good morning, and thank you for taking my question.
We.
A two questions groups and I guess, one on one follow the rules, which is with respect to franchising you know one other ways to accelerate that you know can be to bring in little larger institutional you know franchisees or you know larger scale you know bunch is.
You know rather than one or two at a time, if you could talk about what efforts or may have under way.
To do that.
That would be helpful.
Sure.
Yeah. Appreciate devices, you know my experience before and running France, developing the beeps than say world is that the citizens well. It certainly does attract ones means of mom and pop France, maybe it's also strong <unk>.
In the assets and the cats moves with things and stuff so it already.
We have I've had a lot of no luck with that in the past.
You know obviously, we have a number franchisees that one or properties <unk>, which we feel pretty good about.
We and I believe that you know we have a unique value proposition that.
Shows or so before.
Some of the students so we focused.
On extended snake, it's nobody else.
It has a distribution engine that it's because.
I mean, it's new customers.
You know Nancy it's tough in in hotel business right now they're continued with less influence I don't think so services. We have an active pipeline discussions I think you know there so.
Her expectations, which means.
You know realizing new hotels coming out of the ground is probably a little bit the food.
February but.
The performance of we put on the table, it's gonna be very attractive to the franchise <unk> finance and comes back and activity.
So the first in the one consists in nursing homes with it.
I'd be able to do so but.
I think more correct.
<unk> in terms of web development, then for this and it turned into hotels, it's very well some good too.
It's it's interesting ownership and.
So it's going for.
Okay as my follow up.
It it's noticeable obviously to all of us.
That there have been a couple of meaningful shareholders entering the Max.
You know I'm not going to ask any questions. You know that that you can't answer or address you know, but it it certainly [laughter]. That's certainly noticeable you know when you know the world's largest real estate owner enters and you know other you know highly.
Credentials shareholders become participants <unk>. The the question is are you engaging you know with them as a resource and you know it is there anything you know qualitatively that you can share.
You know that that is available to do now that they're a part of your shareholder base and you know is that something you expect to utilize spelling for.
Sure. Thanks, Thanks to the question.
Yeah, you appreciate it obviously as you know they can't come and <unk>. You know we are I think very transparent.
To you know gone wrong myself and others are open to having discussions and that sort of <unk> at all times.
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You know the promenade shareholders.
With the same depositions and transparency of materials here.
We expect to know conversations and it's.
Pizza those problems and shareholdings <unk>.
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Yeah.
Just one other company sorry go ahead of the data.
You know you know Rob you know be neat.
Due to strive to make ourselves available to shareholders and frankly any shareholders who has a good idea.
Now you that.
Absolutely.
I I appreciate that nice quarter. Thank you very much.
<unk>.
And they can now take our next question from Quest for a long <unk> Chip Bank. He's go ahead.
Hmm Hey, good morning, guys and hope that your your whole team, there's a saying well wanted to ask you and I think you've talked a little bit about this in the past like.
Oh, no longer term business, let's just say to 30 plus nights <unk>.
How how how much of that there can you really kind of walking for more than a month can you maybe give us the the the the terms of some of those.
I don't recall leases, but but the rentals I mean, how how many are for you know 60 nights or 90 nights or longer can you give us any and sense of that.
Yeah I think.
You know a lotta people than them.
The hard crunchy. That's my look into you know looking channels, we have seen the long term rates that we often.
You know one sort of the weeds out there would be might wait a movie strong growth in that in that way and over the last.
A few months compared to last year, and then we have a discounted <unk>, which obviously from 69th and pick up front for 30, when we've seen exponential involved in that in that way.
So you know those retail you know.
You know that discounted rate. Then then that's more one's attention may June.
Great deal of residential units are and that's something that is obviously.
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Segments over the last couple of.
That's a couple of weeks.
But yeah. That's a good basically this is now you know when times get better and.
More higher Regal businessmen <unk> transition out with some that business, but for now it's.
It's a great base to have.
Okay present that Burns and then.
Hmm touched on in the last question I guess, but really why it's kind of ask about conversion opportunities. Obviously, there's a lot of owners who are you know evaluating options right now granted there's not a ton of hotels out there that that have the full catching but you have to what extent would you guys willing to kind of lead into.
No incentive <unk>, maybe help somebody's franchisees convert over to the bread as.
Negotiating with other.
Yeah, I think you're right I mean here, we've had a number of conversion applicants from continue brands, we'd have a comfortable.
That are in the works right now you know, it's interesting that liquidated damages food.
Industry are generally based upon trailing trailing off <unk> revenues go down liquidated damages are going down <unk> make it more intense into for them to <unk> with them and you're right, though the meaning it when like <unk> you know the trampoline linguist and really small university.
Properties that are you know.
Appropriate for our brand we are looking at that you know I think it'll be any criminal opportunity you know.
You know in terms of when we.
I'll be extended stay America brand engine or footprint and our brand equity I think.
Don't come down available, but anyway.
<unk> to.
Entice and decide they want to make a change.
Okay very good thanks birds.
Mmm.
And they can now take our next question from Anthony <unk> go ahead.
Hi, good morning, everyone.
Well I found the hotels that during the boss versus <unk>. So.
Idols and the low personal what <unk>.
Doing were worse now more out of him Okay, I'm guessing target animals hotel in Los Altos.
So we planted them out.
We have to I'm very good good paraphrase requests you're looking at the characteristics of the hotels that are doing the worse than those that are during the months.
Yes.
Yeah, we have.
Largely you know when we have a hotel in a very transplant oriented worker or in the market.
<unk> coven activity and restrictions on traveling restrictions on.
That's or essential travelers rather than.
You know, we things and you know some tough some kind of smoothing South Florida man. It was a good example, such a market it's a truancy market.
<unk> significant restrictions on on travel I'm at work.
On the other hand, you know we have some hotels that are up there in nearly 100 persons.
Outside of Baltimore last week.
You know those are markets that are going to extend say markets those markets, where the local sales operations.
Seem to have going out and business construction business hospitable does and.
And you know, it's very markets and since they're going to take one of the good things about our businesses that extends there's a very local business and we move sort of <unk> to be able to go out <unk>.
And.
Since he was going to be able to go out with them in the business.
In return.
<unk>. So we have quite a number of properties that are actually in 89% occupancy <unk>.
Individually markets, all color blind give us, giving some more details and exactly what were some.
Thanks for is a good morning Anthony.
I guess, the as you might expect some of the changes in activity in our hotels.
And beds hotels that was mentioned that were a little more trendy nature to start with our in some more urban coastal markets that had been.
Just generally more affected by the pandemic and so since the beginning of March.
Solve the biggest drop offs in the Bay area in South, Florida in D.C.N. and Greater New York.
Since early April South, Florida, Integrator, New York City area has come back really strongly.
As well as L.A.
Here in D.C. are not coming back as quickly I would say that they were made.
Fairly soft.
But I think softens the relative term.
I think we'd we'd mentioned in the materials, we distributed we have more hotels with greater than 80% occupancy didn't do hotels with occupancy below 50 per cent, we absolutely have more hotels with occupancy above 90%.
Do below 40% like now.
So.
Given the current situation, even R.R. soft hotels, apart not as soft as others and certainly we have other hotels that are pretty close to firing on all cylinders.
While it and I get them until it's all like in New York in the Bay area bones, or well, Yeah, Hi, <unk> hotel.
That's about it so you wouldn't want to keep those long term.
<unk>.
Okay.
Right. There I mean, you know they're high Red point markets for sure.
Yeah.
You know with like you know air France that'd be than.
The rest of the country removed Midwest.
Better then you know south eastern or New Yorker, California.
Yeah.
<unk>, so I I think.
<unk> now 14%.
Ah, it's <unk> have to pay out <unk> when he games will be able to <unk>.
It was that you around move out most corridor, what's the time in there.
Hmm.
Anthony I'm not going to answer your question directly, but I'm going to give you some more color that I hope will be helpful.
Simply because we're just.
Not in a position now.
To stick out any ground on exactly where we expect operational performance beep when.
Yeah, I'm a dividend we made the frankly fairly painful decision.
To suspend the dividend out of the Seacor.
And what needs to reached it into one said.
This is a decision that we aren't going to be revisiting frequently.
We'll look at it.
Needs to court illegally will probably be talking about it a lot more often than now with our boards, but basically the main reasons that we temporarily suspended the demands you know first given the unknown duration of this thing given the fact that they're still uncertainty about general launching performance.
And the impact that it'll have on us.
We just figure that.
Retaining as much liquidity as we can at this stage is the prudent thing to do.
Seconds.
Keep in mind, but we have traditionally pay the dividend reap, which goes not only directly to shareholders, but also to our <unk> pen becomes essentially the primary source of cash for the top off dividend that comes from the sea corporate to the extent of the week dividend is reduced that also reduces.
<unk> after tax availability of cash.
<unk>, maintaining the dividend becomes.
Yeah, even more expensive.
Also with the care that you know one of the big components of the care as that.
Kids.
He's related to tax policy and so we have the ability to accelerate depreciation we didn't the seacorp you know we would like to minimize our tax liability <unk> possible, we would like to be able to carry back.
Well, because we can do that the higher tax rates that applied beginning and 2015, we think that that's advantageous to test position of the company and therefore to shareholders.
And so.
Lower meet dividend slowing to to seek work during calendar 2020 put this in the best position.
Ah well take to tax policy and those components of the cares.
Yeah, they're a number of things that may affect the dollar amount of a dividend in addition to financial performance.
Reference to the fact that we have asset sales processes in place those.
Potential buyers.
Generally are not looking at these as hotel properties and so the higher and better use that they had in mind is still applicable.
Therefore, we think that there's a very good chance that we can drive these things too.
Closure and if we do that that will certainly had an impact on the dividend, we will have to dividend out that that taxable income.
From those gains.
Hope that's helpful.
Yes. Thank you.
We can now take our next question from Cat. They know how can acquire investment piece go ahead.
I didn't morning, Thanks for taking my question and.
I'm glad to hear that you're saying well, Brian understanding that you guys aren't giving guidance I know you know and prior calls the head of when there were just general recession fears you talked about some sensitivity it's around rough party, but the those still hold off or has the business model changed a little bit you know in these times.
I guess four or five months that it's it's not as applicable backs.
Yeah I had read question I would say that it has changed a little bit margin.
Because we are taking steps.
Primarily driven by a desire to keep our employees and her again I'd say this we can.
Steps that has.
Essentially aside consequence of reducing solve our operating expensive hotel level.
Eliminated our grabbing get breakfast because that is a high touch area.
It's just not feasible.
Not really feasible to get in and you know rubbed down the lever on a coffee dispenser often enough little clock's like to make sure you're safe. There. So we have suspended the gravity of breakfast on the coffee from our lobbies that reduces our operating expense part room expense take great. Similarly is down.
As we have shifted to more about it truly extended state guest.
Not to consume as much of the soaps and shampoos, they want to use their own brand.
And so yeah. Those all weapons in cost savings me has had some offsets in some incremental P.P.D. expense. You know we are providing bloods <unk> guards that sort of thing I property bubble to try to keep our employees as safe as we can.
We've also move to for extended stay guests.
To housekeeping every two weeks persons every week.
Just minimize his.
Touch points and interactions if you will between how employees and gases.
All of that serves to decrease marginally.
The marginal operating cost of occupancy.
[laughter].
And so.
The <unk>.
But intact for each percentage decrease Tina with par.
Gone down a bit since.
Since the discussions we've had about that previously.
That's great. Thank you and then on continued calf x., particularly the renovation capital what type of left on I guess RAF par or yes reduction in the decline or you're expecting or maybe that are white ass kind of you know are you still <unk>.
Back thing returns that.
You know wouldn't wouldn't want spending the money right now obviously most of your competitors and other companies have kind of suspended cap extra business models, a little bit different.
Just kind of talk about expectations on the capital of understanding in in your term. Thank you.
Yeah. This is but it's all won't give me some general comments or you know, yes, that's gonna wanting to get some little detail you know, it's really which really difficult and fair. It out so it'll be a pack of inner prior renovations thing when performance you know insurance market, it's not quite a bit of really based incompetence or <unk>.
Sloane I'm not sure how much then.
<unk> work of versus that realization wants us that you know good though it was an accounting renovating the bay area we have.
So it's really hard right now to kind of.
Right now.
<unk>.
In general we have halted airway relation program, we do have some hotels in the sense for them.
He had expected to renovate this year that word processor because of all the dynamics of that marketing.
Difficulty getting permits and so forth.
It is probably the the the wave substantially wish you, but beyond that I renovation program is.
Q located on the West coast.
<unk>.
Really dig into you know, how we can stay there capital more intelligently.
To give the kind of some kind of.
That we want to see.
<unk>.
We can share with you and serve their franchise we've.
Some kind of more along and kind of normalization potential one, but I don't see that it certainly won't be happy with this year it may not be happening.
2021.
<unk>, Yeah chat I think you'd you'd likely noted cell or.
For renovation expectation limitation.
Expectation for this year.
Midpoint, it's come down about $10 million.
The.
Mentioned there is some.
Yeah. Some renovation work that had been done.
Why are too.
Because it outbreak went missing work that at least was far enough in flight.
We weren't going to stop it when the <unk> started.
Then in South Florida.
The lower season. This summer we had some projects that well planned where we've already.
US to May work and have a lot of that.
The supplies in place to do those renovations legal proceeding appears as best we can.
It makes a lot of sense, because you know occupancy is marginally lower than we had planned on it being.
During this time period, and so it's just a little easier to get into those rooms and get the renovations done.
We expect that you can get inspected permitted and et cetera inspections, especially in certain counties in Florida.
Challenging because yeah, just a pain. So that work is not with was pretty <unk>.
But.
Experts mentions when network is done.
Sickly suspending renovations until we get a better sense for what we can expect out of them and certainly what we <unk>.
<unk> tapes of recovery, let me see and the evolution of demand that we see as we come out of this as a country.
Have an impact followed by renovation planes going for.
Oh.
Thank you very much appreciate it.
We can now take I like final question. It's made his nose up city piece go ahead.
Hi, Thanks, I just had a quick question on labor costs, 16, and a lot of initiative from friends, including yourself, you talked about foreign 10th of cleaning.
Talk about the cost to that I I know you said, you're not creating as much but for the cleaning youre doing is it taking longer from a labor cost perspective, or maybe with different supplies that are going to talk about what anything that might change on the costs side.
Yeah speeds just to provide a little bit of color. There's some meeting parts here, we're not cleaning rooms.
Supplements, we had been before we are cleaning common areas more often than more aggressively than we had before.
So yeah, we had processes in place for.
The lobbies for the front desk for the elevators and elevator buttons et cetera to get in and much more aggressively clean those areas than we had before.
So just to give you a sentence sort of what that's been like in April.
Yeah equal where our revenue was down roughly a third.
We saw reservation and travel agent costs come down more or less we want it over all that any we saw some other variable costs come down like that labor cost was down only about 6% you're over here in April.
It's part of that driven by wage we're still seeing.
More wage pressures then I would have expected given our levels of unemployment, but I think that's related to.
Some unemployment compensation.
Subsidization, what's going on until July it's still relatively attractive.
<unk> hourly workers to remain unemployed as opposed to seek employment while that.
Unemployment compensation subsidization is in place.
But we did see reduction in labor costs. Despite the fact that which is much more aggressive cleaning in all of our common areas.
Okay I've got I've, just wondering if it costs to clean you know where like just sort of <unk> go up or down from here.
In a post covered world.
Yeah.
Good question. It May go very very marginally there's some things that we're doing to handle.
Yeah, the winds in the room that are.
You know beyond what would have been our standard process before you know our employees are.
Are taking care to to the weights those are the gloves with other T.V. bagging that material before case to be washed where it's possible. We are essentially letting the room like salads for 24 hours.
Say that there's less exposure or at least as potential risk associated with exposure to services as our employees clean rooms.
But.
Yeah generally speaking the things that you do <unk> hadn't changed material the way that we handle those processes or maybe a little bit more careful take a little bit more time than they did before.
It's not that we're.
Suddenly lightning surfaces that weren't wiped out before they they used to be wiped out before.
Okay.
Alright.
Make it.
[noise] <unk> question answer session of it now next trying to call it <unk> okay.
Okay, let's just like to think everyone for your time in your interest I'll end on you know positive note you know the company ran it 67% occupancy last night. So we frequent who is a real testament to the resilience that our business model would continue to see absolutely.
<unk> par dollars increase over the last two weeks, where we're pleased to see that it's you know early signs of some springs shoots here.
But I think you were also realistic I think it's clear becoming increasingly clear to all of us that we're not going to go back to a pre coated environment anytime soon you know life has really changed.
That means new travel habits will change I think the good is is that really thick extended stay America was built for this environment.
When we talk to consumers in the coming months, we're going to talk about three things were going to provide you a clean and healthy room.
And everybody else is doing that but we've been doing it continuously through this pandemic. So we have some good experience there.
We're gonna could communicate to consumers that they can control their stay in their kitchen or big Big differentiating factor as I said, we're seeing some share shift you know from translate hotels, because we have kitchens because that gives travelers additional comfort.
Finally, we're going to be a great value you know, it's going to be a tough economy for a lotta people, particularly are.
Particular travelers for for a long time, where do provide a great values, so clean and healthy room.
Control your your say with the kitchen and provide a great. Though I think that's really really funny on this environment. So.
We appreciate a your time and we look forward to any follow up questions into becoming Dave.
They stay safe and have a great to everything.
<unk> cause. Thank you see your participation you may know disconnect.
Oh.
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Oh.
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