Q1 2020 Earnings Call

[music].

Ladies and gentlemen, thank you for standing by and welcome to the tie up also misfortune first quarter earnings call.

At this time.

Certain and listen only mode.

After the speakers presentation there'll be a question and answer session. So that's the question just section you will need to press star one on your telephone keypad MPC advice at the base conference is being recorded.

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I'd now like I had the conference over to your speaker today Mr. Ryan female. Thank you. Please go ahead Sir.

Thank you very much blue.

Morning, everyone and welcome to play with Delta Resorts first quarter 2020 earnings conference call before we begin I'd like to remind participants that many of our comments today will be considered forward looking statements and are subject to numerous risks and uncertainties that may cause the company's actual results to differ materially from what has been communicated.

Forward looking statements made today are effective only as of today and the company undertakes no obligation to update forward looking statements for discussion of some of the factors that could cause our actual results to differ. Please review the risk factor section of our annual report on form 10-K, which was filed at the end of February with the Securities and Exchange Commission, we've updated our Investor relations website at Investor suppliers.

Dot com.

Our recent releases.

A reconciliation to GAAP to non-GAAP financial measures. We discussed on this call were included in yesterday's release on today's call first Wardinsky plus chairman Chief Executive Officer will provide some comments on the first quarter and key operational highlights I will then address our first quarter results our liquidity situation, our outlook, which will then wrap the call with some concluding remarks before we turn it over to keep an eye.

Well I'll turn the call over to burst.

Great. Thanks, Ryan Good morning, everyone and thanks for joining US. We appreciate your interest employed during this extraordinary time for the world and certainly our industry I'll begin today by reviewing some of our operating accomplishments prior to March of this year and then give some high level thoughts on the operating environment. I'll, then turn the call over to Ryan to discuss our balance sheet and outlook.

Now turning to the first quarter results.

We reported our Q4 2019 results in late February Cobot, 19th just started to make more pronounced impact on the travel industry around the world with the first documented case in Mexico being reported on the morning of our earnings call. What a difference a quarter makes first the results prior to March our Q3 2019 earnings call last November.

You mentioned that we were starting to see signs of stabilization in the Yucatan, particularly in can't Count. This was followed by a solid sequential improvement in the fourth quarter led by strong close in bookings. This trend carried over into the beginning of 2020 as January and February combined comparable Revpar in the segment grew.

A 3.1% with both can't could imply you don't Carmen posting positive results.

Specific was down slightly but in line with our expectations, giving given a softer group booked position in Jamaica rebounded nicely to start the year with 3.7% Revpar growth following a difficult fourth quarter due to less group business.

Turning to the Dominican Republic.

The recovery continue to make progress through February with a comparable revpar decline of 24.1% ahead of our expectations for a similar decline of approximately 30%. We saw during the fourth quarter. The strength was driven by better close in bookings at both of the dreams properties Coopcana and the Hilton La Romano also had encouraging starts to the.

Here.

Shifting over to our sales efforts, we remain focused on growing our direct bookings lowering our customer acquisition costs are confident we're on target with our five year plan to increase consumer direct business to at least 50% by 2023.

In aggregate during the first quarter 2020, 23.5% of apply a managed room nights stayed were direct up 280 basis points year over year, and 31.4% of room nights booked were dragged up 470 basis points year over year. Additionally, our loyal direct consumers.

Also tend to have a higher TDR as they represented 34.4% up our revenue booked during the quarter for future periods.

Generally as we think about direct booking growth partnering with globally recognized U.S. brands is key to driving the highest value guests at the lowest possible crossword resorts by reducing customer acquisition costs, increasing our total addressable market mitigating the impact of supply growth and minimizing the negative effects of competition right.

Hilton and Hyatt branded properties, we are seeing strong increases in direct bookings as well as more group business.

Specifically related to group Hyatt Ziva into Lora, coopcana or very strategic resorts reply out all inclusive of sorts of this caliper with meeting space to handle large incentive groups and the destination like put to kind of more often than not do incredibly well make sure should serve to boost bookings that are other grew properties. The Hyatt ziva, Los Cabos Hyatt Ziva.

Hi, its Lora Rose hall to a certain extent the heights, either cancun, because we expect to now be able to fulfill meeting planners three year rotation cycle all in house without them, having to go outside our portfolio to provide the variety of destinations are clients desire.

Ryan will cover the details of our group business in 2020.

Now I would like to touch on some of our ongoing technological strategic initiatives, we continue to invest in the business launching an expanding I'm several initiatives, including our book direct initiative I've already mentioned you to improving the customer experience lowering our customer acquisition costs and driving growth.

In early March 2019, we began the soft rollout new end to end up sell and rebook technology as flight to resorts are using sophisticated algorithms that identifies in real time, new revenue opportunities, including selling ancillary items in additional room packages to targeted gosh.

This technology will enable us to accept more of the room upgrade bids as we move further back through the booking window and enter a seasonally slower period of the year, we finish enabling the entire portfolio with this technology during the fourth quarter of 2019.

During the first quarter of 2019, we launched our proprietary travel agent portal, which travel agents can now make commission reservations directly without having to go through toward travel operator. This effectively removes a layer costs have previously existed saving playa approximately 7% to 9% in commissions per booking well at the same time entail.

Thanks for the travel agent on a basic booking and improving the economics in the case of Upsells were pre booked ancillary revenues.

To date bookings via our website have been inline with our modest expectations as we believe the real growth potential is in 2020 now that agents can book Commissionable end to end vacation inclusive of air ground transportation excursions suites exclusive dinners and luxury spot appointments. We are now live with the ability to booked flights and ancillary service.

As for a complete vacation package to give a better gauge of the underlying fundamentals of our direct to consumer website as of March 19th play resource Dot Com was pacing ahead of our expectations was 40.4 million of gross revenue on the books for 2020 versus 28.8 28.3 million in 2019.

Let's turn now to the rollout of our new yield management system. We went live with our first property in Q1, 2019 and expanded into two more properties during Q2.

We made further progress during Q3 and are now live in nearly all of our hotels law operate the new system in parallel with our current forecasting process for at least at year to fine tune it leveraging historical data in judgment of our marketing teams and important step given the seasonality of our business. We expect the real benefit of the system to show up in or natural results starting in.

Late 2020.

As many of you have seen following the spread of covered 19 and the ensuing impact on global travel, we decided to withdraw our financial guidance for 2020 and temporarily suspend operations at our resorts in late March. While this is unprecedented during my hospitality career was a necessary action based on various restrictions imposed by the Jamaican.

Dominican and Mexican government and to protect the safety of our associates and guess.

Now I would like to share with you our thoughts and plans as we look ahead in these unprecedented times.

We are currently accepting reservations for July across our entire portfolio, but the decision on when to reopen and which properties to reopen will ultimately be determined by the local governments and economic viability of doing so.

As of now we think it is reasonable to assume that the travel restrictions will be eased by July.

We cannot be certain that will actually occur on the financial front, the clustering and fairly close proximity of our resorts and certain destination destinations will provide flexibility to open markets in phases based on the forward booking volumes, helping fine to new operating safety protocols and reopening in the most efficient manner possible.

Ryan will walk you through some of the financial details of our reopening plans momentarily, but I want to highlight given the nature of our resorts near beaches and would generally high occupancy we have historically cleaner resorts much more frequently throughout the day than a typical hotel.

We believe our resorts our position quite well for a world observing social distancing as we have expansive beaches and pools large open spaces and expansive footprints that are accommodating for reconfiguration.

We are working with our brand partners on industry, leading safety protocols and should further separate us from the competition in this new world.

Focused on improving our operation. So that we are the destination of choice for travelers in our markets on the marketing front. We view this as a unique opportunity to take market share from both our direct and indirect competition, we plan to aggressively pursue our competitive advantages.

Ultimately, our guests will need to be able to physically get to our resorts. So we're closely monitoring airlift into our market given that leisure travel leisure traveler is expected to begin traveling again before the business traveler, we're hopeful that airlift into more markets will be sufficient in reasonably priced with that I will turn the call back over to Ryan to discuss first quarter results in our.

2020 outlook.

Thank you Bruce good morning, everyone jumping right into the details of the first quarter. Adjusted EBITDA was 50.3 million, which represents a 33% decrease versus the same period and prior year.

When the timing of the temporary suspension of operations at our resorts, we had to recognize approximately $2.7 million for low cost.

Separate from severance costs in the first quarter, which under US GAAP requires you to expense upfront.

Parable net package Revpar decreased just under 19% during the quarter on a 1200 90 basis point decline in occupancy and a 400 basis point decrease in rate comparable net non package revenue was down 11.6% in the first quarter and total net non package revenue was down 7.4.

And the Yucatan comparable net package Revpar declined 14.4% on a 1.2% LDR decline and 1100 60 basis point lower occupancy comparable owned property level resort EBITDA in the region, which reflects both Kankan plateau, Carmen decreased 6 million or 23% as Bruce mentioned, However, we had an excellent start to the year.

Very comparable Yucatan EBITDA margins expand 140 basis points as we grew revpar by 3.1% and began to lever the investments in the company shared service Operation Center.

On the Pacific Coast net package Revpar decreased 18.5% driven by 1% decrease in SDR and 13, and 3800 40 basis point decrease in occupancy.

On resort EBITDA decreased 3.5 million or 28%.

And group nights in the segment were down 2% in Q1 2021 non package revenue declined about 15% through February however, the Pacific Coast EBITDA margins expanded about 80 basis points.

Turning to Jamaica comparable not package Revpar decreased 15% driven by 40 basis point decrease in HDR at 1200, 30 basis point decrease in occupancy.

Make it bounced back nicely for us in the first quarter. Despite a slightly adverse group book position heading into the quarter through February.

Comparable Jamaican EBITDA margins expanded 490 basis points on almost 4% increase in Revpar.

Now turning to the Dominican Republic.

First quarter compare comparable net package revpar decreased 37% driven by almost 16 point decrease in occupancy and almost 24% decrease in HDR.

Through February however, as Bruce mentioned River, we recorded comparable Revpar declined to 24.1% in the segment well ahead of the expectations. We outlined on our last earnings call comparable EBITDA margins compressed 17 percentage points, which has an improvement versus the almost 19 point decline reported last year. Following the sudden decline in that market in mid 2009.

As we had more lead time to rightsize staffing and operating expenses the newly remodeled help my Romano and the newly opened Devens alarcon generated a combined EBITDA of over 4 million in the first few months and improvement versus the 1.7 million dollar loss in Q4.

As both properties began to ramp profits following the completion of construction work in Q4.

Through February comparable Dominican Republic, EBITDA margins contracted 1100, 30 basis points and improvement versus the margin decline in Q4 of over 12 percentage points.

On our last earnings call, we highlighted the better than expected performance of the dreams Palm Beach, pushing revpar above our comp our expectations due February revpar at both the Dream on Beach Dreams puts a kind of drove the comparable revpar upside versus our expectations.

I'd like I'd like to now turn your attention to the group business, we're very fortunate that coming into the year, we had a little over 50% of our mice business slated to stay in the first quarter and were able to recognize that revenue with very little disruption prior to the crisis.

Another roughly 30% was scheduled to stay in Q2.

And of that business about half of already rebooked with 60% of them Rebooking for later in 2020.

25% Rebooking for 2021, and the rest in 2022.

Of the remaining 50% of the Q2 mice business that has not already rebooked about 15% is still undecided and the remainder has cancel.

As we look out to the second half of the year, we had slightly more group business on the books day in Q4 than in Q3, and a wait to see how that progresses as we move throughout the year.

With respect to advanced deposits. We currently have just over 30 million as it as of the quarter end with about 20% of that tied to stays in the second half of the year.

Looking out to 2021, we have just over 20 million of mice business on the books versus 17.6 million for 2020 at the same time last year. This includes just over 2 million a business that shifted from 2020 into 2021.

Now turning to the balance sheet liquidity and cash flows.

On May 1st we announced the sale of two resorts for cash consideration of $60 million, we anticipate closing the transaction during the second quarter subject to customary closing conditions. This action was taken to further solidify our liquidity position, adding approximately four months of additional liquidity and a no revenue environment at the depth and the length of the travel decline is highly uncertain.

In addition, we believe we believe to unlock the true potential of these two assets. We would have had to spend significant capex incur EBIT disruption from closing the resorts for major renovations.

As of April Thirtyth 2020, we had just under 60 million of cash on hand, which does not include the cash consideration from the asset sales 85 million outstanding borrowings on our revolver and total outstanding debt.

Of 1 billion six 1.060 billion, we do not have any debt maturities and to our revolver matures in April 2022, and our term loan does not mature until April 2024.

We're actively working with our lenders under our revolving credit facility to amend the agreement to modify its financial Covenant and are also actively pursuing alternatives to raise additional capital and provide the company with liquidity and hope to have something to share with you on that front in the near future.

Turning to Capex during the first quarter. We spent just over 3 million on development Capex due to the timing of payments for the work already performed at the Hilton La Romano Hilton Plateau, Carmen and our new Devens Lar Coopcana and we spent just over 3 million a maintenance capex capex given the strong start to the year and work done to fortify the properties before the pandemic and the temporary suspension of operation.

And that our resorts were not expect any any significant development capex spend in 2020, and anticipate spending minimal amounts of maintenance capex as we move its crisis.

Our forecasted use of cash does not include additional share repurchases as we as we have decided to suspend buyback activity for now.

Based on the information we have today and our current debt we estimate the following cash uses while the properties are closed.

Cash interest expense of roughly 5 million per month.

Pretty level cash burn of roughly 7 million per month, while they are closed.

The corporate cash burn of two to 3 million a month.

Insurance premium of 7.5 million in Q2 that include the down payment that is yet to be paid and 1.5 million per month thereafter.

Minimal capex.

So in total we estimate monthly cash burn in the high teens millions under no revenue scenario.

Now turning our attention to our 2020 outlook as previously stated we withdrew our financial guidance for 2020 in March falling extreme disruption to travel trends as a result of the covered 19 crisis.

We currently anticipate reopening selective resorts during the third quarter as Bruce mentioned, we are thoroughly analyzing a variety of determining information in real time and will only open when we believe it is prudent.

Based on our analysis.

At a reasonable HDR, we believe we can achieve property level breakeven at occupancy is in the range of 35% to 45% inclusive of new Cobot 19 safety operating protocol.

Furthermore, we do expect some upfront upfront startup costs relating to marketing staffing et cetera has begun to reopen our resorts.

Our intent is to maintain pricing as much as possible as we believe in echo the sentiment of many others in our industry that the consumer will pay a premium for trust and safety.

As we look ahead as at the end of April our revenue on the books for all segments is ahead of last year for November through September with December only slightly behind last year.

Our fourth quarter is currently pacing ahead of last year by roughly 5%.

Daily sales through our prior resorts Dot Com began to turn the corner in April showing nice improvement had them as the month progressed as we mentioned before while this is encouraging gas will need to be able to travel to the resorts and there was always the risk of delayed cancellation given current 24 hour cancellation policies available in the market will that ill turn it back over to Bruce for some closing remarks.

Thanks Ryan.

Our first quarter performance prior to the Cobot 19 outbreak was very encouraging across the entire portfolio, which gives us optimism that we will be a destination that people will want to return to once they deem it appropriate.

My goal is to play off fence on the sales and marketing front to highlight all of the attractive merits of our resort in the brands, we operate into emerge as the clear leader in our destinations.

Consumers will be willing to pay a premium for excellent service and offerings, we intend to provide just that.

Although there will be a myriad of challenges in the coming months. The engineers. There will also be tremendous opportunities, we intend to take on the challenges and aggressively pursue the opportunities.

Thank you for your time and interest imply up and we will now take your questions.

Thank you as a reminder to ask a question you will need the press star one on your telephone keypad again, navistar well that number one on your telephone keypad.

First question comes from the line of Chris Woronka from Deutsche Bank. Your line is open.

Hey, good morning, guys and thanks for all of detailed prepared remarks.

My first question was just kind of on on how you. When you think about reopening is there are ways to maybe reconfigure bit to make more even more of a premium experience, maybe maybe more cabanas things like that where people could families can feel more distant and presumably pay.

A really a higher rate for that is there anything you can do temporarily until things get back closer to normal.

So first of all Chris Thanks for being there and thanks for the question I Hope I Hope you are doing well in this new world we're in.

I think there's going to be tremendous opportunities for people to pay up as we said in our prepared remarks to pay up for service.

What we're putting in service, okay and quality is safety I mean, it's really going to be the new world will be that people need to feel safe.

Everybody is going to want to feel safe and so when you look at the footprint of our resorts number one.

Open air lobbies white expansive hallways.

Multiple beach Us I'm, sorry, multiple pools why beach us.

Lots of restaurants, we were never in the big pack them in buffet model that many of our competitors, we're using and still have and it's going to be difficult for them to change from from that they're just going to have to have fewer people at the resorts. So our goal is okay partner with our brands have the highest level of confidence for.

I guess that they're going to be number one safe in number to have a great time. So to your point can we upsell Oh, absolutely I think you're going to see families. Wanting cabanas I think you're going to see more private dinners on the beach.

It could be more.

In room dining.

We will not allow.

People at the buffets it won't be self serve will have a different model for that there'll still be buffets, but your point to things and will be.

Served to you at your table by a server we have the ability to spacings out like I said, we have lots of restaurant. So I think people people going to pay up for quality in quality includes includes safety in the confidence that they can go to one of our resorts and have an outstanding time go home and.

Be safe have fallen and be safe and Thats, what were going for in partnering with our brands is going to be a big differentiator for us most of the people as you're well aware in our in our space and they all inclusive segment.

Don't have that brand awareness with the customer and I think customers are going to be more discerning going forward and we think thats going to be an advantage that really plays well into our strengths.

Yes, yes, thanks, Bruce really really good really good color good points, and then kind of on the on the cost model side, obviously, there might be some incremental cleaning expenses. Although you guys have done a lot more than most in the past.

I want to keep service levels high but do you think there may be reduced kind of.

Personal touch cleaning kind of during a stay so you you might the business model might shift, but could it get more expensive less expensive kind of looking out a little bit because people. Many just not want people coming into the room.

While there are there, yes, I think absolutely thats going to be the case and that will be number. One is we will cut back on certain things. We do Walton guest or are they are during their stay and then number two people have the optionality to decrease it even more and I think a lot of people are going to take advantage of that it's not going to be just the.

Hey don't watch my sheets are towels, it's going to be don't come in my room for a week and I think youre going to see some of that and so we will provide that again to make the guest feel at the highest level of confidence in comfort that we're taking care of them amenity packages a lot of things that we would do you know just to make the guest feel welcome and special.

So those are going to change to people are going to be less interested in amenity packages and more interested in just the high level of confidence on safety and security. So we will we will focus on that I think from a cost standpoint, we are much better positioned than traditional hotel to your point, we already do.

A lot anyway, we're in labor labor lower labor cost markets and things like cleaning an elevator, we're constantly cleaning and elevator to get sand and water out of the elevator, we'll just add to that wiping down the keys things like that but but you're going to see it's going to be very obvious.

The extent of of the cleaning and safety in the guests are going to see that and I think they're going to.

Be happy and be willing to pay more in order to get that.

Great and just a housekeeping question can you remind us how we're hearing that more and more travelers might elect to use their points. This year, because they are off to worry about earning status and they might be preserving cash and their personal through their personal use a little bit but your mind is how the point how using points work for you for now.

Actually.

Yes.

It's a good it's a good solution is a good solution for the customer in its a good solution for Playa as well as the brand companies. The brand companies have as you're well aware big liabilities of the point balances that they hold up from our standpoint, we've negotiated very fair terms, where we feel.

Very positive about people reading either points and there is no better place to redeem your point than at an all inclusive resort because you're not just getting the room, you're also getting the food and beverage so.

While they have to redeem more points I think on the cost benefit.

From a cost benefit perspective, it's much more attractive. So yes, we would be very happy if you had a large number of people Hyatt and Hilton frequent stay members redeeming either point and saying Hey. This is a good time to do that and we look forward to it and Chris the only other thing I'd add is that while in no way trying to compare.

This downturn to previous ones, having point in partnering with brands is not a tool.

Until that we do not having our tool belt backing away no nine into we've talked about in the past as being a nice mitigant to future downturn. So we think thats going to bode well for us when the markets start to reopen.

Okay very good thanks, guys and glad you're staying well.

Thanks, Chris Thanks, Chris.

Your next question comes from the high end of Chad Beynon from Macquarie.

Hi, Good morning, Thanks for taking my question and good to hear that you're all well.

Thanks, Jeff Thanks, Chad.

Ryan you mentioned the breakeven occupancy at your your portfolios between 35 in 45.

Per cent, but can you help us think about any margin recovery sensitivity I know historically, you've run occupancy is around 80%. So just trying to figure out how the flow through might work as as the revenues ramp are there any certain breakpoint occupancy is that you really get additional leverage just trying to figure out how this.

How does could look as things return in the next 18 months. Thanks, Yes, so let's start at the bottom. So from an end difference points of while we think we can breakeven inclusive of those additional costs and 35% to 45% were roughly on average indifferent as to open or close properties at about 15% on so we take that into consideration when Bruce talked about.

During hotels, which I would tell to open or combine or not so we can think about that a step one.

And then I don't know Bruce mentioned, but I think the initial plan just given this new.

Social distancing World is for at least the first couple of months or so don't know for how long, but probably cat occupancy around 75% or so just understanding that that helps get customers back allows him to pay a little bit more could they feel safer and secure given that theres not people on top of them, yeah, and so for US if you think.

Where we've had issues from margin in the last year or so it's been in markets, where the rates have been under pressure.

You saw in 2019 years, Yucatan Peninsula, and I had a lot of supply coming in over the last couple of years and rates were down but the occupancy is we're still there and so just stating the obvious.

You have.

The same amount of guests are more guests at a lower rate that's going to put pressure on your margin because the variable costs come up. So if you think about the steps to recovery and the steps are coming out of this it for a short while or at least at the interim and potentially forever, if depending how the world look if were capping occupancy is around 70, 580%, but then still maintaining proper rate.

That's actually going to help us quite nicely as we come out of this because you won't need to staff, stating the obvious for 90, 95% fault property you can actually.

Staff staffing appropriately so I think assuming the margins assuming that recovery is gradual and continues to build momentum I think you'll see nice margin improvement sequentially.

Okay great.

That actually segue to my second question just on rate integrity, you talked about strong pricing in November and December.

In the group business Thats on the books some of your.

Lodging peers have sold future dollars for discounts others are giving away.

Spawn upgrade packages for free I.

Just a two parter one do you plan on doing any type of those inducement packages and then secondly from a rate integrity standpoint, and that's probably early to tell but what are you seeing from your four or five star competitors in your markets are they holding rates as well are they starting to discount in the future. Thanks right right.

As far as far as group business I mean, the vast majority of our group business, we already recognized in the first half its actually fairly minimal for the second half of the year, which was nice.

Right now what we've seen while there has been a few cancellations mostly its groups just just want to adjust and shift their timing. So we've managed to keep the deposit and just some things over our there each individual unique cases, where we've had to negotiate some additional incentives yes.

But on the whole just given that our debt. They destination that are meeting facilities are walburn out and just really really highly coveted by meeting incentive planners, we've not had to do too much discounting there.

Compared to other peers, while we do do considerable amount of group business that a few of our hotels as an overall portion of our overall revenue, it's only kind of 10% to 12% group, while it's helpful to yield it doesn't make or break us one way or another.

As far as the overall rate integrity as Bruce mentioned, it's our it's our goal and right now if you look at the pacing for Q4, our rate is actually higher than it was last year I don't expect that would remain just given that a lot of that business is coming through our direct channels through our brands that there are on web site and now more than ever were excited about our decision to partner with brands and go to direct to the.

Consumer that said, we do expect that at the world's starts to reopen there will be some reductions in rate, particularly from some of the larger carriers that had two and 3000 room properties as they're trying to stimulate more demand.

Normally that would be.

Not something we'd want but just given this new world at least at the interim if it stimulates demand helped bring airlift back I don't think at the onset. It's the end of the world If theres some discounting in the market if its stimulate that demand at the end of the day will always be able to out price where the market is.

In our goal is not to follow them from a downward spiral spiral and rates. They have a different business models, they're going to have to do what they need to do I really believe that the partnership with our brands and the quality level and what we can deliver is going to attract the customer and people, it's going to be less of a.

A rate issue I mean, if you look back to Alito nine it was much more of a rate issue I think with this situation is going to be a safety issue in a quality issue and so our focus is going to be on delivering that experienced the people because once you need to do is get them comfortable to go on an airplane get comfortable to go to your resort and it's not going to.

Like Oh, we're just going to offer you less.

Come visit us it could be very different proposition and thats what were focused on.

Gotcha. Thanks, guys appreciate it best of luck. Thanks. Thanks.

Your next question comes to the lineup Tyler battery from Janney capital markets.

Hey, good morning, Thanks for taking my question.

I wanted to starts on the liquidity side of things and I apologize if I missed this earlier on I can you give some high level thoughts on some of the options are looking at right now in terms of raising additional capital whether that be.

More asset sales or other avenues that might be out there, yes, so we executed the announced asset sale.

Subject to closing because at this point in time, it with our best and lowest cost of capital for our shareholders that holders and so it made sense to be able to do so in a very timely manner and more importantly, it provides us with optionality allows us to be more choosy or four additional capital raises.

I've been asked okay with this additional 60 million in based on your forecasts do you need additional capital maybe not but given the fact that we don't want to keep coming back to the market and because.

You know the markets are so uncertain right now and no one can predict what's going to happen in the fall up is another onset of the virus, we want to make sure that we have enough liquidity to get through an extremely draconian scenario. So we are actively looking for additional capital and working on that and we hope to be back very very soon with but some additional color on that we have additional capacity.

And our debt baskets, and we're looking a number of different sources to answer your question on additional asset sales, we have suddenly we announced on our last call that we had entered into an ally on another asset that was not the two jewel assets and so that is an option, but right now it's incredibly difficult to transact in this market and we feel pretty fortunate we're able to transact on the two jewels.

Those other assets are currently on hold and I can't comment on whether or not we're going to be able to execute anytime soon on those so right. Now is looking at other capital to make sure we have enough to get through any sort of draconian scenarios.

Okay perfect I appreciate that and then my second question is on Capex spending and benchmark mentioned minimal levels, just how much much you spend.

What are you going to spend money on it and kind of how long can you keep spending capex at such a low level.

Yes, so the good news for us is.

Over the two thirds of our portfolio is either brand new are heavily renovated in the last three to four years, obviously, we had brand new properties. The tail end of this year, but even the high. It's all opened at the end of into 15 first full year, they're open to 2016. So we feel good about the hundreds of millions of dollars. We've spent over the last four to five years.

And it allows us to be more flexible when it comes to the spending now I mean, the two assets that were.

We're going to be selling here in the next quarter.

They had probably more deferred capex in any of the other assets in our portfolio. So just looking at what's left we're able to operate at minimal capex levels, Rob do you not going to let the ball drop on anything like safety related or stuff like that Bruce likes a joke, it's impossible to re tile up a pool when there's guests at the hotel. So there's a few cases were doing things like that.

But it's minimal recognizing that cash is king right now and that's our focus.

Okay, that's all from essentially detail.

Thanks.

Your last question comes the line of Sneakers Rose from CD.

Hi, Thank you I just wanted to go back to your.

Breakeven.

Since he had 35% to 40%. So are you assuming kind of flat rates there to what you had been achieving or what sort of underlying.

Sure.

Assumption for that.

We're project, it's what we're seeing in the market for kind of Q3 when the rates are down there is a or is that I mentioned this in competitive discounting in the market. We're not on a following down the rabbit hole, if you will but it's based on the market that the 80 yard that we have on the books and where we're forecasting. So it is not in down as much as you would expect just given our.

Position with the brand in our ability to yield but it is down slightly from where we work recovered obviously.

Okay.

And then I just wanted to ask you to the jewel assets.

Under contract.

Are there any conditions for asset sales closings or any financing needs on the side of the buyer.

Great question, no no financing need I'm, just customary closing conditions. They are going through it now we negotiated a purchase and sale agreement in 10 days burgers and.

We hope that the closing is equally as fast, but we are looking to close it in the second quarter and so we'll be more more to come on that but no. There are no outstanding issues other than customary closing.

Okay, and then I think you had mentioned before there's a small deposit that's already been put down on that as that refundable to the buyer.

No. It's not it's nonrefundable. It was just it was just 3 million 3 million Bucks of is just 5%. So that's an escrow.

It's nonrefundable, unless there's something that we act and bad faith or something like that which we wouldn't do obviously, it's a good deal for both parties and we're excited and proud to work with them.

Okay. Thank you guys.

Thanks.

Look I think thats all the questions.

Yes. Please continue.

Okay well.

I want to say thank you again to everybody. This is you know we've said the word unprecedented multiple times I don't think you can say enough. There is no game plan for dealing with the situation like this but I think.

The team.

The corporate level down to the properties is 100% focused on doing the right thing to protect our associates to protect our guest to get our business back up and running and we think we're going to be able to do that in the very near future in a very highly successful rate. So we look forward to being able to say more.

When things were working on in the near future and again, we appreciate your interest. Thank you very much.

Ladies and gentlemen. This concludes the conference you may now disconnect.

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