Q3 2020 Braemar Hotels & Resorts Inc Earnings Call
Greetings and welcome to the Premier Hotel and resort.
Incorporated third quarter 2020 results conference call.
At this time all participants are in listen only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance. During the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded I.
I would now like to turn the conference over to your host Mr. Jordan jamming Jennings for bringing our please go ahead Ms. Jenny.
Good morning, and welcome today's call to review results for bring more hotel and resort for the third quarter of 2020 and to update you on recent developments.
The call today, well be Richard Stockton, President and Chief Executive Officer, Deric, Eubanks, Chief Financial Officer, and Jeremy Welter, Chief operating officer, the results as well as noted the sustainability of this conference call on a listen only basis over the Internet were distributed yesterday and it properly.
This time I remind you that certain statements and assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provisions of the federal Securities regulation.
Such forward looking statements are subject to numerous uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the call you filings with the Securities and Exchange Commission.
The forward looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise that statement.
Statements made during this call do not constitute an offer to sell or worthless taishan of an offer to buy any securities securities will be offered only by means of a registration statement prospectus, which can be found at www dot C.C. dot Gov.
In addition, certain terms used in this call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on form 8-K with the FTC on October 28, 2020, and May also be accessed the company's website at www Dot DHR wheat dotcom.
Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release I will now turn the call over to Richard Stockton. Please go ahead Richard.
Good morning, welcome to our third quarter 2020 earnings Conference call.
I will begin by providing an overview of our business and an update on our portfolio, which includes our hotels achieving positive hotel EBITDA for the quarter and.
In all of our hotels now being open including the recently rebranded Clancy Hotel in San Francisco after.
After that.
We'll provide a review of our financial results and Jeremy will provide an update on our asset management activity after.
Afterward, we will open the call for acuity.
The cobot Nike pandemic has created both social and economic disruption on an unprecedented level, that's created a bottle landscape about the hospitality industry.
I've said previously this has been an extraordinary period for all of us and our entire leadership team has been steadfast in our commitment to protect all of our stakeholders. During this unprecedented time.
A few objectives have continued to guidance there.
The health and well being of the employees at our hotels, our hotel guests and the communities in which we operate had been a top priority and we have taken several preventative measures to keep them safe.
I stayed home orders were implemented we quickly adopted to the restrictions and challenges affecting our properties and adjusted the staffing model at our hotels, while reducing other operating expenses in an effort to preserve cash and minimize near term losses.
Last time, we spoke the.
The vast majority of our portfolio had suspended operations for a significant portion of the second quarter.
The us I'm extremely pleased to report that since then all of our properties have reopened and we reached an important milestone by achieving positive hotel EBITDA across our portfolio during the quarter driven by strong occupancy performance of over 48% at our resort properties.
Upon the bulk of our properties reopening in July.
We achieved portfolio wide occupancy of almost 30% and hovered around that level for August and September well HDR declined as a result of adding lower rated room inventory the reopen portfolio.
While leisure demand is holding up nicely, particularly on weekends any significant up kit uptick in Revpar performance is likely to rely on the recovery of corporate transient demand and ultimately group demand as a result of widespread vaccination or achieving herd immunity.
Many of our hotels are in drive to leisure markets and have been well positioned to benefit from the resurgence of leisure demand in recent months in total.
Eight of our 13 hotels are considered resort destinations. These hotels include the Ritz Carlton Sarasota BARDA. So no hotel yacht Bill Ritz Carlton Lake Tahoe Pier House Resort Parkside, Beaver Creek, Hilton La Jolla, Torrey Pines, and Ritz Carlton Saint Thomas.
We are pleased to report that this thesis is played out just as we expected as all eight of these properties had positive EBITDA for the quarter.
While it is still early in the reopening process and the impact of the virus is still unpredictable. It is clear from the feedback we are hearing that guests are excited to be traveling again.
With all of our hotels now we open to the public we continue to prioritize the health and safety of our guests and staff and we're being thoughtful deliberate and flexible as our hotels resume operations.
To enhance guest safety our properties have instituted stringent safety measures and protocols consistent with evolving best practice recommendations regarding COVID-19, ranging from enhanced hygiene standards, the keyless check in and electrostatic sprayers to protect guess addition.
Additionally, in the near term we have specific plans to contain expenses across the portfolio as we continue to navigate the reopening process.
We're offering optional housekeeping services at some properties for stay overs.
We're also eliminating van Transportation Airport Shuttle service valet parking services Turndown service and all amenities that exceed brand standards. We're also spending some services that cause years lounges, m. clubs, and all spas and kids' clubs.
Our asset management efforts have been relentless and have positioned us well for the continued ramp up in operations that we now anticipate.
We're also excited about the recent opening of the Clancy in early October located in San Francisco's vibrant Soma market.
The former courtyard, San Francisco downtown underwent a rebranding in renovation in excess of $30 million to create the Clancy.
It joins married Internationals autograph collection hotels and the property features 410 guest rooms over 11000 square feet, a modern meeting space throughout 16 event rooms.
Well construction restrictions delayed the Clancy is reopening by several months and we expect that occupancy levels will be moderately low given covert nineteens negative impact on group and business transient demand, we look forward to realizing enhance financial performance from this property over the long term as a result of the rebranding and renovation.
Well, we continue to face the challenges of the pandemic and the uncertainties that go with it we've taken proactive and aggressive actions to protect and enhance our corporate liquidity.
This included cut expenses at the corporate level and significantly reducing our planned capex spend for the year we.
We will continue to preserve cash until we have more clarity on the recovery in the direction of the economy.
All in we estimate that we have reduced our run rate corporate DNA and Reimbursable expenses under our advisory agreement by approximately 25%.
As previously discussed we also closed on an amendment to our corporate credit facility, where the pay down of $10 million. The amendment converted the $75 million corporate credit facility into a 65 million dollar term loan with the same maturity date of October 25 2022.
During the quarter, we also finalize discussions with our property level lenders and now have no defaults across our borrowings.
Our intention is to remain current on these obligations going forward.
We successfully navigated through a very challenging operating environment. During this quarter our balance sheet is in good shape.
And I believe we are set up very well for the ultimate recovery in our industry.
I will now turn the call over to Derek Thanks, Richard.
During the third quarter, we settled our insurance claim with our carriers related to the Ritz Carlton Saint Thomas for a total of $123.5 million.
$42.3 million related to business interruption income that had been previously recognized in our financial statements.
This was a significant claim that resulted in a positive outcome for the hotel and its associates and demonstrated the great working relationship our risk management team has with our insurance carriers.
For the third quarter of 2020, we report a net loss attributable to common stockholders of $18.7 million or 55 cents per diluted share for the quarter, we reported AFFO per diluted share of negative 15 cents.
Adjusted EBITDA Ari for the quarter was negative $3.1 million.
At quarter's end, we had total assets of $1.7 billion.
We had $1.1 billion of mortgage loans of which $49 million related to our joint venture partner share of the loan on the capital Hilton and Hilton La Jolla Torrey Pines.
Our total combined loans had a blended average interest rate of 2.5%.
Our loans are entirely floating rate.
As of the end of the third quarter, we had approximately 54% net debt to gross assets.
We ended the quarter with cash and cash equivalents of $88.2 million and restricted cash of $34.7 million.
The vast majority of that restricted cash is comprised of lender and manager held reserve accounts.
At the end of the quarter, we also had $14.3 million and do from third Party hotel managers. This.
This represents cash held by one of our property managers, which is also available to fund hotel operating costs.
As Richard mentioned, we have been and continue to work with our property managers and lenders in order to utilize these lender and manager held reserves to fund operating shortfall at our hotels.
To date, we have signed forbearance agreements on six loans, including the mortgage loans on the hotel Yorkville BARDA Sauna Hotel Ritz Carlton like Tahoe, Ritz, Carlton Sarasota Pier House resort capital Hilton and Hilton La Jolla Torrey Pines.
The agreements typically allow the company to differ interest on the loans for a period of up to six months subject to certain conditions. The forbearance agreement also allow us to utilize lender and manager Health Reserve accounts, which are included in restricted cash on our balance sheet.
In order to fund operating shortfall at the hotel. We also signed an f. any use agreement on the four hotel portfolio loan that includes the Sofitel, Chicago Marriott Seattle waterfront, the notary hotel and the Clancy. This.
This agreement allows us to use the lender and manager held reserve accounts to fund operating shortfalls disagree.
This agreement also provides for the exercise of the first of the loans five one year extensions.
With these agreements in place our balance sheet is in good shape.
We are now out of default on all of our loans and our present intention is to remain current on these obligations going forward.
As we highlighted with our positive hotel EBITDA for the quarter, our monthly cash burn at our hotel has been reduced to close to zero.
Interest expense corporate DNA, including advisory fees and preferred dividends total approximately $5 million per month.
With all of our hotels currently open and operating $88 million of cash and cash equivalents at the end of the quarter and based on realistic yet conservative assumptions for future Hotel Hotel operations. We believe that we have sufficient liquidity to outlast the cobot related downturn in our business.
As of September 32020, our portfolio consisted of 13 hotels with 3487 net rooms, our share count currently stands at 41.1 million fully diluted shares outstanding which is comprised of 36.6 million shares of common stock and 4.5 million LP units.
And our financial results. We include approximately 6.7 million shares in our fully diluted share count associated with our series B convertible preferred stock.
This concludes our financial review I'd now like to turn it over to Jeremy to discuss our asset management activities for the quarter.
Thank you Derek comparable Revpar for our portfolio decreased 65.6% during the third quarter impressively hotel EBITDA flow through was 55%.
As a recovery in the hospitality industry continues to take place.
We are tracking the daily performance of each asset.
Generally we are seeing significantly more demand at a resort hotels with third quarter comparable revpar down 37%.
Which is good compared to our urban assets, which are down 91%.
Each of our resort assets had positive EBITDA for the third quarter.
In aggregate they generated over $6.3 million and hotel EBITDA.
As previously noted our resort hotels have performed quite well during the pandemic.
A great example of this is rich Carlton Sarasota, which has been the quickest recover.
For the third quarter comparable revpar decreased 3.7%.
Compared to the prior year quarter.
Hotel EBITDA for the third quarter was up over 500% compared to the prior year period.
This is largely a function of an increase in transient demand.
And the asset management team digging and to ensure that every possible expense has been eliminated.
Some of those completed temporarily limiting tons year services, ending turndown service scaling back on sales and staffing by approximately 50% and reducing expenses related to managing the golf course.
Another asset that has been strong seems strong growth in demand, it's rich Carlton Saint Thomas.
After reopening the hotel in June it ran 63% occupancy in July.
It was seeing demand growth in August when the second stay at home order was issued.
The hotel reopen again September 19th.
Even with having been closed for 25 days hotel was able to produce positive hotel EBITDA of about $100000 for the quarter. This.
This was possible because the expense control measures that we've taken and the realization of pent up leisure demand.
Korea to round out our resort portfolio review for the quarter, the Pier House resort detained 57% occupancy.
Well I call it the California properties BARDA Sona Hotel yacht Bill Hilton La Jolla, Torrey Pines, and the Ritz Carlton Lake Tahoe collectively achieved 50% occupancy.
Lastly, the park Hyatt Beaver Creek had 35% occupancy for the quarter.
Despite the wildfires occurring in September and early October.
The California assets have performed relatively well.
That said.
We have had some impact on our portfolio due to the fires.
Specifically, our yadkinville hotels experienced some displacement.
BARDA signnow the fires cost about $1.1 million in cancellation revenue and hotel yacht Bill we've seen about 900000 and canceled revenue.
With the fire is now subsiding and air quality returning to normal these assets have resumed the rebound.
As Richard mentioned this quarter welcome the completion of our strategic repositioning the courtyard, San Francisco downtown and to the Clancy joining.
Joining marriott's autograph collection.
The entire renovation took a little longer than a year and a half to complete.
With an investment of more than $30 million.
As part of the conversion, we completely reconfigured the hotels entrance and lobby to create more open and inviting sense of arrival.
In doing so we constructed new centralized bar with lounge seating, which flows into the newly renovated restaurant and cafe.
As California's restrictions are lifted we expect this property to experience a rapid ramp up.
I will now turn to capital investment.
In 2019, we invested heavily in our portfolio to enhance our competitive positioning.
These investments included the conversion of the courtyard Philadelphia downtown to the notary hotel the completion of the three suite presidential Villa at the part Ascena hotel and value add projects during the rebuild of the Ritz Carlton Saint Thomas.
These initiatives have allowed us to get by with considerably less spending on capital expenditures than usual during the COVID-19 pandemic.
2020, despite curtailing our capital expenditure significantly weve.
We have completed the conversion of the courtyard, San Francisco downtown to the Clancy as well as completing the renovation of the Guestrooms at the Pier House resort in key West.
In total we expect to spend approximately $25 million on capital expenditures in 2020.
Lastly, something worth pointing out is how well our portfolio has maintained 80 are this year.
Year to date the park have you ever Creek is up 29% Ritz Carlton Lake Tahoe is up 6%.
Rich Carlton Sarasota is up 4%.
And the Clancy is up about 1.4% over 2019.
Overall, our portfolio is up 10.5% in HDR this year compared to the prior year period.
In fact with rates, 36% higher than pre Irma levels Rich Carlton Saint Thomas is forecasted to generate its highest october rate on record.
This illustrates the caliber of our assets and the potential that our portfolio has many board as we see demand continue to come back.
I will now turn the call back over to Richard for final remarks.
Thank you Jeremy and.
In summary, our focus during the quarter was on the reopening of our entire portfolio of hotels. This.
This sets us up nicely for a slow but steady recovery in our financial results.
We've taken decisive actions to navigate the near term challenges of this crisis and while we cannot predict the trajectory of the pandemic. We're encouraged as we look ahead that we have in place the appropriate runway to get back to positive cash flow.
I'm proud of our efforts to protect our assets and maintain financial flexibility to position us for future success.
We look forward to updating you on our progress as we move through the remainder of 2020 and into the new year. This concludes our prepared remarks, and we will now open the call up for today.
Thank you good part will be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tolling. It that your line is in the question queue. You May put star two if you'd like to remove your question from the Q4.
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One moment, please while we poll for questions.
First question is so high little bit Tory Janney capital markets. Please go ahead Sir.
Hi, Good morning. This is Jonathan on for <unk>. Thanks for taking your questions first one from me.
I was wondering if you guys could provide some color on the demand trends that you've seen.
In post Labor day and in October you know has there been any noticeable shift in recent weeks with the recent spike in those cases.
Yes sure.
Yeah, I'll say, there seems to be a commonly held belief that.
Post Labor day things would fall off.
And as as kids went back to school and people aren't able to travel as much particularly to generate that leisure demand I will tell you with our portfolio and what we are seeing that is not the case.
October is tracking.
Several occupancy points ahead of September and it's up a few percent Navy are as well.
So our October is is shaping up very nicely as I look forward at our bookings for November and December.
The occupancy is also building very nicely.
Rate in December is very strong.
And then we get to January and January as part of the first quarter seasonally is always our best quarter and even january's is shaping up well so.
You know, we're benefiting from a couple of different trends going into the first quarter. One is the inauguration.
So we have almost 30% occupancy on the books already for capital Hilton.
But then we also have as you know some resorts that are benefiting from the snow.
And then some resorts that are benefiting from snowbirds traveling south for the Sun.
So so the trends are favorable I do think in order in order for us to get up to your portfolio wide occupancy of.
50% or so which is probably what we need to achieve a corporate level breakeven.
That will take a little bit more time, but I can tell you that things are certainly look to be heading in the right direction.
Thats great. Thank you I appreciate that color and then during the quarter was up 7%, which is quite good and surprising to us and I know Jeremy If you commented in his remarks, but could you guys provide some additional color on your revenue management strategy and the overall rate environment you guys are seeing in your markets.
Yes, I can I can do that I mean, what we're holding firm on rate and the reason why is because it's not a it's not a question of with art the quality of our assets. It's not you know price sensitivity. It's are you going to travel or not and if we're going to travel weve.
We believe our portfolio is is the other types of destinations that folks want to travel to and are willing to pay for it. So we've been holding up and pushing rate as much as we can.
And and I don't think Thats really hurt our occupancy but.
You know because we still see the demand coming back and not at not as quickly as we want but I do think that there's just a level of discipline that weve instilled across our our teams in revenue managers I just to hold firm on rate and and push where we can.
Okay. Thank you that's very helpful. And then last one from me switching gears to thank Tom. It's then I know this may be difficult to answer given the island closure, but can you just talk about what are you seeing there and how performance has come in versus expectation and you know given the flights in nature of the island.
Yeah, well as you know the island is reopened now.
In fact, I personally visited the property a couple of weeks ago and I'll tell you it looks absolutely stunning the renovation that we've undertaken there.
Has really turned out very well and in all of our guests comments and reviews are extremely extremely positive.
Yeah with that with that better product and frankly with less supply in that market.
And the fact that Americans I think feel a little bit more comfortable traveling there and are able to travel there versus international destinations.
Yeah, we're benefiting greatly and if you look at the 80 are for October.
It's up over 30% versus the premium levels and that's.
Thats the result of the new product the restricted supply available and in this pent up leisure demand, which I think is a little little less elastic frankly in the luxury resort space, then maybe other chain scale segments and and we're capitalizing on that yeah, what I'd add to that is prior to.
Having to shut it down for the second time, we were running I believe in the high Seventys with a rate.
Close to 800 Bucks or so we obviously very disappointed that we had to close the the resort down a second time. So as you pointed out theres just a lot of noise in the numbers and the fact that we were able to generate positive hotel EBITDA was a huge accomplishment I mean, just if you think about the cost associated with closing the hotel.
And reopening it again.
We've got to bring back people early to train them and retrain them. So it that it was at.
A great result.
Result that we generated positive hotel EBITDA.
In light of all of that and I'd also add that either.
Even before that because not only because the field trials.
People feel more comfortable maybe traveling to a U.S. destination we.
We had a lot of first time travelers to that resort.
Tons up and down and that is because a lot of the other Caribbean resorts.
We're close to U.S. visitors and so.
We're folks may have typically onto another risk Carlton resort somewhere else and even in locations like California. They chose to to give Saint Thomas to try and now as a huge opportunity for us because we have all this new product fresh product, which I think is.
As as nice as almost any resort in the in the Caribbean and so we do believe that that is going to be.
Be sustainable in terms of recapturing those first time guests on a go forward basis. So I'd be surprised if this property does not well outperform what we would have anticipated coming out of.
The recovery of reopening in and out of out of covet.
That's great I appreciate all that color. That's all from me. Thank you very much.
Thank you. The next question is from Bryan Maher B. Riley <unk> Securities. Please go ahead Sir.
Good morning, guys, just a point of clarity on that same Thomas commentary, which I. Appreciate did I hear you say that it was running high seventys occupancy and an 800 dollar night rate.
Yes, right before we shut it down yeah. So it was it was and that was my math it gets out off my recollection, because we were yeah.
For stations. So it was it was it was it was performing very very well so that would have been a July which was a strong month, yes.
Okay.
What exactly triggered that shut down and what is the likelihood that that could happen again in your view.
Yeah, I I, you know, we actually I had a call with the governor and I think that he you know he was that you know kind of forced to do it it was not because of a U.S. travelers to the the Virgin Islands. It was mainly the locals.
Not maintain.
Maintaining social distancing so.
So it was a pretty severe shutdown that he did over a period of three to four weeks.
But then also part of that is just because you know as you can imagine.
A lot of the restaurants and bars.
Or just SMB outlets in general I think me on a beach and then I'll have like the idea that the sanitary conditions like the Ritz Carlton win out in terms of you know.
It just that the heat that you apply to a cleaning a mature.
Materials and so they went to plastic wares and things like that as requirement the island and so there's just a lot of the initiatives that the.
Government to two.
To try to curtail you know that the spread the virus, but did but the other thing is was was testing and so he had a threshold on a on a testing positivity rate there was requirement to reopen and I do think that part of that.
With the widespread testing.
More people being tested is going to result in a lower positivity rate and so I think that you'll see that it can be a higher hurdle for them to have to read to shut it down in the future.
Got it so there is additional preparation and they've done a great job I'll tell you like when you go in and you and you visit the island to go through you've got to have a negative test and I think that helps more travelers still safe to visit the island and they've done a really good job of.
The temperature checks at the airport to get people and very quickly. So you don't have any that can bend the way that they yeah. We didn't like the fact that they had to shut it down.
But I think the actions that the government taking place in the Governor I think have resulted.
Yeah, probably folks feeling safer to travel to the to the to the island as well.
Got it thanks, and then shifting gears to your urban hotels.
The Chicago itself, it's how the Seattle area.
Yes, the notary the capital Hilton Lisa.
These are pretty aggressive revpar decline, what's the thought process.
Bryan Maher to deal with that is it to just kind of tough it out and make the payments and cost as much as you cannot wait to the recovery or is there a plan b that you're thinking about some of those assets.
Yeah, well you know the decision to reopen our assets was when we could lose as much money being open as we were losing being closed.
And you know that that's still applies although it is less relevant now because those assets you're right. There are they are struggling because we don't have corporate transit, we don't have any group business to speak of.
But they are generating some leisure demand, particularly on weekends and so there is you know if you look at something like the sofitel.
Which had almost a 30.
30% occupancy.
For the quarter, that's primarily weekend staycations from the Chicago suburbs.
And then some of them some of the other properties are benefiting from that as well so.
Clearly our path now is to.
Hold firm.
And continued to.
You move them up in terms of Revpar and profitability overtime.
And I think slowly you people will begin to travel more for business and we will be able to book some smaller groups.
We also benefit from some airline crews on a couple of those assets.
And that's providing some base business as well so yeah, I'd add to <unk> weve rotated into segments that we probably wouldnt, otherwise taken or wouldn't have otherwise taking into in a stronger market, but we're trying to keep that as short term as possible just to mitigate our downside, but as you look at each one of those properties individually.
Hi, there incredible assets Theres still a incredible markets over a long sustainable time period, and they are great locations within those markets and and I'd encourage you Brian to go visit the Atlantic as.
When you look at we've taken a courtyard and converted it to a an incredible Oh hotel and <unk>.
Repositioning I do expect that property to perform incredibly incredibly well given its location to a tremendous amount of demand generators within the San Francisco market.
And also by you talked about funding the losses in.
I think it's all of the cases of our urban properties. It is in fact, we have access to funny reserves to fund operating losses and so.
That's that's that's very helpful right now and we're expecting that they will be sufficient to get us through to the other side.
Great. Thanks, and the next time I feel compelled to rates up in San Francisco I'll be sure to stop in like.
It's beautiful it really came out fantastic.
So I encourage you to say it.
We have a question from Michael Osario Baird. Please go ahead Sir.
Good morning, everyone.
Good morning.
Richard a question for you I know, it's probably a little early but you clearly on a path to being in a better cash flow position soon but I was hoping you could maybe share your thoughts on acquisitions your appetite for.
Growing the portfolio, what you're seeing out there today and how you're positioning yourself to grow the portfolio eventually.
Yeah, No. It's a fair question, we are starting to think about it and.
I am tracking all the transactions that were seeing with just which I know you know is very few.
And there are some interesting trends there are some hotels that are trading at significant discounts on a per key basis than what you would have seen a year ago and in some cases, even even more than the kind of 25% I think people generally believe that values are down.
And so that that's peaked our interest we're not seeing it for properties in the luxury segment.
And I don't know if that's a function of it maybe just being too early the circumstances haven't or isn't yet, but we are seeing it in the in the lower rated chain scales as far as re Mars appetite is concerned.
Right now we are cash flow negative.
And.
Preserving our liquidity is of Paramount importance.
So you won't see us using our cash opportunistically until we get at least back to cash flow positive on a corporate level.
Yes, that's our view is we just don't know when that is going to happen precisely there's too many factors that make that an unknown.
So we have to be.
Be solidly in.
In the black on a corporate level on a monthly cash flow level before we would ever consider a new acquisition.
So that's that's how we think about new accident. So so for the moment we're.
We're studying the market. We're we're aware of kind of what's out there and how things are trading but.
We're not bidding on anything that's for sure.
That's helpful. Thank you.
As a reminder, if you wish that's your question Thats Star one on your telephone keypad Thats Star one.
We have a question from Chris Rock, which bank. Please go ahead.
Yes, Hey, guys good morning.
Yes.
Morning, you mentioned a lot of initiatives you've taken at the property level to to kind.
Kind of maintain margins and generate positive EBITDA and I suspect some of that is because you've had a greater mix where user demand I mean at what point you know just some of that at a certain rate or sort occupancy level. What point do you have to pull back on some of those more aggressive no closures.
Closures of things like lounges, and things like that.
Yeah, I mean, we've had we've had the demand we've had lounges open and so and a risk Carlton's, where we can sell access to lounges, you get a premium rate.
We kept those open or reopen them I guess, but I think that a lot of the cost cuts are are sustainable for an extended period of time, because we've broken down the way, we operate or hotels and rebuilt the operating model.
And I think that what we've been able to accomplish in partnership with Marriott at our Ritz Carlton just phenomenal I mean, you can look at the results and of of Sarasota and.
With that the profitability being up yes.
It significantly in the third quarter with with the Revpar, albeit slight revpar decline.
Now that's not going to be you'd like to see those results you know that for for the for that you know that impressive, but I think you will see.
Incredible flow through is coming out of this.
And I think we'll also have hopefully yes.
Some some property tax declines in our portfolio next year, just because of what the what was experienced and so we'll be very aggressive on that front as well. So I think that yeah. It's an extended period of time, where we were able to drive higher margins and in terms of the mix yet the 80 or may come down just because we'll have more group and lower rated.
Business, but that doesn't mean that at at the rates that we're still going to offer them, we'll still maintains pretty high margins.
Yeah, I'd add to that and say you know our resort portfolio.
The amenities are essentially available, but there is a call made on the grounds on almost a daily basis. If there is not sufficient.
Occupancy on a particular day or they may not open a certain food and beverage outlet or the the the calls years club or the fitness, but.
But but the weekends have been so strong that I think if you're to visit any of our resort hotels by and large most of it is open.
Some some exceptions the urban properties.
Aren't anywhere near the occupancy necessary.
To to open up food and beverage outlets and.
And the M. clubs et cetera, and I think that they would need to significantly move up to at least kind of 50% occupancy I think to justify.
Full operations so so.
Yes again its case by case in some cases, a day by day, but.
Yeah, you'll see the resort portfolio operating you as you'd expect but the urban much less so and and it remains to be seen when we achieve that level of occupancy and that's going to be based on as I said in my opening comments.
Vaccinations.
And the resurgence of business travel.
So that's that's what's going to trigger it.
Okay. That's helpful. Thanks and.
No kind of pretty cold would you guys had a process going on with the with the Chicago So Phil.
That now numbers, you know really disjointed can you give us an update on where that stands and what coming out of this what do you go back to where you were are you negotiating or what's going on.
Yes, that's a subject of an ongoing legal dispute so I'm not able to give any more color on it today.
Okay.
Very good thanks, guys.
Ladies and gentlemen. This concludes today's question and answer session I'd like to turn the call back over to management for closing remarks.
Okay. Thank you everybody for joining us on our third quarter earnings call and we look forward to speaking with you again on our next call.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.
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