Q4 2020 Xenia Hotels & Resorts Inc Earnings Call
Good day, and welcome to the Xenia hotels, <unk> resorts fourth quarter and full year 'twenty 'twenty results conference call.
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I would now like to turn the conference over to Cameron Frosch Senior Analyst Finance. Please go ahead.
Thank you Andrew.
Afternoon, walking the Xenia hotels, <unk> resorts fourth quarter, and full year 2020 earnings call and webcast.
I'm here with Marcel for boss, our Chairman Chief Executive Officer.
Barry Bloom, our president and Chief operating Officer, and <unk> Shah, our executive Vice President and Chief Financial Officer.
Marcel will begin with a discussion of our operating results and our 2022.
Barry will follow with more details about fourth quarter for year 2020 results and details on our capital expenditure projects with tea will conclude our remarks with a review of our balance sheet and outlook.
We will then open the call for Q&A.
Before we get started let me remind everyone that certain statements made on this call are not historical facts and are considered forward looking statements.
These statements are subject to numerous risks and uncertainties as described in our annual report on form 10-K, and other SEC filings, which could cause our actual results to differ materially from those expressed or implied by our comments.
Forward looking statements from the earnings release that we issued this morning, along with the comments on this call are made only as of today March versus 2021, and we undertake no obligation to publicly update any of these forward looking statements as actual events unfold.
You can find a reconciliation of non-GAAP financial measures to net income and definitions of certain items referred to in our margin in this morning's earnings release.
An archive of this call will be available on our website for 90 days.
Now I'll turn it over to Marcel to get started.
Thanks, Andrew.
And good afternoon to all of you joining our call today.
Clearly 2020 was an incredibly challenging year and one that we will not forget anytime soon.
As soon as the pandemic began to unfold lodging demand collapsed.
While the lodging industry continues to struggle due to the pandemic, we shouldn't we have weathered the worst for this downturn and we believe that ciena is well positioned for future growth.
Similar to the third quarter, we saw encouraging levels of leisure demand during the fourth quarter.
Barry occupancy was the high watermark since the beginning of the pandemic.
After which we experienced a slight slowdown in November and December.
As a result of seasonality and demand and more significant restrictions that were enacted this COVID-19 cases increased in many markets.
Corporate transient and group demand continues to be limited.
As it was throughout the upper upscale and luxury segments across the U S.
Yeah.
Our results for the quarter were reflective of the weak overall industry fundamentals.
During the quarter, we had net income attributable to common stockholders from $24 $3 million.
Which was aided by gains on the dispositions, we completed during the quarter.
Adjusted EBITDA range was negative $10 $1 million and adjusted net income per share was negative for 2000 for Seth.
Encouragingly, our same property portfolio of 34 hotels achieved hotel EBITDA was only negative $2 9 million a substantial improvement over the preceding two quarters during which a significant number of our properties were initially close and then methodically reopen.
All of our 30 for same property assets were opened during the quarter.
With only Hyatt Regency, Portland remaining close to 94% of our total room count has been and continues to be open for business.
Out of these 30 for properties.
<unk>, we're able to achieve positive hotel EBITDA for the quarter.
Driven by excellent cost controls, thereby reducing our cash burn and limiting our operating losses compared to prior quarters.
For the full year 2020, we added net losses of $163 $3 million.
Our adjusted EBITDA was negative $51 $7 million and our adjusted <unk> per share was negative <unk> two.
Despite the difficult operating conditions in most of our properties being closed for some portion of the year.
40% of our properties achieved positive hotel EBITDA for the full year.
The pillars of our company strategy were evident in the way from response good prices in 2020.
I would like to highlight these pillars again and review how they provided the company utility as we weathered the worst demand shock the lodging industry has ever experienced.
The first pillar of our strategy as a transaction oriented mindset with a focus on diversification quality and portfolio enhancement.
Since well before our public listing in February 2015, and conceivably. So since that time, we have transformed our portfolio through transactions and we were able to continue doing so in 2020.
Early in the year, we had nine properties under contract to be sold including our Kim from portfolio Renaissance Austin Hotel and Renaissance Atlanta Waverly.
While none of these sales growth as agreed upon we successfully retained approximately $29 million of the bonds.
So initially disappointed that these transactions did not close we pivoted quickly to evaluate different avenues to enhance the company's balance sheet and liquidity, while keeping a firm date on the potential future growth profile for our company.
With the experienced team we have in place we completed for dispositions totaling almost $400 million.
The sales Renaissance Austin to a different buyer at a discount to its prepaid net valuation loss.
Reflective of its nature of the heavily group dependents hotels with significant near term capital needs and we expect that to have a difficult road back to prior peak performance.
The combined sales price of a free our hotels, we sold relative to St. Cambridge, Marriott Napa Hotel Commonwealth represented.
<unk> represented an 11 times multiple on 2019 hotel EBITDA.
And outstanding results considering market conditions.
Yes.
We believe that this pricing represents a minimal discounted pre COVID-19 valuations for.
Let me get into specific market and property dynamics impacting these assets.
Cynthia approximately six years since our listing we've transformed our portfolio by selling 26 hotels for approximately $1 5 billion.
And acquiring 13 hotels for approximately the same amount.
Representing just over $500 million in average annual transaction volume.
As a result of our robust transaction activity over the past several years our portfolio now consists entirely of luxury and upper upscale hotels and resorts.
Compared to approximately 75% at listing.
We are selectively acquiring high quality assets, and primarily top 25 markets and key leisure destinations and decisively sold assets that we believe had limited upside Andrew or significant capital expenditure needs with highly uncertain rois.
We feel that this has enhanced the companys growth outlook considered.
One of the outcomes of our transaction strategy is that we have significant have significant exposure to sunbelt locations.
While we believe demand growth and a more benign expense environment for eight or a recovery.
Yeah.
We also own properties in a variety of key leisure and drive to destinations as this has been an important part of our investment strategy throughout our history.
We believe that markets, such as Orlando, San Diego Savannah key west.
Moving on Scottsdale, and Napa or center of a quicker ramp up to stabilization in the current environment.
And we have seen a glimpse of there's an early days in for recovery.
Our geographic exposure and diversity as well as the appeal of our assets are different demand segments, certainly benefited us in 2020, as we were able to reopen our properties in a more expeditious manner that many of our peers during the year.
Our initial and sustained occupancy levels.
Loudest and reduce our losses significantly from the periods when a substantial portion of our properties were temporarily shuttered.
Yeah.
Okay.
Now turning for the second pillar of our strategy and emphasis from a strong and flexible balance sheet.
Coming into this crisis, we Fortunately, we are well positioned with a strong balance sheet and manageable debt maturities.
Faced with the crisis created by the pandemic, our team put significant time and energy into preserving the balance sheet.
These actions included amending our debt agreements and raising $500 million through the issuance of senior notes.
We addressed our near term maturities and now have no debt maturities until 2023.
Also at year end, we had approximately $750 million in total liquidity.
Compared to approximately $450 million in total liquidity at year end 2019.
Our team has always put an emphasis on balance sheet health and as a result, we've maintained our financial flexibility allow for growth in the years ahead.
Lastly, the third pillar of our strategy is to have aggressive asset management initiatives and leveraging relationships with both brands and managers.
We have some of the strongest relationships in the industry with the best brand and third party management companies.
With a particular emphasis on our relationships with Marriott.
As we think about our deep and long standing relationship with Marriott It.
I would be remiss to not mentioned how deeply saddened we are by the loss of Arnie Sorenson.
As many of the ins for Apple more upset.
And he was not only an outstanding leader and business partner partner. He was a remarkable man who was a friend and mentor to many.
While we more than earnings passing we noted Marriott is in good hands free.
Congratulate Tony Capuano and his appointment as CEO, that's definitely in monarch on her promotion to president.
We look forward to continuing our strong relationship with Tony Stephanie and the Marriott Inc.
Okay.
We believe that being aligned with best in credit class brands that provide a relevant brand promise to consumers is a significant advantage for our company due to the key attributes they offer.
Especially when market conditions led to today's environment exists.
These advantages include superior revenue channels proven guest loyalty programs the free.
It allows a formal brandon branded cleanliness programs.
Strength of marketing and advertising platforms.
<unk> technology investments to quickly implement mobile checking and other initiatives.
And innovative changes to operating models and ancillary fee structures.
Okay.
In the early days will depend on me, we formulated an aggressive action plan to help mitigate this impact on income.
Having a strong and experienced asset managers allowed us to make slips well informed and smart decisions.
Our asset management initiatives and the expertise of the Companys operating our assets allowed us to preserve companies out.
With an emphasis on cost control initiatives, which has been a particular strength of our company throughout the years.
Looking back on the decisions, we made around closing and reopening our properties. We believe strongly that the right decisions were made.
Mowing us to minimize losses and prepare for a recovery.
Okay.
In addition to our asset management expertise, we have a highly experienced price back there.
He has been instrumental in us investment prudently and effectively into our portfolio.
I would have asked for years, we have invested well over $300 million in capital projects from hotels that we currently own.
These projects include a 16 full guestroom renovations for 48 per cent of our rooms.
In addition, we added Andrew were renovated large portions of meeting and public space throughout the portfolio.
True from the combination of recent transactions net capital expenditures.
We have significant revenue growth opportunities.
We developed a new 25000 square foot ballroom and Terry for 32000 square feet of pre function and support space at Hyatt Regency Grand Cypress in 2019.
In addition last year, we graduated to preexisting ballroom and meeting space.
There isn't work now features a 100000 square feet of brand new state of the art flexible meeting space space, which will serve the property well.
Group business demand recovers over the next few years.
Additionally, and as Barry will discuss we have now largely completed the exciting transformational renovation of park Hyatt <unk> and spot.
Okay.
We remain very bullish on the long term growth prospects for many of you at our hotels and resorts we acquired in recent years.
We certainly expect to build a potential acquisition pipeline and also be an active acquirer during the next upcycle, if appealing opportunities present themselves.
As we have successfully done in prior cycles.
However, we are incredibly pleased to have been able to acquire a number of tremendous properties at attractive valuations over the past few years to help fuel our revenue and earnings growth in the years ahead.
In addition to the Ibs C Grand Cypress for archived off guard.
This includes high quality assets, such as Hyatt Regency, Scottsdale, Royal Wolf Resorts, Fairmont, Pittsburgh, Ritz, Carlton, Denver, Ritz, Carlton Pentagon City, and Walter Restorative bucket.
We believe that our asset management oversight and well executed renovation projects will allow us to fully capture of embedded growth opportunities.
The same principle, Boston Hyatt Regency, Portland as well.
It is an outstanding property that we acquired at a very attractive basis in late 2019.
We look forward to reopening the hotel as demand warrants as we remain strong believers in its long term potential.
Overall, we expect our portfolio to adapt very well during the recovery and as our business evolves.
We believe we are poised to outperform relative to others coming out of this downturn.
Dependent make has in many ways surface and economic research for many industries, including the logging industry.
Our industry has been forced to adapt and we expect that overall better expense environment in the future.
Along with less supply growth than what was anticipated before the pandemic and a majority of our markets.
To conclude my remarks, I am pleased with how our team and our operators stamps and persevered in the face of adversity.
I would like to again, thank them for their agility and resilience throughout the year and their continued dedication for the health and safety of guests and our operators employees at our hotels and resorts.
I will now turn the call over to Barry.
Thank you Marcel.
I will be discussing our property performance for the fourth quarter for continued success in operating our hotels in this difficult environment and an update on our recent and upcoming capital expenditures.
On a same property basis for the quarter occupancy was 27, 8% in average daily rate of $182 60 for resulting.
There's also can revpar of $50 82.
The same property basis includes 34 to 35 hotels as of quarter end, which excludes Hyatt Regency Portland.
These 30 for hotels were fully operational throughout the entire quarter.
This reflects a decline in revpar of 68, 5% as a result of a 45 point decrease in occupancy from 17, 5% decrease in rate compared to the same time last year.
Revpar was down 66, 1% in October 71, 6% in new member from 63% in December.
For the following operating metrics I'll be referring to our 30 for same property hotels. These metrics are based on the number of game days individual properties were open and operating.
Okay.
Since Q2, we had started the COVID-19 pandemic when we performed rigorous hotel by hotel analysis and made the hard decision to temporarily suspend operations for the majority of our hotels to year end.
Our hotels achieved 28, 5% occupancy and average generated $169 60.
Listen even up for a $48 41.
Oh, the absolute amounts continue to remain unprecedented we're pleased overall with our proposed performance sorry hotels exceeded our anticipated performance levels through the fall and holiday season.
October occupancy was 33, 8% and 80 or 190 to $1 82.
He had significantly by the 18 day by up immediately based on our park Hyatt <unk>.
As a result, you've ever saw a decline in occupancy to 75, 9% in ADR of $176 71.
<unk> occupancy declined over November to 23, 7% despite declining rates $174 37.
The strong performance over the holiday weeks was not enough to offset seasonal softness in early December.
And increased powers strategic, California, and other locations throughout the month.
Currently estimate for the month of January our 30 for open and operating hotels, we performed in line with our expectations running approximately 24, 5% occupancy and ADR of $170 41 for.
February expected to achieve significantly better performance from approximately 33% occupancy and ADR of approximately $183, reflecting significant leisure demand over the Presidents' day weekend.
Along with continued improvement across all segments.
As we've done over the past few quarters, we wanted to share with you. Some of the items, we continue to track closely as business and consumer confidence shift from week to week.
Overall, we continue to see strong performance in the portfolio from our drive to leisure market hotels and resorts hotels.
We had 17 hotels, representing half of the portfolio achieved 30% with greater occupancy for the quarter, including six that exceeded 50%. He is included properties in Birmingham, Charleston, South Carolina key West Alexandria from both our hotels in Savannah.
As I mentioned, our California hotels were impacted during the quarter as curfews travel advisories quarantines and stay at home orders impacted various markets from late November through late January.
As mentioned last quarter for customer mix continues to evolve. Despite in many cases as a result of the queue for challenges in California. There is now a little doubt that there continues to be pent up leisure demand. So we saw in February and we expect to continue on an ongoing basis as vaccination availability continues to increase.
All of our hotels, especially a boutique hotels resorts and experts and creative uses of social media platforms.
One of the ways. We track this by looking at our hotels collected Instagram followers, which were up 32% over the past year.
Booking windows for the leisure segment, particularly in our larger properties starting to expand for March and April as consumers are learning the booking early ensures the maroon at the most desirable hotels in a given market.
We expect this trend to continue and when combined with the component of business that has a very short booking window. We will forward many of our hotels with the opportunity to yield higher rates on later booking business.
We expect March occupancy at our three largest resorts collectively grow at least 10 occupancy points for February levels with strong increases in ADR as well.
On the corporate transient side, we continue to see improvement in volume, particularly from regional firms where employees have returned to their offices and I'm excited about being back on the road calling on customers.
Average length of stay in this segment's extended due in part to corporate travelers combining business and leisure trips.
Portfolio given its significant sunbelt orientation has certainly been aided by this phenomenon.
On the group side on hotels continued to enjoy business from 2021 from professional sports teams, including NHL, NBA MLS and LPGA related business, reflecting a continuation of our significant success in the fourth quarter with MLB and NFL PGA tour related business.
Charles for hosting smaller association and corporate meetings on a regular basis and we are building significantly more inquiries for business for the second half of 2021 and for 2022.
I'm pleased to note. This is the end of Q3 2020 on group room nights on the books for the second half of 2021 had increased by approximately 35% arguably hope at the end of cancellations outnumbering new bookings.
We continue to see group demand from use dance pageant sporting events and we are fortunate to have a portfolio, which is not overly reliant on <unk>, Mike you mentioned GTR specifics for tons locations and markets.
What do you mean social business.
Continues to be stronger boutique hotels and resorts as many events. Originally scheduled for 2020 are now taking place, albeit with fewer attendees.
Hotels and the sales teams have all the tools in place to aggressively pursue and capture this business with shopping as a virtual components. In addition to the in person events.
Outdoor venues with total over 400000 square feet across our ski resorts in Orlando, Scottsdale, and San Diego are seeing unprecedented demand as are our unique rooftop and other outdoor spaces across the portfolio.
90% of our properties to outgrow food and beverage for event space, all of which is being utilized unprecedented levels.
As we and our management companies continue operating in this new environment, where we're finding the balance between services offered and cost structure.
These efforts have supported a continued expanding EBITDA profile with 13 of our hotels representing over one third of our portfolio generating positive total EBITDA for the quarter.
He is largely tracked higher occupancy hotels that are referenced earlier and includes hotels in Birmingham key West Charleston, South Carolina, and both for our Charleston, and Savannah from our high occupancy list as well as hotels in San Diego, Houston, Atlanta, Phoenix, Orlando, Napa, Salt Lake City, and Santa Barbara.
I would now like to turn to a review of our capital projects completed last year in 2020, we spent $69 million on capital projects, including $11 million in the fourth quarter.
Our largest project the transformation of park Hyatt <unk>, we have completed virtually all of this transformational renovation as a reminder, we reopened resort on September 30th.
During the fourth quarter, we completed the renovation and additions to the pool area and water amenities, including the addition of dueling water slides and innovative splash pad as well as accretion of six freestanding commenced.
Existing specialty restaurant, formerly a dinner only outlet was transformed into a new three meal dining concept featured Baja California inspired cuisine for the existing breakfast only outlet was turned into highly functional meeting space.
The renovation of the golf clubhouse, including a new restaurant concept is on track to be completed later this month.
As mentioned last quarter, we excited Richard blades for announced celebrity chef from former top chef all stars winner with a strong San Diego and National presence, we spearheading innovation outlet aimed amber and ray.
The effectiveness of the design quality of construction and the new fluid throughout the resort for each exceeded our expectations and we continue to believe that is extremely well positioned to capture precisely the type and quality of business portion has been created and which we envisioned when we acquired it at the end of 2018.
Equally important we completed the price of within budget, the tulip had a cost of approximately $51 million.
This next day reception from leisure guests and response from the meeting planning community will continue to be outstanding each of these audiences and exactly for the new revenue structure, we put in place.
The increase rates, we are achieving better reflect the resorts five star and five diamond status outstanding level of service and transform physical atmosphere Theres now comparables, the best resorts, along the California coast.
In the.
Half of the year, we completed the Guestroom renovation at Marriott Woodlands Waterway Hotel and Convention center and the renovation of the existing ballroom and meeting space at Hyatt Regency Grand Cypress.
In 2021, we currently estimate spending approximately $40 million on capital expenditures.
Several of these projects for originally scheduled for 2020 and were deferred who we now intend to move forward with them in the second and third quarters, given our strong return profiles.
These include the development of the Regency core new outdoor social value at Hyatt Regency Scottsdale.
And our restaurant and lobby renovation at Ritz Carlton Pentagon City.
We expect to renovate and reposition in the restaurant and lobby and Waldorf Astoria, Atlanta Buckhead in the fourth quarter in.
In addition planning work is underway on three significant rooms renovations from one significant resort pool area renovation, which could begin as early as the fourth quarter, depending on business conditions are.
Our in House project management team continues to oversee the design planning and construction of these projects.
In addition, we plan to continue ongoing building systems and infrastructure work accomplishing significant projects across 15 properties in 2021.
With that I will turn the call over to Ashish. Thank you Barry I will cover three topics today first I'll provide an update on our liquidity and balance sheet second I will discuss our monthly cash burn and lastly, I'll provide some thoughts on our business outlook as we look forward.
Starting with our liquidity and balance sheet, having balance sheet strength has always been a key focus for the company through a variety of actions we undertook last year, we further enhanced our balance sheet.
As mentioned before we have no near term debt maturities.
We are diversifying the balance sheet by adding high yield debt to our mix now we have this tool available as another source of debt capital for future growth.
Having amended our corporate credit agreements three times over the last year, we enhanced our relationships with existing lenders.
We are confident in our ability to work with them going forward.
We have approximately $710 million of current liquidity, which represents years of runway at current business levels.
Turning to my next topic, our monthly cash burn during the fourth quarter, our average monthly cash burn was lower than expected for.
Recall that our expectations for average monthly cash burn was in the $13 $5 million range at the end of October when we reported third quarter earnings we.
We estimate that our fourth quarter average monthly cash burn was approximately $9 $5 million inclusive of debt service and cash G&A expense.
Drilling down a bit and we estimate that our average monthly cash burn at the hotel level was approximately $2 million in the fourth quarter.
These cash burn figures exclude capital expenditures and in addition, these figures reflect formalizing the timing of certain expenses.
We estimate that the Florida dispositions reduced our cash burn by several million dollars during the fourth quarter.
A portion of that reduction reflects our estimate of what hotel level cash burn would have been had we not sold those properties per quarter.
And a portion reflects lower debt service as a result of using sales proceeds to pay down debt.
Looking ahead, we expect first quarter average monthly cash burn to be higher than it was in the fourth quarter.
We expect a greater in hotel EBITDA losses in the first quarter as compared to the fourth quarter. This is due to restrictions on activity in certain states during the winter as well as lower levels of leisure demand during the first half of them for first quarter.
Despite the second quarter, we expect cash burn to moderate.
With 34 of our 35 properties open and operating we are poised to capture demand as it increases.
Cash at the 35th Hotel Hyatt Regency, Portland is expected to recommence operations in the second quarter. The exact timing is subject to our assessment of whether we are economically better off by refinancing operations.
Moving ahead to my final topic I would like to offer some thoughts on the year ahead, we are increasingly optimistic about the second half of the year based on the rollout of the vaccines and the continued downward trend in public cases.
Back more business group activity.
We expect portfolio hotels, EBITDA that would be positive by mid year, there may be months, which we have positive hotel EBITDA. Prior to then as we did in October of 2020, I think it will likely take until mid year to be more consistently positive in terms of monthly portfolio Hotel EBITDA.
We expect our corporate profit measures to follow.
And as such would expect episodes will be positive by the third quarter.
We do not provide earnings guidance in our release issued this morning, but expect to provide and once we have more clarity on fundamentals and trends within the industry.
We did however provide guidance on certain corporate expenses that are more within our control I will now discuss each of these three items first as to cash G&A expense recall that during 2020, we reduced this expense by about 25% from what we had anticipated at the beginning of the year for 2021.
We expect to keep it approximately in line for 2020 levels, we are forecasting approximately $19 million.
Second we expect cash interest expense to be approximately $60 million. This estimate is a step up from last year, reflecting the senior notes issuance.
As to capital expenditures, we've already discussed $40 million of anticipated projects.
We expect one quarter of the spend to be in the first half or three quarters to be in back half of the year.
Both the outlay and the timing could change based on market conditions, meaning we could advance or push projects and.
In closing over the last 12 months, we've preserved value enhanced liquidity position the company for the future.
We remain focused on creating value over the long term.
And with that we will turn the call back over to Andrew for <unk>.
Q&A session.
We will now begin the question and answer session.
To ask a question you May press Star then one on your telephone keypad.
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To withdraw your question. Please press Star then two.
At this time, we will pause momentarily to assemble our roster.
The first question comes from David Katz with Jefferies. Please go ahead.
Hi, good afternoon, everyone. Thanks for all of your detail.
We appreciate it.
What what I, what I would like to do I mean, we are a bit.
And in this earnings cycle.
We've heard so much positive commentary around for the back half of this year and optimism for it as well as next year.
And we'd like to try and put it in context right.
Right.
And be balanced about it can you.
Just put a little bit more sort of substance or detail around the back half for this year and early next year in terms of bookings and how we might evaluate their sincerity as best we can today.
Sure David So one of the things that gives us a good bit of optimism accident for the back half in terms of group is what we're seeing on the rates on day in fact sitting here today, our group rate on the books for the back half of.
2021 is actually higher than 'twenty than it was for 2019. So I think in light of what we've been through we view that as a pretty remarkable statistic. What I can tell you is that as new bookings are being made.
We're not seeing the ultra competitive price environment.
Might have thought.
We would see given that groups have a lot of options and a lot of hotels with availability for them.
Part of that is that the groups that are booking right now are a lot of re bookings. So its groups that maybe didn't move right away for now no. They want it became from the programme now they know they want to have it so that they've chosen our hotels they want to rebook at that hotel and we're also seeing a lot of groups that I think are getting a lot of confidence around that.
Where they want to be and so as opposed to end.
In a market like Orlando, where we might have seen historically a group come in and look at for five or a half dozen hotels, we're seeing them look at.
A couple of hotels and I think that has certainly changed the rate profile.
From an absolute.
Standpoint in terms of where.
What room nights are on the books, there they are down and they're down fairly significantly we're looking at.
<unk>.
Group pace too.
So what we had at the same time last year for 2020 for the back half down around the 40% level, but given our particular portfolio.
We do not.
Most of the large majority of the group into the non portfolio as corporate driven it's not citywide driven and it's not necessarily large association driven.
Exactly the kind of business that we would expect to book short term and what we're seeing in terms of how that's grown over time, it's been significant I made a comment in prepared remarks, but from the end of Q3 to the end of Q4.
He saw back half.
2021 bookings increased by 35%, we think is significant and we've certainly seen that trend continue in January and February and hope to reported even stronger profile as it relates to that metric by the end of Q1.
Alright, and if I may sort of a follow up I know theres been so much discussion about.
Creating efficiencies and cutting costs.
You know I heard someone you know adopt the expression recently about a lifestyle change rather than just being on a diet.
How.
How confident and Barry I'm guessing. This is right up your alley are you that this is going to be a lot of this will be a lifestyle change not just a diet.
I think there is note I think that's actually a great.
Great analogy, particularly as we've seen all of us have seen friends and family coming from whose physical presence reacted well to COVID-19 and some improved didn't in terms of debt.
The number of snacks. They have all day, we're working from home, so I think thats really appropriate analogy.
Give credit to.
For the author.
But but but there's.
There is no doubt that we will come out of this when we're fully stabilized at with a lower expense structure in place how the cadence to get to that I think is going to be really interesting and one of the things that.
We look at.
Really every day and the portfolio is what are the ftes in the hotel core business of a serving how is that going to step up month over month as hotels in the portfolio go from 30 to 40 to 52 in some cases non portfolio announced 70%, 80%, 90% Occupancies were seeing in some hotels and are we able to maintain that level.
All of employment.
If business does not maintain at those levels and that's going to create an interesting challenge I think if if there are any peaks and valleys to answer how business kind of unfolds and when you look at potentially depending on the market soft for seasonal months in some cases that may be made in some cases that may be our salons will be interesting to see.
How that happens.
But I do think a lifestyle change is is what we've gone through.
And we haven't figured out how to.
Combined services in the hotels have people do more.
Working managers, rather than just managing managers.
We certainly have a tremendous amount of.
With respect and admiration for our managers in the hotels that are working shifts.
How long we can perpetuate that I think it is being dependent on how rapidly business comes back we feel very good about the expense structure. When we come out of this obviously and I think it both in terms of number of bodies, but as well in terms of debt.
What we're doing the services, we're providing having said that we are very focused on making sure that particularly in our upper upscale and luxury hotels that we are.
Providing services index, one fundamental belief that one of the reasons why many of our hotels are doing well and why we're beating our complex is because we have a restaurant open where other hotels may not and Thats driving guest business right now for restaurant may not be profitable in the traditional sense.
But we know that we're driving additional rooms revenue because were offering service and amenities at other hotels in our competitive markets may not be.
Perfect. Thank you very much.
The next question comes from Michael Bellisario with Baird. Please go ahead.
Good afternoon, everyone.
Okay.
Barry just one more for you on that front can you maybe give us a sense of where the bookings are actually occurring and how you are and how some of your bigger assets are actually performing are you seeing any differentiation in and I know you mentioned, Orlando, but Houston versus Portland, which is still close that maybe Santa Clara.
That's a little bit more impacted from a fundamental perspective any other color there would be helpful.
Sure, it's actually interesting and debt.
For the most part if.
If you look at the entire year of 2021.
There is not a huge amount of differentiation in the per.
Performance among the hotels, they're all many of them most of them are down relatively.
Same amounts and that's true even as we look out into Q3 Q4. There are a few pockets of hotels that are down.
A little less but there is there is not.
In the case of our portfolio right now meaningful trends in markets that are doing Andrew <unk>.
And that actually gives us a lot of confidence because again going back to the <unk>.
When I answered the question for for.
David is that all argued for.
Folio in our group.
Delta two green primarily book corporate group, that's by far the largest segment. So we would not so the fact that we're not seeing much differentiation that among hotels actually tells us thats likely to be in fact true and consistent in what we're seeing in terms of new leads and new bookings from that segment has also been relatively spread evenly through the.
Portfolio, obviously not on a case by case basis right. So I'm looking at different ourselves on the portfolio, let's say, but we are seeing kind of consistency to the portfolio. Both in terms of where we are and in terms of where we think we're going.
I think that has a little bit to do two with when you think about the <unk>.
Geography of our portfolio and the exposure that we have to certain markets that are probably not behaving too terribly differently from each other.
And we own significant group hotels in markets like.
New York Chicago from the from the markets that you that you can think of that obviously are probably going to be a little bit flow.
So it does take a little longer to get back to.
The stabilization I think you would see much more of a disparity and what we're seeing from the portfolio.
I think it has to do a lot of what our exposure to as we've talked about sunbelt locations of all of these kind of drive to leisure locations.
And just.
Deal with more homogeneous was solid.
Okay.
Got it that's helpful. And then just one more from me on the capital allocation and capital deployment front I think you said.
You hope to be an acquirer as the cycle progresses, what's your latest thinking on maybe when you'll be able to put money to work and how are you thinking about the different sources of capital that are available to you today.
Yes sure.
Obviously, we have a good amount of liquidity available to us today.
We as we did kind of throughout this pandemic, we're obviously looking at.
Managing to various scenarios and various ways of how things stabilize on how quickly things stabilize so I would say this our continues immediate focus obviously and it remains on.
The operations of our hotels getting to breakeven.
Hopefully getting cash flow positive as it is the company sooner rather than later.
And clearly we have been very active.
Throughout various cycles throughout our history as you know very well. So so it's something that we will absolutely look at it we'll be looking to be an active participants.
<unk> extended the next upcycle provide some interesting acquisition opportunities and I think that there are various levers we can pull to have the type of liquidity available to us of what needs to be inaccurate required under being Seth.
We.
Highlighted there is a little bit in my comments.
They're certainly don't appear to be a tremendous number of.
Assets out there on the markets that are a.
Appealing great strategic fits and be.
We've come at a price that you would view as.
A discounted price if you will there just isn't that much of that kind of stuff out there. Thank you.
Certainly true some of the some of the rumors of potential deals that are currently out there youre seeing us pricing for for attractive hotels remains.
It remains pretty aggressive frankly, so I don't think theres any need for us to be.
And overly jumpy as it relates to acquisition. So I think we can sit back we can see where kind of comes our way as we start to building a pipeline coming out of this.
But we feel really good about not having sat on our hands over the last couple of years on really continuing to transform the portfolio and have a portfolio now where there still are a lot of embedded growth opportunities within the assets that we bought from us say $3 for years.
Okay.
Thank you very much.
The next question comes from Thomas Allen with Morgan Stanley. Please go ahead.
Thanks, just following up on the last question how are you thinking about dispositions.
Dispositions right now.
Not dissimilar Lisa how we've always creative dispositions, which is.
We will continue to look very closely or where we think for tanker values for assets are versus where we think long term growth potential is for a particular in particular assay them.
We will continue to be very diligent in the way that we're evaluating both our existing properties within our portfolio and potential additions are there in the market so that means.
Particularly when there are some bigger capex needs coming up with for some of our assets will take a very close look on whether we think for theirs.
A good enough market out there essentially so on asset as opposed to non making those additional net investment that we don't feel like the.
For the right kind of ROI.
It is available by doing a project so.
I would tell you that we've we've obviously done a lot of heavy lifting and the way that we transformed our portfolio.
And I see a lot of growth potential within our portfolio, even with some of those assets, where we do think that we might be doing some capex projects over the next few years.
So at this point I would say that it's a little bit more around the margin.
As we sit here today with some additional dispositions.
Okay.
Alright, Thanks for yourself and then just youre.
Your commentary around thinking through 'twenty, and 'twenty, one and the comments that.
You are kind of increasingly optimistic about getting too.
Positive EBITDA for positive free cash flow by <unk> sounds a little bit more optimistic than peers, where I feel like most of the committed till I got.
Half of 'twenty one improvement.
Was that on purpose like is that do you feel like it's been for your portfolio is better positioned to turn profitable before peers or <unk>.
Other things that drive you to.
And my eyes, it's kind of come off more more optimistic thank you.
Yes, Thanks, Thomas its a good question.
Frankly, I don't think we kind of went through exactly what each of the peers were saying I mean, our view is that we've got some momentum and traction on booking activity. So that's a positive and then just looking at the portfolio.
As we pointed out in the markets, where we're strong and a lot of the sunbelt markets.
Seem to be doing better so I think thats that performance.
And our expectation that we have is relative to what we're seeing in the business and our mix of <unk>.
Geographic locations, so that's really what's informing it.
Marcel can add anything on that.
Yes.
I'll just ask two and then I think I.
A highlight of design his comments to it.
Certainly good for see some homes coming up where we think we will have.
We will be breaking even.
Where it may not be a structurally you get to ask a little bit later in the year. So we saw that obviously in a month like October Douglas.
Positive.
So EBITDA side, maybe you look at where we finished the quarter.
The fourth quarter.
Negative hotel EBITDA of less than $3 million for to 30 for hotels and our same property portfolio. We're obviously not tremendously far off from getting to a point where were you can envision breaking even at that level. So I.
I do view.
The momentum that we have to the tissue points.
Lead us to believe that.
As we as we kind of entered the second half of the year. There that we will have the opportunity because the debt level.
Alright, thank you.
Okay.
Okay.
The next question comes from Bryan Maher of B Riley FBR.
Please go ahead.
Good afternoon.
Maybe for Marcel and Barry you guys have been at this for a long time.
The Wall Street Journal ran a piece I think it was around.
December suggesting a permanent impairment at business travel to the tune of 20 or 30%.
What are your thoughts on that day, but thats a bit of a stretch do you think theres. Some truth to that do you think the zoom environment's going to hedge business travel by some degree can you expand upon that.
Okay.
Sure I'll start us off and then I'll, let Barry jump in because he's got even more experience than I do.
Now answering your questions.
So.
Yes, the way we view it.
From my personal perspective.
That sounds, particularly excessive I don't believe that there is debt much of a fundamental shift that we'll see in the business certainly.
Short term there are some.
Per some challenges to overcome as far as people are getting back out on the road, but I think a lot of that is being driven by.
We need to see the office environment, improving people getting back for the office and working together.
Then.
I think and I'll steal a little bit of various thunder because I know that's something that we've talked about a lot on that he brings up a lot of it is the fact that there is going to be no greater.
Push for people to start traveling again.
Besides when they see their competitor travelling and meeting customers and being out on the road again so.
I do not believe that we're going to see a truly fundamental long term shift from now could there be situations where people are saying.
Look I do I really want to take this strength because I might just get on the zoom call with someone I think there'll be some of it.
There is other things there will be a play to such as.
What is the long what are the long term ramifications of maybe some more working from home environments versus going to an office. So that does that actually create more travel for people having to travel throughout our home offices, if they don't live in a place anymore, where there were job isn't really base.
I think theres, a lot of ins and outs and pluses and minuses that are just as you sit here today.
Are truly kind of impossible to predict.
I'm not a believer that there is going to be just as fundamental little negative shock to what business travel looks like over time.
Okay. Thank you.
The next question comes from Ari Klein with BMO capital markets. Please go ahead.
Thank you.
Maybe on the Capex front can you expand yeah. How are you thinking about spending over the next.
Have there been significant hurdles and are there a handful of potential IRA lap <unk>.
That youre looking at beyond that beyond the ones that you've highlighted for 2029.
Sure last last year, we came into the year with a bunch of about $120 million and cut that to over the course of the year. The ultimate spending of $69 million. We had always expected 2021 to be a little bit lighter year in terms of capex, knowing how good a shape the portfolio was in an.
And really the for projects that I mentioned for all things that would have been in the either executed.
Yes.
Or is the plan or a deepened in the planning stages in 2000 and for 2021, one of those things.
We are very rigorous from one of the great benefits of having our in House project management team is how much are we put around our five year planning process, where we're constantly looking at the next five years what projects makes sense what can we afford.
What what are the returns going to be on those projects and as we went through that debt.
That process. This year I think we were again pretty pleased with where the portfolio was and not feeling that there was a lot of urgency to spend.
To do a lot of projects in 2021, but there were projects that we thought had some substantial returns. We are this year as part of our overall planning and strategy going back and doing some deep dives on some of the assets. We've had that have been in the portfolio for a more extended period of time and really looking at all the things that we can do to those assets.
From a physical perspective for free.
A brand and management perspective to considerably changed on those assets. So to the extent we identify opportunities. There those are the things that we are in some cases, we are placeholders for them in the five year plan in some cases, we don't but those are the things that could provide and re triggered the plan, but I think we've talked for for quite a while kind of about a.
Normalized run rate on the portfolio and so that a little larger size, we've talked about a normalized run rate of capex around the $60 million level and have kind of tried to in our.
Five year plan balance to that so when you last year was a little over that issue may be a little bit under that but we think thats the right dollars to <unk>.
Keep the portfolio in really good shape and do the projects that we need to do to keep the properties. Both fresh from a guest perspective, but also as I mentioned to make sure that we're spending dollars, which you've always done a very good job of in terms of back of the house infrastructure building systems spending as well.
And one of the.
Not that I want to necessarily put a rosy spend on anything related to the pandemic because obviously there is.
For the negatives that came out of the pandemic.
Craig holds that they are all industry is trying to work its way out of funds all.
All of the silver linings as it related to Covid capex piece, particularly for us.
It allowed us to almost falls a little bit again, and so if you look very closely at our entire portfolio and say.
Where do we think the appropriate money is to be spending for next few years.
And that's because it really goes to the appointed Barry is making as it relates to some of those assets that are in our portfolio a little bit longer to see to say when do we want to do it is how how deeply do we want to do some of these renovations.
To do a lot of planning around from those things.
Also say that the for assets that we sold.
And universally they were going to be requiring some pretty significant capex in the coming years.
There is actually a fair amount of Capex that we're avoiding as a result of having sold those for assets as well.
Got it thanks for that and then maybe just looking at your portfolio from a supply growth standpoint in your major markets do you have any sense of how that may have changed create pre and post COVID-19.
Yeah sure.
So.
Pre COVID-19.
Weighted supply for 2020 was two 7% and was three 6% for 2021.
Post COVID-19.
Year end 'twenty.
2020 supply growth came in at about one 6% and is that three 2% for 2021.
So a couple of reasons I mean, our view on why that came down one selling the assets we did.
Well, we are not and then secondly would be delays.
Some cancellations.
Projects.
We would expect that 2021 number.
Continue to come down during the course of the year.
And as projects continue to get pushed out and obviously not much is being added and new supply for.
'twenty one 'twenty two beyond that at this stage so from a <unk>.
By growth perspective, I think for.
We're likely in a much better position than for a couple of years ago, and we will reap the benefits of that over the next several years.
It's a combination of really what's.
What's happened and how that's changed.
The ability for projects to get done in terms of enhancing as.
As well as <unk>.
As well as our shifting from in the portfolio to just better markets for growth from our transaction activity.
Okay.
Thanks for the color.
Well.
Again, if you have a question. Please press Star then one.
The next question comes from Austin <unk> with Keybanc. Please go ahead.
Hi, good afternoon everybody.
So Marcel you've referenced.
For the Sunbelt exposure is really an outcome of the dispositions you've done.
You highlighted that some of these markets are going to ramp quicker than the overall portfolio and so when you kind of overlay the market view.
With the first pillar the transaction oriented mindset, particularly differs vacation piece you know how does that affect your view on how you allocate the next you know.
The next.
Dollars either on the Capex side or acquisitions for that matter moving forward versus sort of brought broadening your geographic exposure.
Yes, that's a great question Austin, obviously, we continue to say and we're familiar with long term debt, we will primarily be in investing in 'twenty.
25.
U S lodging markets and key leisure destinations and.
And an outgrowth of what our strategy has been up to.
Last few years has been exactly what type of exposure does that we're that we currently have in the portfolio, we think debt as we've always done.
We always have a very open mind to potential acquisitions and I've always wanted to cash flow with wider net than particularly what you saw a few years ago from lot of our peers, which was a little bit narrower focus on a smaller set of markets, which which to US also provided a much smaller settled for acquisition obviously so.
So we're going to continue to kind of have the wider lens for continued to look at a lot of different markets. We.
We like the characteristics of a lot of markets that were concentrated in.
Because of the things I mentioned, it's been a long term demand characteristics.
Certainly a little bit more of a benign.
Expanded environments.
So I think that's that's.
For our primary focus will remain that doesn't mean that.
But it will come a time, where you say look they're just these great acquisition opportunity because that's obviously going to be driven by by the supply of potential deals that are out there what happens with pricing.
We think that there is just a great return to be made on a market where we currently don't have a lot of exposure there, we're not going to shy away from that so so.
Really long winded way of saying, what we're going to be.
We're going to be opportunistic and we're going to keep an eye.
Really on the same kind of characteristics that we've always liked which is non.
Non over reliance on one particular demand segments.
A good level of leisure exposure in our portfolio.
And and just look at where the opportunities will come our way.
I appreciate that and then just there's been a lot hit on the group side, but I'm just curious if these groups re book and others sort of look to get.
On the calendar any change in the F&B side and level of spend or types of items. They are willing to spend on the day and then I'd also be curious specifically.
Specifically on the Hyatt Regency, Portland, if you could give an idea of what the.
Group bookings or even the convention calendar look like in that market just given some of the challenge it challenges it.
Stacey.
Sure. So let me, let me talk about food and beverage group spend.
So it's interesting.
Where groups are meeting today, we're seeing very good food and beverage contribution, but the hotels are having to work.
Differently to figure out how to deliver that right. So.
Good question.
Or is the group into the hotel and varies willing to do a buffet, which which obviously is lower cost more efficient for us doing something played it we continue to see a lot of groups, particularly if it's not there.
Big meal doing wanting more box lunches and things like that so it's been it's been a little bit different certainly depending on the market Youre seeing.
Some groups are that might've done cocktail parties are not doing those where they do move for us. So it's going to be a slow comeback I think to get back to the <unk>.
Group food and beverage spend that we've seen historically and again that does vary a lot market by market.
In California other than one of our hotels were still not able to do indoor dining. So that obviously has a big impact on what we're able to to offer our group and how we are able to offer.
Okay.
Got it and then just as it relates to the Hyatt Regency Portland, If you can give an idea of what the group calendar and the convention calendar looks like for that market.
I appreciate it.
Yes so.
For the market as a whole the overall market when you look at.
City wise, and which from which we are.
Will be the most likely beneficiary of those in the back half for the year. The numbers are significantly greater in terms of definitely events on the books than they ever have debt. So we're keeping a very careful eye on those and windows.
On Windows show up and making sure that those are actually good piece of business for us.
The very first time that kind of changes so I've mentioned the entire back hasn't really every month for the back half.
You start seeing some real transition even to that starting in June so when we talk about having a highest for reopening our hotels in Q2, that's really what we're focused on.
Right now.
The number of citywide they're worse from city wise on the books for the.
First quarter.
Second quarter that kind of went away on us. So that's why we're keeping a careful eye on it but it's part of what gives US again, a lot of long term confidence in.
For hotel and certainly in the market as a whole we still think Portland is a great convention alternatives for.
For Pacific Northwest business.
Seattle, a real run for its money now that there is a dedicated convention center hotel in Portland, but also we think from the entire West Coast and California in particular for importantly surface at much lower cost alternative for.
For those groups to a California, driven convention and you have a terrific important Portland continues to generally range is one of the best airports in the country with a significant Alaska Airlines hub and as Alaska.
Tenant their reach beyond their traditional west coast to a lot more east coast destinations and opens up a lot of opportunities for larger citywide is important.
Great I appreciate it thank you.
Yeah.
The next question comes from Tyler <unk> with Janney Capital markets. Please go ahead.
Hi, Good afternoon. This is Jonathan on for Tyler Thanks for fitting us in.
One quick one on international demand do you have any sense to when that demand will return and how much of a headwind is that for market share more tilted towards international.
We're pretty fortunate we have I mean, we.
We have a very low percentage of international travel in our portfolio overall, given that we are have relatively low exposure to major gateway cities, we have seen significant international business at our.
Westin Oaks in Galleria in Houston, but the South America, and Central American travelers are traveling and when they do travel Houston in general and the Galleria Mall in particular for shopping destination is a very big distinction we've done quite well there are other hotel that has traditionally had a fairly large component of international businesses our marriage.
San Francisco Airport, and we are starting to see international flights International crew business come back and that's probably the best indication of when if you are curious wind business will come back we're keeping a very careful eye on the international flights and international crew business in particular that hotel as a marker for win international.
The international traveler, we will be making inbound business.
Okay I appreciate all the detail that's all from me. Thank you.
Okay.
This concludes our question and answer session I would like to turn the conference back over to Marcel for boss for any closing remarks.
Thanks, Andrew.
Thanks for the thanks.
Everyone again for joining us on our call today.
At the end of earning season, so I appreciate everyone's attention.
Insightful questions.
Certainly there is some light at the end of the total vaccinations increasing in business appears to be.
Slowly rebuilding, particularly on the leisure side obviously.
We look forward to.
Updating you again in the quarter SaaS. So thanks again for joining us.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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