Q4 2020 Park Hotels & Resorts Inc Earnings Call
Okay.
Yeah.
[music].
Greetings and welcome to Park hotels, and Resorts, Inc, fourth quarter, 'twenty and 'twenty earnings Conference call.
At this time all participants are in a 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 and is now my pleasure to introduce your host Ian Weissman Senior Vice President corporate strategy. Thank you you may begin. Thank you operator, and welcome everyone to the park hotels and resorts fourth quarter and.
Full year 2020 earnings call before we begin I would like to remind everyone and many of the comments made today are considered forward looking statements under federal Securities laws as described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed.
And we are not obligated to publicly update or revise these forward looking statements.
In addition on today's call we.
And we may discuss certain non-GAAP financial information such as adjusted EBITDA you can find this information together with reconciliations to the most directly comparable GAAP financial measure and this morning's release as well as and our 8-K filed with the SEC.
And in the supplemental financial information available on our website at PK hotels and resorts Dot com.
This morning, Tom Baltimore, our chairman and Chief Executive Officer will provide an overview of the industry as well as a review of parks fourth quarter performance.
We'll also provide the company's views on 'twenty and 'twenty, one as the industry recovers from the devastating effects on the global pandemic, although we will not be providing full year guidance at this time [noise] Shonda Lotto, our chief Financial Officer will provide a brief review of our fourth quarter and full year results as well as a more chip more detailed view on our balance sheet.
Cash and liquidity for.
Following our prepared remarks, we will open the call for questions with that I would like to turn the call over to Tom.
Thank you Anne.
And welcome everyone.
I want to start by expressing my profound sadness that my friend Arnie Sorenson is no longer with us.
And it was a giant and our industry more importantly, we have lost a genuinely kind and compassion and human beings was a loving father and husband.
And a true friend to many.
For those of US who are lucky enough to cross paths with Arnie.
Our lives are a lot Richard because of it.
And he will be greatly missed.
I send my sincere condolences to his wife, Ruth and their children.
As I reflect back on 2020, there is no doubt that.
Last year was the most difficult period, our industry has ever faced.
And I could not be prouder of how the park team managed through the adversity and met the challenges head on.
As the pandemic began to take hold.
Quickly took steps.
And protect our team members and preserve our liquidity position and.
And plan for the long road ahead.
Our efforts to significantly reduce operating costs by suspending operations at 38 of our 60 hotels.
Cutting our capex budget by 75 per cent.
Suspending our dividend help to meaningfully reduce our monthly cash burn.
Our right to just 42 million during the fourth quarter. And addition, we made great strides to strengthen our balance sheet and liquidity position and.
And with the highly successful launch of two corporate bond offerings, and 2020, raising nearly one point for billions of capital and amending our bank credit facilities.
Finally, with the business stabilized and demand trends showing signs of improvement.
We began to prudently and responsibly reopen hotels, while identifying additional operating efficiencies, including the permanent removal of $70 million of cost across the portfolio.
We continue to actively pursue other potential cost savings.
We ramp up operations at our hotels.
Today 50 of our 60 hotels are open and accounting for approximately 75% of our total room count.
Despite some challenges across some of our core markets. We are optimistic that we will not need to re spend operations and any hotels based on our current outlook.
Regarding our liquidity position, we currently have $1 4 billion of liquidity available to us.
With just $100 million of debt maturing through 2022.
Turning to our fourth quarter results as expected we saw a little performance improvement during the quarter with Revpar down 85 percentage, both group and business transient remained impaired by the effects of the pandemic.
Our leisure business was down 78% overall for the quarter drive to leisure continue to outperform on a relative basis occupancy at our drive to leisure portfolio average over 33% during the quarter and 120 basis point improvement over the third quarter.
We witnessed relatively solid results at several of our resort properties, especially across South Florida.
<unk> remains one of our stronger markets.
Our two hotels, Casa Marina and the reach and continue to outperform the submarket.
With hotel occupancy averaging 70% during the quarter.
I'm also pleased to share that the CASM arena celebrated its 100th anniversary this past December.
And important milestone for this iconic property.
Looking ahead to 'twenty and 'twenty, one we expect performance at our key west properties to remains strong aided by increased airlift capacity, which should help to support the pent up leisure demand for the region.
For years off to a good start.
January occupancy average of 68% across the two properties and.
And February expected to be well above 80% on.
The average daily rate is relatively in line with pre pandemic levels.
And Miami, we witnessed solid results and.
And at our Royal Palm Hotel, and South Beach is enjoy sustained positive leisure momentum.
And by Miami day's decision to lift restrictions on October Royal Palms occupancy for the fourth quarter was 56% and increased to 69% and January.
February on pace to hit 85%.
Turning to Hawaii.
The island's officially reopened for business on October the 15th and visitors can now bypass the state's mandatory 10 day quarantine with proof of a negative COVID-19 test within 72 hours of departure.
We reopened our first hotel for 647 room.
Hilton <unk> village and mid November followed by the partial reopening of our 28.
160 room.
Hilton Hawaiian village Hotel on December 15th.
And Hilton Hawaiian village results were encouraging during the initial two weeks at the hotel was opened in December with Christmas week occupancy and the high 20% range and new year's topping 31%. This level of demand was enough to warrant opening two of the five towers during the holiday season and addition.
Despite being nearly double the size of the nearest comp set property Hilton Hawaiian village materially outperformed its concept properties on both occupancy and revpar throughout the holiday season by 33% and 19% respectively.
Throughout the pandemic, Hawaii has been one of the most restrictive states and the nation on.
And though the situation seems to be turning a corner.
With the rollout of the COVID-19 vaccines and.
And the drop in case count and state officials are close to easing travel restrictions, allowing for unrestricted inter island travel for those individuals that have been fully vaccinated as of March the first on.
And the potential for Trans Pacific travel by Meda and <unk>. This is very good news for demand trends over the back half of the year with the continental United States, making up 67% of inbound travel to Hawaii.
We expect the first quarter of 2021 to remain challenging for a while given the continuation of global travel restrictions. However.
However, we are already starting to see signs of increased demand and that market with a noticeable pickup in February with the Hilton Hawaiian village, achieving 900 rooms occupied over the Valentine and.
And stay weekend combo.
And why koloa hosted over 500 occupied rooms rates are improving as more bookings are funneling through the higher rated channels with a reduced reliance on it.
Otas.
The back half of the year group bookings continue to hold our transient bookings have increased and consistent theme.
Heard from several of the main airline carriers to the islands.
Overall, it looks like demand trends cost efficiencies air lift and travel restrictions are all moving in the right direction and setting a much more positive tone for 2021.
If we look out over the next 12 months we.
Organic growth will be the primary driver.
We'll initiate the marketing process for several hotels is the bid ask spread continues to narrow with the improvement and operating fundamentals.
Overall, we hope to sell upwards of $3 million to $400 million and non core hotels. During 2021, we will provide further details on asset sales as they occur.
We look to safely and efficiently reopened the balance of our portfolio and continue to chip away at our monthly cash burn rate with a goal of returning to breakeven over the back half of the year.
Finally, as we have noted on several past calls we continue to work on and improve on.
We continue to work with our operating partners to enhance the hotel operating model.
Overall, we believe that the efficiencies that we've already implemented over the past year and we will continue to focus on as the sector recovers.
Our sustainable and have the potential to realize incremental margin improvement over time.
With respect to the broader lodging recovery, we remain encouraged by the progress that has been made on the vaccine front for <unk>.
Nearly 70 million doses already administered and the U S.
At the current pace of daily vaccinations. It is estimated that by late summer early fall upwards of 75% of the U S population could be fully vaccinated with.
We expect that lodging recovery will be further bolstered by a healthy U S economy is massive amounts of fiscal stimulus and and accommodative fed.
To support the economy, Inc.
And the $900 billion plan and Congress passed in December.
And an additional one nine trillion and recently put forth by the president.
With the possibility of a significant infrastructure spending bill to follow as well.
Additionally, the U S personal savings rate has soared to almost 14% equating to over one trillion dollars saved over the last 12 months on.
While GDP growth is forecasted to be near 6% for 2021.
Against this backdrop, we believe there is significant pent up demand.
Which should lead to accelerated growth beginning in the second half of 2021 and.
Both business and leisure travelers seek to reclaim all of that was lost in 2020.
As more of the population is vaccinated travel restrictions ease.
Corporate offices reopen.
Demand trends will undoubtedly improve and we believe park is incredibly well positioned to successfully lead our industry through this expected recovery phase.
By and large.
And recovery is projected to follow recent trends with drive to leisure continuing to leave during the early phases of the recovery.
And with over 45% of our rooms, located and drive to markets. We believe park remains very well positioned for this early phase of the recovery.
<unk> been very encouraged with the improvement in demand since the beginning of the year.
For folio wide occupancies improving sequentially over the last several weeks.
Witness, particularly strong results at several of our drive to and leisure markets, including.
Key West Miami, New Orleans, Seattle, and Southern California.
The next phase of the recovery, which we anticipate may begin to take shape during the third and fourth quarter of 2021 is.
And is expected to be flat to leisure.
Disproportionately high use savings rates and pent up desire for travel.
Should help to support demand trends across several of our key markets, including Hawaii, Orlando, Miami, Southern California, and even San Francisco as restaurants and local attractions reopen.
On the corporate side. However, there remains very limited visibility with many companies remaining more focused on on when to bring workers back to the office full time and less focused on booking travel at this point.
<unk> is expected to be similarly impacted by the lack of corporate travel and the near term.
However, we are encouraged by the lead volume and group booking activity seen since November surely after news of the vaccines were announced with leads for 2021, doubling and definite bookings for the year, increasing fivefold and January.
In addition, looking out to 2022.
Pes is largely holding firm at this point with rates up 3% over the 2019 levels. While the industry still has a long road ahead I am very optimistic about the lodging recovery.
And parks relative position and <unk>.
Credibly proud of the entire park team, which worked tirelessly all year and thanks to their hard work and dedication and Im confident that we will emerge from this crisis stronger and more resilient than ever and with that I'd like to turn the call over to Sean who will provide some more color on our results and updated our balance sheet and.
Liquidity.
Thanks, Tom overall fourth quarter and full year operating results were in line with our expectations with Revpar down, 85% and 73% respectively. While we recognized a $65 million adjusted EBIT loss for the fourth quarter and a loss of $194 million for the full year.
Operating losses, and the fourth quarter were offset by a positive $5 million property tax adjustment associated with successful tax appeals for our hotels in Chicago, and addition to approximately $5 million and cancellation and attrition income during the quarter.
As Tom noted, we expect first quarter 2021 performance to largely mirror fourth quarter 2020 results given ongoing challenges on the corporate demand side, while travel restrictions continue to negatively impact demand.
We do anticipate some pods and exceptions to this trend such as it and leisure markets like key west and Miami.
And also on DC, where two of our DC market hotels, the Doubletree Crystal City, and Hilton Mclean benefit and fit benefited from business from the more than 25000 National Guard troops that were called in to provide backup support for local authorities.
Occupancy exceeded 63% and January at Crystal City and reached over eight 2% at our Hilton Mclean Hotel accounting for an incremental $2 $4 million of revenues for the month.
Turning to the 10 hotels that remained suspended within our portfolio as a reminder, almost all of the hotels are located in the metropolitan areas, and New York, San Francisco and Chicago while.
While demand trends across all three cities remained muted there are some positive data points worth noting.
And San Francisco for example, keeping Morgan Health Care conference, which occurs in January shaping up to return to pre pandemic strength for 2022.
And for park portfolio of San Francisco hotels, the vast majority of group contracts for 2021 has successfully been transferred to 2022 at flat rates to this year our.
Our Hilton complex and Union square has already moved over 40 groups worth $4 million into next year, and then J W. Marriott has contracted 75% of its 21 commitments and to next year to date and.
And New York, we are starting to see the benefit of some of the hotel closures around the city <unk>.
Especially from larger group boxes, including the Roosevelt Grand Hyatt and Hilton Times square, which all permanently shut their doors last year.
With the New York Hilton booking group's debt had a long standing relationship with the Rosebel, while our pipeline of corporate clients displaced from the other hotels is significant.
We will continue to monitor the situation and these urban markets and hope to have most of these hotels opened before the summer.
We're all we are encouraged by the pickup and demand across several of our key markets and anticipate achieving breakeven for the hotel portfolio and the back half of this year.
Turning to the balance sheet as of quarter and our liquidity stood at just over one 4 billion, including $474 million available on our revolver.
And our net debt totaled $4 4 billion with.
And with less than a $100 million or less and 2% of total debt outstanding maturing through 2022 with a weighted average maturity of nearly five years.
While the focus last year was to strengthen the balance sheet and our liquidity and strategic capital raises along with Covenant relief. Our plans for 2021 and beyond include reducing leverage via asset sales and cash on hand, reducing corporate level bank debt exposure and further extending maturities, while maintaining financial flexibility and.
Capitalize on potential growth opportunities.
For the public debt markets remain open and constructive and we will evaluate the potential for additional capital raises to further enhance the overall quality of our balance sheet as needed.
Finally, with respect to Capex, we expect to slowly ramp up our maintenance Capex program and restart select ROI projects, including the meeting platform at Bonnet Creek.
Overall in 2021, we plan to spend approximately $40 million on maintenance Capex and an additional $20 million at Bonnet Creek, a $90 million project, which we expect to fully complete by late 2023.
As always we will keep you updated on our progress.
That concludes our prepared remarks, we will now open the line for Q&A to address each of your questions. We ask that you limit yourself to one question and one follow up operator, and we have the first question. Please.
Thank you ladies and gentlemen at this time, we will be conducting a question and answer session. If you'd like to ask a question you May press star one on your telephone keypad, a confirmation tone will indicate your line is and the question queue. You May Press Star two if you would like to remove your question from the Q4 participants using speaker equipment and may be necessary to pick.
And your handset before pressing the star key our first question comes from the line of David Katz with Jefferies. Please proceed with your question.
Hi, good morning, everyone.
Hi, good morning.
Good morning or afternoon.
Hi.
I wanted to talk specifically about two markets and I know, you've given us some commentary around Hawaii.
And San Francisco, but with respect to Hawaii.
The notion is that access right by air travel is going to just continue to progress.
How far out are you taking bookings, presumably those are they are entirely leisure bookings and with all the commentary we're getting from a number of different directions. This week about leisure endeavors and consumer activities.
Help us be balanced and not get too far ahead of ourselves with what Hawaii could be and say 2022.
Good day, and it's a great question, let me try and I'll talk me off the ledge.
Yes.
And if I could just kind of frame Hawaii for you a little bit.
Keep in mind that Hawaii has had really fewer cases and.
The other day.
And for months and Alaska, and we've had fewer cases and pure debt so let's touch on.
Level set about.
About 27.
1000 cases, as and this morning about 435 tests and the loss of life and certainly horrible as we all know but.
But when you think about the restrictions that are put in place how onerous. They were from the 10 day <unk>, obviously now for 72 hours test net.
Negative test before arriving.
And the state is moving to tier.
Tier for us completely unrestricted so again.
Encouraging and our.
Ireland travel is going to start here as of March one and for those that had been fully vaccinated.
And then.
Think about vaccinations and Hawaii.
12% of the population has already been vaccinated, including most of the wrong people. So all of the concerns of the Governor and his administration and the distressed and it may put one on facilities. There I think are being mitigated and so that's a really encouraging backdrop as we think about that.
There is significant pent up demand and Hawaii.
And what you've got really historical short booking patterns and <unk> got the airlines Hawaiian Airlines, and United and southwest all ramping up I believe Hawaiian Airlines for the fourth quarter, we were running at a and above 35% to 40% of 2019 levels and I think is highest and 50% in December.
<unk>.
And if you just look at what we're seeing.
On the last six weeks alone and a.
And why we've gone from January and the third and occupancy of 21%.
And then.
February up to 36%, so again really setting a backdrop and let's not underestimate the need that we all have to reclaim and recapture our lives and has the vaccinations continued to accelerate year on the mainland and given the fact that really 67% historically.
Travel to from Hawaiian Islands are out of the U S and Continental U S. We are very very bullish on and why we think that the second half of the year could surprise to the upside and we are very bullish on 'twenty, two abdominal and move forward.
Got it.
San Francisco I think is a bit more.
Complicated right because were.
On the business travel aspect of this and general and San Francisco in particular is a bit more complex.
Can you just go a little bit farther I heard the Jpmorgan data point.
But what range of strategies do you have to generate demand assuming that business travel does come around a little bit slower.
Yes, it's another fair question and again level set price you've got a mere anecdote vanilla debt essentially.
And.
Adopted as of December for sort of pretty aggressive for a stay at home orders on.
Charles for generally restricted to essential travel only we've had and you're thinking about the CBD six hotels for them remain closed and obviously you've had a 10 day quarantine for anybody and traveling to our returning.
Returning to San Francisco.
And those probably arent going to be relaxed, we believe until probably late February did you look at the two hotels that are open and even in through Q4.
And we were running about 24% occupancy and would you say.
And keeping their ramping up January and February and both properties were about 16, and 17% occupancy and about 26% and $25, 26% in February we expect Q1 to probably continue and that low 20% range.
There is very little citywide business here in the first half.
But if you look at the second half for the year. The game developers conference in July is and still slated to continue the Dream Force conference in September and still slated to continue and there are <unk> and events for about 363000 room nights and for the second half for books now and it doesn't compare.
Favorably to what was the record in 2018 2019 of about 2.1 0.2.
1 million room nights, but but but again.
Look we know San Francisco is a challenging environment and still one of the great cities of the.
Our credit nation of the World.
We're not prepared to write it off and there are some challenging issues with the healthy buildings ordinance that.
And that we continue and I've written to Outbids about it and we don't think Thats a.
Bill or a safety bill and it's just the jobs flow.
We are encouraged by some recent discussions recognizing that tourism.
As such and important part of the local economy there.
So we are optimistic over the intermediate and long term. We certainly think that 2021 is going to continue to be a little softer and clearly going to be a little slower ramp up there.
So and within our portfolio and will be and within the industry.
For the intermediate and long term very bullish on San Francisco and the opportunity zone.
And for being there.
Thank you for those.
Appreciate it.
My pleasure.
Our next.
And it comes from the line of Smedes Rose with Citi. Please proceed with your question.
Hey, Smedes hi, Thanks, Alright.
You mentioned in New York that you're starting to benefit from some of the permanent closures I just wonder are you Sir.
And many other markets are there are there markets for you. Thank you could see.
Supply contract.
Yes.
Great question, and Sean gave color on New York and look if you think about New York today are 129000 rooms, plus or minus and.
And certainly depending on who you believe.
And he is half of those sort of remain closed and some of those are permanent shutdowns, we think theres a great opportunity here to rightsize that.
One part of the problem and New York is really had been the onslaught of supply that has happened over the last five years to seven years and candidly brought on by limited service hotels. There are really only three hotels that have a large meeting platform, we would respectfully submit that.
Hilton New York that we own has and is the best and so as we see hotels that are either going to be converting a permanently closing that nationally we believe that more than on our.
Our fair share of that business will accrue to us and that will help as we rightsize. The business. We've always believed that we've got to play to our natural strength and is a group house.
New anchor with group and then you layer and contract and obviously, we can then yield and the transient.
But still again, New York is another one of those great cities of the world and taking it a bit on and shoot right now and obviously the epicenter and what we all saw on the beginning of the pandemic, but there is no doubt and New York is going to come back.
And we are seeing some green shoots and some evidence of that again I think opening this year.
We are going to be middle of the year, probably at the earliest since we sort of book out and we look at demand patterns and we will continue to track debt carefully as we've done across our portfolio.
I'll remind listeners debt once we closed all of our 85% of our hotels and and we gradually reopen and almost every situation. Once we reopen and we've not had to re spend operations limit reduced slightly but not recent spend and it's a real credit to Sean and the asset management team and how we address and challenged.
And in front of us. So there are some green shoots there and New York and <unk>.
Suspect as we start looking out for group business in 'twenty and 'twenty two given what we expect to be contraction, there and supply.
That's going to bode well for New York over the intermediate and long term.
Thanks, and then I guess, just maybe a little bit of a little bigger picture as the recovery gets underway at some point. Hopefully later this year are you thinking and all differently about park strategy in terms of.
Initially the sort of expectation to group up for do you think maybe it could be more of a focus on leisure and resorts.
Total flow drive to and given its resilience for how you're just thinking about the portfolio I guess over the next few years.
So maybe it's a great question.
Look, we're confident and I repeat very confident and our strategy.
Focusing on assembling a portfolio of upper upscale and luxury.
<unk> assets and top 25 markets, our premium for resort destinations.
Really the right positioning.
Having said that we will follow the demand patterns and we will follow the population growth.
And you can certainly expect that we will continue to evaluate opportunities and they are natural markets that makes sense Phoenix and I'll ask.
And we've got a presence in Denver, but looking to expand that over time, clearly the Austin market and I, certainly know well from my past my past life, obviously, what we're seeing and Nashville, and we're seeing obviously and the southeast and.
Particularly in South, Florida, we think that.
And that those areas are just going to continue to grow and and slowed.
But we are not prepared to begin to look for what we would call non.
Top 25 markets that may have a more suburban bent to it and.
And don't have the multiple sources of demand, we believe and that three legs of a stool and not having strong leisure.
Strong on transient.
Business transient and conditions and strong group as well and if you look at our portfolio and keep in mind.
We would respectfully submit that and it.
And it's 35, 40% leisure today, but we have a really strong leisure.
Think about Hawaii, and think about San Diego, Southern California, and even parts of.
Northern California, clearly, South, Florida, clearly New Orleans and.
Do you think about our drive.
Try to slide two.
Leisure, it's about 61% of our hotels about 35% to 36 of our hotels. So we believe that we're really well positioned today and.
And we will continue to alter that and adjust that but we're not going to make any rash and sort of.
Decisions to sort of a band.
Those strong markets and where you have huge barriers to entry.
And really tie replacement costs and even today, we were probably trading and 50% of replacement cost would be near impossible to replicate.
And this portfolio, we should think about our geographic footprint.
Thank you.
Our next question comes from the line of Danny Assad with Bank of America. Please proceed with your question.
Hey, good afternoon everybody.
Danny.
And then great.
Thanks.
You guys have done a pretty commendable job and being as nimble as you've been with your Capex deployment.
But then just looking ahead for this year and possibly 2022 are there any major ROI projects, we should be thinking about from.
And then.
Looking on the maintenance front is there anything thats been either delayed or deferred in.
And the last call it.
12 months or so that debt.
Moving to I, just think about that needs to be addressed.
Danny.
Great question and thank you for the for the compliment.
Ken I want to commend the park team.
And when you think about what we were faced smoothed.
Nearly a year ago.
Clear and decisive actions and suspended operations, we suspended our dividend and reduce capex by 75%.
Immediately focused on liquidity and on our cash burn rate and I would I would submit that this is a very experienced team not our first crisis. Obviously this was the worst prices at any of us and saying we were.
Our steady and panic, we knew exactly what to do a lot of credit and Shawn and our finance team as we've been on into two bond deals to push out maturities and secure liquidity and candidly I think there were some out there that and sort of.
<unk> saw for debt and I think we've shown just how experienced and capable and men and women of park on volume on one on I want to state that and I think it's really important.
As we think about Capex and as Sean mentioned, we are going to restart obviously, our bonnet Creek low cost from sort, we think the positioning for that over the intermediate and long term is to expand and facility and upgrade the brands and the signature brand by Hilton.
We're really excited about that youll see that ramp up and when you look at really all of the embedded opportunities within our portfolio and I'll just mention a few from Hawaiian village and we're working on debt getting an out parcel, which would allow us to do with six tower.
Hilton New Orleans, Riverside the wheel lock there thats eight acres adjacent to our hotel and Convention Center.
That has probably the equivalent of <unk> 5 million square feet.
On.
And on.
If you think about on.
On the Waldman cash and arena, we have two adjacent sites there and key west.
It gives us also continued optionality the double tree and we have and San Jose.
And that for and upgrades.
And brand.
Sure.
The Hilton Santa Barbara that we converted from a double for you said some success and of course for reach resort and we completed last year and <unk>.
Net a curio collection has been a huge homerun as well. So we will continue to come through we will have more information as to our ROI, but they are here.
<unk> upside and this portfolio embedded within our existing footprint that we really want it and continue to focus on here and then the next few years to realize some of that great upside.
Got it thank you very much.
Thank you.
Our next question comes from the line of Rich Hightower with Evercore. Please proceed with your question.
Hey, good afternoon, everybody. Thanks for taking the questions here.
Rich.
Hey, Todd so I'd like to follow up on the New York Hilton really quickly so.
We all sort of know that.
The issues, perhaps with that asset pre COVID-19 never really surrounded occupancy.
It was more of a rate and and overall profitability.
Hurdle that we had to sort of get all the for various reasons. So maybe take us through the future in that regard.
As you steal share from hotels that are closing down permanently.
Would that be higher rated business and and help us understand maybe the cost structure.
Given the union presence and some of the other moving parts there going forward.
Yes.
A lot in debt.
And then one question on average so let me just.
And the chase because and I think you would appreciate debt book.
The operating environment, just given the current CBA and onerous and I think we all know debt and I think anybody who owns hotels and New York and <unk>.
Clearly, it's lower on the lower and.
And of our EBITDA margin from our portfolio.
We do think that given the crisis and you don't want to let any prices go for it.
Waste and we have been working hard and.
Working with our operating partners and also talking with.
Union about opportunities to rightsize that model nothing is easy and nothing is guaranteed.
But I do think given the fact that youre looking at.
25%, 50% and the supply.
That's a natural benefit 10 years ago, and New York was the best Hotel markets for.
And we're among the vessel tail markets and the land as we as we all know I've had a long history with the investment on <unk>.
First toward duty working with Hilton 25, plus years ago, So I know the history well.
And clearly with you on slot.
Limited service supply there was rate erosion.
Still believe that there are only three hotels that have that meeting footprint.
And for that business, we think and we've got the best mean footprint.
And you think that if we can anchor it with group business as that comes back debt.
And layer and contract and that allows us to to them.
And yield and the transient.
We are optimistic over the intermediate and long term I mean today. It's closed has been closed for a year from now.
Remember that were dealing with travel restrictions.
And your dining limitations.
Gatherings are limited to 50 people. So again, we are dealing with government mandates by node for the management team or anybody else there and the city and we also know that and others.
There is there is capital flight and.
And we're looking at.
How new York, well performance and in the future I think it would be a huge mistake to write and EUR cost.
People have tried that before and I think losses.
And I think that would be a wrong bet again, as we said and move forward.
Do you think about 2011 year, I remember, well and New York and you had.
About 140.
Super compression.
Market was over 95% and you had significant pricing power.
Fast forward and probably 2019 2020.
Probably less than 20 and.
20 days and Super compression days and 2019.
And then imagine for greater than zero, So think about 'twenty and 'twenty. So there is the opportunity for a reset and to right size operations.
And whether that's from job combination.
<unk>.
Working.
Partnering with other owners as we think about range.
Cost per all of those topics are for on the table.
And we continue to explore book no doubt given.
Like nature of that asset.
Significant embedded value and it doesn't mean that we also won't look we do have a timeshare component day to day, we have lots of optionality with the asset and we will continue to explore that and create value for shareholders.
Yeah.
Okay I appreciate those thoughts Tom maybe to switch gears.
To another topic, but how do we think about the the tradeoffs and.
In terms of equity issuance, so to speak via asset sales for equity issuance and the normal manner.
Increasing the share count and then we can obviously see where park as a whole is trading versus pre COVID-19 and maybe compare that to the implied discount. If there is one on the the 300 or so million of non core asset sales and help us think through maybe the cost and the benefit of the trade offs between those two forms.
And with equity in the context of the ultimate goal of deleveraging.
Yes.
And it's pretty simple and pretty clear and rich I think you know I've been.
Steadfast.
For many many months last night and Youll see this management team do a dilutive equity trade.
We see no benefit of that.
And if you think about where we're trading today and we're still trading at a 50% 55% discount.
<unk> costs were still trading at a significant discount to our own internal antibody. So.
And so we don't see that gaming on smart move for.
From shareholders for us to go out and do an equity offering today, we think the more prudent capital allocation.
<unk> is to continue to sell non core assets.
We intentionally a seller and the beginning of last year and the middle of last year as the Covid discount was 2030 and 40% we didn't have to do on the bank based on the other prudent and why its moves that we've made so we've decided and we believe that conditions will improve and be more favorable particularly for vaccines.
And.
And we get more shots and your arms and confidence.
And from stored and people begin to travel.
We believe that debt.
And then it will make more sense to.
And those assets in 'twenty, one and we are.
Same publicly the Cds on our targets and we have.
Got activities already underway and we're cautiously optimistic.
Optimistic we will largely take those proceeds to.
And using to Delever, and we will continue to Delever organically.
We will use equity again as the stock continues to recover and we'll use that for growth opportunities and perhaps over <unk>, a little at that time, but we see no need.
To go and do an equity offering at this time and factory.
We've got more than our fair share of calls from bankers from.
And we're trading at 13, and 14 to 15 took the ref and vaccine. It makes sense and then and it certainly doesn't make sense now and we've also done a lot of calls about ATM programs.
I would say, we prudently pass on all of those.
And as we've done.
And you certainly would have regretted based on that and the stock has performed and stock is still under value and we're still trading at significant discounts and incentives.
Got it thank you.
Thank you.
Our next question comes from the line of and Anthony Powell with Barclays. Please proceed with your question.
Hi, good afternoon, everyone.
Anthony I was going to just a question a question on Capex I guess, I guess competitive Capex again.
One of your large peers.
It is spending a lot on various hotels and your markets and they are staying there and expect to gain market share as kind of as it comes back over the next several years do you do you buy that argument and.
And do any other hotels and markets like New York, San Francisco Orlando.
Boston needing and kind of just regular way maintenance capex and orders compete with those refresh properties that are going to be competing with you.
Yes. It is.
A fair question and I would make.
I'll make a couple of comments.
On our run rate. It means capex spent about six percentage of revenue, we've been pretty consistent with that prior to the spin which on our fifth year now.
And.
Bill.
Blackstone and spent significant dollars on the portfolio and our.
6% level, we were continuing to maintain.
Obviously.
And we wish we could have proceeded.
Bonnet Creek, but we thought the wiser decision was.
And down the hatches and made sure that we have liquidity for the overall enterprise, we will ramp that up and as I mentioned, we have a lot of embedded ROI opportunities.
You'll continue to see us evaluate study.
And we'll prioritize those and the near future and move forward.
We are.
There is not a lot of deferred maintenance on these portfolios and we are.
Confident where we are and will be.
Thoughtful and careful and.
We look to invest and the future.
Got it and then I guess on a market concentration and youre selling some non core assets I'm guessing those arent and Hawaii San Francisco.
Do you view, yes.
Earning over 20% and EBITDA and those two markets 25, or higher and Hawaii and just.
How do you look at the risk of having that exposure.
Exposure to any one market as you have on the portfolio yes.
Yes.
It's a fair question I think look we are confident and as I said earlier and the overall strategy.
And we were also very confident and remain confident.
And the strategic rationale for the Chesapeake acquisition and upgraded our portfolio and it gave us brand and operator diversification and gave us improved geographic diversification and San Diego and Denver.
And on footprint, and Miami, and Los Angeles and.
And then we obviously expanded.
And more on San Francisco and.
And Boston and D. C. So really pleased with that and we think its really improved our growth profile.
And.
On a pure sense really not like to have any one market over a 15% to 18%.
And if you're going to have a market over I think having and I truly iconic portfolio, particularly with what we have in Hawaii.
Never replicate that we'd get back to a more normalized time.
Just given the generation that's been there and the generations that we won't go back.
And certainly believes that that is.
And one that we can deepen.
And it's one that we can reduce the exposure over time by continuing to grow and other markets as we see opportunities.
Be inconceivable for us too.
Okay.
<unk> loans slightly and our San Francisco from our leading standpoint.
But that should be no indication of our confidence and belief and the market over the long term.
So as we think about growth markets as I said oil and natural and legacy markets and I think a lot of people who are also interested in units.
Units and some of the world and Boston Snow.
Clearly, the Nashville, South, Florida, even central Florida, and think about opportunities that better and she is going to continue to explode and other markets and the southeast I think will also continue to have population growth. We will follow the demand we will follow the population historically.
Being anchored and those markets and have multiple sources of demand isn't the most prudent decision.
Got it thank you.
Thank you.
Our next question comes from the line of Bill Crow with Raymond James. Please proceed with your question.
Hey, good morning.
And Tom.
Yeah, I'll stop making debt service payments on the W. Chicago and I know that's a market that you have written and editorial about as well with the labor issues.
What's the future of your footprint and Chicago should you've sold and those were assets that.
The street kind of new from Chesapeake and didn't particularly like him to begin with so.
Is that something you should or shouldn't have gotten out sooner okay.
Well, yes, it's always easy to look back fill and you should think about when we closed on September 2019, and of course getting hit by the asteroid and all of us and by the asteroid called.
Koby.
Look I would put Chicago on the same.
Bucket of New York, and San Francisco, Clearly challenge right now for all the reasons you understand as well as anybody because we've written about it.
And I would also say I would not write off Chicago and other one on the great cities and it will come back.
The issue related to that essence flow unique and that is so we'd like to have a discussion and special servicer you can't have a discussion.
While you are paying.
And we have significant liquidity and.
More than two five.
Here's we have tremendous optionality as you know you know the moves that we've made and I would.
And read anything more than that and Thats just to have a dialogue to look we're on.
Also working with Marriott to combine operations at the two w's and.
We think in both cases excellent real estate and there's a lot of Optionality there.
But.
Tom just to challenge you a little bit.
Talk about the market markets coming back I think you're right.
But in New York for example, the Hilton was it NOI positive.
And 19 or 18 or I mean, it feels like some of these markets we're already.
Spiraling down.
And.
Before before everything happened and now we've got companies relocating into other markets and look at.
Dispersed workforce and so.
So even if they come back do they reach profitability.
Yes.
If you think back historically drilling.
Long relationship given.
And how long are embedded in the business, so Dave and myself, a little bit, but I can't remember when.
That asset was generating.
Higher margins and significant cash flow, but even when I rejoined Hilton to spin out it was still on top.
Top five top seven asset portfolio in terms of the amount of EBITDA. So.
It has always been NOI and positive.
Lower margins using the other assets and the portfolio.
And was not last year, because obviously it was closed and you.
Still have.
Underlying cost settings and despair.
And there is no doubt that this is an opportunity for reset and.
We're not fooling ourselves and were veterans here.
Working through we think that there is there are opportunities to continue to take cost out of it.
Saw we've taken and $70 million and costs about 200 basis points out of the whole portfolio and we can.
Turning to work our tails off to find more opportunities.
And New York is a big challenge and we're up to it and we're working through is the only asset that we have obviously and in.
And Manhattan.
But you Couldnt replicate that asset and there's also optionality and things that we can do over time as we look for other sources of revenue.
Greater question and I mean, everybody is down on New York and that is cash.
Capital flight and yes people are.
Relocating I think thats in part because we are and the middle of the pandemic there are on.
And the deficit that exists there are some concerns about security and safety and.
Look leaders lead and the new mayor is going to be the governor.
Business leaders and people have got to step up for them.
Again, one of the great cities other world.
And we all I think you earned to get back on.
Enjoy the great restaurants for theater seating and shopping.
Those other just writing off and New York is and the bis.
I'd say it'd be a little more careful.
I think thats, a risky bet I think New York, and we'll come back and do I think it will be in 'twenty and 'twenty, one I do not.
Yes.
Alright.
And at the time, thank you. Thank.
Thank you.
Yes.
Our next question comes from the line of Neil Malkin with capital One Securities. Please proceed with your question.
Yeah.
Yeah.
Hello, everyone. Good afternoon pick me up.
Hi.
And I'm pretty good and of earnings so it's never a bad thing.
Just try and feel the same way.
Kind of piggybacking off of those comments and I just want to be cleared and it kind of seems like you are maybe a little bit mixed messaging and terms if you.
Don't want to get away from the sort of core market, but at the same time you're following.
Demand and again, the commentary about sort of the great American cities.
I don't doubt debt.
I guess, a top line standpoint, and those things are true.
Again with labor being the weighted.
You mentioned safety legislation.
And California, it's only a matter of time for legislation on around Panther team continues to push forward.
Ridiculous taxes.
People may want to go there maybe to travel and I suppose it.
The same but for.
For me and operating or EBIT EBITDA standpoint, do you youre confident that youre going to get back to a pre COVID-19 sort of.
Paradigm in those major markets.
I mean, thats fair to say.
Yes, It is fair to say and I hope I'm, not giving sort of mix mixed messages on look we understand that and.
And the near term.
And site those three markets, obviously, and New York or Chicago and San Francisco.
They are largely closed by government mandate given the fact that we're still here and a pandemic and.
We will be coming out of that for.
But there are significant investments.
Across and screen and nation.
And that had been invested in.
And in those cities.
Alright.
Completely and write them off and is a bit premature.
Inc, now and we're all going on.
And relocate and Youre going to see some capital flight and honestly certainly some migration probably more coming out of New York right now and part of that is going into the Florida for all the reasons that we know.
But I also think for good creates an opportunity.
For the right size and remember we have a completely diversified portfolio.
From incredible iconic real estate.
And other parts, whether it's y and whether it's in Boston.
C C.
San Diego New on.
Orleans, South Florida.
So this is not dependent on just those three markets.
Those markets may lag a little.
It would be premature and sort of write them off and say.
Reshaped our band and one at this point.
I also think it's probably not reasonable to think that we would abandon on top 25.
Market strategy and.
And then pivot so that we're chasing more suburban assets and on top 30 top for it.
And do not going to have the barriers to entry and you're not going to happen and sources of demand.
We certainly want to add more resorts.
And as with everybody.
Given the opportunities that exist, but there will also be a very competitive footprint and you've got to be careful.
They are really prudent investment ideas within our existing footprint, given the amount of ROI opportunities and losses.
Okay.
I appreciate that.
Last one for me.
And more of a shock has been relatively quiet on.
But just in terms of I guess, how you think about balance sheet progression versus growth.
And maybe you can take this as well but.
You guys have done a good job on getting ahead of sort of liquidity maturity issue, but at the same time you also have.
More on leverage and now higher coupon.
Price and your capital stack, So you know.
And when you talk about sort of being opportunistic and having the capacity your ability to sort of acquire.
<unk>.
It seems like you guys, maybe have a little bit other things to work on.
On kind of before you.
<unk>.
Being acquisitive and so.
Maybe can you just kind of talk about your thinking on that I understand it's early very early and that sort of recovery, but how you kind of weigh those things.
Yes.
Given the time, youre outspoken and nature about being an industry and consolidated.
Yes, I'll take the comment here about sort of industry consolidation.
Sure.
And I've been saying it now for.
Yes.
And certainly north of a decade or more of that.
And it makes sense.
In fact, and we've got chairman and for how many lodging.
Sure.
So maybe meet some on the way.
10, 11, 12 13 14.
And more efficient use of capital to have.
Net fewer players.
Look I also acknowledge that and you think about us buying Chesapeake are the other two deals moving <unk> fell quarter on public.
Book and Lasalle.
None of them have been incredibly well received by <unk>.
And by investors and some net failure is something that we'll continue to monitor.
Don't see consolidation here in the near term.
Our focus as we articulated on.
And the priorities.
Continuing to reopen hotels.
And so sell non core assets to reduce debt.
We used those proceeds plus excess cash to continue to reduce debt.
I would disagree with your point on given our leverage we don't have optionality, we have plenty of optionality given within the covenant framework and we all.
And the ability as Sean noted, we will continue to look at for the balance sheet and continue to push out maturities.
I also don't think youre going to see a lot of transactions, but I would say bigger.
And those more strategic I don't see those occurring this year.
I think things as we work through the recovery and continue to get better visibility I think those of a.
And in 'twenty, two and beyond and you can rest assure that park will be in position to be able to compete at the appropriate time.
And I'd just add real quick just thinking about the balance sheet and some other things will lead access is for us too and it's getting our scale. We do have access to a lot of different markets.
And to monitor those and just the address is.
And as Tom said, our maturities as.
As well, but I think.
Certainly our cost of debt on it.
Depends on what you go after and certainly the bank debt has been one net I think the entire sector kind of tick and take advantage of it.
That cycle I think.
Sales are exposed to and so certainly our drivers' day kind of reduce debt exposure and you have Walmart flexibility with some other things like bonds going forward.
Okay I appreciate your guys' thoughts thank you.
Our next question comes from the line of Brent Montara with J P. Morgan. Please proceed with your question.
Good afternoon, everyone. Thanks for taking my question just on.
So just on the operating model enhancements and the $70 million and permanent labor expense from where you guys.
Our initiating soon and just.
Curious what types of jobs are being the.
And most of the redundancy related or is it more of a tactical removal of certain services and then I guess on a follow up would be and uniform across the portfolio or is it heavier on your larger asphalt.
Yes, so it's a I would say, it's pretty pretty well across the portfolio and it's a lot of kind of management positions, where you might have a banquet manager or front desk manager position throughout and captain catheter or something like that so.
Clearly you're going to see some more and bigger cuts and from the bigger property just from from.
Number of employees, we had about 1100.
Property level folks that were unfortunately that go through this process, but it and.
And that drop and I Wouldnt say were reported.
Reducing services by any means.
Ultimately getting a chance to where when you can basically your situation right.
<unk> revenues to zero and you bought the business from that from square, one and you had the opportunity to rethink things and take on taking extreme measures. So we're pretty confident about this these.
And these test being permanent.
Recovery here.
And more efficient operation over time.
Okay. Thanks for that Sean and maybe another one for you.
And maybe you can't answer this but are you able to maybe give us a measure of.
EBITDA sensitivity of flow through.
And two revpar topline growth as you sort of build back demand and it appears we are able to measure that and a certain range I don't know if you could give us anything that can help us.
I understand how that will how that could play out.
Well I think.
And you build back occupancy.
Flow through is going to be hard through that youre going to and we're gonna be bringing back from amenities over time that food and beverage and they're going to start you're still going to see that dollar comes back it's going to be you know anywhere from 50% to 60% flow through and you don't have the right profile right, so on and with them on the pure rate.
Profile, you're going on that you'll be more than 89% and flow through.
Pending so.
And for Us as we can.
Kind of go through here I think I think generally that's what it's been in the past I think it's probably a little better than naturally on the oxy thought on that.
Is it builds back just given given some of the things that and put in place like clean today, which we've seen is generally slightly positive.
On the cost side, overcoming and certainly overcoming the embedded cost for the additional cost.
On the DVD and the materials being used the extra labor, we noticed slightly incremental positive. So is that kind of comes back and the length of stays and they'll get a little bit longer across the portfolio. I think we'll see some benefit from that and early on to offset some of that kind of a gradual cost they come online when you bring backs other services like F&B.
Excellent thanks for the comments guys.
Yep.
Our next question comes from the line of Stephen Grambling with Goldman Sachs. Please proceed with your question.
Hey, Thanks, I guess, a few follow ups and starting with with the margins and Brad's questions. There does the $70 million consider any benefits from changes to distribution that could be permanent as you think I think you mentioned less OTA mix and are there any offsets we should think about and our models, whether it's labor insurance for taxes.
Or is that and that $70 million number.
So $70 million it would be strictly just a reduction in force type of exercise some non insured and following with related to <unk>.
<unk> for taxes and alike.
Yeah.
Yes, I guess and then on the I guess and then just considering any other permanent cost outs that we should be thinking about as you think the business and a recovery.
And you gave the sensitivity and a recovery, but like Otas is that something that should be permanently lower based on what you've seen now or could that also creep back.
And I think Otas right now and obviously I think a bigger portion.
Right now versus where it has been historically, so we certainly see that come back and on brand Dot com and other sources being more bigger drivers over time, and we're certainly seeing a discount and easier for the otas and lot more and those channels today, and we expect that to ramp back up.
And the near term we'll see.
Savings on property taxes, certainly jurors jurisdictions, where you have and 8-K income based approach strict for assessments were starting to see.
Some actually it happened already and where we're seeing debt drops.
Dropped and assessments as also and also the build themselves. So not just waiting for them to kind of Jack the rate up to make and equivalent but we're actually seeing reductions in certain jurisdictions for the building had a we had a one time.
Appeal and decrease in Chicago, which we expect Inc will get any other decrease.
This year for its triangle assessments I think we will see some benefits from Kelly's on property taxes going forward on insurance.
And it still remains a pretty challenged market, but I do think it's sopping up somewhat and so we'll get a renewal on June 1st and hope to and we're going to get some not only our rate.
Slight rate increase made but we'll see some offset considerable.
And triple values because of the high levels being reduced given given the lower levels of income so I think well at least kind of see.
And maybe about pause above some of the increases that the marketing team over the last couple of years and insurance break from there.
That's helpful color and then as another follow up just on the balance sheet I think folks have historically been looking at net debt to EBITDA ratios, but with where interest rates are and the flexibility and your covenants. How has your perspective on the right leverage for the enterprise evolve and what are the most important metrics that youre watching from here on out.
And we I think we still we still hold by the range of 3% to five times leverage we've always wanted to kind of get to the lower part of that of that range and now we've been hovering around four times pre pandemic.
Well, obviously with the burn.
We will see net leverage graduate up too.
On Turner cell based on your kind of 19 levels of EBITDA. So awesome work as we've talked about and selling assets.
Utilizing cash flow as you go forward.
It used to reduce debt and debt.
And to that target, but I think I think that's the right target EBIT, we even with if you think about and interest rates popping up some I think that debt.
We're fine and the three lower three times.
Got it thanks, so much.
Our next question comes from the line of Chris <unk> with Deutsche Bank. Please proceed with your question.
Hey, good afternoon, guys and thanks for thanks for hanging on with us past the hour.
A question for Joe.
Yeah, Yeah, well and same to you Tom Thanks.
Question for Thomas how do you think cancellation policies evolve as we kind of come out of this and you know there have been a lot of progress over the years.
And then obviously things change pretty quickly, but how do you see and evolving coming out of this do you see any kind of new opportunities that might come out too.
Further yield up or just any thoughts there would be great.
And it's a great question, Chris because as you know and love.
And we made a lot of progress.
Pre pandemic.
And hope that as we get to the post COVID-19.
Covid era that we would really be.
Kind of get back to where we were.
I think really starting to minimize the impact.
On hotels Tonight and.
And the other services that were.
So the race to the bottom.
So I'm cautiously optimistic that that can happen and I clearly don't see that happening right now and the near term as we're still working through the pandemic and still trying to get to the other side I would say just as a global statement debt.
Through this crisis.
We're seeing more communication and more collaboration between owners and operators.
The brand companies.
And really working hard to rightsize and to take cost out and I know, both Hilton and Marriott Hotel.
Decisions to reduce their workforce and maybe.
For a more efficient and I.
I think thats only going to continue to accelerate.
And we won't go back to the old way of doing business and.
I think advances in technology and we will.
For us to solve and think about it differently and thinking about ways.
And good cost of the business.
Okay very helpful. That's all for me Thanks, Tom.
Okay.
Our next question comes from the line of Robin Farley with UBS. Please proceed with your question.
Great. Thanks, just Robert maybe hi, how are you just to maybe take one more try and add a little bit of clarification on the comment about asset sales I know you talked a lot about the markets that you see is still growing.
And markets that over the long term you may take longer to get back can you sort of characterized for the assets that you would sell that you see of non core can you kind of characterize what that means and then right. Because I think we have a good idea of kind of what you did.
Value and assets, how would you characterize and noncore and when.
And you think about that $300 million to $400 million.
Thinking about what we've done historically from as you may recall.
And we've sold 25 assets for about $1 2 billion and <unk>.
Every case day.
On a 14 and those were international so clearly we made the appropriate decision at the right time.
But if you think about the other assets the other 11, plus or minus they were lower revpar.
Slower growth markets.
<unk>.
Other were functionally obsolete for required extensive capex and.
And we will really go through the same sort of analysis here as well on that.
It could be smaller properties that don't really fit.
Our strategy over the intermediate and long term debt could be some markets, where we just have a little bit more concentration and we want and we'll.
And uses as an opportunity to right size and recalibrate from that standpoint.
Candidly there are some assets debt.
Could be a better play for.
For an owner operator, and as part of our billing to selling unencumbered by flag into our management so all of that.
Fit into the calculus as to how we can maximize value.
And for shareholders.
Wanted to be really thoughtful.
Well, we had discussions last year, we weren't comfortable with where the pricing is coming on and see the number on the pandemic, but as we get improved visibility.
We're optimistic here that we will be able to sell it at reasonably attractive price and again using those proceeds primarily to reduce leverage and we.
We think.
Right capital allocation decision right now.
Okay, great. Thank you for that.
Other color and you mentioned wanting to add resorts and.
I guess would you wait till your balance sheet is investment grade or kind of what is your target for that before you would be willing to buy something.
Yes, we certainly aren't going to wait for investment grade on.
I'm, assuming that we believe investment grade would be a little ways off and as Sean mentioned, we need to get into the low threes and clearly we are above that today.
Yes.
You would expect I think more activity on.
On the buy side and the latter part of this year into 'twenty and 'twenty, two and beyond and.
And it clearly is.
As the recovery takes hold and and.
And I don't think it's inconceivable that it.
Could be a pretty significant snapback and particularly on the leisure side.
And I would also expect it's going to be a fair amount of competition and also for those types of assets for the obvious reasons and we all know that this recovery is going to be led by by leisure and both drive to and imply too.
Okay, great. Thank you very much.
Our next question.
Comes from the line of Lukas <unk> with Green Street. Please proceed with your question.
Great.
Hey, Tom.
So just one question left for me and.
Hawaii I'm just curious do you how do you think the recovery is going to progress between <unk> and the Big Island.
Do you expect a similar recovery or some divergence there.
If you think you might get lower right now.
And we.
Lot of credit for Sean and the team all the work that was done sort of pre spin that hotel was always probably too large and 12 on the rooms and.
Getting and right size now and just over 600 rooms, and the right meetings footprint.
Very efficient.
And what typically happens for those that visit is not uncommon for you to begin and Oahu and ended up on the Big Island.
And that's a common track and there's obviously a lot of a lot of flights.
And I think together as we continue to look at ways for saving costs across two properties.
Having that synergy between them is a really really positive and so on.
We're very bullish on both assets.
Great. Thank you.
Thank you.
There are no further questions I would like to hand, the call back to management for closing remarks.
Thank you we really appreciate everybody taking time today and we look forward to discussions with many of you over Ray Jay and Citi conferences.
Stay safe and be well look forward to seeing you all and person hopefully sometime this summer or early fall.
Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation you may disconnect. Your lines at this time and have a wonderful day.