Q1 2021 Summit Hotel Properties Inc Earnings Call

[music].

Okay.

Thank you for standing by and welcome to the Summit Hotel properties, Q1, 2000, and 'twenty, one and earnings call.

At this time all participants are in a listen only mode.

Please be advised that today's conference is being recorded.

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I would now like to hand, the country summit to your speaker today Ms.

Sure Adam with Y'all Senior Vice President of Finance capital markets and Treasury. Thank you. Please go ahead Sir.

Thank you Justin and good morning, I am joined today by Summit Hotel properties, President and Chief Executive Officer, John Standard.

Please note that many of our comments today are considered forward looking statements as defined by federal Securities laws.

These statements are subject to risks and uncertainties, both known and unknown as described in our SEC filings.

Forward looking statements that we make today are effective only as of today may five 2021 and we undertake no duty to update them later.

You can find copies on our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at Www Dot S. H P Reed dotcom.

Please welcome Summit Hotel properties, President and Chief Executive Officer, John Standard.

Thanks, Adam and thank you all for joining us today for our first quarter 2021 earnings conference call.

Overall, we were extremely pleased with the operating trends, we experienced in the first quarter as the gradual and sequential demand improvements, we began to see and the summer and fall of last year accelerated beginning around Presidents' day weekend, when Revpar reached a post pandemic high of nearly $90.

Since then demand has continued to improve consistently as March revpar finished above $65, which was a 27% month over month increase from February and preliminary April results suggest a revpar of nearly $70 representing continued sequential growth despite transitioning out of peak spring break season.

As importantly, our outlook for the broader industry recovery has accelerated in conjunction with these improved demand trends.

Progress on vaccine distribution and easing regulatory restrictions combined with significant pent up leisure demand drove our first quarter operating results meaningfully above our expectations, even 75 days ago.

As a result, our corporate level cash burn and March was less than a million dollars and we now expect to be very near or cash flow positive in April two months earlier than we telegraphed on our last earnings call for.

For the first quarter, we reported pro forma revpar of $53, which is a decline of 45 per cent compared to last year and 59 per cent compared to the first quarter of 2019. However.

However, it also represented a 23% improvement over the fourth quarter of last year and compares favorably to year over year, Revpar declines and the top 25, and urban markets, a 48% and 55% respectively.

We also continued to gain market share and the quarter as our Revpar index increased to 133%, which represented a nine percentage point increase relative to our competitive set.

And it's still meaningfully above our historical penetration levels.

While lodging demand is generally still heavily concentrated and leisure guest we've experienced strong growth during both weekdays and weekends through the first four months of the year, but particular and March and April.

For example over weekends in March our hotels average more than 75% occupancy and approximately $90 revpar and weekdays average more than 50% occupancy for the first time since the onset of the pandemic.

Weekdays during March generated an average revpar of nearly $57, which is more than 25% higher than the next best monthly average over the last 12 months.

During the first quarter or nine resort hotels continued to lead the recovery with first quarter occupancy exceeding 76% and revpar exceeding $100.

This was driven by a strong March when occupancy ran nearly 85 per cent and revpar was over $130. As a result of continued leisure demand growth related to robust spring break travel.

Our 42, non urban hotels achieved more than 60% of occupancy during the first quarter and and March more and more than 70% occupancy for the month and nearly 85% on the weekend as well.

While urban hotels continued to lag the broader industry recovery, our urban assets also benefited from the recent positive trends reporting post pandemic highs and occupancy and Revpar in both March and the first quarter and exceeding 50% occupancy and April.

The outlook for our urban hotels is getting more constructive and we are scheduled to reopen our holiday and express and the Fisherman's Wharf district of San Francisco on May 10th the final hotel on our portfolio to reopen and post pandemic.

Encouragingly, we are also beginning to see some progress and our ability to derive drive better rates across the portfolio.

March ADR was 9% higher than February and 14% higher than January and looking forward and ADR pace and may is 6% higher than where April pace at 30 days ago.

Combined with additional occupancy growth or May Revpar paces up 17% compares to April to pace. This time last month.

Year to date through April the most robust ADR growth within our portfolio has been among our urban hotels and hotels located in CBD locations.

Each experiencing ADR growth of approximately 27% from December of last year.

Although booking windows remain extremely short and forecasting our business continues to be challenging we started to see a decline and the percentage of rooms nights booked near to our on the night of stay.

For example, transient occupied room nights booked within 24 hours of state declined from 37% to 27% from January to March and nights booked within 72 hours a day declined from 60% to 50% over that same period.

This still represents an extremely short booking window relative to pre pandemic standards. We view this as another encouraging trend, reflecting a generally healthier demand environment.

While demand has returned to a level that allows our hotels to be consistently profitable certain elements of the operating environment remains challenging.

We continue to operate our hotels utilizing a very lean and staffing mouth, which consists of approximately 14 ftes on average are less and 40% of pre pandemic staffing levels.

Rehiring hourly staff, particularly on the housekeeping Department has been a well documented challenges across the industry as enhanced unemployment benefits and additional stimulus checks have created some temporary disincentives to return to work.

Despite these challenges and primarily occupancy driven top line growth our asset management team has done a tremendous job controlling operating expenses, which declined more than 4% on a per occupied room basis compared to the fourth quarter of 2020, and approximately 28% year over year.

As a result from the third consecutive quarter, our portfolio was profitable at the hotel level and has now been profitable on accumulative basis for the duration of the pandemic with an aggregate revpar up just $41 demonstrating the clear benefits of our efficient and flexible operating model and our March and first quarter Hotel EBITDA of $6 2 million.

And $7 $7 million, respectively represents the strongest monthly and quarterly hotel level performance post pandemic, and fact hotel EBITDA and the first quarter was nearly equivalent to that of the previous two quarters combined and we anticipate the second quarter to improve sequentially.

During the first quarter, we invested approximately $3 6 million and our portfolio on items, primarily related to planned maintenance capital. We also completed the last installations of our mobile key and RFID guest room block initiative that was started last year to provide for a contactless check and experience that guests are more frequently opting to use.

We continue to expect to spend between 20 and $30 million and capital expenditures for the year, but we are evaluating accelerating additional renovations to start as early as the fourth quarter of this year, where we see considerable ROI opportunities supported by improving demand trends and we can take advantage is still lower than historical occupancies, which will.

And as a modest disruption from the projects.

On May one we completed the contribution of six wholly owned hotels totaling 846, guestrooms into our joint venture with GIC.

And the valuation of $172 million represents just under $205000 per key and after taking into consideration. The expected fee stream, we will earn for continuing to asset manage the hotels. It equates to an approximately mid 8% cap rate on actual 2019 NOI.

The transaction generated approximately $84 million of cash proceeds, which will be used to increase our investment capacity reduced corporate leverage and enhance our overall liquidity.

We've also agreed with GIC to reset our liquidation promote for all post COVID-19 investments, including the six assets, which creates a difficult to quantify but meaningful improvement to our economics related to the venture.

The joint venture now holds 11 assets with total investments of nearly $450 million and affirms the commitment from both parties to find unique and opportunistic investments to continue to grow the partnership.

We were also extremely active enhancing our balance sheet during the first quarter, including successfully completing a convertible notes offering that generated gross proceeds of $287 $5 million and a one 5% coupon.

We used $21 million of the gross proceeds to enter into capped call transactions that increases the effective conversion premium to 75% or $15 26 per share.

The notes mature in February of 2026.

As discussed on last quarter's call. We also amended our senior unsecured credit facilities, which extends the covenant waiver period through March 31, 2020 to modify its covenant testing through year end 2023, and provides access to the full availability of our $400 million revolver $150 million of which can be funded used to fund new.

<unk>.

This acquisition allotment has been increased to over $170 million. Following the contribution of the six assets to the GIC joint venture and the amendments also provide us with and unlimited ability to fund acquisitions with equity issuances.

Subsequent to quarter and on April 29th we completed an amendment to our $200 million joint venture of revolving credit facility.

These amendments provide for a waiver of certain covenants through the end of this year with modified covenant testing through the second quarter of 2023.

As a result of recent capital markets activities and transactions. We currently have approximately $440 million of total liquidity, which includes approximately $50 million of unrestricted cash on hand.

Today, our weighted average interest rate is approximately three 3% and we have no debt maturities until November of 2022, and ample current liquidity to repay all of maturing debt through 2023.

We also recently announced important additions to our management team and board of directors trade Conklin and will be joining us on may 17th as our new CFO.

I've worked with trade for more than a decade. During his time with bank of America and he has proven himself as a well respective strategic thought leader and the industry and someone that will greatly enhance our team.

Previously, we announced that our Mena bellies, Dan will be joining our board of directors. After our annual meeting may 13th amine and brings a diverse skill set and experience base to our already accomplished board.

And we're thrilled to be able to attract such great talent to our organization.

In closing, we continue to gain enthusiasm on the recovery of our business and the outlook for summit in particular.

Leisure demand remains the primary driver of the early recovery and all indications point to and incredibly robust summer travel season funds are also emerging for the return of corporate travel as case counts and hospitalizations related to the virus decline and vaccine distribution and broadens.

And more normalized school and work environment looks to be taking shape by at least labor day, and while the trajectory of the demand recovery may be more gradual and the leisure component. We're also bullish on the meaningful pent up corporate and group demand, we expect to provide the next leg up and the recovery and with that we'll open the call to your questions.

Ladies and gentlemen, if you have a question or comment at this time. Please press. The Star then the one key on your Touchtone telephone. If your question has been answered or you wish to move yourself from the queue. Please press the balance sheet.

Our first question comes from Neil Malkin with capital one.

Hey, guys.

First question.

It seems like ADR.

And we're kind of been flat over the last couple of quarters.

And just wondering can you maybe give us some idea colored for.

Are you going to be able to start pushing that higher either kind of shifting the mix or just pushing on rack rate.

You know as you see them.

And kind of go up, especially for leisure and the middle and <unk>.

Summer and and how does.

The local and regional business travel.

Play into that.

Over the coming months and are you seeing more of a return.

On that side as well.

Yes. Thanks, Good morning, I think first of all we have started to see some progress on the rate side as we said on the prepared remarks on our March ADR was about 14% higher than our January ADR. So we are seeing some progress we do expect that trajectory to continue and I think particularly as we look into the summer and some of the the higher.

And especially holiday weekends Memorial day fourth of July those type of weekends, we're going to have and ability to push rates beyond what we've seen even early and the recovery and into spring and even over spring break season, which was very very strong I do think and we've talked about this on some previous calls I think the path back for rates is going to be somewhat dependent on getting some level of corporate <unk>.

<unk>, if nothing else just shifting the mix back to what has historically been a higher rated customers. So I think it is going to be a little bit of both again I think youre going to see continued progress on the leisure side and rates continue to grow on the leisure side on the stronger weekend, but for rates to get closer to where they were pre pandemic, we're going to need to see some of that corporate business come back and.

Okay.

Again, you know just kind of the way your portfolio is.

Position I would expect that you'd see that local and regional come back obviously price before the larger corporates.

And so you know or have.

Have you seen that continue to pick up as well.

Is it still kind of spotty.

And because the STR data shows a lot of pickup and weekday and finally, so you know.

That was the second part of that question.

Yes, we are seeing it describe it as somewhat sporadic, but we've seen we've actually seen some of our best growth, albeit off of a much lower base mid week, and I think that points to at least some level of corporate demand returning and we have pockets of it for example, we've got a hotel and Hillsboro outside of Portland, That's full and it's really full with all corporate and now thats a little bit of a unique.

<unk>, we've continued to see good corporate pickup and a market like silverthorne, where we've got some car company business that does high altitude testing out there. So we have started to see some of that I think as you suggested I think what we'll see the first leg back is going to more be more regional and local type of travel and we're starting to hear it more from some of the national accounts that they are put at least putting <unk>.

<unk> back in place to one returned to work Intuit and returned to travel we've we've heard it from some of our banking colleagues, who are getting the point, where they're starting to plan for some travel even before they formally get back to the office even over the summer. So I think we will continue to see it again I think that's going to be a more gradual recovery than we've seen on the leisure side, but we are starting to see some.

And some level of pick up there.

Okay, Great and other one from me is on the.

And the GIC and the six contributed hotel.

The it looks like they were mostly non coastal.

Was that purposeful and how did you get to those assets and and.

Again are you continuing to.

On.

Like the acquisitions are going to be essentially all within the G. I see over the coming on I guess core.

Orders.

Yes.

In terms of how we established a per portfolio. We did spend a fair amount of time with GIC going through our existing portfolio, finding finding markets and assets.

Fit with kind of their per investment parameters, where they felt like they could lean and more on pricing I do think this represents a fairly reflective subset of our overall portfolio, it's kind of right on top of it from a revpar perspective, I think from a pricing perspective, it demonstrates kind of the durability of the type of assets that we have so again, we were very happy to get it to get there.

And we ultimately think that the pricing that we're able to contribute the assets, we're going to be able to take those proceeds and hopefully redeploy them into an asset that we can generate better risk adjusted returns and I do continue to think that the most likely vehicle for growth for us and the near term is within the venture for the reasons that we've discussed frequently.

It lowers our capital requirement that creates a fee stream and and promote structure that ultimately enhances returns and so I think at least for the near to medium term. It is the most logical growth vehicle for us.

Okay. Thank you guys.

Thanks Neil.

Yes.

And next question comes from Austin, <unk> with Keybanc.

Hey, Good morning, guys just wanted to touch on sort of the revenue management strategy, given the pickup and pace you referenced and May versus April and I think you guys had been more focused on grouping up.

You know kind of during the pandemic to grab any demand that you can put that out there. So how does this pickup and pace really shift that revenue management strategy.

If you're at a point now where you're.

More willing to.

Take on less group I guess and then can you also compare how the pace pick up is between urban hotels versus more resort locations.

Yes, let me start with the first one I do think we did have a strategy that was trying to create some sort of group.

<unk> layer of business and the assets and you think you see that if you look at our index, our Revpar index, it's significantly higher midweek and it has been on the weekend and we expected to be able to sell and drive some rates on on the weekends, but having that base level of business and on and the midweek has helped us create kind of over the full seven days.

And for the full month, better Revpar index, and we think overall better performance there will be some level of shift moving forward I think the message I think a lot of particularly over the summer where we see very very strong leisure demand with our operators is to kind of stop pricing. The pandemic. You know, we think we're going to have and ability to really push push rates.

On a go forward basis, and our hope is that over time as we get later into the summer into fall and we're gonna be able to land some layer and some higher rated pieces of corporate business on top of that.

Look I think we've seen better growth on and.

And of the urban and CBD locations and our portfolio again, I would just remind you that the baseline there has been much much lower and I think from trajectory of the recovery of those is longer but we have started to see some pickup and those types of assets as well.

Got it that's helpful. And then one on one of the switch to us on the mezzanine loans and some other modifications was there was there any change to the purchase option.

Weighted to two and the mezzanine loans, specifically that were extended into March of 2022, and can you remind us what the terms are on those purchase options.

There was no change and the anything to the purchase option and the only change was really we were made current on any interest that had been deferred and then we did extend the maturity date.

As of March of 2022, and Thats really the only change there and that's about a $7 million.

For up to $7 million incremental funding for us to complete the overall purchase of the assets if we exercise our option on the 90% equity interest.

And okay, and that $7 million would assume that thats a just outright.

Purchase 100% owned by our on balance sheet.

Yes, it's actually for 90% of the equity, but it would be on that.

Balance sheet got it got it okay. Thank you.

Yes, thanks, Dan Thanks.

Thanks Austin.

Our next question comes from Chris <unk> with Deutsche Bank.

Hey, good morning, guys.

John you talked you touched on a little bit and in the comments, but maybe on the on the labor front.

It's a two part question and one is.

And occupancy rebound further you potentially have to bring back more workers.

And you see incremental pressure, even if it's only kind of temporary and the second part is any update on I.

And any discussions with the brands the operators about permanent changes to staffing models on housekeeping and things like that.

Yes look I think to the first question I think you've heard this probably on all of the earnings call. So far this quarter labor continues to be a challenge. Some of it is temporary and I think some of it is the fact that folks have unemployment benefits that are paying and more to stay home and Dan arent going to work and that's going to abate over time I think the portion of that.

And that's more structural where folks have just left the industry is probably a more manageable component of what we've seen change and and the labor market. So look we've tried to be forward thinking in terms of making sure we keep our best people.

And the directors of sales and keeping particularly where we have very strong teams in place and making sure. They have the right resources and as we've seen demand increase we're increasingly and trying to make sure. We devote the resources to get our managers off the front desk and out of doing housekeeping jobs, it's been challenging obviously, but I think the team's done a very nice job doing that and I do think some of that.

Pressures abate as we get later and of the year and into the fall from a brand perspective, I think those conversations are still ongoing and I think we're just now getting to the point where.

And we're starting to talk about reintroducing more normalized brand standards, we're still not cleaning checkout debt.

We're sorry, we're cycling and stay out or is that really the biggest change from our perspective from a profitability perspective on differences and brand standards and I think how we've reintroduced breakfast and some of the other standards are still being worked out and we'll probably start to see more of those changes and we get into the summer and the fall, where we've got a more normalized demand environment.

Okay very helpful and then as.

And as we think about acquisitions, while your hotel REIT peers are seem to be focused a little bit more on resource right now Scott and area, where you guys play.

Play play Big in on the on the full service side. So the question is if there is a little bit less focus on on urban from from your peers does that potentially make you look at some full service suffers from skinny full service stuff that you might not have looked at kind of and are in the pre COVID-19 normalized environment.

Yes look I think we're always going to just solve for returns and that's always been what's driven our acquisition and really our capital allocation process just margin generally and if you look at the contribution of the assets to the GIC venture and kind of the implied cost of what what at what cost and contribute dose. We think we're going to have opportunities to redeploy that.

Capital and its something thats going to generate a higher risk adjusted return.

I do think theres going to be opportunities and urban markets I think that urban has got a different trajectory from a recovery perspective than youre, seeing and costal markets and drive to non urban or suburban type of markets, but I do think that that type of market is going to come back and so we're certainly going to underwrite those two different type of investment opportunities differently, but we'll look into.

Those markets. If we think we can get the right basis. There I think we will continue to evaluate we did generally described as inefficient operating models. We don't talk a lot about the difference between full service and select service and we're probably not going to go out and buy a 700 around 70000 square feet and meeting space Hotel, we would look to do a compact full service hotel.

And like we did with the Marriott and we own and Boulder.

Which is technically and upper upscale full service hotel, but it's run very efficiently and if we.

Can find those type of opportunities at the right basis, and we can generate the right returns, we'll certainly look there.

Okay very good thanks, Sean.

Thanks, Chris.

Our next question comes from Daniel <unk> with Bank of America.

Hey, good morning, John and Adam.

And my.

Question is my first question is on the asset contribution to the JV can you just help us understand why specifically these ones and how.

How we should think about the balance of summit remaining portfolio. So is there like and opportunity to prune the remainder or.

Or should we think about more contribution from the JV ahead and so on.

And again, we went through a process with GIC to evaluate the portfolio. We felt like we found a portfolio. That's relatively representative of one of the portfolio that we own at summit and to the portfolio Thats held within and the JV. We obviously tried to find markets, where we felt like GIC could be more constructive from a pricing perspective.

I would say that there was nothing that was either completely had to be in there or anything that was completely off the table. It was somewhat of an iterative iterative process I think we looked at the contribution and this plays and kind of the second part of your question in terms of how we think about the rest of the portfolio. We will look at anything Opportunistically, we never felt like we had to create the liquidity.

And by contributing the assets, but we did feel like it was an opportunistic way for us to raise some capital that again, we think we're going to be able to redeploy overtime and do something thats going to create higher better risk adjusted returns I wouldn't preclude us from continuing from contributing additional assets and there I wouldn't say that that's the baseline plan again, I think we have plenty of liquidity today.

And we've done a great job managing the balance sheet, we've got tremendous amount of runway and we've got plenty of dry powder to pursue additional acquisitions.

We'll certainly continue to evaluate dispositions to the extent that again, we feel like we can sell those and redeploy the proceeds and is something that creates better better risk adjusted returns.

And just because you also mentioned.

And that in your prepared remarks, right income like you basically bolstered your investment capacity a little bit with this contribution.

And so is that are you do you have any.

Like do you favor.

One.

And opportunity over the other in terms of like do you prefer.

Deploying that into like an acquisition or.

Maybe you've been growing the JV, even more or even.

Is that like Capex and your own existing portfolio like how should we think about that investment capacity.

Yes.

As we've said over the last several quarters, we think theres going to be great opportunities for us to buy we don't have anything to announce today, but I would say we continue to make sure. We stay very very active and the acquisition market and then and I think our pipeline is probably as busy as it's been at any point.

And the onset of the pandemic. So I do think it creates great capacity for us it creates capacity that all ticket ultimately could be used to put assets into the venture. So one of the things that we've prioritized and structuring the balance sheet is ensuring that we've got flexibility and optionality and so we've been able to do that with whether its with the convert raise of these contribution so it could take many different forms.

And again, we do think we're going to we'll be able to find some unique compelling opportunities.

And thank you so much.

Thanks, Dan.

Our next question comes from Michael Bellisario with Baird.

Good morning, guys.

Good morning, Mike.

John just a couple more on the JV contribution how are you.

Are you guys thinking about balancing how big that part and the company could get versus your 100% owned a fully consolidated portfolio.

Yes, it's a good question, Mike I think that we're at $450 million of assets and there are 11 assets of 72. So it's still a fairly small percentage of the portfolio I think we still have runway to grow it I don't think it will ever be the majority of the assets that we own and the business, but I do think that there is.

Some runway for it to be larger.

Yeah.

Got it and then maybe a little bit longer term focus here, but how are you and GIC and you're thinking about eventually recycling some of the joint venture assets, and then maybe mechanically and who can trigger those decisions.

Yes. It was it was never meant to be a perpetual vehicles, we set this up to.

It would be something that even even when it was set up was set it up and a moment in time, where we felt like we could leverage and operating platform and help narrow and cost of capital disadvantage that we felt like we face when we are pursuing acquisitions.

Today, I think again a lot of that holds and the fact that we can create this fee stream that ultimately and enhances our returns, but we never met debt from this to be perpetual we have structured mechanisms within the venture debt contemplated and exit.

Then try and be thoughtful around them, allowing us to do that either in the form of our ore.

Cash or stock and so I wouldn't say that that is a near term thing but over time.

We'll certainly look to exit this is an IRR driven vehicle in terms of how we calculate the promote and so.

And it over and over time, we're not there yet, but we will look at exiting and kind of the normal course.

Got it helpful. Thank you.

Thanks, Mike next question. Our next question comes from Bill Crow with Raymond James.

Hey, John also on the JV why fix assets I mean, they could buy they can buy anything you wanted to throw at them, where you're trying to solve.

Kind of a capital raise for circled acquisitions from the JV going forward or why is it <unk>.

<unk> six.

Yeah look no magic to six Bill candidly I think again, we wanted to focus on what was a reasonable size kind of to Mike's earlier question. Yeah, we didn't want to put half of the assets and the portfolio and there we didnt want to do one or two assets and go through the process to raise five or $10 million. We felt like we threaded the needle around this is still a significant transaction and a raise.

And $85 million plus or minus through the transaction gives us real additional liquidity. It gives us real additional buying power. It helps us pay down some debt. So we felt like it was a meaningful size without being too significant portion of our assets, but there was no no magic to five or six or eight or whenever it was.

And at what point do you start to worry about shrinking the company too much relative to G&A and public company costs and all the other funds.

Yes look I mean, obviously, we sold some EBITDA here, but we do retain the assets and as I said on the previous question and I think ultimately we're likely the ultimate owners of or the most logical owners of some of the assets there and the existing venture and so it is a consideration.

As we tried to talk through we do think we're going to have some opportunities to redeploy this capital and ultimately find some opportunities for external growth. We're seeing we think we can underwrite higher returns. So again, we don't feel like this was a huge needle mover in terms of making the company too small and because we have created some capacity for us to go out and continue to grow externally.

Donnelley.

Okay. Thank you.

Thanks Bill.

Our next question is a follow up question from Neil Malkin with capital one.

Yeah.

Hey, thanks, everyone.

I asked a question that hasn't been brought up on the.

GIC JV.

And then can you give any specifics on.

What you have temporary identified or core.

LOI or anything like that.

You know in the works I mean should we expect to hear something.

And the second quarter.

What is the timeline and kind of looked like on that and that's it.

The first one.

Yes.

We don't have anything to announce today as we said earlier, we are working through a number of opportunities.

Hopeful that's not optimistic that we'll find some opportunities to redeploy this capital, but I certainly don't want to commit to any type of timeline, there will continue to do and opportunity.

Ultimately, we were solving for ensuring that we can redeploy proceeds or invest proceeds just capital generally at the right risk adjusted returns.

Okay and other one is I think kind of along the lines of Bill's question.

And then you guys have you're always talking about solving for IRR being agnostic focused on the asset but there is a you know how and how do you kind of balance that.

Being a public company and given the size.

Of the portfolio and market cap, it's kind of been kind of running and place arguably.

You know.

Yes.

And being a public company you know how do you think about that and and and you know it is the next couple of years a good time to.

No.

Increase the portfolio.

Gained from scale gains and market cap.

How much of that is the discussion.

And internally when when talking about capital allocation.

Yes look we've been a very transaction oriented company. Historically, if you look at the 72 assets that we own five of them are from the IPO portfolio. We've transformed the company over the last nine or 10 years and so I don't think we need to do that again I think we love the portfolio that we have but I think we will continue to be a very transaction.

<unk> business, both on the buy side and the sales side and as I've said, we think we're going to have some some very compelling opportunities to continue to grow the business externally.

Alright, thank you.

Thank you and our next our next question is a follow up question from Austin <unk> with Keybanc.

Thanks, guys I appreciate you keeping it going here.

Wanted to ask about the ROI opportunities you referenced in your prepared remarks and accelerating.

Some of the Capex into the fourth quarter of this year can you give us a sense of magnitude and what type of projects and returns.

And Youre looking at.

Yeah, when we kind of gave our initial capital Capex guidance for the year, we talked about about $20 million to $30 million range on a consolidated basis about 15% to $25 million on a on a pro rata basis that includes the start of really three renovation activities and the back half of the year that we intentionally put off until.

We saw.

Where we got more conviction around the trajectory of the recovery from a demand perspective, given that we've been pleased with that we are looking at pulling forward. Some projects the spend in 2000 and the incremental spend in 2020 will likely be fairly minimal a lot of the work will get done either late in the year and the first parts of next year, but we.

We are probably looking at and accelerating another three or four projects were getting them started late this year, just given the better demand trends, we've seen and the first four months of the year.

Or are these more room renovations or how would you characterize the work that you are planning to do what are the three and four hotels and blood.

Rooms and public spaces.

Got it okay. Thank you and in a period of time, where we think we can do it with generally lower occupancies and less disruption.

Okay makes sense. Thank you.

Thanks, Jonathan.

And I'm not showing any further questions at this time I'd like to turn the call back over to President and CEO John standard.

Well. Thank you all for joining us today I know, it's a busy morning for everyone. As you can tell we're excited about the future of our industry and the outlook for summit in particular, we look forward to seeing many of you hopefully in person sometime soon and thank you.

Hello, Ladies and gentlemen, this does conclude today's presentation. You may now disconnect and have a wonderful day.

Okay.