Q1 2021 Xenia Hotels & Resorts Inc Earnings Call
Good day, and welcome to the Xenia hotels and resorts first quarter 2021 results conference call.
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Okay.
I would now like to turn the conference over to Cameron Frosch Senior Analyst Finance. Please go ahead.
Thank you Andrew.
Afternoon.
The hotels and resorts first quarter 2021 earnings call of what I'm.
Im here with Marcel for boss, our Chairman and Chief Executive Officer, Eric Bloom, Our President and Chief operating officer and attend the show, our executive Vice President and Chief Financial Officer.
Marcel will begin the discussion of our quarterly performance Barry.
All of the more details about our operating results in detail in the category.
Some of the projects.
And the seats for concluding remarks the reviews.
Our balance sheet.
The call for Q&A.
Before we get started wondering remind everyone that certain statements made on this call are not historical facts and are considered forward looking statements. These statements are subject to numerous risks and uncertainties as described in our annual report on form 10-K, and other SEC filings, which could cause our actual results to differ materially from those expressed debt.
Bye Bye the conference.
Forward looking statements of the earnings release that we issued this morning, along with the comments on this call are made only as of today may six.
We undertake no obligation to publicly update any forward looking statements is actually very simple.
Yes.
You can find the reconciliation of non-GAAP financial measures to net income and net.
Certain items.
Our remarks on this one.
Non.
Kind of as Paul the available on our website for 90 days I'll now turn of all of them ourselves get started.
Thanks, Andrew.
Good afternoon, everyone, joining our call today.
As you are all well aware, we are now more than a year into the COVID-19 pandemic. Unfortunately, we are starting to see more and more signs of our country. Our industry are starting to turn the corner.
Because the explanation range across the country, increasing in cases of hospitalizations, decreasing the resulting loosening of restrictions and improving as the store traffic of manifested itself in increasing occupancy rates across the industry.
Our portfolio in particular.
Last couple of months.
We are encouraged by our recent results and the operating strength, we continue to feed the water portfolio.
And we believe it is safe to think of the worst pandemic impact now of seniors to be behind us.
The fact that have started the significant impact of logging interest rate in March of 2020 at the rate reasonably strong January and February.
As a result of U S. Revpar for the first quarter of 2021 decreased by $27 77 per cent compared to last year.
Price of an approximate 10 point of decrease in occupancy and 19, 6% decrease in ADR.
The luxury and upper upscale segments experienced a revpar decrease of 40 42, seven per cent and 64, 4% respectively.
Given the severe impact on margin demand here Andrew.
Many quarters of 2020.
We expect the industry to post significant revpar gains over last year during the next three worse.
With those comparisons becoming relatively meaningless.
Like most other industry participants.
More closely of comparisons to 2019 results in the months of head.
Okay.
During the first quarter, we reported the net loss of $64 million.
Adjusted EBITDA was negative $3 $6 million.
<unk> per share was negative 18 says.
With both numbers representing meaningful sequential improvements over the prior to the worse.
Most encouragingly all of the adjusted EBITDA range and adjusted income per share were positive during the month of March.
These results for the quarter substantially exceeded the expectations, we had at the end of February.
We're pleased with both topline and Bottomline performance as our portfolio.
Well ahead of our interest the forecasting both measures as the result of a substantial operational improvements in the month of March.
The significant number of our properties configured much of our same property portfolio of producing positive EBITDA for the first quarter.
22 of our hotels and resorts representing over 60% of the portfolio.
Able to achieve positive bottom line results in March.
And 17 bits of the entire first quarter.
Both of which are of high watermarks for our portfolio since the beginning of the COVID-19 pandemic.
These encouraging operating results were not only the chi into occupancy rates of improved during the quarter.
But also by continued outstanding cost controls era of hotels and resorts as our asset management team has done a terrific job working tirelessly with other operators to limit cash burn and get the breakeven hotels EBITDA at occupancy levels well below our prior expectations.
We had previously estimated that we would need to achieve approximately 40% of occupancy to reach breakeven in the same property hotel EBITDA.
However, in the first quarter, we were able to achieve father of hotel EBITDA of <unk>.
Approximately 35% occupancy.
Significant and encouraging improvement.
Same property occupancy ADR and revpar each of essentially improve journey.
April results of our continued their price.
Yeah.
Our April same property occupancy of approximately 49% and ADR of approximately 200 of $60 per.
At the highest levels, we have witnessed since the beginning of the pandemic.
And we continue to be encouraged by demand from the leisure segments that we expect to the particularly strong during the summer season.
So at the beginning of the fourth quarter of 2023.
<unk> 34 of our current 35 hotels and resorts, which represent 97% of our assets at <unk> 94 per cent of our growth.
<unk> been open and operating.
We are thrilled that are only the remainder of bell was suspended operations Hyatt Regency, Portland, Oregon Convention Center, the slated to recommence operations before yesterday.
Yeah.
Our long standing strategic focus on geographic diversification and a significant concentration of key leader of drags in markets.
Benefited us greatly over the past few months as the allowed us to be ahead of the curve and Recommencing operations at our hotels and resorts.
The decision to take advantage of improving demand trends, particularly in many of our sunbelt locations.
Yeah.
While most of our occupancy continues to be driven by weaker demand.
We are starting to see some green shoots as it relates to the business transient and group demand.
And we are hopeful of strong summer leisure business will provide a bridge to gradually improving demand in these other segments in the second half of the year.
Given our recent results and the operating dynamics, we continue the witness throughout our portfolio.
We have been able to return to profitability sooner than we anticipated during our last earnings call.
Clearly the portfolio of products, we have executed over the past several years has been and will continue to be instrumental as we navigate the pandemic.
And position the company for future success.
Okay.
As we have highlighted many times before we have made significant strides since our listing in 2016 to upgrade the overall quality of the other portfolio.
The improvement in our portfolio quality is obviously, taking a detailed look at the assets, we bought and sold over the past few years.
That's also very clearly worked in our favor.
As the industry is starting to recover.
We continue to believe that having a broad geographic presence without the heavy concentration in a handful of urban gateway markets.
Moving to be beneficial.
As our strategic focus on appeal to the wide variety of the demand drivers throughout the portfolio.
We believe that the fact that many of our hotels are resorts are relatively new to our portfolio.
He has to be an important factor in our ability to come out of the downturn on strong footing.
We acquired a number of exciting high quality assets at attractive pricing in the years prior to the pandemic.
And we believe we are of significant embedded growth potential within our portfolio as a result of applying our transactional expertise and experience throughout the lodging cycle.
As we look ahead to further potential transaction activity, our disciplined approach to the acquisitions and dispositions will continue to guide our decision making process.
Okay.
We are actively evaluating opportunities in our pipeline and are hopeful we will be able to add properties of our portfolio that meet our strategic and return requirements in the years ahead.
However, we are very comfortable of the quality of our current portfolio and the internal growth, we expect to be able to achieve as a result of our transaction activity over the past few years.
Yeah.
One Prime example of our transaction of project management expertise and the investments we've made as part of kind of Yahoo.
We are thrilled to have fully completed the transformational renovation and couldn't be happier with the cash products.
We have built a strong foundation to the laws in place and have created a modernized low class of resort. The mill that will appeal to today's high end group leisure and business customer.
And the to be able to compete very effectively in the coastal California luxury resort market.
As importantly, we I'll just answer that I'm extremely attractive basis compared to recent comparable transactions and a day.
Very significant discounts to replacement costs.
As a reminder, we acquired the 327 million resorts in late 2018 or $170 million.
Including the approximately $52 million renovation, we just completed our total investment of approximately $680000 per key.
An outstanding basis for luxury resorts that offers high end of movies, including its outstanding Golf course, and includes well over 200 acres of fee simple land and a highly desirable southern California location.
Okay.
We also remain bullish of the growth we expect to achieve without the assets. We acquired in recent years, such as hiring key experienced divers Ritz Carlton Pentagon City.
The longed resorts hydrogen Scottsdale once before in Buckhead, Ritz, Carlton Denver, and Fairmont Pittsburgh.
All of which we acquired at attractive pricing and substantially below replacement cost.
We are closely evaluating a number of potential slipped in ROI projects not only of some of these more recently acquired assets, but also at certain hotels that I've been part of our portfolio for a more substantial period of time.
We are excited about entering a new phase of the lodging cycle and the opportunities that we believe will be available to us to build of our hard work and dedication of our strategy.
One of the position we're in today.
On the balance sheet strength, we have ample liquidity and flexibility to take advantage of both external and internal internal opportunities as they arise.
Even more so as a result of of the financing activities and dispositions, we completed last year.
I think we will provide additional detail on our balance sheet strength during his remarks.
I will now turn the call over to Barry as he will provide details on our first quarter performance, our capital projects and the current operating environment.
Thank you Marcel and good afternoon Andrew.
As a reminder, all of the polymerization.
I'll be speaking about reported on.
Of the same property basis, the 34 hotels the corner.
Yeah.
For the quarter, our same property portfolio occupancy of 34, 8% and an average.
The average daily rate of $108 68 resorts.
The current $65 and solutions.
It reflects the decline in one of our 49, 4% as a result of approximately 22 point decrease in occupancy.
The team.
During the same time last year.
Our was down 72, 3% of January 16, 2% in February and 42, 1% in March.
Our results were still down given the pre COVID-19 levels. We're encouraged by the sequential improvement month over month during the quarter as well as our continued strong functioning.
The Testament of our portfolio mix components breaking of the jewel assets.
As Marcel mentioned 34 of our 45 hotels resorts are currently open and operating and we reported Recommencing operations This month and the Union.
Hi.
George mentioned.
Which was the only open a few months before the COVID-19 pandemic began early last year.
As in many other markets, we expect strong leasing demand over the summer months and I'm confident that this is the right hand of the open the system.
Particularly given the effects of it we've seen out of the Tolerability of the March specific new marketing campaigns for leisure business all of it.
For periods of the hotels primary target margin on steel group visits to return.
Yes.
For the quarter with growth.
Performance exceeded our expectations largely due to strong March results, which is true.
Primarily by strength of lateral leisure segment, and specifically the drive to leisure markets and destinations of Epocrates.
January occupancy was 25% and an ADR of $170 41.
Continuing to moderate the softening in business with the seat during November and December.
As expected headwinds of notable increase in occupancy to 34, 5% the HR.
The $182 per <unk>.
And particularly the combined Valentine's day Presidents' day weekend.
Sean.
The portfolio also benefited from the resident demand.
As a result of winter storm here.
March occupancy continued decrease in demand for occupancy of 45, 4%.
And an ADR of $202 seven.
Staggered staffing schedules safety openings in California and increase the corporate.
Corporate transient and group demand.
The performance has exceeded our expectations.
We currently estimate for the month of April our 34 who've been operating hotels outperformed expectations as well.
40% occupancy and ADR of approximately $216.
Yeah.
Representing approximately half of the pool of already achieved 38% of the greater occupancy for the quarter, including 90, 650%.
The properties in key west.
Birmingham, Charleston, South Carolina Savanna, Alexandria, Orlando, Phoenix, generally continuing to reflect our leisure hotels the drive to markets.
Most of the March Hyatt centric key west achieved the highest monthly ADR index history.
In terms of profit 17 properties achieved positive hotel EBITDA for the quarter.
13 of the park.
12 properties, excluding resorts compared to the first quarter of 2020.
So the most of the March 'twenty two properties achieved positive adjusted EBITDA.
The management teams at our hotels continue the strong focus on managing expenses very difficult revenue environment.
For the first quarter departmental expenses declined 63, five per cent compared the 2020 nearly matching the 66, 8% decline of revenues.
<unk> expenses off of concerned to be largely <unk> declined by $42 one per <unk>.
Our individual hotels of performed well on the topline we achieved some remarkable performance on the bottom line and highest since the key west.
Scott.
Pumps.
EBITDA margin of 65% 38%.
The 9% respectively. During the first.
Sort of hotels begin to experience challenges the sourcing labor Andrew.
The teams are working on.
The mini programs to attract and retain later Andrew.
Andrew to satisfy the needs of our hotels guests.
As we expected each of booking windows of starting to lengthen and consumers are moving to adapt to an environment, where early booking tours in the room at the most desirable hotels in the given market.
We are working with our brand managers of the Egypt tightened the relaxed cancellation guidelines.
Place over the past.
12 months.
Our hotels continue to refine the service models.
The <unk> outlets wherever possible in order to sort of demand.
Looking ahead, we continue to see strong lead the pages of the coming months of our resorts and drive to leisure destinations.
We track the through a metric we referred to as forward booking velocity, which represents rolling 90 day for transient bookings.
And at the end of March transient business on the books for the second quarter was up 235 per cent compared the transient business on the books for the first quarter at the end of the year.
So you mentioned before on the corporate transient side, we continue to see improvement of volume, particularly from the regional firms one voice of the turned it off the back on the growth calling on customers.
The transient business from large volume accounts for approximately 75% from Q1, 'twenty Q1, 2021 and increased sequentially each month.
Average length of stay in the segment of extended due impart to a group of travelers combined business and the interest as well of some longer term savings.
Portfolio, given the significance of local radiation and certainly been aided by the phenomenon. We look forward to larger companies with terms of our offices and getting the people back on the.
Also as noted previously on the group side of our hotels continue to enjoy business in 2021.
The sports and the gel NBA and MLB.
The key regions of our significant success in the spring.
The continued to boost demand for Eaton Vance patchy and sporting events and now seeing increasing interest in bookings from smaller association corporate meetings and the regular basis.
We continue to feel significantly more inquiries for the business for the second half of 2021 and for 2022 with lead volume for all piece of gates increasingly our margin frequent cells of 65% to January to March.
These 50 largest group hotels booking pace for 2022 is increasing steadily with regeneron the books of increasing probably 13% from the end of Q4 of <unk>.
Q1.
I would now like to turn to a review of our capital projects in progress for the year in the first quarter, we spent $72 million.
Our capital expenditures in the first quarter were primarily spent putting the finishing touches on the park Hyatt hobby are where we've now completed $62 million of information.
In the first quarter, we reopened the former specialty restaurants, neutropenia 90 concept between bottom of iron.
The renovation of the golf clubhouse, who the new restaurant concepts developed in conjunction with what we share with your blades for the <unk>.
In February and has opened the growth strong reviews and strong ratings.
In 2021, we continue the estimates spending constant of 40 million books managers.
Many of these 2021 products were originally scheduled for 2020 will differ.
We will be moving forward with the second and third quarters, given the strong return profiles.
These include the development of each supporting the new entre of social banking with Hyatt Regency, Scottsdale, and the restaurant and lobby renovation of Wisconsin accounts.
We expect to renovate and reposition the restaurant and lobby of one of the story the bucket in the fourth quarter.
In addition is underway on three significant rooms renovations and one significant resort pool area of innovation, which could you give us first in the fourth quarter, depending on when those conditions.
In addition, we are well underway on several ongoing building systems infrastructure projects and 15 of our properties accomplishing. This work all of our hotels are still relatively quiet, we can minimize disruption.
The fact, I will turn the call over to Ashish.
Okay. Thanks, Barry I'll provide a quick update on our balance sheet.
Continues to be strong our current liquidity of approximately $715 million, which is about $5 million higher than it was in early March our liquidity reflects approximately $355 million of unrestricted cash of approximately $360 million of Undrawn undrawn capacity on our line of credit.
We continue to have a well diversified balance sheet with no debt maturities until 2023, and our balance sheet is one of the reasons, we are well positioned to take advantage of opportunities in the years ahead.
So as we look ahead, we expect the momentum we saw in March and April to continue and we expect to continue to be adjusted EBITDA.
The positive going forward.
In conclusion, the strong relationships with industry participants, including wonder as brokers of management brand companies that will service serve well as we move forward.
We have significant experience in capital allocation the various points in the lodging cycle that's true.
Record is a good indicator of travel will approach the opportunities going forward.
And the Fab will turn the call back to Andrew for our Q&A session.
We will now begin the question and answer session to ask the question you May Press Star then one on your telephone keypad.
If you are using a speakerphone please pick up your handset before pressing the keys.
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At this time, we will pause momentarily to assemble our roster.
The first question comes from Bill Crow with Raymond James. Please go ahead.
Hey, good afternoon guys.
Two questions.
Maybe for you first.
I think the labor issue has been discussed in just about all of these calls and I want to ask it from a slightly different point of view, which is.
Any indication in the guest reviews, they're starting to get frustrated by some of the staffing shortages.
Hi, Bill.
I think.
The short answer is yes, but I'm not certain that it's directly a result of of staffing shortages or it's also the 90 hotels continue to provide full services.
Some of the comments, we've tried really hard to ensure our hotels, which are all full service hotel the weekend of restaurant openings of our truck that we're offering the services the bringing back valet parking things like that the guests want and expect I don't think we've reached the point of.
The real dissatisfaction yet.
One reason why the industry would trying so hard to get and stay ahead of that so we don't have people kind of rejecting hotels, Jose interesting and fun and enjoyable place per se.
Yeah, Okay, thanks, something to keep an eye on I guess.
Michelle.
There's a.
Really strong bid out there for assets these days.
Just wondering whether that prompts you to think about.
Continuing to refine your portfolio by selling maybe some noncore assets, where maybe that arent quite as of.
As high quality as the ones that you've given.
You've acquired more recently.
Good afternoon Bill.
Sure.
In general what Youre seeing out there currently I think is the there are some assets that are the other people perceive to be.
Highly attractive, especially in the current environment, but a good part of the leisure component and certainly looking for the high end customer and of its one of the best premium pricing, where you're willing are starting to see some some very aggressive bidding on those assets.
And as you pointed out of there being the key transactions recently.
The Arctic zone, some pretty eye popping.
Cost per key.
We're getting completed I think you are still seeing.
And one of the capital's chasing kind of of small cell of deals kind of one of the spectrum.
Youre not seeing a.
The kind of throughout the industry I guess, when you kind of go down a little bit of and quality level, you probably most of it quite as quite as robust of an environment, yet and I think there is a low bit just simple still waiting to see how some of these assets are recovered.
Before getting too aggressive on trying to see if there is more of the will come to market over time. So I think it is.
Now there are some very specific situations, where youre seeing some pretty aggressive pricing.
As you know this is kind of dividends the words.
Part of your question of Hot as it relates to how we look at it.
In our transaction activity.
As you know we've always been active on both the disposition of acquisitions are kind of throughout the cycle and we will always look for opportunities the team to upgrade the quality of level of the portfolio.
Where we are today, we're pretty excited about what our portfolio of looks like now because we've got so much heavy lifting kind of coming into the pandemic.
We love that the majority of our assets is coming some really great growth potential going forward. So.
We look forward to move the stock.
The harvest total debt and we think there are some real opportunities for us to drive some additional growth coming out of this so soon.
How transactions of something we'll continue to look at on both sides of the both sides of the ledger.
But really are very focused on driving growth in our existing portfolio.
Great. Thanks for the time I appreciate it.
The next question comes from David Katz with Jefferies. Please go ahead.
Hi afternoon, everyone.
I wanted to go back to Avi Arad, which you talked about in your prepared remarks.
You know of having seen it and sort of you know.
Walk us through the road of of doing the repositioning work how are you thinking about really the ramp.
And the ultimate return on that property.
Because we look at it obviously in the context of of leisure.
<unk>, but the world has sort of changed since the roadmap you laid out and so I'd love just a little more color around that.
Yes.
Hey, David It's Barry.
I think.
As Marcel mentioned and as I've mentioned previously prior calls of the product is top notch and certainly at the same misgivings and all of the what we did more or how do we get it I think when you go back and think about the original business plan. It was to really increase leisure on top of of what.
It's historically been a strong group base and what we're seeing is income out of it and that's really part of the timeline Sandy recovery right now will be capable of we've seen so far in.
On the really good and strong reaction from local Lisa market, which we.
Part of what we were hoping for and feel very confident with the product and amenities really matched out I think especially with where the free beverage offerings. You've put in place I think we're also very enthusiastic and perhaps even more so than we've expected about what we're seeing the terms of.
Moving to the group profile moving forward day.
A total of this relatively small size of can focus a lot of attention on the group and has a lot of the always on a lot of meeting space, which we only added June through the renovation we are experiencing significant achieving savings of increases in group rate forward future bookings and that was certainly part of our <unk>.
Strategy, but I think the hotels and our asset management team of it really pleased with how receptive the guests has been the understanding.
This is a product that could be position of $100 above.
Before moving.
<unk> seen the resistance.
And the place where the first starts to matter most of which is the group's of putting on the books for 'twenty, one 'twenty two and 'twenty three and then looking to the always top of it off with the better and more pronounced leisure component and enjoyed in the period prior to all of our ownership in prior to the renovation.
Was there a follow up Mr. Katz.
Oh, sorry about that I apologize for the mute button.
The essence of my question is do you think the return opportunity is better or worse or sooner or farther.
Given how the world has changed since you said about with it.
I think the ultimate.
The ultimate assets. So how do we feel about the return opportunity is probably greater than when we bought frankly the <unk>.
This is just starting at the moment.
The completely modern resorts can compete with any of the luxury resorts in the.
In that region, and we feel to us having been able to complete it for the amount of we put into this asset and I highlighted this in my comments, obviously debt.
The less than $700000 of key for desktop of the resorts, knowing what it would cost of build the resort of mine yesterday.
We feel librarian of extremely good play so.
I have a high level of confidence around speed ultimate return and what we will be driving out of those assets.
The question of Markups will lead us.
The timing of certainly COVID-19 did not help in the and kind of looking at how long does it take the get the Airbus.
So as Barry said.
We're very encouraged by the short term respond per getting particularly with the whole strategy will add around how do we move this asset up pretty significantly on the <unk>.
Our size was there are absolutely having sat with them and obviously it becomes a matter of building on group business over time, and that's going to be a level of dependent on just kind of the strength of approved this coming back here in short term, England.
And we had when we acquired the recall, David Reimposed syndrome materials about our stabilized level of EBITDA.
Moving to more than double.
The EBITDA sort of the highest Finjan Inc.
I believe that with summer.
And Thats certainly is attacked our view on that.
Barry mentioned.
Could it take a little bit longer, but stabilized new certainty that level of if not better.
A lot of debt consists around.
Market share gains the frankly other properties in the comp set of the tab versus.
<unk> the somehow because of the simplification.
So.
We feel.
Particularly around non trajectory.
Subsequent to.
The hotel you can see some of that.
The market.
In terms of the car.
The training so.
That will also.
Kind of on the positive.
Volume opportunities.
The statement.
Okay.
Perfect. Thank you.
Next question comes from Ari Klein with BMO capital markets. Please go ahead.
Thanks, Marcel you noted some of the potential ROI opportunity you have in the portfolio you may be elaborate on some of that was and then.
Given the demand.
The demand is returning is there any opportunity to pull some of those forward into this year.
Okay.
Yes.
Obviously are perfectly slightly building on the exact opportunities because frankly there.
The real effort going on internally right now to do some some deep dive analysis throughout our entire portfolio in the same way of what can we do.
Coming out of the as an annoying.
And forecasting how we think the recovery will take over the coming out of this where there might be some opportunities that may not have been quite as obvious calling into the into the pandemic. So we're going through the process right now Barry alluded to a few rooms renovations in the portfolio. That's the we're looking at debt.
Could be pulled forward a little bit from.
The real kind of starting the process at the end of this year as opposed to maybe one of would've looked at doing it in.
The following year.
In some cases, we all of this things of were supposed to be happening last year that we actually pushed back and that our average this year that which are some of things very very highlighted in his comments.
We do think debt.
And I alluded to in my comments there.
Our a good number of assets of the boss in.
In the year surprises to the of dynamic now looking back on absolutely, we're probably even more excited about buying them. When we did at the prices that we did see and aware of companies, saying, they're getting bill right now.
And the kind of the quality level, so having those assets in our portfolio, having an opportunity to relate the.
That's right of the business plans that we have heard some of those already and then maybe even go a little bit beyond the first of all of those assets and for some of the assets that we've had in our portfolio of living longer and we're pretty excited about being able to come uplifts with kind of a short list of where we think we're going to drive the best returns out of some of these investments that we've made.
And obviously, we will be we will be highlighting those as we move forward over the next few quarters.
Thanks, and then just on the labor front, how should we think about the expenses kind of flowing back back in as he tried to be a little more aggressive here too.
The higher some of our people to keep up with the pace of demand.
I think there certainly is.
If occupancy and rate were stable.
You might not be able to sustain the margin that we ran.
In the quarter and in particular in March, but I think.
What we'll see is the labor.
The labor is going to come back given the.
Lock step with demand increases, we believe and certainly based on our forecasting. So I think it's really hard to to say labor is going up by ex or by y.
We are pretty confident moving vehicles, obviously continue improve margin.
Today in part because I think we've learned a lot.
All of learned a lot about.
The staffing model and the structure of the business of what gets done in 2000 and.
And what position we're positioned we have a lot of overlap.
I think.
The best answer I can give us the it will move in the least.
In the near term involved in relative lockstep with increases, but certainly we are still very confident the we ended up with a more refined cost model when we get back the stabilization that we had.
Pre COVID-19.
Okay.
Alright, thanks for the color.
Again, if you have the question. Please press Star then one on a touchtone phone.
The next question comes from Austin, where Schmidt with Keybanc.
Please go ahead.
Great. Thanks, and good afternoon everybody.
You mentioned just how pleased you are with your basis on the acquisitions you guys have completed in recent years and I'm curious if you think that's simply a function of where we are in the cycle and the growth that we haven't had the.
Driving that or is it more of kind of what Barry was touching on some of the savings and potential margin improvements coming out of the cycle.
But what's kind of your take on this you know on the strength in pricing.
It does at replacement cost have anything to do with it and then how do you guys capitalize on that.
Coming out of the pandemic.
Well clearly we are very pleased with the base of the when we when we acquired these hotels when we did acquired them and it was one of the driving factors.
While we did buy the hotel when we did of kind of a bulk of really high end high quality hotels at pretty attractive pricing.
Sterling compared to replacement cost of the only improves over time clearly.
The cost of it moves of I'm afraid of.
Significantly over the over the last couple of years, so compared to February even in a better position than we work when we acquired of hotels.
We do think of there are some some operational upsides.
Some of the things that Barry talked about but the big driver really is the sense our thesis around the one of those assets is completing the tack on where it was before as it relates to.
The demand segments of a play too.
And.
And in many cases.
And of the balance that we have in demands between just the various segments zone.
Most of these hotels played very well of the leader of components, which is obviously going to be helpful. In the short term.
We also you'll see like I said earlier in my comments around the <unk> transaction activity, that's going on right now.
Sales that are in the type of locations that we bought hotels coming into the pandemic are in pretty high demand in particularly high end hotels and those kind of the bulk of those kind of markets are in pretty good demand.
So I can guarantee you that all of those assets that I mentioned in my comments, we would not be able to volume today for the prices that we volume that's coming into the pandemic. So so whereas you would've kind of thought the opposite of IV would have solved.
Kind of at the tail end of the cycle you are buying hotels, maybe you are buying those at a high level compared to where you could buy items coming out of the downturn here in the short term the doesn't appear to be to kind of maybe there just isn't a real pullback and the type of pricing in those assets and in many cases, they seem to be increasing the.
You, obviously have seen some of the transactions that have happened.
Barry the type of markets, where we own the hotels and we're availing ourselves of the significantly better basis. So now so we're pretty pleased with owning those properties that we have and again our thesis is intact and if anything.
We're.
Even more excited around some of the outside of that we can get out of those assets.
I appreciate the thoughts there and then you talked a little bit about sort of the acquisition pipeline, maybe starting to build a little bit.
Versus the earlier this year and these ROI opportunities are starting to make a little bit more sense, but just curious what type of capacity you have today.
Without needing to either of raise equity or or sell of hotel to move forward with you know an acquisition or any type of significant.
Capex spend.
Yeah on the Austin to teach the second question. So in terms of the capacity, obviously, we've talked about our liquidity the significant amount of that.
We do have restrictions under our corporate credit facilities, which do limit some of our activity so with regard to acquisitions we.
We can make them if they are funded with equity.
First one with regard to capital expenditures, we have of bucket that we can apply for this year and I believe the buckets $80 million or so.
And thank you to the supply from last year. So obviously significantly ahead of us.
Our current capex guidance of funding.
There are additional capex, so so absolutely.
The buckets around.
The activity.
Asked about.
Sure great. Thank you.
Youre welcome.
The next question comes from caller, the Tory with Janney capital markets. Please go ahead.
Thank you. Good afternoon first question I have is on the the group side of things can you talk a little bit more about the pace of what you have on the books for.
For the back half of this year.
Early 2022 as well on the.
The bookings that are coming through right now im assuming theres capacity restrictions or limits, perhaps contemplated in those bookings some of them.
Interesting.
Perhaps how much group space you even have available.
For future periods right now.
Thanks, Howard couple of things too.
<unk>.
Restrictions I think when we're seeing the further out of booking are I think there is certainly an inherent assumption that at some point of restrictions go away I will give you. An example of where there arent the.
The <unk> restrictions right now.
We speak we are hosting our first large scale group and the Grand Cypress is 460 rooms of nice.
They are doing three bank of yields per day for 800, so now.
They're using a little more space in the building of the other liability is based off.
A little a little bit, but there are no in Orange County, Florida. There are no restrictions on how many people can be in a room as it relates to COVID-19 restrictions. So.
So we're watching that but we are not seeing that as of restrained to booking in general our hotels tend to book way more smaller meetings and larger meetings. So we view that as the plants across our portfolio as well.
As it relates to the second half of this year.
We have more group definitely on the books for the second half of them, we did a quarter ago. So that continues to be net.
Bookings are exceeding cancellations.
One of the things, we're really focused on and we think that's of great Mark for the.
'twenty, one and 'twenty two is debt.
And I mentioned it in the prepared remarks, our lead volume is growing considerably for all future dates.
And that volume increased 65% from January to March and a lot more inbound inquiries.
Specifically to.
Page for the back half of 2021 of compared to the piece of the back half of 2019, two years ago, which we think of the more relevant comparison.
We're not about 45% remains but rates were up seven 1%. So the warranty group pediatric about that might impact GAAP really narrows beginning of September.
For the fourth quarter of wound down 30% compared to flow through 2019, and fourth quarter rates on positive again for 'twenty. One 2019, so of each week passes we set up of continuing to look better and better for the second half and really beginning post labor day.
For 2022.
We're seeing a lot of anything moving out of 'twenty. One still is moving into 2022, and we think that that's reflective of.
Our management companies.
Sales teams the half of our properties from each of them.
National sales teams of the biggest brands that we work with the.
Managing our assets right now.
For income tax for 2022 were down 33%.
Compared to the same point in 2018 for 2019, so again looking at in 2019 as the.
The better benchmark.
The rate is up slightly so we're enthusiastic about that as well our hotels of always had pretty short lead times.
And we think that will we're really well positioned to capture of pent up demand the markets, where we're seeing the strongest.
Strong assault of strength for 2022 of our Orlando, Houston, and Dallas and those of the markets, where we've made significant investments over the last few years. So we think thats certainly part of one of those markets are attractive and when people of booking each of those markets and part of the strength, we see across the portfolio for the future dates.
Okay. That's very helpful. As a follow up I'm interested in your perspective on.
ADR here really the sustainability of the ADR that you saw in April is the move through the summer I mean, when you look ahead, you've got some seasonality here, you've got strong leisure trends potentially of a little bit of less perhaps on the business transient side of things so.
Your thoughts about those factors and how they might impact our rates both for you and for the industry broadly.
But I think.
Every month.
We come out of the <unk>.
Challenges, we've had is the new learning for our sales there is no question that in the.
Weaker demand markets, we got some outsized weight this year that we werent expecting and it is probably not sustainable from the summary, we know that the.
In industrial markets and the very different rate profile in June July and it doesn't work.
It does in March and April, but I think from our perspective as it relates to our portfolio I think we're pretty confident that as occupancies increase we're starting to be able to use a lot more.
Or have a much greater ability to compress right and so as hotels continue to pick up in occupancy in Denver, and the discipline of targeting day kind of without more the bar.
Bottom quartile of the portfolio, that's running much lower Occupancies average 10 points those until the increase that we think we're going to see as business travel comes back I mean, we there is no question that we're seeing individual business travel increase of people as one of them to get vaccinated, so kind of as people get back into the hotels.
The much better ability to move.
So we were of that ends up I think of maybe hard to say, but I think some of the factors to think about it youll see.
Softer.
In the summer than you saw in display in the traditional which of resorts, but you'll see better rates than we saw in the winter months in more several of Orient destinations and in your general kind of.
Major market.
Commercial efforts.
And what's been occurring to us, particularly too it's just looking at the past few weeks.
We don't really after the spring break season, and there was a lot of discussion in the industry around out of us.
Does the business look like coming out of kind of the traditional spring break Lisa and leader of potentially dropping off.
What we've seen over the past few weeks of debt.
The occupancy and ADR held up very well, which is encouraging because of just shows you that there is obviously some of the demand is very solid about that as of the discomfort of properties midweek.
And that gives us a lot of confidence as we look ahead to the summer debt, though there'll be a reasonable.
There'll be reasonable results here reported as per experienced coming into a really busy leisure of summer season, which then will provide a good great again to the debt.
The continued strengthening of corporate transient and group of it to kind of the post post labor day environment.
Okay. Thank you for the detail that's all for me.
This concludes our question and answer session I would like to turn the conference back over to Marcel for boss for any closing remarks.
Thanks, Andrew.
Thanks, everyone for joining us today.
Certainly encouraged by the recent trends that we're seeing in the business and certainly in our portfolio and look forward to updating you in the quarters ahead of them hope.
Hope, everyone stays healthy and safe and we look forward to seeing many of them and the person tunica.
The conference has now concluded. Thank you for attending today's presentation you may now disconnect.
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