Q1 2021 Chatham Lodging Trust Earnings Call
[music].
Greetings, ladies and gentlemen, and welcome to Chatham Lodging Trust first quarter 2021 financial results conference call. At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation and anyone require operator assistance. Please press star zero and your telephone keypad.
Reminder of this conference is being recorded and is.
And now my pleasure to introduce your host Mr. Chris Daly. Thank you Sir you may begin.
Thank you Jim.
Good morning, everyone and welcome to the Chatham Lodging Trust first quarter 2021 results conference call.
Please note the many of our comments today are considered forward looking statements as defined by the federal Securities laws. These statements are subject to risks and uncertainties, both known and unknown as described in our most recent form 10-K and other SEC filings.
All information of this call is as of May Force 'twenty, 'twenty, one and otherwise noted and the.
Company undertakes no obligation to update any forward looking statement to conform the statements actual results or changes and the company's expectations. You can find copies of our SEC filings and earnings release, which contain the reconciliations to non-GAAP financial measures referenced all of this call all of our website of Chatham lodging Trust Dot com.
And to provide you with some insights of the Chatham the 2021 first quarter results allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer.
And as Craven Executive Vice President and Chief operating Officer, and Jeremy Wegner, Senior Vice President and Chief Financial Officer Chair of the.
Session over to Jeff Fisher, Jeff.
Thanks, Chris Good morning, everyone. It's great to be here again with everybody. This morning, we're seeing a strong revpar growth trend and our portfolio after bottoming out and December sequentially versus the prior month Revpar grew 18% from December to January 13% from January to.
February 25% from February to March and 14% from March to April the gains have been driven by both increases and occupancy up to 65% and April from 40% in December and right, which is up 15% to of $116 and April.
From a $101 in December we expect to see continued sequential revpar improvement moving forward as leisure travel demand remains very strong and we are seeing the return of the business and transient traveler beginning.
Most importantly, and we are real happy about the sorry April Revpar finished the $75 and at this level, we expect to be positive cash flow after all debt service and corporate overhead and getting the cash flow breakeven is critical to protecting shareholder value. We have the second of all salary to reach the is critical.
The point, which should reaffirm that our corporate actions and our portfolio performance had been outstanding also we're thrilled that our Warner Center development is now projected to open and the 2021 fourth quarter and it's going to provide incremental revenue and <unk> growth and 2022 and 2000 and.
And 23 as it ramps up.
And our negative cash flow has only been $35 million since the beginning of the pandemic.
The exclude our Warner Center development debt, our net debt has actually declined $46 million over that same time frame as we executed a highly successful sale of our residents and and mission Valley and we've been producing great operating results throughout the pandemic that minimized cash.
Cash burn.
Our focus on select service hotels, and particularly extended stay hotels, along with our strong operating team has kept our balance sheet strong.
We have no real debt maturities until 2023 and by the way all of those can be absorbed into today's available liquidity.
We firmly believe the Chatham will emerge from the pandemic financially healthier than many of our lodging peers, who have and will continue to burn significant amounts of cash and equity value as such we will be better positioned to be equivalent of acquisitive and further grow F. F O as we move.
The forward.
On the acquisition front as you've heard from others deal flow has been light.
Similar to the financial crisis, its kind of takes some time for deals to come to light and become available, but this time hotels have been losing money lenders are holding most available cash and forbearance agreements are expiring.
This should provide some interesting opportunities to grow the company over the next few years, we look forward to that.
From a top line perspective, our sales and revenue management teams continued to deliver outstanding results. Our first quarter Revpar index was over 126 still well above our 2019 already strong Revpar index of 118.
The impressive gains are being driven by islands outstanding direct sales efforts from its national regional and local sales teams as well as concentrated revenue management efforts, ensuring that were quickly adjusting to the diverse demand sources and today's lodging environment of.
Although our booking window has been for sure. We are seeing a lot of bookings for the summer and markets like Portland, Maine, Portsmouth, New Hampshire, savanna, and Anaheim and and some of those markets ADR will be above 2019 levels, we expect summer leisure travel.
To be very very strong.
Some funds of course are concerned about the return of the business traveler will they return at all to what extent will of the business traveler return.
And I can tell you the business and transient travel is returning and we are seeing demand return from big Tech companies and Silicon Valley Shipbuilders are coming back to life, San Diego and Portsmith patients doctors and medical consultants are returning to meta.
Call centers and Houston.
And it related projects are starting up and we're seeing some in turn business and some of our markets and Thats leads by Silicon Valley.
We're seeing small functions return to some of our hotels with meeting space, Google has announced it's going to fast track. Its office reopening plan other tech Giants, such as Facebook, Uber and Microsoft with whom we do a lot of business are bringing employees back into the office and that will be occur.
And being all over the country.
From a timing perspective, once we move past labor day, we believe business and transient travel will be robust as.
As the recovery continues and the business traveler does come back we will continue to get more than our fair share of revenue because we have the largest concentration of extended stay rooms of all lodging Reits at 58% and the business traveler is going to get the most value and are kind of the hotels our upscale.
Extended stay hotels provide us the flexibility during periods of growth of weakness to diversify our customer base to maximize revenue of thesis, we believed and espoused for almost four decades with these hotels.
Our relative Revpar performance throughout the pandemic has been strong despite lackluster performance and our most significant market Silicon valley for the quarter of Silicon Valley Revpar was $54, an ADR of $106 and occupancy of only 51%.
The good news is we are seeing business traveler production from some of the Big Tech companies out there as I stated previously we are starting to see the business traveler and return to our hotels and along with the office reopening when you combine this with other tech companies, who are giving employees the opportunity.
To work from alternative locations.
Those workers will have to come back frequently to the central office to the headquarters and we're bullish that corporate demand and Silicon Valley, especially post labor day, we will be even stronger with that kind of travel together with other inbound travel than it was pre.
<unk> pandemic.
Among our top markets, South, Florida remains on fire and our Fort Lauderdale residence Inn and posted the highest revpar of our top markets with Revpar of $161 down just a little bit from last year, but almost double its revpar and the fourth quarter, just three months ago.
No.
As a matter of fact I was looking over our weekend ADR and Revpar for the past weekend and water day have popped up as having and ADR that was up double digits from our 2019 peak ADR, we expect to see that kind of.
And and on this summer in the some of the leisure markets and hotels that I've mentioned, a little bit earlier, our bogie and setting our rates and revenue management will be to exceed 2019, Adr's and I believe we'll get there.
From an operating expense standpoint, we continue to be hyper focused on every expense on the island side. We have a team of analysts that are and day to day touch with every hotel GM and invest and 100% of their time to help each hotel micro manage its expenses as Dennis highlighted and <unk>.
Our release, we produced incredible cash flow.
Flow through of 84% on the sequential revenue improvement from the fourth quarter to our first quarter on a $2 $6 million increase and hotel revenue, we drove an increase and GOP of $2 $2 million. Yet again. This is more proof that our platform with island is.
Producing great results as trends improve in 2021. This focus will need to be maintained to continue to produce strong flow through to the bottom line. If you look at our 39 hotels 32 of the 39 generated positive GOP and the first quarter and our top five.
<unk> of GOP, where all residence Inns Gaslamp, San Diego Fort Lauderdale, Anaheim Mountain view, count of California, and New Rochelle, and New York or.
Our liquidity is up from year end, we are cash flow profit is positive our balance sheet is strong and our actions over the past year of protected shareholder value, while providing flexibility to add value down the road given our portfolio of attributes of our industry, leading platform with island, our ability to appeal.
And to the diverse customer base that our room type and hotel type of allows we believe we'll be able to return to 2019 levels sooner than most of our peers with that I'd like to turn it over to Dennis Thanks, Jeff I want to fill and some additional revenue and the Revpar facts 21 of our 39 <unk>.
<unk> had occupancy over 50% and the quarter all hotels have been opened since the beginning of the pandemic weekend and continue to carry of the day and the first quarter are Friday Saturday night, Revpar was $61, which is up 20% over our weekday revpar of $51 with the differentiation primarily due to occupancy.
Which was almost 60% on the weekends.
And again up 20% compared to our weekday occupancy of 48%.
Our most significant brands had the highest occupancies with residents and at 60% Homewood suites of 58% and Hampton at 60%.
Our suburban New York assets, and New Rochelle, and White Plains had average occupancy of 72% and the quarter and ADR of $150 only down 16% over the 2021st quarter. Despite the challenges of the urban New York City is going to face for years to come until the international traveler comes back and full.
Our hotels are already performing pretty well and again, a differentiation and our portfolio of that often goes unrecognized is of the location of many of our assets that are able to benefit from diverse demand drivers are San Diego Gaslamp residence Inn, Despite no convention business had occupancy over 70% and.
And again, an ADR of $150 again diversity of demand two hotels saw and ADR increase.
And 11 of our 38 39 hotels, so occupancy gains over the 2021st quarter.
Our top five absolute ADR markets, where our residence Inn Fort Lauderdale, Our residence Inn, San Diego Gaslamp, Our Hilton Garden Inn Marina del Rey, our embassy suites, Springfield, and a residence Inn and White Plains, New York All of these hotels had <unk> over $140 and I also might add you've got and.
The incredible representation, there with areas from New York to D C to California to Florida.
Our top five absolute occupancy markets and the quarter, where the residence and Fort Lauderdale, the residence and Anaheim residence and Mountain view, California, which had occupancy of 79%, our homewood suites, and Farmington, Connecticut, and our Hampton Inn and suites Houston Medical Center all of these hotels at occupancy over 75% and these are certain.
Not just leisure markets again look at the diversity of markets from Florida to California to Connecticut to Texas.
This is the first time since the pandemic, we've seen the Silicon Valley hotel pop into the top rankings and with the Hampton and Houston coming in another positive indicator for lodging as patients doctors consultants are starting to resume procedures and treatments.
We continue to see and average length of stay much longer than historical levels for our portfolio, especially with respect to our residents and and Homewood suites brands, our residents and hotels. Our average length of stay was $4 five nights and the first quarter compared to $4 four nights and the 2024th quarter and $2 four nights and the 2021st quarter.
And almost double.
For our Homewood suites hotels, our average length of stay was $3 seven nights and the first quarter compared to $3 three nights and the 2024th quarter and $2 seven nights and the 2021st quarter.
Looking at our segmentation production compared to last year, our corporate revenue was off.
37% versus the decline of 56% and the fourth quarter, and 65% and the third quarter, which was our best performing segment on a year over year basis and are reflective of some of those green shoots and corporate travel and other types of transient travel that Jeff referred to in his prepared remarks.
Our retail production is off 45% versus 60% and the third and fourth quarters and our government business is off 42% versus $45 to 55% previously.
On the corporate revenue negotiated front as well.
And we saw a pretty good boost and our local negotiated segments. As we scored some good wins and a handful of Homewood suites markets book, and primarily government nursing and prison staffing books of business.
Let's talk for a minute and about our best in class operating model the pumps out of operating.
Profit and positive hotel EBITDA for the first time since the pandemic, we generated positive GOP and hotel EBITDA each month during the quarter. Our first quarter operating margins were 30% on revpar of $55, which is of 20% margin jump over our fourth quarter operating margins of 25% on revpar of $4.
$7, obviously again proving that the operating leverage within our portfolio is strong.
Throughout the quarter margins improved meaningfully with operating margins of 23% and January 27% in February and 37% and March Island.
Island Hospitality has dedicated resources on their operations team. The dedicates time every day analyzing data and communicating with our general managers and all of our hotels on a real time basis, managing staffing levels and expenses.
And so that kind of focus which is necessary to control of the pennies and increase our profit.
It's going to be very important for us as a team.
And as lodging recovers to control cost as most of as possible and avoid the expense creep as much as we can labor is a bit of concern I think as many of our peers have talked about.
It is our biggest expense and it has been and <unk>.
Seems to be a challenge to find steady employment on a per occupied room basis of our 39 comparable of hotels payroll and benefit costs were approximately $30, which is down approximately 10% from our 2024th quarter and down approximately 24% compared to our first quarter of 2020.
Our employee count as of the end of the quarter was 915, which compares to approximately 825 at year end and and approximately 1700 hotel level employees before the pandemic.
Fantastic job by our team holding employment relatively steady despite our growth and strong revpar growth trends.
The current employment environment as I said is becoming more challenging to hire and retain hourly employees given the amount of money people are making collecting unemployment and certainly we believe that benefit must and sooner rather than later, we have to be very creative with respect to incentives such as signing bonuses performance bonuses and stay bone.
This is to be able to hire and retain our talent.
And the first quarter, our complimentary food and beverage costs have come down 55% year over year, our breakfast spend was 410000 and the first quarter, which is down from over $900000 last year and even if you look at it on the CPR basis cost per occupied room. Our breakfast is now of $1 50 per room versus $2 80 last year.
Our evening hospitality costs are basically zero with less than $500 and the quarter.
As we move forward, we do believe the complementary food and beverage offices will be changing.
As customer desires change and health and safety protocols and those should benefit our bottom line. We are working closely with our brand leaders at Marriott and Hilton sharing our experiences and our visions for what we believe that should look like.
Another quick data point is that our utility costs were down year over year, despite the horrific freeze and Texas, where many property owners saw major increases due to energy shortages. We had made the decision to lock in prices and our Texas markets. Prior to this year and thus did not get jammed.
On the Capex front, and we spent approximately $1 million and the first quarter with our budget for the full year about $6 5 million and we invested approximately $9 million and our Warner Center development.
The Warner said and the development continues to go according to plan and we're very much looking forward to opening that hotel and the fourth quarter before I turn it over to Jeremy I do want to highlight something.
Is really a lot of initiatives, we've put in place on corporate responsibility and ESG initiatives and early March we rolled out our <unk> and <unk>.
Girl corporate responsibility report for 2020, we have always been committed to ESG matters, but this marks our first memorialized reporting of both our historical average and our renewed approach to sustainability as a direct result of the release of our report our substantial efforts have been recognized by investors and others and the industry and.
<unk> institutional shareholder services, ISS, who gave us improve ratings from December and all areas, including governance, which improved approximately.
Approximately 17% from seven two of us rating.
Our environmental scores, which improved about 50% from of nine two of five rating and social which improved 80% from a rating of 10 two of rating of two.
And we strive to improve our ESG initiatives going forward with a particular focus on day issues over the next year.
With that I'll turn it over to Jeremy.
Thanks, Dennis good morning, everyone.
<unk> Q1, 2021 revpar of $55 represents a 17% increase versus our Q4 revpar of $47 Q1 is generally a seasonally low quarter for our portfolio with absolute revpar levels in line with Q4. So we are very encouraged by the 17% increase versus Q4 <unk>.
The quarter Revpar increased from $47 and January to $53 and February and $66 and March and Q2 is off to a great start with revpar of $75 in April.
Our $55 Q1, Revpar represents a 54% decline from our Revpar in Q1, 2019, and our April 2021, Revpar of $75 represents a decline of 45, 3% to April 2019, we expect Revpar declines relative to 2019, we will continue to be.
Reduced throughout the remainder of 2021.
Through our significant efforts to contain costs, we were able to generate of Q1 hotel EBITDA margin of 11, 1% and GOP margin of 29, 9%, which is quite strong in light of our absolute revpar level of $55 per the quarter.
Our Q1 2021 hotel EBITDA was $3 5 million adjusted EBITDA was $1 2 million and cash flow before capital, which represents hotel EBITDA less corporate G&A cash interest and $2 3 million of principal amortization was minus $7 $6 million.
Chatham portfolio has demonstrated remarkable resilience during the pandemic and our unique focus on extended stay hotels has enabled us to get through the worst of the pandemic with significantly less cash burn and then most of our peers.
Our April 2021, Revpar of $75 is generally what we think we need to be free cash flow neutral through corporate G&A and debt service and when I say free cash flow neutral and that includes approximately $2 3 million of the quarter lets see MBS principal amortization, so and aprils revpar level, we believe our unrestricted cash balance should.
Remained level, while we pay down approximately $2 $3 million of debt per quarter.
In addition to the outperformance of our hotels during the pandemic, we have taken a number of actions that will help us to emerge from the pandemic with a reasonable amount of leverage and liquidity and November we completed the sale of the residents and mission value for $67 million, which allowed us to repay 20, the $26 $7 million of mortgage on the property.
And $37 7 million of borrowings under our credit facility the.
The $67 million sales price represented a six 5% cap rate on the hotels 2019, NOI of $4 3 million and of 14 times EBITDA multiple on 2019 EBITDA of $4 8 million.
In March we completed the sale of our 10, 3% interest and the innkeepers JV for $2 $8 million, which generated a gain of $23 $8 million.
We have received over $100 million of cash distributions over the life of our Innkeepers JV investment since we made the initial investment of $37 million and 2011.
Importantly, the sale of Innkeepers will meaningfully reduce our leverage going forward our share of the innkeepers that was $88 million and the innkeepers JV had net debt to EBITDA of 10 times in 2019 and.
And Q1, 2021, we issued $21 $3 million of equity through our ATM and direct stock purchase programs and an average price of $14 15.
And we felt it was prudent to issue, there's very limited amount of equity and all.
The repay of $12 $5 million loan that was scheduled to mature in 2021, our only debt maturity before 2023 and offset our cash burn in Q1, we take the decision to issue even a very limited amount of equity seriously and we believe this made sense and will allow us to avoid issuing larger amounts of more costly debt or dilutive.
The equity linked securities like we've seen some other companies do we believe the steps that we've taken to reduce leverage and increase liquidity coupled with our return to revpar levels, which we believe are consistent with positive cash flow.
We will enable chatham to exit the pandemic with reasonable leverage and solid liquidity.
And at March 31, we had $145 million of liquidity between our unrestricted cash balance and our revolving credit facility availability.
$12 $7 million of this liquidity was used to repay our 2021 debt maturity at the end of April so pro forma for that our liquidity of approximately $132 million.
We believe our balance sheet is now in great shape since we no longer are burning cash and we now have no debt maturities until 2023. This is very important because it provides time for hotel performance of continued to recover before we need to refinance any debt and should enable us to avoid locking and high cost debt or doing other more dilutive financings.
Our positive free cash flow and solid liquidity also provide us with the capacity to acquire hotels should attractive opportunities arise.
That concludes my portion of the call operator, please open the line for questions.
Thank you, ladies and gentlemen, and if you'd like to ask the question. Please press star one on your telephone keypad and confirmation tone will indicate your line is the question queue. You May press star two if you'd like to remove your question from the queue. The participants using speaker equipment and may be necessary to pick up the handset before pressing the star of keys.
Our first question comes from the line of Ari Klein with BMO capital markets. Please proceed with your question.
Thanks, and good morning.
And the ADR front.
A lot of positives from the leisure side of things and how should we expect the plant that's clean out and the rest of the portfolio is there still of lot of low rate lowering of the occupancy that should turn to higher rate business.
And are you still expecting the internship programs and Silicon Valley of this summer.
Let me start by just talk and then Dennis you can talk about the in terms.
Look the business side of the equation is still I think challenged with ADR.
We're doing about 15 or even up to $20 better and.
Some cases compared even to the fourth quarter. When you look at the segmentation of reports for corporate and business travel, but still without the volume of business traveler, there and without that also coming through the various reservation systems at the higher ADR.
Yes.
Youre not going to see the kind of results and.
Till that volume picks up.
Yes, I think all of the intern program Ari.
And Silicon Valley, which is normally where we have most of the four hotels are full with with tech in terms of lot of those programs are not occurring this summer, especially at the at the size that they did previously.
We have heard of certain companies are looking and believing they're going to do kind of late summer early fall and turn chips, but additionally, we do have and we think we have.
And even our Tysons, our Springfield hotels, some intern and our DC hotels from intern business on the East coast, which is a little bit different for us and prior years, and then we expect a little bit of and turn business up in Seattle, but its certainly its still this summer is not going to be.
The significant book of business that it was for us and in 2019 and prior but we do we are encouraged that we are going to see some of it.
What you want to look at from a macro perspective. It is just the.
And the amount of office re openings that you read about and how online or in the newspaper or whatever and.
And how and how surprising they may be in terms of announcements about office reopening that or that's earlier than most people had expected and you're starting to see a little bit of that even in New York City and.
And when you see announcements.
From different states about the relaxation of restrictions and of course not to make of political statement, but we're living and quite an interesting state on that front, but.
And why.
As you see more of the relaxation and the vaccination rates.
And go up I think that Youll see a faster acceleration of that kind of travel.
Thanks of that and then just on the labor side. How are you thinking about staffing is occupancy and kind of lab.
And what do you think it ends up relative to the kind of pre pandemic levels.
Yes, I mean listen it's a challenge as I said in my prepared remarks, I mean, we're.
And we're throwing out all kinds of incentives to try and hire or retain talent.
Thankfully one of the again one of the benefits of our portfolio, which is the extended stay hotels and as I talked about our length of stay is still quite high compared to what it was pre pandemic is given the size of our hotels, we arent, we arent cleaning them as often so.
I think for us, we get a little bit of a benefit there, even though labors of challenge and the fact that our our guests are staying a little bit longer only and a couple of instances of we had an issue with turning rooms.
To drive revenue or sale of rooms for the night and quite honestly that was in a couple of what I would call those sort of not extended stay hotels. So we had a lot of a lot of room turn on a couple of nights, but thats again thankfully for us it hasnt been a significant problem, but finding labor over the next <unk>.
Many days is going to be important and is a major focus of our of our operations team.
Yeah.
I appreciate the color.
Thank you. Our next question comes from the line of Kyle Mangus with B Riley. Please proceed with your question.
Good morning, this is Kyle on for Brian.
Alright.
I was curious if you could talk a little bit more about the tenant demand youre seeing how you're getting from the summer and coastal Maine, and New Hampshire, and maybe more specifically the kind of booking momentum youre seeing heading into June.
Yeah.
Yes.
And it's very strong and coastal new Hampshire.
We've seen especially over the last 45 days of significant uptick in <unk>.
Room reservation demand for our Port Smith exited and Portland hotels, I think we're very bullish on what that some of it looks like as we talked about really last year. Those markets were closed to essentially any inbound travel until I think it was July 15th so even though on a year over year basis that <unk>.
Be very strong and as Jeff talked about especially in those markets.
We are pushing ADR of <unk> and we believe those are markets that should even compared to <unk> 19 have pretty high if not higher ADR and 2019 so.
We're very encouraged by the booking pattern for those markets, we think it's going to be really strong.
Great. Thank you.
And then as far as capital allocation is concerned.
I was curious kind of of how you're how you're weighing looking.
And looking at acquisitions I know you mentioned the pipeline is a little slow right.
Right now, but kind of how are you looking at acquisitions versus getting capex to a more normal level as we head through 2020, one into 2020 two.
Okay.
Well on the Capex side I think we are.
Conservative there and and our hotels because of the money we've spent over the years, our and very very good shape anyway, so by having even up to 24 months of very little Capex going on.
We will come out of the pandemic and good shape, we have allocated some money to one or two hotels that have about 10 years into their cycle for what really is just the soft goods cycle redo.
Not extremely.
Spence of so on the Capex side, we'll be looking just fine.
And acquisitions are something that just will continue to dig for.
Work on.
And to expand particularly and the extended stay arena you know are kind of presence there.
And I think it's kind of take as we've commented and I think others, a little bit more time here for some of these opportunities to really come to fruition.
But we will continue to utilize our kind of long standing industry contacts and relationships.
And I think we will make some deals down the road here.
Great. Thanks, that's all from me.
Thank you.
Thank you. Our next question comes from the line of Tyler Battery with Janney Capital markets. Please proceed with your question.
Hey, Thank you good morning.
First question for me and I wanted to zero in on the the short term trends and what Youre seeing out there and I. Appreciate all the color on April and I. Appreciate all the the market commentary as well, but it sounds like you expect continued sequential improvement into may broadly for the portfolio can you talk of.
A little bit more about that how much visibility you have into the rest of may and how much is the seasonality you think planning and to some of the stronger results that you've been seeing here.
Well I mean, certainly for Tyler for our portfolio of portfolio November to February are always seen seasonally lower months and slower months.
And then you start to come out of it and in March and in the build to build the really through October with October being historically, one of the strongest months for our portfolio I think from the May perspective, I think we do expect it to be.
<unk> continued to have revpar growth and May over April I think.
And youre in that kind of weird period, where youre not youre not in the spring break and a more schools are kind of starting at least colleges are starting to get out of <unk>.
Finished their spring semesters, and early may or and and as you move through the month. So we do expect may to be better than April.
And I think once you get to June July and August I think you work, we expect to see really strong growth.
So I think yes, we expect that trend to continue.
Okay.
Okay excellent and then in terms of.
Your Revpar index is gone and goes there's really quite and crossover and quite good actually book going forward.
Do you expect to be able to hold on to.
Without the that market share or perhaps.
And level out.
Some of the of.
All of the properties that are out there starting to reopen and whatnot.
I mean listen I think we're certainly in line and you've seen over the last few quarters. It has started to come back closer to our 2019 Revpar index of 118, I think we would like to we do believe that even over the next several quarters that our index remains strong.
Again, our ability to diversify our customer base, but certainly I think expecting it to stay 15% to 20% above is not realistic but.
But we certainly hope to hold onto some of those incremental gains as we move forward.
Yes.
Okay, Great and then just spoke of.
And last question for me to the put a finer point on this book.
Disruption.
Keep in mind for for a lot of investors out there.
Can you quantify or talk more of just about the labor needs and.
And an extended stay hotel versus and extended versus normal flex service versus full service just trying to get a sense of how much variance there is across the property types of here in terms of of how many employees.
And our necessary to effectively operate once you get back to more normalized occupancy levels.
I mean, I think you start I think you first start with.
Especially as we sit here today, and I think even for a little bit of the foreseeable future.
Which is our length of stay which is longer so.
Our length of stay is kind of four to five nights on average and our extended stay hotel, it's most likely half of that.
At something something else and therefore, youre going to be cleaning the room every two nights at least instead of every four nights.
No.
We can manage to clean the rooms as they turn.
With essentially just on a housekeeping perspective have the labor.
I think just to put it simply so.
That at least mitigate some of the the concerns and problems, we're seeing with with hiring the right people.
And I think other owners, who have different types of hotels that are more.
One to two night average day or weekend stays are going to be posed with the problems of cleaning rooms, and flip of them. So you're really talking about housekeepers then and.
And at least and our hotels.
Comparing a select service and so let's start from the bottom and starting with the select service compare and that to upscale extended stay I mean, Dennis hit the nail on the head.
You have got X number of housekeepers, depending on the day and depending on the occupancy.
But with Stayovers, we're not re cleaning the room.
And there is no expectation that we'll re clean the room, especially coming out of the pandemic so that works well.
As you move up the food chain and let me just talk a little bit about food and beverage on the food and beverage side, you've only got one or two dedicated employees and and is and a select service hotel anyway to do the breakfast and to do the evening sort of complementary cocktail hour or otherwise.
And the evening hours and extended stay hotels upscale is gone and probably gonna stay gone. So there are savings there compared to before the pandemic and what we're working on and the brands are helpful is a combination of kind of.
Service level between the front desk and what happens during the more limited breakfast time breakfast hour.
And so I think theres kind of be ultimate actually I know there'll be ultimate labor savings in that arena now of your full service hotel, it's a different story because as occupancy comes back.
Unless full service hotels want to keep their food and beverage facilities closed the way most part today.
And then.
And then theyre going to have as you know quadruple the employees.
That we've got and our hotels so.
And if they keep a close and then the ultimate difference between of select service and a full service hotel really goes away and that would be and interesting.
Perspective from a sales and marketing point of view so.
We feel again pretty good about the kind of hotels that we own.
Okay, Great I'll leave it there.
Thank you for the detail I appreciate it.
Thank you. Our next question comes from the line of Anthony Powell of Barclays. Please proceed with your question.
Hi, good morning, guys.
And somebody like Fort Lauderdale, and New England, where do you expect to maybe get ADR at or above together and 19 levels and you also expect to see GOP your wholesale EBITDA EBITDA I guess.
<unk> 19 levels and and how much above given the cost of and you just talked about.
Okay.
Okay.
Yes, I mean listen I think Anthony.
We do expect and some of those markets to have ADR is higher than 2019 and with the with the challenges and with I think.
I think there is a very efficient.
Operating model at the moment as evidenced by our flow through that we've been producing we do expect in that case GOP to be stronger.
But that also assumes that occupancy is similar to what it was and 19, which we think demand is really strong. So it should be so I think we're not going to step out there and say on a same store basis operating margin should be two.
275.
Basis points stronger at this point.
But especially I think when you looked at the summer we think the the.
The operating margins will be pretty strong.
Got it.
And maybe just.
Broader I mean, I know you like be upscale tenants day business and any changes to the regional or other.
All of the allocation as you look forward to buying hotels and the future.
Leisure more.
Sunbelt just any change in your I guess your target markets are allocation and you look to the next planning cycle.
Well I think we're as favorably inclined as we were pre pandemic frankly, we were talking about sunbelt.
Only come to be more obvious through the pandemic, but I think you have to be careful because there's a lot of money on the sidelines and.
And the herd mentality is we got of by leisure, we got to buy the.
The drive to markets you've heard it right you've heard it all so and you've written about it so.
And that might drive the price is up to a point and those particular locations and less of a special kind of and opportunity.
To make not of lot of sense. So we'll be careful about that but we certainly as we look forward to the next five years, let's say wanna be fundamentally as we always have been and markets with good diverse demand generators and I.
I think thats going to be the key.
Alright, thank you.
Thank you.
Thank you ladies and gentlemen at this time there are no further questions I would like to turn the floor back to the management for closing comments.
Well I appreciate everybody joining us today, I think our hotels performance throughout the pandemic proves the high quality of our assets and the flexibility that we've talked about a lot of the extended stay model and the strength of our operating team, we look forward to a multi year recovery.
Here and that bodes well for the future of our hotels and our ability to grow cash flow and earnings over the next several years.
Looking forward to a very robust summer and I hope youll join us for our August earnings call I would think that'll be an interesting one thank.
Thank you very much.
Thank you, ladies and gentlemen, ladies of todays teleconference. You may disconnect. Your lines at this time. Thank you for your participation.