Q2 2021 Pebblebrook Hotel Trust Earnings Call
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Greetings and welcome to the Pebble Book Hotel Trust second quarter earnings Conference.
There are of time, all participants are on a listen only mode. A question and answer session will follow the formal presentation.
And would like to ask a question. Please press star 1 on your telephone keypad.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder of this conference is being recorded.
The city is now my pleasure to introduce your host Mr. Raymond Martz Chief Financial Officer. Thank you Sir Please go ahead.
Thank you Donna and good morning, everyone welcome to our second quarter 2021 earnings call and webcast.
Joining me today is Jon Bortz, our chairman and Chief Executive Officer.
But before I started.
But the reminder, that many of our comments today are considered forward looking statements under federal Securities laws. These statements are subject to numerous risks and uncertainties as described and Tebo Brooks the SEC filings and future results could differ materially from those implied by our comments.
The forward looking statements that we make today are effective only as of today July 32.
2021 and we undertake no duty to update them later will discuss non-GAAP financial measures during today's call and we provide reconciliations of these non-GAAP financial measures on our website at Fallbrook hotels Dot com.
And also the highlights of the second quarter, well, we're deep into the summer travel season, and then it's clear that the leisure traveler is back.
Start of quick and with a vengeance and that business travel is gaining momentum as well.
Overall demand and the second quarter was robust and much stronger than we expected just 90 days ago same.
Same property revenues of $162.5 million were down 57, 8% versus the same period and 2019.
This was the significant improvement from the first quarter when same property revenues were down 74, 7% versus 2019 sequentially same property revenues grew 95, 4% from Q1 to Q2.
More encouraging is the accelerating demand that we experienced throughout the quarter.
Back June same property revenues were more than 50% higher than April and July is expected to be almost 20% higher than June and encouraging turnaround and such a short time.
These increases are not just out of resorts, but also at our urban hotels, we have seen a resurgence and business travelers as they are clearly getting.
Back on the road.
And we expect this trend of improved business demand, both transient and group to continue during the third quarter we.
And we anticipate leisure demands of slowdown post labor day as is typical of at the end of the summer when kids return to school.
Obviously, the delta variants and its impact on travel demand for the fall, it's hard to forecast today.
And but we have not seen or experienced any notable declines and booking trends or cancellations. So far.
Jon will provide insight on our current post summer booking trends later in the call.
This accelerating strength and hotel demand during the second quarter allowed us to generate $17.1 million of adjusted EBITDA.
This is a dramatic improvement compared with the negative $25 million of adjusted EBIT for the first quarter of 2021 and demonstrates the rapid turnaround for our portfolio.
And the results improved substantially every month throughout the quarter. This is critical as we live in the sequential recovery World right now.
Adjusted <unk>.
There was a negative <unk> 12 per share better than the negative 42 per share from the first quarter.
Most encouraging we generated positive corporate cash flow in June and we expect to generate positive adjusted <unk> and cash flow in the third quarter.
Drilling down to our hotel operating results for same.
Same property Revpar versus the comparable period in 2019 April was down 66, 3% may was down 61% and June was down 51, 6% were forecasting July to be down 38% to 42% continuing the very positive recovery trend.
All per share the third quarter. We currently expect Revpar to also be down between 30, and 42% compared with the comparable period in 2019, which also continues the improving quarterly trend.
Total hotel level of expenses of $134.2 million were reduced by 45, 1% versus Q2.2019.
Extensive before fixed costs like property taxes, and insurance were cut by 59%.
Our total property level expense reduction was 78% of the revenue decline and the 88% before of fixed expenses pretty incredible frankly.
Our resorts generated a positive $28.4 million.
On the hotel EBITDA and the quarter.
This resulted from an occupancy of 66% and and average daily rate of $386, which was more than 100% and $7 and of 38% increase over the comparable 2019 second quarter.
As a result of total revenue.
Inspite of the room was 17% higher than Q2.2019.
This allowed our resorts produced $28.4 million of EBITDA and the second quarter of <unk>.
17, 5% increase over the comparable period in 2019.
And the $13.9 million improvement almost doubling from Q1.
Ian.
EBITDA margins were up an impressive 622 basis points from Q2.2019.
Arb and urban Hotel has also made great strides during the second quarter as well.
Currency was 33, 3%.
<unk> reached $198 and total revenues were $91.6 million.
Urban.
The hotels were just under the breakeven level and second quarter.
A negative EBITDA of just zero point $8 million.
Getting our sequential world, our urban hotels achieved $5.3 million of EBITDA in June with a 43, 5% occupancy and of $210 ADR.
Impressive results considering the still.
Still low occupancy levels, and our urban markets and operationally not something we would of thought possible before the pandemic started.
We want to thank all of our hotel operating teams for their perseverance hard work and creativity of during the most severe downturn of our industry has ever experienced we had general managers parking cars and claims.
Clean floors directors of sales moonlighting as front desk agents and many other managers cleaning rooms, serving guests and performing many other jobs that are hourly employee employees previously did and this is not anything they signed up to do but with the shortage of hourly workers are dedicated and committed hotel management teams stepped in.
Our.
The company's management team board and our shareholders greatly appreciate their leadership and yourself sacrifice.
Shifting to our capital improvement program and the second quarter, we completed the $11.7 million of redevelopment of the bears and del Mar and South California.
In early July we completed and we commenced the 20.
$25 million transformation of hotel Vitale to 1 hotel, the San Francisco and the $15 million comprehensive guestroom renovation at the southernmost resort in key West we expect the 1 hotel to be completed by the end of this year and southern most early in the fourth quarter for.
And for 2021, we anticipate reinvesting.
A total of $70 million to $90 million and the portfolio, which is in line with our prior estimate.
Shifting to our investments program you may of knows that we had a busy quarter taking care of business on April 1 we completed the Sir Francis Drake Hotel.
<unk> and San Francisco.
And then on June 10, and we closed on the sale of our leasehold interest.
And the Roger and New York.
And last week, we executed a contract to sell Gulf War, and San Francisco and Union Square.
Combined with previous sales we've completed since June of last year. This represents approximately $300.130 million of sales proceeds to reallocate and to other assets.
And.
Just because the announced we've already have 2 reinvestment opportunities that we believe would generate substantially better risk adjusted returns for our shareholders.
And in late June we executed a contract to acquire of Margaritaville, Highwood Beach resort and Hollywood, Florida for $270 million.
This acquisition is anticipated to be funded from existing cash.
Cash on hand, and through the assumption of $161.5 million of favorably priced existing nonrecourse property debt. We are targeting to complete this acquisition by the end of Q3.
And last week, we completed the acquisition of the iconic the juggle Island club resort for $94 million Jamba.
Jon will provide more detail on why.
Why were excited about this investment and the upside opportunities of this unique resort.
As a result of these property sales and acquisitions and assuming the influence of sold and Margaritaville. As acquired are 10 resorts will comprise roughly 23 of 24% of our 2019 same property EBITDA.
Our San Francisco.
So share and $2019 were declined to 19% with 10 properties and our southeast focus will increase of 15% with 5 resorts and 1 hotel.
Of course of the World moving forward will be different and we expect these 10 resorts will likely represent a more of a significant percentage of our EBITDA on a go forward basis and they did in 2000.
Turning to our balance sheet and liquidity, we're also taking care of business and this area on.
On May 13th we raised 230 million of capital through our 6.3, 75% of series G preferred equity raise.
On July 27, we successfully raised $250 million through our 5.7%.
Percent series H preferred equity raise the largest preferred offering ever and the lodging space and equal to the lowest rate ever.
And this raise refinances and equivalent amount of higher priced redeemable preferred securities on a 6.5% series C preferred shares.
And 6.375%.
19 of these D preferred shares.
And this effect of $250 million swap will reduce our preferred dividend payments by approximately $1.8 million annually or of $1 <unk> per share.
After completing our Jekyll Island resort acquisition, we have approximately $875 million of liquidity, which includes roughly 2.
$230 million of cash on hand, and 644 million of available on our unsecured credit facility. We also have approximately $235 million of reinvestment proceeds available under our current bank arrangements.
And we're proud of the tremendous progress we've made strengthening our balance sheet, reducing near term debt maturities.
And lowering our cost of capital through our various preferred refinancings and convertible notes offerings, while also increasing our liquidity.
This positions us to take advantage of additional and new investment opportunities as they become available.
And with that I'd now like to turn the call over to Jon Jon.
Thanks, right, so I thought I'd focus on.
What we're currently seeing and our business.
And how we think the rest of the year is likely to play out the other path continues to be of path with uncertainty given the rise of the Delta variant.
We're certainly very encouraged by the consistent increases in demand we've experienced each month.
The robust level of leisure.
The demand that is well outpacing 2019 levels.
The continuing acceleration in business travel and forward bookings.
Our ability to push our average rate closer and closer to 2019 levels.
And our ability to operate our hotels with new operating models.
<unk> and greater efficiencies.
And Q2, Occupancies rose significantly every month on a sequential basis, even as we opened our remaining hotels and softer markets and our portfolio.
Those gains drove revpar higher as rates also gradually increased.
April Revpar was 22, 4% higher than March may.
May was 23% higher than April.
And then June rose, even more up 32, 1% to May.
We think July will be up 25% to June.
We estimate the business travel.
Travel doubled from the first quarter and probably recovered to about 30% to 40% of 2019 levels by the end of the second quarter.
And the airlines, who certainly have more visibility than our industry and.
I've indicated they believe the business travel will improve the 50 to 60.
Per cent of 2019 levels by the end of the third quarter with further improvement through the end of the year and into next year.
Therefore cash seems reasonable given the bookings we've been seeing and the significant advances each month and urban weekday occupancies, which.
60, Peru from 24, 5% and March to 39% by June and.
And they look like they'll be up to around 47 or 48% in July.
Overall urban occupancy rose from 29, 5% and March to 43, 8%.
Which of them.
Just below our overall portfolio occupancy for June of 46, 4%.
July looks to be over 52%.
Most companies have already changed their travel policies, allowing either vaccinated employees or all employees to travel again.
In June of our property teams reports and travel from most of our corporate accounts throughout our portfolio.
Businesses are definitely getting back to travel both transient and group.
For our portfolio, we saw continuing improvement and all of our markets and and all of our properties, but outside of our resorts.
So all of the most advances and Boston, San Diego, Los Angeles, Seattle and Portland.
Chicago, San Francisco and D. C are recovering more slowly primarily a result of their later reopening.
We believe the recovery is about 3 to 4 months.
And we signed the fast of recovering urban markets.
And July looks like Occupancies at our properties and San Francisco will average around 30%.
L a 64%.
San Diego, 74%.
Portland, 58%.
Bihar Seattle, 58%.
D C, 34% and.
And Boston at 66%.
Boston has recovered very strongly and the last 2 months.
We're also encouraged that we're seeing forward trends and bookings pick up as well as.
As the leister customer feels increasingly confident about booking vacations and leisure trips further out.
The lengthening of the booking window gives us more visibility to schedule, our staff and operate our hotels better.
And and and improves our ability to revenue manage more confidently.
And push rate more.
When it comes to room rates, we've seen consistently strong growth and adr's throughout our portfolio.
All 8 of our resorts are achieving significant increases over 2019 levels.
Ray already discussed their combined rates and Q2.
So I won't repeat that but I thought I'd provide some impressive specifics because not only as of the rate growth at our resorts of result of leisure compression and.
And of general lack of consumer right resistance.
But as a result of the reposition nature of our resorts following large investments we made improving.
<unk> unique properties.
For example, ADR year to date at La Playa and Naples is up a $159 or 34% from the first half of 2019.
And ADR for business on the books in both Q3 and Q.
And <unk>.
And as ahead by a whopping $250 versus same time 2019.
Or roughly 100% increase and Q3 and 70%.
Percent in Q4.
Over the year will apply has consistently climbed.
Higher and the Tripadvisor traveler rankings.
Reflecting the increasing desires of leisure guests and groups to choose our redeveloped and more luxurious resort.
And consider this total room revenue currently on the books at La Playa.
And is $5.8 million a head.
<unk> full of total room revenue achieved for all of 2019, and we're only in July with 5 more months to book end of this year.
On the other side of the country and low barriers of del Mar and Southern California, where we just completed a highly.
Highly impactful $11.7 million luxury redevelopment and bay, we're booking at dramatically higher rates as we reposition this property to an even higher tier.
In June we achieved an average rate $258 or <unk> 66.
<unk> <unk> higher than for June 2019.
July is running even higher rate currently on the books for July is at $878, that's $372 or 73% higher than July 2.
<unk> thousand 19.
This past weekend, the resort ran 97% at a rate handedly over $1000.
Paradise point, just down the road and mission Bay, San Diego Q3, ADR on the books is currently at 400.
$650 versus $269 for Q3.2019.
Transient revenue on the books for 2021.
As already 2 point and $8 million ahead of total transit revenue achieved.
<unk> hundred <unk> for all of 2019.
And just across the water from Paradise point at San Diego Mission Bay Resort, which was of Hilton and when we acquired Lasalle and where a year ago, we completed a $32 million multiphase transportation transfer.
Nation of the property into a luxury independent resort.
Is climbing as well compared to 2019.
And Q2, we achieved a 23% higher rate than Q2.2019, as we establish this new independent resort.
Transfer and gained significant ADR share versus our market competitors.
For Q3, as we gained momentum.
And the books is currently ahead by $115 or 46% compared to Q3.2019.
At the marker and key west.
We've also gained ADR and revpar share on our competitors following the $5 million of upgrades. We made in 2019 at this small 96 room resort in Q2 a day.
<unk> was up 45%.
And $143 to $459.
Compared to $316 and Q2 dollars 19.
The third quarter is running a $157 or 65% higher versus Q3.2019.
Or and I could go on and on about our other resorts as well.
But we've been pushing rates hired our urban properties as well as leisure and business travel returns to cities.
While in most cases, we haven't yet achieved rates higher than 2019.
We have grown our city ADR significantly.
Since the pandemic recovery earlier this year, even as we reopened our hotels in the slower to recover markets like Chicago, San Francisco and DC.
Average rate for our urban hotels has grown every month from a low of $155 in January.
Larry to $158 and February to $160 and March to $175 in April of $196 and May and finally, reaching $206 in June.
And July we look to be up again.
As ADR achieved at our <unk>.
<unk> and properties has increased and another 10%.
From June of $227 through July 25.
And right on the books for the fall is running even higher.
Some of our better quality and recently Redeveloped urban properties, which also have strong leisure.
People are closing in on 2019 rates at.
At the Nines, and Portland, where our luxury collection hotel is the market rate leader and the only luxury property and the city.
ADR and the second quarter was down just 7% and Q2 at $250.
And our rate on the books is currently running 19, 9% higher than third quarter 2019.
The <unk> benefits from its number 1 position and the city and its high quality suites and event spaces.
That appeal to high end leisure and business travelers.
We're also seeing both leisure and business travelers by up to suites, and higher priced rooms, and that is helping us as our unique lifestyle urban properties recover rate more quickly than more typical commodity hotels and our markets.
At the Mondrian.
West Hollywood, where we completed a major comprehensive renovation just 2 years ago.
And Q2 recovered to within 4% of Q2.2019.
Third quarter ADR on the books and monitor on is currently within 1% of same time.
And 1019.
And Q4 rate is up over 10% compared to the same time 2019.
Le Parc and La <unk>, which received and $80000 per key upgrading and repositioning just a year ago.
<unk> also closing in on 2019 rates.
Rates on its way to even higher rates.
And Q2 ADR was down just 5.5% from Q2 thousand 19 Q.
Q3 is looking to close the gap further.
And Q4 rates on the books are running ahead of Q4 same time 2019.
In Boston at the Liberty, which is 1 of the most unique and popular higher and properties and Boston we've.
We've achieved a $332 ADR month to date through July 25.
And it's doing.
And it's doing this.
At an impressive 86%.
Occupancy level.
While we're not yet back to the 375 dollar rate and 97% occupancy we achieved in July 2019 the.
And the Liberty like our other properties and Boston.
And has certainly come back a long way from January of.
<unk> percent at $186.
And April of <unk>, 61% at $210.
I can provide more examples of the individual property results.
And that are behind the urban portfolio ADR recovery, we're achieving.
But we must move on.
Third as you know this downturn is unlike any prior cyclical downturn and it would seem that this recovery will be unlike any prior recovery.
With robust macroeconomic fundamentals.
The consumer with record amounts of savings net worth.
On pent up desire to travel and vacation.
And with business profits at record levels and businesses with a significant pent up desire and need to travel.
We believe it's likely that this recovery will be swift.
With demand returning much more quickly than we previously thought.
And rates recovering much more rapidly as well as evidenced by the progress we've already made on rates.
In fact, we're currently forecasting that july's same property ADR will reach 270 to $275.
Which will exceed.
Seed July 2019, ADR by 5 to $10.
We expect to continue to benefit from the quality and uniqueness of our properties.
The strong appeal to both leisure and business travelers and the vast repositioning investments we made.
And the last few years those were currently making and those upcoming repositioning we expect to undertake and complete in the near future.
Of course, the benefit of gaining rate back quickly and gaining material rate share at all of our recently repositioned hotels and resorts.
And is gaining and ability to drive profitability and margins much higher than 2019.
And do it much more quickly than and a typical cyclical recovery.
Not only of we rebuilt our individual property business models to operate more efficiently the gains in.
Of our rates will naturally flow much more substantially to the bottom line.
We've also achieved efficiencies from creating operating clusters and various markets.
Which is something we started pre pandemic.
Because of the turnover the took place following the shutdown of our properties last year and the rebuilding this year.
We've been able to cluster even more of the senior positions, where we have multiple properties with the same operator in the same market.
These clustered positions often include general management sales and marketing revenue management, food and beverage HR and accounting and even engineering.
<unk> properties, and Santa Monica, San Diego, Portland, San Francisco, Seattle, and D. C of almost all of in clustered yielding significant operating synergies, while optimizing performance through the increased quality of the overall clustered personnel.
These.
Our permanent and running the hundreds of thousands of dollars per clustered property.
Ray already talked about the operating cost savings achieved in Q2 versus our revenue shortfalls compared to 2019, so I won't repeat.
Pete those numbers, but when we look forward.
Savings, we expect to continue to close the gap on EBITDA margins to 2019 as revenues and room rates continue to recover.
For example in June with total revenue is down 50% from 2019, our hotel EBITDA margin was 23, 7%.
But for July with 20% sequential growth and revenues.
Our hotel EBITDA margin should recover to around 27% to 28%.
While this is still lower than the 35, 5% achieved in July 2019.
It's a heck of a lot closer.
Or in a much shorter time than we were expecting just 3 months ago.
As we stated previously and still believe today we.
We expect to recover to 2019, EBITDA before getting back to 2019 Revpar and.
And we now believe we're likely.
To get back to 2019, ADR levels before getting back to 2019 Revpar.
As evidenced by our current July ADR expectations to beat 2019 July ADR.
In addition to.
The transient group is returning as well and we've begun to see in the month for the month business group bookings and addition to an increasing volume of business group leads Rfps site visits.
<unk> for contracts and bookings.
While we are yet we're not yet booking at pre pandemic levels.
<unk> activity has been progressing towards those prior levels and bookings each month for this year and next year are increasing monthly.
And yet not surprisingly group revenue on the books for Q3 and Q4.
And is down about 64% and 50.
<unk> percent, respectively versus same time and 2019 for the same quarters.
Group on the books for 2022 has been growing and as of July we had about 32% fewer group room nights on the books.
But it's out of 5% higher.
<unk> <unk> as compared to the same time in 2018 for 2019.
The group deficit is not surprising given corporations are just beginning to get back and their offices and refocus on booking group meetings.
This GAAP should.
Should begin to shrink later this year as businesses gained confidence and getting back to normal.
We expect group bookings to be more share short term until behavior stabilizes at the new normal.
The city Wides are booking rooms throughout our markets and 2022 <unk>.
Including.
And cities like San Francisco, where 2022 kicks off with the Jpmorgan Health care conference in early January where of.
<unk> have been actively booking rooms at our hotels for the conference.
With June achieving positive cash flow and therefore positive <unk>.
Recovery has progressed faster than we expected.
And if the delta or some other variant doesn't drive our economy and and mitigation measures backwards. We certainly expect room revenues total revenues and EBITDA to continue to recover.
And Q3 EBITDA should.
The decline from June as previously discussed.
August is likely to flatten out or decline slightly including.
Including in terms of its percentage of recovery to 19.
As the prime vacation season winds down and the second half of the month.
And kids, presumably begin to go back to.
School, while at the same time, we don't expect business travel gains to accelerate until the post labor day period.
And.
September should then pick up the recovery pace, particularly after the Jewish holidays by mid month.
Which should continue through the rest of the year.
As business travel continues its recovery and leisure travel and social groups remain at elevated levels.
When we think about 2022 were focused strategically on the year being a very strong recovery year overall group.
<unk> should be very healthy as we believe.
There's a great deal of pent up demand.
We also think that leisure will continue to be robust with continuing pent up demand for vacations and getaways.
And while outbound and international travel probably remains more limited.
This means we don't expect rate discounting and 2022.
Again.
This is the with the obvious caveat that we get to relatively normal behavior by the end of this year and it remains.
<unk> relatively normal next year.
As it relates to the review remaining redevelopment projects, we deferred due to the pandemic, we're continuing to complete plans and permanent.
Permitting and will likely pull the trigger on these few remaining projects as soon as soon as the approvals are complete and it's the right time of year to commence them.
All of our Redevelopments and transformations and.
Including the large number and the last few years and.
And all of the current and.
And the projects will provide very significant upside for our portfolio over the next few years as the recovery rolls forward.
Importantly, the vast majority of the dollars for these projects has already been invested.
As we look at the silver lining of potential upsell.
Side from the crisis, we continue to expect there will be significant opportunities over the next few years to acquire highly desirable properties at the lowest risk time and the cycle at attractive returns with significant upside opportunities for us to use our expertise to improve performance.
In this regard as previously announced we have been successful tying up 2 very unique resort properties that we believe have very significant upside from operational and physical improvements, including numerous opportunities to re merchandize them add and enhance amenities and better utilize.
Both indoor and outdoor areas to drive higher rates more revenues and increased EBITDA and NOI.
We believe the Genco of Island club resort, we just acquired last Thursday is the quintessential pebble broke investment.
That being and extremely unique.
Style independent property with an almost unlimited list of opportunities that we'll be able to execute on for many years to come.
And this case very similar to what we've been accomplishing at Skamania Lodge over the last 10 years.
And with much more to come there as well.
Lifestyle and some of these opportunities include upscaling the rooms throughout the resort transforming.
Transforming the Ocean club property into more exclusive resort.
As well as dramatically improving each of the 3 mansion buildings.
To create a more elevated and more personalized service experience.
It takes advantage of each buildings unique historic architecture and interior finishes.
And this would be similar to what we did with the 2 historic bed and breakfast buildings and.
At southernmost resort in key west, where we consistently achieve of 100 to $200 or more and rate premiums.
And then the rest of the resort.
As of the higher personal service and special exclusive club atmosphere that was created and that higher and guests find very appealing.
Jack on the island itself has been growing as a desirable drive to regional vacation and.
And meeting market as the improvements on the island and those currently planned by the Jekyll Island Authority drive the increased desirability of this unique island destination.
We're extremely excited about this acquisition <unk>.
Bringing on noble house, as our operating partner and the vast number of.
And then that will be planning and executing together.
As a reminder, noble house operates a long list of independent unique high and resorts and hotels.
Including of apply of Beach Resort and club San Diego Mission Bay Resort and Lebaron del Mar del.
Del Mar with us.
Improve as it relates to the upcoming acquisition of Margaritaville Hollywood will be and are positioned to discuss the opportunities there and more detail.
Once the acquisition is completed.
We continued to be active and our pursuit of additional new investment opportunities.
And we will be sure to update you as and if.
Us successful.
We believe we have significant competitive advantages and pursuing new investment opportunities as they arise.
These include our ability to operate our properties more efficiently than the vast majority of buyers and the additional cost savings from the economies of scale generated by.
We are greater and our.
Our unique strength and redevelopments transformations, and independent or small brand lifestyle hotels.
Our vast number of operator relationships.
And our high profile and very positive reputation in the industry.
And with that.
We'd now like to move to the Q&A portion of our call.
So Donna you May now proceed.
Thank you, ladies and gentlemen, the floor is now.
Yes.
He would like to ask a question.
1 on your telephone keypad at this time.
From Mason total in the keyboard.
Your line is and the question.
You May press Star 2 if you would like to remove your question from the queue from participants using speaker equipment and may be necessary. The pickup your handset before pressing the star keys and.
And the interest of time, we do ask that you. Please limit yourself to 1 question and 1 follow up once again that is star 1 to register a question at this time.
Question is coming from Dori Kesten of Wells Fargo. Please go ahead.
Hi, Thanks, Good morning, guys and for Jekyll Island, and Margaritaville, how have your expectations for 2020 on EBITDA change since you underwrote them.
Yes so.
Well they've gone.
And up a lot.
When we were underwriting them I think our view was that it would be a couple of years to get back to 2019 levels.
I think in the case of Jackal.
We now expect to be well advanced beyond 2019.
And our parcels.
And I think upwards of $1 million and $5 or more at the bottom line and.
And of Margaritaville.
At this point, we don't yet think will.
We'll get back to 2019 levels I think right now we're forecasting to be about 3 or $3.5 million share.
That's about $2 million better than than what we underwrote and when we agreed upon the pricing.
For for that property.
Okay and then.
And just the follow up on a few quarters ago, Tom said in New York City was no longer red.
Love for acquisitions.
Has there been anything and in that market or the top 10 urban markets and sparked your interest or do you and do you think the vast majority of deals we'll see early in the cycle will be more leisure resort weighted for you guys.
Well.
<unk>.
I think as we've indicated where we.
I'd like to open too.
And to acquiring and 35 different markets that we've spent a lot of time researching and building our database for <unk>.
Which is about <unk>.
15 to 20 more than than where we've invested.
Historically, and then on top of that drive.
2 resort properties, which can be anywhere in the in the 48 states.
As it relates to urban markets and our investments are going to be driven by availability and.
And what we find attractive and and <unk>.
Hopefully.
Our focus will continue to be assets, where.
We can add value through redevelopment and repositioning operator changes.
And applying our best practices and and operating expertise.
And and not pay for those opportunities, which is which is really key.
As it relates to New York specifically.
It is.
Not Red line, I think it's going to be of tough place for us to buy.
We think the recovery.
And to any meaningful cash flow is going to take.
Quite a while.
It's the market is going to struggle.
And be a slower recovery market, we believe.
Given.
It's a heavy dependence on international inbound travel.
For which we have not yet even opened our borders yet.
And so that's a toughie for us.
It may be more attractive for a private investor doesn't care about cash flow for the next few years.
And.
You're basically buying on a price per pound basis.
But for a public company and for US given the high risk we attribute to the market between.
Between that between the rate issues between the challenges with.
With.
And the Union.
And and work rules and the market and.
And real estate taxes.
We just think it's going to be hard for us to find the right deal at the right price with the right opportunity. So while again, we wouldnt redline, it and we wouldn't rule anything out.
I.
And we're very very low probability we ended up buying something and I'm in New York as an example, I'm.
And I'm not sure of that applies to other other urban the major urban markets that are slower to recover like DC or.
Or Chicago.
Where we have a couple of properties and.
And I think San Francisco.
I think we've we've reduced our exposure.
And our share in that market.
As we acquired properties elsewhere, and as we sold properties elsewhere.
During the pandemic and pre pandemic and I think we feel we feel very.
I think it's all with the recovery there I'm not sure it will be a buyer and that market. However, I think I think we feel comfortable with what we've got there.
Okay. Thank you.
The story thanks.
Thank you. Our next question is coming from Gregory Miller of true Securities. Please go ahead.
Thanks, Good morning, Jon and Ray.
This is also another question I like to hear your thoughts about some other specific transaction trends.
You're not alone as acquirers of resorts as of late as of other Reits and private companies and.
Some of the pricing on a per key basis is well north of the $1 billion of room.
And we've also heard of some Uber luxury resorts worldwide that are being marketed for well north of $2 million of room, which perhaps to me suggests is that rock band from Winnipeg would say E&C nothing yet.
I'm curious to hear your thoughts and what do you think about this pricing does it seem reasonable to you did.
Trading multiples make sense, either on a historical or forward basis.
And not to the litany of questions, but if you're willing to share I'm. Just curious how you think about resort transaction pricing today impacting the your view of your own resorts valuation.
Sure so.
Let me start by saying you know what we we don't really feel comfortable commenting on other people's transactions.
Right.
I think obviously you should speak to them about it.
And their view of of values and the future performance I think in our case.
Case, when when first of all you can only acquire what's available and on.
And what we've seen and the market. So far are sort of a bar bell.
The group of available properties at 1 and you've got resorts and and and some urban properties and heavy leisure.
Fast recovering markets.
And then at the other and you've got much more of select service and and and then some defaulting properties and suburban and secondary markets.
At that and of the barbell, that's not what we acquired not what we have and interest and we're.
Looking for non commodity.
The properties.
And as it relates to the to the end of the market that we do find attractive what's been on the market has been more dominated by the leisure properties and so that's.
We've been looking at them and.
And of course found too.
We are.
Marketed to a very smart small group.
And in fact, the Jack of Island property was purchased by the group that the operating partner, who purchased Sir Francis Drake. So there was actually a strong connection there when it came to.
On the opportunity with Jekyll Island.
And our ability to acquire it.
I think.
So when you think about it from that perspective you.
The.
The transactions are going to be more dominated by the properties that are doing better of course, they get the headlines and the.
The urban properties like the Monaco, and Baltimore and that traded for 60000 of key doesn't that doesn't get the headlines.
And so when we think about strategy and and I've heard some people say Oh, Palo <unk> new strategy is to buy resorts, that's not our strategy our strategy is to focus.
On 35 urban markets and drive to resorts and find assets that we can add value to and thats.
That's where we're going to continue to be to.
To be focused so.
As it relates to the 2 that we acquired.
And we tied those up back in early.
On April and and and early May.
Thank you.
The southern part of the country was just beginning to improve significantly by March and April and so sort of these premium levels of rate and performance were not underwritten by us and I don't think.
Appreciated our forecasted by the sellers. So I think we got some very attractive properties at very good price per keys.
And and very unique properties in their markets, including Margaritaville, which is number 1 and it is set and the Lauderdale Hollywood.
And so.
I don't know if that gets to the issues you're.
Youre trying to drive too, but I guess the last part you asked about was our portfolio.
First of all I do think and general resorts are probably most resorts are trading at.
And at 19 values are at a premium to.
And Martijn and values.
And.
I think that would hold well for our portfolio, but but I'd throw in that we and we've invested a lot of dollars and upscaling all of our resorts and the portfolio and.
And as indicated by the ADR is that we're achieving which are significantly higher than the growth in those markets. So we're gaining a lot of share those investments are paying off right now and we expect them to continue to pay off so we feel really good about the values that we have.
Our team.
The 9 Tom.
And Tom Fischer, and I and our investment team were out of Dallas.
This earlier this week.
And based upon the information we got.
From the brokerage community of the assets that are on the market the.
Assets that are going to trade based upon <unk>.
Values.
<unk> heard.
We came back and we said we need to update our internal and Avi.
<unk>.
On the market's moved a lot and the last 90 days so.
And that certainly would include our resort properties Greg.
Thanks, I mean for me.
It's not an issue. It's the reason it's more by intellectual curiosity is the.
And you see and interesting and fast moving trend take place. So I appreciate all of the insights there.
My follow up I'll try and be pretty brief.
You spoke to the unique properties and Jekyll Island seems to fit the bill from my from my seat and.
And I'm curious I don't suspect.
And that weakness and is that while none of our homes.
Tell by some on the call me, if I'm wrong, but it's not and in major Metro maybe 70 minutes or so driving distance from the next big of city could.
Could you provide some greater detail as to why you choose to buy that particular hotel given the small town location and.
And maybe more broadly what appeals to you about the island destination over the longer term.
Sure so.
I hadn't heard of it either I hadn't even heard of Jekyll Island.
When when Tom first talk to me about it and.
And so.
What we found attractive was it.
And we're very familiar with sea island.
Which is very high and particularly with the cloisters and the large there.
And.
We were maybe a little less familiar with Saint Simons and little same Simons.
And are much more commercialized then Jekyll island and so as we did our research we came we thought the.
What they were trying to achieve of jackal, which was really a focus on nature on on wellness on.
Outdoor activities on.
But we're staying ability of those really hit our value system, what we've been trying to achieve at our at our properties, including our resorts and that unique historical.
Aspect of the property gives us what we think is a big mode on top of the fact that the.
This development is expected to be very limited on a go forward basis. According to the the plans that check on island authority has for the island. So it really is meant to be.
And I don't know more of the the lanai or the <unk> of Jekyll Island, if you will.
Of the Golden aisles, and we find.
The attractive.
You've got a very fast growing city, and Jacksonville, which is at.
70 minutes away from Jackal.
It's very close to on 95.
It's a relatively short drive to Atlanta, and its appeal is not.
And that the.
The reason, we like to have we like to have resorts center within.
And an hour or so of of major market or major airport is is when we have resorts that have <unk>.
Large group facilities and and are appealing to group.
And of major way, that's not the case here of Jackal Shekel is really leisure focused and small group.
Strategic planning board meetings et cetera, and from that perspective, being 70 minutes from Jekyll and actually closer.
And then C Island is.
As to.
To Jacksonville as well.
We think of very attractive and so that's our that's our view on Jekyll and happy to get into more detail on at another time.
Wonderful I'll leave there thinks of everyone how big the rest of the summer.
You too Greg.
Thank you. Our next question is coming from rich Hightower of Evercore ISI. Please go ahead.
Hey, guys.
Just add that as a native of Georgia and.
And I know all about shekels. So you guys sort of called me before you started bidding.
Yeah.
Yeah.
But just a quick question on the leisure.
Maybe given some of the.
The kind of anomalies in the macro environment, where we think about.
Stimulus this year.
We think about pent up demand.
Coming out of Covid Lockdowns last year, I mean, what are the.
The chances that leisure underperforms in 2022.
And if this year is indeed, an anomaly and then I'm also curious.
And for what's your guest satisfaction scores look like right now you know to the extent that labor bottlenecks are impacting service, especially.
Especially at the resort and thanks.
Sure so.
Interesting question on on leisure, we actually believe that leisure.
Through next year will actually be stronger than this year and if you think about it and our portfolio even in Florida.
The first quarter was terrible compared to 19.
Southern California in fact, the West Coast was closed.
For the most part for the first 3.4 months of the year.
And.
A large percentage of the population and that's been vaccinated didn't really get vaccine.
Until.
And it May and June and so we think the robust nature of the desire to travel on the part of the leisure customer is going to continue and I also think the stress of the environment, obviously hasn't gone away.
Net with the rise.
Of the Delta variant.
We think.
That win.
We think about leisure.
On the road and the and the financial condition of the consumer well there's been additional stimulus.
On the direct stimulus.
For our customer is probably been zero.
It's not the people traveling to our resorts, who got $3000.
And pay it's generally the upper upscale socioeconomic demographics. So.
Given the robust nature of the economy the.
The fact that it's it's more like later cycle economic activity then.
And then.
Early cycle.
We really do think it's not only going to continue but it's likely to actually increase over the course of the next 12 to 18 months.
Yes.
Okay, and then on the guest satisfaction.
Yeah on the guest scores so.
It's interesting I mean, our guest scores I havent looked at all of them and and I haven't seen a portfolio of rollout, but I would say.
Because of the investment dollars, we've been making and the portfolio our guest scores are actually up.
And.
And the markets, where we struggle with providing the same level of services pre pandemic.
And we're.
Not alone and those markets, it's pretty it's pretty much across the.
The spectrum and <unk>.
And a place like key west so.
We haven't seen declining scores.
Ours and.
And in fact, we've generally seen the opposite.
I think it's more specific to our portfolio rich.
Got it thank you.
Thank you. Our next question is coming from Michael Bellisario of Baird. Please go ahead.
And thanks, good morning, everyone.
Good morning, Mike.
Just 1 question from me just back to all of the <unk>.
Our information you provided was helpful, but maybe on resort fees and urban and many charges I noticed don't get captured and ADR, but.
What have you done here and what have you brought back and any customer pushback. So.
Thanks charges would be helpful.
Yes so.
I think we.
And we've returned guest amenities and the services and products as well as the fee to all of the properties that had them previously.
The pushback has been limited and.
Far and frankly, no different than pre pandemic when it when it's very very very minor.
And I think it's increasingly being accepted particularly and the in the urban markets. We have the restructure some of the packages to provide value to the customer.
And because some things that were in the packages were either no longer available or were not going to be of interest.
To the customer and we've swapped those out with other opportunities within.
Within the the products and services that we're providing.
And our and our capture rate.
And our average capture rates and not surprisingly are much higher because it's.
Such a higher percentage of leisure.
Where where the fees are well very well accepted.
Got it and then would it be fair to assume all of those ADR percentages that you gave you. The included all of the other fees that don't get.
And are there.
It's fair to assume that the percentage change versus 19 levels is actually higher than the numbers that you quoted because of all of the other fees that are there.
Yes.
Thanks couple of Okay.
Thanks, Thanks, Mike.
Thank you. Our next question is coming from Shaun Kelley.
And of Bank of America. Please go ahead.
Hey, good morning, everyone I'll keep it relatively short, but I was hoping we could change gears, a little bit and talk about your sort of urban margin structure.
I think ray if I caught the comment correctly, you made something like.
The $5 million or so in EBITDA in the urban.
Portfolio of June and I'd, just like to get a little bit more color on your thoughts around the margin structure, there going forward, how much you're benefiting from mix today versus how much is that.
It is kind of rate versus occupancy and then kind of going forward. How do you see that side of the portfolio.
Kind.
Of recovering margin relative to maybe some of the the outsized gains you're seeing on the resort side.
Yeah, I mean, I think it's an issue of revenue.
The debt that we need I mean, if we look at urban and at our open urban hotels and the in June.
<unk> margin was over 33%.
Versus 47% and June of 19.
And then tack on.
The fixed expenses.
Which were 11% and 19 because of the higher revenue, but 22%.
And.
In June of this year.
<unk> revenues were half less than half they were.
They were down by 661.
Percent.
And so you only get 2 of 14, 8% EBITDA. So you have incredible operating leverage there and so as our revenues continue to come back both.
Increasing leisure.
<unk> as the cities have reopened and increasing.
The increasing business travel as business gets back on the road and group and citywide.
And we'll cover these fixed expenses pretty rapidly.
With a high flow through on the additional revenue. So the operating models have have been accomplished and those markets there.
We're going to be able to run these properties and at lower revenue levels as it is indicated.
And get to higher margins ultimately is as the revenues recover.
Great and then just 1 other question wanted to ask about.
Yeah, especially given some of the the investments that have been made.
And you're tracking and or any sense of sort of either RPI or you know your ADR share and some of these markets and how much of these rate gains that we're seeing are you know the markets that you're in versus how much are you guys, taking share and and some of the payback on on the Rois on.
Yeah. So are we.
And we do track it I don't know that we have and we haven't rolled up and and we can get back to you on that.
Separately and give you a little bit more detail, but.
The.
Clearly theres a theres of parts of that relates to the market recovering as I indicated in my and my comments and <unk> and then Theres.
Are you taking part.
And that relates to.
The share gain from the improvements and the repositioning of these properties at low bears.
The market is not seeing of $250 increase and and rates.
Are we seeing something closer to 50 to 70.
$5 and the market and mission Bay and most of our competitors are up a little bit and rate were up a lot and rate at both Paradise point, and and and and and mission Bay resort. So I don't have those off hand, but it can be anywhere from picking up 10 points the picking up 50 points.
The Cigna.
Right share, which I think is more we're probably somewhere between 25, and 50 and and Naples, and if I recall so and.
And Sean and just as a reminder of this is these are projects. We completed about 23 projects from <unk> through 'twenty 1 this year.
<unk>, probably is about the REIT over $330 million of invested capital and so it's pretty expansive on a.
<unk> of hotels is not just a couple of resorts with the 23 projects. That's a lot of properties properties, which is why we're now starting to see the benefits of those on investment programs.
That's great. Thank you very much.
Thanks, Sean.
Thank you. Our next question is coming from Bill Crow of Raymond James. Please go ahead.
Great Good morning. Thanks.
Jon we've gotten accustomed to looking at data every day and travel.
The activities and things like that and <unk> started to your commentary talking about the sequential improvement.
<unk> month to months all of the way through July.
But.
Every year has a certain rhythm to it from the travel perspective and.
Just wondering what we should be expecting from us.
Sequential change it seems like July might be the peak and then they go down and.
And in this case are we going to go sequentially.
Work through the end of the year or how do you how do you see that playing out.
Yeah, I think we're probably bill we're.
Probably sequentially lower in August and September So July will be the best month in the quarter.
And then I think we pick up pretty.
<unk> will materially and.
And in October and September from a business travel recovery I know everybody's talked about labor day because of lot of companies are coming back to their offices and labor day and I actually think it's been a of general return of gradual return.
And that continues through.
Ms AMR for many companies maybe the major companies some of the major companies are coming back labor day or later.
But the Jewish holidays fall on that first half of September and.
And labor day is late.
So I do think we'll probably get some leisure benefit.
Through this and.
Early September.
And that we might not otherwise get.
And I think as we.
We roll into September business travel is probably the.
The second half of September picking up, but I think October, particularly without any of the Jewish holidays is probably going.
Very strong and very healthy business recovery months, and and that would be.
System with what we've been seeing in terms of group bookings advanced bookings, assuming those hold on and.
All the way into mid December.
So that's why we think we will see the the continuing sequential improvement.
October through.
Through the rest of the year and then again picking up.
Pretty substantially in January.
Maybe not sequentially, but certainly on a year over year basis.
And probably sequentially against.
January and February of 19.
B of visits.
That's good color Jon Thanks, the <unk>.
Second question or follow up questions you didn't touch much on on the either Chicago or Washington, D C and <unk>.
And maybe specifically, what you're thinking about and as far as your Chicago presence goes and whether this might be an opportunity the to exit 1 or both of the.
The hotels and then.
And D C.
Just curious how important the school groups or to overall industry occupancy or market occupancy there.
And Theres any sign of school groups, starting the book for the for the fall period.
Sure so as it relates to Chicago I think our view is.
And on what certainly pre pandemic, we'd indicated a desire to leave the market we didn't get that accomplished.
And our view right now is the sentiment is still pretty negative on Chicago next year.
Is <unk>.
Right now targeted to.
And a pretty good convention year, assuming the.
Those continue to move forward as planned.
And so I don't know that current the current period right now is the best time to be a seller and the market and <unk>.
Might even be of time to be a buyer and that market at least on a cyclical.
Basis, but probably going to wait a little bit bill unless unless we get approached with something.
And that that's attractive from from somebody who has more conviction and the general perception right now of Chicago.
As it relates to D C.
The the the market highly.
Clinical but depends upon the return of the federal government to work, which it hasnt yet done to the office.
And over.
Over the summer it generally depends highly on the Smithsonian and the museum's being open and while some of them have been open and.
They.
Highlights of the attendance and.
And when I talk to people, who want to come here, they've said I went online tickets available for any of the Smithsonian visits that's opening up.
July the end of the month with the opening of the remaining.
The museum's like air and space.
There.
<unk> been waiting at least that's what they've said unless they change their mind they are eliminating.
The timed limitations of the ticket requirements. So we think that'll help.
To improve the leisure recovery here, but because of the market got such a late start on announcing these reopening.
<unk> I.
I think people made other plans so.
I think it's going to be the fall hopefully the federal government coming back.
Group and and and business travel.
I I don't know how important ex school groups are to the.
And the market I don't think there is important and they often stay.
On the suburbs.
Because historically rates are much less expensive so to the extent they come in the fall and May very well help the city recover its occupancy because thats really where they want to be.
And as opposed to staying in the suburbs because the rates are are lower and.
But what we really need is government to be back and all of the associations and business groups to returned of lobbying and person and coming to the market.
Alright, thanks for your time.
Thanks Bill.
Thank you. Our next question is coming from Anthony Powell of Barclays. Please go ahead.
Hi, good morning, and and similar to the rich I was very familiar with Jack of island Winter and sixth grade on the field trip.
And my family and lot of nature.
The deal there.
Thank you.
Just a question on your on your leisure mix, so given the resort acquisition, given the kind of a strong pricing for.
And urban markets, given you and the last social groups.
On a normalized basis do you think the majority of every room revenue come from leisure and out or is it still kind of ex 60% business the kind of on and stabilized basis.
Well I think with the swapping out of the properties and San Francisco and and New York.
The leisure into.
Jekyll and ultimately Margarita Bill.
I do think the leisure piece will pick up a little bit I mean, we might out and other.
Another point or 2.
To where we've been at around 40%.
Net.
Or are those properties to really any well.
The corporate transient to speak of.
Margaritaville does do a lot of business groups.
And up and a year when youre, having a lot of business meetings.
And we do think that's 1 of the opportunities there was at least prepaying.
Neither too to continue to grow the group mix, there as an opportunity because it generates a lot of profitability there on our food and beverage basis.
But so I do think we'll pick up a little bit, but keep in mind and San Francisco and New York were pretty heavy leisure markets as well.
But clearly not to the same level as as those 2 resorts.
Got it and do you think about your portfolio of that way or are you trying to drive your total user and revenue mix up or is it more of just an opportunistic.
Yes, Anthony analysis.
Youre right it really is more opportunistic.
<unk>, Anthony and I don't think we have taken a position on it.
We want to be we want to be more heavily leisure or we want to be more heavily in the southeast or we want to be.
More and resorts per se, it's really not the way we approach and it really is about.
Buying assets that will have.
Stick more attractive.
The risk adjusted returns and properties, where we can.
Enhance those returns through our expertise.
Definitely not of strategic.
Approach from that perspective.
Got it and maybe 1 more on the labor.
You mentioned a lot of your managers.
Doing double duty and doing.
Duty that hourly employees used to accomplish and thats something that can be.
Permanently instituted maybe pay a manager on a salary of bit more than us.
Managers to kind of.
Keith head count lower at some of your resorts and urban.
On the progress.
Well I think what it is is we certainly won't be able to continue to do it at this level, but I think.
When we think about how we operated these properties at very low occupancy levels.
There are times during the week of the month or the or the year.
Labor, where we typically have slow periods and I think.
The operating models that are now in place and incorporate the fact that managers, particularly middle managers are going to do shifts.
And instead of <unk>.
Managing.
They are function of people on their functions. So I do think that that's a permanent change continuing efficiency at the property level and.
And.
And we'll we'll pull helped pull through better margins.
As we recover.
Great. Thank you.
Thanks Anthony.
Thank you. Our next question is coming from Ari Klein of BMO capital markets. Please go ahead.
Thanks, and good morning, just following up on the acquisition strategy.
And you reduce your especially on the San Francisco and I guess, and then ideal World Post Covid. When you look for more balance across the portfolio, where you maybe wouldn't have.
Anthony and 20% exposure any given market and then just given the pace of recovery.
Do you think gets tougher from here to acquire resort assets at prices that would work and neither do we hit a lull and from 1 on each of our properties plus the market.
Yes, so I think.
And as it relates to share on particular markets I mean I think.
It's likely there'll be some additional diversification.
Over the next few years as we as we expanded.
Our.
Target markets to 35 cities.
And and continuing with drive to resorts.
And.
And it shouldnt be surprising if we get a little bit more diversification, but we don't have a strategy to say Gee, we want to we want to we don't want to have a market over 10% or <unk>.
15% of 5%.
And long time ago.
And do you want to be where the best returns are the best risk.
Adjusted returns and.
Sometimes diversification 1 of our wives Board members said.
Oftentimes diversification is worst suffocation.
So the.
That's not of.
Sort of strategy right now.
And for US and then as it relates to resort pricing.
Again.
Anytime we're acquiring and you can go all the way back to our 2010 to 15 period. There were times when people said well first of all of almost everything we bought during that people.
Perry of people said, we overpaid.
And I don't think that was the case.
I think the values continue to go up and frankly, our ability to to improve performance helped drive value is higher it wasn't just the market recovery and I think as it relates to resorts will.
We continue to look for properties, where we see things that other people don't where we can bring our expertise to bear that maybe expertise other people don't have or we're willing to do much harder work.
And then other people might be willing to do and.
And so.
That's the way, we're going to look at it and.
We don't find anything we don't find anything but.
I'm not sure right now we would say Gee the the market has gotten to a place of valuation that there isn't going to be anything on the resort side.
Thanks for the color.
Yeah. Thanks Erin.
Thank you our next.
Question is coming from Floris van <unk> of Compass point. Please go ahead.
Thanks for taking my question guys Jon.
And Ray and I wanted to follow up on on Oh, you made some comments earlier about any of the and how you think you are any of the.
And it might be ticking up obviously, the resort trades that have occurred and some of them in your markets imply a much higher value for your assets to.
You used to publish.
Clearly and.
<unk>.
And where you should still share those with your board.
On.
Can you.
Any more insights and and let.
Let me with the with the caveat your convertible that you did.
The beginning of the sheer you you page $38 million to to increase the strike price to the to the low $30 range.
Has that value gone.
Give us your view.
Yes, so there is no doubt.
And from our internal numbers and the reason, we haven't published them as the just haven't there just weren't enough transactions and the market.
To feel comfortable that the way we were valuing.
Each asset with support.
Ported by transactions and similar transactions and the market. So.
These aren't meant to be estimates.
Apply sort of and just educated estimates that they are really meant to be supported by actual transactions in the market and they are just haven't just werent.
And upping those until more recently and I think as we get more comfortable as the year goes on Florida will be in a position, we hope to be able to come back out with the NAV, but there's no doubt the values have gone up dramatically and it's not just the resorts. It's you know.
The better properties and the good markets weather.
Many of.
The nines, and Portland, or it's the Argonaut and Fisherman's wharf forwards.
<unk>.
It's the Mondrian and La and frankly, all of the law, I'd say, which is probably back to <unk>.
And 19 values or within 5% or so of them San Diego.
Whether its downtown San Diego I'd guess today values are back to where they were pre pandemic.
And in the sooner.
To recover market, so I think theres, a lot of confidence and conviction on the part of the buying community, which has increased pretty meaningfully over the last 90.120 days.
And as ours has about the pace of the recovery and and really moving forward a lot of underwriting assumptions on the part of the buying community by a year or more from where they were really just 90 or 120 days ago.
Thanks, Jon.
My follow up is so if I'm.
Correct me, if I'm wrong, but obviously you'd feel more comfortable book value today than you did back then.
Should we expect I know that.
Obviously earnings numbers are still going to be all over the place given that the.
The.
The.
The short term nature of your of your rents but.
Youre more comfortable with talking about the value and will you share your NAV estimate before you give guidance.
I would think we would yes.
Would think.
Floris.
Alright. Thanks.
Thanks.
Thank you. Our next question is coming from Stephen Grambling of Goldman Sachs. Please go ahead.
Hi, Thanks for taking my questions.
And I think your strategy is for value add properties versus specific locations. What's your.
We would have on of distributed or decentralized work force going forward and its impact on lodging and is that part of the lens, you're looking at and redefining the markets, where you are kind of targeting.
Yes, so really good question.
I think that when you think about both the more distributed workforce.
Perspective, and a more flexible work force I think that leads to more travel.
And at least some of our business travel.
On where youre, not and the headquarters anymore, or maybe not even and a regional location and youll have to travel the 1 more often than you were when you were in that location.
Certainly.
And it's interesting.
And we've seen reports talked to some companies at the extreme Steve and there are some companies who said we're not even going to have office space, where everybody is going to work from home, but now theyre meeting quarterly and having planning meetings and bonding.
And.
And trust building.
The off sites.
Almost similar 2 incentive trips or strategic planning meetings that you do once a year now theyre doing them much more often quarterly some monthly because.
And because they don't otherwise get together.
So we think theres a lot of reasons why.
The increase is travel.
Certainly.
People who are working.
Working from home can work from anywhere right. The technology today allows you to do the same thing.
At a hotel or a resort and another location as it does from your home.
And and so we do think.
The actual coined the word bleser, which I hate I am thinking about.
<unk> R R, a pleasure, which sounds a little better pronunciation I think.
And maybe more romantic but I do think of all of these changes.
Allow and this evolution of travel that.
That will continue to experience it leads to more travel not less.
That makes sense and then as an unrelated follow up do you have a sense for what the contribution to the strong leisure trends could be from international travel and refocused in the U S.
Okay.
Well.
Pizza of funny thing because it.
Historically for us and particularly now that we're not in New York probably runs about 10, 10.11, 12% maybe at the most of of our segmentation pre pandemic, but youre offset as you've lost that business, but you are.
Youre keeping.
Our people on the United States from traveling abroad, generally and those too.
And they're at the extreme or kind of a wash.
So.
It'll affect different markets differently, I mean, we're not getting wholesale business and Florida internationally and the summer.
But we're getting a lot more drive to local and regional business than we historically get.
And so.
It's.
It's pretty complicated and I can't tell you we have the answer but.
As long as it sort of happens.
Relatively equally meaning opening up to go abroad.
You're kind of opening up the for people to come here I think it's mostly a wash.
Thanks, That's super helpful and 1 quick comment for you all after 2 weeks of business travel around the country would be if you can figure out the taxi and Uber nightmare that would be a homerun and thanks.
Yes, yes, well my recommendation is rent to rent of U.
Paul truck evidently that's very popular and Hawaii. These days for mode of transportation.
Dana we have more questions, we're showing time.
Our last question today is coming from Chris Darling of Green Street. Please go ahead.
Thanks, Good morning, everyone.
Abroad, and I want to go back to the Genco of island of Margaritaville acquisitions, just for a minute.
Given the location of those properties I'm curious, how you think about the risk of rising sea levels over time and the.
Extent to which that risk is kind of baked into your underwriting.
Sure so and.
In both cases as an example.
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The the the beaches are very very large.
And the properties are very far away from the waters edge right now so.
As we look at the as we look at that issue.
We've been more focused on trying to find properties that we think will be if they're impacted there'll be impacted much much later.
But also provide greater protection.
From rising sea levels. So.
So that's the way the way we looked at it.
That exists certainly at.
At both properties and Jack of all at the beachfront.
Property and then.
I mean, it's interesting.
And if you've been to the Citi CEO conference at the diplomat if you.
Look at the diplomat the beach there is very.
Small.
And I would be concerned about that property and the ability to retain that beach because it's so.
So short at this point, whereas if you go up to Margaritaville at that part of Hollywood Beach.
On the water is very.
Far away from from the Boardwalk and the property so.
That's kind of the way, we're taking a look at it and evaluating it as.
And as we look at additional acquisitions and.
And Chris and we look at a lot of those factors with climate change. It's broad it's not just things like beaches, it's the frequency of storms. So we're.
Looking at the age of the ability of building the sort of windows. They have it's very comprehensive because of the beaches will take some time for the.
The rising tides of the does occur.
And what's terms could happen every every year.
It's a very comprehensive review and the funny thing is with all of these areas of the country. They all have their pluses and minuses.
And the South East maybe has the risk of the Hurricanes, which you rightly the question and the rising sea levels. The West coast has fires earthquakes.
And depending on I guess, Texas now has the ice storms. So each of them has their own little areas southwest has droughts and you know, yes, we have to look at that and we have to look at how fat.
Climate change the dose factor and and Thats something we discussed in our underwriting process and we also discussed of the board level. So it is something thats, a real factor in and the operating and hotels and investing and hotels.
Got it and I appreciate the thoughts.
Thanks growth. Thank you.
Thank you at this time I'd like to.
The turn the floor back over to Mr. Bortz for closing comments.
And a long call hopefully.
Everyone.
Appreciate the time and thanks for those of you of hung on to this point and we look forward to updating you again on a monthly basis with R.
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And then quarterly again as we move into the third quarter and late October.
Have a great rest of your summer. Thank you. Thank you.
Thank you ladies and gentlemen. This concludes today's event we thank you.
For your interest and Purple book and enjoy the rest of your day.
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