Q2 2021 Ashford Hospitality Trust Inc Earnings Call
Now at the question and answer session will follow the formal presentation.
If anyone should require operator assistance during the conference. Please press star zero on your telephone keypad as a reminder of this conference is being recorded it is now my pleasure to introduce your host Jordan Jennings Investor Relations for Ashford Trust. Thank you you may begin.
Only to everyone and welcome to today's conference call to review the results for Ashford Hospitality Trust for the second quarter of 2021 and to update you on recent developments on the call today will be Rob <unk>, President and Chief Executive Officer, Derek of Eubanks, Chief Finance Officer, and Jeremy Welter, Chief operating officer the results.
Good day of notice of the accessibility of this conference call and a listen only basis over the Internet were distributed yesterday afternoon and of press release.
At this time, let me remind you that certain statements and assumptions and this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provision of the federal for.
As well or at other station.
Such forward looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These factors of more fully discussed and the company's filings with the Securities and Exchange Commission.
The forward looking statements included in this conference.
Call are only made as of the day of this call and the company is not obligated to publicly update or revise them.
And in addition, certain terms and you spend of call are non-GAAP financial measures reconciliations of which are provided in the company's earnings release and accompanying tables or schedules, which have been filed on form 8-K with the SEC on July.
Security and a 2021 and May also be accessed through the company's website at www Dot H T rate dot com. Each listener is encouraged to review those organization provided and the earnings release together with all other information provided doesn't really.
Also unless otherwise stated all reported results discussed and.
And our call compared of second quarter of 2021 with the second quarter of 2020.
I'll now turn the call of Iraqi Please go ahead Sir.
Good morning, welcome to our call.
I'll start by providing an overview of the current environment and how Ashford Trust has been navigating and recovery.
After that Derek will review our financial results.
At 20, and Jeremy will provide an operational update on our portfolio.
At first like to highlight some of our recent accomplishments and the main themes for the call.
First we had strong earnings and the second quarter that exceeded both street estimates and our internal forecast, we reported positive hotel EBITDA for the second consecutive quarterly period.
And instead of adjusted EBITDA Ari.
Second of our liquidity continues to improve we ended the quarter with over $520 million of cash and cash equivalents.
Third we've continued to lower our leverage and improve our financial position since its peak in 2020, we have lowered our net debt plus preferred equity by over.
And part of $100 million equating to decreasing our leverage ratio defined as net debt plus preferred equity of gross assets of over 10 percentage points.
And finally, even with and already attractive loan maturity schedule and we successfully modify the loan extension tests on another large loan for 'twenty 'twenty, 4 and 2025 improving our.
Our ability to qualify for those extension options. This loan modification initiative will continue to be of focus for us going forward and <unk>.
We are making good progress on refinancing 2 of our upcoming debt maturities at the Marriott Gateway Crystal City and at Hilton Boston back Bay.
There have been numerous positive developments for both of our company and the hospitality industry.
And over the past several months, we highlighted many of them and an updated investor presentation that we put out in early April we encourage you to review the presentation, which can be found on our website.
We are optimistic about the long term outlook for the company and by taking decisive actions to strengthen our balance sheet. We now have multiple years of runway that will allow us to capitalize.
Recovery, we are seeing and hospitality industry.
While our optimism remains we must acknowledge some risks of the pace of the recovery due to the due to the ongoing variance of COVID-19 and.
In addition, we believe the majority of our loans could continue to be and cash traps over the next 12 months to 24 months or longer and as a result, we will continue to focus on building our liquidity.
Quiddity, improving our capital structure and the months of to come.
We have significantly reduced our planned spend for capital expenditures. This year. However, given the sizable strategic capital expenditures, we made at our properties over the past several years, we believe our hotels are and fantastic condition and are well positioned for the industry rebound.
Let me turn now to the operating performance.
And on the wells.
The lodging industry is clearly showing signs of improvement during the quarter, our hotels performed very well revpar for all hotels and the portfolio increased approximately 372% for the second quarter and we reported positive hotel EBITDA for the second consecutive quarter, the third quarter looks to be building.
And upon our strong momentum as July numbers look likely to outperform June numbers. So we are confident that the industry recovery is continuing to take hold we believe our geographically diverse portfolio consisting of high quality well located assets across the U S that are approximately 80% reliant on transient demand will be in a position to capitalize on the pent up leisure and.
And our hope ration of trains and corporate demand.
We continue to be focused on aggressive cost control initiatives, including working closely with our property managers to minimize cost structures and maximize liquidity at our hotels. This is where our relationship with our affiliated property manager Remington and really sets us apart Remington was able to quickly cut costs and rapidly adjust to the new operator.
Operating environment and the same way they were hyper responsive on the way down we expect them to be hyper responsive on the way up mitigating cross cost creep as much as possible throughout this recovery. We are proud of their efforts over the past year and believe this important relationship has enabled us to outperform the industry from an operations standpoint, and Jeremy will discuss this in more detail.
Turning to Investor Relations, our trading volume has hit new highs in 2021 was strong participation from both institutional and retail investors were pleased to report that in June we were added to the U S. Small cap Russell 2000 index. The U S broad market Russell 3000 index and the Russell Microcap index as part of the Russell indexes annual reconstitution.
And we believe our inclusion and creates added exposure to key institutional investors as well as to investors, who use the Russell indexes to benchmark their portfolios.
18 months of been extraordinary by any measure.
Could not be prouder of the effort and the performance of our teams. During this challenging time, our management team has extensive experience in navigating tough market.
Environments, and we believe we of the right plan in place to capitalize on recoveries at unfolds. This plan includes continuing to maximize liquidity across the company.
Optimizing operating performance of our assets as they recover deleveraging the balance sheet over time and looking for opportunities to invest and grow as we bounce off the trough of the industry cycle, we are going to be laser focused on all of these.
I'll now turn the call over to Derek to review the second quarter financial performance.
Thanks, Rob before I discuss our financial results I'd like to note that all per share metrics that I will discuss reflect our recently completed 1 for 10 reverse stock split.
For the second quarter of 2021, we reported a net loss attributable to common stockholders of <unk>.
$9.5 million or $4.35 per diluted share.
For the quarter, we reported <unk> per diluted share of <unk>.
We are pleased to report that our adjusted EBITDA for the quarter was $31.4 million.
At the end of the second quarter, we had $3.9 billion.
<unk> with a blended average interest rate of 4.1%.
<unk> loans were approximately 11% of fixed rate and 89% floating rate, we utilize floating rate debt as we believe it is a better hedge of our operating cash flows. However, we do utilize caps on those floating rate loans to protect the company against significant interest rate increases.
And of loan our hotel loans are all non recourse and as Rob mentioned nearly all of them are currently and cash traps, meaning that we are currently unable to utilize property level cash for corporate related purposes at.
At the properties recover and meet the various debt yield or coverage thresholds, we will be able to utilize that cash freely at corporate.
And we ended the quarter with cash and cash equivalents of $524 million and restricted cash of $70.1 million debt.
Vast majority of that restricted cash is comprised of lender and manager held reserve accounts.
At the end of the quarter, we also had $15.9 million and due from third Party hotel.
This primarily represents cash held by 1 of our property managers, which is also available to fund hotel operating costs.
We also ended the quarter with net working capital of <unk>.
$531 million compared to net working capital of $9.8 million at the end of 2000.
Managing which highlights the continued improvement and our financial position.
I think it's also important to point out at this net working capital amount of $531 million equates to approximately $19.39 per share. This compares to our closing stock price from yesterday of $16.
And 55.
Which is of 17% discount to our cash value per share and we do not believe this reflects the intrinsic value of our high quality hotel portfolio.
From a cash utilization standpoint, our portfolio generated hotel EBITDA of $45.6 million and the quarter of.
Our current monthly run rate for interest.
<unk> expense is approximately $11 million and our current monthly run rate for corporate G&A and advisory expense is approximately $4 million.
On a run rate basis, we were very close to being cash flow positive at the corporate level and the second quarter.
And as of June 32021, our portfolio consisted of 100.
As with 22286 net rooms, our current share count stands at approximately 27.4 million fully diluted shares outstanding which is comprised of 27 million shares of common stock and 0.4 million op units.
And the second.
Hotel under our weighted average fully diluted share count used to calculate <unk> per share included approximately $1.7 million common shares associated with the exit fee on the strategic financing we completed in January.
At the exit fee will be owed once the facility is repaid and could be paid in cash or stock.
Second assuming yesterdays closing stock price of $16.55, our equity market cap is approximately $450 million.
During the quarter, we entered into a modification agreement on the $240 million Renaissance Nashville, and Westin Princeton portfolio alone representing 2 hotels this modification agreement.
And involved is catching up deferred interest and exchange for reducing future debt yield extension tests, thus improving our ability to qualify for future extension options.
As we previously discussed we have been actively exchanging our preferred stock for common stock as a way to de lever our balance sheet remove the accrued dividend liability and.
2 of our equity flow through.
Through these exchanges, we have exchanged approximately 67% of our original preferred stock, which is approximately $379 million of face value into common stock. These exchanges also eliminated a significant amount of accrued preferred dividends after taking into.
And in Peru, $200 million of new corporate debt that we closed in January and our cash balance at the end of the quarter, we have lowered our net debt plus preferred equity by over $800 million since the first quarter of 2020.
We have also been opportunistically raising equity capital to shore up our balance sheet and prove our liquidity.
And to be prepared for potential loan paydowns needed to achieve extension test or meet refinancing requirements during.
During the second quarter, we issued approximately $8.9 million shares of common stock for approximately $356 million and gross proceeds.
Including shares issued subsequent to the end of the second quarter.
<unk> year to date, we have raised approximately $478 million and the sale of our common stock.
Over the past several months, we have taken numerous steps to strengthen our financial position and improve our liquidity and we are pleased with the progress that we've made while we still have work to do to improve our capital structure. We believe the company is now well positioned to benefit from the improving.
Moving trends, we're seeing and the lodging industry. This.
This concludes our financial review and I would now like to turn it over to Jeremy to discuss our asset management activities for the quarter.
Thank you Derek comparable revpar for our portfolio increased 372% during.
During the second quarter of 2021.
Total EBITDA flow through was a strong.
6%.
We're extremely encouraged by the acceleration of occupancy at our hotels with each consecutive month, increasing over the prior month during the second quarter.
June sort of highest occupancy at 63%.
During the second quarter Ashford Trust.
50, corded and incredible 57% occupancy compared to 51% for the U S upper upscale chain scale.
Well, while we are still and the recovery process, we are starting to see green shoots and areas of our portfolio that are now exceeding 2019 levels.
I would.
I'd like to spend some time highlighting those during this call.
And number of our assets have been able to capitalize on the pent up leisure demand that we're experiencing.
Crowne Plaza, a contact key west increase their hotel EBITDA for the second quarter by 74% relative.
Relative to.
We can team.
That is phenomenal.
Our team has done an excellent job of increasing top line, they are increasing seasonal premiums and upgraded room types and increasing seasonal blackouts.
To discount programs.
In addition, we are.
We're also ensuring that.
Of our top line growth hits the bottom line for expense savings include.
Including consolidating our F&B outlets to reduce staffing.
The <unk> resort and Spa had incredible results during the second quarter with Revpar, increasing 11% over the comparable period in 2019.
<unk> 29 and initiatives that has been successful. This year has been of partnerships, we formed with the local Marina and sailing group.
These 2 groups are seeing record years.
Through our partnership has resulted in additional demand.
1 ocean resort and Spa performed remarkably well during the second.
<unk> for.
With revpar, increasing 14% relative.
Relative to the second quarter of 2019.
Our team took a proactive position and increase the ADR of premium room types by more than 10% and anticipation of excess demand.
The impact of this can.
And be seen and our pure rooms, which produced $73000 more revenue from the same time and 2019.
The strategy along with other strategies that we implemented and the second quarter.
Continued.
Contributed to hotel, achieving a hotel EBITDA it was 8% higher.
And the second quarter of 2019.
The hotel of Coral Gables has also done a solid job of exceeding 2019 results with revpar, increasing 3% during the second quarter relative to 2019.
And our team has been successful and gaining momentum and booking group business.
With the hotel producing more than $450000 of group revenue during the second quarter.
Additionally, we were able to successfully secure new airline business at a rate higher than our competitive set.
This group of Airlines business has provided us enough base level of business.
The shift of revenue strategies and be more proactive.
About pushing rate.
Moving on and capital management and prior years, we were proactive and renovating our hotels to renew our portfolio.
That commitment has now resulted in a huge competitive and strategic advantage as a market.
And rebounds.
Not only are our properties more attractive to potential travelers, but we can also deploy capital more prudently throughout the recovery.
Thus far and 2021, the only major project that we have completed is a ballroom renovation at the Ritz Carlton and Atlanta.
Looking ahead, the only major capital projects on the horizon or a renovation of the public space and guest rooms at the Hilton Santa Cruz and renovation of the Guestrooms at the Marriott Fremont and renovation of the public space at 8 select service hotels.
Cumulatively, we estimate spending $40 to $55 million and capital expenditures.
And in 2021.
Just significantly less and we have spent and previous years.
Before moving to Q&A I'd like to reiterate how optimistic we are about the recovery of our portfolio and the industry as a whole.
We're seeing and occupancy continued to accelerate as.
And as well as progressively seen.
Our assets become operationally profitable.
During the month of June 95% of our hotels, where GOP positive.
Although I only highlighted a few properties and this call there were a number of other properties that exceeded their historical performance or just on the cost of doing so.
We fully anticipate this momentum will continue.
That concludes our prepared remarks, we will now open the call up for Q&A.
Thank you at this time, we will be conducting the question and answer session. If you would like to ask a question. Please press star 1 on your telephone keypad, the confirmation tone will indicate that your.
Line isn't a question for you you May press star 2 and he would like to remove your question from the queue for participants using speaker equipment and may be necessary to pick off of your handset before pressing the star keys.
Our first question is coming from the line of Tyler <unk> with Janney Montgomery Scott. Please proceed with your question.
Hi, good morning.
This is Jonathan on for Tyler Thanks for taking our questions first 1 for me I was wondering if you could provide some color on how trends have progressed into July and if theres been any discernible change with the recent spike and adult up there and breakthrough cases, all of that and any signs of deceleration and recently.
Yeah, Good question and answers no.
We've seen some small pockets and a few.
States, where there's a little bit higher case counts, we've seen at a little bit and Florida, and Tennessee, and Texas, but nothing significant at the materials. So as we sit here today the strong summer of of transient continues and we're not seeing that.
And we've not seen at anyway.
And we anticipate a July revpar to exceed at June Revpar, and and we've seen that sort of as I mentioned consecutively each month and so far this year.
In terms of month over month growth.
Okay, Great I appreciate that and so and then and then moving to the labor front.
Really we're thinking about the pace of.
Bring back more employees.
At the Occupancies of demand continues to ramp and.
What kind of staffing levels at Department is currently running and how does that compare to the first quarter of of pre pandemic levels.
Yes. This is Jeremy.
[laughter] staffing and it clearly are our biggest.
<unk> challenge and we have operationally to kind of continue to be at a challenge.
And I think the team has done a great job mitigating as much of that as possible and most of that has been through the efficiencies, we built and the hotels.
The.
Our process of of Covid has really allowed.
How long and kind of.
And of dissect, these hotels and and and rebuild them on a completely different operational model, which is much more efficient and.
And so you're seeing some of those savings and I think it will continue to see those savings for the foreseeable future.
But there continues to be a shortage of labor and.
Continues to be a lot of wage pressures.
Yes.
Most of our hotels.
To give you just kind of at.
High levels.
Understanding and what we're facing we've got about 10% of.
Of our staff are open positions and so that's that's where we stand.
And there can just kind of been the trend.
It hasn't really come down meaningfully over the last 4 to 6 weeks.
So it is just continued to be a focus and and we're just doing the best we can.
Given the current environment.
But I don't think it's a long term issue and something that we excuse of short term issue.
Okay, Great and then.
Thank you for that answer and then a question on the rate side of things if I could and.
And I know and maybe hard to segment and everything else, but is that all of you during the quarter, that's driving that debt.
ADR gains or is there some corporate and their impact and either positively or negatively and.
And obviously, we use of rate quite strong and you know.
And me highlight.
But can you provide any additional color on where do you think corporate rates will come in and as we move through the fall.
Well, let me first of me to say 1 thing about the difference and rate it's been interesting that the step at popped out to me as we're going through our second quarter numbers was right now of weekend rates.
And this is both for group.
And also for most of us for transient weekend of rates have been have had read part of 50% higher than weekday.
So you can really see the amount of <unk>.
Pricing power of that is going.
Going into the weekend because of obviously predominantly leisure.
I think we've been pleasantly surprised overall on the rate side.
And even as we look into group for next year as we're building the books ADR is on our bookings in 2022 were actually 4% up over 19.
So youre seeing I'd say very strong rates and overall, our corporate rates are not really at much reductions I think I saw somewhere it was.
Group, 85% and 90% of our our corporate rates are rolling at levels at or above kind of 2019 levels. So I think from the rate side overall, we feel very good about where we're at.
Things are at and given the rates of what people are paying this summer I think at even psychologically.
Round of allows companies and groups to get comfortable with 2019 or better type rates.
And so rate is definitely not where we are concerned I think it's just a real question of of.
And what does with these various variance.
And some of these companies like Google and Apple and other large S&P 500 type companies as they are pushing out.
<unk> I will turn to office states does that delayed things a little bit in terms of the return to travel, but I think we feel pretty good about where rates are.
And I can give you a little bit more specifics and the quarter.
So typically we run about 20% group and as we've mentioned.
For the quarter.
Some of the rest of the second quarter at 15% group.
81% transient and 4% contract business.
During the recovery, we were pushing out a lot of our contract business moving out of lot of airline crews.
Just because we're hitting high occupancy levels.
We're starting to pick up.
A lot more of that contract business, but it's still at very small number which I think is encouraging.
And it tends to be lower rated.
In terms of the ADR breakup, we had $137 ADR as you know.
Group ADR was $128 <unk>.
<unk> was $1.41.
1 and contract with 101.
At the breakup, so I think we're still getting decent group.
Group rate, but it's a discount to transient.
And then while I don't have a breakout of corporate transit versus leisure.
At the portfolio does have a lot higher leisure demand right now and we hope to.
To see some.
Pick up and corporate after labor day.
Okay, great. Thank you for all of the color on that at the sulfur and many alright. Thank you.
Thank you. Our next question is coming from the line of Bryan Maher with B Riley Securities. Please proceed with your question.
Alright, good morning, maybe a quick housekeeping.
And item for Derek.
On your release on page 15, you had a share count of.
22, 7 million at quarter end.
But in your comments you said, we're now at 27 point for so I'm, assuming the Delta is issuances since the quarter ended.
That's correct.
And the Delta and the share of raising component of that would be.
478 million minus the $3.56, correct that's.
Correct.
Great. Thanks.
You know when we think about your portfolio and Jeremy did.
Great job walking through a handful of the properties and you don't really think of it as kind of leisure beach like we might with Braemar and can you give us a little bit more color on what were some of the strength was in the second quarter.
Sure I think the strength really.
As you can imagine across the kind of a handful.
Full of of southern warmer markets so when.
And when you look at the strongest assets Youre looking at our Nashville, Renaissance Youre looking at Savannah, our Hyatt and Savannah.
Most of Florida or Texas.
Texas assets and then even we're starting to see some strength and southern California are Beverley Hills Marriott was extraordinarily strong as well.
So it's just kind of these various southern warmer markets.
Because when you are looking at even the weaker spots, there's still a lot of weakness in DC.
And actually.
Our worst performing assets and second corner, where these 2 leisure transient hotels in DC, the Churchill and Melrose just because of the government's been shut down.
And just anything that is in.
Minneapolis, Chicago and.
And the Bay area, it's been a little bit of a struggle as well and suburban markets.
It's there.
And so but it's not just as you kind of put out Brian it's not just 1 spot it's fairly broad broadly placed across the kind of southern and warmer markets.
Alright, and then drill down and <unk>.
Brian just to just so.
So Nashville top performing market in terms of year over year growth for us.
At.
It's a big asset for us it is a good way.
National Renaissance as you know and then the other the other top 5 markets, where Miami, Atlanta, Orlando and Tampa.
And 3 of those 3 of those are and Florida.
And it goes to what Rob just mentioned in terms of some of the southern states.
And then Atlanta, we got a good amount of exposure there. So I think that helps us as well, even though it's not really of leisure market given that we've got a decent portfolio of waiting. So I think some of that some of that has helped at in terms of where our assets are located and.
And and non leisure markets, they just happen to be and markets that have done.
Fairly well.
DCP and the 1 that's more disappointing because we obviously have a lot of exposure and DC.
But.
Given our high concentration of Crystal City, and we're extremely bullish on that market given what's going on there as you know.
Great and so you finished the quarter with a lot of cash.
Roughly 500 million give or take.
How much is and I know you guys have a lot of money, that's probably going to be tied up and cash strapped for the next couple of quarters.
Is there a level where you say.
We have enough we don't need it.
Sure.
Can you share with us the board's thought process there.
Sure Yeah, as you know, Brian and me, we do we built a significant amount of cash and given where we've been over the past 12 months, we felt like it's been important to make some substantive changes to the balance sheet and our liquidity profile. The issue. We have is that it's frankly, it's a little bit of and unknown still I mean, even looking.
Looking at these variance that have been coming and at the delaying of certain people to getting back to the office. It does add a little bit of Choppiness to this recovery and to your point is we the vast majority of our loans as Derek mentioned as I mentioned are and cash traps and for most of them generally speaking the way to get out of them is at need they need typically.
<unk> 6 <unk>.
2 consecutive quarters of.
Above and it varies by loan, but generally speaking around call at 1.2 times coverage.
And we just don't know what that data is I don't know if it's in 6 months from now because of things really recover or if it's 12 to 24 months, which I think is frankly, a more likely.
<unk> number as we sit here today and so as we look at the fact that we may not be able to extract cash at of our portfolio from.
For net another 12 or 24 months, we've got to be very thoughtful around well. How then do we fund our Capex program as it begins to ramp up and the next 24 months, we have over the next couple of years we.
Have $2.5 billion of debt that doesn't necessarily have hard maturities, but has extension tests debt include debt yield tests, and it's hard to know whether or not the exposure to those extension tests and the paydowns needed to meet him at $0 or $750 million and we just don't know given the variability.
What's going on now as we mentioned and other.
And in previous calls and we're very focused on trying to get these loan modifications to reduce those debt yield extension tests and we've been successful on.
A handful of of our bigger ones, but we still have some big ones left that we're focused on trying to modify.
And.
So and then when you kind of add on well we've got obviously this and this rescue financing that we did that were needed to payback. The next few years, we've got to be able to get our preferreds back current at some point in order to get our <unk> eligibility back when you start adding up those dollars and just the uncertainty of exactly what the recovery looks like we.
<unk> like it's important to err on the side of being conservative. So that we are avoiding being back in a position like we were a year ago.
Brian This is Derek I just wanted to clarify 1 of the questions you asked about the capital raised to date.
Post the end of the second quarter and kind of walk through that math.
The 470.
$8 million is how much we have raised year to date, the $356 million as what was raised and the second quarter. There was also about $45 million that was raised and the first quarter. So you would need to be to back that out as well if youre trying to get to sort of how much of it raised post quarter end.
Great that's really helpful and just last.
And for me.
When you look at what's going on and the transaction market. Yes. Some assets are turning some interestingly, depending upon where they're located at a decent cap rate.
Is there a thought process that and the second half of this year early next year.
My either try and sell assets.
You can achieve and attractive cap rate or just let go of assets that you just don't think of it going to recover and is not worth holding and that's all for me. Thanks.
Thanks, Brian and I think to your latter point I don't think we'd probably have any assets left that we're just going to let go and we went to that process last year. So as we sit here today unless theres a material.
And in the World I would anticipate hanging back any more assets.
For your earlier question you are right, we are definitely seen and actually getting a lot of inbound traffic on an assets at MIT and kind of.
At the.
I don't know that <unk> of the day and the southern warmer transient focused assets and we do have a good number of those.
Change of the reality of the circumstances that we're in is that while that had net sales are a little less attractive right now because of the nature of this of the rescue financing that we've done so to the extent, we sell any asset and.
And get excess proceeds or if we refinance and get excess proceeds of those are allocated to.
Paying down the loan and given that there's a 2 year make whole, which goes basically until January of 2023.
And it doesn't really make sense for us to pull the trigger on and asset sell today.
In 12 months from now we could sell the exact same asset for additional proceeds and that would still have to.
And to pay down the loan so I think it's something that as we get into later next year and coming closer to the make whole and burn off I think it is something we will consider but by and large we liked the assets of the portfolio we have.
At least something maybe around the edges that we would do as opposed to anything substantive.
And thank you.
Thank you as a reminder, ladies and gentlemen, if you would like to ask a question and at this time. Please press star 1 on your telephone keypad. Our next question is coming from the line of Michael Bellisario with Baird. Please proceed with your question.
Hi, good morning, everyone. Good morning.
And they break.
And can you just go back to maybe.
Jeremy here and just your group comments, maybe could you focus on where you're at in terms of demand and what kind of books today for 'twenty, 2.2020 2.
Versus at the same time and 2019 of them and also at just under the BT side.
And what are you seeing and and.
Scene and inflection maybe occurring in your portfolio in terms of of when you expect BT traveled to pick up based on what you're seeing with the booking pattern today.
Yeah. So.
Rob quoted at the ADR that had 4%.
For for group, it's a it's still pacing.
And down for 2021 about 18% this is all compared to 2019.
In terms of.
Kind of on a quarter over quarter basis, when you look at total group pace.
But it was it was down 70% and Q2, we're looking at 49% and Q3.
And where you've already 6% and Q4.
And down from 24% and Q1, and so you can just see that at each quarter and it's.
And it's coming down.
And then the.
The cancellations of.
And it's been a lot less and what we have experienced over the course of last.
You're at 3 months, I guess youre at a quarter.
The 1 thing that's interesting is.
The way the leads are working and we're just seen such.
Such a high percentage of our lead volume.
And and 3 to 6 months, it's the highest percentage right. Now is our lead volume is for bookings and 3 to 6 months out which is not typical.
And so when you look at the mix of lead.
It is much more weighted towards.
Less than a year out which is definitely different and what we've seen and in previous years and so.
That's it I think that's good because it.
Even though we are as I project out what our group pace.
And like it doesn't really take into account that shift and short term lead volume because we're just kind of comparing of static.
Outlook and.
So I do think that there's a there's an opportunity to continue to see.
For pickup and lead volume and and converting that to actual.
Actual group business, so that can kind of get it gives you a flavor of what we're looking at right now and in 2023 looks very strong.
And it's obviously a ways out.
That help.
Yes. It does all of those comments are specific to group I assume any comments at least in the near term on the BT bookings.
This looks at BP still at it.
I think what we'd say at that we're still and we see it pick up basically on a daily basis.
So theres good acceleration, but it's still on such a small base.
It's just we've got a ways to go.
And Q2.
The mix of business grew from 14% to 16%. So it's it still has a ways to go and and and hopefully after labor day, well, we'll see.
More pickup and <unk> and.
And corporate demand, it's as you can imagine and the Q2 and Q3.
At least at certainly.
Certainly Q2 typically.
Typically the mix of of corporate demand.
Generally goes down and our portfolio anyway, just because it becomes more laser focused.
And as summer travel.
At picks up and so even though the mixed and grow significantly.
Between Q2 and Q1.
It's still positive because because of that mixed usually declines of between those quarters. So were.
And we're hopeful that we see a pickup and transient and corporate transient demand, but as you know the booking window for for our business. When it comes and transient is generally 3 weeks out and.
And today and Thats at a new.
A normal environment and.
And today, it's much shorter than that.
And Michael 1 thing I would say I touched on earlier was is that we are seeing.
Rates from the corporate side, even though they're small and as we're looking at kind of constantly rolling over.
Corporate rates we.
We've seen strength there so when we're looking at the various sometimes fires, we're trying to put out and ways to grow the business when and where we're not seeing pressure is pushed back from a rate standpoint, with corporate which is great.
And is it fair to assume when we hit the fall here with.
RFP season, we're just gonna World.
'twenty rate pre pandemic and.
22 of them to do that but the brands are thinking.
Yeah at least for for US, we think it's gonna be Belmont and mostly probably 90, plus at 90%, maybe just under that'll roll or do a dynamic pricing, which is just kind of of discount off of retail rate. So that's the strategy that we're going to do we're not going.
We're going to kind of hold firm on that and I think that that youre seeing that not just us but all of them are doing that and the brand just because it's the right thing to do.
And we're not going to make sure.
Perfect. Thank you.
Yeah.
Thank you our next question is.
Chris <unk> with Deutsche Bank. Please proceed with your question.
Hey, good morning, guys.
Just a quick follow up on me.
Cash trap situations, Rob I think you mentioned 2 consecutive quarters of <unk>.
1.6 times coverage is there any way to triangulate and using.
Using round numbers, what that might equate to on a portfolio wide Revpar hotel EBITDA basis, just to just to get a sense as to how close you are that's a good question.
And 1 point is it's it's closer to 1 point to overall net $1.6.
Yes, I don't know the best way to triangulate.
<unk> debt to a revpar type number.
And then I guess from a simplistic standpoint, as we sit here now we obviously are generating.
Positive hotel EBITDA.
At.
Overall, our interest expense is roughly 1.
And 20 million Bucks Hunter and some around there.
On an annualized basis, so I think the way to do it is if you're if you're at $120 million plus or minus of interest expense at 20% of that and I guess your agenda and just backing into what do you think hotel EBITDA gets to that level.
And you can use.
100, and seen rate discounts you want to get to it but I think it's probably the easiest daily and it won't be exactly right. Because obviously each pool is different and but if you and do a back of envelope, it's probably the easiest way to do at.
Okay.
That is helpful.
And just a housekeeping question on the quarter to date, which I think we.
Whatever we calculated at $77 million of.
Capital raise and Q3 is that all of the share.
On the share issuance program or does that maybe include some additional preferred buybacks.
For swaps.
And so we don't include the preferred exchanges and that those dollars.
But Chris so that would just be based on the issuance of common shares pursuant to the at the 11th that had been filed.
Yeah.
Okay.
Thanks, Derek and maybe maybe 1 for Jeremy I think we've heard about.
A lot of hotels, where because.
Because of the labor situation and you're actually kind of shrinking at hotel right now and not making all of your rooms available for sale, which can also help you on the rate side is that happening across a lot of your portfolio or not.
And definitely it happen, where we aren't able to put rooms and service just because we can't get them clean I don't think it's at.
And at a wide scale pervasive issue that.
Is it caused us to lose and the revenues.
And that's meaningful at this time, just given where occupancy levels are as well in most cases, so yes and that has helped us and in some cases of push rate.
<unk> taken.
More risks and then.
And then.
I think of lot of our peers have and trying to build for them on pushing rate as much as possible and I've been pleased with some of the pick up we've seen and our ADR and our portfolio.
Okay helpful and just 1 last follow up the Capex number you gave out I think 40% to 55.
And $1 million for the year is.
Does that include anything additional for.
Key west for the autograph.
And Thats were still and the kind of programming phase for that right now so that's not this year.
And Chris we were able to.
Push out.
Our <unk>.
<unk> dates for for that so we've got plenty of time on key west and right now the market is doing so well debt I don't really want to take any of rooms out of service and then I'll have to as you can understand.
Yeah.
Sure Okay, great very helpful. Thanks, guys.
Thanks, Chris.
Thank you we have reached the end of our question and answer session. So I would like to turn the floor back over to management for closing comments. Thank.
Thank you for joining today's call. We look forward to speaking you. All again next quarter and addition, though that we're looking at potentially do at Investor Day, and New York and October likely October 12, So stay tuned and we will provide more details later thank you.
Ladies and gentlemen, this does conclude today's teleconference. We thank you for your participation and you may disconnect your lines at this time.
Okay.
Yeah.
And.
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