Q3 2021 Braemar Hotels & Resorts Inc Earnings Call
Incorporated third quarter 2020 results conference call.
At this time all participants are in listen only mode. A 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, this conference is being recorded I would now like to turn the conference over to your host Mr. Jordan, Germany Jennings for Bryn Mawr. Please go ahead Ms Jenny.
Good morning, and welcome to today's call to review results for Braemar hotels, <unk> resorts for the third quarter of 2020 and to update you on recent developments on the call today will be Richard Stockton, President and Chief Executive Officer, Derek Eubanks, Chief Financial Officer, and Jeremy Welter, Chief operating officer, the results as well as notice.
Of the stuff the ability of this conference call on a listen only basis over the Internet were distributed yesterday in a press release.
At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward looking information and are being made pursuant to the safe Harbor provisions of the federal Securities regulations, such forward looking statements are subject to numerous assumptions uncertainties.
Uncertainties, and known or unknown risks, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the accounting filings with the Securities and Exchange Commission.
Before looking statements included in this conference call are only made as of the date of this call and the company is not obligated to publicly update or revise them statements.
Statements made during this call do not constitute an offer to sell or a solicitation of an offer to buy any securities securities will be offered only by means of a registration statement and prospectus, which can be found at www Dot Etsy C Dot Gov.
In addition, certain terms used in this 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 October 28, 2020, and May also be accessed to the Companys website at Www Dot EHR REIT dotcom.
Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release I will now turn the call over to Richard Stockton. Please go ahead Richard.
Good morning, welcome to our third quarter 2020 earnings Conference call.
I will begin by providing an overview of our business and an update on our portfolio, which includes our hotels achieving positive hotel EBITDA for the quarter and all of our hotels now being open including the recently rebranded Clancy Hotel in San Francisco.
After that Eric.
Eric will provide a review of our financial results and Jeremy will provide an update on our asset management activity.
Afterward, we will open the call for Q&A.
The COVID-19 pandemic has created both social and economic disruption on an unprecedented level and thats created a volatile landscape throughout the hospitality industry.
As I've said previously this has been an extraordinary period for all of us and our entire leadership team has been steadfast in our commitment to protect all of our stakeholders. During this unprecedented time.
A few objectives have continued to guide us to.
The health and well being of the employees at our hotels, our hotel guests and the communities in which we operate have been a top priority and we've taken several preventative measures to keep them safe.
Stay at home orders were implemented we quickly adapted to the restrictions and challenges affecting our properties and adjusted the staffing model at our hotels, while reducing other operating expenses in an effort to preserve cash and minimize near term losses.
The last time, we spoke the.
The vast majority of our portfolio had suspended operations for a significant portion of the second quarter.
Thus I am extremely pleased to report that since then all of our properties are reopened and we reached an important milestone by achieving positive hotel EBITDA across our portfolio during the quarter driven by strong occupancy performance of over 48% at our resort properties.
Upon the bulk of our properties reopening in July.
We achieved portfolio wide occupancy of almost 30% and hovered around that level for August and September while ADR declined as a result of adding lower rated room inventory to the reopening portfolio.
While leisure demand is holding up nicely, particularly on weekends any significant uptick uptick in revpar performance is likely to rely on the recovery of corporate transient demand and ultimately group demand as a result of widespread vaccination or achieving herd immunity.
Many of our hotels are in drive to leisure markets and have been well positioned to benefit from the resurgence of leisure demand in recent months in total.
Eight of our 13 hotels are considered resort destinations. These hotels include the Ritz Carlton Sarasota, BARDA Sonal Hotel Yountville Ritz Carlton Lake Tahoe Pier House Resort Park, Hyatt Beaver Creek, Hilton La Jolla, Torrey Pines, and Ritz Carlton St. Thomas.
We are pleased to report that this thesis has played out just as we expected as all eight of these properties had positive EBITDA for the quarter.
While it is still early in the reopening process and the impact of the virus is still unpredictable. It is clear from the feedback we are hearing that guests are excited to be traveling again.
With all of our hotels now reopened to the public we continued to prioritize the health and safety of our guests and staff and we are being thoughtful deliberate and flexible as our hotels resume operations to.
To enhance guest safety our properties have instituted stringent safety measures and protocols consistent with evolving best practice recommendations regarding COVID-19, ranging from enhanced hygiene standards to keyless check in and electrostatic sprayers to protect guests.
Additionally, in the near term we have specific plans to contain expenses across the portfolio as we continue to navigate the reopening process.
We are offering optional housekeeping services at some properties for Stayovers.
We are also eliminating van Transportation Airport Shuttle service valet parking services Turndown service and all the amenities that exceed brand standards. We're also suspending some services that concierge lounges and clubs and all spas and kids' clubs.
Our asset management efforts have been relentless and have positioned us well for the continued ramp up in operations that we now anticipate.
We're also excited about the recent opening of the Clancy in early October located in San Francisco's vibrant Soma market.
The former courtyard, San Francisco downtown underwent a rebranding and renovation in excess of $30 million to create the Clancy.
It joins Marriott International's autograph collection hotels and the property features 410 guest rooms over 11000 square feet of modern meeting space throughout 16 event rooms.
While construction restrictions delayed the clancy's reopening by several months and we expect that occupancy levels will be moderately low given COVID-19 has negative impact on group and business transient demand. We look forward to realizing enhanced financial performance from this property over the long term as a result of the rebranding and renovation.
While we continue to face the challenges of the pandemic and the uncertainty that go with it we have taken proactive and aggressive actions to protect and enhance our corporate liquidity.
This included cutting expenses at the corporate level and significantly reducing our planned capex spend for the year. We will continue to preserve cash until we have more clarity on the recovery in the direction of the economy.
All in we estimate that we have reduced our run rate corporate G&A and Reimbursable expenses under our advisory agreement by approximately 25%.
As previously discussed we also closed on an amendment to our corporate credit facility with the Paydown of $10 million. The amendment converted the $75 million corporate credit facility into a $65 million.
Term loan with the same maturity date of October 25, 2022.
During the quarter, we also finalized discussions with our property level lenders and now have no defaults across our borrowings.
Our intention is to remain current on these obligations going forward.
We successfully navigated through a very challenging operating environment. During this quarter our balance sheet is in good shape and I believe we are set up very well for the ultimate recovery in our industry.
I will now turn the call over to Derek Thanks, Richard.
During the third quarter, we settled our insurance claim with our carriers related to the Ritz Carlton St. Thomas for a total of $123 5 million.
Of which $42 $3 million related to business interruption income that had been previously recognized in our financial statements.
This was a significant claim that resulted in a positive outcome for the hotel and its associates and demonstrated the great working relationship our risk management team has with our insurance carriers.
For the third quarter of 2020, we reported a net loss attributable to common stockholders of $18 7 million or <unk> 55 per diluted share.
For the quarter, we reported <unk> per diluted share of negative 15.
Adjusted EBITDA for the quarter was negative $3 1 million.
At quarters end, we had total assets of $1 7 billion.
We had $1 1 billion of mortgage loans of which $49 million.
Related to our joint venture partner share of the loan on the capital Hilton and Hilton La Jolla Torrey Pines.
Our total combined loans had a blended average interest rate of two 5%.
Our loans are entirely floating rate.
As of the end of the third quarter, we had approximately 54% net debt to gross assets.
We ended the quarter with cash and cash equivalents of $88 2 million and restricted cash of $34 7 million.
The vast majority of that restricted cash is comprised of lender and manager held reserve accounts at.
At the end of the quarter, we also had $14 $3 million and due from third party hotel managers.
This represents cash held by one of our property managers, which is also available to fund hotel operating costs.
As Richard mentioned, we have been and continue to work with our property managers and lenders in order to utilize these lender and manager held reserves to fund the operating shortfalls at our hotels today.
To date, we have signed forbearance agreements on six loans, including the mortgage loans on the hotel Yountville Barasana Hotel Ritz Carlton Lake Tahoe, Ritz, Carlton Sarasota Pier House resort capital Hilton and Hilton La Jolla, Torrey Pines, the agreements typically allowed the company to differ interest.
On the loans for a period of up to six months subject to certain conditions.
The forbearance agreements also allow us to utilize lender and manager held reserve accounts, which are included in restricted cash on our balance sheet.
In order to fund operating shortfalls at the hotels, we also signed an <unk> use agreement on the four hotel portfolio loan that includes the Sofitel, Chicago Marriott Seattle waterfront, the notary hotel and the Clancy.
This agreement allows us to use the lender and manager held reserve accounts to fund operating shortfalls.
This agreement also provides for the exercise of the first of the loans five one year extensions.
With these agreements in place our balance sheet is in good shape. We are now out of default on all of our loans and our president attention is to remain current on these obligations going forward.
As we highlighted with our positive hotel EBITDA for the quarter, our monthly cash burn at our hotels has been reduced to close to zero.
Interest expense corporate G&A, including advisory fees and preferred dividends total approximately $5 million per month with.
With all of our hotels currently open and operating $88 million of cash and cash equivalents at the end of the quarter and based on realistic yet conservative assumptions for future Hotel operations. We believe that we have sufficient liquidity to outlast the COVID-19 related downturn in our business.
As of September 32020, our portfolio consisted of 13 hotels with 3487 net rooms, our share count currently stands at $41 1 million fully diluted shares outstanding which is comprised of $36 6 million shares of common stock at $4 5 million op units.
And our financial results. We include approximately $6 7 million shares and our fully diluted share count associated with our series B convertible preferred stock.
This concludes our financial review 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 decreased 65, 6% during the third quarter.
Impressively hotel EBITDA flow through was 55%.
As the recovery in the hospitality industry continues to take place.
We are tracking the daily performance of each asset.
Generally we are seeing significantly more demand at our resort hotels with third quarter comparable revpar down 37%.
Which is good compared to our urban assets, which are down 91%.
Each of our resort assets had positive EBITDA for the third quarter.
As previously noted our resort hotels have performed quite well during the pandemic.
A great example of this is Ritz Carlton Sarasota.
Which has been the quickest recover.
For the third quarter comparable Revpar decreased three 7%.
Impaired to the prior year quarter.
Hotel EBITDA for the third quarter was up over 500% compared to the prior year period.
This is largely a function of an increase in transient demand.
And the asset management team digging and to ensure that every possible expense has been eliminated.
Some of those include temporarily eliminated contour services and in turn down service scaling back on sales and staffing by approximately 50% and reducing expenses related to managing the golf course.
Another asset that has been strong it.
It seemed strong growth in demand is rich Carlton St. Thomas.
After reopening the hotel in June it ran 63% occupancy in July.
It was seeing demand growth in August when the second stay at home order was issued.
Reopened again September 19th.
Even with having been closed for 25 days the hotel was able to produce positive hotel EBITDA of about $100000 for the quarter.
This was possible because of the expense control measures that we've taken and the realization of pent up leisure demand.
To round out our resort portfolio review for the quarter, the Pier House resort attained 57% occupancy.
While our California properties, Barcelona Hotel, Yountville Hilton La Jolla, Torrey Pines, and the Ritz Carlton Lake Tahoe collectively achieved 50% occupancy.
Lastly, the park Hyatt Beaver Creek had 35% occupancy for the quarter.
Despite the wildfires occurring in September and early October the.
The California assets have performed relatively well.
That said, we have had some impact on our portfolio due to the fires.
Specifically, our yacht mill hotels experienced some displacement.
And BARDA sooner the fires caused about $1 $1 million in cancellation revenue and hotel Yountville, we've seen about 900000 and canceled revenue.
With fire is now subsiding and air quality returning to normal these assets have resumed the rebound.
As Richard mentioned this quarter welcome the completion of our strategic repositioning of the courtyard San Francisco downtown into the Clancy.
Joining marriott's autograph collection.
The entire renovation took a little longer than a year and a half to complete.
With an investment of more than $30 million.
As part of the conversion, we completely reconfigured the hotel's entrance and lobby to create a more open and inviting sense of arrival.
In doing so we constructed a new centralized bar with lounge seating, which flows into the newly renovated restaurant and cafe.
As California's restrictions are lifted we expect this property to experience a rapid ramp up.
I will now turn to capital investment in.
In 2019, we invested heavily in our portfolio to enhance our competitive positioning.
These investments included the conversion of the courtyard Philadelphia downtown to the notary hotel the completion of the three suite presidential Villa at the <unk> hotel and value add projects during the rebuild of the Ritz Carlton St. Thomas.
These initiatives have allowed us to get by with considerably less spending on capital expenditures than usual during the COVID-19 pandemic.
'twenty despite curtailing our capital expenditures significantly we have completed the conversion of the courtyard San Francisco downtown to the Clancy as well as completing the renovation of the Guestrooms at the Pier House resort in key West.
In total we expect to spend approximately $25 million on capital expenditures in 2020.
Sure.
Lastly, something worth pointing out is how well our portfolio has maintained ADR this year.
Year to date.
Park Hyatt Beaver Creek is up 29% Ritz Carlton Lake Tahoe is up 6% rich.
Rich Carlton Sarasota is up 4%.
And the Clancy is up about one 4% over 2019.
Overall, our portfolio is up 10, 5% and ADR this year compared to the prior year period.
In fact with rates, 36% higher than.
Pre Irma levels Ritz Carlton Saint Thomas is forecasted to generate its highest October rate on record.
This illustrates the caliber of our assets and.
And the potential that our portfolio has moving forward as we see demand continue to come back.
I will now turn the call back over to Richard for final remarks.
Thank you Jeremy in summary, our focus during the quarter was on the reopening of our entire portfolio of hotels.
This sets us up nicely for a slow, but steady recovery and our financial results. We have taken decisive actions to navigate the near term challenges of this crisis and while we cannot predict the trajectory of the pandemic. We are encouraged as we look ahead that we have in place the appropriate runway to get back to positive cash flow.
I am proud of our efforts to protect our assets and maintain financial flexibility to position us for future success.
We look forward to updating you on our progress as we move through the remainder of 2020 and into the new year.
This concludes our prepared remarks, and we will now open the call up for Q&A.
Thank you.
We will be conducting a question and answer session. If you'd like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate that your line is in the question queue. You May press star two if you'd like to remove your question from the queue.
Core participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys, one moment, please while we poll for questions.
The first question is from Tyler Batori Janney capital markets. Please go ahead Sir.
Hi, Good morning. This is Jonathan on for Tyler Thanks for taking our questions first one for me.
I was wondering if you guys could provide some color on the demand trends that you've seen post labor day in October.
Has there been any noticeable shifts in recent weeks with the recent spike in Covid cases.
Yes sure.
I will say there seems to be a commonly held belief that.
Most labor day things would fall off and.
As kids went back to school and people aren't able to travel as much particularly to generate that leisure demand I will tell you with our portfolio and what we're seeing that is not the case.
October is tracking.
Several occupancy points ahead of September and its up a few percent in ADR as well.
So October is shaping up very nicely as I look forward at our bookings for November and December.
The occupancy is also building very nicely.
Right in December is very strong.
And then we get to January and January as part of the first quarter seasonally is always our best quarter and even January as it is shaping up well so.
We're benefiting from a couple of different trends going into the first quarter one is the.
The inauguration.
So we have almost 30% occupancy on the books already for capital Hilton.
But then we also have as you know some resorts that are benefiting from the snow.
And then.
Some resorts that are benefiting from snowbirds traveling south for the Sun.
So so the trends are favorable.
Do think in order in order for us to get up to portfolio wide occupancy of 50.
50% or so which is probably what we need to achieve corporate level breakeven.
That'll take a little bit more time, but I can tell you that things would certainly look to be heading in the right direction.
That's great. Thank you I appreciate that color and then ABR.
ADR in the quarter was up 7%, which was quite good and surprising to us and I know Jeremy gave some comments in his remarks, but could you guys. Just provide some additional color on your revenue management strategy in the overall rate environment you guys are seeing in your markets.
Yes I.
I can do that I mean, what we're holding firm on rate and the reason why is because it's not a it's not a question of.
Art and quality of our assets it's not.
Price sensitivity, it's already going to travel or not and if you're going to travel.
We believe our portfolio is.
The destinations that folks want to travel to and are willing to pay for and so we have been holding up and pushing rate as much as we can.
And I don't think that's really hurt our occupancy but.
Because we still see the demand coming back and not as not as.
Please we want but I do think that there is just a level of discipline that we've instilled across our our teams and revenue managers just to hold firm on rate and push where we can.
Okay. Thank you that's very helpful. And then last one from me switching gears to St. Thomas and I know this may be difficult to answer given the island closure, but can you just talk about what you're seeing there and how performance has come in versus expectation given.
Given the <unk> nature of the island.
Yeah.
No the island has reopened now.
In fact, I personally visited the property a couple of weeks ago, and I will tell you it looks absolutely stunning.
Renovation that we've undertaken there.
Has really turned out very well and.
And all of our guests comments and reviews are extremely extremely positive.
Sure.
With that with that better product and frankly with less supply in that market.
And the fact that Americans I think feel a little bit more comfortable traveling there.
We're able to travel there versus international destinations.
We're benefiting greatly and if you look at the ADR for October.
It's up over 30% versus the premium levels.
That's a result of the new product the restricted supply available.
And this pent up leisure demand, which I think is a little little less elastic and frankly in the luxury resort space than maybe other chain scale segments.
And we're capitalizing on that.
I'd add to that is prior to having to shut it down for the second time.
We were running I believe in the high <unk> with right.
Close to 800 box.
So we're obviously very disappointed that we had closed the resort down.
Time, so as you pointed out there's just a lot of noise in the numbers and the fact that we were able to generate positive hotel EBITDA was a huge accomplishment I mean, just if you think about the cost associated with closing a hotel and then reopening it again because.
We've got to bring back people early train them and retrain them. So.
It was a.
A great.
Results that we generated positive hotel EBITDA.
In light of all of that and I'd also add that even.
Before that because not only because the field.
People feel more comfortable maybe traveling to a U S destination, we had a lot of first time travelers to that resort.
Tons of them.
And that is because a lot of the other Caribbean resorts, where close to use lasers.
So.
Where folks may have typically gone to another risk Carlton resort somewhere else and.
Even in locations like California, They chose to give St. Thomas to try and that was a huge opportunity for us because we have all this new product fresh product, which I think is.
As nice as almost any resort in the Caribbean.
And so we do believe that that is going to.
Be sustainable in terms of recapturing those first time guests on a go forward basis. So I'd be surprised at this property does not well outperform what we would've anticipated coming out of.
The recovery of reopening and out of Covid.
That's great I appreciate all that color. That's all for me. Thank you very much.
Thank you Nick.
The next question is from Bryan Maher B Riley's Securities. Please go ahead Sir.
Good morning, guys.
A point of clarity on the St. Thomas commentary, which I appreciate and did I hear you say that it was running high <unk> occupancy and an $800 a night rate.
Yes, right before we shut it down yes.
Yes. So it was it was and that was my math.
Off my recollection, because we were.
Conversations with the team so it was.
Yes, it was.
It was performing very very well so that would have been July which is a strong month.
Okay.
And what exactly triggered that shut down and what is the likelihood that that could happen again in year over year.
Yes, we actually I had a call with the governor and I think that he he was.
Kind of forced to do it it was not because of.
U S travelers too.
The Virgin Islands, it was mainly the locals.
Not.
Maintaining social distancing. So it was a pretty severe shutdown that he did over a period of three to four weeks.
But then also part of that is just because.
As you can imagine.
And while the restaurants and bars.
We just F&B outlets in general that can be on the beach and they don't have like the the sanitary conditions like the Ritz Carlton went out in terms of.
Just the heated EU apply to.
The cleaning.
<unk> and so they went to plastic wears and things like that as requirement in the island and so there's just a lot of initiatives that the.
Government to two.
To try to curtail.
The spread of the virus, but the other thing is was testing and so he had a threshold on a on a testing positivity rate there was requirement to reopen and I do think that part of that.
With the widespread testing.
More people being tested is going to result in a lower positivity rate and so I think that youll see that its going to be a higher hurdle for them to have to read to shut it down in the future.
Got it so there is additional preparation and they've done a great job I'll tell you like when you go in and you visit the island to go through you've got to have a negative test and I think that helps more travelers feel safe to visit the island and <unk>.
They've done a really good job of.
The temperature checks at the airport to get people and very quickly. So if anything I can Ben the way that we didn't like the fact that they had to shut it down but.
But I think the actions that the government taking place in the Governor I think have resulted.
Probably folks feeling safer to travel to the to the to.
The island as well.
Got it thanks, and then shifting gears to your urban hotels.
The Chicago itself, the Seattle area.
Yes.
I noted already the capital Hilton and these are pretty aggressive revpar declines.
What's the thought process at Braemar to deal with that is it just kind of tough it out and make the payment and cut costs as much as you can it and wait for the recovery or is there a plan b that youre thinking about on some of those assets.
Yeah, well you know the decision to reopen our assets was when we could lose as much money being open as we were losing being closed.
And that that's still applies although it is less relevant now because those assets youre right. There are they are struggling because we don't have corporate transit, we don't have any group business to speak of.
But they are generating some leisure demand, particularly on weekends and so there is if you look at something like the sofitel.
Which had almost a 30% occupancy.
For the quarter.
Primarily weekend Staycations from the Chicago suburbs.
And then some of the some of the other properties are benefiting from that as well so.
Clearly our path now is too.
Our whole firm.
And continue to.
Move them up in terms of Revpar and profitability over time.
And I think slowly.
We'll begin to travel more for business and we will be able to book some smaller groups.
Also benefit from some airline crews on a couple of those assets.
And thus, providing some base business as well so yes, we've rotated into segments that we probably wouldn't have otherwise taken or wouldn't have otherwise taken in a stronger market, but we're trying to keep that as short term as possible.
To mitigate our downside, but as you look at each one of those properties individually, they're incredible assets Theyre still incredible markets over a long sustainable time period, and they're great locations within those markets.
I'd encourage you Brian to go visit the plants because.
When you look at we've taken a courtyard and converted it to an incredible.
Hotel.
Repositioning I do expect that property to perform incredibly incredibly well given its location to a tremendous amount of demand generators within the San Francisco market.
And also by you talked about funding the losses.
<unk>.
I think it's all of the cases of our urban properties. It is in fact, we have access to <unk> reserves to fund operating losses and so.
That's very helpful right now and we're expecting that there will be sufficient to get us to the other side.
Great. Thanks, and the next time I feel compelled to rates up in San Francisco I'll be sure to stop in <unk>.
It's beautiful it really came out fantastic.
So I encourage you to see it.
Okay.
We have a question from Michael Bellisario Baird. Please go ahead Sir.
Good morning, everyone.
Good morning.
Yes.
Richard a question for you I know, it's probably a little early but.
Clearly on a path to being in a better cash flow position soon but was hoping you could maybe share your thoughts on acquisitions your appetite for.
Growing our portfolio of what Youre seeing out there today and.
How you're positioning yourself to grow the portfolio eventually.
Yes.
Fair question, we are starting to think about it.
I am tracking all the transactions that we're seeing with dish, which I know is very few.
And there are some interesting trends there are some hotels that are trading at significant discounts on a per key basis than what you would've seen a.
A year ago.
In some cases, even even more than the kind of 25% I think people generally believe that values are down.
And so that's piqued our interest we're not seeing it for properties in the luxury segment.
Okay.
I don't know if thats a function of it maybe just being too early the circumstances have arisen yet, but what we are seeing it in the and the lower rate of chain scales as far as <unk> appetite is concerned.
Right now we.
Our cash flow negative.
And.
Preserving our liquidity is of Paramount importance.
So you won't see us using our cash opportunistically until we get at least back to cash flow positive on a corporate level.
So it's our view is.
We just don't know when that is going to happen precisely there is too many factors that make that an unknown.
So we have to.
Be solidly in.
In the black on a corporate level on a monthly cash flow level before we'd ever consider a new acquisition.
So that's how we think about new oxygen so for the moment were.
We're studying the market, we're aware of kind of what's out there and how things are trading.
We're not betting on anything Thats for sure.
That's helpful. Thank you.
As a reminder, if you wish to ask a question star one on your telephone keypad Thats Star one.
We have a question from Christopher Walker Deutsche Bank. Please go ahead.
Yeah, Hey, guys good morning.
Good morning.
Good morning, you mentioned a lot of initiatives you've taken at the property level to two.
Kind of maintain margins and generate positive EBITDA and I suspect some of that is because you have had a greater mix of leisure demand I mean at what point.
Some of that at a certain rate or sort of occupancy level.
What point do you have to pull back on some of those more aggressive.
Closures of things like lounges, and things like that.
Yes, I mean, we've had the demand we've had allowance is open and so on.
Rich Carlton, where we can sell access to lounges, you can premium rate.
<unk> kept those out.
I have reopened them I guess, but I think that a lot of the cost cuts are are sustainable for an extended period of time.
We've broken down the way, we operate our hotels and rebuilt the operating model.
I think that what we've been able to accomplish in partnership with Marriott at a risk Carlton's is phenomenal I mean, you can look at the results in.
Sarasota and.
The profitability being up.
Significantly in the third quarter with with the Revpar, albeit slight revpar decline.
Now that's not going to be you're not going to see those results for the for <unk>.
That impressive, but I think you will see.
Incredible flow throughs coming out of this.
And I think we'll also have hopefully.
Some property tax declines in our portfolio next year, just because of what the what was.
Experienced and so we'll be very aggressive on that front as well so I think that.
It's an extended period of time, where we were able to drive higher margins and in terms of the mix, yes. The ADR may come down just because we'll have more group and lower rated business, but that doesn't mean that at.
At the rates that we're still going to offer them, we'll still maintain a pretty high margins.
Yes, I would add to that I'd say our resort portfolio.
The amenities are essentially available.
There is a call made on the ground on almost a daily basis, if there's not sufficient.
Occupancy on a particular day, they may not open at certain food and beverage outlet or the.
The courtyard club or the fitness.
But but the weekends have been so strong that I think if you visit any of our resort hotels by and large most of it is open.
Some exceptions the urban properties.
Aren't anywhere near the occupancy necessary.
To open up food and beverage outlets.
And clubs et cetera, and I think that they would need to significantly move up too.
At least 50% occupancy I think to justify a full.
Full operations so.
Again, it's case by case and in some cases a day by day.
Youll see the resort portfolio operating as you would expect but the urban.
Much less so and it remains to be seen when we achieve that level of occupancy and thats going to be based on as I said in my opening comments.
<unk>.
And the resurgence of business travel.
So that's what's going to trigger.
Okay. That's helpful. Thanks and.
I know kind of pre Covid, you guys had a process going on.
The Chicago So Phil.
Now numbers really destroying too can you give us an update on where that stands.
Coming out of this what do you go back to where you were negotiating or what's going on.
Yes, that's the subject of an ongoing legal dispute so I'm not able to give any more color on it today.
Okay.
Very good thanks, guys.
Ladies and gentlemen. This concludes today's question and answer session I would like to turn the call back over to management for closing remarks.
Okay. Thank you everybody for joining us on our third quarter earnings call and we look forward to speaking with you again on our next call.
This concludes today's conference you may disconnect your lines at this time and thank you for your participation.