Q3 2021 Host Hotels & Resorts Inc Earnings Call
[music].
Good morning, and welcome to the host hotels and resorts third quarter 2021 earnings Conference call.
Today's conference is being recorded at this time I would like to turn the call over to Jamie Marcus Senior Vice President of Investor Relations.
Thank you and good morning, everyone. Before we begin please note that many of the comments made today are considered to be forward looking statements under federal Securities laws.
As described in our filings with the S. C. C. These statements are subject numerous risks and uncertainties that could cause future results to differ from those expressed and we are not obligated to publicly update or revise these forward looking statements.
In addition on today's call, we will discuss certain non-GAAP financial information such as I thought so adjusted EBITDA, Ari and hotel levels of Salt.
You can find this information together with reconciliations to the most directly comparable gap information and yesterday's earnings press release and are 8-K filed with the SEC And then the supplemental financial information on our website at host hotels Dot com.
On today's call with me will be Jim Rosolio, President and Chief Executive Officer, and Sarah <unk> Executive Vice President Chief Financial Officer and Treasurer.
With that I would like to turn the call over to Jim.
Thank you Jamie.
Thanks to everyone for joining us this morning.
Despite the adults of areas, we continued to significantly outperform expectations and meaningfully bee confesses matrix during the third quarter.
We delivered adjusted EBITDA, Ari of $177 million, which exceeded our interests and capital expenditures by $21 million adjusted F. F O per share of 20 cents during the quarter.
In addition to delivering positive metrics each quarter this year.
Matrix continued to see meaningful sequential increases over the prior quarter.
Pro forma total revenues in the third quarter increased 25% sequentially over the second order.
Pro forma hotel double operating expenses grew only 21 per cent.
The increase in revenues was driven by strong leisure demand and resorts and hotels in Sun belt markets in Hawaii, which led to a 67 million dollar increase and adjusted EBITDA <unk> in the third quarter compared to the second quarter.
<unk> for the third quarter was strong as volume improvements extended across the portfolio and rates held up and send all markets.
While we saw softer demanded September due to delta variant concerns.
<unk> for the quarter still improved by 26% compared to the second quarter.
Our hotels, sorry, 49 per cent increase in business transient room nights and a 72% increase in group volume over the second quarter.
Our recent acquisitions all contributed to the outperformance during the third quarter and are exceeding our underwriting expectations.
Preliminary October Revpar is expected to be approximately $143 815 dollar increase over September and the highest revpar we have seen this year.
We believe red horrible dip slightly in November due to seasonality before coming back in December.
While much of the recovery was concentrated at resorts and send out markets. During the first half of the year.
Urban markets saw significant revpar improvements during the third quarter.
At the start of the quarter or urban in downtown markets had a weekly occupancy of 50 per cent.
And by the end of the quarter. These markets were running at nearly 56% occupancy.
Quarter over quarter rubbed her in our urban in downtown markets grew by 89% to almost $96.
Driven by both a D R and I can see improvements.
In addition to the sequential improvements in operations, we continue to execute on our three strategic objectives, all of which are aimed at elevating the EBITDA growth profile of our portfolio.
Our objectives include redefining the hotel operating model gaining market share I renovated hotels.
And strategically allocating capital.
As it relates to the last strategic objectives, we made another off market acquisition during the third quarter.
Lila Ventana Big sur in California.
This brings our 2021 year to date acquisitions total to $1.2 billion at a blended 13.1 times EBITDA multiple.
This is a continuation of our strategy to deploy capital into assets that will elevate the EBITDA growth profile of our portfolio.
On the dispositions front subsequent to quarter and we sold five hotels totalling 2323 keys for $551 million, including F. F. Any reserves at a 14.2 times EBIT multiple including forgone Capex based on.
2019 results.
Following this acquisition in our recent dispositions, which I will discuss in a moment.
We have $1.7 billion, a total available liquidity, including $138 million of F F any reserves.
As a reminder, we have completed five off market hotel acquisitions, this year, including the Hyatt Regency Austin, the four seasons Orlando at Walt Disneyworld Bakers.
<unk> K resort and key Largo, but Laura Hotel, which was formerly known as the hotel that was Sandra in Houston.
And Ah Lila Ventana Big sur.
We also have clout acquired the royal kind of Polly and kind of <unk> golf courses and Molly.
All our recent acquisitions are performing substantially ahead of our underwriting expectations.
As of September.
The update it 2021 forecasted EBITDA at the Hyatt Regency, Austin is $3.4 million higher than the full year 2021, EBITDA that was estimated underwriting the four seasons resort Orlando is $17.4 million higher Baker's K resort is too.
$49 million higher and the golf courses are $3 million higher.
In addition, we acquired the former hotel Alessandra a luxury downtown hotel in Houston Central business District at.
At the time of acquisition the hotel was closed and fully unencumbered by brand and management the.
The property has been rebranded as a Laura hotel and there will be operated by a G I hotels and resorts as part of the autograph collection by Marianne.
We have identified a number of opportunities that we believe will increase the EBITDA growth profile. This hotel.
Including affiliating the property with a major brand rather reservation system expanding the after the outdoor seating capacity.
Activating the rooftop pool experience and leasing the ground floor retail the hotel is expected to open in the fourth quarter of 2021.
Turning to our most recent transaction in September we closed on the off market acquisition of Ah Lila Ventana Big sur for $150 million.
This ultra luxury resort is one of the most uniquely located hotels in the United States and benefits from extremely limited supply and high barriers to entry due to strict land use regulations by the California Coastal Commission.
We purchased the property at a 9.3 times EBITDA multiple on 2021 forecast.
The Red part is expected to be $1320.
<unk> is $1870 and the EBITDA Perky is $273000 based on 2021 forecast.
Their performance ranked first in our 2019 pro forma portfolio Ah Red Park, tread part and EBIT perky by a very wide margin.
Ah Lila Ventana Big Sir is located on 160 acres Ah irreplaceable be simple land on the California coast.
It benefits reviews of both the ocean and the Redwood Forest and as a drive to destination for some of the country's most affluent areas.
The hotel has 59 keys, consisting of both rooms and suites and is operated under an all inclusive model.
It offers a luxury spa three pools, a high and fitness center.
12000 square feet of event space, and two restaurants with locally sourced foods and a variety of private dining experience.
In addition, the hotel has a number of unique outdoor amenities, including 63 campsites with 15 Bucks you read Ted's located within the Big sur redwoods as well as numerous tailored experiences and adventures.
I cannot emphasize enough the unique nature of this asset and we are delighted to add it to our portfolio as the 12th type Ranted property continuing our physician is the largest third party owner of Hyatt hotels.
The hotel is Hyatt manage under the Lila Brad.
Since high it's acquisition of two rows hospitality in 2018, the properties has enjoyed increasing market share and a record year of profitability in 2021.
The hotel significantly benefits from the tight affiliation and world of high of redemption bookings, which contributed a substantial amount of total room nights sold in 2020 and 2021.
This demonstrates the growing desire for high end leisure experiences among world of high of loyalty members and.
In conjunction with the operator, we have identified additional opportunities to grow EBITDA at the property and we have conservatively model this asset to stabilize between eight and 10 times EBITDA and the 2025 to 2027 type right.
The hotel recently completed a $23 million renovation and repositioning investing $390000 per T and the guest rooms public spaces pools camping facilities and backup house areas.
We are excited to have an ownership presence in big sur and we believe the iconic and irreplaceable nature I believe I Ventana Big sur will further strengthen the EBITDA growth profile of our portfolio.
As I mentioned, we disposed of five hotels totally 2323 keys for $551 million, which includes $11 million of that Bethany reserves subsequent to quarter and we.
We sold the hotels at a 14.2 times EBITDA multiple including poor Guy Capex based on 2019 results.
These five assets were sold as a portfolio and included the Westfield Mary at Washington, Dulles, the Western bucket Atlanta, So Whitley the San Ramon Mary at in the Western L. A X both on ground leases the.
The avoided capital expenditures associated with these five properties is approximately $122 million over the next five years.
We are pleased to have this capital to further bolster our EBITDA growth profile as we deploy it into a high growth assets in our existing portfolio orange the new acquisitions.
In total we have invested $1.2 billion in early cycle acquisitions here to date.
The blended EBIT multiple on our five hotel acquisitions. This year now stands at 13 times, which compares favorably to the $551 million, we disposed up at 814.2 times EBITDA multiple.
Between 2018, and 2021, we acquired $2.8 billion of assets at a 14 times EBITDA multiple and dispose of $4 billion of assets at is 17 times EBITDA multiple including forgone Capex.
Since 2017.
We have dramatically improved the quality of our portfolio, increasing the red part of our assets by 10% EBIT Perky by 20 per cent and the EBITDA margins by 110 basis points based on 2019 pro forma results.
As we evaluate capital allocation of opportunities going forward, we will continue to focus our efforts on assets with higher expected growth with the objective of elevating our EBITDA growth profile.
Moving onto third quarter operations, we saw significant improvements in transient room nights, which were up 18.5% compared to the second quarter.
Our hotels in urban and downtown markets saw strong improvements and transient demand compared to last quarter as municipalities relax COVID-19 restrictions.
Occupancy in these markets increased by 17.4 percentage points to approximately 50% in the third quarter.
<unk>, 24% ADR growth.
And our sunbelt in Hawaii markets transient rates remained resilient up 26% in the third quarter compared to 2019, despite a modest softening of transient demand over the prior quarter due to seasonality.
Our hotel Sol continued strength and leisure demand during the quarter.
Encouragingly, we saw a solid pick up and leisure demand in our urban in downtown hotels.
For comparison over Columbus day weekend or urban in downtown hotels achieved approximately 70% occupancy with an a D. R a $231 versus 55% occupancy within a D. R. A $180 over the July 4th holiday.
Special events, such as the Boston and Chicago Marathons, and the return of Broadway shows in New York help to drive this demand.
Weekend occupancy at our entire portfolio reached 75% or the October with an a D. R. A $259 compared to a historical level of 87 per cent and $259 and 2019.
Resort revenue increased $43 million over 2019, driven by 39% a D R growth with rates and most of our resort see double digit percentage increases.
We expect strong demand at our resort to continue through year, and particularly at our Hawaii hotels. After the recent news that the state welcome Nonassessable travel back on November 1st.
Throb will get into more detail on our business makes during the third quarter shortly.
In addition to our successful capital allocation efforts this year.
We remain focused on our three strategic objectives. As a reminder, we are targeting a potential $240 million to $350 million of incremental EBITDA overtime on a stabilized annual basis, as we execute the initiatives and projects underlie our strategic objectives.
This range includes hotel EBITDA of approximately $93 million from our acquisitions here to date.
First we expect to generate $100 million to $150 million a potential long term cost savings over time based on 2019 revenues from redefining our operating model with our managers.
We have taken steps toward 50% to 60% of the savings to date.
Second we expect to generate $21 million to $35 million of incremental EBITDA overtime on a stabilized annual basis from our goal of gaining three to five points weighted index.
Growth at the 16, Maryanne transformational capital program hotels, and five other hotels, where major renovations had been recently completed or under way.
Keep in mind that our expectation of a three to five point gain in market share was a prepandemic estimate.
As we have been in the unique position of deploying significantly greater capital in 2020, and 2021 than our competitors. We are optimistic that our market share gains could be greater as the property competitive set is either an inferior product due to lack of renovation are there will be meaningful business.
<unk> as hotels are renovated.
We expect to complete approximately 85% of the marry a transformational capital program by your Ed is substantially complete the program by the end of 2022.
We expect to them that's $1.2 billion in these 21 assets are approximately $73000 per T.
As of the third quarter, we have invested $834 million and renovations at these hotels and we do not expect to spend significant capital on these assets in future years.
During the third quarter, we completed renovations at the New York Marriott, Marquis which include a complete upgraded the guest rooms renovations of over 140000 square feet of meeting space.
The expansion of the Skybridge line with two high definition L E D screens, and a re imagine <unk> lobby with new bars and upgraded restaurants.
Subsequent to quarter, and we completed transformational renovations at the Orlando World Centre Marriott in Florida, which included the guest rooms, and and updated lobby restaurants and bar.
These small tie your comprehensive renovations at the two largest hotels in our portfolio. We're part of the marry a transformational capital program and bring the total number of completed projects and this program to 10 of 16 properties.
We avoided significant business disruption by completing these projects during the pandemic and as a result, they are very well positioned to capture market share in the recovery.
In addition to the Marriott transformational capital program assets. We recently completed the extensive guest room renovations at the Hyatt Regency coconut point in Florida.
Lastly, we expect to generate $25 million to $35 million a drink for mental EBITDA overtime on a stabilized annual basis from recently completed an ongoing R O I development projects.
These projects are a different stages of renovation and development and stabilization is expected to occur two to three years after completion.
Some recent examples about R. O I development projects include the end <unk>, which are targeting 49% occupancy with an a D R over $1600 for 2021.
First is our underwriting at 34% occupancy within a D R $1400 and the one hotel Beach club enhancements, which have led to over $2.5 million in incremental revenues with returns exceeding the underwriting.
To conclude my remarks, we continue to be very encouraged by the operational recovery, we are seeing across the lodging industry as.
As we move further into the recovery R capital allocation efforts over the past few years, the improve quality of our assets and the elevated EBIT gross profile of our portfolio should accrue to the benefit of our stockholders <unk>.
These factors combined with our strong balance sheet geographic diversity in size scale and reputation leave us very well positioned to capitalize on accelerating demand with that I will now turn the call over to survive.
Thank you Jim and good morning, everyone.
Falling gyms comments I will go into detail on our third quarter Cashflow operations expenses and our top line outlook for the remainder of the year.
Has dimension, we delivered positive adjusted EBITDA <unk> <unk> during the third quarter <unk>.
In addition, we achieved an important milestone this quarter with positive cashflow for the first time since the onset of the pandemic weed.
We delivered adjusted EBITDA leap of $177 million, which exceeded all interest and capital expenditures by $21 million.
We continue to benefit from Cortland sequential improvement with 65 hotels, achieving positive hotel level operating profit compared to 53 hotels last quarter.
Subsequent the quota and these operational improvements, let us to another important milestone of exiting all critics facility Covenant waiver period three quarters ahead of its explanation.
And coming into compliance with a bomb and then she'll get in codes covenants.
This would you said R 2.5 billion dollar credit facility interest rate by 40 basis points give us greater balance sheet flexibility.
Moving on to pop on performance, while all Sunbelt's hotels, and all that so let's continue to drive results.
The third quarter, you presented the best quarter of the recovery for non Sunbelt and large group hotels.
Multiple hotels achieved positive EBITDA in Chicago D C, Boston and San Francisco on all hotels in Philadelphia, and Denver maintain positive left park for the second quarter in a row.
A large group hotels in San Diego, San Antonio and New Orleans also maintained positive EBITDA in the third quarter.
Expanding on Jim's business makes comments, all hotel spelled business, Keynesian, whom ninth increased 49% over the ploughed quarter with a 5% increase in a D. R two more than $172.
Even more encouraging is that 40% of those room nights came from urban and downtown hotel, where <unk> transient rooms.
The old increased 112% over the second quarter Adele.
Additionally, we salt increasing activity from traditional top 10 accounts, including a mix of fortune 500 financial gum.
Government and consulting companies a positive given the challenges the delta various presented during the quarter.
On the book Front group revenue showed steady sequential improvement over the crowd quarter with a 72 per cent increase in room nights combined with 811% increase in weight driven by our hotels in San Diego, New York, Boston, San Antonio Austin and Chicago.
Overall group room nights in the third quarter with 52% of 2019 level. Despite the delta variant headwinds.
We were pleased to seek corporate who performed better than expected in the corner.
Segments contribute at 42 per cent of total group room nights in the third quarter, which is on par with our Prepandemic mix.
Corporate Goofily also send them to $196 in the third quarter, which is the highest it has been since the first quarter of 2020.
And indicates that more traditional groups are coming back.
Cause the group also drove significant improvements in bankruptcy Avenue, which was up 100 per cent quarter over quarter.
Association Group, whom nights of 150000 was more than triple that of the second quarter, which we view as another positive sign for the return of large traditional groups.
Ah somebody groups, which includes social military education, religious and political organization had been driving group demand do independent <unk>.
These groups continue to show sequential quarterly improvement up 27% over the <unk>.
Looking forward. We currently have over 570000 definitely group room nights on the books for the rest of 2021.
And we maintained 1.2 million group room nights on the books for the third and fourth quarters. Despite concern over the death of area.
Off the group room nights on the books for the fourth quarter over 42% of them are booked in San Diego, Boston, Orlando and Phoenix.
Nope booking activity in the third quarter, what 2022 totaled 180000 room nights.
Our managers the main focus on holding future group rates, that's a D O. The books is slightly higher than the same period in 2019.
We now have roughly 2.6 million group room nights on the books in 2022 and eight cause some inquiries over the second quarter.
Compare them. This would present about 54% of 2019 actual group room nights compared to 50 per cent last four.
Moving on to expenses.
Pro forma total operating costs rose by 21%, giving the third quarter compared to the second quarter. Despite a 25% increase in total revenues.
Variable expenses went down 40% relative to a total revenue decline of 32% when compared to the third quarter of 2019.
Most of this gap is due to the hiring pace lagging demand growth and we expect the doctor moderates through the fourth quarter I'll go operated continue to ramp up stopping levels.
The number of open positions at all medium operators indicate.
They are at roughly 94% of targeted stopping based on Conan business volumes.
Well compared them on managers have historically operated at 97% of targeted stopping based on historical business volumes.
Hicks expenses, including wages and benefits, 119% lower than the third quarter of 2019, and 16% higher than last quarter.
Similar to last quarter some traditionally.
Six expenses like sales and marketing came back as business LOL Ya.
Continue to increase.
Combining revenues and expenses this quarter our expense reduction ratio came in at <unk> nine three which means that for every 10% decline in hotels Avenue compared to pro forma third quarter 2019, there was a 9.3% reduction in expenses.
As Jim mentioned in the third quarter Cool for my total operating expenses were down 30% to the third quarter of 2019 on revenue is down 32%.
Oh not last call. We indicated that we were expecting an expense reduction Rachel appoint 752.80 for the second half of this year.
Distance between us so a quota resolved and a forecast can be attributed fairly evenly the three factors.
Average daily weight came in better than expected.
Wages and benefits did not ramp up as expected due to hiring challenges in certain markets.
And we had unanticipated favorable one time items on the Porter, including business interruption insurance proceeds on property tax savings totaling approximately $10 million.
We are expecting an expense without convey shield approximately 0.85 for the year, which reflects our expectation of great driven Brook Park Road.
And a continued lack inexpensive growth driven by labor costs.
I'll give me the call we could use to be expense reduction ratio doing the pandemic to measure the change in property level of expenses against the change in total revenue.
As a revenue declines compared to 2019 D T. As in five one time expenses have a much bigger impact on the ratio, that's making it less relevant.
We therefore expect to the work to keep up stomach metrics in the coming quarters as operations continue to normalize.
Turning to our top line outlook for the remainder of the year. We are still unable to provide guidance given the continued uncertainty surrounding COVID-19 that said, we continue to expect sequential corky rough part improvements driven by <unk> visa travelers at a resort.
And we are encouraged by the performance of urban hotels as demand drivers in those markets continue the cover.
We also expect group and business tansey them to continue improving in urban and downtown market impacts from the Delta very moderate companies would turn to the office and traditional groups get back to meeting in person.
To conclude we'll go please with <unk> achievements during the third quarter, including generating positive adjusted EBITDA Harvey ethical uhm exiting all credit facility covering the waiver period, three quarters of hooked up with exploration.
We remain very well positioned to execute on my goal of increasing the EBITDA grilled profile and improving the quality of our portfolio, particularly given a strong balance sheet Akita capital recycling and the stronger the company that is underway.
We continue to make significant progress on redefining the operating model without managers mmm freezing marketshare at all renovated assets and strategically allocating capital.
With that we would be happy to take any questions to ensure we have time to address questions from as many of you as possible. Please limit yourself to one question.
Ladies and gentlemen that flower is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question you. Please pick up your hand.
Sorry, if listening on speaker phone, so provide optimum sound quality, please hold lollipop for questions.
Your first question for today is coming from Rich High tower. Please announce your affiliation fan pose your question.
Good morning, guys and I'm still with Evercore ISI Uhm.
So, but a lot of a lot of statistics thrown out on the on the in the prepared comments to thank you for the detailed there but.
You know maybe give us a sense you know there's a lot of time spent on on the improvement and the urban in the downtown segments of the portfolio and maybe give us a sense there of where you stand in October and I guess even.
November so far in terms of rate and occupancy versus the same periods in 2019, and do you expect those hotels to to bridge that gap in the same way that the the leisure and resort segments of have already done do you think that that get could be fully bridge sometime next year is at a 2023 and then how do we think about that.
Yeah, Rich I will I'm, sorry to hear and then drop feel free to jump in as well the.
The number that we provided for October rib part is is a preliminary portfolio number and we do not have gray or data at this point I'm odd uhm.
Performance at.
The urban hotels versus send out leisure hotels.
You know, we we did a roll up and you know we saw that $143 is a good number of deaths whenever we provided so we're confident given the trajectory of the business return that we saw in the third quarter in particular that.
The business is gonna continue to ramp and you know the encouraging.
A lot of encouraging died of places you set it up Richard's comments.
But what are the most encouraging uhm with respect to the urban hotels is the level of leisure business, we saw come back to those properties.
Uhm.
As an amenity started to open up such as Broadway in New York You know we saw the Boston Marathon you know we've had really strong performance on the leisure side, we're seeing a lot of solid business transit come back to the urban properties as well.
And you know that's business translated from our traditional more traditional accounts.
You know the the top 10 accounts that are household names financial services.
Consulting you know defense related businesses government account. So you know we are very encouraged with the ramp that we're seeing occur you know to give broke from 50 per cent at the beginning of recorded a 56% and occupancy at the end of the quarter and.
C. A nice uptick in rate is very encouraging to us so as vaccines continue to be rolled out you know we have good news.
I guess it was just yesterday that uhm adolescence are now approved for vaccines as so down to children down to five years old are eligible to get it back see we think that's very encouraging we feel that businesses are gonna get back to work, they're gonna open their offices and there is cause.
Nearly a pent up demand on the part of that.
Businesses to get out on the road meet people I mean, we're experiencing it ourself and our offices at the number of folks who when it come by and say Hello face to face really you know is testament to the fact that there's no substitute for in person communication in in person.
Collaboration so I drive I don't know if you have anything else that we can add at this point in time.
Yeah, Hey, very <unk> I can give you some color at least on the P. T front as it relates to October specifically, we do expect October to be the strongest B P month for 2021, approximately 60000 room nights with what we have on the books for B T and that's a 17% increase over September if you can.
From the beginning of the year from January through July we had about an average of 30% sequential improvement in B T room nights every single month, we saw a slight increase from July to August and then a slight dip from August September but now we have picked up and back on the trajectory that we had seen earlier.
And the year, so very encouraged and uhm as you know didn't talk to bounce, but my overall B T rate is actually up 5% quarter over quarter and that's holding strong as it relates to 2019, we are about call at around 50 per cent of 19 levels as we stand right now and we expect that to continue to improve.
With every single border going forward.
Perfect. Thank you guys.
[noise]. Your next question is coming from <unk>. Please announce your affiliation pose your question [noise].
Hi, <unk>.
Uhm throughout the cave a lot of statistics around.
Labor and cost ratios, which will probably between Australia.
Account, but I guess in general I just wanted to ask you about 15th have flavored hot.
Uhm, particularly for island workers and.
Sort of tying that back to your initial coffee.
The teams or.
Tell me if it's fair is that labour, except for moved higher than maybe what those someone that the initial total for for.
Provided and I'm, just wondering if it'd take you longer tickets that cost savings target or if it's just the nature of the off that uhm.
[noise] I'm sure. It's made you were breaking up there a little bit, but I think I got your question on the labor front.
You know what I'll start off with and I was sort of and with 100 150 million that'd be may I have message.
Is when we were.
Going into 2020, we were expecting higher than inflationary growth in a few of the Sun belt markets and that's obviously prepandemic.
So you.
You know as we went through the pandemic obviously the rate of acceleration in terms of where did you grow up in those markets wind up for the portfolio. If that can give you. Some specific numbers here for the portfolio I would say, we expect a kaigler from 19 to 22 of about 5% to 7% now.
I would break that down between urban and son Dunk markets Urban Uhm, just given you know a lot of those are covered under the C. B a that would be around 3% to 4% Kaigler from 19 to 22 in the Sun belt that Keiko would be about 6% to 8%. So again, the overall portfolio, we expect that <unk>.
19 to 22 2022 to be about five to seven now as it relates to the hundred and 150 million that'd be message remember that was in relation to 2019.
Revenues and expenses so <unk>.
Reality is depending on how quickly we get back to 19 levels of revenue, where you can see all that benefit sort of.
Come through to the bottom line, obviously, depending on how much inflation Neapolitan place. We go can we see in wages and benefits it will be shaped shaved off and that will impact margin going forward. So hopefully that answers your question.
Thank you.
[laughter].
Your next question is coming from Neil Malkin. Please announce your affiliation send pose your question.
Good morning, everyone, New market capital one securities Gonna be with you all a great quarter great announcements.
Jim or <unk> I thought it was pretty impressive that you were able to keep your occupancy uhm fairly steady uhm through the third quarter. Despite the you know vicissitudes of the Delta very and its impact on particularly the corporate side to demand.
Can you just talk about.
How you were able to do that and sort of what things <unk> you were able to pull her sort of what came in better than expected I. You know that <unk> that allows you to kind of maintain those those occupancies again, despite the dip in the middle of the quarter Uhm from a national level.
Thanks.
Neil I okay.
We're very encouraged with the the the treadmill that were shake going forward and I think one of the most encouraging data place with respect to the the second half of the year and.
Third quarter of the fourth quarter was the fact that we were able to maintain 1.2 million group room nights on the books notwithstanding delta. So it <unk> it just points out that that there's a lot of pent up demand.
And the and the economy in general people Wanna get back out they would've made they Wanna travel you know we've we've seen.
A little bit of a pullback <unk> as a result of adults as everyone else did but as a as a delta tremain started to diminish and we got over the peak and uhm.
And and new cases, and if people solve it that we were going in the same direction as countries and other parts of the world where they got back on the road. So there's there's no magic to it I mean, I I think one of the.
And we've talked about this a lot the quality of our assets is really second to none.
And the fact that we have to continue to invest capital.
In our portfolio, we think is going to be a true competitive advantages as business really starts to open up I mean, I said in my prepared remarks with respect to market share gains as we embarked upon the mirror transformational capital program back in 17 and 18, we underwrote.
Three to five great point to pick up in Rep or yield index that was prepandemic now that we're gonna have a a portfolio that is largely refreshed I mean, we're gonna spend $75000 a key on the 21 properties that we referenced 16, mariachis and five other assets.
You know, we we would expect it will continue to see a strong performance going forward and I'm optimistic quite frankly that uhm that will pick up more than three three to five points you Kneeled index. So I think it's a combination of the quality of our assets the location of our assets are asset manager.
There's an enterprise analytics team working very closely with the best in the business you know whether it's Mary Hyatt are independent managers that are out there just really being very thoughtful about revenue management strategies, and you'll management strategies and <unk>.
Adding business in the hotels I want maintaining great integrity and I I think that's a big that's another big story as we open up for business again. This this pandemic and post pandemic has been.
Marked by material yield an a D R integrity as opposed to what happened coming out of the great recession. So we're able to truly asset manage these hotels in revenue manage them to to maximize Rep Park.
And I expect it will continue to do that going forward.
Thank you and congrats on the corner.
Thanks, though.
Your next question is coming from Bill crowd. Please announce your affiliation then pose your question.
Take a good morning.
Just curious on the on the group side I think yesterday Mary suggested the group revenues on the books for next year for down roughly 20% and I think you said your your paces down 46% right up just a little bit.
Is is it a locational issue is it just the big city was or what what creates.
Such a big gap between what Maria was was suggestion for their portfolio, a new who owed a lot of the the mirror group houses.
No I I don't know if anybody on the host team of them have survived listen to American <unk> I did not hear what they had to say.
But we are at for 2022 as we sit here today, we have 54%.
Or group room nights on the books for next year that we had a relative to do the same time in 2019.
For 2020, so uhm.
We're encouraged at that number actually picked up from 50 per cent at the end of our second quarter call to to 54% now so I don't know.
I don't know, where what Mary said with respect to pace, but we're actually.
No.
Encouraged I mean, we have roughly 2.6 million group room nights on the books and if if we looked at the same period of time.
<unk> three 2019 four quarter three 2020.
Just to give you some context and this is what we talked about last quarter, we had 68%.
Of our actuals on the books at that point in time, so that I think the the real number to look at is 68 to 54.
And that's that's the gap that we're working real hard to close does that that is your question, though yeah. Yeah, I think if I could just put a little bit finer pointed out at with how are how are New York and San Francisco in particular stacking up next to your other group basis, and then maybe Schropp if.
You could just tell us how much cancellation of nutrition fee income was included in the third quarter results that'd be great I appreciate it.
Yeah, well San Francisco is.
Uhm is gonna have a challenging 2022.
There's no question about it you know as we look at convention calendars for next year.
San Francisco's very challenged there there you've got at the bottom of the pack quite candidly I think a lot of it has to do with the fact that they were the last major city to open their convention center I mean, they didn't open their okay mosconi until September of this year, So San Francisco will recover it's gonna take.
Time for San Francisco to recover now with respect to New York.
New York is a top a tough market. If you want to talk about city wise, because they don't have a lot of citywide in New York City and what we're seeing.
In New York is the return of a lot of affinity groups a lot of corporate groups are coming back and you know a.
We're we're very encouraged with what we're seeing in New York, particularly as international involved comes back into that market.
You know international inbound in New York City accounts for about 12% of our business. So again as as the borders open up and it's it's really but we are encouraged with with what we're seeing in New York.
Hey, before giving you attrition cancellation number bill you know on the roof. One one thing I'll say is we obviously you're expecting more into your for the ear bookings in 2022, so while yet pace is lohr and what we had in 19 for 20, if somewhat expected just given.
The skittishness in terms of booking, particularly with the blip that we had with Delta. We do believe a lot of those accounts are gonna come out from the sidelines and book into your for the ear can we expect in New York what are your activity could be much greater than what we had seen back in 2019 and also go to central start up 2021, just to put in perspective, we.
Book 600000 room nights, what 23 to 25, and that's like a 20% increase since the start of the year and if you compare the same time period. The three years from 19 now with a 23% <unk>. So that we are doing really well to come out of a 2022, which we feel will do well into your for the ear.
Can I ask you if they can get you some questions.
Let me <unk>.
One more data point, though for your benefit as we look because we spent some time looking at city wise for 2022, and if we don't get all citywide markets Uhm, we have about 89% of the citywide calendar is equates to about 89% of 2019 city wives and we have a obviously.
A number of markets that are going to outperform like Minneapolis San Antonio.
Houston, Chicago, and Boston and you know on down the line with quite frankly, San Francisco being at the bottom of that list, but there's a lot of good news out there as well and sitting here today and 89% Uhm again makes us feel pretty good about how things are going to a ball to Rob you wanted to.
Answered the question about attrition cancellation yep, we recognize $16 million of attrition cancellation for the corner.
16 is that what you said, yeah, one six correct yep.
Thank you most of the time.
Your next question is coming from Thomas Allen, Please announce your affiliation and pose your question.
Yeah, I'm ordering family. So just thinking about the fourth quarter on the road Park trend you you talked about November Redcard defamed cause excuse nowadays and back in December caters help us think about the outlook on I kinda versus 2019 level and how how you keep trying to sign for it.
Yeah. So I'll October number was all uhm down about 34% to 2019 that I'll put this in perspective I think November you know sitting here right now would get some somewhere in the neighborhood of you know.
Down five to $7 from October and then December two October Revpar.
That's sort of what we're thinking as he said as of today just based on the data that's available.
Okay, and then I mean, typically you're having given monthly so is that implying on a versus 2019 level things are improving as we got through the era <unk>. My follow up question that I'm Gonna ask us.
The borders are opening next week for for for more international visitors are you seeing a material benefit from that and bookings yet or is it too early to dollar tree too difficult. So thank you.
We've got an anecdotal uhm commentary on that speaking with some of our hotels in New York as well as that San Francisco I'm in flight.
International flight bookings are certainly up uhm, 15% since the announcement have taken place for six weeks out from the time of the announcement bookings are up 15% and specifically for San Francisco, that's up 34% in that compares to what it was six weeks before that announcement, so it's encouraging how come up.
Hotels perspective, and in New York, we've definitely seen a transient pick up and we can attribute.
Meaningful percentage to pick up from Europe, specifically.
But I don't have any hard numbers, yet that I can share.
A couple of thank you.
Your next question is coming from Dori Kasten police announcer affiliation send pose your questions.
Alright. Thanks, Good morning Wells Fargo now do you have.
Labour paying into your <unk>, what what barriers to returning to paint coming to in N.
Hi, Dorrie the the.
The barrier that exist as our beliefs that we.
We'll see a sustained recovery.
And put us in a position when we start paying a dividend and again that we can maintain.
Maintain the dividend and increase the dividend on a regular basis. So we view.
Paying a dividend is one.
One of the arrows in the quiver of capital allocation and we realize that dividends are important to a lot of our shareholders you know our policy.
Prior to the pandemic was to pay out uhm 100 per cent of our taxable income as a <unk>, we have to pay out 90 per cent.
And you know it as we see how business returns and as as we can wrap her arms around.
The pace of the recovery, we will take it take that into consideration as we think about reinstating the dividend.
Alright, thank you.
[noise]. Your next question is coming from Anthony Pal.
<unk> please announcers.
Affiliation then pose your question.
Okay transaction question, we haven't got one yet just.
You know the pipeline has been very strong this year I mean, I'd be I'd be the mixer recognition as attractive what's the pipeline look like going forward and as you look at acquisitions going for giving you exited the covenant waiver, how do you rank incremental debt equity offerings and using your cash balance of sources of funds for those deals.
Anthony they the pipeline continues to be.
Vibrant I would say as as you know the deals that we've been able to get done this year have been off market transactions and that's where we continue to stay focused right now.
Because there is there's a fair amount of competition out there given that the debt markets are flush with cash the C. N B S market in particular flush with cash and uhm.
A lot of the private equity firms were sitting on the sidelines waiting for the C. M B S markets to come back.
So we are starting to see more competition as we think about you know sources of capital Uhm.
We're very very delighted that we could.
Exit the credit Labor <unk> credit waiver amendment three quarters before exploration.
And one of the.
What are the other data points that we didn't discuss is the fact that we had a that encourage test under our bond indenture as you know our portfolio is completely unencumbered. So it's all balance sheet that and we had a dead encourage test under our bond indenture that precluded us from getting from issuing new debt <unk>.
Shop until we got back about 1.5 times interest coverage. So we have we met that threshold as well I think it's going to on the margin give us a little more flexibility on the acquisition front there were several transactions in the market that we worked on last year.
Had existing debt in place.
That Deb was prohibitively expensive to break and pay off so we had to take a pass but now with the fact that we can acquire assets with that that gives us a another opportunity to to look at a few hotels out there that that are encumbered with the existing financing. So we're very.
Happy with our cash position we're happy.
With the fact that depth that we have come out of.
The credit web flavor amendments recorders early and between cash on hand, and the ability to issue new that I think that is the direction you would see US go a if we continue to deploy capital into new acquisitions.
Got it is kind of sort of the bars higher for a T. M. Now is that fair.
I think that's very fair, yes, alright. Thank you.
Your next question is coming from Chris Rock I pray. Please announce your affiliation send pose your question.
He hates Deutsche Bank. Thanks for all day points guys. Very helpful. Question is Jim you you guys scheme out a bunch of.
Data on on your acquisition date, and how much they're beating initial underwriting and I think that was a comment probably on 21 could you just talk about it if it if that's correct could you talk about whether the expectations for future years have also changed sex.
Well, we're <unk>, we are in the middle of the budgeting process. So it's a little early to give you a specific.
Numbers, but I I would venture that <unk>.
<unk> coming off the strong base and 21.
That we're seeing it that really every deal that we've acquired this year that 22 is likely to outperform our underwriting expectations as well.
When we when we underwrote jabs.
The the acquisitions throughout the course of this year, we were in a a very.
Period of Ah Ah Ah grey uncertainty, we didn't really have a sense on how.
Delta co.
It was gonna behave in when when when the country was gonna be able to get Covid under control. So long way of saying that we were conservative in our underwriting and you know conservative in our underwriting, but you know as we looked out to you know take 23 24 and beyond.
And the financial performance that we baked into these.
Properties it it penciled on that your basis it allows us to to pull the trigger and deploy capital I think that it's going to be meaningfully better across the board I mean, if you just look at where we put capital and what's happening in these markets. Some of the best highest grew.
Knowing ice grows markets in the country, you know with with meaningful barriers to new supply. If you think about Ah Lila you know truly iconic and irreplaceable asset to be able to buy that at 9.3 times.
This year's EBITDA it it as it is generating two <unk> $275000, a key an EBITDA and we're not see any any slowed down there. The four seasons resort Walt Disneyworld, we're just starting to see the benefits of the celebration to 50.
With anniversary celebration of Walt Disneyworld at just kicked off in October So I expect that we're gonna see outperformance going forward and you know I I think that you'll see it crossover yes, as we bought but we're gonna continue to see it in her her.
Resort portfolio, which is comprised of 16 properties now and you know.
We will see business return to.
The major urban market said, we've been encouraged there as well this last quarter.
Okay very good thanks for them.
Sure.
Okay.
Your next question is coming from Chris Darling, Please announcer affiliation and pose your question.
Hi, Good morning, with the Green Street, just going back to the Ventana acquisition for a second you mentioned eight to 10 times stabilized EBITDA multiple by about 2025, but given your acquiring it you know it just over nine times multiple does that imply that you know this is really the high watermark for the new.
Your term and you might be expecting a different performance over the next couple of years and then also curious if you could comment on the terms of the highest management agreement then.
Yeah, well you know with respect to the terms of ice management agreement, that's not something that worried a physician to talk about dress I will tell you that the world of Hyatt Uhm is doing an incredible job filling that hope filling Elisa Ventana and then we're getting between.
65, and 75% of our room nights through world of high redemptions and as a high redemption hotel, we're getting a uhm the premium right that the highest rate that the property is so many rooms work.
So it at 59 rooms.
That gives us the opportunity.
To really yield managed to revenue manage the rooms that are not being sold.
Through the world of high redemption programs. So.
Uhm.
With respect to our stabilized EBIT multiple you know we gave it gave a range of eight to 10 times you know.
Is a doable I I think it is doable, but you know are we being conservative and and throwing a range of eight to 10 out there I think that's the way you should think about it.
Alright. Thanks.
Your next question is coming from Eric Klein, Please announce filiation 10 pose your question.
Thank you P. M L. Maybe on the disposition you sell the team posts a corner and I guess are reportedly some other that that might be on the market.
I shall we think about asset sales from here have you done most of the heavy lifting your you know is there anything else that you'd love to to south.
Alright, you know I mean, it's a real estate alert is always good with them publishing.
A rumoured acquisition or a rumor disposition and.
You know I'm I'm very glad that on the on the five pack that they they indicated we would get so I'll for $500 million and we ended up selling for $551 million. So.
With respect to the future dispositions I think that you should you should think about our capital allocation strategy.
Really.
With one bottom line <unk>.
Everything that we do is meant to elevate the EBITDA growth profile of the portfolio.
And if we were to sell other assets it would be because we believe that we're getting fair value for the assets relative to arable value.
And that by making those dispositions, we can redeploy that capital either into new acquisitions or into.
So we currently own that are going to grow faster than the rest of the portfolio on average so as you're thinking about dispose going forward I think that's the way.
That's the bottom line, it's all to elevate the EBIT gross profile the portfolio.
Got it thank you.
Ladies and gentlemen that is all the time, we have for questions I would now like to turn the floor over chicken for any closing remarks.
Well. Thank you everyone I'd like to thank you all for joining us on our third quarter call.
We appreciate the opportunity to discuss our quarterly results with you and I look forward to meeting with many of you. Unfortunately virtually it may read next week, we really wanted to have the NAREIT meeting in person at the wind hotel in Las Vegas, but uhm.
You know there wasn't universal support among all the readout.
All the teams at to meet in an environment, where masks are required and there's still required. So for those of you that I don't eat virtually enjoy the upcoming holiday season be well and stay healthy and we at host. Thank you for your continued support.
Yeah.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Target.