Q3 2021 Chatham Lodging Trust Earnings Call

November 4, 2021

Okay, ladies and gentlemen, and welcome to the chat I'm watching Trust third quarter 2021 financial results Conference call.

At this time all participants are in a listen only mode. A question and answer session will follow the formal presentation.

Do they want to require upper her sister, Please press star zero on your telephone keypad. It's now my pleasure to introduce your house Mister Chris Daly. Thank you Sir you live again.

Thank you Jim.

Everyone and welcome to the chat I'm lodging Trust third quarter 2021 results conference call we.

Note that many of our comments they are considered forward looking statements as defined by federal Securities laws. These statements are subject to risks and uncertainties, both known and unknown as described in our most recent Form 10-K. Another S E C filings.

All information on this call is as of November for 2021, unless otherwise noted the company undertakes no obligation to update any forward looking statement to conform the state with the actual results were changes in the company's expectations.

You can find copies of a R. S E C filings as earnings release, which contained right reconciliations to non-GAAP financial measures reference saw this calls on our website at Chatham lodging Trust Dot com.

No doubt variety with some insight, which Adams 2021 third quarter results allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer.

Craven Executive Vice President and Chief Operating Officer, Jeremy Wagner, Senior Vice President and Chief Financial Officer, Let me turn the session over to Jeff Fisher Jeff.

Thank you.

Morning, everybody, Thanks, Chris and we appreciate everyone who's joining us this morning for our call after having a very good second Florida. When we became the second hotel right to be cash flow positive. We produced a great third quarter that brought our highest revpar since the start of the pandemic and a significant increase.

And free cash flow after all that service preferred dividend and before Capex, our third quarter free cash flow of $10 million was two and a half times greater than our second quarter cash flow of 4 million.

That is only on a 20 dollar or 22% increase in revpar over the second quarter. We are now positive cash flow for the year and expect to remain so for 2021 are cumulative cash burn since the start of the pandemic is amir $25 million.

Or about 50 cents per share.

As we move through the end of this year and into next year. Many of our peers are still gonna be burning cash, but that is not gonna be the case for us will come out of the pandemic healthier than most of our peers when EBIT recovers, many probably don't realize that our debt to EBITDA ratio.

It's gotta be lower than it was heading into the pandemic to the tune of one and a half to two full turns lower excluding the preferred and I have to a full turn lower when you include the preferred.

I'm real proud of that and I think that bodes well for us and our growth going forward in 2022.

Coming off a very successful $120 million preferred equity raise at the end of the second quarter or in very good shape from a capital and leverage perspective, our leverage ratio was approximately 31% at the end of the third quarter down meaningfully from 38% as I indicated just a year ago.

Additionally, our liquidity now stands at approximately $200 million almost double our liquidity from the end of the 2023rd quarter.

Furthermore, we just completed an amendment to our credit facility that keeps key terms unchanged and simply extends our maturity by an additional year to 2024 and as such we have no debt maturities in 21.

2022, and only $115 million maturing in 2023.

We've made fantastic strike solidifying off balance sheet and have the confidence to go on offense and grow our portfolio in early August we invested $71 million to acquire too incredible premium branded extended stay hotels adjacent to the domain in Austin, Texas.

S. A market that we all know is absolutely thriving and we will generate meaningful revpar growth and EBIT of growth for us going forward.

It also far that our exposure to premium branded extended stay hotels that we believe will continue to be brands of choice as we emerge from the pandemic we.

We still have an appetite and the financial flexibility to acquire more hotels cap rates for acquisitions remained close to 2019 valuations and it's a difficult environment.

<unk> the kind of assets that fit I think are very strict criteria, particularly since we're trying to again increase our exposure even further to extended stay hotels, but we are looking at a fair amount of deals and I would expect to be successful.

In that endeavor over the next six to 12 months.

By the way the two Austin acquisitions the residence in.

And the newly opened task plays suites are doing extremely well and outperforming are underwriting results are operations team at island has done a fantastic job delivering those results. The two hotels at occupancy of over 80% in September.

And 90% in October the top play sweeps, which just opened in June saw October occupancy of 89%.

Are of $125 and Rev par of $111 premium to our portfolio performance.

They say that new hotels have to ramp up over 12 to 18 months, but we've certainly accelerated that time fried frame I'd say more than a little bit. So we're real proud of those acquisitions and their performance already.

Speaking of a quick ramp up our ramp up expectations that are soon to open the home two suites out in woodland Hills is not 12 to 18 months. The hotel is expected expected to open this quarter. We just came back from there. It's a beautiful hotel is going to have the best.

Rooms in the market by far the best public space, I think the best amenities and even outdoor experience.

We think that there's going to be very strong demand for this extended stay hotel. Once we open the doors, we look forward to talking very specifically about those results on our next conference call.

As we spoke on our last earnings call. We expected Revpar would modestly decline after July before rebounding in October reflecting the seasonality that we normally see in our portfolio between kids returning to school some offices reopening across the country and the Delta variance spiking up.

Corona cases across the country. It was certainly not going to be up up and away. After July July ramp powers are peak revpar since the start of the pandemic of $113.

And as we anticipated revpar slipped a bit to $104 and $103 in August and September before climbing higher again to $107. An October look into the remainder of the fourth quarter, just like the third quarter, we expect revpar to seasonally modern.

Especially given the delta.

Spike certainly seems to be behind us. So we'll have a normal seasonal moderation for November and December and then get started again as we move through January and February from 2015 to 2019 for example, revpar.

18% from October to November and another 19% from November to December perfectly normal seasonal adjustments.

Leisure travel continues to be the driver performance, but we are seeing demand for healthcare government military as well as the business traveler.

Ours have remained steady at approximately $150 from July through October and we still believe that the business traveler will continue to expand their travel patterns and those travelers will be looking for cost conscious accommodations that in today's economy allows for a longer stay then.

One or two nights are extended stay hotel suite that perfectly and frankly suit the new traveller. That's on the road that has more flexibility about where they can work and where they can work from again, we think we're perfectly positioned.

With our extended stay focus.

Compared to 2019 or monthly Revpar during each month of the third quarter was down about 26%. So we didn't really see any meaningful drop off which affirms the seasonality that we typically see in our portfolio also encouragingly our portfolio outperformed the industry's sequence.

<unk> decline over the past few months by approximately 500 basis points from July to August industry, Revpar was down 13% for the industry versus 8% for us in that industry Revpar from August to September dip, 6%, while we were down only 1% and.

In October or Revpar grew 4% from September.

And we expect to continue to outperform the industry as we benefit from our appeal to a multitude of demand generators.

As the recovery continues in a business traveler does come back will continue to get more than our fair share of revenue because we've got the highest concentration of extended stay rooms, as I mentioned before of all lodging reach at almost 60% and the business travelers going to get the most value.

And flexibility and are kind of hotels are upscale extended stay hotels provide us the flexibility during periods of growth or weakness to diversify our customer base and adjust the mix accordingly to maximize revenue that's a thesis that we've espoused.

For decades and followed.

Among our top markets, our coastal northeastern hotels are absolutely, killing it led by our Hampton Inn in Portland, Maine was generated revpar of $303 up 10% over 29 teams with avr's of almost $330 up 15%.

Sent over 2019.

Power was over $100 higher than the second highest hotel.

Portfolio, the Hilton Garden in in Portsmouth, New Hampshire, or suburban New York, San Diego, Los Angeles in Charleston markets also produced solid results for the quarter.

And Denver, Dallas, and Houston produced above average growth year over year during the quarter. So it's good to see those markets coming back to life as I mentioned previously or Austin hotels are off to a great start under our ownership.

So when you look at our portfolio moving forward into 2022, and 2023 I'm really excited about the internal growth upside because one thing that clearly stands out is that our strong performance today has been accomplished excuse me with little.

<unk> from our technology driven markets.

Particularly silicon Valley, which is about 25% of our annual EBITDA and Bellevue, Washington, or 2019 hotel EBITDA at those five hotels was approximately $35 million and those same hotels are estimated to produce.

Between five and $6 million only.

Of hotel EBITDA in 2021, that's something I really want you to take note up because we are producing results that are as good or better than the industry and all of our peers without the benefit of our most important market that constitute 20.

5% of our annual EBITDA, we all know that those tech companies that when Covid and when Delta spiked at.

At the end of the summer and they pushed back all their office openings that we were expected to have in October and September to the beginning of 2022.

No that as that occurs.

Markets are going to come back strong with a vengeance and we certainly look forward to that lift for 2022.

I'd also be remiss without mentioning the great job by our operating and management teams who've been focused as ever on delivering strong operating profits our third quarter margins grew 25% over the same quarter last year to 45% only one point below are 29.

Teen margins of 46%, despite revpar being approximately $30 lower we are going to remain hyper focus like we always are on driving margins higher and expect the same store margins will be higher on similar liberally levels of Revpar no read.

Is better than us at regularly delivering those kind of results.

I'm going to close my comments by reminding everyone that are relative strong performance today and expected performance moving forward again is going to be significantly enhanced next year by two key factors.

We expect tremendous upside and our tech driven markets.

And we're gonna be generating.

Meaningful incremental cash from both of our Austin acquisitions, and the pending opening of our brand new home two suites at Woodland Hills, which we think will ramp up very quickly also that market and the star reports from that market are strong.

So when we combine this great upsized with our solid capital structure that I think we've done very well.

During the pandemic and suffered very little dilution through that period of time, we are well positioned to deliver deliver some outside growth and value to our shareholders like that with that I'd like to turn it over to Dennis.

Thanks, Jeff Good morning, everyone.

All but one hotel had occupancy over 50% in the quarter, which compares to two in the second quarter and 20 hotels in the first quarter 24 of our hotels had occupancy over 70% during the third quarter.

Half of our hotels at occupancy over 75% and 14 hotels had a higher adr's as compared to 2019.

Relative to 2019, a residence in Fort Lauderdale, Intercoastal waterway hotel sell the highest jumping revpar with an increase of 45%, while our lowest hotels, where are two sunnyvale residence and whose revpar is down on approximately 70% compared to 2019 as Jeff spoke our Silicon Valley hotels are going to <unk>.

Vied substantial growth in 2022 and 2023.

Of all our brands bolster bias significant demand at our coastal northeastern hotels are Hampton and had the highest highest occupancy in the quarter at approximately 85% are Portland, Maine Hotel had occupancy of 92% are exited new Hampshire hotels occupancy of almost 90.

Of almost 90% occupancy at our 17 residence and was a solid 75% in the quarter and basically 70% at our seven Homewood suites hotels.

In addition to our coastal northeastern hotels are some suburban New York assets continue to produce great results and really have been consistent outperformers since the start of the pandemic. Unlike what has been experienced for most owners in Manhattan.

Occupancy our at our three hotels was 91% and the quarter and ADR was also higher than 2019 at those three hotels among.

Among our major market San Diego Denver in L. A are showing decent growth over the second quarter and they're near term outlooks are encouraging smaller conventions are coming back to the San Diego and Dallas Convention centers in the calendar is that both are looking promising for next year.

Silicon Valley, our largest market remains a laggard with Revpar 80 Bucks in the quarter only up 10% from the second quarter, it's really not surprising given the restrictions on international travel.

Fact, the most tech companies that pushed off office reopenings until the new year, having said that our mountain view in San Mateo residence and managed to produce occupancy of 85% in the quarter, but adr's remain a challenge in in the valley with all four hotels, having adr's hovering around $120, which is down.

Basically 50% from 2019.

Our five hotels with absolute Rev are five highest hotels with absolute revpar in the third quarter, where our hempton in in Portland, or Hilton Garden in in Portsmouth, New Hampshire, or a Hilton garden in Marina del Rey and then our residence in Fort Lauderdale, and a residence in San Diego gas lamp, which is making its first appearance on our topless since this started.

The pandemic all five hotels had <unk> above $180.

With gasoline in Marina del Rey being.

Slightly below 2019 or top five absolute occupancy hotels in the quarter, where the residence in in new Rochelle and the residence in in White Plains, then followed by our Hampton in Portland, a residence in Charleston, Somerville, and our Hampton and exit or all five hotels with occupancy above 89%.

Although our length of stay is click down a little bit in the quarter. We continue to see an average length of stay much longer than historical levels for our portfolio at a residence in hotels are average length of stay was three one nights down a bit from three four nights in the second quarter and four or five nights in the first quarter, but still well above the two.

Four nights that we experienced Prepandemic 2021 first quarter for our Homewood suites hotels are average length of stay was $3. Five nights was is actually up fractionally from three four nights in the in the second quarter and when you compare it to the Prepandemic are average was about 2.7 nights, so again, meaning.

Flea higher.

As Jeff mentioned, we are seeing the return of the non leisure traveler, whether that's the business or government related traveller, they're returning steadily if you look at our midweek occupancy trends for a portfolio like ours, it's very encouraging as we appeal to travelers of all types and had multiple price points based on their needed linked to stay or weekday arced.

And see was 69% during the quarter during the third quarter and represents about 82% of 2019 third quarter occupancy and that's up from 65% in the second quarter and 48% in the first quarter.

Additionally, our midweek Adr's came in at about $145, which is up 20% over second quarter eight ADR of 122, and almost 40% higher than the first quarter ADR of $105. If you look at our weaken and our weekend patterns. We can occupancy was approximately 79% in the third quarter.

<unk>.

Up fractionally from 77% in the second quarter, and our third quarter ADR was up 17% over second quarter ADR.

For the quarter total revenue was almost double last year, a $30 million and we generated additional GOP of approximately $17 million flow through of almost 60%, which is particularly strong despite bringing on incremental staffing in response to rising occupancy and the reintroduction of complimentary breakfast services at many.

<unk> of our hotels.

Also we generated adjusted EBITDA of 19.6 million basically four times, the same quarter last year, and we generated SFO per share of 21.

Which is up 30 cents over the same quarter last year and will probably be one of the highest per share figures of all lodging reach for the third quarter.

<unk> an island continue to invest in human capital and data analysis tools on the operating expense side and working alongside working alongside island, we have a best in class operating model that drives premium operating margins, we've generated positive GOP in hotel EBITDA each month during 2021.

During the third quarter, all 41 hotel generated positive hotel EBITDA not GOP not hotel operating profit.

Positive hotel EBITDA, a testament to the quality of our real estate and our operations teams or top five producers of GOP in the second quarter, where the Hampton Portland or residence and gas lamp are Hilton garden in Portsmouth, followed by the residence in New Rochelle, which is making its first appearance.

Sorry, the high place Denver, Cherry Creek, which is making its first appearance in our top five since the start of the pandemic.

Then in that top five four different brands represented so further supporting the quality of our portfolio.

On a preoccupied room basis that are 39 comparable hotels painful payroll and benefit costs were approximately $30, which is down about 15% from our 2019 third quarter cost per occupied room at $35 taken.

Taking out our newly acquired hotels are employee count as of the end of the quarter was 1119, which is up only about 50 employees since the end of the second quarter and up 150 employees since the first quarter, but it is still down basically 35% compared to preterm prepandemic levels of almost <unk>.

1700 employees.

Even with the lower head count overtime, and casual labor is still down about $300000 compared to the 2019 third quarter.

We've managed to maintain a very efficient labor force, despite the horizon occupancy and all of the current employment environment means challenge, we should be in good shape as we entered the seasonally slow slower months.

After several years of making our case to the brands. We finally gotten some traction with regards to housekeeping and labor standards. Hilton is now formalized plans for revised housekeeping standards and Marriott is coming along as well since our hotels have an average length of average length of today, which is a little bit longer than most of our peers we will.

Continue to see meaningful decreases in housekeeping costs compared to other owners, who have a much shorter average length of stay.

We do believe on an apples to apples basis that are operating margins should be a bit higher on a stabilized basis than they were in 2019.

In the second quarter, we Ernst reinstituted complimentary breakfast at most of our locations, where it's offered to guest the brands are proposing new standards that reduced the number of offerings and should lead to some some same store savings for now our breakfast cost per occupied room, as well down compared to 2019.

It's about $3.08 and the.

2019, third quarter and has come down to about $2 30 and.

In the 2021 third quarter. Additionally, the elimination of the evening hospitality hospitality hour basically saves us $300000 a quarter.

On the Capex front, we spent approximately $1 million in the quarter with our budget for the full year still about six and a half million dollars and that again is capital excluding the Warner send in development with respect to that are home to sweets. There. We've spent about 64 million on that hotel versus a budget of $70 million and as Jeff said, we're <unk>.

Looking forward to opening that hotel here in the 2021 fourth quarter, we look forward to talking with many of you during the upcoming World Conference. If we do not currently have a meeting set with you and you would like to set up a virtual meeting. Please do not hesitate to reach out to me and we'll make it happen Jeremy.

Thanks, Dennis Good morning, everyone. <unk> Q3, 2021, Revpar of $107 represents a 23% increase versus our queue to revpar $87. During the quarter Revpar hit a high of $113 in July which along with June has historically been our strongest month of the year due to <unk>.

Or demand Revpar remains strong at $104 in August of $103 in September even as the strongest parts of the summer leisure season came to an end Chatham Q3, Rev. Part of $107 was down 26% to our Q3 2019, Rev Barbara $145.

Chatham strong Revpar recovery continued in October where our portfolio Revpar of $107 was the second highest month of the year, despite being well beyond our peak summer leader season, we expect performance to continue recovering with decreasing road part declines relative to 2019, but it's worth noting that the absolute.

Par for Chatham portfolio, typically declines approximately 15% to 20% from October to November and again from November December due to the seasonality and our business.

It's possible that those seasonal declines could be a little lower this year, depending on the timing and strength of the continuing recovery and business travel, but we still expect that seasonality will impact absolute revpar levels in November and December.

Through our significant efforts to contain costs, we were able to generate the Q3 hotel EBITDA margin of 35.2% in GOP margin of 44, 7%, but.

$44, 7% GOP margin achieved in Q3 out of Revpar of $107 was only 130 basis points lower than a full year 2019, GOP margin of 46%, which was achieved at a revpar of $132.

R Q3, 2021 hotel EBITDA was $22.5 million adjusted EBITDA was $19.6 million adjusted <unk> was 21 cents per share and cash flow before capital with represents hotel EBITDA loss corporate G&A cash interest and $2.1 million a principal amortization was positive $10 million.

I think it's worth noting that the solid results were achieved even with a somewhat limited amount of business travel demand in Q3, some of our largest and most profitable hotels before the start of the pandemic like the four residents in Silicon Valley in the residence in Bellevue are very dependent on business travel and have seen the least amount of recovery of all our hotels to date.

Whenever business travel start to recover in a more meaningful way our portfolio should experienced significant upside from its current performance.

We have taken the steps to strengthen chatrooms balance sheet and non dilutive ways during the pandemic and the balance sheet is now in the best shape. It's ever been between March 31, 2020 in September 30th 2021, we've reduced our net debt balanced by $250 million, which represents a 32% reduction despite spending.

37 $5 million on our home to Warner Center development over this period and spending $71 million to acquire the residence in in town. Please suites Austin.

In September 30th we had $199 million of liquidity between our cash balance of $19 million and 180 million of revolving credit facility availability.

After the end of the quarter, we exercise an option to extend the majority of our credit facility to 2023 and obtained additional options to further extend the maturity of the facility to 2024 with our extended that maturity profile solid liquidity and meaningful free cash flow, we are well positioned to opportunistically pursue attractive investments.

In addition to coming out of the pandemic with a better balance sheet. Then we had going in we're also going to be exiting the pandemic with a better hotel portfolio. Then we have going in the recent acquisitions of the residence in in 10 place with Austin in the home to Warner Center development, which is expected to be completed in December will meaningfully enhanced Chatham is growth and the <unk>.

Quality of our portfolio by adding three newly constructed high Revpar hotels and markets that have very strong demand growth.

We are very optimistic about the future given the potential for significant improvements in operating performance as business travel begins to recover in a more meaningful way the growth that we expect from the Austin acquisitions in the Warner Senator development and our ability to pursue additional growth opportunities given our strong balance sheet and significant liquidity.

While we're not going to provide guidance at this time for those of you building your own projections for Q4, and 2022 I want to remind you that during the construction of the home to Warner Center, we've been capitalizing the interest costs associated with the $70 million development and once it opens in December we will begin recognizing this interest expense, which will be approximately 400.

$1000 per month. So for example in queue for we expect interest expense to be approximately $2 million per month in October and November and then increased to approximately $2.4 million per month starting in December.

This concludes my portion of the call operator, please open the line for questions.

Thank you, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone keypad and confirmation total indicate your lines in your question Q.

Start to if you'd like to remove your questions in the queue.

I'd like to thank you will speak our equipment may be necessary to pick up the handset before pressing this darkies.

One moment, please let me call for questions.

Our first question comes from the line of Kyle Nader.

Security. Please proceed with your question.

Good morning, and compile them for Brian.

I was curious what kind of new development, you're seeing in your key markets.

And are you seeing any opportunities to enter contracts to buy from developers are you still mostly focused on acquiring existing hotels.

Yes. This is Dennis.

And I think we are.

We certainly have a lot of discussions with developers.

And we haven't historically been takeout partners with those but certainly there in our network of people that we reach out to as far as other new supply on our markets, there's really very.

Very little that's currently under construction.

That that.

That really bothers us I think if you look at our brand new home to sweets in woodland Hills, that's opening up.

Really there has been no new construction there for a long time, maybe there is another hotel that starts in the next couple of years.

So we're pretty excited about that opportunity to but in general we experienced a significant amount in direct can be competitive new supply kind of in that 2016 to 2019 timeframe, where I think for us new supply was.

Anywhere from five to nine or 10% of our of our comp set so I think a lot of that is behind us.

Okay. That's helpful. Thank you and then launched for me I'm, just curious how you're thinking about the future acquisitions.

We have a ton of availability under our line of credit now so I think in the near term. That's that's what we would use.

Okay. Thanks, that's all for me.

Thanks.

Thank you. Our next question comes from the line.

Miller battery with Danny. Please proceed with your question.

Good morning, and thanks for taking my questions.

First one for me.

Wanted to dive and a little bit more on the.

Performance in the portfolio October picked up a few points of occupancy compared with September.

We've got the seasonality.

There or perhaps the good business or corporate travel.

A little bit better October compared with September.

Yes, I think Tyler.

<unk>. This is Dennis yes, I mean business travel I think as we have seen kind of going from 65% of midweek to almost 70% in the third quarter.

Stayed at a pretty healthy level about that same level, 70% ish in October. So it's still has kind of maintaining it out there, but yes for us once we get past October it does get a little bit seasonal and October you also have those northeastern hotels, the mid Atlantic hotels.

<unk>.

Tend to do very well with respect to kind of the leaf peepers in those types getting in from a leisure travel perspective. So I think for US October was similar in terms of business travel, but the leisure was just kicked up a little bit with some of that business. So.

Will say the one other thing to add to kind of October and even as you look at November and I spoke to in my prepared comments, which is the Dallas Convention Center of the San Diego Convention Center has seen and is seeing a bit of smaller conventions comic con is not going to be anywhere near what it was.

And prior years prior to the pandemic, but they are still at least planning to have some smaller version of it in San Diego.

So there's a little bit here and there that's that's incremental but we will we do expect to November and December to be to be seasonally lower so.

Okay great.

I'm also wondering.

If you can expand on the margin performance and a quarter I felt really impressive, especially given you're running back some some services and some amenities historic revpar below 2019 level. So if you could just unpack for us help.

Help us understand a little bit more will be driving the room strong margin forms in the quarter that would be helpful.

Yeah, I mean, I think for us the biggest cost driver is always going to be labor and as we mentioned in our prepared comments one thing that that island has done a lot of work on and continues to you as they have expanded.

Really over the last two or three years internal staffing department that really is looking day to day and expenses efficiency ratios and really staying in very regular daily communication with gms across the country to make sure that everybody's on.

The same page with respect to what's on the books, what's coming or what's not coming and trying to adjust that.

Adjust that productivity, so as we talked about what their cost per occupied room still a good 15 or 16% below third quarter 2019 at levels and that's with.

Ah wage per hour that certainly higher than what it was two years ago. So.

I think it's really just analyzing those expenses day to day on a housekeeping basis for the most part so.

Okay, Alright, that's helpful.

Also interested maybe some.

Prepared remarks.

Austin hotels.

Percent occupancy October so I, just wanted to make sure that what.

I heard that correctly.

Talk a little bit more about back with management number the obviously really really exceptional.

Yes, I mean listen, it's especially for a hotel the town place, which is really only three months old for now four months old, but I think listen in Austin, It's and the reason why we liked those two acquisitions at the domain, which is it has a very good mix of not only significant in office.

Component.

Corporate offices, there some of which haven't even fully reopened yet.

But it also has the demand for weekend event. So whether it was September October in October you had a really strong formula one weekend.

That was basically a citywide sell out.

Even though the races, where.

Almost 45 minutes away from the hotel, but given its proximity to.

To.

That domain area. It attracts a lot of interest from a traveler, who can walk to whatever they want to do.

You also have.

On weekends its proximity to the sock the brand New Soccer Stadium, which again for whether it was the USA World Cup qualifying match.

Match, either during the week or the weekend again. It just provides a kind of a really diverse set of.

Events outside of just the business travel that allows us to do really well during the week and the weekend. So.

We're just very pleased with that and yes, we spoke correctly that it was 80% occupancy in September and 90% in October so.

Okay.

I think what last question. Please in terms of Ah.

Warner Center opening in the fourth quarter here.

Help us think about the ramp verbalization.

Property.

The circumstances here, but just kind of kind of curious how quickly you think that could ramp up the stabilization.

Yes, I mean listen I think we are really encouraged as Jeff talked about the the.

The stars are showing.

And Smith travel reports are showing and have shown in the few months, leading up to where we are today.

Market occupancy market Occupancies in the 80 to over 80% range. So that's really encouraging.

I think we've had a lot of we have our full sales team and GM in place. There. So we've got a lot of inbound interest in our hotel moving forward I think if you look at kind of a ramp.

We certainly believe it's we're going to.

We're going to be able to accelerate from a 12 to 18 funtime from probably.

I'd like to say in six months will be fully ramp there that could be a bit aggressive, but listen as we've seen with the market is pretty strong so.

I think.

We're certainly not ready to give any guidance yet on what that looks like in terms of rates and occupancies, but.

Think we're pretty.

Excited about what that hotel is going to do and I am sure. When we talk again in February and the hotels been open at least for six or eight weeks couple months that.

We will have some much better thoughts on what that looks like in the in the near term.

Okay Mccoll for me I appreciate it thank you Tyler.

Thank you ladies and gentlemen at this time there are no further questions I would like to transfer back to management for closing comment.

While this is Jeff again, thank you all for attending and as we've said a few times, there's some specific unique characteristics to chaff.

I think there's got to give us some further.

Upside here, particularly as we move through 2022.

Combining our I think unusual prospects for internal growth.

And the external growth that we've already put on the table with more to come. Thank you all look forward to speaking with you soon.

Thank you, ladies and gentlemen, Thursday teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

[music].

Greetings, ladies and gentlemen, and welcome to the Chatham lodging Trust's third quarter 2021 financial results Conference call. At this time, all participants are in a listen only mode.

A question and answer session will follow the formal presentation.

Should they would require operator assistance. Please press star zero on your telephone keypad. It's now my pleasure to introduce your host Mr. Chris Daly. Thank you Sir you may begin.

Thank you Jim.

Everyone and welcome to the Chatham lodging Trust's third quarter 2021 results conference call. Please note that many of our comments today are considered forward looking statements as defined by federal Securities laws. These statements are subject to risks and uncertainties, both known and unknown as described in our most recent Form 10-K and other SEC filings.

All information in this call is as of November four 2021, unless otherwise noted.

Company undertakes no obligation to update any forward looking statement to conform the statement to actual results or changes in the company's expectations.

You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at Chatham lodging Trust's Dot com.

Now to provide you with some insight into <unk> 2020, one third quarter results allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer.

As Craven Executive Vice President and Chief operating Officer, Jeremy Wegner, Senior Vice President and Chief Financial Officer, Let me turn the session over to Jeff Fisher Jeff.

Thank you.

Morning, everybody. Thanks, Chris and we appreciate everyone who is joining us this morning for our call after having a very good second quarter. When we became the second hotel REIT to be cash flow positive. We produced a great third quarter that brought our highest revpar since the start of the pandemic and a significant increase.

And free cash flow after all debt service preferred dividends and before Capex, our third quarter free cash flow of $10 million was two and a half times greater than our second quarter cash flow of $4 million.

And that is only on a $20 or 22% increase in revpar over the second quarter. We are now positive cash flow for the year and expect to remain so for 2021, our cumulative cash burn since the start of the pandemic is a mere $25 million.

We're about 50 cents per share.

As we move through the end of this year and into next year. Many of our peers is still going to be burning cash, but that is not going to be the case for us will come out of the pandemic healthier than most of our peers when EBITDA recovers, many probably don't realize that our debt to EBITDA ratio.

<unk> is going to be lower than it was heading into the pandemic to the tune of one and a half to two full turns lower excluding the preferred and a half to a full turn lower when you include the preferred.

I'm real proud of that and I think that bodes well for us and our growth going forward in 2022.

Coming off a very successful $120 million preferred equity raise at the end of the second quarter were in very good shape from a capital and leverage perspective, our leverage ratio was approximately 31% at the end of the third quarter down meaningfully from 38% as I indicated just a year ago.

Additionally, our liquidity now stands at approximately $200 million almost double our liquidity from the end of the 2023rd quarter.

And only $115 million maturing in 2023.

We've made fantastic strike solidifying our balance sheet and have the confidence to go on offense and grow our portfolio in early August we invested $71 million to acquire two incredible premium branded extended stay hotels adjacent to the domain in Austin, Texas.

In a market that we all know is absolutely thriving and we will generate meaningful revpar growth and EBITDA growth for us going forward.

It also further our exposure to premium branded extended stay hotels that we believe will continue to be brands of choice as we emerge from the pandemic.

We still have an appetite and the financial flexibility to acquire more hotels cap rates for acquisitions remain close to 2019 valuations and it's a difficult environment to find the kind of assets that fit I think are very strict criteria, particularly since we are trying to.

Again increase our exposure even further.

<unk> extended stay hotels, but we are looking at a fair amount of deals and I would expect to be successful in that endeavor over the next six to 12 months.

By the way the two Austin acquisitions, the residence Inn.

And the newly opened town place suites are doing extremely well and outperforming our underwriting results. Our operations team at island has done a fantastic job delivering those results the two hotels at occupancy of over 80% in September.

And 90% in October the top place suites, which just opened in June saw October occupancy of 89%.

<unk> of $125 and Revpar of $111, a premium to our portfolio performance. They say that new hotels have to ramp up over 12 to 18 months, but we've certainly accelerated that time fried Frank I'd say more than a little bit so where we're at.

I'm proud of those acquisitions and their performance already.

Speaking of a quick ramp up or ramp up expectations that our soon to open home two suites.

<unk> Hills is not 12 to 18 months. The hotel has expect expected to open this quarter. We just came back from there. It's a beautiful hotel is going to have the best rooms in the market by far the best public space I think the best amenities.

And even outdoor experience.

We think that theres going to be very strong demand for this extended stay hotel. Once we opened the doors, we look forward to talking very specifically about those results on our next conference call.

Corona cases across the country and we're certainly not going to be up up and away. After July July Revpar was our peak revpar since the start of the pandemic at $113.

And as we anticipated revpar slipped a bit to $104 and $103 in August and September before climbing higher again to $107 in October looking to the remainder of the fourth quarter, just like the third quarter, we expect revpar to seasonally moderate.

Especially given the Delta spy.

Spike certainly seems to be behind us. So we will have a normal seasonal moderation for November and December and then get started again as we move through January and February from 2015 to 2019 for example, revpar.

18% from October to November and another 19% from November to December perfectly normal seasonal adjustments.

Leisure travel continues to be the driver of performance, but we are seeing demand for health care government military as well as the business traveler.

Our two nights or extended stay hotel suite that perfectly and frankly suite the new traveler. That's on the road that has more flexibility about where they can work and where they can work from again, we think we're perfectly positioned.

With our extended stay focus.

Compared to 2019, our monthly revpar during each month of the third quarter was down about 26%. So we didn't really see any meaningful drop off which affirms the seasonality that we typically see in our portfolio also encouragingly our portfolio outperformed the industry sequential.

Decline over the past few months by approximately 500 basis points from July to August industry, Revpar was down 13% for the industry versus 8% for us and that industry Revpar from August to September dipped, 6%, while we were down only 1% in October are.

Revpar grew 4% from September.

And we expect to continue to outperform the industry as we benefit from our appeal to a multitude of demand generators as the recovery continues in the business traveler does come back we'll continue to get more than our fair share of revenue because we've got the highest concentration of extended stay.

<unk> as I mentioned before of all lodging Reits at almost 60% and the business travelers going to get the most value and flexibility in our kind of hotels.

Our upscale extended stay hotels provide us the flexibility during periods of growth or weakness to diversify our customer base and adjust the mix accordingly to maximize revenue and Thats a thesis that we've espoused for decades and followed.

Among our top markets are coastal northeastern hotels are absolutely, killing it led by our Hampton Inn in Portland, Maine, which generated revpar of $303 up 10% over 2019 with ADR is of almost $330 up 15.

Sent over 2019, as Revpar was over $100 higher than the second highest hotel.

Our portfolio the Hilton Garden Inn in Portsmouth, New Hampshire, our suburban New York, San Diego, Los Angeles, and Charleston markets also produced solid results for the quarter.

And Denver, Dallas, and Houston produced above average growth year over year during the quarter. So it's good to see those markets coming back to life as I mentioned previously our Boston hotels are off to a great start under our ownership.

From our technology driven markets.

Particularly silicon Valley, which is about 25% of our annual EBITDA and Bellevue, Washington, Our 2019 hotel EBITDA at those five hotels was approximately $35 million and those same hotels are estimated to produce.

Between five and $6 million only.

Of hotel EBITDA in 2021, Thats, something I really want you to take note up because we're producing results that are as good or better than the industry and all of our peers without the benefit of our most important market that constitute 20.

5% of our annual EBITDA.

We all know that those tech companies that when Covid and when Delta spiked at.

At the end of the summer and they pushed back all their office openings that we were expected to have in October and September to the beginning of 2022.

So that as that occurs.

The markets are going to come back.

Strong with a vengeance and we certainly look forward to that lift for 2022.

I'd also be remiss without mentioning the great job by our operating and management teams have been focused as ever on delivering strong operating profits are third quarter margins grew 25% over the same quarter last year to 45% only one point below our 2009.

<unk> margins of 46%, despite revpar being approximately $30 lower we are going to remain hyper focused like we always are on driving margins higher and expect the same store margins will be higher on similar levels levels of Revpar No REIT.

It's better than us have regularly delivering those kind of results.

I am going to close my comments by reminding everyone that our relative strong performance to date and expected performance moving forward again is going to be significantly enhanced next year by two key factors.

We expect tremendous upside in our tech driven markets.

And we're gonna be generating.

So when we combine this great upside with our solid capital structure that I think we've done very well with.

Thanks, Jeff Good morning, everyone, all but one hotel had occupancy over 50% in the quarter, which compares to two in the second quarter and 20 hotels in the first quarter 24 of our hotels had occupancy over 70% during the third quarter half of our hotels at occupancy over 75% in 2014 hotels had a <unk>.

<unk> <unk> as compared to 2019 relative.

Relative to 2019, our residence Inn Fort Lauderdale, Intracoastal waterway hotel saw the highest jump in revpar with an increase of 45%, while our lowest hotels, where our two sunnyvale residence and his revpar is down approximately 70% compared to 2019 as Jeff spoke our Silicon Valley hotels are going to.

<unk> substantial growth in 2022 and 2023.

Of all our brands bolstered by significant demand at our coastal northeastern hotels, our Hampton and had the highest highest occupancy in the quarter and approximately 85% or Portland, Maine Hotel had occupancy of 92% are exited new Hampshire hotels occupancy of almost 90%.

Almost 90% occupancy at our 17 residents and was a solid 75% in the quarter and basically 70% at our seven Homewood suites hotels.

In addition to our coastal northeastern hotels are suburban suburban New York assets continue to produce great results and really have been consistent outperformer since the start of the pandemic. Unlike what has been experienced for most owners in Manhattan occupancy.

Occupancy at our three hotels was 91% in the quarter and ADR was also higher than 2019 at those three hotels, among our major markets San Diego, Denver and L. A are showing decent growth over the second quarter and their near term outlooks are encouraging smaller conventions are coming back to the San Diego and Dallas.

Convention centers and the calendars at both are looking promising for next year.

Silicon Valley, our largest market remains a laggard with Revpar of 80 Bucks in the quarter only up 10% from the second quarter, it's really not surprising given the restrictions on international travel and in fact in most tech companies are pushed off office re openings until the new year, having said that our mountain view in San Mateo residence Inns.

Managed to produce occupancy of 85% in the quarter, but adr's remain a challenge.

In the valley with all four hotels, having ADR is hovering around $120, which is down basically 50% from 2019.

Our five hotels with absolute Revpar, five highest hotels with absolute revpar in the third quarter, where our Hampton Inn in Portland, Our Hilton Garden Inn in Portsmouth, New Hampshire, Our Hilton Garden Inn Marina del Rey and then our residence Inn Fort Lauderdale in a residence Inn, San Diego, Gaslamp, which is making its first appearance on our top list since the start of the <unk>.

Endemic all five hotels had ADR is above $180.

With Gaslamp in Marina del Rey being just slightly below 2019, our top five absolute occupancy hotels in the quarter, where the residence Inn in new Rochelle and the residence Inn in White Plains, then followed by our Hampton Inn in Portland, Our residence Inn, Charleston, Summerville, and our Hampton and exited all five hotels with occupancy.

<unk> above 89%, although our length of stay is click down a little bit in the quarter. We continue to see an average length of stay much longer than historical levels for our portfolio at our residence Inn hotels, our average length of stay was $3 one nights down a bit from three four nights in the second quarter and $4 five nights in the first quarter.

<unk>, but still well above the $2 four nights that we experienced pre pandemic 2021 first quarter for our Homewood suites hotels, our average length of stay was $3 five nights was actually up fractionally from three four nights in the in the second quarter.

And when you compare it to the pre pandemic our average was about $2 seven night, so again meaningfully higher.

As Jeff mentioned, we're seeing the return of the non leisure traveler, whether thats the business or government related traveler, they're returning steadily if you look at our midweek occupancy trends for a portfolio like ours is very encouraging as we appeal to travelers of all types and at multiple price points based on their needed length of stay.

Our weekday occupancy was 69% during the quarter during the third quarter and represents about 82% of 2019 third quarter occupancy and Thats up from 65% in the second quarter and 48% in the first quarter. Additionally, our midweek ADR ours came in at about $145, which is up <unk>.

<unk> percent over second quarter, eight ADR of 122, and almost 40% higher than the first quarter ADR of $105. If you look at our weekend in our weekend patterns weekend occupancy was approximately 79% in the third quarter.

Up fractionally from 77% in the second quarter, and our third quarter ADR was up 17% over second quarter ADR.

For the quarter total revenue was almost double last year of $30 million and we generated additional GOP of approximately $17 million flow through of almost 60%, which is particularly strong despite bringing on incremental staffing in response to rising occupancy and the reintroduction of complimentary breakfast services many of.

Our hotels.

Also we generated adjusted EBITDA of $19 6 million basically four times the same quarter last year, and we generated <unk> per share of <unk> 21.

Which is up 30 over the same quarter last year and will probably be one of the highest per share figures of all lodging Reits for the third quarter.

<unk> an island continued to invest in human capital and data analysis tools on the operating expense side and working along silent working alongside island, we have a best in class operating model that drives premium operating margins, we've generated positive GOP and hotel EBITDA each month during 2021.

During the third quarter, all 41 hotels generated positive hotel EBITDA not GOP not hotel operating profit.

Positive hotel EBITDA, a testament to the quality of our real estate and our operations teams or top five producers of GOP and the second quarter, where the Hampton Portland, Our residence Inn Gaslamp, our Hilton Garden in Portsmouth, followed by the residence in New Rochelle, which is making its first appearance.

Sorry, the Hyatt place Denver, Cherry Creek, which is making its first appearance in our top five since the start of the pandemic.

In that top five four different brands represented so further supporting the quality of our portfolio.

On a per occupied room basis at our 39 comparable hotels painful payroll and benefit costs were approximately $30, which is down about 15% from our 2019 third quarter cost per occupied room of $35 taking out our newly acquired hotels, our employee count as of the end of the quarter was $1.

119, which is up only about 50 employees since the end of the second quarter and up 150 employees since the first quarter, but it's still down basically 35% compared to preterm pre pandemic levels of almost 1700 employees, even with the lower head count overtime and casual labor is still.

Down about $300000 compared to the 2019 third quarter, we've managed to maintain a very efficient labor force. Despite the rise in occupancy and all of the current employment environment Challenge, we should be in good shape as we entered the seasonally slower slower months.

After several years of making our case to the brands. We've finally gotten some traction with regards to housekeeping and labor standards. Hilton is now formalized plan plans for our revised housekeeping standards and Marriott is coming along as well since our hotels have an average length of the average length of stay which is a little bit longer than most of our peers we will.

We'll continue to see meaningful decreases in housekeeping cost compared to other owners, who have a much shorter average length of stay.

We do believe on an apples to apples basis that our operating margins should be a bit higher on a stabilized basis than they were in 2019.

In the second quarter, we reinstituted complimentary breakfast at most of our locations, where it's offered to guest the brands are proposing new standards that reduced the number of offerings and should lead to some some same store savings for now our breakfast cost per occupied room is well down compared to 2019.

It's about $3 eight.

The.

2019 third quarter and has come down to about $2 30 in.

In the 2021 third quarter. Additionally, the elimination of the evening hospitality hospitality hour basically saves us $300000 a quarter on the Capex front, we spent approximately $1 million in the quarter with our budget for the full year is still about $6 $5 million and that again is capital excluding the war.

Understood and development with respect to that are home to suites. There. We've spent about $64 million on that hotel versus a budget of $70 million and as Jeff said, we're looking forward to opening that hotel here in the 2021 and fourth quarter. We look forward to talking with many of you during the upcoming REIT World Conference. If we do not currently.

We have a meeting set with you and you would like to set up a virtual meeting. Please do not hesitate to reach out to me and will make it happen Jeremy.

Thanks, Dennis Good morning, everyone. <unk> Q3, 2021, Revpar of $107 represents a 23% increase versus our Q2 revpar of $87 during the quarter Revpar hit a high of $113 in July which along with June has historically been our strongest month of the year due to peak.

As your demand Revpar remains strong at $104 in August and $103 in September even as the strongest parts of the summer leisure season came to an end <unk> Q3, revpar of $107 was down 26% to our Q3 2019 revpar of $145.

Chatham strong Revpar recovery continued in October where our portfolio Revpar of $107 was the second highest month of the year, despite being well beyond our peak summer leisure season, we expect performance to continue recovering with decreasing revpar declines relative to 2019, but it's worth noting that the absolute <unk>.

Revpar for Chatham portfolio, typically declines of approximately 15% to 20% from October to November and again from November to December due to the seasonality in our business. It's possible that those seasonal declines could be a little lower this year, depending on the timing and strength of the continuing recovery in business travel, but we still expect that seasonality will impact.

Absolute revpar levels in November and December.

Through our significant efforts to contain costs, we were able to generate that Q3 hotel EBITDA margin of 35, 2% and GOP margin of 44, 7%.

The 44, 7% GOP margin achieved in Q3 at a revpar of $107 was only 130 basis points lower than our full year 2019, GOP margin of 46%, which was achieved at a revpar of $132.

Our Q3 2021 hotel EBITDA was $22 5 million adjusted EBITDA was $19 6 million adjusted <unk> was 21 per share and cash flow before capital, which represents hotel EBITDA loss corporate G&A cash interest and $2 1 million of principal amortization was positive $10 million.

I think it's worth noting that these solid results were achieved even with a somewhat limited amount of business travel demand in Q3.

One of our largest and most profitable hotels before the start of the pandemic like the four residents in Silicon Valley and the residence in Bellevue are very dependent on business travel and have seen the least amount of recovery of all our hotels to date.

Whenever business travel starts to recover in a more meaningful way our portfolio should experienced significant upside from its current performance.

We have taken a number steps to strengthen <unk> balance sheet and non dilutive ways during the pandemic and the balance sheet is now in the best shape. It's ever been between March 31, 2020, and September 32021, we've reduced our net debt balance by $250 million, which represents a 32% reduction despite spending 30.

$705 million on our home to Warner Center development over this period and spending $71 million to acquire the residence Inn in town place suites Austin.

September 30, we had $199 million of liquidity between our cash balance of $19 million and $180 million of revolving credit facility availability.

After the end of the quarter, we exercised an option to extend the maturity of our credit facility to 2023 and obtained additional options to further extend the maturity of the facility to 2024.

With our extended debt maturity profile solid liquidity and meaningful free cash flow, we are well positioned to opportunistically pursue attractive investments.

In addition to coming out of the pandemic with a better balance sheet than we had going in we're also going to be exiting the pandemic with a better hotel portfolio than we had going in the recent acquisitions of the residence Inn in town place with Austin and the home to Warner Center development, which is expected to be completed in December while meaningfully enhanced chatham growth and the quality.

All of our portfolio by adding three newly constructed high Revpar hotels and markets that have very strong demand growth.

We are very optimistic about the future given the potential for significant improvements in operating performance as business travel begins to recover in a more meaningful way the growth that we expect from the Austin acquisitions in the Warner Center development, and our ability to pursue additional growth opportunities given our strong balance sheet and significant liquidity.

While we're not going to provide guidance at this time for those of you building your own projections for Q4, and 2022 I want to remind you that during the construction of the home to Warner Center, we've been capitalizing the interest costs associated with the $70 million development and once that opens in December we will begin recognizing this interest expense will be approximately 400.

$1000 per month. So for example in Q4, we expect interest expense to be approximately $2 million per month in October and November and then increase to approximately $2 4 million per month starting in December.

This concludes my portion of the call operator, please open the line for questions.

Thank you, ladies and gentlemen, if you'd like to ask a question. Please press star one on your telephone keypad confirmation tone will indicate your line is in the question queue labor.

Start to feel like there will be a question from the queue.

The participants using speaker equipment, it may be necessary to pick up your handset before pressing the star.

Please call for questions.

Our first question comes from the line of child Labor with Zero Securities. Please proceed with your question.

Good morning, Kyle on for Brian.

I was curious what kind of new development you are seeing in your key markets.

And are you seeing any opportunities to enter contracts to buy from developers or are you still mostly focused on acquiring existing hotels.

Yes. This is Dennis.

And I think we are.

We certainly have a lot of discussions with developers and we haven't historically been takeout partners with those but certainly they are in our network of people that we reach out to as far as other new supply in our markets there's really.

Very little of that is currently under construction.

That.

Really bothers us.

If you look at our brand new home two suites in woodland Hills, it's opening up.

Really there has been no new construction there for a long time, maybe there is another hotel that starts in the next couple of years.

So we're pretty excited about that opportunity, but in general we experienced a significant amount of directly competitive new supply kind of in that 2016 to 2019 timeframe, where I think for us new supply was.

Anywhere from kind of 5% to 9% or 10% of our of our comp set so.

A lot of that is behind us.

Okay. That's helpful. Thank you and then last for me I'm, just curious how you're thinking about funding future acquisitions.

Okay.

We have a ton of availability under our line of credit now so I think in the near term that that's what we would use.

Okay. Thanks, that's all from me.

Thanks.

Thank you. Our next question comes from the line of Tyler <unk> with Janney. Please proceed with your question.

Good morning, Thanks for taking my questions.

First one for me.

Wanted to dive in a little bit more on the.

Performance in the portfolio October picked up a few points of occupancy compared with September.

We've got the seasonality impact there or perhaps the business or corporate travel.

A little bit better October compared with September.

Yes.

Tyler This is Dennis yes business travel I think as we have seen kind of going from 65% of midweek to almost 70% in the third quarter.

Stayed at a pretty healthy level about that same level, 70% ish in October so it still is kind of maintaining and out there, but yes for us once we get past October it does get a little bit seasonal in October you also have those northeastern hotels.

Mid Atlantic hotels.

And to do very well with respect to kind of the leaf peepers and those types of getting in from a leisure travel perspective. So.

I think for US October was similar in terms of business travel.

But the leisure was just ticked up a little bit with some of that business. So I will say the one other thing to add to kind of October and even.

If you look at November and I spoke to in my prepared comments, which is the Dallas Convention Center at the San Diego Convention Center has seen and is seeing a bit of smaller conventions comic con is not going to be anywhere near what it was in prior years prior to the pandemic, but they are still at least planning to have.

Some smaller version of it in San Diego, So theres, a little bit here and there that the incremental but we will we do expect to November and December to be to be seasonally lower so.

Okay.

<unk>.

And then also wondering.

If you can expand on the margin performance in the quarter really impressive, especially given youre, adding back some some services. Many of these historic Revpar below 2019 levels. So if you could just unpack for us.

Help us understand a little bit more what was driving the rooms for our margin performance in the quarter that would be helpful.

Yes, I mean, I think for us the biggest cost driver is always going to be labor.

And as we mentioned in our prepared comments one thing that that island has done a lot of work on and continues to do as they have expanded really over the last two years or three years. It's internal staffing department that really is looking day to day and expenses efficiency ratios.

And really staying in very regular daily communication with Gms across the country to make sure that everybody's on the same page with respect to what's on the books, what's coming or what's not coming and trying to adjust that.

Adjust that productivity, so as we talked about what their cost per occupied room still a good 15 or 16% below third quarter 2019 levels and thats with.

Our wage per hour that certainly higher than what it was two years ago. So.

I think it's really just analyzing those expenses day to day on a housekeeping basis for the most part so.

Okay. Okay. That's helpful and then.

Im also interested I think you said in the prepared remarks.

Austin Hotel, 90% occupancy October so I just wanted to make sure that I heard that correctly and maybe you could talk a little bit more about back with that 90% number that's obviously really really exceptional.

Yes, I mean listen, it's an especially for our hotel the town place, which is really only three months old or now four months old but.

Think listen in Austin.

And the reason why we like those two acquisitions at the domain, which is it has a very good mix of not only significant office component.

With corporate offices, there some of which haven't even fully reopened yet.

But it also has the demand for weekend events. So whether it was September October in October you had a really strong formula one weekend.

That was basically a citywide sellout.

Even though the races.

Almost 45 minutes away from the hotel, but given its proximity to.

To that domain area. It attracts a lot of interest from a traveler, who can walk to whatever they want to do.

We also have on weekends its proximity to the.

The brand New Soccer Stadium.

Which again for whether it was a USA World Cup qualifying.

<unk> either during the week or the weekend again, it just provides kind of a really diverse set of.

Events outside of just the business travel that allows us to do really well during the week and the weekend. So.

We're just very pleased with that and yes, we spoke correctly that it was 80% occupancy in September and 90% in October so.

Okay very good.

Last question. Please in terms of the <unk>.

Warner Center opening in the fourth quarter here.

Just help us think about the ramp to stabilization at that property.

The circumstances here, but just kind of curious how quickly you think that could ramp up.

The equalization.

Yes, I mean listen I think we are really encouraged as Jeff talked about.

The stars are showing.

Smith travel reports are showing and have shown in the few months, leading up to where we are today.

Market occupancy market Occupancies in the 80 to over 80% range. So that's really encouraging.

I think we've had a lot of we have our full sales team in GM in place. There. So we've got a lot of inbound interest in our hotel moving forward I think if you look at kind of a ramp.

We certainly believe it's we're going to work.

We're going to be able to accelerate from a 12 to 18 month timeframe to probably.

I'd like to say in six months will be fully ramped there that could be a bit aggressive, but listen as we've seen with the market is pretty strong so I think.

We're certainly not ready to give any guidance yet on what that looks like in terms of rates and occupancies, but I think we're pretty.

Excited about what that hotel is going to do and I'm sure. When we talk again in February and the hotel has been opened at least for six or eight weeks couple of months that.

We will have some much better thoughts on what that looks like in the in the near term.

Okay.

For me I appreciate it thank you.

Tyler.

Thank you ladies and gentlemen at this time there are no further questions I would like to turn the floor back to management for closing comments.

While this is Jeff again, thank you all for attending and as we've said a few times there is some specific unique characteristics to Chatham.

I think that's got to give us some further.

Upside here, particularly as we move through 2022.

Combining our I think unusual prospects for internal growth.

And the external growth that we've already put on the table with more to come. Thank you all look forward to speaking with you soon.

Thank you ladies and gentlemen. This concludes today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation.

Q3 2021 Chatham Lodging Trust Earnings Call

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