Q4 2021 Sonder Holdings Inc Earnings Call
Thank you for standing by and welcome to Saunders fourth quarter and full year 2021 financial results conference call.
At this time all participants are in a listen only mode.
After the speaker presentation, there will be a question and answer session.
I ask a question during the session you will need to press star one on your telephone. Please be advised that todays call may be recorded excuse you require any further assistance. Please press star zero I would now like to hand, the call over to Nicholas Cmos VP of strategic finance and investment analysis.
Thank you operator.
Morning, Ladies and gentlemen, thank you for joining us to discuss <unk> fourth quarter and full year 2021 financial results.
Joining me on the call today are Francis Davidson co founder and Chief Executive Officer, and Sanjay banker, President and Chief Financial Officer.
Full details of our results and additional management commentary are available in our fourth quarter and full year 2021 shareholder letter, which can be found on the Investor Relations section of our website at investors got Fonder dotcom.
Before we start I'd like to remind you that the following discussion and the Q&A session. At the end contained forward looking statements, including but not limited to saundra as market opportunities and future financial and operating results.
Risks and uncertainties that may cause actual results to differ materially from those discussed here.
Additional information about the factors that could cause our actual results to differ from those expressed or implied in any forward looking statements can be found in saunders periodic and other SEC filings.
Forward looking statements and discussion of risks in this conference call, including responses to your questions.
Based on current expectations as of today, and Saundra assumes no obligation to update or revise them, whether as a result of new developments or otherwise except as required by law.
The following discussion contains non-GAAP financial measures for a reconciliation of these non-GAAP financial measures to the most directly comparable financial measure calculated and presented in accordance with GAAP. Please see our shareholder letter posted to our Investor Relations website.
Now I'll turn the call over to Francis Davidson Saunders co founder and CEO .
Thanks, Nick Good afternoon, everyone and thank you for joining us today for our inaugural earnings call I'm very pleased to be reporting on our strong fourth quarter and full year 2021 results. We ended 2021 with great momentum and became a NASDAQ listed company in January we're really excited about reaching this milestone and entering 2022 with a strong.
Balance sheet that will allow us to lean into the travel recovery and capitalize on the opportunities it opens up for our disruptive model.
Despite another very challenging year for the hospitality sector, we accelerated year over year revenue growth three quarters in a row from 151% in Q2, 255% in Q3, and we finished the year with Q4 revenues growing 204% versus the prior year.
In addition, our free cash flow burn improved meaningfully year over year from 173% of revenue in Q4 2022, 61% of revenue in Q4 2021, we're encouraged by the progress we've made here as we continue on our path to profitability.
Our mission is to instill a revolution in the world of hospitality travelers in particular millennials and Gen Z Love our tech enabled designed for accommodations and high quality consistent guest experience, we believe that a better more modern and more affordable guest experience paired with efficient operations and powered by proprietary.
<unk>.
Is the way to win in this nearly one trillion dollar industry.
Throughout 2021, we pursued our ambitious growth strategy, while focusing on five key levers, which we believe will drive long term value for our shareholders.
Our first lever is delivering an incredible guest experience we have a relentless focus on improving the guest experience through inspiring design modern service and consistent quality technology enabled us to consistently deliver an exceptional guest experience even as we rapidly scale our global footprint.
We made great strides in 2021, including Rolling out new features and they stand or apps, such as improved messaging to enable seamless communication with our guests.
As well as and automated in App early check in and late checkout request.
We also successfully rolled out metrics for internally tracking guest satisfaction and we're encouraged by early results.
One metric we track is the proxy for the strength of our brand and guest loyalty as our direct bookings I'm, sorry, dot com, despite minimal marketing spend sort of dot com continues to be our largest single channel for bookings and accounted for 44% of total bookings in Q4, and 45% of total bookings in 2021.
We believe delivering a better guest experience will translate to more direct bookings and increased customer loyalty, resulting in lower customer acquisition costs higher lifetime value improved revpar and higher cash flows to saundra.
Our second lever is securing high quality properties at attractive economics, one of the major drivers of our top line growth is our ability to source sign an open high quality apartments, and hotels and desirable locations, but superior unit economics.
In 2021, we added over 70, new properties to our lives unit portfolio across more than 25 U S and international markets and top tourist destinations, including New York City, Nashville, Miami, Dubai, Mexico City.
Our total portfolio grew by over 6000 units and we ended the year with 18100 unit.
Representing 51% year over year growth in our pipeline of prospective deals also continues to improve and grow as a result of our unique value proposition to real estate owners, who partner with us to better monetize their assets.
Through 2021, we've scaled the size of our real estate team and have put new processes and systems in place to enable us to capture supply an even faster clip in 2022 and beyond.
Our third lever is our capacity to generate strong revpar.
In the near term, our Revpar growth will benefit from travel market recovery tailwind as well as our own initiatives to enhance guest demand generation and monetization.
These pursuits include innovative revenue management tactics improve distribution capabilities expansion into new demand pools, like corporate travel and ciliary revenue opportunities such as monetizing any unit upgrades and Interstate cleanings.
In the fourth quarter, we achieved revpar growth of 92% year over year to $142 per night.
This was a major milestone as we surpassed pre pandemic revpar levels for the first time since the onset of the pandemic.
Even more exciting is the runway still ahead of us on revpar growth given broader market still lags pre pandemic levels. According to.
One of our key performance benchmarks track by just travel research in 2021 U S. Upper upscale hotels recovered only 58% of 2019 Revpar.
Meanwhile, we reach 82% of our 2019 Revpar in 2021, we attribute this outperformance to our unique value proposition and the success of our Revpar improvement initiatives combined with the stronger market dynamics for leisure travel.
Fortunately, we expect the overall market recovery to fuel our revpar growth as STR project comparable hotels to grow revpar by 56% in 2022.
Despite strong sequential quarter over quarter momentum in travel demand. During 2021, we acknowledged that the ever changing macro environment has the potential to make the overall travel recovery and our corresponding growth trajectory uneven for example, we experienced dampening effects from omicron beginning in late November 2021, and into Q1 of this year more recently, however, we did incur.
<unk> by a resurgence of pre omicron booking patterns.
Okay.
Our fourth lever is to continue driving operating efficiencies. Our core philosophy has always been to use technology to cut inefficiencies from our operations. The sufficiency mindset and allows us to increase service levels, which boost revpar or directly reduce our cost structure. In 2021, we introduced several initiatives with the goal of improving property level cost efficiency for.
Example, we piloted a re architecture of our back of house operations to improve our room turnover productivity. We also expanded our rollout of internet connected thermostats and we further shifted various guest support functions to lower cost geographies.
The rollout of additional self service features on our mobile App has also increased app adoption and utilization by stronger gap, which has improved our service efficiencies are.
Fifth and final lever is our people and culture, we firmly believe that the people who work at Thunder and the culture that defines how we work set the tone for our innovation and execution.
The onset of the pandemic tested our resolve but our team bounced back impressively in 2021, our frontline teams are key to delivering exceptional guest experiences around the world.
And we're committed to initiatives that support engagement and retention among those teams. Our most recent internal survey has revealed a highly engaged team ready to meet historic pent up demand for a successful 2022.
One notable change to our human capital strategy in 2021 was our formal move to what we call. Our work choice model. It means that we allow our non frontline employees to work from anywhere they choose at the end of the day, we care about results and trust that our team will do what's best for them and in turn bring their best selves to work that saundra.
Plus allows their team the opportunity to explore additional thunder markets and work directly from our statements a trend of nomadic work, we're very excited about our uniquely suited to serve.
We believe our work choice model also broadens our talent pool is recruiting is no longer geographically constrained, which we believe will enable us to better attract and retain employees.
In addition to executing against our five key levers. We also took important steps in 2021 to strengthen our governance, we appointed Janice theory, formerly imagining director and Western region had a bank of America Merrill Lynch to our board as Audit Committee chair.
And we also named held up her as Alvarado global CEO of the hotels and hospitality group of J O L to our board.
Both of these women are phenomenal leaders, who bring highly relevant industry and public company experience to our business.
We're really proud of what we accomplished in 2021, we entered 2022 with a great guest experience supply and growth engine humming demand generation capabilities that consistently beat our benchmarks technology that allows us to operate more efficiently and engaged team ready to make this year, a knockout success and with that I will turn the call over to our president and CFO Sanjay banker.
To provide you with further details on our recent financial performance and an update on our growth outlook.
Thank you Frank I'd also like to welcome all of you and I look forward to working with you know Andre as a public company.
We're so proud of our record results for the fourth quarter and full year 2021.
All while working tirelessly to enter the public market, which took place on January 19th this.
This was both an important milestone in Saundra's journey and the major funding event in which we secured approximately $400 million in fresh capital to strengthen our balance sheet, enabling us to pursue our ambitious plans to revolutionize hospitality.
Turning to our fourth quarter and full year 2021 results, our key operating metrics, including slide unit's total portfolio Bookable nights occupied Mike and Revpar.
Improved meaningfully year over year and versus prior quarters.
As a testament to our differentiated offering.
Terry technology and operational excellence.
In the fourth quarter 2021, we delivered our third consecutive record revenue quarter with $87 million in total revenue, representing an increase of 204% year over year.
For the full year 2021.
Revenues more than doubled versus the prior year to $233 million and increased 63% versus 2019.
Our growth was fueled by the ongoing rebound in global leisure travel strong life unit growth driving a large increase in bookable nights and early traction from various revpar improvement initiatives, such as our mid 2021 corporate travel watch.
In addition, alright, adjusted EBITA margin improved year over year from the 207% loss in Q4 2022, 67% loss in Q4 of 2021.
Yeah.
On the supply side, our year end 2021 live units and total portfolio grew year over year by 69% and 51% respectively.
We consider total portfolio growth to be our most important supply metric as it provides the best forward looking view of contracted future supply.
Our total portfolio grew to 18100 units as of December 31, which.
Which we believe will drive strong light unit growth over the next few years.
In addition, we ended 2021 with over 7600 live units, which our guests can and increasingly do book directly on the <unk> mobile app or website or on our OTT partners sites.
As a result of a lot of unit growth. Our Q4 2021, Bookable nights increased by 59% year over year and contributed to over 2 million Bookable nights in 2021.
On the demand side, we saw strong occupancy rates at 69% in Q4, and 68% for full year 2021, representing a 300 basis point improvement from full year 2020.
In addition, our Q4 average daily rates or <unk> or $206 and eight 9% increase versus the prior year.
Occupancy rate in Edr's led.
It led to Revpar of $142 in Q4, 2021, representing an increase of 92% year over year.
Importantly, Q4, Revpar reached 112% of our Q4 2019 levels and was fueled by market recovery, our outperformance versus the market and the traction we're seeing with a revpar improvement initiative.
Lastly, our full year 2021, revpar increased 55% year over year to $115.
As Francis mentioned, we did see some measurable omnicom impact very late last year.
And into Q1 of this year.
The impact upon the crime on our business were greater in geographies affected by new travel restrictions.
Testing, but the inability to travel played a larger role in consumers unwillingness to travel.
Despite the surge in nonrecurring cases in December pent up travel demand was evident in our new year's Eve performance well.
We exceeded 2019 levels in both ADR and Revpar and nearly doubled the ADR and Revpar, we delivered on the same day in 2020.
We maintained a five night average length of stay in the fourth quarter, which was in line with 2019 in.
In addition, our 30 day plus extended stay bookings helped us offset typical seasonality and slower leisure travel recovery in markets like New York, Dubai, London, Minneapolis, Chicago, Boston and Houston.
In terms of profitability.
Our fourth quarter property level loss improved by $13 million versus the prior year to a loss of $6 million.
Fourth quarter, adjusted EBITDA loss improved by approximately $1 million year over year to a loss of $58 million.
In addition, our free cash flow burn as a percentage of revenue improved meaningfully year over year from 173% in Q4, 2020% to 61% in Q4 2021.
These improvements were primarily fueled by strong net par recovery and revenue growth.
Bind with improved operational efficiency.
For full year 2021 property level loss improved by 32% to a loss of $42 million driven primarily by Revpar improvement.
Revpar for full year, 2021 was $115, 55% improvement versus 2020, there's still meaningfully below pre pandemic levels are.
Our 2021 adjusted EBITDA loss was it.
A loss of $217 million.
Which represented a 3% decline compared to 2020, despite an increase in pre opening costs associated with the rapid expansion of her life unit portfolio additional guest experience investments and the incremental costs required to operate as a public company.
Okay.
Total cost and expenses increased by 64% year over year to $155 million in Q4, 2021 inclusive of $5 $1 million of stock based compensation expense in the quarter.
Total costs and expenses were driven by additional investments in research and development, primarily focused on enhancing the sander app for our guests additional investments in sales and marketing as we build out our corporate travel capabilities G&A expenses related to our ongoing needs as a public company and operations costs related to the rapid expansion of our lives.
Yes.
Moreover, our global head count increased 60% year over year to almost 600 employees to support the rapid growth of our light duty portfolio and prepare for our expected growth in 2022 and beyond.
As of December 31, 2021, we had $70 million of cash and restricted cash subsequent to year end in conjunction with taking the company public in January we raised approximately $400 million in net proceeds.
Our current balance sheet gives us the confidence to continue to invest in improving the guest experience through technology, while growing prudently with the goal of generating consistently high free cash flow for our shareholders.
Turning to our outlook, we entered this year with strong momentum and we are optimistic about our trajectory and the large market opportunity ahead of us.
In the first quarter of 2022, we anticipate revenue of more than $75 million, representing 138% year over year growth versus 32 million in the first quarter of 2021.
Primarily due to growth in Bookable night, and live eat it as well as improved revpar.
In terms of Revpar seasonality. The first quarter is typically our weakest due to less leisure travel at the start of the year. Moreover, we expect the first quarter of this year to be further impacted by a temporary slowdown in bookings due to.
Omicron related concerns and travel restrictions.
Specifically, we began to experience some impact from Amazon in late November 2021, where we saw a slowdown in forward bookings.
The impact on revenue. However, it wasn't felt until January and February which are typically our weakest seasonal model.
As a result.
We expect Q1 2022 revpar to decline versus Q4 2021.
Phil meaningfully improved the year over year versus Q1 2021.
We also therefore expect adjusted EBITDA losses to increase in Q1, two loss of approximately $90 million as Revpar remains in recovery mode and as we continue to rapidly expand our liability portfolio and scaling G&A and operations functions to support our expected portfolio growth this year.
This represents an expected improvement in our adjusted EBITDA loss margin from 167% in Q1, 2021% to 120% in Q1 2022.
As a reminder, our presentation of adjusted EBITDA straight lining the upfront benefits. We received in the form of initial rent abatement periods and owner funded capex allowances over the life of the lease in accordance with GAAP.
These benefits can be substantial and resulted in landlord payments lower than GAAP rents during periods of why do you think growth.
Therefore, as a management team we take into account the rent abatement and owner funded capex allowance the period, when we actually receive the benefit when calculating an internal measure of adjusted EBITDA as we believe it presents a closer approximation of cash from operations.
These factors are accounted for by adding back on GAAP rent to landlord payments adjustment.
And if any allowance realized adjustments.
We expect a positive benefit from these adjustments in the first quarter of 2022.
Turning to our full year 2022 outlook. We are encouraged by the positive trends we saw over the last several quarters, specifically the rebound of leisure travel and its impact on ADR and Revpar.
However, forecasting several quarters out remains challenging given continued COVID-19 related uncertainties.
We are cautiously optimistic that favorable macro trends will continue and combined with all of us.
<unk> on growth in my view and it's applicable night, we expect to increase full year revenue by between 100% to 110% as compared to full year 2021.
In terms of adjusted EBITDA, we are implementing a number of new revenue and cost improvement initiatives in 2022, but the magnitude of impact of these efforts is uncertain and will in part be driven by the pace of Covid recovery.
It's therefore challenging to forecast full year 2022, adjusted EBITDA with sufficient precision.
That said, we expect full year 2022, adjusted EBITDA losses to be lower than 2021 on a percentage of revenue basis, the higher on a dollar basis.
We expect both cost of revenue and property level costs will be meaningfully higher versus 2021 on a dollar basis.
The increase roughly in line with our expected unit growth as cost of revenues, mainly comprised of GAAP rent to landlords, which is directly related to increases in my view that's.
Finally, we expect our other operating expenses, which include Preopening costs related to opening new units to be meaningfully lower in 2022 on a percentage of revenue basis, albeit higher on a dollar basis.
More specifically.
Preopening costs are expected to grow generally in line with increases in units, but we expect to benefit from some significant operating leverage in both G&A and operations expenses, which we expect will increase at a meaningfully slower pace than our expected revenue increase as we benefit from economies of scale.
I'll now pass the mic back to France, before we open the call to questions.
Thank you Sanjay before concluding my prepared remarks I wanted to thank all our employees across the globe, who work tirelessly every single day to ensure seamless for our guests across all of our properties.
I'd also like to thank our real estate partners everywhere for their trust and confidence in our business as well as both historic and new investors, who partner with us to support our long term growth as a public company.
Our mission to revolutionize hospitality is ambitious but we are strongly positioned to continue innovating by driving amazing guest experiences through tech enabled basically been on fire.
The future of hospitality and we have every confidence in our ability to drive sustainable long term value for our shareholders as we enter our next phase of growth. Thank.
Thank you again for joining us this afternoon with that we look forward to answering your questions.
As a reminder to ask a question you will need to press star one on your telephone to withdraw your question press the pound key please standby, while we compile the Q&A roster.
Our first question comes from the line of Jed Kelly of Oppenheimer. Your line is open.
Okay, great great. Thanks for taking my question and congrats on becoming a public company.
Your first earnings call.
So you spoke you spoke earlier on the calls to your occupancy and Revpar outperformance through the pandemic versus peers, noting that this was driven largely by internal initiatives can you speak to the key initiatives implemented and how this growth in revpar flows through your property level margins as well.
Yes, absolutely. Thanks, so much for your question Jed Revpar is probably the most important variable to what that when it comes to the profit potential of this business and as you mentioned, we've done a lot over the last couple of years to outperform the market I think the first thing I want to highlight is our extended stay campaign. So early in the pandemic. This is something that's actually.
Really amazing on the part of our teams.
In mid March we launched sales initiatives and a landing page and await methodology for us to be able to generate strong.
<unk> stay demand given that there was substantially less back in March 'twenty 'twenty.
Short term demand in the market and so we thought Hey, 14 day plus days.
It's going to be a source of demand for us to fill our properties and what we didn't realize at the time that that initiative is very successful allowed us to get back to pre pandemic levels of occupancy, but really the realization came afterwards that this is a really important capability for the business and something that much goes much beyond.
A moment of difficulty in the industry, but something that could bolster our demand generation capabilities, even in a fully recover department. So corporate housing as an example or internships.
Relocations those are all sources of demand that are it did have to what we were capable of doing prior to dependent so extended stay that first piece, that's been really crucial for our success.
The second piece is revenue management, so we built a really impressive technology.
In order to be able to Christ algorithmic, New York Algorithmically, our properties and maximize the yield that we can generate off of these available units. So of course. This is pricing elasticity tests that we've run to understand this trade off between occupancy and price and seeing how we can get a disproportionate benefit with one of the two.
There's other things that we've done on revenue management, such as rate plan non.
Non refundable rates fully flexible fully refundable rates, a little bit more subtlety when it comes to pricing differentially by length of stay so a series of initiatives there that we've done that really.
Make us feel great about the innovation.
That has occurred over last couple of years, even though we see quite a lot of.
Ideas that could be bear fruit in the coming years as well.
First question is.
I'm sorry, that's the third piece I want to mention is the corporate travel demand. So we've launched in mid 2021 like Sanjay mentioned earlier.
<unk>.
Corporate travel program with 100 partners, we relied now and all the GDS system and this is all incremental revenue.
More eyes looking at our supply if more people invited to the auction so to speak and we think there's going to be a lot of change in the corporate travel sector. Yes.
Going forward post pandemic and we're uniquely positioned to answer some of these changes and do you really nimble and adapt ourselves, particularly the workforce that isn't tethered to an office folks that can work from anywhere there's going to be a lot of important changes and we're ready to take advantage of them.
As the market recovers.
Well I think last thing I want to mention is the monetization of add ons. So those are things like monetize in early <unk> or late checkouts mid.
Mid state cleanings or upgrades things that require very little if no expense. It also service, but but accrue to the top line revenue that we can generate first day, while enhancing the quality of the guest experience.
For the second part of your question, though on how this ties into the property level.
Margins I'll hand, it over to Sanjay to kind of break that down.
Thanks, Francis and thanks for the question.
So, but the second part of the question about how revpar filters down to PLT margins.
As pointed out Revpar is obviously the key for us to get to our long term full potential PLP margins and within Revpar market recovery is the biggest driver for which we're cautiously optimistic given the expected travel rebound in 2022, but there are many ways that we can outperform market Revpar is France has outlined and as we've also demonstrated over there.
Last several quarters.
For the past few quarters, most of our Revpar growth has come through <unk> and the benefit there obviously is it mostly dropped through straight through the PLP.
But theres also occupancy growth, which drops through net margin on direct costs.
Given this dynamic we evaluate all of our perspective revpar enhancing initiatives based on their potential profitability impact and not just their revpar impact and so all revpar levers are evaluated based on the impact that can have on our margins.
Also worth reiterating what I mentioned, a few minutes ago that our PLP margin is shown on a GAAP basis, which requires us to straight line the upfront benefits of rent abatements on our new leases as well as straight line the impact of future future annual rent Escalations as a result, our cash rents are much lower and a much more accurate.
A reflection of a PLP would add back the adjustment for GAAP to cash landlord payments.
Got it.
Thanks, and then just can you talk about one how our March ramp how is March revpar trending.
Maybe relative to the <unk> as you kind of and we've kind of gotten past. This all mccraw wave and then.
Can you talk about your property power pipeline outlook for 2022 and how.
How we can kind of tie it back to Todd.
You know how you how you were thinking about it maybe back in November .
Yes, absolutely Jeff Thanks for the follow up so Q O Q1, ADR, we see as being down quarter over quarter.
But up year over year meaningfully right and a quarter over quarter dynamic is explained by Q1 being just generally a weaker seasonal quarter for us.
Secondly, the effective on a crime.
We mentioned, where we saw booking patterns start to slow down end of November mainly hitting the P&L and stays that occur in January and February though like like you mentioned that the March March bookings.
And are seeing our strongest surgeons right and so the omicron wave was the case counts increased really rapidly, but decrease just as rapidly and travel behavior booking behavior on our platform and our channels has the husband make that trend.
On the second question on the property pipeline.
Yes, we saw a really strong expansion of our pipeline. This is the reason why we've managed to grow our portfolio. Our total contracted units by such a meaningful amount in 2021, and so there's a few things that result.
And the growth of our pipeline first is what we call the flywheel effect for the on the supply side right. The more properties, we have to show for the more properties. We have to tour. The case studies that the financial improvements that guest experience improvement that you're able to deliver for these assets. The easier. It is to then go across the street and convince another property owner to work with us.
The stronger of course, our balance sheet is and the more into the recovery. We are strongest financial performance of the business. The larger the set of guests that we have.
The easier it is for us to make the case that working with Saundra has the best highest and best use of that asset.
And then the second driver is really just a straightforward is growing our real estate team, having more boots on the ground. It turns out that there's a lot of real estate a lot more than we can so we can handle and so part of generating supply growth for us in 2021 had been adding adding more folks to our real estate team and ensuring that they remain productive and.
And so these two things combined really gives us a lot of optimism when it comes to our capacity to keep adding high quality supply to our portfolio.
Got it and then I guess just one more.
Any change I mean, I saw your guidance for I guess, a 100, 110% revenue growth for 2022.
Any change to the five year outlook you provided at your at your Investor Day back in the fall or how we should be thinking about it.
Yes, thanks for that question.
How can we provided 2022.
Outlook in terms of longer term outlook, I'd say, we remain confident and optimistic.
Market recovery and all the levers that we're pulling to do better than the market. Both this year and beyond.
I'll add that our book of signed not yet live properties and our deep pipeline of prospective properties that will deliver in 2023 and beyond make us very excited about the future growth prospects, but of course, we're not going to provide outlook for 2023 year future years as yet.
Thank you.
Thank you. Our next question comes from Andrew Boone of JMP Securities. Your line is open.
Hi, good afternoon, guys and thanks for taking my questions.
I want to go back to the 2022 revenue Guide you guys provided a really helpful bridge to investors during the November update of contracted units new units and then revpar initiatives to get 2022 revenue.
Can you talk about just what changed between November and now is that just new unit slipping in terms of units coming online.
Is there any change in the pipeline or as Revpar, just weaker because of omicron and it's just conservatism and just help us with that rich. Thank you. So much yeah. Thanks for your question Andrew.
Yes.
The bridge is directionally similar the majority of the changes due to.
Timing of delivery.
Expected forthcoming buildings, plus the impact in Q1 of <unk> and <unk>.
And then it will take time to recover back to the expected revpar trajectory that we had planned to be on it. So it's a combination of those two factors on the former.
It's really a timing issue, we still have those signed properties that will go live, but the schedule with which they go live you've always partly due to.
The well documented supply chain and labor shortage issues that have led to building deliveries being slowed but we still expect those buildings to go live.
The changes in those calendars and schedules.
Drive changes to the volume forecast.
Nonetheless, I would say, we're still I'd underscore that we are still incredibly excited about a 100% plus year on year revenue growth, which is a remarkable annual revenue growth target and one that we're very.
Proud of all of our teams to help deliver.
That makes sense and then let me try it a different kind of macro question that's related.
Given the very strong rental market within apartments.
As well as a rising interest rate environment, how do we think about those things impacting developers and their ability to work with Honda.
Yeah. Thanks, so much for instance here jumping in.
The value proposition.
Still holds right across the board for both or the independent hotel owners that used to work with US and also the property developers that are building new buildings, specifically for saundra and what's really important to understand here is how they make the economic calculation of whether it's worth it to work with us and.
The the benefit of our of our model is really our capacity to operate at a meaningfully lower cost structure and deliver really strong net operating income at the asset level until the technology that we felt.
Manual labor that we've that we've managed to streamline.
And the fact that this doesn't come at the compromise of our capacity to generate really strong revenue.
That kind of combination makes it extremely attractive for an owner to work with US right. It's important to understand as well that the market is moving in lock step right in market square.
There is strong rent growth. There was also really impressive revpar right and so.
The question for US is are we capable of capturing these revpar is that demand comes back and I think we've shown that we've been able to outperform even the market.
So as you see this has translated in really strong.
Total portfolio growth, even as those dynamics that you mentioned have been at play for the last several months.
Great. Thanks, so much guys.
Thank you. Our next question comes from Stephen Grambling of Goldman Sachs. Your question. Please.
Hi, Thanks for taking the questions on the growth in the contracted rooms, how did the markets and underwritten revpar compared to the core as we think about the mix impact in 2022.
Okay.
Oh, sorry, Steven Thanks. Thanks, So much for your question, maybe I'll ask you to repeat the question on the on the mix in the core I just want to make sure that we touched on the right points here, yes, as we think about the contracted rooms are those generally in markets that are similar to the core and so revpar should be comparable or is that could there be a tailwind or a headwind from revpar for what's being signed and maybe.
The related follow up how did these deals compare contrast, with your existing as we think about the structure of the contracts, specifically revpar being as abatements versus history.
Capex nuances.
No. That's a great question and thank you for that Steven and so on the first point about mix effects. There are a couple of different mix effects and you highlight one of them, which is what we'll call market mix generally speaking while market mix quarter to quarter. It can vary generally speaking.
The market mix is moving in our favor, meaning we are increasingly getting to better higher revpar markets and it's a concerted strategy as well as as we become a more sophisticated counterparty and better capitalized counterparty. We're also more effective in landing and closing deals and those what we call internally, we call our <unk> markets and so we think market.
Mix has got a really attractive tailwind as we move towards markets also as we increase the mix towards Europe , which is not as big as our North American portfolio that is also a tailwind to <unk>.
A market mix in terms of weighted average revpar is.
The other driver of market mixes the balancing effect of.
Multifamily versus hotels and as we balanced towards.
Hotels, while they tend to have.
For like lower Revpar than our comparable multifamily unit. They tend to also be in the better markets the higher revpar markets and so in that sense.
I'd say its a push.
And then the last drivers building quality.
And that is every year getting better and better and so we're signing better quality deals, which can generate a higher revpar and so I'd say for all three of those reasons our mix is improving.
Over time, it should be a tailwind to revpar.
The second part of your question is the deal quality, we're seeing.
Our track record as Francis mentioned earlier more ability to show proven case studies to our perspective.
Repartee owner partners.
And that's helping us get better deals.
This transaction itself has allowed us to create more visibility transparency confidence in the company, which allows us to get better deals and sale period to period quarter to quarter sort of the market <unk> emphasize different things, but we're seeing a broad tailwind and thats, what France is described as a flywheel effect.
Yes.
And maybe one other clarification on the.
Delays that youre seeing in terms of the.
Contracted rooms or contracted units is that primarily because of newbuild or is there also just procurement issues of game after after knee or other things that are impacting that.
Yes, that's a good question I.
I'd say, its probably spectrum, but that spectrum, obviously skews more towards the newbuild, but as it happens.
Heavy renovations.
Thanks for the heavy renovation and a new builds can be maybe a distinction without difference in terms of this point.
And then Les renovation, that's much less of an issue and there are definitely assets that we take over more or less as is we keep our stock of <unk>.
Supplied and so that shouldnt be the main delay it's much more around construction and building materials and it would be around if any.
Got it thank you.
Thank you for the question.
Thank you at this time I would like to turn the call back over to Francis Davidson for closing remarks, Sir.
Yes.
Well, thanks, so much everyone for tuning in today on our inaugural earnings call as a public company. So really appreciate the engagement. The question I just want to close off with a huge. Thank you to our team that has worked tirelessly to make this business a success to date and couldn't be happier to be to be working alongside you to revolutionize hospitality. So thanks, so much Robert.
Who called in and for all of our employees for making sound great.
This concludes today's conference call. Thank you for participating you may.
Now disconnect.
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