Q2 2022 Chatham Lodging Trust Earnings Call
Greetings and welcome to the Chatham lodging Trust's second quarter 2022 financial results Conference call.
At this time, all participants are in listen only mode.
A question and answer session will follow the formal presentation.
What should require operator assistance during the conference. Please press star zero on your telephone keypad.
As a reminder, this conference is being recorded.
I would like to turn the conference over to your host Patrick Daily Executive Vice President of D. G Public Relations L. L C.
Thank you Joe Good morning, everyone and welcome to the Chatham lodging Trust's second quarter 2022 results conference call.
Note that many of our comments today are considered forward looking statements as defined by federal Securities laws.
Statements that are subject to risks and uncertainties right known and unknown.
As described in our most recent Form 10-K and other S E T filings.
All information in this call is as of August 3rd 2022, unless otherwise noted.
The 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 S E C filings and earnings release.
Which contain reconciliations to non-GAAP financial measures referenced on this call on our website at Chatham lodging Trust's dotcom.
Now to provide you with some insight into Chatham 2022 second quarter, Brazil.
Allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer, Dennis Craven Executive Vice President and Chief operating Officer, and Jeremy Wegner, Senior Vice President and Chief Financial Officer.
Turn the session over to Jeff Fisher, Jeff.
Thanks, Patrick I appreciate everyone. Joining us this morning for our call I Hope all of you have had a chance to take a look at our earnings release. It certainly was a great quarter for us on many fronts.
First Revpar has really jumped in recent months second quarter Revpar was up 50% over last year in June Revpar of $158 exceeded June 2019, Revpar of $156. The first month since the start of the pandemic, where revpar exceeded 2019 levels.
June Revpar was up a strong 19% over Mays, driven by a combination of incremental leisure travel and a more meaningful return of the business traveler, especially in our five hotels in the tech reliant markets of Silicon Valley in Bellevue, Washington.
Second quarter operating margins of 51% I think a great. Overall result were up 60 basis points over the 2019 second quarter, which is especially impressive when you consider that revpar of $138 was still $8 below <unk>.
2019 second quarter.
Historically, we've produced the highest operating margins of all lodging Reits and we are well on our way to producing those again the second quarter operating margins would be our third highest second quarter margin since our IPO 12 years ago, We know, there's even more margin upside in the portfolio, particularly.
Really as ADR continues to increase and its encouraging that we are within earshot of an all time high set seven years ago, given all the incremental costs, we absorb over the years from a labor and benefits perspective.
As a result of the strike.
If we were able to generate free cash flow of over $20 million in the quarter almost double our free cash flow from the entirety of 2021 and more than five times higher than our 2021 second quarter and up over seven times over our first quarter results.
Lastly, we closed on the extremely successful sale of our four hotels for $80 million at a 2019 cap rate of approximately 6%.
And 2021 cap rate of 2% the sale of these four hotels certainly positions our balance sheet to be aggressive on the acquisition front when the time is right.
Structurally I am very pleased with where we stand today, we are exiting our credit facility covenant waiver period, and our financial position is healthier than it has been in a decade, we have a mere $15 million outstanding on our $250 million credit facility and project that'll be reduced.
Zero by the end of the year.
Additionally, we will have 24 unencumbered assets available to provide liquidity to acquire hotels and address at the right time are very manageable $114 million of fixed rate debt maturities next year.
Before turning it over to Dennis I want to talk about some developing trends.
<unk> has been building all year within our portfolio and I think this is an important point since.
Since the start of the year weekday and weekend occupancy as well as weekday and weekend ADR have grown sequentially each month of 2022.
As most experienced the first week or so of July was a little soft given the timing of the July 4th holiday certainly not indicative of our trend because for the last 21 days of July occupancy was 85% ADR was $194 and Revpar.
Was $165, Paul would be cobot COVID-19 area highs.
Interesting not only with this revpar before percent higher than last month as well as July 2019.
This revpar of $165 would be at all time July high for Chatham $5 higher than our previous record of $159.
In 2018.
These trends further support our belief that the business traveler is returning and adding to a very strong leisure base. We're seeing increased demand in many of our primary business travel driven markets, such as Washington D. C. The northeastern U S Dallas and especially in.
Austin, all post posting sizable gains again this quarter.
But for US as we've said many times is the resurgence in Silicon Valley in Bellevue, Washington.
It really helps pop our performance and increases our confidence for a promising outlook going forward.
Since the interim business returned this year starting in late May and the business traveler is picking up scheme overall our performance in these markets is nearing pre pandemic levels.
At the five hotels June Revpar was $192 on occupancy of 86%, an ADR of $223, which is down 10% from June 2019, revpar of $213 on occupancy of 88% and ADR of two.
<unk> hundred 41 <unk>.
July Revpar finished a strong $207, which was up 12% over June revpar and only off 2% to July 2019, So are really coming along there.
Looking past the summer we're encouraged by what we're hearing from our teams in these five hotels are key accounts continue to reach out for blocks of rooms in the fall and that list includes common names known by everybody and our long term customers Samsung Google Apple applied materials Amazon.
And the rest.
Retail perspective, although our booking window is relatively short term.
We are seeing retail bookings ahead of 2019 levels and although it isn't huge in terms of dollars. It is the first time, we've been up in quite some time.
International travel is slowly gaining traction and again, even though total revenue dollars are not significant.
The list of countries from which we're seeing gas has grown from 15 to 25 countries in July .
Lastly, we're starting to see the bell curve with Monday, Wednesday, Thursday, and Thursday, beating the rest of the week.
Air travel into San Francisco, and San Jose is starting to rebound.
It has a lot of upside to come domestic deployments are down.
25% from 2019 levels still in international deployments are off about 40%.
Seattle, both domestic and international deployments are up 15% and 20%, respectively, but would the lessening of restrictions for international travel and the return to office, just starting to pick up steam.
And these lagging tech driven markets, we certainly expect business travel to continue to gain momentum that just translates into more upside for Chatham.
In Austin, where we acquired two hotels last year demand continues to strengthen and is benefiting from tech company expansions and relocations to the area. Our two hotels at the domain ran occupancy of 89% in the quarter and Revpar at the residence Inn and the town place suites were $154 at <unk>.
<unk> 31, respectively on the operating side. These two hotels generated operating margins of 58% pretty strong.
Washington D C, which was previously a pretty dormant market, where we managed to put heads in beds came back to life in the second quarter with our two residents ends in Tysons corner, and foggy bottom seeing occupancy of 87% and the embassy suites in Springfield, Virginia, just outside of D. C.
Boosting occupancy above 75%.
Accordingly, the big driver of the growth was ADR with average ADR gains of 55% at the three hotels.
Needless to say with these kind of numbers. We believe the future is bright people still like to travel people like to do business in person and we've got some new kinds of travelers to the space. The digital Nomad traveler that we've talked about people who live away from the office and are asked to come back to their office regularly.
And with the return to office, allowing more flexibility employees can get away for a long work weekends and mix business with leisure as we've seen.
These new travelers will be staying for more than one or two nights.
The flexibility to do that and our extended stay hotels, which of course is the predominance of our portfolio. The majority of our hotels are extended stay and we believe we will be the primary beneficiary of this new added demand.
So we remain confident in the ultimate recovery and trajectory of the portfolio and this was the first quarter since the pandemic began where our most significant markets started to show strong gains in either ADR occupancy or both.
Adding two great top line performance of course is our ability to generate very strong operating margins very high flow through of that top line higher than 2019, and we believe we will we will take same store margins, even higher which means our free cash flow will.
Meaningfully grow our.
Our balance sheet as I said is in great shape.
We're poised to outperform with that I'd like to turn it over to Dennis for a little more color.
Thanks, Jeff compared to 2019, our monthly Revpar improved each month of the quarter from.
From down, 12% and 6% in April and May to up 2% in June .
As Jeff talked about the acceleration is primarily attributable to the return of the business traveler, especially in our tech driven markets.
As we talked about on our last earnings call. This quarter Mark the return of in person internships and significant room demand from high Tech companies, such as meta Apple ebay and T mobile.
As we said before the business accounted for over $7 million in revenue.
This year, we allocated more rooms for that business, knowing that the return of the international business traveler and longer term consulting type business in these markets would build gradually over the course of this year and next year.
At this point, we are projecting to earn approximately $13 million and in turn revenue. This summer so almost double what we did in 2019, taking more of this business was definitely the right decision is proven out by a pretty pretty attractive gain in our revpar indexes. These past two months and added benefit is that our operating margin.
This business is very high.
As limited room servicing as part of the arrangement June operating margins at these five tech driven hotels were approximately 63%.
Large group and convention business is also coming back and we're seeing healthy gains at our hotels in and certain downtown markets, such as San Diego, Dallas and San Antonio San.
San Diego just recently hosted comic Con this month, and it's really been a standout all year for us during the second quarter 17 of our 37 comparable hotels produced revpar greater than 2019.
We can travel which for us averaged just over 80% in the quarter continued to outperform weekday travel, but the gap is compressing do in most part again to the business traveler, becoming coming back weekday occupancy, which is the best indicator of business travel has risen from below 70% in March to the mid seventies.
April and may to over 80% in June another Covid era, hi.
Coinciding with the rising demand, we continue to push rates in our ADR, both weekday and weekend have also grown each month of 2022 sequentially.
<unk> have increased from $158 in March to 187 in June and weekend <unk> have increased from $168 in March to a $198 in June .
Our message to our operating team continues to be to push rates as we believe it is a great opportunity to hopefully reset some rates in our business driven markets, our five highest hotels with absolute revpar in the quarter, where our Hilton Garden Inn in Marina del Rey with Revpar of almost $200 on occupancy of 86% followed by.
Our resident and foggy bottom and Hampton Inn in Portland, with Revpar of $195 and then the residence Inn San Diego Gaslamp.
District, and then the Springhill suites Savannah.
Leisure markets remained strong in the quarter, both relative to last year in 2019, and we haven't seen much of a hit due to rising inflation and travel costs, whether that's flying or driving San Diego, Anaheim, Savannah, Charleston, and Fort Lauderdale are all still showing growth are seasonally high performing some of our hotels in new Hampshire, and Portland are showing growth of AUM.
20% relative to last June and up approximately 5% in 2019 or.
Our destin market has shown some softness relative to last year, which we believe is most likely attributable to gas and other inflationary costs.
Our top five absolute occupancy hotels in the quarter, where our residence Inn Charleston Summerville.
I'll buy a residence in white plains, our Homewood suites in Maitland and then our residence Inn in New Rochelle with all four of those hotels.
Occupancy above 92% our.
Our top five was rounded out by the Springhill suites, Savannah, and a residence Inn and Austin, both with occupancy of 89%.
Our portfolio did significantly better than the industry with first with the second quarter occupancy, reaching 77% compared to industry wide occupancy of 67%. We continue to see an average length of stay longer than our historical levels, which dovetails back to Jeff's comments regarding today's traveler staying longer and hotels.
At our residence Inn in Homewood suites hotels, our average length of stay was approximately three nights, which is still about 20% higher than pre pandemic levels.
For the quarter total revenue of $82 million was up 63% compared to last year's revenue of $50 million and we were able to generate incremental GOP of almost $19 million for flow through of approximately 60% on that increased top line.
Revenue growth doesn't mean, certainly as much if you can't push that through to the bottom line and we certainly have been delivering great flow through and same store margin growth over 2019, despite revpar coming in 5% below 2019 levels.
That margin growth is based on our entire comparable portfolio not just some select component thereof, our same store second quarter operating margin surpassed 50% and we're up 60 basis points over the 2019 second quarter.
A good bit of this increase is attributable to a more efficient operating structure, especially with respect to labor our employee count is still down about 20% compared to pre pandemic levels and although we are a bit understaffed out there. We expect there'll be certainly be a permanent head count reduction on a long term basis on a per occupied.
<unk> basis as our at our <unk> at our comparable hotels payroll and benefit costs were approximately $32 a decline of $2 or 6%.
During the quarter, all hotels generated positive hotel EBITDA in GOP or top five producers of GOP in the quarter, where our Gaslamp residence Inn.
It was also the highest producing GOP hotel in the first quarter, followed by Silicon Valley too and then our residence Inn in Bellevue, Washington.
And then lastly, our embassy in Springfield, and our Silicon Valley, One hotel and.
And just missing out on the top five where our springhill suites in Savannah, and a residence Inn and map in mountain view.
And really the fact that three of the top seven.
GOP producing hotels, where tech related obviously is very encouraging as we move forward in a sign of certainly what those markets mean to us.
As an added note the recently opened hone tube woodland Hills.
Generated a pretty respectable operating margin of 43% in the quarter given again that that hotel is continuing to ramp up on all fronts on the Capex side, the company incurred capital expenditures of approximately $5 million.
In the quarter, which excludes any spending related to the Warner Center development, our 2022 capital expenditure budget.
Now going to be approximately $19 million after the sale of the four hotels and later this year.
Renovation, starting at three hotels, which is our residence inns in Washington D. C. Foggy bottom White Plains, New York and <unk> in New York.
I'll go ahead and turn it over to Jeremy. Thanks, Dennis Good morning, everyone. <unk> Q2, 'twenty two revpar of $138 represents a 50% increase versus our Q2 2021 revpar of $92 and was only five 2% below our Q2 2019 revpar of $146.
Performance strengthened significantly over the course of the quarter with April Revpar of 123 down 11, 9% to 2019 may revpar of $133 down six 4% in 2019 and June Revpar of $158 up one 9% to 2019.
The early stages of the recovery were driven primarily by leisure travel, but over the course of Q2, we have seen a significant uptick in midweek results, which indicates that business travel is now starting to make a meaningful recovery.
Q3 is off to a strong start with July revpar of $158 equal to the Revpar achieved in July 2019.
We were able to generate a cue to GOP margin of 49, 2% and hotel EBITDA margin of 41, 9%, which were up from our Q2 2019 margins. Despite the fact that Q2 Revpar was $8 below the Q2 2019 level.
Our Q2 hotel EBITDA was $34 $1 million adjusted EBITDA was $31 3 million adjusted <unk> was <unk> 41 per share and cash flow before capital, which represents hotel EBITDA west corporate G&A cash interest and $2 2 million of principal amortization was positive 23.
$3 million.
In Q2, Chatham completed the sales of the Hilton Garden in Billerica, Homewood, Dallas Market Center residence Inn, Houston, West University, and courtyard, Houston West University hotels for $80 million. These hotels had an average age of 29 years approximately $12 million of capital requirements over the course of the next year and Jen.
<unk> 2019, revpar of $98 versus 2019, revpar of $135 for the rest of channels portfolio.
Pro forma for the sales of these four hotels Chatham in 2019, Revpar would have been $124 in Q1 $146 in Q2, $149 in Q3 and $121 in Q4 despite.
Despite the fact that the quality of these hotels will be much lower than the rest of Chatham portfolio, the sale price, including capital savings reflects a six 3% cap rate on 2019 NOI.
Proceeds from these asset sales were used to repay credit facility borrowings chat.
<unk> balance sheet is now in the best shape, it's ever been at June 30, we had $253 million of liquidity between our unrestricted cash balance of $18 million and $235 million revolving credit facility availability, we are exiting or credit facility covenant waiver period with the delivery of our Q2 compliance certificate, which further.
Increases our financial flexibility.
At the end of Q2, our leverage ratio as defined by our credit agreement was approximately 30%, which is materially below our pre pandemic leverage which was generally in the 45% area.
Have no debt maturing in 2022, and only $114 million of maturities in 2023.
With our reasonable leverage solid liquidity and meaningful free cash flow, we are well positioned to refinance debt maturities when needed and acquire hotels, when we find attractive opportunities.
We are very encouraged by the improving operating trends, we have seen in Q2, especially the continuing recovery we have seen in business travel the growth that we expect the Austin invest in acquisitions and the Warner Center development to generate and our ability to pursue additional growth opportunities given our strong balance sheet.
This concludes my portion of the call operator, please open the line for questions.
Thank you.
Ladies and gentlemen, who will now be conducting a question and answer session. If you would like to ask a question. Please press star one on your telephone keypad, a confirmation tone will indicate your line is in the queue. You May press star two if you would like to remove your question from the queue.
All participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
I'm pleased when we pull for questions.
Our first question comes from the line of Anthony Powell with Barclays. Please proceed.
Hi, good morning.
Just a question on business and leisure. So you mentioned that business travel is really picking up which is nice.
And leisure is actually still holding in except for one hotels I'm curious what your view is on.
The ability for leisure properties to really maintain or even grow versus 19 <unk>.
And as you see more business travel come back have you seen any kind of softening up.
Booking trends or anything like that outside of Destin and what's your view on that.
Those hotels over the next year or so.
Yeah, I think I'd start out by saying, we don't see any soft softening here.
At all.
If anything we're encouraged as I said by just the newer type of flexibility with people working away from the office and allows them to come to our hotels in these kind of markets use our full suites with kitchen or four or five days at a time.
And work and play so I think that that will continue to be a trend.
And although folks are.
Worried about leisure again, you got to remember when you count up our leisure hotels.
They might be in hotel number.
15% of our portfolio so we.
We are in a little different spot I think been a lot of these other companies that have just bought a ton of resorts and a ton of hotels in these kind of markets we.
We are staying true to our form and our belief in the kind of hotels in the kind of markets. We're in.
Thanks for that and maybe just an update on the transaction market. What are you seeing out there in terms of deals in the market a bid ask spread.
Things like that would be super helpful.
Well not to be cute, but it seems like most most buyers are taken in the summer off here.
With what's gone on in the credit markets and really banks tightening up that obviously, becoming way more expensive.
There is a pretty wide in my opinion anyway yeah.
In the bid to ask and I think that.
There were a bunch of transactions pending.
I'm aware of with different folks and different companies.
All I think are almost all within the last 30 days or are looking for some price reduction and if the price reduction isn't happening.
The deals are kind of being table for the time being.
And we are certainly not in a rush.
To take are pretty I think fantastic balance sheet right at this moment.
It is a compelling opportunity at what I would call a re priced opportunity given the realities of today.
Do you think that this strong performance that we're seeing across the industry will actually result in price cuts because it seems to me that you know.
Things are pretty good so if you're a seller or why why why would you actually accept the price cut and I understand rates are up but performance is strong and better than people thought so how do you think that balances out this.
This year well that's.
Right. That's why that that's why I said people are taken time out.
Got it.
Because you're right I mean business is so damn good people are getting ADR is that they never suspect that they would get.
Those of us that have been in a hotel business a long time, but even if you had your hotel over the last five to seven years. Prior to 2019 didn't see a heck of a lot of ADR growth. So now youre seeing it you're seeing people willing to pay.
And and you're right.
If the buyer comes along and I think the typical ask right now is about a 10% price reduction.
It's really not happening.
Alright, thanks for that appreciate it.
Thank you.
Our next question comes from the line of Ari Klein with BMO capital markets. Please proceed.
Thanks, and good morning.
Maybe just on Silicon Valley, you know that markets are recovering quite well benefiting on the interim business that's come back, but how are you thinking about that market.
The rest of the year post post the interim business.
And as kind of normalized business travel returns.
Hey, Ari this is Dennis yes, I mean listen I think in some of Jeff Jeff's prepared comments he addressed kind of the trend that we're seeing out there which is our top corporate accounts are looking at doing business with us in the fall and in the winter.
The on the retail side, even though it's not a meaningful producer at the moment.
<unk> well up compared to 2019.
And even if you look at some of the.
Kind of the corporate related stuff.
That also is at least encouraging so I think for us as.
As we get past Labor day.
The true revenue dollars I think we will.
Whether it's softens out compared to the summer because of all the interim business.
Then start kind of building back up again or not is probably too early to tell but at least as we sit here today, all signs are pretty encouraging that that.
The top accounts that we normally do business with are going to continue to produce.
Produce room demand for the second half of the year after the <unk> turns out checkout. So.
That's encouraging as well from an ADR perspective that that business is still strong. So I think and I think as we talked about with deployments in international travel coming into San Jose.
Belvieu.
In San Francisco still.
Still being off kind of 22 to <unk>, 40%, whether you're talking domestic or international travel.
I think it's just going to continue to get better and better so.
It's going to be a little bit bouncy, along the way, but I think the overall trend is.
Still looking upwards sue.
Got it thanks for that and then maybe Dennis you mentioned destin softness likely related to some of the higher cost out there why is it only that market really see that and could it just be tougher comps.
Given that the more travel options now versus last year.
I think if some of that already I think also you've got a market. There that that is a fairly significant drive to market and that Scott. It's also a market that has a tremendous amount.
Of of condominiums in homes that are rented out on a weekly basis. So.
Whereas for those condos and town homes and houses generally those are probably going to be for a week's day something like that and hotels are not quite as long and if you look at our pattern, especially at the Hilton Garden in Destin, its really not necessarily an occupancy deal.
Or it's more just a rate perspective at this moment. So the hotel is still throughout the summer running 90% to 100% Occupancies.
It's merely a right thing so I think as you've kind of seen that softness.
In term from inflationary prices affect kind of that type of specific drive to market.
And if you compare it to like our Fort Lauderdale residence Inn, which is still holding up pretty well compared to last year, and obviously still well up compared to 2019. So I think it's just a combination of a few different factors for that specific market.
Great. Thanks for the color.
Thank you.
Our next question comes from the line of Tyler Battery with Oppenheimer. Please proceed.
Good morning, Thanks for taking my questions. A couple from me a couple from me here.
In terms of trends post Q2, I wanted to circle back first on the July commentary, which I thought was very helpful in terms of highlighting.
21 days of the month Revpar of $165.
How did that compare.
July of 2019, and I'm, assuming the the strength there the progression.
Second half of July compared with Germany is really really business travel related that was driving the strength there.
Yes, that's exactly right I mean July overall July 2022, compared to July 2019 was basically I think up about maybe 'twenty.
2022 versus 2019 for all 37 comparable hotels and then yes, obviously for the last 21 days as we kind of got out of.
But I think for the industry ended up being a relatively soft period of time around July 4th Yes, you saw and really as you got to that next Monday night.
After July 4th it really ramped up pretty quickly. So I think it is was primarily due to people, especially btu getting back out on the road.
Okay, and then in terms of August .
In September .
Would you expect or is it possible that August revpar and an absolute basis.
Higher than July and just help us remind us kind of typical seasonality and how that might impact your portfolio as we move through Q3 here.
Yeah, Tyler good question seasonally August ticks down a bit compared to July and I think we would expect that to be the same for 2022, because you obviously have.
People going back to school, especially all across kind of the the.
The South East, where they think in many markets and you've already started back to school. So starting this week so seasonally it ticks down a few dollars.
From July to August So I think we would expect all things being the same on the business traveler side that would be that'd be the same yeah. Tyler just looking back at 2019. For example, our July was $1 58 August was $1 49 in September was 139, so like Dennis said, we'd probably expect to see the same sort of <unk>.
Seasonal trends this year.
Okay excellent all right very helpful.
In terms of the <unk>.
Margin performance.
Really really quite strong really impressive group of over 2019.
I mean do you think that's something that's sustainable in the back half given some of the cost inflation that's out there maybe with seasonality.
Starting to impact the portfolio as well or you're kind of in the spot where.
No you were up 60 basis points over 19 in the second quarter about perhaps that growth could even accelerate or at least continue over the next couple of quarters here.
And we think we're going to continue to outperform 2019 margins as I talked about in my prepared comments.
We do believe there is a permanent workforce reduction across the portfolio, we're still down I think just over 20% in employee head count.
At the comparable hotel so.
I think certainly even the seasonal seasonally we will continue to come down on the top line a little bit over the next couple of months, we would expect to produce.
Still strong margins, especially relative to 2019.
Okay. Okay.
And then last question for me just in terms of the capital allocation side of things, what's the liquidity a great balance sheet here.
Obviously, you're looking at an acquisition, we will see what comes down the Pike, obviously in January can repair that Warner Center.
Interested in how youre thinking about deploying some of your capital over the next six months here and really worried about where the priorities are.
Yes.
Start and then I'll, let Jeremy or Geoff chime in as well I think as Jeff talked about with Anthonys question. The acquisition market is pretty dead at the moment.
So at least for the near term.
<unk>.
Who knows how many days or months, we're going to be pretty quiet until there is either a settling down of financing options or upper repricing of buyer and seller expectations. So I think in light of that we're going to be pretty.
Pretty.
Quiet on that front.
Jeremy talked about we've got.
$114 million of maturities next year.
That doesn't include the the Warner Center construction loan that we can take out early next year. So I think we're going to continue to work.
Towards trying to grow the portfolio, but Meanwhile, we sit in a pretty good position to address the maturities and not have to be forced into doing some type of financing transaction that would be.
Not very smart at this point.
Yeah like Dennis said I think we just wanted to maintain our flexibility give.
Given our leverage level, we've certainly got capacity to acquire hotels, but just because we have that liquidity and low leverage doesn't mean, we want to go out and overpay for something today either so.
We're just going to wait for the right opportunities to deploy capital.
Okay, Great. That's all for me. Thank you.
Our next question comes from the line of Bryan Maher with B Riley Securities. Please proceed.
Thanks, and good morning.
Silicon Valley, maybe asked a different way.
I think in 2019, you did maybe $35 million in EBITDA, there and in 2021 seven.
What's kind of your best guess for how 2022 shakes out given the current trends youre seeing.
You know, Brian I don't know that number off the top of my head for those five hotels I'd have to get back to you on it but.
I think if you just look at where revpar still as compared to 2019.
We're still down compared to that even 2% in July so.
Yeah, I would expect we'd still be.
Meaningfully below that whether that's 25% or.
30%, 20% don't know, but can come back to you on it.
Okay and then.
And then on business travel.
That you've sold a few assets you bought a few assets and so the mix is kind of changed a bit from pre pandemic.
Or would you say you are on you know kind of the continuum.
Business travel.
You know on our portfolio adjusted basis, how far down is it still relative to kind of pre pandemic levels again kind of adjusting for your transactions.
I think let me start out high Brian Let me start out by saying when you think about what we sold and what we bought.
Really other than destin.
Theres probably.
A very similar reliance as I said.
With a 15% or so be in leisure.
So only so that is a little bit changed with destin, but it I think you'd think about it generally the same way.
And.
Again, I think others will tell you.
But we have obviously the largest concentration in pure tech markets.
That's where the unknown is as to the strength of the business traveler wants the interns go away.
And really I think the third quarter, specifically, we'll tell that story.
And we'll be able to talk to you in.
I think in a.
A lot more specific terms.
As for the overall business traveler environment, but in most of our other markets those business travelers are back they are more diversified.
And therefore.
And therefore, not as reliant on tech, which as you know.
Seems to be a little bit more liberal and allowing folks to work from wherever not come back to the office et cetera on the other hand, when you look at future trends and I read the Silicon Valley business Journal.
Does that come out every week.
You keep seeing all the big names, taking down and committing <unk> building more office space. So it's an interesting market that's for sure.
You know what time will tell on that front.
Great and just last for me on the rate right.
People, who know that I cover hotels constantly calling me complaining about how insane rates are at certain leisure hotels, not necessarily yours some of the higher end stuff.
But given what's going on with everybody pushing rate.
When do you know that you need to kind of pull back or leveled off you know what signals are you looking for that.
Can't go any more is it is it a certain call back in occupancy is it something else there that would be helpful. Thank you.
Well I guess, it's a day by day minute by minute <unk>.
Environment in terms of revenue management and.
Our revenue managers are tweaking that purely with the aid of obviously the revenue management systems provided by the franchise ores.
Daily.
Take that what you definitely see as compared to prior periods.
In the same month in the same week, some kind of falloff in demand, which is going to result, most likely and not being able to fill so its occupancy and then when you say that you can't fill those rooms.
Other hotels are perhaps dropping their rates a little bit it's just the way the.
Revenue management is done away the brand systems work.
There'll be a little abatement in terms of.
Right.
In most cases.
For us.
With our extended stay predominance in the base occupancy and actions that you've got it's higher than most traditional transient hotels I think we can be a little more.
Bullish or.
Less likely to have to drop rate to fill if thats what.
The game is so.
Again, we like our type of hotels for that reason.
Thank you Jeff.
Thank you.
This concludes our question and answer session I would like to turn the call back to management for any closing remarks.
Well, we thank you all for being on the call today is certainly was an exciting quarter.
And.
It will continue to be so as we move forward and look forward to our next call with everybody. Thank you and have a great day.
Yeah.
Yeah.
This concludes today's conference thank.
Thank you for your participation you may now disconnect.