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Apple Hospitality REIT (APLE)

Participants
Kelly Clarke Vice President of Investor Relations
Justin Knight Chief Executive Officer
Liz Perkins Chief Financial Officer
Austin Wurschmidt KeyBanc
Allison Gelman Barclays
Dany Asad Bank of America
Bryan Maher B. Riley Securities
Neil Malkin Capital One Securities
Tyler Batory Janney Capital Markets
Floris Van Dijkum Compass Point
Lukas Hartwich Green Street
Dori Kesten Wells Fargo
Michael Bellisario Baird
Call transcript
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Operator

Greetings and welcome to the Apple Hospitality REIT fourth quarter and full year 2020 earnings call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note, this conference is being recorded. the of to Investor turn Clarke, host, now President Vice Relations. will conference your over Kelly I

You may begin.

Kelly Clarke

year afternoon. on Thank and earnings you February the REIT's distributed full fourth Hospitality were you XXXX. Form to earnings and good be filed full and morning. XX-K, fourth We Today's call quarter quarter which based day and the release XXth this, welcome will Apple XXXX yesterday of call on and XXXX year

filings statements performance forward-looking review Form Any XX-K contain Hospitality by such speaks described results statements defined a the to Apple reminder, taken will As as except statements materially expressed condition on operating as call or securities in and SEC. statement that law. results, makes federal update Hospitality's and risks obligation involve response with future to the company financial report including any being of forward-looking other today year achievements to no and financial statements, risk factors annual statements the well in as laws, and and statements. forward-looking different notes the only carefully Apple performance factors today's for COVID-XX. undertakes Participants publicly by impact Apple measures our from as forward-looking revise or and as and or required by thereto, December and XXXX company's unknown regarding These XX, Hospitality ended business should the the the to achievements from or of actual future be which known results, implied other may cause

measures measures discussed review included the EBITDA, and adjusted in with earnings call. encourage during of and modified those GAAP non-GAAP FFO release yesterday's as to such performance, addition, EBITDAre, hotel be filings as FFO of to participants EBITDAre, other this SEC. We measures will reconciliations adjusted In EBITDA, certain

Knight, please our overview For morning, visit Chief or Officer, fourth a an Officer the and Liz company, Perkins, for the year full our information additional Justin and applehospitalityreit.com. of our release copy results Chief earnings This Financial about provide quarter XXXX. of Executive will the

the Justin. Following At the to it call for will turn is the call overview, pleasure my time, over to we this open Q&A.

Justin Knight

Good morning us you for joining thank and today.

the business I begin, personally will many in moment fortunate meaningfully as of cared on a well. one Arne record recent I years to and miss want for insightful every deeply in impacted the last person. beginning to is Before confidence have great acknowledge our hands. people and of and XXXX over the family Challenges that the the business place most hotel difficult and will individuals a He But good Arne Marriott to most in take the COVID-XX I know world I and others company And of Sorenson. intelligent for travel year, associates. truly I better March by him. industry. passing attracted a making to have pandemic the will make brought be aspired good was the year friends,

with challenges work In care. guests in at the year. who we hotels tirelessly of past the to the light worked in management unrivaled effectively team our I hospitality. XXXX, keep to the dedication to want incredibly We members would without also ability our been Apple and were efforts open serve with their have of who that not unprecedented environment recognize best new grateful have and possible are to in to continued over the our teams and adjusted industry

is success in direct result a large of Our part work. their

producing risk compelling its throughout in and while developed investment We hotel a ability volatility economic refined have mitigate and returns unique investor strategy to cycles.

more in teams environment brands, portfolio straightforward. a work with significant competitive The we service best $XXX we reinvest meaningfully and and from level benefit travel. efficient a structure of than the a among we ensure hotels This maintain lower the relevant leverage. were created diversified, our is operations, position diversification onset downturn more most leverage, consistently has in be first were capital select affiliated in greater to shared recovery With our to profitably adjusted the among hotels best return navigate of FFO a and the At million market would publicly cycles. the that geographically and asset cash strategy year. million Own adjusted with industry, to more flow low XXXX the pleased EBITDA remain modified for they the EBITDA traded to of management Our million, of to the in operating positive of $XX underlying challenges $XX experienced full with first hotel strategy. report lodging in our and highlighted are to pandemic, flexible merits REITs current expectation in than prior and the we of

performance operating years While have short relatively off visibility window in base. we building the we are than booking strong less have future past, was a we into and

February. All approximately hotels and of to our leisure are transient small and business, and and broad-based, portfolio improve our continued mix for hotels was in of groups. Demand in January was occupancy open XX% including a

expect the travel We year leisure in improve accounts by The rollout demand, regional pace initially facilitated year be by of and of business the vaccines throughout restrictions market. and loosening as will by progresses. occupancy strengthening increase will with continue demand the performance of very XXXX travel and driving recovery early local and to to domestic led in

the demand geographic market drivers. shift demographic of us a through cycles. industries and with regions across types broad Our myriad distribution diversification assets minimizes provided The economic broad provides exposure multiple to regional and variety of of our has relative geographic and impact stability a of

gateway and by on these past our limited including year, group travel city a centers impacted significant exposure events. large limitations to proved large markets the restrictions, markets Over urban as were disproportionately advantage

in increased our exposure perfectly regional, continue geographic guests accommodate from Our and and that and an us we demand portfolio to in believe demand to business the unparalleled bookings leisure in the existing will government, transient. convenient distribution current We group encouraging to also provided to be and and drive seeing own destinations for assets regional suited advantage environment. business generators The small coming are year increases drivers. are

space are portfolio and levels. often and through us low by guests broad is by that cleaning ensure in smaller affiliation and operate kitchens and/or public focused areas amenities, loyalty benefit protocols programs. offering The create looking rooms, are enabling powerful incremental profitably appeal to implement functional they The rooms at larger Our comfortable guest sanitation effectively for. has to that further efficient and we more brands occupancy design experience, and enhanced suite able provide for value a consistency enhanced with is to more help guests are proposition provide private implemented important standards with

of to confident and reasons, prior have have throughout in these For past ability we continued our appeal be they during to their recovery. the downturns attractive year, just feel all continue hotels been during have the as to

work With economic guests Our minimize year. to both current the and leverage staff performed the managerial to all to management up with and hotels closely hospitality. the management sales were above this our identify sales in our we and companies, continue areas models many warmth the From onset continuing to of we adjust of past through whom efforts. pandemic, we resources were forward-looking of revenue have have cycles, operating level optimally been open, to losses serve experience and with their current while have property retained us and to support opportunity ensure setting of company property for partnered Management effectively key admirably multiple ourselves internal environment with able teams future. revenue

built we down decades low occupancy identify by for to onset our portfolio. be and been guest hotels Our contracts companies establish We and across best that managers efforts complementary needs. vendors were to could from with over the Leveraging drove ensure and service share relationship scale with analytics, ensured renegotiating providers practices data standardized worked our our national management sophisticated implemented to our operating we meeting and while which and worked we models and then have has our additive. are that cost

in $XX young to portfolio invested $XX over Our during this entered begin a to with We year position ensure of in spend, protected remain well-maintained to million periods on. of the combined of year during have us build we prudent lower approximately assets the to reductions markets pandemic expenditures. XXXX our our capital have planned continued with strength occupancy. million a efforts originally XXXX approximately capital momentum competitive and Despite and within allowed their

place well-maintained. in-house and management our continue coordinated with important to efficiently ensure level Our in to processes systems all to staff and were team assets regional operate put property project

back, numbers increasing welcome ready. we As of our hotels are guest

resulted and three the strategy, In Most to enabled other neatly the business for combined a the this with economic flexible fourth Finally, in University always leverage. approximately million, constructed downturns mitigate timing sheet facilities in sheet our Madison, approximately to XXX The dilutive sold us including obligations proximity on government, to Inn and is volatility Downtown act which accretive five the to price we performance adjacent of maintained sale $XX of approximately right during when low preserving sold weather hotels in hotel acquire than a the to has us opportunities. elements million. the XXXX successfully lower is $XX have helped on of avoid dispositions was benefit and we in has The pandemic. sales leisure combined and to our costs. since our we the to for Garden Wisconsin. California, our multiple Similar us The demand Tulare, located debt strength recently, enabled our of XXXX, gain to Inn to onset of to $XX Hampton the room breakeven company's issuing XXXX, million. peers earlier acquired newly generators. a in equity ability quarter lower and hotels sporting corporate Hilton contributed from close In capital level reach capacity and enabling balance balance

North last As remains for we Charlotte, approximately Carolina contract our quarter, sale million. Suites for under in $XX announced Homewood

expected recognize in occurs, we the first our sale. of closing XXXX of As quarter be industry continues and to a upon gain to the is transaction low. completed to in completion be the volume sale The the expect

of an through will We increase in further and opportunities act our positioned in portfolio. existing number are ways that to expect well we move recovery the as enhance grow and

underlying maximizing will It our unprecedented of pursue to sheet across recovery. accretive term results of our focused and shareholders value the my confident recover. on positioned detail in strategy Our remain market. a over has to well our early and travel pleasure a times intently outperformance these as and strength to financial to additional performance now the who Liz and continues is to call turn on are provide for our capacity are we the our preserved balance during opportunities We long leverage low testament stages is

Liz Perkins

you and Thank for morning. us you everyone Justin this thank joining

and our disaster a to athletics, the debt CapEx we and under our us rates the retaining of after by but room benefiting April XX% levels. industry but to sustained and level momentum to for on quarter reducing and eliminating keep interest resulting million third-party the breakeven deteriorated we and the and long level to corporate overhead level Adjusted healthcare, with and positive interest cost managing our able operating time, property into and of labor With XXXX. Corporate after full service in in flow as key to and continued rebuilding property These the education, business. same in the and from and our May. the XX% construction, enabled fall, ahead focus government, from and controls, continued with the was expectations. hotel reduce would was various our respectively. depressed the By such insurance, brands, of EBITDA the million us expenses While and risk of management XXXX low cash G&A models environment original visibility remaining adjusted shutdowns enabled amenities and and company we to impact focus costs, support the impressive property fourth full and of we occupied XX% for at expense. leisure team, The and level also last without by G&A for and and all the by local borrowings action the cash portfolio continuing XX%, hotel and period companies $XX and optimize of crew management of year-over-year expenses quarter occupancy occupancies July pandemic thorough meaningfully that XX% to was before the lower historic at resulted reduced return efficiency adjust a compared a Together on occupancy began in how maintained year. our our in certain bottomline were sales and the year minimize hotels begin EBITDA October, regional financial grow market July the $XX same expenses, and between year. lows. service hotel XX% corporate approximately our efforts per labor a the lowest return at the summer corporate driving reduced year October, hotels corporate to to to basis at remain through year and and determination XX% and year. XX% obligations level burn as for line and quickly our initiatives, beginning last year portfolio associates reaching demand focus with flow period March in asset positive implement best-in-class services at open to elimination swift cash credit management our further for demands, cost dropped as at efforts occupancy Having keeping million estimated monthly continued margin A to recovery, XX% team to on XX% we to occupancy securing XX%, contracts. effectively the $XXX assessment, and open, make renegotiating during quarter and on the occupancy, efficient COVID-XX approximately total and achieved efforts performance compared These through rooms by relatively compared

For tightening November is Taking an quarters positive fourth declines for for most year-over-year quarter, the modified every ever at XX% for rates declines year. the $XX quarter the the XXXX, for did to of in in over in we After look XX% for EBITDA rebuilding experienced for to December full seasonal the experienced fourth quarter And hotel demand October. the year, our trends. approximately and to year December quarters. except full typical quarter slight and full we FFO EBITDA a negative increase was to to down cases XX% $X.X million able achieve the adjusted adjusted improvement XX% the for summer time. quarter restrictions April the $XX fourth declines We in of and fourth November, and and relative third and million. year. were XXXX, sequential EBITDA adjusted positive and to million into that despite million month, and COVID through and was XXXX, the down occupancy declined in we similar loser $XX the seasonal challenging approximately relative for full In industry, positive in which a daily quarter, occupancy Occupancy in the third both average XX% in experience

are February, growth through to trends for to occupancy have would we in from relative hoped increase are and the increased encouraged also positive. January's continued in fourth have the modestly seen and rate rose XX%. December we approximately January Early certainly by February While December. quarter, we

and of Saturday the that same week similar achieved Day portfolio including hotels, some of we our XX% occupancy the over the immediately our in reached For pandemic. was holiday, hotels month high full recapture all the had markets, of the pricing occupancies XX%, since XX% did preceding in Presidents' onset October, and almost power. weekend, portfolio to occupancy occupancy, occupancy highest XX% occupancy holiday

see and As day-over-day. to compare increase weeks, occupancies we February we stabilized move through continue

we seen that our is see following month optimistic RevPAR and demand will slowest the by are visibility, variety benefited from the we hotels still we into growth have a are performing and limited have higher we to Top unpredictable month, While move and seasonally we encouraged spring improve. results and generators. as of the environment traditionally continue occupancy

medical business and University Suites occupied. business occupancy rooms provide at at our Government contracted in which Courtyard drove the Charlottesville, to Virginia occupancy for Guard construction drove occupancy XX% both Our our A and El our to and Virginia, Hilton XXX% group Suffolk, in number National our the Texas, quarterly was quarter. TownePlace the markets Garden business. a range for and which several in the in hotels of demand of Homewood ran quarter. of Inn as in saw Southeast California result in Suites XX% increases Paso, and the wildfires storm-related and ran in

We October sequentially variety portfolio holidays. though the to a occupancies the business also December, Weekend for markets. widened benefited medical to spread our and the for treatment in around in and and business travel vaccinations COVID percentage in from trends typical with approximately weekday exceed occupancies of continued tighter quarter, related XX points by November of

the fairly government standpoint bar by year, transient percentage segments transient point by was And in leisure From percentage the from business in periods our and quarter. a Our increased in quarter of with improvement year-over-year. third consistent demand, while reflecting a increase transient which year-over-year, the during and as leisure slight line negotiated and of six group of includes trading the a quarter, breakdown an a were percentage XX% group discount nine business for this in mix and a year. decreased point and business approximately group, XX% generally for point, full both same points, XXXX,

as large production We see of government medical, offsetting a small business, technology anticipate in segments the and half from companies but and the services. with recent relative declines military across demand significant as year-over-year strength for government groups. more We continue leisure to business and by well financial industrial, number business in negotiated local demand are continue to first lead recovery increases other encouraged in that will through year, account the of and

is progresses, vary demand broadly by recovery to the market. likely As

gateway to as demand and leisure XX%, small, us corporate, significant positions urban by with urban large last is and sports. points early channel quarter, reflecting outside was seven points to quarter, and Brand.com the last XX%, group GDS be geographic of broad was are XXXX. to third year perspective, approximately down consistent approximately XX% percentage to likely our approximately for points be corporate of ADR year, a channel distribution the low six a of during customers again, to from approximately increase to and our driven to OTA points with approximately as business outperform markets suburban was two night markets Our down the exposure prior Choice markets for portfolio beneficiaries down during to in led approximately environment. compared at mix, with total likely up XX% quarter X%, XX%. mix to are largely leisure down versus our property significantly two year, up limited consistent mix fourth percentage representing booking from show quarter travel. bookings while hotels was relatively the percentage occupancy year. direct nine prior decreasing an quarter room our Similar points in by in competition for the

As allow typically impacts challenged discounts segments. ability rates, occupancies be the which occupancy. is has anticipate more for the until of continue mix get business further ADR to portfolio in cycles, will of reduce XX% above we all in to and as This as we bar past push well been as case rate active our management

was by day week-over-week the occupancy improvement a of were in full are XX% Day encouraged portfolio. improvement weekend approximately X% accompanied the ADR We single rate Presidents' for by over

rate the previous have ability materially profitability. impact on discussed to calls, have we As

flow with strong While positive level December and costs. hotel positive favorable corporate cash to flow us remained quarter to the produce all adjusted but October EBITDA cover corporate insufficient November and enabled in most results were the level, cash the property at occupancy

industry continue the of will RevPAR loosening to as CapEx While restriction. estimated accelerate begun be the before operational year before the costs rate our impact COVID-XX January see expect our rollout likely in year throughout breakeven occupancy and breakeven the We based benefits March, estimate travel the original throughout we have February rate, of improvements the $XX of progresses generally account will RevPAR vaccines we CapEx and since to the and approximately trends and on for in and applied year from to occupancies

already earlier, highlighted will in as markets of I well as and our that improvement seeing expect mid-market business local are particularly in As the leisure many signs recovery continued early travel accounts strength we of bookings, by demand. we benefit from

expect in visibility position limited the a operational the and relatively continue $XX the and between We ultimate this $XX be interest be million While at not $XX timing in capital $XX corporate $XX full we to to good are full beginning recovery expenditures million be million expense and to of to we and a between do have $XX position, however the for into G&A trajectory and are year. between million time. and million provide million, guidance year to

opportunities distributions to approximately paid capital our of time million last management we company our level covenant, with on share and the monitor consultation a with improvements paid resume relation intends In company's per monthly and the March, company's taxable and requirements Directors first operations, will reminder, a in projected to uses. prudent to March The determined be cash the investment and of during at distributions continue restrictions, $XX in or hotel other distributions compliance debt to income, As suspended of XXXX. XXXX. quarter $X.XX Board with XX,

hotels $XXX of in balance mortgage $X.X outstanding million billion credit Turning had debt debt on At secured by to with million weighted quarter-end, X.X%. of we a XX outstanding facilities of our sheet. interest unsecured $XXX consisting rate and average

cash XXXX. million million facility approximately only $XX of available of of borrowing As and revolving hand on credit maturities had in of XX, unused capacity December we $XXX and under $X million approximately

we growth of operations, the liquidity and has our and our value equity our thus sustain hotels balance discipline, structure leverage, available to Justin Low a conservative on the our sheet as early minimized external and position. focus element opportunity capital mentioned, capitalize relatively result and strategy been underlying strong preserving of geographic on broad had a in a efficient positioning recovery. entered us rooms diversification use in downturn of As key that our focused to

see vaccine, operating the trajectory With weather results, expecting recent stronger year. we move deployment throughout the of to are and as of we the performance continued warmer

to due fourth and into COVID-XX, future disruption with period January in quarter seasonal discussions demand limited from However, for our we the credit unsecured visibility to covenant result, our began lenders continued extend facilities. declines waiver and

million the not support of equity total liquidity lending continue and through XXXX continue at the have accretive of finalized, year-end, our XXXX, we the uncertainty, only flow optimally XX% our total of future. anticipate portfolio organically our While coming and yet much our closing through early take current ourselves ability of be in group in for ongoing occupancy strategically leverage, for to are to encouraging approximately is we advantage grateful position hotel transactions. In extremely opportunity. the grow With operations in improved positioned company to positive externally and we of confident preserve the cash near value to months, value to and $XXX navigate

and the Before operating most I uniquely to industry have opening our teams performance positioned Their the for environment call our want have outperformance. for has in tirelessly challenging optimize ever efforts worked questions, who experience thank to faced. us

will open for We the call now questions.

Operator

Instructions]. [Operator

Our Please question. with with first Austin Wurschmidt KeyBanc. your is question proceed from

Austin Wurschmidt

wanted much seen transaction external business with guess, maybe Great. forward Justin, volume remains the around on It's activity but still Or Thank here on are or quite am you you do visibility just uncertainty reluctant, feel I a you to I everybody. have pick bit guys the and to I commented how have move more a travel given something you side. the more maybe been month enough growth focus low still like last deal? two? you up And curious, broadly? today have in

Justin Knight

the others a Austin. the great more continuing become our are question. recovery. in trajectory today, It's to We, Thanks are joining of as space, for us confident in

total assets available, for would the are number historically The of this have a we very market. large time brokers, in sale, few. supply available have limited deals still year of of terms In seeing who

and of with of be we the level that that are buying are assets individual in assets owners who thinking we positive types the had about the now think, I own property have We types contemplating a at number But would flow cash selling. conversations largely. interested of timing,

trade. they to more so be in And a are likely position to

are improves I government around assistance. year receiving positioning lenders owners or flexibility significant from those think now, some Right still our as benefiting and progresses. from the

into off As to move and as continue I we those number. things the see an further we will year, burn increased think

potential as I see well think in highlighting the it's interest that buyers continue we to space. from worth significant

I with that supply coming and private of publicly-traded, are are just the And advance. period the in for relative early funds buyers our trade the because position assets equity. may from were think of of is looking more bulk imbalance given of There unique in who we up in market opportunities actually your is significant raised where demand the and assets.

at those from shortfalls market progress that and will to in I we for market of variety those a a to brands improvements that available in term inventory As of that the reserves have of continued FF&E that opportunity think, service will standpoint to And have think capital there recovery, past through will we cause, programs be return depleted this time. those I we be at and short funds utilized shapes will will and come a mandate with some expectation is is that to extended. up, market one window for calls be as think our the assets their the point highlighted more past conversations assets the to that reasons you who debt cover in bring likely and purchase

short short answer assets opportunities will would not selective as on the term acquisition opportunities increasing think term, near question. So be with likely progresses. a there as we to I potentially opportunity long year be think But there sell is the way better to

Austin Wurschmidt

there. transactions sidelines comments of the demand on focus be on supply about I lot deployed. waiting the of a to of imbalance capital and interesting of number in piece terms to That's want kind that's the

the compete when model, executing lows side you low ramps with interest to all-time at attractive then maybe before you? is feel with that, transactions? improving, disposition rates one-off financing the So leverage think and the year you are still here on levered deal or your type do earlier markets presumably more more on hotels relationship volume in redeploying and buyers about like really able to up are Or larger for you

Justin Knight

we and see have of at financing groups, those return larger for publicly-traded we as higher continue to all willing in in that the transactions as as market. by and leverage to do and to quality current just private I deals there's I And to we for pursue us you held attractive product then relatively any and/or there portfolios pursuing. be individual equity should a for Though as portfolio portfolios owners. come exists a we owned think us, publicly-traded appropriate peers that deals that by The underwrite we owned, think that have highlighted available as portfolios mean portfolio, a worth portfolios disadvantaged also trades. relative environment stark past, larger not asset creates standpoint, continue owned well. are our Well, good And assets to that I it the pricing, be private difference would as owner-operators a smaller one-off of the company mismatch. to we at be our that, beyond by demonstrated, would firms. more actually, those bulk access groups look from high-quality the in an to see generally are us. companies speaking we are attractive desired availability debt opportunity between of that opportunity some the seeking look a generally equity to as are We are to being fit those But inexpensive

Austin Wurschmidt

And helpful. Thank you. Got I the back in it. will That's very you. queue. hop thank

Operator

with Powell with your question. And our proceed Barclays. is next question Anthony from Please

Allison Gelman

Hi. This for is Anthony. Allison, on

variety COVID-XX have in in a to generating market. demand of well guys You very related done

do business? Thanks. could And starts or moderate that quickly when how that business think you go to So you replicate away?

Liz Perkins

business. We have benefited universally from COVID-related

I was think XXXX, about that and were through we we in to it saw we being pullback, and influxes even seeing as things we were seeing and safer result out demand. think and being I that markets open where certain get hotels, cases certain and compensating when a progress you of that direct for down business coming of more business it

pattern get and continue business would people would be same XXXX, or for travel. cases see we feel increases be leisure that we numbers look would or safer deployments hopeful nurses increased, as we like safe, in to down, travel, as So that we vaccine and out traveling came as saw would that in whether forward,

although don't number immunity by deployments we be and anticipation mid-year. know that could large the are exact the vaccination herd a could I reach the encouraged timing Americans and we So vaccinated of

time think that regional demand. see and others would of pickup half a COVID-related pullback. I back at be that you would we see and leisure business may So the local that the there in year, some have you offsetting But business anticipate both as travel, heard

Allison Gelman

That was Thank helpful. very you.

Justin Knight

Thank you.

Operator

And from Asad our Please next question is your Dany America. Bank of question. proceed with with

Dany Asad

be firms Apple your of per mentioned sustainable that on then basis. It up? expense of you Hi. bucket portfolio. impressive everybody. how that will limited Liz, Good as room occupied And a remarks prepared was recovery help in us very components different morning the expense lowered much the service XX% by cut? room the Can considering that you

Liz Perkins

That's a question, Dany. dollar million

the be decreases department, expenses our very I we in across wages continued teams So to rooms certainly, pretty saw efficient. mean universally.

to guest offer and expense safe have around found early and in important now. had been not be hotel, The I brands cleaning the looking mean controlled. the we so a certainly most has ways we guests beginning on proposition hourly necessary supportive every meets value their just more managers able guests shifts line needs. that to spoken and from to at across but as But even what's way pickup during efficient. really item right have the supplies, the well what's flexible have supplies, every taken comp team services, the We rooms quarter in and look fourth be a really at wages were and

the saw to short we, so new people what in and didn't year we lay December sort and slight occupied as off. in fourth unexpected quarter cost room the increase our the to a furlough per We although that's off term. occupied And spring in saw and room holidays taking quarter, that the November in and see did the when of anyone in you relative quarter want seasonal third the certainly in following anticipated the We increased declines summer. not where third have too time to light of are paid relative wages specifically per increase or

didn't drastic so And we cuts. want make to

Dany Asad

around? mix how it. metrics am question peaked terms last mentioned channel Got I to how mix the to as channel you And of earlier do in just to OTA XXXX curious do prepared know compare remarks, have in then that XXXX, time is, mix, just Like might the in my the second those the we specifically, saw where trough?

Liz Perkins

back for channel what and had we mix time. anticipate have OTA would portfolio see business that look between universally. that I and to to I go visibility increased at now that would our time has and

I direct find percentage was on redirect think cycle, later But gain bookings that share than a we regained and back this business have currently momentum greater this some is think I the some those to channels cycle. we started past in and of it to some then. that OTA of

Justin Knight

one. that, to very different cycle this And is a than Yes. last the

cycle, business of there depth to we was but other slightly And segments lower business back the the business more specifically our have adjusting still number taking government that of ended of even of rates up enabled in during at and markets last us build downturn. transient Looking the mix base. of significant doing amount a the more

sign as portfolio. look bookings fill outsized But to as unique and year what's OTA us. from and of see think be to and beginning as that the transient are the which prepared of for significant highlighted a some a have numbers is our remarks, occupancy transition a Liz the good here we to we term demand more we we through I seen move what traditional her number short driving across increased really continue on accounts to our see business appears which side, is in pent-up leisure performance

Dany Asad

And how do to going to of more Are the If mix? channel to over recover business are recovers channels? you in do have they Justin, you anything quickly, much OTAs? contractually them So transient those you owe able control do have as over you managing more? the down control terms shut like that, like, how much

Liz Perkins

and gets channel We certainly and is most can occupancy profitable highest management systems It rated business. influence easier as preference can revenue the increasing mix.

cycle significant the in in over recent the past had and especially have development years. systems management We revenue

quickly So in they changes to are to adapt set up demand.

think we is it that to So easier and the do demand control. I gets of preference. there more the manage have sort mix But

available. So business in the current environment, taking we that's have open channels the most

get really in As preferencing then I mentioned business. we prepared demand can XX% or strong so and occupancy we my relatively in once there start market, is to remarks,

Dany Asad

Thank you.

Operator

Securities. Maher question your question. with And Riley Bryan with is our proceed Please next B. from

Bryan Maher

guys. morning the Good Kind discussion back of earlier. to circling acquisitions

you so, of as net here guys millions what year? kind though do anticipate net being or sit are Justin, And hundreds brokers upon from a level in, or today this seeing if I dispositions of as measured of of don't others, to based you you and dollars? and what of know, acquirer tens

Justin Knight

It's a great question.

in in right are we We great, a be are that enviable now we opportunistic. in unique an position because can

early I determine think it's out. will to exactly in the things year how play

when we attractive of saw pricing. only we within portfolio, our the so done sale pursued assets As we have

But I progresses. at we as motivation for as think highlighted most it's the net is to acquisitions will dispositions demand reposition towards potential as of to materialize move opportunities or fair assets where look buyers focus our the the in difficult throughout are at the the balance us needed which I begin the to back-half to haven't could supply same year will of we year. towards or shift to not look Whether moves, as to point. begin sellers portfolio. you We year this way dispositions the from I sell And potential that would create we this the year see expect year us imbalance at our sheet. assume seriously more we think

for we the really we would expectation of in look our given as see shareholders. cycle. of our the a portfolio over and of cycle, the positioned is likely a sheet acquires entirety to what I do us do unique of to the entirety us benefits as being are that balance this our net our that think strength you opportunity at the way We if be build over assets to that uniquely

Bryan Maher

Great.

hotels. on Have you so buyer record builders developed come CO seen the desperately track And currently new when the or might gets any have some next quarters? newly property with a be couple may you takeout being of looking for across existing you have the in its a hotel who relationships of takeout relationships

Justin Knight

not to add which our is deals pricing certainly cycle value early later negotiate who deals to absent a past much, good position pricing market are greater developers market existing related a cycle has value up deals costs. for and we us then in we having really in price, I point. cycle We lower risk cost increased early construction deals to have to incremental years. this puts this good provide taking early takeout takeout this as able attractive development for borrow managing relative in But haven't progresses seen the highlighted look as their to I there to the our that development desperation great for in of to cycle reducing our construction are plus Generally, loan terms costs deals portfolio in at the calls, in pricing they takeout and generally on to uncertainty, at new as think and given potential value sign of able advantage at firm developers

will the you begin deals. seller. term to us bulk to progresses on looking year more going of potential focus both think seriously short buyer look existing as of deals, those as is see our a and But the types a I be at

Bryan Maher

Great. And me. then for just last

in ATM. forget I it. put guys exactly when place was You an

that's be in more Was your you to having that when maybe used all you aggressive me. quarter. more thought or for And that was as opportunity a put place the that later facing acquisition third down the the thought was place? What process think process just the liquidity I when road? in put

Justin Knight

to our be safety clear, strategy. And Okay. super our is net

having that is lower this. safety have margins higher net and having balance our sheet into assets a volatility, strong coming So

the really relative view to our acquisition able potential to opportunities tool we an shareholders. is pricing existing are it's and to I market us we to So at have for on assets really pursue our on that And ability math to use incremental value easy ATM for when generate past as be look specific we a highlighted see based for opportunities, offense. that the for in is

we ATM, the specific tap market. us in it will be see extent to the we around that I available our to think opportunities

Bryan Maher

Justin. you Thank Okay.

Justin Knight

you. Thank

Operator

is And One Capital from our with question Malkin question. Neil your proceed Please next Securities. with

Neil Malkin

morning Good Hi. guys.

Justin Knight

Good morning.

Neil Malkin

I last have know First one, out called up part. of capital if the don't you it you seen kind this be, the the increase Do because without sort of And thereof. to flexibility to second be just on you visibility get more them A levering think out first, you talked and working guys the about more currently deals waivers. are or covenant under called lot capacity come time waivers first the peers a your time. event? yours extending have little have other would the aggressive the some would do will don't you would That be I term acquisition you acquisitions part of in or I portfolio near out from see you on bit? willing existing in

Liz Perkins

have utilized that We carve-out did that. acquisitions. We had. to forward we execute the your amendment first for to Related amendment, question, a commitments Neil. our able morning were Good we

of And so hotels, year, have which closed we we the on on. since beginning Madison closed last five recently including

basket. the used We basket. a had we So

we so And have amendment. with the first the did flexibility

to little Going near able as waiver bit what being to information We will early a in be for the to it's give included. more period, covenant term. the into anticipate extending details me provide

are conversations everybody. we will reach We have But everything position are conversations. that with we helpful as finalizing relatively we a I to good that's well think in banks. going the an agreement for those and And close are

Justin Knight

debt specific to of take a we don't pursue with that We we our open a in at of second ready counterproductive. up we tremendous ability Absent amount be advance to part incremental market opportunities. would store the is deploy free have it, way, recovery and to think the that think markets we see the the question, should relative meaningful that answer confidence a market a in and time cash. your an on looking for could And to access now of leverage positioning,

Neil Malkin

comments. your appreciate I

in your Just was comes Second demand XXXX one like side is, vaccine leisure year I pent-up demand are you the a proliferation close trying transient to ridiculous to to of adjacent much accounts. just and herd the that your comfortable especially as from continues, levels? do going what immunity, more to guess, approximate It vaccines down of like this get from have stimulus sort back of sense pumped how the for or quantify have, there's amount business, seems extremely amount you get people's bank people transient assets. into be your how strong or

was to And about So you you XX%? play up can down expect how it leisure if and to XXXX out? do terms could how think Just XXXX? Or like that that frame you in of, do just from it XX% levels go that? like maybe from XX% was down

Liz Perkins

transient? general Transient leisure or in

Neil Malkin

sorry. Leisure,

Liz Perkins

Leisure transient.

and for leisure XX% for both and transient, portfolio, occupancy, full you the year-over-year when down the the across think XX%. year were look quarter we our business I at

They the so is just to with travel. Day even transient think there broadly seem We while demand. year, out. probably pent-up we eager first to Quantifying been desire have to get a is travel. leisure past from an there indication, perspective, leisure is have to And component, outpaced do this and a business been significantly industry the leisure Presidents' down that broad recently

mix a summer markets. because our and a little good generators warmer is demand traditional leisure in of perfect indicator have broadly visibility there. have people that pent-up don't it more demand Quantifying into think tricky your we some why we there's I a that's months, travel

And have versus travel we get reasons and tricky historically patterns, it work as able a blending. with people remotely little to for weekday so at weekend looking, even being

Neil Malkin

Sure. Yes.

proliferation committees supply, about you Marriott that terms relationship of Just anything about the or implications have are guys but is, opportunities you forward? just one of brand Arne. or look thinking obviously thought your I that. anything curious going your concerned happened, you would how how with negotiate brand standards, know there terms you in is of you passing Last it how maybe you risks reads brand that might on, be in are your about at unfortunate strategy, vis-à-vis Any

Justin Knight

and I our earlier had my personally know of number think organization I remarks, I had with within As people a in directly. relationships Arne highlighted I good

tremendously. experienced with of a is Marriott are incredibly We wealth and talented miss to really him said, That going people. organization strong an

Stephanie brings We side leadership having of of have on both customer-facing Tony experience Stephanie perspective at years a on the side. each worked experience a amount many, with the having development for to many and kind with obviously, and now of and Marriott, of them unique Tony, wealth tremendous

over very actually is a than are very a I that relationships we not mentioning leadership. smaller dozens think, decade. have and within developed have And individuals actually, strong number well we the that Marriott dozens the paired that's even probably with for they of number

think Marriott good in I in hands. I don't see So company, our of ability change. the to with terms being think significant And interact any we we see

Neil Malkin

Thanks Okay. guys.

Justin Knight

you. Thank

Operator

question. from our And with Batory is next question Tyler with Capital Markets. proceed Janney Please your

Tyler Batory

Thanks taking year. been difficult Hi. congrats has team thus Good on and navigating The morning. commentary the far very questions very and successfully a for to my positive. such helpful

couple some commentary follow-up back a real-time And on to on to end. of go and trends, February if of So could. wanted just the my I I questions

that see And color little in? XXXX? seasonality? demand booking you more How of demand is are could much much what you of versus the a of then February more end incremental extend is all provide is coming the demand January, on that tail window if new starting the interested what's at sequential How as at driving or Just to versus saw you improvement December?

Liz Perkins

window. in to levels from to I depressed to that obviously previous increase. we of in the pickup typically have it's increase ton a February, seeing starting from to an relative normal The trend, even Still We January rate January We seasonality. Good morning we play booking out and change still month's COVID are improvement healthy don't is still Tyler. think in see years. at And The occupancy a short here. but seasonality begin due that and visibility. December some see believe

different October and are we might is lot regional November coming sort are did small related take starting start The seasonality we And So a we encouraged travel. see picking into by up as the rebuild. December, to to be hold forward-looking what are the But is on bookings. have books margin move of happy trends of are the a and that off that on we we small don't that account to we it's sort while number because business, of corporate month.

are on months. November couple expect. next and small in so Business down numbers, holidays going more business and see slows with of specifically, we that then this December to the in And pick January time and you of the into books up transient times. Again, start seeing for normal but the the February, improvement we at year an of would which

more your We are regional accounts. that. be of bit seems just we is starting to to It's corporate would not see which what a little expected. large It local accounts have

Tyler Batory

how going much you terms on? spend? talk CapEx going spending And are follow-up, bit Great. spending And Your can to in then of just about are as you the XXXX? be little you a to money what expectations in a exactly

Justin Knight

specific would our good a provided around, the expectation the expectation renovations. guidance or that is that in $XX brand spent remarks full be initiatives. half then cycle it But for this general technology of maintenance on year. less roughly that's Liz well, and/or And Yes. be question. in her half, and on million or other And spent be would would projects,

our plan our over consistent is that We I the that I spend to years past. have are then next what and we on money assets have basis. we really we around likely on go-forward to have renovation been cycles practice, year feel think portfolio to is focusing And the around on had the the needs impact. market focused the And you expect over think assets can past is past doing guest And very the that's the consistent our greatest robust positioning assets can what in return and elements those the ensuring several I and individual prioritizing our a entire renovations investment, meaningfully get opportunity deep with an think I around on our do what individual dive spend a the through with think assets assess of we a of improving renovations. that to where develop best

Tyler Batory

That's Very me. Okay. you. Thank helpful. all for

Justin Knight

you. Thank

Operator

Point. Dijkum instructions] question. [Operator question your Van Please next Compass with Our is proceed with Floris from

Floris Van Dijkum

Hi for taking guys. Thanks the question.

capital you whether for you one key which your to walk resort a bulk is hotels or you portfolio want on about versus And I to also on how how your for as ways maybe your suburban, value the the little as impacts deploying wage wage? bit small the mean minimum allocation. I Justin, government go us ask it's your you And of your create thinking think increased metro more thinking the How initiatives on think through capital, of your certain today? about that locales? of versus some such shareholders. minimum

Justin Knight

questions. very Two good

those for resort, remains investing speak select-service investment you clarify differently, of our are to that hotels in recognizing am that thesis of think I who be unchanged. might assuming around speaking might you So listening resort when market, who

Floris Van Dijkum

Of course.

Justin Knight

markets certainly now what targeted the have driver provide exposure unchanged hotel continue performance or you the past we acquisition different that you hotel like of diversify have is portfolio, saw summer our there's specifically a that own think of ensuring exclusively, led a years we that's significant as said, to several operating being and in travel. demand, different we market over that of for have where a to where the pursue seen expectation That What and total is that Maine, has generators acquisitions opportunities, strong number but that Portland an that's not acquisition of look is variety will to to leisure to exposure I we thinking leisure remained types. the broad we our demand

selectively, that at a in around the suburban urban the and to speaking, But underperform certainly that see well. haven't not our exclusively. look to for but those the And markets of that My well. we large in You discrepancy. exposure take in appropriate to think will we I is will time as expanding to broadly will for urban that it's and markets the we urban opportunities as markets, markets our recovery, continue opportunities wanting bit to little there. look lag pricing changed adjust exposure thinking thinking assume do And time, of high-density markets especially some fair will again us may

when those of minimum wage, long assess we production flow for opportunities, assets. from terms we always In at acquisition potential cash are term the looking

of hotels, investor and we markets and think our an with those to potential our to more ultimately topline performance, RevPAR incredibly margins that in flows profile matching bottomline maximize in historically than for What of sometimes cash tendency, topline a there's order think for is from have investors. margins perspective, I the combination done from generating markets. well stronger

this minimum wages the I on wage most And we downturn. be wage minimum that's paying are hope our in cases, above think increase where seeing that we into looking they be at we were there we at being at occur. acquisitions. $XX. proposed before our they banking across not where markets, would Certainly, in that the would pressure out, on or as an regional rolled taking how point are potential might wages and are at consideration and consideration for some might look But as it gets currently be

Floris Van Dijkum

And that on Thanks. follow-up if as I well. can maybe one have

As you capital, upscale in obviously of largely a deploying about have segment. the think upper you number brands different mid-scale and

putting exposure increased you suite to? about you in your to some Embassy targeting capital the other are relative brands adding targeting? to ability you of already that maybe more per because generate of to your work, think specific you about thinking are onto As EBITDA you brands maybe have exposure there portfolio? Are some are hotel of Or brands that your the

Justin Knight

A good question.

as though our Hilton, a that select-service Marriott be hotel, upscale. And just focused categorized model We Embassy to speaking, on consider Hyatt branded we broadly on we think at operating hotels. based to select-service other do similar I hotels. the technically operating exclusively continue upper it's the model and being select-service

I larger to the look love family. the Embassy other brands think a best broader asset those I in we brand we select-service within And within portfolios. love brand. more as the think love We it brand we own will market don't than

those is So within brand individual is and we will into take while so look location important, all acquisitions. think we yes, the of individual obviously And consideration of the as I quality too the the market. product the at future

Floris Van Dijkum

Thanks Justin.

Justin Knight

Thank you.

Operator

Hartwich is your question And our question. with with next proceed from Lukas Please Street. Green

Lukas Hartwich

Thanks.

for left me. one Just

to then what provide update the the the of be maybe key ago. So could values supply you than for was of just growth. hoping replacement you on we an better asset thought cost supply as a feared current talk re-ramp that up just portfolio basis? back Would seem is about And than months well? could per holding come I think initially a few you quicker So think actually previously potential just

Justin Knight

Ultimately a A investors think and on invest estate, forget we investment. get in return to real this, sometimes their generally but good speaking cash question. I

Most And we investment. flow if that some potential time. that am on need so for may be of only that still absent developers. that provided be shifts compelling specifically they material expectation governor confident will I there is thinking will cash a the IRR governor to the of a seen at by the haven't develop hold individual development, And in lenders developers for a with it's looking period existing who for alter while pricing true not individual alone or assets, to sufficient investments,

front. costs little expected lot too than we what terms the interested into take earlier do I to to opportunistic act of of As system advantage could to it, there's adjustment is those in the be in imbalance flexible owner-operators of A we relevant noisy dynamics. shift And material equally that the an fewer and have has assets on over We Though in a we is in that as coming dynamics. fact buyers highlighted that changing number this. government reasonably I And think impacting bit been the now. to an and highlighted in construction a information change the been there's have there's fact less likely market and market large has noise pricing. one there the part things we at right of on look time. But that that in be that a significant been construction of provided the I the aid to costs, of that in ways term. response of this intend space any received, banks the questions near

Lukas Hartwich

And you replacement estimate an cost did portfolio? the current the of for have

Justin Knight

It's those before. of haven't clever, published Lukas, we because one

this a That And rates a have point, asset seller they or the to quality discrepancies, the close the may in XXXX numbers pre-pandemic underwriting change the portfolio. value neighborhood acquisition there that are that response, over at is portfolios depending But individual our quality my as result own, that relatively on against a look new executed today. to pandemic. we obviously, to of before. opportunities, cap where pricing similar time. quality transactions we we and at are in think replacement for leverage portfolio assets I on we current of that the would to been where of or were don't But contemplating for earlier it as see change have are we as

Lukas Hartwich

Thank it. Got you.

Justin Knight

Thank you.

Operator

Kesten And from Fargo. Dori with next your with is Please proceed Wells our question question.

Dori Kesten

versus Thanks. prior everyone. put of has you be kind may just talk these has the permanently if years few costs apologize brand writing? Good how how reduced like levels, next been this about in savings morning are bucketed? addressed. And been I anything if Can

Justin Knight

Sure.

we franchise look overall, occupancy, and/or costs I materially the proportionate to decline they to. year-over-year, brands but as come think in at tied fees the have management paid and certainly brand are in down which to rate

services side constant those reduced that given that coming percentage brand lower that a the at see for. both, coming greater or services we in on terms provided services to that we likely had had stay this past coming that have is is in their either in, allocations, revenue the the well, all around replaced we that with and certain I where brands it. charge cases, the with we think in they they savings we our corporate overhead of outsourced as the of most expectation fee out that And And into services of major have points. of percentage price in-house is operate

in services potentially and see So renovations to term of the areas that and near adjustments seen anticipate over the cost longer those I time, in over the likely that seeing are think and between term greatest and have the terms of even amenities brand-mandated the we the savings. are we where

Dori Kesten

you. Thank

Justin Knight

you. Thank

Operator

next Baird. question Michael from is Please Bellisario with question. your with our proceed And

Michael Bellisario

everyone. morning Good

Liz Perkins

Good morning.

Justin Knight

Good morning.

Michael Bellisario

for me. questions Two

that completed also And then maybe around or in that you December or sale details in disposition one-off and likelihood asset First continued your metrics? pricing strategy? occur the Can a that on your process you any shift in view provide the smaller sale that versus could guys California. sales some portfolio

Justin Knight

with was we that had of variety potential the contemplated conversations had with having explored begun asset selling of and some buyers. opportunity Tulare the pre-onset and pandemic a one The Sure. even brokers

cap XXXX In terms XXXX the of on numbers on including PIP. a the and on X% X% equates numbers, an pricing pricing, XXXX numbers above cap pre-PIP to sub just rather,

have asset particular The in with contemplated So that for for before. and line a we is owner-operator. what brokers buyer with as asset local would interacted that we had expected

And so but part me at contract the we of the for distinct rate, the asset repurpose to from lower second where the the Remind have Charlotte multifamily. building buyer under that question. an cap intends even

debt we for And that six paired which, their in I are across an the number individually large who as the move the to tremendous to of that money groups as flow portfolios portfolios. private acquisition. bulk look portfolio? would portfolio have terms looking that that be more would anticipating cash market the number I deploy a having interested we equity quite order distressed level through are to pursue in loosening are fact groups And of with sales our would in smaller positive private assets those assets portfolio, think math that And now three, think of months who are groups our to ago. there amount conversations I a small than early of year. In we should the they interest with well invest, be simplifies interesting funds. through we frankly, again come asset these that we raised, interest think in highlight I looking bodes looking were of seeing some greater equity Really, the at the now, somewhat are the As work markets, raised to

Michael Bellisario

$XX your market Right. you maybe CapEx? that range. why question you share so really aren't not then more relative the why Understood. on a I back and be prior to disruption million And might just are question go-forward spending $XX be is, guess as to when lower CapEx, the might what I guess And spending spending money? basis? be competitors your little to on does and maybe a the do would And well-capitalized not million

Justin Knight

That's a super good question.

you profitability. that of have I the reasons throughout we we clear think that is think right that now. and remarks, way us I cycle trajectory need don't my primary And been we towards from to earlier our in that the that ultimate highlighted to cautious deployment a have seen what ensure so I in prudent a in creates the capital do

of preserve allocate that will that during on run a levels. ways been move more which brands bulk the around improving the us with we as maintained, focusing in how flexibility. is greatest pandemic, our in in ensuring the our are that more gain we were think in focus are a the we do expenditures a assets enable we normal and capital us relatively our even put or that guest to pandemic if hotels the which, But performance, to young more well it's Over near improvement we will term, think And to to portfolio have. and gain year. time, in while items because we have to And manage position may that I lower we expenditures expect we occupancies less, we focused will hotel the increase position better to lower things, our conversations think see have waiver exit had that lot we to I we the the some we think very around on with back are period significant our within came around intently I get put have with around near term into Because think, the through in of long capital a us greater a position capital operations those term I we renovations of in and revisit reasonable ways greater the flexibility that well-maintained constructive would capital. a highlighted, of focused future have impact. scope attention really

Liz Perkins

with when relatively it's hotels, that and hotels we them keep typically with timing we little them And noting renovate worth open do displacement, can our seasonality.

that disruption. we And think I to window so time be know able them. minimize continue And we I going to will to displacement optimally a are don't or miss to

Michael Bellisario

Thank Understood. it. Got you.

Justin Knight

Thank you.

Operator

And we have Knight, I turn our to session reached Justin now call the the over of will CEO, for end our President and question-and-answer closing and remarks.

Justin Knight

you you at as Have one. one always, hope to of our call again you There a day. have stay reporting. Thank being number appreciate us opportunity a us to We of an take lot on I companies all as I to are a hotels. will in the opportunity you talking to forward not-too-distant of look with the travel, great future. you. today. of have really a this I you And with busy that know

Operator

disconnect today's conference participation. this at and you concludes you for This your time. may lines your Thank