SOHO - Earnings call transcript Q1 2020

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Operator

Hello and welcome to the Sotherly Hotels' first quarter 2020 earnings conference call and webcast. All participants will be in listen-only mode. [Operator Instructions]. After today's presentation, there will be an opportunity to ask questions. [Operator Instructions]. is event today's note, being recorded. Please now Mack Sims. would like to to over conference the turn I Mr. Sims, ahead. please go

Mack Sims

Thank you and good morning everyone.

made historical, If it at a you the not G comparable which you copy of most to all with Reg GAAP reconciled the call, forward-looking receive statements did non-GAAP constitute are directly earnings company financial requirements. has may on during In sotherlyhotels.com. access website conference our may statements. the release, measure this the accordance not measures release, Any in

in expressed revise assumptions, press time Although turn Factors I statements. any we The company will these from believe time forward-looking can detailed company's with duty materially are a statements any over the the or attained. can or those results expectations undertake risks call and reflected and today's are implied to in the based to give filings actual by release on we update forward-looking be does SEC. differ to cause the that forward-looking Scott. assurance no that in that, expectations will statements to With reasonable from not

Scott Kucinski

a for XXXX, Thanks company balance well-positioned the Heading We a solid had Mack. great into we sheet. is year. Good everyone. morning believe

RevPAR the commendable asset growth on had renewed in executing ever and Our managerial was best with been. January condition focus proved belief our has it And true we strategy. February. This

our that comp, changed Super U.S. the February Excluding total when Compare size portfolio we Georgian as RevPAR know, to of the world respectively. the of X.X%, and Bowl pandemic. RevPAR January in market portfolio. increases was of X.X% February in our and COVID-XX this all the our increases lodging as for due Unfortunately, XXXX was the January by X.X% performance X.X% to experienced in and Terrace the

impact RevPAR our in the surrounding unprecedented we strong in As month last escalated, RevPAR hotels unprecedented topline Despite from sharp for of shape a all XX.X% the surrounding transient across markets industry believe the year. same the travel government cancellations the some and economy the of finished lodging Characterized quarter, declines revenue felt the the the this rapid declines. future and requirements first year Furthermore, industry, all time. pandemic early quarter by of dropping mandated experienced shockwaves U.S. nonessential The local increase pandemic, the Sotherly's through the declines. took issued was and state with as immediately quarter sent with the March, start resulting of government sectors social distancing and group in COVID-XX to performance concerns March restrictions in place. businesses the lodging will in closures events

leadership unfolded, was impact, the team As action Sotherly's severity to speed swift recognized the and pandemic's of that the situation due required.

maintain operations impact its plan objectives. action to staff first key to level several standard Sotherly's our of this term priority long at number procedures of and to The gave its of implementing the operating in safety elevated preserve value to consisted a guests properties by and order of for limit shareholders company sanitization.

and plan. to impact company's hotel the the and Hospitality, property XX% the manager, a with Our relationship company with retrenchment the reduction seek not the outlets expenditures. initiatives. dedicated with levels The include the cost-reduction by renegotiate and of pandemic's management of Town capital cost focused company food and also of which in and rollout partners the on all of of level stringent At fees financial Action guest initiatives, several the subject the downsizing the structure staff of to include staff by Directors. of of swift items other over a revenue staff, service of mitigating corporate layoff Board and the level, benefits, implemented a contracts. XX% quarterly shrink layoff deferral staff the its At in waiving of cost-containment the order benefits reductions layoff nonessential the salaries implementing company's and level, closure for worked of amenities corporate director's alternative nonessential and staffing including Second, properties, a salary for to in and the of its property company quickly all enabled beverage all vendor sources remaining out

company each onset for completion. dividends have the common the mitigate addition, successful has its initiatives suspended to In of mortgage out COVID-XX. sheet of believe At immediately have modifications impact company to To the been variety with The in of the lenders pandemic, completing also balance company its agreements lenders, date, financial that been remaining majority reached near a provided undertaken loans. been which the dividends immediate modifications preferred relief discussing are its the to financial and the forbearance mortgage deferred. we loans for has strengthening of begin

is under applicable company funded assistance the all Additionally, for Paycheck three proceeds CARES the the Program. has Protection separate programs far thus and applications pursuing ACT from federally received

will opportunities. industry, and of industry the the presented now call the and adapt the as has evolving our while Later as depressed challenges changing discuss I strategy the has the Lastly, well turn these Sotherly's pandemic on call, opportunities company. over will to for in to the economy and landscape lodging Tony. CEO, Dave capitalize the macroenvironment Folsom,

Tony Domalski

EBITDA approximately revenue expenses. the a representing Reviewing you decrease approximately adjusted average approximately reserved period March decrease million, a was X.XX%. a Total approximately $X.X XX.X% for weighted the XXX%. a FFO debt was same representing interest taxes, quarter estate And certain balances of million, $XX.X approximately deficit for of million, we and the performance the well ago. over a quarter million decrease capital of $XX.X XX% ago. the $X.X the $X.X had million, year for Thank of same Scott. was carried of million $X.X over principal of the cash company equivalents the quarter over a or of for as of XX. XX.X% other unrestricted the The a or was $XX.X as ended At Hotel $XXX.X for quarter of in year quarter real $X.X million million, rate million interest. the at approximately company's cash fixed end of improvements rate cash $XX.X approximately approximately a had quarter, total of of prior of debt million outstanding which Approximately consisting and year

we took valuation of the quarter, the against asset resulting deferred charge allowance the During $X.X million. tax tax in a approximately

operating to we of of of Scott with and As onset reacted our reduce coordination the in loss impact expenses mitigate the hotel pandemic, the business. with the swiftly management mentioned, companies

of Although million we for expenses income to month of revenue second million per estimate reduced will $X by operating we hotel operating the quarter. approximately range exceed in the XX%, $X.X loss

quarter expect April burn We the from to those rates move increases third to and May customer ease we digits in traffic continued in we seen cost as digits move occupancy into and low rates have double June. as containment in single the

pandemic. well We only had for to put for million a estimate the benefits of of regular reductions hold of members total projects XXXX. by In eliminates all the the $X.XX of capital reduced compensation, and and the end for will of executive approximately elimination per calendar useful life. cash At most quarter. the at as corporate of completed critical also announced is approximately expenditures Most replacement draw capital Board, in XX% suspension their or on anticipate $X.X year we range of mostly expenses the the We to were $X.XX we amount anticipated our company's will the expenses. reserves those discretionary payment the on year The approximately million of officers systems company's deferral bonuses reaching announced a employees, quarter. dividends expenditures of of savings to March, as the underway million million of the suspension and of a and to The capital well and result January. level, $X.XX in to the remainder relate per projects dividend the the onset deferral

under pandemic, the lenders begin early were with of of our we required to forbearance loans. current With onset interest discussions our the payments principal and of regarding

existing While third the quarter payments quarter agreements ranging we million during second from of during contemplated $X.X approximately no payable estimate defer $X.X the to of allow payments us and interest has payable current XXXX been and will million million forgiven, XXXX. $X.X to

also some be default. under maturity lenders regarding its Based been on of them. its the deferrals repaid as has under required most an discussions, from discussion in of repaid loan. anticipated anticipates covenants event financial agreements agreements company that with that articulate noncompliance waivers these contain subsequent While to are or up quarters, with be caught lenders the company of The the will in upon deferrals the the noncompliance

interest, Program or During the $XX.X SBA's of made must under XX% proceeds payroll payroll ACT, PPP its and to lowered of loan of received the that the provides and amount costs of on the extension terms related for covered million. weeks and the approximately proceeds costs, the mortgage banks the Recent used of loan proceeds for through company Protection each utility regarding quarter, loan second the to rent proceeds. Pursuant be to CARES the changes will costs. application regulations be it forgiveness to XX of spent Paycheck

later to the the forgiven has with now Dave. months XX than of turn five qualify of is after anticipates XX loan repayment date. loan forgiveness. I the to no not for the to from And Additionally, origination portion period The loan loan over portion beginning significant that months a extended call company for years will the repayment been

Dave Folsom

everyone. workers off appreciation as Tony who efforts. their prayers first responders have would by valuable thoughts the I to those morning our and you pandemic extending start well like and as for ongoing to our Thank affected healthcare good and to by

the days. Our have our its business future XX preserve ensure to efforts success decisions in required past make and to difficult us

As the were suspended and demand were extensive curtailed, operating evaporated improvements due reductions employee expenses capital virus made. spread, to

open transition but the a the minimal that whose presence technically is recovery. Our remained hotels have to pandemic, smooth to small occupancy, only needed cadre albeit a ensure key service personnel during are necessary of during with

our the whose least, We at welcoming macroeconomic near negative say travel that our valued company make to the demand heart to lodging especially on our guests of hospitality back return. respect with portfolio our difficult, to Despite of forward it we associates. future. industry the business, the has look both a these the COVID-XX's to impact staff As been is confident and environment, remain decisions, staff hotels will larger and loyal in to

with the However, undoubtedly ability by along the preferences. and response to government's be it industry's changing to the adjust consumer to shaped will recovery virus the

we company's the end believe at it and with crisis key to shape first the company, ensure that Hospitality, Our recovery. few dedicated To industry's success Our unfolding Town efficient factors the partnership important of facilitated our and a adapt is the manager, of response the will consider to future swift the quarter. hotel

three of levels of trajectory to help uncertainty protocols occupancy virus the and jurisdictions strategies for due the changing efficiency optimize maximum remains manage and Therefore, be virus. various to the on the the variable Staffing costs the inconsistent company openings property level prepared based cost itself First, must and profitability. its of among scenarios. will containment unknown of ensure

demand Second, lodging the muted we believe this term. uncertainty will near be in reflected in

and As the come. a and traveler until likely for impact sources creatively to cleanliness standards shape seek business the service result, normalizes. industry lodging continue must Last, preferences demand the behavior travel company to pandemic's of years alternative on will

So Hilton's monitor of property The our will CleanStay experience implemented at our long adopted hygiene to the protocols. changes programs changing been As which and that at guest preferences implement fit Clean a every term to encompass every company strategy. continue standards result, own level portfolio in and changes have consumer properties. our has service our extensive

that, travel checkpoint experience TSA weeks, believe Travel positively, recent corporate drive-to-leisure our industry and The will in data to definite markets Smith lag, that be call as peers. will up starting and portfolio's questions. improvement we of transient consensus to momentum the we are to and growing will consumer a among believe as general, business stronger relatively locations. a lead with as quickest we trend leisure continue agree segment to for exposure our we In its minor outperformance Overall, the And a While material confidence has some positive seen underscoring international the our a over company. destinations as to recovery recover. coastal segment continue will an gateway now open travelers. benefiting transient to with global in and we improvement well drive-to-leisure and leisure concentration

Operator

[Operator from Instructions]. first And Janney comes Tyler with the Capital question Batory Markets.

Tyler Batory

doing well. my everyone is morning. Hi. Good questions. you Thank I for hope taking

in you data color terms some give what First terms of can are getting occupancy for any more ground of You seeing bit of mentioned on Any one improvements trends and or these you the the portfolio can some drive-to-leisure. trends in points in you your May beach on me, in more in focused of little share better? terms assets leisure at a June?

Dave Folsom

Yes. saw single of the of had lot Generally markets, of for or of were been Tyler, a really and healthcare digit that were while was all worker. I any guest. restrictions guests have or the occupancy occupancies not mean, most That's our some problem, that government to at depth of a for we and we locations. lot these our unless some in a even nonessential government allowed an at they in hotels, a of changed essential speaking, function, we in this was less, function a no has

past over we to So teens and occupancies is low teens, what say, very seen, from weeks single have growing. that's the digit a several change let's low

locked meeting group a a resumption of a couple the I for Atlanta reservations while. markets our a including some in second of our City are of of hotels Some trend. seen room leisure in example booked bookings a still that. the which is we good which half of down. leisure actually of haven't are a we lot year, of the are being think space But essentially bookings of some good And is seeing seeing

are we to not you I after return but we a a to occupancy but call, data soon, we XX% there seeing anytime lot pickup. could is a of generally are So talk XX%, provide seeing can you the mean XX%, and Scott

Tyler Batory

you just zero seen have all a And travel Or your at point? Okay. any at basically properties? corporate is at this that

Scott Kucinski

clients, Good Scott. are or muted. Yes. corporate are Nestle I who very It's typical normal corporate I not of example and clients Hi. of we that Virginia, giving the Tyler. large huge yet. they mean zero, throughput for, the is mean it's large very, IBM, it any traveling Northern have morning the client not but

their starting right individual seeing bit of on are to own weekday You smaller it's very business the but during muted little now. kind traveler, travel a shops

Tyler Batory

thoughts terms properties? am of see at need at may a get by trying profitable? occupancy property Okay. different sense some to I of your it levels or sort of to mean But And then just I be any of level, property the breakeven in to of location. imagine be you type I kind what occupancy

Scott Kucinski

difficult ADR if It's it's look look at just on it Yes. basis cover and an through occupancy to to hotel, obviously you because at lower expenses. flow a tougher

we I a cover across of cost. case-by-case envelope before the $XX you speaking, generally that's So But It's as looking at a obviously think around know. ownership ballpark are the back level property expenses well RevPAR just basis, should board.

Tyler Batory

little that. gears appreciate a then I Okay. And switching bit.

have You got forbearance. some

those how been Have of sense has how get some Just gone conversations lenders? tone more Just of the with a or conversations of to are discussions recently? trying your the the changed progressing? conversations

Dave Folsom

Sure.

balance another lots have to have March whole and and mortgage sheet us right to banks firm after relationships balance I from with Typically a sheet CMBS. than had probably on of be out the seen We understanding mix XX, mean very we small and lender big willing explaining our know, to were lenders you speaking, beginning. of balance ahead most. the calls all I from the sheet one of of more hold we As company got situation. think work we than this banking start

of as for am part, just more well up through industry is has the set to a for us. try solutions work out it government level has I everybody as to little and the been, different, of just CMBS publications for the than this. us structure with documented, as some CMBS government sure in kind well been world the figure appreciative The So is both to looking some pandemic The communication like been a intervention. manage really willing most and not

where are I getting open been not be starting are will some just It's overly there worked to an think But them. a progress dialogue but to-date out point them. productive So some we with to with we productive. solutions see

Tyler Batory

following curious Okay. But burn just question. of But now? provided of of potential you are and in the the the is some your And more months? liquidity cash whatnot. of you kind be how am about couple right out thinking I an you about there that might over options next have I on this thinking just terms that, up data are open-ended mean how

Dave Folsom

Yes. remember that I to reducing, liquidity mean burn burn the rate is cash demand about it thing and as the the reducing recovers. is the is

active pace of remarks, the the in look But I rate for company's in demand board my the a we month opportunities in and And both breakeven the form continue the as the about and for program amount to to bring will difficult all in the with half we for remarks, active advantageous company. of a to as his and stops. paycheck company been for think, and capital correct to domain burn ago were for mentioned survival the are demand and sources in essential the to liquidity able Tony the mentioned with But do I that hotel access that the that is, continue to we is of return. that we capital. on hotel and want underscore depending most the And for in your basically going pace have when looking our any counterparties in That we confident that part we it's fact is the view to all or liquidity trying have do was, we way it to of began, recovery been weekly forecast the question. And looking public Now, we for solution capital resumption, across government. private from company. capital domain, since the this of

Tyler Batory

COVID And might What is behind Okay. going at some for sort you in when you us. me. the from think just going of your you specifically? And At operations last properties point be future, question come think to more we to perhaps the the structure the you may through do hotels, after at benefit the Or it's this? through disruption of do look after be the tailwinds higher margin been possible to may same? things or back pandemic, that the to is that is have flow in attractive be go future roughly the the kind you your that's

Dave Folsom

mark. mentioned any on with laid our is that the company and restructure the essentially, management new Your of to Tony, have off costs I mean given question opportunity conjunction hotels. in the our at right we we the staff XX% as gives have hotel. at us And this Scott unfortunately, operations and XX%, essentially

we think realize on us from pick And use to going managers on tell their out margins They think we perhaps there So leisure for and sanitation there half us remains, yet. demand whether words, a you telling Tony, travel. an have of get and behind there the apples-to-apples an for On we of our there efforts, front. when that get across And emerge going put want canceled, the is year it though to that opportunity think house. up demand, we We for even departments travel opportunity well-founded. think know lot seeing marketing we leisure don't undistributed the up this, that second that to from hotels to the expenses, your can able the pent we be as and that this tailwind, abates some we margin. all we we you field, we comparison, an out and is question do Sales pandemic eagerness that side. Whether and all is think is our of hygiene pickup. there to anecdotally there gets get are we But there for of margin want they think all have can are protocols, are these be a people travel. any? to I is People future. out reorganize an is the lockdowns new some to and to group. leisure we of in to is pickup think But is a we your want

Tony Domalski

and labor in are I add and I of going I were market to high market. we extraordinary same short term, that where won't markets hotels. I some we to not going having the in short be the keep our as the are with several kind in And to expect was the would only to as pickup rates pay before in know I be the that experiencing tight demand certain housekeepers we labor think that term, think for seen in segments they strong housekeepers the were of pandemic. tightness the extremely

Tyler Batory

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

Dave Folsom

Thank you.

Operator

the with And you. question Thank Jaffray. comes from Piper next Santos Daniel

Daniel Santos

look Thanks you the Hi. my the little in you that obviously, bit for what going mean change run maximum differently hotels environment? question just does cleaner be. like? guys. the envision Good question. a hotels could in talk will of can might I occupancy And morning before how this What your taking sort off of me, about post-COVID more

so, could up? your impact you you of occupancy open give think And this do sense what start things might a once how us

Dave Folsom

impact restructuring cost occupancy. the organization necessarily or Well, I restructuring the will don't the of think

beverage. of that mean housekeeping, forward. is to it's function are may you going front think we I the will from have of every guest a that there change of to really front I to things a how the host point run a food door going and from function and to the it's hotels the service desk

will of the Some mandated to just by these be brands.

be generated. internally will Some

room hygiene a extra three you can are two receive not receive infect a is into guests it's will there that check that industry cost. room want housekeeping you the level, will work them inside strangers stay, to focused. if night that and because the the you, all But you tell it on I Some will same the what may used seeing that is mainly be could government disinfected for service add a instance, might that will protocols or do you have or them. been think are for housekeeping but this of certify housekeepers in not daily appropriately that staying potentially that are it, they seal on you

the checks a going housekeeping So guest that or not when day and terms after the beverage example. are and have to you cleaning then a protocols room out it thorough have you disinfecting of new daily a lengthier two used that's see. are prepared of you on three for to stay, the in cleaning as a routine host that there food And for At pickup guest. and for other is us margin end, probably things an the the side. owner. And That's far a

it do are I to to beverage right going continued and now a in you where food food and way a the have beverage. the not areas back actually those it to pick delivered go down take What comes are guest and and where think guest and their doing see food for orders them then service room we is you different they but or and up to gets room. there beverage

So different and XXth do floor old to structure cost deliver it's beverage a in tower. have a way member of a the you hotel is room that of food where it than to the the staff uniformed

Daniel Santos

to may any Got being universities hearing students. more like you little was at just a that you your assets? some then are of wondering close demand seeing of could some are it. opportunities drivers? about used You That's I hotels helpful. any Are in markets for alternative bit And talk that be if

Dave Folsom

students. each government. We for on FEMA, have your night have rent to There term there rooms and frankly long healthcare, for have universities been are at dormitory we point one attempting individually. programs. though, room been a worker, been hospital basis To looking stays Essential who

a lot alternative of seen have that We work.

We have it. some taken of

not be that's our to are a use, We run. pleased profitable in into idea hotel hotel is long with or our a not the dorm too nor the We turning it good think room. of half going

would resisted for don't do that hotels franchise. brands those And formally we So flagged national seen overtures opportunities. I But think a from the universities are that. different it with have we frankly have allow to

selective very them. the We in to way have been that answer take best I that's probably And think we question. how

Daniel Santos

Got it. guys. Thanks

Dave Folsom

Thank you.

Operator

comes next from And you. Reynolds the question Chris Thank Neuberger. with

Chris Reynolds

Yes. and my as with as about in property? update that Good there you Hyde for is the morning. Maybe activity generally And the Can Thank question. just just associated think well at there comment properties I you your taking that. some Florida Resorts? start condos

Dave Folsom

Yes.

We assets in several Florida. have

the Jacksonville. We have got DoubleTree and

the flanked Alba not have like Tampa. hotels the complex House. assets and but with and a we Hollywood Florida Hyde in the Hotel two that Tapestry Hyde DoubleTree, got a It's And We brand. the carry would in Hyde moniker of Resort then It's have the the condo in by a three market. brand, you really Beach think Hilton Hyde

local assets officials been Florida. the resumption five for allowed the our and are those have hotels, and they recently So reopened as of close two The have in state condo travel. we did technically during the pandemic

now and have the and closed they were up re-staffing we those reopened operations So there. are been and ramping

Chris Reynolds

Thank you so much.

Operator

to Thank you. return time, the present management And are floor more at closing to any for no there like questions are I would comments. the

Dave Folsom

I you and it everyone very hope appreciate No. safe. remains for call. the much I Thank

Operator

Thank for Thank This today's you today's attending concludes you. teleconference. presentation.

You may lines. now your disconnect

Mack Sims	Vice President of Operations, Investor Relations
Scott Kucinski	Executive Vice President, Chief Operating Officer
Tony Domalski	Chief Financial Officer, Secretary
Dave Folsom	President, Chief Executive Officer
Tyler Batory	Janney Capital Markets
Daniel Santos	Piper Jaffray
Chris Reynolds	Neuberger

Sotherly Hotels (SOHO) 24 Jun 202020 Q1 Earnings call transcript