CLDT - Earnings call transcript Q1 2020

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Operator

Greetings and welcome to the Chatham Lodging Trust First Quarter 2020 Financial Results Conference Call. At this time, all participants are in a listen-only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded.

It is now my pleasure to introduce your host, Chris Daly, Owner of Daly Gray. you. Thank Mr. begin. may you Daly,

Chris Daly

considered you, recent risks Devin. Chatham call. welcome the unknown, in statements today everyone, note federal described defined securities as laws. XX-K uncertainties, Good Trust first both and morning, These other are comments Lodging our conference subject many and statements, quarter SEC as that by Form to to filings. are of Thank most forward-looking and XXXX Please and our results known

of forward-looking as in and to is XX, conform call XXXX no noted this in or the information statement otherwise May the obligation unless All changes the expectations. results actual to statement undertakes company's company update any to

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

and insight Officer; Now me allow and introduce quarter provide with to Craven, Chief Senior you Financial Dennis Chatham's Executive and Chief XXXX first Chairman, Officer. results, into President Vice President Jeff COO; President Executive Jeremy and Fisher, Wegner, to some Vice

me to Jeff? Jeff the over Let Fisher. session turn

Jeff Fisher

very Good Okay you much. thank morning, everyone. Chris,

the is knowing hotel quickly impact recovery. the on not the the lodging of most the First events appreciate participation industry length of national these and hotel in times. trends owners operations and your for and been unusual has COVID-XX economy to under assess destructive its your assessment the the scenarios is operators The history, pandemic to global the the unprecedented, during in we and most and foremost, one of forcing dire current thank Chatham, you complicating sincerely duration interest and

to of our reasonable as whose needs, well especially the Key companies from long-term the actions pandemic include to which space, the rapid lodging that and March, are knew was analyze impact week following. capitalized all having we corporate companies feel is our something financial into leverage to We second liquidity unheard stability. in pandemic. of take the needed action Accordingly, started the such going protect Chatham, for to

extremely million on decision enhancing renovations suspend we preserving million. We non-emergency CapEx spending the development, Of started $XX suspended course, We to required cash local dividend flow made CapEx not had regulations, or by preserving our all our $XX we and that on difficult CapEx Warner facility an amended slowed annual all our credit down basis. our of Center

liquidity group our we providing by quarter, of key the relief of support endeavor. appreciate and million covenant in through bank end the XXXX the that $XX first

or all took one-third. Reduced of voluntary cash employees XX%. XX% I pay took cuts cuts million approximately corporate Dennis $X of and G&A pay by and expense other Chatham voluntary

to board tools to operating impact of on best-in-class the XX% the line. also I’m now, platform thankful reduction which and act and have and a more expeditiously especially gives top trustees properly the agreed than others us to with voluntarily our bottom Hospitality, comp. Island has in Our meaningful

on numerous to years working times. at now XXth know public and lead REIT company We through am lodging thankful platform. my teams CEO. public persevere situations, have to I and challenging experience to and having these experience, the our as REIT a Furthermore, we’re has Dennis lodging through year public of a how this successfully through navigated have Island Chatham cycles, these XX

our been critical Contrary workers, and responders related accommodations to our of other hotel this all open, pandemic. to significant we've hotels companies provide their workers nation's dedicated XX able that kept to infrastructure to military closed number we've of a ending hotels, medical as first

portfolio EBITDA believe especially every over of limited single sourcing our has day. daily, hotels. our aggressively Islands revenue are in amount teams generated the our sales opportunities appealing look at as team we portfolio working review was direct and all from that markets and our been national management and demand I at revenue Our XX% sales extended-stay to of reports

You three sharp the over an the going increase also RevPAR in index our from efforts index last see over now with February can months, XXX. to off paying of are that XXX in

performance out on our March occupancy at at for early look of since approximately today XX% bottomed low us hotel a March, XXth at sits you If XX%. and

we've since the surprisingly, we’re ADRs in our been different Since no and on rates, future. that, in incomparable is and lower is hold if of Having accurately I Not we've the that $XX. behind these bottoming the and RevPAR hopes really there's happening the mean which encouraging. said March. projecting early anything, range. the days Does at declined us, somewhat since March times, trend March, it's its now currently no these $XX unable have darkest slowly are at low XX industry and lowest current learned to But share are early of highest times way out are

with start we and to Looking leisure to urban next flight by be to drive demand to And lastly, then large will forward that then as urban regional scale locality back group the first to reopen, drive markets. believe followed or markets come corporate events.

limited with longer also provide amounts ability as well will recovery. price hotels road best point variety will due unbranded reliable accommodate and that We a to to positive premium-branded, face a foreseeable select environment experience. for and of safe Big hotels hotels a as and and massive of travelers different a the extended-stay Box an future rooms service believe attractive and at perform their to

we're extended-stay the forthcoming lodging gap markets and our highest In in addition better recovery. service capture well to our of the returns, for limited More the situated our rooms, concentration This hotels to the should public as than to bridge demand of among are portfolio. bode of portfolio percentage REITs. as more XX% hotels reopen, premium-branded demand

money full-service hotels is closure be less lose pandemic. more revenue, hotels better from during employees able ramping-up course and of many to We're markets. overall since the in there'll mostly cash paramount related this when are our other hotels of which economic costs Our minimum more our recovery open, benefiting the to our hotels, our And begins. retain and are generate position

we've this got to structure withstand the believe capital pandemic. I

current cash, cost If is you on XX%. our operate XXXX. with the million certainly us of is remember approximately credit of to of the least million that to assume at at of ratio of in six don't borrowings necessary. $XX debt expect additional full-line investment hotels additionally, drawn, aggregate at be available got With We allows cash source RevPAR our a January to net And debt, we've trend and facility, until liquidity of the our available hotels value unencumbered case credit by $XXX course. as investment of if $XXX an

or how whether have other to services, that very guests the with guests food different should going and complimentary housekeeping, Marriott is the going look respect Hilton served, major as pay a do are our beverage, and pandemic as we to model Operationally, to to for and those what franchisee, operating that triggered services industry us forward, has offer. reevaluate believe is that I an

heard These As making you us happen now changes us successful. most the brands course, very while, But necessary won't of a much for pushing overnight. have to be are to for relative changes in with of from the change. we've been concert

most new move you've will forward. impact supply, we the read, least under slowed as mitigate down. of at construction, be Hotels sure should completed, but I'm as Additionally,

to it's difficult to for do difficult underwrite construction, going it's than the be ever construction to aren't new construction. obtain more And returns appropriate to to justify hotels. be going you loans under believe If I

to that, Dennis. over With to like I'd turn it

Dennis Craven

Thanks Jeff.

down massive we I early few using able prior operating direct decline U.S., soften since on base. on, and our are we pandemic were more from revenue providing changes our want to real cycles, to start back lodging experience on minutes industry. daily the a structure commenced on implementing the outreach sharp with to hotel expense basically the a to Island, activities March, spend shocks the access daily our time and a relying bit building sales operating to Working our trends, when color early in emphasizing or revenue data basis,

We've lot structure. expense adjustments to our make had a of to

First essentially about employees, approximately at of full-time XXX of headcount approximately XX% the essentially hotel end our or X.X reducing across of average the XXX end employees at of end our employees, hotel. equivalents employees April, employees to were the of hotels layoff of furlough we and as foremost, to February XX our an unfortunately, per from XXX April, had our

a Valley, of the businesses scale of all partner as F&B Houston University, operations gain We and Summerville, shuttered hotel. our of locations case the necessary Silicon we're these consolidated of such guests the Dallas, newly essentially and West We've a Houston, outlets. arriving provide Charleston, grab go limited economies hotel. breakfast do in We've in in shifting where Carolina at South Denver, for to hotels greater Medical nearby to Center, it's

offerings. hospitality and the along way. for reduced other, out are in these we're And being levels obviously including that in Hilton every that Hyatt having some at best service hotels, housekeeping Marriott we've and hotel, by adopting said practices cleaning rolled the of And

Analyzing and all, costs limiting et and all ongoing consolidating cost monitoring much within hotels occupancy temperatures, we've programs and of costs analyzing our purchasing certain possible adjusting we're floors to cetera. or been for utility as maintenance in by by lighting, opportunities, savings additional or as locations programs floors, unoccupied utility rooms

On results, types we'll look as burn, quarter essentially before these expenditures the occupancy of mid-XXs, just never levels. we had through breakeven some which based staffing the in to like. changes, $XX. on RevPAR, our related Our current of noise levels all it and basis, cash estimate of And at April levels disclosed when are estimates of of low our a these debt cash our to capital the kind our have you vacation, of hotels $XX to we operating model at service flow, In before. RevPAR on based refine GOP it's some operated get certain release, after benefits in at and second these preliminary depressed certainly monthly

kind of $XX we which the On we're we're quarter. all as service gather cash on basis at RevPAR approximately again approximately a hotel ADR and occupancy, again get $XXX CapEx, more to detail and and before after RevPAR think through I of debt the just a on breakeven some of basis, breakeven $XX mix we depending of EBITDA flow at will

lower. in three to quarter. We to approximately spend how lower believe that $X our hotels, see $XXX little the kind the over wait of out CapEx end breakeven we'll due of in even $X final respect to million to quarters inspections $XX XX occurring approximately stoppages. bit from our the do well perhaps million With inspections a to at the again, we play expect of in as But towards be second range, the the the in we essentially that renovations actual York, of Silicon final Valley down New location, Anaheim as with with finish shut rooms New second been have Rochelle, city. spending year XX as has city Coronavirus two But that's we our quarter, that number waiting two and been up the might all

the quarter, Turning different world. it's to obviously, first a

for as going XX% time this XX%. a that down and before occupancy pandemic last to to was spend some for major to ADR was XX%. occurred. emphasis XX% before of other quarter, RevPAR that couple details hit Again, So flat $XXX about the to and was seeing the other cycle benefits to revenue we XX% the decline we're were improving down revenue year-over-year rehashing line, down just RevPAR dipping which lot the not still of RevPAR was February, and over $XX operating years year-over-year us us Through X% a with the effects declining

trend the obviously benefits those benefits in quarter. labor a quarter. costs side, with -- on and the payroll only operating year-over-year to down XX% benefits our side in costs in our Again, payroll a specific down of expense costs of trail and little to XX% respect benefits, the terms with to bit about down continued On the

each and Travel, basically On XXXX. a supply, at measured had It as X XXXX end new there to remain X% through Houston peaked there our hotels, bit take little markets Smith supply. first our the where did the which declining the significant in supply year new still X% as which XXXX is you by perk of a up of front in out and of amount was When quarter. been

the about coming about. is impacted as due that you should it and us for industry we and a if lot severely down thereof be the over XX March effects development talked likely tailwind certainly hotel lack most remarked, X% at the for supplied the to a will on believe basis, as Jeff years of be supply Jeff New look hotel

So I it turn to think with that, over I'll Jeremy.

Jeremy Wegner

Adjusted in this and everyone. down Good hotel is in XX.X% impact down Well, margin was XXXX. FFO $X.XX XX.X% of the to EBITDA COVID-XX Even an in March, the full quarter. was in XX.X% QX felt RevPAR QX $XX.X adjusted Chatham’s pandemic. though EBITDA than over off only QX, Chatham’s RevPAR lodging was it Despite Thanks Dennis. decline half QX just of far represents Hotel Chatham’s EBITDA XX% pandemic down March morning million FFO was XXXX COVID-XX margin, the of share RevPAR XX.X%. was of from QX. the the for decline not adjusted was prior margins many generated point REIT basis peers XXX $X.XX our XXXX QX our down to in from the from per share the per XX.X%

were ventures and environment. current operating pandemic significant two are highly leveraged challenges Our COVID-XX in the before joint facing the

and service debt leverage Colony loans. in start X.X the servicers these of XXXX, not are times full-year the potential of and and from pandemic, the For lenders had April before Both JVs JVs Chatham May, have relief their the combined made pursuing debt-to-EBITDA. payments two for the

are to amount Inland except debt the bad not of any million JV default loans acts, a which Chatham Chatham equity debt. recorded on current full impairment JV for the investment defaults in certain represented and Chatham this light under carrying non-recourse $XX.X JV of circumstances, trigger its investment. Both under the cross do boy In

no in for investment. negative, basis Innkeepers the so Our JV is was impairment necessary that

to escrowed strong of significantly an the capital under has and sheet from and that end JVs. servicers had with a million and cash loan we that cash balance to for whether $XX credit our At QX, for be completed expenditures, year profile insurance. facility. restricted million amendment pandemic, the ended being facility. unrestricted the taxes drawn of that property of balance COVID-XX $XX.X million QX the used $XXX $XXX that entire with revolving And in different caused credit Chatham ability Chatham’s disruption the of and by is May, the can liquidity us next million we facility sheet positions wealth covenant our the early provides relief capacity utilize we our

NOI liquidity When XXXX. in balance and covenants begin $XXX between XX, covenants annualized be we again, figures starting basis tested on end the million used EBITDA through calculated cash revolver our of and be for At of had to XXXX, March an credit June will unrestricted

is availability, including approximately of even our burn million G&A $XX, for CapEx. monthly principal at $X.X a RevPAR corporate cash and interest amortization

at approximately liquidity performance current current cover our us should So position for XX months levels.

will improve point. We expect before operating performance that materially

could need we debt liquidity, additional additional have with raise believe as we don't value unencumbered collateral of While we hotels will proceeds. book six that a serve $XXX million to that

March single from Chatham’s balance between sheet we million debt option maturing is have is maturities debt end a and several in of matures also credit through XXXX. over the mortgage the But next only debt that benefits September now $XX.X maturity non-recourse for XXXX in XXXX. March The our facility we minimal years. After the have have that, XX. we an loan next extend maturity that to

the material both for of time of amount before amount significant recover the hotel XXXX. capital beginning a to operating we to need in have refinance will markets We debt performance and

visibility early we operating withdrew going With in the lack we're of visibility limited, the stages not economy hotel of at time. to the performance we’re of performance, guidance a the guidance our recovery this reopening around earnings in March. current and of provide operating around Since timing a remains and very

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

Operator

first with Our question BMO proceed of the Capital from Klein your comes line Instructions] Please [Operator question. Markets. with Ari

Ari Klein

changes likely looking a mean the Can of you on you this be expect elaborate structural little what potentially you then Jeff some implemented looking different mentioned operating standpoint post-COVID. profitability from longer-term? most could a bit and model the

Jeff Fisher

Hilton, with limited Marriott for but or hotels The conversations course of around all housekeeping whether you. thank for frankly service cost items, they'd highest beverage. revolve to and and be Yes, food

much as On settle I disclose I the between really what all want until too to they on the do again, conversations brand, groups front board, and brand's can't of with residence these ongoing which so they various housekeeping currently advisory the that sit us. are on in

to service not the to the are a three cleaning and even upon for But the course, for maybe it'll that you're whatever on example pick going up frankly, at of nights, to for is room, roll-out feel new I'd say be depending going that. talking to each pretty hotels requirements of effort. extra any the comfortable be significant or to guests to think brand some about coming there costs also I extend and But or, four going that's brand make cleaning going be least stay-overs, will you're again, general beyond automatic about public

minutes a a to cleaning for it And up minutes XX took even XX take that XX we normal think a even room. minutes maybe or room, may

that practical pretty costs impact and hotels, all in margin wash, really to has everyday to the real food buffet. in side, breakfast a experience So we on and extensive least the of the in come beverage service see provided all overall to out at select

As go costs you week, expect with free few go bag, for and to in a it, the paper food Homewood I'd evening reduce three a grab our into our that those to our with brown know, concept most times away Inns brands Suites, some future, pretty items little foreseeable expect go so go probably I’d and with were see away. In should items and substantially. at hours Residence some that of least cocktails In there a

testing a opportunity need I the more significant start up what be. going occupancy little But bit is our there. we to there's impact said, as get I think So and rates to

Ari Klein

do like before sounds right recover, you now first percentage others standpoint seen have accounting see out then advance then an decent start July things you June improvement? a in to step down of look you maybe from a as And responders recent as Maybe for to weeks? it you are booking occupancy it. Got and what see or and

Jeff Fisher

I missed part. the last

Dennis Craven

Yes, that out, some of how first back listen needed a be disconnect, as these industry and be they coming military you business will think for I and an whomever in, have I travelers areas happens. be as there the leisure travelers bit right, I as are mean it might check that a there little of of think basically, think as will far responders, I urban or timing

States have the demand, though two I part you're especially weekends a leisure where seeing certain Savannah fall a to I locations some don't the this see of the what bit, in think Southern XX%. in primarily off think, United our to massive was ago going been because weekend shelter-in-place restrictions essentially related whether we’re that little pickup up it Hotel, relaxed in about a past at jumped of

think of on again kind a but think out, the be to depends there essentially to first it some Now, point, be at certainly demand. now going level really low others checking leisure XX% is I But just of I will responders nurses XX% from in. that but checking and timing,

Operator

Our with question. next question Tyler Batory Markets. Janney of from Please comes proceed Capital the line your with

Tyler Batory

So somewhat follow-up talking and wanted about Jeff, also prepared encouraging. bit current in previous the I just trends on question you're think there a to more the I remarks, little

markets, strength You talked just at markets about you're the get more. Which what have a Can of in would trying in removed, of shelter-in-place terms what's to leisure just precise little be XX% bit been driving hotels closer seeing there, helpful. XX%, where real in that? of more occupancy Savannah some those the sense bit you you're to these rules bottoming seeing seeing now what detail, some of of get you're the little demand just time terms throughout of is more a

Dennis Craven

only of last leisure I mean to real and I quick. in a last couple just Yes, is a just hit weeks markets. your point, Tyler. phenomenon two it's demand mean, really

was for gave because I ago, So Savannah think occupancy kind its standards example weeks the teens, two relaxed weekends I you Georgia, it ago, demand two upper weekend, was this again at the Savannah of past mid-XXs.

as think it’s around come rooms. total to the portfolio So was be think hotel count our first I I as of a of leisure think will total some but XX% leisure one of probably back, in just I room our percentage markets,

that bode should for well that. So

I to to to XX% it's across Now, XX% of of would I that mix now have occupancy you as markets but markets mid a also teen there's half occupancies only we far And to not XX%. occupancy, of coastal where those a a military. or us as meaningfully performing XX% dozen tell XX% is What as for responders our would a are first portfolio, so in at characterize from most the better. least kind

have So naval some, Silicon Seattle, between our a and in in related Northeast. business some San Diego the markets Valley, in little even military or

We as Summerville as Charleston, well, as area. in have well some our

think a business I military getting those where types out seeing or of or we're mix of some So responders, highest performers. the plus we're areas first where naval

Tyler Batory

are about And or get but some you curious, sense. makes bottom that market of going, potentially too mean, trying these thinking of some things to now the train and markets some concerned terms some be when strategy more I demand both get your there's perfect, same in you being just capture also issue? Okay, following-off ADR share going that reopen. the the as ADR to not thought how race guys to other about an a market, you're meaning hotels of

Dennis Craven

mean, because are hotels the one, at it closed. just that the are your depends us the we're I occupancy levels concerned And what got you've all for of a rate breakeven everybody the basically heck Yes, on listen, that's day, I all giving is. lying end companies it, I are think that about lot mean of no,

new what as rooms your to similar going up, China are people hotels, more hotel to open try as get in are stay occupancy have inventory seen you've what business. because to as that hotels opens levels and open, you you because rates back Korea, as depressed, in hotel and become are up, challenging say going So as back again,

be going So issue. rate an to is

of to like. at to this OC think believe that's think best heck point ADR even we hey, looks basis, the we a why mix a you, on break is it's what So, least and tell guideline that appropriate most the that RevPAR at I is which

us rate in hotel an picking ADR will be though is So everybody, come a issue for to as is ADR to going the be be to demand start for issue, back up, I even going think short-term. There up.

Jeff Fisher

let there around And ability to with information desire be out and tend to least relative all of and businesses users, the that drive of not come add and at just day-to-day just a to large start us that there. the here again, what conversation they conversations when because rates say, really Island’s me going ADR, were let's to already communications sharing their out corporate and paying ones expectations, corporate back they whole the an in with that's there, traveling ADR there's way on and little And March. to before than start thing this anyway, at hit lower

to wouldn't and every to on and those I So responding But to heads put pre-pandemic to bearish. hotels buddy we I else, rates maintain will be in it. want but similar will hope too looked bank we don't be looking beds that we'll rates, to like and work be requests rates

Tyler Batory

Last the it's possibly, helpful. just finished I on Center in for cetera. me, of, probably could just when of spend I that on you update, on could any but when terms you construction where in start be that or mean, very this, that timeline again? that's developments, premature, provide terms could I working you Okay, if et Warner miss guys question apologize are

Jeff Fisher

majority the is level Yes, through Tyler. about on four of of building, three. three the to mean back which Yes, we've concrete I'm up pour weeks say we listen, the going finished weeks that I ago, ago,

next can site challenges construction, operational given and kind where associated slow and to labor, hopefully with us the the to of to the to we down the early we kind July, be to decided full getting XX construction, for of days, reconsider at least For essentially efficiencies the July at timeline. get to it

can As we of that going XXXX that certainly about quarter use push to opening, with into on, day felt feel and till let's the kind pause, I now get hold probably at didn't was fourth we say this wait that development we you're dollars essentially were up of XXXX. our full we the XX before, moment to But expecting think of talked a best July scale.

And slow I was the contractors down XX of days. felt things well we on least field, that in of next at to advice it our the think for kind the best

We’re they some the around the concrete still like B still and exterior, work call, everything on we’re work to what site. utilities and related doing some doing permit that

of just lower a So scale next months. the for it's still two bit little active on a

Operator

comes proceed question from with Matt questions. Boone Please with line Riley. next of Our FBR your

Matt Boone

on I'm question just I for Bryan. on quick had a liquidity.

pursuing that mentioned hotels dispositions currently had But profile? six your had was that raising considered if unencumbered, curious I for collateral just serve help you You are as you debt. additional could that any to potentially improve liquidity

Dennis Craven

Yes this of consider certainly hey listen, lot not it is we'd point disposal this is whole I mean, Matt, there activity. acquisitions Dennis. or a at but

is I think backing hotels you see everybody everything all that's out there that had contract under are contract. Those out.

proceeds disposition in limited. from is really least at ability, short-term the any really, get a to the So

somebody it's what next So, if mean, hotel like. know But I to think hotel. can going doesn't looks I you're buy and people at where least things do see seeing to going a back start maybe every that. willing is us start not certainly, come month to to go,

deal point. going So be hard that buy to it's a at to

Jeff Fisher

And with that's the the in occur. our And only redone I sale here. transaction no facility, days believe fire next you'll there's that XX see

kind think like cash will ability manage having I of day and in yes, go prevent Island road. from with other hotel down the out the that relative are to us So to to and liquidity burn REITs day

Matt Boone

near-term in any are put then you additional additional And good headwinds? that position That's you considering you're instituted cost deploying there initiatives you've moment or any savings, a turning helpful. to Okay, you. enough do already weather should to believe at the thank that that everything

Jeff Fisher

benefit done what Yes, I mean done far is to-date. we've I we've of think significant so provide everything

honestly, and of volume everything we talked vendor looking such and as already a of mean the types As utility or prepared of about that savings in services cut side, there's relationships remarks, we not the quite lot and utilization still back. I've pricing but garbage haven't on are I my whole at anyways purchasing

of lot hotels. So because and occupancy a of limited

we'll ground the has the that help and little work been but here bit can look majority So at there us. of continue done, work and to obviously the

Matt Boone

my be then the can what supposed And it. missed CapEx, to is over the Got exact remind breakdown next last is that. you with quarters? question I'm me sorry, I few

Jeremy Wegner

are And got Residence we've isn't up balance to of $X our we're and their related quarter Center, $X second to renovations. going about million Inns in of but going CapEx Rochelle about to the Warner $X the year that that Anaheim that wrapping spend. of New million related for Yes, this to the with million be

Operator

no the at are comments. this closing floor to further to back turn There questions you. over for time. like Thank management I'd

Jeff Fisher

you are listening. for a forward better obviously And to look looking thank course basis. things Well, to times And I a and on relative better at ahead, you think on we of basis. days have all comp

as and and proud the well of being way are around those secure positioned sales we expect proud we they hotels. our able put as be. that for you to by And particularly are. country in of can all. Those teams, listening which any folks our these business the I We’re the are Thank if teams of

Operator

This teleconference. concludes today's

day. your disconnect you Thank a your participation may You time. lines for and wonderful at this have

Chatham Lodging Trust (CLDT) 11 May 202020 Q1 Earnings call transcript