RLJ - Earnings call transcript Q2 2020

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Operator

Welcome to the RLJ Lodging Trust Second Quarter 2020 Earnings Conference Call.

As a reminder, all participants are in listen-only mode and the conference is being recorded. [Operator Instructions] I would now like to turn the call over to Nikhil Bhalla, RLJ’s Vice President and Treasurer of Corporate Strategy and Investor Relations. Please go ahead.

Nikhil Bhalla

Thank you, operator. to Trust welcome earnings second and call. morning, RLJ XXXX Lodging quarter Good Leslie and Executive for Mahoney, our will today’s results; be Officer, Hale, On call, available company’s the President of President Chief highlights financial Asset the will will discuss Vice Bardenett, discuss for Chief President quarter; Q&A. Executive Sean our our Tom and Financial Vice key Officer Executive Management

as we are actual certain it Forward-looking may the to the will subject to be on statements call to that from measures, SEC. what review company’s this and over the results discuss from helpful Factors lead company risks materially the can may I of night. the Leslie. with communicated. the release to now company’s our obligation the press other The that results turn XX-Q in in Also, impact call GAAP numerous to differ last reports located uncertainties reconciliations no been company non-GAAP filed made statements. had undertakes update forward-looking found to and be may

Leslie Hale

these morning also Good a deal We healthy your these for remaining joining We ones and that express you Nikhil. Thanks, continue to tirelessly and working with thank safety hope loved times. who unprecedented gratitude during like are everyone, times. and of our health to associates, would frontline help who are you us. our navigate to great and our us the prioritize uncertain associates, of to corporate our guests operators

bottomed and was demand in Demand virtually of as lowest leisure country group shutdown. industry. was by improved history our in was by up industry impacted the as primarily second non-existent. our in COVID-XX, much for quarter we pent lodging the the of which and May monthly April corporate with the demand June, driven industry anticipated, As demand The dramatically

dropped year. With to our was the in XX.X% in broader be occupancy Occupancy portfolio, to cadence worst respect XX.X% that the highlighting XX.X% this at lack of April second in improved during to second while future to demand. fundamentals, open and local trends, clarity and the Although, quarter ability we will at our quarter of industry quarter. our capture June, continue on hotels we mirroring believe the XX% the May

Although portion number Southern state in Florida, California from hotels of demand mandated markets suspended our of remained of a restrictions. such many due quarter our benefited Charleston, leisure the to South a closures the significant hotels and for in as lift and

impacted to limited by of total a our light portfolio critical executed which on of challenging of quarter background, Our urban lack the were we demand, number particularly second occupancy hotels XX.X%. priorities. In this

hotel focused First, we liquidity shortfalls to reduce rate. and operating burn on our managing our remained minimizing

including and successfully financially finally, successfully during quarter XX second hotels manner, we in the the amended and so socially debt responsible XX unsecured reopened a quarter. far And we facilities. or in Second, hotels hotels third

staffing reducing and remains a including of As to closing to priority. aggressive preserving have all we implemented crisis, outset reduce outlets, closing one navigate non-essential the At F&B eliminating of containment levels, cost liquidity our COVID-XX, floors room services number continue number inventory. this we initiatives,

limited containment have in All and remain rate. these our burn efforts of place cost

of lower quarter the expected, that hotels than due combination was initially we open, and hotels at Our $XX our remained of containment aggressive cost cash approximately second a more of revenues million success burn reopening higher our to than initiatives. expectations the

demand achieved rate profitability hotels in throughout as our the as portfolio Our burn quarter materialized. more improved

achieved XX% During open June, achieved hotels of our open approximately XX% as positive positive gross operating profits, our of over and EBITDA. hotels

over period have took combined through to in uncertainty. capital rate, G&A, in the as this position strengthened and expenditures and our cash, steps ability us limiting the burn position strong gives previously with confidence with navigate preserve we optimizing liquidity our our such of corporate our billion reducing to enhance our $X our in success liquidity Our liquidity

As we responsible we we framework suspended outlined last socially quarter, that previously XX developed financially manner. and a in the a to thoughtful reopen hotels

operating drive-to focused this is positioned costs are safety hotels, by reopening while and demand, approach capture in best on assets, resort our shortfalls hotels Our minimizing located those that for select that The maintaining occupancy hotels a all-suite our low markets. and control best hotels guests’ this in service or available to fit environment. criteria

in lifting opening plan, opening As led to May, we execute yielding of on and with these in to which XX restrictions began July reopening XX XX in began hotels many our the results. June assets states of positive

achieved hotels nearly occupancy June, service in select in XX% and Our XX% July.

XX% including two Our and our and drive-to occupancy achieved in months. and in same achieved June over our in occupancy July XX% XX% of in hotels hotels, occupancy July, mid-XX% most achieved resort June suites low-XX%s our of embassy in while approximately the these hotels occupancy and all-suite markets

open. we portfolio at now pleased number underscores the a to pace are were construct. seeing which level The the of are in occupancy is our portfolio of properties benefits of that XX% and at We able we of reopen, our

low reopen we our hotels to occupancy due levels. to Specifically, to us allows significantly portfolios our shortfalls minimize structure, which operating more even able operating were cost at

will navigate only this early oriented once environment to team. our sustainable early, also Ultimately, the recovery rooms, advantage of diverse pockets especially to and list as extended and to occupancy near-term workers social crucial small and a demand portfolio corporate demand us and us of social Our proving available. state guests, is of geographically XX% youth to crisis, our leisure groups, were included to positioned drive from which are distancing all-suite base hotels, attracted be the take allowing in position benefit benefit to portfolio transient portfolio to our These we quickly that of project hotels attributes demand our such construct essential ideally represent our This geographic diversification all but and approximately from total in us enable all pivoted unfolds. will to existing sports as in segments. was not demand the early

will to pre-COVID-XX timing return lodging Looking ahead, when one of while fundamentals. no knows we the

any that slow be the to believe healthy. in form levels, fully needs to demand to continue recovery recover will order all of be likely to industry three to build, pre-COVID We segments

remainder we we recovery rebound year, current relates after leisure For in we advantage sooner believe of particularly California, relative opportunities COVID-XX Texas, resurgence continue extreme it across take of anemic. us our given including and the of the cases corporate with sober sustainability we, rest in or of the industry, as the will Day demand, number a to the allow and the time. at to any in Labor Florida, group demand, states, which facing to the challenges, to Well, expect remain are appropriate along of remain positioning

confidence Our the and creation the model, portfolio. hotels lower embedded our to smaller low In in operational footprint have complexity, our position, levels. and allows for value geographic occupancy lean draw construct and of diversification our our liquidity which select-service strong and a portfolio hotels, continues at opportunities our full-service of particular, to our operating portfolio, compact breakeven

lean achieve earlier. operating profitability our model Our hotels to allows

unfolds. unlock we and portfolio, significant potential bolster believe within new finally, hotels recovery and will ramp of which have concentration value our early this the all-suite further our to continue normal transient our the our products to to in shareholder And positions during the us as embedded Our long-term. nature ramp up a opportunities

the the already quarter benefits relative as are performance. seeing our that in evidenced We advantage our offers, of portfolio second

liquidity. the into differentiating an turn of more we early. which of over results the balance Given attributes positive continued billion liquidity is of these when illustrates number that sheet and near-term us pace benefit emerge believe Sean? only up, EBITDA, the continues ramp period levels in extended Overall, open of the our in achieved review that hotels, to assets relative that but portfolio the financial Nevertheless, to uncertainty, to combined a recovery well, all not does recovery. with call our occupancy demand or recent a position now over and will July. sustained and Sean of our of of $X a current navigate strength early detailed number unfold, sustainable for unknown. of flexible position exceptionally are not in I to should performance sizable Whether

Sean Mahoney

Thanks, Leslie.

expected, marked lodging while demand, during has by May June. and levels, for order weekly still the April which mark COVID-XX. at occupancy was low significantly impacted anemic As gradually lows April improved from

Turning all to include still the suspended despite throughout numbers. hotels XXX results. to XX the reported second having hotels will continue our quarter, within we

point a percentage quarter by was rate. XX.X occupancy in and average XX.X% of primarily decrease daily a RevPAR Our in second contraction XX.X% driven decrease

April, occupancy the May quarter, of respectively. quarter average substantially XX.X% absolute and the XX.X%, and RevPAR XX.X% by XX.X%, declining our June of actualized daily in throughout contracted rate During $XXX.XX. an portfolio

$XX. in approximately and better June with meaningfully of open second and Open quarter bottomed May results daily resulting in of approximately in for XX% XX% out improved The of respectively. average at hotel $XXX at April rate and hotels were XX% month occupancy and each our occupancy XX% sequentially RevPAR

Leslie performance benefited in and hotels resort lift as and early properties, of hotels, markets As mix open the our at the second improved mentioned, hotels our throughout leisure all-suite quarter drive-to-leisure from demand.

points index of pleased attractiveness market second all-suite with this share our gained the relative are of an X,XXX the underscores basis during approximately product which that quarter. hotels of Two type. Ending We Bay quarter the XXX%,

leisure XXX XX the RevPAR remain to demand the to our healthy at lows Labor quarter is expect of expected hotels open least Third as improve Day. we are from second and quarter through of

As to July by portfolio. we for approximately contract operating XX% an RevPAR current example of entire expect trends, the

we our open ADR approximately our line July, in open hotels $XXX, approximately For and in XX% estimate was hotels which of with in ADR occupancy of June.

by gross during GOP to expect the portfolio encouraged positive the month pandemic. operating the our the of start fact positive first are is of hotel July, we profit We since which XXX that generate

quickly how recovery. can sustainable good a to GOP positive representation to ability Our perform of is our a during return portfolio

to line. bottom Turning the

was negative and forma were negative FFO pro million share negative $XX.X adjusted respectively, quarter second million Our and $XX.X per hotel and adjusted EBITDA $X.XX. EBITDA

As instituted XX%. the Leslie last quarter quarter. operating underscoring structure, containment mentioned, second continue committed operating remain lean we we cost monitoring that to declined compliance with flexible our cost operator initiatives and approximately costs our aggressive to

our would was million team we cost in on expect, I on and withstand remains ROI to focused of strong containment projects this variable achieving in outlook. Even into To team an costs efforts RLJ with that and our with to end, including vigilant a that we clarity line to entered focused liquidity, be controlling on laser protracted initiatives more environment. disruption. $XXX liquidity XX% benefits. of adequate have minimize a capital a reduction credit. the quarter, to the of Our period position until we has shortfalls suspend Wyndham continued continue that our turning like cash the operating ensuring have initiatives, strong and undrawn allocation current to on reemphasize you conversions the liquidity. the approximately as during year in would wages

pleased Additionally, cash we monthly April XXXX. burn. quarter monitor lower were continue expectations, which all closely shortfalls were to of assumed second for operating continuation that our than the trends We of prior demand our

second XX% approximately our driven quarter were better by factors. was monthly operating which primarily shortfalls than three Our average expectations,

at hotels First, and sooner open leisure revenue our demand than stronger rebounded stronger expected as was than expected.

during quarter, XX their than benefits. assumed hotels at shortfalls our comprised than focus managing cost average monthly hotels full-service operating to The were would at service operating operating expected differ And was effective and hotels. be we portfolio the shortfalls wages revenues will individual Second, The continue type shortfalls expectations. hotels. hotel in particular and on operating operating success exceeding led hotels’ factors. containment with our Overall, substantially reopened more hotels initiatives our is by third, at which based of full-service more location hotels, better than shortfalls model, meaningfully lean at is our other our traditional portfolios better than reopened and

our for a property now $XX and other of primarily G&A. $X attributable between a and top better the hotel burn. cash midpoint. range operating second range dividends, expected level is have which than of taxes and corporate inclusive $XX and reflecting cash range to burn primarily debt the to costs, XX% reduction at our insurance For changed million, quarter, of service million to is represent shortfalls, and the end The the not reduction $X.X outflows, costs, the improvement expected in including assumptions million hotel XX% to monthly total fixed million our the

third current are range, quarter levels. actual decline of property taxes demand. These could will year withstand expected turning expect is of demand. than Regardless, interest, corporate lodging and as expenditures. and cash the to the and low our quarter end high of unrestricted range there XXXX. be a impacted the burn sheet. costs be cash if payments senior if with outflows we maturities remain the demand end operating premiums, Day funded a was levels be positioned and and to higher exclude in protracted debt post-Labor lodging lumpy current insurance our shortfalls with liquidity monthly due towards the notes RLJ to outflows no expected timing capital well end remains Our of our estimates debt billion significant We lodging ended at quarter of billion be of fourth until balance $X to the $X.X fixed the approximately of hotel if fortress the timing to period contracts and to demand from of limited the cash,

balance our continue We sheet. significant to on flexibility maintain

our debt is or hotels unencumbered. are hedged of end our the XX quarter, fixed As the of and approximately XX% XXX of of

our quarter, of end first the and thresholds mid-XXXX. covenants reduce financial amended to of our credit line the XXXX, we During flexibility second of term further waive corporate financial through covenant through financial and loans and also certain quarter quarterly enhanced the

with and continue our have during remained aligned process. We lending great place the our value entire to lenders on relationships

to industry, timing nimble remarks. remains the high As levels. of the to all uncertainty, are portfolio the balance continue demand. return model, And environment. this ultimately with degree will that well operating returning the ahead, sheet, and given lack ample with we continue pre-crisis pre-COVID-XX as trends RLJ confident visibility despite we we of positioned our industry prepared Thank will and and facing monitor to flexible react to uncertainty lean liquidity, catalyst. of a we said, a that the stay we transit-oriented meantime, cadence to changing look demand lodging levels concludes closely you. our embedded of In on

We Q&A. lines operator? open will for the now

Operator

Golladay from Thank you. RBC is Wes please [Operator Markets. Instructions] proceed. with Our first question Capital

Wes Golladay

to Santa frame Monica, Hey, or one sense just good yourself, how that up, have It’s and key this these it preserve the hotels, making holding brands is from at for morning everyone. maybe, some close back hold. looking or capital one, you conversions if of leisure-oriented the money can were Charleston you on for financial maybe on

get to where sense we’re there. trying Just of at a

Leslie Hale

one Hey, Look, priority I talked good about now. that as morning, are think right before we’ve that Wes. capitals preserving number

finalize new situation unique and will last really understanding the normal we continue on in select to negotiations design work how that how the we’re and move this normal the long will Wyndham’s and as brands to ground – and with working so We’re that renovations. with said, unfold. new those can a the as not very dislocation our when and forward manager, well the hit hard the running

to the our this the of two in going continue to beginning said is. that’s two and about and shift by year, next thinking year this is we we renovations believe year, we to that’s As what expected current year sequencing, start a but right

Wes Golladay

than of being occupancy F&B with – can are the you close some a you maybe, open little you how to then up And thought, Okay. outlets? bit higher

Tom Bardenett

do this careful predominantly, service is Tom. we breakfast in and still at lower in for. assets, Right in the resort bag to Hey, have the what the and that deliverable that the we’re reason menus. properties, doing consumer they’re we and go be F&B at very levels look acceptable Wes. a regards is when select our morning based to our seems for behavior we’re looking on now, occupancy the to

regards beverage the and and what’s regards and demand overall pool, to there’s back a we’re F&B to to hotels. going meeting normal that’s food hotels, the going we’re I on the the what to little our based profitable. beverage in opportunity We’re regards opportunities to on would at providing ways in going to to also be levels providing off where in catering be in around say guests but our space,

Leslie Hale

think or think the out the Wes, thing Tom’s fourth believe the point add prepared sort one, I risk But that in other approach we and to service quarter whether operations. staffing new would to there’s level the is room we’ve you versus to buffet remarks. and how about we The sort greatest F&B to where the for to that of of normal the hours And offerings, the opportunity service on operating new the a improvement, is mentioned as of the just in comments; about model. that some do pullback offering our of there it’s

and So, sort understand how we’re we’re with not F&B do can going hurry a to hard to re-imagine be that. be really able really working to to the an that until reopen of brands we in we

Wes Golladay

Got it, Thanks the taking questions. okay. for

Operator

proceed. Anthony is Powell please question next from Barclays. with Our

Anthony Powell

good Hi, morning.

guess, yes. rest guess, fall. that be seem the I kind Hoping of current sharp persist they not through may pretty, of So, thought trends to there I yesterday and your year REIT not the other drop-off that some could, believe peers optimistic, but seemed of the a in

seem can that’d other You with Maybe, if be bit to of go great. into more some maybe, a participants, why be cautious more market you these you’re cautious.

Leslie Hale

general view look But I back look, Anthony, go to as lie. will taper kids much Yes. would house leisure that August to off after say, school. our Labor will slight that is Day,

back than perform get Now, in we out of have will the to may their still year in of recognize demand a pattern, a that desire the weekends people because better normal homes. half

relates there. mimics. going able seeing to opportunity So, limited to we to to then supplement we very by it’s be BT, it’s not And going think summer. the it that it we’re and what but over think there’s some large, be as and

we so don’t exists materializing limited pushed are the next their September then continuing there’s which that off is of limited. that we correlate the to think replace path, we have, same offices of see And that is whatever As see travel the and that on to business no books now, very reopening year, group right and cancellations now. after the now, to them very corporations demand leisure right many on with have will that

We expect continue for no the change to group to catalyst that to it as and the cancel environment. relates there’s

three our are the windows from short to right days. booking perspective, zero now, So, extremely

what at zero we’ve window. experienced that XX% look you our come far, If from of to three-day so has contribution

don’t don’t the demand to look to leisure So, is of to level we have that ability see just today. But forward. we replace going we the have the

Tom Bardenett

notwithstanding is cautiousness I that that worth Anthony, the to still our of Yes. And have We of house better than thing of then sort on some is view XX% comments, open to quarter. quarter position is fourth what for the fourth Leslie’s in think portfolio noting our bolt that of if expect. the we of

the core those New core urban the some We’re demand. the clusters around roughly generally, that I areas, think in York and don’t of markets. some sort balance areas of are open that still well different that suspended our that on from half view urban – positioned of to as hotels certainly specifically, our – that with more are well cautious and San any clustered around have we’re that will hotels are demand those the capture I remain peers that Francisco, hotels think

having is And also we think portfolio manage our environment. from how able to flow are cost continue and so But I in to to that think us is our that. that be about cautious set to initiatives. around vigilant tone up enabling we containment when costs benefit

Anthony Powell

share fall. about, Do you well? bit or that business as a than kind corporate travel and guess, business are view you maybe travel lot travel, I that cautious this regional local talk And Understood. there’s being better Yes. or small still a of of on national

Leslie Hale

local capture right group business our spot portfolio and makeup product is So, that, right. is I designed that travel is would to say sweet our what small in the and in that

to when small anemic, would quarter, and look this they is XX% relatively XX% we represent that we be whatever at our side from to. what So, that got from replace are just say to enough, if our I we contribution those alluding what type that general about we’re the had there. on little our is how Anthony, view BT out is today it which comes current was fact is. demand, you’re back, you groups, not portfolio about What matter perform which expect of numbers what of leisure but the seeing demand the The is earlier house it’s

Anthony Powell

in like – it. up the Got the you ramp easier are a all ups money environment? maybe, more of the understood. key conversions on to just more as favorable come seeing I guess, the that try turn Wyndham, on or with And brands the key current engine one brands maybe terms kind conversion

Leslie Hale

that these quality, say what we’re Anthony, negotiations assets. after sought high that I and highly in are active high, would is

we be to competitive it’s good the feel the brand. what of to so and very we’re able about And get a from going contribution

Anthony Powell

Thank you.

Operator

Austin next Wurschmidt please Our is from with proceed. question KeyBanc.

Austin Wurschmidt

more ducks the good of and still row planning sight on feel what’s I the well Thanks. maybe, more we’re normalizing conversions? there as forward morning. one Hi, have timeline comfortable that, to guess, you capital, for line the in move conditions, Wyndham, with of on having as turnaround once on a forward moving kind just with those your or

Leslie Hale

bit. little broke year two projects but you anticipated off would following two that’s I up sequencing. starting year. that again, the we had say the still by pushed and starting it’s year, a a this Austin, and But

from renovations earlier a assets on to the Charleston normalized lag assets to those I of to those the think months ramp Santa demand will and assuming up that so completion levels. finish the start and year would on early. expect fully we a be would on expect And XX nicely – Monica We

Austin Wurschmidt

more lot the with likely open hotels open thoughts competing there are and about in still seeing your from your to curious you sub-markets. in where along hotels you reopen? supply what just or do the perspective on – of I then are mean, markets, like And that a suspended – hotels, a you’re within is have sets shadow feel a Understood. competitive lot

Tom Bardenett

the on for on ordinance June similar open in full-service our do our then the that except predominantly of to and opens opening ability portfolio. suspended, And in and going pattern the where well, to the Airbnb then finding still based until what’s would started it’s for is flexibility what to all three are months what’s same are and as hotels the that markets group in be significant and in hotels continuing supply, as we’re I July in with and up. of they is consumer open service to is well happening select the host proximity, consolidated our compact and follow our to to and what’s regards the over in spurred in you if cancellation. out finding then and and to seems as to nature, brands outside talked what’s in our two has come environments San that of that full-service full-service. Hawaii Francisco the allow But for more opens New operate, York regards as or isn’t smaller hotels that last in shadow cancel and largest for last have as about Sean that that premium obviously, have actually urban amount them have as the ability certainly exposure, what back in Airbnb well the Hawaii those meeting earlier the brands, responsible say we but we’re please demand go also world, space

that’s as three hotels for next to Airbnb advantage in months or our regards well. versus think So, for space an we the the two

Leslie Hale

element other comment add just the I think shadow supply. about on the to Tom’s to

were be pre-COVID, to to business think that the liability, corporations to side. leisure do the stunted. into other going they’re think going on and the we focused represent be safe that want brands to on is know We that that think and like that on that they segments get We are fine business that. world traveler. to Airbnb’s and will they’re safety that their We think While going employees trying very the that the of do

see being we So, that stunted. those segments

Austin Wurschmidt

last that. And Appreciate me. for then one just

of little I trended. you you kind have missed I touched ADR this, a is ADR growth into if on how how July? and but track month-to-month know seen specifically Sorry,

Tom Bardenett

Sure. today. stable from pretty Austin, through we’ve late seen much may really ADR

ADRs, our in we the right we’re in June which is ADR July remarks. included line with prepared Our

in markets, yield ADRs just what so across aggressively today’s a the And the reality country the in to environment. really manage in seeing is which that us ability really we’re the most that that there’s environment to believe leads in – not as consistency this

there. up so just out at those – business variability occupancy not the a lot And of market market up are prevailing picking we within picking And and rates. there’s within rates

when so pretty you look portfolio, consistent. across our been it’s And

Sean Mahoney

to just OTA other at I you contribution look when with the which what’s was is on say, happening thing, would Typically, mix one where book. that’s out is GDS about add little up. about you we channel earlier Austin, corporations there today. down, is and And talked what think going percentage a bit

therefore usually segments on based that’s bar highest is parity. which rates is to group at two – at So, down, average in a down. the regards your then are and rate are ones that

pricing traveler, that which you’re of and able availability discounts out who get discretionary those to leisure to demand. as the be typically for to looking is a more what try is well to there, really as it’s of offering the brands So, dynamics discount traveler increase

Leslie Hale

breakeven point, of taking to seeing a seeing is housing the as And strategy alternative education, demand now, sort channels, there beds simplify lower and it’s Tom’s that we’re largely all looking what’s today. a business to for our is advantage as with opening schools medical as and out medical. rate the out even to obviously, summarize leisure is related BT the of would I revenue we’re Yes. a race and helping whatever heads there, in burn it. rate. long of our management

of on lower is end Austin. that of All the rate,

Austin Wurschmidt

makes Yes. sense. Great, That everyone. certainly thanks

Operator

question is next from Our Chris Woronka with please Bank. proceed. Deutsche

Chris Woronka

morning, everyone. Hey, good

point those will. keep cash longer-term? that you do made think, basically, kind with of changes luck operators do at convincing you’ve levels them these How these improve margins, to of conversations and if do low some the burn you stick make of your with much Some what you can to operational you around many have expect changes And these – brand have how to you permanent? and of how

Leslie Hale

re-imagine be but say to to and reduce buckets. to and to working all overall all, the that actually really of be too first temporary? to generally permanent? model. a – costs is also Our early and of puts What’s going are neutral, What’s couple in will control and I takes the collaboratively things be are these Look, to think unfold. burn house it going of about how going view parties But sort it’s rates

greatest mentioned a the around offering, the earlier, I F&B opportunity I think the staffing has approach, hours. the change As long-term and for

down frequency going the increased about unfold how know the space, consumer is based within I unknown that’s public housekeeping, rooms, it’s As that of to in the housekeeping think we on already the preferences. but ultimately

of about the impact I check-in, you implemented key, that’s a of think technology made been As like stay, contact for people that’s investments. list had have mobile it because allows to here and sort those think I

that it’s a we rate on I had that out some that largely amenities are no of exactly greater performance unfold. on burn point but stuff a we role, that focused down, fact the room, early and come being you on cut had I aggressive that basis, valet that a whether would too cost things it’s played to we’re no this will seeing while temporary was or quarter. our coffee better what also revenues containment it Some say will think your but back. in how to

Chris Woronka

of that market, hold calculus fair your asset? Okay, that the that at enough. come on longer-term inventory then decision terms in lot of expect we Knickerbocker, all out of the on kind does the or fact sell And of New change the York a

Leslie Hale

decision think we of at that the mean, No. had made the the asset I day, information end with that on the at time. I that we

in stigma York to overcome shoots are green other some New related that hotels, and going reopening, just there relative a have going lag. to that in New have not unfolds. that of York and recognize that early going markets, York that to a being we challenges is is some York we’ll all early, lag. New but to to It’s to believe a hotspot recognize But international to we New has and continue too on to We it’s long-term, see

Chris Woronka

Thanks. good. Very Okay.

Operator

Batory is please question from with next Capital Our Tyler Markets. proceed. Janney

Jonathan Jenkins

our Tyler. taking Thanks morning. is questions. Jonathan Good for This for on

you if have July seen have wondering color COVID specifically provide in is First and in states, and been on in been rising. the could recent initial cases portfolio one some from the where specifically, trends me that

Sean Mahoney

remarks, we’ve within rate, I generally mentioned both in July; the June occupancy prepared in is the seen we’re stable. in What was portfolio – as stable with Sure. and

just of And where that’s have across in hotels portfolio we market still over now still the XXs amongst so healthy some two COVID But down running our But bit key our – I in today, see increased to portfolio. and – top was West, of little the as few the the to cases, with were our it’s the and in a there we in characterize didn’t we were occupancy the portfolio demand saw we’ve weeks, that only key high-XXs, West, even we a of where last we down XX%, would upside. the stable. pullback

Houston. Houston The opening our us, We’ve I market. other largest hot in markets, actually mean, cautious we’re hotels for Texas – more on is

hotels a suspended largest on that suspended. that’s the continue of really, in look see we of relative performing hotels and didn’t you our portfolio. the in one we be at have to market the Houston to of so Texas when are so remained side. And actually lastly – number It’s the they steady are that and there our then falloff California, there. percentage And hotels

Jonathan Jenkins

the hotels? reopening guys rent, about with as there, thinking any it question, I and Okay, color are great. hotels, second they’re the to That’s And appreciate all remaining up there. relates or about ramping surprises rent then or the been you closed there very changes the have thinking helpful. the way

Leslie Hale

I and three reality was that of look we be thought was. the that that window window earlier, window. three-day mentioned The opened when would that zero booking getting booking days. able zero can’t. to is out And we to is biggest We think sort hotels, is, it XX% contribution in short as we our of occupancy how the of the surprise I we’re to

open booking And hotels paraphrase of so hotel. is team the one lesson the of what learned that we to members my

lesson here open hotels. so the And the really us learned is for to

in we re-suspending hotels. not so do the we a fourth see – anticipate And we even pullback if our quarter,

And open. so of we XX at are our hotels, when I not that look balance the have

And be to about August, Waikiki’s tied would that’s to XX to We in to rather. which the going clearly, hotels the in leaves XX have we the Louisville, cost New place. open near-term. in of boxes, month our expect and that’s of there largest, largest leave structure. you – expect higher that where to our Francisco then assets, York, San three in ordinance five one open larger

we’re those the seeing upon are And reality of they so while right now. the year, going is lag based to to of before what we open the it end expect

Sean Mahoney

hotels that were pandemic. I tag one is lower sort Leslie’s us, would And that going more, then, function relatively important into shortfalls. of I running occupancy have minimum which operating to have hotels on were at you of would to staffing operating of able demand the operating incremental what’s even with reduce is we comments, we When the look that we’re is with at those we shortfalls limited we’re to Leslie thought in – of shortfalls, the that’s for these levels allows which than able performed, levels a decrease think, demand, low, how much mean, our staffing. required cut for us very and

And much thought, or ago. will, than so our again, if hotels have – about breakeven at level because that decision, to months four make Leslie’s you occupancy again, hesitant works close that we is the hotels lower being of a with to would suspend comment three,

Jonathan Jenkins

me. That’s Thank Okay, great. detail. the all you. from Appreciate all

Operator

– with from Please Trust Securities proceed. next is Truist Gregory Miller sorry, Our question I’m Securities.

Gregory Miller

and on the industry what been very you on much. using position today result? staffing. of discussion lot hotel this a matter morning. curious There’s Thank cost implications may Good outsourced your is what in I’m

Leslie Hale

of been Boston, Greg, concern or their some for childcare our has risk a markets, cases the where the and family. staff labor back for or labor particularly the on front contract benefits look it’s are about unemployment we bit So, Orlando, we’ve bringing Atlanta, whether some in need seen challenged, seeing little

XX% it’s do labor. labor we at of an contract where at hotels, levels our contract normal to seen seeing So, have we whether service, about but XX% running to we uptake have currently, in labor. are we’re full use service pockets, limited or

Gregory Miller

Thanks. But one material great the also one least real on and could also could conversion from hotels some disposition grid a us a macro be case environment? disposing away. Yes. especially, given the side. long-term at the if you with incremental EBITDA question of few that be some And opportunities. entertain theoretical make concur just with post-conversions Would estate more years today’s could candidates, I catalysts Wyndham of hotels these

Leslie Hale

assets you price. assets sale, though point the we well, would you us great dispositions which year, Wyndham are, our say need described, what in did to described. that at those Look, actually based for a position sell on all heavy we any current an Having based in in the beneficial to have that, this coming I last see in our rate today, the put a performing to don’t is that today. year, that said backdrop I think on and have are right in at the time as maintain you liquidity relatively asset lifting What with burn the on would We climate that we assumptions. portfolio

Gregory Miller

much. Thanks very Okay.

Operator

One. Our Malkin next question is from with Please proceed. Capital Neil

Neil Malkin

thank guys, you. Hi

universities doing potential about talked the terms question, just in you after defensive to that that. of First wondering in the fourth what first-line alluded deceleration be you’re that of I’m to people kind leisure limiting are to of help yourself against anything more the a talk people the you to downside kind could likely about, or of the opportunistic defend prepare guys contracts would that that, or terms going side, in call to like quarter. and slowdown or you on or you see on

Tom Bardenett

Yes.

And where small starting of this and that Tom. regards at. that to we’re that replace which in groups, hotel coming contracts making people a book is of in are on on to we couple focusing leads trying youth is teams, social standpoint as of this from That’s with buyout XX% did strategic area. probably, the in find another, are What will focused. still have the group some things an the business, one to then actually weddings, Neil, locking is we’re of a So be XX to that of we a from in, We and finding a one A coming we we business leisure. looking couple and thing that it’s location dorm sure we’re what in from because sports mention weekends, amount increase fall. happening we’re that in is XX

to right August, in demand now that of very because being levels our management companies bit what markets, to in And approvals revenue top-line. lastly, profitable will that a focus the demand on leisure on mentioned. in beyond and maintain the going that in through a the and us encouraged That of for at was we’re of us with come on specifics top say, the gives prepared in regards with to to we and the they’re those really sales, so being And add regards we’re that our in there have based level to current of would and smart, regards levels I continue to enjoying decision thoughtful you levels occupancy little All you to and aren’t amount strategy July above strategic cost line lower around the that. FTEs. case tend the then

Leslie Hale

to of the we was add Yes. And now level question be occupancy on as mentioned prior in smarter occupancy fourth we see the earlier, we’ll are that, be that level we that I that and how possibly that thing on now, to of between and quarter. would we at at the toggle think the

how and understand other you’re for open. utilities having have some hotel normal open. incremental like come We’ve are to at out And toggle model off so that cable, to even our we pool of ability where versus get the that know costs, that despite you sort to to between things figure of a when that. suspended of a been of example, and also sort able savings how labor how to now, We’ve at run we’re

a So, soft. through operators are we going that to both get and are mentally our dialogue preparing things with

not We’re till get they waiting soft.

We made preparation are in around get going we’re and a soft and assuming control tight that are for they’re that. managing to being that

Neil Malkin

cycle, exposure of the the are over that terms – relatively a I fair of demand that me increasing amount well, social I you. How anyway. also legislation, capital I to agree, that in it’s to on would call guys build been and for say, Francisco in upticks you that, a very but basically you and couple supply navigate do is, you restrictions next radical flows? recent, I are the of have cities hard violence, or always feel synthetic Okay, the terms I years, have – onerous have but unaffordability. shifts Other I would people these San of argue how requirements question do in know building seen union unrest, great. in, things political understand coast it like Thank

be So very helpful. get just would your to comments

Leslie Hale

I you is that Well, think the first that to have long-term foremost and view. have a

normal we is can’t based on We location this again, before, on decisions going we’re know is environment this And right what going what You to is as this don’t the mentioned going complex to in. now new last. how in I make long be. a don’t moment. know is

to and to to the that that we’re our of evolved. we things is you overall minimizing hope risks at footprint portfolio a our of our are the of happening, we exposure medical particularly sort out-sized think make Some have will to markets the also diversification result a look these we of what’s solution have as that But ultimately solved, sure be which factors described.

Neil Malkin

you. one can get Okay, Tom, I great. more And then for

of talk within Your into lot, your trends performed there has that that how Embassy discernible and are over you the sources factors brands demand �� the many and performing biggest different then can – And that couple any how about a brandings Suites portfolio? and last generates, July? months are brand

Tom Bardenett

Yes. brand month. for occupancy, during Embassy the was Suites XX% that at in quarter look and remind roughly write-up when that, answer Happy were quite our The performance a you we of some Neil. of few about that the performance closed to

feel the the about of out in that for and number all-in assets, July, And where an XX% month were the assets, in we was that it’s those available ran XX performing. of demand how where started instance some opportunity were open the learned, it in we opened. there. that’s So because June, market. XX good actually of then improved, we the number Again that in of that’s

It’s In I index and that that yesterday And call Bay. of our over always one groups the And fact, we’ve Two it’s about the suite. Embassy obviously Embassy fits talked we’re what’s look certainly, – that think we Suites, cycle. down Homewood people XX small Two we earlier. Suites. years, been X, other the all-suites Suites Bay in area, is on about last the that Embassy value seen value in within brands, at and in want right for now. of proposition the Hilton brand brand one brand because We portfolio, that key is I that’s during Suites the Suites a the brand It’s how when opportunity, attractive is Embassy where performing, and for think exactly what that as with drivers and was proposition Home the

have in the are kids the that. watching room while in room TV one example is an So, parents other of they can

happening, tackling So, feel opportunity brand after what’s we’re about at we Suites though with this unique Embassy we’re a business even good in attracts. the environment, going

Sean Mahoney

of assets. to our share a The toggle products XXX% on of Suites. the X,XXX Tom’s comments, basis I those market share to my – prepared marks, of and are in at mentioned me quarter their I Yes. sort mean, Embassy points second And during sitting Neil, all-suite as gains, our within are majority

the is the by with outperform had July. are well on stats Some strong open they cadence, a of positioned But hotels. influenced that Embassy remain we which second to confident the we Suites mentioned that the quarter Tom are

as with maker and our we NBC our are And as so this going environment all-suites hotels we of for portfolio to in a well out think as come difference it. with be

Leslie Hale

level we that and mentioned open of last to were add I products. the that those as at And hotels XX% suite point of would is breakeven that EBITDA or our XX% before,

Neil Malkin

guys Thank Okay. very you, much.

to turn Leslie the end closing the over I like of question-and-answer reached Hale for session. have to remarks. back We conference would our

Leslie Hale

you, today. for Thank us joining guys

continued the challenges. face extreme As that call, on entire we there’s denying no the discussed lodging to industry has

on the guys family our Be model and with asset type However, with stay everyone, and well, a strong or to situated operating summer. find unusual footprint. our hope well your and RLJ you then is geographic I position a this lean safe, liquidity you favorable enjoy that way

Operator

Thank you. today’s This conclude conference. does

at your and lines You a may have wonderful this weekend. time disconnect

RLJ Lodging Trust (RLJ) 7 Aug 202020 Q2 Earnings call transcript