Pebblebrook Hotel Trust(PEB) - 2020 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q2 2020, total revenues were $22.3 million, a decrease of 94.5% compared to the prior year period [8] - Total hotel level expenses were $63.1 million, reduced by 75.7% from the prior year [8] - Adjusted EBITDA was negative $50.2 million compared to positive $151.6 million in the prior year [10] - Adjusted FFO declined to a negative $0.58 per share compared to a positive $0.85 per share for the prior year [10] - Monthly hotel cash burn averaged about $10.5 million for May and June, which was $6 million better than previous estimates [6] Business Line Data and Key Metrics Changes - Same-property hotel EBITDA was negative $40.8 million compared to positive $146.9 million in the prior year [9] - The portfolio generated $3.5 million in revenue in April, $5.6 million in May, and $13.2 million in June as more hotels reopened [8] - Resorts generated a positive $1.3 million of hotel EBITDA in June, indicating a recovery in leisure demand [9] Market Data and Key Metrics Changes - Average daily rates at resorts during June were up 18.5% compared to last year, with weekly occupancies climbing to 46.4% [10] - For July, occupancy for 23 open hotels is estimated at 28% with an average daily rate of $239 [26] - Resort occupancy is expected to be around 45% for July, with an ADR of approximately $315 [26] Company Strategy and Development Direction - The company plans to focus on reducing cash burn and returning to profitability, with expectations of a slow recovery [7][27] - The strategy includes reopening hotels based on demand and only when it is financially viable to do so [27] - The company is pursuing nontraditional business opportunities, such as contracts with universities to house students [28] Management's Comments on Operating Environment and Future Outlook - Management indicated that the second quarter was the worst quarter, with expectations for gradual improvement in the third and fourth quarters [19] - The recovery is expected to be dictated by the virus and the world's ability to mitigate it, with leisure transient demand anticipated to recover first [20] - Management expressed confidence in the company's ability to navigate the current challenges and thrive during the recovery [34] Other Important Information - The company completed the sale of Union Station Nashville for $56 million, enhancing liquidity [12] - At the end of June, the company had $2.5 billion of debt, all unsecured, with total liquidity of $606 million [13][14] - The company has invested $39.5 million in capital for renovations and redevelopment projects [11] Q&A Session Summary Question: How does working capital affect cash burn analysis? - Management clarified that cash burn estimates focus on true cash in and out, excluding benefits from accounts receivable [37][38] Question: What percentage of furloughed employees have become permanent layoffs? - Management noted challenges in bringing back employees due to unemployment benefits and personal circumstances, but staffing needs are being met [41][42] Question: What is the expected change in margin as business recovers? - Management indicated that properties will operate with fewer staff and more efficient food and beverage operations, potentially improving margins [44][46] Question: What is the status of business interruption claims? - Management stated that evaluating options for claims is complex and may take years to resolve [49][50] Question: Are there plans to open more than 5 hotels in August? - Management indicated that additional openings are possible based on market conditions and demand [51][54] Question: What is the impact of seasonality on travel demand? - Management expressed concerns about seasonality but noted potential for stronger weekend demand due to flexible work arrangements [61][62] Question: How is the urban hotel market performing? - Management observed a slow reopening of urban hotels, with some properties remaining closed due to low demand [64][65] Question: Are there markets where permanent closures could benefit the company? - Management acknowledged that closures in challenging markets could benefit remaining properties by reducing competition [73][74]