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Edited Transcript of INN earnings conference call or presentation 12-May-20 2:00pm GMT

Q1 2020 Summit Hotel Properties Inc Earnings Call

Sioux Falls May 13, 2020 (Thomson StreetEvents) -- Edited Transcript of Summit Hotel Properties Inc earnings conference call or presentation Tuesday, May 12, 2020 at 2:00:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Adam Wudel

Summit Hotel Properties, Inc. - SVP - Finance & Capital Markets

* Daniel P. Hansen

Summit Hotel Properties, Inc. - Chairman, President & CEO

* Jonathan P. Stanner

Summit Hotel Properties, Inc. - Executive VP, CFO & Treasurer

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Conference Call Participants

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* Austin Todd Wurschmidt

KeyBanc Capital Markets Inc., Research Division - VP

* Chris Jon Woronka

Deutsche Bank AG, Research Division - Research Analyst

* Dany Asad

* Michael Joseph Bellisario

Robert W. Baird & Co. Incorporated, Research Division - VP & Senior Research Analyst

* Neil Lawrence Malkin

Capital One Securities, Inc., Research Division - Analyst

* William Andrew Crow

Raymond James & Associates, Inc., Research Division - Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the Summit Hotel Properties, Inc. First Quarter 2020 Earnings Conference Call. (Operator Instructions) Please be advised that today's conference call is being recorded. (Operator Instructions) I would now like to hand the conference over to your host today, Mr. Adam Wudel. Sir, begin.

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Adam Wudel, Summit Hotel Properties, Inc. - SVP - Finance & Capital Markets [2]

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Thank you, Howard, and good morning. I am joined today by Summit Hotel Properties' Chairman, President and Chief Executive Officer, Dan Hansen; and Executive Vice President and Chief Financial Officer, Jon Stanner.

Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our 2019 Form 10-K and other SEC filings.

Forward-looking statements that we make today are effective only as of today, May 12, 2020, and we undertake no duty to update them later. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at www.shpreit.com.

Please welcome Summit Hotel Properties' Chairman, President and Chief Executive Officer, Dan Hansen.

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [3]

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Thanks, Adam, and thank you all for joining us today for our first quarter 2020 earnings conference call. Yesterday, we reported first quarter results in our press release, including all standard comparable operating measures and financial metrics, which have been rendered largely irrelevant by the dramatic falloff in demand we saw in the middle of March as widespread closures were implemented to slow the spread of the COVID-19 virus.

Therefore, we're going to spend our time today, reinforcing the many proactive measures we took to combat the effects of the virus on our business, provide an update on the current operating environment, balance sheet, and look ahead to how we envision leading in the future.

Over the past two very challenging months, we have prioritized the health and safety of our guests, our brand and management company associates, and our own employees, and I'm quite pleased with the resolve demonstrated by our team managing through this unprecedented crisis. We have been fortunate to speak with many of you in recent weeks and are genuinely grateful for both the concern for our well-being and the interest in our business.

As the depths of what is certain to be a historic downturn became apparent in March, we swiftly began implementing hotel-level contingency plans focused on right-sizing staffing levels and adjusting service amenity offerings to an exceptionally low occupancy environment. Fortunately, the efficient nature of our operating model has allowed us to keep all but six of our 72 hotels open with another nine hotels effectively consolidated into adjacent, typically dual-branded hotels.

The hotels that remain open are operating with very limited staff and providing only the very basic service and amenity offerings. We have suspended all nonessential capital expenditures for the remainder of the year, along with common dividend distributions, which combined, will preserve over $100 million of cash on an annualized basis. We have also taken additional measures at the corporate office, implementing temporary base salary reductions for the majority of our employees and furloughing approximately 25% of the staff.

We were very pleased to announce yesterday an amendment to our senior bank credit facilities. Jon will provide more details on the agreement shortly, but this amendment provides us with an additional $150 million of undrawn funding capacity, a full financial covenant waiver for 12 months and a modified covenant package beyond those initial 12 months that creates considerable flexibility and runway for our business to recover.

As I mentioned, the majority of our hotels remain open today, and despite the incredibly challenging conditions, we are pleased to have found some level of stabilization over the last few weeks. Preliminary April results for our portfolio point to RevPAR declining approximately 89% compared to last year, including results from hotels that were closed or consolidated during the month.

However, occupancy levels were four full percentage points higher in the second half of the month compared to the first as certain brand initiatives, including first responder rate programs and our own internal revenue management strategies, prove successful in capitalizing unlimited opportunities. While high teens occupancy levels may seem trivial, I would remind you that even with 90% year-over-year RevPAR declines, that marginal incremental revenue reduces our monthly estimated cash burn rate from $15 million to $11 million per month.

With nearly $300 million of current liquidity, we have well over two years of capital to survive very draconian and thankfully, highly unlikely operating scenario. While we are all facing what is undoubtedly an uncertain future in road recovery, we also believe this will ultimately provide unique opportunities for value creation. We generally share in the emerging consensus that leisure travel broadly and drive to leisure demand more specifically will be the first and fastest segment of business to recover.

We stand well positioned to benefit from such a recovery as our efficient operating model has afforded us important flexibility to remain open at the vast majority of our hotels and a clear pathway to relatively quick reramp of business. Approximately 50% of our pre-crisis business mix was leisure oriented, while group business, particularly large groups and international demand, make up a disproportionately small portion of our customer base.

Before I turn the call over to Jon, I would like to make a few comments about our brand partners and provide some examples of how they have responded in a constructive manner. As you are probably well aware, the major brand companies have implemented several measures to help support owners through the crisis, including the postponement of brand-mandated capital plans, access to and utilization of FF&E reserve funds for operating expenses, fee relief and the suspension of some brand standards and quality control audits.

More importantly, we have collaboratively begun the very important process of addressing the future operating standards of our business, one in which cleanliness, hygiene and sanitation will undoubtedly take on a more prominent role. Our belief is a watershed event like this gives us a rare opportunity to address meaningful shortcomings and implement important changes to the day-to-day operations of our hotels.

While we are in the very early stages of redefining our model, we remain committed to finding solutions that enhance the long-term profitability of our hotels and delivering on guest evolving and likely elevated expectations.

With that, I will turn the call over to John Stanner, our CFO.

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Jonathan P. Stanner, Summit Hotel Properties, Inc. - Executive VP, CFO & Treasurer [4]

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Thanks, Dan, and good morning, everyone. In yesterday's press release, we outlined critical amendments to approximately $1.1 billion of debt, which includes our $600 million senior credit facility as well as two $225 million term loan facilities that are governed by the same set of financial covenants, and thus were modified in essentially identical ways.

Importantly, these amendments allow for the outright waiver of testing of financial covenants through the first quarter of 2021 and modified covenant thresholds, along with annualized testing mechanisms in the last three quarters of 2021 to accommodate what may be a more gradual recovery in our business. We have an ability to draw an additional $150 million under the revised terms of our revolving credit facility, giving us nearly $300 million of total liquidity, including approximately $145 million of unrestricted cash currently on hand.

This gives us not only considerable capacity to survive an extended period generating extremely limited revenue, but flexibility to operate in a potentially longer downturn and slower recovery scenario. We also broadly preserved our ability to continue making preferred dividend payments and retained flexibility to renovate hotels in a manner more consistent with our past cadence once demand begins trending towards normalized levels.

In consideration for this flexibility, the credit facilities are now secured with pledges of equity from our borrower-based assets and includes certain restrictions on uses of cash during the waiver period, including investments, common dividend distributions and share repurchases. The amendments to these facilities address more than 80% of our current debt balance, and when combined with an absence of debt maturities until November of 2022, position our balance sheet well to withstand the financial ramifications of a severe decline in revenues.

Today, our weighted average interest rate is 3.4% and weighted average term to maturity of nearly four years. We are truly grateful for the support we received from our bank group and proud that our many strong relationships allowed us to work through this process efficiently and successfully. As Dan mentioned, our cash burn rate in a zero revenue scenario is approximately $15 million per month, which is split roughly evenly between covering operating losses at the hotel level and funding corporate cash needs, including all principal and interest payments, corporate G&A, preferred dividend and nondiscretionary capital expenditures.

We've seen an encouraging stabilization in occupancy levels in recent weeks, which is reducing our cash burn rate by over 25% and in turn, adding considerable runway to our liquidity profile even in this historically low demand environment. As our attention turns increasingly towards a recovery in demand and evaluating reopening the few hotels that are currently closed, we remain focused on adding back labor, services and amenities gradually and prudently.

Less than 10% of the total rooms in our portfolio are closed today, and the majority of those we are planning to reopen over the next 30 days, pending any further changes to local market conditions. Thankfully, our operating model has always relied on relatively less labor, and we believe there's an opportunity at a minimum on an interim basis to operate with fewer FTEs at more normalized occupancy levels.

While revenues have declined dramatically across the industry, we have continued to gain market share despite the lack of traditional demand. Even before we begin to feel the effects of broad travel restrictions, we improved our RevPAR index by nearly 300 basis points in both January and February. Our 7.6% RevPAR index gain in March is likely somewhat skewed by hotel closures in certain markets, but nonetheless, we have been successful capitalizing on opportunities that currently exist, which speaks highly of our revenue management team and augurs well for our ability to reramp quickly.

Finally, we formally withdrew full year guidance ranges in the middle of March in response to the COVID-19 pandemic, and given the continued uncertainty in our business, we are not in a position to provide updated ranges for the remainder of the year. We will evaluate reinstating guidance as the operating environment continues to evolve over the coming months and quarters.

With that, I'll turn the call back over to Dan.

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [5]

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Thanks, Jon. In summary, we are pleased with our business model, our partnerships and our process to mitigate losses and prepare for the future. And with that, we'll open the call to your questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Our first question comes from the line of Chris Woronka from Deutsche Bank.

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Chris Jon Woronka, Deutsche Bank AG, Research Division - Research Analyst [2]

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Do you guys have an estimate of maybe what percentage of the portfolio is drive to, fly to? I know it's not something you typically ask guests, but if you are looking at just the location of those hotels, is there any way to ballpark it?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [3]

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Chris, this is Dan. It's a little hard to get an accurate estimate. I mean, technically, all of our hotels you can drive to as most, you can. I think what we see is some of the more traditional locations that maybe haven't been as much of a drive to market are starting to see some pickup as people may be looking at different modes of transportation, and they may be modifying their plans instead of flying somewhere to go somewhere where they can drive to, and that drive to market may have previously been a fly to market.

So, as we look at it, we think that all of our markets have a component that are visitable in this recovery period. I know that doesn't specifically answer your percentage question, but it's really -- there's not a real specific metric that we get through our guests that we could use.

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Chris Jon Woronka, Deutsche Bank AG, Research Division - Research Analyst [4]

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Yes. Yes. No, fair enough. I also wanted to ask you about kind of how you see rate integrity unfolding going forward, maybe if you look out to July or August? Because I think we know that some of the bigger full-service boxes might have higher breakeven occupancy, they have to use rate as a tool. Are you seeing any signs of more severe rate erosion as you look further out? Or is it so far holding up pretty well?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [5]

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I think so far, it's held up alright in light of the circumstances we're sitting in. Forward-looking trends are really hard to have any sort of confidence in at this point. I'm not sure how reliable demand forecasts are out beyond the next 30 days. So I think where we line up is that we expect to compete very well with our hotels in our immediate area, whether they're in our comp set or not, for the factors that we've been really positive on our portfolio for the last several years, which is they're great boxes, great locations. They have an average effective age of a little over three years, so they've been renovated, and I think that we believe will help us manage rate as best as possible.

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Operator [6]

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Our next question or comment comes from the line of Michael Bellisario from Baird.

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Michael Joseph Bellisario, Robert W. Baird & Co. Incorporated, Research Division - VP & Senior Research Analyst [7]

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Just wanted to dig into March and April trends a little bit, really kind of better understand the RevPAR declines. Can you maybe give us a sense of how your urban versus suburban properties fared? And then any particular markets that drag down the overall portfolio's performance would be helpful.

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Jonathan P. Stanner, Summit Hotel Properties, Inc. - Executive VP, CFO & Treasurer [8]

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Yes. Mike, it's Jon. I would say March finished down for the portfolio about 60%. As you would imagine, I think we started to feel the effects in some of the urban markets more quickly than we did in suburban markets, San Francisco probably being the one market that stood out where we saw a more -- a quicker decline earlier. I think the trends, and Dan mentioned a little of this in the prepared remarks, I think the trends in April, which our hope will be kind of the worst month for in the first half of the month than they were in the second half of the month. The occupancy was a full four percentage points higher in the second half of April than it was in the first half of April. Again, I think generally, I would say the suburban portfolio outperformed the urban portfolio. We've seen a continuation of that trend in slightly higher occupancy levels as we've gotten in the first few weeks of May.

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Michael Joseph Bellisario, Robert W. Baird & Co. Incorporated, Research Division - VP & Senior Research Analyst [9]

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Got it. And can you tell us the six hotels that are closed out right currently?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [10]

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Sure. Mike, it's Dan. We've got Hampton Inn & Suites in Silverthorne, Hyatt Place Minneapolis Downtown, the Hyatt Place in Orlando the convention center and the Hampton Inn Suites Baltimore Inner Harbor; Holiday Inn Express San Francisco and the Hotel Indigo in Nashville.

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Michael Joseph Bellisario, Robert W. Baird & Co. Incorporated, Research Division - VP & Senior Research Analyst [11]

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Got it. Helpful. And then just last one for me, probably for Jon. You mentioned $150 million of availability. What are the requirements for you to get that last $50 million? It looks like there's $100 million that's kind of freely available, and then there's a couple more steps you'd have to take to get to that last $50 million. Can you walk us through the mechanics of that?

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Jonathan P. Stanner, Summit Hotel Properties, Inc. - Executive VP, CFO & Treasurer [12]

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Yes, sure. So the -- I think as we've laid out, we drew $125 million of cash up and right around quarter end. So we're sitting on $145 million of cash today. In addition to that, we preserved $150 million of incremental borrowing capacity under the facility. The first $100 million, it will be secured by pledges of equity of the borrowing base assets, and the last $50 million of availability gets secured by outright mortgages on those borrowing-based assets.

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Michael Joseph Bellisario, Robert W. Baird & Co. Incorporated, Research Division - VP & Senior Research Analyst [13]

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Got it. So if you wanted, but for whatever reason, you found a use for that $50 million, you'd have to go through the process. It's a little bit more work to get that. It's not as easy and efficient to get than the first $100 million, right?

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Jonathan P. Stanner, Summit Hotel Properties, Inc. - Executive VP, CFO & Treasurer [14]

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Yes, that's right. I mean, I think the rationale for us was, one, I think for the banks, it's obviously a significant credit enhancement. In our view, between the $145 million we have today and the incremental $100 million before that last $50 million gets us through, again, a pretty long period of time in a pretty draconian scenario with $300 million of liquidity and a RevPAR environment where we run even down 90%, which was kind of the worst month of the year in April. It gets us 27, 28 months of total liquidity. So we've got a fairly long runway. You start getting into kind of back end of the year '21 and '22 covenants at that point in time. So I think that the liquidity and even getting that last $50 million to the extent that the market dictates it, we do have to give mortgages, but we've got a fair amount of runway before we get to that point.

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Michael Joseph Bellisario, Robert W. Baird & Co. Incorporated, Research Division - VP & Senior Research Analyst [15]

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Got it. And sorry, that 27 to 28 that's with the extra $100 million, not the full $150 million, right?

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Jonathan P. Stanner, Summit Hotel Properties, Inc. - Executive VP, CFO & Treasurer [16]

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That's with the full $150 million.

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Operator [17]

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Our next question or comment comes from the line of Neil Malkin from Capital One Securities.

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Neil Lawrence Malkin, Capital One Securities, Inc., Research Division - Analyst [18]

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First question, a lot of people have been talking about how this pandemic had kind of shifted or swung the pendulum back toward owners in the brand and owner sort of dynamic. I'm just wondering, I'd be interested to hear your thoughts in terms of what that kind of looks like in terms of -- or how you see that playing out in terms of fees, brand standard proliferation of new brands, and if you think that will lead to higher margins than you've seen before when everything stabilizes.

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [19]

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Neil, it's Dan. Look, I think the brands, as I stated in my prepared remarks, have been very much supportive of taking a hard look at the operating model across the board. I think that we've made great progress in discussions on things that would help the operating model, but that would also meet the expectations, which are, as you would expect, likely elevated for guests. So I do think that on a broad scale that we will come out of this with an even better operating model to the extent that we can achieve peak margins, I think a lot of that will have to do with the speed at which rate recovers. But I've actually been very pleased. I sit on a number of advisory boards with the brands, and they have been very much supportive of ways to help not just during this environment, but in evaluating a longer-term solution to some of the struggles we've had from operations.

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Neil Lawrence Malkin, Capital One Securities, Inc., Research Division - Analyst [20]

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Appreciate that. Other one I have is what, I guess, portion of your portfolio is traditional extended stay versus the, I guess, just traditional select service? And then are there anything that you're seeing from COVID that would maybe make you change or alter in some way your portfolio or capital allocation strategy?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [21]

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It's Dan again. The -- our portfolio is roughly between 20% and 25% extended stay. Look, we love that business. And should opportunities be available for those type of transactions, we would love to continue to grow that part of the portfolio. But we're very much -- very methodical on our acquisition. The returns still have to be there. The entry point would have to be right; locations would have to be right. So that would just be one of the factors we would look at and as we continue the evolution of our portfolio.

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Neil Lawrence Malkin, Capital One Securities, Inc., Research Division - Analyst [22]

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Okay. I guess last one for me. The mezz loans you have on the development, what have preliminary conversations been like with your partners based on the deterioration? And any possibility of potentially that capital stack getting pushed down and you maybe wind up being the equity holder?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [23]

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I think, Jon, I probably could share that question. I'd say that there -- the mezz loans are with a very experienced developer.

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Neil Lawrence Malkin, Capital One Securities, Inc., Research Division - Analyst [24]

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I think you may have hit mute.

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [25]

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Sorry about at that. I think we had a little bit of a power outage. Go back to the question on the mezz loan. Is everybody still on?

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Operator [26]

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Yes, sir.

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Neil Lawrence Malkin, Capital One Securities, Inc., Research Division - Analyst [27]

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Yes, I can hear you.

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [28]

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Look, I think as far as our partners on the mezz loans, they're very experienced developers. They're properties in good markets with strong demand generators. And we do have a mechanism to push those out a year or even two. So that's probably more likely the direction we'd go with those. We have given them a forbearance for the next 3 months, which I think is appropriate given the current environment. But we still feel good about the long-term prospects of these particular properties.

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Operator [29]

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Our next question or comment comes from the line of Austin Wurschmidt from KeyBanc.

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Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [30]

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I hope you haven't cut the utility bill at this point, but just into my first question here, in sort of a gradual occupancy ramp type scenario, how should we be thinking or what range of flow-through multiples should we be thinking about as you reramp costs and services over time?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [31]

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Austin, can you kind of repeat that? Are you talking about occupancy or...?

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Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [32]

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So yes, well, so as we think about RevPAR declines and how that flows through to hotel EBITDA decline, sort of a multiple of EBITDA decline to RevPAR decline, you guys were 1.7x, which stood out versus, I think, a lot of the peers being well north of 2 and even 3x, which maybe speaks to the efficiency of the operating model. You referenced earlier that ADRs have hung in there fairly well. And so as we think about a gradual occupancy ramp in the portfolio, maybe what type of multiple or flow-through should we think about on that incremental occupancy as you also reramp costs and services.

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Jonathan P. Stanner, Summit Hotel Properties, Inc. - Executive VP, CFO & Treasurer [33]

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Yes. So I'll take a first crack at this. So I think the way that we've looked at it, when we looked at retention in March, our March retention was somewhere between kind of 30% and 35%. And I think March is probably our best indicator at this point, but really only half of the month is reflective of operating at what are kind of these very, very lean staffing models. I think April will be the better tale. We don't have final April numbers yet. But my expectation is that the retention rates as we get through April, it would be somewhere in the kind of 35% to 40% range. So I think we'll have pretty good retention. That probably implies that kind of somewhere between 1.5 and 2x EBITDA losses, a multiple of RevPAR loss that you referenced.

I think as we think about how revenues flow through going forward, a lot of it is going to be, as you know, the mix between kind of rates and occupancies. And we're in a little bit of a unique circumstance here where this is a lot different scenario than going from normalized kind of RevPAR and growing those 2%, 3%, 5%, whatever it is you're -- at some level, you have to start adding back some of that incremental labor that has been cut. Take managers kind of off the front desk and get them back and bring in some of the more traditional staffing that you have.

So, I do think we'll see good flow-throughs. I think that, again, what we're seeing now in this environment is somewhere between kind of 35% and 40% type retention levels at these low occupancy levels that we sit at today.

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Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [34]

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Yes, that's helpful. I appreciate the thoughts. And then I was curious, do you guys have a sense of within your submarkets or comp sets, what percent of those hotels are closed or have suspended operations?

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Jonathan P. Stanner, Summit Hotel Properties, Inc. - Executive VP, CFO & Treasurer [35]

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Yes. We've got some sense. I would say the sense that we have is frankly, probably more anecdotal than what's getting reported by Smith Travel. I think as most know that Smith Travel has come out and said that until a hotel was closed for 30 days, it's going to continue to be included as reporting in the comp set. So we're just getting now to the point where some of the hotels that closed later in the month of March or into April are coming out of those sets.

I think as reported by Smith Travel, it's in kind of the high single-digit percentage numbers. I think realistically, it's likely higher than that. About 8% or 9% of our total rooms are closed. My sense is that the comp set is at least that high and probably a little bit higher than that. We should be able to have a more concise answer to that question over the next coming weeks as we continue to get better data from Smith Travel on closures.

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Austin Todd Wurschmidt, KeyBanc Capital Markets Inc., Research Division - VP [36]

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Okay. That's helpful. And then lastly, I think somebody earlier had kind of spoken to breakeven occupancy. I'm not sure that you guys gave a figure or not. I might have missed it, but could you give us a sense of where you think breakeven occupancy is? Is it both the GOP, hotel EBITDA and then maybe on a cash flow basis for your portfolio?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [37]

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Sure. Austin, it's Dan. There's a lot of variables that go into that. Clearly, at this level, there's not as much labor. And as you continue to reopen and occupancy picks up, there is an added labor cost. So -- and a lot of it is a function of the rate you use. So, if we think that at a breakeven level for hotel level EBITDA, it's somewhere between probably 40% and 45% using $100 as the base rate. Obviously, it depends on the market and the labor profile. And the breakeven to cover costs at a corporate level of probably 10 basis -- 10 percentage points higher. That does include covering the preferred dividends and Capex in that as well.

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Operator [38]

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Our next question or comment comes from the line of Bill Crow from Raymond James.

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William Andrew Crow, Raymond James & Associates, Inc., Research Division - Analyst [39]

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Dan or John, you think we get back to '19 levels in RevPAR first or margin first?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [40]

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That's a great question, Bill. I would, at this point, say RevPAR is probably the easiest way back. But it's really a function of how the operating model changes and evolves, a combination of what the supply picture looks like and our ability to push rate, which both, I believe, will be favorable in the future. But I think my perspective would be RevPAR would recover first.

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William Andrew Crow, Raymond James & Associates, Inc., Research Division - Analyst [41]

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Alright. And then how much exposure or demand do you generate from colleges and universities? Do you have a sense for that?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [42]

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I would say it's frankly pretty small. We do have the hotel on Yale campus, and we bought the hotel out in Portland that gets some exposure from some of that, from the university right there and with the Marriott in Boulder. But I wouldn't say it's a particularly large demand generator across the portfolio generally.

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William Andrew Crow, Raymond James & Associates, Inc., Research Division - Analyst [43]

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And then, um, thank you for that. Last one for me, and maybe you went through this and I missed it, but how is Memorial Day stacking up? Do you see a material increase in demand?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [44]

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Bill, it's Dan. I think, our perspective on Memorial Day is probably going to be more short-term focused. I think that is where the pickup is likely to be, and that's where we're seeing a lot of the successes that we're having currently across the board. So, we think that will be consistent with what we've seen the last couple of weeks.

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Operator [45]

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Our next question or comment comes from the line of Dany Asad from Bank of America.

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Dany Asad, [46]

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Can you hear me okay?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [47]

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Yep. Got you, Dany.

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Dany Asad, [48]

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Great. So, Dan, are you hearing about any suburban property owner distress? And if so, like, what would that mean for property values and potential M&A as things start to ramp up?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [49]

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Yes. I mean I think it's fair to say that everybody is in some level of distress right now, particularly the smaller owner-operators. I don't know that there is an immediate opportunity regardless of the level of leverage or operations. I think that banks have generally been supportive of smaller owner operators and giving them time to get their feet back under them.

As far as opportunities, our priority right now is really on the portfolio. And based on our portfolio, the locations, the chain scale and the operating model, we think there's a lot of value to be created from here, simply with that. But to the extent there is an opportunity in the future, we do have as a good relationship with our lenders as anybody in this space. And we've got a terrific partner with GIC, and we could look at things along those lines.

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Dany Asad, [50]

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Great. And then more from like a distribution strategy. So, once you start ramping back up, what does your distribution mix look like? Do you lean into maybe some channels more than you typically would or do you kind of -- yes, that's -- is -- yes, it's just going to be a mix? Or is it going to be the same as what it would have been pre-outbreak, I guess?

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [51]

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Well, I think one of the strengths of our portfolio and our operating model is we do have flexibility where we were probably more of a balanced business versus leisure from an occupancy standpoint. I think there will be more of a bias towards leisure. I think there'll be an increased focus on digital as we try to be creative and proactive in driving that business. So yes, I think there will definitely be a shift in tactics from our corporate revenue management team and how we go after business and fill rooms.

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Operator [52]

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I show no additional questions in the queue at this time. I'd like to turn the conference back over to management for any closing remarks.

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Daniel P. Hansen, Summit Hotel Properties, Inc. - Chairman, President & CEO [53]

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Well, again, thank you all for your partnership and patience with the power outage. We look forward to connecting soon. Hopefully, that will be in person. I hope you all have a terrific day. Thank you.

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Operator [54]

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Ladies and gentlemen, thank you for participating in today's conference. This concludes the program. You may now disconnect. Everyone, have a wonderful day.