Diamondrock Hospitality Co (DRH) 2007 Q1 法說會逐字稿

Welcome to the DiamondRock Hospitality's first quarter 2007 conference call. The company is hosting a live web cast of today's call which you can access on the company's Web site at www.drhc.com in the investor relations section.

Many of the comments made today are considered to be forward looking statements under Federal Securities laws. As described in the company's SEC filings, these statements are subject to numerous risks and uncertainties which could cause future results to differ from those express in or implied by our comments. The company is not obligated to publicly update or revise these forward looking statements.

In this call, the company will discuss non-GAAP financial information, such as adjusted FFO and adjusted EBITDA which is believed useful to investors. You can find a reconciliation of this information to GAAP in today's earning press release which is available on the company's Web site and in the company's form 8-k filed with the SEC.

I would now like to welcome management. With us to day are Bill McCarten, Chief Executive Officer; John Williams, Chief Operating Officer and Mark Bruggert, Chief Financial Officer.

At this time I would now like to turn the call over to Mr. Bill McCarten for his opening remarks. Please proceed, sir.

Thanks, [Antuan]. Good afternoon everyone and welcome to DiamondRock Hospitality's first quarter 2007 earnings conference call. Let me start the call by providing a brief overview of our first quarter highlights and outlook. Mark and John will then provide additional color and discuss guidance.

We're off to a very good start in 2007 and look forward to another solid year of growth. Here are the highlights.

DiamondRock again reported strong operating results in the quarter. Which were generally at the upper range of our guidance. Thanks to our RevPar increase of 9.7% with about 80% coming from higher room rates. Thanks to our level EBITDA margins expanded 183 bps, adjusted EBITDA was $34 million and adjusted FFO per share was $0.26.

We recorded double digit RevPar growth at eight of our 20 comparable properties. Led by our hotels in New York and downtown Chicago. We did experience somewhat softer than expected results in our California hotels and in Atlanta.

In January, we acquired the six month old, 793 room Westin Boston Waterfront hotel for $330 million. This is our first true convention center hotel and is located in the developing seaport district. This hotel will provide solid future growth as it continues to ramp up and the seaport market comes into its own over the next few years.

In connection with this acquisition, we also completed an over subscribed $330 million equity offering in January. We also refinanced our $75 million secured credit facility with a $200 million unsecured facility at more favorable economic terms. The company's low leverage, its increased credit facility and unencumbered assets provide us with significant financial flexibility and about $300 million of investment capacity.

Our outlook for the year is positive and we remain confident in our 2007 guidance. We are forecasting solid growth this year following a truly outstanding 2006, a tough act to follow.

Lodging fundamentals continue to be strong and supply growth although slightly increased from recent historic lows remains restrained in urban markets. Although we have a couple of issues in the second quarter that we will discuss in a minute, the second half of the year looks solid as bookings in third and fourth quarters are quite strong.

We believe that industry fundamentals will remain strong for several years and that our hotel portfolio will continue to leverage this positive industry environment. It is concentrated in high barrier to entry gateway cities in destination resorts. We're benefiting from more than $100 million recently spent on renovating our portfolio. And our hotels are in the upper upscale category which tends to perform relatively better in this part of the cycle.

The acquisition environment remains challenging. We continue to review and look at a number of opportunities. However, cap rates are low and it is a challenge to find acquisitions that fit our quality and market objectives as well as our financial criteria.

I believe we said about the same thing last year and yet we were able to uncover and complete over $700 million of high quality acquisitions that met our criteria. However, we will remain disciplined in this environment.

Now I'll turn the call over to Mark Brugger who will cover our financial results in a bit more detail. And introduce our second quarter guidance. Mark.

Thank you, Bill. As Bill touched on, DiamondRock had a strong quarter. Now let's jump into the numbers.

For the first quarter the company reported total revenue of $133.7 million, adjusted EBITDA of, was $34 million above the high end of our prior guidance. Adjusted FFO was $24.2 million, which was majorly impacted by an incremental $1 million tax expense resulting solely from a timing issue with appreciation schedule of certain capital improvements. Adjusted FFO per diluted share was $0.26. The timing of the tax expense shifted $0.01 of FFO per share from the first quarter into the balance of the year.

RevPar in the first quarter for our portfolio of 20 comp hotels, which excludes the Westin Boston since it was still under construction in the first quarter of '06, was $119.77. A 9.7% increase over the same period of 2006 driven by a 7.7% increase in average [selling] rate and a 1.4 percentage point increase in occupancy.

Same store hotel adjusted EBITDA margins for hotels increased to 27.52%, 183 BP increase over the same period in the prior year.

Now turning to the balance sheet. Our balance sheet is in great shape and is among the best in the industry. As of the end of the first quarter, the company had $2.1 billion in assets, a total debt of approximately $864 million. We've taken advantage of historically low interest rates to lock in inexpensive debt for an extended period of time. As of the end of the quarter, the company's debt was comprised almost entirely of fixed rate property specific mortgages with a weighted average interest rate of 5.7% and a weighted average maturity of approximately 8.4 years. Moreover, nine of the company's 21 hotels were unencumbered by mortgage debt and can be leveraged providing flexibility for future financing.

In addition, as Bill mentioned, we amended/restated our corporate credit facility transforming it from a $75 million secured credit facility to a $200 million unsecured credit facility with a term of four years. The pricing grid on new facility cuts 50 bps from the old facility interest rate. Moreover, the new facility can be extended to $500 million if we meet certain, defined conditions.

The company's overall capital structure continues to be very straight forward and transparent with a 100% ownership in all of our hotels, in other words, no JV interest. We've not issued any operating partnership units and we've not issued any preferred stock. We believe that our capital structure is a competitive advantage as it makes it easy for investors to understand our operating results and provides us maximum flexibility going forward.

Now as Bill mentioned, our balance sheet today provides us flexibility to acquire another $300 million of hotels. Note that our net debt to enterprise value is about 32% at the end of the quarter and today. Even after pulling our investment capacity of $300 million, our net debt to enterprise value will be only 39%.

Turning to dividends. As a result of strong cash flow growth from our hotels, the company increased its quarterly dividends 33% to $0.24 per share or $0.96 per share annualized. This new dividend is well covered and represents a payout of about 70% of our '07 cash available for distribution, or CAD.

The company is providing the following specific guidance for the second quarter 2007 and reaffirming full year guidance.

So for the second quarter, we expect RevPar to increase 7% to 8%. Hotel adjusted EBITDA margins will be significantly impacted by yield support in the comparable period, so let me state margin guidance two ways. One, including yield support we expect margins to include an increase 50 bp to 70 bp. Stated alternatively, excluding the impact of yield support in both years, we expect margins in the second quarter to expand 120 bp to 140 bp. Note that margins will also be negatively impacted because of difficult comparisons at some of our Atlanta hotels which benefit from Katrina displacement last year.

We expect adjusted EBITDA to be between $51 million and $53 million in the second quarter. Adjusted FFO to between $36 million and $38 million and adjusted FFO per diluted share of $0.38 to $0.40.

Now turning to full year guidance. We've not changed our full year 2007 guidance. We continue to expect RevPar to increase 8% to 10%. Hotel adjusted EBITDA margins to increase 150 bp to 200 bp, adjusted EBITDA of $204 million to $208 million. And we continue to expect adjusted FFO of $148.6 million to $152.6 million. And adjusted FFO per diluted share of $1.58 to $1.62.

Lastly, total capital expenditures are still expected to be approximately $70 million to $80 million for the full year 2007. John will spend some time discussing specific projects in a minute.

To sum up, we had a very good first quarter and now look for the remainder of 2007 as solid. With that I'd like to turn it over to John Williams, our Chief Operating Officer.

Thanks, Mark. I'll focus my remarks on some of the underlying operating fundamentals that drove our strong first quarter results and support our guidance. I'll also update you on our planned capital projects and our pipeline of acquisition opportunities.

Eight of our hotels enjoy double digit RevPar increases over Q1 2006 led by the Courtyard Midtown Manhattan and the Conrad in Chicago. The Courtyard Midtown and Bethesda Marriott Suites turned in great performances. Not only because of their strong markets and renovations, but because the 2006 comp period had renovation disruption. Average daily rates at the New York City Courtyards were approximately $230 with occupancies in the mid and high eighties in the traditionally slowest quarter of the year. And we're seeing very little price resistance.

The Buckhead and Waverly properties in Atlanta underperformed in the quarter because of tough comps created by Katrina displacement last year. We expect this situation to continue through the second quarter.

Oak Brook Hills had significant renovation during the seasonally low first quarter. Oak Brook Hills group bookings are strong with definite bookings for 2007 up 17.5% over the same time last year. The renovations at Oak Brook are virtually complete and we continue to feel comfortable that the hotel's hitting stride with a truly first class product to sell.

Our recent acquisition, the Conrad Chicago showed great growth in the seasonally low first quarter. As we've mentioned, we had to turn over the entire executive team, with Hilton's full cooperation, to get the right team in place to implement our acquisition strategy of capitalizing on the strong Hilton presence in Chicago.

The new team is doing a great job and Hilton reservations are up 45% year to date. Although we now have the right team and strategy in place, it took longer than originally anticipated to get this done and thus it will take longer to hit our underwriting pro forma. The hotel is exceeding its budget and its momentum is accelerating.

Our most recent acquisition, the Boston Westin Waterfront Hotel, closed on January 31, 2007 and it reports on a calendar basis and thus the company's first quarter results only include one month of the hotel operations, February. Overall, the Downtown Boston hotel market was slow in the first quarter. The Westin faces a difficult second quarter which will include March through May because of booking patterns at the Convention Center and a major group cancellation. But then it's forecasted to hit budget for the back half of the year.

To help illustrate the issues in Boston, eight citywide events will occur in the first half of this year, expected to generate a 128,000 room nights. But in the second half of the year, nineteen events with 293,000 room nights will occur. That's 70% weighted to the back half of the year. Obviously a heavy impact on the city.

Generally in our portfolio, we continue to see positive trends in all segments including business transient group and leisure. With first quarter revenue growth of approximately 11%, 5% and 15% respectively.

The group booking page for our portfolio is back-end loaded. Definite group bookings versus the same time last year are down approximately 9,500 room nights in Q2, but are up a solid 8% or 30,000 room nights in the second half at rates 8% over same time last year.

Group activity in the first half of this year moderated in relation to the very strong first half of 2006 in Atlanta, Chicago, the Caribbean and Salt Lake City. As I've said, second half group bookings are strong, particularly at the Atlanta Waverly Renaissance, the Boston Westin, Oak Brook Hills and Vail Marriott hotels.

We see similar patterns in varying degrees in our three California hotels. And the Chicago Marriott has a great fourth quarter pace but needs to fill some gaps in Q3. At the LAX Marriott we're experiencing relatively softer group bookings this year when compared to last year. The reason relates more to the tremendous success the hotel enjoyed in 2006 when it booked a record number of group room nights. So it's facing a tough comp. But the hotel is forecasting to beat its 2006 net operating income, which by the way was the best NOI in the hotel's history, by over a $1 million. And 2008 bookings are very strong.

Food and beverage sales were strong as well in the quarter. Food and beverage revenues were up 6.5% for comp hotels in the quarter. Food and beverage margins improved 80 bp on a comparable basis in the quarter.

For the quarter wages increased 3.7% across our comparable hotels. Benefits increased 5.2%. As a result, wage and benefit costs as a percent of total sales dropped from 34.9% to 33.6% for the quarter among comp hotels. That's 130 bp improvement.

Other expenses among comp hotels in Q1, property taxes increased 12.3%. For the full year we are projecting an 8.3% increase. Property insurance was up 34% in the first quarter. Renewal rates for our portfolio, on average, are up approximately 4%, so we anticipate much lower full year increases.

Incentive management fees were up $0.5 million, which is a 47% increase over Q1 2006. For the full year we anticipate incentive fees will increase approximately $3.3 million or 36% to $12.3 million.

Energy costs rose about 6% for the quarter and we anticipate an increase of approximately 8.5% for the full year.

As we've discussed previously, our 2007 capital projects will total approximately $70 million to $80 million, significantly less than 2006 relative to the size of the portfolio.

In Boston we're proceeding with plans for the additional 45,000 square feet of meeting space and 20,000 square feet of leased restaurants in the adjacent Shell retail building we bought. We've also begun feasibility work for the potential 350 room expansion of the hotel. The additional meeting space should be online by the end of Q1 2008 and it will enable the hotel to be self sufficient in housing group business when the Convention Center is dark. The restaurants should open at about the same time and will provide the hotel and Convention Center customers with a great amenity. For [gear rights] investors we anticipate an ROI over 20% for the projects.

Our other major capital project, the addition of new meeting space and renovation of the ballrooms, lobby and public space at the Chicago Marriott is proceeding well. Planning and design are nearly complete and the project has been through a number of costing reviews, and it remains on schedule for completion in the first half of 2008.

Our other 2007 capital projects included a room's redo at the Atlanta Westin in Q2 and a redo of suites and break out meeting rooms at LAX in the second and third quarters. Total budgeted disruption in 2007 is approximately $1 million of EBITDA across the entire portfolio. Total disruption in 2006 came in at $2 million which was, by the way, $1 million under budget.

I also wanted to touch on our pipeline of acquisition opportunities. As Bill mentioned, in 2006 we acquired approximately $730 million of hotel assets. We also completed the acquisition of the Westin Boston Waterfront hotel as scheduled January 31 of this year. We continue to see many opportunities through our network of contacts, our first look relationship with Marriott and the hotel broker community. The pricing remains rich. We have remained disciplined in our underwriting parameters and will continue to do so.

We're very excited about the balance of the year. Our portfolio continues to perform very well. We anticipate a continuation of the trends we've seen over the past two years. We anticipate a continuing migration into higher rate categories in business transient and leisure segments. Revenue in the business transient and leisure segments are budgeted to increase approximately 15% and 10% respectively in 2007.

Special corporate rates are up approximately 9% in 2007 across the portfolio. And group revenue is budgeted to increase almost 7% in 2007 despite the first half softness.

I want to stress that the strong second half bookings are definite bookings and they have signed contracts.

So in summary, our portfolio performed very well in the first quarter and we continue to feel confident in our full year guidance. We continue to benefit from our concentration in major markets like New York, Chicago, Boston and L.A. And strong destination resort markets in Vail and St. Thomas.

We'll continue to work hard to maximize asset values through thoughtful asset management and will continue to source hotel acquisitions that deliver the same strong results as our portfolio has delivered to date.

With that I'll turn things back over to our Chairman.

Thanks, John. Antuan, I think we're ready to open the lines for questions.

(Operator Instructions) Your first question comes from the line of Will Marks with JMP Securities. Please proceed.

Yes, good afternoon, everyone. A couple of questions. One, I think, John, you'd mentioned on Buckhead and Waverly with tough Katrina comps. What about why did the other two Atlanta hotels do well? Are they, obviously to protect the customer but can you explain that?

Well, remember the Atlanta Westin properties compared to a period in '06 that had a different management team. And in both that and Alpharetta's case, we had pretty strong transient business which offset the group weakness which they didn't feel as much as Waverly and Buckhead because they're further out.

Okay. And you gave some comments on LAX. Can you just give me a general sense of the L.A. market. I've heard about overall weakness from others. But maybe some comments from you.

Well, I won't speak for the overall L.A. market. Our two hotels in L.A. have both had a similar phenomenon in that group demand well I should say at LAX group demand was down from an incredibly strong 2006. It's not entirely explainable but I think really it relates mostly to the strength in '06. '08 their bookings are up over same time last year, on par with '06. So we think this a just a little downturn in their group sales efforts.

Both Torrance and LAX have a little bit of transient weakness which seems to hit that market unpredictably, occasionally and it usually happens in the first and early second quarter of the year.

Okay, great. That's helpful. One other just big picture question. You guys certainly aren't the first company to show much better expected growth in the second half of the year, in fact it's the L.A. portion we're hearing about, every quarter second better than the first or better the second quarter better than the third and I'm wondering how can you make us comfortable that why this is happening and make us comfortable that you can hit the estimates?

Will, I think if you look at the growth in the company and the acquisitions that were completed, particularly when you focus on the fourth quarter, a number of our acquisitions were completed in November and December of last year so they had a little impact in the fourth quarter of last year and a significant impact in this year's fourth quarter. On top of that, our fourth quarter really includes effectively results from September through December for really the total portfolio.

So you take an asset like the Conrad and then on top of that a number of those acquisitions are really ramping up, Boston Westin was just opening in June of last year so we should have a really solid growth in the second half. Same with the Conrad is really ramping up.

So it's not that comps are necessarily much easier in the second half?

Well, there is an impact because on the renovations. Our renovations last year were primarily in the first quarter or the fourth quarter. At least the impact. In L.A. and Torrance were undergoing a fair amount of disruption last year, so you won't have that. So that does help. But I think much more of it is really the mix of the assets and the ramping up major.

Will, this is Mark. Just as John mentioned earlier in his call, as you look at Boston, which is our largest asset, if you look at just the convention bookings, they're 70% weighted in the back half of the year. So obviously that has a huge impact there. Atlanta, similarly, if you kind of look at their quarterly breakdown of city wides, it's really focused. They're actually down Q2, up slightly in Q1 but Q3's up 40% to 50% and they have positive growth in the fourth quarter as well. So you see more positive growth in the back half of Atlanta as well. I think you're probably hearing it from others as well.

Great, thank you.

Your next question comes from the line of David Loeb with Baird. Please proceed.

Mark, let me do hopefully an easy one first and then follow up with John. You mentioned 300 million of capacity but that you're at about 39% leverage or are you calculating 39%?

We're probably that 32% today, that's enterprise value. If we deployed the 300 million, that would get us up to 39%.

And how do you see that 39% as representing capacity or do you?

That's not our single measure, we, obviously depends how the cash flows and assets you're buying, where you want to keep the overall portfolio leverage. We're probably three times fixed charge coverage today. Obviously those metrics are important to us as well. So we don't base it just on one metric, but we're looking at a number of different factors. And 300 million is just a number that we're very comfortable talking about publicly.

Okay. I know part of this is strategic that you want to keep your balance sheet relatively loose to be able to take advantage of opportunities whenever the next downturn comes along. But I guess I'm just trying to understand about how easily it would be for you to go beyond that 300 if opportunities arose.

One's a comfort level of how you want to run your company. But clearly we have the capacity with a $200 million line that we've drawn very little on. It's expandable up to $0.5 billion. We have nine of our 21 assets; including some of our largest assets have no debt at all on them. So obviously we can leverage those up. So if there was a large acquisition or we wanted to go after a portfolio, clearly we have capacity to do that, if we chose to.

Okay. And then for John, can you talk a little bit about cap rate trends? Are they lower, higher, different for different kinds of hotels or different geographies?

Well, David, I think you're hearing the same thing from most. I mean for the really good urban markets and destination resort markets we're seeing sub six which is I wouldn't say is trending one way or the other. I think it's fairly constant. You know suburban properties you can get at a much better cap rate. But those aren't strategically where we're headed. So and then you combine that with the private equity that's going after it and the leverage game that they play, it becomes difficult to compete on a price basis. Even, although at a six cap it's not necessarily even accretive if you put leverage on it. So, it's a tough market out there. But I don't see it getting worse, by any means.

How about the spread between urban and suburban? Is that widening and are you seeing any slow down in the appetite for suburban hotels among your competing buyers?

Yes, it does seem to be slowing down. I couldn't put a number on it, but a lot of the, well and it depends on the quality of suburb, obviously. If you talk about Westchester county or Bethesda, some people would consider that urban. But it can be a fairly substantial spread and in some cases the number of bidders will be heavily influenced by the location of the product.

Okay. Thanks.

Thanks, David.

Your next question comes from the line of Michael Salinsky with RBC Capital Market. Please proceed.

Good afternoon, guys. Quick question. Your RevPar guidance for the second quarter seems to be a little bit out of place for the rest of [them]. I know you mentioned Atlanta being, facing some difficult comparisons. But are there any other markets or areas of concern? The second quarter that's really driving that RevPar guidance down?

Well, I'll take a stab at that. This is John. I think probably the biggest driver in the second quarter is group. The pace is off last year by 9,500 rooms and that falls among the markets pretty much we've talked about, Atlanta, Frenchman's Reef, Los Angeles Airport. So it's, you know it's, and to some extent the other California hotels. So I would say it's primarily on the group side.

In the first quarter we say some unexpected pickup on the business transient and leader side. We don't have visibility on that in the second quarter so much. So we're not able to kind of project that as overcoming some of that group softness. But our best guess is the numbers we're putting out there and the main impact, I think, is on the group side.

And actually, Mike, we feel very good about the RevPar growth in the second quarter. The 7% to 8% range is pretty strong. We had some benefit, as we mentioned, in the first quarter from last year's renovations. But I think we've got probably nine of our hotels that are probably going to turn in double digit RevPar growth.

Okay. Second question, as the bulk of the renovations are completed here over the, in the second and third quarters essentially, and you've got a couple going on beyond that, but how many additional projects do you see within the portfolio currently? As we begin to look out one to two years essentially.

Well our, it's John again. Our - the work we've done over the past two years really has been pretty inclusive. The biggest projects we have are Boston and Chicago, which we've highlighted, those will run into 2008. In Salt Lake City we have a rosary due we're looking at in a couple of years. But really we've done really the lion's share of our portfolio at this point as a result of the work we've done in the last two years and are doing over the next year.

Thanks, guys.

Sure.

Your next question comes from the line of Gustavo Sarago with FBR. Please proceed.

Hi, good afternoon, guys. Probably most of my questions are for you, John. Starting with the special corporate increase. I think I heard 9% across the portfolio. Could you kind of describe how that is amongst your major markets, particularly the urban ones.

Well I think it's kind of falling the way you're reading the weekly and monthly RevPar reports. New York for example has been double digits. Some of the biggest customers there are going up at 15%, 17% rates. Some of the slower growth markets are down in the low single digits. So, I think it's pretty much following the trends you're seeing in overall RevPar.

Okay. And looking at some of these ROI projects that you're doing, particularly in Chicago. Have you gone back and looked at kind of you're original underwriting for the expansion of meeting space given that Host is doing an expansion of it's meeting space, substantially I think almost twice the size of yours at their Swissotel? And looked at what that impact is or is it two separate sub markets?

Oh no, we've I think all the group houses in Chicago will feel that Swissotel meeting space expansion. But in terms of going back and looking at it, in some ways it makes it even more important for this hotel. We have 60,000 square feet with almost 1,200 rooms. We're at the very low end of our competitive set in terms of square feet of meeting space per room. So if anything, it makes it all the more critical that we get this 17,000 square feet of additional meeting space done.

But in general, it will be a more competitive market in 2009, 2010 when that Swissotel meeting space comes on stream. But at the same time we feel very good about our location, our product and our brand to compete effectively in the city.

Okay. Kind of touching on another market, Fort Worth specifically with the Omni, if you can talk about how that project's coming along, has it influenced any of the selling of rooms in the outer years? And I noticed that the director of sales at your property has kind of been stolen away and is now working for Omni. So has that impacted anything?

Keeping up with things aren't you, Gus?

I'm digging.

Yes, we well actually in '08 the bookings at that property are up 40%, believe it or not, course it doesn't open till late '09, but theoretically we would start feeling the competitive sales effort. We have not, to date, felt a competitive sales effort. We don't really have very good visibility on 2009 and 2010 group bookings there. But they're really just getting started. Having said that, it's going a very nice product. When we underwrote this hotel we knew about it and we took probably on the heavy end of the potential range of impact estimates. So, we feel we haven't underwritten and the hotel itself has fairly dramatically outperformed the acquisition pro forma. So when all is said and done, it's going to look tough on a year to year comp basis, but in the overall return on investment analysis we're way, way ahead and will be ahead when that hotel opens.

And from a position, have you filled the, filled back the position, the director of sales at the property?

It's imminent.

And I guess I read recently also that the Days Inn in that Market is now going to be, the buyers going to convert it to a Sheraton. Was that understood in your original underwriting or I guess, have you looked at what that potential impact is or is that a positive to the market or up branding that product?

Yes. I think the net answer, Gus, is yes because the Convention Center complains on a regular basis they don't have enough concentration of hotel rooms to really be effective competing against some of the other cities. And having said that, on a transient basis, obviously that's additional quality rooms in the marketplace. We have a much better transient location. So I don't think we're concerned about transient impact. So I think net, net we think the added rooms to help the Convention Center sell against other cities is a net benefit for the city.

Okay. One last question on this property. Given that it's a Renaissance and Marriott's pushed to really bring that brand forward with the customer base. Is there any [branding] initiatives that you guys are going to be undertaking other than the meeting space redo that you've done or are conducting right now?

This hotel was just -- the rooms were just done in this hotel when we bought it. It actually is at the forefront, if you will, of the Renaissance brands. It's one of the hotels they point to. Having said that, we're doing a Starbuck's on the Sky Bridge, we're taking a former leased restaurant and we're making that a three meal restaurant which enables us to take the existing restaurant and bar and turn it into meeting space, which is of course is the lifeblood of this hotel. So, yes, we are doing some things but it's not so much brand initiative as it is ROI initiative.

Okay. Thanks, guys.

Sure.

Your next question comes from the line of Will Truelove with UBS. Please proceed.

Good afternoon, guys. In terms, we talk a lot about group bookings and where they stand relative to last year. Can you just sort of tell us overall how much of your room nights, in your portfolio specifically, are attributed to group oriented business versus the transient kind of business?

It varies by quarter, but it's about 35% group. It's about 33% to 34% business transient, 28% leisure and the balance contract and other.

Okay. And the second question relates to this group booking window. I mean I know we're talking about the second half this year, but is there - has there been any kind of change in terms of the window of way the corporates are booking their group business. Are they booking further out, are they booking shorter term? Because when I hear about weakness in group business coming up here in the second quarter and what not, but it's better in the second half. I just want to sort of get a flavor for what kind of trends beyond just where we are versus last year in that group booking pace.

We're not I'm not hearing of any acceleration in the booking patterns, nor deceleration. So the corporate window of 30 to 90 days seems to be holding. It never came back to larger groups, the association and convention groups never went back to their traditional three to five year booking window. They have remained shorter after the last downturns, but not but they're trending back towards that longer term.

Okay, thank you very much.

Thanks, Will.

(Operator Instructions) There are no questions at this time. I would like to turn the call back over to management.

Okay, well thank you very much. We really appreciate your participation and your support. And we look forward to talking to you again at the end of the next quarter. Thank you.

Thank you for your participation in today's conference. This concludes the presentation. You may now disconnect. Good day.