Service Properties Trust (SVC) 2021 Q1 法說會逐字稿

Good morning, and welcome to the Service Properties Trust First Quarter 2021 Financial Results Conference Call. (Operator Instructions) Please note that this event is being recorded.

I would now like to turn the conference over to Kristin Brown, Director of Investor Relations. Please go ahead.

Good morning. Joining me on today's call are John Murray, President; Brian Donley, Chief Financial Officer; and Todd Hargreaves, Chief Investment Officer.

Today's call includes the presentation by management, followed by a question-and-answer session with analysts. Please note that the recording, retransmission and transcription of today's conference call is prohibited without the prior written consent of SEC.

I would like to point out that today's conference call contains forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995 and other securities laws. These forward-looking statements are based on SEC's present beliefs and expectations as of today, May 10, 2021. The company undertakes no obligation to revise or publicly release the results of any revision to the forward-looking statements made in today's conference call other than through filings with the Securities and Exchange Commission, or SEC.

In addition, this call may contain non-GAAP financial measures, including normalized funds from operations or normalized FFO and adjusted EBITDAre. Reconciliations of normalized FFO and adjusted EBITDAre to net income as well as components to calculate AFFO are available in our supplemental package found in the Investor Relations section of the company's website. Actual results may differ materially from those projected in these forward-looking statements. Additional information concerning factors that could cause those differences is contained in our Form 10-Q on file with the SEC and in our supplemental operating and financial data found on our website at www.svcreit.com. Investors are cautioned not to place undue reliance upon any forward-looking statements.

And with that, I will turn the call over to John.

Thank you, Kristin, and good morning. Our first quarter operating results reflect the continuing impact of the pandemic on the economy and especially on hotels and certain service retail businesses. As you know, we transitioned the branding and management of over 200 hotels to Sonesta during the past 2 quarters. The disruption driven by these transitions, coupled with normal seasonality and more restrictive government lockdowns through February had a negative impact on our hotel results that weighed on our overall results for the quarter. Despite current challenges, we are optimistic for a number of reasons. Lockdowns are easing in a growing number of states, more of the population is now vaccinated, and airlines are increasing flights for the summer. So we see a light at the end of the tunnel for a return to a new normal.

While we expect modest disruption to our second quarter results from recently transitioned hotels, we are encouraged by recent increases in demand and booking activity. Year-over-year comparisons look more favorable as occupancy levels exceeded prior year for the first time since the start of the pandemic in March. In particular, leisure demand in drive-to and resort markets has recovered meaningfully. With properties like our Royal Sonesta San Juan, Sonesta Hilton Head and Sonesta Fort Lauderdale, posting occupancies in excess of 80% in recent weeks.

Business transient demand increases are likely to be more gradual, not making a material contribution until 2022 and thereafter. In the near term, at least, group meetings will likely allow for a combination of in-person and video attendance with proof of vaccination or negative COVID testing a requirement for attending. Our suburban extended stay hotels continue to outperform our urban full-service and business-focused select service hotels, a trend we have seen throughout the pandemic. Our extended-stay hotels continue to have a significant occupancy premium to nonextended-stay hotels, with our 165 extended-stay hotels reporting occupancies of 54.5% during the quarter compared with occupancies of 31.2% and 28.7%, respectively for our 94 select service and 51 full-service hotels.

We expect our diverse portfolio of suburban extended-stay hotels will continue to outperform our other hotels until business travel recovers. Importantly, approximately 41% -- our approximate 41% weighting of rooms in extended-stay hotels has positioned us well and helped to mitigate cash burn rates. In the seasonally weak first quarter, average occupancy for our comparable hotels was 40.1%, average daily rate was $87.19 and RevPAR was $34.96, each roughly flat with the fourth quarter as a result of the initially negative impact of the 88 transitions from Marriott in February and March. However, results have trended upward on a monthly basis since year-end, with occupancy increasing to 46.6% in March and 51% in April compared to a low of 33.1% in December 2020.

I think it will be helpful to update you on Sonesta, the operator of the largest number of our hotels. First of all, it is important to keep in mind that Sonesta and its capabilities are far different and improved today than they were when we first announced we would be taking back hotels last year. Back then, Sonesta was a small independent hotel company that managed 53 hotels with 9,600 rooms for us in the upscale extended-stay and upscale and upper upscale full-service segments. At that time, Sonesta employed approximately 800 people and its small corporate office was in Newton, Massachusetts.

Sonesta currently manages 256 hotels with over 41,000 rooms for us in the extended-stay, select service and full-service segments, which range from mid-scale to upper upscale hotels. In addition, Sonesta recently acquired Red Lion Hotels, which franchises approximately 900 hotels with over 100,000 rooms. Today, Sonesta is one of the largest hotel management companies in the U.S., and it is the eighth largest hotel brand and franchise company in America.

Sonesta currently operates 15 different brands and has close to 1,300 hotels with over 140,000 rooms, with the majority of them located in the U.S. With this massive increase in size, Sonesta has also upgraded its management team with several recent management additions that have significant hotel industry experience. Today, Sonesta employs approximately 6,200 people and maintains its corporate offices in 3 locations spread across the U.S. in Newton, Massachusetts; Orlando, Florida; and Denver, Colorado.

Now I'll provide more specific color on the hotels that we transitioned to Sonesta in the fourth quarter of 2020, which included 112 hotels. Sonesta has now managed these hotels for a full quarter, and we are generally pleased with the progress to date. Comparing the results of these hotels from March 2021 to results in October of 2020, the last stabilized month prior to the transitions, RevPAR for the 102 former IHG hotels is slightly above the October levels at $43.61, despite lingering transition challenges. For the 97 Marriott hotels, it's too soon to make relevant comparisons as most of those hotels were transferred in February and March, but early indications are showing the same trends we saw with the IHG transitions.

While the transition of hotels to a new manager is always disruptive, and it has been difficult to build Sonesta brand awareness during the pandemic, we believe the worst of the transition disruption is behind us and Sonesta brand awareness is starting to grow. Nevertheless, even before hotel industry demand fully recovers, Sonesta is starting to realize the benefits of its much larger scale. For example, Sonesta's increased size is enabling it to significantly lower per transaction reservation costs through their own network as well as through the OTAs in the area of 15% to 20% savings versus last year.

In short, we believe that once the transition noise is fully behind us and hotel industry demand improves further, Sonesta will deliver solid results on both the top line and bottom line. In fact, we believe that this new larger Sonesta is positioned to perform as well as, if not better than, some of the larger, more-established hotel brand companies, especially in a post-COVID world with less business travel and more competition for every marginal customer.

SVC is also well positioned to participate in any upside realized by the creation of Sonesta as a major hotel brand and franchise company through its 34% ownership in the business.

I also want to provide an update on our relationship with Hyatt. As you know, Hyatt sent SVC a termination letter in January, the effective date of which has been extended to May 22. We are attempting to negotiate a mutually agreeable path forward for some or all of these hotels under this management agreement, and we are reasonably optimistic about how this is going. If we are unable to reach an agreement, these 22 hotels will transition to Sonesta by the end of the second quarter.

For all of our recently transitioned hotels, we have entered short-term management agreements with Sonesta through December 31, 2021, to allow for a thorough review of the highest and best use and renovation needs of each hotel.

Turning to our net lease assets. TravelCenters of America, which represents about 27% of our total portfolio based on investment, has continued to perform well through the pandemic and remains current on its rent obligations to us. Property level coverage at our TA locations was 1.84x this quarter. Rent collections from our net lease portfolio, including TA, were 93.1% during the first quarter, and our service retail asset management team continues to work with our net lease tenants, most affected by reopening and occupancy restrictions. Requests for deferrals have slowed significantly and rent collections have stabilized. However, we continue to work with certain tenants in the hardest hit industries, like movie theaters as they reopen in accordance with easing lockdown restrictions.

I believe we have passed the worst of the COVID crisis. However, we continue to take steps to preserve capital and solidify our liquidity, including drawing down the remainder of our revolving credit facility in January, maintaining a nominal dividend, deferring nonessential capital spending, working with our operators to control costs and completing select asset sales. Supported by steady cash flow from TA and our net lease portfolio, we are well capitalized with ample liquidity and well positioned with a diverse portfolio of assets to successfully navigate a gradual recovery of our hotel assets. We are confident that the early improving operating trends we are seeing in our hotel portfolio will continue to gain momentum as we finish out the second quarter and the balance of 2021.

With that, I'll turn the call over to Todd to discuss our net lease portfolio in further detail as well as our recent transaction activity.

Thanks, John. As of March 31, 2021, we owned 798 net lease service-oriented retail properties, including our travel centers, with 13.5 million square feet, requiring annual minimum rents of $375.8 million, representing 42.5% of our overall portfolio based on investment, our net lease assets were 98.5% leased by 174 tenants with a weighted average lease term of 10.7 years and operating under 142 brands in 21 distinct industries at quarter end.

The aggregate coverage of our net lease portfolio's minimum rents was 2.19x on a trailing 12-month basis as of March 31, 2021. Rent collections from our net lease tenants were stable at 93.1% for the first quarter, up from a low of 80.5% for April 2020, and anchored by our largest tenant, TravelCenters of America, which represents 27.2% of our portfolio based on investment. We collected 97.7% of April rents from our net lease tenants.

Since the beginning of the pandemic, we have provided rent assistance to 46 net lease tenants and deferred an aggregate of $12.1 million of rent, net of previous deferrals granted and reclassified due to lease modifications or extensions. As of April 30, 2021, approximately $11 million of rent remains deferred.

During the first quarter, we recorded reserves for uncollectible revenues of $4.8 million for certain of our net lease tenants, primarily movie theaters, fitness and restaurant leases. As a reminder, we recognize all changes in the collectability assessment for an operating lease as an adjustment to rental income.

Turning to our recent transaction activity. During the quarter ended March 31, 2021, we acquired a land parcel adjacent to a property we own in Nashville, Tennessee, for a purchase price of $7.7 million, including acquisition-related costs, and sold 1 net lease property with 2,800 rentable square feet for $400,000, excluding closing costs. In April 2021, we sold the leasehold interest in 1 hotel in Florida with 146 rooms, pursuant to a purchase option exercised by the ground lessor for $9.8 million, excluding closing costs, and 1 net lease property in Colorado Springs with 32,000 rentable square feet for $1.2 million, excluding closing costs.

We are also under agreement to sell 5 hotels with 430 rooms for an aggregate sales price of $22.3 million. We are currently leasing these hotels to the potential buyer at an 8% annual return on the purchase price, and we expect this sale to be completed this quarter. We continue to evaluate each of the recently transitioned as well as legacy Sonesta hotels to determine the long-term highest and best use of each asset. In the upcoming quarters, we may decide to market for sale or repurpose some of the hotels that we don't envision operating as a Sonesta-branded hotel long term. The decision to sell or repurpose could be the result of market overlap with other Sonesta hotels or otherwise as a mechanism for reducing leverage and improving the overall quality of our hotel portfolio through the disposition of capital-intensive properties or hotels located in out of favor or declining geographic markets.

I will now turn the call over to Brian.

Thanks, Todd. Starting with our consolidated financial results for the first quarter of 2021, normalized FFO was negative $42 million or a loss of $0.26 per share, and adjusted EBITDAre was $48.7 million. Our hotel portfolio generated negative $38.2 million of adjusted hotel EBITDA for the first quarter of 2021, compared to $30.6 million of hotel EBITDA in the prior year quarter and negative $26.1 million in the fourth quarter of 2020. Guaranty payments and security deposit utilization that supported our hotel returns under our historical agreements declined $60 million from the prior year quarter.

Rental income from our leased properties declined $8.1 million year-over-year. $5 million of this decline relates to reserves for uncollectible rents and $3 million relates to our net lease disposition activity. Interest expense increased $18.3 million over the prior year quarter as a result of our 2020 financing activities and our revolver draw this quarter. A $10.4 million decline in FF&E reserve income and a $1.4 million decline in G&A expense also impacted our overall results this quarter.

For our 304 comparable hotels this quarter, RevPAR decreased 50.6%. Gross operating profit margin percentage decreased by 21.7 percentage points to 2.6% and gross operating profit decreased by approximately $85 million from the prior year period. Below the GOP line costs, excluding hotel transition-related costs at our comparable hotels declined $14 million from the prior year primarily as a result of decreases in FF&E reserves, management fees, system and other costs that are tied to hotel revenues.

Our consolidated portfolio of 310 hotels generated operating losses of $58 million for the quarter, including $19.6 million of onetime rebranding-related costs. $34 million of these operating losses were generated by our 51 full-service hotels. Our full-service urban hotels in key markets where lodging activity remains depressed, such as San Francisco, Chicago, Boston and DC, continue to weigh on the portfolio. 2 of our full-service hotels remain closed due to the pandemic and local market conditions. $21 million of hotel operating losses were from our 94 select service hotels, driven largely by disruption related to rebrandings. $3.4 million of losses were from our 165 extended-stay hotels. Excluding onetime rebranding cost, our 165 extended-stay hotels generated hotel EBITDA of $4 million during the quarter.

49 select service, 36 extended-stay and 3 full-service hotels were rebranded during the first quarter. $19.6 million of transition-related costs recognized during the quarter included $11.1 million incurred by Sonesta to move the hotels to their brand flags, and we also incurred an additional $8.5 million to Marriott for costs, the majority of which related to employee severance costs at the transitioned hotels. Excluding the $19.6 million of rebranding costs, adjusted hotel EBITDA for the 2021, first quarter was negative $38 million.

Hotels in states that have lifted or have less restrictions or where we have leisure destinations have continued to improve performance. In the month of March, our 36 hotels in Florida, Arizona, Louisiana, South Carolina and San Juan generated positive hotel EBITDA in the aggregate of $5 million. To contrast in Illinois, California, New Jersey and Massachusetts, our 77 hotels in those states generated operating losses of $8 million in March. Overall, our 310 hotels generated negative hotel EBITDA of $9.8 million in March. 138 of our 310 hotels were cash flow positive in March and many others in their breakeven. As states continue to lift COVID restrictions, we believe performance will continue to strengthen in the coming months.

Excluding the 203 hotels that changed flags in the last 2 quarters, 105 comparable hotels in the month of March were just below breakeven, with occupancies of 51% and RevPAR of $49.76, which represents a 36% sequential increase in RevPAR compared to February 2021. Our overall occupancy for the month of April was over 51%, an increase of about 10% compared to the 46.5% seen in March. Overall RevPAR was $48.38 for April, a 13% sequential increase compared to March of 2021.

Turning to liquidity. Our overall cash burn in Q1 averaged approximately $16 million per month based on our adjusted hotel EBITDA for the first quarter. We currently expect our monthly cash burn to decrease in the second quarter before turning positive in the third quarter, given the improving fundamentals in the hotel industry and as the disruption from rebranding a significant number of hotel subsides. Based on our current outlook and expectation for stronger lodging activity in the back half of 2021 and stable rent collections from our triple-net lease portfolio, we continue to expect to be cash flow positive for the full year 2021 before any capital expenditures.

We funded $29 million of capital improvements during the first quarter, primarily for maintenance capital, rebranding costs and ongoing renovations at 3 full-service hotels. We expect to fund approximately $140 million of capital over the remainder of 2021 or a total of $169 million projected for the full year 2021. This projection represents a reduction of approximately $23 million of projected capital spend I provided during our fourth quarter call.

We continue to be prudent as we evaluate, prioritize our capital spending as part of our liquidity management. Maintenance-related capital is projected to be approximately $60 million for the year, ongoing renovations at 3 full-service assets, including our Royal Sonesta in Hawaii and Chicago, and a full-service Sonesta in Irvine, California projected to be approximately $40 million. Capital investments related to the transition of the management, branding of certain hotels to Sonesta is projected to be $40 million for the year.

We funded the $25.4 million capital contribution of Sonesta during the first quarter related to its acquisition of Red Lion Hotels. SVC continues to maintain its 34% ownership of Sonesta after giving effect of this funding. To echo John's comments, we believe this acquisition by Sonesta will directly and indirectly benefit SVC. The significant scale Sonesta has achieved will provide cost savings that benefit SVC's hotels and increase the value of SEC's ownership interest in Sonesta.

Regarding our common dividend, we continue to expect to maintain the current quarterly distribution rate of $0.01 per share through mid-2022. At quarter end, we had approximately $875 million of cash after fully drawing down our $1 billion credit facility as a precautionary measure to preserve our liquidity as we navigate not being in compliance with one of the financial covenants under our debt agreements. We currently believe we have adequate liquidity through 2022 and our next debt maturity is in August of '22, and we believe we will continue to assess and explore all of our options to ensure we are well positioned until this pandemic is behind us and lodging fundamentals stabilize.

Operator, that concludes our prepared remarks. We are ready to open up the line for questions.

(Operator Instructions) Our first question today will come from Bryan Maher with B. Riley Securities.

A couple of questions for me. First, starting with liquidity. I think you just touched upon the $875 million in cash left from the drawdown. When you think about the next 2 years, I think you just said plenty of liquidity through 2022, how much of that is cushion? I mean if you go cash flow positive in the third quarter, is the bulk of that $875 million just CapEx spending that you discussed and then the rest is cushion at the year-end 2022?

Bryan, thank you for that question. Yes. And I think if we do nothing else, we think we have enough cash to cover the $500 million that becomes due in August of '22. We think we'll be able to cover the CapEx and start building cash from operations in the latter half of this year and into next year. So barring any other transactions that we might do or consider, we think we'll be able to ride right into 2023.

Okay. And when you look back at the last 5 or 6 months with the transitions, what has been the biggest challenges there? And do you foresee with a much bigger Sonesta, the opportunity to may be convert some unhappy other brand owners to the Sonesta brand over the next couple of years?

Bryan, it's John. I'll take that one. I think the biggest challenge is that there's a notice period when you decide you're going to transition hotels or terminate an operator and obviously, the Marriott and IHG weren't happy about the fact that they were losing hundreds of hotels from their systems. So they stopped taking reservations for dates post planned transition date. So there's usually a couple of months where guests could be making reservations where Marriott or IHG really weren't letting them. The prior operators call on those who have made reservations before that cutoff happened, and try to move them to other hotels.

So besides GDS codes and things changing, the prior operators don't do you any favors leading up to the transition period. And then from an operational perspective, you typically don't get detailed employee information until just a couple of weeks, maybe a few weeks before the transition date. And so you have to make sure that you have all the information to make sure you have legally documented employees. You have to make sure they're appropriately trained in the new systems. And so that's time-consuming and it's much more problematic when a percentage of your workforce is furloughed. And so you're reaching out to introduce yourself not only to the existing employees, but the furloughed employees. And so those -- I think those were the biggest challenges.

But we think that Sonesta has done a pretty amazing job of taking the bull by the horns and transitioning these hotels quickly and ripping off the band-aid and getting back to work. They've assessed their sales team, and they've got a number of really great employees that they've transitioned over from IHG and Marriott. In some cases, they found in the sales area that because of the strength of the systems that Marriott and IHG both had that some of the salespeople that initially transitioned over were not scrappy enough to get out and battle for business. They were used to the telephone ringing and the computer screen popping up new reservations without having to work that hard. And so I think with the drop-off in business travel that Sonesta's scrappiness and their new size is going to help them compete head-on with the major brands.

In terms of their -- in terms of Sonesta's ability to franchise, I think that they're going to have a lot of opportunities to take on hotels from a number of the brands. I think that month in and month out, you see that the 3 largest brands, Marriott, Hilton and IHG have most of the new development rooms are going towards their brands, and they've really taken over a lot of the street corners and shelf space, if you will, for hotels such that new owners contemplating a hotel probably are going to have a difficult time making the economics work for the amount of dollars they have to invest, to be one of the -- 15th or 16th Marriott property in a market where they have an ability with Sonesta to have the focus of the brand and the support of the brand. I think that's something that's going to distinguish Sonesta from the bigger brands. Our experience is that hotel owners who think that Marriott is working for them and not working for Marriott don't really understand what's going on at their hotels.

Great. And just one more quick one for me, if I might, and then I'll hop back in the queue. Have you guys like kind of narrowed down what the cost per property is to convert from a Marriott, InterCon to a Sonesta, kind of the hard cost on signage?

And then kind of a follow-up to that. I've noticed some signage at previously other branded properties that announced Sonesta kind of have a temporary sign over the physical sign that was there before. Should we expect those to kind of stay on there while you analyze whether the property will be kept by Sonesta or sold as opposed to kind of spending the hard money to replace that only for it to be kind of waste of dollars 2 or 3 quarters from now?

Thanks, Bryan. I'll take that one. To answer the latter part of that, I think a lot of what you're seeing, if you see a temporary signage is just the time line it takes to get permitting and get those dollars out there to put the permanent signage up. So I don't think it's really the latter of whether or not we're going to keep it with Sonesta at that point. I mean, obviously, we're evaluating the portfolio, and we continue to look at every property, and there could be changes there. But for the most part, it's the permitting and how long it takes to get that out there.

But as far as the cost per hotel of the transition, I think I talked a little bit about the numbers in aggregate. But if you break it down, what we expensed at the hotel level, it averages about $120,000 per hotel from operations, whether it be procurement or getting revenue management systems and other legal costs for permitting and licensing and things of that nature on average. The capital component is about $225,000 a hotel, call it. And that's where you're talking about signage and IT hardware, computer systems, things of that nature.

And our next question will come from Jim Sullivan with BTIG.

I'd really like to have a follow-on initially, really, on that same question about the operating expense cost to transition. In this quarter some $19 million of transition cost, in Q4, $14 million of transition cost. So assuming that Hyatt -- that you continue with Hyatt, you don't transition, I guess the first question is, how much additional transition costs should we be assuming for the full year in addition to what you've just reported here in Q1 for transition costs, assuming no conversion of Hyatt?

Assuming no conversion of Hyatt, I think from an income statement standpoint, we've captured most of it, if not all of it, to date. I don't think there'll be much of a bleed into the future quarters.

Okay. And then secondly, you provided a very helpful detail regarding the calculation of hotel EBITDA and adjusted hotel EBITDA, providing a good line item detailed on the expenses. And then you deduct to get to the adjusted hotel EBITDA, the $19 million of transition-related costs. Just looking at kind of those line items on a consecutive quarter basis, the big increase as you move from Q4 to Q1 was on the other direct and indirect expenses, which rose about $11 million. Is that where the lion's share of the transition costs are located?

Yes, that's correct. That's why we showed this as an add-back to strip out those onetime expenses, we don't think they're recurring costs. So that's why we're adjusting them out. Yes.

Okay. And then you had mentioned the employee severance in connection with the Marriott transition. So I wonder if you could help us understand, number one, when the hotels were branded Marriott and branded IHG, were the employees of the hotel subject to union contracts, number one? Number two, with the transition to Sonesta, do those union contracts continue? Or do they become nonunion?

Yes. So there are a handful, maybe a dozen hotels in our portfolio that are union hotels. 2 of them are still closed. The other 10 are spread out around the country, but there's a concentration in the New York, New Jersey and Philadelphia markets. And if they -- and Chicago as well. If the hotel was union when it was managed by Marriott or IHG, then it has remained union when it's come over to Sonesta. It's -- in most cases, the owner has to sign a recognition letter acknowledging the union. And there are significant costs, a lot of which are pension related to trying to determinate those relationships.

So the -- I think that was cited in the prepared comments that about $8 million of the transition costs were for severance agreements. So do those arise because of the employment agreement that Marriott has with the employees? And does IHG or does Hyatt have a similar type of agreement with a similar type of expense, if you were to transition?

A lot of the severance costs that we saw with Marriott related to employees that have been furloughed for a substantial period of time. And there are a lot of nuances to -- if you're not planning to bring furlough employees back initially, if operations are still negatively affected by the pandemic and so there's an uncertain period of time, additional time that those employees will be furloughed. The labor counsels or employment counsel at Marriott and at IHG evaluated those and that's an astute. They all evaluated those conditions and made some determinations as to which hotel employees needed to be terminated as opposed to trying to transition them as furloughed employees. And that's just the way it should have happened.

Okay. And then just on one specific line item, management fees. On a sequential quarter basis, they more than doubled here in the first quarter from the fourth quarter. And I don't know if that had anything to do with the -- if any of the transition costs are on that line item or not. And -- or is that a result of the Sonesta transition agreement? That kind of going forward, should we assume that, that kind of $5 million run rate is something that's likely to continue on this revenue base?

Yes, Jim, that's directly correlated to the Sonesta contracts. The historical contracts and these contracts related to transition hotels are the same, so full-service hotels, Sonesta earns a 3% management fee; extended stay, 5%. So I mean that's directly tied to revenues. So as revenues grow, that fee will grow accordingly. So the historical agreements you might recall under Marriott and IHG, those were junior expenses, meaning if there was sufficient cash flow to pay our returns, then they could earn their profit fees. But in the Sonesta structure, which is more in line with the market agreement, those fees are just part of operating costs.

Okay. And then that kind of leads to the final question, which is, obviously, you've given very helpful information on top line trends by month here, in terms of ADR, occupancy and RevPAR. Under the Sonesta agreement, should we be assuming that as you -- as the portfolio recovers, hopefully to the pre-pandemic revenue run rate, should we be assuming that the EBITDA margin, the hotel EBITDA margin would be the same as what it was under Marriott, IHG management and branding? Or should we assume it would be higher or lower?

We -- I mean, as Brian indicated, the management fees will -- base management fees on the Sonesta will be an operating cost. So in that respect, there'll be added expense, or at least that's the way it looks superficially, but the fact is that when the credit support ran out with IHG and Marriott, and we talked about possible ways forward with them before deciding to transition to Sonesta, among the changes that both IHG and Marriott insisted upon was that their management fees would become senior as well. So I think it was that aspect -- that changes to our P&L is something that was going to happen across the board really without regard to whether it's Sonesta managing or one of the other brands managing.

And this will conclude our question-and-answer session. I'd like to turn the conference back over to John Murray for any closing remarks.

Thank you very much for joining us today. We look forward to seeing some of you at the in-person and virtual hotel and real estate conferences that are coming up in the next couple of months. Thank you.

The conference has now concluded. Thank you for attending today's presentation. You may now disconnect your lines at this time.