Pebblebrook Hotel Trust  (NYSE: PEB) Q2 2020 Earnings Call Transcript

Pebblebrook Hotel Trust  (PEB) Q2 2020 earnings call dated July 01, 2020

Corporate Participants:

Raymond D. Martz — Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Analysts:

Anthony Powell — Barclays Capital Inc. — Analyst

Ari Klein — BMO Capital Markets — Analyst

Rich Hightower — Evercore ISI — Analyst

Wes Golladay — RBC Capital Markets — Analyst

Michael Bellisario — Baird — Analyst

Shaun Kelley — Bank of America Merrill Lynch — Analyst

Neil Malkin — Capital One Securities — Analyst

Gregory Miller — SunTrust Robinson Humphrey — Analyst

Stephen Grambling — Goldman Sachs — Analyst

Smedes Rose — Citigroup — Analyst

Presentation:

Operator

Greetings and welcome to Pebblebrook Hotel Trust Second Quarter Update Call. [Operator Instructions].

I would now like to turn the conference over to your host, Ray Martz. Thank you. You may begin.

Raymond D. Martz — Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Thank you, Rob and good morning everyone. Welcome to our second quarter 2020 update call and webcast. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer. But before you start, a quick reminder that many of our comments today are considered forward-looking statements under federal securities laws and these statements are subject to numerous risks and uncertainties as described in our 10-K for 2019 and our other SEC filings and future results could differ materially from those implied by our comments. Forward-looking statements that we make today are only effective as of today, July 1, 2020 and we undertake no duty to update them later. You can find our SEC reports and our updated release and investor presentation, which contain reconciliations of the non-GAAP financial measures we use on our website at pebblebrookhotels.com.

The purpose of our call this morning is to provide an update on our second quarter operating trends, including the reopening of our hotels and resorts since we last updated you in early May. We will also provide our updated cash burn rate, as a result of our hotel reopenings. But first as you hopefully saw this morning, we successfully executed an agreement with our banks, on instead of financial covenant waivers and an extension of most of our November 2021 debt maturity to November 2022. The agreement provides a waiver of all of our financial covenants through the end of the first quarter of 2021. Starting in the second quarter 2021, until the third quarter 2022, we will have relaxed financial covenants for a handful of our most important credit terms. This will provide us with an extended period of flexibility, as the hotel industry recovers from this global pandemic. We thank our banks and our private noteholders for their strong support.

Also, the agreement provides an extension of $242 million of our $300 million November 2021 debt maturity out to November 2022. The remaining $58 million is our only 2021 maturity. This extension provides us with enhanced liquidity over this uncertain time. Although we will have some limitations on our use of cash during our waiver period, we have the flexibility we desired with capital renovations, acquisitions and investments, while also allowing us to continue to pay our preferred equity dividend, and our $0.01 per quarter common dividend. We will be filing the detailed amendments to the loan agreement, so if you have any questions, please feel free to give me a call.

Shifting to our operating trends, as we noted in our press release this morning, we reopened seven resorts between late May and late June, meaning all eight of our resorts are open as of June 25. Within just a few days, we expect to have 23 hotels and resorts open, which marks significant progress for mid-May when we only had eight hotels opened. As a result of this encouraging progress, we estimate our average monthly cash burn has been reduced from our worst case scenario previously provided and is now running approximately $3 million lower, implying our total average monthly corporate cash burn is now at $22 million to $27 million. As a reference, at the end of May, we had cash on hand of $627.5 million.

I want to turn the call over the Jon now, to provide more detail on our operating trends and our recent hotel reopenings. Jon?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Thanks Ray and good morning everyone. As Ray indicated, we’ve made significant progress, bringing our business back up and running, following the government ordered shutdown of the economy, and of course, travel. Hotel demand clearly bottomed in mid-April, and has been returning gradually and consistently over the days and weeks since then. Leisure is leading the return of demand, as individuals, couples, families and friends look to get away for vacations, visit family members or just escape from their home shelters. Not surprisingly, while air travel has also been gradually and consistently recovering, much of the leisure travel is by car. We’re seeing strong demand for weekends at our eight drive-to resorts in particular. But we’re also seeing some weakened demand in the cities, where we are open, including at our hotels in West LA, San Diego, and most recently in Boston. And midweek leisure demand has been recovering as well, as the school season has ended. That recovery is showing up in gradual and consistent growth in midweek occupancies throughout our markets.

In addition to the information we provided in our release this morning, I thought I’d provide some additional anecdotal data. Certainly, we have some positive and encouraging results. Last weekend, a number of our resorts hit occupancies for at least one of the nights, in the 80s and 90s, including both of our Key West resorts, Southernmost and Marker Harbourfront, which both had nights in the 90s. In fact, Marker had both nights hit 94%.

Paradise Point, which is a large Resort in Mission Bay, San Diego, has 462 keys, ran Friday at 79% and Saturday at 88%, with a weekend rate at a strong $328. L’Auberge Del Mar in Southern California ran 83% on Saturday night and the weekend at 78%, at a $501 average rent. In fact, as shown in the information we provided this morning in our press release and investor presentation, we’re not discounting at our resorts, and we ran average rates in total at our resorts, that were higher than last year. And these are not low rates. Our resorts ran an average rate of over $347 this past weekend, and Southernmost and Marker had nights over the weekend, with RevPAR is higher than the same weekend nights last year.

We’ve also begun to see some business travel return in our markets and at our hotels. Some entertainment businesses returning in West LA, as production restarts with some farm production returning to LA. We’ve also begun to see some project business return and other business, which can only be conducted locally or in person. A few small groups have met for business, and a few small weddings have moved forward. In fact, we had a 50-person wedding at Skamania Lodge just this past weekend.

With the return of any meaningful group business, it still might be a long way out. Particularly, as our country is experiencing a resurgence of virus spread, [Technical Issues] and hospitalizations in many markets. And of course, as resurgence can impact the recovery in our channel, including [Technical Issues], so we are keeping a very close eye on transit cancellations and bookings.

As a result of the overall gradual and consistent recovery in demand we’ve experienced in many of our markets, we have or shortly will reopen three hotels in West LA, two additional hotels in downtown San Diego, two additional hotels in Boston and one each in Miami and Chicago. That will bring us to 23 open hotels and resorts, including all seven of our hotels and resorts in San Diego. Reopening additional hotels will continue to be based on the ability to achieve occupancy levels and revenue, that allow us to reduce our losses and cash burn compared to remaining closed. That will not only depend on city governments progressing with the reopening plans, but business and and leisure feeling comfortable travelling. In the meantime, we’ll continue to maximize the performance of those hotels open, and minimize cost of those hotels that remain close. This will allow us to continue to lower our monthly cash burn, as has occurred over the last two months.

So with that we now like to move to the Q&A. Rob, you may proceed with questions from our distinguished listeners.

Questions and Answers:

Operator

[Operator Instructions]. Our first question comes from Anthony Powell with Barclays. Please proceed with your question.

Anthony Powell — Barclays Capital Inc. — Analyst

Hi, good morning.

Raymond D. Martz — Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Good morning, Anthony.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Good morning, Anthony.

Anthony Powell — Barclays Capital Inc. — Analyst

Good morning. So you mentioned that you’re looking at possible slowdown of transient bookings given the rise in COVID cases in the country. Have you seen anything to date that indicates that your — that customers are starting to pull back a bit?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Just yesterday, we saw some cancellations down in Key West after they announced the closing of the bars at both of our resorts, and that was a level of cancellation, slightly above what we’ve generally been seeing on a daily basis. So that’s the only thing we saw in the portfolio. We did not see that on the West Coast, but we did see that in Key West.

Anthony Powell — Barclays Capital Inc. — Analyst

Got it. And just to my next question, a lot of these states are reconsidering I guess indoor dining given some indoor spread we’re seeing. How important is indoor dining to the value proposition of the hotels now and what happens to your property, let’s say, California were to ban indoor dining or scaling back in any way?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah. You know, it’s interesting. It might actually help us, Anthony, because our resorts, for the most part, have outdoor dining at all of them, whereas our urban properties that are open we’re actually not doing any dining at those properties. So banning indoor dining wouldn’t have any impact pretty much anywhere within our portfolio and possibly a positive impacts from a competitive perspective.

Anthony Powell — Barclays Capital Inc. — Analyst

Got it. Maybe just one more. In terms of the urban hotels, Boston, Chicago, what are you seeing there in terms of the forward bookings? And I’ll get back into queue.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah. I mean the idea forward bookings, I think I would just throw away in the garbage right now. What we’re seeing throughout the country is for the most part bookings within a couple of weeks, including quite a lot of bookings in the week for the week and even in the day for the day, and that includes the urban properties. I mean our property in West Hollywood, Montrose, which has been open throughout, we’re seeing as much as 10% occupancy pickup in the day for the day. So I don’t know if that’s just in some cases people wanting to get out of their houses, if it’s people deciding to drive up that day and stay overnight. It’s hard to say since we’re limiting our contact with our customers as much as possible because that’s what they’re looking for. So there’s not a tremendous number of conversations that are going on with our customers.

Anthony Powell — Barclays Capital Inc. — Analyst

Thank you.

Operator

Our next question comes from Ari Klein with BMO Capital Markets. Please proceed with your question.

Ari Klein — BMO Capital Markets — Analyst

Thanks, and good morning. Maybe can you just talk a little bit about what you’re seeing from a performance standpoint, whether it’s occupancy or ADR at your non-resort properties? Obviously, it sounds like demand trends are pretty healthy at the resort properties. But just curious what you’re seeing at the non-resorts?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah. So at the urban properties, we had — what we’ve seen since mid-April is a gradual increase in occupancy. So I think in mid-April we got down as low as 4% on average occupancy levels and those have been growing pretty consistently since. And we started to see those run up into the 20s and even 30s. We’ve had a few days in the 40s depending upon the individual market. Rates are generally significantly discounted. Part of that is mix. We are still in some markets accommodating healthcare demand, and those are at low rates and then the additional customers. Our rates, what we’re seeing in the market is, rates significantly below last year in those urban markets.

Now we’ve in general been increasing those rates gradually by $10 a week as an example in a number of our markets and we are getting traction on those rate increases, but we’re a long way off. We don’t have the highest rated business. Obviously, we don’t have a lot of corporate transient. We don’t have a lot of bar-rated business right now in the urban markets.

Ari Klein — BMO Capital Markets — Analyst

Thanks. And then as far as the waiver agreement, any additional detail you can provide on the M&A carve out in there? And then just broadly, when do you expect that M&A market become more active? And has there been any kind of narrowing between bid/ask spread that you’ve seen?

Raymond D. Martz — Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Sure. So Ari, just on details and we’ll be following the full amendments later today for all the details, if you have acquired additional questions. But for additional acquisitions and investments, we have the ability to complete up to additional $600 million. Now it’s in a couple of buckets. One is we have reinvestments of assets. So if we sell an asset, we can designate that capital to reinvest in a new hotel. So we have up to $200 million of reinvestment assets. We have up to $300 million of new acquisitions and that will be provided through an equity raise to complete those. And then we have up to $100 million simply other investments where this is a investment in a joint venture or some other sort of investment in a another asset or entity. So 600 million in total and there is three different buckets for all of that.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

And Ari, in terms of the — your question about bid/ask spread, there’s not much on the market. We’re starting to see some foreclosure sales, some note sales, some mezz position sales within the market, but it’s still a relatively limited at this point as there are obviously a lot of discussions going on between lenders and borrowers. But — and outside of that, really not much on the market that’s being offered by equity holders, if you will. So hard to measure at this point whether there is a spread at all between buy and sell if there’s not much on the market.

Ari Klein — BMO Capital Markets — Analyst

Great. I appreciate the color.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Sure.

Operator

Our next question comes from Rich Hightower with Evercore. Please proceed with your question.

Rich Hightower — Evercore ISI — Analyst

Hey, good morning, guys.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Good morning.

Rich Hightower — Evercore ISI — Analyst

I was straining to come up with a clever joke about Christie Brinkley in a Ferrari given the hold music, but I just couldn’t come up with one, so I’m going to move right to my questions. So I’m eyeballing some of the resort data that you guys put into the deck here. And in some cases, I think in every case actually, the weekly ADRs are far above what was achieved last year. So I’m wondering just on that topic of mix, I mean are you just sort of compressing a hotel given limited occupancy or are those rates representative of what you think a sort of normal run rate might be or how do we think about how you’re sort of getting to those rates at this point?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Sure. It’s a good question. So part of that is mix and part of that is just regular demand and revenue management. We’re offering our regular bar rates or our transient rates at various levels primarily above last year’s offerings. And what we’re finding is most of our business is coming through direct channels and much of it is purchasing bar rates and/or length of stay packages. And what we’re — what we don’t have is the discounted business. Group at our resorts generally prices below transient and we don’t have any FIT international business that typically comes in at lower rates because it’s done through the wholesalers or the major package providers.

So because of the mix change, we’re averaging rates that are higher than last year. And I think that is telling you that on the weekends and to some extent during the week, we are seeing transient offset group and those other channels that we used last year to get to high occupancy levels.

Rich Hightower — Evercore ISI — Analyst

Okay. Got it. That is helpful. And then maybe just thinking a little bit ahead. I know we’re playing this day-to-day, week to week at this point in time, but leisure demand, seasonally is strong right now. What are your expectations for the fall when the business is more dependent on corporate transient and group traditionally, and we just don’t know where things are going to be, in terms of second wave shutdowns, if that happens. And what do you sort of foresee at that point, and and how do we contemplate the possibility for renewed sort of — closings of hotels, if it ever came to that? How do we think about that?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah, I mean it’s, it certainly something to think about. I don’t have a crystal ball about how this healthcare crisis is going to continue to play out. So I don’t know where we’re going to end up in the fall. You know, it’s interesting, one of the things we’re seeing is, we are seeing people who who — look I’m doing a sum in California right now, we’ll be out here for 17 days. I’m working from San Diego or LA from my hotel or resort, as are some other people that we have seen around the property and, so there’ll be some pushes and pulls from it. Obviously, we’d love to see the healthcare part of this mitigated, so that more folks can feel comfortable traveling at the end of the day. But so our school is going to open in the fall. How much flexibility will people have? Are they going to go back into the office. I mean here in LA, I spoke with some folks, they are reopening their offices. They’re bringing in 30% or 50% of their people on a daily basis. Other businesses are remaining with work from home.

So Rich, I just — it’s hard to prognosticate. The one thing I feel pretty comfortable about, which unfortunately is a negative, but I just don’t see major group coming back this year, It doesn’t seem like we’re on a path — from a healthcare perspective, in fact in some places as you indicated, we’re going in the opposite direction as we get these flare-ups and I suspect, that’s probably what we’re going to see for the most part, for the next few months.

Rich Hightower — Evercore ISI — Analyst

Okay, thanks for the color, Jon.

Operator

Our next question comes from Wes Golladay with RBC. Please proceed with your questions.

Wes Golladay — RBC Capital Markets — Analyst

Hey, good morning guys. Just a quick question on the $300 million of potential acquisitions tied to an equity raise. Would that be any type of equity, when — probably more so dispositions at this level where the stock is, and for the national asset that is pending, so would that be included?

Raymond D. Martz — Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Yeah. So just to be clear, the $300 million, that’s for common equity raises and just because we have the ability to do that and the flexibility, doesn’t mean, we would do it. It has to be — based on the opportunities and then clearly at these prices, we have no desire here for raising equity. And then your question on the Nashville, so for example, the Nashville sale, if that’s completed, we could designate that as a reinvestment asset, if we choose to use that for additional acquisitions. That would be apart from the $300 million acquisition bucket.

Wes Golladay — RBC Capital Markets — Analyst

Okay. Thanks, Ray. Now looking at $12 million to $15 million hotel cash level burn for the balance of the year. Now is that front half loaded? I would imagine, and I guess how would you see that ending the year, maybe in the fourth quarter?

Raymond D. Martz — Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Yeah. While we do our best. As we noted here, its hard to forecast month-to-month, let alone week-to-week here. It’s our best guess based on what the properties are trending right now with the resorts, and and looking out for the balance of the year, assuming no additional hotels and no improvement in performance. So that would still bring us with it, kiquidity in the range of over $350 million, upwards of $400 million and liquidity, just so you’re clear is, that’s all cash plus availability we have under our $650 million credit facility.

Wes Golladay — RBC Capital Markets — Analyst

And I guess the numbers don’t include the Union Station disposition numbers?

Raymond D. Martz — Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Right.

Wes Golladay — RBC Capital Markets — Analyst

Okay. And then I guess, maybe looking at the hotel, does your guidance embed some sort of opening plan for the balance of the 31 hotels that are not set…

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

No.

Wes Golladay — RBC Capital Markets — Analyst

Oh, they don’t? Okay.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

It doesn’t, Wes. We’re planning this day by day and week by week. So just similar to my answer to Rich, it’s impossible to forecast and so, the only thing we’re forecasting is that the sort of pace of the existing performance doesn’t worsen. So that’s the reduction, based on primarily the resorts turning EBITDA positive in June, and continuing to be EBITDA positive at the same number, not at any kind of improving number, which certainly could be the case over the course of the summer, particularly as we — we literally opened five of them in June. The last one opening on June 25, which was just a few days ago. So the fact that they’ve turned EBITDA positive so quickly, is an indication of the strength of of leisure demand and the attractiveness of drive-to resorts. But it doesn’t — we’re not currently driving at a positive EBITDA in the urban hotels yet, but we do have a couple of them that have turned EBITDA positive.

Wes Golladay — RBC Capital Markets — Analyst

Okay, thanks a lot guys.

Raymond D. Martz — Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Thanks Wes.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Thanks Wes.

Operator

Our next question comes from Michael Bellisario with Baird. Please proceed with your question.

Michael Bellisario — Baird — Analyst

Good morning, everyone.

Raymond D. Martz — Executive Vice President, Chief Financial Officer, Treasurer and Secretary

Good morning Michael.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Good morning.

Michael Bellisario — Baird — Analyst

And just along the same lines on the other 31 hotels. Is it possible that some of those remain closed for the rest of the year? And how are you thinking about maybe contingency planning for those 31 properties at this point?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah, I mean — again, we are taking it day by day to be speculating on our part. I mean, could there be some of them closed through the full year, yes. I’d make a particular note of San Francisco, which the only city in California that has not reopened for leisure and tourist business. They’re lagging behind significantly, not because of of healthcare resurgence, but just because of their very conservative approach to reopening. And not for me to judge whether that’s right or wrong, because I’m not a healthcare expert. The challenge that we’re most concerned about in San Francisco, is a recent ordinance that was — is being heard by the Board of Supervisors in San Francisco. That was — that’s being urged by UNITE HERE and SEIU to adopt a set of a pretty wildly extensive and unnecessary cleaning standards, meant purely frankly as a Jobs Bill, which will have the opposite effect unfortunately, meaning the the level of cleaning, which is not supported by science or by the CDC, goes to a level that causes us to increase our reopening occupancy requirement on average about 10% for our hotels in San Francisco, which is readily achievable, if they reopen the city, to something closer to 35% to 40% or more, depending on the property in the market. And that just means our hotels are likely to remain closed, until there is that much demand in the market and for an urban market, that’s a pretty high level of of demand, and we’re clearly not seeing anywhere near that anywhere, in the United States, and with major group conventions not happening this year, with corporate, that’s unlikely to be sort of released, if you will, in size in the fall.

Obviously our concern would be that, getting to that level of demand is not likely and it means, that we keep our hotels closed. In fact it would likely lead us to close the two hotels that we have opened that are running 10% or so slightly better than that at one of the two where we have an international crew, but the supporting demand in the market is only about 10%. And so that’s the one market we would highlight as the most concerning, primarily because of this legislation and the conservative nature of their reopening process.

Michael Bellisario — Baird — Analyst

That’s very helpful. And slightly different topic, and I know it might not be comparable to prior years given everyone’s flexibility to travel. What’s the typical leisure mix or makeup of the portfolio 2Q versus 3Q?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

I don’t have that data, Mike. We can take a look at that and get back to you. But for the year, leisure runs 35% to 40% in total in the portfolio. So it definitely would generally run higher. But I don’t know that you can count on leisure coming back into some of these cities, right? I mean I don’t see leisure coming to New York this summer and Boston and San Francisco and some of the major cities. We will see it in San Diego and are seeing it because of the leisure activities in the city, the opening of the restaurants, the zoo, the other entertainment facilities, the water and the weather. But projecting that into New York and San Francisco as examples or even DC, which has been slow to reopen, it’s just not something that anybody should be doing at this point.

Michael Bellisario — Baird — Analyst

Got it. And then just last quick one for me. Is the national sales still on track? And then fair to assume those sale proceeds go to pay down the remaining $58 million at the end of November ’21 maturity?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Well, the sale is continuing to move forward. There is no expectation at this point that it won’t happen. The buyer is hard. They’re working on the transitions, etc. And the hotel is going to remain close until they own it and then they’re going to reopen it. So — but no, it would not be appropriate to assume that that’s with the proceeds will be. I mean first of all, that’s a year and a half away. And so the minor amount of maturity next year, I wouldn’t be too concerned about at this point. We have plenty of liquidity to pay it down if ultimately we can’t replace it or have it extended. So the use of the proceeds for the moment would be used to pay down, I presume our line or just sit in cash.

Michael Bellisario — Baird — Analyst

Got it. That’s helpful. Thank you.

Operator

Our next question comes from Shaun Kelley with Bank of America. Please proceed with your question.

Shaun Kelley — Bank of America Merrill Lynch — Analyst

Hi, everyone. Good morning. Jon, you mentioned something pretty interesting as it relates to that ordinance in San Francisco and it sort of hits on a broader theme that we approached on earnings call. But I’m just curious now that you have a few more hotels up and operating, which is what have you kind of learned or seen so far in terms of the cost structures as you kind of move to reopen? And this is more of an operational question, right, just moving things around. I think early on the response was that guest wanted a pretty normal experience and behavior, is that continuing? Is there any difference between urban and resort properties or just kind of what are you seeing at hotel level margins as we put together some of the pieces a few weeks further?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah. It’s interesting, AHLA just released a survey that they just did and it’s pretty consistent with what we’re finding, which is something on the order of about two-thirds of the guests don’t want anyone entering their room during their stay. I would say that’s the case whether it’s a resort or an urban property based upon, again, this is our anecdotal evidence, it’s their survey information, but I don’t think their survey tries to differentiate between resorts and urban hotels.

I also think we’re starting to see a bit of a change in customer behavior where with more states coming out either requiring or strongly urging people to wear masks. We are seeing more of that. Our properties in most cases do require folks to wear masks as they enter the restaurants, even the outdoor restaurants. But then, of course when they sit down and eat, you can’t eat with a mask on, although I’ve seen some new masks with little holes for straws. So probably something that was created for bars at the end of the day. But in terms of the cost, Shaun, I mean again, we’ve — our models are trying to adapt so that we are mitigating the losses that we have. And what we’re doing primarily is a lot of job sharing where we can do it, certainly at the non-union properties. We’re doing that having managers work shifts, frankly, because in many cases, they don’t have a lot of things to do. Our sales agents are still — they still have plenty of time to work shifts as opposed to do sales efforts because there’s not a lot of in the year activity going on right now that’s real.

And so what we’re finding is, we are running more efficient. We have to at this point in time in order to bring even the people back that we’ve already brought back by mitigating the losses that we have. So we are not offering cleaning during stay overs at I think pretty much all of our properties. And then of course if — but we’re providing whatever service you want. If you need extra towels, we’ll bring you towels. Many cases we have either knock and drop or we have carryout if we have a restaurant that’s operating on the premises, and otherwise you can order from through Grubhub or Postmates or whatever and pick it up in the lobby for delivery. So from a cost perspective, at these level of revenues, we’re going to run lower losses or more positive cash flow than we would have last year with the same level of revenue.

Shaun Kelley — Bank of America Merrill Lynch — Analyst

That’s helpful, Jon. And then the other kind of question I have is just as you think about the demand side, and obviously your commentary on the bar rates and just the natural mix shift is pretty interesting. Anything else Pebblebrook is doing in terms of the ability to maybe target slightly even more long stay type guests? I think there have been some — some people would have been somewhat successful in targeting a little bit more of an extended stay type travel or I mean, you basically get into almost a crossover to sort of a short-term residential component. But is there — I’m sure you’re looking at every stone, so any successes or failures in attacking a vertical like that or what some of the risks could be in doing that?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah. I mean there is a few things we’re doing, it’s more successful in some places than others. We certainly are encouraging length of stay. And so the one place where you might see discounting would be at the resorts would be to encourage those weekdays, but encourage them only through length of stay. So if you’re staying one night during the weekday, there is no discount, but if you’re staying three, you might get 10% or 15% off etc. The longer they stay, the bigger the discount.

In some of the urban properties, we have been targeting some longer length of stay both healthcare and non-healthcare. We’ve had some success with that in West Hollywood. And we just opened our second property that is all suites, Le Parc in addition to Montrose, which has been open the whole time. We are targeting longer length of stay and we’ve had some success with that, with folks staying multiple months. Some of that is — somebody renovating their home or building a new home, or they have moved to the area, that are looking for a home and they’re going to stay a month or two or three. We certainly do have some of that and have been targeting it and have the properties for it, where we have, I mean, compared to a New York apartment, if we have 600 or 650 square feet, with a full kitchen add and a stove and microwave etc, sink, separate living room from bedroom, we are seeing takers in that regard. But it’s not enough at this point to be material in anyway, and I don’t know. I don’t see the hotel shifting to a monthly leasing model.

The one thing we have seen, Shaun is — there is demand in some of the markets from the colleges. And so we are looking at, in some cases competing for a business that might run four months or might run eight months, if it’s two semesters. And that business would obviously be at lower rates, but it would be without services as well. So it would definitely be a good replacement for a business that particularly group, that we just don’t expect in this year.

Shaun Kelley — Bank of America Merrill Lynch — Analyst

And John, that’s effectively to be able to spread people out from dormitories and double occupancy, is that sort of thing. In some of the really highly compressed…

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah. Its to reduce density, and in some cases interaction. So in one case, the business we’re competing for. It’s a college of a university, it’s hundreds of rooms. They will actually do their classrooms on the premises, and they’ll do their meals on the premises as well. So to me, it sounds a little like a jail. But hey, that’s not for me to judge.

Shaun Kelley — Bank of America Merrill Lynch — Analyst

I mean, I’ll put it out in the brochure.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

I don’t think they will be locked in the property by the way.

Shaun Kelley — Bank of America Merrill Lynch — Analyst

Understood. Thank you very much.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Sure.

Operator

[Operator Instructions]. Our next question comes from Neil Malkin with Capital One Securities. Please proceed with your question.

Neil Malkin — Capital One Securities — Analyst

Hey guys, good morning.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Good morning, Neil.

Neil Malkin — Capital One Securities — Analyst

Hey, first off, just wanted to say, I hope the statue in this — Sir Francis Drake bar doesn’t get torn down this weekend.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

That will be a challenge, because the hotel is closed and boarded up. So I’m not too worried about that. But thank you.

Neil Malkin — Capital One Securities — Analyst

You never know. Yeah. Let’s see; the other question or the first question is, on the earnings calls, all companies have kind of given initial thoughts on what talks with brands will be in the sort of new restructured operating model, as we emerge from the COVID pandemic. One of the things that was talked about a lot is, a pretty significant change in the F&B outlet or avenue in totality. And I’m just wondering, your non-room revenues like F&B, other, especially at some of your larger properties, how do you see that playing out or do you see that model sort of being reconfigured to adjust for? For example, less groups, lower quantities of groups, less density restrictions, maybe lower minimum spend etc. How do you think about how that side of the business winds up shaking out, as we get out of the pandemic and then maybe more over like a long-term basis?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah, I mean — you have to tell me what the world is going to be like, what the health risks are going to be like. What does post pandemic mean. And if — our view would be — and that, we get to the point where COVID-19 is equivalent to the flu, in terms of outcome — potential outcomes, then our answer would be, it’s pretty much going to go back to the way it was, in terms of group business. And we don’t really see any kind of secular structural change in the desire on the part of businesses to meet. In fact, we would see a likely increase, if in fact there are more people working from home or people who work from home, one or two or three days a week versus none before. There is an increasing reason to get your people together, to promote your corporate objectives, your goals your culture, which is going to be harder to do, if everybody is not in the office at the same time. And so we actually would see a greater reason for businesses to get together.

I think I do find it — I don’t know, to some extent, amusing, that there is so many positive comments about technology that I think only works partly and I think it’s a great — video can be a great replacement for teleconference. But I don’t know that it’s much of a replacement for in-person in general, and it doesn’t work that well. It’s not like sitting down, having a drink and it’s not like going to convention and having casual interactions, that frankly are usually more valuable than the planned meetings and interactions. And so, we’re not really planning for things to be totally different now. We’re going to take this day-by-day, week-by-week, month by month as we mentioned. And we just have to see how it all plays out. We don’t know. I think things will be done differently. I think this will change some customer desires. I think people have gotten used to order meals online. I think we can do a lot more personalization at group meetings. Then, then having broad the phase. I think we’ll be able to do that, hopefully less expensively, and provide a better quality product and service at the end of the day.

I think — so, I think it’s the outlets. I think it’s room service. I mean, interestingly Neil, for properties where we’re still operating, call it room service, it’s obviously knock and drop right now. But the demand for that not surprisingly is up at our properties, right? More people, there are plenty of people who would rather have their meal in their unit or on their patio or their balcony, as opposed to going into a restaurant and sitting down, even if it’s an outdoor restaurant, in many cases. So we’ve seen an increase in that. We’ve seen an increase in parking. Everybody’s driving. Our parking revenue, which was on a pretty, pretty consistent decline, is now increasing at our properties, and where we’ve had valet, where we can, we’ve reverted that to self-park and put in the equipment to do that.

So I mean, we’ll continue to make changes as we go along. I haven’t seen anything come out of the brands yet, and I wouldn’t expect this to say, here’s how things are going to be on the other side of this, because we’re still trying to figure out how things are on this side of it, and how we operate. So I’d love to tell you, we have the answer for your question, but unfortunately we don’t.

Neil Malkin — Capital One Securities — Analyst

No, I understand. It’s pretty tough. I kind of — I was more referring to, when the sort of F&B at — call it the — your branded properties that have a buffet or maybe a couple of outlets, we’ve heard shutting down non-profitable or reducing buffet, reducing hours, reducing amenities offered as potential things that could come out of it. I just wonder, if that’s the case? And you’ve reduced a lot of the other revenues in the hotel, doesn’t that bring down EBITDA on a absolute basis potentially for a long-term basis or permanently?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah. I don’t think so. I think it would have the impact you actually were mentioning, which is the ability to reduce things that are unprofitable. I think that will increase. I think you’re going to see far fewer F&B outlets in hotels in New York and many of the major cities because they’re unprofitable or they are marginally profitable. And the amenity can be divided easily and quickly through delivery or carryout that people have gotten accustomed to.

So I do think it’s accelerated trends, just like it’s accelerated online retail at the end of the day. I think we’ve accelerated the use of apps. If you go into many of our restaurants, at our resorts, they’re touchless now. Your menu is a QR code. You read it on your phone and you order off of that. So does that reduce costs? It does. I mean we don’t have to produce menus for the most part anymore. So there are going to be advances in technology that help that come out of that, that come out of this pandemic and there’ll be more mobile check-in, there will ultimately be fewer people at the front desk. I believe in five years to 10 years, you’re likely to have almost nobody at the front desk and it’s done through a video interaction if you need it at the end of the day with a person as opposed to with the robot.

Neil Malkin — Capital One Securities — Analyst

I know. I appreciate that. Last one for me is, are you seeing any differences or disparities in your hotels that are open in terms of business travel, I’m sure there is very little of it. But have you noticed that potentially your smaller accounts, your more local or regional accounts are back on the road as opposed to the larger Facebook, IBM, Googles of the world just given the larger companies have HR, legal, ESG sort of implications, whereas Bob’s Boating [Phonetic] probably doesn’t have that. Are you seeing those things play out or is it hard to discern those things from your data?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Well, I would say the business that we’re seeing, and again, we don’t know why everyone is there. Certainly if somebody is there for multiple nights, there is likely to be some interaction and we can find out why someone is there and who they work for in some cases. We’re not seeing much come through our corporate accounts, and we see that through our corporate rate. The rate is being utilized. So that certainly is easier to see, and there’s not a whole lot there.

We are seeing a little bit of project business in a couple of our markets, and again, that comes through the corporate booking code. But yes, we are seeing more local accounts that obviously is where we put more efforts. They don’t have those kinds of restrictions you mentioned. They’re more flexible. We’re seeing business in advance of production in LA, both in terms of some crew business, some production crew business as well as the actual actors and performers. So that’s more of the kind of business that we’re seeing. If you have technology you’re installing, it has to be done in person on site, somebody is coming in for that and staying for that. So we are seeing that kind of business.

Neil Malkin — Capital One Securities — Analyst

Thank you.

Operator

Your next question is from Gregory Miller with SunTrust. Please proceed with your question.

Gregory Miller — SunTrust Robinson Humphrey — Analyst

Thanks. Good morning, gentlemen.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Good morning.

Gregory Miller — SunTrust Robinson Humphrey — Analyst

I’d like to ask a couple of questions on capex. The revised credit agreements seem to suggest that you’re still not resuming a pre-COVID-19 level of capex spend. Do you consider the back half of 2020 or early 2021 a preferred time to take advantage of potentially lower labor and material costs versus say pulling out and perhaps approaching the ROI capex in later 2021 or beyond?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah. So we’ve built into the the arrangement with the banking group, the ability to do a number of projects that were part of our plan. And that is in those projects somewhere I think for four to six projects that we could move forward with should we choose to. We haven’t made decisions on those yet, Greg. We want to see how it plays back, how things play out, how does the recovery go, how the health situation advance.

I would tell you that, yes, costs have come down. On the other hand, we also don’t expect them to increase over the next several years because we think capital investment is going to be restrained, particularly in the hotel business over the next few years. So I don’t think there is a rush to do these to take advantage of lower costs. And unfortunately, in many cases, particularly as it relates to the — to some of the urban markets, we don’t think there is a rush to avoid displacement because we think there is not going to be a lot of displacement over the next, at least 12 months in those projects.

So we are prepared to move forward. We’ve been moving forward with design and approvals and permitting so that we’re in a position to be able to pull the trigger and move forward, particularly with any of the closed hotels already where he had projects scheduled where we can roll right into the renovation, while the hotel remains close, do it less expensively and more quickly and not have much impact on operations. So we do have the flexibility there to move forward with a number of projects that we discussed last quarter. And we’ll just have to see whether that’s the right decision based upon how things play out.

Gregory Miller — SunTrust Robinson Humphrey — Analyst

Thanks. And just a quick follow-up on the same topic. In the 1Q release, a lot of the projects that you had listed that were in repositioning phases were expected to be completed around the end of second quarter. Was that timing intact or a lot of these hotels [Phonetic] now completed in terms of the renovations or has that been pushed back somewhat into this quarter?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

So there is — well, they proceeded. Some of them have been completed. So just toward last week, our properties down in San Diego. Three of them are complete; the Westin Gaslamp, the Embassy Suites and the San Diego Mission Bay Resort, which we completed and then reopened on the 25th of June. So those are done. They look spectacular. Customer response seems to be pretty good. I was pretty impressed frankly of the quality of the work. And I think the properties look great and that will help them moving forward.

We’re probably a month behind at the Viceroy and Santa Monica due to just work crews being smaller than where they were before. And — but we don’t have plans to open that hotel just yet anyway. That should be completed by July 15, so a couple more weeks. And then in DC, we have two, the Viceroy, the one that will be converted to the Viceroy, Mason & Rook and the Donovan, which is being converted to Zena. Those are both wrapping up this month. Originally they were scheduled to be — Zena was scheduled to be done by Memorial Day, again with smaller crews and delays in delivery and other impediments that came up, slower response from the district on inspections. That will be done this month as well, by mid-month. And then Viceroy, same thing. So however, we’ve yet to determine opening dates, as demand in the district has has been fairly minimal in the market. So that’s — they will all get done and will all get done at this point by the end of July. And with no impact on operations at the end of the day.

Gregory Miller — SunTrust Robinson Humphrey — Analyst

Great, thanks. So looking forward to seeing live pictures versus renderings of [Multiple Speakers] later. Thanks. That’s all from all from me.

Operator

Our next question comes from Stephen Grambling with Goldman Sachs. Please proceed with your question.

Stephen Grambling — Goldman Sachs — Analyst

Thanks for sneaking me in and I apologize if you already addressed this a little bit. But on the last call, I think you alluded to and you were kind of highlighting this again in one of the other questions. On the supply side, a lack of development likely being a positive ray of light. I guess any updated thoughts on what you’re seeing in either the pipeline of new construction in markets where your portfolio is? And any changes in terms of things that were in the pipeline that may be have either been abandoned or deferred?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah, I mean, well the most obvious thing we’ve seen, as we track supply is, delays, just as I was mentioning Stephen with our renovations, new construction is all taking longer, as groups are smaller. Materials have had hiccups in coming in. A lot of material is coming from other markets, whether it’s in Asia or it’s south of the border, or even in the United States, where plants shut down, there have been a lot of delays in that regard. So we’ve certainly seen projects push deliveries for existing construction, being pushed back anywhere from three to six months and of course then you still have, even if you’re done, what is your opening decision and is it appropriate to open. I can’t say I’ve heard much of abandoned projects just yet. But again, I’m not sure those would be announced at the end of the day, and we’re going to have to learn that through probably some on the ground research this year.

Work is actually happening on some sites that were underway. And then certainly as it relates to new construction, things advancing in the pipelines, there isn’t any construction financing available to speak of and so, we expect, not much to roll out of the planning phases or the almost to start construction phase into the construction phase for — frankly for a long time now. There is nothing that would be — it won’t be zero, right, because there will always be someone who finds a way, perhaps with dramatically increased equity. But by and large, we expect new starts to shut down and that is what we’re seeing in the markets.

Stephen Grambling — Goldman Sachs — Analyst

Great. Thanks so much.

Operator

Our next question comes from Smedes Rose with Citi. Please proceed with your question.

Smedes Rose — Citigroup — Analyst

Hi, thanks. I was just wondering, if you guys have received any sort of incremental data on conventions for next year? Some of the markets, where typically convention demand has been a positive for your properties in San Diego or Boston or do you see any change in sort of overall group bookings that the core convention centers are seeing, that you could share?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah. I mean we continue to get updates from the convention authorities, and the sales organizations for those conventions. I would say for the most part, sales for major citywides are proceeding pretty much as as normal. With one exception, which is, we’ve begun to see a few particularly smaller or corporate driven citywides cancel in the first quarter of next year. It’s not a lot, but it it’s noticeable and in many ways again, not surprising, given the position some corporations have taken, based upon travel policy, sort of pre-announced in some cases for next year. So that’s pretty much all we’ve seen Smedes, and frankly I think any of those, certainly corporate travel policies could all be reversed, if there was a health solution that that occurred.

Smedes Rose — Citigroup — Analyst

Yeah. Okay, thank you. And then I just wanted to ask you, I was reading that ordinance you mentioned earlier in San Francisco. So just, I don’t remember, so your hotels in San Francisco are union, or this would apply to any hotel, regardless of its status?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Well, the legislation proposed would apply to all hotels, regardless of whether they are union or non-union. The only — and by the way, it includes office buildings as well. Although it does exclude city, state or county buildings in [Indecipherable], which I guess don’t need to be as clean, compared to commercial providers. So we find that rather curious, and not only that, but probably discriminatory at the end of the day to businesses. So our properties are a mix of union and non-union and it would apply to all of them.

Smedes Rose — Citigroup — Analyst

Okay. Thanks Jon.

Operator

Our next question comes from Anthony Powell with Barclays. Please proceed with your question.

Anthony Powell — Barclays Capital Inc. — Analyst

Just a follow-up for me. In terms of Boston and Chicago and DC, what’s the updated schedule in terms of getting things like museums open other attractions? And just more broadly, how are these jurisdictions viewing travel and conventions right now? Are they looking to try to get them back? Are they cautious about them? What’s kind of the overall regulatory approach to these industries in the current environment?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Yeah, I don’t think — I can’t say that I’m completely up to speed by day on museums and and other similar facilities in those markets. DC is a little slower to reopen. So I don’t think any of the museums have reopened. Interestingly, in some of those cities like San Diego that have been on the, the more progressive side of reopening. They have opened the zoo, they have opened museums. And so I think in most cases museums are on a reasonable list, as opposed to live sporting activities or with fans or concerts that — or at large groups that would be sort of in the last final phase in most of these cities. So it would be encouraging to see, you know, museums open up, zoos open up, seaworld open up and do it in a safe way. Obviously, you’re aware that, Disney World opened in Orlando, but Disneyland has been postponed in Orange County in California.

Anthony Powell — Barclays Capital Inc. — Analyst

Just maybe more broadly, are city governments actively trying to get travel reopened or are they just more cautious in their approach to this segment, given all the news?

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

I would say, it varies, but most of the cities tend to be liberal. They seem to be a little more maternalistic or paternalistic. And so they have been, I would say slower and reopening than say at San Diego, which has a Republican Mayor and maybe a less liberal council, which has been more aggressive or certainly at least, being more active in reopening earlier.

Anthony Powell — Barclays Capital Inc. — Analyst

All right. Thank you.

Operator

We’ve reached the end of the question-and-answer session. At this time, I’d like to turn the call back over to Jon Bortz for closing comments.

Jon E. Bortz — President, Chief Executive Officer, Chairman of the Board

Thank you all for participating. The one thing I would certainly encourage you to do is indicated by our song this time is, if you really want to do research, you need to get out on the road even if it’s by car and see what it’s like because I can — I would encourage you, it’s actually a good experience. It’s good for your souls. And it’s good to get out of your house or your neighborhood or your city and see what’s going on in the rest of the country. And I think it’s both good personally and good from a research and a business perspective for everyone. And so hopefully by the time we do our second quarter call later this month, some of you or many of you will have kind of done that research and know more about what it’s like out there in the real world. Look forward to updating you guys in a few weeks about our second quarter performance. Thanks again for participating.

Operator

[Operator Closing Remarks]