Braemar Hotels & Resorts Inc.

Welcome to the Braemar Hotels and Resorts Incorporated third quarter 2019 results conference call. At this time, all participants are in listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. Please note that this conference is being recorded. I will now turn the conference over to your host, Jordan Jennings. You may begin, ma'am.

Good morning, and welcome to today's call to review results for Braymore Hotels and Resorts for the third quarter of 2019, and to update you on recent development. On the call today will be Richard Stockton, President and Chief Executive Officer, Derek Eubanks, Chief Financial Officer, and Jeremy Welter, Chief Operating Officer. Your results as well as notice of the accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday in a press release that has been covered by the financial media. At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the safe harbor provisions of the Federal Securities Regulations. Such forward-looking statements are subject to numerous assumptions and certainties and known or unknown risk, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the company's filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of this call, and the company is not obligated to publicly update or revise them. Certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided, an accompanying earnings release, and accompanying tables or schedules, which have been filed on Form 8K with the SEC on October 30, 2019, and may also be accessed through the company's website at www.bhreit.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. I will now turn the call over to Richard Stockton. Please go ahead, Richard.

Good morning. Welcome to our third quarter 2019 earnings call. I will begin by giving a brief overview of our quarterly financial results. I'll then provide an update on our major capital expenditure projects. Finally, I will conclude with an update on our investor outreach efforts. After that, Derek will provide a more detailed review of our financial results, and Jeremy will provide an update on our asset management activity. Afterwards, we will open the call for Q&A. For the third quarter, comparable rent par for all hotels declined by 2%, while comparable rent par for hotels not under renovation decreased 1.4%. We reported adjusted EBITDA RE of $28.6 million and ASFO per share of 29 cents for the quarter. Our overall portfolio trailing 12-month comparable rent par of $230 continues to be the highest in the lodging REIT sector. During the quarter, We continue to make good progress on reopening the Ritz-Carlton St. Thomas after the damage caused by Hurricane Irma approximately two years ago. We are working closely with our insurers to both seek recoveries for physical damage to the hotel, as well as to minimize the impact of the property's P&L through BI insurance recoveries, which totaled $4 million in the quarter. The hotel is planned to reopen to transient guests on November 22nd. The new property will be fantastic. We have completely renovated all 180 guest rooms, And there are new F&B outlets, new pre-function space, and a new family pool. The St. Thomas Hotel market has lost approximately 35% of its inventory, which positions our property for a ramp-up. Board booking rates are already 10% higher than they were pre-hurricane. We are very excited about the prospects for the Ritz-Carlton St. Thomas and believe it is well-positioned going into 2020. We're also pleased with the progress we have made on our strategy to up-brand our Courtyard Philadelphia and Courtyard San Francisco properties to autograph collection hotels. In July, we announced the completion of the conversion of the Philadelphia property to the Notary Hotel. Located in downtown Philadelphia, the property underwent a spectacular $20 million renovation. Additionally, in July, we announced the rebranding of the Courtyard San Francisco to the Clancy. That conversion is expected to be completed in early 2020. The Clancy is ideally situated in San Francisco's vibrant south of Marks District, which has established itself as a hub for international visitors, regional day trippers, and locals enjoying music, art, multimedia, and a technology-driven culture. Year-to-date, we reported 8.7% Red Park growth at the hotel even while the property was under renovation, which when combined with only modest supply growth and the recent reopening of the expanded Moscone Convention Center near the hotel, continues to fuel our excitement for the upcoming repositioning of this property. Thus far, we have spent approximately $44 million on these conversions and anticipate spending an additional $15 million during the remainder of 2019 and the first quarter of 2020. Finally, in October, we announced the opening of the Maple Grove Presidential Villa at the Bartisano Hotel and Spa in Yachtville, California. The new 3,705 square foot presidential villa is available at a published rate of $9,000 per night and offers guests secluded space with elite experiences that enable us to provide guests with an unforgettable Napa Valley stay. The Presidential Villa is also available as three separate luxury suites. Each has a distinctive gray room, stately king bedroom, spa bathrooms, and courtyard. We're excited about the prospects for the Presidential Villa at the Bar de Sonos. as we are seeing strong forward bookings and expected to generate significant incremental annual EBITDA in excess of $1 million per year. On the capital markets front, during the quarter we amended and extended our mortgage loan secured by the Ritz-Carlton St. Thomas and more recently refinanced our mortgage loan for the Pier House Resort and Spa in Key West, Florida. Derek will discuss these in more detail, but we are happy with the execution of these transactions as they were excellent opportunities to address our upcoming debt maturities while both lowering the spread and increasing our cash balance. All of our debt continues to be non-recourse, and as a result of our financing activity over the last year, we have a very attractive maturity schedule with no final debt maturities until 2022. We have also been active on the investor relations front. Over the past few months, we have attended several bank and industry conferences and participated in numerous investor meetings. Additionally, we recently held a well-attended Investor Day in New York. During the remainder of 2019, we will continue to get out on the road to meet with investors to communicate our strategy and the attractiveness of an investment in Braemar. We believe we have made great progress executing on our strategy this past quarter. We are optimistic about the upcoming performance of the portfolio. We also continue to believe there are several unique stories in our portfolio that could result in red-par performance in excess of the broader market. I will now turn the call over to Darren.

Thanks, Richard. As Richard mentioned, during the third quarter, we recognized $4 million of business interruption income for the Ritz-Carlton St. Thomas, which is reflected in the other hotel revenue line of our income statement. These insurance recoveries related to the months of June 2019 through August 2019. We expect these insurance recoveries to taper off as the hotel reopens, which is scheduled for later this year. As a reminder, in the prior year quarter, we recorded business interruption income of $3.8 million at the Ritz-Carlton St. Thomas. For the third quarter of 2019, we reported a net loss attributable to common stockholders of $11.9 million or 37 cents per diluted share. And we reported AFFO per diluted share of 29 cents. Adjusted EBITDA RE for the quarter was $28.6 million. At quarter's end, we had total assets of $1.8 billion. We had $1.1 billion of mortgage loans, of which $49 million related to our joint venture partner's share of the loan on the capital Hilton in Hilton, La Jolla, Torrey Pines. Our total combined loans had a blended average interest rate of 4.3%. Our loans are entirely floating rate and the vast majority of interest rate caps in place. As of the end of the third quarter, we had approximately 49% net debt to gross assets, and our trailing 12-month fixed charge coverage ratio was approximately 1.6 times. Our next final loan maturity is not until April 2022. Our cash and cash equivalents at the end of the quarter was $83 million with an additional $57 million of restricted cash. As of September 30, 2019, our portfolio consisted of 13 hotels with 3,484 net rooms. Our share count currently stands at 37.7 million fully diluted shares outstanding, which is comprised of 32.9 million shares of common stock and 4.8 million OP units. In our financial results, we include approximately 6.6 million shares in our fully diluted share count associated with our Series B convertible preferred stock. On the capital markets front, during the quarter, we amended and extended a mortgage loan secured by the Ritz-Carlton St. Thomas. The amended $42.5 million loan has a two-year initial term with three one-year extension options subject to the satisfaction of certain conditions. The loan will continue to bear interest at a rate of LIBOR plus 4.95%. Upon the reopening of the hotel, as of Ritz-Carlton, which is planned for later this year, there is the potential for the spread on the loan to be reduced. If the appraised value of the hotel results in a loan-to-value ratio between 65% and 70%, the spread will be reduced by 50 basis points. If the appraised value of the hotel results in a loan-to-value ratio less than 65%, the spread will be reduced by 100 basis points. Also, during the quarter, we refinanced the mortgage loan for the 142-room Pure House Resort and Spa in Key West, Florida, which had an existing outstanding balance of $70 million, a floating interest rate of LIBOR plus 2.25%, and a final maturity date in March 2020. The new non-recourse loan totals $80 million and has a five-year term. The loan is interest-only and provides for a floating interest rate of LIBOR plus 1.85%. Additionally, in October, we announced a stock purchase agreement with Ashford, Inc., under which Ashford, Inc. purchased 19,897 shares of its common stock from us for $30 per share, resulting in total proceeds of approximately $600,000. The purchase price reflected a premium of approximately 20% based on the closing price of Ashford Common Stock on October 1, 2019. We also announced plans to distribute the remaining 174,983 shares of Ashford Common Stock on a pro rata basis to Braemar common shareholders and unit holders. The pro rata distribution of Ashford shares is expected to be completed on November 5, 2019, two shareholders of record as of October 29, 2019. Earlier this week, we announced that we had entered into a new $75 million secured credit facility, which replaced our previous credit facility that was scheduled to mature in November. The new credit facility provides for a three-year revolving line of credit and has two one-year extension options. With regard to dividends, the Board of Directors declared a third quarter 2019 cash dividend of $0.16 per share or 64 cents per diluted share on an annualized basis. This equates to an annual yield of approximately 6.8% based on yesterday's stock price. This concludes our financial review. I'd now like to turn it over to Jeremy to discuss our asset management activities for the quarter.

Thank you, Derek. As Richard mentioned, during the quarter, comparable REBPAR for our portfolio decreased 2%, while comparable REBPAR growth for our hotels not under renovation decreased 1.4%. Results were negatively impacted by a weak quarterly performance from the Soap Hotel in Chicago, Marriott Seattle Waterfront, Pier House Resort, and the La Jolla Hilton Torrey Pines. Third quarter hotel EBITDA flow-through for those hotels not under renovation was an impressive 71%. In July, we successfully completed the conversion of the Courtyard Philadelphia downtown to the Notary Hotel, part of Marriott's autographed collection. We hosted a grand opening celebration on August 15. And as a direct result of the grand opening celebration, the hotel booked $176,000 of no new business. In addition, PR coverage of the opening has reached over 350,000 unique monthly visitors and social media campaigns from the event have reached over 4,000 users with over 250 engagements. While comparable rent part during the third quarter decreased 6.5% due to the renovation impact, rate increased 4.7%. During the fourth quarter, the first full quarter following the conversion, the hotel will continue to ramp. Fourth quarter group and transient revenues are pacing ahead of the same period last year by 12% and 33%, respectively. Tentative group pace in 2020 is 61% ahead of the same period last year. We expect to see attractive growth in rates in the fourth quarter and throughout the balance of 2020. Looking ahead, we continue to be excited about the Courtyard San Francisco downtown and its upcoming conversion to the autograph collection under the name The Clancy. The hotel remains on track to complete its conversion in the first quarter of 2020. There have been headwinds and challenges with the timing of the conversion because of access to labor. We're competing for labor in a very competitive downtown San Francisco market, yet we remain pleased with progress so far and are very happy with fantastic work quality. Construction continues on the front entrance, exterior, lobby, and restaurant, while the coffee shop has been framed out and the new front desk has been installed. The hotel's performance continues to be strong. Comparable red part has grown 8.7% year-to-date, driven by 5.5% rate growth. This rent part growth represents increases of 7.4 and 5.3 percentage points relative to upscale and above chains in the San Francisco Market Street, California Submarket, and the San Francisco San Mateo, California Market, respectively. Let me take this opportunity to highlight even further the incredible job Premier Project Management has done during the renovation. Using their stealth renovation program, which is designed to minimize the renovation work impacted guests, Premier has contributed to the hotels gaining significant market share despite being under a substantial ongoing renovation. In addition to the impressive market share growth, year-to-date occupancy has been 91.5%. Construction at the Ritz-Carlton St. Thomas also remains on track with an expected opening before the end of the year. During the third quarter, the hotel was unavailable and comparable rent part fell to zero. BI insurance continues to make us whole during this period of impacted performance. Work remains on the restaurant, meeting space, and family pool in Splashdad. Staff hiring is substantially complete and training is underway. We're also finalizing lease terms with pre-hurricane bussees that utilize retail space in the hotel and marketing additional space for new leases. As of October 15th, 102 rooms were ready for occupancy. Our first group date is November 20, and our first available date for training in business is November 22. We identified the closure of the hotel as the perfect time to accelerate value-added capital projects that will not only drive incremental revenue, but also improve the guest experience. We're expanding the meeting space pre-function area, repositioning the hotel's signature restaurant, Allura, renovating the kids' club, adding a centralized cafe and market, constructing a family pool with a splash pad, and adding 11 luxury pool comandos. We will now undoubtedly be positioned as one of the finest resorts in the Caribbean. Our best-performing hotel during the third quarter was the Hotel Yachtville. The Bearable Rev Park grew 8%, driven by occupancy growth of 12.3%. This red bar growth represents an increase of 4.5 percentage points relative to the California North market. Transient room night growth of 17.5% occurred over both weekdays and weekends. Weekend ICMNC for the quarter reached nearly 97%. Hotel Eva the flow-through was 80%, leading to Hotel Eva the growth of 23.3%, or $471,000. At our other Yonville property, the Bartisano Hotel and Spa, comparable rent per group 2.1% during the third quarter. The biggest story of the quarter at this hotel was the opening of the Maple Grove Presidential Villa. This villa is roundable as three separate suites and published rates range from $2,500 to $3,500 per night. Each of the three units boasts a great room, separate king bedroom, and an outdoor spa. Units can be sold separately or together as a one, three-bedroom retreat. The rooms are available on the website and are already generating forward bookings despite limited marketing. I will now turn to capital investment. During 2019, we will continue to invest in our portfolio in order to maintain competitiveness. In total, we estimate spending approximately $85 to $95 million in capital expenditures during the year, excluding proceeds from insurance. We completed the conversion of the Courtyard Philadelphia downtown to the Notary Hotel. We've also completed the renovation of the lobby and bar at Park High Beaver Creek and the three-key, 4,000-square-foot presidential villa at the Bartisano Hotel and Spa. We continue to make capital expenditures comprised predominantly of the strategic acceleration of capital projects in order to mitigate renovation impact. Specifically, pulling forward additional amenity enhancements at the Ritz Carlton St. Thomas, while the resort is under renovation, and work related to the conversion of the courtyard of San Francisco downtown to the Clancy. Finally, we have identified an accretive opportunity for our portfolio by adding two keys at the Hilton La Jolla Torrey Pines. Looking ahead to 2020, we anticipate spending approximately $40 to $60 million in capital expenditures. Lastly, I want to reiterate the strength of our portfolio's positioning entering 2020. We will have two newly renovated and converted autograph collection hotels. Park High Beaver Creek Lobby and the Bartisota Village construction projects are substantially complete. The Ritz-Carlton Sarasota Beach improvement is complete. There are no signs of an impending government shutdown that could impact the Capitol Hilton. And finally, the Ritz-Carlton St. Thomas will be reopening post-hurricane recovery. In addition to the property-specific factors I just mentioned, We're currently experiencing some favorable portfolio-wide dynamics. First, excluding the Ritz-Carlton St. Thomas, group revenue pace is up 2% for 2020, driven by increased room nights sold. Second, we are seeing new supply in our market slow down throughout our portfolio. Over the past two years, our portfolio's sub-markets have experienced slightly greater than 2.5% annual supply growth. We estimate this number to reduce to roughly 2% annually over the next two years. This decrease in supply growth will be especially prominent for the Marriott Waterfront Seattle. In addition, over the past year or so, we have focused a great deal of our attention on non-RIMS revenue. We're proud to say comparable total hotel revenue, excluding RIMS revenue, has increased 4.2% year-to-date for $5.6 million. This concludes our prepared remarks and we'll now open it up for Q&A.

Yeah, thank you, Jeremy. Let me just say one more thing. We're pleased with our third quarter performance and continue to believe Raymar is well-positioned for strong growth in the remainder of 2019 and into 2020. While energy forecasts remain lackluster, our portfolio has a number of unique aspects that should allow us to drive material roadblock growth and increase profitability in the short term. Now we can open it up for Q&A.

Thank you. At this time, we'll be conducting a question-and-answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. A confirmation token will indicate that your line is in the question queue. You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment please while we poll for questions. The first question is from Tyler Batori. Janney, Capital Markets. Please go ahead.

Hi, thank you. Good morning. The first question I had, I wanted to ask a little bit more about the flow through at some of the hotels that was not under renovation that looked quite strong. Can you talk a little bit more about what's been driving that?

Yeah, I mean, there's just been a lot of different – it's a mixed bag across the portfolio. So, I mean, I can answer any specific questions on specific assets. There's not really any prevailing theme. We've been very aggressive on focusing on non-REMS revenue, and that's where you've seen here today we've had incredible growth in our ancillary revenue, and that's been a great success for our team. Some of the revenue streams are very incrementally positive as it relates to flow-through because it's rate-driven, and it just flows right down to the bottom line. We've had some situations where we've been able to have some properties that have had, you know, declines in incentive fees. And then actually what's interesting is like Hilton Torrey Pines, even though RevCar was down 5.1% for the quarter, we had total revenue down 1.7%. But what that resulted in is a pretty big decline in our lease payment because we were able to grow non-rooms revenue higher than rooms revenue, And our lease is based on the types of revenue that we generate. And so F&B revenue is going to be at a lower incremental lease payment. And so that actually resulted in an outsized decline in the lease payment for Torrey Pines. So there's just a lot of different things that it's contributed to. But I think what I can say is that I'm very proud of the team in a very difficult environment doing everything they can to optimize cost controls and flow-throughs and really focus on pushing ancillary revenue, which is much needed.

Okay, perfect. That's helpful. And I also wanted to ask about San Francisco and the conversion there. You know, the rep part results year-to-date have been very strong. Has there been any disruption from the renovation year-to-date? I don't know if you're able to quantify that. And then can you also just remind us, you know, what is left as far as that conversion to get it open, what else you need to complete before you open it in the first quarter of 2020?

Yeah, I can answer that. Yeah, so it's – It's all basically public space and exteriors. So, if you've been in the hotel, we had a drive-through in a port this year, and we're actually closing that in and extending that to recapture more space into the lobby. So, we're expanding the lobby. We're doing a major repositioning of the F&B concept of the hotel, the bar, the restaurant. So, all of that is underway, and that will continue on through the first quarter. As far as displacement, we haven't had a ton of displacement that's really directly attributed to the renovation. As I mentioned, we've got a pretty good plan in place where we have this stealth renovation program, and we've got very strict rules on what can and cannot be displayed so it doesn't impact the guests and how we do the flow of traffic for check-in to to minimize the impact to the guest experience, and I think that we've got that down incredibly well. The quarter was a little bit weaker, but that was mainly some anomalies to the mix of business, and we had a decline in rate. But here today it's been great, and we've been under substantial renovation. So I think overall it's a great success story. And as it relates to that market, I'm just very, very optimistic that our hotel is – really strategically and competitively positioned to capture a lot of incremental rate as we brand out and fully go to the autograph distribution just because there's a lot of high-end business demand strategically located around our property. And so I'm very optimistic with the market dynamics as well.

Okay, thank you for that. And this is my last question for Richard on capital allocation. Any changes to your priorities and how you're thinking about things? You're a little bit above your net debt to gross assets target, so is it a priority to reduce leverage here, or how are you thinking about balancing some of the options you have given the attractive outlook you have coming up in 2020 here?

Yeah, Tyler, thanks for that. That's definitely an astute observation. You know, we are slightly above our target leverage right now, which means that any capital allocation decision that we take will want to ensure that it's not increasing leverage further. And so while we don't have a specific plan to reduce leverage, you know, our target is a self-imposed target, and we're certainly well within any of our debt covenants. anything that you see us doing going forward is unlikely to increase leverage any further. So we're pretty optimistic that the property performance coming through in 2020, ability to generate cash flow that way, will help us fall in line with our targets over time.

Okay, great. That's all for me. Thank you.

The next question is from Chris Volanka, Deutsche Bank. Please go ahead, sir.

Hey, good morning, guys. I want to ask you about the cost structure at the three, so the Ritz-Carlton, St. Thomas, and the two autograph collection conversions. Does the cost structure change dramatically there post-renovation? Just trying to figure out, especially in the case of St. Thomas, you know, is the profitability profile different? reasonably similar to what it was before all the disruption.

We'll take those in kind of separate buckets. So we'll start with St. Thomas. I think the cost structure, we're actually taking advantage of just doing a revamp and relook at the entire organizational structure. So we're actually going to open up with a lower cost structure initially and with the flexibility and agreement with Rich Carlton that if we need to add back some supervisor or managerial positions, we can always do that. But we basically took advantage of a zero staffing assumption and built up what we think the resort should be staffed at as we open, and we've combined some positions. So I would say at worst-case scenario, we're very similar from a cost structure. At best-case scenario, we're able to add more increased margin. And there's a lot of other Ancillary revenues that we plan to capture, as I mentioned, we're adding 11 high-end cabanas. We also have the kids pool, which we plan to utilize to charge day pass resort fees to the adjacent Ritz-Carlton residences. And so I think that's going to be very good, profitable, incremental revenue as well. As it relates to autographs, the cost rate is definitely going to be a little bit higher. But what we're banking on is that we're going to have increased ADR at both properties. So the margins might be just a little bit lower because we're going to have a lot more F&B revenue, but overall EBITDA should be considerably higher given the additional rate and additional profit that we anticipate on the incremental revenue streams as well.

Okay, great. And then maybe talk a little bit about Sofitel Chicago. I know It's been a little bit up and down this year, but, you know, kind of tough again in the third quarter. Is there anything – I noticed the margins were actually up and wondered if, you know, there's something exogenous there. Just kind of your outlook for whether that hotel kind of has a – you know, is there a ramp coming or is it just kind of stable as it is?

Yeah, so we lost share in the quarter. about 610 basis points. Very disappointing given our significant capital investment we made into the property, as you're aware of, just recently. We continue to experience a very, very weak brand contribution for that hotel from Accor. So I'd say that we're very frustrated with the performance of the property. Our team is pressuring the brand to improve performance. As it relates to the flow-throughs that you see, Those are really one time as it relates to some reductions that we want in some property taxes, and that flows through to EBITDA. So not really operating performance.

Okay, that's helpful. And then maybe a question for Richard. A lot of REITs are talking about disconnect between public and private valuations, and you guys don't have too much in the way of non-core assets, maybe one or two possibly that I could see. Is there any thought to just monetizing one of those two non-core assets if you view them as non-core just to kind of prove that value out to the market?

Yeah, thanks for that, Chris. If you look at our proportion of EBITDA contribution from luxury and upper upscale, you can see we're predominantly luxury, which is where we want to be. We do have upper upscale properties and they, in many cases, are contributing significant amounts of EBITDA to the company, which is helping support our dividend and obviously all of our other fixed charges. So at the moment, we like that mix. We like having those kind of cash cows to generate income. It would have to be a circumstance if we were to try to monetize one of those assets where we could flip it very quickly into a luxury property to maintain cash flow and maintain our strategy. So at the moment, we're not in the process of marketing any assets for sale, but there are always those unique circumstances that could cause us or give us the opportunity to upgrade the portfolio. So that's how I think about it.

Okay. Very good. Thanks, guys.

We have a question from Barry Oxford, DA Davidson. Please go ahead, sir.

Great. Thanks so much. Just to build on that, you're not in the market to dispose of any assets, so is it fair to say that on the other side of the coin that you're not really looking at acquisitions, or are you eyeing a couple properties right now?

Thanks, Barry. You may remember from our Investor Day presentation, we talked about where we were in terms of capital. We talked about our leverage, even just on this call. So you're right, in the traditional sense, we're not in the market to acquire assets on balance sheet. That said, one of the things we are exploring is a GPLP structure where we can partner with a capital source to make acquisitions that would contribute to our profitability and in some regard, at least in respect of the amount that we invest in the venture and any incentive fee that we would earn, but also to line up a future pipeline when our equity cost of capital is much more favorable than it is today. So for that reason, we continue to be active in the market in the sense that we do maintain a pipeline. We are looking at a number of deals. We're keeping our tools sharp. but you wouldn't see us acquiring anything on balance sheet in the short term.

Great, great. Thanks. And then last question. You indicated $40 million to $60 million spend in 2020. Are most of those dollars going to be headed towards a particular hotel or project, or is that more just, look, Barry, this is normal pace of business in order to keep our hotels where they need to be?

There will be some renovations of some hotels, but we're going to disclose that in the next quarter once we finalize our capital plans in December. And some of that spend actually will be carryover spend from the autograph conversion in San Francisco that is ongoing. We spend a decent amount of money at the very end because we hold back a lot of payments from our contractors. So it will be a combination of that, and then we will provide more details in the upcoming quarter of individual hotel renovation activity?

Yeah, I'd add to that. I'd say, you know, certainly the long-term average spend or an appropriate level of kind of, you know, capex without any special ROI projects is within that range, probably more towards the lower end of that range. So, as Jeremy said, it's really based on what projects we can identify that we want to bring forward or that we think will significantly increase the attractiveness of our property in the short term. Well, there'll be more details coming out on that in the next quarter.

Yeah, but what I would add, though, is that from a year-over-year comparability standpoint, just because we've been under some significant renovation at some very large strategic hotels, that you will see that we will have less overall displacement next year than we did this year, especially with St. Thomas is back open.

Right, and I think that will hopefully bear out in the power of your earnings in 2020.

That's our hope.

Yes, yes. All right, guys, thanks so much. Appreciate it.

Thanks, Barry. As a reminder, if you wish to ask a question, press star 1 on your telephone keypad. That's star 1. We have a question from Brian Marr, D. Riley, FBR. Please go ahead.

Yeah, good morning. Most of my questions have already been asked and answered, but can you give us, Richard and Jeremy, you know, what you're seeing as far as kind of early booking trends at the Park Hyatt in Beaver Creek, you know, which we all know is a very seasonal property for you, and then also what you're seeing for 2020 booking trends at the Ritz-Carlton St. Thomas?

Well, we commented on the script, at least, as it relates to – The ADR at St. Thomas, the range has been very attractive. We're still building up the group business at St. Thomas, but the training gym bookings have been very favorable so far. And I think that there's a lot of pent-up demand for St. Thomas. I don't know if there's anything really to comment on specifically as it relates into the short term. A lot of that is just kind of how the snow season plays out. We do have a new team in place, and so we are repositioning that property from a segmentation and group perspective. And that always takes a little bit of time, but I am optimistic that we have the right players for that property.

Yeah, I think with the new lobby renovation, which looks absolutely spectacular, I don't know if you've got a chance to see any of the images on that yet, Brian, but I do think that takes a little bit of time to get the word out. But I think that'll start to happen over the next couple of months. And so hopefully by the time we get into the first quarter next year, you'll start to see that benefit in the numbers. But I just think the word's not out yet on that. And that'll start to happen, I think, here in the short term.

Yeah, I'd say that the property is up about 8% in group business in terms of year-over-year pace. And that's actually 70% of what they actualized in 2018. So the group outlook is building and should be fairly strong. They've been focused on a lot of need periods as well.

Great. And then just I know you touched upon, you know, the supply picture and how it's improving across the portfolio. But when you look at your various markets for the 13 hotels, Which, you know, maybe you can rank the top three that you're most concerned about in 2020 and 2021 as it relates to new supplies still coming into the market.

Yeah, so I think that the Sarasota market continues to have a decent amount of supply that we expect to come in not only in the next 12 months but over the next 24 months. And that was something that we underwrote. And I think the property's actually done remarkably well and actually exceeded our underwriting as it relates to absorbing some of that supply. So hopefully that continues to be the case. But I would say that that market clearly stands out as the one that would concern me the most. Aside from that, probably, at least in the near term, San Diego, we're projecting at least the markets around our hotel to be about 3% growth next year. But everybody else is in the twos or ones or even, you know, of course, Key West is zero supply, new supply outlook. So I think we're very well positioned across the portfolio from a supply perspective.

Over the next two months, we estimate about 2%. supply growth in our markets, both on market and track, which is, I think, a great place to be.

All right. Thank you, Richard and Jeremy. I appreciate it.

Thanks, Brian.

We've reached the end of the question and answers session. I would now like to turn the call over to management for closing remarks.

Thank you for joining us on the third quarter earnings call. We look forward to speaking with you again on our next call and seeing many of you at Navy in Los Angeles in a couple weeks. Thank you.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation. Have a good day and a happy Halloween.