Diamondrock Hospitality Company

Ladies and gentlemen, thank you for standing by, and welcome to the Diamond Rock Hospitality First Quarter 2020 Earnings Conference Call. At this time, all participants are in listen-only mode. After the speaker presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. Please be advised that today's conference is being recorded. If you require any further assistance, please press star 0. I would now like to hand the conference to your speaker today, Ryan E. Quinn, Senior Vice President and Treasurer.

Please go ahead, ma'am. Thank you, and good morning, everyone. Welcome to Diamond Rock's first quarter 2020 earnings call. Before we begin, I'd like to remind everyone that many of the comments made today are considered forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ materially from those implied by our comments. In addition, on today's call, we will discuss certain non-GAAP financial information. A reconciliation of this information to the most directly comparable GAAP financial measure can be found in our earnings press release. With that, I'm pleased to turn the call over to Mark Brugger, our President and Chief Executive Officer.

Good morning, and thank you for your interest in Dimerock. I want to start by extending our thoughts and prayers to those who have been affected by the ongoing pandemic. At our core, we are about bringing people together and sharing experiences. It is personally painful to see people isolated and hotel associates out of work. Based on the current flattening trend lines, we are hopeful that the U.S. has seen the worst of the pandemic. Together, we will make it through this. and we eagerly look forward to welcoming back the thousands of valued hotel associates and the tens of thousands of hotels through the front doors of our hotels and resorts. Today, I'll focus my remarks on the steps we've taken here at Dimerock to respond to the COVID-19 crisis. After which, I'll turn the call over to our Chief Financial Officer, Jeff Donnelly, to review first quarter results and our liquidity. I'll then conclude with a few thoughts on the future. In understanding Dimerock's COVID-19 action plan, it is helpful to review where we were before the epidemic started impacting us. Probably most importantly, as of the end of 2019, Dimerock had low leverage with about 30% debt to asset value, net debt to EBITDA of only 3.7 times, no preferred equity, and fixed charge coverage on our debt was nearly 3.5 times. We also had $325 million untapped on the credit facility and only one small debt maturity in the next three years. Operationally, pre-crisis, our high-quality and diverse portfolio was outperforming. Our geography and ROI projects were paying off with portfolio rep par up 13.9% in January and 7.2% in January. This strong starting point did not slow us from rapidly responding to the impact of the healthcare crisis that gripped the U.S. with unprecedented force starting in March. Almost immediately, we enacted far-reaching action plan to fortify our balance sheet by building cash and dramatically curtailing costs at every level. Let me review for you the steps we have taken thus far. Action item one was to build cash. In March, we drew down our revolver. Our cash balance at the end of the first quarter was $388 million. Second, we preserved $100 million of cash over the next year by suspending our common dividends, including the first quarter dividend. Note that we have no preferred equity in our capital structure. Third, we reviewed every planned project line by line, item by item. In total, we have canceled or deferred 70% or $80 million of projects originally in our 2020 capital budget. The remaining expenditures are focused on four main categories. One, projects underway that are more cost effective to complete than delay. Two, critical expenditures to preserve and protect your investment. Three, projects that were highly disruptive, so now provides a unique opportunity to complete them. And four, a few select high impact ROI projects. The fourth action item was to review the ongoing rebuild of the Frenchman's Reef Resort. Prior to COVID-19, Frenchman's Reef was on pace to reopen in late 2020. However, with the priority on liquidity and the likely pushing out of demand in the USVI, we made the decision to suspend the rebuilding effort. The rebuild is halfway complete, and there is about $170 million remaining to complete the project. We are excited about the long-term prospects here, but it is prudent to push it out given the current environment. Okay, let's discuss our most difficult action step, to dramatically reduce the cost at the hotels, given the lack of travel demand. We temporarily suspended operations at 20 of our 31 hotels between March 17th and April 10th. Collectively, these represent 61% of our rooms. Five of the suspensions were the result of government mandates. These include Kavala Point, our two resorts in Key West, Burlington Hilton, and the Charleston Renaissance. The remainder were based on the simple fact that it was more cost effective to close them than to keep them operating. One of the most painful parts of the pandemic is that regardless of whether operations were temporarily suspended, or we kept a hotel open with minimal services, we had to significantly reduce hotel staffing levels of the portfolio. Budgeted monthly payroll across the portfolio was $25.5 million. Today, it is just under $6 million. This 80% reduction in our monthly payroll expense equates to over $230 million of savings on an annualized basis. We have placed full-time security and building engineers in every one of to preserve and protect asset value. We are also preserving a minimum level of sales associates to capture future business so that we can bounce back quicker. In fact, in April, we generated nearly 1,300 leads for 360,000 roommates spanning late 2020 and beyond. Our sales team and asset managers have been hard at work buying alternate demand generators with good success. We have provided housing for healthy personnel in our nation's military, first responders, medical staff, and even diplomatic groups. Thus far, these initiatives have generated several million dollars of incremental revenue, and we continue to seek ways to drive non-traditional business until more travel demand returns. The cost savings were not just at the hotel level. At Diamond Rock, our 2020 cash G&A cost will be reduced by approximately 20% through lower executive compensation, reduced employee headcount, and numerous other smaller but aggressive reductions, such as rebuilding contracts, renegotiating with vendors, and outright termination of third-party services. Another major action item we have taken as a company relates to our secured financings and ground leases. For example, we secured a 50% reduction in the payment for a ground lease at the courtyard in New York. On our seven CMBS loans, we are seeking accommodations such as permission to tap FF&E reserves for hotel working capital and debt service. Ironically, to date we have not received much relief as the CMBS lenders have said Dimerock is too well capitalized to receive relief. Nevertheless, we will continue to be proactive on this front. While we have diligently pursued all these major action items, it is by no means an exhaustive list. I'm very proud of the relentless effort taken by my team to leave no stone unturned due to cost savings. Let me now turn the call over to Jeff, who will talk more about our financial liquidity. Jeff?