Operator: Good day and welcome to the Hersha Hospitality Trust. Q1, 2021 Earnings Call And Webcast today. [Operator Instructions]. I would like to turn the conference over to Mr. Greg Costa with Investor Relations.

Please go ahead, sir.

Greg Costa: Thank you, Chris. And good morning to everyone joining us today. Welcome to the Hersha Hospitality Trust. First quarter 2021 Conference Call.

Today's call will be based on the Q1 2021 Earnings Release, which was distributed yesterday afternoon. Before proceeding,. I'd like to remind everyone that today's conference call may contain forward-looking statements. These forward-looking statements involve known and unknown risks and uncertainties and other factors that may cause the company's actual results, performance, or financial positions to be considerably different from any future results, performance or financial positions. These factors are detailed within the company's press release as well as within the company's filings with the SEC.

With that it is now my pleasure to turn the call over to Mr. Neil H Shaw Hersha Hospitality Trust President And Chief Operating Officer. Neil, you may begin.

Neil Shaw: Thank you, Greg. And good morning, everyone joining me here today are Jay Shaw, Our Chief Executive Officer, And To Sheesh Pareek Our Chief Financial Officer.

Again, thank you all for joining our call today. What a difference one year makes, last year at this time we were burning cash in a completely uncertain environment. Today, there was positive momentum across the economic spectr and we can report a clear acceleration in year to date results and positive cash-flow. We are grateful for the courage, hard work and commitment of our people, both our frontline staff and our regional teams. They did right by all of our stakeholders, our guests, our investors, fellow team members, and our hard hit communities throughout this pandemic.

Our first quarter results also underscore the quality of our portfolio, the effectiveness of our cluster operating strategy and the resilience of our locations. All of which provided the flexibility we needed to get through this pandemic. These competitive advantages will continue to differentiate our portfolios earnings growth profile as the economy recovers and the sends its next peak. Let's start with the quarter we'll then go market by market. Before Sheesh takes a deeper look at our cost controls and margin story, The first quarter is typically the softest quarter of the year, but results from January to March surpassed results from the fourth quarter 2020 as occupancy for our comparable portfolio was higher by 1300 basis points and ADR grew by 8% leading to quarter over quarter RevPAR growth of 50%.

Despite growing case counts and lockdowns January was more resilient than we anticipated for our portfolio returning to greater than $60 RevPAR with strength in South Florida and Washington DC offsetting lockdowns on the West coast and the Northeast. Absolute portfolio RevPAR sequentially improved throughout the quarter increasing to $75 in February and surpassing $90 in March and recent results indicate that we approaching a hundred dollars For April, Occupancy for the first quarter eclipse our internal forecast at the beginning of the year, by more than 1200 basis points and our ability to hold rates during this demand in flux led to a 34% higher absolute RevPAR than we initially expected in early January. Results month to date in April are similar to March. Our portfolio occupancy is approximately 55% and we continue to drive ADR in South Florida and on the West coast with ATRs 10% and 7% higher respectively than we forecast at the beginning of April. The shift in sentiment is remarkable and forward.

Bookings are providing more visibility than any time in the last year. The stimulus holiday schedules and pent up demand have clearly driven a robust spring travel season and we are seeing positive momentum into the second quarter. Leisure remains the primary source of portfolio demand, particularly in South Florida and along the California coast drive to resorts have been our strongest performers since the inception of the pandemic and this portfolio of hotels about 25% of our pre pandemic EBITDA had a weighted average occupancy of 56% with similar daily rates for the first quarter 2021 compared to the first quarter of 2019 leisure demand is not proving to be price sensitive. Urban markets will take several more quarters to recover, but we are encouraged by accelerating demand in the hardest hit urban markets like Boston, New York and Seattle Demand remains Leisure driven, but in both transient. And now the small group segments, the return of smaller social groups is beginning to accelerate with collegiate and youth sports events, taking place across our urban clusters, benefiting our select service assets in these markets In our luxury and lifestyle, hotels, weddings, and other special agape [inaudible] have begun in earnest and deposits continue to be made for the rest of the year.

The number of wedding blocks currently on the books for 2021 is more than 20% higher than wedding blocks we had on the books during the same period in 2019. Demand across the portfolio continues to be heavily weighted on weekends versus weekdays stays. But with passing month, the number of weekday stays continues to increase year to date results for our portfolio show average weekday RevPAR growth of 56% and weekend RevPAR growth of 85%. Weekday occupancy has grown from 38 per 38% in January to 48% month to date in April while weekend occupancy has increased from 46% in January to 66% month to date and April over that same period, weekday and weekend ATRs have increased 25 and 30% respectively When the high rated business traveler returns and replaces government contract business, we would expect a meaningful leg-up in weekday ADR. Harbor travel recovery has been slow, but steady airline sector reports that the airline sector reports that corporate volumes are accelerating and could reach prior peak by next year.

American express expects, travel and entertainment spending to recover to 70% of pre pandemic levels. by the end of this year at our hotels, we continue to find small and medium enterprises producing the most room nights to date, but we are beginning to see the larger enterprises mobilizing. While we expect continued improvements to business travel throughout the summer, we anticipate the next big leg up in the recovery to be after labor day, when schools reopened in person and employers returned to the office. Once the recovery of business transient and corporate group is underway, we expect to see a powerful cash and profitability driver for our business into the fourth quarter and accelerating into 2022. Let's start in Miami and key West.

Our first Ray of sunshine in 2021 for the first quarter, our largest asset, the Cadillac hotel and beach club on Miami beach, So a continued demand from leisure travelers in the first quarter generating over $3 million in EBITDA at a 73% occupancy demand to South Florida built sequentially over the quarter with the strongest period from president's day until Easter, when the Cadillac and our Paris key resort in key West generated weighted average occupancy of 83%, essentially flat versus the same period in 2019 with weighted average rate growth rate growth, exceeding 5%. Despite only reopening in mid January as an independent hotel, even the blue moon hotel on Miami beach generated positive cash flow for the quarter demand at the Ritz-Carlton coconut Grove is primarily driven by member, reward stays and Amex packages today. But we are beginning to see some pickup in LNR business from financial services and aviation related companies. We have hosted several weddings and social events and we're expecting more corporate group business in the fall. Although performance year-to-date in South Florida is not indicative of the remainder of the year.

There are a number of events, festivals, and conventions returning to Miami in the coming quarters, the South beach food and wine festival, our Basel this fall, and then the recently awarded formula one grand Prix next year. Beyond tourism. Miami has also announced several new corporate demand generators and new tenants to the market, including Blackstone, volley Disney, icon enterprises, Tom Bravo, and of late venture and tech firms like the PayPal founders fund and SoftBank the short medium and long-term demand fundamentals in Miami are quite impressive. Key West is similarly encouraging performance at the pair of key hotel and villas was strong for the second consecutive quarter generating 76% occupancy and 24% ADR growth, which led to 10% higher RevPAR growth in the first 10% higher RevPAR growth than the first quarter of 2019. Performance in March highlighted the substantial demand witnessed in the Florida keys as the pair of key hotel and villas ended the month with 91% occupancy and the $489 absolute ADR, which equated to 27% growth in ADR and RevPAR versus March of 2019 key West began the pandemic as the prototypical drive to resort market today, it continues to attract and Southeastern residents, but TSA data shows that airlift is now significantly higher than before the pandemic.

The barriers to entry in key West are nearly absolute or at the very least zero SOC we reinvested approximately $27 million in a major upgrade of the resort in 2018 and like the Cadillac we expect to achieve results well beyond prior peak performance on this hotel. California and Seattle are coastal resorts in California, all benefited from significant renovations in 2018. And we were enjoying strong, early returns despite significant restrictions still in place. During the quarter in California, the sanctuary beach resort generated an absolute ADR of $410 during the first quarter, during the first quarter, which represents 51% growth versus the first quarter of 2019. Our hotel Milo and Santa Barbara also saw significant rate growth last quarter with increased demand in March around spring break, ending the quarter with 28% re ADR growth versus the first quarter of 2019, the Santa Monica Ambrose weekends performed well in the quarter, but weekdays remained weak with the area technology companies, still not back in the office.

Next quarter, we expect elective medical procedures to resume and have begun to both some small business at the Ambrose are more business oriented hotels in Seattle, Silicon Valley and Los Angeles continue to improve steadily from an admittedly low base. There are the homes. These are the homes of the largest technology companies in the world. Also absorbing new office space during this pandemic in Seattle, in South Lake union, Apple recently Apple recently announced a new office location close to our hotel with plans to double over the next several years. Amazon reaffirmed its commitment to Seattle and signaled to return to the office in September while life science and office space are renting and selling for higher than pre pandemic levels.

Multifamily absorption has also spiked in Seattle and the Memphis and the South Lake union submarket until corporate travel returns. The pan Pacific has had, has had some success booking entertainment, film related groups, residential and corporate relocation and leisure business. PSA data for Seattle has shown a notable acceleration since the start of the year and throughout the last several months in particular in Silicon Valley, our top clients are Facebook, Google and Apple most have reopened offices, but have extended remote work directives through the third quarter. Facebook appears to be a first mover in the Valley and is expecting travel to return to prior levels. All three companies have been hiring new talent and expect to remobilize training and other traditional activities in the fall.

Until then our team has been scrappy by booking construction and nursing crews to generate some revenue. And the team remains poised to capture early business from our key accounts. Our Los Angeles courtyard is in Culver city, a booming sub market with newly developed and least studio tech and life science buildings, very little business travel yet, but we are capitalizing on our convenient location for collegiate sports. While the hotels meeting space is being used as a COVID vaccination site, whether it be on the West coast or the East coast, we assembled our urban portfolio one by one targeting locations and innovation markets that have proved to be the most resilient. We would include our height union square hotel, well located in Silicon alley, new York's tech sub market and the Boston Seaport, which continues to draw pharmaceutical technology and research and development centers near our Envoy hotel.

It is noteworthy to highlight then March. We were approximately, there were approximately 76,000 tech job openings across the country, the highest monthly total over the past three years during the month, 11 markets had higher tech job postings than their 2019 levels with four of the top five being in Seattle, Washington, DC, Los Angeles, and New York city. And then zooming out by state. California has grown employment the most since the pandemic. New York, in New York, traditional sources of demand remain weak, but our teams have been entrepreneurial in their approach and it is allowed us to serve the community.

Our teams continue to contract with first responders and other government groups to build revenue leading our portfolio to end the first quarter with 53% occupancy in New York, resulting in absolute RevPAR for the portfolio more than 20% higher than our forecast at the beginning of this year, continued stays by first responders, traveling nurses and the New York fire department resulted in portfolio occupancy approximately 15, 1500 basis points higher than our initial expectations for the quarter. New York city, which was the hardest hit city for travel during the pandemic is beginning to see leisure travelers return to the market as daily visitors to times square eclipsed, 110,000 per day in March up 23% month over month while the MoMA is getting close to 7,000 visitors per day, up from 4,000 per day, when it reopened towards the end of last summer, returning visitors to New York are welcomed to new gateway improvements like Moynihan station for Amtrak and transit or the new terminals at LaGuardia airport. In several of our locations in the final weeks of March on Saturdays, we reached 70 to 80% occupancy and this boost comes ahead of the city's announcement of committing $30 million to its tourism campaign. Beginning in June. There were also some great announcements this morning, if you may have caught them.

In addition to leisure, returning to the city, we are seeing more data on the return of workers to the market major financial firms, such as Goldman Sachs, JP Morgan and Barclays have already begun to mobilize staff to return to the office this summer. And each firm intends to get close to full capacity before the end of the year. Additionally, mayor de Blasio has disclosed intentions to bring an estimated 80,000 municipal workers back to the office by early may, which will help increase transit ridership and availability and sizeable leases by notable tech firms in Manhattan have continued in droves, Facebook taking down 730,000 square feet in Manhattan, tick top 232,000 square feet in times square. And Apple's 336,000 square foot Manhattan sublease. Just to highlight a few.

These are all signs that shows that the resiliency of New York city and travelers desire to return for both business and pleasure. Our Manhattan select service portfolio is particularly well located and built to the tastes and preferences of today's travelers, high-quality corner locations and the most important sub markets that are seeing successful new technology tenants absorbing new office near our hotels. Our Hilton garden in Tribeca near Disney's new location in Hudson square are Hilton garden in Midtown East near the iconic new tower, one Venderbilt or JP Morgan's new building, or our express at 29th and eighth Avenue. Its gateway to Penn district and Manhattan West, when the higher rated weekday business returns to occupy these new buildings. Later this year, we will be able to drive margins and cash-flow meaningfully outside of the city of the white house.

The Hyatt house white Plains produced over 500,000 of EBITDA, as it continues to benefit from social and sports groups, wedding blocks, and some early corporate LNR production, not to mention its recent renovation and additional key count. Finally, Boston, Washington, Philadelphia, most of these cities like most around the U S were essentially shut down from March to September, 2020, but as demand generators began to reopen and restrictions eased, we have seen increasing leisure demand in all of our cities here in Philadelphia. Our offices literally overlook independence hall and the Liberty bell we're aligned to growing longer and longer by the day growing more than 225% from February to March in Washington, DC, we saw travelers slot to the region for the annual cherry blossoms, despite heavy restrictions and less than welcoming messages from the City in both Washington and Philadelphia weekend. RevPAR has been two times the weekday RevPAR levels, the widest margin in our portfolio in Philadelphia, our sales teams are having success with university and professional sports teams and the entertainment segment at several of our hotels. The Hampton Inn has hosted several university and high school sports tournaments.

And the Western is once again, working with major league baseball, the hotel continues to book some entertainment and small group weddings with our first board meetings and corporate events slated for the fall On still very low occupancy. The written house has pushed ADR higher than 2019 to $441 for the quarter evidence of less price, sensitive luxury, luxury consumers, and a preference for our well-known suites within the inventory On the Chesapeake Bay at the Annapolis waterfront hotel and other autograph collection hotel. We recently upgraded substantially. We were enjoying better weekends than before the pandemic, and I've had some success with social corporate and state legislative groups. By next quarter, we should be close to second quarter, 2019 performance in the district.

In Washington. Our team was able to book national guard and Capitol police to provide base occupancy in the first quarter at our Hampton and Hilton garden in properties, which offset weakness in the market more broadly, the same Gregory is capturing some law firm demand, but most legal and diplomatic businesses is expected to return in the third quarter in Washington, despite persistent local restrictions. We have seen a sharp increase in TSA volumes across the last several months that we expect to lead to more lodging demand and new presidential administration, particularly one with as large of an agenda and spending plan as this one leads to substantial legislative lobbying, federal contracting, and foreign policy, all big drivers for lodging demand. The Ritz-Carlton Georgetown may be the biggest flow-through beneficiary. Next quarter, as occupancy is already over 50%.

And our ADR at $380 is within 15% of pre pandemic In Boston. Spring comes late, but governor Baker on Tuesday announced changes to restrictions in the city for events, weddings, live sports concerts, and other social events will now be permissible in may. Although graduations limited in scope. Again this year, we do suspect that many parents will travel to still be with their children if only to help tack them up for the Envoy. The start of federal courts.

And the first trials beginning in June will be a strong generator of mid-week demand that should allow us to double RevPAR Our locations in the Seaport, the boxer hotel in the West end, and the courtyard in Coolidge corner or Brookline are attractive to leisure university related demand and ultimately weekday corporate when it does return. Okay. A few words on capital allocation before I turn it over, as we outlined on our previous earnings call, we entered into binding sales agreements on six hotels that represent total proceeds of $216 million. Five of those six hotel sales have closed, and we expect the Dwayne street hotel sale to close this quarter. We were able to transact at attractive pricing, highlighting the high valued real estate of our purpose-built portfolio.

We sold the oldest most stabilized hotels in each of our market clusters for a $54 million gain. And they 7.5% cap rate on 2019 NOI, several of the assets that were sold, represented hotels with capital intensive projects on the horizon and the successful completion of these sales. We'll lower our CapEx budget by approximately $20 million. Over the coming years, we are not anticipating any additional sales this year. We also closed on our strategic financing with affiliates of Goldman Sachs merchant bank, providing a $150 million unsecured term loan, which can be expanded to $200 million and notably with flexible prepayment terms, this notes facility in conjunction with the with the aforementioned asset sales led to the successful amendment of our credit facility, extending our covenant waivers until June 22 and eliminating term loan maturities in 2021, without a change in our rate, inclusive of the GS notes.

And there were other bank or mortgages inclusive of the GS notes and our other bank and mortgages our total cost of borrowing on $1.1 billion of debt is 4.4% with an over three years life to maturity. We are pleased to have forged a strong relationship with Goldman Sachs merchant bank that provides us with a well capitalized partner to seek out strategic opportunities and to have been provided the financial flexibility, to clear the runway and focus on the ramp of our portfolio in the coming quarters. This year has gotten off to a very strong start and a robust economic recovery appears underway. Of course, there are still risks and uncertainties as our portfolio gets beyond breakeven and cities and States ease restrictions, our operating and financial leverage can drive outsized returns as what, as we kickstart. Well, we anticipate to be a multi-year recovery.

We remain bullish on the cities where we operate innovation oriented, urban gateway markets with regional resorts, just a short drive away drive to resorts and leisure destinations. We'll continue to enjoy demand, but we believe the top us cities will see a Swift recovery beginning of the second half of this year and extending for the next several years. Our innovation districts provided strong results prior to the pandemic. And these markets have the most recover as we make strides towards returning to a more normalized operating environment. And this summer we remind everyone that New York, Boston, Washington, and Los Angeles are among the greatest tourist destinations in the world.

Extraordinary richness comprised of every culture on earth. World-class art, music, bars, restaurants, public parks, and sports. We hope to see all of you out with that. Let me turn it over to Sheesh.

Sheesh Pareek: All right, Thanks Neil.

Good morning. Everyone I'll provide further detail on what we witnessed from a portfolio operating standpoint, as it progressed, it's impact on our cash burn and breakeven levels before closing with an update on current performance for the month of April and our balance sheet demand fundamentals that our properties move significantly over the balanced first quarter and ultimately led to the validation of our property level break, even forecast in what is typically the slowest quarter of the year, historically accounting for less than 15% of full year EBITDA, our property has generated positive property level cash flow of $4.8 million on 45% occupancy with RevPAR levels, 54% a low the first quarter of 2019. We held firm on our strategy of maintaining rate integrity and capturing the significant pent up demand to resort assets. During the quarter, we were able to generate more than 20% ADR growth compared to first quarter, 2019 at both the pair of key and key West and the hotel Milo in Santa Barbara, while at the sanctuary beach resort in Monterrey, our absolute ADR exceeded $400 and it was more than 50% higher compared to the first quarter of 2019. In March 24 of us three operational hotels broke even on the GOP lines with 19 achieving EBITDA breaking level, representing 58% of open hotels breaking even on the EBITDAR line versus just 28% in December of 2020 and 39% in January of 21 results in March represent a 90% increase in properties, achieving break, even EBITDA levels compared to December of 2020 Performance.this quarter cemented that we are comfortable forecasting, positive hotel level EBITDA moving forward in our approaching levels music to break even at the corporate level, which we believe occurs at approximately 60% occupancy with a 40% RevPAR declined from 2019 levels Throughout the pandemic.

Our franchise operating model has afforded us the flexibility to run our hotels at current staffing levels at breakeven occupancies approximating 35%. But what we have now seen is that we can run most of these hotels at similar staffing levels, even as occupancies approach 60% with this operating model, as occupancies increase across the portfolio, we're seeing flow through is as high as 75% on the GOP line. And as we push both the rate and occupancy, we anticipate maintaining them for the remainder of the year. The asset management initiatives we implemented in 2020 in conjunction with our flexible operating model showed early signs that our margin improvement goal following the pandemic is beginning to take shape as GOP margins of 36% during the first quarter were essentially the same as our first quarter of 2019 GOP, despite a RevPAR decline of over 50, over 50% to 2019 levels. Most of the first quarters operational improvement was realized in March and was led by our South Florida portfolio, which ended the month with 50% EBITDA margin highlighted by our parent key and Cadillac Assets.

The pair of Key finished March with a 63% EBITDA margin, which represented close to 1300 basis points of growth versus March of 2019. While the Cadillac ended the month with a 51% EBITDA margin with one and a half million in absolute EBITDA generation strong results. We're also seeing in California, in Washington, DC as our sanctuary beach resort generated a 43% EBITDA margin while in DC strong occupancies, coupled with proprietary operational initiatives done large ins, approximately 44% at both the health and guardian M street and Annapolis waterfront hotel. Our Franchise operating strategy has also led to incrementally reduce cash firms over the course of the pandemic. As I mentioned, our total property level cash flow for the first quarter was $4.8 million and grew sequentially through the balance of the Corp in January increased demand at our South Florida in DC clusters, combined with the asset management initiatives that we implemented in 2020 allowed us to break even at the hotel level for the first time.

Since the onset of the pandemic generating $133,000 in earnings continued portfolio improvement led to 986,000 in property level of cashflow during February, while stronger demand in Palm, Florida, Philadelphia, and on the West coast in March resulted in $3.7 million of property level earnings Robots Assaulted our hotels during the first quarter led to corporate cash burn totaling $8.9 million for the quarter 54% better than we forecasted at the beginning of the year. So total corporate cash burn in March at approximately $900,000, which represented as 91% reduction compared to April of 2020 depths of the crisis. We have seen incremental pickup dust in demand far in April in our urban market with weighted average occupancy for our urban clusters, Boston Manhattan, Philadelphia and Washington DC up approximately 400 basis points month to date in April versus March Activity In South Florida remains robust with occupancies on pace degenerate similar results in April versus March, but we are getting towards the tail end of the higher rated leisure traveler ascending upon the region. Typically the second quarter is the strongest quarter for our portfolio with extremely busy, busy conference calendars for business travel graduation ceremonies in urban markets and summer vacations, beginning to take shape. Although we have begun to see the early stages of leisure travel returning to our markets, the offset of lost revenue from higher rated business travel will weigh on cashflow generation versus a normalized year with the alteration in traveler to all of our markets.

We anticipate cashflows in April and may to be on par with March with operating results thereafter projected to surpass. those levels. The pace of the vaccination distribution. Easing government restrictions increased social gathering, such as weddings and sports groups and the resumption of summer travel plans that were canceled in 2020 should yield a robust pickup in bookings across our portfolio. As we get into the summer, our ability, we need to maintain operations at more than 55% of our hotels, even in the depths of the crisis and reopened close to 85% of our portfolio by the end of September is a Testament to our team and operating model, but it also allowed us to maintain core staff across our clusters.

As the pace of occupancies continues to trend higher into the summer, it will yield incremental revenue growth and require additional staffing. So we remain confident that our operational strategy will continue to deliver the service. Our has become accustomed to in a cost efficient manner. We were fortunate to maintain the majority of our market leading Salesforce and management personnel throughout the pandemic. And we have been selectively adding to our staff the past few months to drive future growth.

Although we are feeling the same labor supply pressure as our peers, it has not resulted in us holding back operations across our portfolio. We move to [indiscernible] and a few closing remarks on our balance sheet. We ended the first quarter with $83.3 million in cash and cash equivalent in deposits. As of April 1st, we had approximately $45 million in capacity on our $250 million senior revolving line of credit and $50 million in undrawn credit from the unsecured note facility, we placed with affiliates of Goldman Sachs merchant bank. During the quarter, we spent $2.7 million on capital projects, primarily focused on maintenance and life safety renovations.

Our 2021 cap ex load is projected to be roughly 35% below our 2020 spent and following the disposition of the lower growth higher cost hotels. We announced last quarter, in addition to the $200 million spent on more than 50% of our rooms. The last few years, our portfolio will experience very little disruption or capital spend for the coming years with the recent surge in construction materials, such as copper lumber and steel freight rates skyrocketing to the highest level of senior decade and all indications that the supply chain is tightening and all construction materials, labor and FFNE are becoming more costly in the process. We are happy to have our significant renovations behind us and believe that the replacement cost of our portfolio, all the portfolio similar dollars is significantly undervalued. We look back on the past year and especially this past quarter proud of what we accomplished as a company, despite the challenging operating environment for the industry.

We successfully zero-based budget at our hotels, allowing for margin improvement well into the recovery, which has begun to take shape, we reopened all of our wholly owned hotels faster than the majority of our peers. And we were able to record property level cash-flow just nine months after the onset of the pandemic. And in the slowest quarter of the year, all are a Testament to our aggressive asset management and nimble franchise operating model. Following the strategic transactions we accomplished, we remain laser focused on operational performance of the portfolio and creative opportunities that become available the cycle. There's my portion of the call.

We can now proceed to Q&A. We're happy to address any questions that you may have operator.

Operator: We will now begin the question and answer session to ask a question. [Operator Instruction] At this time, we will pause momentarily to assemble our roster. Today's first question comes from Dory Keston with Wells Fargo.

Please go ahead.

Dory Keston: Thanks. Good morning guys. You said that you were able to maintain your employment levels despite the increase in occupancy across the quarter. I was just wondering how you think, employment eventually does ramp.

Jay Shaw: I'm sorry. I'm sorry. Did you say, how we think that employment ramps or it was a little hard to hear you?

Dory Keston: Yeah, I think, I think one of your initial comments was that you didn't really increase, the number of employees when your occupancy was at 35% versus the, you said 60. So I was just wondering, how do you think employment eventually does ramp?

Jay Shaw: Yeah, absolutely. You know, as we get above that level, I wouldn't say that it's, you know, an immediate sort of exponential growth that we need in our staffing levels.

You're going to need more housekeeping. You may need more front desk from a shift standpoint, but with the focus of our hotels being primarily on the room side with no date F and B, we don't believe that we're going to need to bring back too many people. And certainly not people don't want to gear staffing 2018 or 2019 as occupants itself.

Dory Keston: Okay. and then if we were to ask you in 2019, how much of your expenses were fixed versus variable, and then asked you again today, how, how does that answer change for you?

Jay Shaw: Right now it's actually a higher percent of the expenses are probably fixed, you know, because we just have sort of on a, on an overall base, we still have managers and we still have salespeople, but we don't have the revenues that we had previously.

so, and we don't have the operating expenses. So I think that at this point, what gives us kind of a lot of what gives us a lot of confidence going forward is we have the fixed expenses. We're not going to have to add those. It's really variable as we grow occupancies and grow revenues.

Operator: Our next question comes from David Katz with Jefferies.

Please go ahead, sir.

David Katz: Hi, good morning every one. what I do and thank you for the copious detail, you know, if we roll the clock back, you know, to a different time, there was sort of a notional EBITDA post, some of the investments you were making in the hotels that if memory serves, you know, it was going to get us in the neighborhood of a couple of hundred million of EBITDA. And then if we were to ask you in 2019, how much of your expenses were fixed versus variable, and then asked you again today, how did that answer change for you?

Jay Shaw: Now it's actually a higher percent of the expenses are probably fixed. Yeah, because we just have sort of on a, on an overall base, we still have managers and we still have a salespeople, but we don't have the revenues that we had previously.

so, and we don't have the operating expenses. So I think that at this point it gives us kind of a lot of what gives us a lot of confidence going forward is we have the fixed expenses. We're not going to have to add those. It's really variable as we grow occupancies and grow revenue.

Operator: Our next question comes from David Katz with Jefferies

David Katz: Please go ahead, sir.

Hi, good morning everyone. what I do and thank you for the copious detail, you know, if we roll the clock back, you know, to a different time, there was sort of a notional EBITDA post, some of the investments you were making in the hotels that if memory serves, you know, it was going to get us in the neighborhood of a couple of hundred million of EBITDA? And since then, you know, quite a bit has changed, right? Both, you know, the cost management, as well as some assets, you know, leaving the system. How should we think about kind of whatever some untimed notional EBITDA level could be now? And, you know, the second part of the question is, you know, obviously de-levering is, you know, at the top of the list and maybe it's second, third, and fourth on the list also, you know, w where, you know, where are we trying to get to leverage wise?

Sheesh Pareek: The first part of the question was, on the EBITDA, you know, we didn't sell, we sold it six of six hotels, across, you know, across the last year. So that represents somewhere between 10 and 15% of our pre pandemic EBITDA. so I think a rough we're just speaking roughly a 10% reduction to a former goalpost would be a reasonable estimate of peak of kind of coming Peak EBITDA And with respect to leverage again, you know, untimed, but just sort of setting the goalpost out there.

and obviously it's, you know, a ways away and important. w where, you know, where are we trying to get to in terms of an optimal leverage level in the future? No, I, I think the optimal leverage level, remains, you know, kind of four times for a portfolio like ours, debt to EBITDA. we're, we're quite a ways away from that. until we see the recovery in these major cities as the year progresses, and next year, as we see, corporate group, and convention business start to pick up and hopefully international business as 22 moves forward, I think at that point, it becomes a little bit more rational, a little bit easier to see the path to a four times kind of level we require. And we're looking for significant organic growth from our existing assets.

We think that they are leaner, whereas a company or a leaner. And, and we think we can, we can produce, good income on that side. how else would you expect to just, yeah. Okay. David, we provided the copious levels of details, to just provide some context in each of these markets, you know, and, we are seeing the news sentiment has just shifted so much, you know, it's gone from you, couldn't find a good story out there to today.

You can't find a bad story out there. Uh, we wanted to make sure that we provided some on the ground color from what we're seeing at each of our hotels and among each of our team members and the like, you know, how close we are to each of the cities we operate in. And we want it to provide as much visibility as we can in this difficult

environment
Operator: The next question comes from a Tyler with Janney. Please go ahead. Jonathan: Good morning.

This is Jonathan on for Tyler. Thanks for taking my questions. first one for me, Neil, you highlighted some larger groups in Miami in your prepared remarks, but I was curious what you're seeing more broadly on the larger group side. And if you're seeing any larger conventions or city-wise returning in the back half of the year?

Neil Shaw: You know, this isn't just for Miami, but we've, you know, across the, across the country, we do see convention centers and the, the booking agents and our sales teams, getting excited about bookings in the back half of the year and into 22. But frankly, a lot of those, you know, pieces of news and pieces of needs are still potentially cancelable or can be pushed back in time.

And so we're, we're not yet ready to kind of put a stake in the ground in terms of the amount of convention bookings we're expecting in each of our markets in the back half of the year, but the trends are, are, continue to be positive. I think we had a little bit of a disappointment in DC. We were expecting the diabetes convention, and the national police force kind of convention this summer. Both of those conventions were pushed into the fall into September and October, but they're happening in their big and significant for Washington. similarly, most of, most of the other markets, also, their things are being pushed into the fall.

We don't have absolute certainty on them, but you can be sure that most revenue managers around the country are starting to kind of push rates up, assuming there's going to be some demand compression midweek in the fourth quarter. So I think there are expectations there, and it's not just ours, or it's not just the CVBs of these cities, but, but the entire market starting to feel it and expect it. Jonathan: Okay, great. I appreciate all that detail and then returning to the labor market. can you just provide some additional color on the labor pressures that are, that are out there that you guys are seeing and what could potentially be driving that?

Neil Shaw: I think on the labor side, you know, the biggest challenge we've found is, is on the hourly kind of staff front desk team members and particularly housekeeping, for managers and for, kind of more senior operating level team members.

We have not had, a great challenge there. you know, we're a play great company to work for. We're recognized in, in most of our markets as being a great employer. And so we've on that, on kind of that mid-level and above, we continue to, to have our pick of very strong talent today because the industry is still very disrupted, but on the hourly side, we, it is difficult. And particularly in, in some of the coastal markets that are seeing such, such, such significant demand, but all across America, there is, when hotels closed down, people did look for, for other opportunities and now we have to attract them back.

I think one factor is clearly the stimulus and the, the math is, is very clear. You can make more money, collecting the stimulus and not working, then you can working. So until September, we will have that headwind that will likely change after September, and then it will remain more market based. but until September, we do have that headwind of just kind of stimulus and economic policy leading to, to be some of these challenges. We think it is, it's a challenge and it will continue to be a challenge, but we've gone through this and other cycles and other periods of time as well.

and we've started to, we've started some really not all that innovative, but they're interesting and they're working, but these kinds of referral programs among our team members and, and the like, and, so it's a, it's an area of attention for sure. it's an area that in the summer will continue to be a challenge. but longer term, we don't think that it, impairs the margin story and moving forward this cycle. Jonathan: Okay, great. Thank you for all the color Neal.

That's all for me.

Operator: The next question comes from Michael Bellisario of Baird. Please proceed

Michael Bellisario: The morning, everyone. Hey, Mike, you know, want to go back to one of the prior questions, just kind of de-leveraging but ask it related to regarding acquisitions. I think you mentioned you've kind of completed your disposition activity for the year, at least that's the expectation today, aside from Dwayne street, does that mean you are starting to think about acquisitions today and then how would you balance putting some money to work if, if deals did arise versus how you think about your current cost of capital and, and that further balance sheet you leveraging that, that you want to achieve eventually over time?

Jay Shaw: Yeah.

You know, we are on the disposition side, as I mentioned in the prepared remarks. We're not expecting any additional, dispositions, but, but we remain opportunistic at all times. And, and there is a chance that we would before the end of the year or sell and other assets and then have some additional proceeds that we may be able to use for acquisitions and the like, but, but generally we think of, we're, we're thinking at least for this early part of the cycle for, for us to generate free cash flow and, and, and pay down debt and remove this very significant discount that we're trading out in the public markets. You know, we, we feel that we're, unlike most of our peers who have rebounded closer to, to prepaid DEMEC levels, we're still, you know, well over 30% below that level and I'm well below our considerations of nav. So it's very difficult for us to consider issuing new equity to get on office.

at least until our cost of capital, remains where it is today. as you know, we're, we're very active in the acquisitions and dispositions markets generally either from our activities at HT or, or our insight from our private operating company HHM, and there are opportunities out there. I, I wouldn't describe the deal flow as, as, as once in a lifetime. I wouldn't even describe it as distressed. I think as the year moves forward, we're going to continue to see more fatigued donors.

We're gonna see special servicers and lenders, kind of getting, you know, becoming impatient and looking to get paid back. And that will lead to some transactions. We think that, you know, the back half of this year, 2022, 2023, we'll all still be very strong acquisition will still provide great acquisition opportunities. And at that time we expect our cost of capital may be more attractive than we may be more willing to, to raise equity to go after acquisitions. But at this time, we're, we're not seeing anything to make us regret, not having more liquidity on the balance sheet nor, no attempted to, to raise any capital to go after any opportunities.

We always have the opportunity to do joint ventures. We have, and being public, you have the ability to, to raise capital if the opportunities are that compelling. Uh, but for now, and for the rest of this year, we're just very focused on driving cash flow.

Michael Bellisario: And then just, before, Sheesh is, how were you guys thinking about that last $50 million tranche on the Goldman facility? Is it your hope? You don't have to draw on that, or I guess maybe what would be the circumstances that would arise for you to maybe need to draw on that

Sheesh Pareek: Michael, you know, it is, it's there and it's available to us when we, if we want it at this time, you know, with what we're seeing from accelerating cash flows and, you know, the ability to probably move forward, our internal estimates of when we could go corporate cashflow positive, you know, it is our hope that we would draw that cap.

Operator: The next question is from Brian Maher with B Riley securities, please go ahead.

Brian Maher: Good morning. Just two questions on your markets, in south Florida, you know, with a heating up in the second, the third quarters, I mean, do you expect demand there, which was so robust in the first quarter to fade as we get into the hot summer months? Or do you think that there's just so much pent up demand to get out of the house that, you know, people will power through the heat and, and, and go anyway?

Jay Shaw: That's what we feel like right now, Brian, you know, our internal models and things do, do still have a moderation of demand and particularly ADR in south Florida, in the coming quarters. But I think we, you know, w we may be set up for another surprise there. we're seeing just tremendous, moment in, in Miami where, and Miami and Miami beach and the surrounding areas of key west in the region, just, you know, even though it's been very popular and people have been coming there still isn't, nearly the number of demand generators open even for leisure guests in Miami. So that's all continuing to open.

We didn't have any of the music festivals they're finally coming back. We have food and wine coming next month. this summer there's, there's some other interesting things planned. So I do think that, this year will be exceptional in Miami. We used to have to rely on international demand to even out kind of, demand patterns during the summer in, south Florida.

That doesn't seem to be we, I don't think we'll need that this time. there's some other kind of leading indicators where ours is just more gates and more airlift into Miami from various cities across America. Southwest now flies to Miami. That's a new as of the last quarter or two, and a handful of other airlines also coming in key west. Is that a lot more flights as well? So we do think it's going to be a big summer.

and it's, it's, it's kind of obvious in that there are still, the Caribbean is still, relatively restricted. Europe is starting to open up, but, but probably a concern for a lot of domestic travelers, Mexico has opened and they have been getting a lot of California, traffic, but I think there are a lot of Americans that are, would be concerned still about going there and the cruise line industry still in the United States at place hasn't, that, any certain dates around its opening. So until all of that comes back, we think, warm water, warm weather destination in the United States, particularly culturally unique ones like Miami will have a great one.

Brian Maher: Great,.And then just on New York city, you know, it's most estimates of supply being down kind of 20 to 30% with so many hotels having closed. I mean, clearly you and certain others will benefit from that.

There's the New York city market comes back. And what percentage of that closed supply currently do you think actually makes its way back into the market?

Jay Shaw: We've seen, we've seen the same reports of 20 to 30% in our mind. We think of it over the kind of the medium or long-term, it's probably closer to 10% that remains permanently closed. They were assets that were, you know, struggling pre pandemic, union boxes, aging, hotels, too, small rooms, too, little of windows. And you can, we've seen already, I think we've counted internally about it 7% absolute reduction in supply today where it's been clearly named in announce.

So things like, you know, the 1700 room hotel, Pennsylvania, or the, Roosevelt, the east side, a lot of hotels within the Midtown east kind of sub-market, which make us excited for our positions there. I think hard supply clearly reducing at least 10%, if, if not more. I think sometimes what's overlooked is the reduction in the shadow supply inventory. Airbnb, inventory in major cities reduced by at least 20 to 30% during the pandemic. Uh, we continue to think that the affordable housing lobby, as well as the hotel workers union and the light will continue to raise, raise, issues around Airbnb inventory and major cities.

And so we think that the reduction in shadow inventory and shadow supply is also going to have a meaningful impact on, on New York performance, this cycle.

Operator: Our next question comes from Ari Klein with BMO capital markets. Please proceed.

Ari Klein: Thanks. following up on the staffing question period, house staffing looks at some of the hotels or resorts that have kind of gone back to pre pandemic occupancy levels and maybe change just to get a sense of what ultimately staffing will look like at other hotels across the portfolio.?

Jay Shaw: Yeah, sure.

Ari, you know, what, what we are looking at in staffing hotels that are coming back or are pretty close to prior occupancy is at this time, I mean, you are certainly operating these hotels with just less people. you know, housekeeping protocols and some situations have changed. There's more contactless, check-in, there's more contactless, FNB or ring. people we've found ways to do more with less from a sales perspective and, you know, salespeople using technology to get out to different customers using e-commerce channels. I would say that, you know, the number of bodies in the, in the buildings is, is just less than it was previously.

And at our select service assets, you're seeing, you know, just less in the way of maybe hot breakfast bar offerings or how some of those amenities were offered. And we don't think that a lot of that comes back in the near future. So I think that, you know, certainly the levels of service and what we provide to guests, we're, we're trying to keep it the same or trying to provide value while we're just doing it with less bodies.

Ari Klein: Got it. And then just, you know, obviously a lot of improving trends, of course, across the portfolio, as you look out over the next few years, how are you thinking about the recovery prior RevPAR levels and given the clutch production, do we get to prior EBITDA levels ahead of, ahead of a recovery and repertoire?

Jay Shaw: Yeah, I mean, that's, that is really sort of our thesis.

And I think a lot of the industry's thesis as well, because what we're seeing in markets, where there is demand is that you are able to not just maintain rates, but push rates, you know, that the customers are willing to pay for it. And, you know, our operating models have changed and there is a high likelihood that, you know, our margins will, as we always have been kind of at the leading edge of, you know, the type of hotels that we run. So with our flex operating model, with our focus on cost containment, but keeping, you know, strict rate integrity and pushing, pushing that as much as we can, we, we do see an opportunity to exceed EBITDA levels, from same-store hotels. And in addition to some of the comments that Neil made, you know, our 2019 levels of the dollar significantly disrupted, we had several hotels in south Florida. Our two biggest that were just coming off of being closed for the, for the entirety of 2018 from the hurricanes.

We had a lot of cap ex work going on in 2018, 19 that was affecting our margins and our wrap up. So, you know, as we look at getting back to IRP, it's not really 19, it's sort of the peak for these hotels was really anywhere from 2015 to 17 in many, many cases.

Ari Klein: Got it. That's helpful. And just last, and if I can, can you just talk a little bit about ADR? What does that look like in urban markets?

Jay Shaw: you know, obviously there's a lot of strengths in the, resort markets, but to get a sense of how far below 2019 levels it is at the urban markets.

Yeah. You know, in the urban markets are pretty significant on, let me look at like the first quarter, I would say that in most cases it was 30% in you know, 30% or higher off from 2019 levels from an ADR perspective.

Operator: Next question comes from Anthony with Barclays, please proceed. Anthony: Hi, good morning. Uh, another question on pricing, you know, and, and some of the resort markets and even emergency DC pricing, you'd be pretty strong.

Uh, guest travelers are traveling now seem to have a strong desire to travel as the travel recovery broadens to more people. Do you expect that pricing power to kind of remain as especially given the service level that the hotels may be slightly different than what people remember?

Sheesh Pareek: No. I mean, it's a, it is a, it's a big question. I would just tell us our biases that we think that there will be, that we're going, we're entering kind of an inflationary environment and there will be increased pricing for a lot of things that, that people valued, relative to pricing before the pandemic. I think, you know, we're seeing strong performance, not just among our rates, which is still up based on very low demand, but, but there is pricing power in other sectors of the economy as well.

and so we, we, we think that, you know, hospitality is one of the great benefits of hospitality that we have the ability to reprice our inventory on a daily basis. If there is as much stimulus, as expected as much infrastructure spending as expected, even just the productivity benefits of this kind of virtual world, all of those things set up for tremendous growth in the economy. And we think that that will translate to a significant growth in the lodging sector, particularly with kind of differentiated hotels that that can offer either a killer location or a truly experience oriented stay. yeah, so we're, we're, we're bullish on rates for, for this cycle. And, and so far it's been wonderful to see the industry generally not drop rates tremendously.

I mean, it's still a challenge in many of our markets. and we do wish that there was a little bit more of a concerted effort to, to hold onto rate integrity, but it's been better than most cycles that we remember in terms of, keeping some base of rates when there is without demand. You know, it's, we, we sometimes struggle at the Rittenhouse because we're doing well over $400 rates. if we were to lower the rate, we're not going to be able to drive enough more RevPAR, to drive better profitability, and we're going to ruin our brand and we are going to create more wear and tear in our buildings. And, and so I think we're seeing that kind of, as lodging has become more institutionalized, I think we are seeing better pricing decisions.

Anthony: Okay. Got it. Thanks. And you mentioned a couple of dimension to BC delayed into the fall, I guess. What do you think drove those decisions? Was it uncertainty around the government regulations or the, the market? Was it I'm certainly from commission attendees, you know, about gathering and what do you think maybe the switch to get the conventions to finally say, all right, we're going to commit to a date and we're going to go through with it?

Jay Shaw: I think a big part Of it is city regulations.

You know, I think that's, I think, it's how much how many people can kind of meet in the convention hall. How many of the venues that conventioneers, will do outside of the convention hall will be open? How big of, you know, because these are, it's all of the stuff that happens outside of the convention hall. That really is the most memorable parts of conventions for these big, these big productive room night conventions. And so I think it's until more kind of demand generators and kind of venues and facilities reopen. I think that's, what's kind of slowed it down in Washington, in particular, Washington and Philadelphia prior the two markets within our portfolio that has had the most stubborn restrictions.

Philadelphia is starting to open up. Washington is starting to open up. We would expect by summer of bill. But, but to your question, Anthony, I, I do think for conventions to return, not only do you need to see the vaccination kind of trends that we are now seeing over 50% of the adult population has been vaccinated. I think that's a critical, critical fact for, for booking conventions.

But I think you do need to have more facilities open in major markets in order for it to be worthwhile to host.

Operator: Thank you. Next question is from Danny Assad with Bank of America, please proceed.

Danny Assad: Hey, Good morning everybody. my question is probably for a sheesh, but, we can appreciate that it's still early in the recovery, but can you maybe help us think about where, GOP margins can go and like, what is the opportunity relative to last cycle for the Hersha portfolio as it stands today?

Sheesh Pareek: Yeah, I said from a GOP standpoint, you know, we continue to target anywhere from 150 to 250 basis points of margin improvement.

you know, we, we all know that there's wage pressures and that there's just operating expense pressures, but we do believe that have pricing power in a portfolio like ours, where you're, you know, you're running some, some of the highest rates amongst all of our peers. We know for a certainty that we are not going to have the same number of plots in these buildings as we did pre pandemic. And, you know, as we look out at our protocols and ways to use technology, we'll continue to think about more ways that we can utilize technologies to cut down expenses. So all those things, you know, still give us confidence that we are going to be able to run these hotels better operating margins, post pandemic than we did present. And we think that that range is still something that we are pretty confident in.

And, you know, as we always have Danny, we have been the leaders in driving, even down margins at our hotels and these types of hotels. And we don't see why we couldn't do that post pandemic with our operating model and our alignment with our operator.

Danny Assad: Got it. Makes sense. And just to clarify, when you're talking about 150 to two, like that, that extra bump, is that off of the 2019 pre pandemic margins, or is it, you know, your prior peak and like 15 to 17 Sort of?

Sheesh Pareek: You know, we're looking at it right now off of 19.

and it every had a peak at different periods of time, but some hotel in 19 seven, 15, seven 17. So, you know, we're right now baseline tonight.

Danny Assad: Understood. Thank you so much.

Operator: The next question comes from Dell Crow with Raymond James, please proceed.

Dell Crow: Yeah, thanks. Good morning guys. I appreciate your commentary on cap ex and the rising cost environment, which, is somewhat alarming if we just think back to the old rule of thumb for maintenance cap ex uh, reserves, we'd kind of gotten to a place where it was call it six to 8% of revenues. you know, revenues are misled down a decent amount from where they were CapEx is up a decent amount. And I understand your portfolio may be a little bit different, but you think we're in a 10% sort of number at point?

Jay Shaw: I wonder really build because there's been a little wear and tear, you know, on hotels during, I mean, it depends on the kind of hotel, I guess, of a resort in a leisure market.

but there's a lot of urban hotels that just haven't had any occupancy. So I don't know if they're going to require more CapEx than, than usual increase in, in construction cost is real and freight and associated labor and the like, but I guess our, our expectation is that room rates are also going to move up. And so on a percentage of revenue, I don't think we would jump to your six to eight number or 10 would be for like a big box full service hotel, right? Like I we've generally felt like select services depending on when, how old it is. Like since we generally focus on newly built hotels, we think of it as three to 5% on select service and maybe five to seven on kind of lifestyle hotels. But since we're generally focused on newer hotels, less than 10 years old, you've never felt like that was underestimating our capital needs.

So Dell, I don't think I Would go that far yet. I still think it's still in, in this kind of the ranges that it was before, but, but let's see where room rates go in the recovery and how that compares to increased construction costs and the like, Part of Biden's initiative calls for the end of the 10 31 exchange, talk about what sort of risks that may pose to transaction volumes in the hotel space. Not as big as you know, it's not as big as I think we initially fear, you know, like when you read the newspapers articles and stuff, you start to think about the dollar amount to think, but I think it is still much more relevant for smaller assets, assets that have a lot of private high net worth kind of owners, retail tripled net, you know, some of those kinds of segments and, and smaller assets where it's, where it's so significant in the larger institutional lodging marketplace. I don't think 10 30 ones are a real driver of, Transaction activity necessarily. so I don't think it's a, it's a major thing, but it's anything that, increases transaction costs and friction we'll have some resulting of impact on, on transaction velocity.

So, so it's not great, but, but it's not a major concern for us. I think on one hand for REITs, maybe it even makes our currency more attractive. as owners don't want to trigger such high capital gains, they can defer it, and hold onto the yield from a, from a diversified reach or something. Yeah. One final question from me, I know we're on in the tooth here, but uh, I know there's often a lot of focus on the hotels that come out of New York city.

but the pipeline shows that about 7% supply growth new openings this year, another 6% next year. So it's number one in the country. If you will, you think there's risks that those numbers don't materialize or maybe opportunity those numbers don't materialize? I assume most of those have already gotten started Take longer, you know, so I think there's a very good chance that, that that 7% takes several years to deliver rather than delivering in one or two years. It may take three to four. I think projects that are in the ground are clearly going to keep moving.

They, their pace may be slower, but they'll likely keep moving. But if you haven't gone into the ground, you were trying to preserve some permits. You had an M one zone, and now you've just gone through this pandemic and you see how difficult the logic market is. I, I, I'm hard pressed to think of some think of someone to really put a shovel in the ground if they hadn't had a project capitalized, premed dedic. So I do think that there will be a real deterioration in the, in the current supply pipeline.

Now that said, we do have some new hotels opening this year, so like you're going to continue to see it and so, you know, w we, we, we are monitoring and we are expecting each quarter, we go pretty detailed. And so we know, each quarter, which hotels are going to be opening in our comp sets or adjacent to our comp sets and the like, and, and at least for the new supply that's coming in the next six months, it's, it's higher quality interesting kind of boutique oriented projects or luxury oriented projects or lifestyle or in projects. So I think that hotels like the Virgin and the Ritz-Carlton nomad, I think those actually are good benefits for, for that lower park avenue tech corridor, you know, to have a little bit more luxury offerings. And there are a couple of hundred rooms, two, 300 rooms. yeah, the stuff we worried about, there's A dynamic where you, where you might see, you know, 10% of the stock come out, but five or 6% get added and that five or 6% may be much more competitive.

then, then the 10% that comes out, is that a fair way of thinking about it? I think so. At least that there's a very strong possibility of that. All right. Appreciate it guys. Thank you.

Thanks.

Operator: I am showing no further questioners in the queue, and this concludes our question and answer session. At this time, I would like to turn the conference back over to management for any closing remarks.

Jay Shaw: I think we've, we've kept everyone long enough where we remain in the office the rest of the day today. If we could answer any further questions.

Thank you. And, and we're just speaking to you in the summer, or again, not sooner. The conference is now concluded. Thank you for attending today's presentation and you may now disconnect.