Apple Hospitality REIT, Inc.
Q2 2016 Earnings Call Transcript

Published: 9 Aug 2016

[Operator:]

Greetings, and welcome to the Apple Hospitality REIT Second Quarter 2016 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host Kelly Clarke, Vice President of Investor Relations. Thank you, Ms. Clarke. You may begin.

[Kelly Clarke:]

Thank you. Good morning, and welcome to Apple Hospitality REIT's second quarter 2016 earnings call on 9th day of August 2016. Today's call will be based on the second quarter 2016 earnings release, which was distributed yesterday afternoon. I would like to remind everyone that today's call will contain forward-looking statements as defined by federal securities laws, including statements regarding future operating results. These statements involve known and unknown risks and other factors, which may cause actual results, performance or achievements of Apple Hospitality to be materially different from future results, performance, or achievements expressed or implied by such forward-looking statements. Participants should carefully review our financial statements and the notes thereto, as well as the risk factors described in Apple Hospitality's 2015 Form 10-K, second quarter 2016 Form 10-Q, and other filings with the SEC. Any forward-looking statement that Apple Hospitality makes speaks only as of today, and the Company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, certain non-GAAP measures of performance such as EBITDA, adjusted EBITDA, FFO, and modified FFO, will be discussed during this call. We encourage participants to review reconciliations of those measures to GAAP measures as included in yesterday's earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the Company, please visit applehospitalityreit.com This morning, Justin Knight, our President and Chief Executive Officer; Krissy Gathright, our Chief Operating Officer; and Bryan Peery, our Chief Financial Officer, will provide an overview of our results for the second quarter of 2016 and an outlook for the sector and for the Company. Following the overview, we will have a question-and-answer session. It is now my pleasure to turn the call over to Justin.

[Justin Knight:]

Thank you, Kelly. Good morning, and welcome to Apple Hospitality REIT's second quarter 2016 earnings call. While general U.S. economic indicators provided a less than stellar backdrop for the hotel industry as a whole during the second quarter, we’re happy to report Comparable Hotels RevPAR grew 5.1%, bringing year-to-date RevPAR growth through June to 4.5%. Comparable Adjusted Hotel EBITDA margin for the same period increased 90 basis points and adjusted EBITDA and modified FFO per share grew 11.6% and 18.2% respectively. With 180 hotels located in more than 80 MSAs across 32 states, our portfolio of hotels is one of the largest, most geographically diverse hotel portfolios in the United States. This broad geographic diversity provides us exposure to a wide variety of demand generators and minimizes the overall impact of volatility within a single market, region, or industry. Our strategy has somewhat insulated our portfolio from supply demand dynamics uniquely impacting gateway markets over the past several quarters. However, we cannot fully mitigate macroeconomic factors that impact U.S. markets broadly. Second quarter GDP growth for the U.S. came in below expectations, and while projections for performance in the remainder of the year remains somewhat mixed, an increasing number of economists haven taken a more conservative views. As has been the case for much of this extended economic recovery, signals vary with consumer spending and job growth both improving, but somewhat offset by declines in corporate profits and spending. Although, we continue to see strength and opportunity in overall domestic travel and remain confident in the fundamentals of our hospitality platform with softer than anticipated RevPAR numbers in July, and the potential for some economic headwinds in the back half of the year, we are tempering our full year RevPAR guidance by 50 basis points. Given the strong operating performance of our hotel properties year-to-date and the anticipated mix of business and operating fundamentals for the remainder of the year, we do not see a need to adjust EBITDA guidance at this time. New construction starts in our markets decreased slightly in the second quarter, approximately 46% of our hotels anticipate one or more new upper mid scale, upscale, or upper upscale hotels to open within a 5 mile radius during the next 18 months. This is down from 50% reported last quarter. Approximately 61% of our hotels had one or more hotels open within a 5 mile radius over the past 12 months or anticipate having one or more hotels open during the next 18 months. This is also down 200 basis points from the prior quarter. Anecdotally, we continue to hear that financing for new hotel construction is becoming increasingly difficult, and with slower market growth and continued increases in construction costs, we do not see supply as an imminent threat to our business outside of a select number of high rate, traditionally higher barrier-to-entry markets. In order to maintain the relevance and competitiveness of our hotel portfolio, we continue to make strategic capital reinvestment. During the six months ended June 30, 2016, the company invested approximately $29 million in renovations and property improvements. We anticipate spending an additional $20 million to $30 million during the remainder of 2016, with scheduled renovations at approximately 25 hotels for the full year. In our experience, consistent reinvestment through well timed effectively managed projects strengthens the competitiveness and operational stability of our hotels. Our scale ownership with specific Marriott and Hilton brand helps reduce the cost of major renovation by increasing our purchasing power and enabling us to develop process efficiencies. With an average effective age of 4 years, we firmly believe our hotels are well positioned to be competitive within their local market. The strength of our balance sheet continues to be an important differentiating factor for our company providing us with additional security during periods of volatility and the flexibility to act in meaningful ways to enhance shareholder value. We ended the quarter with outstanding debt at 3 times trailing 12 months adjusted EBITDA with approximately $480 million available on our existing unsecured credit facilities. We have financial flexibility to fund capital requirements, purchase our own stock when appropriate, and pursue opportunities in the marketplace including the potential merger with Apple REIT Ten. Subsequent to the end of the quarter, we closed on the acquisition of the 128 room Home2 Suites by Hilton in Atlanta for $24.6 million. We are pleased to enter the Downtown Atlanta market with this hotel, which we believe is well-positioned to benefit from the market’s wide variety of demand generators. As we have previously mentioned, we continue to have agreements in place for the potential purchase of three additional hotels, all of which are under construction. Assuming closing conditions are satisfied, we will acquire the hotels upon completion over the next 12 months. We continue to make progress towards closing on the merger with Apple REIT Ten. The voting process is currently underway, and the required shareholder meetings are scheduled for August 31. We remain excited by both the strategic and financial merits of the potential merger, and assuming the necessary shareholder approvals and satisfaction of other closing conditions are met, we anticipate completing the transaction in early September. As we have outlined before, the Apple REIT Ten portfolio complements our existing hospitality platform, strengthens our presence in key markets, and expands our geographic footprint to include locations in 96 MSAs throughout 33 states. The transaction maintains the strength and flexibility of our balance sheet, highlights our disciplined approach to the allocation of capital and portfolio growth and would uniquely position us as one of the largest select service hospitality REITs in the industry. Because of our timing in the process, we will again be limited in our ability to answer questions on today’s call. We encourage you to continue to review our filings -- our SEC filings and investor communications for additional information. Our broad geographic diversification and choice of markets, our decision to focus on the upscale select service and extended stay sector, our exclusive investment in Hilton and Marriott branded hotels, and our decision to maintain a strong, flexible balance sheet all contribute to a strategy designed to reduce volatility and generate strong, stable investor returns over time. I've been on to hundreds of hotels through multiple cycles spending over a decade and a half. We continue to assess and fine tune this strategy to drive performance across our portfolio. From the beginning, this economic recovery has been characterized by mixed indicators, which have in hindsight yielded slow industry growth over an extended period despite limited visibility along the way. Looking forward, we continue to see opportunity. Our asset management team continues to work in collaboration with our managers to adjust business mix and control operating costs in order to maximize property level profitability. Our concentrated ownership of specific select service and extended stay brands provides us with unparalleled access to performance benchmarking data. This, combined with purchasing power enhanced by scale, enables us to consistently produce industry-leading operating margins. It’s now my pleasure to turn the call over to Krissy who will provide additional detail regarding performance across our markets and the industry overall.

[Krissy Gathright:]

Thank you. We are very pleased with our second quarter performance. As Justin mentioned, our comparable RevPAR grew 5.1% with a slight increase in occupancy and an average rate growth of 4.7%. With our geographically diversified portfolio, only seven markets had an EBITDA contribution greater than 3%. Of those, Los Angeles, Nashville, and Dallas were our strongest performers. Even after the Porter Ranch gas leak business left the market in May, RevPAR growth at our Los Angeles area hotels remained solid. Our San Diego and Seattle hotels had modest growth impacted somewhat by new supply. Although demand outlook for San Diego is improved in the third quarter with stronger group base. Of note, our Phoenix and Tucson, Arizona markets continued to outperform with fast growing economies featuring diverse business and leisure demand generators. With over 80 different MSAs in our portfolio, performance has varied widely. For some perspective, 78% of our hotels had positive RevPAR growth with 42% achieving RevPAR growth greater than 5%. 22% of our hotels experienced RevPAR decline with just 8% declining more than 5%. Our outperforming markets had benefited from healthy demand in the following industries; Internet retail, home goods, various technology sectors, healthcare, insurance, aviation, entertainment, and government contractors among others. As per segmentation trends in the quarter, our negotiated account room night mix decreased 130 basis points to 22%, as our management teams have been successful on shifting business to the highest rated retail segment in the majority of markets. Although, our retail rate growth was modest at 1%, our hotels were able to drive solid rate growth overall by increasing the retail room night mix 230 basis points to one-third of our total room nights, consistent with the year-to-date trend. Group room nights remained stable at 15% of our mix. Although it's difficult to determine the net impact of RevPAR from brand member discounts in the quarter, we do believe that new member enrollments are driving some of the retail room night increases with some small short-term trade down in rates. Hilton was the first to roll out member discounts and while it is still early yet, we are pleased to see channel shift as our hilton.com business grew more than our OTA business during the quarter. OTA business, representing 88% of our mix, still grew, but a more moderate single digit versus double-digit pace. We, along with our brands, feel it is extremely important to permit our direct channels to improve the customer experience, drive loyalty, and maximize the long-term value on our brands. As per recent trends, an already short booking window has compressed even further. We are entering the month with less retail and corporate occupancy on the book, and then being pickup in the month -- for the month in those segments. The uncertainty around transient pickup has prompted some hotels to open up discounts earlier than needed limiting rate growth. Due to the continued wide variability in performance from market to market, our asset management team has been working closely with their management partners to remain aggressive in driving rate and stronger markets, and to adopt more defensive strategies, including layering on more base business as conditions warrant in other markets. With the shift of July 4 holiday to a Monday dramatically reducing business travel during that week, July got off to a slow start for our portfolio. In spite of experiencing a sizeable RevPAR decline over that week, consistent with upscale industry performance, we were able to finish July with flat RevPAR growth. Turning to profitability, Comparable hotel adjusted EBITDA margin increased 90 basis points to a strong 41% for the quarter, representing a 57% flow through of total revenues to hotel EBITDA. Our operators did an excellent job managing controllable expenses with over two-thirds - achieving their operating flex flow-through target, a 6% increase over the prior year. Our asset management team and operators continue to drive industry-leading margins, capitalizing on our highly analytical review of broad benchmarking data, our centrally negotiated and managed programs, and our pull through of best practices across the platform. I will now turn the call over to Bryan to provide additional detail on our financial results.

[Bryan Peery:]

Thanks, Krissy, and good morning. As both Justin and Krissy highlighted, we believe our results for the second quarter and year have been very positive. With solid RevPAR growth, we've been able to increase adjusted EBITDA to $100.5 million and $179.1 million, an increase of almost 12% for the quarter and over 11% year-to-date from last year. Modified FFO per share grew to $0.52 for the second quarter and $0.91 year-to-date, representing growth of 18% for the second quarter and 17% year-to-date. At the end of June, the company had approximately $1 billion of outstanding debt with a current combined weighted average interest rate of 3.5% for the remainder of revenue year. Excluding debt issuance cost and fair value adjustments on acquired debt, our debt is comprised of $400 million in property level debt and $631 million outstanding on our $1.1 billion of unsecured credit facilities. Our outstanding debt, net of cash on hand is approximately 3 times trailing 12-month adjusted EBITDA and 23% of enterprise value at the end of the quarter. Although we intend to continue to utilize traditional long-term mortgage debt as a means of diversifying our capital structure, reducing a portion of this component provides us an opportunity to improve pricing and flexibility. With this in mind, we continued to reduce our secured mortgage debt during the first six months of the year by repaying eight mortgage loans totaling $82 million with an average interest rate of 5.3%. We anticipate extinguishing another 10 secured loans with an average rate of approximately 6% by the end of the year. During the second quarter, the company paid distributions of $0.30 per share. Our board of directors has authorized a regular monthly cash distribution of $0.10 per common share. The annualized $1.20 per common share represents a 6% yield based on our August 5 closing price of $20.10. We provided 2016 guidance in our earnings release based on our current view of both operating and economic fundamentals of the Company’s existing portfolio of hotels and hotels under contract except for those related to Apple Ten. Our guidance does not take into account the impact of any unanticipated developments in our business or changes in the operating environment. For the full year of 2016, based on our performance year-to-date and our visibility into business drivers for the remainder of the year, we reaffirm our anticipated adjusted EBITDA of $340 million to $360 million for the full year of 2016 and slightly reduced our anticipated Comparable hotels RevPAR growth to 3% to 5%. Although, we have reduced the low and high end of our anticipated RevPAR growth due to overall industry moderation in recent months and broad economic uncertainty, we do believe we will continue to be able to improve operating margins as we have demonstrated in the first six months of the year. Our guidance assumes we will be able to continue to offset pressure from property tax increases, labor initiatives, and comparable third quarter 2015 one-time benefits from recoveries related to the BP oil settlement, with among other anticipated benefits, favorable energy costs, rate-driven revenue growth, and mix management. As Justin mentioned, the shareholder meetings for Apple Hospitality and Apple Ten necessary for the proposed merger of the companies are scheduled for August 31. If the merger is completed, we would plan on updating our guidance at that time. Thank you for joining us this morning. We will now open the call up for questions.

[Operator:]

Thank you. [Operator Instructions] Our first question comes from the line of Ryan Meliker from Canaccord Genuity. Please proceed with your question.

[Ryan Meliker:]

Hey, good morning, guys. I just had one here just trying to understand how you guys are thinking about. I guess a little more color on guidance, obviously as you mentioned you don't have a lot of visibility, your booking window has even narrowed. Given that dynamic and the fact that the big brands not to mention all of the other REITs cut guidance on the top line, more than you guys did at 50 basis points. What gives you confidence that you're going to be able to maintain that 3% to 5% RevPAR growth? I know the first half has been pretty strong. And then your market seem to be holding up better than most, but just any color on what gives you guys confidence that you're not going to see the fall off that the brands in the C-Corp’s and lot of other REITs are expecting in the back half of the year.

[Justin Knight:]

Hi, good morning, Ryan. Good question. Generally speaking our guidance is in line with our performance relative to industry year-to-date. And so I'm not confident that we're seeing anything different from what the brands are seeing. We have a very large diversified portfolio which is somewhat representative of the industry as a whole, but not perfectly and because of the differences in our portfolio, we see opportunities continue to perform relative to the industry as we have through the first half. Because we only give annual guidance, we benefit on an annual basis from the outperformance we have already achieved year-to-date as well.

[Ryan Meliker:]

That’s helpful. And I guess as a follow-up then when you think about your outperformance year-to-date, what do you think is driving that; is it your markets, is it your diversification, is it your select service exposure, is it the fact that you're a little bit more transient oriented, we've heard a lot of negative surrounding corporate transient, are you guys seeing those types of impacts. Help us understand how you guys are outperforming. So we can get a better understanding of how you guys will continue to outperform.

[Kelly Clarke:]

Ryan, it's a great question. So far this year I think that our diversification has been one of the keys. Also as you look at our performance in these suburban markets have still been outperforming the urban markets. And for the first part of the year continuing into the second quarter, we were still able to mix manage and the retail demand was strong enough so that we were able to focus on driving that highest rated -- driving more business to the highest rated retail. As we enter this summer months, which are traditionally less business travel focused. We did see the trends change a little bit, so when we were looking at our position on the book. We had less occupancy going on and less occupancy on the books going into the month. But we have seen a decent pick up so far in retail and the group as we moved throughout the month. August, we do just to give you a little bit further color. August, we continue to see that consistent pattern where we’ve entered the month with less room nights on the books. But our property forecasts are for the pickup in the month, for the month and August looks better than July. September is actually the strongest and September is a more of a business travel oriented month. And we're actually seeing our position on the books being ahead of last year and with that our focus with our asset management teams is to shift back to what we were doing in the first part of the year and focus on really driving rate. And as I mentioned I think our operators have gotten a little bit nervous as they’ve seen less occupancy on the books and they are opening up discounts a little sooner than they really need to in some of these strong markets. So our asset management teams are working with our operators to make sure that they're not overreacting and maximizing rates as much as they can because part of our strength from the first part of the year has really been our ability to drive that rate and maintain occupancy as much as possible.

[Ryan Meliker:]

Got you. So that’s helpful. So it sounds Kelly, it sounds like in general that you guys are holding on to pretty strong corporate transient demand. I’m not seeing the falloff in that dynamic that we've heard from some of your peers and to the same front you're actually having some success driving rate. You think any of that has to do with your select service orientation and the fact that you guys are at mid tier price point that is a nice trade down from some of the higher end properties.

[Kelly Clarke:]

Our product definitely has broad consumer review and that continues to be the case. And I wouldn't – just to clarify, I wouldn't classify that corporate demand is being strong, it is still soft and soft and we continue to see that it is soft and it is softening a little bit more and more markets than it has in the first part of the year. But when we're in this stronger business travel months there's still additional business travel demand to choose from into mix manage. So when we’ve entered into the summer months, there's a little bit less of that. But yes, we do feel that we are in the right product. We do feel that in looking across all of our markets. There are still many markets that are performing very well and the markets that aren’t performing well clearly oil and gas is not performing. There are – Austin is the market that we continue to watch. We had a great year last year in the second and third quarter in Austin. And we actually I think we’re up 12%, 13% in the second quarter and close to 18% in the third quarter last year, because we had some strong FEMA business and we had some strong FEMA business and good corporate base. Now this year, that FEMA business, we don't have that in house and there is some softening the corporate -- the business transient side as we see, absorb from additional new supply as well. Hopefully that answers your question, yes.

[Justin Knight:]

Yes. And it’s really tended to be…

[Kelly Clarke:]

Right.

[Justin Knight:]

…industry specific, so it’s easy to draw broad conclusions.

[Kelly Clarke:]

Right.

[Justin Knight:]

But what we've seen and Clarke highlighted is that there are a number of industries that continue to produce strong demand. And our markets that are more heavily dependent on this industry perform very well. And there's been some imbalance in business transient demand with certain industries, more negatively impacted than others.

[Ryan Meliker:]

Great. That’s really helpful color. Thanks, guys.

[Operator:]

Our next question comes from the line of David Loeb with Baird. Please proceed with your question.

[David Loeb:]

And Justin, Krissy, sorry to, beat a dead horse but just to follow up on Ryan’s question. I guess I'm particularly – I guess concern is too strong word, but little confused. I get that your operators are opening the discount channels a littler earlier than you need, but what gives you the confidence that you'll be able to actually have ADR led RevPAR in this slower transient environment in the second half.

[Krissy Gathright:]

Part goes back to have my comments on September as we enter back in to the stronger business travel months we’re already seeing the position on the books improve stronger demand in retail rates, stronger rates on the book. From a macro standpoint, we’ll have to see in terms of what happens with GDP and the general economy, but we are seeing improved trends as we look into September.

[David Loeb:]

Okay. And how about October, do the Jewish holiday shifts have much of an impact on your smaller market, urban and suburban assets.

[Krissy Gathright:]

Much less of an impact on -- there has been some impact, but much lesser impact on our smaller markets, suburban assets. And just to give you a little bit of perspective when we go into the months and typically right now is the beginning of August. For example, we have approximately with our product 40% of our occupancy on the book. When you look out 30 days out, then we have a 20% of our occupancy on the books. And another 30 days out, that’s 10% of occupancy in our books. So when we're forecasting, we’re forecasting over the next 90 days with less reliant each 30 days that you go out. And so we were looking at trends in terms of position on the books, we rated, our revenue management systems -- those are being used constantly tweaked and looked at because, the booking window has shortened. So the revenue management systems need to look, they always look at history from the previous year, but they need to be tweaked off to understand that the transient pickup has become, the booking window has become shorter. So our visibility is the next 90-day customer layering and overall macro assumptions as we know it.

[David Loeb:]

Okay that’s makes a lot of sense. Justin, I know you can’t answer much about this given and Apple Ten shareholder vote coming up. But could you comment a little bit about your thoughts about further industry consolidation and what your appetite would be to – look to acquire additional single assets or portfolios.

[Justin Knight:]

And certainly, we've commented on this in most of our calls and are regularly asked about this as we meet investors on the road. And the Apple Ten transaction is unique in that –it preserves and actually increases the size and strength of our balance sheet and because we are already the managers of the portfolio. And the integration of that portfolio with our current portfolio we anticipate to be seamless. And so in terms of our positioning and capacity to pursue other opportunities where – I think exceptionally well-positioned to pursue opportunities that might present themselves. That being said as we continue to explore opportunities in the industry. We've seen consistently and this has been highlighted by a number of our peers in prior calls significant EBITDA spread. So still our expectations continue to be very high, both on individual assets and on larger portfolios and I think as we look forward the largest impediment to us pursuing acquisitions in scale, it is likely that. That being said we continue to have interactions with owners of portfolios and individual assets. We feel opportunities are right for us strategically and where we feel we can -- the transaction will be accretive for our existing shareholders. Right. I’ve highlighted this in past calls. But we're a very large company in our current state following the transaction with Apple Hospitality – Apple REIT Ten will be an even larger Company. We operate extremely, efficiently and don't have a mandate as we see it to grow for growth sake. I think you can anticipate and we will continue to be very strategic as we pursue opportunities, grow and enhance the value of our portfolio overall. Absent those opportunities we’ll continue to manage the portfolio we have to achieve greater efficiency.

[David Loeb:]

Great. Thank you for that.

[Justin Knight:]

Thank you.

[Operator:]

[Operator Instructions] Our next question comes from the line of Bryan Maher from FBR. Please proceed with your question.

[Bryan Maher:]

Good morning, guys.

[Justin Knight:]

Good morning.

[Krissy Gathright:]

Good morning.

[Bryan Maher:]

Just to kind of clarify on one of Ryan's 17 questions. And he hit on several of mine but I wouldn’t -- I don’t think it is proper to characterize all other companies as having kind of guidance because two other outperformers that play in your space, HPT and Ashford trust don’t guide. So it’s not fair in my view. But more succinctly, do you get the sense that corporate transient is in any way or at any level kind of trading down to the upscale select service product from the full service urban product.

[Krissy Gathright:]

Overall it’s hard to measure that what we can say is that we have heard anecdotally that there if -- your companies are looking to cut back, they're asking their -- if their employees to look at either narrowing the focus of the number. There are cases with the narrowing the focus of the number of hotels that they are booking in, in which case then we would benefit because we would be in that upscale segment versus the higher dollar upper upscale hotel. But it's too early to say yes that we’ve seen that a measurable amount of that. But anecdotally we have heard that there out there, there are opportunities where that we can be a part of a narrow group of hotels.

[Bryan Maher:]

And when those companies are kind of guiding their employees to move in a certain direction, do you get the sense that they're asking to trade down a segment or into a different segment or into a branded product versus maybe a boutique hotel or some combination of two of those things.

[Krissy Gathright:]

I've not heard anything about going from a branded to boutique hotels or vice versa. And I think really it is more towards rates that are being charged. And then in some cases as we have spoken about before it really depends on the market because in the some cases, we are higher positioned trade wise in the market than some of the full-service hotels in other markets where the full-service hotels are higher priced, and we're going to be perceived as more of a value play.

[Justin Knight:]

And it's important to understand that there's been much made of the growth slowdown and corporate transient. On an absolute basis, there's still a tremendous amount of corporate demand and we haven't seen outside of a few specific industries, massive cutbacks, a massive adjustments to travel planning that we've seen in past cycles. When that happens, we anticipate our portfolio will benefit, because a relative value proposition, the majority of our hotels offer either free or relatively inexpensive breakfast options, some of them offer light dining options in the evening as well. And the value proposition for select service hotels tends to be a better value proposition than other segments. And really before that happens, major trade down, we see something more dramatic in terms of a shift in consumer demand that has yet to really materialize. What we've seen so far in most of our markets [are struggling to offset] energy markets and a few markets that are dependent on financial services. That’s probably where we’ve seen some of the biggest hits is just tampering of demand one or two fewer nights at our hotels, which are mostly 100 to 150 rooms from a particular client and not the major cutbacks that we saw in the last recessionary period, which drove a massive rethinking in terms of business trials.

[Bryan Maher:]

Hey great, thanks. That's helpful.

[Operator:]

There are no further questions in queue. I'd like to hand the call back over to Justin Knight for closing comments.

[Justin Knight:]

Thank you for joining us this morning. Overall, we're pleased with our performance of our hotels during the first six months of 2016 and we believe we're well positioned for the remainder of the year. We hope that as you travel with us. You'll take opportunity to stay with us in our hotels and I hope you have a great week.

[Operator:]

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.