CLDT
#Thanks.
Thank you.
Hey, <UNK>.
Good morning.
The Cherry Creek Hotel ---+ which really, since we bought it, the Hyatt Place in Cherry Creek is really benefiting from just a very good location in a market that has seen tremendous demand growth really from the transient customer.
From a corporate perspective, the Hotel does sit adjacent to a pretty large office tower, but it's really not the primary driver of business in that market.
And we've continued to see just nice outperformance out of that hotel.
The Hilton Garden Inn at the Tech Center as well as upper-single digit RevPAR growth in the quarter, and that one is more obviously corporate-driven.
But again, just that entire Denver area ---+ and we see it in our Innkeepers assets as well that are in Denver ---+ just a ---+ it's just a very strong market.
You know, I don't really know enough about full service hotels to be able to give you a very good comparison, but you know what the trends are, and you know where select service companies have positioned themselves for RevPAR for this year.
So, I kind of think that the numbers are out there for everybody to see.
Yes, I mean, certainly, <UNK>, as well from a new supply perspective, even though the historical new supply growth is still less than 2% projected for 2016 in the ---+ within kind of the upscale segment, it's closer to 5%.
So, there are certainly, across the country, from a new supply perspective, that will have somewhat of an impact in 2016 and 2017.
Yes.
I mean, listen, I think at this point, we are ---+ it's a nice mechanism for us to have.
We don't have any plans to announce any type of share repurchase programs at this point.
It allows us to repurchase, I think, $75 million of stock, which is a little less than 10% of our float.
I think for our shares, it would be difficult to really acquire much ---+ many shares anyways.
But listen, from a use of proceeds perspective of our credit facility, right now with the Silicon Valley expansions projected to generate kind of a low-teen returns, that's the best use of our capital at this point.
Thanks, <UNK>.
Yes, basically, with the ---+ I think you are referring to the San Mateo location.
Yes, so the ---+ the area in the hotel ---+ well, the area where the hotel sits is something called Mariners Island.
And just going through the process of getting the approvals there, we've uncovered some old provisions within the plan of that Mariners Island area.
And essentially, what we are looking at, at the moment, is the 43 rooms that we thought we were going to be able to add in that location, at least as currently where we stand is going to be less than 30.
So from a ---+ just a pure returns perspective, we are ---+ if we get held to that number of rooms, then from a pure returns perspective, it doesn't appear as though that is going to make a whole lot of sense to invest the dollars in adding the rooms.
So, we still are looking at that situation.
Just to be clear, the reason why ---+ if it was pure incremental rooms, any room you add, in our view, in Silicon Valley is going to make you money, and it's going to increase the NAV of the Company.
But you've got to take down rooms, okay, meaning existing buildings ---+ and you remember these are eight-plex kind of individual buildings ---+ in order to build the new rooms.
So, the math starts looking pretty dicey when you are taking down a number of rooms.
And in that case, I think we were originally going to take down ---+ what were we taking down, 24 there or something.
---+ in order to ---+ or a little bit less in order to create the new room count.
But now, if the new room count can only be 30, then it's just a wash.
Well, certainly, costs ---+
Yes, I mean, certainly, costs are rising if you when ---+ and we've spent a bunch of time out there in the last six months just understanding what's going on and as we planned these expansions.
But construction is just rampant in the area, whether it's multifamily, whether it's corporate.
So certainly our expansion costs have risen about 25% since ---+ you know, from a year and a half ago.
So it's not surprising given what's going on.
The good news is that the hotels have continued to grow from a RevPAR and earnings perspective, so the returns are still pretty strong, but there's obviously a lot of construction activity in Silicon Valley.
It still makes sense with an un-levered 12% to 14% return, which is what we project, based on not even inflating RevPAR.
Okay.
Just quick and dirty using existing RevPAR numbers.
So, we are still real excited about having those rooms onboard.
And also, those buildings in each hotel also gets us a brand-new lobby.
We call it a Gatehouse in a Residence Inn, but it's the area that you serve your breakfast, your evening cocktail and reception area.
So all of that together will enhance, I think, our overall RevPAR as well.
And the timing on those is, as <UNK> indicated, is more of a Q4 start rather than mid-Q3.
So we haven't slipped much, but when you drive around in Silicon Valley, you do see a lot of apartment construction, and you see Google, you see Apple's new headquarters under construction.
And frankly, the contractors are having trouble finding labor.
You know, we are watching this really closely here, because obviously trends are pretty volatile right now in the industry.
And you know we are keeping our hands on pretty much a weekly basis what's going on.
And we are told and we don't see any substantial trends there.
There have been a couple of newspaper articles in the San Jose Business Journal in the last month, oops, XYZ is going to lay off some people.
And there is some obviously negative things being written, since the IPO market has fallen apart, about VC travel and that kind of stuff.
But frankly, they don't stay in our Residence Inns; the engineers stay in our Residence Inns.
So I think maybe the upper-end hotels might be feeling a little bit of that impact.
So, we still feel good, but we are, I would say, more cautious and careful about not waiting until the last minute to book business, trying to put some heads in beds perhaps a little earlier, because we definitely see, wherever you look, less of a transient business customer in the hotels.
Right.
Well, let's see how we can do this nicely.
(laughter) We ---+ and as you know, we love Residence Inns.
And it's not because we love Residence Inns; you know, we really like the returns we get on our investment in these hotels.
So, our preference, as you know, is to be in the upscale extended-stay business.
We've got some Hyatt houses that fit that bill.
They were formally Summerfield Suites.
And then Hyatt bought that chain, so ---+ and converted them.
But what we see, as particularly compared to Marriott and Hilton, is just less contribution through the reservation system.
And even though that Hyatt Place in Cherry Creek has really done well, when you look at the contribution numbers, and you look at the source of business and the market segmentation of the hotel, what you find is a lot of it is OTA business.
And it's not sort of Hyatt.com.
And that, I think, is probably a fair cross-section of the few Hyatt Places that we own and the Hyatt Houses that we own.
Well, to me, it's all positive.
<UNK> mentioned the impact in Q4 to our FFO and to our earnings.
I think primarily, other than some real estate tax increases that are one-time, the expansion of our TA costs as a line item, and particularly all in the OTA line is just enormous on a year-over-year percentage basis.
So, anything that the brands can do to combat this and get us a little more in line with the airline fees that are paid, et cetera, as an industry, we are just getting gouged.
And the cost to deliver that room just keeps going up.
We are not facing labor cost pressures and wage pressures, and certainly not sort of food cost pressures or otherwise utilities seem to be in line.
I mean, you know, frankly, that is the pressure.
It's the OTA line.
All right.
Well, we appreciate everybody being on the call today.
And again, we are looking forward to 2016.
We're looking forward to continuing to put up what we see as some outperformance numbers.
And hopefully, over time, our share price and our multiple, as compared to others, will reflect the quality of the assets we have.
And most importantly, if we are exceeding on metrics, then I think that our multiples should exceed the norm as well.
So that's our goal.
And we're going to keep working towards that.
Thank you, all.
