Summit Hotel Properties, Inc. (INN) Earnings Call Transcript & Summary

Thank you for standing by, and welcome to the Summit Hotel Properties Q1 2021 Earnings Call. [Operator Instructions] Please be advised that today's conference is being recorded. [Operator Instructions] I would now like to hand the conference over to your speaker today, Mr. Adam Wudel, Senior Vice President of Finance, Capital Markets and Treasure. Thank you. Please go ahead, sir.

Thank you, Justin, and good morning. I am joined today by Summit Hotel Properties' President and Chief Executive Officer, Jon Stanner. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our FCC filings. Forward-looking statements that we make today are effective only as of today, May 5, 2021, and we undertake no duty to update them later. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at www.shpreit.com. Please welcome Summit Hotel Properties' President and Chief Executive Officer, Jon Stanner.

Thanks, Adam, and thank you all for joining us today for our first quarter 2021 earnings conference call. Overall, we were extremely pleased with the operating trends we experienced in the first quarter because the gradual and sequential demand improvements we began to see in the summer and fall of last year accelerated beginning around Presidents' Day weekend when RevPAR reached a post-pandemic high of nearly $90. Since then, demand has continued to improve consistently as March RevPAR finished above $65, which was a 27% month-over-month increase from February. And preliminary April results suggest a RevPAR of nearly $70, representing continued sequential growth despite transitioning out of peak spring break season. As importantly, our outlook for the broader industry recovery has accelerated in conjunction with these improved demand trends. Progress on vaccine distribution and easing regulatory restrictions combined with significant pent-up leisure demand drove our first quarter operating results meaningfully above our expectations, even 75 days ago. As a result, our corporate level cash burn in March was less than $1 million, and we now expect to be very near or cash flow positive in April, 2 months earlier than we telegraphed on our last earnings call. For the first quarter, we reported pro forma RevPAR at $53, which is a decline of 45% compared to last year and 59% compared to the first quarter of 2019. However, it also represented a 23% improvement over the fourth quarter of last year and compares favorably to year-over-year RevPAR declines in the Top 25 in urban markets of 48% and 55%, respectively. We also continued to gain market share in the quarter as our RevPAR index increased to 133%, which represented a 9 percentage point increase relative to our competitive sets and is still meaningfully above our historical penetration levels. While lodging demand is generally still heavily concentrated in leisure guests, we've experienced strong growth during both weekdays and weekends through the first 4 months of the year, but particularly in March and April. For example, over weekends in March, our hotels averaged more than 75% occupancy and approximately $90 RevPAR, and weekdays averaged more than 50% occupancy for the first time since the onset of the pandemic. Weekdays during March generated an average RevPAR of nearly $57, which is more than 25% higher than the next-best monthly average over the last 12 months. During the first quarter, our 9 resort hotels continued to lead the recovery with first quarter occupancy exceeding 76% and RevPAR exceeding $100. This was driven by a strong March when occupancy ran nearly 85% and RevPAR was over $130 as a result of continued leisure demand growth related to robust spring break travel. Our 42 nonurban hotels achieved more than 60% occupancy during the first quarter and in March ran more than 70% occupancy for the month and nearly 85% on the weekends. While urban hotels continue to lag the broader industry recovery, our urban assets also benefited from the recent positive trends, reporting post-pandemic highs in occupancy and RevPAR in both March and the first quarter, and exceeding 50% occupancy in April. The outlook for our urban hotels is getting more constructive, and we are scheduled to reopen our Holiday Inn Express in the Fisherman's Wharf district of San Francisco on May 10, the final hotel in our portfolio to reopen post-pandemic. Encouragingly, we are also beginning to see some progress in our ability to drive better rates across the portfolio. March ADR was 9% higher than February and 14% higher than January. And looking forward, ADR pace in May is 6% higher than where April pace sat 30 days ago. Combined with additional occupancy growth, our May RevPAR pace is up 17% compared to April's pace this time last month. Year-to-date through April, the most robust ADR growth within our portfolio has been among our urban hotels and hotels located in CBD locations, each experiencing ADR growth of approximately 27% from December of last year. Although booking windows remain extremely short and forecasting our business continues to be challenging, we started to see a decline in the percentage of rooms nights booked near to or on the night of stay. For example, transient occupied room nights booked within 24 hours of stay declined from 37% to 27% from January to March and nights booked within 72 hours of stay declined from 60% to 50% over that same period. While this still represents an extremely short booking window relative to pre-pandemic standards, we view this as another encouraging trend, reflecting a generally healthier demand environment. While demand has returned to a level that allows our hotels to be consistently profitable, certain elements of the operating environment remain challenging. We continue to operate our hotels utilizing a very lean staffing model, which consists of approximately 14 FTEs on average or less than 40% of pre-pandemic staffing levels. Rehiring hourly staff, particularly in the housekeeping department, has been a well-documented challenge across the industry as enhanced unemployment benefits and additional stimulus checks have created some temporary disincentive to return to work. Despite these challenges and primarily occupancy-driven top line growth, our asset management team has done a tremendous job controlling operating expenses, which declined more than 4% on a per occupied room basis compared to the fourth quarter of 2020 and approximately 28% year-over-year. As a result, for the third consecutive quarter, our portfolio was profitable at the hotel level and has now been profitable on a cumulative basis for the duration of the pandemic with an aggregate RevPAR of just $41, demonstrating the clear benefits of our efficient and flexible operating model. Our March and first quarter hotel EBITDA of $6.2 million and $7.7 million, respectively, represents the strongest monthly and quarterly hotel-level performance post-pandemic. In fact, hotel EBITDA in the first quarter was nearly equivalent to that of the previous 2 quarters combined. And we anticipate the second quarter to improve sequentially. During the first quarter, we invested approximately $3.6 million in our portfolio on items primarily related to planned maintenance capital. We also completed the last installations of our mobile key and RFID guest room lock initiative that was started last year to provide for a contactless check-in experience that guests are more frequently opting to use. We continue to expect to spend between $20 million and $30 million in capital expenditures for the year, but we are evaluating accelerating additional renovations to start as early as the fourth quarter of this year, where we see considerable ROI opportunities supported by improving demand trends. And we can take advantage of still lower-than-historical occupancies, which will minimize disruption from the projects. On May 1, we completed the contribution of 6 wholly owned hotels, totaling 846 guest rooms, into our joint venture with GIC. The valuation of $172 million represents just under $205,000 per key. And after taking into consideration the expected fee stream, we will earn for continuing to asset manage the hotels, it equates to an approximately mid-8% cap rate on actual 2019 NOI. The transaction generated approximately $84 million of cash proceeds, which will be used to increase our investment capacity, reduce corporate leverage and enhance our overall liquidity. We've also agreed with GIC to reset our liquidation promote for all post-COVID investments, including these 6 assets, which creates a difficult to quantify but meaningful improvement to our economics related to the venture. The joint venture now holds 11 assets with total investments of nearly $450 million and affirms the commitment from both parties to find unique and opportunistic investments to continue to grow the partnership. We were also extremely active enhancing our balance sheet during the first quarter, including successfully completing a convertible notes offering that generated gross proceeds of $287.5 million at a 1.5% coupon. We used $21 million of the gross proceeds to enter into capped call transactions that increases the effective conversion premium to 75% or $15.26 per share. The notes mature in February of 2026. As discussed on last quarter's call, we also amended our senior unsecured credit facilities, which extends the covenant waiver period through March 31, 2022, modifies covenant testing through year-end 2023 and provides access to the full availability of our $400 million revolver, $150 million of which can be fund -- used to fund new investments. This acquisition allotment has been increased to over $170 million following the contribution of the 6 assets to the GIC joint venture, and the amendments also provide us with an unlimited ability to fund acquisitions with equity issuances. Subsequent to quarter end, on April 29, we completed an amendment to our $200 million joint venture revolving credit facility. These amendments provide for a waiver of certain covenants through the end of this year, with modified covenant testing through the second quarter of 2023. As a result of recent capital markets activities and transactions, we currently have approximately $440 million of total liquidity, which includes approximately $50 million of unrestricted cash on hand. Today, our weighted average interest rate is approximately 3.3%, and we have no debt maturities until November of 2022 and ample current liquidity to repay all maturity debt for 2023. We also recently announced important additions to our management team and Board of Directors. Trey Conkling will be joining us on May 17 as our new CFO. I've worked with Trey for more than a decade during his time with Bank of America, and he has proven himself as a well-respected, strategic thought leader in the industry and someone that will greatly enhance our team. Previously, we announced that Amina Belouizdad will be joining our Board of Directors after our Annual Meeting May 13. Amina brings a diverse skill set and experience base to our already accomplished Board. We're thrilled to be able to attract such great talent to our organization. In closing, we continue to gain enthusiasm on the recovery of our business and the outlook for Summit, in particular. While leisure demand remains the primary driver of the early recovery and all indications point to an incredibly robust summer travel season, signs are also emerging for the return of corporate travel as case counts and hospitalizations related to the virus decline and vaccine distribution broadens. A more normalized school and work environment looks to be taking shape by at least Labor Day. And while the trajectory of the demand recovery may be more gradual than the leisure component, we are also bullish on the meaningful pent-up corporate and group demand we expect to provide the next leg up in the recovery. And with that, we'll open the call to your questions.

[Operator Instructions] Our first question comes from Neil Malkin with Capital One.

First question, it seems like ADR has kind of been flat over the last couple of quarters. Just wondering, can you maybe give us some idea or color for are you going to be able to start pushing that higher either kind of shifting the mix or just pushing on rack rate as you see demand kind of go up, especially for leisure in the middle -- or in the summer? And how does the local and regional business travel play into that over the coming months and are you seeing more of a return on that side as well?

Yes. Thanks, Neil. I think first of all, we have started to see some progress on the rate side. As we said in the prepared remarks, our March ADR was about 14% higher than our January ADR. So we are seeing some progress. We do expect that trajectory to continue. And I think, particularly, as we look into the summer and some of the higher demand, especially holiday weekends, Memorial Day, 4th of July, those types of weekends, we're going to have an ability to push rates beyond what we've seen, even early in the recovery in the spring and even over spring break season, which was very, very strong. I do think, and we've talked about this on some previous calls, I think the path back for rates is going to be somewhat dependent on getting some level of corporate traveler back. If nothing else, just shifting the mix back to what has historically been a higher-rated customer. So I think it's going to be a little bit of both. Again, I think you're going to see continued progress on the leisure side and rates continue to grow on the leisure side on the stronger weekends. But for rates to get closer to where they were pre-pandemic, we're going to need to see some of that corporate business come back in.

Okay. So just -- again, just kind of the way your portfolio is positioned, I would expect that you'd see the local and regional come back obviously first before the larger, the corporates. And so have you seen that continue to pick up as well? Is it still kind of spotty? And because the STR data shows a lot of pick up in weekday finally. So just -- that was the second part of the question.

Yes. We are seeing it. I would describe it as somewhat sporadic, but we've seen -- we've actually seen some of our best growth, albeit off of a much lower base midweek. And I think that points to at least some level of corporate demand returning. We have pockets of it. For example, we've got a hotel in Hillsboro, outside of Portland, that's full and it's really full with all corporate. Now that's a little bit of a unique situation. We've continued to see good corporate pick up in a market like Silverthorne, where we've got some car company business that does high altitude testing out there. So we have started to see some of that. I think -- as you suggested, I think what we'll see the first leg back is going to more -- be more regional and local type of travel. And we're starting to hear it more from some of the national accounts that they're at least putting plans back in place to, one, return to work; and two, to return to travel. We've heard it from some of our banking colleagues who are getting to the point where they're starting to plan for some travel, even before they formally get back to the office, even over the summer. So I think we will continue to see it again. I think that's going to be a more gradual recovery than we've seen on the leisure side. But we are starting to see some level of pick up there.

Okay. Great. Other one for me is on the GIC and the 6 contributing hotels. It looks like they were mostly noncoastal. I mean was that purposeful? How did you get to those assets? And again, just -- are you continuing to feel like the acquisitions are going to be potentially all within the GIC over the coming, I guess, quarters?

Yes. I think in terms of how we establish the portfolio, we did spend a fair amount of time with GIC going through our existing portfolio, finding markets and assets that fit with kind of their investment parameters, where they felt like they could lean in more on pricing. I do think this represents a fairly reflective subset of our overall portfolio. It's kind of right on top of it from a RevPAR perspective. I think from a pricing perspective, it demonstrates kind of the durability of the type of assets that we have. So -- again, we were very happy to get it -- to get that done. We ultimately think that the pricing that we're able to contribute the assets, we're going to be able to take those proceeds and hopefully redeploy them into assets that we can generate better risk-adjusted returns. I do continue to think that the most likely vehicle for growth for us in the near term is within the venture for the reasons that we've discussed frequently. It lowers our capital requirements that creates a fee stream and a promote structure that ultimately enhances returns. And so I think at least for the near to medium term, it is the most logical growth vehicle for us.

Our next question comes from Austin Wurschmidt with KeyBanc.

Just wanted to touch on sort of the revenue management strategy, given the pickup and pace you referenced in May versus April. And I think you guys have been more focused on grouping up kind of during the pandemic to grab any demand that you can that's out there. So how does this pick up and pace really shift that revenue management strategy if you're at a point now where you're more willing to take on less group, I guess? And then, can you also compare how the pace pick up was between urban hotels versus more resort locations?

Yes. Let me start with the first one. I do think we did have a strategy that was trying to create some sort of group-based layer of business in the assets. And you think you see that if you look at our index, our RevPAR Index, it's significantly higher midweek than it has been on the weekends. We expected to be able to fill and drive some rates on the weekends. But having that base level of business in the midweek has helped us create kind of over the full 7 days of the week or the full month better RevPAR Index and we think overall better performance. There will be some level of shift moving forward, I think. The message I think a lot -- particularly over the summer where we see very, very strong leisure demand with our operators is to kind of stop pricing the pandemic. We think we're going to have an ability to really push rates on a go-forward basis. And our hope is that over time, as we get later into the summer and the fall, we're going to be able to layer in some higher-rated pieces of corporate business on top of that. I think -- look, I think we've seen better growth in kind of the urban and CBD locations in our portfolio. Again, I would just remind you that the baseline there has been much, much lower. And I think the trajectory of the recovery of those is longer. But we have started to see some pick up in those types of assets as well.

That's helpful. And then one I wanted to switch to is on the mezzanine loans and some of the modifications. Was there any change to the purchase option related to 2 of the mezzanine loans specifically that were extended into March of 2022? And can you remind us what the terms are on those purchase options?

There was no change in anything to the purchase option. The only change was really -- we were made current on any interest that had been deferred. And then we did extend the maturity date to March of 2022. That's really the only change there. And it's about a $7 million incremental funding for us to complete the overall purchase of the assets, if we exercise our option of the 90% equity interest.

Okay. And that $7 million would assume that that's a just outright purchase, 100% owned by -- on balance sheet?

It's -- yes, it's actually for 90% of the equity, but it would be consolidated on the balance sheet.

Our next question comes from Chris Woronka with Deutsche Bank.

Jon, you touched on it a little bit in the comments, but maybe on the labor front -- it's a 2-part question. One is, as occupancy rebounds further, you potentially have to bring back more workers. Do you see incremental pressure, even if it's only kind of temporary? And the second part is, any update on -- any discussions with the brands, the operators about permanent changes to staffing models on housekeeping and things like that?

Yes. Look, I think -- to the first question, I think you've heard this probably on all the earnings calls so far this quarter. Labor continues to be a challenge. Some of it's temporary. I think some of it is the fact that folks have unemployment benefits that are paying them more to stay home and they aren't going to work. And that's going to abate over time. I think the portion of this that's more structural where folks have just left the industry is probably a more manageable component of what we've seen change in the labor market. So -- look, we've tried to be forward-thinking in terms of making sure we keep our best people, GMs, directors of sales and keeping particularly where we have very strong teams in place and making sure they have the right resources. As we've seen demand increase, we're increasingly trying to make sure we devote the resources to get our managers off the front desk and out of doing housekeeping jobs. It's been challenging obviously, but I think the team's done a very nice job doing that. And I do think some of those pressures abate as we get later into the year and into the fall. From a brand perspective, I think those conversations are still ongoing. I think we're just now getting to the point where we're starting to talk about reintroducing more normalized brand standards. We're still not cleaning checkout. That's -- sorry, we're still not cleaning stayovers. That's really the biggest change from our perspective, from a profitability perspective on differences in brand standards. And I think how we reintroduce breakfast and some of the other standards is still being worked out. We'll probably start to see more of those changes as we get into the summer and the fall where we've got a more normalized demand environment.

Okay. Very helpful. And then as we think about acquisitions, a lot of your hotel REIT peers are -- seem to be focused a little bit more on resorts right now. It's not an area where you guys play big in on the full-service side. So the question is, if there is a little bit less focus on urban from your peers, does that potentially make you look at some full-service stuff or some skinny full-service stuff that you might not have looked at kind of in the pre-COVID normalized environment?

Yes. Look, I think we're always going to just solve for returns. That's always been what's driven our acquisition or really our capital allocation process just more generally. And if you look at the contribution of the assets to the GIC venture and kind of the implied costs of what it costs to contribute those, we think we're going to have opportunities to redeploy that capital into something that's going to generate a higher risk-adjusted return. I do think there's going to be opportunities in urban markets. I think that urban has got a different trajectory from a recovery perspective than you're seeing in coastal markets and drive to nonurban or suburban type of markets. But I do think that, that type of market is going to come back. And so we're certainly going to underwrite those 2 different type of investment opportunities differently, but we'll look into those markets if we think we can get the right basis there. I think we'll continue to evaluate what we generally describe as an efficient operating model. We don't talk a lot about the difference between full service and select service. We're probably not going to go out and buy a 700-room, 70,000 square feet of meeting space hotel. We would look to do a compact, full-service hotel like we did with the Marriott we own in Boulder, which is technically an upper -- upscale full-service hotel, but it's run very efficiently. If we can find those types of opportunities at the right basis and we can generate the right returns, we'll certainly look there.

Our next question comes from Dany Asad with Bank of America.

My question is -- my first question is on the asset contribution to the JV. Can you just help us understand why specifically these ones and how we should think about the balance of Summit's remaining portfolio? So is there like an opportunity to prune the remainder or should we think about more contributions to the JV ahead and so on?

Yes. Again, we went through a process with GIC to evaluate the portfolio. We felt like we found a portfolio that's relatively representative of, one, the portfolio that we own at Summit; and two, the portfolio that's owned within the JV. We obviously tried to find markets where we felt like GIC could be more constructive from a pricing perspective. I would say that there was nothing that was either completely had to be in there or anything that was completely off the table. It was somewhat of an iterative process. I think we looked at the contribution, and this plays in kind of the second part of your question in terms of how we think about the rest of the portfolio. We'll look at anything opportunistically. We never felt like we had to create the liquidity by contributing the assets, but we did feel like it was an opportunistic way for us to raise some capital. But again, we think we're going to be able to redeploy over time into something that's going to create higher, better risk-adjusted returns. I wouldn't preclude us from continuing -- from contributing additional assets in there. I wouldn't say that that's the baseline plan. Again, I think we have plenty of liquidity today. We've done a great job managing the balance sheet. We've got a tremendous amount of runway and we've got plenty of dry powder to pursue additional acquisitions. We'll certainly continue to evaluate dispositions to the extent that again, we feel like we can sell those and redeploy the proceeds into something that creates better risk-adjusted returns.

And just -- because you also mentioned on your prepared remarks, right, you basically bolstered your investment capacity a little bit with this contribution. So is that -- do you have any -- do you favor one opportunity over the other in terms of -- like, do you prefer deploying that into like an acquisition or maybe even growing the JV even more? Or even -- Is that like CapEx in your existing portfolio? Like how should we be think about that investment capacity?

Yes. Look, we -- as we've said over the last several quarters, we think there's going to be great opportunities for us to buy. We don't have anything to announce today, but I would say we continue to make sure we stay very, very active in the acquisition market. And I think our pipeline is probably as busy as it's been at any point since the onset of the pandemic. So I do think it creates great capacity for us. It creates capacity that ultimately could be used to put assets into the venture. So one of the things that we've prioritized in structuring the balance sheet is ensuring that we've got flexibility and optionality, and we've been able to do that with whether it's with the convert raise or these contributions. So it could take many different forms. But again, we do think we're going to -- we'll be able to find some unique, compelling opportunities.

Our next question comes from Michael Bellisario with Baird.

Jon, just a couple of more on the JV contribution. How are you guys thinking about balancing how big that part of the company could get versus your 100% owned fully consolidated portfolio?

Yes. It's a good question, Mike. I think that we're at $450 million of assets and there are 11 assets of 72. So it's still a fairly small percentage of the portfolio. I think we still have runway to grow it. I don't think it will ever be the majority of the assets that we own in the business, but I do think that there's still some runway for it to be larger.

Got it. And then maybe a little bit longer-term focus here, but how are you and GIC thinking about eventually recycling some of the joint venture assets, and then maybe mechanically, who can trigger those decisions?

Yes. It was never meant to be a perpetual vehicle. We set this up to be something that -- even when it was set up, it was set up in a moment in time where we felt like we could leverage an operating platform and help narrow a cost of capital disadvantage that we felt like we faced when we were pursuing acquisitions. Today, I think, again, a lot of that holds and the fact that we can create this fee stream that ultimately enhances our returns, but we never meant for this to be perpetual. We have structured mechanisms within the venture that contemplated an exit. We've been trying to be thoughtful around allowing us to do that, either in the form of cash or stock. And so I wouldn't say that, that is a near-term thing. But over time, we'll certainly look to exit. This is an IRR-driven vehicle in terms of how we calculate the promote. And so over time -- we're not there yet, but we'll look at exiting in kind of a normal course.

Our next question comes from Bill Crow with Raymond James.

Also on the JV, why 6 assets? I mean, they could buy anything you wanted to throw at them. Were you trying to solve kind of a capital raise for circled acquisitions from the JV going forward? Or -- why 6?

Yes. Look, no magic to 6, Bill, candidly. I think, again, we wanted to focus on what was a reasonable size -- kind of to Mike's earlier question, we didn't want to put half of the assets in the portfolio in there. We didn't want to do 1 or 2 assets and go through the process to raise $5 million or $10 million. We felt like we threaded the needle around. This is still a significant transaction, raising $85 million, plus or minus, through the transaction gives us real additional liquidity. It gives us real additional buying power. It helps us pay down some debt. So we felt like it was a meaningful size without being a too significant portion of our assets. But there was no magic to 5 or 6 or 8 or whatever it was.

At what point do you start to worry about shrinking the company too much relative to G&A and public company costs and all the other things?

Yes. Look -- I mean, obviously, we sold some EBITDA here, but we do retain the assets. And as I said on the previous question, I think, ultimately, we're likely the ultimate owners of -- or the most logical owners of some of the assets that are in the existing venture. And so it is a consideration. We tried to talk through -- we do think we're going to have some opportunities to redeploy this capital and ultimately, find some opportunities for external growth where we think we can underwrite higher returns. So again, we don't feel like this was a huge needle mover in terms of making the company too small, and we have created some capacity for us to go out and continue to grow externally.

Our next question is a follow-up question from Neil Malkin with Capital One.

I'm going to ask you a question that hasn't been brought up. It's on the GIC JV. So just -- I mean, can you give any specifics on what you have potentially identified or -- post LOI, anything like that in the works? I mean, should we expect to hear something in the second quarter? What does the time line kind of look like on that? That's the first one.

Yes. Look, we don't have anything to announce today. As we said earlier, we are working through a number of opportunities. I'm hopeful, if not optimistic, that we'll find some opportunities to redeploy this capital. But I certainly don't want to commit to any type of time line there. We'll continue to do it opportunistically. Ultimately, we were solving for ensuring that we can redeploy proceeds or invest proceeds, just capital generally, at the right risk-adjusted returns.

Okay. Other one is, I think, kind of along the lines of Bill's question. I mean, you guys -- you're always talking about solving for IRR, being agnostic, focused on the assets. But there's -- how do you kind of balance that being a public company? And given the size of the portfolio and market cap, it's kind of been -- kind of running in place, arguably. I guess, being a public company, how do you think about that? And is the next couple of years a good time to increase the portfolio, gain some scale, gain some market cap? How much of that is a discussion internally when talking about capital allocation?

Yes. Look, we've been a very transaction-oriented company, historically. If you look at the 72 assets that we own, 5 of them are from the IPO portfolio. We've transformed the company over the last 9 or 10 years. And so I don't think we need to do that again. I think we love the portfolio that we have. But I think we'll continue to be a very transaction-focused business, both on the buy side and the sell side. And as I've said, we think we're going to have some very compelling opportunities to continue to grow the business externally.

Our next question is a follow-up question from Austin Wurschmidt with KeyBanc.

I wanted to ask about the ROI opportunities you referenced in your prepared remarks, accelerating some of the CapEx into the fourth quarter of this year. Can you give us a sense of magnitude and what type of projects and returns you're looking at?

Yes. When we kind of gave our initial capital -- CapEx guidance for the year, we talked about a $20 million to $30 million range on a consolidated basis, about $15 million to $25 million on a pro rata basis. That includes the start of, really, 3 renovation activities in the back half of the year that we intentionally put off until we saw -- where we got more conviction around the trajectory of the recovery from a demand perspective. Given that we've been pleased with that, we are looking at pulling forward some projects. The spend in -- the incremental spend in 2020 will likely be fairly minimal. A lot of the work will get done either late in the year or the first part of next year. But we are probably -- looking at accelerating another 3 or 4 projects. We're getting them started late this year, just given the better demand trends we've seen in the first 4 months of the year.

Are these more room renovations? Or how would you characterize the work that you're planning to do at the 3 or 4 hotels, I believe?

Yes. Rooms and public spaces.

Got it. Okay.

In a period of time where we think we can do it with generally lower occupancies and less disruption.

And I'm not showing any further questions at this time. I'd like to turn the call back over to President and CEO, Jon Stanner.

Well, thank you all for joining us today. I know it's a busy morning for everyone. As you can tell, we're excited about the future of our industry and the outlook for Summit, in particular. We look forward to seeing many of you, hopefully, in person some time soon. Thank you.

Ladies and gentlemen, this does conclude today's presentation. You may now disconnect, and have a wonderful day.