Good day, and thank you for standing by. Welcome to the Summit Hotel Properties, Inc. Fourth Quarter 2021 and Full Year Earnings Conference Call. . I would now like to hand the conference over to Mr. Adam Wudel, Senior Vice President of Finance Capital Markets and Treasurer. Sir, please begin..

Thank you, Norma, and good morning. I am joined today by Summit Hotel Properties President and Chief Executive Officer, Jon Stanner, and Executive Vice President 'and Chief Financial Officer, Trey Conkling. 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 SEC filings. Forward-looking statements that we make today are effective only as of today, February 24, 2022, 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 fourth quarter and full year 2021 earnings conference call.

2021 was a transformative year for Summit as we saw a significant acceleration in the recovery of our business, meaningfully added to our already strong portfolio of hotels with a series of transactions that improve our growth profile, and prudently raised capital to position our balance sheet for further growth.

Today, Trey and I will discuss our results from last year, our outlook for this year and how our recent transaction activity position Summit to continue to be a leader in the lodging recovery. Overall, we were extremely pleased with the improving operating trends within our portfolio, which exceeded our expectations for the year.

Our pro forma portfolio of 74 hotels generated RevPAR of $81 for the full year, which represents a 55% increase over 2020 and a 63% recapture rate relative to 2019.

Leisure demand was particularly strong, beginning its return in earnest around President's Day weekend last year and accelerating through spring break in what was an incredibly strong summer of leisure travel. During the second half of 2021, weekend RevPAR was essentially equal to pre-pandemic levels, primarily driven by strong leisure demand.

Midweek non-leisure demand has been slower to return, but began to improve in the fall, driven by a pickup in many local and regional corporate accounts and smaller groups, which drove October RevPAR above $100, the highest nominal RevPAR we've achieved since the pandemic started.

While the natural seasonality of our business resulted in lower nominal RevPAR in November and December, the 2019 RevPAR recapture percentages for these months improved sequentially, culminating with December RevPAR down only 9% versus December of 2019. The highest recapture rate we have seen since the onset of the pandemic.

We reported fourth quarter pro forma RevPAR of $94, which was driven by a 51% increase in occupancy and a 44% increase in average rate. And despite the seasonal decline in demand experienced in the fourth quarter, average rate actually increased approximately 2% from the third quarter.

Although our fourth quarter RevPAR declined slightly from the $98 RevPAR achieved in the third quarter, the rate of 2019 RevPAR recapture continued to accelerate, achieving 80% in the fourth quarter compared to 76% in the third quarter.

Our asset and revenue management teams continue to produce tremendous results in what is still a challenging operating environment.

RevPAR index for our pro forma portfolio finished the fourth quarter and full year at 119% and 121%, respectively, which was driven primarily by occupancy premiums of nearly 10 percentage points during each period, demonstrating our ability to continue to capture market share even as the recovery in our markets begins to accelerate.

Trey will provide more detail on the cost side of our business shortly as we've been very successful in continuing to manage our hotels with a lean staffing model and create meaningful margin expansion despite some well-documented pressure on wages.

Consistent with what was experienced across the industry, demand softened throughout our portfolio in January and early February as Omicron-related concerns caused travel disruptions and led many corporations to further delay their return to office plans.

January is not a historically strong leisure travel month to begin with, but this year's performance was undoubtedly exacerbated by a temporary COVID-related dislocation in demand. Our preliminary January RevPAR finished at approximately $75, which was 31% below January 2019 levels.

However, encouragingly, pace trends for the next 3 months are remarkably strong and point to a meaningful rebound more consistent with the sequential improvements we saw for much of the second, third and fourth quarters of last year. February RevPAR pace is up over 30% from where January stood 30 days ago.

And for the full 3-day President's Day weekend that just ended, our portfolio posted RevPAR of $126, which was 62% ahead of the same 3-day weekend a year ago. Saturday was one of our best single nights in nearly 2 years, as RevPAR was nearly $150.

March pace is currently up approximately 35% compared to the same time a month ago for February, and we continue to feel confident in the favorable demand backdrop for our portfolio, which is well positioned to benefit from the combination of continued robust leisure demand and a more meaningful return of corporate travel as we move through the year.

As I mentioned, 2021 was an extremely successful year for Summit on the transaction front, as we were particularly active in our joint venture with GIC, which has proven to be a true differentiator for us and enabled us to pursue a more aggressive growth strategy early in the industry's recovery.

In May, we contributed 6 wholly owned hotels into the venture for total consideration of $172 million, demonstrating the embedded value in our portfolio and creating additional liquidity for the company. In July, we acquired the recently developed 110-room residence in Steamboat Springs for $33 million through the joint venture.

Although the asset has only been opened a little over a year, the hotel produced approximately $130 RevPAR in its first year of operation and exceeded our year 1 underwriting by nearly 30%, generating a nearly 6% NOI yield.

The hotels continued to perform exceptionally well early this year, with January RevPAR of approximately $220, which is 135% increase from last January, and February is pacing significantly ahead of last year.

In December, we acquired the 120 guestroom Embassy Suites in the Catalina foothills of Tucson, Arizona, for $25.5 million, also through our joint venture with GIC. Strong peak season demand in Tucson helped drive January RevPAR at the Embassy Suites to over $130, which exceeded last year by nearly 80% and also surpassed January 2019 levels.

The Embassy Suites proximity to our Homewood Suites, Tucson, will allow both hotels to mutually benefit from various operational synergies and complexing opportunities.

Both the residence in Steamboat and Embassy Suites Tucson are located in high growth, high barrier to entry resort markets and our top performers in those markets, having generated an average 2021 RevPAR index of over 150%.

In January, we completed the initial closing of 26 of the 27 hotels included in $822 million portfolio acquisition from NewcrestImage. The investments significantly increases Summit's exposure to several dynamic and high-growth Sun Belt markets.

The 27th and final hotel, the 176-room canopy in downtown New Orleans is expected to open next month at which point we would complete the acquisition. The value allocated to the 27 hotels in total equates to approximately $209,000 per key and represents a meaningful discount to estimated replacement cost.

The NewcrestImage portfolio acquisition also included 2 parking garages and various economic incentives. In total, we announced or completed over $1 billion of transaction activity in 2021, which increased the number of hotels in our portfolio by 40%.

Our joint venture with GIC now totals 40 hotels, representing over $1.3 billion of invested capital, including the pending acquisition of the Canopy New Orleans. The recent growth of the joint venture will result in a substantially increased ancillary fee stream earned by Summit for asset and capital project management services.

For 2022, we estimate our pro rata share of annual fees to be approximately $2 million to $2.5 million, which equates to 10% to 15% of our estimated corporate cash G&A. We expect this fee stream to increase in future years as the performance of the acquired asset stabilizes and planned renovation projects commence.

With that, I will turn the call over to our CFO, Trey Conkling..

Thanks, John, and good morning, everyone. Throughout 2021, our portfolio demonstrated strong sequential improvement across all location types.

While urban hotels look meaningfully in the first half of the year, these hotels generated outsized year-over-year growth in the third and fourth quarters of 160% and 200%, respectively, translating to nominal RevPAR of $94 and $88. These RevPAR levels represent 2019 recapture rates of 69% and 72%, respectively.

As an additional point of reference, in October, a month, a month which typically produces the portfolio's highest nominal RevPAR our urban hotels generated $105 RevPAR, representing a recapture rate of approximately 70% to October 2019's urban portfolio RevPAR of $140, further evidence of improving fundamentals.

Key factors driving improved performance for the urban portfolio include increased business activity, professional and college sports attendance and small group demand. RevPAR for the nonurban portfolio was approximately $98 in the fourth quarter, driven by continued strength in our non-resort properties, which generated a RevPAR of $118.

December was particularly strong for our resorts with a RevPAR of nearly $130, representing an approximate 5% increase from December 2019. Strength in resort demand has continued into early 2022, with January RevPAR of $129. Shifting to portfolio segmentation.

While seasonality translates to slowing demand in the fourth quarter, average rate for the quarter increased across the entire portfolio in most segments for the full week, including the group and negotiated segments.

The fourth quarter continued to benefit from strength in leisure demand particularly within the retail segment as ADR increased 2% relative to the third quarter and generated 100% ADR recapture rate to Q4 2019. On the corporate front, occupancy contribution from the negotiated segment increased modestly from the third quarter, while ADR increased 4%.

Throughout 2021, booking windows experienced sequential quarterly improvement. In the fourth quarter, bookings within 24 hours declined by nearly 10% from the third quarter and bookings within 1 to 3 days a stay, declined by 9% relative to the third quarter.

Overall, same-day bookings comprised of less than 20% of our total bookings in the fourth quarter, which is down nearly 10% from the previous quarter. Finally, bookings more than 30 days out increased from 19% of total bookings in the third quarter to 21% of total bookings in the fourth quarter.

While the overall booking window remains short relative to pre-pandemic standards, we remain encouraged by the continued improvement in these trends.

From a cash flow perspective, continued strength in average rate and ongoing expense management discipline enable Summit to generate its third consecutive quarter of positive adjusted FFO, which was $14.8 million in the fourth quarter, resulting in full year adjusted FFO of $36.8 million.

Pro forma hotel EBITDA for the fourth quarter was approximately $36.1 million, resulting in $109.4 million of pro forma hotel EBITDA for the full year 2021.

Operating cost per occupied room in the fourth quarter declined more than 5% compared to 2019, which drove fourth quarter gross operating profit margin and hotel EBITDA margin to 44% and 33%, respectively. These margins represent only 115 basis points and 133 basis point decline to Q4 2019 levels despite a 20% decline in revenue.

For the full year, operating costs per occupied room declined 13% compared to 2019. We continue to operate our hotels utilizing a relatively lean staffing model, which consists of approximately 19 FTEs on average or slightly more than 55% of pre-pandemic staffing levels.

While staffing shortages and rising labor costs continue to affect our industry, our asset management team has worked diligently to manage operating expenses, which allowed our portfolio to achieve hotel EBITDA retention of 60% when compared to the fourth quarter of 2019.

During the fourth quarter and full year 2021, we invested approximately $9.7 million and $20.4 million, respectively, in our portfolio on items primarily related to maintenance capital and advanced purchasing related to upcoming renovations.

As communicated on last quarter's call, we have recently commenced, or planned to commence, several renovations in markets where we anticipate a more rapid return of demand in order to minimize disruption from these projects.

Throughout 2022, we are planning for a more typical renovation program in line with pre-pandemic levels, although supply chain issues may ultimately impact timing. Finally, turning to the balance sheet. Our current overall liquidity position of nearly $450 million was enhanced throughout 2021, in part due to numerous capital markets transactions.

Early in 2021, we completed the issuance of $287.5 million of 1.5% convertible notes to repay over $250 million of debt, including our revolver to its current 0 balance. Additionally, we accessed the preferred market in August, taking advantage of a favorable market backdrop with the issuance of $100 million of 5 7/8% Series F perpetual preferred.

Proceeds from this opportunistic offering were used to accretively refinance our $75 million 6.45% Series D preferred stock and to further reduce the outstanding balance on our November 2022 term loan to its current outstanding balance of $62 million.

This sub-term loan remains the company's only 2022 maturity, and we continue to maintain ample liquidity to repay all maturing debt through 2024 when considering available extension options.

From an interest rate risk management perspective, our balance sheet continues to be well positioned, including an average interest rate of 3.3%, with approximately 70% of our current outstanding debt fixed after consideration of various interest rate swaps.

In the second quarter of 2022, we expect to exit the existing waivers on certain financial covenants related to our primary corporate credit facility, which will provide for more capital allocation flexibility regarding investment activity, use of proceeds, capital projects and potential distributions.

During the fourth quarter, we were repaid in full on two mezzanine loans that have been outstanding since 2017. Aggregate proceeds from the loan repayments were approximately $26 million, and the company earned an 8% IRR on its debt investment over that whole period.

Included in our press release last evening, we provided 2022 guidance on certain nonoperational items, including cash corporate G&A, interest expense, preferred dividends and capital expenditures, both on a consolidated and pro rata basis.

Based on the hotels that we own today, plus the pending acquisition of the Canopy New Orleans Downtown, we expect the midpoint of consolidated cash corporate G&A to be $20.5 million; interest expense, excluding the amortization of deferred financing costs, to be $53.5 million; preferred dividends to be $18.3 million; and pro rata capital expenditures to be $70 million.

With that, I will turn the call back over to Jon..

Thanks, Trey. In closing, I'd like to take just a minute to publicly thank Craig Aniszewski, our retiring COO, for his tremendous contributions to our growth and success over the years.

In his 25 years with Summit, Craig and his team have demonstrated a tremendous ability to produce results in a wide range of operating backdrops, and he deserves a men's credit for helping establish our best-in-class operating platform.

He leaves the company in extremely good hands, having developed a strong team fully capable of carrying on his legacy of success. I've been truly privileged to have him as a partner and wish him the very best in retirement. And with that, we'll open the call to your questions..

. Our first question comes from Austin Wurschmidt with KeyBanc..

First, Jon, just curious how the pace of acceleration you highlighted in some of the booking trends for February and March compare versus -- or between the various segments, albeit business weekday, urban resort, other segments and then certainly, leisure, BT and small group. However, you kind of can segment that? Any detail would be helpful..

Yes, sure. Thanks for the question. I think where we sit today, you're still seeing strength in similar markets that you've seen strength in over the past 12 months or so. It's still tends to be a leisure dominated market.

We saw incredible strength, as we mentioned in the prepared remarks, over President's Day weekend, our spring break period, particularly in March in some of these leisure oriented markets continues to pace very, very strongly as well.

We are starting to see a pickup midweek not just similar to kind of what we saw later in the fall in October and November, particularly where we are starting to see better performance midweek even over the last couple of weeks, frankly, we've started to see that.

So I do think, again, it's more of a continuation of what we saw towards the end of last year, but we are seeing more and more strength midweek..

That's helpful.

And then with the NewcrestImage portfolio now closed and the booking trends picking up, what's Summit's leverage to kind of the potential urban recovery today versus prior to the Newcrest acquisition?.

Yes. We're still about 50% of our portfolio still urban-based. What we have done is that urban mix has shifted. So it's clearly shifted more towards Sun Belt urban markets than it was previously. But it has stayed roughly the same.

I think one of the things that we focused on and we've talked a lot about as we've talked about the rationale and the outlook for the portfolio, particularly as we start to integrate the Newcrest portfolio is just how different the business recovery can potentially be by market.

I think when you look at the recovery in the Dallas market is over 80% of where we were in 2019. It's a fraction of that and some of the other gateway -- more gateway urban markets. So I don't think you're necessarily going to see a linear even recovery amongst markets.

We do feel really good that even the -- first of all, there's a lot of upside in the urban portfolio, but particularly in some of the urban markets where we have exposure -- in the Sun Belt in particular, you've got enormous population growth down here. You've got a huge amount of corporate relocations happening to these type of markets.

And we do feel like there's going to be a quicker trajectory of recovery and a better growth profile over a longer period of time to some of these urban markets than maybe some of the other gateway urban markets..

And then just kind of last as a follow-up to that, how does Newcrest's portfolio perform during this period of disruption relative to your legacy portfolio?.

Yes. It has performed better. I think from a recapture perspective. We -- our overall recapture percentage for the full year last year was about 63%. If we layered in the Newcrest portfolio, it add a couple of hundred basis points to that recapture percentage. It does get a little bit dicey getting into the numbers in too much detail.

As you'll recall, a fair number of the assets in the Newcrest portfolio were either weren't open in 2019 or weren't fully ramped up in 2019. But again, if you look at the pace of recovery in those 26 assets that are currently open today, it is a little bit ahead of our legacy portfolio..

Our next question comes from Michael Bellisario with Baird..

Jon, I just wanted to go back to the labor comments that you made, it looks like FTEs were flat -- roughly flat versus 3Q.

How much of that is it simply hard to find labor today versus seasonality and slightly lower occupancy levels in the fourth quarter versus the third quarter?.

Yes, a little bit of both, frankly. I think we've started to see some improvement in the labor market. I think the number of applicants that we're seeing for positions has ticked up. It's still challenging out there. I think you're seeing it really across the industry. We did expect there to be a seasonal slowdown in demand.

I think as we've kind of talked about, it's been hard to find people. So once we've been able to find those bodies, we want to make sure that we keep them in place despite the fact that we were moving into what we knew was going to be a little bit slower seasonal period, but we're still running very, very lean.

Trey mentioned, we've got roughly 19 FTEs per property. It's about 55% of what our typical run rate is. We've, obviously, talked a lot about the wage pressure we've seen across the industry. Certainly, some of that was in the fourth quarter, and we're still operating these hotels.

Our cost per occupied room is still down more than 5% fourth quarter of this year versus fourth quarter of 2019. So the team has done a really remarkable job continuing to operate the hotels in a very efficient manner.

And I think they've done a good job positioning hotels from a staffing perspective once we start to see more of a ramp-up in demand here as we progress through this year..

Got it.

And then that 45% that hasn't come back yet, what type of position at the hotel level? is that? Is it mostly housekeeping?.

Yes. It's mostly hourly staff, so mostly housekeeping up front desk..

Got it. And then just switching gears to acquisitions and capital allocation, just digesting the Newcrest portfolio here.

What's your view on the transaction landscape? And how much money you guys might be able to put to work on a net basis in 2022, aside from the Newcrest transaction?.

Yes. Look, we've only owned the Newcrest portfolio for about 40 days. So we're definitely well on our way to integrating that portfolio within the company. I think we feel better today than we did even when we underwrote or even when we announced the acquisition about what the opportunity set looks like through that acquisition.

As we talked a lot about, we were very thoughtful and diligent in how we structured the deal. So we didn't use any of our liquidity. Trey mentioned, we still have nearly $450 million of liquidity available for us to continue to be thoughtful and try to grow the business.

We do expect to exit our covenant waivers here over the course of the next quarter. And so we'll have even greater flexibility to continue to pursue growth opportunities. On a net basis, we prefer to be a net acquirer early in a cycle. I wouldn't preclude us from looking to sell some assets on an opportunistic basis.

I think as everybody knows, there's a lot of capital chasing high-quality assets like the ones that we own, which speaks to supporting the overall value of the business.

So again, I think we've been thoughtful in positioning the company to continue to grow externally, but we'll always continue to be prudent capital allocators and opportunistic both on the buy and the sell side..

Our next question comes from Neil Malkin with Capital One Securities..

Glad we're not in Ukraine right now. Sorry about what's going on. I'm pretty sad and hurting the market. Switching gears to something, I guess, a little less concerning. Can you talk about the benefits from the Aimbridge takeover of the Newcrest hotels.

Just in terms of like maybe articulating or giving us some numbers around savings, margins, best practices, leveraging approximate hotels, synergies and things like that, that maybe weren't underwritten in the purchase, that would be great..

Yes, sure. Thanks for the question. First of all, Aimbridge is our largest manager and has been for some time.

We have a wonderful relationship that been amazing partners for us really since the time of the company's IPO, we do have kind of our own dedicated team within the Aimbridge platform that really services our assets in particular that we think is very unique, and we're big believers in that kind of optimizes overall results.

We do think there's real opportunity in terms of the upside in the assets. We haven't quantified that. We didn't underwrite that, but we do think that there's real opportunity, both from a sales and a cost perspective. Some of that is driven by kind of exactly what you've alluded to. There's real complexing activities.

We bought 27 hotels, we're in the process of buying 27 hotels. Many of them are complex. They're either dual-branded or Triplex type branded properties where we think there's opportunities to complex positions and ultimately have a more efficient sales operations. So we're still, again, we're 40 days into the acquisition.

It's part of what I alluded to that we feel better today than we did even when we underwrote the asset because we didn't bake any of that upside into our underwriting. But we do believe there's going to be some real opportunity there to drive better results, not necessarily just because of the Aimbridge relationship.

It has a lot to do with the expertise that we have in-house as well, both from a revenue and asset management perspective..

That's super helpful. I guess maybe talking about balance sheet or capital allocation, a bigger picture question. I guess, two parter. One, do you have a different outlook or view toward leverage, just kind of over the last 2 years going into COVID a little bit higher leverage, you were more limited and what you could do or how you could do it.

Everything you've done COVID to date has been through in GIC. So that's kind of the first part.

And the second part is, what are the signals, lines in the sand metrics you need to see or achieve before you can start doing things more on balance sheet?.

Yes. I'll start and Trey can feel free to chime in here on the balance sheet side. Look, I think everybody would have liked to have a little bit less leverage going into the downturn. We're no different than that. I think when we look and we assess kind of our overall balance sheet health, we look at it beyond just one metric of net debt to EBITDA.

And I know that's the easiest metric to compare across the space and across industry, but we look at it on a more holistic basis. We look at interest coverage ratio as we look at fixed charge coverage ratios. We look at our maturity ladder, we look at our total liquidity.

And if you look at that kind of total picture, I think what we felt going into this and this was very intentional, was that we really had a very healthy balance sheet. We had a little bit more leverage. We were kind of at the high end of our stated leverage range going into the downturn.

But we did have for the size of our business, we had a lot of liquidity. We didn't have any near-term maturities. And so we were able to navigate through a very choppy couple of years without having to raise any dilutive capital.

Our balance sheet is in a better position today than it was a couple of years ago in part because we've been very thoughtful around how we've raised capital.

So I think that where we sit today, we feel very good about the progression and kind of the natural deleveraging that's going to happen over the course of the next couple of years to get us down to a more normalized leverage range. In terms of how we think about acquiring within the joint venture or outside the joint venture.

Look, we still really like the joint venture. It's about 1/4 on a pro rata basis of our overall portfolio. We think there's still an ability for us to grow within that venture. We love the fee stream that it creates. It still does help us because it does limit the overall capital that we need to put in any deal.

GIC has been wonderful, wonderful partners. We are cognizant of making sure we don't get to a point where we have an inverted capital structure. And so I'm very proud that we've gotten to about $1.3 billion of invested capital in the venture. I do think there becomes a time as that grows that you'll start to see some growth outside of that as well..

The only thing I'd add to that is, as what John said is I think organically, we feel like we'll be able to get back into the ZIP code that we've always put out there from a net debt-to-EBITDA perspective over the next couple of years and that we feel good about the kind of embedded growth that's in the portfolio.

And as Jon said, we don't want to look at that. When we look at our kind of EBITDA to interest coverage ratio, we're at roughly 2.5x. And so there's a fair amount of capacity there.

And as we look at exiting our waivers and what our agreement is within our credit facility, we'll be able to operate within that starting in the second quarter, and that gives us a lot of flexibility to be able to go out continue to deleverage, but also continue to achieve our growth plans.

So I think that the long-term goals of the company from a leverage perspective remain the same and we plan to get there in a relatively normal course..

I appreciate that. Last one, I think, to follow-up to a previous question, but you talked about your FTE count. And I'm just wondering, assuming that demand comes back to '19 levels tomorrow, how close are you to your sort of new brand standard enhanced operating model, lodging sector type of run rate.

I mean are you -- do you think when everything comes back and things sort of normalize out, stabilize out, are you at 80% of FTE, 75% of FTEs.

Can you just kind of maybe talk about that?.

Yes. It's a great question. I think where we sit today is we're about 55% of normalized FTE count. I think in fairness, we're still working through with the brands what the normalized brand standards are going to look like.

I think in part because we're waiting to see this return of business travel and what the effects of that has on our overall business. I don't suspect that we're ever going to go back to 35 FTEs for asset.

I think, as you've alluded to, there's going to be some efficiencies in this business that's going to allow us to continue to operate with a more efficient model and less FTEs per hotel. We're going to still figure that out over time. My guess is that somewhere to use a broad range, somewhere between 70% and 80% of our pre-pandemic total FTE count..

Next question comes from Chris Woronka with Deutsche Bank..

I wanted to also revisit the labor issue from a slightly different angle.

What kind of differences do you see geographically? And you kind of talked about the Newcrest portfolio, but when you're -- whether it's the amount of the percentage increase for wages and benefits or whether it's availability, is there a big difference between Sun Belt and kind of northern half or coastal?.

Yes. I think it's market by market, Chris. But there is a difference. I mean, we're talking very broadly, we're lumping 40 markets together over 100 hotels when we kind of give statistics about what we're seeing labor dynamics. There's no question that it's more acute in certain markets.

Orlando, as a market, in particular, that we've talked a lot about where we've got some more acute staffing challenges in that market. So where there's demand, particularly service-related demand, it is a tougher staffing market in some of those areas..

Okay. That's helpful. And then I appreciate the CapEx outlook for the year. Just thinking a little bit longer term and maybe it's more directional than specific numbers.

But as we look out and a few things you want to do with the Newcrest portfolio and some of the stuff you might have kind of delayed the past 2 years, is there a kind of a run rate you think you get to in '23, '24 kind of a new peak level of CapEx? Or is there -- I guess what I'm really asking, is there any big spike coming that you see?.

One, just the higher hotel count; and secondly, we do have some renovation activity that we want to get caught up on. We talked, I think, even very early last year about starting to accelerate the pace of renovations when we had conviction that the demand was in place. So we didn't fall into a period where we had a lot of deferred capital.

And we were very fortunate to go into the downturn with a new portfolio where we didn't have any deferred capital. The last thing I would point out and talked a lot about this as we talked about the integration of the Newcrest portfolio. It's a very new portfolio. There is really one asset in the entire portfolio that needs an immediate renovation.

The vast majority of those assets have been opened within the last 3 or 5 years and we don't have any real immediate capital needs. So it was an ability to really add scale to the business without adding a lot of capital in these over the next couple of years.

So I think you can look at the run rate that we put out for 2022 to be in and around what we would expect over the next couple of years..

Okay. Very helpful. And last one is just kind of on potential dispositions from here. I mean, by definition, you always have a bottom 10%. And I don't know, Newcrest probably changes the definition of bottom 10%, pushed some legacy hotels down a little bit.

I mean is there a way to gauge how you guys view -- how many noncore hotels do you think you have today that you could -- you'd sell if the price was right versus stuff you want to hold long term for -- in the core portfolio?.

Yes. Look, I don't know that there's anything that we really look as truly noncore that we just don't want to own anymore. As you said, there's always kind of a bottom 10% of the portfolio that you could dispose of. I think more importantly, the way we look at it is, first of all, we don't have to sell.

We don't feel like we need to go sell assets to raise capital in some sort of defensive manner. Again, I wouldn't preclude us from selling assets, but we've always been opportunistic sellers of assets. And as we all know, there's a tremendous amount of capital chasing high-quality assets in good markets.

And we've got a portfolio full of those type of assets. And so to the extent that we can find a buyer that will pay the right price, every asset in this portfolio is for sale every day. And again, I wouldn't preclude us from being an opportunistic seller of assets this year..

Our next question comes from Bill Crow with Raymond James..

John, any change in guest satisfaction score trends now that the changes in service levels have been implemented for a longer period of time.

Are your guests getting used to the changes or as you welcome more business travelers, are they rediscovering the experience is not quite as good as it used to be?.

Yes. Look, I think it's less of an issue today than it was early in the pandemic. When we stripped out a lot of the amenities and services, we did see that reflected in guest satisfaction scores. Now some of it is we've added back a lot of amenities and services. Breakfast is running in a normalized manner.

I do think you're seeing some level of education of the customer that's happened over the last 24 months. So I do think guest satisfaction scores are less bad, maybe than they were before. I think we -- along with the brands, we do want to make sure that there's not additional disruption as the business traveler comes back.

I don't suspect that there will be. I think this business traveler that hasn't been traveling for 2 years, hasn't been traveling for work, but has been traveling for leisure. So I think that customer is already pretty naturally educated. So I do think, again, this is less of a concern today than it was a year or 2 ago..

And Jon, shifting over to that leisure traveler. It seems like logic would suggest that $5 per gallon gasoline, higher rental rates for apartments, et cetera, would take a greater relative toll on maybe select service leisure guests than it would on luxury or even upper upscale leisure guests.

And I'm just wondering if that's starting to be evident in maybe some pushback on rates or shorter average durations that sort of thing.

Are you seeing any pushback yet?.

Yes. We're not, Bill. In fact, we were -- we've been talking about this over the last couple of days. Obviously, with some of the news that's going on over in Ukraine and I think kind of the one natural fallout of that is potentially higher gasoline prices. You've seen oil over $100 a barrel a day. We just haven't.

I think we've even gone back and looked historically, even in periods of time where you've seen rising gasoline prices, you really haven't seen much of an effect on -- or at least any discernible effect on our occupancies, our abilities to push rate.

I think where we sit today and look, we hope this doesn't go on along, we prefer lower gas prices than higher gas prices clearly. But we just haven't seen a lot of effects from that. I think you've got a consumer today that's a very healthy consumer. There's a lot of savings that have been built up.

And you've just seen a large propensity to consume and particularly for travel-related things. You saw that even a little bit in the results that we had over President's Day weekend, which were up 65% year-over-year. we were up 4% or 5% in RevPAR versus '19.

Our rates were actually almost 10% higher over President's Day weekend this year than they were in 2019. So again, I don't think we're rooting for higher gas prices. But historically, it hasn't been a big driver of our business, and we certainly haven't seen any effects from it so far this year..

And I'm currently showing no further questions. I'd like to hand the conference back over to Mr. Stanner for any closing remarks..

Yes. Thank you all for joining us today. We're excited about the future of Summit. We look forward to seeing you all, hopefully, in person soon and speaking with you again next quarter. Have a nice day..

Ladies and gentlemen, this concludes today's conference call. Thank you for your participation. You may now disconnect. Everyone, have a wonderful day..