Ashford Hospitality Trust, Inc. (NYSE:AHT) Q2 2021 Results Conference Call July 29, 2021 11:00 AM ET

Company Participants

Jordan Jennings - Investor Relations
Robison Hays - President and Chief Executive Officer
Deric Eubanks - Chief Financial Officer
Jeremy Welter - Chief Operating Officer

Conference Call Participants

Tyler Batory - Janney Montgomery Scott
Bryan Maher - B. Riley Securities
Michael Bellisario - Robert W. Baird
Chris Woronka - Deutsche Bank Securities

Operator

Greetings. Welcome to Ashford Hospitality Trust Second Quarter 2021 Results 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 remainder this conference is being recorded.

It is now my pleasure to introduce your host Jordan Jennings, Investor Relations for Ashford Trust. Thank you. You may begin.

Jordan Jennings

Good day, everyone and welcome to today’s conference call to review the results for Ashford Hospitality Trust for the second quarter of 2021 and to update you on recent developments. On the call today will be Rob Hays, President and Chief Executive Officer; Deric Eubanks, Chief Financial Officer; and Jeremy Welter, Chief Operating Officer.

The results as well as notice of the accessibility of this conference call on a listen-only basis over the Internet were distributed yesterday afternoon and a press release.

At this time, let me remind you that certain statements and assumptions in this conference call contain or are based upon forward-looking information and are being made pursuant to the Safe Harbor provisions of the Federal Securities regulations. Such forward-looking statements are subject to numerous assumptions, uncertainties and known or unknown risks, which could cause actual results to differ materially from those anticipated. These factors are more fully discussed in the Company’s filings with the Securities and Exchange Commission. The forward-looking statements included in this conference call are only made as of the date of the call and the company is not obligated to publicly update or revise them.

In addition, certain terms used in this call are non-GAAP financial measures, reconciliations of which are provided in the Company’s earnings release and accompanying tables or schedules, which have been filed on Form 8-K with the SEC on July 28, 2021 and may also be accessed through the Company’s website at www.ahtreit.com. Each listener is encouraged to review those reconciliations provided in the earnings release together with all other information provided in the release. Also, unless otherwise stated, all reported results discussed in this call compared to second quarter of 2021 with the second quarter of 2020.

I will now turn the call over to Rob Hays. Please go ahead, sir.

Robison Hays

Good morning and welcome to our call. I will start by providing an overview of the current environment and how Ashford Trust has been navigating the recovery. After that, Deric will review our financial results and Jeremy will provide an operational update on the portfolio.

I would first like to highlight some of our recent accomplishments, and the main themes for the call. First, we had strong earnings in the second quarter that exceeded both street estimates and our internal forecasts.

We reported positive hotel EBITDA for this second consecutive quarterly period and positive adjusted EBITDA RE. Second, our liquidity continues to improve, we ended the quarter with over $520 million of cash and cash equivalents.

Third, we continue to lower our leverage and improve our financial position since its peak in 2020, we have lowered our net debt plus preferred equity by over 800 million, equating to decreasing our leverage ratio defined as net debt plus preferred equity gross assets by over 10 percentage points.

And finally, even with an already attractive loan maturity schedule, we successfully modified the loan extension tests on another large loan for 2024 and 2025, improving our ability to qualify for those extension options.

This loan modification initiative will continue to be a focus for us going forward. Additionally, we are making good progress on refinancing two of our upcoming debt maturities, the Marriott Gateway Crystal City and Hilton Boston Back Bay.

There have been numerous positive developments for both our company in the hospitality industry over the past several months. We highlighted many of them in an updated investor presentation that we put out in early April. We encourage you to review the presentation, which can be found on our website.

We are optimistic about the long-term outlook for the Company and by taking decisive actions to strengthen our balance sheet we now have multiple years of runway that will allow us to capitalize on the recovery we are seeing in hospitality industry. So while our optimism remains, we must acknowledge some risks the pace of recovery due to the ongoing variance of COVID-19.

In addition, we believe the majority of our loans could continue to be in cash traps over the next 12-months to 24 months or longer. And as a result, we will continue to focus on building our liquidity improving our capital structure in the months to come.

We have significantly reduced our planned spend for capital expenditures this year. However, given the sizeable strategic capital expenditures we made in our properties over the past several years, we believe our hotels are in fantastic condition and are well positioned for the industry rebound.

Let me turn now to the operating performance of our hotels. The lodging industry is clearly showing signs of improvement. During the quarter, our hotels performed very well. RevPAR for all hotels in the portfolio increased approximately 372% for the second quarter and we reported positive hotel EBITDA for the second consecutive quarter.

The third quarter looks the building upon our strong momentum as July numbers looked likely to outperform June numbers. So we are confident that the industry recovery is continuing to take hold.

We believe our geographically diverse portfolio consists of high quality well located assets across the U.S. that are approximately 80% reliant on transient demand, we will be in a position to capitalize on the pent up leisure and the celebration of transient corporate demand.

We continue to be focused on aggressive cost control initiatives including working closely with our property managers to minimize cost structures and maximize liquidity or hotels. This is where our relationship with our affiliated property manager Remington really sets us apart.

Remington was able to quickly cut costs and rapidly adjust to the new operating environment. In the same way they were hyper responsive on the way down, we expect him to be hyper responsive on the way up mitigating cost creep as much as possible throughout this recovery.

We are proud of our efforts over the past year and believe this important relationship has enabled us to outperform the industry from an operation standpoint and Jeremy will discuss this in more detail.

Turning to investor relations, our trading volume is at new highs in 2021 with strong participation for both institutional and retail investors. We are pleased report that in June, you are added to the U.S. small cap Russell 2000 index, the U.S. broad market Russell 3000 index, and the Russell Microcap index, as part of the Russell indexes annual reconstitution. We believe our inclusion creates added exposure to key institutional investors as well as to investors who use the Russell indexes to benchmark their portfolios.

The past 18-months have been extraordinary by any measure, like but I could not be prouder of the efforts and the performance of our teams during this challenging time. Our management team has extensive experience navigating tough market environments. We believe, we have the right plan in place to capitalize on recoveries that unfolds.

This plan includes continuing to maximize liquidity across the company, optimizing operating performance of our assets as they recover deleveraging the balance sheet over time and looking for opportunities to invest and grow as we bounce off the trough of the industry cycle. We are going to be laser focused on all of these.

I will now turn the call over to Deric to review second quarter financial performance.

Deric Eubanks

Thanks, Rob. Before I discuss our financial results, I would like to note that all per share metrics that I will discuss reflect our recently completed one for 10 reverse stock split. For the second quarter of 2021, we report a net loss attributable to common stockholders of $69.5 million or $4.35 per diluted share. For the quarter we reported AFFO per diluted share of $0.04.

We are pleased to report that our adjusted EBITDA ROE for the quarter was $31.4 million. At the end of the second quarter, we had $3.9 billion of loans with a blended average interest rate of 4.1%. Our loans were approximately 11% fixed rate and 89% floating rate.

We utilized floating rate debt that we believe it is a better hedge of our operating cash flows. However, we do utilize caps on those floating rate loans protect the company against significant interest rate increases.

Our hotel loans are all nonrecourse and as Rob mentioned, nearly all of them are currently in cash traps, meaning that we are currently unable to utilize property level cash for corporate related purposes. As the properties recover and need the various debt yield or coverage thresholds, we will be able to utilize that cash freely at corporate.

We ended the quarter with cash and cash equivalents of $520.4 million and restricted cash of $70.1 million. The vast majority of that restricted cash is comprised of lender and manager held reserve accounts.

At the end of the quarter we also had $15.9 million in due from third-party hotel managers. This primarily represents cash held by one of our property managers, which is also available to fund hotel operating costs.

We also ended the quarter with net working capital of $531 million compared to net working capital of $9.8 million at the end of 2020 which highlights the continued improvement in our financial position.

I think it is also important to point out does net working capital amount of $531 million equates to approximately $19.39 per share. This compares to our closing stock price from yesterday of $16.55 which is a 17% discount to our cash value per share and we do not believe is reflect the intrinsic value of our high quality hotel portfolio.

From a cash utilization standpoint our portfolio generated hotel EBITDA of $45.6 million in the quarter. Our current monthly run rate for interest expense is approximately $11 million and our current monthly run rate for corporate G&A and advisory expense is approximately $4 million.

On a run rate basis, we were very close to being cash flow positive at the corporate level in the second quarter. As of June 30 2021, our portfolio consisted of 100 hotels with 22,286 net rooms. Our current share count stands at approximately 27.4 million fully diluted shares outstanding, which is comprised of 27 million shares of common stock and 0.4 million OP units.

In the second quarter, our weighted average fully diluted share count used to calculate AFFO per share included approximately 1.7 million common shares associated with the exit fee on the strategic financing we completed in January. The exit fee will be owed once the facility is repaid and could be paid in cash or stock. Assuming yesterday’s closing stock price of $16.55, our equity market cap is approximately $450 million.

During the quarter we entered into a modification agreement on the $240 million renaissance Nashville and Westin Princeton portfolio loan representing two hotels. This modification agreements involved us catching up deferred interest in exchange for reducing future debt yield extension tests, thus improving our ability to qualify for future extension options.

As we previously discussed, we have been actively exchanging our preferred stock for common stock as a way to de-lever our balance sheet, remove the accrued dividend liability and improve our equity flow.

Through these exchanges, we have exchanged approximately 67% of our original preferred stock, which is approximately $379 million of face value into common stock. These exchanges also eliminated a significant amount of accrued preferred dividends.

After taking into account the $200 million of new corporate debt that we closed on in January, and our cash balance at the end of the quarter, we have lowered our net debt plus preferred equity by over $800 million since the first quarter of 2020.

We have also been opportunistically raising equity capital to shore up our balance sheet, improve our liquidity and to be prepared for potential loan pay downs needed to achieve extension test or meet refinancing requirements.

During the second quarter, we issued approximately 8.9 million shares of common stock for approximately $356 million in gross proceeds, including shares issued subsequent to the end of the second quarter year-to-date, we have raised approximately $478 million from the sale of our common stock.

Over the past several months, we have taken numerous steps to strengthen our financial position and improve our liquidity and we are pleased with the progress that we have made. While we still have work to do to improve our capital structure, we believe the company is now well positioned to benefit from the improving trends we are seeing in the lodging industry.

This concludes our financial review. And I would now like to turn it over to Jeremy to discuss our asset management activities for the quarter.

Jeremy Welter

Thank you, Deric. Comparable RevPAR for our portfolio increased 372% during the second quarter of 2021. Our hotel EBITDA flow through was a strong 56%. We are extremely encouraged by the acceleration of occupancy at our hotels, with each consecutive month increasing over the prior month during the second quarter. June saw the high stagnancy at 63%.

During the second quarter Ashford Trust, recorded an incredible 57% occupancy compared to 51% for the U.S. abrupt scale change scale. While we are still in the recovery process, we are starting to see green shoots in areas of our portfolio that are now exceeding 2019 levels. I would like to spend some time highlighting those during this call.

A number of our assets have been able to capitalize on a pent up leisure demand that we are experiencing. Crowne Plaza La Concha Key West increase their hotel EBITDA, for the second quarter by 74% relative to 2019, that is phenomenal.

Our team has done an excellent job increasing top line there increasing seasonal premiums and upgraded room size, increasing seasonal blackouts to discount programs. In addition, we are also ensuring that our top line growth hits the bottom line through expense savings, including consolidating F&B outlets to reduce staffing.

The Lakeway Resort and Spa had incredible results during the second quarter with RevPAR increasing 11% over the comparable period in 2019. An initiative that has been successful this year has been the partnerships we formed with the local marina and sailing groups. These two groups are seeing record years, which through our partnership has resulted in additional demand.

One Ocean Resort & Spa performed remarkably well during the second quarter, with RevPAR increasing 14% relative to the second quarter of 2019. Our team took a proactive position and increased the ADR of premium room types by more than 10% in anticipation of excess demand.

The impact of this can be seen in our pure rooms, which produces $73,000 more revenue in the same time in 2019. The strategy along with other strategies that we implemented in the second quarter contributed to hotel achieving a hotel EBITDA, it was 8% higher than the second quarter of 2019.

The hotel Coral Gables has also done a solid job of exceeding 2019 results, with RevPAR increasing 3% during the second quarter relative to 2019. Our team has been successful in gaining momentum and booking group business with hotel producing more than $450,000 of group revenue during the second quarter.

Additionally, we were able to successfully secure new airline business at a rate higher than our competitive set. This group in airlines business has provided us enough base level business to shift our revenue strategies and be more proactive about pushing rates.

Moving on capital management. In prior years, we were proactive in renovating our hotels to renew our portfolio. That commitment has now resulted in a huge competitive and strategic advantage as the market rebounds. Not only our properties more attractive to potential travelers, but we can also deploy capital more prudently throughout recovery.

Thus far in 2021, the only major projects that we have completed is a ballroom renovation at the Ritz-Carlton, Atlanta. Looking ahead, the only major capital projects on the horizon are renovation of the public space and guest rooms available in Hilton Santa Cruz, a renovation of the guestrooms at the Marriott Fremont, and renovation of the public space at eight select service hotels. Mostly, we have to make spend $40 million to $55 million in capital expenditures in 2021 which is significantly less than we have spent in previous years.

Before moving to Q&A, I would like to reiterate how optimistic we are about recovery of our portfolio and the industry as a whole. We are seeing occupancy continue to accelerate, as well as progressively seen our assets become operationally profitable.

During in the month of June 95% of our hotels were GOP positive. Although I only highlighted a few properties on this call, there were a number of other properties that exceeded their historical performance or were just on the cusp of doing so. We fully anticipate this momentum will continue.

That concludes our prepared remarks. We will now open the call up for Q&A.

Question-and-Answer Session

Operator

Thank you. At this time we will be conducting the question-and-answer session. [Operator Instructions] Our first question is coming from the line of Tyler Batory with Janney Montgomery Scott. Please proceed with your question.

Unidentified Analyst

Hi good morning. This is [Jonathan] on for Tyler. Thanks for taking our questions. First one for me, I was wondering if you could provide some color on how trends have progressed into July and if there has been any discernible change with the recent spike in the Delta variant breakthrough cases or any signs of deceleration in recent weeks?

Robison Hays

Good question. The answer is no, we have not. We have seen some small pockets in a few states where there is a little bit higher case counts. We have seen it a little bit in Florida and Tennessee and Texas, but nothing significant, nothing material. So as we sit here today, the strong summer of transient continues and we are not seeing that really weaken in any way.

Deric Eubanks

We anticipate July RevPAR to exceed June RevPAR. And we have seen that as mentioned consecutively each month, so far this year, in terms of month-over-month growth.

Unidentified Analyst

Okay, great. I appreciate that detail. And then moving to the labor front, how are you thinking about the piece of bringing back more employees, documents fees and demand continues to ramp? And look what kind of staffing levels our department is currently running and how does that compare to their first quarter or pre pandemic levels?

Jeremy Welter

Yes this is Jeremy. Staffing is clearly our biggest challenge we have operationally, it is going to continue to be the challenge. I think the team has done a great job of mitigating as much of that as possible.

Most of that has been through the efficiencies we built in the hotels. The process of COVID has really allowed us to kind of dissect these hotels and rebuild them on a completely different operational model which is much more efficient.

And so you are seeing some of those savings and I think it will continue to see those savings for the foreseeable future. But there continues to be a shortage of labor and there continues to be a lot of wage pressures across most of our hotels.

To give you this kind of high level understanding of what we are facing, we have got about 10% of our staff are open positions. And so that is where we stand and that is kind of been the trend as we has really come down meaningfully over the last four to six weeks.

So it is just continue to be a focus, and we are just doing the best we can given the current environment. But I don’t think it is a long-term issue, it is something that we see as a short-term issue.

Unidentified Analyst

Okay, great. Thank you for that answer. And the question on the rate side of things if I could, and I know it may be hard to segment everything out. But is that all leisure in the quarter that is driving that ADR gains or is there some corporate and they are impacting you know positively or negatively? And obviously leisure rates have been quite strong as Jeremy highlighted, but can you provide an additional color on where you think corporate rates will come in as we move through the fall?

Robison Hays

Let me first say one thing about the difference in rate has been interesting that the stat that popped out to me as we are going through our second quarter numbers was right now weekend rates. And this is both for group mostly for transit. Weekend rates have been, have had RevPAR that is 50% higher than we get. So you can really see the amount of pricing power that is going into the weekend because of obviously predominantly leisure.

I think we have been pleasantly surprised overall on the rate side I mean even as we look into group for next year, we are building the books, ADRs on our bookings in 2022 are actually 4% up over 2019. So you are seeing I would say very strong rates and overall our corp rates are not really at much reductions, I think I saw somewhere was around with 85% or 90% of our corporate rates are rolling at levels at or above 2019 levels.

So, I think from the rate side overall, we feel very good about where, where things are in, given the rates of what people are paying this summer, I think it even psychologically allows companies in groups to get comfortable with 2019 or better type rates. So, rate is definitely not where we are concerned.

I think it is just a real question of what does with these various variants And some of these companies like Google and Apple and other large S&P 500 type companies, as they are pushing out some of the return to office dates, does that delay things a little bit in terms of the return to travel, but I think we feel pretty good about where rates are.

Deric Eubanks

Yes I can give you a little bit more specifics in the quarter. So typically we run about 20% group, as we have mentioned, for the quarter, for the second quarter it was 15% group, 81% transients and 4% contract business.

During the recovery, we were pushing out a lot of our contract business, moving out a lot of airline crews, just because we are hitting high occupancy levels, we are starting to pick up a lot more of that contract business, but it is still a very small number, which I think is encouraging, because it tends to be lower rated.

In terms of the ADR break up, we had $137, ADR. Group ADR was $128, transient was $141 and contract was $101 and that is a breakup. So, I think we are still getting decent group rate. But it is a discount to transients.

And then why I don’t have a breakout of corporate training versus leisure, the portfolio does have a lot higher leisure demand right now. And we hope to see some pickup in corporate after Labor Day.

Unidentified Analyst

Okay, great. Thank you for color and that is all form me.

Deric Eubanks

Alright, thank you.

Operator

Thank you. Our next question is coming from the line of Bryan Maher with B. Riley Securities. Please proceed with your question.

Bryan Maher

Alright good morning, maybe a quick housekeeping item for Deric. On your release on Page 15, you had a share count of 22.7 million at quarter end but in your comments, you said we are now at 27.4. So, I’m assuming the delta is issuances since the quarter ended?

Deric Eubanks

That is correct.

Bryan Maher

And the delta in the share raising component of that would be 478 million minus the 356. Correct?

Deric Eubanks

That is correct.

Bryan Maher

Great. Thanks. When we think about your portfolio, and Jeremy did a great job walking through a handful of the properties, we don’t really think of it as kind of leisure beach, like we might with Braemar. Can you give us a little bit more color on some where some of the strength was in the second quarter?

Jeremy Welter

Sure. I think the strength really was, as you can imagine, across the bay handful of Southern warmer markets. So, when we look at the Chinese assets. You are looking at our National Renaissance, you are looking at Savannah or Hyatt and Savannah, most of Florida, our Texas assets.

And then even we are starting to see some strength in Southern California or Beverly Hills, Marriott was extraordinarily strong as well. So, it is just kind of these various Southern warmer markets, because when you are looking at even the weaker spots, there is still a lot of weakness in DC. I mean I think actually our worst performing assets in the second quarter were these two leisure, transient hotels in DC as Churchill and Melrose, just because the government has been shut down.

And just anything that is in the Indianapolis, Chicago, in the Bay Area has been a little of a struggle as well in suburban markets there. So but it is not just as you got to point out, right. It is not just one spot, it is fairly broadly placed across the kind of Southern warmer markets.

Jeremy Welter

And Bryan just, so Nashville’s top performing market in terms of year-over-year growth for us. It is a big asset for us as a good wave, the Nashville renaissance. And then the other top five markets were in Miami, Atlanta, Orlando, and Tampa. And three of those were in Florida. So it goes to what Rob just mentioned, in terms of some of the southern states.

And then Atlanta, we got a good amount of exposure there so I think that helps us as well, even though it is not really a leisure market, given that we have got a decent portfolio waiting. So I think some of it has helped in terms of where our assets are located in non-leisure markets, they just happen to be in markets that have done fairly well.

DC being the one that is more disappointing, because we actually have a lot of exposure in DC. But given our high concentration crystal city, we are extremely bullish on that market, given what is going on there, as you know.

Bryan Maher

Great and so you finish the quarter with a lot of cash roughly 500 million give or take. How much is enough? I know you guys have a lot of money that is probably going to be tied up in cash traps for the next couple of quarters. But is there a level where you say, we have enough, we don’t need to issue shares? Can you share with us the Board’s thought process there?

Robison Hays

Sure. As you know, Bryan, we do, we have built up a significant amount of cash and given where we have been over the past 12-months. And we felt like it has been important to make some substantive changes to the balance sheet, our liquidity profile.

The issue we have is that it is, frankly, it is a little bit of an unknown still, I mean even looking at these variants that have been coming and the delaying of certain people to getting back to the office, it does add a little bit of choppiness to this recovery.

And to your point is, the vast majority of our loans, as Deric mentioned, as I mentioned, are in cash traps. And for most of them, generally speaking, the way to get out of them is they need typically six or two consecutive quarters above and it vary by loan, but generally speaking around, call it 1.2 times coverage.

And we just don’t know what that date is. I don’t know if it is in six months from now, because things really recover or if it is 12-months to 24-months, which I think is frankly, a more likely number as we sit here today.

And so as we look at the fact that we may not be able to extract cash out of our portfolio from for another 12-months or 24 months. We have got to be very thoughtful around well how then do we run our CapEx program as it begins to ramp up in the next 24 months. We have over the next couple of years, we have $2.5 billion of debt that doesn’t necessarily have hard maturities, but has extension tests that include debt yield tests.

And it is hard to know whether or not the exposure to those extensions test and the pay downs needed to meet them is $0 or $750 million. And we just don’t know given the variability what is going on.

Now, as we have mentioned in other, in previous calls, we were very focused on trying to get these loan modifications to reduce those scheduled extension tests. And we have been successful on a handful of our bigger ones, but we still have some big ones left that we are focused on trying to modify.

And then when you kind of add on well, we have got obviously this rescue financing that we did that were needed to pay back the next few years. We have got to be able to get our preferred back current at some point in order to get our S-3 eligibility back.

When you start adding up those dollars, and just the uncertainty of exactly what the recovery looks like, we feel like it is important to err on the side of being conservative so that we are avoiding being back in a position like we were a year ago.

Deric Eubanks

Hey, Bryan, this is Deric, I just want to clarify, one of the questions you asked about the capital raising to-date, post the end of the second quarter, and kind of walk in through that math. The $478 million is how much we have raised year-to-date. The $356 million is what was raised in the second quarter. There was also about $45 billion that was raised in the first quarter. So you would need to back that out as well, if you are trying to get to sort of balance is the rate post quarter end.

Bryan Maher

Great, that is really helpful. And just last for me, when you look at what is going on in the transaction market, some assets are turning some interestingly depending upon where they are located a decent cap rate. Is there a thought process that in the second half of this year, early next year, you might either try and sell assets where you can achieve an attractive cap rate or just let go of assets that you just don’t think are going to recover and not worth holding? And that is all for me.

Jeremy Welter

Thanks, Bryan. I think to your latter point, I don’t think we probably have any assets left that we are just going to let go. And we went through that process last year. So as we sit here today, unless there is a material change in the world, I wouldn’t anticipate hanging back any more assets.

To your earlier question, you are right, we are definitely seen and actually getting a lot of inbound traffic on assets that knit a kind of sit, I don’t know, the soup issue or the day of Southern warmer transients focused assets. And we do have a good number of those.

The reality of the circumstances that we are in is that while that type of sales are a little less attractive, right now, because of the nature of this other rescue fancy that we have done, so to the extent we sell any asset and get excess proceeds, or if we refinance, and get excess proceeds, those are allocated to paying down the loan.

And given that there is a two year make hole which goes basically until January of 2023, it doesn’t really make sense for us to pull the trigger on an asset sell today, in 12-months from now we could sell the exact same asset for additional proceeds, and that would still have to go to pay down the loan.

So I think it is something that as we get into later next year, and coming closer to make whole burn off, I think it is something we will consider. But by and large we would like the assets the portfolio we have. So I think it is something maybe around the edges that we would do as opposed to anything substantive.

Bryan Maher

Okay thank you.

Operator

Thank you. [Operator Instructions] Our next question is coming from a line of Michael Bellisario with Baird. Please proceed with your question.

Michael Bellisario

Could you just go back to for Jeremy just your group comments? You focus on where we are at in terms of demand, what is on the books today for 2022 versus the same time in 2019. And also just on the BT side. What are you seeing and where are you seeing inflection maybe occurring in your portfolio in terms of the waves that BT traveled to pick up based on what you are seeing with the booking pattern today?

Jeremy Welter

Yes, so we Rob quoted at the ADR is at 4%. For group, it is still pacing down for 2021, about 18%, this is all compared to 2019. In terms of a quarter-over-quarter basis, when you look at total group pace, it was down 70% in Q2, we are looking 49% in Q3, 36% in Q4, and down point 24% in Q1. So, you can just see that each quarter is kind of down. And then the cancellations have been a lot less than what we have experienced over the course last year, in three months, I guess, here in a quarter.

The one thing that is interesting is the way the leads are working, we are just seeing such a high percentage of our lead volume in three to six months, it is the highest percentage right now is our lead volume is for booking three to six months out, which is not typical. And so we look at the mixed breeds, it is much more weighted towards less than a year out, which is, is definitely different than what we have seen in previous years.

And so I think that is a I think that is good, because even though we are - is a project out what our group pace looks like, it doesn’t really take into account that shift into your term lead volume, because we are just kind of comparing the static outlook.

And so I do think that there is an opportunity to continue to see more pickup in lead volume and converting that to actual group business, so that just kind of gives you a flavor of what we are looking at right now. And then 2023 looks very strong, but it is obviously a ways out. Does that help?

Michael Bellisario

Yes, it does. All those comments are specific to group, I assume any comments, at least in the near term on the BT volumes?

Jeremy Welter

The BT still - it is, it is, I think what we would say is that we are still using pickup based on a daily basis. So, there is good acceleration, but it is still on such a small base, that it is just, we have got a ways to go. in Q2 the mix of business grew from 14% to 16%. So it is, it is still a ways to go.

And hopefully after Labor Day, we will see more pickup in incorporate demand. As you can imagine, in the Q2 and Q3, at least, certainly Q2, typically, the mix of corporate demand, generally goes down our portfolio anyway, just because it becomes more leisure focused as summer travel picks up. And so even though those mixed in grows significantly, between Q2 and Q1, it is still positive because that mix easily declines between those quarters.

So, we are hopeful that we see a pickup in corporate transit demand, as the booking window for our business when it comes to transients, is generally three weeks out, and today - and that is in a normal environment, and today is much shorter than that.

Deric Eubanks

But Mike, one thing I would say, I touched on earlier was, is that we are seeing rates from the corporate side even though there is small and as we are looking at kind of constantly rolling over corporate rates. We start seeing strength there, so when we are looking at the various - sometimes fires we are trying to put out and ways to grow the business where we are not seeing pressure is pushed back from a rate standpoint with corporate, which is great.

Michael Bellisario

And is it fair to assume when we hit the fall here with RFPCs, and we are just going to roll the 2020 rates pre-pandemic into 2022 then too, is that what the brands are thinking?

Deric Eubanks

Yes. At least for us, we think it is going to be most mostly probably 90% maybe just under a little roll or do a dynamic pricing, which is just kind of a discount off of retail rates. So that is a strategy that we are going to do, we are not going to kind of hold firm on that. And I think that that you are seeing that, not just us, but that all our - are doing that and the brand, just because it is the right thing to do and we are not -.

Michael Bellisario

Understood. Okay thank you.

Operator

Thank you. Our next question is coming from Chris Woronka with Deutsche Bank. Please proceed with your question.

Chris Woronka

Hey good morning guys. Just a quick follow-up on the cash trap situation. Rob, I think you mentioned two consecutive quarters of 1.6 times coverage. Is there any way to triangulate using round numbers what that might equate to on a portfolio wide RevPAR hotel EBITDA basis, just to get a sense as to how close you are?

Robison Hays

That is a good question. One point is it is closer 1.2 overall, not 1.6. I don’t know the best way to triangulate that to a RevPAR number. I mean I guess from a simplistic standpoint, as we sit here now, we all see you are generating positive hotel EBITDA. Overall, our interest expense is roughly what 120 million bucks, somewhere around there on an annualized basis.

So I think the way to do it is, if it is $120 million, plus or minus of interest expense to add 20% of that, and I guess you just back it into when you think hotel EBITDA gets to that level. You can use whatever occupancy rate discounts you want to get to it. But I think it is probably the easiest count. And it won’t be exactly right, because obviously each pool is different. But if you are going to do back of envelope it is probably the easiest way to do it.

Chris Woronka

Okay that is helpful. And just a housekeeping question on the quarter-to-date, which I think we calculated 77 million of capital raise in Q3. Is that all on the share issuance program or does that maybe include some additional preferred buybacks or swaps?

Deric Eubanks

Yes. So we don’t include preferred exchanges and that the dollars that are quoted, Chris. So that would just be based on issue as a common shares pursuant to the F-11 that have been filed.

Chris Woronka

Okay thanks Deric and maybe one for Jeremy, I think we have heard about a lot of hotels where because of the labor situation, you are actually kind of shrinking the hotel, right, not making all your rooms available for sale, which can also help you on the rate side. Is that happening across a lot of your portfolio or not?

Jeremy Welter

It definitely has happened where we aren’t able to put brands and service just because we can’t get them clean. I don’t think it is a large scale pervasive issue that is causing us to lose the revenues. That is meaningful at this time. Just given where occupancy levels are as well in most cases.

And that has helped us in some cases push rate. I mean, we have taken more risk than, I think a lot of our peers have been trying to hold firm on pushing rate as much as possible. And I have been pleased with some of the pickup we have seen in our ADR in our portfolio.

Chris Woronka

Okay, helpful and just one last follow-up. The CapEx number you gave out, I think 40 million to 55 million for the year. Does that include anything additional for Key West for the autograph?

Jeremy Welter

We are still in kind of programming phase for that right now. So no, that is not this year. Yes, Chris, we were able to push out our [PIP] (Ph) dates for that. So we got plenty of time on Key West. And right now, the markets doing so well but I don’t really want to take any rooms as serves, as you can understand.

Chris Woronka

Sure. Okay, great. very helpful. Thanks guys.

Robison Hays

Thanks Chris.

Operator

We have reached the end of our question-and-answer session. So I would like to the floor back over to management for closing comments.

Robison Hays

Thank you for joining today’s call. We look forward to speaking to you all again next quarter. In addition, know that we are looking to potentially do an Investor Day in New York in October, likely October 12^th. So stay tuned and we will provide more details later. Thank you.

Operator

Ladies and gentlemen, this concludes today’s teleconference. We thank you for your participation and you may disconnect your lines at this time.