Greeting and welcome to Apple Hospitality Fourth Quarter and Full Year 2021 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Kelly Clarke, Vice President, Investor Relations. Please proceed.

Thank you and good morning. Welcome to Apple Hospitality REIT’s fourth quarter and full year 2021 earnings call. Today’s call will be based on the earnings release and Form 10-K, which we distributed and filed yesterday afternoon. As a reminder, today’s call will contain forward-looking statements as defined by federal securities laws, including statements regarding future operating results and the impact to the company’s business and financial condition from and measures being taken in response to COVID-19. These statements involve known and unknown risks and other factors, which may cause actual results, performance or achievements of Apple Hospitality to be materially different from future results, performance or achievements expressed or implied by such forward-looking statements. Participants should carefully review our financial statements and the notes thereto as well as the risk factors described in our 2021 annual report on Form 10-K and other filings with the SEC. Any forward-looking statement that Apple Hospitality makes speaks only as of today, February 23, 2022 and the company undertakes no obligation to publicly update or revise any forward-looking statements, except as required by law. In addition, non-GAAP measures of performance will be discussed during this call. Reconciliations of those measures to GAAP measures and definitions of certain items referred to in our remarks are included in yesterday’s earnings release and other filings with the SEC. For a copy of the earnings release or additional information about the company, please visit applehospitalityreit.com. This morning, Justin Knight, our Chief Executive Officer and Liz Perkins, our Chief Financial Officer, will provide an overview of our results for the fourth quarter and full year 2021. Following the overview, we will open the call for Q&A. At this time, it is my pleasure to turn the call over to Justin.

Good morning and thank you for joining us. I am excited to be able to share our operating results for the fourth quarter and full year 2021 and to provide some insights into what we are seeing as we begin 2022. We ended 2021 with the strongest quarterly performance we have achieved since the onset of the pandemic despite the emergence of a new variant in November, seasonal travel trends, a challenging labor environment and increasing inflationary pressures. ADR was essentially flat as compared to the same period in 2019, with occupancy down 7%, RevPAR down 8% and adjusted hotel EBITDA down only 13%. December results exceeded our expectations and were the strongest during the quarter, with RevPAR down only 1% as compared to December 2019. While the gap to 2019 widened in January impacted by leisure seasonality and the spread of the Omicron variant following the holidays, RevPAR for the month was up meaningfully to the prior year and occupancy and rate have continued to improve in February. With COVID cases declining and cities easing restrictions as we move into the spring, we continue to expect strong leisure demand and increasing business travel as we move through the remainder of the year. Full year operating results showed significant recovery relative to 2020 and continue to bridge the gap to pre-pandemic levels. Comparable total revenue was up more than 62% relative to 2020 and comparable hotel’s adjusted hotel EBITDA margin was 35%, down only 3 percentage points to 2019. 2021 adjusted EBITDA was $279 million and modified funds from operations, was $211 million or $0.93 per share. Our recent acquisitions and dispositions have further optimized our portfolio by lowering the average age of our assets and increasing our exposure to markets that we anticipate will outperform over the next cycle.…

Thank you, Justin. Coming off a strong third quarter, demand continued to exceed our expectations through what has historically been a seasonally slower period for our portfolio. ADR for the fourth quarter was over $131, nearly equal to our ADR for the same period in 2019. Occupancy was 68%, down just over 5 percentage points and RevPAR was $88, down less than 8% as compared to the same period in 2019. As Justin highlighted, the gap to 2019 performance narrowed as we moved through the quarter despite concerns related to the Omicron variant and December RevPAR nearly equaled December 2019 with ADR over $2 higher. Led by rate, the gap to 2019 RevPAR meaningfully decreased quarter-over-quarter as we moved throughout the year from down 26% in the second quarter to down 10% in the third quarter to less than 8% in the fourth quarter. While the Omicron variant tempered positive momentum seen during the fourth quarter and the gap to 2019 RevPAR widened some in January, year-to-date numbers are up meaningfully to 2021 and we expect continued improvement as we move into the spring and summer. For the full year 2021, comparable occupancy was 66%, ADR was $125 and RevPAR was $83 up to 2020 by 11%, 44% and 61% respectively and down 11%, 14% and 24% to 2019. Weekend occupancy remained strong throughout the fourth quarter, showing continued strength in leisure demand. October and November weekend occupancies were 85% and 80% respectively, with December weekend occupancy of 67%, in line with 2019. Weekday occupancy remained strong with October approaching 70% that declined to approximately 60% in November and December. These months are seasonally slower for business travel and we were pleased to see the gap to 2019 weekday occupancy shrink to only 3 percentage points in December. The strength…

[Operator Instructions] Our first question comes from Anthony Powell with Barclays. Please proceed with your question.

Hi, good morning.

Good morning.

Question on the transaction environment, you said you were looking at dozens of deals. Could you just maybe talk about how pricing expectations have changed recently given the strong performance of the segment, seller expectations and just the overall environment should be helpful?

Good question. It continues to be incredibly competitive now. So, I think as we saw last year, a significant amount of money came into the space with interest investing in hotels, broadly speaking, but specifically in the types of hotels that we have owned, high-quality select service hotels, specifically in markets initially that benefited early from the recovery. We have seen continued demand for that type of asset. But we have also seen a meaningful uptick as we moved through last year and we believe as we continue into this year in terms of total product available. We have had successful conversations both around brokered transactions and as we interact with groups that we have worked with for 10 plus years in the industry and anticipate that we will be well positioned to take advantage of opportunities as we move through the year. But from a pricing standpoint pricing remains competitive with most assets trading or asking prices related to those assets being at or above 2019 levels. For us to achieve our targeted returns, we’re focused currently on markets where we anticipate outsized growth in the early phases of the recovery.

Is this a portfolio premium for smaller portfolios or midsized portfolios? Or is that kind of compressed a bit?

We believe that still exists. Certainly, for the two larger portfolios that we saw trade last year, we saw some form of portfolio premium for those trades. There are a number of portfolios in market, and we will have more data here shortly. But from what we’re looking at in terms of pricing expectations, portfolios, both small and large, seem to be trading or at least the anticipated trading price is at a 50 to 100 basis point spread to individual assets.

Got it. Maybe one more for me, I guess, how much of that, I guess, discounted business, longer stay or government business, not traditional business is still in the portfolio as of now? And what’s the opportunity to raise the price on that business or yield it out, I guess, here over the next few months?

Good question. As we have progressed through the recovery, especially in market in the back half of last year, where we were beginning to see occupancies improve and specifically in those markets where we mentioned we have RevPAR above 2019 levels, that’s been based on being able to mix shift into higher rated business and really capitalize on rate growth where we have occupancy compression on weekends. So we’ve materialized some of that benefit in a subset of our markets and hotels but still have meaningful upside there as we progress into this year. And as more traditional corporate business continues to come back in some of the more urban areas, we look at our occupancies and rates on the weekends relative to weekdays and we still are seeing premiums on the weekends, giving us significant upside midweek.

Okay, thank you.

Thank you.

Our next question comes from Kyle Menges with B. Riley. Please proceed with your question.

Good morning. This is Kyle on for Brian.

Good morning.

I was hoping that you I was hoping you could talk a little bit about – good morning. I was hoping you could talk a little bit about the demand you’re seeing from corporate accounts as we move through 2022? And just if you’re starting to see any sort of mix shift between demand from regional versus national accounts?

As we look forward and even taking into account the impact of Omicron in January, we continue to see negotiated business being booked as a percentage of mix moving forward, increase relative to what we actualized in the fourth quarter, which was up to 16% for negotiated broadly. That includes local negotiated and corporate negotiated business. And even as we look at channel mix and look forward, our GDS bookings are continuing to improve. And what we have on the books is up from where we’ve been materializing for GDS where sort of your corporate travel agents tend to buy. So we’re seeing progress on the business transient front, both with local negotiated and corporate negotiated. There is still outperformance on the local negotiated side but opportunity on the corporate negotiated and have continued to see improvement despite the impact of Omicron at the beginning of the year.

Okay, thanks. That’s helpful. And then could you talk a little bit about amenities and how you and the brands are thinking about bringing back amenities as RevPAR returns to pre-pandemic levels?

As we saw occupancy improve throughout, especially the back half of last year, the brands reimplemented a significant portion of the brand standards or services and amenities that had existed prior to the pandemic. Those amenities and services have been modified in ways that we believe will drive long-term savings offset in part by continued inflationary pressures, both on the labor side and cost materials. But as we finished last year, by and large, what we anticipate to be longer term service and amenity models were in place at the majority of our hotels.

Okay, thank you. That’s all for me.

Thank you.

Our next question is from Tyler Batory with Janney. Please proceed with your question.

Thank you. Good morning. First question, just in terms of the dividend announcement, any more detail you can share in terms of what factors were contributing to that decision? Why you think this level is appropriate? And then interested in your perspective on potential payout ratio going forward as well.

Appreciate the question. Really thinking about the dividend, our reinstatement is a testament to both the performance of our portfolio throughout the pandemic and our outperformance there and our confidence in the recovery. As we assessed a variety of different scenarios for how things might play out moving through this year and took into consideration operating environment opportunities for the use of our capital and other capital needs of our business, we felt this was an appropriate level to start or to reinstate our dividend. We believe we’re extremely well positioned to benefit from the recovery and anticipate that we will be in a position to increase our dividend over time. As we think about long-term payout, we’ve historically and anticipate we will continue to look to establish a dividend rate that’s sustainable over an extended period of time and that allows flexibility to utilize capital in other ways to drive total returns for our investors. Looking at the $0.60 per year payout relative to our 2021 modified funds from operation, we’re still at roughly 65%. So allows us a tremendous amount of flexibility. And as we highlighted in our prepared remarks and as we’ve continued to highlight in response to questions, our expectations are that we will see meaningful improvement in terms of overall operations as we move through this year, which will put us in a position to consider changes over time. We interact with our Board of Directors on a monthly basis. And considering the various factors that I highlighted, we will make adjustments when appropriate.

Okay. Appreciate that. Thank you. And then just as a follow-up, in terms of what you’re seeing current trends into Q1, you gave some statistics in the investor presentation. You gave some details on occupancy in January. Certainly, the commentary on February and March does sound quite optimistic. Your understanding that the booking window for you, perhaps not super long, just interested in any details you can give a little bit more kind of what you’re seeing in February, perhaps expectations for March and a lot of discussion on the occupancy side of this, I’m also interested what you’re seeing on ADR and rates in February as well?

Okay. As you mentioned in the investor presentation I shared yesterday, you can see that in the first 2 weeks of February, our occupancy levels have increased from January. And we expect the gap to 2019 to narrow slightly based on month-to-date results, including a strong President’s Day weekend, which is not reflected in the investor presentation. That Saturday – last Saturday was 90% for our portfolio. We were at 90% occupancy with 16% rate growth over 2019. The strong indications for continued performance with related to leisure business. Looking at February booking data through the 20th of this month, average daily room nights booked in February of this year are higher than any month in 2019 or 2021, which gives us optimism as we move into the seasonally stronger months and with case counts continuing to decrease. When we think about that, where we’re really starting to see bookings pick up, it’s for forward – further bookings – further outbookings, so a week plus out and really 30 days plus out. So, really encouraged by those booking trends in February. As you can also see in the investor presentation, we’re continuing to see weekends improve as well as weekday. And when I look at the bookings further out, while we see continued strength in leisure, again, with the mix of business coming in through GDS and corporate and negotiated on the books, we’re seeing business transient positive trends as well into March and April. Specific to rate, we started consistently producing higher rates on the weekends relative to 2019 in the spring of last year. Even with the impact of Omicron, our most recent weekends are still in line or above 2019 levels. Weekday rates have lagged relative to 2019, which aligns with less occupancy compression that we’ve seen on those nights. But we have seen that weekday rate gap to 2019 widen slightly with the impact of Omicron in January and February. But as occupancy continues to improve, we anticipate that gap to narrow, especially as business demand returns more meaningfully. And while our current rate on the books looking forward can change just relative to what books sort of in the month for the month. Right now, what we’re seeing for March and April is a continuation of rate growth. So we’re optimistic both on the occupancy and the ADR side.

Okay, that’s great commentary. That’s all for me. Thank you.

Thank you.

Our next question comes from Michael Bellisario with Baird. Please proceed with your question.

Thank you. Good morning, everyone.

Good morning.

Good morning.

Just want to go back one more time to customer mix, maybe ask it in a different way. BT, you mentioned historically, it’s been more than half of demand. Maybe help us put a number around where was that in 4Q and then how do you see that trend progressing at least through the early part of 2022?

I think we continue to see outperformance of leisure in Q3 – I mean, Q4. November and December, December specifically really outperformed from a leisure perspective relative to historic trends for our portfolio. So still seeing – I mean still seeing more strength out of leisure, but just a continual increase – gradual increase in business transient trends. So we’re still probably around that 50-50 mark. But I think that, that will shift some as we progress into the first quarter of this year, just given that January and February are traditionally less strong from a leisure standpoint and business transient begins to pick up as we get to the end of February and into March.

Okay, that’s helpful. And then just switching gears sort of two-part question on capital allocation. You sort of answered the first one already, but I kind of want to hear your thoughts on kind of how quickly you could turn the acquisition spigot on? And then two, how you’re thinking about using your currency to fund potential deals? And maybe just remind us of the math you do to figure out if a deal makes sense using some equity currency?

Two good questions. I highlighted in my prepared remarks that we’re currently underwriting dozens of deals. To put a fine point on that, we are exploring opportunities, both as buyers and potential sellers of assets though we expect this year that we will be net acquirers looking at our transaction activity in total. As we look at potential equity issuance, we look to issue equity to acquire specific assets where we see a multiple spread that would drive value for our existing shareholders. Given that what we’re buying is largely consistent with what we currently own. The calculus there is relatively simple. And given what we’re seeing in the market, today, we would need to be trading at a higher price point than we had recently in order for that calculation to work.

Got it. And when you say multiple spread is, is that next 12 months EBITDA or NOI? Is it DCF, NAV? What multiple are you looking at in particular?

I mean, we’re looking at relative return on investment over a more extended period of time. But certainly, near-term cash flow on a relative basis from acquisition targets – near-term cash flow and a discounted cash flow model have greater value than future cash flow. And so certainly, we’re looking at the ability to drive incremental earnings per share in the near-term.

Got it. That’s helpful. That’s all for me. Thank you.

Our next question comes from Dany Asad, Bank of America. Please proceed with your question.

Hi. Good morning, everybody. Can you just give us a quick update on the current like labor and hiring environment in your markets? And then what sort of staffing levels are you operating at right now versus ‘19? And then where would you see those levels normalize as we start to clear 2019 levels of demand and RevPAR potentially later in the year into ‘23?

Good morning, Dany, as we highlighted on our third quarter earnings call, going into fourth quarter, understanding that we might see seasonal occupancy declines in November and December, we indicated we would likely maintain staffing levels where we needed to hire an incremental associate we would if occupancy supported that. But through the winter months, where we’re typically seasonally slower, we would maintain staffing levels, not adjust meaningfully for occupancy declines and start the year off at relatively the same levels of – that we were – as we were entering Q4 and wrapping up Q3, which is around 70% to 75% full-time employees relative to 2019. I think we are looking at future trends and market-by-market making decisions as to what staffing levels need to look like as occupancy continues to grow, we will be thoughtful there. It will vary by hotel and asset and how we’re operationally structured to maximize and take advantage of productivity efficiencies. We are still optimistic that we will have some long-term FTE savings relative to 2019. But we have found that we need to continue to add associates where managers have been covering more shifts and really get to a more optimal level on average going forward. But relative to probably the industry as a whole, we thoughtfully added back associates throughout last year and feel well positioned as we enter 2022.

Okay, got it. And then at the corporate level, I know you guys kind of had a guide for 2021 in Q3 into Q4. And that number came in a little bit higher than that in Q4. And just was there something to call out on that? And I know you also had ‘22 outlook out there. So it’s not about – it’s more just trying to understand kind of what happened in the quarter that kind of puts you above the range.

The – related to G&A expense, the increase to G&A in 2021 was driven by incentive compensation related to higher operating and shareholder return performance at the end of the year. Operationally, November and December exceeded our expectations, and our shareholder return performance at year-end was higher than expected as well. Also keep in mind that almost 60% of target compensation is paid out in stock, and we do not adjust EBITDA for non-cash share-based compensation expense. Turning to what we have guided for 2022, we’re assuming more normalized travel and conference attendance. And at the midpoint of that guidance range, we’re representing target incentive compensation payout. We may adjust that as we progress through the year. But really, as you approach year-end, you have more visibility in-house shareholder return metrics will materialize, and that incentive compensation can swing that outside of the midpoint of your guidance range. But for now, just as you think about 2022 and how we’re looking at it at the midpoint of the range is based on target compensation.

Understood. Got it. Thank you very much.

Thanks.

Our next question is from Floris Van Dijkum with Compass Point. Please proceed with your question.

Good morning, guys. Van Dijkum, of course, as you know, but I wanted to – just have you maybe provide – just a follow up on the NAV question. I know you guys don’t give any Bs, but I may talk about replacement costs. One of your competitors talked about the fact that replacement costs in the hotel industry are certainly up 20%, 25%, land costs are higher. And obviously, that also means that the potential for new supply coming online and competing with your assets is also reduced. And maybe if you can give some comments in terms of how that pertains to your replacement cost per key and how you think about that? And then also maybe your thoughts on the threat of supplier, why you feel comfortable? Where you are right now?

Certainly. And I may, if it’s okay, tackle those questions in reverse order. Speaking to supply specifically and I think even listening to the major brands in our recent conference calls, we’ve seen a significant pullback in new construction starts in our markets, driven in part by the factors that you highlighted, increased construction costs, increased land costs, greater uncertainty from a supply chain standpoint and certainly labor availability and cost, all are factored into that equation. There has also been a greater limitation on debt financing for new construction projects, which has created a bit of a governor. As we look forward, given the time that it takes from shovel in the ground to completion of new construction projects, we see ourselves having a multiyear window with below average supply in the vast majority of our markets. And as we look at the potential that gives us, especially given continued robust leisure demand and what we anticipate to be a meaningful uptick in business transient puts us in a position to meaningfully drive top line revenues across our portfolio. And as we have talked about in the past, that movement in top line revenues, especially in the rate fuels margin expansion over time and yields greater profitability for our investors. And when we talk about the optimism that we have for our portfolio, the lack of new supply is a meaningful contributor to that optimism. Speaking to NAV, we are certainly in a period of transition as we think about the value of our portfolio and there are a number of factors playing there, replacement cost is certainly one of those factors. And we have highlighted the various components that are leading to meaningful increase in cost to replace assets. Beyond that, we have seen a significant increase in interest in the types of assets that we own. And if we think about the historic cap rate spread that’s existed between high-quality select service assets and upper upscale and luxury assets, we have seen that spread compress and cap rate compression acts as a multiplier for the increases in profitability that we anticipate over the next several years. And so as we think about the value of our existing portfolio, we see meaningful upside as we move through this year proved out the strength of the markets and get back to and surpass many of those markets pre-pandemic profitability.

Thanks Justin. That’s helpful. Clearly, that suggests you think that your NAV is higher than where your stock price is. But if I can have my follow-up question, I guess the other question that we are hearing from some investors is about, well, geez, this cost savings is margin improvement. And again, margin improvement also includes the revenue part, which is – again, there is multiple facets to it. But certainly, in terms of the cost savings, the employee costs are up, certain other things are up and the previous ranges provided by the many management teams of 100 basis points to 200 basis points of margin improvements going forward. Maybe if you can touch on some of the initiatives that you have worked on why you think there is going to be – there should be some margin improvements that will be permanent? What that – to what extent that’s from some cost reductions and you put some information in your slide deck, but also maybe some of your strategy in terms of clustering management in certain markets and some of the other operational initiatives that are more Apple specific?

Absolutely. Certainly, over the past several years, we have found ways to do things more efficiently than we imagined possible – where possible prior to the pandemic. You know us well enough to know that we have always generated industry-leading margins at the property level from an operations standpoint. And in part, that’s attributed to the types of assets that we own. But certainly, we have employed best-in-class management companies and oversee their operations with sophisticated asset management using benchmarking data to drive operating performance to those high levels. We have been strategic in thinking about our management companies specific to individual markets and consolidated management within individual management companies to gain greater efficiencies within markets where we have concentration. Beyond that, we have looked at staffing models, questioning the way that we did things historically and ensuring that we are driving the best return on our investment in people and in assets. And I think outside of the areas that we have highlighted in the past as have our peers, related to greater efficiencies in housekeeping and potentially around food and beverage operations, we have spent a significant amount of time focused on sales operations at our properties, recognizing that a more meaningful percentage of our total business comes through online channels, including brand.com online channels and looking to allocate a greater percentage of our total resources as we think about sales to those channels and to revenue management, both of which have a meaningful impact on total profitability. Thinking about long-term margin expansion, much of what we have done on the productivity side will act as an offset to inflationary pressures. And so in the environment that we are in today, we won’t yield on a dollar-for-dollar basis, the total benefit in terms of margin expansion from the…

Thanks Justin.

Thank you.

[Operator Instructions] Our next question is from Chris Darling with Green Street. Please proceed with your question.

Thanks. Good morning. Just a couple of questions on my end. First, you have been fairly comprehensive in discussing the favorable supply backdrop in terms of the construction pipeline across your portfolio. But I am wondering about recently delivered hotels that maybe haven’t fully stabilized yet. Is that a meaningful consideration at all?

Assuming has been as we moved through the early phases of recovery. We continued to have meaningful supply growth in 2020 and through 2021. As we look at potential deliveries in ‘22 and ‘23. As a result of fewer construction starts in recent years, those numbers are coming down. And so looking at our portfolio, broadly speaking, there are very few markets where we see that being a significant impediment to near-term results.

Okay. Understood. Thanks for those thoughts. And second, kind of switching gears. I am curious, when you think about the idea of business and leisure travel blending together more consistently going forward. One, are you believers in that over the long-term? And if so, does that play a role in how you think about where you allocate capital going forward?

It definitely does. And this is a trend that we have spent a decent amount of time highlighting recently, but really a trend that we began to identify prior to the pandemic. As we look at the next generation of travelers, there is a greater priority placed on having experiences with travel. And that had put us in a position where we were interacting with the brands and reimagining brand concepts to cater to individuals and to groups that were looking for a better travel experience related to business travel. We have certainly seen with increased flexibility related to in-office work, an increase in what may call leisure travel and anticipate that’s a trend that’s likely to continue. As we highlighted in our prepared remarks and have discussed regularly for that very reason, we look to acquire and to own assets in markets that have a good mix of leisure and demand – and business demand drivers. And we have seen that as a primary driver for consistent demand for room nights across our portfolio. And so when you look at our recent acquisitions, whether in Portland, Maine or Greenville Downtown or even in Fort Worth and you look at how those assets are positioned within the market. They are ideally located in – to benefit from strong corporate business and business transient midweek with easy access to leisure demand generators that encourage individuals to extend their space.

I appreciate it. Thank you.

Thank you.

Our next question comes from Austin Wurschmidt with KeyBanc. Please proceed with your question.

Great. Thank you and good morning everyone. In the past, Justin, it was, we have kind of talked about that midweek ADR being an attractive upside opportunity for your portfolio. If I recall correctly, that was tracking around 20% below ‘19 kind of late last year. And you mentioned it recently widened due to Omicron. So first, is my recollection on sort of the size of that spread accurate? And as you return to that 70% occupancy level midweek, should we expect midweek ADR to kind of quickly close the gap relative to ‘19?

We are optimistic as we get above – around or above 70% any night of the week that we will have rate opportunity, and we will be able to grow rate as we have seen on the weekend. Your recollection from a rate gap standpoint was, I think specifically referencing peak night midweek occupancies versus full week. But when I look at full week occupancies or full week rates historically, those rate premiums over weekends. We have been averaging – and even in recent months averaging about 1,500 basis points to 1,600 basis points of upside relative to weekends and how we have been performing on the weekend. So, the gap where we have been outperforming on weekend, splitting that to what it was historically, we have meaningful upside weekday.

Got it. That’s And then – and just really aside from broader inflation, certainly, the strength in the consumer has helped as well, I assume. But like what else has changed that’s giving management companies the confidence to push rates that wasn’t there pre-pandemic?

I think management companies, it was very, very clear in 2020 that rate was not going to drive demand. And so both management companies and the revenue management systems were optimized to ensure that we weren’t needlessly lowering rate without gaining incremental demand. That put potentially a floor on how far we would drop. But also the brands and our management companies did a great job working with top accounts, both corporate and local to find either price points that match the demand generated or to maintain rates going into 2020 and 2021 such that we weren’t negotiating because corporate accounts had lower demand, which would warrant a rate increase versus the need for that demand, potentially putting us in a position from a negotiating standpoint. It really just allowed everyone to take a breath and figure out as people got more comfortable traveling and travel policies eased that rates were at a reasonable level. I think that we have all evolved from a revenue management perspective, both the talent that we have on site at our hotels and with our management companies. But the incremental resources that we have here corporately too, we work together to think about broad trends and ensure that we are effectively optimizing the use of our revenue management systems, layering in base business at the right rate and capitalizing on opportunities in market. And so I think it’s a collaborative effort, but the advancements in revenue management systems, the approach to corporate and local negotiated rates throughout the pandemic and then just a recent and more recent performance with rate growth gives management companies and revenue managers confidence.

That’s really helpful. It sounds like the tools are certainly having an impact. And then one other thing I wanted to hit on was around the booking window. It sounds like your visibility is improving a bit, maybe relative to where we were last year. Which segments are you really seeing that booking window extend to provide a little bit of extra visibility into sort of the business?

The forward booking window and seeing bookings further out, looking at it in the next couple of months and even beyond, which, again, we are talking about small volume, but it is still centered largely around leisure business and weekend from what we can see. That said, when I look at the percentage of mix, and I mentioned this earlier in my comments, we continue to see corporate and local negotiated percentage of mixed bookings increase gradually looking forward and GDS from a channel mix perspective maintained despite Omicron and increase looking forward into March and so continuing to see that mix of business transient improve as we see forward bookings for leisure, so both really good indications for both segments into the spring and summer.

Alright. That’s very helpful. And then Justin, just one for you, and sorry if I missed anything on this front, but how did the recommendation to the Board as far as in the Board’s decision to setting the dividend? How did you kind of land on the quarterly rate of $0.15? And how do we think about the ramp from here relative to growth in cash flow?

We touched on this briefly earlier, but it’s worth revisiting. We have always looked to establish a dividend at a payout rate that takes into consideration, other opportunities that exist and other capital needs for our business and to establish a payout rate that we anticipate will be sustainable over an extended period of time. Looking at the $0.05 per month per share payout relative to our performance last year, it represents – depending on whether you are looking at the cash payout within the year or the $0.60 per year longer term payout between 55% and 65% of modified funds from operations. As we move forward, we see ourselves being exceptionally well positioned to benefit from the recovery and anticipate that we will be in a position to increase the dividend over time. We interact with our Board of Directors on a monthly basis and assess our payout in the context of the operating environment and our expectations for the future along with, as I have highlighted, other opportunities to ensure that we are allocating capital to drive the strongest total returns for our investors over time.

I appreciate you revisiting the topic and thank you.

Thanks Austin.

Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the call back over to Justin Knight for closing remarks.

Thank you. We really appreciate you spending time with us today and for your interest in our company. We hope, as always, that as you travel, you will take the opportunity to stay with us in one of our hotels. We wish you the best and look forward to talking to you again soon.

This concludes today’s conference. You may disconnect your lines at this time. Thank you for your participation.