Good morning, ladies and gentleman, and thank you for standing by. Welcome to the Sunstone Hotel Investors First Quarter 2020 Earnings Call. At this time, all participants are in a listen-only mode. Later, we will conduct a question-and-answer session and instructions will be given at that time. I would like to remind everyone that this conference is being recorded today, May 8th, 2020 at 12:00 PM Eastern Time. I'll now turn the presentation over to Aaron Reyes, Vice President of Corporate Finance and Treasurer. Please go ahead.

Thank you, Anna, and good morning, everyone. By now, you should have all received a copy of our first quarter earnings release and supplemental, which were made available earlier today. If you do not yet have a copy, you can access them on our website. Before we begin, I would like to remind everyone that this call contains forward-looking statements that are subject to risks and uncertainties, including those described in our prospectuses 10-Qs, 10-Ks and other filings with the SEC, which could cause actual results to differ materially from those projected. We caution you to consider these factors in evaluating our forward-looking statements. We also note that this call may contain non-GAAP financial information, including adjusted EBITDA, adjusted FFO and hotel adjusted EBITDA margins. We are providing that information as a supplement to information prepared in accordance with Generally Accepted Accounting Principles. With us on the call today are John Arabia, President and Chief Executive Officer; and Bryan Giglia, Chief Financial Officer. After our remarks, we will be available to answer your questions. With that, I would like to turn the call over to John. Please go ahead.

Thank you, Aaron. Good morning, everyone. Let me start-off by saying I hope you and your families are safe and healthy during this incredible time. And also, we very much appreciate you taking the time out of your busy schedules to get what is a very important update on the company. Much has changed in the three months since our last earnings call as the country, lodging industry and our company has had to react to the health risks and economic threats posed by COVID-19. Today, I'll provide an update on the following. First, what has transpired at our company over the last three months; second, how we reacted quickly in the early weeks of the pandemic to protect our company, to mitigate our damages and to preserve our already significant liquidity; third, the current status of our portfolio and the operating environment; and finally, our focus on methodically managing our business to not only protect our company, but to position our company to take advantage of the significant dislocation that is likely to occur. So let's begin with a review of the past three months. Following our earnings call on February 19, the world generally seemed to be business as usual. We continue to execute on our business plan, press forward with ongoing capital projects, work on additional asset sales, and gradually bought back common stock as our share price declined. In fact, we were quite pleased with our portfolio operating performance as we began 2020, as hotel EBITDA -- with hotel EBITDA exceeding our budget in both January and February. In early March right after the Raymond James and Citi conferences, it became clear that concerns over COVID-19 were increasing; major sporting events, festivals and conferences were being canceled. And stay-at-home orders and travel restrictions never before considered…

Thank you, John, and good morning everyone. As of the end of the quarter, we had $847 million of unrestricted cash including the $300 million draw on our credit facility. As John mentioned, we are currently working with our Bank Group and secured note holders to amend our in-place credit documents to and expect to agree on a waiver of financial covenants over the coming weeks. The intention of the waiver is to provide relief during the time period in which trailing financials will be impacted by the COVID-19 pandemics. As we've previously discussed, our balance sheet was built to easily maneuver through a significant recession. It unfortunately was not designed to withstand an ongoing global pandemic. That said, while we anticipate that we will emerge from the covenant relief period with higher leverage than where we stand today, we expect to have significantly more flexibility and ability to take advantage of opportunities than those that went into this with higher leverage. It is important to note and to reiterate a point that John made. Based on our current cash balance excluding the $300 million drawn our credit facility or any future draws on credit facility. And just to be clear, as of the end of the first quarter, this is a cash balance of approximately $547 million. We would have approximately 18 months of liquidity. Again that is 18 months of liquidity before we would need to take on any additional leverage from proceeds from our line or any other capital source, which could extend that liquidity to up to two-and-a-half to three years. This assumes no change to the operating environment, meaning the 14 hotels that have suspended operations continue to be suspended. This also assumes that we continue with our current planned capital investment which could be…

Yes, sir. Thank you. [Operator Instructions]. We will now take a question from Lukas Hartwich with Green Street Advisors.

Thanks. For closed hotels, I'm just curious what markers you're using to gauge when to reopen properties?

Hey, Lukas, good morning. Our asset management team has been working daily with our operators to try and answer those questions. Obviously, this is something new to all of us and something that thank God we've never had to do before. And so what we're looking for is any indication of demand in markets whether that's indication of transients or groups that will show up short-term. So the real question then becomes at what point do we open and to us, it's once we can open up safely. Once we have those protocols in place that we can actually handle folks or guests safely, our associates safely, the hotel associates safely, I should say. And at the same time, not lose more money than we're currently already burning. And so a lot of questions on the table. Our asset management team is working diligently and I will tell you again another shout out to our operators, who are working with far fewer people to try and answer all of those questions in a very, very fluid and dynamic situation. So the good news, Lukas and boy we're looking for good news these days, but we think we have -- we found it in different spots. The good news is we have maintained executive teams, engineering staff, HR professionals, sales professionals on property. And so our ability to turn these hotels back on which will be a fantastic day. But the ability to turn these hotels back on will probably take us depending on the hotel three days to seven days depending on the complexity of the hotel.

Great, that's really helpful color. And then just to turn to values. I'm just curious at Sunstone; we're looking for acquisition today what discount would you require compared to where values were a few months ago?

Great question. Unfortunately, I don't have a great, probably a great answer. And what we're seeing right now is just tidbits of information. And as you would anticipate in a period of this level of dislocation, there is going to be a significant bid ask spread. We have heard of and had been in contact with certain folks that are looking for liquidity and need liquidity don't have the resources to get through something like this with cash burn rates or might not have institutional backing. And they have been looking for discounts of 10% maybe 20% as a seller. I think buyers are looking for something, if you have cash right now and you have liquidity, I think buyers are looking for something far wider than that. I'm hearing 25%, 30%, 35% or more percent down from what one would anticipate the value to be prior to COVID-19. Now obviously, that is all going to change in this very fluid situation as we have a better handle on what's happening with the virus, what's happening with travel, what the debt markets do, et cetera, et cetera? And so again, that is simply a spot market now, and I would anticipate that to change if I'm right on those numbers, I would anticipate that to change meaningfully over time. This is not a good time to be on hotels.

Right. And then maybe just one final one kind of bigger picture theoretical, as people get more comfortable with working from home and we're all doing virtual meetings. The obvious question comes up will lodging demand, business, transient, et cetera be impacted in the long-term? I'm just curious what your thoughts are on that?

I don't think so, Lukas. I really don't. I think if boy, there's, from what I see, I think that there's an enormous pent-up demand for people to get out of their homes and to go do something fun and to congregate. I have been on hundreds and hundreds and hundreds of conference calls, Zoom calls, go-to-meetings, et cetera, et cetera. And I will tell you, I cannot wait to get on an airplane. And I love my family, take them with me. But I cannot wait to get out of my house. And I think there are a lot of people like that, business is best on face-to-face. Now, will there be systematic changes because of this? Of course. Do I expect that to have a material long-term impact on our business? I do not.

Thanks.

So if I can get back to prior way, because it will be spectacular.

Yes, sir. We will take our next question from Anthony Powell with Barclays.

Hi, good morning. I guess on the question on Wailea it's obviously a leisure market in Hawaii generally but fly to market. What's the thought process from the authorities there about a reopening? And when do you think you may start to see travel resume there?

Yes, so Hawaii in general has been shut down as there's effectively a quarantine for anybody traveling to Hawaii to effectively shelter in place for 14 days. And so as a result of that air traffic directly to Maui has been effectively completely curtailed. In fact, flights are coming in from Oahu. And so we would anticipate that through this until the local health authorities lift that and feel more comfortable that that demand there or excuse me that occupancy there will remain, the hotels will remain shut. Having that said and as is one of our data points that shows there is significant pent-up demand for leisure traffic, the inquiries, the reservations for the fourth quarter for Wailea are off the charts. And again, I do think that people want to get back and really just come down to when people can safely travel again. We, working with other hotel owners are in communication with the airlines to try and coordinate that. And so while I don't have an answer of a specific date for you right now, I feel good about once this -- once time passes and perhaps get a lucky break and some of the restrictions lift, that Wailea will be just fine.

Got it. Thanks. And going back to capital allocation you bought back stock really in the quarter and suspended that, how do you view buying back stock versus buying hotels that are out there kind of in a turn environment. You may have already seen a lot of stock. So are there better opportunities now out there in the hotel market and you are looking what's it really is you can really think about buying hotels, is it once you get past this really the acute pandemic crisis? Can you be buying hotels later this year or is that too early, what's kind of the timeline here?

So a couple of questions in there. How do we feel about buying back stock? Right now we've suspended our stock repurchase, not out of a desire or lack of desire to do so. But really just ensuring up our balance sheet is getting through our covenant amendments with our capital partners. The real question will be is when do we come off of that covenant holiday and what's available to us at that point. I do expect to have some flexibility in terms of capital allocation, which we can't go into the details of now. But I expect to once we get through this covenant waiver, I do expect to have some flexibility. But unfortunately, can't go into the details of that right now. In terms of what's available, or how do we waive share repurchase versus acquiring assets. Still little bit too early on that, Anthony. There's really not a robust market for acquisitions as we stand here today or a real sense of exactly where pricing is as I had mentioned on Lukas's comments.

Got it. And if you get the covenant waiver, could you be in the market for acquisitions with fourth quarter, first quarter next year? What's the earliest you think you could get back to the market?

Yes, good morning, Anthony. It's Bryan. We don't have this -- we don't have a waiver in place yet. So let me talk generally about the structure and what that would look like and then base it off what we've seen in the market, there tends to be a basic construct that has standardized the material terms of what waivers for public lodging companies will look like right now. So you should expect from the ones you've seen so far, for most of them to share a lot of those -- those characteristics. And then based on the specific leverage of each company -- would -- would there -- there would be specific nuances to each one, the more levered companies, obviously would have heavier restrictions and more restrictions on mandatory prepayments, restrictions on acquisitions, capital investment, limiting dividends or share repurchase also. So, that would be for the most leverage. For companies that went into this with lower leverage, you should expect more breathing room when it comes to capital, when it comes to acquiring assets. You're not going to have the ability to do whatever you want but you will have, there should be some easing of restrictions that would allow for buckets of investment. And so again, we said that, our expectation is that we over the coming weeks, we will be to a point, I think you saw one file today, my guess is that the majority of companies will have them rolling out over the near-term. And when you look at this waiver period and you look at the restrictions, the other thing you need to think of is when we all come out of this and at the other side of this relief period, and once we have a cleaner trailing 12 to calculate our covenants off of just because you have a covenant waiver doesn't mean that when you come out on the other side, your leverage is in an area that's conducive to acquiring or allocating capital. Remember, we built the balance sheet. So we could handle major downturns. And if you were to take a 50% decline John talked about earlier, at the end of the day, we would be between three-and-a-half, four times levered at that point, which would give us the ability to do a lot of things. Others may at that 50% decline, even though you get through this waiver period, others may come out of this they could have leveraged as high as six to 10 times which is quite restrictive. So I think that, to answer your question, during the covenant waiver period, we should expect to have some flexibility. But more importantly, when we come out of this, we think we will have significantly more options than many of our peers.

We will now take our next question from Shaun Kelly with Bank of America.

Hi, good morning out there guys. And John, Wailea sounds probably pretty good to many of us on the call right now. So just I was hoping you could comment a little bit further, Bryan on the clarity of what you just gave was important so maybe just to be super clear on it. There's basically both restrictions during the covenant waiver period and then obviously, what the whole situation is going to look like afterwards. Do you expect the restrictions during the waiver period on Sunstone to be lower, appreciate you can't get into specifics, but is that part of the crux here is that you should have a little bit more flex and possibly some -- I know there would be restricted payments, but there might be more flex in what you can do earlier than most?

Good morning, Shaun. Well, I can't get into the specifics. I would speak -- speaking generally to credit. Our credit and some of our peers that have credit that's comparable to ours. So those that have the lower levered balance sheets are superior credits. And should -- that should warrant flexibility that those that are more highly levered will most likely not have. I think that's is probably as specific to that as I can be right now.

Understand, appreciate that. And then the other kind of question, I had is I think going back to Anthony's on sort of the fly to piece for Hawaii that's obviously a really, really important market for Sunstone. Just have you been in dialogue at all with in particular with some of the airlines and thinking about how they're going to work with reopening capacity to a market like that where interestingly it could be outsized demand on that leisure traveler there as well, especially relative to what we're going to see with air travel elsewhere and just how are they thinking about it if you have?

So I think the question is, have we been in dialogue with folks in the broader tourism industry of restarting and the answer is yes in general with other hotel owners, very early conversations with transportation as well. So just how we're going to get the islands restarted.

Any color you can provide John on how it looks or just too early on flight schedules, and things like that?

Too early to tell. I would tell you that the only thing I actually can point to. I was just too early for specifics on that. But the only thing we can really point to is just the reservation volume coming in and looking for -- looking for reservations particularly in the fourth quarter.

Got it. And last question for me would just be on the cash burn figure. So first of all, thank you for all the detail on that. As we start to kind of think about these numbers and differences by operator, especially if let's call it the hotel level. I think John, you made it really clear that you're choosing deliberately to invest in certain areas of hotel, do you see because you can, is a big part of the difference as you think about it right now probably in that sales piece and keeping that that ongoing relationship going is that probably the biggest primary difference as we line from these other -- as we think about some of these line items and anything -- anything else that you think might drive that difference?

Well, from what we can tell it's number of executives, executive time. And then also number of salespeople. There are a few others that are taking the same path that we are. It's our understanding. But I would say that there are others that are not and some have taken a lock the front door mentality because quite honestly, they can't afford it. And they're looking for every dollar of liquidity that they can get right now. Look, there's not many folks that can sustain $30 million a month for a portfolio for example like ours or take it down and say you owned a couple of hotels and instead it's 30, let's say it was $2 million or $3 million a month. Certain owners that just can't sustain that and they're cutting everywhere they can. And where I think that that will eventually manifest itself is how long does it take the property to reopen or does it reopen, can it be nimble enough to make the changes to be the safest hotel, if you did the safest hotel possible to the traveling public and to the meeting planners? What does your -- what does your sales look like in future periods, how have you treated that group customer? So these are all decisions that you can't see from a burn rate, but are important for the longevity of the assets. We own a $4.5 billion, $5 billion portfolio of assets having right engineers on property, protect those assets. Having the right security around those building to protect those assets, and your investments is really important. So that has been our focus. I do know just having listened to a couple other calls that a few other of our peers share this view and have done the exact same thing. My understanding is many have not.

We'll now take our next question from Chris Woronka with Deutsche Bank.

John and Bryan, you guys, hey good morning. You guys have seen a couple of cycles and they're all different in their own right. But the one thing we always think about is what does pricing look like on the other side? And I'm certainly not asking you for a number, but do you see, do you think directionally the same thing is going to hold true this time, where we build occupancy and takes a lot longer for rates to come back. And how do you think distribution and loyalty plays into that? And I guess the question is really also do you expect there to be enough maybe property closures that that rates come back a little bit faster than they have in the past?

Very, very early days, Chris, and I think some of it will be dependent on when is our vaccine, what our therapies look like, what's, will there be a near-term aversion to traveling, to gathering, to congregating et cetera. Long-term as I think I was saying earlier, I don't anticipate any material reduction in demand because of this. I think long-term this industry has proven time and time again to be incredibly resilient and always in each cycle, reach new highs. The trajectory of coming out of this I don't yet know. I think it's probably safe to say that with the amount of unemployment we currently have that the economy is going to be on rocky footing, and list a bunch of companies just like ours that have been knocked back a bit that business investment et cetera is likely to take a pause. Does that lead to a temporary lower occupancies or ramping occupancies and reduced rates? I think that's a very fair assumption. The good news is as we've been talking about is we're prepared for that; we're set up to take. We've always said, we were set up to take a 50% decline in same-store EBITDA, something that up until this point has never happened before to that degree and still have offensive capabilities. So if that is the case, I'm hoping for something better. We have a large portfolio, I'd love to have nothing more to have far higher than where we were in 2019. But in that event that we do come out of this and some level of recession, I think we're really well-positioned.

Okay, very good. And then wanted to ask you on the group side, none of us know how, what some of the restrictions are going to be or how long they're going to last. But do you guys think is it possible to make investments that might make smaller group meetings possible, if distancing rules continue and how much of an investment you want to make in reconfiguring group space for the idea this could be worst for a few years versus the idea that it might not be with us 18 months from now?

Yes. I think it's on a case-by-case basis. I mean look, we're accelerating certain investments in some of our group hotels, our Renaissance Orlando, we've been waiting to do the Atrium, big beautiful atrium, which has a lot of meeting space and basically feed space that we've been waiting to do the flooring and the painting of that building for quite some time. Our General Manager, Bob is down there cannot wait to have that done and it's been so disruptive to turn all that stuff up that it'd be a lot of displacement in the building. And so well, the hotels currently suspended operations, there's no better time for the present. If we believe that there was going to be a long-term impairment to groups that want to experience at hotel, we probably wouldn't do it. But that's not our view. And for a couple extra million bucks, we decided to accelerate that. Same thing in the Renaissance DC fully anticipate that group will come back, it might be slow for a bit. And we might -- and we're very likely going to have to implement all of these procedures for social distancing and make sure that the hotel associates and guests are safe. And going back to a hotel like Orlando, we added a significant amount of meeting space there. And so we could easily handle smaller groups because we have so much space there. So I don't know if that answered your question, but a couple things to think about.

We will now take our next question from Smedes Rose with Citi.

Hi, thanks. John you mentioned that operating paradigms have to kind of be changed significantly. And I'm just wondering kind of as the businesses or your properties reopen I mean do you think labor costs go down as a percent of revenue kind of the post-COVID world or stay the same or go up with extra protocols that might be in place?

Yes, well, there's a lot that goes into it and depends also how you look at it. So if you say as a percentage of revenues, well, that'll also depend on what revenue levels look like. There will --

That might not have been the best measure then, but I guess it's sort of on the same-store basis absolute cost I guess maybe think about it that way.

Look, I think there's going to be incremental costs of making sure that the health and safety standards are implemented once we know all those, and there's a lot of people that are working very diligently on coming up with those standards. You have to remember we're a high touch business. We -- our business prides itself on service, on guest interaction. And this is going to be a new paradigm; it's going to be in the intro. It's going to be, there'll be some challenges, but again there's a lot of really smart people working on these things, too early for all of the details. But from that standpoint, I think there'll be some incremental costs. But there's other, there is other services that we look at, and we say, is this an opportunity to relook at how we do things at the property and above property to become more efficient. And it was a quarter or two ago, and I forgot who asked a question but somebody on the call said, is there any way that you can revamp the paradigm effectively in operations? And I said, no, not yet because even in a flat RevPAR environment, there's just -- there's too much inertia to get these changes. Well, this is a different environment. With 14 of our 20 hotels closed, this is a different environment. And so a lot of these questions are being asked, not only by hotel ownership groups, but also by operators. So we'll see where it goes.

We will take our next question from Michael Bellisario with Baird.

Just want to go back to the Hilton Times Square. Let's clarify that. Your plan right now is to hand the key back to the lender. All else equal assuming current condition persist?

Good morning, Michael. It's Bryan. In addition to what we hear, I can't say a lot more than what we've disclosed on the call so far. But let me recap that is that given the current conditions of the hotel, and again we're anticipating it to lose $6 million to $8 million of EBITDA this year and with the uncertainty of the ground rent reset, the tax reset all these other items. At this moment, we're working with the special servicer on the options which will -- which could include a receiver going into effect. If a receiver goes in to effect there, then the conclusion of that would be some sort of central foreclosure or other item. So that that is potential outcome, if that -- if the receiver goes in. At this time, that's where we are on this.

Got it. And are you guys funding debt service today and do you plan to fund that shortfall between now and November? How should we think about that?

We are not; we did not make the May 1 debt service.

Got it. And then just maybe digging a little bit further out the Renaissance DC loan? How were you guys thinking about addressing that? And then does your month of liquidity include potentially paying that hundred plus million dollar loan off? If that's what needs to happen in the Spring next year?

We are without maturity; it’s a little too early at this point to start that, the talks with the lender. It is a lender; we've had a long, long relationship with. And so I think there are options there. Given the current environment is being able to extend things is definitely on the table these days. So that's something we can look at and at the end of the day, if we're unable, we definitely have liquidity to address situations. Again, Hilton Times Square is a very unique situation where just the confluence of several value destructive items that are all happening at the same time makes it unique and difficult. Any other look we're having to support all of our mortgage hotels right now. So that's something you continue to do and we feel good about being able to work out a good solution at DC.

Got it, that's helpful. And then just to clarify though that hundred plus million dollars is not inclusive, included in your cash burn at least months of liquidity analysis?

Not in the liquidity analysis.

Yes, the ongoing debt services, the ongoing debt service payments are but not a final payoff.

We will take our next question from Stephen Grambling with Goldman Sachs.

Hey, thanks. In the opening remarks, I think you mentioned as you're thinking about the market potentially seeing some small owners that could come to market on the back end of this, you generally anticipated that the hotels that will hit the market could fit the criteria of what you would want to pursue. And then maybe more broadly, are the things that on the back end of this, you're thinking about trying to reposition your portfolio around as it relates to dispositions or acquisitions? Thanks.

Sure, I think I got the question. Do we anticipate that there would be opportunities to acquire assets that fit our strategy, I believe is the question. Too early to tell immediately or maybe we're in early days of it. Eventually, yes, I do think that there will be assets that fit our strategy of long-term relevant real estate. There have been assets that have been acquired recently or later in this past cycle that might eventually need to find a home. But again, this is -- these are early days. Do we want to continue to capital allocate and dispose of hotels? Yes. As we've talked about on previous calls, there's still probably a small handful of hotels that do not fit our strategy that we would eventually like to sell. We have no pressure to sell these hotels. We have no desire to give them away. We're comfortable with the hotels. And we have again; we have lasting power that we're not forced to raise liquidity right now. So while there are still a few number of hotels that don't fit that strategy, more hotels there are values so to speak, we will be patient.

Great. And then maybe an unrelated question, as you work to reopen properties, are there generally working capital or other kind of almost pre-opening type expenses that we should be thinking about that could put some pressure on margins or cash flow relative to either the burn rate you're referencing, or just thinking through that ramp-back? Thanks.

Yes, not really. Not really. Obviously, there's going to be some restocking of certain supplies, be some expenses and just pulling people back et cetera, et cetera. But it'll be no, I don't see anything material that I would think about modeling.

We will take our next question from David Katz with Jefferies.

Hi, good to hear everyone's voices. And obviously it would be much nicer in person. Have you sort of laid out portfolio wide just so we can sanity check ourselves where a kind of EBITDA or a break-even occupancy or RevPAR level is?

Yes, we have done a little bit of work on that. By the way, this is not an analysis; I ever thought we would have to do. But I say they're doing it. For the obvious reasons, we are doing it and we believe the answer is with a whole bunch of variables, we believe that the answer is somewhere between 35% and 45% occupancy the hotels, most hotels are break-even. Now that assumes, that ADR is lower, that assumes some incremental costs, et cetera, et cetera. There are a whole bunch of variables in there and we could be off fairly meaningfully, a couple of hotels, maybe some of the larger group hotels, a hotel like Wailea, the occupancy is probably five points higher than that. So say call it 40 to 50 occupancy, again with a whole bunch of variables. So that number though, I will tell you, David that number is a lot lower, that occupancy level is a lot lower than what we would have estimated six months ago. And again, what we've seen from the operators is a significant reduction in property level costs and above property pushdowns and expenses, et cetera, et cetera. So on one hand; it's good news because we're losing less money. But again, I have to point out that the human toll of this is significant. That's one of the key reasons we're focusing so hard on trying to get back to normal. So we can get people back to work.

Understood. And if I can just sort of lay out one final topic, conceptually, because you're usually very thoughtful about these things. We observed full service properties in general. They're cutting back on things like full-time restaurants and other kinds of services that enhance the value and the earning capacity of an asset but impact profitability, generally speaking. Is there some sort of a shifting paradigm, where higher and higher end hotels offer less and less in terms of those kinds of services directly, where the services are limited even at higher price hotels, and whether something like that endures over time?

Really depends, it really depends on the hotel, David, I would think. Certain hotels are going to require that that significant services and amenities. Others think they have been forced to offer those services and amenities because of a brand standard, but quite honestly, might be an antiquated thought. And that's it. So we said is, earlier was this is the time to reevaluate those paradigms and see what the consumer actually wants and will pay for. And so while we have a lot of thoughts right now, it's really too premature to share those views. But we're having those conversations with our operators. And one thing, I really appreciate about our operators right now is they're open to those discussions.

Right. I'm sure, they're. Thank you for that. And be safe and good luck.

You as well, thank you.

We will take our next question from Bill Crow with Raymond James.

John, you mentioned advanced reservations and looking out towards the end of the year and getting some activity there, certainly evidence that consumers, the guests are responding to discounting? Or is it just those who feel safe are willing to pay up for it? Is there any sensitivity there?

Well, Bill, that's a great question. I just don't have that information at my fingertips. I think there will be discounting as, the more commodity type assets, I do think there will be discounting. And even as operators find out, for example, there was a couple of resorts here open in Southern California on a limited basis over the past couple of weekends that put 30%, 40%, 50% of their rooms out available. And a lot of them sold out pretty quickly. Now some of those rates were okay. They weren't great. They weren't fantastic, but they were testing the market and also testing operations. And so I do believe that as we open up, there will be some discounting. But I can also see evidence and not necessarily from hotels, but also from the golf courses that are reopening, and other leisure amenities. I think there's pent-up demand. For a lot of these things, as I'm sure many of you right now are sitting in your basement, your garage, your living room, your dining room table, et cetera and are very much looking forward to the day that you can go out and enjoy again. And that's what we're seeing. Where that all runs out, I don't quite yet know.

All right. Next quickie here. You took over kind of midway through this current cycle. And when we come out of this, we're obviously going to be at, day one, year one of whatever the next cycle brings. Does that change your risk appetite at all knowing that we're at the start?

No, I think it's the same playbook that we've laid out. We're very acquisitive early on in the last cycle. We pulled that back pretty meaningfully. And one acquisition over a four, five-year period, numerous dispositions over that period. We've had lots of conversations with everybody on the phone about our methodology of underwriting hotels and building in cycles. Bill, we didn't see this coming. But if our fundamental view is that long-term things have not changed, short-term shouldn't change. Long-term things have not changed, I don't know it's necessarily our risk profile has increased. But I could see us being -- well let's put it this way. We're far more interested in acquisitions now than we were six months ago.

Yes, that's great, that’s the answer. Okay. One more from me --

We have -- we have --

Go ahead, John.

I'm sorry, go ahead, Bill. Go ahead.

I know we got a lot more things to think about. But eventually, it seems that local governments are going to need to get some money somewhere. And I'm just wondering about property taxes, occupancy taxes. I mean it always has been lodging had a target on its back and it just feels like it's going to be a bigger headwind going forward. Is that something you all thought about?

Thought about it, don't know where it ends up. With property values going down, I think that there will be somewhat of an offset there. But I do believe the municipalities, states, local governments will be looking for more and more revenues as their coffers are being depleted currently. Labor, I think that there's going to be a significant conversation about folks that don't provide healthcare benefits and whether they should. And the good news is we provide those benefits. In fact, I think we're very good employer, our operators are very good employers. But I think this is going to shake up the world in many different ways. But then again, nobody's calling in here to listen to what I have to say about that. So I will stop talking.

Perfect. Listen, John, I always appreciate your insights.

Thanks, Bill.

And we'll take our next question from Patrick Scholes with SunTrust.

Hi, good morning. Just a quick question for you on how we should think about your CapEx for this year. I think the prior-year guidance was $65 million to $85 million. And you've talked about some non-essential capital improvements deferred. Can you put a dollar amount around those non-essential capital improvements? And then any high-level color on how we think about those deferrals getting pushed into next year or are they permanently deferred? Thank you.

Good afternoon, Patrick, it's Bryan. Yes, the initial guidance for earlier this year was $65 million to $85 million. Our new guidance for CapEx based on about $30 million, $35 million decline in that budget the new guidance is call it $35 million to $45 million. And then on top of that, John -- John mentioned a few new projects that were accelerated based on being able to get them completed and not having the displacement that we would have normally expected there. For the items -- the items that we kept in for this year are all one was the Portland hotel renovation that was ongoing and started last year and so that that was a good piece of the forecast for this year. Others are any important systems or infrastructure at the hotels that needed to be done or it was their time to be done. Those we're not deferring, we're keeping the facades that need to be done, the elevators that need to get done, that stuff is getting completed. Some of the stuff we pushed off are more of the things that can wait 12, 18 months, the refreshes of lobby, restaurant, furniture, gym equipment, that sort of thing. So that can be deferred into next year or the following year. It'll all depend on what the recovery looks like and how fast those items get rescheduled. And then as we get into next year, we'll go through the same as everyone else, we will go through the same exercise. I think given our position and provide -- or assuming that things continue that we see improvements, larger rooms renovations or renovations that have displacement associated with them, we will most likely get the preference early on due to our ability to not experience that displacement. So, next year will be a moving target. But especially since the amount of capital, we have put into our portfolio over the years, the things that are getting deferred are one not permanently canceled or permanently deferred. But we have some flexibility and when we can slot those back in.

And that does conclude today's question-and-answer session. I would like to turn the conference back over to Mr. Arabia for any additional or closing remarks.

Wonderful, thank you, Anna. And thank you everybody again for joining us today. Stay safe, stay healthy, and we look forward to seeing you in better days. Thanks, everybody.

And once again, that does conclude today's conference. We thank you all for your participation. You may now disconnect.