Hello and welcome to the Xenia Hotels & Resorts Third Quarter Earnings Conference Call. My name is Quan and I will be coordinating your call today. [Operator Instructions]. I will now turn over to your host, Danielle Burgoon, Vice President of Finance to begin. Danielle, please go ahead.

Thank you, Operator. Good afternoon and welcome to Xenia Hotels & Resorts third quarter 2021 earnings call and webcast. I'm here with Marcel Verbaas, our Chairman and Chief Executive Officer; Barry Bloom, our President and Chief Operating Officer; and Atish Shah, our Executive Vice President and Chief Financial Officer. Marcel will begin with a discussion of our industry fundamentals, our quarterly performance, and an update on our portfolio strategy. Barry will follow with more details about our operating results, recent operating trends and status of our capital expenditure projects. And Atish will conclude our remarks with an update on our balance sheet. We will then open the call for Q&A. Before we get started, let me remind everyone that certain statements made on this call are not historical facts and are considered forward-looking statements. These statements are subject to numerous risks and uncertainties as described in our Annual Report on Form 10-K and other SEC filings which could cause our actual results to differ materially from those expressed in or implied by our comments. Forward-looking statements and the earnings release that we issued this morning along with the comments on this call are made only as of today November 2nd, 2021, and we undertake no obligation to publicly update any of these forward-looking statements as actual events unfold. You can find a reconciliation of our non-GAAP financial measures to net income and definitions of the certain items referred to in our remarks in this morning's earnings release. The property level information our executive team will be speaking about today is reported on a same-property basis for 34 hotels which excludes the Hyatt Regency Portland. An archive of this call will be available on our website for 90 days. I will now turn it over to Marcel to get started.

Thanks, Danielle, and good afternoon to all of you joining our call today. The U.S. lodging industry continued on its path to recovery in the third quarter as increased COVID vaccinations and continued strong leisure demand drove the highest occupancy the industry has experienced since the beginning of the pandemic. U.S. backlog for the third quarter of 2021 decreased by only 4.8% compared to 2019 comprised of approximately six point decrease in occupancy and 3.8% increase in ADR. The luxury and upper upscale segments have lagged lower tier chain scales in terms of the recovery through 2019 occupancy levels and experienced occupancy declines of 19.8 points and 20 points respectively compared to the third quarter of 2019. However luxury ADR increased 15.9% and upper upscale ADR increased 0.4%. The rate increase in the luxury segment have been impressive and a positive signs we're referring to see as it relates to business transient and group demand, certainly give us cause for optimism for a robust recovery in the segments where our portfolio is positioned. Similar to the rest of the lodging industry, our portfolios faced some headwinds as the third quarter progress, due to a resurgent of COVID cases in the Delta variants, a seasonal decline in leisure demand, and a tougher comparison to 2019 in September due to the timing of Jewish holidays. Given this backdrop, we were pleased with the 12% sequential improvement in our same-property RevPAR over the second quarter. Especially since the third quarter has historically been our portfolio's softest due to seasonality within our top markets. We were also happy to see the RevPAR declines compared to the same quarter in 2019, continued to moderate and that's despite cancellations that were likely linked to the emergence of the Delta variant, business transient and group demand appear…

Thank you, Marcel and good afternoon to everyone. For the quarter, our portfolio occupancy was 55.1% and average daily rate of $224.54 resulting in RevPAR of $123.70. As a reminder, RevPAR in the third quarter of 2020 was $42.09 and in the third quarter of 2019 was $160.79. The sequential improvement quarter-over-quarter given the headwinds faced last few months gives us optimism about the trajectory of our portfolios recovery. July was a particularly strong month with occupancy reaching 59.1%, a new high for 2021, and an ADR of $224.23, which represented a 9.3% increase to 2019, amongst benefited from the 4th of July holiday and five weekends, which averaged 72.4% for them allowed our hotels to capture additional leisure demand. We had seven hotels that achieved occupancy over 80% during July, primarily hotels in our leisure focused and drive-to markets such as Charleston, South Carolina, Savannah, Birmingham, Key West, Santa Barbara and Napa all of which continue to show substantial strength. We also had 12 hotels that exceeded their July 2019 ADR by over 20%. In August, we began to see some moderation in occupancies during the month due to the seasonal decline for the beginning of the new school year and the spread of the Delta variant across the Sunbelt region. As a result, August occupancy dropped seven points from July to 52.1% and an ADR of $218.12. On August 29th, Hurricane Ida made landfall in the world with Louisiana as a Category 4 storm, [indiscernible] rooms hotel, incurred property damage from storm we believe will exceed our maximum deductible for this loss, approximately $4 million. In addition to property damage insurance claim, they're currently evaluating our ability to recover, proceeds for loss profits and direct policies, which we would expect to settle in 2022. Moving to September, where…

Thank you, Barry. I will provide an update on our balance sheet. Our balance sheet continues to be strong with no debt maturities until 2024, over $1 billion in liquidity and strong banking relationships. We are in a good position to take advantage of opportunities. We continue to believe that our business will be cash flow or FFO positive going forward. And as we look ahead, we expect our properties will continue to pivot to capture what demand is present with a focus on controlling expenses. As we look farther out, we believe our assets are well-positioned as the rate of new supply growth decline. Properties in markets such as Houston, Orlando, and Atlanta are expected to see lower levels of new competitive supply growth. Our portfolio consists of well-located higher end properties that we expect to continue to recover well, particularly as corporate transient and group demand recovers. And with that, we will turn the call back over to Quan for a Q&A session.

[Operator Instructions]. Our first question comes from David Katz from Jefferies. Please David, your line is now open.

Hi everyone, good afternoon and thanks for taking my question and for all the information. Earlier on, Marcel, you indicated that there is a pipeline of opportunities out there and to the degree you can, I'd love to just have you elaborate on that a little bit. The focus on the Sunbelt area has been pretty productive so far and fortuitous, any geographic or size or cap rates perspectives would be helpful on what might work in this environment?

Yes. Good afternoon, David. Like I said, our situation as it relates to our pipeline today is probably not too different from whatever we saw it last quarter as I mentioned in my remarks as well. So we're looking at a number of opportunities and we've certainly underwriting -- underwritten a good number of opportunities here in the last quarter or so. But really feel like the pipeline is still relatively limited compared to where we think it will be in the quarters and years ahead. So I mentioned last quarter that we felt that expectations that seller had -- sellers had on some of these assets were still a little bit beyond where we were comfortable stretching to get deals done, and didn't really feel the need to go that far, particularly given the internal opportunities that we still have in our portfolio with some of the assets that we bought coming into this. So I'm not sure that I can give you a whole lot more color than that, except for to say that what we can see on underwrite assets, but haven't really found the type of deal on asset that we think is a great strategic fit for us at a price that we're very -- we're comfortable transacting. And yes to your point, as far as it relates to kind of our focus. We can see and look at what does work well for us. Obviously, we have a pretty significant Sunbelt presence there at market where we aren't in yet, but we'd like to get in over time, but time has to be right and the asset has to be right to get into those markets. And there are certain markets still where we have some presence where we wouldn't mind either upgrading our presence over time or increasing our footprint a little bit. So largely, we're going to play that fits our strategy that you've seen from us over the past few years, as it relates to any new opportunities that we will pursue.

All right. And if I can appreciate that, if I could follow that up are there areas somewhere on the board now, I guess, I can't imagine you might name them in this forum. But areas where you would consider lightening up, where you may be a little heavier?

Not, not particularly. As you know, we've always been pretty careful about not getting overexposed in any particular market, which is really kind of set us apart a little bit from where our peers were certainly over the last few years where some of our peers went pretty heavily into certain markets. We've -- our philosophy has always been to be a little bit more diverse in the markets that we play in. Historically, kind of the -- at the top level where we were comfortable being in a market with somewhere in the 10% type or range. We're a little higher in a couple markets just because of some dispositions that we've gone over the past few years. But we think that that will balance out again over time. So there's no particular market where we say, at this point, business where we'd like to lighten load or anything like that. We're pretty comfortable with where the portfolio stands right now. As you know, we've talked about this a lot, we'll always continue to look for opportunities to strengthen the portfolio and upgrade the portfolio over time. So particularly when we ask somebody bear CapEx decisions coming up on some assets, we'll do a very in-depth wholesale analysis to see if it makes sense to potentially sell an asset or two. But we fine tune the portfolio well. So we're happy with where we stand. And certainly you could expect us to -- on the margin, sell some assets over time. But we'd like to focus to be a little bit more on the acquisition side here in the short and medium term.

That's perfect. And if I may ask one additional question, which is about labor and the cost thereof. I think there's little disagreement that it is an issue. I think, where there's more debate is how long it lasts. And I would welcome your opinion on that as well.

Hey David, it's Barry. I think it's really hard to gauge how long it lasts. Certainly, we continue to encourage our managers and they have put in place their own programs to really make sure that a) they're hiring quality labor. b), they're hiring the right amounts of it so that they're not ahead of where business levels are. And c) I think really try to ensure that they're paying a market competitive wage. I think, knowing if when or how that changes course, I think is really hard to determine, because we're still in a), still in think of it. And b), certainly looking forward to generating higher occupancies, which will require the near mid-term on more employees.

Thank you so much. Our next question comes from Bill Crow from Raymond James Financial. Please Bill, go ahead.

Yes. Thanks. Good afternoon guys. Is it fair, I was trying to read through your comments earlier, Marcel about kind of the upcoming calendar? And if you think about historical leisure trends, and where we are in business transient is it fair to consider kind of January, February are going to be pretty weak as we stand today. Is that kind of the way you're thinking about and as we've roll through the next few quarters?

I wouldn't necessarily say that Bill, because in our portfolio, we do have some seasonality that helps us a little bit in first quarter too. As you know, especially in markets like Phoenix, Orlando, those are historically some stronger months from a seasonal perspective on the leisure side, particularly. I think it's more a matter of kind of looking at the next couple bumps and saying, now you get post-Thanksgiving, where you're always starting to see a little bit of a letdown generally on business travel and group travel. And that's more some of the seasonally weaker months that I talk about in a normal situation particularly in the fourth quarter, where October is only very strong, the first half of this November remains strong. And then after that obviously the business starts to tail off a little bit. What we're certainly hoping for is that some of these back-to-office trends will improve a little bit, where we're starting to hopefully see some more people getting back in the office, which will spur some more, some business travel kind of going through those months coming up. I'll also like looking into next year that's the first quarter is a little bit weaker for us from a group base perspective than the rest of the year. And I think some of that was also still impact with some of the cancellations that Barry talked about as COVID was kind of rearing its head a little bit more again. But we're hopeful going into certainly based on the trends we're seeing on the leisure side, we're very hopeful that that will continue through to holiday season and then provide some strength from us on that side.

Got it. And speaking of the group cancellations, I think, Barry, you mentioned maybe $3.5 million of term fees collected or I should say cancellation -- fees collected. I'm just curious what that looks like for the fourth quarter?

It's a little too early to think about that, because some -- there are still accounts out there that could still actualize versus not. And the way the revenue is recorded is when they actually don't attend a program. So it's really too early to put a number of any kind of a magnitude at this point.

So the majority would not necessarily be in October, it could be in November, December as well.

Yes, that's correct.

Thank you, Bill. Our next question comes from Bryan Maher from B. Riley Securities. Please Bryan, your line is now open.

Thank you very much. Maybe a question for Barry. Yes, I'm interested so much has been talked about with labor costs and labor shortage, but we've noticed a pretty meaningful uptick in your food and beverage revenue. And I'm curious as to what you're experiencing on food and beverage cost, the impact on margins. And then secondarily on other supplies, if you're finding any problems, getting stuff like towels and other supplies through the supply chain that we keep hearing about so much.

Yes. Let me -- good on point question, Bryan. We've certainly been talking about here over an extended period of time. I guess kind of taking a little bit in order food and beverage staffing, other than culinary has actually not been a challenge as we ramp up in part because in most markets banquet servers are often on call and work at multiple properties and they seem to be quite available given the amount of business, the hotels are generating at this point. So that's kind of one item. Food costs we've actually although costs are higher than they might have been by a few hundred basis points. They've been pretty stable in our portfolio each month through this past quarter. I think -- and I think as it relates to kind of guest supplies, whether that's towels or other operating supplies, I think this is one of the cases where affiliation with the biggest branch has been really helpful and many of their relationships with the vendor has been very helpful in that they're kind of at the front of the line for getting supplies. We had a couple months back in Q2 where we had a couple hotels that had some challenges with sheets, for example, but that really kind of went away in the third quarter. And again, as we've seen kind of the bigger brand hotels get to the front of the line for supplies, I think hotels have gotten a little smarter, more educated about thinking about when they're going to need those kinds of supplies and making sure they get their orders in earlier used to be kind of order a week or two out that's changed. There's a longer lead time on those, but we are seeing relative success or hanging that relative success from the hotels in inability to acquire whatever kind of physical could they need.

Okay, thank you for that. And just one question on the Grand Bohemian, that hotel has and probably still has quite a bit of character to it. And so I was interested in your comment on having a more lighter contemporary, look and feel to it. First of all, can you quantify roughly how much money you're going to be spending on that renovation and how much are you going to kind of de-characterize it for lack of a better word?

Yes. On the cost, we'll probably have a better handle and talk about that as we have head into Q1 of next year, so we'd like to hold off on that for now, particularly as we're kind of working through a lot of the design and working on adding and subtracting components from a value engineering perspective. So appreciate some flexible in that. I think you've written everything we're doing with any of the hotels is really in keeping with the character of the hotel in the market. There is some -- actually some deep steaming to Grand Bohemian that is culturally related. And it's a major part of the design team effort has been to make sure that that's retained while creating a look that's different quite frankly, than the hotel had 20 years ago. There's certainly been an evolution of hotel design. And part of our feedback over time has been that it's the dark colors and perhaps by some -- in some opinion, over hearted nature of the property that people were perceived as detractors in the current environment. And those are some of the things we're trying to solve with the design team to create that fresher lighter look.

Thank you, Bryan. The next question will come from Ari Klein from BMO Capital Markets. Please Ari, your line is now open.

Thank you. Maybe following-up on that, the cost, have you started to pass any of those along in the form higher menu prices or other ancillary items like parking to customers, are you still holding off on that?

Yes, no, absolutely, we have. And that's been probably our asset management team and our portfolio initiatives teams biggest efforts through the last few months has really been looking at how do we make sure that that we're taking advantage of the reverse side of inflationary costs that we're paying in the hotels. And I think as inflation become part of the common vernacular in the U.S. that people are expecting to pay more for most things. And we don't have a single hotel that hasn't gone through adjusted pricing. I'll tell you, as we've spent the last few weeks taking off the 2022 budget season and the asset management team, and I had been out of the hotels, that's a major part of the dialogue, which is if costs are going up x revenue needs to go up by y, because we need to not only maintain our profit margins, but where we can improve them. And this is -- we think we view it as some of the unique moment in time while we [ph] all inflation is on people's tongues. And while they're seeing it in the grocery stores and in the gas stations and in the retail auto market that it's a real opportunity for us to move revenues as costs increase as well.

Got it. And then on the business transient improvement trends, you're starting to see midweek. Can you give us a sense of from a market standpoint, which ones maybe are doing best and which ones are lagging? And then how much of business transient typically those large corporate accounts that are a little bit slower to recover here?

So the answer to the first part it's really been pretty consistent across the portfolio. There are very few hotels we can point to that are lagging. In fact, the hotels that you might view as a little more corporate. So if you think about our hotels in Houston and Dallas and the San Francisco Bay Area, we're actually seeing the biggest increase in those right now. And of course, they had the longest room. They had the most room to run, because they hadn't been as successful in filling weekday nights with leisure businesses, some of the other markets that we're in. So I think that that addresses that piece. And then how long the other part of the question Ari, if you would?

Just on how much of a business transient is typically those large corporate accounts that maybe have been a little bit slower to recover?

Yes. So the way we've accumulated that data over time, it's a little different to a little difficult to look back and see kind of what that has been. We look more on kind of across the portfolio on an account-by-account basis, and how they're going over time. And looking in particular, the big four accounting firms and the large consulting firms and the Fortune 500 names. And they're down significant from where they were. I think you certainly say in the more than 50% but probably less than 80%, but I'm thinking about that on an account-by-account basis. So that may not translate to the -- to those on an aggregate basis.

Thank you, Ari. The next question comes from Austin Wurschmidt from KeyBanc Capital. Please Austin, your line is now open.

Yes. Thanks. I'm not sure if this is what Ari was just getting at and I may have missed it, but can you put some detail? You mentioned group, I guess is 20% versus 30% historically what's sort of the leisure BT mix today versus historical levels?

Yes, it's really hard to -- it's always been a little hard to certain that because obviously we don't -- no one states up front, whether they're for business or leisure and there's no doubt in the portfolio. We've seen this concept of leisure really kind of looking different than it has historically where Sunday nights are almost as good as Monday nights and Thursday nights have become a real swing night that substantially better than has been historically on a relative basis to Tuesday, Wednesday. So we know we have a lot of guests who are making combined stays, and we've seen that average length of stay in the corporate segment increase significantly. And in fact, it's increased so much as something like question the data, but I -- but what I think it really is corporate customers that are extending their stays into and on to weekends and meeting and having families meet them or spending extra time in a market. But to really break that down precisely right now between business and leisure, I think is a really difficult thing to do.

Got it. No, that’s helpful. And then can you just provide some additional detail? I mean the AGR trends month-to-month versus 2019 and certainly moderated since July. And I assume that the leisure component trailing off a bit is some portion of that, but is there anything else that's going on sort of under the hood? Or can you give us a sense what -- where that corporate rate is trending maybe versus pre-pandemic to help us better understand as we think going forward from here, what the ADR trends could look like?

Yes. I think when you kind of work your way through the quarter, and then particularly as you work your way into October, what you're seeing is really a change in mix. Where there is significantly more corporate demand and that demand I think we've had great fortune with the leisure guests throughout the industry and certainly in our portfolio where that guest has gotten accustom and trained to if they want to stay in their first choice hotel, they need to pay a pretty good rate to do it. And the hotels have not resorted to significant price lowering and discounting the way they may have in prior cycles. I would suggest that I think as we look at the data across our portfolio, corporate rates are generally flat not to where they were in 2019. So again and we've seen, I think some pre -- I think that's also again reflective of not a race to the bottom in corporate rates. And in fact, a lot more accounts that have moved from static rates to percent discounts off of bar, which is also helpful, because obviously each individual hotel controls bar on a day-to-day and a week-to-week basis. So I think what you're seeing in that trend is really just mix of business versus leisure business travel is increasing. I would add -- you didn't mention it, but I would add group into that as well. And that the group rates quite frankly, particularly through certain months of the year, because of the volume of food and beverage business they do, because it's directly negotiated are often some of the lower actual rates that that hotels achieve. So you're also seeing that mixed in to this blended rate as well. And again, it's recovering at a case as well.

Got it. No, that's helpful detail as always Barry and just kind of piggybacking up the last one, just on the leisure side, what sort of your house view on the sustainability of pricing power amongst leisure customers over the next 12 to 24 months?

Yes. I don't know the way the house view on it over 12 months to 24 months. We certainly feel good about what we're seeing in the 90-day forward bookings on leisure, which take us through the holiday season and obviously feel pretty good about that. I think there's certainly a view that we've in many cases broken through to new and higher ground, quite frankly higher ground than we would've expected or naturally would've gotten to, but I think there's a lot to be said for the retraining of the consumer that this type of hotel costs this amount of money, and you're not seeing it as you probably know only in the luxury and upper upscale segments, but you're seeing it in the select service properties as well, where they've really gotten some pricing power with leisure. And I think that as, if and as we stay in kind of this newfound inflationary environment, I think people are expecting to pay more. And I think don't see any reason to think that that necessarily change materially going forward.

Thank you, Austin. The next question comes from Michael Bellisario from Baird. Please Michael, go ahead.

Thanks. Good afternoon, everyone. Barry, I have another question for you also on F&B, but want to focus on revenues. It looks like F&B revenues I think they were down about 15 more points than room revenues on a two-year basis. How much of that is due to group lagging versus because some of your restaurants and outlets are still closed and kind of how do you think about the ramp up of the F&B revenues aside from group over the next 12 to 24 months?

Yes, it's interesting. In our portfolio, I would say that almost all of the decline is banquets related. We -- as -- I think we've talked about before, we made great efforts in our hotels to make sure that we have food and beverage outlets open and operating in our resorts. Our outlet food and beverage revenues have set all-time records. Literally every week, maybe not every day, but certainly every week and month through the summer months in terms of that leisure guest being very captive in the resort buying a lot of beverage at the pool, having more meals on property. It's been a really favorable trend. So it -- we think, I mean, and our data tells us that the real gap is on the banquet side and as group business recovers, we're actually seeing really good results in banquets on a per occupied group room basis. And our catering and events people are telling us, and the numbers are showing us that they're doing a really good job of capturing banquets business that more groups when they come to properties right now are saying on property, as opposed to doing more off property events, which is great for the hotels. They're also buying the same or better quality and cost menus than they had been buying pre-pandemic. And that that has gotten even better as the group has shifted more from that smurfy type business and we're adding more and more traditional higher caliber corporate group business.

Got it. That that's helpful. And then --

That may be more you asked for, but I thought I'd give it to anyone.

No, no, that's helpful. And then the second part of the question Atish could chime into, what is your longer-term outlook on margins has that changed at all? And when you think the brands formalize their brand standards for 2022 and beyond?

Yes. Mike, I think it's been interesting to see that, and we're still certainly waiting to see what the brands really want to ensure happens in terms of housekeeping. We continue do a lot of experimenting within our portfolio in many of our hotels, as you can imagine, given our profile with the brands, serve -- are serving as beta is for a lot of the things they're trying in terms of light touch housekeeping, and how effective is that and how -- and what the housekeeping piece looks like. I think it's just too early to really think about what margins look like overall, as we get to stabilization. I think certainly we've proven we can operate with fewer bodies in the business and the hotels can run well. But I do think we're going to see over time, we will see additional staff and we're not going to have the labor -- the low labor costs we've necessarily run, particularly in Q2 of this year when hotels were significantly understaffed. And that we've got to at some point get to a place where we are reversing the downward trends everyone's seeing, although it's really stabilized now, but much, much lower to get satisfaction scores, which I think are directly related to both labor, the amount of labor in hotels, the amount of services the hotels are providing to guests. And those are obviously the tradeoffs and what makes it hard to know where that shakes out on cost relative to revenue.

Got it. And then just last one for me on the transaction front for you Marcel, just in terms of the deals that you've looked at, you haven't done, or the ones you've passed on, is it simply because you can't get to the pricing level that the seller wants or is it because maybe you're more turned off by certain qualitative factors like location urban versus resort or other aspects of a particular deal?

Yes. It's obviously a combination, right. I mean, you start off with kind of looking what's out there in the market and seeing, what do we think is something that we think is really additive to the portfolio and something that helps our portfolio from a growth perspective and something that might work for someone else isn’t going to work for us, just because of what the makeup of a portfolio currently is already. So certainly, there's product out there. There's no question but there's not a lot of product out there that kind of rises to the quality level that we want to have in our portfolio and that we want to grow with so that that's the first component of this. And obviously location plays into that and where our hotels out there, that's the fit our portfolio well or not. And then when you kind of drill it down and you end up with a relatively small pool of potential assets that you can -- that that really do fit well for us. And we just haven't found that deal, where we felt like the pricing really matches our outlook of cash flow in both the short-term and where it can growth. So we've certainly -- we've bid on a few things and we're out there just because someone obviously wanted to get more aggressive on a deal than we did. So that goes back to my comments about us being willing to be patient and stay really disciplined in the way that we're looking at deals. We have -- as you know, we have plenty of history and a very significant track record as it comes -- when it comes to doing deals and not any part of the cycle. So I don't worry that we're not going to find things kind of as we progress here. But we're kind of, like I said, we're remaining patient, we're remaining disciplined and, pretty comfortable with where we are with our current portfolio and hopeful that we'll be able to find some things here over the next couple quarters, if that makes sense for us.

Thank you, Michael. The next question comes from Thomas Allen from Morgan Stanley. Please Thomas, your line is now open.

Thanks. So just a couple more questions on the cost side, you talked about lower than expected real estate taxes. Can you just help us think about the trajectory of that line for the next few years and quarters?

Yes, sure, Thomas. Thanks for the question. So yes, property taxes are coming in a little bit lighter than they did for the same-property portfolio. If you go back to last year, the year before, they're down roughly 10%. So I think that's a good rule of thumb to use. Now within that line on our income statement is also insurance costs. And insurance costs are up 15% to 20%. So there's a little bit of offset there, but that's why that line has come down and we expect that to continue this year. We're a little bit too early to know what that looks like next year, but obviously we've been pretty aggressive trying to get assessments and the tax expenses lower for us going forward.

And Atish, is that so are real estate and property taxes usually sounds like the larger like two-thirds of that line or is it -- what's the kind waiting line historically.

Yes. They are two-thirds or even a little bit more than that that's right.

Perfect. And then I think I heard you right that payroll expenses are down 32%. I mean, any sense of if we're in a more normalized environment where we think we can keep payroll expenses down versus 2019 levels?

Yes. I think it's really hard because you've got a confluence of both because again not knowing kind of where staffing levels ultimately shake out. And if and when kind of the late the actual wage rates flatten, it's really hard to put a number to that today.

Thank you, Thomas. Our next question comes from Tyler Batory from Janney Montgomery Scott. Please Tyler, go ahead.

Good afternoon. This is Jonathan on for Tyler. Thanks for taking our questions. First one for me today, I wanted to follow-up on the labor and margin discussion. Can you provide some additional color on the guest feedback you're hearing and do you think you'll need to add labor or amenities to meet guests needs in the near-term, or are you still providing ample services in this current or occupancy environment?

Well, I think it's something that in our portfolio, our management companies have been, are keenly attuned to and the asset management I'm working with on making sure that we're providing the right levels of service. I think you certainly saw higher levels of dissatisfaction across the industry with housekeeping services over the summer when hotels were still kind of sorting out what the right level of service was, when you've got three or four people in a guest room in a resort type environment. So I think that's certainly a challenge. I think as the labor markets have opened up a little bit; I think the hotel always been successful in bringing back people into the more guest touch positions. So think about front desk, think about restaurant servers, things like that, that have been a little easier to fill than the housekeeping and culinary positions.

Okay. Very helpful. And then can you remind us how much exposure the portfolio has to international travel and how much of an additional talent any could the reopening of international travel under the U.S. be to the portfolio?

Yes. When we looked at it last, we were sub 10% for sure across the portfolio. As you know, we don't have a lot of significant major market gateway exposure. We do have in some of our hotels, some international crew business, and some of that is in place today, but that we expect to grow as well. We also look forward to the reopening of in particular, the European and South American markets to Orlando and where Hyatt Regency Grand Cypress has been successful at times in capture some of that business information strategies in place to go after that business particularly from the UK as that market opens up.

Thank you, Tyler. We currently have no further questions. I would like to hand over to Marcel Verbaas for any closing comments. Please Marcel, go ahead.

Thanks. Thanks everyone for joining us today and thanks for all the great questions. We look forward to talking to you and seeing many of you over the next few weeks at the various conferences and look forward to talking to everyone again next quarter. Thank you.

This concludes today's call. Thank you for joining. You may now disconnect your lines.