Greetings. And welcome to the Chatham Lodging Trust Second Quarter 2022 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.

Thank you, Joe. Good morning, everyone, and welcome to the Chatham Lodging Trust Second Quarter 2022 Results Conference Call. Please note that many of our comments today are considered forward-looking statements as defined by federal securities laws. These statements are subject to risks and uncertainties, both known and unknown, as described in our most recent Form 10-K and other SEC filings. All information in this call is as of August 3, 2022, unless otherwise noted. And the company undertakes no obligation to update any forward-looking statements to conform the statement to actual results or changes in the company's expectations. You can find copies of our SEC filings and earnings release, which contain reconciliations to non-GAAP financial measures referenced on this call on our website at chathamlodgingtrust.com. Now to provide you with some insights into Chatham's 2022 second quarter results, allow me to introduce Jeff Fisher, Chairman, President and Chief Executive Officer; Dennis Craven, Executive Vice President and Chief Operating Officer; and Jeremy Wegner, Senior Vice President and Chief Financial Officer. Let me turn the session over to Jeff Fisher. Jeff?

Thanks, Patrick. I appreciate everyone joining us this morning for our call. I hope all of you have had a chance to take a look at our earnings release. It certainly was a great quarter for us on many fronts. First, RevPAR has really jumped in recent months. Second quarter RevPAR was up 50% over last year and June RevPAR of $158 exceeded June 2019 RevPAR of $156, the first month since the start of the pandemic where RevPAR exceeded 2019 levels. June RevPAR was up a strong 19% over May's, driven by a combination of incremental leisure travel and a more meaningful return of the business traveler, especially in our 5 hotels in the tech-reliant markets of Silicon Valley and Bellevue, Washington. Next, second quarter operating margins of 50.1%, I think, a great overall result were up 60 basis points over the 2019 second quarter, which is especially impressive when you consider that RevPAR of $138 was still $8 below the 2019 second quarter. Historically, we produced the highest operating margins of all lodging REITs, and we are well on our way to producing those again. The second quarter operating margins would be our third highest second quarter margin since our IPO 12 years ago. We know there is even more margin upside in the portfolio, particularly as ADR continues to increase. And it's encouraging that we are within earshot of an all-time high set 7 years ago, given all the incremental costs we've absorbed over the years from a labor and benefits perspective. As a result of the strong performance, we were able to generate free cash flow of over $20 million in the quarter, almost double our free cash flow from the entirety of 2021 and more than 5x higher than our 2021 second quarter and up over 7x our first quarter results. Lastly, we closed on the extremely successful sale of our 4 hotels for $80 million at a 2019 cap rate of approximately 6% and a 2021 cap rate of 2%. The sale of these 4 hotels certainly positions our balance sheet to be aggressive on the acquisition front when the time is right. Structurally, I'm very pleased with where we stand today. We are exiting our credit facility covenant waiver period, and our financial position is healthier than it has been in a decade. We have a mere $15 million outstanding on our $250 million credit facility and project that will be reduced to 0 by the end of the year. Additionally, we'll have 24 unencumbered assets available to provide liquidity to acquire hotels and address at the right time, a very manageable $114 million of fixed rate debt maturities next year. Before turning it over to Dennis, I want to talk about some developing trends. Momentum has been building all year within our portfolio, and I think this is an important point. Since the start of the year, weekday and weekend occupancy as well as weekday and weekend ADR have grown sequentially each month of 2022. As most experienced, the first week or so of July was a little soft given the timing of the July 4 holiday, certainly not indicative of our trend because for the last 21 days of July, occupancy was 85%, ADR was $194 and RevPAR was $165, all would be COVID area highs. Interesting, not only would this RevPAR be 4% higher than last month as well as July 2019, this RevPAR of $165 would be an all-time July high for Chatham, $5 higher than our previous record of $159 set in 2018. These trends further support our belief that the business traveler is returning and adding to a very strong leisure base. We're seeing increased demand in many of our primary business travel driven markets such as Washington, D.C., the Northeastern U.S., Dallas and especially in Austin, all posting sizable gains again this quarter. But for us, as we've said many times, it's the resurgence in Silicon Valley and Bellevue, Washington that really helps pop our performance and increases our confidence for our promising outlook going forward. Since the intern business returned this year starting in late May and the business traveler is picking up steam overall, our performance in these markets is nearing pre-pandemic levels. At the 5 hotels, June RevPAR was $192 on occupancy of 86% and ADR of $223, which is down 10% from June 2019 RevPAR of $213 on occupancy of 88% and ADR of $241. July RevPAR finished a strong $207, which was up 12% over June's RevPAR and only off 2% to July 2019. So we're really coming along there. Looking past the summer, we're encouraged by what we're hearing from our teams in these 5 hotels. Our key accounts continue to reach out for blocks of rooms in the fall, and that list includes common names known by everybody and our long-term customers, Samsung, Google, Apple, Applied Materials, Amazon and the rest. From a retail perspective, although our booking window is relatively short term, we are seeing retail bookings ahead of 2019 levels. And although it isn't huge in terms of dollars, it is the first time we've been up in quite some time. International travel is slowly gaining traction. And again, even though total revenue dollars are not significant, the list of countries from which we're seeing guests has grown from 15 to 25 countries in July. Lastly, we're starting to see the bell curve with Monday to Wednesday, Thursday and Thursday, beating the rest of the week. Air travel into San Francisco and San Jose is starting to rebound and has a lot of upside to come. Domestic deployments are down about 25% from 2019 levels still and international deployments are up about 40%. In Seattle, both domestic and international deployments are up 15% and 20% respectively, but with the lessening of restrictions for international travel and the return to office just starting to pick up steam in these lagging tech-driven markets, we certainly expect business travel to continue to gain momentum. That just translates into more upside for Chatham. In Austin, where we acquired 2 hotels last year, demand continues to strengthen and is benefiting from tech company expansions and relocations to the area. Our 2 hotels at the domain ran occupancy of 89% in the quarter and RevPAR at the residence and in the TownPlace Suites were $154 and $131 respectively. On the operating side, these 2 hotels generated operating margins of 58%, pretty strong. Washington, D.C., which was previously a pretty dormant market where we managed to put heads in beds came back to life in the second quarter with our 2 residences in Tysons Corner and Foggy Bottom seeing occupancy of 87% and the Embassy Suites in Springfield, Virginia, just outside of D.C., boosting occupancy above 75%. Importantly, the big driver of the growth was ADR with average ADR gains of 55% at the 3 hotels. Needless to say, with these kind of numbers, we believe the future is bright. People still like to travel. People like to do business in person. And we've got some new kinds of travelers to the space, the digital nomad traveler that we've talked about, people who live away from the office and are asked to come back to their office regularly and with return to office allowing more flexibility, employees can get away for long work weekends and mix business with leisure as we've seen. These new travelers will be staying for more than 1 or 2 nights, they've got the flexibility to do that. And our extended stay hotels, which, of course, is the predominance of our portfolio, the majority of our hotels are extended stay, and we believe we will be the primary beneficiary of this new added demand. So we remain confident in the ultimate recovery and trajectory of the portfolio, and this was the first quarter since the pandemic began where our most significant markets started to show strong gains in either ADR occupancy or both. Adding to great top line performance, of course, is our ability to generate very strong operating margins, very high flow-through of that top line higher than 2019, and we believe we will take same-store margins even higher, which means our free cash flow will meaningfully grow. Our balance sheet, as I said, is in great shape. I think we're poised to outperform. With that, I'd like to turn it over to Dennis for a little more color.

Thanks, Jeff. Compared to 2019, our monthly RevPAR improved each month of the quarter from down 12% and 6% in April and May to up 2% in June. As Jeff talked about, the acceleration is primarily attributable to the return of the business traveler, especially in our tech-driven markets. As we talked about on our last earnings call, this quarter marked the return of in-person internships and significant room demand from high-tech companies such as Meta, Apple, eBay and T-Mobile. As we said before, the business accounted for over $7 million in revenue. And this year, we allocated more rooms for that business, knowing that the return of the international business traveler and longer-term consulting type business in these markets would build gradually over the course of this year and next year. At this point, we are projecting to earn approximately $13 million in intern revenue this summer, so almost double what we did in 2019. Taking more of this business was definitely the right decision. It's proven out by a pretty attractive gain in our RevPAR indexes these past 2 months. An added benefit is that our operating margin on this business is very high as limited room servicing is part of the arrangement. June operating margins at these 5 tech-driven hotels were approximately 63%. Large group and convention business is also coming back, and we're seeing healthy gains at our hotels in certain downtown markets such as San Diego, Dallas and San Antonio. San Diego just recently hosted Comic-Con this month and has really been a standout all year for us. During the second quarter, 17 of our 37 comparable hotels produced RevPAR greater than 2019. Weekend travel, which for us averaged just over 80% in the quarter, continued to outperform weekday travel, but the gap is compressing due in most part again to the business traveler coming back. Weekday occupancy, which is the best indicator of business travel has risen from below 70% in March to the mid-70s in April and May to over 80% in June, another COVID era high. Coinciding with our rising demand, we continue to push rates in our ADR both weekday and weekend have also grown each month of 2022 sequentially. Weekday ADRs have increased from $158 in March to $187 in June, and weekend ADRs have increased from $168 in March to $198 in June. Our message to our operating team continues to be to push rates as we believe it is a great opportunity to hopefully reset some rates in our business-driven markets. Our 5 highest hotels with absolute RevPAR in the quarter were Hilton Garden Inn in Marina del Rey with RevPAR of almost $200 on occupancy of 86%, followed by our residences in Foggy Bottom in Hampton Inn, Portland with RevPAR of $195 and then the residences in San Diego, Gaslamp district and then the Springhill Suites, Savannah. Leisure markets remained strong in the quarter, both relative to last year in 2019, and we haven't seen much of a hit due to rising inflation in travel costs, whether that's flying or driving. San Diego, Anaheim, Savannah, Charleston, Fort Lauderdale are all still showing growth. Our seasonally high-performing summer hotels in New Hampshire and Portland are showing growth of over 20% relative to last June and up approximately 5% in 2019. Our Dustin market has shown some softness relative to last year, which we believe is most likely attributable to gas and other inflationary costs. Our top 5 absolute occupancy hotels in the quarter were our residences in Charleston Summerville, followed by our residences in White Plains, our Homewood Suites in Maitland and then our residences in New Rochelle, with all 4 of those hotels seeing occupancy above 92%. Our top 5 was rounded out by the SpringHill Suites Savannah and our residence in Austin, both with occupancy of 89%. Our portfolio did significantly better than the industry with second quarter occupancy reaching 77% compared to industry-wide occupancy of 67%. We continue to see an average length of stay longer than our historical levels, which dovetails back to Jeff's comments regarding today's travelers staying longer in hotels. At our Residence Inn and Homewood Suites hotels, our average length of stay was approximately 3 nights, which is still about 20% higher than pre-pandemic levels. For the quarter, total revenue of $82 million was up 63% compared to last year's revenue of $50 million, and we were able to generate incremental GOP of almost $19 million for flow-through of approximately 60% on that increased top line. Revenue growth doesn't mean certainly as much if you can't push that through to the bottom line. And we certainly have been delivering great flow-through in same-store margin growth over 2019 despite RevPAR coming in 5% below 2019 levels. That margin growth is based on our entire comparable portfolio, not just some select component thereof. Our same-store second quarter operating margin surpassed 50% and were up 60 basis points over the 2019 second quarter. A good bit of this increase is attributable to a more efficient operating structure, especially with respect to labor. Our employee count is still down about 20% compared to pre-pandemic levels. And although we are understaffed out there, we expect there will be certainly be a permanent headcount reduction on a long-term basis. On a per occupied room basis at our comparable hotels, payroll and benefit costs were approximately $32 a decline of $2 or 6%. During the quarter, all hotels generated positive hotel EBITDA in GOP. Our top 5 producers of GOP in the quarter were our Gaslamp Residence Inn, which was also the highest producing GOP hotel in the first quarter, followed by Silicon Valley II and then our residences in Bellevue, Washington. And then lastly, our embassy in Springfield and our Silicon Valley I hotel. And just missing out on the top 5 were our SpringHill Suites in Savannah and our residences in Mountain View. And really, the fact that 3 of the top 7 GOP producing hotels were tech-related obviously is very encouraging as we move forward and a sign of certainly what those markets mean to us. As an added note, the recently opened Home2 Woodland Hills generated a pretty respectable operating margin of 43% in the quarter, given again that, that hotel is continuing to ramp up on all fronts. On the CapEx side, the company incurred capital expenditures of approximately $5 million in the quarter, which excludes any spending related to the Warner Center development. Our 2022 capital expenditure budget is now going to be approximately $19 million after the sale of 4 hotels. And later this year, we'll have renovation starting at 3 hotels, which is our Residence Inn in Washington, D.C. Foggy Bottom, White Plains, New York; and Holtsville, New York.

Thanks, Dennis. Good morning, everyone. Chatham's Q2 '22 RevPAR of $138 represents a 50% increase versus our Q2 2021 RevPAR of $92 and was only 5.2% below our Q2 2019 RevPAR of $146. Performance strengthened significantly over the course of the quarter with April RevPAR of $123, down 11.9% to 2019, May RevPAR of $133, down 6.4% in 2019 and June RevPAR of $158, up 1.9% to 2019. The early stages of the recovery were driven primarily by leisure travel, but over the course of Q2, we have seen a significant uptick in midweek results, which indicates that business travel is now starting to make a meaningful recovery. Our Q3 is off to a strong start, with July RevPAR of $158 equal to the RevPAR achieved in July 2019. We were able to generate a Q2 GOP margin of 49.2% and hotel EBITDA margin of 41.9%, which were up from our Q2 2019 margins despite the fact that Q2 RevPAR was $8 below the Q2 2019 level. Our Q2 hotel EBITDA was $34.1 million. Adjusted EBITDA was $31.3 million. Adjusted FFO was $0.41 per share and cash flow before capital, which represents hotel EBITDA less corporate G&A, cash interest and $2.2 million of principal amortization was positive $20.3 million. In Q2, Chatham completed the sales of the Hilton Garden in Billerica Homewood Dallas Market Center, Residence Inn, Houston West University, and Courtyard Houston West University hotels for $80 million. These hotels had an average age of 29 years, approximately $12 million of capital requirements over the course of the next year and generated a 2019 RevPAR of $98 versus the 2019 RevPAR of $135 for the rest of Chatham's portfolio. Pro forma for the sales of these 4 hotels, Chatham's 2019 RevPAR would have been $124 in Q1, $146 in Q2, $149 in Q3 and $121 in Q4. Despite the fact that the quality of these hotels was much lower than the rest of Chatham's portfolio, the sale price, including capital savings, reflects a 6.3% cap rate on 2019 NOI. Proceeds from these asset sales were used to repay credit facility borrowings. Chatham's balance sheet is now in the best shape it's ever been. At June 30, we had $253 million of liquidity between our unrestricted cash balance of $18 million and $235 million of revolving credit facility availability. We are exiting our credit facility covenant waiver period with the delivery of our Q2 compliance certificate, which further increases our financial flexibility. At the end of Q2, our leverage ratio as defined by our credit agreement was approximately 30%, which is materially below our pre-pandemic leverage, which was generally in the 45% area. We have no debt maturing in 2022 and only $114 million of maturities in 2023. With our reasonable leverage, solid liquidity and meaningful free cash flow, we are well positioned to refinance debt maturities when needed and acquire hotels when we find attractive opportunities. We are very encouraged by the improving operating trends we have seen in Q2, especially the continuing recovery we have seen in business travel, the growth that we expect the Austin and Dustin acquisitions and the Warner Center development to generate and our ability to pursue additional growth opportunities given our strong balance sheet. This concludes my portion of the call. Operator, please open the line for questions.

[Operator Instructions] Our first question comes from the line of Anthony Powell with Barclays.

Just a question on business and leisure. So you mentioned that business travel is really picking up, which is nice and leisure is actually still holding in except for one hotel. I'm curious what your view is on the ability for the leisure properties to really maintain or even grow versus '19, even as you see more business travel come back. Have you seen any kind of softening of forward booking trends or anything like that outside of Dustin? And what's your view on the those hotels over the next year or so?

Yes. I think I'd start out by saying we don't see any softening here at all. If anything, we're encouraged, as I said, by just the newer type of flexibility with people working away from the office that allows them to come to our hotels in these kind of markets, use our full suites with kitchen for 4 or 5 days at a time and work and play. So I think that will continue to be a trend. And although folks are certainly worried about leisure, again, you've got to remember, when you count up our leisure hotels, they might be in hotel number, 15% of our portfolio. So we are in a little different spot. I think than a lot of these other companies that have just bought a ton of resorts and a ton of hotels in these kind of markets, we are staying true to our form and our belief in the kind of hotels and the kind of markets we're in.

Maybe just an update on the transaction market, what are you seeing out there in terms of deals in the market, bid-ask spread, just things like that would be super helpful.

Well, not to be cute, but it seems like most buyers are taking the summer off here with what's going on in the credit markets and really banks tightening up, debt obviously becoming way more expensive. There is a pretty wide in my opinion, anyway, gap in the bid-ask. And I think that there were a bunch of transactions pending that I'm aware of with different folks and different companies and all, I think, are almost all within the last 30 days are looking for some price reduction. And if the price reduction isn't happening, the deals are kind of being tabled for the time being. And we are certainly not in a rush to take our pretty fantastic balance sheet right at this moment, unless it is a compelling opportunity at what I would call a repriced opportunity given the realities of today.

Do you think that the strong performance that we're seeing across the industry will actually result in price cuts? Because it seems to me that things are pretty good. So if you're a seller, why would you actually accept the price cut? And I understand rates are up, but performance is strong and better than people thought. So how do you think that balances out this year?

Well, that's right. That's why I said people are taking time out because you're right. I mean business is so good. People are getting ADRs that they never suspected they would get. Those of us that have been in a hotel business a long time, but even if you had your hotel over the last 5 to 7 years prior to 2019, didn't see a heck of a lot of ADR growth. So now you're seeing it. You're seeing people willing to pay. And you're right. If the buyer comes along, and I think the typical ask right now is about a 10% price reduction, it's really not happening.

Our next question comes from the line of Aryeh Klein with BMO Capital Markets.

Maybe just on Silicon Valley, that market is recovering quite well here and benefiting from the interim business that's come back. But how are you thinking about that market, the rest of the year post interim business and as kind of normalized business travel returns?

Aryeh, this is Dennis. Listen, I think in some of Jeff's prepared comments, he addressed kind of the trend that we're seeing out there, which is our top corporate accounts are looking at doing business with us in the fall and in the winter on the retail side, even though it's not a meaningful producer at the moment, the pace is well up compared to 2019. And then even if you look at some of the kind of the corporate-related stuff that also is at least encouraging. So I think for us, as we get past Labor Day, the true revenue dollars, I think, will -- whether it softens out compared to the summer because of all the interim business and then start kind of building back up again or not is probably too early to tell. But at least as we sit here today, all signs are pretty encouraging that the top account that we normally do business with are going to continue to produce room demand for the second half of the year after the interns all check out. So that's encouraging as well from an ADR perspective, that business is still strong. So I think -- and I think as we talked about with deployments and international travel coming into San Jose, Bellevue in San Francisco still being off kind of 20% to 40%, whether you're talking domestic or international travel that I think is just going to continue to get better and better. So I think it's going to be a little bit bouncy along the way, but I think the overall trend is still looking upwards still.

And then maybe, Dennis, you mentioned Dustin softness likely related to some of the higher cost out there. Why would only that market really see that? And could it just be tougher comps given that there are more travel options now versus last year?

I think it's some of that, Aryeh, I think also you've got a market there that is a fairly significant drive to market, and it's got -- it's also a market that has a tremendous amount of condominiums and homes that are rented out on a weekly basis. So whereas for those condos and townhomes and houses, generally, those are probably going to be for a week stay, something like that, and hotels are not quite as long. And if you look at our pattern, especially at the Hilton Garden in Dustin, it's really not necessarily an occupancy deal, it's more just a rate perspective at this moment. So the hotels are still throughout the summer running 90% to 100% occupancies, it's merely a rate thing. So I think as you've kind of seen that softness, at least in term -- from inflationary prices affect kind of that type of specific drive to market. And if you compare it to like our Fort Lauderdale Residence Inn, which is still holding up pretty well compared to last year and obviously still well up compared to 2019. So I think it's just a combination of a few different factors for that specific market.

Our next question comes from the line of Tyler Batory with Oppenheimer.

A couple for me here. In terms of trends post Q2, I wanted to circle back first on the July commentary, which I thought was very helpful in terms of highlighting the last 21 days of the month, RevPAR $165. How did that compare with July of 2019? And I'm assuming the strength there, the progression, second half of July compared with June is really, really business travel related that was driving the strength there?

Yes, that's exactly right. I mean July -- overall July 2022 compared to July 2019 was basically, I think, up about maybe $0.20 2022 versus 2019 for all 37 comparable hotels. And then, yes, obviously, for the last 21 days as we kind of got out of what I think for the industry ended up being a relatively soft period of time around July 4. Yes, you saw and really as you got to that next Monday night after July 4, it really ramped up pretty quickly. So I think it is -- was primarily due to people, especially business travel, getting back out on the room.

Okay. And then in terms of August and September, would you expect or is it possible that August RevPAR on an absolute basis is higher than July? And just help us -- remind us kind of typical seasonality and how that might impact your portfolio as we move through Q3 here?

Yes, Tyler, good question. Seasonally, August ticks down a bit compared to July, and I think we would expect that to be the same for 2022 because you obviously have people going back to school, especially all across kind of the southeast where they think in many markets, they've already started back to school, so -- or starting this week. So seasonally, it ticks down a few dollars from July to August. So I think we would expect all things being the same on the business traveler side that that would be the same.

Yes, Tyler, just looking back at 2019, for example, our July was $158. August was $149 and September was $139. So like Dennis said, we expect to see the same sort of seasonal trends this year.

In terms of the margin performance, I think, really quite strong, really impressive growth over 2019. I mean do you think that's something that's sustainable in the back half, given some of the cost inflation that's out there maybe with seasonality starting to impact the portfolio as well? Or are you kind of in the thought where you're up 60 basis points over '19 in the second quarter, that's perhaps that growth could even accelerate or at least continue over the next couple of quarters here?

We think we're going to continue to outperform 2019 margins, as I talked about in my prepared comments. We do believe there's a permanent workforce reduction across the portfolio. We're still down, I think, just over 20% in employee head count at the comparable hotels. So I think certainly, even though seasonally, will continue to come down on the top line a little bit over the next couple of months, we would expect to produce still strong margins, especially relative to 2019.

Okay. Okay. And then last question from me, just in terms of the capital allocation side of things, lots of liquidity, a great balance sheet here. Obviously, looking at an acquisition, we'll see what comes down the pipe obviously, in January, can repay that Warner Center loan. Just interested how you're thinking about deploying some of your capital over the next 6 months here and really where the priorities are?

Yes. I mean I'll start and then I'll let Jeremy or Jeff chime in as well. I think as Jeff talked about with Anthony's question, the acquisition market is pretty dead at the moment. So at least for the near term, i.e., next -- who knows how many days or months we're going to be pretty quiet until there is either a settling down of financing options or a repricing of buyer and seller expectations. So I think in light of that, we're going to be pretty quiet on that front. And as Jeremy talked about, we've got $114 million of maturities next year, and that doesn't include the Warner Center construction loan that we can take out early next year. So I think we're going to continue to work towards trying to grow the portfolio. But meanwhile, we sit in a pretty good position to address the maturities and not have to be forced into doing some type of financing transaction that would be not very smart at this point.

Yes, like Dennis said, I think we just want to maintain our flexibility given our leverage level. We've certainly got capacity to acquire hotels. But just because we have that liquidity and low leverage doesn't mean we want to go out and overpay for something today either. So we're just going to wait for the right opportunities to deploy capital.

Our next question comes from the line of Bryan Maher with B. Riley Securities.

On Silicon Valley, maybe asked a different way, I think in 2019, you did maybe $35 million in EBITDA there. And in 2021, it was $7 million. What's kind of your best guess for how 2022 shakes out, given the current trends you're seeing?

Bryan, I don't know that number off the top of my head for those 5 hotels. I'd have to get back to you on it. But I think if you just look at where RevPAR still is compared to 2019, we're still down compared to that even 2% in July. So yes, I'd expect we'd still be meaningfully below that, whether that's 25% or 30%, 20%, I don't know, but I can come back to you on it for the full year.

And then on business travel, given that you've sold a few assets, you've bought a few assets, and so the mix has kind of changed a bit from pre-pandemic. Where would you say you are on kind of the continuum of business travel on a portfolio-adjusted basis? How far down? Is it still relative to kind of pre-pandemic levels, again, kind of adjusting for your transactions?

I think -- let me start out by saying when you think about what we sold and what we bought, really, other than Dustin, there's probably a very similar reliance, as I said, with 15% or so will be in leisure. So -- only. So that is a little bit changed with Dustin. But I think you think about it generally the same way. And again, I think others will tell you, but we have, obviously, the largest concentration in pure tech markets. That's where the unknown is as to the strength of the business traveler once the interns go away. And really, I think the third quarter specifically will tell that story, and we'll be able to talk to you, I think in a lot more specific terms as to the overall business traveler environment. But in most of our other markets, those business travelers are back. They are more diversified and therefore, not as reliant on tech, which, as you know, seems to be a little bit more liberal in allowing folks to work from wherever not come back to the office, et cetera. On the other hand, when you look at future trends and I read the Silicon Valley Business Journal, does that come out every week? You keep seeing all the big names taking down and committing and/or building more office space. So it's an interesting market. That's for sure. And you know what, time will tell on this front.

Great. And just last for me. On the rate front, and people who know that I cover hotels constantly calling me complaining about how same rates are at certain leisure hotels, not necessarily yours, some of the higher-end stuff. But given what's going on with everybody pushing rate, when do you know that you need to kind of pull back or level off? What signal are you looking for that you can't go anymore? Is it a certain pullback in occupancy? Is it something else? That would be helpful.

Look, it's a day-by-day, minute-by-minute environment in terms of revenue management and our revenue managers are tweaking that purely with the aid of obviously the revenue management systems provided by the franchisors daily. I think that what you definitely see is compared to prior periods in the same month in the same week, some kind of falloff in demand, which is going to result most likely in not being able to fill. So it's occupancy. And then when you see that you can't fill those rooms and other hotels are perhaps dropping their rates a little bit, it's just the way the revenue management is done, the way the brand systems work. There'll be a little abatement in terms of rate in most cases. For us, with our extended stay predominance and the base occupancy in essence that you've got that's higher than most traditional transient hotels, I think we can be a little more bullish or less likely to have to drop right to fill if that's what the game is. So again, we like our type of hotels for that reason.

This concludes our question-and-answer session. I would like to turn the call back to management for any closing remarks.

We thank you all for being on the call today. It certainly was an exciting quarter, and I think it will continue to be so as we move forward. And look forward to our next call with everybody. Thank you. Have a great day.

This concludes today's conference. Thank you for your participation. You may now disconnect.