Thank you, Donna, and good morning, everyone. Welcome to our first quarter 2021 earnings call and webcast. Joining me today is Jon Bortz, our Chairman and Chief Executive Officer. But before we start this morning, a quick reminder that many of our comments today are considered forward-looking statements under federal securities laws. These statements are subject to numerous risks and uncertainties as described in our 10-K for 2020. Our other SEC reports and future results could differ materially from those implied today and by our comments. Forward-looking statements that we make today are effective only as of today, April 30, 2021, and we undertake no duty to update them later. Our SEC reports and our earnings release contain reconciliations of the non-GAAP financial measures we use, which are available on our website at pebblebrookhotels.com. When discussing our financial and operating results, we will, in many cases, also compare our first quarter results to the first quarter of 2019. We believe this is a more accurate representation of the comparable operating and financial performance rather than comparing to 2020. We provided these comparative performance measures for 2021, 2020, and 2019 in the financial statement tables as part of our press release we filed last night. Okay, on to the highlights of the first quarter. Last year this time, hotel demand was virtually zero. We only had 8 of our hotels open. We are burning between $25 million and $30 million of cash per month, and we also had about $450 million of liquidity. Today, about a year later, we have 48 hotels opened, 11 more than when we started the year and 8 more since last quarter. In March, for the first time since the pandemic began, we achieved positive hotel EBITDA for the month. This exceeded our expectations due primarily to the greater pickup in March from an extended spring break. Our total corporate cash burn in March was approximately $12 million, a significant improvement from January and February when we averaged over $21 million per month. And today, we have over $900 million of liquidity. Progress on vaccinations combined with significant pent-up leisure travel demand provides us with more confidence and optimism in the path to recovery despite business travel and group demand still far from pre-pandemic levels. The crisis is far from over, but the hotel industry in our portfolio is heading in the right direction, and trends are improving monthly, which is very encouraging. As the songs from the '70s indicated, yesterday is gone and tomorrow should be better. Same-property total revenues of $83.2 million were 74.7% below the first quarter of 2019, but marked a 12.3% improvement from the fourth quarter of 2020 when we had revenues of $74 million. You'll recall when we spoke 2 months ago, we thought the first quarter would be slightly below the fourth quarter. Total hotel level expenses of $99.3 million were reduced by 58.5% versus Q1 2019. Expenses before fixed costs like property taxes and insurance were cut by 66.6% compared to Q1 2019. Our total property level expense reduction was 78% of the revenue decline and 89% before fixed expenses. This highlights the tireless efforts of our operating and asset management teams who have been focused on maintaining enhanced cleaning and safety protocols for our guests and hotel team members while also instituting cost controls and implementing new best practices to improve efficiencies. Our hotel operating teams are also trying to overcome the challenges we are experiencing with a lack of available workers in every market. We expect this shortage of hotel workers to remain a challenge for several months but improve in September as enhanced unemployment benefits are due to run out, children should be back in school full-time, and the fear of the virus is dramatically reduced due to widespread vaccinations. On the same-property RevPAR basis versus the comparable period in 2019, January was down 83%, February was down 76.4%, and March was down 70.2%, which represented the best-performing month since the pandemic started last March. For the second quarter, we currently expect RevPAR to be down between 66% and 70% compared with the comparable period in 2019, which continues this improving trend. Our total portfolio generated $19.4 million of revenue in January with 37 hotels opened, $26 million in February with 38 hotels opened, and $38.1 million in March with 39 hotels opened. We forecast revenues of approximately $42 million for April, slightly up from March with 44 hotels open. Now, 44 excludes the additional 4 hotels we reopened near the end of the month. Please keep in mind that as these last hotels reopen, they opened with lower occupancies, and they're reopening in lower occupancy and slower recovering markets. So ADRs will also be at lower levels. This will weigh down our overall statistics, but it will increase our total revenues and hotel EBITDA numbers. For the first quarter, same-property hotel EBITDA was negative $16.1 million compared with a positive $89.4 million from Q1 2019. However, it does mark an improvement from the fourth quarter of 2020 when we had a hotel EBITDA loss of $19.1 million. By month, same-property hotel EBITDA was negative $11.4 million in January, negative $6 million in February, and positive $1.3 million in March. Our 8 resorts have been the consistent bright spot in our portfolio throughout this pandemic, whether in summer, fall, winter, or spring. They generated a positive $14.5 million of hotel EBITDA in the quarter. This resulted from an occupancy of 41% at an average daily rate of $406, which was more than $93 and a 30% increase over the comparable first quarter of 2019. Spend at our resorts was also up significantly over the comparable period in 2019, resulting in total revenue per occupied room higher by more than 10%. As a reminder, leisure transient portfolio-wide has historically accounted for about 40% of our demand, with corporate transient at 35% and group at 25%. Not only do our drive-to resorts benefit from strong leisure, but all of our urban markets have strong leisure components. Markets like San Diego and Los Angeles are benefiting now. Washington, D.C., Boston, Seattle, Portland, San Francisco, Chicago, and Philadelphia should also benefit from this summer, assuming the amenities and attractions are open in those markets. Our adjusted EBITDA was negative $25 million in the first quarter compared with a positive $90.5 million in Q1 2019. Despite this seasonally slower first quarter, this is an improvement compared with the negative $27.9 million of adjusted EBITDA for the fourth quarter ending December 31, 2020, and shows the positive direction of the portfolio. Adjusted FFO per share declined to a negative $0.42 per share compared with a positive $0.46 per share in Q1 2019. Shifting to our capital improvements, during the first quarter, we invested $9.6 million in our portfolio. About one-third of this capital was related to the redevelopment of L'Auberge in Del Mar, California. This transformation is expected to be completed within several weeks, and the new lobby, outdoor restaurant, new cafe, and renovated rooms have reopened. For 2021, we anticipate investing an additional $60 million to $80 million for a total of $70 million to $90 million in our portfolio. We've decided to move forward on the $25 million redevelopment of Hotel Vitale in San Francisco into the 1 Hotel. We will start this renovation later this summer and target to complete it by year-end. As a result, we will keep Hotel Vitale closed for the rest of this year to complete the redevelopment and transformation with less disruption than if the hotel were open. This will also allow us to complete the renovation more quickly and at a lower cost. We will also be moving forward on the $5 million redevelopment and renovation of the Grafton on Sunset in West Hollywood, California. We expect to start this renovation in the fourth quarter with completion in the first quarter of 2022. We will relaunch this hotel as the eighth member of the Unofficial Z collection upon its completion, with the new Z name yet to be finalized. Our decision to ramp up our reinvestment projects is a very positive indicator of our confidence in the direction of the travel recovery that is beginning to take hold and our strong overall financial condition and resources. We want our hotels to be in a position to take advantage of the substantial step-up in travel and hotel demand that we expect in 2022 and beyond, which is why we are moving forward with these renovations, which are transformational and should lead to outsized cash flow growth. Shifting to asset dispositions, on April 1, we announced we completed the sale of the Sir Francis Drake Hotel in San Francisco. We generated approximately $157.6 million of proceeds from the sale. Since the second quarter of 2020, we completed approximately $225 million of property dispositions. We intend to strategically reallocate this capital into new investment opportunities that we believe will provide enhanced returns and greater diversification for our portfolio as the opportunities become available. Turning to our balance sheet and liquidity, with the proceeds from the recent sale of the Sir Francis Drake, we have more than $920 million of liquidity. This includes cash of $279 million and $643 million available under our unsecured credit facility. Our net debt to book value is approximately 42%. Excluding our convertible notes, which can be converted to common equity when our common share price exceeds $25.47 per share, this ratio is 27%. We're proud of the tremendous progress we've made, strengthening our balance sheet, reducing near-term debt maturities, and increasing our liquidity. This should allow us to take advantage of new investment opportunities as they become available.

Thanks, Ray. So I thought I'd focus on what we're currently seeing in our business and how we think this year is likely to play out now that it seems we have perhaps a more predictable path, though it continues to be a path with quite a lot of uncertainty. None of us has ever been through a pandemic, so the big variables include the progress we make against the virus, both here and around the world, and then how governments, individuals, and businesses, in particular, behave as the health issues recede, assuming we have no setbacks. We're certainly very encouraged by the reduction in our country's daily cases, hospitalizations, and deaths, and the pace and general level of vaccinations. This year's recovery is being led by the leisure traveler, who continues to be the majority of the demand currently traveling. While all segments will increase as the year goes on, leisure travel is a segment that is likely to remain the driving force behind the recovery for the second and third quarters as government restrictions ease and as more and more people feel safe and comfortable traveling. In fact, we've already seen the leisure recovery pick up speed since the beginning of the year when it was at its low point. Not only did occupancy pick up in February and March, but overall bookings consistently increased throughout the entire first quarter, including for future months. For us, demand consistently increased throughout all of our markets. For example, total hotel revenue per day in February averaged about 49% higher than in January, and March increased another 32% from February. April is forecasted to be up another 17% from March based on the first 25 days of the month. Room revenues have improved even more. Average daily room revenues increased 55% from January to February, another 35% from February to March, and we're forecasting they'll be up another 17% from March to April, again based on the first 25 days of the month. While the nominal numbers are still very low, averaging about $1.2 million per day in March for total revenues, the improvement in transient demand and occupancy have clearly been significant. Overall, except for periods following holidays, our total transient bookings have increased week-over-week just about every week this year. We're also encouraged that we're seeing forward transient bookings pick up as well as the leisure customer feels increasingly confident booking vacations and leisure trips further out than they've been doing so far during the pandemic. When it comes to rates, we've seen consistently strong growth in ADRs at our resorts, with 7 of 8 of them achieving significant increases over 2019 levels. In the first quarter, the average rate at our resorts on a combined basis increased $93.88 over 2019's first quarter, a whopping 30.1%. Weekday rate growth at our resorts was even stronger than weekend rate growth, up 31.5% on weekdays versus 20.6% on weekends. The leisure customer has plenty of money to spend, and a greater number are choosing upgraded and more expensive room types, including view rooms and suites, and this is helping to increase average rates. While the same cannot be said for rate growth at our urban hotels, the strength of our resort portfolio has been so great that it dramatically mitigated the urban rate decline of 31.5%. This decline was less on the weekends than on the weekdays. Not surprisingly, given our traditional weekday high-rated business in our urban markets comes from citywide conventions, corporate group and business transient, all segments traveling in a very limited amount during the first quarter. Yet because of the huge rate increases in our resort portfolio, the entire portfolio only experienced a 4.7% rate decline from 2019's Q1. We continue to focus our revenue management efforts on recovering ADR in our urban markets, particularly as demand improves. During last September and October, we saw the beginnings of a modest recovery in business travel. However, with the rise in the virus' spread, increased government restrictions and the arrival of winter, transient business travel slowed significantly in the first half of Q1. We're encouraged that we've begun to see some business travel return again. Some examples include TV, movie and music production in L.A.; consultants, health care, pharmaceutical and IT-related project travelers in various markets, including Boston; and some government, as well as sports and entertainment throughout the portfolio as those event venues reopen again with spectators and fans. We've also had some corporate groups actualize, primarily in Florida, including incentive groups and strategic planning meetings. We expect to see a gradual improvement in business travel over the course of the year, but we don't really expect a major increase until after Labor Day in early September. Growth in business travel between now and Labor Day will likely come from private businesses and small- to medium-sized public companies. We've also hosted many social groups at our properties, especially related to weddings. In fact, wedding bookings for the second half of the year continue to pick up, and we may see a record number of weddings in the second half. In the first quarter, group accounted for 10.2% of our total room revenues. This does not include the university student business at the W Boston, but includes airline crew business throughout the portfolio, representing over 4% of total room revenues. Corporate group represented a little over 2% of total room revenues in the quarter. There are also a significant number of groups that have or intend to rebook into the second half of 2021 and into 2022 as well. We're very encouraged about how well group is shaping up for 2022 at this point. While the pace for 2022 continues to be significantly behind the pace in 2018 and 2019, not surprisingly, it's down 28% in room nights. Activity has definitely picked up as meeting planners return to work and become more confident about holding meetings. There's more clarity and optimism on success against the virus with restrictions on meetings being loosened or dropped altogether, and that's providing more comfort that groups will be able to meet or hold their events after they do book their business. Equally encouraging is that rate is holding as well. Our group rate for 2022 is currently ahead by 3.8% versus the same time in 2018 and 2019, which was our last normal pre-pandemic year. When we look at the second half of 2021, we're definitely much more cautious about groups and trying to forecast when businesses will move forward and meet in person. In the last 4 months, we're encouraged by the continuous improvement in activity related to the number of leads, site tours, discussions, and group bookings throughout our portfolio. Nevertheless, overall activity levels, especially bookings, are not yet at the levels of 2019, and they certainly vary meaningfully from market to market. Our group pace for the second half of 2021 is down roughly 45%, with ADR about flat, which is very encouraging. Group rates have generally held up or been rolled forward from previous bookings, and some have even increased if they've moved from a seasonally lower-rated time of year to a seasonally stronger time of year. We certainly hope group will begin to pick up as the year moves along, and progress continues against the virus. However, we're concerned that businesses will be more cautious about meeting this year, particularly before Labor Day. There are glimpses of hope, however, including the Concrete Citywide to be held in Las Vegas in June, which seems to be a pretty scary idea, concrete in Vegas. Nevertheless, we should go forward. We have the Alice Convention scheduled for late July in L.A., which should go forward if California and L.A. reopen as announced and allow such a large conference. I'm sure there are many other examples. So we'll get a better view of the willingness of business travelers to attend meetings, conferences, and conventions later in the second quarter. From an expectations perspective, if we assume continued progress against the virus, we believe the second quarter should be better than the first quarter. We should be able to achieve not only positive hotel EBITDA, but we should be able to generate positive corporate adjusted EBITDA for the quarter. With further progress in the second half of the year, we're hopeful that we can eliminate our operating cash burn and generate positive adjusted FFO sometime in the third quarter. One important item about the first quarter I want to point out. Previously, we had indicated that we believed we needed to get to 30% to 35% occupancy in order to get to breakeven for the portfolio. In March, we achieved a positive $1.4 million of hotel EBITDA at an occupancy level of just 24.7%, obviously, much lower than our prior estimates. So think about that, profitability at an overall occupancy level less than 25%, pretty remarkable, I think. This very positive result was primarily due to a pretty healthy portfolio-wide average rate of $245, as well as our new operating models throughout our portfolio. While this average rate in March benefited from prime season rates in South Florida, that will come down as we move out of high season. Our average rate will be helped by increases in rates at our other resorts on the West Coast as they move into prime season in Q2 and Q3 and as we benefit from the redevelopments that recently took place at Mission Bay Resort, Chaminade, Skamania, L'Auberge Del Mar, LaPlaya, Marker Harborfront Resort, and Paradise Point. That's all of our resorts, except Southernmost Resort, which will undergo a major renovation this summer. In addition, most of our urban markets will be moving into stronger leisure months as we move into the middle of the calendar and into and through the summer, hopefully, just-in-time for business travel to accelerate in the fall. So we're very optimistic that our overall operating model is much improved and should allow for enhanced results as revenues continue to recover. When we think about 2022, we're focused strategically on the year being a very strong recovery year overall. Group should be as strong as we believe there's a great deal of pent-up demand, and it will also benefit from all the meetings being rebooked from 2020 and 2021. We also think leisure will continue to be robust, with a lot of pent-up demand for vacations and getaways, while outbound international travel is probably still more limited. This means we don't expect significant rate discounting in 2022. Again, this is with the obvious caveat that we get to relatively normal behavior by the end of this year, and it remains relatively normal next year. We believe we're in a great position to take advantage of this recovery in 2022 and beyond based on the outstanding condition of our hotels and resorts. As we've reported, we're moving forward with the redevelopment of the Southernmost resort in Key West this summer; Vitale into a 1 Hotel in San Francisco in the fall; Grafton into an Unofficial Z Collection hotel in West Hollywood also in the fall; and we're completing L'Auberge Del Mar next month. As it relates to the remaining few redevelopment projects we deferred due to the pandemic, we're continuing to complete plans and permitting. We'll pull the trigger on these projects when we have more clarity on recovery and progress against the virus. Specifically, with regard to the $37 million redevelopment and transformation of Paradise Point in San Diego's Mission Bay into a Margaritaville Island Resort, we're still working our way through discussions with governmental authorities. At this point, we don't expect to be able to start construction until at least late this year, assuming we get the necessary approvals in the next 6 months. All of these completed redevelopments and transformations, including the large number in the past few years, and all of the upcoming projects and improvements will provide significant upside for our portfolio over the next few years as the recovery takes hold and rolls forward. Importantly, the vast majority of the dollars for these projects have already been invested. As we look at the silver lining of potential upside from this crisis, we expect there will be significant opportunities over the next few years to acquire properties in distress due to a large number of cash-trapped and over-leveraged owners and many properties that will go back to lenders. In this regard, we're actively looking for opportunities to reinvest the dollars from the hotels we've sold over the last 12 months. We believe we have significant competitive advantages as opportunities arise over the next few years. These include our ability to operate properties more efficiently than the vast majority of buyers, the additional cost benefits from the additional economies of scale that can be generated from Curator, our unique strength in redevelopments and transformations, as well as with independent or small brand lifestyle hotels, our vast number of operator relationships, and our high-profile and positive reputation in the industry. We're confident that our industry and our portfolio are currently on a path to recovery that is becoming increasingly clear. We believe we've got the team, the portfolio, the knowledge, and the experience to perform exceedingly well in this recovery. We appreciate your patience, support, and confidence in us. And with that, we'd now like to move on to questions. Donna, you may proceed with the Q&A.

Our first question is coming from Neil Malkin of Capital One Securities.

First question, a lot of people have been talking about are there going to be people who want to come back for groups, how that's going to look, rebookings, et cetera. But there's two sides of that coin. Because the cities, municipalities also have to give the go-ahead. And I'm just curious, markets like San Francisco, New York, L.A., et cetera, are you confident that, let's say, California reopens June 15, that you'll have the okay from the city to basically go and have full-scale normal capacity group events, if they are, in fact, on the books, let's say, in the fourth quarter of this year? Or do you think it will take some time for sort of headcount or density restrictions to kind of lift, therefore, providing a temporary capacity constraint?

Yes, you're asking me to predict government, and I'm not great at that. I would tell you, based upon the guidelines that have come out already in California and other markets, that there are many markets where we believe that hotels will be able to have good-sized meetings with appropriate safety and cleaning precautions. But in terms of the big city-wide events, if those are handled in the same way as they were pre-pandemic, I'm not sure I'd have a lot of confidence in that, Neil, before the end of the year. But it's really going to depend upon where the cases are, where hospitalizations and deaths are. If we can look like Australia, where they haven't had a death since October of last year, and they have single-digit cases a year or zero because people get vaccinated, and we've protected those who are at greatest risk, then yes, I see no reason why all of the governments wouldn't move forward with allowing normal behavior, normal meetings, normal commerce in their markets. I don't think, at this point, perhaps California might be behind Florida, Texas, or some of the other Southern states in their progress. But I don't believe they're behind any of the East Coast cities, as an example, who I think are being more cautious about allowing normal commerce in their markets.

I appreciate that. One question I have is, it seems like since last quarter, there has been a significant shift or acceleration in achieving corporate cash flow positivity. You mentioned being profitable at lower occupancy rates, but I’m curious if you could elaborate on how you see this playing out, especially in the third quarter. By that time, most of your urban hotels will be open, even with lower occupancy and lower average daily rates, which might impact overall performance. Additionally, you will be in the off-season for your resorts, yet more demand and occupancy could arise as recovery progresses. Wouldn't this necessitate hiring more fixed, full-time employees, creating a situation where reaching that next level of demand imposes certain staffing requirements that could affect margins or profitability? Could you discuss how you plan to navigate this, particularly if corporate travel isn't rebounding strongly? What gives you confidence in achieving this level of profitability?

First of all, we haven't confirmed that we are confident about reaching our goal. We mentioned it is possible to achieve this in the third quarter, depending on our progress in health and the return of travel, particularly business travel in the last four months of the year. While we are exiting the prime season in Florida, we are entering prime season in Q2 and Q3 for the other five resorts on the West Coast, which will see increased rates. Consequently, we should be able to maintain our average rate as we reopen urban hotels. Regarding margins, to achieve corporate breakeven, we need an additional monthly profit of around $12.5 million to $11.5 million compared to March. To reach that, we believe we need to generate approximately double the revenue from both room sales and additional sources. As occupancies increase, our food facilities will also become more profitable, with more banquets and catering that yield higher returns than our outlets. Overall, we anticipate achieving corporate profitability with about 50% flow-through from the increased revenues. We aim to raise our overall portfolio occupancy to the low 40s, benefiting from stronger leisure travel and gradually improving business travel over the next four months, ideally accelerating in the latter half of the year. Therefore, it seems reasonable to expect that we could reach our goal by the third quarter.

Our next question is coming from Smedes Rose of Citi.

I was just wondering on the group bookings that you said you're starting to see some improvement on and some, albeit modest gains in business transient. Are you hearing at all, besides the health care concerns, any sort of pushback from businesses looking to not spend as much going forward and sort of take advantage of the fact that no one has been traveling, yet productivity has been apparently fairly robust over the last year or so? Just kind of curious if you're hearing anything on that front?

Yes. We're actually noticing the opposite trend. We're seeing increased spending. Currently, we have limited data, but in terms of what companies are planning for their activities, they're investing more in property, which is advantageous. As a result, they're hosting fewer off-site events and providing more for their attendees. Overall, they expect to spend more, indicating there's no reluctance from groups to invest. This is reflected in the rates, and we aren't experiencing any pushback on rates at this time from the group side. Regarding productivity, I’m not entirely sure those concerns are significant. However, businesses are currently quite profitable. They typically become more cautious about spending during less profitable times, but they are also generous towards their employees. Consider this: we know that the staff in our company and at our hotels need break time, relaxation, and care. That's the message we're receiving from businesses. Recently, we hosted a large incentive group in Florida which spent $30,000 on food and beverages over three days. Though the group was not large, this equated to over $1,000 per person each day. While this is just an anecdote, it suggests that businesses want to reward their employees when they’re traveling and meeting in person. This motivation appears to influence the types of activities they are booking around their meetings.

Okay. That's really helpful. And then I just wanted to ask you more specifically on the conversion of the Hotel Vitale. Just looking at the EBITDA results for that property, it looks like it peaked back in '15 and kind of just continued to trail down through '19. Is it your thought that with the $25 million investment, you can get back to the kind of that 2015 level of $11 million? Or would you expect to surpass that, assuming kind of a normalization of business trends?

Yes. Looking at historical numbers reveals that there are many variables affecting them, especially at Vitale, which experienced several market influences. For instance, the convention center underwent renovation and expansion, which affected the overall market. Therefore, Vitale was not the only property that peaked around 2015 or 2016. Additionally, the sale of Destination Hotels and Joie de Vivre to Hyatt, along with the change in operators, impacted the property. Furthermore, it had not been renovated since its construction, which was around 12 or 13 years ago, and now it's been 14 or 15 years. We believe that the investment we are making in improvements will result in a double-digit cash yield. However, this will hinge on market developments over the next few years. We anticipate that through increased rates and some improvement in occupancy and events, we will generate significantly higher profits and achieve a strong return on that investment.

And Smedes, also to add to that on Vitale. As you recall, when we acquired LaSalle, all their properties, the California properties had a step-up in property taxes. So that impacted Vitale as well as any of the legacy LaSalle Hotels in California. So that explains also some of the 2019 performance relative to 2018.

Our next question is coming from Rich Hightower of Evercore.

So a couple of questions. First one, just a quick housekeeping one, I think, for Ray. Can you remind us, I think there's a $500 million unrestricted investment bucket in your current waiver package. Does the conversion of the converts change that at all? Or is there anything to look out for as that may happen in the future?

No, the conversion of the converts has no impact other than that, in a way, we have $500 million less debt we have to worry about refinancing. But we have 3 investment baskets. One is $500 million of new investments that we can complete with any sort of equity raises. We have up to $500 million also from the reinvestments from any hotels that we sold, and we've sold about $225 million, as we've talked about. We have another basket of $100 million of other investments, which can entail a bunch of other things, whether that's looking at joint ventures, but other sort of structures and other special investments. There's plenty of flexibility right now. The good thing is in this environment, our bank has been very supportive, so that's not a constraint. With the improving trends, as we noted on our call, we will be more active in looking at some opportunities.

And Rich, if you have one question, go ahead. We have a pretty long queue. So I think we're going to ask people just to pick their best question and then fire away, so we can get through everybody.

Yes, sure. No. Feel free to take it offline.

Our next question is coming from Aryeh Klein of BMO Capital Markets.

What are you seeing from a staffing standpoint at resorts where occupancy is a lot closer to pre-pandemic levels? And has there been any pushback from customers maybe being impacted in some way from lower levels of staffing? And then just separately on the Villa Florence, I think it's the only hotel in San Francisco that's still not open. If you can just update us there.

As it relates to staffing at the resorts with higher occupancies, getting labor back is a challenge. There are a few primary reasons for this. Frankly, we're seeing it everywhere. It's not just where we have higher occupancies. It might even be a little bit less in those properties than at the properties in markets with lower occupancies. There are a few inhibiting factors. One is the enhanced unemployment insurance benefits and the free COBRA that have come through in the various legislation passed by Congress. Second, when you compound that with kids, in many places, not being in school 5 days a week, one of the parents needing to stay home to take care of those kids and help those kids learn, there are also folks who have generational issues with parents they need to take care of in this period of time. When we look at those issues, we think these mitigate dramatically when we get into the fall when the unemployment insurance runs out. Clearly, there have also been people who've left the industry and gone into other fields. But, what we hear from the employees we call, and we have the less we go through the less is those issues. The last one is some who haven't been vaccinated yet still fear coming back to work and interacting with their colleagues and guests in some cases who don't behave properly. We think those mitigate. In the meantime, the industry is actively sourcing people from other areas, going back to colleges where many graduates are having trouble finding jobs in the hospitality or retail or other industries, as well as younger students in college who have had a hard time getting internships who can come work for the summer and learn about the hotel industry. Our properties are doing many things differently to source staff because we're not getting the talent we need just from the people who've been previously employed. As it relates to Villa Florence, it's really the same boat as Vitale. Vitale is going to remain closed through the year because of the benefits of renovating while we're closed and then reopening as a 1 Hotel at the end of the year or the very beginning of next year before the JPMorgan Conference. We have a redevelopment plan for Villa Florence that is not only completed, but we actually purchased the FF&E sitting in a warehouse in the Bay Area. We're just waiting until we feel comfortable that the investment makes sense. So in the meantime, we're keeping it closed because we may go through the same thing there. We don't need to pull the trigger on the renovation yet because we already have the FF&E, which is usually your long lead item. That's why we needed to make a decision to move forward with Vitale, because you've got a 16 to 20-week lead on FF&E today.

Our next question is coming from Michael Bellisario of Baird.

Regarding the labor topic you mentioned earlier, I’d like to ask about your perspective on the 100 to 200 basis points you’ve discussed previously concerning the long-term margin growth. How do you see this developing in your stronger markets, such as Naples, compared to some of your more affected urban markets? Where do you anticipate greater potential for growth? How does labor influence your outlook and contribute to your analysis at this moment?

Yes. I mean, it's hard to make that differentiation between the two different properties because I think the same benefits accrue in both places. Obviously, bigger properties will get more benefit, but the properties are being run more efficiently. We've found different ways to do business, and we're using more technology, and we're providing the services in a way that the customer wants. We have a lot more cross-trained staff, which is good for their career development. I don't know, Mike, that it really varies by urban versus resort when it comes down to it. I do think, and I think already asked this question, if you've eaten in a restaurant recently, you may be a little bit unhappy with the speed of service. That's because everybody's struggling to have enough labor to deal with the periods when you max or near maximum occupancy, whether it's cooks in the kitchen or servers or bussers or someone to answer the phone if you don't have technology to do it. That will be at a different level for the next 4 or 5 months in the country in a lot of different businesses. We feel good about what we've said previously. We don't see this temporary labor issue as any kind of long-term problem. We hope that all those folks who are sitting at home come back to work sooner rather than later.

Our next question is coming from Shaun Kelley of Bank of America.

Ray, Jon, just maybe a fairly straightforward one, but I believe there was a $200 million ATM program that was filed. Can you just comment on that? And any thoughts on potential opportunities or what that could be used for?

Sure. Well, this is similar to, we had an ATM program that we let expire several years ago. We've just renewed it. It's $200 million, the last one was $175 million. This just provides us with another tool for capital in the event there's an opportunity. You should not expect that because we have an ATM in place that we're going to use it. There were many quarters and years when we had ATM previously, and we had zero usage on it. It's just another tool in there. We have, as you know, sufficient liquidity right now. We have cash from the recent sales. In terms of uses of cash for any investment opportunities, we would likely use that first, given where we are.

I wouldn't read anything into it other than it's administratively a good thing to have in place.

Okay. So, it seems that using direct deleveraging is less probable. I believe you have been quite cautious about utilizing straight equity, but since the stock has increased in value, I just want to confirm that this is still mainly the plan.

It's not only less likely, it's not going to happen.

I think that's clear.

We don't have a deleveraging issue. We need EBITDA to recover. We see no reason to lower the leverage level in a recovery from low levels already.

Also the timing of that now as we did in concert with the filing of our Q, just because we save legal fees and audit, consent fees, and all those things doing it now versus doing it in a month from now or 2 months from now. So that was the reason for the timing.

Our next question is coming from Bill Crow of Raymond James.

Jon, I really want to focus on the recovery of group travel, which isn't here yet. But I'm curious when it does come back, it will probably be different for a while, especially in markets that were closed or more closed than others. Is that a disadvantage to smaller independent hotels as these meetings may fill up the host hotels first and maybe not have the same spillover or city-wide effect that they used to have? What do you think about that?

Many people might choose not to stay at the host hotel for various reasons, such as the fact that these hotels are usually large, impersonal, and crowded, with often inconvenient amenities and long waits for elevators. As we move forward, it will be interesting to observe how people's behaviors change, especially considering they have become accustomed to having fewer people in elevators and rooms. This is a matter of behavior, and while I'm not an expert in that field, I believe it will evolve gradually rather than suddenly. Therefore, I don't have any concerns regarding this specific issue.

To be clear, when we say host hotel, what it means is the convention center, host hotel, not our neighbors upstairs.

That's correct. That is correct. And Jon, just if you could clarify for me, it sounded like you're still very, very optimistic about acquisition opportunities and distressed opportunities. That hasn't changed based on some of the prints that we've seen, which certainly seem fully priced?

No, what you're currently seeing are mainly the high-quality properties, as those tend to attract media attention. Many properties are trading at much lower values that are less reported on, aside from occasional stories highlighting significant sales. We are quite far from experiencing high transaction volumes. Extensions and forbearance are prevalent, which is not the same as abatement. Loan levels are increasing, and liquidity is insufficient. Similar to the last cycle, we began purchasing in mid-2010 after the recession had ended and continued through early 2015. This presents a multi-year opportunity to acquire resort properties. I believe the focus should be on obtaining quality assets rather than just seeking discounts. Our aim is to invest in properties where we can make a substantial operational impact. We're not interested in spread investing or solely cyclical opportunities. Our goal is to invest in assets that can generate better returns through improvements such as redevelopment, transformation, brand upgrades, operational changes, and enhanced efficiencies. I am not concerned by the headlines regarding trading assets; most of those do not interest us.

Our next question is coming from Jim Sullivan of BTIG.

Yes, Jon, just kind of following on a little bit from your answer to Bill's question. I'm curious how you think about the supply variable today versus where it was pre-COVID? And what I'm thinking of is pre-COVID, the industry appeared to be facing a situation of somewhat weakening demand growth in percentage terms, and potential growth in supply in terms of hotels in construction and otherwise that was going to be running ahead of that demand growth. We hear a lot of talk about hotels that have closed that won't reopen. Number one. And then number two, there is this percentage of assets, and we can describe them as kind of the walking wounded, where they're not cash flowing. They're filing up deferred CapEx. They're not being maintained. Therefore, arguably, they're not going to be competitive with a well-maintained portfolio. So I just wonder, as you think about the supply-demand variable post-COVID, how are you feeling about that? Do you have a handle on how many hotels that are closed will not reopen? And maybe what percentage of the prior inventory is really not going to be competitive for a while?

I can address your question generally, and it's a pertinent one regarding our typical recovery patterns. Historically, in the first few years following a downturn, we notice very little new construction, which allows the industry ample time to rebound, as it is cyclical. This cycle resembles previous ones in some respects, while differing in others, being event-driven. The economy is performing well overall, despite a few sectors being impacted. Significant financial resources have been injected into the economy from both monetary and fiscal sources. Looking ahead 3 to 5 years, we anticipate minimal new supply, as projects in progress will be completed, but older properties, especially in urban areas, may become outdated and exit the market. We're optimistic about the future, as supply should not act as a constraint; rather, it could help in terms of maintaining flat or even negative levels. Construction financing is considerably limited now and likely will remain so for the next few years. While there may be some new projects starting, the volume will be low. Developers are currently facing steep rises in construction costs across materials and labor, which will increase the expense of new developments. This trend can extend the recovery period for operations and values in the industry. We believe that this recovery may be swift, driven by the economy's strength. Consumers presently have more savings and pent-up demand akin to what is usually seen toward the end of a cycle, not the beginning. However, we must navigate through the health challenges posed by the pandemic to return to normalcy.

Our next question is coming from Gregory Miller of Truist.

I want to follow-up also on the group front. How concerned are you that vaccination interests in the U.S. appears to be slowing in some parts of the country and that there may be a meaningful percentage of the population that intends to travel for work and remain unvaccinated? I particularly think of the implications for convention demands and whatever health safety measures may still need to be taken next year to ensure events can transpire with normalized attendance for most attendees that feel comfortable with us to show up in-person before the true end of the pandemic?

Yes, it will depend not only on vaccination rates but also on the level of virus transmission in the community. We know that some individuals will choose not to get vaccinated for various reasons. We need to reach a point where transmission does not occur from person to person in the community. Until we achieve that, we will continue to see protocols in place. For instance, our CIO recently attended a meeting in Florida where attendees had to take a COVID test and show their vaccination card. If attendees were fully vaccinated for at least two weeks, they did not need to test beforehand. On-site testing was also available for those who could not obtain a test before arriving. As long as the virus is circulating in the community, protocols will remain in effect. It is clear that increased vaccination can lead to reduced transmission. We just need to see how the situation unfolds and hope for a minimal level of spread so that people feel safe attending events, regardless of their vaccination status.

Our next question is coming from Anthony Powell of Barclays.

Kind of on the same topic. There's a lot of talk about things improving after Labor Day into the third and fourth quarter, but some experts, including, I think, Dr. Scott Gottlieb, have said that they expect a seasonal kind of increase or resurgence of COVID in the late kind of fall to winter timeframe, let's say, Thanksgiving to February just due to unvaccinated people, the natural seasonality of respiratory illnesses, and whatnot. Does that concern you? Have you heard that being brought up in any of your group conversations? Could that put things like the JPMorgan Conference at risk in January? Just thoughts about that seasonality risk that could still be around this year or next year, to be honest.

Yes. So interestingly, none of us have gone through a pandemic, including the pandemic experts. We continue to be concerned about the virus; that's why we're cautious about an inability to make forecasts and provide confidence and guarantees. So we have to see how it plays out. We've seen predictions come through. There was going to be another wave following the holidays in November and December, and that happened. We heard that the last winter would be disastrous because we were going to have the flu season on top of the pandemic, and we didn't have a flu season because, of course, everybody wasn't meeting with other people, and it was hard to transmit. The answer to your question is, I'm not an expert on this. There continues to be concern on the part of businesses and individuals about resurgence, and we just have to see how it goes. Right now, we're seeing increases in leads and bookings. That's evidence of people being increasingly confident. But we're not at normal pre-pandemic levels, which again suggests that some people aren't there yet. This is why it's going to take some time. The only way to get back to a level of normalcy is to crush this thing. It means people participating in society by getting vaccinated because what's clear is vaccinations work. While there may need to be boosters, perhaps annual ones, and ones for variants, the science is confident in its ability to deliver effective vaccines against this virus. It really comes down to humans who have to make these decisions for society's benefit. I don't mean to preach, but it's selfish not to get vaccinated because it's for the benefit of society. It's not just about you not getting sick, it's about not passing it along to someone else. I urge people to go get vaccinated, but we won't crush this thing unless most people do.

Right. Agreed on that. But given the seasonality of risk, shouldn't you be trying to pull demand forward as much as you can, let's say, into the summer, if possible, as opposed to waiting for the fourth quarter, given just seasonality?

Anthony, we're not waiting for anything. We're trying to get the most amount of demand we can get as soon as we can get it. But you need the customers. It's not like we suggest to a business customer that they have their meeting in October; they should have it in July, August, and they say no, we want to have it in October. That’s all we can do. Just to be clear, we're trying to fill as soon as we can and encourage people to travel, but folks are still going to make their own decisions.

Our next question is from Lukas Hartwich of Green Street.

So the ESG movement has started to focus on the emissions related to business travel. I'm just curious if that's coming up in conversations with corporates and maybe just how you're thinking about that looking out a few years. I know COVID is kind of the focus at the moment, but is that something you're worried about maybe 3, 5 years down the road?

Yes. That's a good question, Lukas. It's an issue that we're going to need to understand. We've actually asked clients that question. Some of the larger folks, in particular, are increasingly focused on how that might affect their businesses, how they run their businesses, and how they meet and travel. I think I'd be a little bit more concerned if I were an airline than a hotel because one of the things we hear is that it may mean we don't allow day trips on an airplane because the biggest producer in travel is not the hotel, it's getting to the hotel; it's the airline, in particular. It may lead to longer stays, longer trips. But I think it's too early to understand the dynamics. But it's a real issue. We were talking to an accountant. I haven't seen this announced, but I think we are going to see it shortly as the airline works with a number of the major corporate travel accounts, where corporations are committing to pay basically over current fares to subsidize alternative fuels for certain airline routes. There are many things we will see. They inquire about our sustainability practices in RFPs, and that's becoming increasingly common and increasingly important. We take our commitment to ESG very seriously, moving to much more sustainable practices and more interaction with all of our stakeholders, including the communities we do business with. I think your question related to whether people will travel less because of ESG. I don't know the answer to that, and I don't think the clients know either.

Our next question is coming from Floris Van Dijkum of Compass Point.

I know it's a long line here. Hopefully, we're close to the end. Can you maybe comment on Curator? We've talked about a lot of the other key issues, but could you touch on what you're seeing? I know you recently signed up Sage. Any updates you can provide on how that's going? How is the signing up of new partners progressing? Are you feeling positive about where that stands?

Yes. We are feeling good about the speed at which it is growing. We are making progress in terms of building out the benefits provided through attractive master service agreements with our product and service partners in the industry. As we build those out, we're seeing increasing commitments from folks in the independent side of the business. I think the one thing we've learned, Floris, based on the number of leads we have from people who've contacted us and the properties they have, is that the addressable market is actually probably more than double the size we thought it was. We were initially thinking the market was about 500 hotels or so. Today, we think it's probably 1,000 hotels or more just in the U.S. So I think we feel really good about where we're going. We provided an update in the press release on the number of members who've signed up now, the hotels that have signed up, and the number of master service agreements we've completed and those in process. So we feel good about the progress so far.

Just you mentioned domestic, is there a potential that you could take this abroad as well down the road? Presumably that would increase the market size significantly, but...

Yes. I think that's possible. We're not an expert on how things are purchased abroad. If it's anything like the U.S., the larger you are, the better pricing you get. We certainly know that with some of the service providers, that's the case around the world, but we don't know about some of the other products and services. It's not something we've investigated yet. We've got our hands full within the U.S. The one area I would say we're beginning to look into as an expansion of it is with restaurants, independent restaurants outside of hotels that suffer from the same sort of anti-competitive situation as independent hotels do. That's something we're beginning to look at and talk to some folks about, and that may be an opportunity to expand where Curator is focused.

Thank you. At this time, I'd like to turn the floor back over to Mr. Bortz for closing comments.

Thanks, Donna. Thanks, everybody, for taking the time. Long call. We wanted to get to everybody's questions, so we appreciate that. We wish everybody to stay safe and healthy. Go travel if you've been vaccinated. It's a lot of fun. Go to a meeting; I think you'll find it's not a scary experience. Thanks for taking the time, and we look forward to updating you in 90 days.

Ladies and gentlemen, thank you for your interest in Pebblebrook. You may disconnect your lines at this time, and have a wonderful day.