Chatham Lodging Trust - Earnings Call - Q3 2021

Transcript

Operator (participant)

Good evening, ladies and gentlemen, and welcome to the Chatham Lodging Trust's third quarter 2021 financial results conference call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Should anyone require operator assistance, please press star and zero on your telephone keypad. It is now my pleasure to introduce your host, Mr. Chris Daly. Thank you, sir. You may begin.

Tyler Battery (Analyst)

Thank you, Jen. Good morning, everyone, and welcome to the Chatham Lodging Trust third quarter 2021 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 November 4, 2021, unless otherwise noted, and the company undertakes no obligation to update any forward-looking statement 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 insight into Chatham's 2021 third 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?

Jeffrey Fisher (Chairman, President and CEO)

Thank you. Morning, everybody. Thanks, Chris. We appreciate everyone who's joining us this morning for our call. After having a very good second quarter when we became the second hotel REIT to be cash flow positive, we produced a great third quarter that brought our highest RevPAR since the start of the pandemic and a significant increase in free cash flow after all debt service, preferred dividends, and before CapEx. Our third quarter free cash flow of $10 million was two and a half times greater than our second quarter cash flow of $4 million, and that is only on a $20 or 22% increase in RevPAR over the second quarter. We are now positive cash flow for the year and expect to remain so for 2021.

Our cumulative cash burn since the start of the pandemic is a mere $25 million or about $0.50 per share. As we move to the end of this year and into next year, many of our peers are still going to be burning cash, but that is not going to be the case for us. We'll come out of the pandemic healthier than most of our peers. When EBITDA recovers, many probably do not realize that our debt to EBITDA ratio is going to be lower than it was heading into the pandemic, to the tune of one and a half to two full turns lower, excluding the preferred, and a half to a full turn lower when you include the preferred. I'm real proud of that, and I think that bodes well for us and our growth going forward in 2022.

Coming off a very successful $120 million preferred equity raise at the end of the second quarter, we're in very good shape from a capital and leverage perspective. Our leverage ratio was approximately 31% at the end of the third quarter, down meaningfully from 38%, as I indicated just a year ago. Additionally, our liquidity now stands at approximately $200 million, almost double our liquidity from the end of the 2023 quarter. Furthermore, we just completed an amendment to our credit facility that keeps key terms unchanged and simply extends our maturity by an additional year to 2024, and as such, we have no debt maturities in 2021, 2022, and only $115 million maturing in 2023. We've made fantastic strides solidifying our balance sheet and have the confidence to go on offense and grow our portfolio.

In early August, we invested $71 million to acquire two incredible premium-branded extended stay hotels adjacent to the Domain in Austin, Texas, a market that we all know is absolutely thriving and will generate meaningful RevPAR growth and EBITDA growth for us going forward. It also furthered our exposure to premium-branded extended stay hotels that we believe will continue to be brands of choice as we emerge from the pandemic. We still have an appetite and the financial flexibility to acquire more hotels. Cap rates for acquisitions remain close to 2019 valuations, and it is a difficult environment to find the kind of assets that fit, I think, our very strict criteria, particularly since we are trying to, again, increase our exposure even further to extended stay hotels.

We are looking at a fair amount of deals, and I would expect to be successful in that endeavor over the next 6 to 12 months. By the way, the two Austin acquisitions, the Residence Inn and the newly opened TownePlace Suites, are doing extremely well and outperforming our underwriting results. Our operations team at Island has done a fantastic job delivering those results. The two hotels had occupancy of over 80% in September and 90% in October. The TownePlace Suites, which just opened in June, saw October occupancy of 89%, ADR of $125, and RevPAR of $111, a premium to our portfolio performance. They say that new hotels have to ramp up over 12 to 18 months, but we've certainly accelerated that time frame, I'd say, more than a little bit. We are real proud of those acquisitions and their performance already.

Speaking of a quick ramp up, our ramp up expectations at our soon-to-open Homewood Suites out in Warner Center, Woodland Hills is not 12 to 18 months. The hotel is expected to open this quarter. We just came back from there. It's a beautiful hotel. It's going to have the best rooms in the market, by far the best public space, I think the best amenities, and even outdoor experience. We think that there's going to be very strong demand for this extended stay hotel once we open the doors. We look forward to talking very specifically about those results on our next conference call. As we spoke on our last earnings call, we expected RevPAR would modestly decline after July before rebounding in October, reflecting the seasonality that we normally see in our portfolio.

Between kids returning to school, some offices reopening across the country, and the Delta variant spiking up corona cases across the country, it was certainly not going to be up, up, and away after July. July RevPAR was our peak RevPAR since the start of the pandemic at $113. As we anticipated, RevPAR slipped a bit to $104 and $103 in August and September before climbing higher again to $107 in October. Looking to the remainder of the fourth quarter, just like the third quarter, we expect RevPAR to seasonally moderate, especially given the Delta spike certainly seems to be behind us. We will have a normal seasonal moderation for November and December and then get started again as we move through January and February.

From 2015 to 2019, for example, RevPAR dipped 18% from October to November and another 19% from November to December, perfectly normal seasonal adjustments. Leisure travel continues to be the driver of performance, but we are seeing demand for healthcare, government, military, as well as the business traveler. ADRs have remained steady at approximately $150 from July through October, and we still believe that the business traveler will continue to expand their travel patterns, and those travelers will be looking for cost-conscious accommodations that, in today's economy, allows for a longer stay than one or two nights. Our extended stay hotels suit that perfectly and, frankly, suit the new traveler that's on the road that has more flexibility about where they can work and where they can work from. Again, we think we're perfectly positioned with our extended stay focus.

Compared to 2019, our monthly RevPAR during each month of the third quarter was down about 26%. We did not really see any meaningful drop off, which affirms the seasonality that we typically see in our portfolio. Also, encouragingly, our portfolio outperformed the industry's sequential decline over the past few months by approximately 500 basis points. From July to August, industry RevPAR was down 13% for the industry versus 8% for us. Industry RevPAR from August to September dipped 6% while we were down only 1%. In October, our RevPAR grew 4% from September, and we expect to continue to outperform the industry as we benefit from our appeal to a multitude of demand generators.

As the recovery continues and the business traveler does come back, we'll continue to get more than our fair share of revenue because we've got the highest concentration of extended stay rooms, as I mentioned before, of all lodging REITs at almost 60%. The business traveler is going to get the most value and flexibility in our kind of hotels. Our upscale extended stay hotels provide us the flexibility during periods of growth or weakness to diversify our customer base and adjust the mix accordingly to maximize revenue. That's a thesis that we've espoused for decades and followed. Among our top markets, our coastal northeastern hotels are absolutely killing it, led by our Hampton Inn in Portland, Maine, which generated RevPAR of $303, up 10% over 2019, with ADRs of almost $330, up 15% over 2019.

Its RevPAR was over $100 higher than the second highest hotel in our portfolio, the Hilton Garden Inn in Portsmouth, New Hampshire. Our suburban New York, San Diego, Los Angeles, and Charleston markets also produced solid results for the quarter, and Denver, Dallas, and Houston produced above-average growth year over year during the quarter. It is good to see those markets coming back to life. As I mentioned previously, our Austin hotels are off to a great start under our ownership. When you look at our portfolio moving forward into 2022 and 2023, I am really excited about the internal growth upside because one thing that clearly stands out is that our strong performance to date has been accomplished, excuse me, with little contribution from our technology-driven markets, particularly Silicon Valley, which is about 25% of our annual EBITDA, and Bellevue, Washington.

Our 2019 hotel EBITDA at those five hotels was approximately $35 million, and those same hotels are estimated to produce between $5 and $6 million only of hotel EBITDA in 2021. That's something I really want you to take note of because we're producing results that are as good or better than the industry and all of our peers without the benefit of our most important market that constitutes 25% of our annual EBITDA. We all know that those tech companies that, when COVID and when Delta spiked at the end of the summer and they pushed back all their office openings that we were expected to have in October and September to the beginning of 2022, we know that as that occurs, these markets are going to come back strong with a vengeance, and we certainly look forward to that lift for 2022.

I'd also be remiss without mentioning the great job by our operating and management teams who've been focused as ever on delivering strong operating profits. Our third quarter margins grew 25% over the same quarter last year to 45%, only one point below our 2019 margins of 46%, despite RevPAR being approximately $30 lower. We are going to remain hyper-focused like we always are on driving margins higher and expect that same store margins will be higher on similar levels of RevPAR. No REIT is better than us at regularly delivering those kind of results. I'm going to close my comments by reminding everyone that our relatively strong performance to date and expected performance moving forward, again, is going to be significantly enhanced next year by two key factors.

We expect tremendous upside in our tech-driven markets, and we're going to be generating meaningful incremental cash from both of our Austin acquisitions and the pending opening of our brand new Homewood Suites at Woodland Hills, which we think will ramp up very quickly. Also, that market and the STAR reports from that market are strong. When we combine this great upside with our solid capital structure that I think we've done very well with during the pandemic and suffered very little dilution through that period of time, we're well positioned to deliver some outside growth and value to our shareholders. With that, I'd like to turn it over to Dennis.

Dennis Craven (Executive VP and COO)

Thanks, Jeff. Good morning, everyone. All but one hotel had occupancy over 50% in the quarter, which compares to two in the second quarter and 20 hotels in the first quarter.

Twenty-four of our hotels had occupancy over 70% during the third quarter. Half of our hotels had occupancy over 75%, and 14 hotels had higher ADRs as compared to 2019. Relative to 2019, our Residence Inn Fort Lauderdale Intercoastal Waterway hotel saw the highest jump in RevPAR with an increase of 45%, while our lowest hotels were our two Sunnyvale Residence Inns, whose RevPAR is down approximately 70% compared to 2019. As Jeff spoke, our Silicon Valley hotels are going to provide substantial growth in 2022 and 2023. Of all our brands, bolstered by significant demand at our coastal northeastern hotels, our Hampton Inns had the highest occupancy in the quarter at approximately 85%. Our Portland, Maine hotel had occupancy of 92%. Our Exeter, New Hampshire hotels had occupancy of almost 90%.

Occupancy at our 17 Residence Inns was a solid 75% in the quarter and basically 70% at our seven Homewood Suites hotels. In addition to our coastal northeastern hotels, our suburban New York assets continue to produce great results and really have been consistent outperformers since the start of the pandemic, unlike what has been experienced for most owners in Manhattan. Occupancy at our three hotels was 91% in the quarter, and ADR was also higher than 2019 at those three hotels. Among our major markets, San Diego, Denver, and Los Angeles are showing decent growth over the second quarter, and their near-term outlooks are encouraging. Smaller conventions are coming back to the San Diego and Dallas convention centers, and the calendars at both are looking promising for next year.

Silicon Valley, our largest market, remains laggard with RevPAR of $80 in the quarter, only up 10% from the second quarter. It's really not surprising given the restrictions on international travel and the fact that most tech companies have pushed off office reopenings until the new year. Having said that, our Mountain View and San Mateo Residence Inns managed to produce occupancy of 85% in the quarter, but ADRs remain a challenge in the valley, with all four hotels having ADRs hovering around $120, which is down basically 50% from 2019.

Our five hotels with absolute rev, our five highest hotels with absolute RevPAR in the third quarter were our Hampton Inn in Portland, our Hilton Garden Inn in Portsmouth, New Hampshire, our Hilton Garden Inn in Marina del Rey, and then our Residence Inn in Fort Lauderdale and our Residence Inn San Diego Gaslamp, which is making its first appearance on our top list since the start of the pandemic. All five hotels had ADRs above $180, with Gaslamp and Marina del Rey being just slightly below 2019. Our top five absolute occupancy hotels in the quarter were the Residence Inn in New Rochelle and the Residence Inn in White Plains, then followed by our Hampton Inn in Portland, our Residence Inn in Charleston, Somerville, and our Hampton Inn Exeter, all five hotels with occupancy above 89%.

Although our length of stay has clicked down a little bit in the quarter, we continue to see an average length of stay much longer than historical levels for our portfolio. At our Residence Inn hotels, our average length of stay was 3.1 nights, down a bit from 3.4 nights in the second quarter and 4.5 nights in the first quarter, but still well above the 2.4 nights that we experienced pre-pandemic 2021 first quarter. For our Homewood Suites hotels, our average length of stay was 3.5 nights, which is actually up fractionally from 3.4 nights in the second quarter. When you compare it to the pre-pandemic, our average was about 2.7 nights. Again, meaningfully higher. As Jeff mentioned, we're seeing the return of the non-leisure traveler, whether that's the business or government-related traveler. They're returning steadily if you look at our midweek occupancy trends.

For a portfolio like ours, it's very encouraging as we appeal to travelers of all types and at multiple price points based on their needed length of stay. Our weekday occupancy was 69% during the third quarter and represents about 82% of 2019 third quarter occupancy, and that's up from 65% in the second quarter and 48% in the first quarter. Additionally, our midweek ADRs came in at about $145, which is up 20% over second quarter ADR of $122 and almost 40% higher than the first quarter ADR of $105. If you look at our weekend patterns, weekend occupancy was approximately 79% in the third quarter, up fractionally from 77% in the second quarter, and our third quarter ADR was up 17% over second quarter ADR.

For the quarter, total revenue was almost double last year, up $30 million, and we generated additional GOP of approximately $17 million, flow-through of almost 60%, which is particularly strong despite bringing on incremental staffing in response to rising occupancy and the reintroduction of complimentary breakfast services at many of our hotels. Also, we generated adjusted EBITDA of $19.6 million, basically four times the same quarter last year, and we generated FFO per share of $0.21, which is up $0.30 over the same quarter last year and will probably be one of the highest per share figures of all lodging REITs for the third quarter. Chatham and Island continue to invest in human capital and data analysis tools on the operating expense side, and working alongside Island, we have a best-in-class operating model that drives premium operating margins.

We've generated positive GOP and hotel EBITDA each month during 2021. During the third quarter, all 41 hotels generated positive hotel EBITDA, not GOP, not hotel operating profit, positive hotel EBITDA, a testament to the quality of our real estate and our operations teams. Our top five producers of GOP in the second quarter were the Hampton Inn Portland Maine, our Residence Inn San Diego Gaslamp, our Hilton Garden Inn Portsmouth, followed by the Residence Inn New Rochelle, which is making its first appearance, or I'm sorry, the high-placed Denver Cherry Creek, which is making its first appearance in our top five since the start of the pandemic. Again, in that top five, four different brands represented, so further supporting the quality of our portfolio.

On a per-occupied room basis at our 39 comparable hotels, payroll and benefit costs were approximately $30, which is down about 15% from our 2019 third quarter cost per occupied room of $35. Taking out our newly acquired hotels, our employee count as of the end of the quarter was 1,119, which is up only about 50 employees since the end of the second quarter and up 150 employees since the first quarter, but it's still down basically 35% compared to pre-pandemic levels of almost 1,700 employees. Even with the lower headcount, overtime and casual labor is still down about $300,000 compared to the 2019 third quarter. We've managed to maintain a very efficient labor force despite the rise in occupancy, and although the current employment environment remains challenged, we should be in good shape as we enter the seasonally slower months.

After several years of making our case to the brands, we've finally gotten some traction with regards to housekeeping and labor standards. Hilton has now formalized plans for revised housekeeping standards, and Marriott is coming along as well. Since our hotels have an average length of stay, which is a little bit longer than most of our peers, we will continue to see meaningful decreases in housekeeping costs compared to other owners who have a much shorter average length of stay. We do believe on an apples-to-apples basis that our operating margins should be a bit higher on a stabilized basis than they were in 2019. In the second quarter, we reinstituted complimentary breakfast at most of our locations where it's offered to guests. The brands are proposing new standards that reduce the number of offerings and should lead to some same-store savings.

For now, our breakfast cost per occupied room is well down compared to 2019. It's about $3.08 in the 2019 third quarter and has come down to about $2.30 in the 2021 third quarter. Additionally, the elimination of the evening hospitality hour basically saves us $300,000 a quarter. On the CapEx front, we spent approximately $1 million in the quarter with our budget for the full year still about $6.5 million, and that again is capital excluding the Warner Center development. With respect to that, our Homewood Suites there, we've spent about $64 million on that hotel versus a budget of $70 million, and as Jeff said, we're looking forward to opening that hotel here in the 2021 fourth quarter. We look forward to talking with many of you during the upcoming REIT World Conference.

If we do not currently have a meeting set with you and you would like to set up a virtual meeting, please do not hesitate to reach out to me and we'll make it happen. Jeremy.

Jeremy Wegner (SVP and CFO)

Thanks, Dennis. Good morning, everyone. Chatham's Q3 2021 RevPAR of $107 represents a 23% increase versus our Q2 RevPAR of $87. During the quarter, RevPAR hit a high of $113 in July, which, along with June, has historically been our strongest month of the year due to peak leisure demand. RevPAR remained strong at $104 in August and $103 in September, even as the strongest parts of the summer leisure season came to an end. Chatham's Q3 RevPAR of $107 was down 26% to our Q3 2019 RevPAR of $145.

Chatham's strong RevPAR recovery continued in October, where our portfolio RevPAR of $107 was the second highest month of the year despite being well beyond our peak summer leisure season. We expect performance to continue recovering with decreasing RevPAR declines relative to 2019, but it's worth noting that the absolute RevPAR for Chatham's portfolio typically declines approximately 15%-20% from October to November and again from November to December due to the seasonality in our business. It's possible that those seasonal declines could be a little lower this year depending on the timing and strength of the continuing recovery in business travel, but we still expect that seasonality will impact absolute RevPAR levels in November and December. Through our significant efforts to contain costs, we were able to generate a Q3 hotel EBITDA margin of 35.2% and GOP margin of 44.7%.

The 44.7% GOP margin achieved in Q3 at a RevPAR of $107 was only 130 basis points lower than our full year 2019 GOP margin of 46%, which was achieved at a RevPAR of $132. Our Q3 2021 hotel EBITDA was $22.5 million, adjusted EBITDA was $19.6 million, adjusted FFO was $0.21 per share, and cash flow before capital, which represents hotel EBITDA less corporate G&A cash interest and $2.1 million of principal amortization, was positive $10 million. I think it's worth noting that these solid results were achieved even with a somewhat limited amount of business travel demand in Q3.

Some of our largest and most profitable hotels before the start of the pandemic, like the four Residence Inn in Silicon Valley and the Residence Inn Bellevue, are very dependent on business travel and have seen the least amount of recovery of all our hotels to date. Whenever business travel starts to recover in a more meaningful way, our portfolio should experience significant upside from its current performance. We have taken a number of steps to strengthen Chatham's balance sheet in non-dilutive ways during the pandemic, and the balance sheet is now in the best shape it's ever been. Between March 31, 2020, and September 30, 2021, we've reduced our net debt balance by $250 million, which represents a 32% reduction despite spending $37.5 million on our Homewood Suites Warner Center development over this period and spending $71 million to acquire the Residence Inn and TownePlace Suites, Austin.

At September 30, we had $199 million of liquidity between our cash balance of $19 million and $180 million of revolving credit facility availability. After the end of the quarter, we exercised an option to extend the maturity of our credit facility to 2023 and obtained additional options to further extend the maturity of the facility to 2024. With our extended debt maturity profile, solid liquidity, and meaningful free cash flow, we are well positioned to opportunistically pursue attractive investments. In addition to coming out of the pandemic with a better balance sheet than we had going in, we're also going to be exiting the pandemic with a better hotel portfolio than we had going in.

The recent acquisitions of the Residence Inn and TownePlace Suites, Austin, and the Homewood Suites Warner Center development, which is expected to be completed in December, will meaningfully enhance Chatham's growth and the quality of our portfolio by adding three newly constructed high RevPAR hotels in markets that have very strong demand growth. We are very optimistic about the future given the potential for significant improvements in operating performance as business travel begins to recover in a more meaningful way, the growth that we expect from the Austin acquisitions and the Warner Center development, and our ability to pursue additional growth opportunities given our strong balance sheet and significant liquidity.

While we're not going to provide guidance at this time, for those of you building your own projections for Q4 in 2022, I want to remind you that during the construction of the Homewood Suites Warner Center, we've been capitalizing the interest cost associated with this $70 million development, and once it opens in December, we will begin recognizing this interest expense, which will be approximately $400,000 per month. For example, in Q4, we expect interest expense to be approximately $2 million per month in October and November, and then increase to approximately $2.4 million per month starting in December. This concludes my portion of the call. Operator, please open the line for questions. Thank you.

Operator (participant)

Ladies and gentlemen, if you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue.

You may press star two if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment, please, and we'll call for questions. Our first question comes from the line of Kyle Menges with D-Rally Securities. Please proceed with your question.

Good morning. This is Kyle. I'm from Bryan. I was curious what kind of new development you're seeing in your key markets, and are you seeing any opportunities to enter contracts to buy from developers, or are you still mostly focused on acquiring existing hotels?

Dennis Craven (Executive VP and COO)

Yeah, this is Dennis. I mean, listen, I think we are—we certainly have a lot of discussions with developers, and we haven't historically been takeout partners with those, but certainly they're in our network of people that we reach out to.

As far as other new supply on our markets, there's really very little that's currently under construction that really bothers us. I think if you look at our brand new Homewood Suites in Warner Center, Woodland Hills that's opening up, really there's been no new construction there for a long time. Maybe there's another hotel that starts in the next couple of years. We are pretty excited about that opportunity. In general, we experienced a significant amount of directly competitive new supply kind of in that 2016-2019 timeframe, where I think for us, new supply was anywhere from 5-9% or 10% of our comp set. I think a lot of that is behind us.

Kyle Menges (Equity Research Analyst)

Okay. That's helpful. Thank you. Last for me, I'm just curious how you're thinking about funding future acquisitions.

Dennis Craven (Executive VP and COO)

We have a ton of availability under our line of credit now, so I think in the near term that's what we would use.

Kyle Menges (Equity Research Analyst)

Okay. Thanks. That's all for me.

Dennis Craven (Executive VP and COO)

Thanks.

Operator (participant)

Thank you. Our next question comes from the line of Tyler Bakery with Danny. Please proceed with your question.

Tyler Battery (Analyst)

Good morning. Thanks for taking my questions. First one for me, I just wanted to dive in a little bit more on the performance in the portfolio. October picked up a few points of occupancy compared with September. Was that the seasonality impact there, or perhaps did business or corporate travel get a little bit better October compared with September?

Dennis Craven (Executive VP and COO)

Yeah. I think, Tyler, this is Dennis. Yeah.

I mean, business travel, I think as we have seen kind of going from 65% of midweek to almost 70% in the third quarter, stayed at a pretty healthy level, about that same level, 70%-ish in October. It still is kind of maintaining out there. Yes, for us, once we get past October, it does get a little bit seasonal. In October, you also have those northeastern hotels. The Mid-Atlantic hotels tend to do very well with respect to kind of the leaf peepers and those types getting in from a leisure travel perspective. I think for us, October was similar in terms of business travel, but the leisure was just ticked up a little bit with some of that business.

I will say the one other thing to add to kind of October and even as you look at November, and I spoke to in my prepared comments, which is the Dallas Convention Center, the San Diego Convention Center has seen and is seeing a bit of smaller conventions. Comic-Con is not going to be anywhere near what it was in prior years prior to the pandemic, but they are still at least planning to have some smaller version of it in San Diego. There is a little bit here and there that is incremental, but we do expect November and December to be seasonally lower.

Tyler Battery (Analyst)

Okay. Great. Also wondering if you can expand on the margin performance in the quarter. I thought really impressive, especially given you're adding back some services and some amenities. You still have RevPAR below 2019 levels.

If you could just unpack for us, help us understand a little bit more what was driving the really strong margin performance in the quarter, that would be helpful.

Dennis Craven (Executive VP and COO)

Yeah. I mean, I think for us, the biggest cost driver is always going to be labor. As we mentioned in our prepared comments, one thing that Island has done a lot of work on and continues to is they have expanded really over the last two or three years, its internal staffing department that really is looking day to day at expenses, efficiency ratios, and really staying in very regular daily communication with GMs across the country to make sure that everybody's on the same page with respect to what's on the books, what's coming, or what's not coming, and trying to adjust that productivity.

As we talked about with their cost per occupied room, still a good 15% or 16% below third quarter 2019 levels, and that's with a wage per hour that's certainly higher than what it was two years ago. I think it's really just analyzing those expenses day to day on a housekeeping basis for the most part.

Tyler Battery (Analyst)

Okay. That's helpful. I'm also interested, I think you said in the prepared remarks, the Austin hotels had 90% occupancy in October. I just wanted to make sure that I heard that correctly. Maybe talk a little bit more about that because that 90% number, that's obviously really exceptional.

Dennis Craven (Executive VP and COO)

I mean, listen, and especially for a hotel, the TownePlace, which is really only three months old or now four months old.

I think, listen, in Austin, and the reason why we like those two acquisitions at the Domain, which is it has a very good mix of not only significant office component with corporate offices there, some of which have not even fully reopened yet, but it also has the demand for weekend events. Whether it was September or October, in October, you had a really strong Formula One weekend that was basically a citywide sellout, even though the races were almost 45 minutes away from the hotel. Given its proximity to that Domain area, it attracts a lot of interest from a traveler who can walk to whatever they want to do.

You also have, on weekends, its proximity to the brand new soccer stadium, which, again, for whether it was a USA World Cup qualifying match either during the week or the weekend, it just provides kind of a really diverse set of events outside of just the business travel that allows it to do really well during the week and the weekend. We are just very pleased with that. Yes, we spoke correctly that it was 80% occupancy in September and 90% in October.

Tyler Battery (Analyst)

Okay. Very good. I think last question for me, just in terms of the Warner Center opening in the fourth quarter here. Just help us think about the ramp to stabilization at that property. I know it is unique circumstances here, but just kind of curious how quickly you think that could ramp up to stabilization.

Dennis Craven (Executive VP and COO)

Yeah.

I mean, listen, I think we are really encouraged, as Jeff talked about, the stars are showing in Smith Travel Reports are showing and have shown in the few months leading up to where we are today, market occupancies in the 80%-over 80% range. That is really encouraging. I think we've had a lot of we have our full sales team and GM in place there. We've got a lot of inbound interest in our hotel moving forward. I think if you look at kind of a ramp, we certainly believe it's we're going to be able to accelerate from a 12-18 month time frame to probably a I'd like to say in six months we'll be fully ramped there. That could be a bit aggressive. Listen, as we've seen with the market is pretty strong.

I think we're certainly not ready to give any guidance yet on what that looks like in terms of rates and occupancies, but I think we're pretty excited about what that hotel is going to do. I'm sure when we talk again in February and the hotel has been open at least for six or eight weeks, a couple of months, that we'll have some much better thoughts on what that looks like in the near term.

Tyler Battery (Analyst)

Okay. That's all for me. Appreciate it. Thank you.

Dennis Craven (Executive VP and COO)

Thanks, Tyler.

Operator (participant)

Thank you. Ladies and gentlemen, at this time, there are no further questions. I would like to turn the floor back to management for closing comments.

Jeffrey Fisher (Chairman, President and CEO)

This is Jeff again. Thank you all for attending.

As we have said a few times, there are some specific unique characteristics to Chatham that I think are going to give us some further upside here, particularly as we move through 2022, combining our, I think, unusual prospects for internal growth and the external growth that we have already put on the table with more to come. Thank you all. Look forward to speaking with you soon.

Operator (participant)

Thank you. Thank you. Ladies and gentlemen, this concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.