Diamondrock Hospitality Co. (NYSE:DRH) Q1 2020 Earnings Conference Call - Final Transcript
May 12, 2020 • 09:00 am ET
Mark W. Brugger
Action item one was to build cash. In March, we drew down our revolver. Our cash balance at the end of the first quarter was $388 million. Second, we preserved $100 million of cash over the next year by suspending our common dividends, including the first quarter dividend. Note that we have no preferred equity in our capital structure.
Third, we reviewed every planned capital project line by line, item by item. In total, we have canceled or deferred 70% or $80 million of projects originally in our 2020 capital budget. The remaining expenditures are focused on four main categories: one, projects underway that are more cost effective to complete than delay; two, critical expenditures to preserve and protect your investment; three, projects that were going to be highly disruptive, so now provides a unique opportunity to complete them; and four, a few select high impact ROI projects.
The fourth action item was to review the ongoing rebuild of the Frenchman's Reef Resort. Prior to COVID-19, Frenchman's Reef was on pace to reopen in late 2020. However, with the priority on liquidity and the likely pushing out of demand in the USVI, we made the decision to suspend the rebuilding effort. The rebuild is halfway complete, and there is about $170 million remaining to complete the project. We are excited about the long-term prospects here, but it is prudent to push it out, given the current environment.
Okay. Let's discuss our most difficult action step, which was to dramatically reduce the cost at the hotels, given the lack of travel demand. We temporarily suspended operations at 20 of our 31 hotels between March 17 and April 10. Collectively, these represent 61% of our rooms. Five of the suspensions were the result of government mandates. These include Cavallo Point; our two resorts in Key West: the Burlington Hilton; and the Charleston Renaissance. The remainder were based on the simple fact that it was more cost effective to close them than to keep them operating.
One of the most painful parts of the pandemic is that regardless of whether operations were temporarily suspended or we kept a hotel open with minimal services, we had to significantly reduce hotel staffing levels across the portfolio. Budgeted monthly payroll across the portfolio was $25.5 million. Today, it is just under $6 million. This 80% reduction in our monthly payroll expense equates to over $230 million of savings on an annualized basis. We have placed full-time security and building engineers in every one of your assets to preserve and protect asset value.
We are also preserving a minimum level of sales associates to capture future business so that we can bounce back quicker. In fact, in April we generated nearly 1,300 leads for 360,000 room nights spanning late 2020 and beyond. Our sales team and asset managers have been hard at work identifying alternate demand generators with good success. We have provided housing for healthy personnel in our nation's military, first responders, medical staff