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Chatham Lodging Trust (CLDT 1.09%)
Q4Â 2019 Earnings Call
Feb 26, 2020, 10:00 a.m. ET
Contents:
- Prepared Remarks
- Questions and Answers
- Call Participants
Prepared Remarks:
Operator
Greetings and welcome to the Chatham Lodging Trust Fourth Quarter 2019 Financial Results Conference Call. [Operator Instructions] As a reminder, this conference is being recorded.
It is now my pleasure to introduce your host, Chris Daly, President, Daly Gray Public Relations. Thank you, Mr. Daly. You may begin.
Chris Daly -- President
Thank you, Devin. Good morning, everyone, and welcome to the Chatham Lodging Trust fourth quarter 2019 results conference call.
Please note that many of our comments today are considered forward-looking statements as defined by federal security laws. These statements are subject to risks and uncertainties, both known and unknown, and described in our most recent Form 10-K and other SEC filings. All information in this call is as of February 26, 2020, 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 2019 fourth quarter results, allow me to introduce Jeff Fisher, Chairman, President and CEO; Dennis Craven, Executive Vice President and COO; and Jeremy Wegner, Senior Vice President and CFO.
Let me turn the session over to Jeff Fisher. Jeff?
Jeffrey H. Fisher -- Chairman, President and Chief Executive Officer
That's great. Thanks, Chris. Good morning, everybody. Glad you're on the call here today. As you know, we reported our fourth quarter results and RevPAR finished above the upper end of our guidance range and adjusted EBITDA and FFO beat consensus and the upper end of our guidance range due to the RevPAR beat, as well as slightly better than expected margin performance. As a reminder, we had a very tough fourth quarter due to the comps and significant revenue we earned in 2018 in that quarter from the gas explosions in North Boston, as well as a huge quarter in San Diego. Within the fourth quarter, RevPAR was down 5% in October, 2% in November and 7% in December. Given the very unusual fourth quarter comps, certain metrics such as overall RevPAR and margin performance are really not indicative of our current operating environment, especially as we look forward into this year. So I'm going to spend a few minutes talking about what the current trends are that we're seeing in our portfolio and the overall operating environment.
Market share was up yet again gaining almost 70 basis points for the quarter, which is very encouraging, given the amount of new supply, especially new brands that have been introduced into some of our markets. We continue to drive other revenue, which was up $1 million, or 31% in the quarter led by a 27% increase in parking revenue. We firmly believe we have the best-in-class operating platform as you've heard before, and our collaborative efforts with Island really have paid off over the last couple of years. We're perfectly positioned to quickly rollout revenue enhancement and expense saving initiatives, properly assess their impact and then decide whether to move forward with those or tweak or cancel initiatives as we analyze those initiatives together with the Island people.
This is further supported, when you look at some full-year operating highlights for 2019. First, we minimized operating margin erosion to only 40 basis points despite a 160 basis point decline in RevPAR. I think this is pretty impressive and I don't think you'll see those kind of results as you look across the peer group. Second, we gained RevPAR index of approximately 60 basis points. And last, we drove other revenue up $3 million, or 22%. In this kind of environment, those are the kind of metrics that you ought to be considering and that we continue to push as very important priorities for 2020.
Looking at our financial results for the full-year, our adjusted EBITDA and FFO per share finished at the upper end of our initial 2019 guidance range after taking into account the sale of two hotels, which was not factored into our guidance. Despite the 1.5% decline in RevPAR, adjusted EBITDA was only down 0.4%. This performance was driven by our overall superior operating margins, as we've said. On the corporate side, our overall leverage declined to 34.1% from 34.7% as we use proceeds from the sale of two non-core hotels at 6 cap, as well as proceeds from a small amount of equity we issued back in early 2019. We also commenced our first ground up hotel development in 2019.
Going somewhat against the grain of our peers, we've also been net acquirers of assets over the last three years. We have acquired approximately $200 million of high-quality hotels and are in the midst of a $65 million development. We have funded $225 million of this growth through the issuance of equity and proceeds from the sale of hotels.
Now, shifting gears to 2020. Our RevPAR growth range of minus 1.25% to plus 0.25% is reflective of a flat RevPAR environment across the US, further impacted by above-average supply growth in the upscale segment. Smith Travel is projecting RevPAR to decline 1.3% for the upscale segment versus flat for the entire industry. Our guidance does not factor in any material adverse impact on lodging demand due to the coronavirus. Although, we have experienced a revenue loss of approximately $200,000 to date this year and that doesn't account for the unknown loss in demand.
At the midpoint, our FFO guidance is down $0.09 or 4.9% compared to last year. Our margins are down approximately 120 basis points driven primarily by an approximate 5% increase in rooms, labor and benefits on a per occupied room basis as our industry continues to experience the effects on labor pricing as a result of historically low unemployment. As mentioned on our last call, we're continuing to rollout housekeeping efficiency programs aimed at improving our productivity. Hilton's also rolled out some similar programs being first to do that, and we're investing dollars to reduce our energy usage, where the return on investment is worthwhile and we're enhancing our risk management programs to reduce losses or minimize premium increases. As you know, we try to be conservative in our approach. So hopefully, there is some upside to our estimates because we remain focused, as I said, on maximizing revenue and minimizing margin erosion. Chatham still generates the highest operating margins of all lodging REITs and we're going to maintain our position at the top in 2020.
In 2020, we'll continue to explore asset sales with the intention of using those proceeds to invest in acquisitions or development. Having said that, the acquisition market is pretty thin due to buyer-seller pricing expectations. We'll have a look at a few value-add opportunities as we've stated previously, and we may develop one or two more hotels over the next several years if the returns generate the proper risk adjusted return, compared to buying an asset of similar quality in that same market.
Additionally, we've talked about our initiatives in adding value by converting existing space in our hotels to a higher revenue generating activity, and now we are working on and are about to convert some existing space in our Residence Inn in San Diego Mission Valley, in our Residence Inn Anaheim Garden Grove into further income producing assets. In this case, similar to our Savannah conversion, small bars being added to the lobby of the hotels offering minimal food service enough to meet obviously [Phonetic] local beverage requirements, liquor law requirements. But with our experience in our success in Savannah with our bar that is called Toasted Barrel, we are further encouraged by looking at other hotels and trying to rollout similar initiatives.
Toasted Barrel, for example, produced revenue of $350,000 and profit of $85,000, a noteworthy 24% margin and a return on our investment to fit out what was otherwise just a pretty much empty meeting room. Excuse me, ROI on that was over 20% just in year one. We're pleased with that result.
Our annual dividend is expected to remain at a $1.32 per share, a level maintained since midway through 2016 and represents a very attractive today 7.9% yield. We remain comfortable with our current dividend and excluding our development spend, we're producing positive free cash flow after dividends and capex in 2020. Of course, our long-term goal is to increase free cash flow and our strategic efforts are aimed at driving incremental cash flow as I've said, wherever we can. As we look forward to 2021 and the opening of our LA development, our free cash flow will increase.
With that, I'd like to turn it over to Dennis.
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Thanks, Jeff. RevPAR for the fourth quarter declined 4.9% to $118 with average daily rate down 4.1% to $157 and occupancy down 80 basis points to 76%.
Looking into our six largest markets, starting with Silicon Valley, which is by far our largest market contributing approximately one-fourth of our EBITDA. RevPAR was down 4.2% to $158, but two of the hotels were under renovation during the quarter. And when you look at our guidance, it assumed to decline of about 7%. So performance was a little bit better than expectations there.
San Diego represents our second largest market and RevPAR was down 19%, pretty much in line with our expectations for the quarter, as both of our San Diego hotels face really tough comps in the fourth quarter due to significant border patrol demand and a huge convention calendar in Downtown San Diego.
Washington DC market experienced a RevPAR gain of almost 3% to $132, driven by strong gains at our Tysons Residence Inn, where RevPAR grew 9%. That hotel is benefiting from a great renovation earlier in 2019, that's bringing back corporate guests, as well as the de-flagging of a hotel that was in our comp set in the past that we're gaining some additional market share.
Our three Northeastern coastal markets in New Hampshire and Maine saw RevPAR decline 8.4% better than our expectation of an 11% decline. Two of those three hotels, our New Hampshire hotel saw huge gains last year from the North Boston gas explosion demand. Something to note is that, these same hotels all RevPAR advance 18% last year. So it's pretty impressive that we were able to hold on to a chunk of that gain.
Houston, which is our fifth largest market continues to struggle with RevPAR declining 12% to $83 and that decline was right in line with our expectations for the quarter. New supply in our market and tract is over 20% of room supply. This has significantly impacted our performance, 2019 RevPAR -- full-year RevPAR of $93 is $25 below the all-time high of $118 in 2015 for those same four hotels.
And Los Angeles RevPAR was down 4% with RevPAR at our Residence Inn in Anaheim down 7% in the quarter, again related really to demand related to Disneyland being down this year.
Parking revenue was up $400,000 or 22% in the quarter. We continue to rollout additional parking charges at hotels and where we are allowed, we were able to increase parking revenue at other hotels. Looking ahead to 2020, we expect parking revenue to flatten out on a year-over-year basis, most likely over the second half of 2020.
Payroll and benefits represented approximately 38% of our overall quarterly operating expenses and 22% of our quarterly revenue. On a per occupied room basis, payroll and benefits rose 3.6% with payroll-related cost inclusive of overtime and casual labor up 4.8%, while our benefit costs were actually down 50 basis points in the quarter. Year-to-date, payroll-related costs represent approximately 37% of our operating expenses and on a per occupied room basis, payroll and benefits rose 3.1%. Payroll-related costs were up 4.9%, while our benefit costs were actually down 2.8% [Phonetic] for the full-year.
Wage pressures remain our biggest concern and are due to historically -- due to historical low unemployment rates, which is obviously driving hourly wages higher, but also causing a shortage in the qualified lodging labor workforce. When we can hire sufficient employees, we have to bring in casual labor, which is more expensive and less productive. In the fourth quarter, casual labor was $0.3 million, actually down $1 million year-over-year, but when you look at our year-to-date results, casual labor was $1.1 million for the portfolio, up about $400,000.
The reduction in benefits is generally attributable to better overall claims experience on both our medical and workers' comp plans, as well as planned modifications that help reduce premium cost. Again, a huge benefit to our platform with Island is the ability to work with them as our operating partner to maximize plan, design, co-pays, networks, etc.
Lastly, during the quarter, our guest acquisition costs were down 1.8% in the quarter and 3.2% year-to-date, really little impact on our quarterly margins, but for the year, it aided our margins by approximately 20 basis points.
On the supply front, industry new supply supposed to rise approximately 2% in 2020 and upscale supply is supposed to increase almost 5%, both increases similar to growth in 2018 and 2019, in our market, tracts is measured by Smith Travel, new supply peaked at 5% in 2015 and is declined each year through 2018. But it did ease back up to almost 3% in 2019, excluding the four Houston hotels where just supply is significant. Overall, the impact on new supply on our portfolio compares favorably to the overall upscale segment.
On the operating side, our biggest opportunity is increasing the efficiency of our housekeeping departments. We're communicating with our customers to understand the services that they value most on daily basis, so that we can spend our time performing tasks, most critical to our guest satisfaction. We're using that knowledge to customize our guest service model. We're sharing those experiences with our brands, who are also rolling out programs as well. We do expect to spend over $65 million on payroll and benefits in 2020. And our rooms department will comprise about 60% of that expense. So, to the extent that we can get some favorable results out of these housekeeping initiatives, those should accrue to our bottom line.
Working more efficiently will allow us to improve employee satisfaction and offer competitive wages to our employees and hopefully reduce over time, casual labor and employee-related claims. Working better and more efficiently to improve our employee retention without sacrificing guest experiences would be a model change that could certainly benefit us down the road.
With that, I'll turn it over to Jeremy.
Jeremy Wegner -- Senior Vice President and Chief Financial Officer
Thanks, Dennis. Good morning, everyone. For the quarter, we reported a net loss of $2.4 million, or $0.05 per share, compared to a net loss of $0.2 million, or $0.01 per share in Q4 2018. Our Q4 2019 results included $2 million of losses related to our share of one-time items, which occurred in the joint ventures. These items include a $0.8 million write-off of deferred financing costs associated with the refinancing of the Innkeepers JVs debt, a $0.2 million loss associated with the sale of the Hampton Inn Willow Grove in the Innkeepers JV and a $0.9 million impairment of the Residence Inn Lexington in the Innkeepers JV.
The primary differences between net income and FFO related to non-cash costs such as depreciation, which was $12.8 million, one-time gains or losses, which are $1.1 million and our share of similar items within the JVs, which were approximately $2 million in the quarter.
Adjusted FFO for the quarter was $15.3 million, compared to $18.4 million in Q4 2018. Adjusted FFO per share was $0.32, compared to the $0.39 per share generated in Q4 2018.
Our $0.32 of FFO per share for the quarter was $0.01 above the high end of our guidance range of $0.28 to $0.31. Our Q4 2018, FFO per share benefited by approximately $0.03 from demand related to the gas leak business in the Boston area.
Adjusted EBITDA for the Company was $25.9 million in Q4, down from $28.9 million in Q4 2018, which benefited by approximately $1.5 million from the gas leak business in Boston. In Q4, our two joint ventures contributed approximately $3.3 million of adjusted EBITDA and $0.9 million of adjusted FFO.
Fourth quarter RevPAR was down 1.7% in the Inland portfolio and 4.8% in the Innkeepers portfolio. The Innkeepers JVs RevPAR was impacted by a fire at the Western Morristown, which [Technical Issues] in the property being closed for 18 days. In November, we successfully refinanced the $850 million of CMBS on the Innkeepers JV with a new $855 million loan priced at LIBOR plus 282 with a seven-year maturity inclusive of extension options. In December, the Innkeepers JV sold the Hampton Inn Willow Grove for a $11.25 million. Chatham received $2 million of cash distributions from the JVs in Q4.
At year-end, our net debt was $580 million and our leverage ratio was 34.1%, which is down from the 40% area, where we have generally operated in the past.
Our balance sheet remains in great condition and provides us with the capacity to complete our Warner Center development project and pursue additional investment opportunities if they become available.
Transitioning to our guidance for Q1 and full-year 2020, I'd like to note that it takes into account completion of the renovation of the Residence Inn Sunnyvale II in quarter one, commencement of the anticipated renovations of the Residence Inn Anaheim and Residence Inn New Rochelle in Q1, and commencement of the renovations of the Residence Inn Holtsville and Residence Inn Washington DC in Q4. 2020 does set up better for us on the renovation front as we will be only renovating four hotels in 2020 compared to six in 2019. The number of rooms under renovation is down 32% this year.
We expect to spend approximately $23 million on our 2020 capital plan, which includes the renovations that I mentioned, as well as other planned capital expenditures on our existing properties. This is down approximately $13 million from our spend on existing hotels in 2019. We expect to spend an additional $30 million associated with our Warner Center development in 2020.
As a reminder, the quarterly RevPAR results we reported in 2019 included the results of the Courtyard Altoona and SpringHill Suites Washington hotels prior to their sales and did not include the results of the Residence Inn Summerville or Courtyard Dallas Downtown prior to their first full year of operation. Excluding the RevPAR of the Courtyard Altoona and SpringHill Washington for the full year, and including the RevPAR of the Residence Inn Summerville and Courtyard Dallas Downtown for the full year, 2019 revPAR would have been $122 in Q1, $143 in Q2, $146 in Q3, $118 in Q4 and $133 for the full-year.
We expect Q1 2020 RevPAR to be down 2% to down 0.5% and we expect full-year 2020 RevPAR of down 1.25% to up 0.2%. January RevPAR was down 80 basis points. February RevPAR is projected to be flat and March RevPAR is projected to be down approximately 3%. Our RevPAR guidance does not reflect any additional adverse impact from the coronavirus outbreak because it's too early for us to know what the magnitude or duration of any potential impact is likely to be.
We expect hotel EBITDA margins decline approximately 120 basis points, which reflects the continued increase in labor, property tax and property insurance costs. Based on our RevPAR and margin outlooks, we expect adjusted EBITDA to be between $123.1 million and $127 million in 2020. The $125.1 million midpoint of this range reflects a 4.5% decline from the $131 million of adjusted EBITDA we generated in 2019.
On a full-year -- our full-year forecast for 2020 corporate cash G&A is $9.3 million. On a full-year basis, the two JVs are expected to contribute $14.9 million to $15.5 million of EBITDA and $6.2 million to $6.8 million of FFO. On a full-year basis, we expect FFO per share of $1.72 to $1.80 with a midpoint of $1.76 in 2020.
I think at this point, operator, that concludes our remarks and we'll open it up for questions.
Questions and Answers:
Operator
Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Anthony Powell with Barclays. Please proceed with your question.
Anthony Powell -- Barclays -- Analyst
Hello, good morning, everyone.
Jeffrey H. Fisher -- Chairman, President and Chief Executive Officer
Hey, Anthony.
Anthony Powell -- Barclays -- Analyst
Hey. Just one coronavirus question. One of your peers said that they had a decent amount of China business in their Silicon Valley properties. Is that the same case for you? And what's your outlook for the impact if there was particular properties for coronavirus?
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Yeah. Anthony, we certainly have a little bit of China business in our hotels in Silicon Valley, also in our Bellevue Downtown location, even have a little bit in one of our Houston hotels. Certainly, the impact for us, I think, we quantified it has been about $200,000 a little less than that through the end of February. We are seeing a little bit of attrition, but I think one thing to note, even when you look at our portfolio, the impact even in Silicon Valley isn't necessarily Chinese-related guests staying at our hotels. It might have been that they were staying at other hotels in the market that have now canceled their trip and therefore, you have a little bit more vacancy that people are trying to fill and that does filter through to our hotel. So, even though, for us, the impact hasn't been significant at this point, I think there has been a little bit of a drag on the overall market, especially Silicon Valley.
Anthony Powell -- Barclays -- Analyst
Got it. And that March 3% expected decline, is that just due to tough comps or is it any of the coronavirus impact in that March number?
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Certainly, we have a little bit of -- we certainly are a little bit -- we are reflective of a little bit of a coronavirus impact, especially stuff that we know that has canceled. But we do have a major renovation ongoing at the Sunnyvale II location. I think for the full-year that renovation or that hotel RevPAR is down about 9% for the full year and actually impacts our full-year RevPAR by about 90 basis points, that renovation alone. So, that's the main driver behind Silicon Valley.
Anthony Powell -- Barclays -- Analyst
Right. Okay. All right. And could you update us on how the Charleston and Dallas assets are ramping? And what you expect them to do this year?
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Yeah. I think if you look at the Charleston assets, actually I think certainly had a good last three or four months of 2019. And we've got some good business going in early 2020. If you look at our RevPAR change for -- I'm just pulling them up here, the Residence Inn Summerville in 2020, our RevPAR is projected to be down about 6%, the Courtyard Summerville I think is projected to be down about 6% in that market. The two hotels we hope that we outperform that. But I think when you look at, certainly, there has been two new Hilton products that have opened up there recently. So we are feeling some supply in that market.
Our Courtyard Dallas Downtown, our 2020 projection is RevPAR growth of about 9%. So that hotel continues to ramp. I think as we've had a full-year to prepare for convention-related business and establishing the right relationships, that hotel is going to continue, we think, to outperform in 2020.
Anthony Powell -- Barclays -- Analyst
All right. Maybe just one more from me, you mentioned the Hilton introduced some new efficiency initiatives. Can you just go into detail about what those were? Thank you.
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Yeah. Similar to what we're doing, where they're looking at the stays of guest and if it's more than a single night, their -- either tailoring guest expectations for how often they're making -- cleaning the entire room versus doing a quick run through, making the bad, cleaning the bathroom, replacing the towels if asked. So it's truly trying to reduce minutes in those rooms on stay-overs for sure.
Anthony Powell -- Barclays -- Analyst
Okay. All right. Great. Thank you.
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Thanks, Anthony.
Operator
Thank you. Our next question comes from the line of Ari Klein with BMO Capital Markets. Please proceed with your question.
Ari Klein -- BMO Capital Markets -- Analyst
Thanks and good morning.
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Hey, Ari.
Ari Klein -- BMO Capital Markets -- Analyst
Hey. Maybe just following up on that last question, can you talk a little bit about the incremental opportunity on expense savings from the housekeeping initiatives in 2020? And then there seems to be a little more margin pressure in 2020 despite the RevPAR outlook being somewhat better than 2019. So maybe what are you looking for on the labor [Phonetic] side this year?
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Yeah. I think there's two things there. One is, certainly, the impact on margins -- I'll take the second one first, the impact on margins is influenced a little bit on just the flattening out of that other revenue increase. But secondly, in addition to labor, you have labor, but then in the third point, like many others we have seen a pretty good increase in property taxes and insurance, especially on the property and liability insurance side, which I think, for us, as a Company, those two line items are up about 4 -- a little over 4% year-over-year. Now, hopefully, we can fight some of the property tax stuff and bring that number back down. But at this point, we've got about an impact on our margins of about 50 basis points between our property taxes and insurance line items to our overall margins.
On the housekeeping side, listen, I think we spend -- we're projected to spend over $65 million on labor and benefits in 2020. So, with 60% of that being in the housekeeping department. So when you look at kind of a $35 million to $40 million spend in housekeeping, I think we are hopeful that we can eke out where we normally spend it might be 16 to 18 minutes in a stay-over room, if we can knock that down into 12 minutes or 13 minutes, those things add up a little bit here and there. So, it's too early to quantify our initial rollout results that we've done in the handful of hotels that we started in the fourth quarter, but I think as we kind of move through on our next call and even probably the one in August, we'll have a much better handle on the success of those initiatives. But Hilton is doing something similar and our guess is others will probably fall in the line to try and battle this cost increase that hitting us all.
Ari Klein -- BMO Capital Markets -- Analyst
Okay. And then just on the supply outlook in 2020, where you expecting the most supply pressure across your markets?
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Yeah. I mean, listen, I think the -- we -- I talk briefly about Anthony's question, certainly, within our Charleston market, the impact for the next -- for 2020, we're going to feel it a little bit. We didn't know those hotels were coming. So it was expected when we bought the hotels. This is just going to be one of those years where we have to absorb it. We still are seeing some decent new supply in our Silicon Valley market, as well, mid- to upper-single digits in 2020. So we continue to absorb that.
Ari Klein -- BMO Capital Markets -- Analyst
All right. Thank you.
Operator
Thank you. Our next question comes from the line of Bryan Maher with B. Riley. Please proceed with your question.
Bryan Maher -- B. Riley FBR -- Analyst
Good morning, guys. Just a couple of quick ones from me. Kind of staying on that property tax and insurance discussion. I mean, it almost seems as if, listening to your call, and certainly, other hotel REITs that we cover here, that hotels are almost targeted by municipalities, as it relates to jacking up property taxes. When and how does that ever get mitigated? And what can you do other than just -- is there anything else you can do besides just simply go through the process of fighting them? And how long does that take to resolve a certain client?
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Yeah. I mean, listen, I think if -- there is a reason why there's lots of property tax consultants out there getting commissions and making pretty nice livings doing that as a career because it's a never-ending process. I think for -- as the cycle ramps up in the jurisdictions typically are kind of two to three years behind in the cycle. So, as you get kind of late cycle, they're trying to increase at the most. And by the time the cycle might turn a little bit, they're still trying to increase the property tax value. So, it's a constant game that you have to play. Certainly, when you're looking at -- when we look at acquisitions and development costs and everything like that, it's a major factor in underwriting and some of these jurisdictions that have actually killed quite a few deals that we've looked at when you start going through the process of assessing what's going to happen to your property tax number. So, it's just a game. I'm not sure there is any way to really get ahead of it.
Bryan Maher -- B. Riley FBR -- Analyst
Okay. And then moving on to your discussion regarding cost containment opportunities, you were a little coy in your discussion on Hilton providing some relief there. Can you get a little bit more granular on that? And how far behind Hilton do you think Marriott is in giving you a little relief?
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
I don't have any knowledge on what Marriott is doing as far as rolling out those initiatives, other than to just say that Hilton is -- this is something, Bryan, I think you know we've talked about for a little over a year that we've been trying to work through a plan to rollout that we can properly train our employees. I think Hilton has been certainly pretty aggressive on that front as well and doing stuff, quite honestly, very similar to what we're doing. I can't really speak for what Marriott is intending to rollout to its managed hotels. But certainly, I think we're all facing the same issue, which is rising labor. And a lot of times as guest expectations for what they really need on a daily basis.
So, I think as the -- as technology continues to evolve and guest expectations, especially with kind of the younger travelers who have the do not disturb on their door a lot of the time, I think we'll be able to continue to tailor those experiences and hopefully, make housekeeping a little bit more efficient. And I think you can switch that into two things, which is one, employee morale. But also I think you can then afford to pay -- continue to pay competitive wages to your housekeeping department.
Bryan Maher -- B. Riley FBR -- Analyst
And then just lastly from me, on the Warner Center development, you guys have -- I mean, I'm sure you do. But can you share what kind of level ADR you looking to get on that property when it opens up?
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Well, we haven't shared that yet. So we're still over a year from opening the hotel, but I like the question. Listen, I think, Bryan, as we get toward the end of the year and we are topped off and working inside and pretty -- have a pretty good understanding of when we're going to open that hotel, which we still expect to be late second quarter of 2021, I think we'll start to put that in. I will say without disclosing ADRs and all that stuff, we-it's a $65 million investment. We've talked publicly that we expect to be able to ramp that to a pretty nice return over the first -- a ramp of a couple of years. That we hope to get 200 basis points spread over where we could buy assets, generally speaking. So, I think for that purpose, at least will give you kind of where we think the cash flow will be as it ramps.
Bryan Maher -- B. Riley FBR -- Analyst
Okay. Thanks. That's all for me.
Operator
Thank you. Our next question comes from the line of Tyler Batory with Janney Capital Markets. Please proceed with your question.
Tyler Batory -- Janney Montgomery Scott LLC -- Analyst
Hey, good morning. Thanks for taking my questions. So, a question on the other and non-room revenue, the growth there pretty significant in 2019. Can you talk a little bit more about what that might look like in 2020 and beyond? And how much room there is left to grow that?
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Yeah. I mean, I think through -- if you look at how we've modeled it, Tyler, I think -- and what I think I spoke to in my cared remarks, we expect that to kind of flatten out on a year-over-year basis over the last half of the year. So I think you can continue to see similar type increases, maybe not on the overall percentage-wise but to the tune of $300,000 to $400,000 a quarter over the first half of the year just in terms of parking revenue alone. And that, again, like I said, that probably flattens out a little bit more in the second half of the year. We did benefit a little bit in the fourth quarter, we did have a new breakfast or a new tenant in some of our restaurant space at our San Diego Gaslamp hotel. So we did start to collect some rent on that hotel -- on that space. But the main driver is certainly the parking revenue. And like I said, it's kind of $300,000 to $400,000 a quarter for the first couple of quarters in 2020.
Tyler Batory -- Janney Montgomery Scott LLC -- Analyst
Okay. And switching gears a little bit then the pipeline for dispositions and acquisitions, it doesn't sound like much has changed there. So, just wanted to confirm that and also curious if you guys think you might be a net seller this year, or maybe you think you can get a couple of deals across the finish line from the acquisition perspective?
Jeffrey H. Fisher -- Chairman, President and Chief Executive Officer
Yeah. This is Jeff. How are you? I think that we'll probably be pretty quiet on the acquisition front. We really look at development on a very selective basis as we've said, as just given us a much better yield in today's environment and with our knowledge that we gain through operating hotels in markets that we have great familiarity with. So, the Warner Center development is a good example of that. So, maybe we sell one or two hotels and maybe we add one more development opportunity to what we're doing here that would kind of follow-on to our next year opening for Warner Center. But I think that's probably the most realistic expectation for you to have.
Tyler Batory -- Janney Montgomery Scott LLC -- Analyst
All right. That's all from me. Thank you.
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Thanks, Tyler.
Operator
Thank you. We have no further questions at this time. I'd like to turn the floor back over to management for closing remarks.
Jeffrey H. Fisher -- Chairman, President and Chief Executive Officer
Well, thanks to everybody for being on the call and we look forward to talking to you with the next quarter results. Bye-bye.
Operator
[Operator Closing Remarks]
Duration: 39 minutes
Call participants:
Chris Daly -- President
Jeffrey H. Fisher -- Chairman, President and Chief Executive Officer
Dennis M. Craven -- Executive Vice President and Chief Operating Officer
Jeremy Wegner -- Senior Vice President and Chief Financial Officer
Anthony Powell -- Barclays -- Analyst
Ari Klein -- BMO Capital Markets -- Analyst
Bryan Maher -- B. Riley FBR -- Analyst
Tyler Batory -- Janney Montgomery Scott LLC -- Analyst
