Park Hotels & Resorts Inc. Q3 FY2024 earnings call

• Tom Baltimore reported a 3.3% RevPAR growth in the third quarter despite transitory factors disrupting demand in certain markets. The portfolio's performance showed strong execution of business priorities. - Recent redevelopment projects in Orlando and Key West are well-positioned to benefit from healthy group and leisure trends, with the Waldorf Astoria Orlando ranked ninth in Condé Nast Traveler's 2024 Reader's Choice Awards. - Actively exploring additional development opportunities in key markets like Hawaii, Key West, Santa Barbara, and Miami. - Closed two non-core assets in the third quarter: Hilton La Jolla Torrey Pines and Hilton Oakland Airport, with proceeds used for share repurchases. - Sean Dell’Orto mentioned Q3 RevPAR for the portfolio was ~$190, up 3.3% YOY, with occupancy up 2.5 percentage points and rates flat. Hotel revenue was $625 million, hotel adjusted EBITDA was $170 million with a nearly 27.2% margin. - Dividend: Paid $0.25 per share in Q3 and anticipate a Q4 dividend subject to Board approval.

Resorts saw strong performance with RevPAR growth. For instance, resorts in Chicago, New Orleans, Boston were driven by convention calendars, with combined RevPAR increase of 14%. Orlando, Miami, and San Diego had solid leisure trends, collectively generating an 11% RevPAR growth. Group revenue increased nearly 13% year-over-year to approximately $110 million, coupled with strong banquet and catering revenue improvement of 9%. Hawaii had Q3 RevPAR decline by 8% due to labor strikes, tough year-over-year comparisons, and weather events like three severe weather events in August impacting inbound travel from Japan, which saw a 17% decline in the month.

• Due to uncertainties from labor negotiations, unable to update full-year 2024 RevPAR and EBITDA guidance. - Expect to continue aggressively pruning non-core portfolio in 2025, with proceeds used for stock buybacks and funding development/renovation pipeline. - Anticipate paying a Q4 dividend subject to Board approval, targeting 65% to 70% of full-year adjusted FFO per share.

• Labor strikes at certain hotels, impacting operating results and RevPAR. - Weather events like Hurricanes Helene and Milton disrupting business, with estimated $2 to $3 million impact to hotel adjusted EBITDA, most in Q4. - Uncertainties from continuing negotiations between operators and labor unions affecting guidance and financial projections.

Q: About Hawaii's RevPAR decline and future leisure demand into Hawaii?

A: Tom Baltimore noted Hawaii's RevPAR decline was due to lapping Maui impact, tough comps at Hilton Waikoloa, weather events in Japan, but remains bullish long term as Oahu's RevPAR growth has outpaced the U.S. by nearly 300 basis points over 20 years.

Q: Thoughts on disposing of non-core hotels and focusing on core portfolio?

A: Tom Baltimore said Park is laser-focused on reshaping the portfolio, having sold 44 assets for nearly $3 billion since the spin, and will continue to recycle capital from non-core assets to invest in the core portfolio which has significant upside.

Q: Group pace for 2025 and key markets?

A: Tom Baltimore mentioned group pace expected to be mid to high single digits in 2025, with markets like Hilton Waikoloa expected to have group pace up almost 77%, Denver strong, Bonnet Creek strong, etc.

Q: Expectations for ROI CapEx projects and union markets?

A: Tom Baltimore stated Park is bullish on ROI CapEx projects in union markets, confident operators and unions will resolve issues, and these projects are part of the strategy to invest in high-quality real estate for outsized returns.

Q: Hawaii's Japanese travel and 2025 expectations?

A: Tom Baltimore said Japanese travel to Hawaii is expected to get back to pre-pandemic levels around 2026-2027, with current annualized visitation around 720,000, still 54% below 2019.