Park Hotels & Resorts Inc. Q1 FY2025 earnings call

Key Managerial Messages - Performance: Delivered better-than-expected first quarter performance with RevPAR essentially flat. Bonnet Creek complex and Casa Marina resort performed well after renovations. Hilton Hawaiian Village Hotel's strike recovery affected results. - Capital Allocation: Initiated over $80 million of capital improvements during the quarter. Plan to execute second phase of renovations in Hawaii and New Orleans, and $100 million renovation of Royal Palm South Beach, Miami. Expect to invest $310 million to $330 million on capital improvements in 2025. - Asset Sales: Making progress toward selling $300 million to $400 million of noncore hotels this year, with several assets in marketing and disposition process. - Operations: Orlando Bonnet Creek complex results ahead of expectations. Key West hotels performed strongly. Hawaii hotels recovering from strike with recent capital investments. Long-term看好Hawaii market. Fundamentals: U.S. lodging fundamentals near-term uncertain, but focusing on controllable factors and working with operators on contingency plans.

1. Orlando's Bonnet Creek complex: First quarter RevPAR increased by 14%, with the Waldorf Astoria in the complex seeing a 32% RevPAR increase in Q1, driven largely by a surge in transient revenues of nearly 65% and a 30% market share gain. 2. Key West's Casa Marina resort: First quarter RevPAR up 12%, driven by a 680 basis point increase in occupancy and nearly 4% growth in ADR. 3. Hilton Hawaiian Village Hotel: Continues to recover from the labor strike last fall, causing a 420 basis point drag on first quarter results. RevPAR across Hawaii properties declined by 15% during the quarter, while Hilton Waikoloa Village Hotel in the Big Island had a 2.5% RevPAR decline in Q1 but expected mid-single-digit RevPAR growth in Q2. 4. U.S. lodging fundamentals: Near-term outlook uncertain due to ongoing global trade war, causing booking windows to narrow and disrupting cross-border leisure travel load. April RevPAR growth was 1.6% with mixed performance across markets, but pockets of strength in many resort and urban hotels.

Guidance - Revised full year outlook to reflect modest slowdown in demand. Lowered RevPAR growth forecast by 100 basis points at midpoint to a new range of negative 1% to positive 2%. - Lowered adjusted EBITDA forecast by just 3% at midpoint to a new range of $590 million to $650 million. Hotel adjusted EBITDA margin range now 25.6% to 27.2%, down 50 basis points from initial range. - Lowered adjusted FFO per share by $0.11 at midpoint to a new range of $1.79 to $2.09 per share. - Renovation-related displacement at Royal Palm South Beach Hotel expected to reduce RevPAR growth by approximately 110 basis points for the year.

Risks - Global trade war: Continues to delay decision-making and amplify geopolitical tensions, causing booking windows across most segments to narrow significantly and disrupting cross-border leisure travel load. - Transaction market: Uncertainty in the transaction market regarding the sale of noncore hotels, with no assurances on when transactions will close. - Hilton Hawaiian Village Hotel recovery: Uncertainty in the ramp-up of Hilton Hawaiian Village Hotel following the labor strike, including potential impacts on RevPAR and EBITDA.

Q: Floris Van Dijkum asked about planned asset sales and confidence in achieving decent prices and having willing buyers.

A: Tom Baltimore responded that there's uncertainty due to geopolitical and trade war factors, but the team has a track record of selling assets, has assets in various stages of marketing, and is confident in achieving objectives despite market uncertainty.

Q: David Katz inquired about core hotels trimming and the 5 non-core hotels and the Miami project.

A: Tom Baltimore said the core assets are the top 20 hotels accounting for about 85%-90% of the company's value, working to sell noncore assets to recycle capital, and the Miami project is a complete transformation with expectations of good returns.

Q: Duane Pfennigwerth asked about updated views on leading and lagging markets and if the pecking order changed.

A: Tom Baltimore mentioned Hawaii, Orlando, Key West, New York City, Caribe, Denver as leading markets with various demand drivers, and discussed the performance and outlook of these markets.

Q: Patrick Scholes asked about group pace comparison to prior projection.

A: Tom Baltimore discussed group pace for Q2-Q4, noting Q2 pace slightly down 0-1%, Q3 weaker down 10% due to factors like Hilton Hawaiian Village and lapping strong prior performance, and Q4 up 18% with strong drivers.

Q: Smedes Rose asked about EBITDA of Hilton Hawaiian Village and impairment.

A: Tom Baltimore said it's hard to say yet if EBITDA can be ahead of 2024 but is bullish on Hawaii long-term, and impairment was related to an asset where the team determined appropriate write-down.

Q: Chris Woronka asked about asset sale definition of good outcome and OpEx offsets.

A: Tom Baltimore said asset sales seek attractive pricing at multiples greater than trading, and Sean Dell’Orto discussed OpEx offsets including mix, staffing, and insurance renewals.

Q: Jay Kornreich asked about Orlando performance drivers and macro landscape impact on transient customers.

A: Tom Baltimore discussed Orlando's strength from theme park openings and meeting space expansion, and said while there's macro uncertainty, April performance was above initial forecast with some markets strong.

Q: Robin Farley asked about ranking of group, leisure transient, and business transient strength.

A: Sean Dell’Orto ranked group as strong with solid base, leisure second with summer potential, and business transient with some pressure but solid performance so far.

Q: Chris Darling asked about incremental share repurchases vs liquidity.

A: Tom Baltimore said it's a balancing act, with careful management of balance sheet and liquidity, and seeing share repurchases as a good investment at current pricing.

Q: Dany Asad asked about leisure behavior difference in higher-end vs non-luxury resorts and non-rooms revenue.

A: Sean Dell’Orto said no particular different behavior, and non-rooms revenue was driven by strong group catering contribution, with mix shift contributing to RevPAR.