Park Hotels & Resorts(PK) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The portfolio generated a 5.3% year-over-year increase in RevPAR for Q2, with a strong start in April and May, moderated by tougher comps in June [7][10] - Full year 2023 comparable group revenue pace improved by approximately 150 basis points to 91% relative to the same period in 2019, with projected comparable group ADR exceeding 2019 levels by nearly 7% [8] - Current liquidity stands at over $1.7 billion, including over $840 million in cash, with net debt at $3.8 billion and a net leverage ratio of 6x [40] Business Line Data and Key Metrics Changes - Comparable urban hotels achieved over 14% year-over-year RevPAR growth, while Hawaii hotels exceeded expectations with nearly 11% year-over-year RevPAR gain [7][11] - Group revenues for the comparable portfolio increased 10% year-over-year to approximately $120 million, benefiting from strong short-term pickup [33] - RevPAR growth in Chicago was up 23%, while Boston and Denver saw growth of 11% and 12% respectively [35] Market Data and Key Metrics Changes - San Francisco continued to negatively impact results, with a 175 basis point drag on Q2 portfolio RevPAR growth compared to the same period last year [10][20] - Healthy domestic demand is expected to drive performance in Hawaii, with low to mid-single-digit year-over-year RevPAR growth forecasted for the latter half of the year [12] - The market share for Hilton Hawaiian Village and Waikoloa exceeded 24% and 15% RevPAR premiums respectively compared to the competitive set [37] Company Strategy and Development Direction - The company remains committed to executing strategic goals that create long-term value for shareholders, focusing on capital allocation and internal growth strategies [13][14] - Proceeds from noncore asset sales are expected to reduce leverage and reinvest in the portfolio, with a robust CapEx and redevelopment pipeline exceeding $350 million this year [39] - The company is optimistic about the recovery in lodging and expects improved macro conditions to support solid consumer trends and business travel [38] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism regarding the recovery in San Francisco, acknowledging structural challenges that will prolong recovery [46][88] - There are expectations for a strong third quarter and respectable fourth quarter, with RevPAR growth projected at 26% for Q2 and July [98] - Management remains bullish on Hawaii, anticipating a reduction in EBITDA declines and a strong performance trend [51][72] Other Important Information - The company fully repaid a $75 million mortgage allowance, adding another property to its unencumbered portfolio [16] - The ground lease for the Embassy Suites Phoenix Airport Hotel was terminated, but guidance remains unaffected as it was a noncore asset [17] - The company has successfully sold or disposed of 40 hotels for $2.1 billion since spinning out from Hilton in 2017, improving overall portfolio quality [17] Q&A Session Summary Question: Impact of San Francisco on results and guidance - Management acknowledged that San Francisco's performance has deteriorated significantly, leading to a reduction in guidance due to expected EBITDA losses [43][44] Question: Future of group business in San Francisco - Management noted that the city is facing challenges with a weakened convention calendar and high office vacancy rates, impacting group business [44][46] Question: Performance in Hawaii and future expectations - Management remains optimistic about Hawaii's recovery, with expectations for improved booking trends and increased direct flights from Japan [55][72] Question: Business transient recovery - Management indicated that while business transient recovery has been slower than expected, there are signs of improvement in the latter half of the year [75][81] Question: CapEx needs and portfolio investments - Management highlighted ongoing investments in key assets, including a $200 million renovation at Bonnet Creek, and plans for additional capital deployment in high-potential areas [90][91]