Park Hotels & Resorts(PK) - 2021 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company achieved corporate level breakeven for the first time since the pandemic began, with pro forma RevPAR of $105, which was above expectations and represented a nearly 35% sequential increase over the second quarter [7][50] - Total operating revenue for the quarter was $404 million, with pro forma hotel adjusted EBITDA reaching $83 million, nearly double the previous quarter [51] - Adjusted FFO per share was $0.02, marking the first quarter of positive earnings since the pandemic started [51] Business Line Data and Key Metrics Changes - Leisure properties showed strong performance, with an average leisure transient ADR 3.4% ahead of Q3 2019, particularly in Hawaii, Southern California, and South Florida [18][27] - Group revenues increased nearly 130% from the second quarter, growing from 8% to 13% of the revenue mix, while business transient demand increased nearly 100% to account for nearly 20% of the mix [19][22] - 38 out of 45 open consolidated hotels generated positive EBITDA for the quarter, with resort properties achieving EBITDA margins exceeding 36% [52] Market Data and Key Metrics Changes - The unemployment rate improved to 4.8% in September, contributing to increased consumer confidence and spending [10] - Hawaii resorts averaged over 75% occupancy in Q3, with the Hilton Hawaiian Village achieving a RevPAR index of 124% [27] - In New York, the Hilton Midtown reopened and exceeded performance expectations, achieving 44% occupancy shortly after reopening [24] Company Strategy and Development Direction - The company executed a non-core disposition program, selling or disposing of 31 hotels for over $1.7 billion, enhancing the overall quality of its portfolio [11][39] - The company plans to capitalize on embedded ROI opportunities within its core hotels, including expansions and brand conversions [14] - The focus remains on maximizing shareholder value through selective acquisitions and capital recycling, particularly in upper upscale and luxury hotels [41][76] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the recovery of business transient and group demand, expecting a return to pre-COVID levels [13][44] - The company anticipates a strong holiday season, particularly in markets like New York and Florida, with ADRs significantly above 2019 levels [32][102] - Management noted the ongoing valuation gap between public and private markets, suggesting that the recovery path will help narrow this gap [46][47] Other Important Information - The company reported a liquidity position of over $1.8 billion, including $1.1 billion available on its revolver, and only 2% of total outstanding debt maturing through 2022 [55] - The company is committed to ESG initiatives, having published its fourth annual Corporate Responsibility Report and updated several ESG-specific policies [58][60] Q&A Session Summary Question: What are the historical patterns regarding office utilization and occupancy ramp-up? - Management indicated that the reopening of Parc 55 in San Francisco is planned for December, with expectations of occupancy ramping up as more people return to offices [65][67] Question: Are there any discussions on further divestitures? - Management stated that all options are on the table to create shareholder value, including potential divestitures if they align with strategic goals [73][75] Question: What is the outlook for acquisitions? - Management emphasized a focus on value-add opportunities and being selective in acquisitions, particularly in upper upscale and luxury markets [81][110] Question: How are group spending habits changing? - Management noted that groups are generally behaving consistently with pre-pandemic patterns, with some incremental spending observed during events [97] Question: What are the expectations for cold weather markets during the holidays? - Management expressed optimism for New York and Florida markets, with strong bookings and rates expected during the holiday season [100][102]