Park Hotels & Resorts Inc

Greetings and welcome to Park Hotels & Resorts' second quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the formal presentation. If anyone should require operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ian Weissman, SVP, Corporate Strategy. Please go ahead.

Thank you, operator, and welcome, everyone, to the Park, Hotels & Resorts Second Quarter 2020 Earnings Call. Before we begin, I would like to remind everyone that many of the comments made today are considered forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, we may discuss certain non-GAAP financial information such as adjusted EBITDA. You can find this information together with the reconciliations to the most directly comparable GAAP financial measure in the morning's earnings release as well as in our 8-K file with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com. This morning, Tom Baltimore, our Chairman and Chief Executive Officer will provide an update on Park's current operations in addition to his thoughts on the industry as a whole. Sean Dell'Orto, our Chief Financial Officer, will provide a brief review of our second quarter results as well as an update on our balance sheet and liquidity. Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Tom.

Thank you, Ian, and welcome, everyone. I want to start by saying that I hope all of you and your families remain safe, healthy, and well. Without a doubt, the last five months have been the most challenging period the lodging industry has ever faced, with travel grinding to a virtual standstill amid mandated stay-at-home orders and restrictive travel policies across the world. While the U.S. began a gradual reopening in early June, COVID-19 cases continue to rise, and with widespread uncertainty, travel demand remains largely depressed. With social distancing practices still very much the norm, businesses have encouraged employees to remain at home and many school districts will implement virtual or remote learning for students, both of which are major impediments to business travel. We don't expect a meaningful increase in demand until medical solutions, including vaccines and therapeutics are in place. And we are encouraged by the global race underway and the pace of vaccines in development, including several that are moving into phase three trials. Despite these challenges, our team remains committed to executing our action plans to mitigate our losses and bolster our liquidity. We moved quickly in March and April as we suspended operations at 38 of our 60 hotels dramatically reduced our capital spend by over 75% and drew down our $1 billion from our revolver. We further solidified the balance sheet by amending our corporate credit facility to obtain covenant relief and substantially increased our liquidity with a $650 million bond issuance. Through the combination of these actions, We ended the quarter with over $1.6 billion of liquidity available, a $300 million increase from the end of the first quarter, and reduced our monthly cash burn rate to $65 million, assuming all hotels have suspended operations, or a 23% reduction from our original estimate. This equates to over two years of runway under the most severe Thank you for joining us today. including state and local ordinances, demand and booking trends, airlift capacity, the potential to consolidate operations with neighboring park hotels, and ultimately the cost-benefit of opening versus remaining closed. Accordingly, as restrictions started to ease in June, we reopened 10 hotels during the month, followed by another 10 hotels in July, all of which were done relatively quickly and with minimal startup cost. Currently, we have 42 of our 60 hotels open, accounting for approximately 53% of our total room count. Over the balance of the third quarter, we expect to open an additional 11 hotels, bringing our total open count to 53 hotels by September the 30th, accounting for almost 80% of our total room count. And with most of the remaining suspended hotels open by year end. Turn into broader operating trends, we have seen pressure across all segments and markets, with leisure, transient, and drive-to locations performing better on a relative basis. Hawaii remains one of our more challenged markets, with the state extending its mandatory 14-day quarantine restriction for travelers through at least September 1, while also requiring inbound travelers beyond that date to provide proof of a negative COVID-19 test. On a positive note, however, Japan recently included Hawaii on an exclusive list of just 12 countries and regions they have designated as safe travel partners. With Japan accounting for more than 1.5 million visitors to Hawaii in 2019, this is an important step forward, given how meaningful Japan is to Hawaii tourism. In 2019, inbound travel from Japan accounted for nearly 19% of total demand across our two Hawaiian hotels. Turning to San Francisco, which is among the most challenged hotel markets in the country, the mayor ordering all hotels closed with the exception of those housing first responders and essential workers. The outlook over the back half of 2020 remains challenged with all major city-wise either canceled or scaled back and with the majority of the city's largest business transient players electing to keep associates at home for the foreseeable future. On the group side, we are working to rebook council events. However, most are targeting the second half of 2021 or beyond at this point. South Florida was a relative bright spot in the portfolio with both of our Key West hotels and the Royal Palm Hotel in Miami opening in early June. Demand trends have been relatively healthy for the drive-to leisure properties with occupancy trending in the 30% range for Miami and north of 45% in Key West for the month of June. Notably in Key West, ADR impressively remained flat year over year. Finally in Orlando, our Bonnet Creek complex, which was closed for the entire second quarter, opened its doors on July 1st. Group demand is virtually nonexistent across the Orlando market, but I am pleased to report that our property team successfully negotiated a large contract with the Waldorf Orlando Hotel for media and other ancillary demand tied to the restart of the NBA season. effectively buying out the resort through early October, accounting for $5 million of incremental revenue. This demonstrates the tremendous resilience, perseverance, and creativity of our local sales teams as they try to find ways to identify and capture demand. As another example, the Hilton New Orleans Riverside, we looked outside of the box for alternative sources of revenue and successfully negotiated a block of roughly 690 rooms for Xavier University of Louisiana to serve as an auxiliary student housing for its fall and spring semesters, filling approximately 42% of a hotel which traditionally relies on a group mix of 65 to 70% while accounting for incremental $7 million in revenue. We also could continue to look aggressively at each department to improve efficiency, We are in the process of complexing operations across several key markets, looking to partner with neighboring hotels with similar operators to consolidate management positions where it makes sense. We hope to provide further updates on our progress in the coming months ahead. While there are many factors outside of our control that are having a profound impact on our industry, I can assure you that the PARC team is laser-focused on successfully navigating through this crisis, working hard to strategically position the company for an eventual recovery. We took the difficult but necessary steps to drastically cut costs across the portfolio while raising enough capital to more than adequately cover our liquidity needs in the interim. On the other side of this health crisis, we believe You will find an industry that should benefit from significantly less hotel supply and more profitable hotel operating model as brands and owners work collectively to permanently take cost out of the system and strong pent-up demand from both business and leisure travelers. Finally, I'd like to offer my sincere thanks to all of our team members and operating partners who have truly stepped up throughout this time and have displayed all of our core principles as we all wade tirelessly through these uncharted waters. Park has a seasoned and experienced team of men and women, and this is not our first crisis. And with that, I'd like to turn the call over to Sean, who will provide some more color on our balance sheet and liquidity.