Park Hotels & Resorts Inc

Greetings and welcome to Park Hotels & Resorts Incorporated third quarter 2020 earnings conference call. At this time, all participants are in a listen-only mode. A question and answer session will follow the form of 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 today, Ian Weissman, Senior Vice President, Corporate Strategy. Please begin, sir.

Thank you, operator, and welcome, everyone, to the Park, Hotels & Resorts third 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 will discuss certain non-GAAP financial information, such as adjusted EBITDA. You can find this information together with reconciliations to the most directly comparable GAAP financial measure in this morning's earnings release, as well as in our 8K 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 overview of PARC's current financial position as well as an update on operations. Sean Dell'Orto, our Chief Financial Officer, will provide a brief review of third quarter results as well as more detail 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. Unfortunately, the pandemic is continuing across much of the globe and its impact has been profound on our industry. As we have adjusted and adapted to this new reality, I am pleased to report that PARCC has made significant progress on its near-term objectives. while keeping an eye towards longer-term opportunities when more widespread travel resumes. Since the onset of COVID-19, our priorities have been clear. First and foremost, to ensure the health and safety of our employees and hotel guests. Second, reduce our burn rate by aggressively asset managing the portfolio, including the responsible suspension and subsequent reopening of hotels. And third, Thank you for joining us today. Our balance sheet and ensure the company is well positioned to successfully navigate these unprecedented times by executing a strategic capital raise and extending our near-term debt maturities. Accordingly, in mid-September, Park launched our second corporate bond offering, successfully raising $725 million of eight-year secured notes at very attractive pricing and eliminating the risk of impending debt maturities I am incredibly proud of the collective efforts of our team and our partners to make impactful changes in such a short period of time. Finally, as it relates to the balance sheet, we remain focused on continuing to selectively sell non-core assets with net proceeds expected to be used to pay down debt. While the bid-ask spread remains wide, there is a significant amount of capital on the and we anticipate a more active transaction market once the path to recovery is more apparent. Turning to operations. Since March, our team has been focused on mitigating the impact of severely diminished hotel demand. We have undertaken several initiatives in order to reduce our monthly burn rate and maximize efficiencies in a low demand environment. During much of the second quarter, our actions were largely defensive As we suspended operations at 38 of our 60 hotels, at the height of travel restrictions, and reduced operations at several others, ending the quarter on a more positive note with our first set of hotel reopenings in June. During the third quarter, as we witnessed pockets of increased demand across our portfolio and moved closer toward a recovery, we opened an additional 14 hotels, including our 1,500-room Bonnet Creek Complex of Hotels in Orlando, which exceeded 30% occupancy during the quarter, and the 1600 room, Hilton New Orleans Riverside, which averaged 42% occupancy. Among our drive-to leisure markets, occupancy for the quarter averaged over 30%, up from 8% in the second quarter. Key West continued to post very solid results, with occupancy averaging 57% for both properties for the quarter, In fact, our Casa Marina Resort in Key West, along with our Hilton Resort in Santa Barbara and the Hyatt Regency Mission Bay in San Diego all impressively held rate relative to last year, supporting the appeal to drive leisure resort locations. Our teams also continue to find areas of incremental demand, such as the NBA-related business at the Waldorf Astoria at Bonnet Creek, as well as university-related demand at the Hilton in New Orleans, which resulted in $9 million of revenue for the quarter. Thus far in the fourth quarter, we have opened two additional hotels, the Cree Bay Hilton in Puerto Rico and the Hilton Lake Bonavista in Orlando, and we currently plan to open both Hawaiian hotels in the coming weeks. In mid-October, the state of Hawaii began accepting proof of a negative COVID test taken within 72 hours of departure to bypass the mandated 14-day quarantine. Data from these first few weeks show strong demand with airline loads at over 50% and forward trends for airlift to the state are also encouraging with Hawaiian Airlines reporting that they expect to reach over 50% capacity by December, while both United and Southwest expect to significantly ramp up flights into Hawaii over the next two months. Based on these initial positive perceptions, And as we continue to monitor the demand patterns in reaction to these testing protocols, we currently plan to open the Hilton Waikoloa Village around mid-November, and we expect to open the 793-room Rainbow Tower at the Hilton Hawaiian Village by mid-December. All combined, we would expect to have 50 out of our 60 hotels open by year-end, and with those hotels representing 74% of our total rooms. In terms of the remaining ten suspended hotels, four are in San Francisco. The city's lengthy restrictions on travel have suppressed leisure demand, and its irresponsible healthy building ordinance has added unreasonable incremental cost. And with higher occupancy thresholds needed in New York and Chicago, coupled with little or no business across these markets during the winter months, the New York Hilton Midtown and the Hilton Chicago will remain suspended for the rest of the year and likely through most of Q1 in 2021. As I emphasized on our last call, we do not expect to see a meaningful increase in demand until vaccines and therapeutics become widely available. Given this current situation, we remain disciplined in our approach to hotel reopenings moving forward only when the economic benefits outweigh the cost in order to preserve our liquidity. Turning to forward trends. While our property teams and brand partners are working hard to generate demand and reassure the public that the hotel brands have instituted top-of-the-line cleanliness standards, ongoing concerns over the surge in cases through the winter months will likely dampen both business transient and group demand over the balance of this year. Overall, we expect leisure to continue to outperform during the fourth quarter, and that positive for part with 40% of our hotels located in drive-to locations, as we continue to witness solid trends among our resorts in markets like Key West, Santa Barbara, and San Diego. We are also encouraged by the expected reopening of our properties in Hawaii and the initial airlift to the state, Thank you. Thank you. Thank you. and group bookings in the first half of 2021 continue to weaken as meeting planners look to cancel their events a quarter or two in advance. However, group pace for the second half of 2021 is holding. It clearly depended on medical solutions being available by early next year. Over 25% or 450,000 room nights of the COVID cancel group business has been booked into future years. with approximately 6% booked into the second half of 2021 and 5.5% booked in 2022. In this environment, we are laser focused more than ever on cost savings and opportunities to reimagine the business model. As a result, we took the very difficult but necessary steps to reorganize property level management across our portfolio, which will result in $70 million of savings on an annualized basis Equating to a 200 plus basis point improvement in margins based on 2019 revenue levels. While these savings are significant, we also continue to work with our brand partners to identify ways to eliminate cost from the business model, including revisiting both operational and CapEx brand standards, complexing positions, reinventing the food and beverage model, and reducing above property expense allocations. I am very proud of our progress to date and will continue to keep you apprised of additional initiatives and the expected improvements to the bottom line. While there are many challenges still ahead, I am reassured by the incredible work our team has done to date in managing through this crisis and positioning PARCC to successfully navigate this through the other side. I also believe in our country's resilience. and do not believe that virtual mediums will replace the fundamental need people have to connect in person. While we have limited near-term visibility on when demand will return to normal, we have an incredibly strong platform with high-quality assets that should realize outsized benefits and operating leverage as demand recovers. And we will continue to work tirelessly to serve our stakeholders and position PARCC for long-term success. And with that, We'd like to turn the call over to Sean, who will provide some more color on our balance sheet and liquidity.