Park Hotels & Resorts Inc

Greetings and welcome to Park Hotels and Resorts Inc. Fourth Quarter 2020 Earnings Conference Call. At this time, all participants are on 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. It is now my pleasure to introduce your host, Ian Weissman, Senior Vice President, Corporate Strategy. Thank you. You may begin.

Thank you, Operator, and welcome, everyone, to the Park, Hotels and Resorts Fourth Quarter and Full Year 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 reconciliations to the most directly comparable GAAP financial measure in this morning's release, as well as in our 8-K file with the SEC, and in 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 the industry as well as a review of PARCC's fourth quarter performance. He will also provide the company's views on 2021 as the industry recovers from the devastating effects of the global pandemic, although we will not be providing full-year guidance at this time. Sean DiLorto, our Chief Financial Officer, will provide a brief review of our fourth quarter and full year results, as well as a more detailed view 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 expressing my profound sadness that my friend Arne Sorensen is no longer with us. Arne was a giant in our industry, more importantly, We have lost a genuinely kind and compassionate human being who was a loving father and husband and a true friend to many. For those of us who were lucky enough to cross paths with Arnie, our lives are a lot richer because of it. Arnie will be greatly missed. I send my sincere condolences to his wife, Ruth, and their children. As I reflect back on 2020, there is no doubt that The last year was the most difficult period our industry has ever faced, and I could not be prouder of how the Park Team managed through the adversity and met the challenges head on. As the pandemic began to take hold, we quickly took steps to protect our team members, preserve our liquidity position, and plan for the long road ahead. Our efforts to significantly reduce operating costs by suspending operations at 38 of our 60 hotels, cutting our capex budget by 75%, and suspending our dividend helped to meaningfully reduce our monthly cash burn rate to just $42 million during the fourth quarter. In addition, we made great strides to strengthen our balance sheet and liquidity position, and with the highly successful launch of two corporate bond offerings in 2020, raising nearly 1.4 billion of capital and amending our bank credit facilities. Finally, with the business stabilized and demand trends showing signs of improvement, we began to prudently and responsibly reopen hotels while identifying additional operating efficiencies, including the permanent removal of 70 million of cost across the portfolio. We continue to actively pursue other potential cost savings as we ramp up operations at our hotels. Today, 50 of our 50 hotels are open, accounting for approximately 75% of our total room count. Despite some challenges across some of our core markets, we are optimistic that we will not need to resuspend operations at any hotels based on our current outlook. Regarding our liquidity position, we currently have $1.4 billion of liquidity available to us with just $100 million of debt maturing through 2022. Turning to our fourth quarter results, as expected, we saw little performance improvement during the quarter, with RevPAR down 85% as both group and business transient remained impaired by the effects of the pandemic. While leisure business was down 78% overall for the quarter, drive-to leisure continued to outperform on a relative basis. Occupancy at our drive-to leisure portfolio averaged over 33% during the quarter, a 120 basis point improvement over the third quarter. We witnessed relatively solid results at several of our resort properties, especially across South Florida. Key West remains one of our stronger markets. Our two hotels, Casa Marina and The Reach, continue to outperform the sub-market, with hotel occupancy averaging 70% during the quarter. also pleased to share that the castle marina celebrated its 100th anniversary this past december an important milestone for this iconic property looking ahead to 2021 we expect performance at our key west properties to remain strong aided by increased airlift capacity which should help to support the pent-up leisure demand for the region the year is off to a good start which The January occupancy averaging 68% across the two properties, and February expected to be well above 80%. While the average daily rate is relatively in line with pre-pandemic levels, in Miami, we witnessed solid results at our Royal Palm Hotel, as South Beach has enjoyed sustained positive leisure momentum, aided by Miami-Dade's decision to lift restrictions in October. Royal Palms occupancy for the fourth quarter was 56% and increased to 69% in January, with February on pace to hit 85%. Turning to Hawaii, the islands officially reopened for business on October the 15th, and visitors can now bypass the state's mandatory 10-day quarantine with proof of a negative COVID test within 72 hours of departure. We reopened our first hotel, 647 rooms, Hilton Waikoloa Village in mid-November, followed by the partial reopening of our 2,860-room Hilton Hawaiian Village Hotel on December the 15th. At Hilton Hawaiian Village, results were encouraging during the initial two weeks that the hotel was open in December, with Christmas week occupancy in the high 20% range and New Year's topping 31%. This level of demand was enough to warrant opening two of the five towers during the holiday season. In addition, despite being nearly double the size of the nearest comp set property, Fulton Hawaiian Village materially outperformed its comp set properties on both occupancy and rev par throughout the holiday season by 33% and 19% respectively. Throughout the pandemic, Hawaii has been one of the most restrictive states in the nation, although the situation seems to be turning a corner. With the rollout of the COVID-19 vaccines and the drop in case count, state officials are close to easing travel restrictions, allowing for unrestricted inter-island travel for those individuals that have been fully vaccinated as of March the 1st, while the potential for Trans-Pacific travel by May the 1st. This is very good news for demand trends over the back half of the year, with the continental United States making up 67% of inbound travel to Hawaii. We expect the first quarter of 2021 to remain challenging for Hawaii given the continuation of global travel restrictions. However, we are already starting to see signs of increased demand in that market with a noticeable pickup in February with the Hilton Hawaiian Village achieving 900 rooms occupied over the Valentine and President's Day weekend combo. Waikoloa hosted over 500 occupied rooms. Rates are improving as more bookings are funneling through the higher rated channels with a reduced reliance on OTAs. The back half of the year, group bookings continue to hold. While transient bookings have increased, a consistent theme we heard from several of the main airline carriers to the islands. Overall, it looks like demand trends, cost efficiencies, airlift, and travel restrictions are all moving in the right direction and setting a much more positive tone for 2021. We look out over the next 12 months. We have several key priorities we intend to focus on, which we believe will help position PARCC for long-term success. First and foremost, we remain laser-focused on deleveraging the balance sheet with a long-term goal to get back to our stated range of three to five times net debt to adjusted EBITDA. While organic growth will be the primary driver, we will initiate the marketing process for several hotels as the bid-ask spread continues to narrow with the improvement in operating fundamentals. Overall, we hope to sell upwards of $300 to $400 million in non-core hotels during 2021. we will provide further details on asset sales as they occur. Second, we look to safely and efficiently reopen the balance of our portfolio and continue to chip away at our monthly cash burn rate with a goal of returning to break even over the back half of the year. Finally, as we have noted on several past calls, we continue to work with our operating partners to enhance the hotel operating model Overall, we believe that the efficiencies that we have already implemented over the past year and will continue to focus on as the sector recovers are sustainable and have the potential to realize incremental margin improvement over time. With respect to the broader lodging recovery, we remain encouraged by the progress that has been made on the vaccine front, with nearly 70 million doses already administered in the U.S., At the current pace of daily vaccinations, it is estimated that by late summer, early fall, upwards of 75% of the U.S. population could be fully vaccinated. We expect that the lodging recovery will be further bolstered by a healthy U.S. economy as massive amounts of fiscal stimulus and an accommodative Fed continue to support the economy, including the $900 billion plan Congress passed in December and an additional $1.9 trillion recently put forth by the President. with the possibility of a significant infrastructure spending bill to follow as well. Additionally, the U.S. personal savings rate has soared to almost 14%, equating to over $1 trillion saved over the last 12 months, while GDP growth is forecast to be near 6% for 2021. Against this backdrop, we believe there is significant pent-up demand, which should lead to accelerated growth beginning in the second half of 2021 as both business and leisure travelers seek to reclaim all that was lost in 2020. As more of the population is vaccinated, travel restrictions ease, corporate offices reopen, demand trends will undoubtedly improve, and we believe Park is incredibly well positioned to successfully lead our industry through this expected recovery phase. By and large, Man recovery is projected to follow recent trends with drive to leisure continuing to leave during the early phases of the recovery. With over 45% of our rooms located in drive to markets, we believe park remains very well positioned for this early phase of the recovery. We've been very encouraged with the improvement in demand since the beginning of the year. The portfolio wide occupancy is improving sequentially over the last several weeks. We have witnessed particularly strong results at several of our drive to. and leisure markets, including Key West, Miami, New Orleans, Seattle, and Southern California. The next phase of the recovery, which we anticipate may begin to take shape during the third and fourth quarter of 2021, is expected to be fly-to leisure. The disproportionately high U.S. savings rate and pent-up desire for travel should help to support demand trends across several of our key markets, including Hawaii, Orlando, Miami, Southern California, and even San Francisco as restaurants and local attractions reopen. On the corporate side, however, there remains very limited visibility with many companies remaining more focused on when to bring workers back to the office full-time and less focused on booking travel at this point. The group side is expected to be similarly impacted by the lack of corporate travel in the near term. We are encouraged by the lead volume and group booking activity seen since November. Shortly after news of the vaccines were announced, with leads for 2021 doubling and definite bookings for the year increasing five-fold in January. In addition, looking out to 2022, Group Pace is largely holding firm at this point with rates up 3% over the 2019 levels. While the industry still has a long road ahead, I'm very optimistic about the lodging recovery and Park's relative position. I'm incredibly proud of the entire Park team, which worked tirelessly all year. And thanks to their hard work and dedication, I am confident that we will emerge from this crisis stronger and more resilient than ever. And with that, I'd like to turn the call over to Sean, who will provide some more color on our results and update on our balance sheet and liquidity.