Park Hotels & Resorts Inc

Greetings and welcome to the Park Hotels and Resorts fourth quarter 2021 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. Please note that this conference is being recorded. I will now turn the conference over to our 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 2021 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 and adjusted FFO. You can find this information together with reconciliations to the most recently comparable GAAP financial measure in yesterday's earnings release, as well as in our 8K file with the SEC. and the supplemental information available on our website at pkhotelsandresorts.com. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide a review of PARCC's major milestones, an overview of our fourth quarter performance, and thoughts on PARCC's priorities as we head into the recovery. Sean DeLorto, our Chief Financial Officer, will provide additional color on fourth 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. Six weeks ago, we celebrated the fifth anniversary of Park Hotels and Resorts. Over the past five years, the Park team has worked tirelessly and with laser focus and discipline to transform the company. We have sold or disposed of 31 assets for $1.7 billion, including all 14 of the international assets that were part of this spin, vastly simplifying the park's operating profile. We added 18 high-quality assets through the $2.5 billion Chesapeake Lodging Trust acquisition, improving portfolio metrics and diversifying our geographic, brand, and operating We facilitated the exit of both Blackstone and H&A from Park stock, eliminating the perceived equity overhang, and taking out H&A in a highly successful secondary offering that allowed us to buy back Park stock at a significant discount to NAV. We also shut down operations at the three freestanding laundry facilities and turned over management of Park's or select hotels to third-party management, bringing up our internal resources and simplifying our employee base. And as we pass the five-year anniversary on January the 3rd, 2022, we removed significant built-in gain tax restrictions on the sale of legacy park assets, giving us increased flexibility and optionality as we expect to enter the growth phase of the lodging recovery. The past two years have been grueling for all of us. When I think about PARCC's efforts, I'm especially proud of how our experienced team has navigated this environment. We did not panic. We acted swiftly and decisively to stabilize the business, temporarily suspending operations at several hotels to reduce monthly cash burned. Thanks to the exceptional efforts of our asset management team to reimagine the operating model, and reopen hotels only when it was financially beneficial to do so. We reduced our monthly cash burn from a high of $85 million to portfolio break even by March of 2021. We also worked proactively to maximize our financial flexibility. We were one of the first lodging REITs to enter the bond market in 2020, orchestrating three successful bond offerings between May 2020 and September 2021, and raising $2.1 billion in senior secured notes. In combination with the proceeds from PARCC's Strategic Capital Recycling Program, the bond issuances allowed us to push out debt maturities, pay off 97% of our bank debt, and perhaps most importantly, avoid the need to issue dilutive equity, which we communicated as a key priority. Looking at 2021 in particular, I'd like to call out four key achievements. First, we successfully reopened six hotels during the year, including the nearly 1,900 room New York Hilton Midtown with the portfolio now 96% open and only two of our hotels still suspended. Second, we achieved positive FFO for the last two consecutive quarters through the stellar efforts of our asset management team and operating partners to drive top-line growth, while working towards reimagining the operating model to permanently cut an estimated $85 million in expenses through the elimination of approximately 1,200 full-time positions across the portfolio, translating into an estimated 300 basis points of margin upside. Third, we increased our financial flexibility through our strategic capital allocation priorities opportunistically selling five hotels for nearly $480 million to reduce leverage and issuing $750 million of attractively priced corporate debt. And finally, we restarted work on several key ROI projects, including the Bonnet Creek meeting space platform expansion in Orlando, which we expect will drive outsized growth for our portfolio going forward. In sum, we finished 2021 well-poised to capitalize on the expected recovery and the return to normalcy. Turning briefly to fourth quarter performance, results came in ahead of our expectation, driven by strong performance from several core markets. Consolidated pro forma rev par of $110 was above expectations, fueled by outsized ADR growth, with 37 of our 46 open consolidated hotels generating positive EBITDA for the quarter. Similar to the third quarter, leisure strength in Hawaii, Southern California, and South Florida helped drive portfolio performance, generating an average leisure transient ADR that was 5.2% ahead of the fourth quarter of 2019. We saw healthy performance at two hotels in Hawaii during the fourth quarter with minimal impact from the Omicron variant over the holidays. Hilton Hawaiian Village ran over 96% average occupancy during the last week of the year, and in Waikoloa, we continue to see strong rates in comparison to 2019, with ADR up 27%, or $63, to the fourth quarter of 2019. On the mainland, our Florida properties continue to post incredible rate growth, increasing by nearly 30% over 2019 levels in the fourth quarter, and by 18% for the full year. In particular, our two Key West hotels saw a 76% increase in RevPar compared to 2019 levels during the fourth quarter and a 44% increase the entire year. We continue to see meaningful sequential improvement to group and business transient demand as well. Business transient revenues increased by over $10 million from the third quarter to account for 30% of the total quarterly revenue mix in the fourth quarter, and group revenues increased by over $19 million from the third quarter to account for nearly 20% of the total mix during the fourth quarter, up from just 7% in the first half of the year. Saw pockets of group strength in New Orleans, Orlando, and New York, and short-term group demand in Hawaii throughout the quarter, an encouraging sign of the pent-up demand that is present as groups increase meeting in person. Looking ahead to 2022, Park remains laser focused on key priorities as we move from the pandemic to the endemic phase of the crisis. Park owns among the highest quality hotel portfolio in the sector, with incredible optionality and significant embedded value, which we plan to unlock over the next several years. Our focus over the balance of this year and beyond remains to aggressively asset manage our hotel portfolio and adhere to our principle of relentless pursuit of operational excellence. I mentioned earlier, we have eliminated an estimated $85 million in expenses through our tireless efforts to reimagine the operating model, translating into an estimated 300 basis points in margin upside. As our portfolio recovers, we seek to demonstrate to the market that the operational efficiencies we achieved over the last two years are permanent while unlocking the embedded growth opportunities across the portfolio. In addition, we will seek to take advantage of the strong demand for hotel real estate in the private markets by continuing to sell an estimated $200 million to $300 million of non-core assets at or near 2019 valuations while evaluating opportunities to buy back upwards of $250 million of stock at a meaningful discount to NAV. We believe that there is no better capital allocation decision than to invest in PARC, either through share repurchases or investment in ROI projects. Thanks to the great work of Sean and his team, we recently amended some of our debt covenants to our credit facility to allow for more flexibility going forward. As the recovery broadens over the back half of 2022, We plan to reinstate a modest dividend subject to board approval and plan to selectively pursue attractive acquisitions in our target markets that are immediately accretive to both earnings and NAV with a continued focus on upper-up scale and luxury hotels in top 25 markets and premium resort destinations. And finally, we expect to prioritize portfolio-enhancing ROI projects that are targeted to drive outsized growth and unlock the embedded value in our portfolio. Significant work is underway on our $110 million Bonnet Creek Meeting Space expansion project. We seek to repeat the incredibly successful brand conversions at the Hilton in Santa Barbara and the Reach Resort in Key West. We plan to launch two additional brand conversions, DoubleTree San Jose to a Hilton and the Waldorf Casa Marina to a Curio branded hotel. Overall, We expect to invest at least $200 million in value-enhancing ROI projects over the next few years with projected attractive returns. Before I hand the call over to Sean, I want to emphasize the strength of PARCC's current position as we head into a more broad-based recovery. We remain committed to maximizing shareholder value and working aggressively to narrow the current valuation gap, which currently stands at over a 25% discount to consensus estimates, and an even wider gap based upon our own internal view of value. Our balance sheet is in excellent shape with over $1.6 billion of liquidity, and we believe we have several levers to pull to generate outsized earnings growth over the next few years as we unlock the enormous embedded value within our portfolio while also taking advantage of our streamlined operating model and the impending return of the business and international traveler. We expect our strong leisure base of business in markets like Hawaii, Florida, and Southern California to continue to fuel results, and the recovery of business and group-related demand in markets like New York and San Francisco should translate into a strong second half of the year, with overall group pace approximately 62% of 2019 pace as of December 2018. Despite the near-term challenges presented by the Omicron variant, we believe we will remain on track to return to prior peak operating results by 2023. With that, I'd like to turn the call over to Sean, who will provide some more color in our results and updates on our balance sheet and liquidity.