Park Hotels & Resorts Inc

Greetings. Welcome to the Park Hotels and Resorts Inc. Fourth Quarter 2022 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, this conference is being recorded. I will now turn the conference over to your host, Ian Weissman. You may begin.

Thank you, operator, and welcome, everyone, to the Park Hotels and Resorts fourth quarter and full year 2022 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. Actual future performance outcomes and results may differ materially from those expressed in forward-looking statements. Note also that comparisons to prior year periods are on a comparable basis as defined in our earnings release. Please refer to the documents filed by PARCC with the SEC, specifically the most recent reports on Form 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information, such as FFO and adjusted EBITDA. You can find this information together with reconciliations to the most directly comparable GAAP financial measure in yesterday's earnings release, as well as in our 8K filed 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 a review of PARCC's fourth quarter performance and outlook for 2023. Shawn Dilorto, our Chief Financial Officer, will provide additional color on fourth quarter results, an update on our balance sheet and liquidity, and further details on guidance. 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. 2022 was an incredibly productive year for Park as we witnessed widespread improvements in demand throughout the portfolio while continuing to strengthen the overall quality and flexibility of our balance sheet. For the travel industry as a whole, 2022 was an important year as businesses returned to the office, conferences resumed, and the majority of travel restrictions were lifted around the globe. allowing the industry to benefit from a broad-based recovery across all demand segments. For the park portfolio, we saw improving group and business transient demand throughout the year, which combined with ongoing strength and leisure demand to deliver healthy results for the full year. Looking ahead, the continued increase in group demand and recovery in urban markets provides a favorable backdrop for park to outperform. In 2022, we remain focused on our strategic priorities, including operational excellence in terms of realizing operational efficiencies, prudent balance sheet management, and investing in value-enhancing projects. We continue to reap the benefits from the reimagined operational model developed during the pandemic, which translated into labor costs that were 16% lower in 2022 versus 2019 and are expected to remain above our target of approximately 1,200 positions or a 9% headcount reduction throughout 2023. We also made substantial progress improving the overall quality of our balance sheet in 2022, raising our total liquidity to $1.9 billion, an increase of approximately $300 million over the last 12 months due to both our capital recycling efforts, and our debt modification initiatives. On the capital recycling front, we sold interest in eight non-core hotels for $435 million at a 12.7 times 2019 EBITDA since the start of 2022, including the recently announced sale of the Hilton Miami Airport for $118 million in early February. Additionally, we exited our covenant waivers and pushed out debt maturities with the recast and upsize of our $950 million revolver in December. Thanks to these incredible efforts by the team, PARC remains well positioned to execute on our internal and external growth initiatives with the flexibility to pivot between offense and defense, certainly depending on market conditions. In terms of our strategic priority to invest in our assets, we spent $168 million across our portfolio in 2022, and we expect to increase to over $300 million this year, nearly half for ROI projects as we continue to unlock embedded value opportunities throughout our portfolio. Excellent progress continues on our meeting platform expansion at Bonnet Creek. With the opening of the new Waldorf Ballroom this past December, along with the completion of lobby renovations at the Signia Hotel, with a full rooms, public space, and existing meeting space renovation at the Waldorf expected to be completed by the fourth quarter of 2023. We expect to finish the Signia meeting platform expansion along with the renovation of the Reese Jones Championship Golf Course by Q1 2024, completing a five-year, $220 million full-scale renovation of this world-class resort. We are also finalizing plans to complete our Curio conversion at our iconic Casa Marina Resort in Key West later this year, a $70 million investment which will include a full rooms renovation and a reimagination of the public space, including its food and beverage outlets. We also plan to implement climate change mitigation upgrades during our renovation, making the asset more resilient in the event of weather-related issues. Finally, we also completed phase two of the Tapa Tower Rooms renovation at Hilton Hawaiian Village during the fourth quarter and expect to execute the third and final phase of the renovation at the Thousand Room Tower in the fourth quarter of this year. culminating in $85 million of total CapEx spend for the project. Finally, in 2022, we returned over $290 million of capital to shareholders in the form of common stock dividends and share buybacks. Beginning in Q1, we reinstated our quarterly dividend, generating a full-year payout of $0.28 per share. In addition, given the ongoing dislocation between public and private valuations, We bought back a total of $227 million of stock last year, in addition to another $30 million of stock so far in 2023, for a total of over 15 million shares repurchased at a significant discount to net asset value. Looking at fourth quarter results, comparable REVPAR increased 47% year-over-year, having recovered to 91% of 2019 levels and fully recovered within 0.3% increase to 2019 for the fourth quarter if we exclude San Francisco. Results were led by strong leisure demand in our resort markets and healthy group trends in markets like New York, Hawaii, and New Orleans. In Hawaii, our Hilton Hawaiian Village Hotel reported fourth quarter rev par That was 2% ahead of 2019 results, with average daily rate 11% above 2019. L'Hotel reported its strongest group quarter since 2019 during the fourth quarter and finished 2022 with an annual EBITDA contribution of over $173 million, its highest amount in our company's history. While we have been very encouraged by the strong fundamentals in Hawaii, we believe tailwinds for continued growth remain, with international demand still pacing 70% below 2019 levels and Japan off by over 95%. As a reminder, Japan historically represented nearly 20% of our demand at the village. Turning to Florida, Key West was the only resort market within our portfolio that faced notable headwinds in the fourth quarter. The entire island has seen demand moderate as a result of reduced compression, while hurricanes Ian and Nicole also negatively impacted the island in the quarter, accounting for 420 basis points of RevPAR drag. Looking ahead to 2023, we expect RevPAR at our reach resort to likely be flat to down versus 2022, but still well in excess of prior peak levels, while the transformative $70 million renovation of Casa Marina during the second half of the year is expected to account for approximately 105 basis points of full-year REVPAR disruption and $14 million of EBITDA disruption overall. The recovery in urban markets was solid during the fourth quarter, as we expect that rebound to accelerate this year. We saw ongoing improvements in demand during the quarter in most of our urban markets, led by New Orleans, New York, Boston, and D.C. Performance at the New York Hilton was driven by better than expected group demand, which helped to drive both strong occupancy gains and subsequent rate compression, with ADR averaging nearly $365 for the quarter, or 13% above 2019 levels. As a result, hotel adjusted EBITDA increased sequentially over Q3 2022 by over $19 million to more than $22 million for the quarter, while hotel adjusted EBITDA margin was an impressive 27.5% during the fourth quarter. We expect that momentum to continue into 2023 with both REVPAR and hotel-adjusted EBITDA margin expected to exceed 2019 levels and 2023 group pace to be above 2019 for the same period. Turning to San Francisco, our Q4 performance was weaker than expected. We were very encouraged by January's preliminary results following a successful J.P. Morgan Healthcare Conference. And we see several encouraging green shoots that we believe will help support ongoing improvements in the city in 2023 and beyond. First, group is expected to continue to improve in 2023 with the Moscone Center expected to generate nearly 700,000 room nights of citywide demand this year, up from just 380,000 in 2022. Several airlines have announced plans to return or expand key international routes throughout the year, bringing welcome economic activity as international spend was nearly three times domestic spend in the city in 2019. Finally, both political and business leaders are now more focused than ever to reimagine and re-energize the city. Just two weeks ago, Mayor Breed announced an economic recovery plan with nearly 50 initiatives, including taxes, incentives, health and safety measures, and designs to diversify the city's employer base. While San Francisco's fortunes will not change overnight, we do expect to see continued recovery that will lead to more meaningful contributions to parks earnings growth over the next few years. In terms of revenue segments, the rebound in group demand is a strong tailwind for our portfolio. that we started to see in 2022 and expect to accelerate further in 2023. Q4 group revenues exceeded our forecast by 9%, or approximately $9 million, and showed a 12% incremental improvement over Q3. While we continue to see robust short-term group bookings, we are also encouraged to see the booking window elongate. In Q4, $55 million of new business was booked for 2023, with gains primarily concentrated in San Francisco, New York, and Orlando, and group revenue pace for 2023 increased by 300 basis points to 78% of pre-pandemic levels. Group revenue pace is up 28% to the same time last year, nearly doubling during the quarter, 15% at the end of Q3. If we look out to 2024, over 70,000 room nights were booked in December alone, led by San Francisco, with over 15,000 room nights, or over 21% of December's pickup for the year. Given these trends, the park remains very well positioned to generate impressive year-over-year earnings growth, driven by ongoing strength in resort markets, like a Hawaii, and Orlando, while pent-up business travel and stronger citywide calendars should support accelerating demand across our core urban markets. Accordingly, we are establishing full-year REVPAR guidance based on year-over-year growth of 7% to 14% with a wider-than-usual range driven by ongoing macro uncertainty. With respect to earnings, we anticipate adjusted EBITDA to be in the range of $610 million to $690 million, while hotel adjusted EBITDA margin is expected to range between 26.7% and 27.3%, a roughly 80 to 140 basis point improvement over the prior year. Adjusted FFO per share guidance is forecast to be between $1.60 to $1.99 per share. As we look ahead to 2023, our strategic priorities are unchanged. We remain laser-focused on operational excellence as we continue to aggressively asset manage our portfolio and improve the operating model, and we will continue to reshape and upgrade the portfolio by selling non-core assets and heavily reinvesting in the core portfolio with value-enhancing renovations and ROI projects. With that, I'd like to turn the call over to Sean, who will provide further details on our performance, as well as providing additional details on first quarter expectations.