Park Hotels & Resorts Inc

Greetings and welcome to the Park Hotels and Resorts fourth quarter and full year 2024 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, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ian Weissman, Senior Vice President, Corporate Strategy. Please go ahead.

Thank you, operator, and welcome everyone to the Park Hotels and Resorts fourth quarter and full year 2024 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. Please refer to the documents filed by PARCC with the SEC, specifically those 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 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. Additionally, unless otherwise stated, all operating results will be presented on a comparable hotel basis. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will review PARCC's fourth quarter performance and provide an outlook for 2025, while Shawn Dilorto, our Chief Financial Officer, will provide additional color on fourth quarter results 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. Let me begin by saying how proud I am of our performance in 2024, the year in which we achieved sector leading results while advancing multiple strategic objectives, building a strong foundation for the company's sustained growth and long-term success. Operationally, portfolio exceeded our expectations for both top line and bottom line performance showcasing the exceptional quality of our portfolio further enhanced by the strategic capital investments we've made and our team's steadfast commitment to operational excellence on the capital allocation front we continue to reshape our portfolio and by strategically divesting of non-core hotels. Accordingly, we disposed of three hotels during the year, including two hotels and joint ventures that were sold for a combined $200 million, in addition to the early termination of a ground lease and closure of the Hilton Oakland Airport, which incurred an EBITDA loss of nearly $4 million over the prior 12 months. Exiting these hotels improved 2024 REVPAR by $3, while increasing EBITDA margin by over 30 basis points. As we enter this year, we intend to be more aggressive with our disposition efforts, targeting between $300 to $400 million of non-core asset sales as we seek to further improve the overall quality of our portfolio enhance our long-term growth profile, and pay down debt. As a reminder, since 2017, we have sold or disposed of 45 hotels for over $3 billion, while meaningfully upgraded the quality of our portfolio. As we execute our strategy to sell non-core assets, we remain laser-focused on allocating capital to maximize shareholder returns, including the reinvestment of proceeds into our core portfolio of iconic hotels. I'm incredibly proud of the value we have created through recent redevelopments at our Bona Creek Resort in Orlando and Casa Marina Resort in Key West. Each property has delivered exceptional performance in their first year post-improvement, with RevPar increasing 17% at Bona Creek in 2024 over the prior year and EBITDA for the complex exceeding 82 million, which is nearly 22 million or 36% above last year. At Casa Marina, REVPAR increased almost 29% since 2019 and EBITDA for the resort finished the year at 30 million or over $96,000 per key and up over 31% since 2019. Looking ahead to 2025, we expect continued growth at both resorts, with group revenue pace at the Bonnet Creek Complex up 15%. Additionally, we expect tailwinds from the opening of Universal's new $6 billion Epic Theme Park, which is anticipated to accelerate leisure transient demand into the market, after its expected opening this May. The Waldorf Astoria is also poised for a further lift, spending fitting from the Condé Nast recognition as a top 10 global resort, destination in 2024. For Casa Marina, we expect continued market share gains as the resort recaptures its place as the top resort in Key West, while benefiting more this year from an enhanced guest experience with the new Dorada Beach front bar and restaurant. We expect each resort to produce Red Park growth in the upper single digits, translating to double-digit EBITDA growth this year, exceeding our underwriting for each of these ROI projects, and further demonstrating our ability to unlock embedded value in our core portfolio which remains one of our key strategic priorities. With our proven track record of value creation through major ROI projects, I'm excited to announce plans to reposition our Royal Palm Resort in South Beach, ideally situated along the prestigious Collins Avenue corridor. This transformational $100 million investment is designed to significantly elevate the property's quality and overall guest experience, allowing it to better compete with other premium lifestyle resorts in the market and command a substantial ADR increase. The comprehensive renovation will encompass a full refurbishment of all 393 guest rooms, along with the addition of 11 new rooms. We will also reimagine all public spaces, including a new lobby bar, reconcepted food and beverage outlets, and expanded meeting spaces designed to enhance the overall group experience. Construction is expected to begin after peak season in May and will require us to suspend operations into Q2 of 2026. with the expectation to reopen well ahead of the World Cup matches scheduled to begin in June of 2026. Based on our underwriting, we expect the project to generate an IRR of 15% to 20%, while potentially doubling the EBITDA of the hotel once stabilized. We continue to actively explore additional development opportunities in key markets, such as Hawaii, Key West, and Santa Barbara, our ROI pipeline now exceeds $1 billion with an estimated incremental value creation potential of over $300 million. We remain disciplined and strategic in which projects we pursue as we invest our capital to unlock long-term value for our shareholders. Turn to operations. We ended Q4 on a solid note, following a strong pickup in demand across most segments following the presidential election, with the quarter supported by double-digit red bar gains in Orlando and Key West, coupled with solid group and business transient demand in several key urban markets, including Chicago, Boston, and New York. In Orlando, REVPAR increased nearly 30% during the quarter across our three hotels, driven by strong group production and solid gains in the leisure transient segment. I am particularly pleased with the outstanding performance of the Waldorf Astoria Bonnet Creek following last year's renovation, with the hotel reporting an 85% surge in transient revenues, while group revenues increased over 55% during the quarter. Additionally, the hotel generated a 40% increase in ancillary revenues as guests took advantage of the upgraded outlet facilities and enhancements to our championship golf course. In Key West, Casa Marina continued to exceed expectations, with the hotel reporting a 77% increase in rev par during the quarter following the 2023 renovation, with the hotel's rev par index improving to 108. December was particularly strong, ending with nearly $120 ADR premium over the competitive set and a REVPAR index of 126, marking the highest quarterly performance since 2019. The hotel saw wins across the entire operation, including a total banquet contribution of $543 per group room night, and a notable increase in ancillary spend per occupied room, up over 25% versus the prior year period. After New York Hilton, DREPAR increased 3.5% during the fourth quarter, driven by a 17% increase in group room nights. ADR growth was approximately 3% during the quarter, with the expanded group base enabling the hotel to push transient rates up nearly 4%. Notably, rate gains in December were up nearly 6%, further reinforcing the hotel's strong pricing power and demand momentum. At the Hilton Chicago, REVPAR growth was nearly 15%, which combined with operational efficiencies contributed to a 53 basis point improvement in EBITDA margin over the prior year period. Heading into 2025, the Hilton Chicago is seeing healthy demand across all segments, driving expectations for REVPAR growth this year above a very strong 2024 performance. Turning to Hawaii, as previously disclosed, results at our Hilton Hawaiian Village Hotel were negatively impacted by a 45-day labor strike coupled with disruption from the renovation of 404 guest rooms at the iconic Rainbow Tower, collectively accounting for a nearly 540 basis point headwind, the total portfolio rebar during the fourth quarter. Looking ahead, we anticipate a solid rebound for the resort in 2025, despite a modest start with very challenging year-over-year comparisons during the first quarter, we expect solid growth the rest of the year, with fourth quarter growth aided by lapping last year's strike disruption. While we continue to see improvements in demand from Japan, most of the gains are expected to be driven by inbound domestic travelers, along with increased citywide activity with a nearly 85% increase in convention room nights this year. At our Hilton Waikoloa Hotel, where full-year REVPAR was down 16% on lower group demand due to tough comparisons and renovation disruption in the second half of the year, we expect a sharp rebound in group production in 2025, with group revenue pace up nearly 70% leading to anticipated positive red bar growth in 2025. Turning the focus to our outlook for 2025, we continue to see positive demand trends across all segments, which accelerated following the presidential election in November, and I feel cautiously optimistic about how the year will unfold. From a macro standpoint, the U.S. economy remains on firm footing, supported by healthy employment, strong corporate profit growth, and a resilient US consumer, all backed by an administration that is pro-growth, with more rational regulation, which we believe will continue to drive demand for hotels. That said, some uncertainty remains, and it's hard to predict how the new administration's policies will impact this business momentum. For Park specifically, we remain laser focused on what we can control and believe our portfolio is well positioned for long-term growth based on the strategic investments we've made, as well as our presence in markets with limited supply growth. More specifically, we expect 2025 to be a tale of two halves for the portfolio, beginning with a first quarter that is lapping a tough comparison to last year, in which the total portfolio outperformed in just about every market with REVPAR growth of 8%. Therefore, we expect REVPAR to be slightly negative in the first quarter, followed by positive growth in the second quarter, and then rounding out the year with a strong second half aided by easier comparisons as we lap the strike disruption from last year. The group segment is expected to remain one of the strongest segments with revenue pace of 6%, complemented by improving corporate business transient and low single-digit leisure transient growth. For the year, we are expecting top-line comparable REVPAR growth of 0% to 3%, reflecting several key factors, including a slower first quarter, 110 basis points of disruption from the planned closure of the Royal Palm Resort beginning in May, and our cautious optimism about the US economy as we monitor developments under the new administration. Excluding Miami, however, growth improves by 110 basis points, at the midpoint to 2.6% for the year, reflecting the overall strength of the broader portfolio. Sean will provide more details about guidance in his prepared remarks. In summary, I wanted to emphasize that 2024 was another transformative year in which we achieved key objectives that have positioned our company for accelerated growth over time. Our strategic ROI investments continue to yield strong returns. And our return of over $400 million of capital to shareholders last year between dividends and stock repurchases, which totaled 8 million shares, had values well below net asset value. Underscores our commitment to maximizing shareholder value. We are optimistic about our long-term growth prospects as we unlock the significant embedded value within our portfolio with renovation projects such as the Royal Palm repositioning in Miami, while we further enhance the overall quality of our core portfolio through our ongoing capital recycling efforts. And with that, I'd like to turn the call over to Sean.