Park Hotels & Resorts Inc

Greetings and welcome to the Park Hotels and Resorts first quarter 2025 earnings conference call. At this time, all participants are in listen-only mode. If anyone should require operator assistance, please press star zero on your telephone keypad. A question and answer session will follow the formal presentation. You may be placed into question queue at any time by pressing star one on your telephone keypad. And we ask you to please ask one question and one follow-up, then return to the queue. As a reminder, this conference is being recorded. It's now my pleasure to turn the call over to your host, Ian Weissman, Senior Vice President, Corporate Strategy. Ian, please go ahead.

Thank you, Operator, and welcome everyone to the Park Hotels and Resorts First Quarter 2025 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 the most recent reports on Forms 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 this morning's earnings release, as well as in our 8-K 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 basis. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide a review of PARCC's first quarter performance and strategic initiatives, as well as update on our 2025 outlook. Shawn Dilorto, our Chief Financial Officer, will provide additional color on first quarter results and 2025 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. I'm pleased to report that we delivered better than expected performance in the first quarter with REVPAR essentially flat despite a tough comparison to last year when our portfolio significantly outperformed in almost every market, resulting in nearly 8% rev par growth compared to the first quarter of 2023. Our Bonnet Creek Complex in Orlando and Casa Marina Resort in Key West continued to lead the portfolio following their transformative renovations, with first quarter rev par increasing by 14%, and 12% respectively, and we were very pleased to see broad-based strength in several of our core markets with Miami, New Orleans, Puerto Rico, Washington, D.C., and San Francisco reporting above industry average REVPAR gains. Results from our Hilton Hawaiian Village Hotel, which continues to recover from the labor strike last fall, offset these gains, causing a 420 basis point drag on our first quarter results. From a capital allocation perspective, it was another productive quarter as we remained laser focused on allocating capital to unlock the embedded value in our portfolio and maximize shareholder returns. We initiated over $80 million of capital improvements during the quarter, while we plan to execute the second phase of renovations at both of our Hawaii hotels during the third quarter, alongside with the second phase of main tower guest room renovations at the Hilton New Orleans Riverside. We're also excited to announce the upcoming $100 million transformative renovation of the Royal Palm South Beach Miami, with the hotel having recently suspended operations Construction is expected to begin within the next few weeks. The renovation will include a complete refurbishment of all 393 guest rooms, along with the addition of 11 new rooms. All public spaces will be reimagined, including a new lobby bar, reconcepted food and beverage outlets, and expanded meeting spaces designed to enhance the overall guest experience. Forecast of returns. are in excess of 15% to 20% with the expectation of doubling the hotel's EBITDA once stabilized. In 2025, we expect to invest a total of $310 million to $330 million on capital improvements as we continue to reinvest in our iconic portfolio with the confidence that we can generate higher development yields compared to acquisition yields. We also achieved a major milestone in the entitlements process for the planned 515 room tower and related campus expansion at Hilton Hawaiian Village. In mid-April, the City Council of Honolulu approved our discretionary entitlement applications for the project, subject to certain conditions which we expect to be able to satisfy. We also expect to receive final administrative approval of the project by the end of this year. Additionally, given the historically wide disconnect between public and private market valuations, we remain active in repurchasing shares during the quarter at a material discount in net asset value, having bought back approximately 3.5 million shares for a total purchase price of $45 million and approximately 11.5 million shares over the past year. Finally, despite a very challenging transaction market, We continue to make progress toward our strategic initiative of selling $300 to $400 million of non-core hotels this year. We have several assets in various stages of the marketing and disposition process, including a pending sale of a non-core hotel at very attractive pricing. However, given the current market uncertainty, we make no assurances as to whether or when the transaction will close. As a reminder, since 2017, we have sold or disposed of 45 hotels for over $3 billion, an effort that has materially reshaped our portfolio and strengthened our long-term growth path. Turning to operations, we are very pleased with the performance of our Bonnet Creek complex in Orlando, following our $220 million comprehensive renovation and meeting space expansion project. Results for the complex continue to come in well ahead of expectations, with a 32% red bar increase in Q1 at the Waldorf Astoria, driven in large part by a surge in transient revenues of nearly 65%, while the hotel grew market share by nearly 30%. Looking ahead, the outlook for our Our Orlando hotels remains very strong, with group revenue pace up 9%, while the overall market is expected to witness tailwinds from the opening of Universal's new Epic Theme Park, which is anticipated to accelerate leisure transient demand into the market after its expected opening this May. EBITDA for the complex is currently forecasted to exceed $90 million in 2025. a $30 million increase over 2023. In Key West, Casa Marina delivered another strong quarter, with REVPAR up 12%, driven by a 680 basis point increase in occupancy and nearly 4% growth in ADR, despite lapping an impressive first quarter of performance last year when REVPAR growth was over 34% compared to 2023. The hotel also continued to outperform its competitive set, posting a REVPAR index above 112. At the reach, REVPAR held steady year over year, following a 7% increase in the first quarter of last year over 2023. The hotel continued to outperform, achieving an impressive REVPAR index of 119. exceeding its competitive set in March by nearly 300 basis points in occupancy and nearly $100 in rate. As we move through the second quarter, we are seeing continued solid performance from both Key West properties, with Revpar expected to trend up, low single digits fueled by Casa Marina's continued momentum, strong group booking patterns, and the favorable timing of the Easter holiday shift into April. Turning to Hawaii, Rep Park across our two properties declined by 15% during the quarter as our Hilton Hawaiian Village Hotel continues to ramp up following the labor strike in Q4. Marginally softer inbound travel from abroad also weighed on results, with arrivals from Japan down 6% and Canada down 1.5%. However, We were very encouraged that U.S. domestic visitation remained flat year over year, supported by increased airlift from major U.S. carriers, including new domestic routes into Honolulu, announced by both Delta and American earlier this year, which continues to drive healthy inbound travel from the mainland. At our Hilton Waikoloa Village Hotel on the Big Island, RevPAR declined just 2.5% during the quarter, while Q2 REVPAR growth is expected to accelerate to mid single digit range driven by the nearly 90% increase in group revenue pace during the quarter. Additionally, we continue to see benefits from our recent capital investments at both of our Hawaii hotels. At Hilton Hawaiian Village, we completed phase one of the Rainbow Tower renovation in February which included a full upgrade of 392 guest rooms in the addition of 12 new guest rooms. At Waikoloa Village, phase one of the palace tower renovation was finalized, upgrading 197 guest rooms and expanding the inventory with six new guest rooms. We were pleased to see meaningful rate premiums of 25 to 30% for the renovated rooms at both resorts in the first quarter, a clear reflection of the quality and impact of the investments made at both resorts. We plan to kick off the final phase of both the Rainbow Tower and Palace Tower guest room renovations during the third quarter with the project extending into early next year. Looking ahead, The long-term outlook for Hawaii remains very favorable, supported by limited new supply expected through at least 2029 and the anticipated improvement of inbound travel from Japan as the dollar-yen exchange rate normalizes. Hawaii is one of the most dynamic and resilient resort markets in the country, with over 3,500 These simple guest rooms at a huge discount to replacement cost, Park remains well positioned to deliver above average long-term growth for shareholders. With respect to fundamentals over the balance of the year, the near-term outlook for U.S. lodging fundamentals remains uncertain as the ongoing global trade war continues to delay decision-making and amplify geopolitical tensions causing booking windows across most segments to narrow significantly and disrupting cross-border leisure travel. April results have been mixed with preliminary red-par growth of 1.6%, driven by double-digit gains in New York, Orlando, and San Francisco, which benefited from exceptionally strong group trends while preliminary rep power in Puerto Rico increased by 25%, offset by weaker performance in Hawaii, Chicago, Seattle, New Orleans, and Washington, D.C. Despite the modest decline in a select few markets, we continue to see pockets of strength in many of our resort and urban hotels. While concerns persist about a significant slowdown in both international and government-related demand, neither has had a meaningful impact on our performance. International demand represents just 10% of total room nights, while government-related business accounts are only 3% of overall room nights. Based on our current forecast, Q2 REVPAR growth is expected to be relatively flat year-over-year are approximately 290 basis points lower than initial forecast, with Hilton Hawaiian Village representing roughly 80% of the reduction. Despite ongoing macro uncertainty, we remain laser-focused on factors within our control and continue to work closely with our operators as they develop contingency plans for managing operating expenses in the event of further demand softening. While the transaction market remains episodic, we will remain prudent capital allocators, advancing our strategic objective of selling non-core hotels to further deleverage the balance sheet and support our robust ROI pipeline. Sean will provide greater details about guidance in his remarks. Overall, I am incredibly proud of the progress we've made in elevating the overall quality of our portfolio, positioning the company for sustained long-term growth, and returning capital to shareholders. Our targeted capital investments are delivering strong results, reinforcing the overall quality of our portfolio, and the significant embedded value within our real estate. And with that, I'd like to turn the call over to Sean.