Park Hotels & Resorts Inc

Greetings and welcome to the Park Hotels and Resorts Third Quarter 2025 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 requires operator assistance during the conference, please press star zero on your telephone keypad. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Ian Weisserman, Senior Vice President, Corporate Strategy. Thank you. You may begin.

Thank you, Operator, and welcome everyone to the Park, Hotels, and Resorts Third 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 PARC 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 file 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 provide an update on PARCC's strategic initiatives, third quarter performance, and outlook for the remainder of the year. Sean DeLorto, our Chief Financial Officer, will provide additional color on third quarter results and 2025 guidance, as well as an update on our balance sheet and dividends. 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. Park remained laser-focused on our strategic priorities during the third quarter, fortifying our strong and flexible balance sheet, recycling capital to enhance the quality and growth potential of our core portfolio, and driving operational excellence by minimizing cost in a challenging operating environment. Through disciplined execution, we continue to transform Park into an owner of high-quality, iconic hotels with compelling growth profiles. We believe this ongoing portfolio refinement, combined with unlocking embedded value across our assets, positions us to deliver stronger performance in the years ahead. Because we continue to be proactive with respect to our balance sheet, We successfully extended and upsized our corporate credit facility in September to provide us with committed debt capital that increases our total liquidity to $2.1 billion to address our 2026 debt maturities. I want to thank our bank partners for their continued support and confidence in PARC and for giving us the flexible capital to execute our business plan. Turning to our capital allocation initiatives, Our strategy over the past several years has been and continues to be focused on unlocking significant embedded value within our core portfolio to maximize returns for our shareholders. With development returns far exceeding acquisition yields, we continued to lean into high ROI reinvestments, deploying over $325 million across our best performing assets, at returns approaching 20%, including the meeting space expansion and renovations at our Signia and Waldorf Astoria Bonnet Creek Complex in Orlando, the renovation and repositionings at our Casa Marina and Reach Resorts in Key West, and the renovation and up-branding of our Santa Barbara Resort. In May, we launched our sixth major hotel redevelopment in seven years. a $103 million renovation and repositioning of the rural palm located in the heart of South Beach, Miami. This transformational project is expected to generate a 15% to 20% IRR and more than double the hotel's EBITDA from $14 million to nearly $28 million upon stabilization. Importantly, construction remains on schedule and on budget. and we are targeting a reopening ahead of the 2026 World Cup matches in Miami next June. We also have several other major renovation projects underway, including the final phases of guest room tower renovations at both of our Hawaii hotels, expected to be completed in early Q1 2026, as well as the second phase of guest room renovations at our Hilton New Orleans Riverside Hotel, upgrading another 428 guest rooms, in the 1167 room main tower. The remaining 489 guest rooms at New Orleans are expected to be completed over the next one to two years. In total, we expect to execute approximately 220 million in strategic renovation projects this year, further enhancing the quality of our core portfolio. We remain confident that reinvesting in our assets represents the highest and best use of capital. Since 2018, we have invested approximately $1.4 billion in our core hotels, upgrading nearly 8,000 guest rooms and fully repositioning several of our most strategic assets. We continue to be disciplined and deliberate with our capital recycling efforts, particularly as the transaction market remains episodic. Our goal remains crystal clear to divest our remaining 15 non-core consolidated hotels and concentrate ownership across 20 high quality assets in markets with strong growth fundamentals and limited new supply and that account for 90% of the value of our portfolio. Successful execution of this strategy will position us with one of the highest quality portfolios in the sector and among the strongest same-store growth profiles. In line with this plan, we recently closed the 266-room Embassy Suites Kansas City, a property on an expiring ground lease that generated minimal EBITDA. And by year-end, we will exit two additional non-core hotels on expiring ground leases, the Doubletree Seattle Airport and the Doubletree Sonoma Airport. which are expected to generate a combined EBITDA of just $300,000 this year. Exiting these three lower-quality assets will meaningfully enhance our portfolio metrics, increasing nominal REVPAR by nearly $6 and expanding margins by approximately 70 basis points. Despite a challenging environment, we remain laser-focused on executing our strategic objectives with several non-core assets currently being marketed and active discussions underway on multiple transactions, including two potential deals under letter of intent. Turning to operations, as we disclosed on our second quarter call, third quarter results were impacted by a meaningful decline in group demand, driven by tough year-over-year comparisons following last year's strong citywide calendars across several of our markets. incremental disruption from the second phase of our Hawaii renovations, which began in August, a month earlier than last year, and further challenged by softer leisure and government demand. Overall, REVPAR declined 6% or approximately 5% when excluding Royal Palm South Beach. Despite these headwinds, some of our core markets performed exceptionally well. further demonstrating our ability to unlock value at our hotels. In Orlando, the Bonnet Creek Complex delivered nearly 3% rev par growth, with both the Signia and Walter Pastoria hotels achieving their highest third quarter rev par and GOP in the complex's history. Looking ahead to Q4, the complex is set to benefit from multiple group buyouts. The group revenue pays up 28%. and REVPAR growth expected in the mid to upper single digits. In Key West, REVPAR growth outperformed the broader portfolio, increasing 1% for the quarter, while Casa Marina's REVPAR index reached 110, up nearly 800 basis points year over year, driven by very strong group demand. Overall, group room rates increased 28%, driving higher occupancy and stronger overall results. For Q4, we expect continued outperformance, supported by ongoing leisure transient strength, as we head into peak season, translating to mid-single-digit REVPAR growth. In New York, REVPAR rose nearly 4%, with meaningful share gains across all segments. Meanwhile, in San Francisco, the JW Marriott Union Square delivered RevPAR growth of nearly 14%, supported by strong group and transient demand. Both hotels are expected to maintain strong momentum through year-end, driven by very strong group trends, with group revenue pace up 14% in New York and 160% in San Francisco. Finally, at the Cree Bay Hilton in Puerto Rico, Q3 RevPAR increased nearly 12%, with incremental leisure demand driven by the Bad Bunny residency, which added roughly 1,300 basis points of lift to the quarter. Looking ahead to the fourth quarter, we expect a significant rebound led by a broad-based recovery in group demand, coupled with easier year-over-year comparisons in Hawaii, as we lap the 45-day labor strike, which began late September last year, the impact of which was endured throughout the fourth quarter last year. Group revenue pace for the fourth quarter is currently up over 12% year-over-year, with double-digit increases for several of our largest group houses, including our Bonnet Creek Complex in Orlando, our JW Marriott in San Francisco, our Hilton's in New York, New Orleans, Chicago, and Denver, our two Hawaii resorts, and the Caribbean Hilton, resort in Puerto Rico. That said, the extended government shutdown has impacted both group and transient demand in several of our core markets, and more pronounced in Hawaii, D.C., and San Diego, placing additional pressure on fourth quarter results. Through the end of October, we estimate that the shutdown has reduced expectations for room revenue by approximately $2.5 million, resulting in a roughly 180 basis point drag on this month's REVPAR performance. October REVPAR is now expected to be relatively flat year over year for the total portfolio, or up approximately 1.5% when excluding the Royal Palm in Miami. Based on our current forecast, which reflect the impact of the shutdown through October only, We expect fourth quarter REVPAR growth to range between negative 1% and plus 2% or positive 1% to positive 4% when you exclude Royal Palm. Sean will provide more detail on our updated full year guidance in just a moment. Finally, as we turn our attention to 2026, I am confident that the strategic investments we have made will position PARC to outperform during re-acceleration of the lodging cycle. While some macro uncertainty persists, particularly for the lower-end consumer facing economic pressure from higher rates, we see the foundation forming for the next cycle of expansion. A more accommodative Fed and easing financial conditions resulting in lower rates in taxes should support a rebound in business investment. At the same time, sustained public sector and private sector spending, particularly around AI infrastructure and the anticipated productivity gains from AI adoption, together with a modest pickup in inbound international travel, particularly from Japan, should further strengthen lodging fundamentals. Looking ahead, We remain optimistic about 2026 and beyond, supported by expectations for lower interest rates, a more favorable regulatory environment, and a renewed investment cycle, all of which should drive stronger economic and travel growth, along with a meaningful boost from major events, including World Cup events in multiple cities, the Super Bowl in San Francisco Bay Area, and New York and Boston's 250th anniversary celebrations. With industry supply growth remaining at historic lows, we see a clear path for REVPAR acceleration and sustainable long-term growth, particularly across the segments and markets where our portfolio is concentrated and additional growth from the capital investments we are making in the core portfolio. And with that, I'll turn it over to Sean.