Q4 2019 Earnings Call
Greetings and welcome to the park hotels, and resorts fourth quarter and full year 2019 earnings conference call.
At this time, all participants are to listen only mode.
Brief question answer session will follow the formal presentation.
If anyone should require up or your since during the conference. Please press star zero under telephone keypad.
As a reminder, this conference is being recorded.
It is now my pleasure to introduce your 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 2019 earnings call.
Well, we began I would like to remind everyone that many of the comments made today are considered forward looking statements under federal Securities laws.
Described in our filings with the FCC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed and we're not obligated to publicly update or revise these forward looking statements.
In addition on todays call, we will discuss certain non-GAAP financial information such as ever 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 art in our 8-K filed with the FCC and the supplemental financial information available on our website at PK hotels and resorts Dot com.
I'd like to call out our enhanced disclosure in the supplemental package, where we now breakout property level detail for 30 core hotels, which accounts for nearly 85% of our hotel adjusted EBITDA further highlighting the overall quality of the park portfolio.
This morning, Tom Baltimore, our chairman and Chief Executive Officer will provide a brief review of our fourth quarter and full year 2019 operating results additional color on our integration of the Chesapeake portfolio.
An update on our capital recycling efforts as well as established guidance for 2020.
Sean Dillard, though our chief financial Officer will provide further detail on our fourth quarter financial results and 2020 guidance. In addition to an update to our Capex plan and balance sheet initiatives.
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 Ryan.
And welcome everyone.
2019 was another outstanding year for park.
I'm incredibly proud of all the we've accomplished.
We achieved a significant milestone and parks evolution.
As we not only executed on our operational objectives and portfolio recycling goals.
But also position park for long term success.
Most notably.
We completed our 2.5 billion dollar acquisition of Chesapeake.
Transaction, which is accretive to both earnings and portfolio quality.
Enhances the long term growth profile of our company.
We are energized and excited about the incremental opportunity for our portfolio.
We look forward to sharing our ongoing progress.
Operationally.
Park once again outperformed revpar growth topping the full service hotel REIT sector by 30 basis points.
As we continue to make progress on narrowing.
The margin gap at our peers.
Also continued to recycle capital in 2019.
Completing the sale of eight noncore hotels for total proceeds or 497 million.
Terminating the ground lease hold in Sheffield.
In addition, we closed on two noncore sales to smoke, which takes our total non core dispositions over the last two years to 24 assets.
And over $1.2 billion in proceeds.
Finally in 2019, we returned over 420 million of capital to shareholders.
Taking our three year total to nearly 2.3 billion.
The highest in the sector.
Before I discuss our priorities for 2020, I would like to address the recent management changes apart.
I want to emphasize what I couldn't be prouder of a team were built since spitting out of Hilton three years ago.
Park has assembled an incredibly talented group of men and women.
Well each played an integral role in the company's achievements.
Together, we have worked tirelessly to drive results, while also fostering supportive and respectful culture for all of our team members.
Within the investments team I thought it was the appropriate time to expand the depth and experience of the team and promote how more into our chief investment officer.
Tom as a key member of the park executive team and it's been intimately involved in every major transactions who's joining the company as part of parks formation.
And I'm excited about the knowledge and technical expertise he brings to the investments team.
I would like to sincerely, thank Matt sportswear his contributions and dedication to park and we wish him well.
On his future endeavors.
With respect to the departure of our head of asset management.
Well it was extremely disappointed by this isolated incident.
But by no means distracts from the stellar results delivered by our asset management team.
Our deep and talented benches comprised of seasoned professionals.
An average of nearly 20 years of industry experience.
These individuals have been directly responsible for executing on our strategic goals of closing the margin gap with our peers.
Achieving operational excellence and realizing the synergies.
It's a big portfolio.
We remain confident that our team is focused on executing our current playbook.
We are evaluating both internal and external candidates to lead the asset management team.
And in the interim.
Team will report to Sean.
I want to stress that these changes do not signal any shift in strategy.
Remain focused on recycling capital.
Achieving operational excellence and creating long term value for shareholders.
As we turn to 2020, it's hard not to ignore the heightened caution seen around the world as the Corona virus continues to dominate the headlines.
Good assets and global Gateway cities Park is not immune to the impacts it is having on travel and group meetings.
While it is still too early to quantify the ultimate impact on our business based on what we know today.
We have assumed approximately 25 basis points of drag on Revpar.
Or $5 million of EBITDA, our 2020 guidance.
We will continue to closely monitoring the situation and reevaluate our approach if necessary.
However for now for Playbook for park does not change.
We remain focused on three.
She priorities over the next 12 months.
Our first priority, it's a realization of the 24 million of synergies.
Underwritten in the Chesapeake portfolio.
Roughly 20 million already achieved between corporate DNA savings and management contract negotiations.
We are confident and delivering on on the remainder of this year.
And we are seeing promising results already by analyzing the mix of business within our segments.
And making a strategic shift toward higher rated transient channels.
Overall, we grew 80, our share at 12 of the 16 Chesapeake hotels during the fourth quarter.
And we expect additional growth in the coming here.
As one example.
80 are at the higher Fisherman's wharf increased 11% in the fourth quarter as we encourage our operators to shift their tactics.
The more patient and not pursue a first to fill strategy.
At the Mariana Newton, we recently installed parking gates at the hotel that are expected to generate a minimum of $380000 annually and incremental revenue.
There are similar examples throughout the portfolio and we are confident and excited and our ability to unlock the embedded opportunities.
Second we remain focused on recycling capital with a goal of continuing to improve the quality of the portfolio.
We recently announced the sale to Hilton San Paulo for total proceeds of 118 billion at a gross multiple or 14.9 times.
Completing our exit from international markets after having disposed of 14 non U.S. hotels in just three years an impressive accomplishment.
We also closed on the sale of parks Embassy suites DC for 90 million.
Or 14.8 times forward EBITDA.
Both sales were part of our broader program to sell approximately 550 million of noncore hotels to reduce leverage following our acquisition of Chesapeake.
But these latest transactions.
We have nearly reached our goal with 470 million sold following the Chesapeake acquisition.
Looking ahead, we expect to remain active sellers with another 250 to 350 million or potential future sales by year end 2020.
Finally, we will continue to prioritize our commitment to maintain a strong and flexible balance sheet.
Healthy dividend payout for investors.
To that end.
Plan to utilize proceeds from our asset recycling program to reduce debt.
And to also activate stock buybacks during periods of share price dislocation.
At the end of 2019, we repaid 230 million of debt with proceeds from our Chiu for asset sales.
Well look to use all or a portion of the proceeds from our recent sales to further reduce leverage.
Turning to our portfolio's performance I am pleased with our overall results for both a quarter and full year 2019.
Comparable revpar growth for the quarter was ahead of expectations at 0.7%.
And for the full year it came out at 1.9% at the top end of our full year range.
Total revpar growth was 2.1% for the quarter.
And 3.2% for the year.
Driven by our solid group base and our aggressive push on out of room spend.
Although the industry has been faced with increased challenges on the expense side I'm very pleased with our ability to control our hotel adjusted EBITDA margin, which decreased by just 10 basis points for the year.
It was materially better than our peers on average.
Well on our revenue segments group was up 1.8% for the quarter.
Following last year's nearly 4% increase while on a full year basis pro forma group revenues increased a very impressive, 5.8%, which lapped a tough year over year comp.
Strong geographic footprint in key markets like San Francisco as well as our healthy in House group bookings at our hotels in Hawaii, and Orlando helped drive results throughout the year.
Our current group pace in 2020 is down approximately 1%.
However, excluding San Francisco, our overall group pace improves 350 basis points to over a positive 2%.
Standouts for group in 2020.
Include the Chesapeake portfolio.
Up over 8% and strong markets like Southern California.
Up 11%.
Denver up 16% in New York up 10%.
In addition, citywide calendars are favorable this year in San Diego Chicago.
Boston and Miami.
The transient side comparable revenue was flat for the quarter and down just 60 basis points for the year.
With fourth quarter performance negatively impacted by business transient.
It was down 3.6%.
And down 2.2% for the year.
This is transient weakness was partially offset by strengthened leisure.
Which was up 3.1% in the fourth quarter.
And 0.9% for the year.
Overall I've been pleased with our ability to drive out a room spend particularly in our current low revpar environment.
And our 2019 total revpar growth of 3.2% highlights the success of our revenue initiatives.
Food and beverage revenues increased 3.9% during the quarter on a pro forma basis.
Driven by nearly 5% increase in banquet and catering revenues.
Our ancillary income, which includes resort fees and parking revenues increased an impressive 8%.
Our food and beverage revenues are heavily dependent on our group segment.
Our asset management team has continued to find ways to diversify improved revenues across both the legacy portfolio.
And the Chesapeake portfolio.
We believe we still have runway for additional revenue growth in the coming year.
Turning to guidance.
As I look to the remainder of 2020.
I am encouraged by broader macro trends as the economy continues to be supported by healthy employment gains a sturdy and resilient U.S. consumer.
And low rates from an accommodative Federal reserve.
As it relates to park.
We remain confident in our ability to continue achieving our objectives as we are prepared ourselves to reap the benefits of the operational synergies embedded within the Chesapeake portfolio.
And take advantage of relative strength across our core portfolio relatively healthy operating results across several of our core markets, including Hawaii.
Miami.
She west San Diego.
Boston, Denver and Chicago.
Despite this relative optimism, it's hard to ignore the ongoing headwinds our industry faces in the wake are slower global growth.
A stronger U.S. dollar.
Increase wage pressure and the uncertainty.
Around the U.S. election, but.
Additionally.
And concern over the impact of the Corona virus not only on the global economy, but also in U.S. lodging fundamentals in particular.
Has us taking a more conservative approach the 2020 guidance.
Accordingly, we are establishing comparable revpar guidance.
Of negative 1% to a positive 1% for the full year 2020.
With a comparable hotel adjusted EBITDA margin range of negative 175 basis points to a negative 100 basis points.
Additionally, we anticipate adjusted EBITDA to be in the range of 800 billion.
To 830 million.
While adjusted FFO per share to being a range of $2.55 to 2067 cents per share.
Note that our 2020 guidance takes into account the recent sales of both the Hilton San Paulo.
And embassy suites DC.
Which reduced earnings by approximately 16.5 million over the balance of this year.
And with that I'd like to turn the call over to Sean who will provide further details on our performance and earnings guidance, Thanks, Tom and welcome everyone.
Looking at our results for the fourth quarter, we reported better than expected results for both Revpar and earnings as Tom mentioned Revpar growth for the quarter was 0.7% versus the flat growth we had expected as of Q3.
While adjusted EBITDA was nearly $223 million and our adjusted FFO was $173 million or 72 cents per diluted share.
On a full year basis, which includes Chesapeake since the September 18th closing, we reported total revenues of approximately $2.8 billion adjusted EBITDA of $786 million and adjusted FFO of $613 million or $2, an 88 cents per diluted share.
Turning to our core operating metrics for the fourth quarter, the reported comparable revpar of $178 in total revpar up $276.
Our occupancy for the quarter was 80.9%.
And our 480 basis points higher than prior year, while our average daily rate ended the quarter at $221 or decreased 30 basis points year over year.
These top line results produced comparable hotel adjusted EBITDA of $211 million, while our comparable margins decreased 40 basis points to 28.3%.
For the full year 2019 performer comparable portfolio, which includes the results from the Chesapeake assets for the fourth quarter only produced a revpar of $183 and total revpar up $284, our occupancy for the year was 82.6%.
Up 50 basis points, while our average day rate was $222 or an increase of 1.2% versus the prior year.
These topline results produced a pro forma comparable hotel adjusted EBITDA of $769 million with margins falling just 10 basis points year over year to 29.2%.
Looking more closely at our performance across our core markets.
Hawaii was a stand out market for us with Revpar up 8.7% in the fourth quarter and 5.5% for the year.
Driven by incredibly strong results at our Waikoloa resort.
Revpar at Waikoloa was up nearly 29% for the quarter outperforming the concept by 1000 basis points incoming and 9.3 percentage points higher than we had expected at the end of the third quarter.
For the full year at the hotels Revpar was up 18.5% again outperforming the concept by 1000 basis points in a big on Submarket by roughly 1200 basis points.
Leisure demand to the Big Island sharply rebounded in 2019 following the prior years disruption from the killer whale volcano.
Coupled with strong growth in a contract segment and two grew buyouts at the resort.
With the successful hand off at the remaining 466 Ocean tower rooms to Hilton Grand Vacations on January Onest.
Hilton Waikoloa Bill. It's now operates as a two tower 644 room complex, which we expect to be efficient efficiently rightsized to remain strategically focused on the group segment, while more aggressively yielding transient demand.
The life results were also supported by strong performance at our Hilton Hawaiian village resort Revpar up 4% during the quarter due to strong transient and contract demand.
Despite a 130 basis points of disruption related to phase one of our capital our guest rooms renovation.
In line village also increased market share by 170 basis points during the quarter and recorded 2.1% revpar growth for the year.
Given the solid leisure trends, we have seen in Hawaii combined with increased airlift from southwest and Anais. We're currently forecasting modest growth in Hawaii for 2020. However, this does not consider any impacts from the crime virus.
Other solid performance during the quarter included Denver with Revpar growth up nearly 10% our three hotels in Orlando, which were up 5.5% combined and the Hilton Santa Barbara which is up 8.6% on continued tailwinds from our brand conversion in 2018.
Our portfolio of six hotels located in San Francisco generated Revpar growth, just north of 3% during the quarter as strong group revenues of nearly 30% or partially offset by weakness in business transient demand.
Our San Francisco properties finished the year with 6.3% Revpar growth, which outperformed the San Francisco market by 210 basis points capped a landmark group year.
Looking ahead to 2020, San Francisco face is very difficult comps with convention calendar room nights down materially to 850000 room nights.
Moving to our balance sheet, we remain in great shape, but pro forma net debt to adjusted EBITDA at just 4.2 times as at year end 2019.
Which takes into account the full year impact of last year's acquisition and disposition activity.
Accounting for last week's announced sales or the Hilton Sao Paulo, and the embassy suites DC.
Form and net leverage would drop by another 10th of a turn to 4.1 times.
Overall, we feel very good about our leverage ratio and liquidity position with over $1.3 billion between our untapped revolver and cash on hand.
Turning to the dividend similar to prior periods, we paid a fourth quarter step up dividend of 55 cents per share.
Equating to a full year distribution of $1.90 cents per share currently north of a 9% dividend yield by far the most attractive in the sector.
Looking ahead, our board recently declared our first quarter dividend at 45 cents per share be paid on April 15th stockholders of record as at March 30 Onest.
Based on our full year, adjusted FFO guidance and targeted payout ratio in the range of 65% to 70%.
We remain committed to paying out there 45 cents per share quarterly dividend, but potential upside in the fourth quarter.
With respect to Capex, we invested $61 million in our talent during the fourth quarter over half of which was for guest facing areas.
Taking our full year total capex spend to $240 million inclusive of our rebuild that create a hilton.
Our maintenance Capex figure was $160 million or just under 6% of revenues.
Renovation and conversion of our reach resort in key west wrapped up in the fourth quarter.
But the resort reopening in December that completely renovated and reposition product as a curio about by Hilton.
Early returns are strong and we're really excited about the future for this resort.
We also completed Guestroom renovations at Hilton Boston Logan Airport Hilton Bonnet Creek.
As we make progress towards operating the Hilton Sydney Hilton.
Phase one of the Guestroom renovation and debt held in wind I'll just have a tower that I mentioned earlier.
For 2020, we continue to target, 6% maintenance Capex spend while our ROI pipeline is expected to meaningfully increase our largest active ROI project remains the expansion as a meeting platform at our Bonnet Creek complex.
Which is currently underway at the Waldorf with its new meeting platform expected to open by the second quarter 2021.
And the Hilton meeting space expansion expected to open by the second quarter of 2022.
Turning to 2020 guidance I would like to provide a few more details on some of the key assumptions driving our expectations.
First I remind listeners that waikoloa will be noncomparable in 2020 to account for the room give backs.
While the create health and will also remain a noncomp hotel.
I'd also like to point out that there'll be some variability in our quarterly performance, but Q1 expected to be one of our weakest quarters, given very difficult year over year comps, but revpar growth for our San Francisco portfolio lapping its 22% growth in Q1 of last year.
We expect much better performance over the back half of the year, especially during Q4, which is anticipated to be our strongest quarter in the year driven by several of our core markets, including San Francisco, New Orleans in key West, which should benefit from renovation tailwinds at the reach.
Finally, given some of the renovation and ROI projects, we havent progress for 2020.
We expect about 80 basis points of disruption, which has been factored into our comparable revpar growth guidance range.
This includes roughly 50 basis points of Revpar disruption and approximately $12 million of EBITDA disruption from the Bonnet Creek ROI project.
That concludes our prepared remarks, we'll now open the line for couponing to address each of your questions. We ask that you limit yourself to one question and one follow up.
Operator may we have the first question. Please.
Thank you we will now be conducting a question and answer session. If you would like to ask your question. Please press star one on your telephone keypad.
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First question comes from the line of David Katz with Jefferies. Please proceed with your question.
Mr. Catch your line is lives.
Mr Cats, perhaps you have your line a mute.
Yes.
Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.
Hi, good morning, everyone stuff.
Good morning.
A question on the kroner virus impact you outlined in the prepared remarks.
Where specifically what that impact and then it relates a either group cancellations or leisure transient and generally would you expect there to be more impact.
Group versus leisure and your portfolio.
No.
And given our remarks in her prepared remarks, Andrew sitting above 5 million.
Million dollars.
The biggest piece was the Facebook group cancellation in San Francisco.
There are accounting for probably a million and a half dollars plus or minus.
There was about a million dollars for Chinese group in Hawaii.
And then.
To remind us.
Another million dollars than what we saw in sort of a Chinese crude coming out of New York City.
Again very isolated.
Perhaps frame for listeners.
Hi, these demand in our portfolio is about 0.5%. It's about 50000 room nights, what we saw last year about 10 to 12 million in revenue.
As you think about what's happening in Japan as an example.
Certainly Japan accounts for about 3% overall demand about 250000 room nights and probably at about 90% of that coming into into a why.
As you think about our portfolio given the fact that.
Clearly the strong presence on the coastal and certainly in Hawaii.
We are watching carefully we were in frequent discussions with our operators.
At this point, it's been minimal as we've outlined we thought it was important to be transparent and to share. What we know at this time, we don't see this changing the part playbook, we're focused on one and priorities are we outlined in our prepared remarks.
Okay. Thanks, maybe separate question you mentioned, it but you could activate the share repurchase activity this year.
Given the current dislocation in stock in the 9% yield as it makes sense to maybe accelerate some of those repurchases and fun later via via asset sales.
It's it's a great question and again as we outlined in our prepared remarks, and consistent with the playbook that I've shared with many analysts and some of many of investors. The park priority remains the same.
Based on where we sit today and that is integrating chesapeake portfolio, continuing to sell noncore assets and reduce leverage and activate the buyback clearly at these levels in fact that were trading at such a huge this comes energy.
Clearly you can expect us to do more active on that front. We also are committing to maintain a dividend.
We certainly believe me we can do all of its on our leverage neutral basis. So that's the plan and we plan on maintaining that as we.
Received through the year.
Okay. Thank you.
Okay.
Our next question comes from the line of Rich Hightower with Evercore. Please proceed with your question.
Good morning, guys.
Rich.
I guess really just a follow up on both of Anthony's question, Sir the first one.
Just to clarify in terms of the Corona virus impact that's embedded within guidance is it a it sounds like those were either.
Past events or events that are known on the books and so you can sort of quantify it within that 5 million EBITDA impact. So is that to say that there is no sort of assumed unknown future impact to forward bookings or whatever that are included in that number.
That is correct we are.
We wanted to be transparent and the share what we know at this time.
Okay, Yeah, I think that answers that then and yeah. You know just just on a follow up to the capital allocation question has your is your view of of the company's any V changed at all in the past six to 12 months as we as we talk about sort of discounts to any the to varying degrees.
Yes.
You know maybe given outside of current of ours, just the changing sort of fundamental picture in lodging over that time, and how does that factor into the to the repurchase decision.
It's a great question rich I think it's important to sort of step back and think about part and we were spot out right 67, largely Hilton Grand hotel sort of a barbell.
We had a top 10 or 15, and then of course, we got a collection of other assets. This team has worked tirelessly as you know and helping to recycle capital. We have sold 24 assets, including 14 international including assets in South Africa, and Germany UK.
In Brazil, which obviously, we concluded a joint venture in Dublin, So we've really been able to reshape the portfolio coupled with bolting on the Chesapeake portfolio. So as Jim noted in his prepared remarks, we're providing increased.
Certainly disclosure and information on the top 30 assets. We would respect we submitted to those top 30 assets or is a high quality high revpar and comparable to any of the high quality portfolios in our sector. They account for about 85% of our EBITDA and north of 90% of the value. So if anything we think.
That core portfolio is clearly close to best in class you will see us continue to recycle capital. So that we can use those proceeds to continue to reduce debt and activate the buyback. We are we certainly are well aware of our stock performance in the discount in any maybe you could argue whether that any of you.
Come in slightly.
We're not but the reality is that we clearly are trading at a significant discounts any day.
Alright, Thank you very much.
Our next question comes through line of Smedes Rose with Citi. Please proceed with your question.
Hi, Good morning, I Wonder just wanted to ask you. Good morning, what are you seeing in terms of the pace of wage and benefit growth in 2020, and just since I think your portfolio is a little more has a little more heavy union presence can you give any do you have any sense of its a peak year or what is 2021 look like.
Yes, I, we ran we assumed about 3.8% and wage and benefits us needs and 19 were assuming about the same run rate I think the one benefit in our portfolio recognizing were about 60% Union is most of those union contracts were negotiated last year. So we can expect as we move.
Sure. It in terms of wage rate benefits, peaking I would say that it's going to peak certainly this year in that 3.84% range.
Okay. Thanks, and then you know just wanted to ask you. If you take the low end of your guidance and make some assumptions on on maintenance Capex. I know you said is using a percentage of revenues that I mean, it looks like that dividend becomes kind of tight I mean, you would you be willing to funded with.
With with debt on a short term basis or do you think.
You could cut back on maybe some of the maintenance capex spending if need be no. We we remain committed to the dividend at the current levels. We do not believe consistent with what Sean a seven past panning out our AFFO and that 60, 67% range that we are comfortable.
We do not see risk at AOS names and we can maintain our our maintenance capex in that in that 5.56% range.
Okay. Thank you.
Our next question comes from the line of Gregory Miller with Suntrust. Please proceed with your question.
Thanks, Good morning, Tom and Sean morning, Greg How are you doing well how are you both good thanks.
Great.
First question I have is on Bonnet Creek.
I apologize if I missed this but do you have an update on the timing of the signal flock change and how you and help more working together to market that new brand.
Both to the transient and group guest.
Hey, Greg Sean the.
The branch and ultimately come through.
Around kind of late 2021, we believe.
Obviously, we've got a few things do within the asset.
To achieve that brand conversion.
Well as kind of tie all things related to the construction of the.
Just a meeting space, so more kind of towards back and I think of next year on that.
They are doing plenty of great marketing.
Meeting space, certainly got Youve got a lot of good traction on booking into.
That means space beyond its opening in mid 2022.
Right now, but I think it's probably a little bit more premature to tightly marketing as insignia right now, but it's only been working closely with helping to kind of things efforts in due course.
And Greg one of the things that we heard.
Both Hilton in our on site operators that we needed more meeting capacity to certainly be competitive.
Market as you know certainly one of the top convention markets top leisure markets 75 million visitors. We are really blessed to have a resort with 350 acres Championship golf course, plus having both until then the Waldorf brands. So we're making that long term investment. We believe this is a great ROI projects.
And we'll generate high teens returns.
And the booking Jason the feedback that we're hearing from you planners and others has been overwhelmingly positive building I believe has a pipeline several signals I know that it's a real focus for them to particularly on the group's side to have these well position.
Assets that have it sort of elevated if you will.
Bumped into perhaps compete with the JW Marriott brand as an example, so we're really excited about it we think this huge upside.
Our portfolio.
This clearly is a world class action on asset that is also proximity to do.
Thanks for all the great color there.
I want to keep going further south for the follow up question and ask about the Caribbean.
You know given what you guided for this year how much of the challenge do you see is.
Driven by perhaps supply or demand issues in the Caribbean in general.
Versus say challenges in attracting demand to Puerto Rico specifically.
I would say, Greg, it's really a ramp up keep in mind the trauma that the island experience post Hurricane Murray as we all know.
No we took 18 months to rebuild and.
To relaunch and there are many assets that are still in that renovation on the restoration phase. So it's really beginning to get better airlift better visitation.
We believe.
Greatly in the island greatly in the asset and we're very optimistic we just think the ramp up seven take a little longer hence the reason that you see relatively flat performance here and in in 2020.
Okay. Thanks for the answer.
Our next question comes from the line of Ari Klein with BMO capital markets. Please proceed with your question.
Thanks.
I was a little little surprised that perhaps there wasn't perhaps a better comparable margin outlook considering the synergies can you can you provide some color on the underlying assumptions on expense growth I know you mentioned wage growth, but was there anything anything else in there that's worth calling out.
Okay.
Hi, Yes, I would probably say worked well our group pace for the portfolio.
It is down or kind of almost flattish versus kind of group that can you had last year. So kind of the extra SMB revenue that we benefit from last year. The growth is a little bit lower this year. So I think I kind of contributed kind of that portion of the out of rooms Ben.
As you do the Revpar.
Arjun Checkbook lesion clearly that's a domestic equation and part of the question that.
People don't discuss logic trying to do revpar down to that but I haven't spend is certainly key and we're seeing that in parking and resort fees seeing great growth, there, but at least a little bit I'm, a little bit lower than in the past just given the group.
Set up for this year.
Okay, and then maybe just on total revpar growth.
As you mentioned you expect to see some lighter SMB gross but how do you expect total revpar growth relative to revpar growth for 2020.
Certainly higher I'd, probably kind of circa 2% plus or minus.
Okay perfect.
Thank you.
Our next question comes from the line of Robin Farley with UBS. Please proceed with your question.
Hi, Thank you all have a two quick ones. This is our conifer robin good morning, others have mentioned tougher pricing environment and that perhaps that's good for salaries and tougher for buyers could you could you remind us what remains of your disposition plan and whether you're actively marketing any assets now.
We are.
Robin we've got as we said in our prepared remarks, another 250 to 350 million in assets.
Currently our marketing one asset now and expect obviously to receive a real time bids here in the very near future. We still think gives an active market. There's plenty of equity there's plenty of debt capital as well and I think as we've indicated by selling.
Eight assets last year in terminating our ground lease in Sheffield in the UK, we've had great success, continuing selling noncore assets. So there's an active market up here.
Whether that is temporarily disrupted or deeper a little more cautious we'll see.
We're not hearing that is we as we talk with prospective buyers about assets that we are marketing or considering the market. So we are we remain cautiously optimistic and we would also bring you back to our track record of really having.
I think demonstrated our ability to sell non core assets many of which have been very complicated from both and legal tax and structuring, particularly given the fact that move on loaded.
14 international assets many of those with.
Foreign buyers.
Thank you and then transient business, obviously seems softer but did that get worse on year over year basis versus Q3 or sort of continue the weaker trends since Q3 in terms of what you're seeing in transient business.
No.
Clearly October was really soft.
On November came back and it certainly December was strong as Sean mentioned in his prepared remarks, obviously first quarter and to remind listeners will be our salt, we believe our softest quarter given the fact that we're lapping revpar growth last year for 4.2% and I believe group.
Group up well north of 20% in the first quarter of last year.
So we would expect first quarter to probably be down in the other 1% to 2% range of Revpar, but.
We'd obviously stronger back half of the year, we're expecting transient clearly leisure continues to be stronger than what we've seen and this is transient although we did to.
Due to somewhat positive on the on the December front.
Thank you.
Thank you.
Our next question comes from one of Chris Woronka with Deutsche Bank. Please proceed with your question.
Hey, good morning, guys.
Good morning, Chris how are you more than good how are you.
Thanks.
Good wanted to ask on the obviously you guys have given us a lot of color about.
The Chesapeake synergies wanted to ask with some of the recent changes to the Marriott, but the bond Boyd program at those hotels.
There you could you see additional upside from some of those changes or was that kind of baked into your your prior.
Synergy and upside guidance.
Yes, it's a great question.
Chris We are we're continuing to study that ourselves. We do you think back to the original plan in the 24 million largely weighted towards replacing and eliminating obviously the jumei we've done that.
The opportunity to renegotiate management contracts, we've done that.
So as we said in our prepared remarks, we're very confident in the 20 million out of a 24 million.
We think about other opportunities.
Clearly remixing the mix as we've talked about in the early.
You bet that we're getting there is really encouraging.
We also think we benefit from having a favorable convention calendar in many of those markets coupled with renovation tailwinds as we sort of dig in and out I'll take the two w.'s in Chicago is an example is we dig in there and we hope and work with our partners and Marriott we are seeing other opportunities we're seeing improved perform.
Is there and I do think envoy well Marriott's got 137 million members and they continue to think creative ways to monetize it.
We're studying carefully to see whether or not.
Cost in fact are rising versus decreasing not only for.
Barnwood across the Hilton systems as well so.
The jury's still out we continue to study you monitor that ourselves.
And we'll certainly have more to report back in the future.
Okay, Great and then just wanted to ask you about New York and realizing one hotel five or 6% of EBITDA for the company, but any.
Any change in kind of your secular long term view there as we've seen a lot of your public peers move to.
Reduce their exposure to the to the market.
Yes, it's a great question we.
We all struggle is just thinking about New York one of the grade cities in the World and we all have to believe that it's going to come back, but it's really Miss this cycle and as we think about again being down 4.7% in.
In the corner and another 1.8% and watching so the cash flow continue to eroded is quite frustrating.
Supply I would tell you is the biggest issue and I would I would encourage the brand little hard on it enough is enough in New York is is a.
Very direct comment there on the on that and I also think we think about what's happening with Shadow supply you think back to 2011, you know there were.
Super compression days, there were demand sitting north of 95% of about 141 days. We estimate this year will be down probably the mute achieved as an example, so that's really eroded the pricing integrity, New York and made a very difficult environment and now as we all year.
Potential owners, who.
Who are in jeopardy, I personally believe that that is going to expand over time, that's not going to shrink and I think a lot of and it's driven by too much supply we benefit we believe by having the best group House in city.
In the status given size given the the.
Meeting space platform and so we are we're not throwing the towel and we'll continue to work hard with our partners at Hilton continue to drive value, but clearly it's been a it's been for us quite frustrating as we think about this decade and this cycle for New York.
Okay very good appreciate all the color thanks, Tom.
Our next question comes from the line of Bill Crow with Raymond James. Please proceed with your question.
Hey, good morning.
I apologize I got on a little bit lights, if you covered it just move on but.
You tend to have.
Raised the crew business the contract business, a little bit more than maybe some other owners.
And I'm wondering how big impact.
You are seeing from Corona virus from cancel flights.
And in particular, San Francisco, Hawaii, New York is that a is that really have a headwind for you.
It is not.
As we early.
In the June as you May have missed we talk little about some Chinese food business and what we've seen in New York.
But if you think about Hawaii, particularly with.
What's happening with southwest and their expansion plans in the relationship we have with them, we're not seeing at all any kind of fall off in that respect.
Look through contracts about 5% as you know really part of the strategy for park was to anchor our business with.
Group layer in some contract.
And then really the transient and we've had success.
Short duration since we respond out of home. So we continue to see you'll continue to see us use that playbook as we move forward.
No impact in San Francisco from the group business, thus far.
Not at this time, we've seen obviously, the Facebook cancellation and you said earlier about 5 million and it's largely coming San Francisco, Hawaii in New York, where we've seen in and again, that's that's really been minimum when you think about the scope of our operation.
Okay. Appreciate it thank you.
Thank you.
Our next question comes the line of David Katz with Jefferies. Please proceed with your question.
Hi, good morning, everyone.
Apologies were no dancing back and forth.
Among a number of things this morning so.
My My guess, who said that we have discussed.
The near term impact.
Fairly thoroughly what I wanted to ask your opinion about is we have more and more discussions about owners contemplating then the notion of third party managers rather than using the brands as managers can you just philosophy rise a bit about that and you know the boundaries and.
Circumstances under which you know you think through those alternatives.
You know due to its a great question I think back to my past life. When at peak, we had 16 or 17 different management companies.
Moving all of the brands, coupled with a lot of independent operators and what I would tell you is that we like the make up that we have today.
Meeting, having seven eight management companies, including Hilton and Marriott, our partners that higher plus independent of what we find that sometimes there are.
Right operator from right situation clearly you would think of the Big Convention Center hotels are the big resorts.
Generally biomarkers to be brands management companies have the wherewithal they have the scope in capacity and the resources to be able to support those other hotels that may be a 300 Rome urban.
Largely rooms box with limited food and beverage and limited group.
Having more nimble management company that May have a particular brand focus or regional or an asset type focus so I.
I think finding the right situation makes sense for us obviously, given the fact that we were spun out of Hilton clearly.
As you think about our top 10 assets and those iconic assets. Those are obviously under long term management agreements, but but I would say that we have a very healthy working relationship and there's a good push and pull and I think that the system works right, we should make them any better.
Manager and they should make us a better owner and we have a wonderful partnership and well from that standpoint.
Are there some situations we're.
It may make sense to take out a brand manager firmer independent absolutely. We continue to explore many b assets that we've been selling we have.
For the sell those that are unencumbered by flat again to our management. So that's clearly something that we'll continue to evaluate overtime.
But make no mistake I think I think having multiple managers and looking at best practices and being able to use that push and encourage your.
Your your management companies is really a good thing and we are incorporating that into.
Asset management tool kit here at park.
If I may follow that up would be a circumstance like New York.
Were there. However, there is general pressure and searching for best outcomes would those kinds of circumstances be one where you'd be more inclined to obviously not with big box.
Flagship hotels, but.
Would that be a circumstance, where you'd look more into third party opportunities.
Yes, it's a great question I think I think New York, Unfortunately, oftentimes, it's sort of split beyond whether or not you're an existing.
Unions shop, or not I think if you have an existing union operation more than likely you would need to find the management company.
Who who operates under that framework.
Other cities, clearly and I think San Francisco as an example, where we have again multiple operators given six hotels that we up there and being able to share best practices looking at revenue management strategies thinking about different ways to manage in yield there has been really really helpful to us so we see that being a positive but.
No doubt in New York happening offerings are on the table I think the biggest issue among the biggest issues is that we just have too much supply that's eroded any kind of pricing integrity, coupled with the shadow supply and enough is enough and I think I think the brands and got a step forward and and show leadership.
Regarding.
Thank you very much I appreciate it.
Our next question comes from the line of Neil Malkin with capital. One. Please proceed with your question.
Hey, guys.
Yes.
Just kind of on the West coast have you seen any incremental.
Cancellations of group.
You know just from your maybe larger on.
Account.
Inkling or are kind of asking you about.
Either deferring it or canceling due to.
Current affairs.
But nothing more than what we've shared.
Okay, Great and then just related to the dividend you said 60 to 70% to 70% Pat I'm, assuming you're talking about half that though.
In terms of band of I think it's much higher like 85, plus so I think thats. The question someone was asking before about.
What you would do in terms of either labor or or.
Capex.
To preserve that because.
If EBITDA drops.
Yeah.
High single digit around 10% or something like that I think you'd be at breakeven. So just curious to hear kind of what potential.
Contingency plans would be and if you stress tested the.
The balance sheet.
In that way.
Yes.
Of course stress tested the balance sheet and I will.
Restate, what I said earlier that we remain committed to dividend at the current level and believe that we have plenty of cushion that basis.
Alright, thank you.
Our next question comes from the line of Lukas Hartwich with Green Street Advisors. Please proceed with your question.
Thanks, a I just have a quick clarification question earlier.
You mentioned in the discussion on non room revenue and and total revenue I think he said, 2% growth and 20 and I just didnt catch if that was the non room revenue line or total revenue line.
2% is plus or minus up of total revenue.
Okay. So it sounds like relative to where this year's shook out but that kind of in a implies a bit of a pickup in terms of out of room spending is that is that right.
No.
Well that little bit.
It should be a little bit lower I think on out of them spend.
Okay.
Great. Thank you.
Thank you.
Mr. Baltimore, we have no further questions at this time I would now like to turn the floor back over to you for closing comments.
Thank you we enjoyed our discussion today, but look forward to see many of you if the city conference next week a safe travels.
Look forward to see.
Ladies and gentlemen, this does conclude today's teleconference. You may disconnect. Your lines at this time. Thank you for your participation and have a wonderful day.