Q2 2024 Park Hotels & Resorts Inc Earnings Call
Greetings and welcome to Park Hotels and Resorts Incorporated second quarter 2024 earnings conference call. At this time all participants are on the listen only mode. A question and answer session will follow the formal presentation.
Operator: 2024 Earnings Conference, LLC. At this time, all participants are on a listen-only basis.
Operator: 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 television.
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Operator: As a reminder, this conference is being recorded. I would now like to turn the conference over to your host, Ian Weissman. Thank you.
As a reminder this conference is being recorded. I would now like to turn the conference over to your host Ian Weissman. Thank you. You may begin.
Ian Weissman: Thank you, Operator, and welcome, everyone, to the Park Hotels & Resorts Second Quarter 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 law. 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 those forward-looking statements.
Ian Weissman: Thank you operator and welcome everyone to the Park Hotels and Resorts second quarter 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.
Ian Weissman: Actual future performance outcomes and results may differ materially from those expressed in forward-looking statements. Please refer to the documents filed by us with the SEC, specifically those 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 statement.
Speaker Change: 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 those forward-looking statements.
Speaker Change: Actual future performance outcomes and results may differ materially from those expressed in forward-looking statements.
Speaker Change: please refer to the documents filed by part with the SEC, specifically those 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.
Ian Weissman: 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 direct comparable GAAP financial measure, in yesterday's earnings release, as well as on 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.
Speaker Change: 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 direct comparable GAAP financial measure.
Speaker Change: in yesterday's earnings release as well as on our 8k filed with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com
Speaker Change: Additionally, unless otherwise stated, all operating results will be presented on a comparable hotel basis.
Ian Weissman: This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide a review of Park's second quarter performance and update you on our 2024 outlook. Sean DeLorto, our Chief Financial Officer, will provide additional color on second quarter results, full year guidance, and an update on our balance sheet. 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.
Tom Baltimore: This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide a review of PARC's second quarter performance.
and update you on our 2024 outlook. Shawn DeLorto, our Chief Financial Officer, will provide additional color on second quarter results, full year guidance, and update on our balance sheet.
Speaker Change: Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Tom.
Thomas Baltimore: And welcome, everyone. It was another very productive quarter for Park. We continue to improve our balance sheet and execute our capital allocation strategies. Achieve solid REBPAR results and benefit from stronger-than-expected gains from our recently completed value-enhancing ROI project. We have made considerable progress over the past two years repositioning our balance sheet. Further progress was made during the second quarter as we extended our debt maturities by refinancing our $650 million of senior notes that were due in June 2025.
Tom: Thank you, Ian.
Tom: and welcome everyone.
Tom: It was another very productive quarter for Park.
Tom: As we continue to improve our balance sheet.
Speaker Change: Execute our capital allocation strategies.
Achieve solid REBPAR results.
Speaker Change: and benefit from stronger-than-expected gains from our recently completed value-enhancing ROI projects.
Speaker Change: We have made considerable progress over the past two years repositioning our balance sheet.
Speaker Change: The further progress made during the second quarter as we extended our debt maturities by refinancing our 650 million of senior notes that were due in June 2025
Thomas Baltimore: Leaving no material maturities to address until Q4 2026, and we continue to make progress with our efforts to dispose of non-core assets with the recent JV sale of Hilton Torrey Pines. Including the two San Francisco hotels and receivership, we have now sold or disposed of 43 hotels for nearly $3 billion since the spin.
Speaker Change: leaving no material maturities to address until Q4 2026 and continue to make progress with our efforts to dispose of non-core assets with the recent JV sale of Hilton Torrey Pines
Speaker Change: Including the two San Francisco hotels and receivership, we have now sold or disposed of 43 hotels for nearly $3 billion since the spin.
Thomas Baltimore: In terms of capital allocation... We repurchase nearly 1.7 million shares of our common stock for $25 million at a significant discount to net asset value. Operationally, results continue to be driven by solid leisure performance in Key West, Orlando, and Miami, coupled with improving group and business transient demand trends in core urban markets, including New York and Boston. In Key West, our Casa Marina Resort reported stronger than expected results. Following our $80 million comprehensive upgrade, which was substantially completed last December,
Speaker Change: In terms of capital allocation, we repurchased
Speaker Change: Nearly 1.7 million shares of our common stock for $25 million at a significant discount to net asset value.
Speaker Change: Operationally, results continue to be driven by solid leisure performance in Key West, Orlando, and Miami, coupled with improving group and business transient demand trends in core urban markets, including New York and Boston.
Speaker Change: In Key West, our Casa Marina resort reported stronger than expected results following our $80 million comprehensive upgrade, which was substantially completed last December.
Thomas Baltimore: RevPAR at the hotel increased by nearly 215% over the same period last year and achieved the highest Food and Beverage Revenue quarter on record, with several groups adding or expanding events throughout the second quarter. Performance at Casa, since the completion of the renovation, has been extraordinary and has exceeded our initial underwriting.
Speaker Change: RevPAR at the hotel increased by nearly 215% over the same period last year and achieved the highest food and beverage revenue quarter on record, with several groups adding or expanding events throughout the second quarter.
Speaker Change: performance at Casa since the completion of the renovation has been extraordinary and has exceeded our initial underwriting. With the hotel on track to generate hotel-adjusted EBITDA in excess of 31 million dollars in 2024
Thomas Baltimore: With the hotel on track to generate hotel-adjusted EBITDA in excess of $31 million in 2024, or 35% above the 2019 peak. At the peak, results materially beat expectations with the hotel, reporting REPAR growth of approximately 7% during the quarter. This was driven by a 520 basis point increase in occupancy, at rates that remain 56% above 2019. In Orlando, our Bonnet Creek complex continued to benefit from the completion of our $220 million transformative renovation and expansion, which wrapped up in February, with the Waldorf Astoria reporting REPAR growth of 11% during the quarter, driven by a 13% increase in rates.
Speaker Change: or 35% above the 2019 peak.
Speaker Change: At the reach, results materially beat expectations with the hotel reporting REPAR growth of approximately 7% during the quarter, driven by a 520 basis point increase in occupancy.
at rates that remain 56% above 2019.
Speaker Change: in Orlando.
Speaker Change: Our Bonnet Creek complex continued to benefit from the completion of our $220 million transformative renovation and expansion, which wrapped up in February with the Waldorf Astoria reporting REPFAR growth of 11% during the quarter, driven by a 13% increase in rates.
Thomas Baltimore: While room revenue gains were compounded by improved ancillary capture, with outlets, spa, and golf increasing 31% year-over-year. At the Signia Bonnet Creek, REPFAR growth was 9% during the quarter, driven by solid group performance, with the hotel capitalizing on the addition of the 35,000-square-foot Waterside Ballroom, adding nearly $2 million of incremental revenues over the same period last year. Looking ahead, 2024 Group Revenue at the Bonnet Creek Complex. Group revenue is pacing up nearly 18% over the back half of the year, while 2025 Group revenue is up over 23%.
Speaker Change: While room revenue gains were compounded by improved ancillary capture with outlets, spa and golf increasing 31% year over year.
Speaker Change: At the Signia Bonnet Creek, REPFAR growth was 9% during the quarter, driven by solid group performance.
Speaker Change: with the hotel capitalizing on the addition of the 35,000-square-foot Waterside Ballroom, adding nearly $2 million of incremental revenues over the same period last year.
Speaker Change: Looking ahead, 2024 group revenue at the Bonnet Creek Complex is pacing up nearly 18% over the back half of the year, while 2025 group revenue pace is up over 23%.
Thomas Baltimore: We also witnessed solid group and leisure demand trends in Miami, with our Royal Palm reporting rep par growth of nearly 6% for the quarter, evenly split between rate and occupancy gains, and the hotel significantly outperformed its comp set during the quarter. In Boston, the Hyatt Regency reported REBPAR growth of approximately 15% for the quarter, with the hotel benefiting from a significant increase in citywide events during the quarter. This translates into 28 compression days, over three times the number of compression days during the same period last year. Overall, group room nights at the Hyatt Regency increased by over 15%.
Thomas Baltimore: With rates up approximately 8%, food and beverage revenue increased nearly 22% during the quarter, with strong group and leisure spend. We forecast the hotel to deliver double-digit Red Park gains over the balance of the year, driven by ongoing improvements in occupancy, which is pacing 10 percentage points below 2019. In New York, solid group trends helped to drive REBPAR growth of 4% for the quarter, with group room nights up 7.5% and rate increases of approximately 7% during the quarter.
Thomas Baltimore: In addition to solid group production, the hotel also witnessed better-than-expected food and beverage revenues, increasing almost 29% over the prior year period, as several groups had materially higher spend than anticipated. Turning to Hawaii, RevPAR at our two hotels decreased by approximately 5.5% during the quarter.
Thomas Baltimore: His occupancy fell by 620 basis points to approximately 87%, although just 240 basis points below 2019, while average daily rates increased year-over-year by approximately 1%. Overall, year-over-year group revenues increased by an impressive 77% during the quarter at Hilton Hawaiian Village. Although driven by a strong citywide calendar, transient revenues decreased by 14%, resulting in a 4% year-over-year decrease in RIV PAR during the quarter at Hilton Hawaiian Village.
although just 240 basis points below 2019, while average daily rates increase year-over-year by approximately 1%.
Speaker Change: However, transient revenues decreased by 14% resulting in a 4% year-over-year decrease in REV PAR during the quarter at Hilton Hawaiian Village.
Thomas Baltimore: As expected, U.S. arrivals were down 2% during the quarter; however, inbound travel from Japan grew, but at a slower rate than we had expected, due in large part to continued weakness in the Japanese yen, which hit a 37-year low in early July. We are very encouraged, however, by the Yen's recent rally and the Bank of Japan's expected plan to adopt a tighter monetary policy, which we expect will provide additional support to inbound travel over the next year.
Speaker Change: As expected, U.S. arrivals were down 2% during the quarter.
Speaker Change: However, inbound travel from Japan grew, but at a slower rate than we had expected, due in large part to continued weakness in the Japanese yen, which hit a 37-year low in early July.
Speaker Change: We are very encouraged, however, by the Yen's recent rally and the Bank of Japan's expected plan to adopt a tighter monetary policy.
Speaker Change: which we expect will provide additional support to inbound travel over the next year.
Thomas Baltimore: [inaudible] Oahu is expected to remain among the top-performing hotel markets in the U.S., driven by limited new supply. Strong inbound demand from Japan once the currency normalizes, and expanded airlift from both Southwest and Alaska Airlines, which has helped to permanently support increased domestic travel to the island over the last several years. Over the last 20 years, Oahu's REVPAR growth has outpaced the broader U.S. by nearly 200 basis points, while exceeding other major resort markets by nearly 150 basis points, delivering a nearly 5.5% compound increase in REVPAR. Japan will continue to play an important role in Oahu's ongoing success, with inbound travel from Japan still pacing approximately 55% below 2019 levels, implying significant upside potential as the yen strengthens against the U.S. dollar.
[inaudible]
Speaker Change: Oahu is expected to remain among the top-performing hotel markets in the U.S., driven by limited new supply.
With inbound travel from Japan still pacing approximately 55% below 2019 levels
Speaker Change: implying significant upside potential as the yen strengthens against the U.S. dollar.
Thomas Baltimore: In the third quarter, we plan to commence... A two-year phase room renovation of the iconic Rainbow Tower 796 room, along with 26 additional keys being added as part of the project. Total investment over the next two years is expected to be approximately $90 million. Looking ahead to the balance of this year, we are forecasting REVPAR growth at Hilton & Wineville to be slightly negative over the remaining two quarters. At our Hilton Waikoloa Village Hotel, REVPAR fell by 12% during the quarter, which was in line with our expectations, as group revenue was down 48% year-over-year due to many groups taking a gap year while most hotels in our comp set undergo comprehensive renovations this year.
Speaker Change: In the third quarter, we plan to commence a two-year phased room-to-room renovation of the iconic Rainbow Tower 796 rooms.
Speaker Change: along with 26 additional keys being added as part of the project.
Speaker Change: Total investment over the next two years is expected to be approximately $90 million.
Speaker Change: Looking ahead to the balance of this year, we are forecasting REPAR growth at Hilton & Wineville is to be slightly negative over the remaining two quarters.
Speaker Change: At our Hilton Waikoloa Village Hotel, Repar fell by 12% during the quarter, which was in line with our expectations.
Speaker Change: as group revenue was down 48% year-over-year due to many groups taking a gap year while most hotels in our comp set undergo comprehensive renovations this year.
Thomas Baltimore: Our group revenue pace remains at a similar level over the balance of the year, down 43% on average. We expect a sharp rebound in 2025, when group revenue pace is up nearly 80%. Our Waikoloa Village Hotel will also commence a comprehensive room renovation in August when we expect to renovate nearly half of the rooms, and the 400-room Palace Tower, the balance of the rooms to be renovated next year, along with 11 keys being added as part of the project.
Speaker Change: Our group revenue pace remains at a similar level over the balance of the year, down 43% on average. We expect a sharp rebound in 2025, when group revenue pace is up nearly 80%.
Speaker Change: Our Waikoloa Village Hotel will also commence a comprehensive room renovation in August when we expect to renovate nearly half of the rooms.
Speaker Change: and the 400-room Palace Tower, with the balance of the rooms to be renovated next year, along with 11 keys being added as part of the project.
Thomas Baltimore: Total investment over the next two years is expected to be approximately $70 million. On a portfolio-wide basis, total renovation disruption for 2024, when including both Hawaii hotels and our rooms renovation in New Orleans, is expected to account for a 50 basis point headwind to REVPAR and a $9 million drag on earnings for the full year. Turning to group performance,
Speaker Change: Total investment over the next two years is expected to be approximately $70 million.
Speaker Change: on a portfolio-wide basis.
Speaker Change: Total renovation disruption for 2024.
Speaker Change: When including both Hawaii hotels and our rooms renovation in New Orleans, is expected to account for a 50 basis point headwind to RevPAR and a $9 million drag on earnings for the full year.
Thomas Baltimore: We saw continued acceleration in group trends, with Q2 group revenues for the portfolio increasing 8% year-over-year to approximately $128 million, coupled with strong banquet and catering revenue improvement of 18%. We are seeing strength in both the forward pace, as well as in the year-over-year pickup. The group continues to be a key driver for our growth as we look over the balance of 2024. Group demand is expected to remain very strong.
Speaker Change: Turning to group performance.
Speaker Change: We saw continued acceleration in group trends, with Q2 group revenues for the portfolio increasing 8% year-over-year to approximately $128 million, coupled with strong banquet and catering revenue improvement of 18%.
Speaker Change: We are seeing strength in both the forward pace
Speaker Change: as well as in the year for the year pickup.
Speaker Change: The group continues to be a key driver for our growth as we look over the balance of 2024.
Thomas Baltimore: Group revenue pace as of June 30th was up nearly 10% compared to the same time last year, and Q3 group revenue pace is up nearly 13%, driven by the months of August and September, with pace up over 30% and 22%, respectively, when exceptionally strong convention and citywide activity is expected in Chicago, New Orleans, Orlando, Denver, and Miami. Chicago and New Orleans citywide room nights are up 200% and nearly 300% year-over-year, respectively, and both markets are expected to have near-record convention room nights in the second half. In the year, 40-year bookings also remain very active.
Speaker Change: Group demand is expected to remain very strong.
Speaker Change: while Q3 group revenue pace is up nearly 13%.
Speaker Change: In the year, 40-year bookings also remain very active.
Thomas Baltimore: The portfolio picked up approximately 140,000 room nights for 2024 during the quarter, accounting for $33 million of incremental group revenue with gains primarily concentrated in Boston, New York, Chicago, and Hawaii. Looking ahead, while our near-term outlook assumes a slight moderation in demand at Hilton Hawaiian Village, we remain very confident that our well-located portfolio will continue to deliver solid results. Lodging fundamentals remain strong, driven by healthy corporate profits, low unemployment, and Limited New Supply.
Speaker Change: accounting for 33 million dollars of incremental group revenue with gains primarily concentrated in Boston, New York, Chicago, and Hawaii.
Speaker Change: Lodging fundamentals remain strong.
Speaker Change: driven by healthy corporate profits, low unemployment, and limited new supply, which we believe should continue to support healthy gains for both business and leisure demand trends.
Thomas Baltimore: All of which we believe should continue to support healthy gains for both business and leisure demand trends. Additionally, we anticipate benefiting from the significant embedded value in our portfolio, which we plan to realize through our strategic ROI pipeline and proactive asset management strategy. We are currently evaluating over $1.5 billion of potential ground-up and redevelopment opportunities at returns that are well in excess of acquisition yields, while there remains significant uplift across our urban portfolio relative to 2019, which we expect will continue to narrow as both business transient and international demand trends further improve.
Speaker Change: Additionally, we anticipate benefiting from the significant embedded value in our portfolio.
Speaker Change: which we plan to realize through our strategic ROI pipeline and proactive asset management strategies.
Speaker Change: We are currently evaluating over 1.5 billion of potential roundup and redevelopment opportunities at returns.
Speaker Change: that are well in excess of acquisition yields while there remains significant uplift across our urban portfolio relative to 2019 Which we expect will continue to narrow
Speaker Change: as both business transient and international demand trends further improve.
Thomas Baltimore: Additionally, we expect to remain active with our capital recycling program, having closed the joint venture sale of Hilton Torrey Pines in July, with gross proceeds of over $40 million year-to-date, while we actively pursue other potential non-core asset sales. I want to reemphasize that our team remains laser-focused on executing our internal growth strategies and capital allocation priorities, which we are confident will create long-term shareholder value. With that, I will turn the call over to Sean. Thanks, Tom.
Speaker Change: Additionally, we expect to remain active with our capital recycling program, having closed the joint venture sale of the Hilton Torrey Pines in July.
Speaker Change: with gross proceeds over $40 million year-to-date while we actively pursue other potential non-core asset sales.
Speaker Change: I want to reemphasize that our team remains laser-focused on executing our internal growth strategies and capital allocation priorities, which we are confident will create long-term shareholder value.
Speaker Change: With that, I will turn the call over to Sean.
Sean DeLorto: Q2 RAPFAR for the portfolio was approximately $195, representing year-over-year growth of 2%, with occupancy at just over 77%, and ADR increasing nearly 2% to $253. Year-to-date through June, REBPAR has increased 4.6%. Total REB FAR for the second quarter increased by 3.2%, driven mostly by a 9% increase in F&B revenue. Hotel revenue was $664 million during the quarter, and hotel-adjusted EBITDA was $199 million, resulting in a nearly 30% hotel-adjusted EBITDA margin. Q2 adjusted EBITDA was $193 million, and adjusted FFO per share was $0.65.
Sean: Thanks, Tom. Q2 REBPAR for the portfolio was approximately $195 representing year-over-year growth of 2% with occupancy at just over 77% and ADR increasing nearly 2% to $253. Year-to-date through June, REBPAR has increased 4.6%.
Speaker Change: Total REB PAR for the second quarter increased by 3.2%, driven mostly by a 9% increase in F&B revenue.
Speaker Change: Hotel revenue was $664 million during the quarter and hotel adjusted EBITDA was $199 million resulting in a nearly 30% hotel adjusted EBITDA margin.
Speaker Change: Q2 adjusted EBITDA was $193,000,000 and adjusted FFO per share was $0.65.
Speaker Change: Note that results include a $2.5 million net property tax benefit recognized at our Chicago-based hotels, which was not included in the annual guidance provided last quarter.
Sean DeLorto: Note that results include a $2.5 million net property tax benefit recognized at our Chicago-based hotels, which was not included in the annual guidance provided last quarter. Turning to the balance sheet, our current liquidity is approximately $1.4 billion, including $450 million of cash. Our net debt is currently $3.6 billion, which translates into a net debt-to-adjusted EBITDA ratio of just 5.3 times. We continue to enhance the overall quality of our balance sheet. Obtaining $750 million of debt capital during Q2, consisting of the issuance of $550 million of unsecured senior notes maturing in 2030 with a fixed coupon of 7%, and in addition to amending the company's existing credit facility to include a new $200 million senior unsecured floating rate term loan maturing in 2027.
Speaker Change: Turning to the balance sheet, our current liquidity is approximately $1.4 billion, including $450 million of cash. And net debt is currently $3.6 billion, which translates into a net debt-to-adjusted EBITDA ratio of just 5.3 times.
Speaker Change: We continue to enhance the overall quality of our balance sheet, obtaining $750 million of debt capital during Q2, consisting of the issuance of $550 million of unsecured senior notes maturing in 2030 with a fixed coupon of 7%.
Speaker Change: in addition to amending the company's existing credit facility to include a new $200 million senior unsecured floating rate term loan maturing in 2027.
Sean DeLorto: Proceeds from the new debt were used to fully repay our $650 million, 7.5% senior notes, which are scheduled to mature next year, while the remaining dry powder further enhances our financial flexibility. As you look ahead to balance sheet priorities, we remain committed to extending near-term and pending maturities. This includes evaluating options for a $1.275 billion CNBS loan on Hilton Hawaiian Village, which comes due in November 2026, while maintaining sufficient liquidity to execute near-term ROI projects within our core portfolio. Other accomplishments during the quarter included a very successful renewal of our property insurance program, which went into effect June 1st.
Speaker Change: Proceeds from the new debt were used to fully repay our $650 million 7.5% senior notes, which were scheduled to mature next year, while the remaining dry powder further enhances our financial flexibility.
Speaker Change: As we look ahead to balance sheet priorities, we remain committed to extending near-term and pending maturities. This includes evaluating options for a $1.275 billion CNBS loan on Hilton Hawaiian Village, which comes due in November 2026.
Speaker Change: while maintaining sufficient liquidity to execute near-term ROI projects within our core portfolio.
Speaker Change: Other accomplishments during the quarter included very successful renewal of our property insurance program, which went into effect June 1st.
Sean DeLorto: Overall, we achieved an 8% year-over-year decrease in our premium, compared to our expectation of a 10% increase, resulting in estimated annualized savings of nearly $3 million and a nearly $4 million improvement to our balance of year forecast. I'm incredibly proud of this accomplishment, which is a testament to our efforts in establishing a best-in-class risk management program. Concerning our dividend, on July 15th, we paid our second quarter cash dividend of $0.25 per share, and on July 26th, our board approved a third quarter cash dividend of $0.25 per share to be paid on October 15th to stockholders of record as of September 30th.
Speaker Change: Overall, we achieved an 8% year-over-year decrease in our premium, compared to our expectation of a 10% increase, resulting in estimated annualized savings of nearly $3 million and a nearly $4 million improvement to our balance-of-year forecast.
Speaker Change: I'm incredibly proud of this accomplishment, which is a testament to our efforts in establishing a best-in-class risk management program.
Speaker Change: Concerning our dividend, on July 15th we paid our second quarter cash dividend of 25 cents per share and on July 26th our board approved a third quarter cash dividend of 25 cents per share to be paid on October 15th to stockholders of record as of September 30th.
Sean DeLorto: The quarterly dividend translates to an annualized dividend yield of over 6.5% based on recent trading levels and is well-covered based on our full-year outlook. As a reminder, we expect our full-year dividend payout ratio to equate to 65% to 70% of adjusted FFO per share, which, based on our current guidance, would result in an incremental top-off dividend at the end of the year. Turning to guidance, with Q2 REBPAR slightly below expectations and a slight moderation expected for the remainder of the year, we are lowering our full-year 2024 REBPAR growth forecast by 75 basis points at the midpoint to a new range of $185 to $187, representing year-over-year growth of 3.5% to 4.5%.
Speaker Change: The quarterly dividend translates to an annualized dividend yield of over 6.5% based on recent trading levels and is well covered based on our full year outlook.
Speaker Change: As a reminder, we expect our full-year dividend payout ratio to equate to 65% to 70% of adjusted FFO per share, which, based on our current guidance, would result in an incremental top-off dividend at the end of the year.
Speaker Change: Turning to guidance with Q2 REVPAR slightly below expectations and a slight moderation expected for the remainder of the year
Speaker Change: We are lowering our full year 2024 red part growth forecast by 75 basis points at the midpoint.
Speaker Change: to a new range of $185 to $187.
Speaker Change: representing year-over-year growth of 3.5 percent to 4.5 percent. Despite this adjustment, we believe the company remains well-positioned to deliver sector-leading red part growth over the remainder of the year, driven by solid group trends and tailwinds from our strong redevelopment pipeline.
Sean DeLorto: Despite this adjustment, we believe the company remains well-positioned to deliver sector-leading REBPAR growth over the remainder of the year, driven by solid group trends and tailwinds from our strong redevelopment pipeline. Despite the change to our top-line growth assumption, we are maintaining our full-year adjusted EBITDA guidance at the midpoint while narrowing the range by less than 1% to a new range of $660 million to $690 million, while our full-year adjusted FFO guidance improves by 1 cent per share at the midpoint to a new range of $2.10 to $2.26 per share, representing year-over-year growth of approximately 2.5% and 6% respectively.
Speaker Change: Despite the change to our top-line growth assumption, we are maintaining our full-year adjusted EBITDA guidance at the midpoint.
Sean DeLorto: Our adjustments to guidance are based on a number of factors, including moderating performance at our Hilton Hawaiian Village Resort during the second quarter, a trend we expect to continue over the back half of the year, given weaker-than-expected inbound travel from Japan into Oahu. Adjusted EBITDA will also be impacted by the sale of Hilton Torrey Pines, which will account for approximately $2 million of earnings drag over the balance of the
Speaker Change: Our adjustments to guidance are based on a number of factors, including moderating performance at our Hilton Hawaiian Village Resort during the second quarter, a trend we expect to continue over the back half of the year given weaker than expected inbound travel from Japan into Oahu.
Speaker Change: Well adjusted EBITDA will also be impacted by the sale of Hilton Torrey Pines Which will account for approximately two million dollars of earnings drag over the balance of the year
Operator: Partially offsetting these headwinds is the previously discussed Chicago Property Tax Benefit, recognized in Q2, as well as the more favorable insurance renewal, which collectively will account for roughly $6 million of positive adjustments. Please note that guidance does not account for our eventual exit from the Hilton Oakland Hotel, a property which is scheduled to close in the third quarter. Finally, with respect to hotel adjustment, even on a margin, we are increasing our forecast by 10 basis points at the midpoint to a new range of 27.3% to 28.1%, or down 50 basis points to up 30 basis points versus 2023. As a reminder, our Q3 hotel adjustment, even on a margin, will be negatively impacted from lapping the $8 million of property tax benefit and relief grants we recognized during Q3 of last year.
Operator: This concludes our prepared remarks. We will now open the line for Q&A. 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?
Speaker Change: This concludes our prepared remarks. We will now open the line for Q&A. 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?
Operator: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone. As a reminder, please limit to one question and one follow-up. You may press star 2 if you'd like to remove your question from the... For participants using speaker equipment, it may be necessary to pick up your handset before.
Speaker Change: Thank you. At this time, we'll be conducting a question and answer session. If you'd like to ask a question, please press star 1 on your telephone keypad. As a reminder, please limit to one question and one follow-up.
Speaker Change: Bye.
Speaker Change: You may press star 2 if you'd like to remove your question from the queue. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
Floris van Dijkum: One moment, please, while we poll. Our first question comes from Floris van Dijkum with Compass Point. Please proceed with your question. Thanks, guys, for taking my questions. Hey, Tom. Good afternoon.
Speaker Change: One moment please while we poll for questions.
Speaker Change: Our first question comes from Flores Van Dykem with Compass Point. Please proceed with your question.
Speaker Change: Thanks, guys, for taking my question.
Floris van Dijkum: So, I wanted to talk a little bit about, or maybe you could expand a little bit more on... Capital allocation. Obviously, you've got some attractive redevelopments that tend to pay back within a pretty quick period, as we're seeing in Key West and Orlando. You've bought back some stock.
Speaker Change: Hey Tom, good afternoon. So I want to talk a little bit about or maybe if you could expand a little bit more on
Speaker Change: Capital Allocation.
Speaker Change: Obviously you've got some attractive redevelopments that tend to pay back within a pretty quick period as we're seeing in
Thomas Baltimore: Maybe the other thing that if you could expand on a little bit more in terms of your potential asset sales. I think in the past you've said some non-core could be sold before year-end. What could we expect and where do you think proceeds will be spent between redevelopments and buyback? All great questions, of course.
Speaker Change: in Key West in Orlando.
Speaker Change: You've bought back some stock.
Speaker Change: Maybe the other thing that if we could if you could you know expand on a little bit more in terms of your your potential asset sales I think in the past you've said you know some non-core hotels could be sold before year-end what could we expect
Speaker Change: And where do you think proceeds will be spent on between, you know, redevelopments and buybacks?
Thomas Baltimore: Let me just start with... So the first priority for us, and as we think about 2024, is really operational excellence, to achieve our operational targets, our guidance, and obviously to continue to work with our operators and really reimagine the operating model. And I want to point out that we've made a lot of good progress there in really thinking about the business and how we can be more efficient. So, you know, we're sort of anchored there.
Speaker Change: All great questions. Let me just start with...
Speaker Change: So the first priority for us as we think about 2024 is really operational excellence.
Speaker Change: really thinking about the business and how we can be more efficient so that you know we're sort of anchored there. You're right, we each year set a goal of continuing to sell or dispose of non-core assets. If you think back to the prepared remarks
Thomas Baltimore: You're right; we set a goal each year of continuing to sell or dispose of non-core assets. You know, we noted that we have sold or disposed of 43 assets now. That does not include Oakland at this point, but that's about $3 billion.
Thomas Baltimore: So the team has worked incredibly hard to reshape the portfolio. You know, we have said that our top 25 assets really account for about 90% of the company's value. So, you know, there's another 10 to 15 hotels easily that we are actively looking to recycle that capital. Each of them has its own story, whether it's a low-tax basis, a joint venture partner, or other challenges.
Speaker Change: You know we have said that our top 25 assets really account for about 90% value
Speaker Change: of the company.
Speaker Change: So, you know, there's another 10 to 15 hotels easily that we are actively looking to recycle that capital. Each of them has its own story, whether it's a low-tax basis, a joint venture partner, or other challenges.
Thomas Baltimore: But our team, led by Tom Morey, our Chief Investment Officer, are working their tails off as we continue to make progress there. We also set a target this year of $100 to $250 million. We are confident that we will make significant progress against those goals. And then we'll use those proceeds as you've seen us do in the past. It'll be a balance between reinvesting back into our portfolio. We think that's really the... Now, a key priority for us, you've seen obviously the extraordinary success that we're having with Bonnet Creek already and then CASA, CASA probably finishes the year at a rev par in excess of 100% plus or minus, Bonnet Creek, the insignia of the Waterside Ballroom, probably busy already for 225 days already this year in its first year, the CASA as we're also going to be opening the Dorado Restaurant, we've opened the bar, All Oceanfront.
Speaker Change: But our team, led by Tom Morey, our Chief Investment Officer, are working their tails off as we continue to make progress there. We also set a target this year of $100 to $250 million.
Speaker Change: We are confident that we will make significant progress against those goals, and then we'll use those proceeds as you've seen us do in the past. It'll be a balance between reinvesting back into our portfolio. We think that's really the...
Speaker Change: Now, a key priority for us, you've seen obviously the extraordinary success that we're having with Bonnet Creek already and then CASA, CASA probably finishes the year at a red par in excess of a
Speaker Change: 100% plus or minus, Bonnet Creek
Speaker Change: The Signe of the Waterside Ballroom, probably busy already for 225 days, already this year in its first year.
Speaker Change: the Casa, as we're also going to be opening the Dorado restaurant. We've opened the bar, all oceanfront. So those are just great examples of really the talent that exists within the team and those remain obviously high priorities for us as we look to the future.
Thomas Baltimore: So those are just great examples of the talent that exists within the team, and those remain obviously high priorities for us as we look to the future. We will also be using proceeds to pay down debt. Our balance sheet has improved significantly, but we will continue to seek opportunities to pay off and then return capital through share buybacks and dividends. We returned $630 million in capital last year.
Speaker Change: We will also be using proceeds to pay down debt.
Speaker Change: The balance sheet has improved significantly, but we will continue to seek opportunities to pay off. And then return capital through share buybacks and dividends. We returned $630 million in capital last year.
Thomas Baltimore: We're tracking this year to be well north of $300 million so far this year, including our dividend and probably estimated top off, as Sean mentioned. I feel very good about that, but we're laser-focused on really continuing to be disciplined as a capital allocator. We do not think it makes sense to be out buying at high multiples right now. We think the better play is to invest back into our portfolio and buy back stock, particularly when we're trading at absurd levels like we are today at a sub-10 multiple.
Speaker Change: We're tracking this year to be well north of $300 million so far this year, including our dividend and probably estimated top-off, as Sean mentioned.
Speaker Change: I feel very good about that, but we are laser focused on really continuing to be disciplined.
Speaker Change: as a capital allocator. We do not think it makes sense to be out buying at high multiples right now. We think the better play is invest back into our portfolio and buy back stock.
Speaker Change: particularly when we're trading at absurd levels like we are today at a sub-10 multiple. So we think that's really the highest and best use. And I believe generally investors really applaud that kind of discipline that I think we've continued to show for many, many years.
Thomas Baltimore: We think that's really the highest and best use. We really applaud that kind of discipline that I think we've continued to show for many, many years. Thanks, Tom. Maybe I can have one follow-up for Sean. I know it's very early, but could you share some ideas on options for the refinancing of the CMBS debt on Hawaii Village?
Sean: Thanks, Tom. Maybe if I can have one follow-up for Sean. I know it's very early, but if you can share some ideas on options for the refinancing of the CMBS debt on Hawaii Village.
Sean DeLorto: Yeah, Floris, certainly taking a look at that, I think that, you know, certainly the positives of the efforts we've done over the last few years are certainly to expand the options that we have available to us. We've obviously accessed the bond markets. We certainly have other institutional debt markets out there available to us, whether it's term loans, whether term loan A or B. We successfully did the $200 million term loan A with the banks.
Speaker Change: Yeah, Flores, certainly taking a look at that. I think that, you know, one of the certainly the positives of the efforts we've done in the last few years is certainly to expand
Sean: The options that we have available to us, we've obviously accessed the bond markets, we certainly have other institutional debt markets out there available to us, whether it's term loans.
Speaker Change: Terminal 1A or B, we successfully...
Sean DeLorto: We're very supportive. So despite, I think, discussions around bank capital being scarce, which I think it still is, I think we have demonstrated we can already access that market as well since we repaid them coming out of the pandemic. So we're looking at all those kinds of options. You know, we'll also look at CNBS as an option. Don't necessarily want to just repeat and have another billion plus outstanding on the asset, but that is certainly, I wouldn't rule it out either.
Speaker Change: We did the $200 million term on A with the banks.
Speaker Change: I think discussions around bank capital being scarce, which I think still is, I think we demonstrated we can only access that market as well since we repaid them coming out of the pandemic. So we're looking at all those kinds of options. We'll also look at CNBS as an option. Don't necessarily want to
Speaker Change: Just repeat and have another billion plus outstanding on the asset But that is certainly I wouldn't rule it out either. So We have a number of options available to us. We're looking at it We're certainly sensitive to the pricing as we look at today Obviously the maturity as it comes up in 26 and getting ahead of that next year So you will have more color as we kind of progress over the next several months as to how we want to attack it
Sean DeLorto: So we have a number of options available to us. We're looking into them. It's sensitive to the pricing as we look at today, obviously the maturity as it comes up in 26 and getting ahead of that next year. So we'll have more color as we kind of progress over the next several months as to how we want to attack it. Thanks, Sean. Our next question comes from Smedes Rose with City. Please proceed with your question. Hi.
Sean: Thanks, Sean.
Speaker Change: Our next question comes from Schmieds Rose with Citi. Please proceed with your question.
Smedes Rose: Thank you. I just wanted to ask a couple of things. Hi. Just on the...
Schmieds Rose: Hi, thank you. I just wanted to ask a couple of things. Hi. Just on the
Smedes Rose: Maintaining the midpoint of your EBITDA guidance, and it sounds like you have... [inaudible] Do you have a doc item? Yeah, Smedes, so just to clarify, the property tax credit in Chicago and the insurance benefit for the remainder of the year really equates to $6 million. It's about, I'll call it rounded, four on insurance and two on Chicago, to kind of get through the six. Okay.
Speaker Change: maintaining the midpoint of your guidance so that and it sounds like you have
Schmieds Rose: I guess $8.5 million of benefits between the tax credit and the lower insurance expenses. But then, is there also something maybe factored in for closing Oakland? Because it seemed like that was running at a loss. So, will that help support your...
Speaker Change: EBITDA guidance
Speaker Change: Yeah, just to clarify, the property tax credit in Chicago and the insurance benefit for the remainder of the year, that really equates to $6 million. It's about, I'll call it rounded, four on insurance and two on Chicago to kind of get through the six. Oh, okay.
Sean DeLorto: Yeah, Oakland. Oakland is not in our guidance, as we mentioned, certainly a potential headwind or, I'm sorry, tailwind for us. Depending on when it closes, the asset, as we noted on a trailing basis, lost more than $3 million. So you can kind of probably back into kind of a quarter's worth of that as a potential tailwind for us, but I think we feel comfortable kind of assessing the risk out there. Clearly, we noted Hawaii being that, the chief risk out there from a leisure standpoint.
Speaker Change: Oakland is not in our guidance as we mentioned, certainly a potential tailwind for us.
Speaker Change: depending when it closes, that the asset, as we noted, on a trailing basis...
Speaker Change: lost more than $3 million, so you can kind of probably back into kind of a quarter's worth of that as a potential tailwind for us, but I think we feel comfortable kind of assessing the risk.
Speaker Change: out there. Clearly, we noted Hawaii being that.
Speaker Change: The chief risk out there from a leisure standpoint.
Sean DeLorto: On other leisure markets, like Orlando and Key West, we're certainly demonstrating strength there from the investments we've made, stealing a lot of share from those assets. I think performing well in those markets, despite those markets being actually down, performing below 2023 levels. So we feel kind of good.
Speaker Change: On other leisure markets like Orlando and Key West, we're certainly demonstrating strength there from the investments we've made. We're still getting a lot of share from those assets, so I think performing well in those markets, despite those markets being actually down, performing below 2023 levels.
Sean DeLorto: The Group has held up strong since relative to what we forecasted even at the beginning of the year. And I'd say IBT, individual business transit, has also been a welcome surprise and healthy year to date thus far. So we think we forecasted, again, the risk on the leisure side, but I also think that we have potential benefits, even if there's a little more risk out there on some of these other components that might offset that going forward. So we feel good about where we are, at 675. Okay.
Speaker Change: So we feel kind of good, you know group has held up strong since relative to what we forecasted even the beginning of the year
Speaker Change: And I'd say IBT, Individual Business Transient, has also been a welcome surprise and healthy year-to-date thus far. So we think we forecasted, again, the risk on the leisure side, but I also think that we have potential benefits, even if there's a little more risk out there on some of these other components that might offset that going forward. So we feel good about where we are, 675 midpoint.
Smedes Rose: And can you maybe speak to kind of the ranges of rent per growth you're thinking about for third quarter versus fourth quarter? I think you talked about that on the first quarter call, thinking about ranges for the second quarter. I was wondering if you could share that through the balance of the year. Yeah, I think, look, there's a lot of uncertainties, Smedes, out there. I think we all know.
Speaker Change: Okay, and can you maybe speak to kind of maybe the ranges of web cart growth you're thinking about for third quarter versus fourth quarter? I think you talked about that on the first quarter call, thinking about ranges for the second quarter, if you could share that through the balance of the year.
Speaker Change: Yeah, I think, look, there's a lot of uncertainty out there. I think we all know.
Thomas Baltimore: You've got obviously the geopolitical, you've got obviously will the Fed begin to ease on rates, and obviously the consumer is certainly feeling more stress. So, you know, we don't want to ignore that, hence the reason that we were pretty thoughtful about raising and about lowering, obviously, the top end of our REBPAR guidance. And, you know, having said that, I do think that there is a really compelling story for PARCC. We're expecting the third quarter to be strong.
Speaker Change: You've got, obviously, the geopolitical. You've got, obviously, will the Fed begin to ease on rates. Obviously, the consumer is certainly feeling more stress.
Speaker Change: So, you know, we don't want to ignore that, hence the reason that we were...
Speaker Change: pretty thoughtful about raising and about lowering obviously the top end of our REBPAR guidance and
Speaker Change: Having said that, I do think that there is a really compelling story for Park. We're expecting the third quarter to be strong.
Thomas Baltimore: You know, the components of that are really the group pace is up 13%. If you think about August as an example, August already has group pace north of 30%. September, group pace up around 22%. So that's probably about 330,000 rooms just in those two months. If you look at New Orleans.
Speaker Change: You know, the components of that are really the group pace is...
Speaker Change: is up 13 percent. If you think about August as an example, August already group pace north of 30 percent. September group pace up around 22 percent. So that's...
Speaker Change: probably about 330,000 rooms just in those two months. If you look at New Orleans,
Thomas Baltimore: Group pay is up about 69%, Chicago's up about 34%, Bonnet Creek up about 33 percent, and Denver up north to 35. So that really provides a great tailwind for us. You know, we said we gave a range last quarter and, you know, sort of had to backtrack, so we're hesitant to give a range this quarter. We feel very good about how things are tracking for the third quarter. Certainly, low to mid-single digits is probably, but I don't want to give any specific numbers, but probably in that range is something we feel reasonably comfortable with at this time. Thank you.
Speaker Change: Group pays up about 69%, Chicago's up about 34%.
Speaker Change: Bonnet Creek up about 33 percent, Denver up north to 35.
Speaker Change: So that really provides a great tailwind for us.
Speaker Change: You know we said gave a range last quarter and you know sort of had to backtrack so we're hesitant to give a range this quarter. We feel very good about how things are tracking for the third quarter and
Speaker Change: Certainly, low to mid-single digits is probably, but don't want to give any specific numbers. But probably in that range is something we feel reasonably comfortable with at this time.
Speaker Change: Thank you. I appreciate that.
Duane Pfennigwerth: I appreciate it. Our next question comes from Duane Pfennigwerth with Evercore. Please proceed with your question.
Speaker Change: Our next question comes from Duane Fenningworth with Evercore. Please proceed with your question.
Duane Pfennigwerth: Hey, thanks. So you've disclosed the headwinds to REVPAR and earnings from renovations this year. I think it was 50 bips to REVPAR and $9 million to EBITDA. Any early views on how you're thinking about renovation or displacement headwinds in 2025? Yeah, I would say, look, it's probably a little too early other than to make this global statement. Sean and I and the team work really hard to not be the construction story.
Duane Fenningworth: Hey, thanks.
Duane Fenningworth: So, you've disclosed the...
Duane Fenningworth: Headwinds to RevPAR and earnings from renovations this year, I think it was 50 bips to RevPAR and $9 million to EBITDA. Any early views on how you're thinking about renovation or displacement headwinds in 2025?
Speaker Change: Yeah, I would say, look, it's probably a little too early other than to make this global statement.
Speaker Change: Sean and I and the team work really hard to not be the construction story.
Thomas Baltimore: So we try to be very, very thoughtful and think about this year where we've got, obviously, Rainbow Tower, we've got the Palace Tower, we've got New Orleans, and we're confident in about 50 basis points of REPAR disruption and about, obviously, $9 million in EBITDA, as we communicated. We always want to be under 100 basis points. Next year, obviously, we'll have the second phases of both the palace and Rainbow Tower, and then, of course, we'll have a little more work in New Orleans, and then, of course, Royal Palm, which is going to be our next, what we would call, really big transformation, and we couldn't be more excited about that. Our asset management team and our design and construction team, led by Carl Mayfield, really are the best in class.
Speaker Change: So we try to be very, very thoughtful and think about this year, where we've got, obviously, Rainbow Tower, we've got the Palace Tower, we've got New Orleans.
Speaker Change: And, you know, we're confident in about 50 basis points of REPAR disruption and about obviously $9 million in EBITDA as we communicated.
Speaker Change: You know, we always want to be under 100 basis points.
Speaker Change: Next year, obviously, we'll have second phases of both the palace and Rainbow Tower.
Speaker Change: And then, of course, we'll have a little more work in New Orleans. And then, of course, Royal Palm, which will be our next, what we would call, really big transformation, and we couldn't be more excited about that.
Speaker Change: Our asset management team and our design and construction team, led by Carl Mayfield, really are best in class.
Thomas Baltimore: We work seamlessly hand in glove to figure out the really best windows to renovate, have materials on site, and have the contractors lined up. We've had a lot of success, and I think we've demonstrated that time and time again. So we'll work hard to really keep that disruption under that 100 basis points as a really guiding principle for us. But I don't want to say anything more than that other than, look, there isn't anybody better in the sector than us and this team in how we handle those renovations. And those of you that have seen Orlando, I think, would really certainly agree with that statement.
Speaker Change: We work and seamlessly.
Speaker Change: hand-in-glove to figure out really the best windows to renovate, have materials on-site, have the contractors lined up and
Speaker Change: You know, we've had a lot of success and I think we've demonstrated that time and time again.
Speaker Change: And so we'll work hard to really keep that disruption under that 100 basis points as a really guiding principle for us. But I don't want to say anything more than that other than, look, there isn't anybody better in the sector than us.
Speaker Change: and this team and how we handle those renovations. And those of you that have seen Orlando, I think, would really certainly agree with that statement.
Thomas Baltimore: Thanks, Tom, and maybe just thoughts on Hilton Hawaiian Village and how the team thinks about the new normal beyond this year. Why is that asset in that market different than other markets that have surged and begun to normalize? Why do you think the floor is now higher on that asset? Thanks for taking the question. Yeah, a couple of things about Hawaii.
Speaker Change: Thanks Tom and maybe just thoughts on on Hilton Hawaiian Village and how the team thinks about the new normal, you know, beyond this year. Why is that asset...
Speaker Change: in that market, different than other markets that have surged and begun to normalize. Why do you think the floor is now higher on that asset? Thanks for taking the questions.
Thomas Baltimore: Obviously, second quarter, we had about 213 basis points of drag on Q2 REV-PAR. You know, for the reasons we all know, obviously, the weakening yen, the surcharges on travel. And we began the year; historically, visitation from Japan has been about 1.5 million into Hawaii and the islands. We were about 600,000 last year.
Speaker Change: Yeah, a couple of things on Hawaii. Obviously,
Speaker Change: Second quarter, we had about 213 basis points of drag on Q2 Rev Par.
Speaker Change: You know, for the reasons we all know, obviously the weakening yen, the surcharges on travel.
Speaker Change: And we began the year, the visitation historically from Japan has been about 1.5 million into Hawaii, into the islands. We were about 600,000 last year.
Thomas Baltimore: We expected that it would be about $850,000 to $900,000 this year in calendar year 2024. It looks like it's trending right now at about $770,000, approximately, so about 10% sort of lower. It's still up 34% from last year, but still about 50% below sort of pre-pandemic levels. So if anything, we look today and say, with obviously the Bank of Japan beginning to adjust monetary policy, and if you can get that moving in the right direction, and given the pent-up demand, Japanese people have consistently been strong visitors to Hawaii for north of 30 years and more, and we don't expect that to change. We just think it gets elongated, and really, we thought we'd be back to pre-pandemic in 2026. It probably gets slightly extended.
Speaker Change: We expected that that would be about $850,000 to $900,000 this year in calendar year 24. It looks like it's trending right now at about $770,000 approximately.
Speaker Change: so about 10% sort of lower. It's still up 34% to last year, but still about 50% below sort of pre-pandemic.
Speaker Change: So, if anything, you know, we look today and say...
Speaker Change: With, obviously, the Bank of Japan beginning to adjust monetary policy and if you can get that moving in the right direction, and given the pent-up demand, Japanese have consistently
Speaker Change: We've been strong visitors to Hawaii for north of 30 years and more, and we don't expect that to change. So we just think it gets elongated, and really we thought we'd be back to where we were.
Speaker Change: pre-pandemic in 26, it probably gets slightly extended. Obviously, that can change if the financial conditions change, but we remain...
Thomas Baltimore: Obviously, that can change if the financial conditions change, but we remain steadfast. Hawaii has been the strongest market over the last 20 years, just a fortress position, obviously 22 acres oceanfront. We're working on adding a sixth tower there, which we couldn't be more excited about, and have been a long-term great corporate citizen and partner there with all of our stakeholders.
Speaker Change: Steadfast. Hawaii has been the strongest market over the last 20 years.
Speaker Change: When you think about just some of the stats that we gave in our prepared remarks, we don't see that changing. Impossible to add, near impossible to add new supply. We've got...
Speaker Change: Just a fortress position.
Speaker Change: Obviously 22 acres oceanfront.
Speaker Change: We're working on adding a sixth tower there, which we couldn't be more excited about.
Ann: and Ann have been a long-term great corporate citizen and partner there with all of our stakeholders.
Thomas Baltimore: So we are very, very bullish on Hilton Hawaiian Village and Hawaii long-term, and candidly feel the same way about Hilton Waikoloa. The opportunity to add an additional 200 keys there, and the Big Island continues to surge. And remind listeners, we generate more EBITDA today as a 600-room hotel than we did as a 1,200-room hotel, and probably EBITDA per key, somewhere in the $85,000 a key.
Speaker Change: So we are very, very bullish, Sean.
Speaker Change: on Hilton Hawaiian Village and Hawaii long-term and candidly feel the same way about Hilton Waikoloa.
Speaker Change: You know, the opportunity to add additional 200 keys there and the Big Island continues to surge. And, you know, remind listeners we generate more EBITDA today as a 600-room hotel than we did as a 1,200-room hotel.
Speaker Change: and probably EBITDA per key, somewhere in the $85,000 a key. So very, very bullish on Hawaii. This is a short-term blip.
Thomas Baltimore: So I am very, very bullish on Hawaii. This is a short-term blip. If you think about just July, our occupancy right now at Hilton Hawaii & Villages, I think we're running month-to-day at about 95 percent, Hilton Waikoloa, I think, at 86 percent. So, you know, any concerns about Hawaii not being a preferred destination, we would certainly strongly disagree with that, and we continue to see that in July. There's going to be some softening.
Speaker Change: If you think about just July
Speaker Change: Our occupancy right now, Hilton Hawaiian Villages, I think we're running month-to-date at about 95%. Hilton Waikoloa, I think, at 86%. So, you know, any concerns of Hawaii...
Speaker Change: not being a preferred destination, we would certainly strongly disagree with that.
Speaker Change: and we continue to see that in July. There's going to be some softening. Part of that, obviously, on the Hilton Waikoloa side. Obviously, root pace is down about 48% this year. That'll be low 40s, we think, for the balance of the year. Not unexpected.
Thomas Baltimore: Part of that, obviously, on the Hilton Waikoloa side, group pace is down about 48 percent this year. That will be in the low 40s, we think, for the balance of the year, not unexpected in our original forecast, but next year, you're looking at group pace up around 80 percent, so it rebounds quickly. And Hilton Hawaiian Village, you know, it benefits, obviously, Southwest Airlines and Alaskan Airlines, so there's a little bit of moderating, but it's very different than other resort markets. It hasn't had that, you know, huge increase in rates. We don't have the Japanese traveler back.
Speaker Change: in our original forecast.
Speaker Change: but next year you're looking at group A's up around 80 percent. So it rebounds quickly, and till in the wine village.
Speaker Change: You know, it benefits obviously Southwest, Alaskan Airlines.
Speaker Change: So there's a little bit of moderating, but it's very different than other
Speaker Change: other resort markets, it hasn't had that huge increase in
Thomas Baltimore: They tend to stay longer and spend more. We also have a big wedding environment that used to be 150 weddings a year, and we're, I think, just a fraction of that. So there are a lot of really, really good things over the intermediate and long term. So, I'll stop there, but I think you get the message.
Speaker Change: We don't have the Japanese traveler back. They tend to stay longer and spend more. We also have a big wedding environment that used to be 150 weddings.
Speaker Change: a year and we're, I think, just a fraction of that. So there's a lot of really, really good things over the intermediate and long-term.
Speaker Change: So I'll stop there, but I think you get the message.
Aryeh Klein: Thank you, Tom. Our next question comes from Aryeh Klein with BMO Capital Markets. Please proceed with your question. Hey Aryeh.
Tom Baltimore: Thank you, Tom.
Speaker Change: Our next question comes from Ari Klein with BMO Capital Markets. Please proceed with your question.
Aryeh Klein: Thanks. Hey, Tom. Thanks, and good afternoon.
Ari: Hey Ari. Thanks.
Aryeh Klein: Within 2Q, can you help parse out how much of the 200 basis points in Lower Redpill was the Y versus the rest of the portfolio? And then the second half of the year was effectively lowered by about 25%. In terms of REBPAR, when accounting for the 2Q shortfall, is that all Hawaii? And I get that the group pace underpins expectations, but Tom, you also talked about some things that are uncertain around the consumer and the macro. To what extent is that factored into the second half outlook? Thanks.
Ari: Hey, Tom. Thanks, and good afternoon.
Ari Klein: Within 2Q, can you help parse out how much of the 200 basis points in lower red per was the Y versus the rest of the portfolio? And then the second half of the year?
Speaker Change: was effectively lowered about 25 basis points in terms of REBPAR when accounting for the 2Q shortfall.
Speaker Change: Is that all Hawaii? And I get that the group pace underpins expectations, but Tom, you also talked about some things that are uncertain around the consumer and the macro. To what extent is that factored into the second half outlook? Thanks.
Thomas Baltimore: MR. Yeah, I mean, I would say a good portion of Q2 was Hawaii. We saw certainly a continuation from what we saw kind of in April through most of the quarter, certainly on the transient side, and a little bit as well in New Orleans.
Speaker Change: Yeah.
Speaker Change: Yeah, I mean I would say a good portion of Q2 was Hawaii. We saw certainly a continuation from what we saw kind of in April through most of the quarter, certainly on the transient side. A little bit as well in New Orleans.
Sean DeLorto: I would say they're kind of the key ones. New Orleans didn't have a lot of, you know, strong pace backdrop groups in the second quarter, so there's certainly some softness there. But I'd say those are kind of the key contributors for the most part in terms of versus expectations for Q2. Yeah, Aryeh, the other thing to keep in mind is that we gave on the last call a range of three to five percent. And at the time, we felt comfortable with that, but to Sean's point, I mean, we were down 213 basis points. Thank you very much.
Speaker Change: I would say they're kind of the key ones. New Orleans didn't have a lot of strong pace backdrop group in second quarter. So certainly some softness there.
Ari Klein: But I'd say those are kind of the key contributors, for the most part, in terms of versus expectations for Q2. Yeah, Ari, the other thing to keep in mind, we gave last call, I think, a range of 3 to 5 percent.
Speaker Change: At the time, we felt comfortable with that, but to Sean's point, we were down 213 basis points.
Speaker Change: and second quarter, and we ended up two. So you're really back to midpoint. So largely driven by Hawaii.
Speaker Change: A little bit, obviously, in New Orleans.
Speaker Change: Denver also on the transient side a little softer, but the big issue in second quarter was really Hawaii from that standpoint.
Aryeh Klein: Thanks, and then just a second half outlook, kind of what's implied outside Hawaii in the RASPBAR guide, given, you know, some, I guess, concerns around the macro and the consumer. Yeah, well, listen, there's a lot of uncertainty out there, and we don't want to be Pollyannish and not acknowledge it, and we're watching carefully. I do think that we're in a unique position because as we started the year, remember, we had 150 basis points of tailwind from the transformation in Bonnet Creek and also Casa.
Speaker Change: Thanks, and then just a second half outlook, kind of what's implied outside Hawaii, you know, in the RFPAR guide, given, you know, some, I guess, concerns around the macro and consumer.
Speaker Change: Yeah, well, listen, there's a lot of uncertainty out there
Speaker Change: not acknowledged and we're watching carefully. I do think that
Speaker Change: We're in a unique position because we've started the year, remember, we had the 150 basis points of tailwind from
Aryeh Klein: But as you sort of think about Bonnet, we're probably looking at REVPARs north of 20%. In Bonnet in the third quarter, New Orleans, we've got a huge increase in group. We're probably 20%, 25% or more there. Chicago, you're up significantly 34% in group pace. And Q3, you're up a double-digit REVPAR. Boston looks good. High single digits.
Speaker Change: the transformation in Bonnet Creek and also Casa. But as you sort of think about Bonnet, you know, we're probably looking at RevPars.
Speaker Change: You know north of 20% and
Speaker Change: And bonded in the third quarter, New Orleans, we've got the huge increase in group. We're probably 20%, 25% or more there. Chicago, you're up.
Speaker Change: significantly 34% in group pace and Q3 you're up a double-digit REBPAR. Boston looks good.
Thomas Baltimore: So we've got a number of things. Denver, a very strong group pace. So just given the diversity of our portfolio will really help to offset some of the softness that we're seeing in Hilton Hawaiian Village. But, again, we're still expecting that. Low single digits.
Speaker Change: high single digits.
Speaker Change: So we've got a number of things, Denver, very strong group pace.
Speaker Change: So, just given the diversity of our portfolio, will really help to offset some of the softness that we're seeing in Hilton Hawaiian Village, but again, we're still expecting that.
Thomas Baltimore: You know, based on how we look today. So, you know, we've adjusted based on the best information that we have today. We're watching the macro like we all are. No doubt the consumer is feeling a little stressed and certainly being more value conscious. And, you know, I think it sets up well for the Fed to ease and begin that process. But we're watching carefully. And, you know, we sent the signal, as you may recall, during NARIT. And, you know, we could see then that demand was softening a little bit. And I think, you know, we were certainly one of the few to point that out, which I did pretty openly at NARIT.
Speaker Change: Low single digits.
Speaker Change: you know based on how we look today.
Speaker Change: So, you know, we've
Speaker Change: We've adjusted based on the best information that we have today. We're watching the macro like we all are.
Speaker Change: No doubt the consumer is feeling them.
Speaker Change: a little stress and certainly being more value conscious. I think it sets up well for, hopefully, the Fed to ease and to begin that process.
Speaker Change: but we're watching carefully and You know we sent the signal as you as you may recall during they read and you know We could see then that that demand was softening a little bit And and I think you know we were certainly one of the few to point that out which I did pretty openly at nary with
Thomas Baltimore: You know, in our meetings at that time, we're not seeing that. As I said, we're looking at Thelma Wine Village right now, which is running 95%, and it's north of 2,800 rooms, and we're running, you know, 95% occupancy right now. Thanks for the color.
Speaker Change: You know in our meetings at that time. We're not seeing that as I said, we're looking at Hilton Hawaiian Village right now in July is running 95% and that's north of 2,800 rooms and we're running you know 95% occupancy right now
Speaker Change: Thanks for the color.
David Katz: Our next question is from David Katz with Jefferies. I'm pleased to receive it. Hi. Afternoon, everyone. Good to talk to you.
Speaker Change: Our next question is from David Katz with Jefferies. Please proceed with your question.
David Katz: Hi, afternoon, everyone. Good to talk to you.
David Katz: Afternoon. So I wanted to go back, and everything, you know, appears to be working as well as it could be. And, you know, the backdrop will be what it will be. But just focusing on the non-core aspects. And, you know, the possibility that they could, you know, go in the form of ones and twos versus sort of some larger bites.
David Katz: Good afternoon.
David Katz: Afternoon. So, I wanted to go back and everything, you know, appears to be working as well as it, you know, could be and, you know, the backdrop will be what it will be.
David Katz: but just focusing on the non-core assets and you know the possibility that they could you know go in the form of ones and twos versus go to some some larger bytes
David Katz: And, you know, with this change in backdrop, do you think that it potentially, you know, creates a headwind to getting anything else done from here? David, it's a great question and thank you. You know, you and I have had this conversation many times.
Speaker Change: And, you know, with this change in backdrop, do you think that it potentially creates a headwind to getting anything else done from here?
Speaker Change: David, it's a great question and thank you. You know, you and I have had this conversation many times. No one is more focused than the women and men on the park team on this. We think this is...
Thomas Baltimore: No one is more focused than the women and men on the park team on this. We think this is, you know, a mini-overhang, if you will, and as we've said, look, the top 25 assets are really the core part of the portfolio. We are working hard to accelerate that pace, and that means, look, we're confident the debt markets are improving. You know, part of it is that each of these assets has some different unique challenges, whether it's a lease duration, it's a tax issue, or a partner.
Speaker Change: You know, a mini overhang, if you will. And as we've said, look, the top 25 assets are really the core part of the portfolio. We are working hard to accelerate that pace.
Speaker Change: and that means
Speaker Change: Look, we're confident the debt markets are improving.
Speaker Change: You know, part of it is that each of these assets has
Speaker Change: some different unique challenges, whether it's
Speaker Change: A lease duration, it's a tax issue, a partner, but we get it and we understand the sooner we can do that, the better off we will be and the more optionality.
Thomas Baltimore: But we get it, and we understand the sooner we can do that, the better off we will be, and the more optionality we have. So the message has been delivered. It's delivered to me, to the team every day, and we're working hard to make progress there. And we're not looking for perfection.
Speaker Change: So message has been delivered. It's delivered to me, to the team every day, and we're working hard to make progress there. And we're not looking for perfection.
Thomas Baltimore: We recognize that these are assets that are non-core, and we're working hard. I think you're going to see some continued productivity and evidence of that. And, look, Oakland's a great example. Losing money, short-term ground lease, undesirable market, safety, and security issues. We didn't waste time.
Speaker Change: We recognize that these are assets that are non-core, and we're working hard. I think you're going to see some continued...
Speaker Change: productivity and see evidence of that. And look, Oakland's a great example.
Speaker Change: Losing money, short-term ground lease, undesirable market, safety, security issues.
Thomas Baltimore: We went into action on that, and you're going to see other situations like that where we're also going to continue to move quickly here. The core value, and if you think about some of the recent trades that have happened in Hawaii just as a data point, and our asset is... A whole lot better, and if assets are trading at 16 to 17 times, what do you think Hilton Hawaiian Village is worth? A lot more than that, and I don't think you would dispute that. I would not, either.
Speaker Change: We didn't waste time. We went into action on that, and you're going to see other situations like that where we're also going to continue to move quickly here. The core value, and if you think about some of the recent trades that have happened in Hawaii just as a data point, and our asset is...
Speaker Change: a whole lot better, and if assets are trading at 16 to 17 times, what do you think Hilton Hawaiian Village is worth? A lot more than that. And I don't think you would dispute that. I would not.
Speaker Change: Thank you very much.
David Katz: Thank you very much. The next question comes from Chris Woronka with Deutsche Bank. Please proceed. Hey, good afternoon, Tom and Sean, Ian.
Speaker Change: Our next question comes from Chris Ronca with Deutsche Bank. Please proceed with your question.
Chris Ronca: Hey, good afternoon Tom and Sean and Ian. So, Tom, I have a non-guidance, non-Hawaii question for you, if that's okay, and it relates to the first ones on Key West.
Chris Woronka: So, Tom, I have a non-guidance, non-Hawaii question for you, if that's okay. And it relates to the first ones on Key West. You know, obviously, some really impressive numbers coming through this quarter and last quarter. Is 2024, you know, is that kind of the peak for those two assets post-renovation? Or do you think there's still more to go? You're having great success at the rate. I think you might still be a little below on OCK, which might be intentional.
Speaker Change: You know obviously some really impressive numbers coming through this quarter last quarter
Chris Ronca: Is 2024, you know, is that kind of the peak for those two assets post-renovation, or do you think there's still more to go? You're having great success on the rate. I think you might still be a little below on OCK, which might be intentional, but do those still have legs in 2025 and beyond?
Thomas Baltimore: But do those still have legs in 2025 and beyond? We really believe they do, Chris. I mean, if you think about the Dorado restaurant, that has yet to open, will open soon. The bar is open.
Speaker Change: We really believe they do, Chris. I mean, if you think about the Dorado restaurant,
Chris Woronka: Just the quality of the renovation; there's no better asset in that sub-market now. We really were thoughtful, and again, credit to Carl Mayfield and our design and construction team for how thoughtful we were in creating really just a phenomenal product. And then having, obviously, the piers redone, both the group, the high-end group we can get there, coupled with, obviously, the high-end leisure, it's a real repositioning of a world-class asset. So we couldn't be happier and prouder, and we think, clearly, there's going to be continued upside there.
Chris Ronca: That has yet to open. It will be soon. The bar is open.
Speaker Change: Just the quality of the renovation, there's no better asset in that sub-market now. We really were thoughtful, and again...
Speaker Change: credit to Carl Mayfield and our design and construction team
Speaker Change: in creating really just a phenomenal product.
Speaker Change: and then having, obviously, the piers redone, both the group, high-end group we can get there, coupled with, obviously, the high-end leisure.
Speaker Change: It's a really repositioning of a...
Speaker Change: of a world-class asset, so we couldn't be happier and prouder.
Chris Woronka: And we gave you stats as to how it's performing today, but even the reach, I mean, the reach is an example of that, where we're up 7%, but we're still up 56%, plus or minus, in rate over 2019. So we think the cost has got plenty of ramp-up room and running room as we move forward. Okay, that's great to hear, Tom.
Speaker Change: and we think clearly there's going to be continued upside there and you know we gave you stats as to how it's performing today but but even the reach, I mean the reach is an example of that where you know of seven percent but we're still
Speaker Change: You know, up 56% plus or minus in rate over 2019. So we think the cost has got plenty of ramp-up room and running room as we move forward.
Chris Woronka: And then I guess we can keep it in Florida and go to Orlando. And you guys are, again, having good results this year with the repositioning. A lot of your peers are not having great results this year there. It's a tough market for a lot of reasons. Similar question, which is, you know, can you guys outperform there again next year if the broader market remains tough? And do you have any indications?
Speaker Change: Okay, that's great to hear, Tom, and then I guess we can keep it in Florida and go to Orlando. And you guys are, again, you're having good results this year with the repositioning. A lot of your peers are not having great results this year there. It's a tough market for a lot of reasons.
Speaker Change: Similar question, which is, you know, can you guys outperform there again next year if the broader market remains tough? And do you have any indications?
Thomas Baltimore: I think you had someone from the, I remember being in the room in Orlando, and I think they were a bit more optimistic about 25, just based on the, I guess, some of the citywide that might come in. But any thoughts on that? Yeah, listen, we remain very bullish on Orlando. You think about, and I think sometimes people forget, it's the most visited destination in the United States. Seventy-four million visitors, I think, is part of that presentation that you and many others attended. Think about Vegas. Now, Vegas has the gaming, Orlando doesn't, but that's about 45 million, I think, plus or minus.
Speaker Change: I think you had someone from the, I remember being in the room in Orlando, I think they were a bit more optimistic about 25 just based on the, I guess, some of the city wide that might come in. But any, any thoughts on that? Thanks.
Thomas Baltimore: The other thing to keep in mind is you've got Epic and Universal opening next spring. And I think Universal is on a record of spending $5 billion or more and 50 different experiences and 800 acres. So that's going to be a huge tailwind for the destination. And then Disney's on the record of saying they're going to invest $60 billion over the next decade, plus or minus. And certainly another tailwind as well for the market. So we're very, very encouraged, as we think. And then, again, we're well-positioned.
Speaker Change: Yeah, we, listen, we remain very bullish on Orlando. You think about, and I think sometimes people forget, it's the
Speaker Change: most visited destination in the United States. Seventy-four million visitors, I think, is part of that.
Speaker Change: that presentation that you and many others attended. Think about Vegas. Now Vegas has the gaming Orlando doesn't, but that's about $45 million, I think, plus or minus.
Speaker Change: The other thing to keep in mind is you've got EPIC, Universal opening next spring.
Speaker Change: You know, I think Universal's on.
Speaker Change: on record of spending $5 billion or more and 50 different experiences and 800 acres.
Speaker Change: So that's going to be a huge tailwind for the destination. And then, you know, Disney's on record of saying they're going to invest, you know, $60 billion over the next decade, plus or minus.
Speaker Change: and certainly another tailwind as well for the market. So we're very, very encouraged as we think. And then again, we're well positioned.
Thomas Baltimore: Think about the amount of meeting space we have, a completely renovated and reimagined resort, coupled with a championship golf course. So, look, the Four Seasons is the best brand, the best asset in that market, and a huge rev par. But there's plenty of running room to continue to raise our performance there, and we expect we're going to continue to be a very, very formidable player. And no one has the waterside ballroom that we do.
Speaker Change: The amount of meeting space we have, a completely renovated and reimagined resort, coupled with a championship golf course. So, look, the Four Seasons is the best market, the best asset in that market.
Speaker Change: You know, a huge rev par, but there's plenty of running room to continue to raise our performance there. And we expect we're going to continue to be a very, very formidable player. And no one has the water side ballroom that we have.
Thomas Baltimore: You saw it, you witnessed it, just the optionality that we have from a demand standpoint. And, again, 225 days it's being operated on, and that's in the first year. So we think we've got many, many years. And I think that's part of the park story that's more compelling than a lot of our peers, the tailwinds from reinvesting back in our portfolio. We passionately believe that it's the better play.
Speaker Change: You saw it, you witnessed it, just the optionality that we have from a demand standpoint. Again, 225 days.
Speaker Change: It's being operated, and that's in the first year. So we think we've got many, many years. And I think that's part of the park story that's more compelling than a lot of our peers are the tailwinds from reinvesting back in our portfolio. We believe passionately that's the better play.
Chris Woronka: And we'll generate additional cash flow above what we can get from acquisition yields and paying some of the lofty prices that are being demonstrated right now. Okay, I appreciate all the perspective. Thanks, Tom.
Speaker Change: and will generate additional cash flow above what we can get from acquisition yields and paying some of the lofty prices that are being demonstrated right now.
Speaker Change: Okay, appreciate all the perspective. Thanks, Tom.
Dori Kesten: Our next question comes from Dori Kesten with Wells Fargo. Please proceed with your question. Hi all, thanks for taking my question. I think in your prepared remarks, you said guidance as soon as international demand trends improve. I was just checking.
Speaker Change: Our next question comes from Dory Keaston with Wells Fargo. Please proceed with your question.
Dory Keaston: Hi. Hi all. Thanks for taking my question.
Dory Keaston: I think in your prepared remarks you said guidance assumes international demand trends improve. I was just checking was that a portfolio wide comment or were you specifically referring to Hawaii?
Thomas Baltimore: Was that a portfolio-wide comment, or were you specifically referring to Hawaii? I think Hawaii is a good portion of that, as I outlined. Dori, we expected demand coming into Hawaii to be about 850,000 to 900,000 visitors, and that's currently tracking at about 770,000. So that, you know, it's a small, obviously Hawaii is a 200 basis point drag in the second quarter, and we sort of walked you through how we're trending and what we see for the balance of the year.
Speaker Change: Good portion of that, as I outlined, Dory, we, you know, we expected demand coming into Hawaii to be about 850,000 to 900,000 visitors, and that's currently tracking at about 770,000.
Thomas Baltimore: We expect, obviously, Hilton Waikoloa is gonna continue to be a drag, but we knew that given the fact that the group pace is down 48%, and we think that's probably a low 40% for the balance of the year. But again, that rebounds pretty quickly, and it paces up 80% next year. And we're obviously looking at completing half of the renovation of the Palace Tower, so we're gonna use that time to take advantage of it.
Speaker Change: to be a drag, but we knew that, given the fact that the group pace is down 48%, and we think that's probably low 40% for the balance of the year. But again, that rebounds pretty quickly to pace is up 80% next year.
Thomas Baltimore: And obviously, feel very good about Waikoloa and how it's trending for the balance of the year, as well as as we look out to the next years. But clearly, a little bit of softening there versus what we thought going into the second quarter for all the reasons that we've outlined and discussed with other analysts that have raised the question. But so for the remainder, just so I understand, for the remainder of the portfolio or just, you know, Park as a whole, the assumption is that for the rest of the year, international inbounds continue to improve, and you have a deceleration in domestic outbounds. Is that a fair characterization?
Dori Kesten: Yeah, you know, it's a fair question, Dori, if you take a step back for a second, you know, this step as well as I do. But if you look pre-pandemic, right, inbound was about seventy nine million. I think last year was about $63 million to $65 million, and I think the forecast was somewhere in that $67 million to $70 million overall visitation. No doubt the high-end consumer is still enjoying considerable time in the international, and particularly the Olympics are playing a role there.
Speaker Change: I think the fork last year was about $63 to $65 million.
Speaker Change: And I think the forecast was somewhere in that 67 to 70 million overall visitation. No doubt, you know, the high-end consumer is still enjoying considerable time in...
Dori Kesten: There's no doubt that the success that's occurring there is certainly diverting what people may travel to the U.S. otherwise. So that's probably on the margin, but we're very comfortable with the range of guidance that we've given for the balance of the year, that 3.5 to 4.5, to us, seems very reasonable at this time. Okay, thank you. Our next question comes from Jay Kornreich with Woodbush. Please proceed with your questions. Hey, thanks. Good afternoon.
Speaker Change: and international, and particularly, you know, the Olympics are playing a role there. There's no doubt that...
Speaker Change: that the success that's occurring there is certainly diverting what people may not
Speaker Change: may travel to the U.S. otherwise. So, you know, that's probably on the margin, but we're very comfortable with the range of guidance that we've given for the balance of the year, that 3 1⁄2 to 4 1⁄2 to us seems very reasonable at this time.
Speaker Change: Okay, thank you.
Speaker Change: Our next question comes from Jay Kornrick with Woodbush Securities. Please proceed with your question.
Jay Kornreich: As it seems that out-of-room spend remained elevated despite some transient booking softness, I guess, how does that make you think about just the overall health of the consumer? And do you see total REVPAR performing better than just REVPAR in the second half of the year? Yeah, I think in the end, what you've seen, I think you have seen just through the out-of-room spend, what the trends you've seen between groups and kind of leisure transient.
Jay Kornrick: Hey, thanks. Good afternoon.
Jay Kornrick: As it seems that out-of-room spend remained elevated despite some transient booking softness, I guess how does that make you think about just the overall health of the consumer and do you see total RevPAR performing better than just RevPAR in the second half of the year?
Speaker Change: Hey, yeah, I think in the end of what you've seen, I think you have seen just a, through the Out of Room spin, what the trends you've seen between group and kind of leisure transient. On the group side, from the F&B side, the strengths really come from
Jay Kornreich: On the group side, from the F&B side, the strengths really come from banquets and catering, which are ultimately up 18 percent and certainly exceeded our expectations for the first half of the year. So it's really banquets and catering supported by the group strength that we've seen. And on the leisure side, I think it shows in the out-of-room spend that outlets are technically down a little bit year over year. So it is kind of a mixed shift fundamentally, but I would say it does track kind of the macro trends we see of group strength and some leisure moderation.
Speaker Change: from Banquets and Catering, which are ultimately up 18%.
Speaker Change: and certainly has exceeded our expectations for the first half of the year. So it's really bankruptcy support by the group.
Speaker Change: strength that we've seen. And then the leisure side, you know, I think it shows in the out-of-room spend that, you know, outlets are technically down a little bit.
Speaker Change: year-over-year. Some of it is kind of a mixed shift fundamentally but I would say it does track kind of the macro trends we see of group strength and some leisure moderation. Over the back half of the year I think in the end we'll see we'll continue to see some outperformance.
Jay Kornreich: Over the back half of the year, I think in the end, we'll continue to see some outperformance on out-of-room spend relative to room rent par. So I think overall for the year, we kind of anticipate about 40, 50 basis points higher total rent par than room rent par.
Speaker Change: on out-of-room spend relative to room rep par. So I think overall for the year we kind of anticipate about 40-50 basis points higher total rep par than room rep par. So I think that kind of flows into a slightly better performance for the back half of the year than room rep par.
Sean DeLorto: So I think that kind of flows into a slightly better performance for the back half of the year than room rent par. Our next question comes from Robin Farley with UBS. Please proceed with your... Great, thank you.
Speaker Change: Okay, a couple. That's it. Thank you.
Speaker Change: Our next question comes from Robin Farley with UBS. Please proceed with your question.
Robin Farley: I'm just kind of circling back to the asset sales. Do you think it's just a matter of waiting for some interest rate cuts before there's more movement there? Or is there anything else that you would like to characterize about the buyer side of the market that, you know, could change or, you know, how you see that over the next six months? Is it just a rate cut issue, or are there other factors? Robin, a great question.
Robin Farley: Great, thank you. Just kind of circling back to the asset sales, do you think it's just a matter of waiting for some interest rate cuts before there's more movement there, or is there anything else that you would like characterize about the buyer side of the market that
Speaker Change: You know could change or you know how you see that over the next six months Is it is it just a rate cut issue or are there other factors? Thanks
Thomas Baltimore: I think obviously lower rates and, certainly, a more active lending environment. And candidly, I think once buyers have a little more comfort with what their cost of debt is, and particularly if that can be reduced slightly, I think that helps. I think that's going to help both buyers and sellers. I think we've been able to demonstrate, I mean, think through the pandemic and subsequent to that. I mean, every year we've been able to advance and continue to sell non-core.
Speaker Change: Great question. I think, obviously, lower rates and certainly
Speaker Change: certainly a more active lending environment, and candidly, I think once buyers have a little more comfort on what their cost of debt is.
Speaker Change: And particularly if that can be reduced slightly, I think that helps. I think that's going to help both buyers and sellers.
Speaker Change: I think we've been able to demonstrate, I mean, think through the pandemic and subsequent to that. I mean, every year we've been able to advance and continue to sell non-core. We had 14 international assets we were selling during the pandemic.
Thomas Baltimore: We had 14 international assets we were selling during the pandemic, so I'm not sure there's anybody more skilled, and each deal, again, a lot of these deals had hair on them in joint venture partners and international and legal and tax issues. So we're working hard on it, it remains a top priority for us, and you'll continue to see us put points on the board and show additional activity here for the balance of the year. Thank you. Thank you for that color and maybe just one follow-up.
Speaker Change: So I'm not sure there's anybody more skilled at and Each again a lot of these deals had hair on them and joint venture partners and international and legal and tax issues
Speaker Change: So we're working hard on it. It remains a high, top priority for us. And you'll continue to see us put points on the board and show additional activity here for the balance of the year.
Robin Farley: In your conversations with potential buyers, do you get the sense, you know, you talked about all the things with interest rates and the cost of their debt and all of that, do you get the sense they're worried at all about what's happening with the consumer and what that means for the EBITDA performance of the property, or do you think these buyers are sort of, they would look through whatever might happen in the next couple quarters because they're long-term buyers Like in other words, if we get interest rate cuts, do you think there are still potential asset buyers who are as concerned about the consumer as, you know, maybe equity investors are right now? Thanks. Yeah, it's another great question. I think the answer is really dependent on the buyer.
Speaker Change: Thank you. Thank you for that color and maybe just one follow up.
Speaker Change: In your conversations with potential buyers, do you get the sense, you know, you talked about all the things with interest rates and cost of their debt and all of that, do you get the sense they're worried at all about...
Speaker Change: What's happening with the consumer and what that means for the EBITDA performance of the property, or do you think these buyers are sort of, they would look through whatever might happen in the next...
Speaker Change: a couple quarters because they're long-term buyers. Like in other words, if we get interest rate cuts, do you think there are still, do you think there, you know, potential asset buyers are as concerned about the consumer as, you know, maybe equity investors are right now? Thanks.
Thomas Baltimore: If it's a private equity shop that's probably got a 5 to 7 or 7 to 10 year hold, I think they can look through some of the near-term noise and buy on a by pound or per pound basis and do quite well. Obviously, and I had a private equity platform in the past, so I certainly understand that. I think family offices could also, or owner-operators as well, could be looking through.
Speaker Change: Yeah, it's another great question. I think the answer is really depending on the buyer. If it's a private equity shop that's probably got a 5-7 or 7-10 year hold, I think they can look through some of the near-term noise.
Speaker Change: and buy on a...
Speaker Change: by pound or per pound basis and do quite well.
Speaker Change: had a private equity platform in the past, so I certainly understand.
Speaker Change: understand that. I think family offices could also, or owner operators as well, could be looking through.
Thomas Baltimore: Uncertainty is the enemy of decision-making. So if we get additional clarity, and that's geopolitical, you've got a pending election. Obviously, you've got the Fed probably being one of the more important issues that people are waiting for the Fed to begin the easing process. I think it looks more likely than not, but we'll all see.
Speaker Change: You know, uncertainty is the enemy of decision-making, so if we get additional clarity and...
Speaker Change: That's geopolitical. You've got a pending election. Obviously, you've got the Fed probably being one of the more important issues that people are waiting for the Fed to begin the easing process. I think it looks more likely than not, but we'll all see.
Thomas Baltimore: And I certainly think that that will help as we move forward. We are active. We're in frequent discussions with buyers of all types.
Speaker Change: and I certainly think that that will help as we move forward. We are active, we're in frequent discussions with buyers of all types.
Thomas Baltimore: So I think we've got a pretty good pulse on it. We've sold or disposed of 43 assets, and that list is going to grow. We're going to continue to reshape and clean up this portfolio and get it back to its core. We think that core portfolio is the real value of the company, and it also gives us a lot of optionality as we move forward. Okay. Great. Our next question comes from Chris Darling with Green Street. Thanks. Good afternoon. Hey Chris.
Speaker Change: So I think we got a pretty good pulse on it, and look, as I said, we've demonstrated time and time again, we've...
Speaker Change: sold or disposed of 43 assets and that that list is going to grow. We're going to continue to reshape and clean up this portfolio and get it back to its core. We think with that core portfolio is the real value of the company and also gives us a lot of optionality as we move forward.
Speaker Change: Okay, great. Thank you very much.
Speaker Change: Our next question comes from Chris Darlin with Green Street. Please proceed with your question.
Chris Darlin: Thanks, good afternoon everyone.
Chris Darling: Tom, going back to New Orleans, do you have a view on the reopening of the Caesars Casino and the potential impact on the Hilton Riverside? Do you think that could be a meaningful tailwind going forward, or perhaps just more incrementally out? I think it's more incrementally additive.
Chris: Hey, Chris.
Chris Darlin: Going back to New Orleans, do you have a view on the reopening of the Caesars Casino and the potential impact on the Hilton Riverside? You think that could be a meaningful tailwind going forward or perhaps just more incrementally additive?
Speaker Change: I think it's more incrementally additive.
Thomas Baltimore: Look, that hotel is probably about 65% group, plus or minus. So certainly from an additive standpoint, getting additional transient or incremental group that we could get, I think it's a positive for the destination. New Orleans, obviously, has always been a solid convention market. It's always been a very good leisure market.
Speaker Change: Probably about 65% group, plus or minus.
Speaker Change: So, certainly from an additive standpoint, getting additional transient or incremental group that we could get.
Speaker Change: I think it's a positive for the destination.
Speaker Change: New Orleans, obviously, has always been a solid convention market, it's always been a very good leisure market. Where it's Achilles heel has been, really, is on the corporate demand.
Chris Darling: Where its Achilles' heel has been really corporate demand, but I think it's a net positive. Look, we're not in the gaming business. The opinions expressed herein are those of the guests and not necessarily those of Douglas Goldstein, Profile Investment Services, Ltd., or Israel National News. Readers should consult with a professional financial advisor before making any financial decisions.
Speaker Change: But I think it's a net positive. Look, we're not in the gaming business.
Thomas Baltimore: We do think it will be incrementally positive for us, and again, we've got an additional eight acres there and, you know, five million square feet of additional FAR. So we like our positioning in New Orleans, and we think, clearly, over the intermediate and long term, there's going to be significant value that can certainly be realized. All right, helpful thoughts. And then just one more on the non-core portfolio. Park, of course, they have a handful of ground lease properties other than the Hilton Oakland with relatively near-term maturities.
Speaker Change: We do think it will be incrementally positive for us.
Speaker Change: you know, 5 million square feet of additional FAR. So, we like our positioning in New Orleans and we think clearly over the intermediate and long term there's going to be a significant value that certainly can be realized.
Speaker Change: All right, helpful thoughts. And then just one more on the non-core portfolio. Park, of course, they have a handful of ground lease properties other than the Hilton Oakland with relatively near-term maturities.
Chris Darling: I recognize it's a small piece of the portfolio, but is there an opportunity for you to proactively extend some of those leases, maybe acquire the fee position in certain cases? Are you thinking about it at all like that, or are you more so focused on dispositions incrementally in terms of that portfolio? Chris, another great question.
Speaker Change: recognize it's a small piece of the portfolio, but is there an opportunity for you to proactively extend some of those leases, maybe acquire the fee position in certain cases? Are you thinking about it at all like that, or are you more so, you know, focused on kind of dispositions incrementally in terms of that portfolio?
Thomas Baltimore: Look, all options are on the table. We have a lot of experience, and you think back again to the 43 that we have disposed of and International, JV. All the domestic, the ports, all the different entities that we've dealt with, partners. So all those issues, we're laser focused on what can create the most value for shareholders and what can we move as quickly as possible. So you're going to continue to see activity there and see us put points on the board and make real progress.
Speaker Change: Chris, another great question. Look, all options are on the table.
Speaker Change: We have a lot of experience, and you think back again to the 43 that we have disposed of, and International, JV,
Speaker Change: all the domestic, the ports, all the different entities that we've dealt with, partners. So all those issues, we're laser focused on what can create the most value for shareholders and what can we move as quickly as possible.
Speaker Change: So you're going to continue to see activity there and see us put points on the board and make real progress.
Thomas Baltimore: Alright, thanks for the time. We've reached the end of the question and answer session. I'd now like to turn the call back over to Tom Baltimore for closing. Well, we really appreciate everybody taking their time today, and I hope you have a great remainder of the summer. I look forward to seeing you at the various conferences in September and beyond. This concludes today's conference. You may disconnect your lines at this time, and we thank you for your...
Speaker Change: All right, thanks for the time.
Speaker Change: We've reached the end of the question and answer session. I'd now like to turn the call back over to Tom Baltimore for closing comments.
Tom Baltimore: We really appreciate everybody taking time today and I hope you have a great remainder of the summer and look forward to seeing you at the various conferences in September and beyond.
Speaker Change: This concludes today's conference. You may disconnect your lines at this time and we thank you for your participation.