Q4 2024 Park Hotels & Resorts Inc Earnings Call
Speaker Change: Greetings and welcome to the Park Hotels and Resorts 4th Quarter and Full Year 2024 Earnings Conference Call.
Speaker Change: At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. It is now my pleasure to introduce Ian Weissman, Senior Vice President, Corporate Strategy. Please go ahead.
Speaker Change: Thank you, operator, and welcome everyone to the Park Hotels and Resorts fourth quarter and full year 2024 earnings call. Before we begin, I would like to remind everyone
Speaker Change: that many of the comments made today are considered forward-looking statements under federal securities laws.
Speaker Change: As described in our filings with the FCC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these 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 PARC with the SEC, specifically those most recent reports on Form 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in forward-looking statements.
Speaker Change: In addition, on today's call, we will discuss certain non-GAAP financial information such as FFO and adjusted EBITDA.
Speaker Change: You can find this information together with reconciliations to the most directly comparable GAAP financial measure in yesterday's earnings release as well as in our 8K filed with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com.
Speaker Change: Additionally, unless otherwise stated, all operating results will be presented on a comparable hotel basis.
Speaker Change: This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will review PARCC's fourth quarter performance and provide an outlook for 2025, while Shawn DeLorto, our Chief Financial Officer, will provide additional color on fourth quarter results and further details on guidance.
Tom Baltimore: Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Tom. Thank you, Ian, and welcome everyone.
Tom Baltimore: the year in which we achieve sector-leading results while advancing multiple strategic objectives.
Tom Baltimore: building a strong foundation for the company's sustained growth and long-term success.
Tom Baltimore: Operationally, our portfolio exceeded our expectations for both top-line and bottom-line performance.
Tom Baltimore: further enhanced by the strategic capital investments we've made and our team's steadfast commitment to operational excellence.
Tom Baltimore: On the capital allocation front, we continue to reshape our portfolio by strategically divesting of non-core hotels.
Accordingly, we disposed of three hotels during the year.
Tom Baltimore: including two hotels and joint ventures that were sold for a combined 200 million dollars in addition to the early termination of a ground lease and closure of the Hilton Oakland Airport.
Tom Baltimore: which incurred an EBITDA loss of nearly $4 million over the prior 12 months.
Tom Baltimore: Exiting these hotels improved 2024 REBPAR by $3 while increasing EBITDA margin by over 30 basis points.
Tom Baltimore: As we enter this year, we intend to be more aggressive with our disposition efforts, targeting between $300 million to $400 million of non-core asset sales as we seek to further improve the overall quality of our portfolio.
enhance our long-term growth profile and pay down debt.
Tom Baltimore: As a reminder, since 2017, we have sold or disposed of 45 hotels for over $3 billion while meaningfully upgrading the quality of our portfolio.
Tom Baltimore: As we execute our strategy to sell non-core assets, we remain laser-focused on allocating capital to maximize shareholder returns.
Tom Baltimore: including the reinvestment of proceeds into our core portfolio of iconic hotels.
Tom Baltimore: I'm incredibly proud of the value we have created through recent redevelopments at our Bonne Creek Resort in Orlando and Casa Marina Resort in Key West.
Tom Baltimore: Each property has delivered exceptional performance in their first year post-improvement.
Tom Baltimore: with REVPAR increasing 17% at Bonnecreek in 2024 over the prior year.
Tom Baltimore: and Iveta for the complex exceeding $82 million, which is nearly $22 million, or 36% above last year.
Tom Baltimore: At Casa Marina, REPFAR increased almost 29% since 2019, and EBITDA for the resort finished the year at $30 million, or over $96,000 per key, and up over 31% since 2019.
Tom Baltimore: Additionally, we expect tailwinds from the opening of Universal's new six-billion-dollar Epic theme park, which is anticipated to accelerate leisure transient demand into the market after its expected opening this May.
Tom Baltimore: For Casa Marina, we expect continued market share gains as the resort recaptures its place as the top resort in Key West, while benefiting more this year from an enhanced guest experience
with the new Dorado Beach front bar and restaurant.
Tom Baltimore: We expect each resort to produce REV PAR growth in the upper single digits, translating to double-digit EBITDA growth this year.
Tom Baltimore: exceeding our underwriting for each of these ROI projects and further demonstrating our ability to unlock embedded value and our core portfolio which remains one of our key strategic priorities.
Tom Baltimore: With our proven track record of value creation through major ROI projects, I'm excited to announce plans to reposition our Royal Palm Resort in South Beach.
ideally situated along the prestigious Collins Avenue corridor.
Tom Baltimore: This transformational $100 million investment is designed to significantly elevate the property's quality and overall guest experience.
Tom Baltimore: allowing it to better compete with other premium lifestyle resorts in the market and command a substantial ADR increase.
Tom Baltimore: The comprehensive renovation will encompass a full refurbishment of all 393 guestrooms.
along with the addition of 11 new rooms.
Tom Baltimore: We will also reimagine all public spaces, including a new lobby bar, re-concepted food and beverage outlets, and expanded meeting spaces designed to enhance the overall group experience.
Construction is expected to begin after peak season in May.
Tom Baltimore: and will require us to suspend operations into Q2 of 2026 with the expectation to reopen well ahead of the World Cup matches scheduled to begin in June of 2026.
of potentially doubling the EBITDA of the hotel once stabilized.
Tom Baltimore: We continue to actively explore additional development opportunities in key markets, such as Hawaii, Key West, and Santa Barbara.
Our ROI pipeline now exceeds $1 billion.
Tom Baltimore: with an estimated incremental value creation potential of over $300 million.
Tom Baltimore: We remain disciplined and strategic in which projects we pursue as we invest our capital to unlock long-term value for our shareholders.
Turn to operations.
Tom Baltimore: We ended Q4 on a solid note, following a strong pick-up in demand across most segments following the presidential election, with a quarter supported by double-digit red bar gains in Orlando and Key West.
Tom Baltimore: coupled with solid group and business transient demand in several key urban markets including Chicago, Boston, and New York.
Tom Baltimore: In Orlando, REVPAR increased nearly 30% during the quarter across our three hotels, driven by strong group production and solid gains in the leisure transient segment.
Tom Baltimore: I am particularly pleased with the outstanding performance of the Waldorf Astoria Bonnet Creek following last year's renovation.
Tom Baltimore: with the hotel reporting an 85% surge in transient revenues, while group revenues increased over 55% during the quarter.
Tom Baltimore: Additionally, the hotel generated a 40% increase in ancillary revenues as guests took advantage of the upgraded outlet facilities and enhancements to our championship golf course.
marking the highest quarterly performance since 2019.
Tom Baltimore: The hotel saw wins across the entire operation, including a total banquet contribution.
Tom Baltimore: of $543 per group room night and a notable increase in ancillary spend per occupied room, up over 25% versus the prior year period.
Tom Baltimore: At the New York Hilton, RevPAR increased 3.5% during the fourth quarter.
Tom Baltimore: driven by a 17% increase in group room nights. ADR growth was approximately 3% during the quarter with the expanded group base enabling the hotel to push transient rates up nearly 4%.
Tom Baltimore: Notably, rate gains in December were up nearly six percent, further reinforcing the hotel's strong pricing power and demand momentum.
At the Hill in Chicago, rare part growth was nearly...
Tom Baltimore: Heading into 2025, the Hilton Chicago is seeing healthy demand across all segments driving expectations for red bar growth this year above a very strong 2024 performance.
Tom Baltimore: Turning to Hawaii. As previously disclosed, results at our Hilton Hawaiian Village Hotel were negatively impacted by a 45-day labor strike, coupled with disruption from the renovation of 404 guest rooms at the iconic Rainbow Tower.
Tom Baltimore: electively accounting for a nearly 540 basis point headwind to total portfolio report during the fourth quarter.
Tom Baltimore: Despite a modest start with very challenging year-over-year comparisons during the first quarter, we expect solid growth the rest of the year, with fourth quarter growth aided by lapping last year's strike disruption.
Tom Baltimore: While we continue to see improvements in demand from Japan, most of the gains are expected to be driven by inbound domestic travelers along with increased citywide activity with a nearly 85% increase in convention room nights this year.
at our Hilton Waikoloa Hotel.
Tom Baltimore: where full-year REV-PAR was down 16% on lower group demand due to tough comparisons and renovation disruption in the second half of the year.
Tom Baltimore: We expect a sharp rebound in group production in 2025, with group revenue pace up nearly 70%, leading to anticipated positive red bar growth in 2025.
Tom Baltimore: Turning the focus to our outlook for 2025, we continue to see positive demand transit across all segments.
which accelerated following the presidential election in November.
Tom Baltimore: and I feel cautiously optimistic about how the year will unfold. From a macro standpoint, the U.S. economy remains on firm footing.
Tom Baltimore: supported by healthy employment, strong corporate profit growth, and a resilient U.S. consumer.
All back, bye.
an administration that is pro-growth, with more rational regulation.
which we believe will continue to drive demand for hotels.
Tom Baltimore: That said, some uncertainty remains and it's hard to predict how the new administration's policies will impact this business momentum.
or Park specifically.
Tom Baltimore: We remain laser-focused on what we can control and believe our portfolio is well-positioned for long-term growth.
Tom Baltimore: based on the strategic investments we've made, as well as our presence in markets with limited supply growth.
More specifically.
Tom Baltimore: We expect 2025 to be a tale of two halves for the portfolio
Tom Baltimore: beginning with a first quarter that is lapping a tough comparison to last year.
Tom Baltimore: in which the total portfolio outperformed in just about every market with REPAR growth of 8%.
Tom Baltimore: Therefore, we expect REV-PAR to be slightly negative in the first quarter, followed by positive growth in the second quarter, and then rounding out the year with a strong second half, aided by easier comparisons.
as we lap the strike disruption from last year.
Tom Baltimore: complemented by improving corporate business transient and low single-digit leisure transient growth.
reflecting several key factors
Tom Baltimore: 110 basis points of disruption from the planned closure of the Royal Palm Resort beginning in May.
Tom Baltimore: and our cautious optimism about the U.S. economy as we monitor developments under the new administration.
Excluding Miami, however,
at the midpoint to 2.6% for the year.
reflecting the overall strength of the broader portfolio.
Sean will provide more details about
In summary,
I wanted to emphasize that 2024 was another transformative year.
in which we achieve key objectives.
that have positioned our company for accelerated growth over time.
Our strategic ROI investments continue to yield strong returns.
Tom Baltimore: and our return of over $400 million of capital to shareholders last year.
between dividends and stock repurchases.
Tom Baltimore: which totaled 8 million shares at values well below net asset value.
underscores our commitment to maximizing shareholder value.
We are optimistic about our long-term growth prospects.
Tom Baltimore: as we unlock the significant embedded value within our portfolio with renovation projects such as the Royal Palm repositioning in Miami.
Tom Baltimore: while we further enhance the overall quality of our core portfolio.
through our ongoing capital recycling efforts.
Tom Baltimore: And with that, I'd like to turn the call over to Sean.
Sean: Thanks, Tom. As Tom noted, we were very pleased with our fourth quarter performance.
Sean: Q4 Repar was $179, a decline of 1.4%. However, if you were to exclude the impact from strike activity in the quarter at the four affected hotels, Q4 Repar increased 3.1% year over year.
Occupancy for the quarter was 69.9% and ADR was $256.
Sean: Q4 hotel revenue was $600 million, while hotel-adjusted EBITDA was $147 million, resulting in hotel-adjusted EBITDA margin of 24.6%.
Sean: Or 28.1% if you were to exclude the $28 million of EBITDA disruption from strike activity during the quarter, resulting in margin expansion of nearly 20 basis points.
Sean: Q4 adjusted EBITDA was $138 million and adjusted FFO per share was $0.39.
Sean: For the full year, Repar was up 2.9% versus 2024, and Hotel Adjusted EBITDA Margin was 27.5%, or down 70 basis points versus last year.
Sean: When adjusting for the strike disruption, Foyer Repar increased 4.2% while Hotel adjusted even a margin, improved by approximately 30 basis points.
Sean: Adjusted EBITDA for the year was $652 million, inclusive of $32 million of strike impact, and adjusted FFO per share was $2.06.
Sean: In terms of CapEx, during 2024, we reinvested approximately $230 million into our portfolio.
Sean: Prioritizing upgrades and resiliency work aimed at elevating the guest experience and strengthening our assets.
Sean: This included the first phase of a two-phase comprehensive guest room renovation at the famed Rainbow Tower in Waikiki, and the Palace Tower at the Hilton Waikoloa Resort on the Big Island.
Sean: as well as the first of a three-phase guest room renovation of the 1167-room main tower at the Hilton New Orleans Riverside.
Sean: In 2025, we will execute the second and final phase of guest room renovations at both towers in Hawaii, with a total investment of $75 million.
Sean: Both renovations are scheduled to start in Q3 of this year and extend through early 2026.
Sean: Additionally, in New Orleans, we plan to launch phase two of the guest room renovation, a 31 million dollar investment covering 428 rooms.
Sean: This project, which is nearly double the rooms covered last year in Phase 1, is scheduled to begin in the second quarter of this year and continue through year-end.
Sean: With respect to operational excellence, we have proactively transitioned operating partners at six of our hotels over the past six months.
three of which were converted to franchise models.
Sean: with impacted hotels including the Royal Palm in Miami, Hilton Denver, Hyatt Centric at Fisherman's Wharf in San Francisco, Marriott Newton in Boston, and both of our Chicago W hotels, which have also been rebranded as part of this strategic shift.
Sean: Overall, we are very excited about the upside potential at each of these hotels, further underscoring our commitment to brand and operator diversification as a key growth strategy.
Sean: This transition introduces managers with strong market presence, driving greater focus and efficiency, and we anticipate meaningful improvements to operations, in addition to long-term cost savings.
Tom Baltimore: Turning to guidance, as Tom noted, we are establishing full-year 2025 Red Park guidance of $187 to $192 or year-over-year growth of 0% to 3%.
Sean: While hotel adjusted even a margin is expected to be between 26.1% and 27.7%.
Sean: for a 60 basis point decrease to 2024 at the midpoint.
Sean: With respect to earnings, we are forecasting adjusted EBITDA to be in the range of $610 million to $670 million, and adjusted FFO per share guidance is forecast to be between $1.90 to $2.20.
Sean: Assumed in our 2025 guidance is approximately 17 million dollars of expected EBITDA displacement associated with our Royal Palm renovation project which is scheduled to suspend operations in May to the remainder of the year.
Sean: Excluding the Miami renovation, Red Park guidance would improve by 110 basis points at the midpoint to approximately 1% to 4% for the full year of 2025.
Sean: With respect to expense growth, our guidance implies comparable hotel operating expenses increased by three to four percent over the prior year period.
Sean: Looking closer at the first quarter, as previously disclosed, Q1 faces tough year-over-year comparisons.
benefiting from exceptionally strong group performance.
Sean: leading to an 8% increase in REVPAR, while earnings were positively impacted by nearly $10 million of grants and state employment tax refunds received during the quarter last year, resulting in approximately 150 basis points of even a margin tailwind.
Sean: January 2025 Red Park finished 2.7% lower than the prior year period, driven by tougher comparisons in Hawaii, Chicago, Boston, and Silicon Valley, partially offset by ongoing strength at Bonnet Creek and Casa Marina.
Sean: Finally, with respect to our dividend, on February 14th, we declared our first quarter cash dividend of $0.25 per share to be paid on April 15th to stockholders of record as of March 31st. At current trading levels, this quarterly fixed dividend translates to a 7.5% to 8% yield.
Sean: 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: Thank you. Our first question is from Flores Van Dykem with Compass Point. Please proceed with your question.
Morning guys, thanks for taking my question.
Speaker Change: Good morning, Tom. So the disposition target that you've laid out, the $300 to $400 million,
Speaker Change: That only covers, as far as I can tell, a portion of your non-core assets. You've got another, you know, probably half of your, at least half of your non-core EBITDA that's probably left for sale.
Speaker Change: Can you walk us through how you plan to deploy that capital? What percentage could we expect is going to be spent on ROI projects versus potential share buybacks?
Thank you for the question, Florence.
Speaker Change: It's important to sort of level set. I think we've consistently shown as a team
our ability to recycle capital.
If you think back from the spin now we have
Speaker Change: sold or disposed of 45 hotels for about $3 billion. We've been very thoughtful about it. Even under difficult circumstances, we've been able to achieve at least some portion of that objective each year. Last year, obviously, selling about $200 million.
Speaker Change: We will use, we'll wait and look for how best to reallocate that capital, but you can expect obviously we're going to continue to invest.
Speaker Change: in our core portfolio. We believe passionately that we can generate
projects at this point, so that's sort of point one.
Speaker Change: Point two, we will continue to use proceeds to pay down debt.
Want to make sure that the balance sheet is
Speaker Change: remains in great shape and that we've got liquidity. And then, opportunistically, we will look, from time to time, in buying back shares where it makes sense. I mean, obviously, we continue to trade at a really significant discount to NAV.
Speaker Change: The team is laser focused on doing everything we can to close that gap as quickly as possible.
Speaker Change: Thanks, Tom. Maybe my follow-up is, and maybe this is more pointed towards Sean, I know it's early, but how are you thinking about the 1.2 billion CMBS debt on Hawaii Village?
Speaker Change: And you have flexibility obviously with cash on the balance sheet, potential more non-core sales. How do you think your balance sheet is going to look or how will you address that refinancing in 2026?
Speaker Change: Boston asset as well with Hawaiian Village. I think in the end, we have access to a number of debt capital markets. We continue to monitor them, talk with our bankers about some of the strategies and thinking about doing this. But we're certainly weighing the cost.
Speaker Change: tenure, looking at a maturity table, flexibility of the capital, as well as timing of the asset sales, as you noted as Tom talked through. So kind of putting all that together, it is early, we continue to monitor to the extent market conditions change, we feel like it compels us to go earlier, certainly you'll see that activity as we at least take a look to take maybe a portion of that CMBS off the table. So I think as we go further into the year, I think you'll see us address at least a portion of that.
Speaker Change: All that said, I would say even one scenario out there is...
Speaker Change: CMBS had in place back in 2016, so it certainly supports
Speaker Change: even a higher level of debt on it at this point. So that's an option. I wouldn't say it's our first option. But again, it goes back to saying we have a lot of scenarios we can look at with all the access that we have to the debt markets. Again, proving that we did that last year when we accessed both Term Loan A, Bank.
Speaker Change: Capital, as well as Bond Capital, and again, we'll look at some of those markets as well as we look to this solution.
Speaker Change: Flores, the other thing that I would add just to agree with everything that Sean has said is
Speaker Change: Sean and the team have done just a fabulous job, and when you think about it, even coming out of the pandemic, we paid all the banks back. The credibility that we have with the street gives us optionality as strong as anybody in our peer set.
Speaker Change: And so Sean and team are already out in front of this, looking at different options. Obviously, it doesn't mature until late until the second half of 26, but you can expect us to be proactive, to be disciplined, and really under Sean's leadership, we'll find the right balance.
Thanks, guys.
Thank you.
Speaker Change: Our next question is from Dwayne Fenningworth with Evercore ISI. Please proceed with your question.
Hey, hey, thanks. Good morning.
Dwayne Fenningworth: I wonder if you can walk us through the expectation for Hawaii in total.
Dwayne Fenningworth: over the course of the year, you know, maybe what, you know, growth or a lack of growth look like in Q1, Q3, is all the growth kind of Q4 weighted in that market in total. And then one of the questions we get from clients is how to convert the pacing stats you give to EBITDA. So, for example,
Dwayne Fenningworth: Waikoloa group pace up 70%. How does that translate to EBITDA growth for that asset?
Yeah, let me
Dwayne Fenningworth: Grab the first part of it, Sean can talk a little bit about the Yibidaw side. I think it's important to kind of, again, level set. If you look historically, demand into the islands,
You know north of 10 million
Sean: If you look back to 2023, it was around $600,000. We expected last year to be probably in that $800,000 range, ended about...
Sean: 720,000 plus or minus, still 22% above the prior year, and then still about 54% beneath 2019.
Sean: This year, the current estimate is about 930,000 visitors right now.
Sean: down from closer to a million. So you're still about 41% beneath 2019.
Sean: But arrivals from Japan are up about 14% same time last year including up about, and that includes up about 22% plus or minus in January.
Sean: and even the domestic arrivals into Oahu are up about 3.7% over last year.
and her...
and are 21% plus or minus ahead of 2019.
Sean: partially covering some of that international deficit. We have no doubt that Hawaii is going to ramp up. We certainly, as Sean outlined, expect that.
Sean: The first quarter is going to be soft, we know that. We expect, obviously, the second half of the year to a tail of two halves, as Sean outlined.
Sean: And we expect significant increase, obviously, in Q3, Q4. And we expect both properties to be in the low to mid-single digit at the end of the year in REVPAR growth. So, I feel very confident, seeing very good trends.
You know, Southwest just also announced, obviously, 33...
Sean: settle and some of the surcharges go away, you're going to see the Japanese travelers sort of back. Will it be back to the...
Sean: We had historically seen, you know, certainly remains to see over time, but we're currently forecasting in that 27, 28 window to get back to that sort of one and a half million visitors into the Hawaiian Islands.
Sean: So with that, let me hand it off to Sean and he'll provide some additional color on it.
Sean: Yeah, I mean, I would say it's not an easy formula to think through how you translate kind of group pace into EBITDA conversion, you know, a couple of components that go into it not to get down.
Sean: to in too much detail. But if you think about that group pace, it's certainly very strong, speaks to
Sean: You know, strength of that market with, I think, groups kind of cycling back into the Big Island. We had a number of hotels, including ours, under renovation in the comp set there. And so, I think you're seeing the benefits of people seeing better product coming online here and looking to go there for their group activity. That said, I mean, you are displacing transient and group is, well, a meaningful component. It's about 20 percent, I would say, kind of max on peak.
Sean: of the demand of that asset. So it's good. It's obviously great. You get better banqueting, catering, contribution. I think we're looked to be up around 20-plus percent.
I would say it's kind of
That's kind of what...
Sean: Factors into the wider range is a little bit of uncertainty as to how that demand comes back But certainly could be some upside that you could garner with that strong foundation So that all it's a lot to say to say how does it translate to EBITDA? I think in the end you've got positive REBPAR growth positive revenue growth We have to manage some of the expense assumptions as well to what you know as you think about the overall algorithm of converting group pace down to EBITDA
I appreciate the thoughts. Thank you.
Speaker Change: Our next question is from David Katz with Jeffries. Please proceed with your question.
David Katz: Good morning everyone. Thanks for all of the copious details so far. I wanted to just circle back on the Royal Palm having you know toured it not too long ago.
David Katz: When, you know, when finished, right, it's a meaningful project. Can you just talk about its, you know, intended positioning within, you know, Miami, which obviously big, important, hot market.
David Katz: where does it fit in the landscape there as you've laid out?
Yeah, it's a great question.
David Katz: David, I've, like you, have spent a lot of time down in Miami. I walked it recently with the team. Huge credit to Carl Mayfield, who heads our design and construction.
David Katz: team who, by the way, David, is best in class. There isn't anybody in the lodging sector, certainly in the REIT sector, that has his experience and knowledge.
David Katz: and I think his track record really demonstrates that. You think about our success in Bonnet Creek. You think about, obviously, our success down in Casa Marina. We have studied
David Katz: Royal Palm carefully for more than a year and really with, given the historic nature, given the three buildings and how best to really activate and take advantage of that bullseye location.
And you've got on deck here the Aubert's that's coming
Rosewood coming, the Amman obviously coming, the Andaz.
David Katz: which eventually will open. I mean, all of that we see Royal Palm being tucked underneath that. We don't see taking it to that level.
David Katz: So, certainly an upper upscale lifestyle, but we think we can tuck under and really raise rate significantly and give what is a varied and diverse customer base.
David Katz: And just given what's happening in Miami, we don't see that slowing down, we see that just accelerating.
a more activated public space.
David Katz: obviously a renovated room product and really adding 11 keys so we are really, really excited about this.
Really long-term value for shareholders, so
Very excited about it
David Katz: and we don't see any slowing down. If you look over the last 20 years, what are the three markets that have certainly been...
Been among the strongest
It's really Hawaii, it's Orlando, it's Miami, it's Key West.
David Katz: And in all of those markets, you know, Park is really well positioned. I'm not sure we get the kind of credit from shareholders that we should when you carefully look at the quality of the real estate that we have in all of those markets.
Perfect, thank you.
Thank you.
Speaker Change: Our next question is from Smead Rose with Citi. Please proceed with your question.
Hey, Smeeds.
Speaker Change: I apologize, I was on mute there. That's all right. Can you hear me now? Okay. I wanted to ask you on the Bonnec Creek asset. It looks like it came in in the low 80 millions. I think that's kind of around the range you would you would target it kind of post investment and it just do you feel like that's kind of stabilized here? Do you think there's sort of significant upside or just kind of sort of more normalized organic growth?
Speaker Change: Yeah, we are incredibly bullish, Smeeds, and think that that's, again, in the first year
Speaker Change: Seeing REVPAR up 17% and obviously EBITDA, as you noted, going from $60 million to about $82 million, up 36%.
and the ability to really layer in multiple groups.
Speaker Change: We could not be more excited. Obviously Condé Nast, given the Waldorf, you know, a top 10 rating globally, we are incredibly excited as you sort of look at group pace.
Speaker Change: in 25 and I think up another 20% plus or minus in what we see right now in 26.
So we are very, very encouraged as we look out.
Speaker Change: You know the other thing that really helps us to smeeds is
Speaker Change: As you think about city-wides are up this year in Orlando, so that's certainly going to be a tailwind for For the market and then of course epic universe which is going to be opening in May plus or minus and
Speaker Change: and 50 experiences plus or minus. So we think that's only going to continue to benefit the overall market and we certainly think that it's going to benefit Bonnet Creek and our assets in Orlando.
Speaker Change: Okay, thank you. And if I could just ask one more, and I...
Speaker Change: Yeah, maybe I missed this, so at the risk of embarrassing myself, I'll ask it anyway. The W Hotels in Chicago look like they've been renamed, and I was just wondering, does that brand switch help you maybe on CapEx requirements, or would you expect operational improvements there, or maybe you just could talk about that a little bit?
Speaker Change: So we're very excited about that decision, as Sean noted in his prepared remarks.
You know, we've...
Speaker Change: changed out really six operators. In this case we're also changing, converting to a franchise model, certainly staying within the Marriott family.
So, really excited about these decisions again.
Speaker Change: credit to our asset management team and our development team that's worked very hard over the last year plus in discussions with Marriott to make that happen and we think it's really a win-win for everybody.
Great. Okay. Thank you.
Great, thank you.
Speaker Change: Our next question is from Chris Veronka with Deutsche Bank. Please proceed with your question.
Good morning, guys. Thanks for taking the questions.
Chris Veronka: Tom, can you comment on whether those are longer term franchises with the new, I think one's a Tribune, one's a Marriott Independent, because I think it's pretty well known that Lakeshore was shopped.
Chris Veronka: a few times, and so, you know, does this, does what you've done with the change impact your ability to, you know, sell the assets, or how a buyer might view them as being long-term encumbered or unencumbered by grants? Thanks.
Tom Baltimore: Yeah, we actually think it gives us more optionality. Chris, obviously having those be in a franchise...
Again, spent a lot of time with Marriott negotiating and
Speaker Change: And we didn't think either asset really were W caliber in terms of what Marriott was looking for.
We wanted the optionality of more of those soft brands.
Speaker Change: We found the right balance. We'll continue to look how we can create shareholder value and if that means selling or monetizing an asset, as we've demonstrated time and time again, we will certainly do that.
Speaker Change: But we are confident that we've arrived at the right decision and the right outcome here.
Speaker Change: Okay, very good. Just a follow-up, if I could, and that's on a similar kind of question, but on Miami, kind of post-renovation, you know, it sounds like you stay in the Marriott, staying with the Tribute, but does that renovation, I mean, is there a reset of the...
Speaker Change: of the franchise contract. I think that was one of the first tributes in the old Starwood portfolio in 2015, if I remember. So, you know, is there like a reset on, are you going to be kind of wedded to tribute portfolio for that for a much longer period, or are you still going to keep some optionality there?
Chris Veronka: We've all been around a long time, Chris. In fact, it was the first tribute is our understanding as well.
Chris Veronka: with Starwood and really under the same term at this point. Doesn't mean that that can't change, but that's the current structure.
Chris Veronka: Marriott's been a great partner and been working with us. They can certainly speak for themselves, but the feedback that we've gotten is they are thrilled.
Chris Veronka: with our program, with our design features, how we're going to reimagine the public space.
the food and beverage offerings.
Chris Veronka: We are very excited about this, and again, a shout out to our team who have worked incredibly hard for more than a year as we've planned this out.
Chris Veronka: And at the end of peak season, we're going to hit the ground running with strong confidence that we will deliver for the World Cup next year.
Okay, very good. Thanks, Tom.
Thank you.
Speaker Change: Thank you. Our next question is from Chris Darling with Green Street. Please proceed with your question.
Thanks, good morning.
Speaker Change: Tom, can you walk through your expectations for New York this year? I would be curious about your perspective on the overall market as well as your Hilton Midtown specifically. Additionally, I would also be curious to hear about how you're thinking about margins at your property there.
Speaker Change: I mean if you if you think about New York I mean obviously we we ended fourth quarter I think up about three and a half percent in REVPAR and I think for the full year just just south of four percent
group pace
In 25, I think we're looking up about 10%.
Speaker Change: There's been, you know, little supply increase in New York, so twenty-five I think we're...
Speaker Change: continues to decline, I think 0.5, 0.6% in 2026, and I think clearly just flat in 2027.
Speaker Change: and Manhattan supply has fallen, I think, 8-9% since 2019. So, look, New York has turned out to be a stronger market. Obviously, some of the restrictions that have been imposed and required on Airbnb have helped the market.
Speaker Change: Our hotel continues to gain market share, and there are really only two hotels that can...
that can handle large groups.
Speaker Change: So, we're encouraged. Obviously, group room nights, I think we're going to be down a little bit here in the first quarter. But we still expect that we're going to finish the year 25 probably in low single digits in terms of rep par.
Speaker Change: I've got no comment on that as to when our operator will start to engage, but I suspect that will be a 2026 execution.
Speaker Change: But we remain cautiously optimistic in New York. I think New York, and you think about return to office, you think about visitation, you think about what's happening, it continues to be a solid market.
Speaker Change: All right, that's helpful thoughts and then just one more shifting gears a little bit Thinking about the transaction market just curious your perspective Do you see any increased appetite among private buyers to transact at scale? You know portfolio transactions anything like that or do you think it's really more of a kind of one-off deal situation still these days?
Speaker Change: Yeah, it's a great question. You know, Chris, you would expect, obviously...
Speaker Change: You know, rumors are there's some 400 billion of private equity real estate capital kind of on the sidelines.
Small to mid-sized players, you've got family officers and owner-operators.
Speaker Change: I certainly think the debt markets are open. Pricing seems to have improved slightly.
Speaker Change: The transaction market to continue to improve probably more the second half of this year
Well, I think there's optimism.
Certainly with the new administration, pro-growth, more rational regulation.
At some point, hopefully, rates start to come in.
Speaker Change: But there is uncertainty. There's uncertainty, obviously, with inflation still, while coming in, still a little sticky. And, obviously, the impact of some of the policy decisions that are being talked about, including tariffs.
Speaker Change: So I think there's still optimism, but a little bit of wait-and-see But we fully expect that we are going to be more active And we would expect to see our peers and and others in the transaction market really pick up in the second half of the year
I think we've demonstrated
Speaker Change: Yeah, Chris, I think we've demonstrated again, and as we said in our prepared remarks and I said earlier, look, that we've...
when you've moved 45 hotels and...
Speaker Change: in the last five years, or five years from the pandemic, I mean, we have been as...
Speaker Change: active and even in difficult circumstances, the pandemic, international assets, etc. We've been able to close deals and get deals done, so I expect you'll continue to see that kind of execution from us.
Understood. Thank you, Tom.
No, thank you.
Speaker Change: Thank you. Our next question is from Patrick Scholz with Truist Securities. Please proceed with your question.
Speaker Change: Hey Patrick. Hi, good morning. Good morning. We know that amongst international travelers, Canadian inbound is the most important.
Speaker Change: international traveler to Florida. Have you seen any impact on the propensity to visit your Florida properties from Canadian travelers given all of the attention and whatnot with tariffs? Thank you.
Speaker Change: It's a great question. The answer is we have not at this point.
Speaker Change: We continue to monitor that and as you correctly point out, as you think about the inbound visitation
Speaker Change: and it's still about half of that coming from Canada and Mexico. But at this point we have not seen any softening or slowdown and Florida and particularly our properties certainly remain strong and we are encouraged at this point.
Okay, thank you.
Speaker Change: Our next question is from Jay Kornreich with Wedbush Securities. Please proceed with your question.
Hey Jay
Hey, good morning. Thanks so much.
Speaker Change: Just to ask a question going back to the outlook for 2025, there's a pretty wide range for adjusted EBITDA, so I was just curious if you can give any more of the puts and takes you're considering that might lead you to the high end versus the low end of that range.
Speaker Change: or kind of equate to pre-strike levels. And so the question will be just kind of how much, you know, that can kind of recover and build through the year. That helps, I think, drive, again, the opportunity and top line of the range. So I think it's more kind of operational. I wouldn't say there's anything transactional in it in any sense. It's just more kind of we think about the operational potential of Hawaii and really the conservatism of kind of the slower start to the quarter for Q1, the slower start of the year for Q1.
Okay, thanks for that and then
You know, just as we're halfway through the first quarter.
Speaker Change: Naturally, as you mentioned, there's a tough comp in Hawaii, but there should be some other markets with some one-time benefits such as the Super Bowl being in New Orleans, the inauguration in D.C.
Maybe, is there any other just...
Speaker Change: You know core portfolio or market comments that you would outline just in terms of as we think of performance so far in the quarter
Speaker Change: Yeah, I would say New Orleans is very strong, very encouraged.
Speaker Change: I think January was a little softer and down 4-5% in New Orleans.
You know we were we had a
Speaker Change: Just given the location, headquarter hotel, we had one of the teams and you know we were up
Speaker Change: mid-teens in Rev Par there and probably looking at a you know for first quarter probably up in the five to seven percent range there so certainly very strong and as I pointed out feel very good about
Speaker Change: what we're seeing in Florida and Orlando in particular, and as we look out.
Speaker Change: You know, as Sean pointed out, Hawaii, we had a tough comp, and Hawaii's certainly going to be a little softer in the first quarter. No surprise there, but as we look out to the second half of the year, very, very encouraged. And I gave you some of the stats of what we're seeing already.
Speaker Change: both in enplanements, both in arrivals, both international as well as domestic.
Speaker Change: So, certainly expect first quarter, you know, down in that low single digit range, plus or minus. But very encouraged as we look out for the balance of the year.
Okay, thank you.
Thank you.
Speaker Change: Thank you. Our next question is from Robin Farley with UBS. Please proceed with your question.
Speaker Change: Thanks. On Miami, when you talk about doubling EBITDA there, is that something that you think you would ramp up to or would you be at that rate in, you know, by 2027, you know, understanding that next year is not a full year?
Speaker Change: Yeah, I mean, obviously we would, as we've seen, obviously, and...
Speaker Change: transformation that we're talking about and also dependent on how that market's doing but when you're bringing in that kind of high-end product above us
Speaker Change: We certainly think that gives us the right opportunity to sort of tuck underneath and really push rate and given the Premier location that we have in South Beach. We're very excited about the opportunity
Speaker Change: Okay, great, thank you. And maybe just one more on Q1.
Speaker Change: Just given the Easter shift, you know, we'd be kind of helping Q1.
Speaker Change: And others are talking about leisure demand, you know, still being up in 25 versus 24. Is there something in particular at a property or two that's maybe with a large group or something in last year's Q1 that you would call out as sort of the driver of the decline?
Speaker Change: The decline, I'm sorry, the decline this year versus last year?
Speaker Change: Yes, you're guiding to Q1 RevPAR while others are kind of calling out Q1 benefiting from the Easter shift and just wondering if there's...
Speaker Change: specific to Q1 last year that isn't recurring or, you know, while others are kind of pointing to leisure being up in Q1.
Crushed.
Speaker Change: Yeah, I think in the end it was, as we've mentioned before Robin, it was broad-based, we had some group strength.
Speaker Change: and we also had transient leisure strength across a number of our markets. I would say it was probably more centered in January and February than it was in March in terms of that strength, so it certainly was more, a bigger driver of what we saw in Q1 performance relative to kind of a specific Easter shift impact of March.
Okay, thank you.
Thank you.
Speaker Change: Thank you. Our next question is from Dory Kirsten with Wells Fargo. Please proceed with your question.
Thanks.
Dory Kirsten: Do the two phases of renovations at Hawaiian Village, Waikoloa, and Riverside effectively offset each other from a REVPAR perspective this year and then how should we start to think about the aggregate of those tailwinds for next year?
Dory Kirsten: Yeah, Dorian, the first part I'd say it's essentially they lap each other and I think it's maybe 10 to 20 basis points or so of impact. We've had we had a little bit of disruption in January in Hawaii, Hawaiian Village, some of the phase one we can say beginning of this year, but overall I think it's you know not dramatic impact to the top line and don't see obviously some impact to the bottom line at all.
Dory Kirsten: And then just regarding your operating cost growth assumptions for this year, I think we were a little bit surprised at the low end of the range, just given given labor cost headwinds. So can you just walk us through, does it assume, you know, fewer FTEs? Are there some relatively low growth markets that should be highlighted, some lower insurance assumptions?
Speaker Change: Yeah, I mean, from a cost standpoint, I would say, in general, its overall costs are kind of in that 3-ish, 3.5% range. Clearly wages are elevated and certainly north of inflationary costs.
Speaker Change: 3.5% range as you think about our midpoint of our guidance. If you think about lower end, clearly there are some assumptions that go into that, that if it's less occupancy driving that, you'll have less expenses.
Speaker Change: Our next question is from David Hargreaves with Barclays. Please proceed with your question.
Speaker Change: We don't have a need to access the debt markets at this time. Obviously we've got the revolver, we've got, you know, about 1.4 billion dollars in liquidity, plus or minus.
We obviously are going to be working to recycle capital.
Speaker Change: and sell, as we've said, about $300 to $400 million in non-core assets, which gives us a lot of optionality to pay down debt and also really reinvest back into our portfolio.
Speaker Change: Laser focused and pretty consistent with that strategy Over the last few years and you're really not going to see that change
We will as we think about our maturities next year.
very seasoned and experienced team here.
Speaker Change: gives us the optionality as we think about other strategic options as well for the company.
Speaker Change: Thank you for that. And in the past, I think you've expressed a comfort level, leverage-wise, in the three to five times range. I'm just wondering if that's updated at all, if that's still your policy.
Speaker Change: It's still, Sean and I from day one really, really three to five is sort of a guiding principle. We were sort of at four-ish pre-pandemic. Obviously we were above that. Certainly a little higher than we'd like in a normalized.
Speaker Change: But we're confident that we'll be able to get sort of inside at five times at some point here in the near future. Whether that's a year or two, we certainly will make that happen.
Speaker Change: Our next question is from Ari Klein with BMO Capital Markets. Please proceed with your question.
Speaker Change: and the expected disruption related to it. It looks like the hotel did about $14 million in 2024 EBITDA. I'll be opening to May this year, but the anticipated disruption for 25 is about $17 million. Maybe you can help reconcile that.
It may be something else.
Speaker Change: 80% or so of our kind of group forecast on the books.
Speaker Change: Low single digits, maybe even kind of flattish, so I think that's kind of, as we look at the outlook and the predictability of the business, we kind of feel comfortable with the range we've given.
Speaker Change: Thanks if I could just squeeze in one one last clarification just on the 2020 25 guidance 24 had some non-recurring tax benefits there anything like that or one-timers you know in the 25 guide that we should be aware of
No, nothing baked into that, sorry.
Thanks.
Speaker Change: Thank you. There are no further questions at this time. I would like to hand the floor back over to Tom Baltimore for any closing comments.
Tom Baltimore: Appreciate everybody taking time today. We look forward to seeing many of you at the City Conference. Safe travels.
Speaker Change: We are laser focused here at PARC and excited about 2025.
and look forward to seeing many of you soon.