PK - NYSE

Greetings. Welcome to the Park Hotels & Resorts First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded. At this time, I will now turn the conference over to Ian Weissman, Senior Vice President, Corporate Strategy. Mr. Weissman, you may now begin.

Thanks, Tom. Overall, we were very pleased with our first quarter performance. As Tom noted, Q1 RevPAR came in at approximately $159 with 65% occupancy and strong ADR growth of 7% year-over-year to $244 or 8% above 2019 levels. Hotel revenue was $623 million during the quarter, while hotel adjusted EBITDA was $151 million, resulting in hotel adjusted EBITDA margin of over 24% or 550 basis points above the same period in 2022. Q1 adjusted EBITDA was $146 million and adjusted FFO per share was $0.42 or 25% above the midpoint range of the guidance we set last quarter. Turning to the balance sheet, our current liquidity is approximately $1.8 billion, while net debt is currently $3.9 billion, down approximately $600 million since Q1 2021 when net debt peaked at approximately $4.5 billion. Overall, our balance sheet remains in excellent shape with ample liquidity to execute our strategic priorities regardless of potential shifts in the macro backdrop. In terms of deleveraging, during the second quarter, we expect to repay the $75 million loan secured by the W Chicago City Center. With respect to our $725 million San Francisco CMBS loan maturing in November, we continue to evaluate our options, which includes a potential extension of the current loan and we remain confident we will have a resolution by early summer. Turning to guidance, our RevPAR forecast for the year remains unchanged at $167 to $179 or a year-over-year increase of 10% at the midpoint, while our hotel adjusted EBITDA margin forecast has increased versus prior guidance by 10 basis points to a new range of 26.8% to 27.4%, a roughly 125 basis point improvement at the midpoint over the prior year. Better-than-expected margin gains were driven by solid group contribution as group demand continues to build, a trend we anticipate continuing throughout the balance of the year, helping to offset increasing costs for property insurance and utilities. While we are moving away from providing quarterly guidance, now that we have lapped the impact of last year's Omicron surge, we wanted to provide a bit more color on second quarter expectations. Despite facing difficult year-over-year comparisons, we expect our portfolio to continue to narrow the gap to 2019, with Q2 RevPAR forecast to be up year-over-year within a range of 7% to 11%, driven in large part by our portfolio of urban hotels led by Chicago, New Orleans, San Francisco, and New York City. Note however, that Q2 margins are likely to soften relative to last year's peak performance which was driven by outsized cancellation income during Q2 2022, that exceeded $9.6 million or roughly $6 million above historical levels and disruption this quarter from the comprehensive renovation of our Casa Marina resort in Key West, with operations expected to be suspended from mid-May through most of Q4. Overall, the negative impact on earnings from Casa Marina renovation is forecast to be approximately $14 million for the full year. With a roughly 130 basis point drag on RevPAR growth and a more than 30 basis point drag on hotel adjusted EBITDA margin during the second quarter and negatively impacting full year RevPAR growth by a forecasted 110 basis points and hotel adjusted EBITDA margin by 30 basis points. As a reminder, the renovation disruption at Casa is already factored into our full year guidance. 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?

Thank you. [Operator Instructions]. And our first question comes from the line of Smedes Rose with Citi. Please proceed with your questions.

Our next questions come from the line of Duane Pfennigwerth with Evercore ISI. Please proceed with your questions.

Our next question is from the line of Floris Van Dijkum with Compass Point. Please proceed with your questions.

Thanks guys, that’s it for me.

Our next questions are from the line of Dany Asad with Bank of America. Please proceed with your questions.

Awesome, thank you very much for that.

Our next question is from the line of Anthony Powell with Barclays. Please proceed with your questions.

Alright, thank you.

Our next question is from the line of Aryeh Klein with BMO Capital Markets. Please proceed with your questions.

Appreciate that, thanks.

Our next question is from the line of Dori Kesten with Wells Fargo. Please proceed with your questions.

Our next question is from the line of Chris Woronka with Deutsche Bank. Please proceed with your questions.

The next question is coming from the line of Patrick Scholes with Truist Securities. Please proceed with your questions.

Yeah, I just might add, I wouldn’t say there is any specific verticals that are performed. I think everybody is kind of just find the way back and getting into group settings. And so, the company in house group and the company’s corporate side you are seeing just across the portfolio. Again a lot of it is still very much short-term where you see people coming back, whether it is training or gathering for other things that they haven’t done in the past. I think you have seen that come through. Conventions are clearly getting back on the way, a lot of strength in Chicago, New Orleans first half of this year for the first quarter. San Francisco J.P. Morgan Healthcare Conference plus a couple of others this quarter helped that market as well and out portfolio. And then finally group tour for the quarter at least is certainly was stronger. As you think about things like in group other events like instead of travel and it just took a while for them to kind of get pass the pandemic and start getting back on that cycle. So I think just a matter of that delay and that lag of -- group sub segments absence, SMERF which clearly was one that was [indiscernible] during the pandemic. You have seen that kind of just level off and it has been more in the corporate side and side really coming back.

Okay, great color there. Thank you.

Thank you. Our next question is from the line of David Katz with Jefferies. Please proceed with your questions.

Okay, thank you very much.

Our next question comes from the line of Robin Farley with UBS. Please proceed with your questions.

Okay, thank you.

Our next question comes from the line of Chris Darling with Green Street. Please proceed with your questions.

Fair enough, thank you for the time.

Our next question is from the line of Bill Crow with Raymond James. Please proceed with your questions.