Park Hotels & Resorts (NYSE:PK) held its first-quarter earnings conference call on Friday. Below is the complete transcript from the call.
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Summary
Park Hotels & Resorts announced a $96 million renovation project for the Ali’ I Tower at Hilton Hawaiian Village, which will impact 2026 financials slightly.
The company has strengthened its balance sheet with $2 billion liquidity and significant progress on refinancing 2026 maturities, including a new $700 million loan.
RevPAR growth guidance for 2026 increased by 50 basis points to a range of 0.5% to 2.5%, with adjusted EBITDA guidance raised by $7 million.
Royal Palm is set to reopen in June, with expectations for substantial operational improvements and potential benefits from the World Cup.
Management is actively working to dispose of 12 non-core assets and expressed confidence in progress by year-end.
Hawaii market is expected to perform well, with potential benefits from global travel shifts and investment in property upgrades.
Group demand is strong, particularly for June, with significant growth in key markets like New York, Orlando, and Hawaii.
Operational focus includes managing labor costs, insurance reductions, and real estate tax appeals to optimize expenses.
Full Transcript
OPERATOR
Palm and the launch of the Ali’ I Tower renovation at Hilton Hawaiian Village. This project will encompass all 351 guest rooms, the tower lobby, its private pool and the addition of three new keys. Total investment for the project is expected to be approximately $96 million. We expect renovation related disruption at Hilton Hawaiian Village to have a modest impact in 2026 with the towers closure expected to have less than a $2 million impact on 2026 Hotel Adjusted EBITDA and representing just a 10 basis point impact to portfolio RevPAR. Once complete, nearly 80% of the resort’s rooms will be newly renovated, significantly enhancing the iconic hotel’s long term competitive positioning. Turning to the balance sheet, our liquidity at the end of the first quarter was approximately $2 billion including $156 million of cash plus $1.8 billion of available capacity under our $1 billion revolving credit facility and $800 million delayed draw term loan. With respect to our 2026 maturities, we have made significant progress over the past two months to raise a $700 million floating rate delayed draw mortgage on Bonnet Creek which is expected to close this week. The loan, which was upsized $50 million based on the complex strong results, will bear interest at SOFR 225 basis points. When combined with the $800 million delayed draw term loan, this $1.5 billion of new debt capital commitments provide us with certainty while also allowing for the flexibility to fund within par prepayment windows and closer to the maturities. Accordingly, we expect to execute a partial draw under the delayed draw term loan and in June to fully repay the $121 million Hyatt Regency Boston mortgage which matures in July. We then expect to draw the remaining capacity in September along with fully drawing proceeds from the Bonnet Creek mortgage financing, to fully repay the $1.275 billion CMBS loan on the Hilton Wine Village which matures in early November with additional proceeds to be used for corporate purposes. We are grateful for the continued support of our bank group whose confidence in Park’s credit profile and strength of our portfolio has been instrumental in executing these transactions. Their commitment is a clear validation of our balance sheet strategy and underscores our ability to address all 2026 debt maturities in a comprehensive and highly effective manner. Upon completion of these transactions, we will have meaningfully enhanced our financial flexibility unencumbering the Hilton Hawaiian Village, extending our weighted average debt maturity to nearly four years and eliminating any significant maturities for approximately two years on an annualized basis. These refinancings are expected to increase interest expense by approximately $28 million, with roughly $13 million reflected in our 2026 AFFO guidance,. Based on the timing of these transactions with respect to our dividend, on April 15th, we paid our first quarter cash dividend of $0.25 per share. On April 24th, our board of directors approved a second quarter cash dividend of $.25 per share to be paid on July 15th to stockholders of record as of June 30th. The dividend currently translates to an annualized yield of approximately 9% based on recent trading levels. Turning to Guidance While we remain mindful of the geopolitical uncertainties and the potential impact of higher oil prices on both business and leisure travel, we were very encouraged by the strength observed in Q1. With solid demand trends continuing into the second quarter April, RevPAR is expected to be flat but up 3% excluding Miami, with performance led by continued strength in Hawaii, Bonnet Creek and Key west, as well as solid Spring Break leisure transient demand in Santa Barbara. And while we expect performance to modestly soften in May, June looks very strong, driven by strong group demand up nearly 10% and favorable year over year comparisons across several key markets including Hawaii, Orlando, Key west and New York. Overall, we expect Q2 RevPAR to come in around the midpoint of our guidance range with roughly a 100 basis point drag from Miami for the year. With Q1’s outperformance, we are increasing our RevPAR growth guidance by 50 basis points at the midpoint to a new range of 0.5% to 2.5% and Adjusted EBITDA guidance by $7 million at the midpoint to a new range of $587 million to $617 million. While AFFO increases by a penny at the midpoint to a new range of $1.74 to $1.90 per share. It is also worth noting that the recently sold Hilton Seattle Airport Hotel was expected to contribute approximately $3 million in EBITDA for the remainder of the year. 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? We’ll now be conducting a question and answer session. If you’d like to ask a question, please press Star one on your telephone keypad. The confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please, while we poll for questions. Thank you. Our first question is from Flores Van Dykem with Ladenburg Thalman.
Flores Van Dykem (Equity Analyst)
Hey, Dr. Flores. Thanks. Morning, Tom. Glad to be on these calls again with you guys. If you can give us a little bit more of an update on the disposition. One of the key things I think the market is having some trouble understanding is the quality of the portfolio that’s being shielded by the lower 10% of your assets. If you can talk a little bit about where I know that you have pretty much all of those presumably in the market, what’s the status on that? Are you having some detailed discussions? What’s the pushback that you’re getting from the market and are you going to hold out for the last dollar on those assets?
Tom Baltimore
Well, Flores, it’s great to have you back and appreciate the question. If I could sort of frame it for a second. Keep in mind, if you think about the remaining 12 assets that we have, we currently have 33 assets in the portfolio. We have sold or disposed of 52 assets. As I said in the prepared remarks for over $3 billion, we have 12 assets that we’re defining as sort of non core. Three of those assets obviously rest with the dispute with Safehold, which will resolve itself, if not this year, certainly next year. The EBITDA from those assets is about $16 million plus or minus the remaining nine assets account for about $41 million in EBITDA and candidly, probably 45% of that relates to one asset in Florida. So, you know, we’re generally dealing with eight assets that are small. Some have short term ground leases, some are joint venture, some have various challenges. And I would say obviously the last mile is often the most difficult. I would hope the market would give us credit for the perseverance, the discipline, our ability to reshape, the portfolio over the last nine years. We are very confident we’re going to make substantial progress this year on those non core assets. And our collective team are working their tails off. We have work streams underway on all of them and it’s going to be a little lumpy and choppy. I think you’ll see more reported as the year unfolds. And believe me, no shortage of effort and focus. We realize it’s while a small overhang. It’s an overhang. It clearly is less if you look at the 41 million, certainly less than 5, 6% of overall EBITDA. But it is a drain when you think about operating metrics. And so we’re working hard to get the assets sold as quickly as we can. We’re not holding out for, the last dollar, but we certainly want to have counter parties who can execute and who can move through the process. And we certainly are always focused on creating value for shareholders.
Flores Van Dykem (Equity Analyst)
Thanks. Maybe a follow up question on the World Cup. I know that your Royal Palm asset I think is opening up in June. Is that. And that is a market potentially that could get impacted by the demand for the World Cup. If you can talk broadly about what the impact is going to be or are you seeing so far, I think it’s everybody’s sort of muted on the World cup impact, but if you can give us a little bit more color on that, that would be great.
Tom Baltimore
Yeah, it’s a lot to unpack there, Flores, but I’m happy to take it. I think most importantly, if we step back and think about the Royal Royal Palm at 15th and Collins 393 Keys, we’re expanding to 404, putting in approximately $112 million. We could not be more excited. We could not be prouder. We had obviously a group there. We can’t wait to get more analysts and more investors in. I couldn’t be more grateful to Carl Mayfield, who heads our design and construction team, who is literally spending three or four days of his week in Miami leading. And we also have the operator, lead operator from Davidson who’s been on site since we launched construction in last May. As of this morning, we had 417 men and women on site. And that includes from owners reps to general contractor to subs to owners teams to operations folks. And we are currently targeting that construction will be substantially complete by early June. And what we would call the stocking and training TCO would begin and target sort of in mid May. You’ve got a few weeks of testing all the fire alarm and life safety issues that have got to work through. And we’re probably looking at a target public occupancy TCO and hoping for sort of mid June. So when you think about where that all unfolds as it relates to the World Cup, we have included in our guidance that Shawn outlined in his prepared remarks. We have no contribution coming from Miami in that process at this time. So if we are able to get open, I think the two prominent games in Miami will be July 11 and July 18. We are cautiously optimistic that we should be open in time for those. And that’s what we’re all working our tails off to make sure that that occurs again. We don’t have anything in the current guidance. So we’ve been quite conservative in that intentionally, just given all of the geopolitical, but also the complexity of the inspection and regulatory process as we close out the job. But you may recall other projects and the months and in some cases years, I think that this, again speaks to the core competency, the leadership that we have at park, our experience, the extraordinary success that we’re having obviously at Bonnet Creek, and also what we’re seeing also in Key West. And we feel the same way about Royal Palm as we look out. So we’re very, very bullish and excited about this project and think we’re going to have a tremendous success there over time. Thanks to. Thank you.
OPERATOR
Our next question is from Smedes Rose with Citi.
Smedes Rose (Equity Analyst)
Hi. Thank you. I just wanted to ask you. Hi. I wanted to ask you, in your guidance, it looks like the expense expectations moved up around 40 basis points versus your prior guidance. And I was just kind of wondering what was behind that.
Shawn
Yes, Mead. Shawn, we obviously in Q1, we had some outperformance top line. A lot of that was occupancy based. So we certainly naturally see while cost per room solid in terms of, you know, basically 50 basis points or so growth, you know, with the extra occupancy expense growth was a little more than expected as well. So we’re kind of carrying that through much like we’re doing with the top line into the expense. Certainly expected …
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