Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Park Hotels & Resorts Inc (PK, Financial) successfully refinanced $650 million of senior notes, extending debt maturities and leaving no material maturities until Q4 2026.
- The company repurchased nearly 1.7 million shares of common stock for $25 million at a significant discount to net asset value.
- RevPAR at Casa Marina resort increased by nearly 215% over the same period last year, with the hotel on track to generate hotel adjusted EBITDA in excess of $31 million in 2024.
- The Bonnet Creek complex in Orlando reported strong performance, with the Waldorf Astoria achieving RevPAR growth of 11% and the Signia Bonnet Creek achieving RevPAR growth of 9%.
- Park Hotels & Resorts Inc (PK) achieved an 8% year-over-year decrease in property insurance premiums, resulting in estimated annualized savings of nearly $3 million.
Negative Points
- RevPAR at the two hotels in Hawaii decreased by approximately 5.5% during the quarter, with occupancy falling by 620 basis points.
- Transient revenues at Hilton Hawaiian Village decreased by 14%, resulting in a 4% year-over-year decrease in RevPAR during the quarter.
- The company expects a $9 million drag on earnings for the full year due to renovation disruptions at multiple properties.
- Full-year 2024 RevPAR growth forecast was lowered by 75 basis points at the midpoint due to moderating performance at Hilton Hawaiian Village and weaker-than-expected inbound travel from Japan.
- Hilton Waikoloa Village Hotel reported a 12% decrease in RevPAR during the quarter, with group revenue down 48% year over year.
Q & A Highlights
Q: Can you expand on your capital allocation strategy, particularly regarding potential asset sales and how proceeds will be used?
A: Our primary focus for 2024 is operational excellence and achieving our targets. We aim to continue selling non-core assets, having already disposed of 43 assets worth nearly $3 billion. We plan to use proceeds from asset sales to reinvest in our portfolio, pay down debt, and return capital through share buybacks and dividends. We believe investing back into our portfolio and buying back stock, especially at current low multiples, is the best use of capital.
Q: What are your options for refinancing the CMBS debt on Hilton Hawaiian Village?
A: We have several options, including accessing bond markets, institutional debt markets, and potentially CMBS. We are evaluating these options and are sensitive to pricing, aiming to address the maturity ahead of its 2026 due date.
Q: How does the closure of the Oakland hotel impact your EBITDA guidance?
A: The Oakland hotel is not included in our guidance, but its closure could be a potential tailwind. The asset lost more than $3 million on a trailing basis, so its closure could positively impact our EBITDA.
Q: Can you provide RevPAR growth expectations for the third and fourth quarters?
A: We expect the third quarter to be strong, driven by group pace up 13%, with significant increases in August and September. We anticipate low to mid-single-digit RevPAR growth for the third quarter, although we are cautious about providing specific numbers due to market uncertainties.
Q: What are your views on renovation or displacement headwinds in 2025?
A: We aim to keep renovation disruption under 100 basis points. Next year, we will continue renovations at the Palace and Rainbow Towers and work on the Royal Palm. We are confident in our ability to manage these projects with minimal disruption.
Q: Why is Hilton Hawaiian Village facing challenges, and what is the outlook?
A: The weakening yen and travel surcharges have impacted Japanese arrivals, which are still below pre-pandemic levels. However, we remain bullish on Hawaii's long-term prospects due to limited new supply and strong historical performance. We expect a rebound as financial conditions improve.
Q: How much of the 200 basis points in low RevPAR was due to Hawaii, and what is the outlook for the second half of the year?
A: Hawaii was a significant contributor to the RevPAR shortfall in Q2. For the second half, we expect some moderation in Hawaii but are optimistic about strong group performance in other markets like Orlando, New Orleans, and Chicago.
Q: How do you view the reopening of the Caesars Casino in New Orleans impacting Hilton Riverside?
A: We see it as incrementally positive, particularly for transient and incremental group business. New Orleans remains a strong convention and leisure market, and we expect the casino reopening to add value.
Q: Are there opportunities to extend ground leases or acquire fee positions for non-core assets?
A: All options are on the table. We are focused on creating shareholder value and will consider extending leases, acquiring fee positions, or disposing of non-core assets as appropriate.
Q: Do you think interest rate cuts will facilitate more asset sales?
A: Lower rates and a more active lending environment would help. Buyers need clarity on their cost of debt, and easing financial conditions would likely facilitate more transactions. We remain active in discussions with potential buyers and are confident in our ability to continue selling non-core assets.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
