Park Hotels & Resorts Inc. Common Stock 2026 Q2 Earnings Call

Please go ahead. Thank you, operator, and welcome everyone to the Park Hotels & Resorts second quarter 2026 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. 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. We are not obligated to publicly update or revise these forward-looking statements. Actual performance outcomes and results may differ materially from those expressed in forward-looking statements. Please refer to the documents filed by Park with the SEC, specifically the 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.

In addition, on today's call, we will discuss certain non-GAAP financial information such as adjusted FFO and adjusted EBITDA. 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 8-K 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. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide an update on our strategic initiatives and review Park's second quarter performance and outlook for the year. Sean Dell'Orto, our Chief Financial Officer and Chief Operating Officer, will provide updates on our capital investments and additional color on guidance. 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. I am pleased to report that Park delivered another outstanding quarter with results meaningfully exceeding our expectations and demonstrating the continued strength and resilience of our portfolio. RevPAR increased nearly 7% year-over-year, excluding Royal Palm South Beach, with growth accelerating from approximately 4% in April to 5% in May and over 11% in June. Performance was driven by strong group demand and higher rated leisure travel across the portfolio, highlighted by the exceptional strength in Hawaii. As a result, resort RevPAR increased more than 9% excluding Royal Palm, while our urban portfolio delivered nearly 4% RevPAR growth. These results reflect both the pace of demand across our markets and the benefits of our disciplined capital investment strategy.

Notably, our strongest performance continues to come from assets where we have invested significant capital in recent years, including Orlando, Key West, and Hawaii, underscoring the value creation and outsized returns generated by our targeted reinvestment initiatives. Hawaii was among the top performers, with RevPAR increasing approximately 9% year-over-year and accelerating meaningfully from the first quarter. Performance improved sequentially each month, driven by a significant increase in leisure demand and strong in-house group activity, which more than offset the loss of citywide business resulting from the partial closure of the Honolulu Convention Center, which is expected to remain closed through 2027. Hilton Hawaiian Village was the clear standout, with RevPAR increasing nearly 12% and EBITDA growing more than 13%.

Property continued to gain market share throughout the quarter, ending June with a RevPAR index of 117, representing a four-point improvement compared to June 2024 or prior to the commencement of the Rainbow Tower renovation. The hotel's momentum continued into July with occupancy of 98%, or a nearly 700 basis point improvement year-over-year, and preliminary RevPAR growth of over 6%. Both Hilton Hawaiian Village and Hilton Waikoloa Village are benefiting from our recent capital investments as the renovated Rainbow and Palace Towers are generating strong guest demand and meaningful rate premiums. Hawaii is demonstrating why it remains one of the most attractive resort markets in the country. Demand trends are healthy, with the Hawaiʻi Tourism Authority recently raising its 2026 visitor arrivals forecast by a full percentage point to nearly 2%, supported by growth from East Coast markets and improving international trends.

Several major airlines, including Alaska, Delta, and Southwest, have also announced increased airlift to Hawaii for the remainder of the year. We remain confident that both hotels still have significant runway for future growth as they recover back to their 2023 peak earnings levels. With the Rainbow Tower and Palace Tower renovations now complete, and the Ali'i Tower renovation at Hilton Hawaiian Village about to commence, we believe the setup for 2027 and beyond is exceptionally strong. Turning to Florida, our Bonnet Creek complex and Key West properties once again delivered outstanding results with RevPAR growth of 13% and 10% respectively, underscoring the strength of our capital investments and the sustained demand for Florida's premier resort destinations. At Bonnet Creek, the complex achieved record second quarter rooms and food and beverage revenue for the third consecutive year, further validating the significant investments we have made in the assets.

Both the Waldorf Astoria Orlando and the Signia by Hilton Orlando Bonnet Creek contribute exceptional performance, with RevPAR increasing nearly 15% and 12%, respectively. Remarkably, Waldorf Astoria's food and beverage revenue surpassed last year's record by 24%, driven by strong outlet performance and meaningful group contributions. We were also pleased to see the Waldorf Astoria Orlando recognized on Travel + Leisure's 2026 World's Best list. In Key West, second quarter rooms and food and beverage revenue also reached new record levels, supported by strong leisure demand and continued growth in group business. Casa Marina led performance, with RevPAR increasing more than 14% year-over-year as the property's repositioning continued to drive gains in market share, which was up over eight points in the quarter to a RevPAR index of over 120.

The resort also delivered record food and beverage results with a 36% year-over-year increase, benefiting from enhanced restaurant offerings and the continued success of Dorado, highlighting the strong returns generated by our recent investments. Our urban portfolio was another source of strength during the quarter. Washington, D.C. led the way with nearly 17% RevPAR growth as government-related demand increased. Chicago delivered nearly 12% RevPAR growth, supported by strong group and transient demand and exceptionally strong banquet and catering results, which drove meaningful profit growth, while Hyatt Regency Boston benefited from continued strength in group and citywide business, along with demand associated with the Boston Marathon and World Cup matches, resulting in nearly 9% RevPAR growth. Turning to group demand, which was a major contributor to our second quarter's outperformance.

Group rooms revenue increased 9.5% year-over-year, led by strength in Washington, D.C., Orlando, and Chicago, while June group revenue increased nearly 23%. Full year 2026 group revenue pace is now up nearly 6% compared with the same time last year, representing a meaningful improvement from last month, while third quarter group pace is up over 15%. We remain encouraged by overall group booking trends for the balance of the year, supported by continued strength in corporate groups, in-house events, and citywide activity across several of our core markets. Looking ahead to 2027, group revenue pace for our core portfolio is up over 6%, with double-digit increases in Hawaii, New York, Key West, and San Francisco, providing us with further confidence in the continued strength of group demand.

On the capital allocation front, we continue to execute our strategy of recycling capital out of underperforming non-core assets while enhancing the quality and long-term growth profile of our portfolio. Since our May earnings call, we have completed three additional dispositions. In May, we sold our ownership interest in an unconsolidated joint venture that owns and operates the 288-room Embassy Suites Old Town Alexandria, for gross proceeds of $29 million. In June, we exited the 262-room Embassy Suites Austin through the termination of the short-term ground lease and sale of the hotel's operating assets, generating approximately $6 million of proceeds. Most recently, in July, completed the sale of the 314-room Hilton Short Hills for $12 million. These transactions represent another step forward toward simplifying the company, lowering future capital needs, concentrating our portfolio on higher quality assets with stronger growth prospects and more durable earnings.

Since announcing our plan in early 2025 to exit our remaining non-core assets, we have sold or disposed of 10 of the 19 identified hotels, generating nearly $200 million of proceeds at an average multiple of approximately 12.5 times EBITDA. Since the spin, we have now sold or disposed of 55 assets for more than $3 billion. We continue to make solid progress with the remaining non-core hotels, which today account for less than 5% of the portfolio's value, and remain firmly committed to materially reducing our exposure by year-end, with active marketing efforts underway for several assets. As always, we remain disciplined and laser-focused on executing transactions that strengthen our earnings, improve the long-term growth profile of the portfolio, and maximize shareholder value. Turning to capital investments. We are thrilled to have officially reopened the Royal Palm South Beach on July 22nd, following the successful completion of its transformative redevelopment, which was completed in just 15 months as planned.

More than $100 million project included the comprehensive renovation of all 393 existing guest rooms, the addition of 11 new keys, a complete reimagination of the lobby and public spaces, four new food and beverage concepts, and significant enhancements to the hotel's meeting and event facilities. We believe Royal Palm is now exceptionally well-positioned to capitalize on ongoing strength of the South Florida market and compete more effectively within the upper upscale and luxury segments. Upon stabilization, which we expect could occur over the next two years, we believe this investment has the potential to double the hotel's EBITDA.