Park Hotels & Resorts continues to execute on its plan to sell assets and reinvest that money back into portfolio improvement projects, while keeping a steady eye on long-term operating efficiency.

In the third quarter, the real estate investment trust sold the 162-room Hilton Garden Inn LAX/El Segundo for $37.5 million, and the 128-room Hilton Garden Inn Chicago/Oakbrook Terrace for $9.4 million. Last month, the company’s unconsolidated joint venture sold the 190-room DoubleTree Hotel Las Vegas Airport for $22.4 million, with Park getting $11.2 million in gross proceeds.

So far this year, Park has sold its interest in seven of its non-core hotels for total gross proceeds of approximately $317 million, with more to come.

At the end of the third quarter, Park had 47 hotels in its portfolio, comprised of 30,000 rooms.

Park chairman and CEO Tom Baltimore said during a third-quarter earnings call with analysts that the company is well on its way to closing on more than $500 million in asset sales by the end of the year, giving the company liquidity in excess of $2 billion and making it “well-positioned to pivot between defense and offense depending on the macro backdrop,” Baltimore said.

The company is investing in big-ticket capital improvement projects at hotels including the Waldorf Astoria Orlando and Signia by Hilton Orlando Bonnet Creek Complex and Casa Marina Key West. Stock buybacks and asset acquisitions will happen as market conditions allow, Baltimore said.

“Part of the reason why we want to continue to build tremendous liquidity is so Park can be ready and active at that time, even though we don’t think that’s necessarily today or this quarter,” he said.

Tightening operating costs with a vision of long-term savings and model changes has been a priority for the company over the past few years, and Baltimore said that despite increases in wages and benefits, full-year 2022 labor costs are pacing 15% lower than in 2019.

“We are confident the $85 million in expense savings, achieved over the last three years, are permanent, leading to meaningful gains as our portfolio returns to prior peak levels,” he said.

Upticks in group business and business travel are fueling Baltimore’s optimism, since those segments are key parts of Park’s business- and convention-focused portfolio.

New York City, where Park owns the New York Hilton Midtown, is one city Baltimore said is experiencing “robust recovery” thanks to growth in business transient demand that picked up largely post-Labor Day in the U.S.

Group bookings for 2023 as of the end of September 2022 were more than 96% of what 2019 bookings were as of the end of September 2018, with average group rates more than 2% higher than in 2019. In September 2022, more than 25,000 group room nights were booked for 2023, four times more bookings than the previous three months combined, according to the company’s earnings release.

Portfolio-wide, Baltimore said group business is materializing at an improving pace. At the end of September 2022, group bookings for the remainder of 2022 were approximately 77% of what 2019 group bookings were as of the end of September 2019, and group bookings for 2023 were at 72% of what 2019 bookings were at the end of the same quarter in 2019. Average group rates for 2023 now exceed 2019 average group rates by more than 4%, Baltimore said.

San Francisco, where Park owns four hotels comprised of 3,605 rooms, continues to suffer from lower overall demand, but Baltimore is optimistic tides will change, due in part to a more robust citywide events calendar on the books in 2023.

“Our complex [in San Francisco] is 10% of San Francisco’s 30,000 rooms, which allows us a great opportunity to yield out the transient business and sets us up nicely for a significant tailwind there,” he said.

Tech company repositioning, layoffs and the slow return to office around the San Francisco Bay Area are concerns, Baltimore said, but he’s not writing the city off.

“The real benefit historically of San Francisco is having constrained supply, a great convention market and a strong leisure and business-transient business,” he said. “We are seeing green shoots and we want to see that accelerate in 2023 and beyond.”

Park’s Hilton Hawaiian Village Waikiki Beach Resort in Honolulu represented another third-quarter performance highlight. Even without Japanese inbound tourists, who typically make up the second-highest demand segment for Hawaii behind the U.S., the Hilton Hawaiian Village achieved its highest-ever rate of $354 for the month of July.

Year to date, the company has spent $104 million on capital improvements, including $52 million in the third quarter.

A key project in the works is the company’s two-hotel complex in Orlando, the Waldorf Astoria Orlando and Signia by Hilton Orlando Bonnet Creek. The project, which was put on hold in 2020, is back on track, Baltimore said, with meeting space expansion, golf course renovations, and guestroom and public space renovations underway.

Guestroom renovations are also underway at the Hilton Hawaiian Village Waikiki Beach Resort, with completion projected for the end of 2023.

In the third quarter, Park’s portfolio had pro forma revenue per available room of $171.27, an increase of 61.7% compared to the same quarter in 2021, and down 8.8% from 2019.

Occupancy was 71.7%, down 13 percentage points from the same period in 2019, and average daily rate was $238.87, up 7.2% from 2019. Adjusted earnings before interest, taxes, depreciation and amortization for the quarter was $158 million, a year-over-year increase of $81 million.

At press time, Park's stock was trading at $11.99 per share, down 36.5% year to date. The NYSE Composite was down 15.4% for the same period.

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