Executives at Park Hotels & Resorts said they have renewed optimism, fueled by a spike in hotel operating metrics from resurgent business travel and continued strengthening of group demand.
During the hotel-focused real estate investment trust's fourth-quarter and full-year 2023 earnings call, Chairman and CEO Thomas Baltimore Jr. said business from groups in particular has started the year strong, with that segment's booking pace up 29% in January and 26% in February.
"It's broad-based," he said. "Chicago was up 38%. Denver was up 34%. In San Jose, our business out there close to Apple and others is up 35%. New Orleans is up 52%. New York is up 31%."
Baltimore said strong citywide event calendars across some of the major markets buoy the 2024 outlook. Park's strategy with groups has been built around layering in a strong base of group business at its owned hotels before driving yield from the smaller pool of transient business on top of that.
There are "strong citywide calendars across several of our core markets — including Chicago, Honolulu, New Orleans, San Diego and Miami, all of which are expected to produce double-digit increases in convention roomnights," he said.
Park ended 2023 with year-over-year revenue per available room growth of 8.7%, including a 4.1% increase in the fourth quarter, and is now projecting a 2024 RevPAR increase between 3.5% and 5.5%.
Park executives are also optimistic about continued strong performance from the company's Hawaiian hotels, even as visitors to Hawaii continue to be down significantly from pre-pandemic totals, Baltimore said.
Reshaping Portfolio
Baltimore said 2023 was a significant year for Park as it reworked the composition of its portfolio. Most notably, the company walked away from its two large hotels in San Francisco — the 1,024-room Parc 55 San Francisco and the 1,921-room Hilton San Francisco Union Square — in October when they were placed in court-ordered receivership.
He also noted significant investment and repositioning of the REIT's other hotels as a reason for optimism.
In recent months, Park has completed renovation work at the 1,021-room Tapa Tower of the Hilton Hawaiian Village Waikiki Beach Resort; the transformation of the Waldorf Astoria Orlando and Signia by Hilton Orlando Bonnet Creek for more than $220 million; and an $80 million renovation of the Casa Marina Key West, Curio Collection.
Baltimore said the company has already realized performance boosts from all that work, with average daily rates increasing $75 at Tapa Tower. Hilton Hawaiian Village currently has five towers, and Baltimore said his company is currently going through the entitlement process to add a sixth.
"We think there's even more upside in Hawaii, as we look out," he said. "It would be impossible to replicate what we have at Hilton Hawaiian Village ... I'm not sure there's another REIT asset across any of the sectors that generates the kind of [earnings before interest, taxes, depreciation and amortization] that we do at Hilton Hawaiian Village."
Earnings Performance
In addition to the 8.7% RevPAR increase for 2023 to $178.62, Park reported a 1.3% increase in average daily rate and a 4.9-percentage-point increase in occupancy.
The company posted even stronger growth in total revenue per available room, up 10.2% for the full year to $285.50 and 4.9% for the fourth quarter to $287.21.
Total revenue increased from $2.5 billion in 2022 to $2.7 billion in 2023.
Baltimore said Park has seized on the disconnect between market value and the net asset value of its portfolio by repurchasing $180 million in common stock, equivalent to 14.6 million shares.
As of publication time, Park's stock was trading at $16.69 a share, up 9.1% year to date. The NYSE Composite was up 4.3% for the same period.