Park Hotels & Resorts executives say they plan to sell between $300 million and $400 million in non-core hotel assets in 2025 while simultaneously investing up to $330 million in renovations to improve their existing portfolio.
During the hotel-focused real estate investment trust's fourth-quarter and full-year 2024 earnings call, Park Chairman and CEO Thomas Baltimore Jr. said the company is in the process of refining and improving its portfolio. A highlight of this plan is a $100 million renovation and repositioning of the Royal Palm South Beach Miami, a Tribute Portfolio Resort, which will close the property in the second half of 2025 through the second quarter of 2026.
"This transformational $100 million investment is designed to significantly elevate the property's quality and overall guest experience, allowing it to better compete with other premium lifestyle resorts in the market and command a substantial [average daily rate] increase," he said. "The comprehensive renovation will encompass a full refurbishment of all 393 guest rooms, along with the addition of 11 new rooms. We will also reimagine all public spaces, including a new lobby bar, reconcepted food-and-beverage outlets and expanded meeting spaces designed to enhance the overall group experience."
Additional renovation work planned for Park includes:
- The $42 million second phase of renovations at the Hilton Hawaiian Village Waikiki Beach Resort, which will renovate 404 existing rooms and add 14 new rooms.
- The $33 million second phase of renovations at the Hilton Waikoloa Village, renovating 203 rooms and adding eight.
- The $31 million second phase of work on the Hilton New Orleans Riverside, renovating 428 rooms.
On the asset sales front, Park executives said they'll continue their long-standing plan of selling of non-core hotels and resorts. Baltimore said Park has made more than $3 billion in sales since 2017 in efforts to "meaningfully upgrade the quality of our portfolio."
He added it's not immediately clear how Park will spend proceeds from potential sales, although there are a few attractive options.
"We'll wait and look for how best to reallocate that capital, but you can expect, obviously, we're going to continue to invest in our core portfolio," he said.
Baltimore said the company is keenly interested in developing on land it already owns, similar to projects recently executed at the Signia by Hilton Orlando Bonnet Creek and Casa Marina Key West, Curio Collection.
"We believe passionately that we can generate higher yields from development projects than we can from acquisition projects at this point," he said.
Other potential uses include paying down existing debt and buying back shares since Park's shares continue to trade at "a really significant discount to" net asset value.
"The team is laser-focused on doing everything we can to close that gap as quickly as possible," he said.
Sean Dell'Orto, executive vice president, chief financial officer and treasurer of the company, said Park doesn't have any pressing debt maturities in 2025. But there is $1.4 billion in CMBS debt maturing in the second half of 2026, which covers both the Hyatt Regency Boston and the Hilton Hawaiian Village. But Dell'Orto said he's not concerned as of right now.
"I think in the end, we have access to a number of debt capital markets," he said. "We continue to monitor and talk with our bankers about some of the strategies and thinking about doing this. But we're certainly weighing the cost, tenure, looking at our maturity table, flexibility of the capital, as well as timing the asset sales. ... It is early. We can see the monitor to the extent market conditions change. If we feel like it compels us to go earlier, then certainly you'll see that activity as we at least take a look, to take maybe a portion of that CMBS off the table. As we get further into the year, I think you'll see us address at least a portion of that."
However, the Hilton Hawaiian Village in particular is seeing such strong performance that it could support even higher levels of debt than the $1.2 billion currently on it.
"So that's an option," Dell'Orto said. "I wouldn't say it's our first option, but again, it goes back to saying we have a lot of scenarios we can look at with all the access we have to the debt markets."
Earnings performance
For full-year 2024, Park's portfolio saw 2.9% year-over-year improvements in both comparable revenue per available room and total RevPAR, fueled about equally by increases in occupancy and demand.
Performance in the fourth quarter specifically wasn't as strong, with a 1.4% year-over-year drop in comparable RevPAR and a 1.9% drop in total RevPAR due to a 1.5-percentage-point decrease in occupancy.
Total revenues for 2024 came down slightly from the year prior to $2.6 billion, with net income of $226 million and adjusted earnings before interest, taxes, depreciation and amortization of $652 million.
For 2025, Park executives are projecting RevPAR growth between 0% and 3% — or a range of 1% to 4% excluding the impacts of closing the Royal Palm South Beach Miami for its renovation.
As of press time, Park's stock was trading at $13.07 a share, down 14.7% year over year. The New York Stock Exchange composite was up 16.2% for the same period.