Executives with Park Hotels & Resorts believe the hotel-focused real estate investment trust had a "solid" third quarter, but performance was nonetheless mired by strikes at several of their properties, including their largest.
Speaking during Park's third-quarter earnings call, Chairman and CEO Thomas Baltimore Jr. said the company managed to outpace other hotel REITs with 3.3% year-over-year revenue per available room growth in the quarter, but that number would've been as high as 5.7% if not for the combined headwinds of strikes and hurricanes that affected the Southeast U.S.
"This obviously is a solid third quarter, probably going to be sector-leading as you think about the top line," he said.
Park pushed off updating its full-year performance outlook, citing the uncertainty created by strikes and storms. Baltimore said it's ultimately up to the REIT's operating partners — most notably Hilton as many of Park's properties are brand-managed — to resolve the labor disputes.
Park's largest property, the 2,860-room Hilton Hawaiian Village Waikiki Beach Resort, is one of the strike-affected hotels. Baltimore noted the market is still suffering from a lack of Japanese travelers, but he remains bullish on the long-term prospects in Hawaii.
"As it relates to Hawaii, I'm not going to comment on the specifics. Obviously, our operator and the unions are in ongoing discussions, and when that agreement is reached and when it's ultimately ratified, we'll all get back to normal. We do believe that this is a transitory matter, and we remain, as I've said throughout the call, we remain very bullish on Hawaii on the intermediate and long term," Baltimore said, adding the only clarity he can provide on the timeline is "the process will last as long as the process lasts."
Unite Here, the labor union representing striking hotel workers across the country, had previously publicly called out Park as the ownership group most associated with striking hotels. On Oct. 16, the union estimated four hotels representing roughly 32% of the REIT's collective earnings faced strikes, including the Hilton Hawaiian Village, DoubleTree by Hilton Hotel Seattle Airport, Hilton Boston Logan Airport and Hilton Seattle Airport & Conference Center.
Hilton Hawaiian Village has also been subject to negative media coverage related to a drop in service levels due to strikes.
When asked directly by an analyst, Baltimore wouldn't quantify how much of Park's quarterly earnings before interest, taxes, depreciation and amortization was affected by strikes. But Baltimore said employees at two of the company's Hilton managed hotels — Hilton Boston Logan Airport and DoubleTree Hotel San Jose — had agreed to new contracts this week.
Park Chief Financial Officer Sean Dell'Orto estimated hurricane and strike disruptions in the quarter accounted for roughly $4 million in lost revenues at the REIT.
Union officials have criticized hotel brands and ownership groups for not adequately disclosing ongoing strikes to potential guests, but Baltimore said he believes brands are properly communicating with guests.
"I think they've been publicly disclosed, and so I'm sure through their channels [brands] are making sure that people are aware," he said.
Storm impacts
Park also has a high-concentration of its portfolio in Florida, particularly Orlando — which is home to the Hilton Orlando, Signia by Hilton Orlando Bonnet Creek, Hilton Orlando Lake Buena Vista and Waldorf Astoria Orlando — and Key West — which has the Casa Marina Key West, Curio Collection, and The Reach Key West, Curio Collection.
Dell'Orto said those hotels and resorts remained open despite the storms, but did see revenue dips. He added the combination of Hurricane Helene and strikes amounted to a 70-basis-point drop in RevPAR in the third quarter, and Hurricane Milton dropped RevPAR 80 basis points in October.
"Overall, we estimate the total impact from both hurricanes to amount to roughly $2 million to $3 million of hotel adjusted EBITDA disruption, with most of the impact occurring in" the fourth quarter, he said.
Asked by analysts if the increasing frequency of major storms impacts Park's willingness to invest in the region, Baltimore said it's considered when looking at a market from a big-picture view.
"It's something we've got to continue to monitor and be proactive on," he said. "We do factor it into our underwriting. We think about what that risk may be as part of that investment and the assessment of that opportunity."
Third-quarter performance
In addition to the 3.3% increase in RevPAR for the quarter, Park recorded $649 million in total revenues for the quarter. The company had an 83.9% year-over-year increase in net income to $57 million.
The company's increased revenues came entirely through increases in demand, with a 2.5-percentage-point improvement in occupancy as rates remained flat year over year.
Adjusted EBITDA dropped 2.5% year over year to $159 million.
As of press time, Park's stock was trading at $14.15 a share, down 7.6% year to date. The NYSE Composite was up 15.3% year to date.