From cost-saving initiatives to converting hotels, Park Hotels & Resorts President and CEO Thomas Baltimore Jr., believes his company has significant room to improve performance and profitability without buying new hotels.
Speaking during the hotel real estate investment trust's second quarter earnings call, Baltimore discussed various properties that are either undergoing conversions or could be converted to higher-rated brands in the near future.
"Obviously, the [Signia by Hilton Orlando Bonnet Creek conversion] that we've talked about has been reactivated, and we're really excited about that one, both the name change and the repositioning of that world-class resort," he said. "The DoubleTree in San Jose is another great conversion opportunity for us, taking that up brand like we did with the DoubleTree in Santa Barbara, where we had incredible results. And then, of course, the Casa Marina in Key West is another you'll see us reposition, as well, even though it's having phenomenal results."
In the company's four-year history, Park has sold roughly 30 assets for $1.7 billion, Baltimore said, adding that the portfolio has been refined to focus primarily on larger, group-business-driven assets. In all, 90% of the rooms in the REITs 56 properties are now open after the vast majority of the portfolio closed during the depths of the pandemic.
He said getting the existing portfolio back up and running while maintaining profitability has been the biggest goal for his team.
"We are laser-focused on reopening hotels," he said. "We've got three [hotels still closed], and again, we'll wait for the right conditions to open those."
The company has completed the sales of various properties during the quarter, including the $24 million sale of the W New Orleans - French Quarter and the $149 million sale of the Hotel Indigo San Diego Gaslamp Quarter and the Courtyard Washington Capitol Hill Navy Yard. In July, the company also sold the Hotel Adagio in San Francisco for $82 million, and they currently have an agreement to sell the Le Méridien San Francisco for $222 million, with that deal slated to close by the end of September.
Baltimore said scaling back the work force has been a priority across Park's portfolio, eliminating 1,200 full-time positions in all, which represents roughly 8% of its workforce. In all, his company has "been able to pull out $85 million in cost savings," he said.
The almost complete lack of business travel and corporate bookings during the course of the pandemic has lead to massive swings in performance metrics for Park Hotels & Resorts, evidenced by a 909.7% year-over-year increase in revenue per available room during the second quarter, according to the company's latest earnings release. The RevPAR figure for the quarter — $78.46 — was still 59.2% below RevPAR recorded in the second quarter of 2019.
The company posted a $114 million net loss for the quarter with $33 million in adjusted earnings before interest, taxes, depreciation and amortization.
As of press time, Park's stock was trading at $18.83 a share, a 9.7% increase year to date. The NYSE Composite was up 15.3% for the same period.