Anyone betting against major U.S. markets such as New York City and San Francisco "is making an unwise bet," Park Hotels & Resorts President and CEO Thomas Baltimore Jr. said.
"These are great cities of the world," he said, including Chicago on that list, that "are certainly going to be coming back" from the COVID-19 pandemic. He added that "fears and concerns ... will certainly subside," particularly around owning and opening hotels in major cities.
Park owns three hotels in Chicago and four in San Francisco, including the temporarily closed Parc 55 San Francisco - a Hilton Hotel. The company owns one hotel in New York City, the New York Hilton Midtown, which reopened in the third quarter.
On the company's third quarter earnings call, Baltimore said the New York Hilton Midtown — the third-largest hotel in Park's portfolio at 1,878 rooms — has exceeded expectations since reopening on Oct. 4 after an 18-month shutdown, "ramping up better, candidly, than any of us thought possible."
Bookings around the Thanksgiving holiday at the New York hotel are "pacing around 80% of 2019 levels, with sellouts for Wednesday and Thursday and [average daily rate] flat," said Sean Dell'Orto, executive vice president and chief financial officer.
Even before that, Baltimore said, "we expect to be near, if not a full sellout for the [New York City] Marathon this weekend."
"I've been in New York three times in the last couple of weeks, and the city's coming back to life, and it's great to see," he said.
Park's suspended San Francisco hotel, the 1,024-room Parc 55, is across the street from its Hilton San Francisco Union Square, which has 1,921 rooms open. Baltimore said Parc 55 is projected to reopen sometime in December and ramp up in time to take advantage of hotel demand from the JP Morgan Healthcare Conference in mid-January.
"What we're hearing so far is probably 50% to 75% [conference] participation at 2019 rate levels. If that holds true, it certainly makes sense for us to reopen in that December time frame," Baltimore said.
He said the San Francisco market represents "probably the most complex situation" in our portfolio, noting the company sold two hotels in the market in 2019.
"But I think it would be a huge mistake to bet against San Francisco," he said. "When you look at the amount of innovation that is coming out of that market, the job creation, the educational footprint, the venture capital being anchored there in the amount of capital flows — no doubt, it's a tougher environment right now, particularly for business transient and group, but ... when you get people back in offices, you get more vaccinations for kids and families, and people resuming sort of a normal life, we fully expect that San Francisco, among the other urban markets, is going to come back."
Park also owns the JW Marriott San Francisco Union Square and the Hyatt Centric Fisherman's Wharf in the market, both of which performed well in the third quarter, Baltimore said. Occupancy at the JW Marriott property ramped up to about 67%, while the Fisherman's Wharf hotel had occupancy in the mid-80% range.
Thirty-four citywide events set for 2022 in San Francisco are accounting for about 620,000 hotel room nights so far, compared to an all-time high of 1.2 million room nights in 2019, which Baltimore said is evidence that demand is "continuing to ramp up."
In Chicago, corporate group bookings pace is at about 83% of 2019 levels, which amounts to approximately 168,000 room nights citywide.
"We're very encouraged. Chicago has really held up better [than expected] since we reopened back in June of this year," Baltimore said.
The performance of Park's hotels in those major city markets is largely dependent on demand from groups and business travelers, which has grown sequentially quarter to quarter throughout 2021.
Across Park's portfolio, revenue from group bookings increased 130% from the second quarter to the third quarter, and "there's been a notable increase in midweek demand among our hotels that cater to business transient demand," Baltimore said.
Groups also made up 13% of the guest mix at Park hotels, up from 8% in the second quarter. Business transient makes up nearly 20% of the guest mix, Baltimore said.
That improvement in group and business transient demand is expected to moderate somewhat in the fourth quarter, "as the uncertainty surrounding the [COVID-19] delta variant has caused nearly $8 million in cancellations," with "many of these groups rescheduled for later in 2022," he said.
Group bookings for 2022 are pacing at about 66% of 2019 levels, and rates are exceeding 2019 levels, he said.
Signs of group demand strength are also evident at the company's hotels in the New Orleans, Orlando and Honolulu markets, while hotel demand from leisure travelers drove results in Southern California, South Florida and Hawaii, particularly.
Park executives are encouraged by the reopening of Hawaii to international travelers and expect increased demand in 2022 as vaccination rates ramp up in other countries, particularly Japan, which accounts for approximately 20% of all visitors to the company's two Hawaiian resorts.
Third Quarter Performance
Of Park's portfolio of 45 open hotels, 38 exceeded break-even occupancy levels during the quarter, driving positive hotel adjusted earnings before interest, tax depreciation and amortization, according to the company's earnings release. Occupancy portfolio-wide was 58% for the quarter.
In addition to the Parc 55 in San Francisco, the company has one other hotel which has suspended operations — the Hilton Short Hills in New Jersey, which Baltimore projects to reopen in the first quarter of 2022. As of October, 96% of the company's rooms are in operation.
The company achieved hotel revenue per available room of $105.48, which was a 301.6% increase from the third quarter of 2020, but down 43.4% from the same quarter in 2019.
Adjusted EBITDA was $77 million, which represented a 141% sequential improvement over the second quarter of 2021. Net loss for the quarter was $82 million.
The company sold two hotels in the third quarter — the Hotel Adagio, part of Marriott's Autograph Collection; and Le Meridien San Francisco — for total gross proceeds of $304 million.
As of press time, Park's stock was trading at $19.82 a share, a 15.6% increase year to date. The NYSE Composite was up 18.5% for the same period.