While first quarter performance metrics are still severely depressed compared to pre-pandemic levels, officials with Park Hotels & Resorts have been pleasantly surprised by the pace of the demand rebound in early 2021.

Speaking during the hotel real estate investment trust's first quarter earnings call, President and CEO Thomas Baltimore Jr. pointed to performance in Hawaii specifically as a sign that the return of hotel demand might be more robust and quicker than expected.

At the Hilton Hawaiian Village Waikiki Beach Resort, "we were about 13% occupancy in January," he said. "Move that to 34% in March. We're expecting to be closer to 60% in the second quarter. And we're probably in the high 70s in the third quarter and continuing that into the fourth quarter. We could not have predicted that."

This is noteworthy not just because of the stronger demand figures but because the property doesn't rely on the drive-to leisure travel that has buoyed so many properties throughout the pandemic, Baltimore said.

"This is a fly-to market, and you've got testing requirements that are still in place, but the pent-up demand, the revenge spending that we're seeing, it's really snapping back certainly quicker than we anticipated," he said.

What will throw fuel on the fire of a Hawaiian tourism rebound would be a reopening of travel between the state and Asia, Baltimore said.

"The real game-changer for Hawaii will be when unrestricted pan-Pacific air travel is allowed for those fully vaccinated, which could happen as early as July 1," he said.

The signs of a rebound within Park's portfolio isn't isolated to Hawaii, with strong forward-looking signs in leisure markets like Miami and Key West and urban centers like San Francisco — where Park officials decided to reopen the Hilton San Francisco Union Square earlier than initially planned — and Chicago.

Baltimore stressed the resort and convention center hotel REIT's ability to reopen hotels has been boosted in a low demand environment by its significant cost-cutting measures, which will persist even when demand returns to more normal levels.

"I know there are going to be skeptics out there who look and say, 'We've been to this movie before. We take costs out in a recessionary environment, and as soon as things come back, we have the arms race with the brands adding all of their amenities and the cost creep starts,'" he said.

He expects this rebound to be significantly different.

"Think about how [Hilton and Marriott International] have taken out 20%, 30%, 40% of their costs at the corporate level," Baltimore said. "I've never seen that before over a long career."

While the strong signs of a leisure rebound are positive signs overall, Park's hotel portfolio is disproportionately reliant on group business, and Baltimore noted the company has more big-box properties than its hotel REIT counterparts. While group and corporate transient demand are slower to return, Baltimore said he remains positive on Park's long-term outlook.

"I think the need for companies to bring their people together in a safe environment for training, for team building ... you're never going to do away with that need to be together," he said. "So we'll have to wait and see what that impact is on the business transition."

A potential decrease in business demand won't be as significant as some say, he added.

Baltimore acknowledged that hotels still have significant operational challenges in front of them, primarily an extremely difficult labor environment, where some people are unable or are disincentivized from returning to the workforce.

"There are people who are unable to go back to work, whether they have school-aged children at home and the schools have [opened], and that's certainly part of it, is we look at some of the gaps today," he said. "But the other part is in the elephant in the room, [which is] there are very generous unemployment benefits and you hear numbers to the tune of $20 to $23 an hour and full benefits. So there are some that have that bridge ... through September."

He said more people should be more confident to return to the workforce as the year progresses and vaccination is more widespread.

"I expect when people are back in their offices for some significant period of time plus kids are in schools, then I think we're going to have a much better sense of really where the labor picture is," he said.

During the first quarter of 2021, Park reported a net loss of $191 million. Fifty-two of the company's 59 hotels are now open. The company is projected to break even at the corporate level in the second half of 2021 for the first time since the onset of the COVID-19 pandemic.

Park reported adjusted earnings before interested, taxes, depreciation and amortization of negative $49 million, with pro-forma hotel adjusted EBITDA up 34.7% since the fourth quarter of 2020.

Revenue per available room for open properties during the quarter was $40.79, down 70% from the first quarter of 2020. Pro-forma occupancy of its 42 consolidated open hotels was 37.4%.

As of press time, Park's stock was trading at $22.34 a share, up 30.3% year to date. The NYSE Composite was up 14.3% for the same period.