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Park Hotels & Resorts Inc. (NYSE:PK)
Q4 2019 Earnings Call
Feb 27, 2020, 11:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Greetings and welcome to the Park Hotels & Resorts Fourth Quarter and Full Year 2019 Earnings Conference Call. [Operator Instructions]

It is now my pleasure to introduce your host Ian Weissman Senior Vice President Corporate Strategy. Thank you. You may begin.

Ian C. Weissman -- Senior Vice President, of Corporate Strategy

Thank you operator and welcome everyone to the Park Hotels & Resorts Fourth Quarter and Full Year 2019 Earnings Call. Before we begin I would like to remind everyone that many of the comments made today are considered forward-looking statements under federal securities laws. As described in our filings with the SEC these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed and we are not obligated to publicly update or revise these forward-looking statements. In addition on today's call we will discuss certain non-GAAP financial information such as FFO and adjusted EBITDA. You can find this information together with reconciliation to the most directly comparable GAAP financial measure in yesterday's earnings release as well as in our 8-K filed with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com. I would like to call out our enhanced disclosure in the supplemental package where we now break out property level detail for 30 core hotels which accounts for nearly 85% of our hotel adjusted EBITDA further highlighting the overall quality of the Park portfolio. This morning Tom Baltimore our Chairman and Chief Executive Officer will provide a brief review of our fourth quarter and full year 2019 operating results additional color on our integration of the Chesapeake portfolio an update on our capital recycling efforts as well as establish guidance for 2020. Sean Dell'Orto our Chief Financial Officer will provide further detail on our fourth quarter financial results and 2020 guidance in addition to an update to our capex plan and balance sheet initiatives. Following our prepared remarks we will open the call for questions.

With that I would like to turn the call over to Tom.

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Thank you Ian and welcome everyone. 2019 was another outstanding year for Park and I am incredibly proud of all that we've accomplished. We achieved a significant milestone in Park's evolution as we not only executed on our operational objectives and portfolio recycling goals but also positioned part for long-term success. Most notably we completed our $2.5 billion acquisition of Chesapeake transaction which is accretive to both earnings and portfolio quality and it enhances the long-term growth profile of our company. We are energized and excited about the incremental opportunity for our portfolio and we look forward to sharing our ongoing progress. Operationally Park once again outperformed with RevPAR growth topping the full-service hotel REIT sector by 30 basis points as we continue to make progress on narrowing the margin gap with our peers. We also continued to recycle capital in 2019 completing the sale of eight noncore hotels for total proceeds of $497 million while terminating the ground lease of the Hilton Sheffield. In addition we closed on two noncore sales this month which takes our total non-core dispositions over the last two years to 24 assets and over $1.2 billion in proceeds. Finally in 2019 we returned over $420 million of capital to shareholders taking our three year total to nearly $2.3 billion the highest in the sector.

Before I discuss our priorities for 2020 I would like to address the recent management changes at Park. I want to emphasize that I couldn't be prouder of the team we have built since spinning out of Hilton three years ago. Park has assembled an incredibly talented group of men and women who have each played an integral role in the company's achievements. Together we have worked tirelessly to drive results while also fostering a supportive and respectful culture for all of our team members. Within the investments team I thought it was the appropriate time to expand the depth and experience of the team and promote Tom Morey to our Chief Investment Officer. Tom is a key member of the Park executive team and has been intimately involved in every major transaction since joining the company as part of Park's formation. And I'm excited about the knowledge and technical expertise he brings to the investments team. I would like to sincerely thank Matt Sparks for his contributions and dedication to Park and we wish him well on his future endeavors. With respect to the departure of our Head of Asset Management while I was extremely disappointed by this isolated incident it by no means distracts from the stellar results delivered by our asset management team. Our deep and talented bench is comprised of seasoned professionals with an average of nearly 20 years of industry experience. These individuals have been directly responsible for executing on our strategic goals of closing the margin gap with our peers achieving operational excellence and realizing the synergies with the Chesapeake portfolio.

We remain confident that our team is focused on executing our current playbook. We are evaluating both internal and external candidates to lead the asset management team. And in the interim the team will report to Sean. I want to stress that these changes do not signal any shift in strategy. We remain focused on recycling capital achieving operational excellence and creating long-term value for shareholders. As we turn to 2020 it's hard not to ignore the heightened caution seen around the world as the coronavirus continues to dominate the headlines. With assets in global gateway cities Park is not immune to the impact it is having on travel and group meetings. And while it is still too early to quantify the ultimate impact on our business based on what we know today we have assumed approximately 25 basis points of drag on REVPAR or $5 million of EBITDA in our 2020 guidance. We will continue to closely monitor the situation and reevaluate our approach if necessary. However for now the playbook for Park does not change and we remain focused on three key priorities over the next 12 months. Our first priority is the realization of the $24 million of synergies underwritten in the Chesapeake portfolio. With roughly $20 million already achieved between corporate G&A savings and management contract negotiations we are confident in delivering on the remainder this year. And we are seeing promising results already by analyzing the mix of business within our segments and making a strategic shift toward higher-rated transient channels. Overall we grew ADR share at 12 of the 16 Chesapeake hotels during the fourth quarter and we expect additional growth in the coming year. As one example ADR at the Hyatt Fisherman's Wharf increased 11% in the fourth quarter as we encourage our operators to shift their tactics be more patient and not pursue a first-to-fill strategy.

At the Marriott in Newton we recently installed parking gates at the hotel that are expected to generate a minimum of $380000 annually in incremental revenue. There are similar examples throughout the portfolio and we are confident and excited in our ability to unlock the embedded opportunities. Second we remain focused on recycling capital with a goal of continuing to improve the quality of the portfolio. We recently announced the sale to Hilton Sao Paulo for total proceeds of $118 million and a gross multiple of 14.9x completing our exit from international markets after having disposed off 14 non-U.S. hotels in just three years an impressive accomplishment. We also closed on the sale of Park's Embassy Suites D.C. for $90 million or 14.8x forward EBITDA. Both sales were part of our broader program to sell approximately $550 million noncore hotels to reduce leverage following our acquisition of Chesapeake. With these latest transactions we have nearly reached our goal with $470 million sold following the Chesapeake acquisition. Looking ahead we expect to remain active sellers with another $250 million to $350 million of potential future sales by year-end 2020. Finally we will continue to prioritize our commitment to maintain a strong and flexible balance sheet and a healthy dividend payout for investors. To that end we plan to utilize proceeds from our asset recycling program to reduce debt and to also activate stock buybacks during periods of share price dislocation. At the end of 2019 we repaid $230 million of debt with proceeds from our Q4 asset sales and we look to use all or a portion of the proceeds from our recent sales to further reduce leverage. Turning to our portfolio's performance. I am pleased with our overall results for both the quarter and full year 2019. Comparable RevPAR growth for the quarter was ahead of expectations at 0.7% and for the full year it came in at 1.9% at the top end of our full year range.

Total RevPAR growth was 2.1% for the quarter and 3.2% for the year driven by our solid group base and our aggressive push on out-of-room spend. Although the industry has been faced with increased challenges on the expense side I'm very pleased with our ability to control our hotel adjusted EBITDA margin which decreased by just 10 basis points for the year which was materially better than our peers on average. Within our revenue segments group was up 1.8% for the quarter following last year's nearly 4% increase while on a full year basis pro forma group revenues increased a very impressive 5.8% which lapped a tough year-over-year comp. Our strong geographic footprint in key markets like San Francisco as well as our healthy in-house group bookings at our hotels in Hawaii and Orlando will drive results throughout the year. Our current group pace in 2020 is down approximately 1%. However excluding San Francisco our overall group pace improves 350 basis points to over a positive 2%. Standouts for group in 2020 include the Chesapeake portfolio up over 8% and strong markets like Southern California up 11% Denver up 16% and New York up 10%. In addition citywide calendars are favorable this year in San Diego Chicago Boston and Miami. On the transient side comparable revenue was flat for the quarter and down just 60 basis points for the year with fourth quarter performance negatively impacted by business transient which was down 3.6% and down 2.2% for the year. Business transient weakness was partially offset by strength in leisure which was up 3.1% in the fourth quarter and 0.9% for the year. Overall I've been pleased with our ability to drive out-of-room spend particularly in our current low RevPAR environment and our 2019 total RevPAR growth of 3.2% highlights the success of our revenue initiatives.

Food and beverage revenues increased 3.9% during the quarter on a pro forma basis driven by a nearly 5% increase in banquet and catering revenues while ancillary income which includes resort fees and parking revenues increased an impressive 8%. While food and beverage revenues are heavily dependent on our group segment our asset management team has continued to find ways to diversify and improve revenues across both the legacy portfolio and the Chesapeake portfolio. We believe we still have runway for additional revenue growth in the coming year. Turning to guidance. As I look to the remainder of 2020 I am encouraged by broader macro trends that the economy continues to be supported by healthy employment gains a sturdy and resilient U.S. consumer and low rates from an accommodated federal reserve. As it relates to Park we remain confident in our ability to continue achieving our objectives as we have prepared ourselves to reap the benefits of the operational synergies embedded within the Chesapeake portfolio and take advantage of relative strength across our core portfolio with relatively healthy operating results across several of our core markets including Hawaii Miami Key West San Diego Boston Denver and Chicago. Despite this relative optimism it's hard to ignore the ongoing headwinds our industry faces in the wake of slower global growth a stronger U.S. dollar increased wage pressure and the uncertainty around the U.S. election. Additionally heightened concern over the impact of the coronavirus not only on the global economy but also in U.S. lodging fundamentals in particular has us taking a more conservative approach to 2020 guidance.

Accordingly we are establishing comparable RevPAR guidance of negative 1% to a positive 1% for the full year 2020 with a comparable hotel adjusted EBITDA margin range of negative 175 basis points to a negative 100 basis points. Additionally we anticipate adjusted EBITDA to be in the range of $800 million to $830 million while adjusted FFO per share to be in the range of $2.55 to $2.67 per share. Note that our 2020 guidance takes into account the recent sales of both the Hilton Sao Paulo and Embassy Suites D.C. which reduced earnings by approximately $16.5 million over the balance of this year.

And with that I'd like to turn the call over to Sean who will provide further details on our performance and earnings guidance.

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

Thanks Tom and welcome everyone. Looking at our results for the fourth quarter we reported better-than-expected results for both RevPAR and earnings. As Tom mentioned RevPAR growth for the quarter was 0.7% versus the flat growth we had expected as of Q3 while adjusted EBITDA was nearly $223 million and our adjusted FFO was $173 million or $0.72 per diluted share. On a full year basis which includes Chesapeake since the September 18th closing we reported total revenues of approximately $2.8 billion adjusted EBITDA of $786 million and adjusted FFO of $613 million or $2.88 per diluted share. Turning to our core operating metrics. For the fourth quarter we reported comparable RevPAR of $178 and total RevPAR of $276. Our occupancy for the quarter was 80.9% and our or 80 basis points higher than prior year while our average daily rate ended the quarter at $221 or a decrease of 30 basis points year-over-year. These top line results produced comparable hotel adjusted EBITDA of $211 million while our comparable margins decreased 40 basis points to 28.3%. For the full year 2019 our pro forma comparable portfolio which includes the results from the Chesapeake assets for the fourth quarter only produced a RevPAR of $183 and total RevPAR of $284.

Our occupancy for the year was 82.6% up 50 basis points while our average daily rate was $222 or an increase of 1.2% versus the prior year. These top line results produced a pro forma comparable hotel adjusted EBITDA of $769 million with margins falling just 10 basis points year-over-year to 29.2%. Looking more closely at our performance across our core markets. Hawaii was a standout market for us with RevPAR up 8.7% in the fourth quarter and 5.5% for the year driven by incredibly strong results at our Waikoloa Village Resort. RevPAR at Waikoloa was up nearly 29% for the quarter outperforming the comp set by 1000 basis points and coming in 9.3 percentage points higher than we had expected at the end of the third quarter. For the full year the hotel's RevPAR was up 18.5% again outperforming the comp set by 1000 basis points in the Big Island submarket by roughly 1200 basis points. Leisure demand to the Big Island sharply rebounded in 2019 following the prior year's disruption from the Kilauea Volcano coupled with strong growth in the contract segment and two group buyouts at the resort. With the successful handoff of the remaining 466 Ocean Tower rooms to Hilton Grand Vacations on January one Hilton Waikoloa Village now operates as a 2-tower 644-room complex which we expect to be efficiently rightsized to remain strategically focused on the group segment while more aggressively yielding transient demand.

Hawaii results were also supported by strong performance at our Hilton Hawaiian Village Resort with RevPAR up 4% during the quarter due to strong transient and contract demand despite 130 basis points of disruption related to Phase one of our Tapa Tower guestrooms renovation. Hilton Hawaiian Village also increased market share by 170 basis points during the quarter and recorded 2.1% RevPAR growth for the year. Given the solid leisure trends we have seen in Hawaii combined with increased airlift from Southwest and AA we are currently forecasting modest growth in Hawaii for 2020. However this does not consider any impacts from the coronavirus. Other solid performance during the quarter included Denver with RevPAR growth up nearly 10% our three hotels in Orlando which were up 5.5% combined and the Hilton Santa Barbara which was up 8.6% on continued tailwinds from our brand conversion in 2018. Our portfolio of six hotels located in San Francisco generated RevPAR growth just north of 3% during the quarter as strong group revenues of nearly 30% were partially offset by weakness in business transient demand. Our San Francisco properties finished the year with 6.3% RevPAR growth which outperformed the San Francisco market by 210 basis points in capital landmark group year. Looking ahead to 2020 San Francisco faces very difficult comps with convention count on room night down materially to 850000 room nights. Moving to our balance sheet. We remain in great shape with pro forma net debt to adjusted EBITDA at just 4.2x as of year-end 2019 which takes into account the full year impact of last year's acquisition and disposition activity. Accounting for last week's announced sales of the Hilton Sao Paulo and the Embassy Suites D.C. pro forma net leverage would drop by another tenth of a turn to 4.1x.

Overall we feel very good about our leverage ratio and liquidity position with over $1.3 billion between our untapped revolver and cash on hand. Turning to the dividend. Similar to prior periods we paid a fourth quarter step up dividend of $0.55 per share equating to a full year distribution of $1.90 per share currently north of a 9% dividend yield by far the most attractive in the sector. Looking ahead our Board recently declared our first quarter dividend of $0.45 per share to be paid on April 15 to the stockholders of record as of March 31. Based on our full year adjusted FFO guidance and targeted payout ratio in the range of 65% to 70% we remain committed to paying out the $0.45 per share quarterly dividend with potential upside in the fourth quarter. With respect to capex we invested $61 million in our hotels during the fourth quarter over half of which was for guest-facing areas taking our full year total capex spend to $240 million inclusive of our rebuild of the Caribe Hilton while our maintenance capex figure was $160 million or just under 6% of revenues. The renovation and conversion of our Reach Resort in Key west wrapped up in the fourth quarter with the resort reopening in December with a completely renovated and repositioned product as a Curio by Hilton. Early returns are strong and we are really excited about the future for this resort. We also completed guest room renovations at Hilton Boston Logan Airport Hilton Bonnet Creek as we make progress toward upgrading the Hilton to Signia Hilton in Phase one of the guest room renovations at Hilton Hawaiian Village's Tapa Tower that I mentioned earlier.

For 2020 we continue to target 6% maintenance capex spend while our ROI pipeline is expected to meaningfully increase. Our largest active ROI project remains the expansion of the meeting platform at our Bonnet Creek complex which is currently under way at the Waldorf with its new meeting platform expected to open by the second quarter of 2021 and the health and meeting space expansion expected to open by the second quarter of 2022. Turning to 2020 guidance. I would like to provide a few more details on some of the key assumptions driving our expectations. First I remind listeners that Waikoloa will be noncomparable in 2020 to account for the room give backs while the Caribe Hilton will also remain a noncomp hotel. I would also like to point out that there will be some variability in our quarterly performance with Q1 expected to be one of our weakest quarters given very difficult year-over-year comps with RevPAR growth for our San Francisco portfolio lapping its 22% growth in Q1 of last year. We expect much better performance over the back half of the year especially during Q4 which is anticipated to be our strongest quarter in the year driven by several of our core markets including San Francisco New Orleans and Key West which should benefit from renovation tailwinds at the Reach. Finally given some of the renovation and ROI projects we have in progress for 2020 we expect about 80 basis points of disruption which has been factored into our comparable RevPAR growth guidance range. This includes roughly 50 basis points of RevPAR disruption and approximately $12 million of EBITDA disruption from the Bonnet Creek ROI project. That concludes our prepared remarks. We will now open the line for Q&A.

[Operator Instructions] Operator may we have the first question please.

Questions and Answers:

Operator

[Operator Instructions] Our first question comes from the line of David Katz with Jefferies. Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question

Anthony Powell -- Barclays -- Analyst

Hi. Hello. Good morning, everyone.

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Good morning.

Anthony Powell -- Barclays -- Analyst

Question on the coronavirus impact you outlined in the prepared remarks. Where specifically was that impact? And did it relate to either group cancellations or leisure transient? And generally would you expect there to be more impact on group versus leisure in your portfolio?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

As we outlined in our remarks in our prepared remarks Anthony we're seeing about $5 million. The biggest piece was the Facebook group cancellation in San Francisco so accounting for probably $1.5 million plus or minus. There was about $1 million for a Chinese group in Hawaii. And then plus or minus another $1 million to what we saw in sort of a Chinese crew coming out of New York City again very isolated. If I could perhaps frame for listeners Chinese demands in our portfolio is about 0.5%. It's about 50000 room nights what we saw last year about $10 million to $12 million in revenue. As you think about what's happening in Japan as an example. Certainly Japan accounts for about 3% of our overall demand about 250000 room nights and probably about 90% of that coming into Hawaii. As you think about our portfolio given the fact that clearly a strong presence on the coastal and certainly in Hawaii we are watching carefully. We are in frequent discussions with our operators. At this point it's been minimal as we've outlined. We thought it was important to be transparent and to share what we know at this time. We don't see this changing the part playbook what we're focused on and the priorities that we outlined in our prepared remarks.

Anthony Powell -- Barclays -- Analyst

And maybe a separate question. You mentioned that you could activate a share repurchase activity this year. Given the current dislocation in the stock of the 9% yield does it make sense to maybe accelerate some of those repurchases and fund later via asset sales?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

It's a great question. And again as we outlined in our prepared remarks and consistent with the playbook that I've shared with many analysts and some of the many investors the priorities are going to remain the same based on where we sit today and that is integrating the Chesapeake portfolio continuing to sell noncore assets and reduce leverage and activate the buyback. Clearly at these levels and the fact that we're trading at such a huge discount to NAV clearly you can expect us to be more active on that front. We also are committing to maintain the dividend and we certainly believe that we can do all of this on a leverage-neutral basis. So that's the plan and that we plan on maintaining that as we proceed through the year.

Anthony Powell -- Barclays -- Analyst

Okay, thank you.

Operator

Our next question comes from the line of Rich Hightower with Evercore. Please proceed with your question.

Rich Hightower -- Evercore -- Analyst

Hey, morning, guys.

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Hey. Rich.

Rich Hightower -- Evercore -- Analyst

Hey. Tom. I guess really just a follow-up on both of Anthony's questions there. The first one just to clarify in terms of the coronavirus impact that's embedded within guidance. Is it it sounds like those were either past events or events that are known on the books and so you can sort of quantify it within that $5 million EBITDA impact. So is that to say that there is no sort of assumed unknown future impact to forward bookings or whatever that are included in that number?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

That is correct. We are we wanted to be transparent and to share what we know at this time.

Rich Hightower -- Evercore -- Analyst

Okay. Yes I think that answers that. And just on a follow-up to the capital allocation question. Has your view of the company's NAV changed at all in the past six to 12 months as we talk about sort of discounts to NAV to varying degrees maybe given outside of coronavirus just the changing sort of fundamental picture in lodging over that time? And how does that factor into the repurchase decision?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

It's a great question Rich. I think it's important to sort of step back and think about part when we were spun out right? 67 largely Hilton branded hotels sort of a barbell. We had a top 10 of 15. And then of course we got a collection of other assets. This team has worked tirelessly as you know in helping to recycle capital. We have sold 24 assets including 14 international including assets in South Africa and Germany and the U.K. and Brazil which obviously we concluded a joint venture in Dublin. So we've really been able to reshape the portfolio coupled with bolting on the Chesapeake portfolio. So as Ian noted in his prepared remarks we're providing increased certainly disclosure and information on the top 30 assets. We would respectfully submit that those top 30 assets are a high quality high RevPAR and comparable to any of the high-quality portfolios in our sector. They account for about 85% of our EBITDA and north of 90% of the value. So if anything we think that core portfolio is clearly close to best-in-class. You will see us continue to recycle capital so that we can use those proceeds to continue to reduce debt and activate the buyback. We are we certainly are well aware of our stock performance and the discounted NAV. You can argue whether that NAV has come in slightly or not but the reality is that we clearly are trading at a significant discount to NAV.

Rich Hightower -- Evercore -- Analyst

Alright, thank you very much.

Operator

Our next question comes from the line of Smedes Rose with Citi. Please proceed with your question.

Smedes Rose -- Citi -- Analyst

Hi, good morning. I wanted to ask you what are you seeing in terms of the pace of wage and benefit growth in 2020? And just since I think your portfolio is a little more has a little more heavy union presence can you give any do you have any sense of is this a peak year or what does 2021 look like?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Yes I we ran we assumed about 3.8% of wage and benefits Smedes. In 2019 we're assuming about the same run rate. I think the one benefit in our portfolio recognizing we're about 60% union is most of those union contracts were negotiated last year. So we can expect as we move forward in terms of the wage rate and benefits peaking I would say that it's going to peak certainly this year in that 3.8% to 4% range.

Smedes Rose -- Citi -- Analyst

Okay. And then I just wanted to ask you if you take the low end of your guidance and make some assumptions on maintenance capex. I know you said it's using a percent of revenues. But I mean it looks like the dividend becomes kind of tight. I mean are you would you be willing to fund it with debt on a short-term basis? Or do you think you could cut back on maybe some of the maintenance capex spending if need be?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

No we remain committed to the dividend at the current levels. We do not believe consistent with what Sean has said in the past paying out our AFFO in that 67% range that we are comfortable. We do not see a risk at all Smedes. And we can maintain our maintenance capex in that 5.5% 6% range.

Smedes Rose -- Citi -- Analyst

Okay, thank you.

Operator

Our next question comes from the line of Gregory Miller with SunTrust. Please proceed with your question.

Gregory Miller -- SunTrust -- Analyst

Thanks. Good morning Tom and Sean.

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

Morning. Greg. How are you?

Gregory Miller -- SunTrust -- Analyst

Good. How are you both?

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

Good, thanks.

Gregory Miller -- SunTrust -- Analyst

Great. So first question I have is on Bonnet Creek. I apologize if I missed this but do you have an update on the timing of the Signia flag change and how are you and Hilton are working together to market that new brand both to the transient and the group guests?

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

Greg Sean. The Signia brand should ultimately come through around kind of late 2021 we believe. It's obvious that we've got a few things to do within the asset to achieve that brand conversion as well as kind of tie off things related to the construction of the additional meeting space. So more kind of toward the back end I think of next year on that. is doing plenty of great marketing on the meeting space. Certainly you've got a lot of good traction on booking into that meeting space beyond it's opening in mid-2022 right now. But I think it's probably a little bit more premature to kind of do marketing as a Signia right now but working closely with Hilton to kind of ramp up those efforts in due course.

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

And Greg one of the things that we heard from both Hilton and our on-site operators that we needed more meeting capacity to certainly be competitive in that market. As you know it's certainly one of the top convention markets top leisure markets 75 million visitors. We are really blessed to have a resort with 350 acres championship golf course plus having both the Hilton and the Waldorf brand. So we're making that long-term investment. We believe this is a great ROI project that will generate high teens returns. And the booking pace and the feedback that we're hearing from meeting planners and others has been overwhelmingly positive. Hilton I believe has a pipeline of several Signias and I know that it's a real focus for them to particularly on the group side to have these well positioned assets that have that sort of elevated if you will something to perhaps compete with the JW Marriott brand as an example. So we are really excited about it. We think there's huge upside in our portfolio. And this clearly is a world-class asset an asset that is also proximate to Disney.

Gregory Miller -- SunTrust -- Analyst

I don't want to keep going further south for the follow-up question and ask about the Caribe. Given what you guided for this year how much of the challenge do you see is driven by perhaps supply or demand issues in the Caribbean in general versus say challenges in attracting demand to Puerto Rico specifically?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

I would say Greg it's really a ramp-up. I mean keep in mind the trauma that the island experience post-Hurricane Maria as we all know. And we took 18 months to rebuild and to relaunch. And there are many assets that are still in that renovation or restoration phase. So it's really beginning to get better airlift better visitation. We believe greatly in the island greatly in the asset and are very optimistic. We just think that ramp-up is going to take a little longer hence the reason that you see relatively flat performance here in 2020.

Gregory Miller -- SunTrust -- Analyst

Okay, thanks for the answer.

Operator

Our next question comes from the line of Aryeh Klein with BMO Capital Markets. Please proceed with your question.

Aryeh Klein -- BMO Capital Markets -- Analyst

Thanks. I was a little surprised that perhaps there wasn't perhaps a better comparable margin outlook considering the synergies. Can you provide some color on the underlying assumptions on expense growth? I know you mentioned wage growth but was there anything else in there that's worth calling out?

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

Klein I would probably say it worked well that our group pace for the portfolio is down or kind of almost flattish versus kind of the group activity we had last year so kind of the extra F&B revenue that we benefited from last year. And yes the growth is a little bit lower this year. So I think that kind of contributed to kind of that portion of the out-of-room spend as you do the RevPAR to margin type of equation. Clearly that's the best equation and part of the equation that we don't people don't discuss a lot. They try to do room RevPAR down to that. But out-of-room spend is certainly key. And we're seeing that in parking and resort fees seeing great growth there but F&B is a little bit lower than in the past just given that the group setup for this year.

Aryeh Klein -- BMO Capital Markets -- Analyst

Okay. And then maybe just on total RevPAR growth as you mentioned you expect to see some lighter F&B growth but how do you expect total RevPAR growth relative to RevPAR growth for 2020?

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

Certainly higher it's probably kind of circa 2% plus or minus.

Aryeh Klein -- BMO Capital Markets -- Analyst

Okay, perfect. Thank you.

Operator

Our next question comes from the line of Robin Farley with UBS. Please proceed with your question.

Robin Farley -- UBS -- Analyst

Hi, thank you. I have two quick ones. This is our Connect for Robin Good morning. Others have mentioned tougher pricing environment and that perhaps that's good for sellers and tougher for buyers. Could you remind us what remains of your disposition plan and whether you're actively marketing any assets now?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

We are Robin we've got as we said in our prepared remarks another $250 million to $350 million in assets. We currently are marketing one asset now and expect obviously to receive real-time bids here in the very near future. We still think it's an active market. There's plenty of equity. There's plenty of debt capital as well. And I think as we've indicated by selling eight assets last year and terminating our the ground lease in Sheffield in the U.K. we've had great success continuing to sell our noncore assets. So there's an active market out there. Whether that is temporarily disrupted or people are a little more cautious we'll see. We're not hearing that as we talk with prospective buyers about assets that we are marketing are considering the market. So we are we remain cautiously optimistic and we would also bring you back to our track record of really having I think demonstrated our ability to sell noncore assets many of which have been very complicated from both a legal tax and structuring particularly given the fact that we've unloaded 14 international assets many of those with foreign buyers.

Robin Farley -- UBS -- Analyst

And then transient business obviously seems softer but did that get worse on year-over-year basis versus Q3 or sort of continue the weaker trend sensitivity in terms of what you're seeing in transient business?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

No. Clearly October was really soft. November came back and the chilling December was strong. As Sean mentioned in his prepared remarks obviously first quarter and to remind listeners will be our we believe our softest quarter given the fact that we're lapping RevPAR growth last year at 4% to 4.2% and I believe group up well north of 20% in the first quarter of last year. So we would expect first quarter to probably be down in the 1% to 2% range of RevPAR but with obviously stronger back half of the year. We're expecting transient. Clearly leisure continues to be stronger than what we've seen. And this is transient although we did see somewhat positive on the December front.

Robin Farley -- UBS -- Analyst

Thank you.

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of Chris Woronka from Deutsche Bank. Please proceed with your question.

Chris Woronka -- Deutsche Bank -- Analyst

A Good morning, guys How are you?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Morning. Good. How are you?

Chris Woronka -- Deutsche Bank -- Analyst

Good. Wanted to ask on the obviously you guys have given us a lot of color about the Chesapeake synergies. Wanted to ask with some of the recent changes to the Marriott the Bonvoy program at those hotels are you could you see additional upside from some of those changes? Or is that kind of baked into your prior synergy and upside guidance?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Yes. It's a great question Chris. We're continuing to study that ourselves. We to think back to the original plan and the $24 million largely weighted toward replacing and eliminating obviously the G&A we've done that. The opportunity to renegotiate management contracts we've done that. And as we said in our prepared remarks we're very confident in the $20 million out of the $24 million. As we think about other opportunities clearly remixing the mix as we talked about in the early feedback that we're getting there is really encouraging. We also think that we benefit from having a favorable convention calendar in many of those markets coupled with renovation tailwinds. As we sort of dig in and I'll take that the two Ws in Chicago as an example as we dig in there and we huddle and work with our partners at Marriott we are seeing other opportunities because we're seeing improved performance there. And I do think the Bonvoy of Marriott's got 137 million members and they continue to think creative ways to monetize it. We're studying carefully to see whether or not those costs in fact are rising versus decreasing not only through for Bonvoy but across the Hilton system as well. So the jury is still out. We continue to study and monitor that ourselves and we'll certainly have more to report back in the future.

Chris Woronka -- Deutsche Bank -- Analyst

Okay great. And then just wanted to ask you about New York and realizing one hotel 5% or 6% of EBITDA for the company. But any change in kind of your secular long-term view there as we've seen a lot of your public peers move to reduce their exposure to the market?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Yes. It's a great question. We all struggle. As you think about New York one of the great cities of the world and we all have to believe that it's going to come back but it's really missed this cycle. And as we think about again being down 4.7% and in the quarter another 1.8% and then watching sort of cash flow continue to erode it is quite frustrating. Supply I would say was the biggest issue. And I would encourage the brand to put a hold on it. Enough is enough in New York is a blunt very direct comment there on that. And I also think when you just think about what's happening with shadow supply you think back to 2011 there were super compression days there where demand in the city north of 95% about 141 days. We estimate this year will be down into probably the mid-teens as an example. So that's really eroded the pricing integrity in New York and made it a very difficult environment. And now as we all hear about potential owners who are in jeopardy. I personally believe that that is going to expand over time. That's not going to shrink. And I think a lot of that is driven by too much supply. We benefit we believe by having the best group house in the city given the status given the size given the meeting space platform. And so we're not throwing in the towel and we're continuing to work hard with our partners at Hilton continue to drive value. But clearly it's been quite frustrating as we think about this decade and this cycle for New York.

Chris Woronka -- Deutsche Bank -- Analyst

Okay, very good. appreciate all the color. Thanks, Tom.

Operator

Our next question comes from the line of Bill Crow with Raymond James. Please proceed with your question.

Bill Crow -- Raymond James -- Analyst

I apologize I got on a little bit late. So if you covered it just move on. But you tend to have embraced the crew business the contract business a little bit more than maybe some other owners. And I'm wondering how big an impact you're seeing from coronavirus from canceled flights in particular San Francisco Hawaii New York? I mean is that really a headwind for you?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

It is not Bill. As we early in the Q&A you may have missed we talked a little bit about some Chinese crew business and what we've seen in New York. But if you think about Hawaii particularly with what's happening with Southwest and their expansion plans and the relationship we have with them we're not seeing at all any kind of fall off in that respect. The crew contracts about 5%. And as you know really part of the strategy for Park was to anchor our business with group layer in some contract and then really yield the transient. And we've had success in our short duration since we were spun out of Hilton. So we continue to see us use that playbook as we move forward.

Bill Crow -- Raymond James -- Analyst

So no impact in San Francisco from the crude business thus far?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Not at this time. We've seen obviously the Facebook cancellation and as we said earlier about $5 million and it's largely coming San Francisco Hawaii and New York where we've seen it. And again that's really been minimal when you think about the scope of our operation.

Bill Crow -- Raymond James -- Analyst

Okay, appreciate it. Thank you.

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Thank you.

Operator

Our next question comes from the line of David Katz with Jefferies. please proceed with your question.

David Katz -- Jefferies -- Analyst

Good morning, everyone. Apologies we're dancing back and forth among a number of things this morning. So my guess is that we have discussed the near-term impact fairly thoroughly. What I wanted to ask your opinion about is we have more and more discussions about owners contemplating the notion of third-party managers rather than using the brands as managers. Can you just philosophize a bit about that and the boundaries and circumstances under which you think through those alternatives?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

David it's a great question. I think back to my past life when at peak we had 16 or 17 different management companies including all of the brands coupled with a lot of independent operators. And what I would tell you is that we like the makeup that we have today meaning having seven eight management companies including Hilton Marriott our partners at Hyatt plus independent. And what we find is that sometimes there are the right operator for the right situation. Clearly you would think of the big convention center hotels or the big resorts. Generally by and large the brands management companies have the wherewithal they have the scope and capacity and the resources to be able to support those. Other hotels that may be a 300-room urban largely a rooms box with limited food and beverage and limited group you could have a more nimble management company that may have a particular brand focus or regional or an asset type focus. So I think finding the right situation makes sense for us obviously given the fact that we were spun out of Hilton.

Clearly as you think about our top 10 assets in those iconic assets those are obviously under long-term management agreements. But I would say that we have a very healthy working relationship and there's a good push and pull. And I think if the system works right we should make them a better manager and they should make us a better owner. We have a wonderful partnership and it's worked well from that standpoint. Are there some situations where it may make sense to take out a brand manager from our independent? Absolutely. We continue to explore many of the assets that we've been selling. We have been able to sell those either unencumbered by flagging in for management. So that's clearly something that we'll continue to evaluate over time. But make no mistake I think having multiple managers and looking at best practices and being able to use that and push and encourage your management companies is really a good thing. And we are incorporating that into the asset management toolkit here at Park.

Bill Crow -- Raymond James -- Analyst

If I may follow that up. Would a circumstance like New York right where there is general pressure searching for best outcomes would those kinds of circumstances be one where you'd be more inclined obviously not with big box flagship hotels but would that be a circumstance where you'd look more into third party opportunities?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Yes it's a great question. I think New York unfortunately oftentimes it's sort of split beyond whether or not you're an existing union shop or not. Because I think if you have an existing union operation more than likely you would need to find the management company who operates under that framework. Other cities clearly and I think San Francisco is an example where we have again multiple operators given the six hotels that we have there and being able to share best practices looking at revenue management strategies thinking about different ways to manage and yield there it's been really really helpful to us. So we would see that being a positive. But no doubt in New York I think all things are on the table I think the biggest issue among the biggest issues that we just had too much supply that's eroding any kind of pricing integrity coupled with the shadow supply and enough is enough. And I think the brands have got to step forward and show leadership in that regard.

Bill Crow -- Raymond James -- Analyst

Thank you very much. Appreciate it.

Operator

Our next question comes from the line of Neil Malkin with Capital One. please proceed with your question.

Neil Malkin -- Capital One -- Analyst

Hey guys, just kind of on the West Coast. Have you seen any incremental cancellations of group just from your maybe larger accounts inkling or kind of asking you about either deferring it or canceling this due to corona fears?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Nothing more than what we've shared.

Neil Malkin -- Capital One -- Analyst

Okay great. And then just related to the dividend you said 60% to 70% payout. I'm assuming you're talking about FFO because in terms of AFFO I think it's much higher like 85% plus. So I think that's the question someone was asking before about what you would do in terms of either labor or capex to preserve that because if EBITDA drops high-single digits around 10% or something like that I think you'd be at breakeven. So just curious to hear kind of what potential contingency plans would be and if you stress tested the balance sheet in that way?

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

We of course have stress tested the balance sheet and I will restate what I said earlier that we remain committed to the dividend at the current level and believe that we have plenty of cushion on that basis.

Neil Malkin -- Capital One -- Analyst

All right, thank you.

Operator

Our next question comes from the line of Lukas Hartwich with Green Street Advisors. please proceed with your question.

Lukas Hartwich -- Green Street -- Analyst

Thanks. I just have a quick clarification question. Earlier you mentioned in the discussion on non-room revenue and total revenue I think you said 2% growth in 2020. And I just didn't catch if that was the non-room revenue line or total revenue line.

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

2% is plus or minus of total revenue.

Lukas Hartwich -- Green Street -- Analyst

Okay. So it sounds like relative to where this year should cap at that kind of implies a bit of a pickup in terms of out-of-room spending. Is that right?

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

No. Little bit to be a little bit lower I think on out-of-room spend.

Lukas Hartwich -- Green Street -- Analyst

Great. Thank you.

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

Thank you.

Operator

Mr. Baltimore we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Thank you. We enjoyed our discussion today. We look forward to seeing many of you at the Citi conference next week. Have safe travels. Look forward to seeing you.

Operator

[Operator Closing Remarks]

Duration: 57 minutes

Call participants:

Ian C. Weissman -- Senior Vice President, of Corporate Strategy

Thomas J. Baltimore, Jr. -- Chairman of the Board, President and Chief Executive Officer

Sean M. Dell'Orto -- Executive Vice President, Chief Financial Officer and Treasurer

Anthony Powell -- Barclays -- Analyst

Rich Hightower -- Evercore -- Analyst

Smedes Rose -- Citi -- Analyst

Gregory Miller -- SunTrust -- Analyst

Aryeh Klein -- BMO Capital Markets -- Analyst

Robin Farley -- UBS -- Analyst

Chris Woronka -- Deutsche Bank -- Analyst

Bill Crow -- Raymond James -- Analyst

David Katz -- Jefferies -- Analyst

Neil Malkin -- Capital One -- Analyst

Lukas Hartwich -- Green Street -- Analyst

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