Park Hotels PK Q1 2026 Earnings Transcript

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DATE

Friday, May 1, 2026 at 11 a.m. ET

CALL PARTICIPANTS

• Chairman and Chief Executive Officer — Thomas Jeremiah Baltimore
• Chief Financial Officer and Chief Operating Officer — Sean M. Dell'Orto

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TAKEAWAYS

• RevPAR -- Increased 5.5% year over year excluding Royal Palm South Beach, with segment details showing over 6.5% growth in January, approximately 3.5% in February, and nearly 6.5% in March.
• Resort RevPAR -- Increased 7.6% excluding Royal Palm, supported by continued strength in leisure demand.
• Urban Hotels RevPAR -- Increased over 2% during the quarter, attributed to healthy corporate group demand.
• Total Hotel Revenues -- $591 million, up nearly 2% year over year.
• Hotel Adjusted EBITDA -- $152 million, with an approximate hotel adjusted EBITDA margin of 26%.
• Total Company EBITDA -- $143 million for the quarter.
• Adjusted FFO per share -- $0.45.
• Core Portfolio RevPAR -- Increased 5.4% to nearly $216 excluding Royal Palm, with nearly a 400 basis point drag attributed to Royal Palm and a 170 basis point drag from lapping last year's Super Bowl at the Hilton New Orleans Riverside.
• Bonnet Creek RevPAR Growth -- Approximately 16% increase, with a 20% rise in hotel adjusted EBITDA and trailing twelve-month EBITDA exceeding $103 million, $20 million above projections.
• Casa Marina (Key West) RevPAR -- Increased nearly 9%; trailing twelve-month EBITDA of nearly $36 million exceeded projections by over $4 million.
• Hilton Santa Barbara RevPAR -- Increased nearly 23%, with a nearly 13 percentage point increase in occupancy and a 3% increase in ADR.
• Hyatt Regency Mission Bay RevPAR -- Up 12% for the quarter.
• Hawaii Properties Combined RevPAR -- Increased 2%, or approximately 5.4% when adjusting for storm-related drag of 340 basis points.
• Waikoloa Village RevPAR -- Grew 6%, benefiting from an expanded airline contract and improved ADR.
• Hilton Hawaiian Village RevPAR -- Increased 1%, or over 4% when adjusting for storm disruption.
• Portfolio Group Revenue -- Grew 5% excluding Royal Palm, led by double-digit gains in Puerto Rico, New York, and Bonnet Creek, with second-quarter group pace up approximately 4% and full-year pace improving to 3% growth (excludes Royal Palm and Hilton Hawaiian Village).
• 2027 Group Pace (Core Portfolio) -- Currently up 5.5% with markets such as New York, New Orleans, and Waikoloa showing notable strength.
• Noncore Asset Sales -- Hilton Checkers in Los Angeles and Hilton Seattle Airport sold for a combined $31 million; these sales valued at 16x 2025 EBITDA, factoring anticipated $36 million CapEx.
• Royal Palm Renovation -- On track for completion by early June, with $1.4 million of group business for 2027 at an average rate of $460, up 31% from 2024 pace; investment of approximately $112 million budgeted.
• Annualized Returns (Royal Palm) -- Targeting 15%-20% return on invested capital; projected EBITDA to more than double from $14 million to $28 million upon stabilization.
• Liquidity -- $2 billion at quarter-end, comprising $156 million in cash and $1.8 billion in available capacity under credit facilities and delayed draw term loan.
• Debt Raising -- $700 million delayed draw mortgage on Bonnet Creek closing this week, upsized by $50 million, at SOFR plus 225 basis points; combined with the $800 million delayed draw term loan, totals $1.5 billion in new commitments.
• Debt Repayment Strategy -- Partial term loan draw in June to repay $121 million Hyatt Regency mortgage (maturing July); remaining capacity to be drawn in September, and combined with Bonnet Creek proceeds, will repay the $1.275 billion Hilton Hawaiian Village CMBS loan due in November.
• Interest Expense Increase -- Annualized interest expense expected to rise by approximately $28 million as a result of the refinancings, with roughly $13 million reflected in 2026 AFFO guidance.
• Dividend -- $0.25 per share paid April 15 and declared for July 15, representing an annualized yield of approximately 9% based on recent trading levels.
• Capital Investment Guidance -- $230 million to $260 million planned for 2026, including completion of Royal Palm and launch of the Alethe Tower renovation at Hilton Hawaiian Village ($96 million investment).
• Renovation Disruption (Hilton Hawaiian Village) -- Closure of the Alethe Tower in 2026 expected to have less than a $2 million EBITDA impact and 10 basis point hit to portfolio RevPAR.
• Guidance Updates -- RevPAR growth midpoint increased 50 basis points to 0.5%-2.5%; adjusted EBITDA guidance raised $7 million at the midpoint to $587 million-$617 million; AFFO guidance raised $0.01 at the midpoint to $1.74-$1.90 per share.
• Hilton Seattle Airport Sale Effect -- Asset sold was expected to contribute approximately $3 million in EBITDA for the remainder of the year.
• Expense Outlook -- Hotel operating expenses increased 2.6% in the quarter; updated guidance reflects mid-2% to mid-3% annual growth in OpEx, with labor and wage growth around 5%.

SUMMARY

Management increased full-year RevPAR and EBITDA guidance due to first-quarter outperformance and ongoing demand resilience across core markets. The company advanced its capital recycling strategy by selling noncore assets amounting to $31 million and detailed completion timelines for major renovations that are positioned to drive higher future EBITDA. Debt refinancing plans were clarified, with $1.5 billion in new debt commitments on track to address all 2026 maturities and extend the weighted-average debt maturity to nearly four years. The Royal Palm renovation remains on schedule for a mid-June opening, with no projected World Cup benefit currently included in guidance. Dividend levels were affirmed, and the company reported sufficient liquidity and enhanced financial flexibility after refinancing activities.

• Management stated that the remaining 12 noncore hotels account for less than 6% of total EBITDA, with active marketing campaigns in progress for all assets.
• During Q&A, Sean M. Dell'Orto indicated, "RevPAR guidance raise was obviously a growth rate, and it is comparable growth. So we remove that from the portfolio on a like-for-like basis. So no impact."
• Capital investments in the Rainbow Tower and Palace Tower in Hawaii were completed at a total Phase Two cost of approximately $85 million; New Orleans Riverside's room renovations will finish in Q4 2026.
• Management stated the Alethe Tower renovation targets 15%-20% returns on $96 million invested and is expected to be completed by mid-2026, creating a "hotel within a hotel" model at Hilton Hawaiian Village.
• Dividend announcements specified a 9% annualized yield given the current share price, representing continued capital return discipline.
• In response to macro risks, management noted "growing geopolitical tensions in the Middle East and their potential impact on consumer discretionary spending and business investment sentiment certainly warrant a continued measured approach."
• Sean M. Dell'Orto explained that group demand improvement drove a greater than 180 basis point increase in group revenue pace since last quarter, with core 2027 group pace up 5.5% including both Hawaii and Royal Palm.
• Management described ongoing efforts to reduce operating cost pressures, with insurance premiums expected to decline at the June 1 renewal, supporting OpEx guidance.
• Within the Q2 demand outlook, management highlighted a "very strong" June with group demand up nearly 10%, after a softer May setup.

INDUSTRY GLOSSARY

• RevPAR: Revenue per available room; a key metric in the hotel industry measuring room revenue divided by total available room nights.
• Adjusted FFO: Adjusted funds from operations; a non-GAAP REIT profitability metric that adjusts FFO for recurring capital expenditures and other items.
• CMBS loan: Commercial mortgage-backed securities loan; a type of mortgage financing where loans are pooled and sold to investors as securities.
• SOFR: Secured Overnight Financing Rate; a reference interest rate for U.S. dollar-denominated derivatives and loans.
• RevPAR index: A property’s RevPAR performance as a percentage of its competitive set, reflecting relative market share.
• ADR: Average daily rate; the average rental income earned per paid occupied room.
• Group pace: The percentage growth or decline in group bookings revenue for a future period compared to a prior period or forecast.
• Delayed draw term loan: A loan facility allowing the borrower to draw down funds at a later date rather than at closing.

Full Conference Call Transcript

Thomas Jeremiah Baltimore, our Chairman and Chief Executive Officer, will provide an update on strategic initiatives and review Park Hotels & Resorts Inc.’s first quarter performance and outlook for the year, while Sean M. Dell'Orto, our Chief Financial Officer and Chief Operating Officer, will provide updates on our capital investments and balance sheet management along with additional color on guidance. Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Tom.

Thomas Jeremiah Baltimore: Thank you, Ian, and welcome everyone. I am pleased to report that we delivered better-than-expected performance in the first quarter with RevPAR increasing 5.5% year-over-year excluding our Royal Palm South Beach hotel, which suspended operations in mid-May 2025 for a comprehensive renovation. I was incredibly impressed by the strong performance throughout the quarter with RevPAR excluding the Royal Palm increasing over 6.5% in January, approximately 3.5% in February, and nearly 6.5% in March. Results were driven by continued strength in leisure demand at our resort properties, where RevPAR increased 7.6% excluding Royal Palm, along with healthy corporate group demand that helped our urban hotels generate over 2% RevPAR growth during the quarter.

From a capital allocation perspective, it was another productive quarter as we remain laser-focused on enhancing the overall portfolio quality through the disposition of noncore assets while continuing to unlock embedded value within our core assets through our transformative renovations, and further strengthening our balance sheet by addressing upcoming debt maturities. Following the January disposition of the Hilton Checkers in Los Angeles, we recently sold the 396-room Hilton Seattle Airport hotel, which was on a short-term ground lease, for $18 million, bringing total noncore asset sales for the year to $31 million, or 16 times 2025 EBITDA when accounting for nearly $36 million of CapEx expected for both properties.

Together, these transactions reflect the continued execution of our capital recycling strategy and our commitment to improving the long-term growth profile of the company. We continue to make solid progress on the remaining 12 noncore hotels and remain firmly committed to materially reducing our noncore exposure by year end. To that end, we have active marketing campaigns underway on several assets but remain disciplined in our approach to prioritize transactions that improve our portfolio's growth profile and maximize shareholder returns. While the transaction market remains challenging, our track record speaks for itself, having sold or disposed of 52 hotels for more than $3 billion over the last nine years, materially improving the quality and earnings power of our portfolio.

Turning to capital investments, we are making significant progress on our comprehensive repositioning of the Royal Palm in Miami. The pace and execution have been exceptional, especially given the scale and complexity of this project. We remain on track to achieve our target completion date by early June thanks to the tireless efforts of our best-in-class design and construction team and all of our partners involved on this project. Miami continues to be one of the strongest hotel markets in the country, and we remain highly confident in the long-term outlook for this asset.

We are already seeing strong group demand with the property securing $1.4 million of group business as of the end of the first quarter for 2027 at an average rate of $460. This represents an increase of $108, or 31%, compared to our pace for 2024 at the same point pre-renovation. Looking ahead, we expect returns on invested capital between 15% to 20%, with EBITDA projected to more than double from approximately $14 million to $28 million upon stabilization, or roughly $69 thousand per key, positioning the hotel to be among the most profitable assets in our core portfolio. Turning to operations, the strength of our core portfolio remains evident.

Core RevPAR increased 5.4% during the quarter excluding Royal Palm, which represented nearly a 400 basis point drag on core results. Performance was led by strong leisure demand in Bonnet Creek, Key West, and Hawaii, along with a sharp rebound in Southern California driven by improved group and leisure transient demand. In Orlando, Bonnet Creek once again exceeded expectations, delivering approximately 16% RevPAR growth and a 20% increase in hotel adjusted EBITDA over the prior-year period, driven by a 10% increase in transient revenues and a 19% rise in group production supported by large in-house events and stronger average daily rate.

Revenues and earnings reached all-time highs with trailing twelve-month EBITDA exceeding $103 million, nearly 60% above pre-renovation levels and $20 million, or 24%, above our projections, meaningfully exceeding our return expectations on our $220 million investment and further underscoring our ability to unlock embedded value across the portfolio. Adding to the property's momentum, our Waldorf Astoria Orlando was recently recognized on Travel + Leisure's list of the top 500 hotels in the world, one of only two Orlando properties to receive the honor. In Key West, performance remained strong at both Casa Marina and The Reach, with RevPAR increasing nearly 9% and capturing meaningful market share during the quarter.

Results were driven by increased transient demand and favorable holiday calendar shifts. Like Bonnet Creek, Casa Marina also exceeded our underwriting for the $80 million investment with trailing twelve-month EBITDA of nearly $36 million, exceeding our projections by over $4 million, or approximately 14%. Southern California results significantly exceeded expectations. At the Hilton Santa Barbara, RevPAR increased nearly 23% as strong transient demand helped drive a nearly 13 percentage point increase in occupancy and a 3% increase in ADR. The Hyatt Regency Mission Bay also delivered exceptional performance with RevPAR up 12% supported by continued strength in drive-to leisure demand.

Turning to Hawaii, we continue to see a steady rebound in demand following the completion of our comprehensive room renovations for the Rainbow Tower at the Hilton Hawaiian Village hotel and the Palace Tower at the Waikoloa Village that, despite the disruption from historical storm activity, resulted in a combined RevPAR increase of 2% across the two resorts, or approximately 5.4% when accounting for the 340 basis point drag from the storms. Waikoloa Village delivered 6% growth, benefiting from an expanded airline contract and improved ADR following the renovation of the Palace Tower.

At Hilton Hawaiian Village, which was far more impacted by the storms, RevPAR increased 1%, or over 4% when adjusting for the storm disruption, driven by higher-rated transient demand in the newly renovated Rainbow Tower. Looking ahead, we remain very encouraged on Hawaii demand trends and expect both hotels to perform at the upper end of our guidance range for the year. Easier year-over-year comparisons, coupled with tailwinds from the completion of our tower renovations at both resorts, should continue to support a higher-rated customer mix. Group performance in the first quarter also exceeded expectations, with portfolio group revenue increasing 5% year-over-year excluding Royal Palm.

Growth was led by double-digit gains in Puerto Rico, New York, and our Bonnet Creek complex, driven by a higher-rated group mix and by strong in-house events along with active citywide calendars in Denver and San Francisco. Looking ahead, group trends remain stable, with second-quarter group revenue pace up approximately 4% and full-year pace improving to 3% growth excluding Royal Palm and Hilton Hawaiian Village, which is being impacted by the partial closure of the Honolulu Convention Center. Stronger-than-expected convention demand across several core markets, coupled with the momentum for in-the-year-for-the-year bookings, has driven a greater than 180 basis point improvement in the group revenue pace since last quarter.

Longer term, group demand remains healthy, with 2027 pace currently up 5.5% for the core portfolio, reflecting continued confidence in the segment. As we look at the balance of the year, we remain cautiously optimistic based on our first-quarter outperformance and the underlying strength of demand across the portfolio, but recognize the broader macro setup remains uncertain. We continue to believe fundamentals will be supported by a combination of anticipated macro and lodging-centric tailwinds.

Fiscal stimulus, including favorable tax policy, deregulation, and potential lowering of near-term interest rates, coupled with easier year-over-year comparisons, favorable calendar shifts, and incremental demand generators such as the World Cup and America's 250th anniversary celebrations, should promote a continuation of the demand growth we saw in the first quarter. That said, growing geopolitical tensions in the Middle East and their potential impact on consumer discretionary spending and business investment sentiment certainly warrant a continued measured approach. Sean will address this more when he talks about guidance.

The first quarter was an encouraging start to the year, and I am very pleased with the progress we have made thus far to elevate the quality of our assets and strengthen our long-term growth profile. I could not be prouder of our team's ability to execute in a challenging environment for our business. We remain laser-focused on our strategic priorities: reinvesting in our iconic properties to drive long-term value, advancing the disposition of noncore hotels, and further strengthening the balance sheet through successful maturity extensions and disciplined leverage reduction over time. And with that, I will turn the call over to Sean.

Sean M. Dell'Orto: Thanks, Tom. We are very pleased with our first quarter results. RevPAR exceeded $191, up approximately 2% over the prior-year period, or approximately 5.5% when excluding Miami, and over 6.2%, or another 75 basis points, when adjusting for the Hawaii storms that Tom mentioned earlier. Total hotel revenues for the quarter were $591 million, up nearly 2%, and hotel adjusted EBITDA was $152 million, resulting in a hotel adjusted EBITDA margin of approximately 26%. Hotel operating expenses increased 2.6%, reflecting continued cost discipline. Overall, earnings came in ahead of expectations with EBITDA of $143 million and adjusted FFO per share of $0.45.

Core portfolio performance remained strong with RevPAR increasing 5.4% to nearly $216 excluding Royal Palm, while gains were partially offset by typical comparisons at both of our D.C.-area hotels following last year's presidential inauguration in addition to a 170 basis point drag on the core portfolio as our Hilton New Orleans Riverside hotel lapped last year's Super Bowl. As Tom mentioned, we continue to make significant progress on our comprehensive transformation of the Royal Palm South Beach hotel in Miami. As we look ahead to the second quarter, we expect the hotel to remain a partial drag on operating results as the property ramps up its staffing ahead of its opening and rebuilds its demand through Q3.

Overall, we are forecasting a nearly $3 million loss for Q2, and expect the resort to ramp up quickly over the back half of the year. During the first quarter, we also completed the second and final phase of guest room renovations at both the Rainbow Tower and the Palace Tower, bringing the total investment for Phase Two across both Hawaii properties to approximately $85 million. In addition, we completed the second of three phases of room renovations, totaling more than $30 million, at the Hilton New Orleans Riverside this past January, with the third and final phase scheduled for completion in the fourth quarter of this year.

Looking ahead over the balance of 2026, we expect a lower level of capital investment this year, with $230 million to $260 million of planned spend, including the completion of Royal Palm and the launch of the Alethe Tower renovation at Hilton Hawaiian Village. This project will encompass all 351 guest rooms, the tower lobby, its private pool, and the addition of three new keys. Total investment for the project is expected to be approximately $96 million.

We expect renovation-related disruption at Hilton Hawaiian Village to have a modest impact in 2026, with the tower's closure expected to have less than a $2 million impact on 2026 hotel adjusted EBITDA and representing just a 10 basis point impact to portfolio RevPAR. Once complete, nearly 80% of the resort's rooms will be newly renovated, significantly enhancing the iconic hotel's long-term competitive positioning. Turning to the balance sheet, our liquidity at the end of the first quarter was approximately $2 billion, including $156 million of cash, plus $1.8 billion of available capacity under our $1 billion revolving credit facility and $800 million delayed draw term loan.

With respect to our 2026 maturities, we have made significant progress over the past two months to raise a $700 million floating-rate delayed draw mortgage on Bonnet Creek, which is expected to close this week. The loan was upsized $50 million based on the complex’s strong results and will bear interest at SOFR plus 225 basis points. When combined with the $800 million delayed draw term loan, this $1.5 billion of new debt capital commitments provides us with certainty while also allowing for the flexibility to fund within par prepayment windows closer to the maturities.

Accordingly, we expect to execute a partial draw under the delayed draw term loan in June to fully repay the $121 million Hyatt Regency mortgage which matures in July. We then expect to draw the remaining capacity in September along with fully drawing proceeds from the Bonnet Creek mortgage financing to fully repay the $1.275 billion CMBS loan on the Hilton Hawaiian Village, which matures in early November, with additional proceeds to be used for corporate purposes. We are grateful for the continued support of our bank group whose confidence in Park Hotels & Resorts Inc.’s credit profile and the strength of our portfolio has been instrumental in executing these transactions.

Their commitment is a clear validation of our balance sheet strategy and underscores our ability to address all 2026 debt maturities in a comprehensive and highly effective manner. Upon completion of these transactions, we will have meaningfully enhanced our financial flexibility, unencumbered the Hilton Hawaiian Village, extended our weighted average debt maturity to nearly four years, and eliminated any significant maturities for approximately two years. On an annualized basis, these refinancings are expected to increase interest expense by approximately $28 million, with roughly $13 million reflected in our 2026 AFFO guidance based on the timing of these transactions.

With respect to our dividend, on April 15, we paid our first quarter cash dividend of $0.25 per share, and on April 24, our Board of Directors approved a second quarter cash dividend of $0.25 per share to be paid on July 15 to stockholders of record as of June 30. The dividend currently translates to an annualized yield of approximately 9% based on recent trading levels. Turning to guidance, while we remain mindful of the geopolitical uncertainties and the potential impact of higher oil prices on both business and leisure travel, we were very encouraged by the strength observed in Q1 and solid demand trends continuing into the second quarter.

April RevPAR is expected to be flat, but up 3% excluding Miami, with performance led by a continued strength in Hawaii, Bonnet Creek, and Key West, as well as solid spring break leisure transient demand in Santa Barbara. And while we expect performance to modestly soften in May, June looks very strong, driven by strong group demand up nearly 10% and favorable year-over-year comparisons across several key markets, including Hawaii, Orlando, Key West, and New York. Overall, we expect Q2 RevPAR to come in around the midpoint of our guidance range with roughly a 100 basis point drag from Miami.

For the year, with Q1's outperformance, we are increasing our RevPAR growth guidance by 50 basis points at the midpoint to a new range of 0.5% to 2.5%, and adjusted EBITDA guidance by $7 million at the midpoint to a new range of $587 million to $617 million, while AFFO increases by $0.01 at the midpoint to a new range of $1.74 to $1.90 per share. It is also worth noting that the recently sold Hilton Seattle Airport hotel was expected to contribute approximately $3 million in EBITDA for the remainder of the year. This concludes our prepared remarks. We will now open the call for questions.

Operator: We will now be conducting a question-and-answer session. If you would like to ask a question, please press 1 on your telephone keypad. For participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys. One moment, please, while we poll for questions. Our first question is from Floris Van Dijkum with Ladenburg Thalmann.

Floris Van Dijkum: Morning. Tom, glad to be on these calls again with you guys. If you can give us a little bit more of an update on the disposition. I think one of the key things I think the market is having some trouble understanding is the quality of the portfolio that is being shielded by, you know, the lower 10% of your assets. If you can talk a little bit about where they are. I know that you have pretty much all of those presumably in the market. What is the status on that? Are you having some detailed discussions? What is the pushback that you are getting from the market?

And are you going to hold out for the last dollar on those assets?

Thomas Jeremiah Baltimore: Well, Floris, it is great to have you back, and I appreciate the question. If I could sort of frame it for a second, keep in mind, if you think about the remaining 12 assets that we have, we currently have 33 assets in the portfolio. We have sold or disposed of 52 assets, as I said in the prepared remarks, for north of $3 billion. We have 12 assets that we are defining as noncore. Three of those assets obviously rest with the dispute with Safehold, which will, we know, resolve itself, if not this year, certainly next year. The EBITDA from those assets is about $16 million, plus or minus.

The remaining nine assets account for about $41 million in EBITDA, and candidly, probably 45% of that relates to one asset in Florida. So we are generally dealing with eight assets that are small. Some have short-term ground leases. Some are joint venture. Some have various challenges. I would say, obviously, the last mile is always the most difficult. I would hope the market would give us credit for the perseverance, the discipline, our ability to reshape the portfolio over the last nine years. We are very confident we are going to make substantial progress this year on those noncore assets. And our collective team are working their tails off. We have work streams underway on all of them.

And it is going to be a little lumpy and choppy. I think you will see more reported as the year unfolds. And believe me, no shortage of effort and focus. We realize it is, while a small overhang, it is an overhang. It clearly is less—if you look at the $41 million—certainly less than 5% to 6% of overall EBITDA. But it is a drain when you think about operating metrics. And so we are working hard to get the assets sold as quickly as we can. We are not holding out for the last dollar.

But we certainly want to have counterparties who can execute and who can move through the process, and we certainly are always focused on creating value for shareholders.

Floris Van Dijkum: Thanks. Maybe a follow-up question on the World Cup. I know that your Royal Palm asset, I think, is opening up in June. Is that a market potentially that could get impacted by the demand for the World Cup? If you can talk broadly about what the impact is going to be or what you are seeing so far. I think everybody is sort of muted on the World Cup impact, but if you can give us a little bit more color on that, that would be great.

Thomas Jeremiah Baltimore: Yeah, it is a lot to unpack there, Floris, but I am happy to take it. I think most importantly, if we step back and think about the Royal Palm at 15th and Collins, 393 keys—we are expanding to 404—putting in approximately $112 million. We could not be more excited. We could not be prouder. We had, obviously, a group there. We cannot wait to get more analysts and more investors in. I could not be more grateful to Carl Mayfield, who heads our design and construction team, who is literally spending three or four days of his week in Miami leading.

And we also have the lead operator from Davidson who has been on-site since we launched construction last May. As of this morning, we had 417 men and women on-site, and that includes from owners’ reps to general contractor to subs to owners’ teams to operations folks, and we are currently targeting that construction will be substantially complete by early June. What we would call the stocking and training TCO would begin and target sort of in mid-May. You have got a few weeks of testing all the fire alarm and life safety issues that have got to work through, and we are probably looking at a target public occupancy TCO, and hoping for sort of mid-June.

So when you think about where that all unfolds as it relates to the World Cup, we have included in our guidance that Sean outlined in his prepared remarks that we have no contribution coming from Miami in that process at this time. So, if we are able to get open, I think the two prominent games in Miami will be July 11 and July 18. We are cautiously optimistic that we should be open in time for those, and that is what we are all working our tails off to make sure that occurs.

Again, we do not have anything in the current guidance, so we have been quite conservative in that intentionally just given all of the geopolitical issues and also the complexity of the inspection and regulatory process as we close out the job. But you may recall other projects and the months, and in some cases years. I think this again speaks to the core competency, the leadership that we have at Park Hotels & Resorts Inc., our experience, the extraordinary success that we are having, obviously, at Bonnet Creek and also what we are seeing in Key West. And we feel the same way about Royal Palm as we look out.

So we are very, very bullish and excited about this project and think we are going to have tremendous success there over time.

Floris Van Dijkum: Thanks, Tom.

Operator: Thank you, Floris. Our next question is from Smedes Rose with Citi.

Smedes Rose: Hi, thank you. I wanted to ask you, in your guidance it looks like the expense expectations moved up around 40 basis points versus your prior guidance, and I was just wondering what was behind that.

Sean M. Dell'Orto: Yes, Smedes. We obviously, in Q1, had some outperformance top line. A lot of that was occupancy-based. So we certainly naturally see, while cost per occupied room was solid—in terms of basically 50 basis points or so growth—with the extra occupancy, expense growth was a little more than expected as well. So we are kind of carrying that through, much like we are doing with the top line, into the expense. Certainly, it is expected the rest of the year that expenses operate as we expect, much like we are thinking about the top line, kind of expecting that to perform as we expected for Q2 through Q4.

Smedes Rose: Okay. Yeah. So thanks. That is helpful. And then, Tom, you said that you think the Hawaii assets this year can trend towards the upper end of your expected ranges. Can you just remind us what that range was for this year?

Sean M. Dell'Orto: Well, I think, ultimately, you are talking about the upper end of our guidance range. So, certainly, you know—yeah, so 2.5%, somewhere in that zone or a little better.

Thomas Jeremiah Baltimore: Two and a half. You know, as we said, we did not provide an EBITDA outlook. The other part is we do have, obviously, some favorable comps coming up on the heels of renovations and certainly some softening activity that we saw last year in Hawaii. So to Sean’s point, we feel good about that. If anything, it is conservative, but that is intentional given all the uncertainty right now.

Smedes Rose: Okay. Thank you. Appreciate it.

Operator: Alright. Thank you. Our next question is from Duane Pfennigwerth with Evercore ISI.

Duane Pfennigwerth: Yes. Hi. This is Peter on for Duane. Thanks for taking the question. I think I would like to maybe just piggyback off Smedes’ last question on Hawaii. And bigger picture, Tom, if you could just kind of lay out the building blocks of the recovery in Hawaii getting back to kind of pre-strike levels—what do you need to see happen, and what could kind of the cadence of that recovery look like?

Thomas Jeremiah Baltimore: Yeah, Peter, it is a fair question. I would just again kind of frame it a little bit. If you look historically, Oahu’s RevPAR growth has always outpaced the U.S. pretty consistently by about 120 basis points. And I think Key West and Hawaii both are around CAGR of about 4.5% versus certainly 3.3%. Obviously, you have got very limited supply growth in Hawaii through 2030. And, again, the investment that we are making—that we continue to make—and after we have finished the Elihi Tower, at least 80% of the rooms at Hilton Hawaiian Village, in particular, will be renovated. And we have been looking to sort of reposition.

If you think about the Japanese traveler, we are at about 750,000 visitation versus about 1.5 million historically. So we have been seeing that shift away, and we have been really repositioning the business to account for that. So Japanese travelers are really accounting for about 3% of our business approximately, which was probably high teens—18% to 20%—pre-pandemic. So as we look out, we are still very encouraged. Obviously, right now, you do have current headwinds, given what is happening with the conflict and the impact it is going to have on fuel and fuel surcharges and, obviously, the strong dollar versus the yen and, candidly, some cheaper alternatives.

Having said that, when you look at the investment we have made and think about the favorable comps that we have, we think there is an opportunity for Hawaii to perform on the higher end of our guidance, if not exceed that. Do not want to get ahead of ourselves, but we are certainly very, very bullish over the intermediate and long term. We still, last year, generated north of $140 million in EBITDA, plus or minus. Think about the highs—it is about $185 million, plus or minus, coming out of the pandemic. So with that backdrop and some of those headwinds, we are really not that far.

We continue to think about repositioning and get back some of the higher-end business. And certainly, as the convention center is also done, we also see that as another tailwind for us as we look out in the outer years. So we remain very, very encouraged for Hawaii over the intermediate and long term. And as it relates to Waikoloa, we are just very, very bullish—obviously, completing the Palace Tower renovation. If you look at the second half of this year and what we are lapping, we had 20 thousand out-of-order rooms last year. That also is going to, I think, be a favorable dynamic for us as we finish 2026 and look to 2027 and beyond.

Duane Pfennigwerth: Great. Thanks for the detail. And then my follow-up, you mentioned group pace improving from the beginning of the year. Group pace ex Hawaii and Miami—could you highlight maybe some markets that you saw some sequential improvement and the flavor of those bookings? Is it corporate groups in the year for the year? Is it convention blocks booking up? Some details there would be helpful. Thanks for the time.

Sean M. Dell'Orto: Yeah, sure, I will jump in on this. I would say from what we saw for Q1, we saw some help in New York on group where we had a nurses strike there and then ultimately, we were at a table taking some of the temporary labor as a group block there for a few weeks. So that was really helpful. We have seen some of the disruptive forces in Mexico and the Middle East allow for some groups to transition or change out and come into markets like Hawaii. So we are seeing some benefit there, and some of that will be in future periods. I think those are kind of the bigger things.

I think we have seen revaluations across the portfolio for group be stronger, where groups have outperformed in their blocks, and so we have seen a little bit of that across the board in both in-house group and, ultimately, convention.

Operator: Thank you. Our next question is from Ari Klein with BMO Capital Markets.

Ari Klein: Thanks. Good morning. Just following up on Hawaii. First, I guess, is that market benefiting from some rotation from maybe also Puerto Rico? And then, Tom, you kind of touched on this, but if oil prices do materially impact airline prices, do you think that disproportionately impacts Hawaii relative to the rest of your portfolio? Thanks.

Thomas Jeremiah Baltimore: Yeah, I mean, look, you have to believe, Ari—it is a fair question—if we get a prolonged supply shock and the conflict continues indefinitely, you certainly have to believe that it is going to have an impact, not only on long-haul air travel but certainly on air travel broadly, and certainly affect the sector. So certainly not going to argue that point. I would think, as you think about sort of rerouting, one of the things that I think would be important to point out is, if you think about inbound traffic into the U.S., we still have not gotten back to pre-pandemic.

We were about 79 million; I think today we are somewhere in the 67 to 68 million—we are about 86%. And if you think about outbound from the U.S., that had gotten up to about 110% to 112%. I think given the conflict, if anything, you might see some of that reroute. People start to onshore themselves, if you will, to the U.S., and I think Hawaii could certainly benefit from that, as well as certainly the Caribbean and seeing Puerto Rico benefit from that. So, obviously, in Mexico, I think we are already, as an industry, seeing rerouting and seeing certainly Florida and the Caribbean. Certainly, we are seeing that in Puerto Rico.

Puerto Rico has had a great first quarter. We are very encouraged about second quarter as well, and certainly seeing that—and those benefits also in California and other parts of the U.S. So those are sort of natural, and I think we are seeing certainly some evidence of that. If you think about all the various cycles over the last thirty-plus years, Hawaii has always been a fan favorite—generations, families, both domestic and international. We certainly think that there is no risk of that changing materially. Mix may change, and we are certainly spending our time as we make these big investments.

And you think about Alihi as a great example—a hotel within a hotel—and the amount of investment that we are going to make in that really flagship, with its own check-in, its own pool, an elevated experience. We think that just continues to help us as we continue to reposition Hilton Hawaiian Village over the future. We also have the opportunity in Waikoloa, just by way of right, to certainly continue not only as we have renovated but certainly add additional keys when market dynamics make sense for us.

So we remain bullish on Hawaii, and as I said, if you look historically from a CAGR standpoint, it certainly has been among, if not, one of the top performers over the last twenty-plus years, and I think the evidence would support that.

Ari Klein: Thanks. And then I just had two clarifications on group. For the fourth quarter, I think previously it was down 8%, and it was going to be a headwind. Just curious, with the improvement, what that now looks like. And then on 2027, the 5.5% growth in pace—does that also exclude Hawaii and Royal Palm?

Thomas Jeremiah Baltimore: It does not. Yeah, it includes Hawaii and Royal Palm. So if you think about 2027 just for a second, as Sean said in his prepared remarks, I think the core was up 5.5%. But you have got New York up mid-teens. You have got New Orleans up mid-teens. You have got Hilton Waikoloa up 17%. Bonnet Creek up mid-single digits. Key West up significantly—north of 20%. Hilton Hawaiian Village is down slightly there, in part. And you also keep in mind that you have got the convention center that will be under renovation at that point. But it is broad-based, and we are very, very bullish as we look out to 2027.

Sean M. Dell'Orto: And I would just add on Q4, we were thinking about pace down 8% last time around; we are about down 4% now.

Thomas Jeremiah Baltimore: Thank you.

Operator: Our next question is from Chris Jon Woronka with Deutsche Bank.

Chris Jon Woronka: Hey, good morning, guys. Thanks for taking the question. Morning. So, question—I was hoping maybe we can spend a minute going back to the transactional market and, you know, good progress so far to date. The question would be, are you seeing a difference in the buyer pool in terms of it broadening out and being more institutional as opposed to, you know, local or owner-operator?

Thomas Jeremiah Baltimore: Yeah, Chris, it is a great question. I would say, candidly, for these types of assets—and again, as I try to frame for listeners—when you think about the eight for a second, these are smaller assets, not big EBITDA contributors. More attractive, I would say, generally to owner-operators, entrepreneurial, could be small PE firms—clearly experienced—and see value and see the opportunity to reposition in some cases. So no shortage of interested parties. Some markets are more attractive—no secret. L.A. certainly would not be at the top of anybody’s list, given some of the challenges there. And I would say Chicago, generally a more tough market.

But, certainly, as you look across the assets that we are marketing, we have got a healthy buyer pool and interested parties. It is just really working through the process, which—the last mile is always the toughest. Many of these assets were assets that had been in the old Hilton portfolio, and they were not a high priority for obvious reasons. And then when Hilton was sold, it was not a high priority to that buyer. And the Park Hotels & Resorts Inc. team has the challenge. We accept the challenge. No excuses. We own it. And we have got to make it happen, and we are going to do that. And I think we have demonstrated that.

And keep in mind, again, the long track record—we have sold assets before the pandemic, during the pandemic, after the pandemic. That also included 14 international—all of those assets—and all of these assets have, you know, some are legal issues, some are joint ventures, some are tax-related issues. Whatever it is, we are up to the challenge, and we are going to get it solved. And you are going to see significant progress this year.

Chris Jon Woronka: Okay. Thanks, Tom. And as a follow-up on Miami—on the Royal Palm. I think you guys have outlined kind of EBITDA expectations fully ramped and timing of opening. So my question is, when that thing opens and it starts the ramp, how much does the composition of the earnings change to get to your EBITDA target, in terms of, you know, ancillary and getting the higher rate and maybe some—are you doing a beach club there—things like that? So just maybe how does the composition look versus what it did pre-renovation? Thanks.

Thomas Jeremiah Baltimore: Yeah. I do not have all of that with me other than to just tell you how excited we are. If you think about the ADR pre-renovation, I think we were $265. I think we have underwritten this at around $400. I think in the prepared remarks I talked about business that we are already getting at $460, plus or minus. And then when you see it and you see the 2nd floor, which had a pool, and now it has got outdoor, really, entertainment space.

Plus, as we are bringing all three of the buildings together, all of the opportunities for an elevated guest experience—and we are planning to really tuck underneath when you think about the Auberge and Rosewood and the Aman and Andaz and the Delano and all of those—and where they are going to be priced at $600, $700, $800 or more, and us underwriting at $400, I personally believe that we will exceed that. I think there is a significant opportunity for us, and just the response that we are getting is really exceeding expectations. So we are very, very bullish and very excited about it.

And, again, I would draw your attention to the success that we are having at Bonnet Creek. We have taken that already from $60 million in EBITDA to north of $100 million. And you think about the success that we are having at Casa. I think it really speaks—we believe, passionately, and I think the track record is demonstrating—that we can generate higher returns on development deals than we can on acquisition deals. And I think it is a real core competency for the team. So we are excited to finish it and then to have an event and have analysts and investors down to see it, and to see what an incredible transformation really looks like.

So we have got to get it done—we know that. As I mentioned, we have got north of 400 people on-site right now working two shifts, really to get the construction completed and to get as much of the World Cup as we can. But also keeping in mind we did not plan for any benefit in the World Cup as part of our guidance as it relates to Miami Royal Palm. So anything we get, we think is going to be incremental gravy, and we are pretty excited about the challenge and look forward to getting it done.

Chris Jon Woronka: Okay. Very good. Thanks, Tom.

Thomas Jeremiah Baltimore: Thank you.

Operator: Our next question is from David Brian Katz with Jefferies.

David Brian Katz: Hey, everyone. Thank you. So I feel like we always cover the quarters quite well, and I wanted to ask something a little longer term. Ian always reminds us about, you know, the pipeline of longer-term repositionings. Clearly, Royal Palm gets done. You know, Hawaii—I think you have given pretty good updates on it. Can you talk about, in qualitative terms, some of the ones that might be next and how we think about sort of building the portfolio for the longer term?

Thomas Jeremiah Baltimore: Yeah. There are a few, obviously, that come to mind. Obviously, Santa Barbara—we think there is significant upside. We have a proposal to add approximately 70 keys, plus or minus, and so we have been working through the entitlement process there. I am really excited. And when you think about—obviously, that is unencumbered and will be unencumbered. We have a great JV partner, but unencumbered in terms of its visibility and views. So pretty excited about that as we sort of look out. As you think about Hawaii, something like at Waikoloa—by way of right—we have the opportunity to add another 200 keys.

I would not say that would be on the front burner until, obviously, we see the market recovered enough to where that makes sense, but it certainly is in the pipeline. We have the ability, obviously, with our DoubleTree in Crystal City—not sure that the market conditions warrant that right now—when you think about just bull’s-eye real estate and where it sits in the location at the front of Amazon HQ2. Certainly pretty excited about that over the long term. I do not think that is something intermediate as we look out right now.

Now the one that we continue to noodle and study—we are working on some of the elevator modernization in New York—but there is no doubt as we think about New York and how to reposition that, that certainly is also a priority and one that needs to be addressed within the portfolio. We know that. It is just trying to figure out what is going to make the most sense for that asset over the intermediate and long term. We certainly think that there is significant value as you think about just the sheer scale of it. It continues to improve from a performance standpoint.

We certainly think that there are opportunities—different things that can occur with that asset over time. So just to give you a few that are on the mind and ones that we certainly think about.

David Brian Katz: Okay. Thank you. I appreciate it. Got a lot done. That is it for me.

Thomas Jeremiah Baltimore: Okay. Thanks, Dave.

Operator: Our next question is from Daniel Brian Politzer with JPMorgan.

Daniel Brian Politzer: Hey, good afternoon, everyone. Thanks for the question. Just had a quick follow-up on the second quarter. I think you mentioned RevPAR in range, but I think you had a comment on May, how it is tracking. I was wondering if you could just give a little bit more detail what is driving that, because I think you kind of characterized it as mix.

Sean M. Dell'Orto: Yeah. Ultimately, to the core second quarter—April, obviously, almost finished here—just looking, we probably have about a week or so of data to get in and get real time. But tracking flattish—might be a little bit better there. Certainly better than expectations, so it kind of continues from Q1. May is the weakest, I think, setup right now for the quarter, with group pace just down slightly. Transient—we ultimately need there to make the numbers we are thinking, which are kind of a flattish type of result. But there is some risk there, so we kind of hold that out as the one where we are going to monitor May. But June is really strong. So June makes the quarter.

As we look at it right now, pace is up double digits for group. Obviously, we have got some things related to World Cup and Juneteenth and other activities going on around that month. Certainly, we think it is going to be a good performer. But altogether, April kind of flattish, May where we see a little bit of risk, and then June strong—comes together to be plus or minus the midpoint of the guide for the year.

Daniel Brian Politzer: Got it. And just for my follow-up, I know we spent a lot of time talking the World Cup as it relates to Miami. But I guess more broadly, as you think about where your footprint is and across the portfolio, have you seen kind of a change in terms of the demand for World Cup maybe versus, say, three or six months ago?

Sean M. Dell'Orto: Nothing dramatic. I think, for us—you put Royal Palm aside, Miami aside; Tom talked to that—the really two big markets for us are New York and Boston, and these are two markets that typically have been 90% occupied during this timeframe of June and July. So it is really kind of a rate play. I think the positioning right now is good in those two markets around the matches. It remains to be seen. Clearly, there is a lot of uncertainty around this event. But right now, we think we have a good position. I would not say it is—what we would say is fantastic like people thought coming into the year.

We said about that impact between those two—those two markets considerably make up the most of the impact for the year for the portfolio. It is probably—we probably said $35 million or so, plus or minus, which might come off a little bit from our expectations today, but still a demand generator, still a positive. But I would not say as dramatic as we thought necessarily as we go into it. We will see. It could change, but I think there are a lot of unknowns around this event right now.

Daniel Brian Politzer: Got it. Thanks so much.

Sean M. Dell'Orto: Thank you.

Operator: Our next question is from Chris Darling with Green.

Chris Darling: Hi. Thanks. Good morning. Hey, Tom. Quick one circling back to Hilton Hawaiian Village, maybe framing the trajectory there in a different way. Can you update us on where your RevPAR index share is today and where you see that metric heading over time as you realize the benefit of the capital you have invested over the last few years?

Sean M. Dell'Orto: Yeah. The RevPAR index is kind of tracking in that 95 to just around 100. We have seen that last year and this year as we started the year because we have had some of that work going on at the Rainbow Tower. What we saw last year is once we got past the first quarter, we saw that pick up a little bit more. But in terms of recovery, where we see it going from there is really back to the historical levels of 110 to 115 range. That is where we kind of were sitting ahead of the renovation and some of the other events like the strike.

I think that is where we want to ultimately see it come back to. And certainly, if we can get there more on a rate profile as well, that is going to help the bottom line, given the renovation work.

Chris Darling: Okay. Understood. And, you may not have a perfect answer to this, but just how are you thinking about the timing in terms of that index share? Is that a one-year timeline, three-year timeline? And maybe you cannot quantify.

Thomas Jeremiah Baltimore: Chris, we would hope that—just if you look historically and the amount of investment that we have made, the corporate resources that we are devoting in addition to our operating partners at Hilton—we would expect that ramp-up to accelerate. And, again, once we get the Alihi Tower done—again, that is somewhat isolated and self-contained—we think that is going to help. And, obviously, we project there is going to be minimal disruption. But when you get that done and you have got 80% of the campus done, we think that is just going to really continue to reposition and, candidly, give us the opportunity to change the customer mix as well. So very excited, remain committed to it.

And, also, when we pay off the mortgage, keep in mind we will have two marquee assets in Hawaii completely unencumbered. Very rare. Most of those resorts and many of the assets owned are under long-term ground leases. That is not the case with Park Hotels & Resorts Inc.’s portfolio. So that is a real benefit for us too and gives us a lot of optionality.

Chris Darling: Alright. I appreciate the thoughts. That is all for me. Thank you.

Thomas Jeremiah Baltimore: Thank you.

Operator: Our next question is from Cooper R. Clark with Wells Fargo.

Cooper R. Clark: Great. Thanks for taking the question. Can you talk us through some of the building blocks for the updated OpEx guide for the full year and what you are expecting to see from a growth perspective on wages and benefits, insurance, and utilities?

Sean M. Dell'Orto: Sure. Like I mentioned before, we have a range right now kind of in the mid-2s to mid-3s. Labor and wage growth should be kind of in that 5%, plus or minus, as you go throughout the year on average. We have some of the offsets to that. Fundamentally, our insurance—we do have embedded in our budgets favorable premium reduction—certainly continues to be a good market for the insureds as we look to renew. We renew on June 1, so we will get the continuation of our reduction from last year through May, and then ultimately pick up for the next seven months what we expect to be a favorable outcome.

And we will give more color to that when we know more in the back part of the year. Estate taxes—once again, we kind of find ourselves with probably about a 5% increase right now through the budget process. But the whole appeal process is in place, and we have not fully factored that into any guidance because we just do not know—in terms of outcomes, amounts, timing, and the like. So I would say labor and wages are clearly the big driver on the growth side, but certainly some good offsets, and we continue to work with our asset management teams and the operators to find those meaningful ways to further offset.

Cooper R. Clark: Great. Thanks. And then a quick follow-up. Just curious how much, if any, impact the Hilton Seattle sale had on the RevPAR guidance raise?

Sean M. Dell'Orto: RevPAR guidance raise was obviously a growth rate, and it is comparable growth. So we remove that from the portfolio on a like-for-like basis. So no impact. Clearly, from a nominal RevPAR, you are seeing a nice increase.

Cooper R. Clark: Great. Thank you.

Operator: Our next question is from Robin Margaret Farley.

Robin Margaret Farley: Great. Thank you. Most of my questions have been answered. I wonder if you could—oh, can you hear me okay?

Thomas Jeremiah Baltimore: We can. Go ahead.

Robin Margaret Farley: Okay. Great. Sorry. Yeah, most of my questions have been covered. Just going back to the Aliyah Tower in Hawaii. I wonder if you could walk us through a little bit about what you are expecting in terms of returns and change in RevPAR, kind of the way you—you know, I think you have given great color on Royal Palm. Just kind of what you are expecting from that Hawaii tower? Thanks.

Thomas Jeremiah Baltimore: Yeah. We would certainly think, again, the opportunity is to take it from 351 keys to probably pick up three keys incremental, budgeting approximately $96 million. Any of these transformations—we have got to be in returns of 15% to 20%. And, again, if you think about Bonnet Creek and Key West that we have talked about already—already confidently exceeding that. The opportunity here is it is really a hotel within a hotel. You have got your own separate check-in. You have got, obviously, an embedded pool given its premier location on the Village. I am just really, really excited about it, and it has not had really that sort of upgrade for some time. So we are excited about it.

Again, we will start that later this year and expect to finish that in the middle of next year, plus or minus. And given the experience that we have had, the success that we have had with the Tapa Tower there, obviously the Rainbow Tower—this is really the next in line to really reposition and, again, take the opportunity to change the customer mix. We are pretty excited about it.

Robin Margaret Farley: And are there any limits on brand there in terms of—do you have to do something Hilton-branded, or could you do something completely different?

Thomas Jeremiah Baltimore: It would have to stay within the Hilton family. And, you know, we have looked at whether you want to rename, but the reality—given the fact that Hilton Hawaiian Village is iconic; you think about that in north of sixty years, plus or minus—and Alihi Tower obviously has its own following. So we think really just the repositioning and the upgrade is the right answer there. But, you know, we will continue to look and continue to study it. But at this point, we have concluded really just the repositioning and the upgrade.

And we are getting a phenomenal response, not only from Tapa but also the Rainbow Tower, and the room product and the quality of the renovation and how thoughtful we were about it. So, again, really excited and, to the point that Sean was making about RevPAR index, getting the whole Village back into that 110 and above range—we certainly think that is within our eyesight, and that will be accelerated once we get this final tower done.

Robin Margaret Farley: Okay. Great. Thank you.

Operator: There are no further questions at this time. I would like to turn the floor back over to Tom Baltimore for any closing remarks.

Thomas Jeremiah Baltimore: I appreciate everybody taking time, and I look forward to seeing many of you at upcoming meetings—one hosted by Wells Fargo, JPMorgan, and, of course, NAREIT. Safe travels, and I look forward to seeing you all.

Operator: This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.