Greetings, and welcome to Park Hotels & Resorts' First Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. Operator provided instructions. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ian Weissman, Senior Vice President, Corporate Strategy. Thank you. You may begin.

Thank you, Operator, and welcome everyone to the Park Hotels & Resorts first quarter 2022 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. Actual performance, outcomes, and results may differ materially from those expressed in forward-looking statements. Please refer to the documents filed by Park with the SEC, specifically the most recent reports on Forms 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the 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 reconciliations to the most directly comparable GAAP financial measure in this morning's earnings release, as well as in our 8-K filed with the SEC, and the supplemental information available on our website at pkhotelsandresorts.com. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide a review of Park's first quarter performance and outlook over the balance of this year. Sean Dell'Orto, our Chief Financial Officer, will provide additional color on first quarter results, as well as more detail on our balance sheet and liquidity, and will provide additional information on second quarter performance. Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Tom.

Thank you, Ian, and welcome everyone. I'm very pleased to report stronger than expected first quarter results as we enter a new phase of the recovery. More specifically, I am incredibly encouraged to see demand accelerate across all segments. While we expect a continuation of strong leisure demand across our portfolio, the recovery of both group and business transient is gaining momentum, with some of the most negatively impacted urban markets seeing demand up 300% since the start of the year. In addition, with COVID case counts down significantly in the U.S. and more companies returning to the office, our urban portfolio has witnessed a sharp rebound, specifically in San Francisco and New York, where second quarter occupancy is forecasted to nearly double over the first quarter to nearly 60% in both markets. Further support of the broad-based recovery taking shape within our portfolio. And in Hawaii, we are very excited about the upside potential, especially in Honolulu, with the return of travelers from Japan expected toward the back half of this year, which should help support a meaningful acceleration in our earnings, with Japan representing nearly 20% of demand in Hawaii in 2019. Looking at Park's 2022 priorities, we continue to see the benefits of our operational initiatives in realizing a more efficient model, and the opportunity to create value by executing on our capital allocation priorities, including stock repurchases and ROI initiatives. We remain committed to upgrading the overall quality of our portfolio, and plan to take advantage of the strong bid for real estate in the private market through targeted asset sales. Supported by our diversified portfolio, our rapidly improving backdrop, and healthy balance sheet, we believe Park is incredibly well-positioned in the quarters and years ahead. Touching briefly on the macro backdrop, despite concerns over global geopolitical uncertainty and higher commodity prices, we have not seen a noticeable impact on our business as the U.S. economy continues to grow, driven by healthy consumer spending, strong corporate profits, and record low unemployment, coupled with the widespread shift in return-to-work policies among the largest companies in the U.S., and declining COVID cases. The macro environment should help fuel a full recovery in the lodging industry by the end of 2023, if not sooner. Starting with group, we have witnessed a material increase in demand within the past two months because declining COVID cases and loosening travel restrictions have translated to significant increases in both lead volume generation and actual group bookings. The pent-up group demand that we saw in the fourth quarter pre-Omicron resumed by mid-February, with first quarter group demand achieving a 35% sequential improvement to Q4 despite large spread cancellations in January. Group bookings for both 2022 and 2023 increased three-fold in March by approximately 200,000 room nights versus just one month prior, with over $44 million of group business added during the month. Currently, our group pace for Q2 through Q4 of 2022 stood at 66% of what 2019 bookings were as of March 2019. And group pace for the full-year 2023 sits at 73% of 2019 pace, as of March 2019. The improvement in group trends is particularly evident at our urban hotels. In markets like San Francisco, New York, Boston, D.C., and Chicago, 2022 group bookings accelerated materially from February to March, with some markets seeing a 25% increase in pace. Our group demand improved 400% from January to March for our urban hotel portfolio overall. We are seeing similar pricing power among our groups that we have seen with leisure travelers, including very strong ancillary spending that resulted in March group contribution exceeding 2019 levels in markets like San Francisco, New York, Orlando, and Key West. We are encouraged by recent trends and feel confident that our group-oriented hotels will realize outsized growth over the near term, and will return to pre-COVID group demand levels in 2023. Additionally, we expect business travel to accelerate during the second quarter, paving the way for healthy portfolio-wide growth in the second half of 2022. Business transient demand saw promising improvements beginning in February, overcoming a 34% sequential decline in January, with a 25% sequential growth in February, and a 46% sequential growth in March, resulting in March business transient revenues that were just 16% below March 2019 levels. In addition, midweek occupancies for our hotels that cater more to business travelers improved to 56% in March, up from just 27% in January, highlighting increased mobility as the COVID wave receded. Looking ahead, second quarter transient pace is down just 11% to the same time in 2019, while the pace of improvement continues to accelerate. In the last four weeks, we have seen overall transient pickup increase by 7% over 2019 levels, an encouraging indicator of demand trends as a broader return to office unfolds, and leisure demand remains healthy. In sum, we expect business transient demand to continue to build throughout the year and into 2023, accelerating Park's overall growth profile. Looking briefly at portfolio results, Q1 came in ahead of our expectations and portfolio-wide ADR surpassed first quarter 2019 levels for the first time since the start of the pandemic. As mentioned earlier, results were driven, once again, by robust demand trends in Hawaii, Florida, Southern California, and Puerto Rico. Importantly, we are seeing an inflection for our urban markets as we have also witnessed a strong uptick in business transient and group demand across several of our core urban hotels, including San Francisco, New York, Boston, D.C., and Chicago. By the middle of the quarter, more specifically, hotel occupancy for our core urban hotels across these five markets increased by more than 2,700 basis points from the January lows to nearly 47% in March, and are on pace to be near 68% during the second quarter, based on our current forecast. Turning to some highlights from our core markets. Hawaii continues to exceed expectations. Waikoloa surpassed first quarter 2019 RevPAR by 32% and exceeded first quarter 2019 EBITDA by $1.2 million, or 9.5%, on half as many hotel rooms compared to 2019. Our hotel EBITDA margins exceeded 2019 levels by nearly 700 basis points. The hotel hosted two near buyouts during the quarter, which helped push banquet revenues 19% ahead of first quarter 2019. At Hilton Hawaiian Village, our hotel consistently outperformed budgeted expectations throughout the quarter with March RevPAR just 5% below 2019 levels, while EBITDA margin was up 140 basis points compared to March 2019, a testament to effective operating model changes. Based on our current forecast, we expect our Hawaii hotels to surpass 2019 RevPAR on a combined basis during the second quarter, despite a lack of international demand, which has historically been around 30%. Overall, with the return of the international traveler expected to occur during the second half of the year, this should further accelerate our growth profile. South Florida remains incredibly strong with our Key West hotels exceeding 83% occupancy during the first quarter. Our ADRs continue to climb, reaching $752 during the first quarter, and more than 60% higher than levels achieved during the same period in 2019. Miami occupancy topped 82%, while rates at our Royal Palm Hotel were nearly 30% higher than Q1 2019. We do expect a modest deceleration of growth during the summer, as our hotels start to lap RevPAR growth rates of 150% to 200% on average achieved last year. However, fundamentals remain strong in South Florida for continued leisure strength. Looking at some of our urban hotels, in New York, Omicron hit particularly hard in January, but the market quickly rebounded in February with occupancy improving nearly 21 percentage points sequentially to 34% and 54% in March as the removal of vaccine and mask mandates in early March led to a sharp increase in reservations. Based on preliminary results, April occupancy is on pace to be approximately 70%. Domestic leisure has made up the bulk of the demand thus far. But there are encouraging signs of material improvements for both business transient and international travelers. And the group outlook looks strong. The group pace is up over 96% for the balance of 2022. Overall, we expect the hotel to end the year at over 80% occupancy with average daily rate above 2019 levels. In San Francisco, the outlook is very promising. Based on preliminary results, our open hotels are expected to report occupancy of over 64% in April and more than a 22% improvement from March with the pace of improvement expected to continue throughout the second quarter as group returns to the market. Tech companies resumed travel and leisure production accelerates. Performance has been particularly strong at our 1,900-room Hilton San Francisco Union Square, with occupancy improving to 60% in April, based on preliminary results, up from just 30% in March. Given better than expected group production, we made the decision to accelerate the reopening of Park 55 which is now scheduled to open on or around May 19. Hotels are expected to quickly ramp up with forecasted occupancy over the back half of the year expected to be just 10 percentage points below 2019. Performance should accelerate as we move through the second quarter, with hotel occupancy for our San Francisco assets, excluding the still-closed Park 55, forecasted to exceed 70%. As demand trends improved, our efforts to reimagine our operating models since the onset of the pandemic have translated into improved flow-through and strong margin gains, with our cost-saving initiatives expected to yield 300 basis points of margin expansion peak-to-peak. As a reminder, we have eliminated $85 million of operational expenses across our portfolio, the majority of which are managerial salaries and benefits that we expect to continue to maintain, even as demand levels return to pre-pandemic levels. By way of example, at our two Hawaii hotels, we have successfully maintained a nearly 30% reduction in mid-level management staff despite nearing 80% occupancy during the first quarter. In addition, our properties continue to evaluate their food and beverage offerings, flexing outlet openings based on demand and rethinking concepts and products to ensure profitability and alignment with changing guests' preferences. As demand returns, our properties will continue to employ thoughtful staffing strategies to help minimize unnecessary cost creep going forward. Turning to capital allocation priorities, we remain laser focused on pursuing strategies to create long-term shareholder value. Accordingly, we remain committed to taking advantage of the strong private market bid for real estate and anticipate executing on our stated goal of $200 million to $300 million of non-core dispositions this year, with over $100 million already under contract. Proceeds will be reallocated to repay debt, repurchase stock to the extent that deep discounts to our internal NAV estimates persist, and invest in our pipeline of in-process ROI projects, including the Bonnet Creek meeting platform, the rebranding and renovation of the Waldorf, Casa Marina and Key West to Curio, and the conversion of the DoubleTree in San Jose to Hilton, all of which should generate returns in excess of 15% to 20% while enhancing the overall quality of our iconic portfolio. To briefly recap, we're very excited about Park's setup for the balance of 2022 and into 2023. Hawaii is expected to continue to outperform expectations, particularly from the robust pent-up demand from our Japanese travel partners, and it's expected to materialize by the summer, accelerating group and business transient demand should help push growth among our urban assets with these assets expected to fully recover next year. While labor remains a near-term headwind in certain markets, we remain confident that our cost savings initiatives will translate into more efficient operations as demand recovers. With over $1.5 billion of liquidity and just 1% of debt maturing in 2022, we have ample liquidity to execute on our capital allocation priorities to help drive growth. Overall, we remain laser focused on creating shareholder value, and narrowing the valuation gap with our peers. With our 2022 priorities squarely focused on operational excellence, and realizing the embedded 300 basis points upside potential in operating margins, recycling capital and taking advantage of the strong private market bid for real estate, unlocking the significant embedded value in our portfolio by reinvesting in our hotels through our robust ROI pipeline and continuing to improve the quality of our balance sheet to provide for enhanced financial flexibility and optionality to execute on our long-term growth plans. Now, I'd like to turn the call over to Sean, who will provide some additional color on operations along with an update on our capital allocation priorities, balance sheet and guidance for Q2.

Thanks, Tom. Overall, we are very pleased with our first quarter performance as recovery has expanded beyond leisure travel. Pro forma RevPAR improved sequentially to $116, despite a 60 basis point decline in occupancy to 51.9%. While rate averaged an impressive $224 during the quarter, a 7% sequential improvement over Q4 2021 and in line with the same period in 2019. First quarter results were negatively impacted by the spike in case counts in January. However, as concerns over Omicron waned toward the tail end of the month, we witnessed a sharp rebound in demand over the balance of the first quarter, with RevPAR improving by 45% in February from January and by 26% in March to $249. Total operating revenue for the portfolio was $463 million during the first quarter. Hotel adjusted EBITDA was $89 million resulting in hotel adjusted EBITDA margin of 19.3%. Margins quickly ramped up as we moved through the quarter, increasing from a low of just 2.8% in January to 29.3% in March. Note that our first quarter EBITDA margin was down slightly versus Q4 2021 due to a $7 million sequential increase in property taxes. Overall, Q1 adjusted EBITDA was $82 million and adjusted FFO per share was $0.08 for the quarter, with March FFO coming in at nearly $35 million. Turning to the balance sheet, our liquidity currently stands at over $1.5 billion, including over $900 million available on a revolver and approximately $640 million of cash on hand. Our net debt sits at $4.2 billion. With respect to potential refinancing opportunities, we continue to monitor the credit markets as both treasuries and spreads have widened, resulting in a meaningful increase in borrowing costs over the past couple of months. In spite of this, Park's balance sheet remains in very good shape with 99% of its debt fixed and just $84 million of debt maturing within the next 12 months. We will continue to closely monitor the debt capital markets and update you on our refinancing efforts over the course of this year. On the capital return front, as previously announced, we reinitiated our quarterly dividend in the first quarter at $0.01 per share, and expect to continue paying a $0.01 per share dividend over the next couple of quarters, ending the year with a potential fourth quarter top-off dividend. Also, as previously reported, we bought back a total of $61 million of stock during the first quarter at an average price of just under $18, with nearly $190 million of capacity still available, subject to the limitations outlined in our credit facilities. Overall buybacks were executed at a nearly 40% discount to our internal entity estimate or just 10.3 times 2019 pro forma adjusted EBITDA. In fact, when comparing to recent transactions we've evaluated in recent months, there's simply no better use of our capital — buybacks more than twice create the earnings versus buying hotels at north of 14 times 2019 EBITDA. We believe the stock remains undervalued. We will update you on future buybacks during our second quarter earnings call. Finally, as Tom noted in his earlier comments, the pace of improvement has been remarkable. And while COVID led to unprecedented uncertainty over the last two years, I'm thrilled to announce that we've decided to reinstate earnings guidance for the second quarter based upon the broad-based recovery taking shape within our markets, especially across our urban portfolio of hotels. Accordingly, we are establishing Q2 RevPAR guidance of $160 to $164, or 15% below 2019 levels at the midpoint. With adjusted EBITDA guidance for the second quarter between $160 million and $180 million or 18% below 2019 pro forma adjusted EBITDA at the midpoint. Hotel adjusted EBITDA margins will range from 27% to 29%, while FFO per share will range between $0.40 and $0.49 for the second quarter. This concludes our prepared remarks. We will now open the line for Q&A. To address each of your questions, we ask that you limit yourself to one question and one follow-up. Operator, may we have the first question please.

Thank you. Operator provided instructions. Our first question comes from the line of Smedes Rose with Citi. Please proceed with your question.

Hi, good morning, it's Smedes. I wanted to ask you just two quick questions. Just relative to your forecast, the other revenue line is quite a bit higher than what we had been anticipating. I was wondering if you could maybe talk about customer spend or out-of-pocket spend during the quarter, what you're seeing there? And were there maybe some cancellation fees booked into that number as well?

Yes, Smedes, this is Sean. You're talking through Q1 reporting here. And if you recall, with a lot of Omicron-related cancellations on the group side, cancellation fees were certainly elevated if you're tracking relative to prior pandemic levels. I'd say that's the biggest gap you're probably seeing at this point. I would say we're probably normalized around $2 million or so of cancellations any given quarter, and we were around $10 million for the quarter. I think that's the biggest gap. I think as you look at occupancy levels and whatnot certainly being down meaningfully to pre-pandemic levels. But from a resort fee standpoint, which is in that line, we're probably about 5% down. So, I think those two combined are probably where you might be a little bit off.

Okay, thanks. And then I just wanted to ask, you touched on the private bid for asset sales, and given the rising costs of debt and some things we're seeing in the CMBS market, what have you seen more recently from potential buyers? And would you consider doing seller financing as a way of maybe getting a deal done?

Yes, I would say, Smedes, there's tremendous capital whether it's private equity, high-net-worth, or sovereign funds. Clearly, as we look out, and given limited supply growth, and as we demonstrated last year — we sold five assets for $477 million at attractive cap rates and multiples — we see really no slowing down of that. The debt markets are a little choppy and have widened out a bit, but it's still not a real hindrance in getting a deal done. Seller financing is not something we're considering at this time, and we don't really think it's needed for the types of deals that we're looking to transact.

Great. Well, thank you very much.

Thank you. Have a great day.

Our next question comes from the line of Floris Van Dijkum with Compass Point. Please proceed with your question.

Hey, thanks, guys.

Hey, Floris.

Good morning.

Good morning. Tom, on capital allocation, you have some flexibility. You did buy back some stock, which many investors appreciated. Maybe talk about how you weigh potential new investments, for example, building another tower in Hawaii at Hawaiian Village, where you could potentially double your capital when the doors open because the values there are so much higher than replacement costs. How do you weigh those competing demands on your capital?

Floris, it's a great question. The first thing we've been crystal clear about is that when you're trading at a significant discount — as Sean noted — the highest and best use of available cash for us is really investing back into our portfolio, either by buying back stock or reinvesting in ROI projects such as Bonnet Creek. Finding the right balance is important. We've set a target of selling non-core assets of $200 million to $300 million; I expect we'll at least meet that, if not exceed it. We'll use those proceeds and allocate carefully between buybacks and permitted actions under our credit facilities. We also expect to be out of the covenant restrictions in the near term, possibly by the second quarter or shortly thereafter, which will give us increased flexibility. Regarding something like Hawaii, we have an extraordinary asset and are working through entitlement now. We're still a few years out before a decision to invest would need to be made; we're doing entitlement work and design now, and fortunately we don't need to make that allocation decision in the near term.

Right. My follow-up, if possible — you touched upon potentially emerging from covenant waivers in the second quarter. Where do you see your split between resort and urban at the end of this year? Do you have an optimal percentage of your portfolio? Has that changed over the past 18 months?

Two things. Sean will give clarity on the covenant piece in a moment. We don't look at Hawaii simply as 25% in isolation; those two assets are phenomenal and we're not looking to add more product there or sell either asset at this point. Regarding urban markets, we'll continue to evaluate markets — we're looking at attractive opportunities in places like the Southeast, such as Nashville, Austin, or Phoenix — but we need to be thoughtful because there is a lot of supply coming in certain markets. We fully expect recovery to continue to accelerate in urban markets, making them attractive opportunities going forward.

Floris, to clarify: we have covenant waivers through Q3. We expect to be in a position where our covenants, when you analyze Q2, will be very strong. Ultimately, since the covenants aren't truly tested until later, we originally expected more toward Q3 to be completely out, and we did a lot of work to give us flexibility during the covenant waiver period. We're not too worried about functioning as we need to through Q3, but we typically won't be fully out until Q3.

Thanks, guys. Technical difficulty on my end there. That was it for me.

Okay. Yes, the Park team is here.

Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.

Hi, good morning, everyone. A question on leisure pricing: you said you expect to see tougher comps in the summer in your leisure properties, which we'd expect. But do you expect to be able to push pricing over 2021 levels in some of these markets, or do you worry about inflation taking away some purchasing power this summer?

Anthony, great to hear from you. We were saying a little bit of moderation really in the context of what we're seeing in Key West. As Sean noted, we're looking at numbers that were 150% to 200% above prior thresholds, which are healthy. As we look at Q1, both RevPAR and rates were up and we're expecting to be in the 40% to 50% range versus 2019 as we look forward. There's a bit of moderation, but fundamentals remain strong. As for Hawaii, Hawaii hasn't had the same run as some other leisure markets, so we are incredibly encouraged. For second quarter we are looking at our Hawaii properties combined likely to have RevPAR ahead of 2019 levels. Waikoloa has been an incredible performer and we fully expect that to continue. So, while trees don't grow to the sky and some moderation is not unreasonable, we see no real retreat in leisure demand.

Got it, okay. Maybe on Hawaii — you mentioned being very positive on the second half of the year given the return of Japanese travelers. The yen is near a 21-year low, so how does currency play into your view of Hawaii in the back half of the year as those travelers return? Are there currency headwinds?

It's a fair point, Anthony. Historically, Japanese visitation to Hawaii has been quite consistent, and Japanese travelers historically spend more and stay longer. They represented a meaningful portion of demand, and their visitation was down about 97% over the last two years. We believe based on trends and discussions that the recovery and return of Japanese travelers is coming and will be robust, supporting strong performance in Hawaii in the second half of 2022 and into 2023 and beyond. While currency can have an impact, the pent-up demand and the nature of the Japanese traveler give us confidence they'll return in meaningful numbers.

Okay, thank you.

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

Yes, hey, good morning guys. I appreciate the decision to give guidance. Since it's your first time going back into it, I'll go easy on you. But basically, what you said about March numbers and the acceleration into April suggests your guidance might be conservative. Is April the strongest month of the quarter from where you sit now?

A couple of things, Chris. We're a conservative team and based on the trends we're confident in the guidance. We hope to be having this discussion in fewer than 90 days and meeting or exceeding it. We want to give confidence that management is confident. We're seeing encouraging signs and the group and business transient segments in urban markets are accelerating. We believe those segments will continue to accelerate and support our guidance.

Okay, fair. Thanks, Tom.

Our next question comes from the line of Dany Asad with Bank of America. Please proceed with your question.

Hi, good morning, everybody.

Good morning, Dany.

Tom or Sean, I'm going to ask this a bit differently. The Q2 RevPAR outlook of down 15% is lower than your April run rate. So, when thinking about May and June, can you unpack whether there's an implied de-sell in specific markets or segments, or are you just being conservative because visibility is limited?

Dany, I'll take a stab. We did take a conservative tone since it's the first time we're re-establishing guidance in a couple years. May is coming off a strong April leisure performance, so May is a little weaker than April, but June is in line or slightly better than April. So May is a bit soft, but overall we feel pretty good about the guidance provided.

Understood, thank you. For my follow-up: it's been tricky to map out margin recovery because there are many moving pieces — permanent cost reductions, labor issues in certain markets, ROI projects — beyond how we think about core portfolio margin recoveries. How should we think about this for the balance of the year? Are there milestones, e.g., certain occupancies in New York or San Francisco, that would indicate an inflection point?

When I think about it, getting group back to a stabilized level is key. We're down materially on mix with group and banquet revenue compared to 2019; banquet historically has roughly 45% margins versus outlets which are more like 12% to 15% margins. Getting that mix back will help margins. If you look at the portfolio over past downturns, like the Great Recession, RevPAR drops of 10% to 15% corresponded to margins down 500 to 600 basis points. For the quarter we're down around 300 basis points in margin versus 2019 at the midpoint. You're going to see variability as different elements of the business come back, but as mix stabilizes and group and banquet return, margins should improve over time.

I would add we're laser-focused on reimagining the operating model with our operating partners and stand by the $85 million in cost reductions — about 1,200 jobs, the vast majority in management positions. The pandemic forced us to think differently and adapt to customer preferences. In Q1 our labor expenses were down by $73 million in the quarter, much of that from food and beverage labor and sales and marketing. We understand it's a 'show me' story for investors, but we are confident that as occupancies and business travel continue to accelerate, you'll see this operating model deliver a better margin profile.

Okay, very helpful. Thank you very much.

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

Maybe on group bookings: they've been improving quite a bit. Wanted to dig in on the rate side, which is flat for 2022 and about 2.5% for 2023 versus 2019. Rate back up has evolved since many bookings were made. Can you give color on how more recent bookings compare versus 2019, and whether you expect more uplift from near bookings?

I don't have a lot of hard data to give you in this call, but generally, our operating partners are seeing more pricing power on the group side. They're also implementing adjustment factors in contracts for outer years to account for inflationary elements, which hasn't been common in recent cycles. So, you're starting to see more push on pricing when signing group contracts for future years.

Got it. And on group pace for 2023 at 73% of 2019, that was flat where it was at the end of December. Do you expect that gap to continue to narrow?

Yes, there's no doubt it will continue to narrow. We've seen large increases in bookings month over month, and the traction in Orlando, New York City, Hawaii, and D.C. is encouraging. We expect acceleration as we move forward.

Thanks.

Our next question comes from the line of Jay Kornreich with SMBC. Please proceed with your question.

Hi, thanks. Good morning.

Good morning.

As you mentioned seeing solid pickup in urban markets, can you give more color on what you're seeing on the ground and highlight how San Francisco is improving — is this transient or group demand driving the rebound?

We've been talking a lot about San Francisco and I've been there several times over the last months. The city's leadership and outreach, including public safety improvements, have helped. There are roughly 34 events totaling just south of 42,000 room nights in the pipeline for the city. In Q2 there are notable conferences like RIMS and RSA that will provide good city-wide demand. These events, plus improved sentiment, gave us confidence to accelerate the reopening of Park 55. The Hilton San Francisco was at 30% occupancy in March and rose to roughly 60% in April; we expect second quarter occupancy in the mid-60s. JW Marriott and hotels near Fisherman's Wharf have done well, posting mid-to-high 80s in some instances in April, and we expect mid-70s in the second quarter. So the outlook is far more encouraging than 30 to 120 days ago, with both group and transient contributing to the recovery.

To add: pickup activity has been driven by urban markets lately, though Hawaii and Orlando remain consistent performers. Considering four main urban markets — New York, San Francisco, Chicago, and D.C. — you had about $4.5 million of cancels at the end of the year for 2022. By February that was just over $1 million of cancels among those markets, and in March it was $11 million of positive pickup across those four markets, with New York up about $7 million. So you're seeing a clear turnaround and inflection point driven by urban group recovery.

Got it, great color. A quick follow-up: on the international demand picture, are you still targeting summer months for stronger international demand? There's been an uptick in COVID cases abroad, specifically in China. How do you see international demand returning throughout the year?

China has been a smaller part historically; international demand for Hawaii comes more from the U.K., Canada, and Mexico. We had about 79 million inbound international visitors in 2019 and we don't expect to return to those levels for a few years. But for Japan specifically, we're confident their return will be robust and meaningful in the second half of the year and into 2023. Overall, the international rebound will be gradual and driven by specific source markets returning as travel restrictions ease.

All right, thanks so much and congrats on the quarter.

All right, thanks.

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

Good morning, guys. Tom, curious whether you're building in a recession scenario for 2023. About 30% of economists expect one. How do you think about that when considering capital allocation?

Bill, it's on everyone's minds. We have the parade of concerns — war, rising inflation — and while there's evidence inflation may be peaking, no one's crystal ball is certain. What this team has done well is learn from past crises: we didn't panic in the last downturn, we didn't do a dilutive equity raise, we shut down hotels where needed, and we reimagined our operating model. It's part of our DNA to toggle between defense and offense. We're encouraged by demand trends and providing guidance reflects that. We will continue to reshape the portfolio, sell non-core assets, reinvest in the portfolio through buybacks and ROI projects, and pay down debt when appropriate. Our priority is to protect the balance sheet and preserve optionality.

And a follow-up on group demand you're pacing to pick up so dramatically: does that imply smaller groups or are there markets that did a better job of increasing group pace over the last 90 days?

On pace, the urban markets I mentioned have seen strong improvement — New York, Chicago, D.C. — and we're seeing accelerating group bookings in those markets. I would say overall the urban side has driven the recent resurgence, while resort areas have been more consistent throughout.

Our next question comes from the line of Stephen Grambling with Goldman Sachs. Please proceed with your question.

Thanks. Following up on the volatility in hotel transaction debt markets, what do you think changes that dynamic? With residential mortgage rates now well over 5% versus three-ish before, cap rates may be following. What do you think this means for hotel cap rates — any crossover in investor base or correlation with multifamily/residential properties?

It's a fair question. Historically, cap rates may move 25 to 50 basis points depending on market, but we're not seeing broad softening when marketing assets today. There's a lot of capital seeking opportunities across asset classes. We believe this dynamic can make hotels more attractive as an asset class given daily leasing economics and pricing power. We're not seeing issues selling or financing assets — our disposition process is robust for assets currently marketed.

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

Hey everyone, thanks. First: Blackstone has been active acquiring public REITs trading at discounts to private market values. Lodging REITs would be a good candidate. Do you think Blackstone or others could look at your sector and what's the likelihood of M&A or take-privates in lodging this year?

Great question — I've been an advocate for consolidation or take-privates in the sector. Given the amount of capital on the sidelines, I would expect lodging to attract interest over time. I won't predict specific timing for Blackstone or others, but given the disconnect between public valuations and private NAV, the sector could be enticing over time.

Okay, great. Another on leisure ADR: many companies have reported confidence in the stability of leisure ADR and a reset versus last cycle. I'm cautious: with unusual savings and fiscal stimulus, some of these high ADRs may not be sustainable. How do you view the sustainability of very high ADRs at coastal leisure properties? Any demographic mix or trends that give you caution?

I think the shift to more hybrid work provides more optionality — blending business and leisure. That should allow hoteliers to find balance in product, service, and pricing. While we agree that some moderation is possible, we don't see a major retreat at this point in leisure demand. Key West and other markets have been strong, and while peaks may moderate, fundamentals remain robust.

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

Thanks. Circling back on group: it's surprising for 2023 given groups that haven't met for three years. From what you're seeing, do you think 2023 group could be above 2019 levels? Why are groups coming back that haven't met in three years?

We expect group to continue to accelerate. As I mentioned, we saw a threefold increase between February and March with about $44 million in bookings added in a 30-day window, including over 117,000 room nights for 2022 and roughly 77,000 room nights for 2023. The body language and feedback from our operating partners indicate continued acceleration. We expect to get back to 2019 group levels during calendar year 2023 and in some markets possibly sooner, even as early as Q4 2022 for specific markets like Hawaii where demand is recovering strongly.

Okay, thank you.

Our next question comes from the line of Patrick Scholes with Truist. Please proceed with your question.

Hi, good afternoon. In your Q2 outlook you gave a range of down 14% to 16% for RevPAR versus 2019. How would you think about that for the three customer segments: Transient Leisure, Transient Business, and Group — ballpark expectations for each segment versus down 14% to 16%?

You're going to see continued improvement across group and business transient. Leisure is likely to be up relative to 2019 levels in April, but May moderates. Group will generally be in line with our guidance as it's still below normal levels but improving. Business transient was recovering but likely still pacing at roughly 60% to 65% of 2019 levels entering the quarter, so that segment may be down roughly 20% versus 2019. We didn't break out exact segment-by-segment guidance, but that's the general shape.

Okay, thank you.

Our next question comes from the line of Christopher Darling with Green Street. Please proceed with your question.

Thanks, good morning. Tom, can you provide a few thoughts on the supply backdrop across your portfolio? Do any markets stand out positively or negatively, and how does that outlook for supply play into your confidence in urban recovery over the next couple of years?

Chris, great question. In Hawaii, it's nearly impossible to get new product given barriers to entry. San Francisco also has very low supply — sub 1% — and Orlando is another low-supply market. Our portfolio exposure relative to peers is sub 2% supply, and industry-wide we're below the long-term average of 2% — likely around 1%. Urban full-service hotels are difficult to replicate and take years through entitlement. That scarcity is a real benefit to our portfolio, particularly given rising replacement costs which would increase another 10% to 15% or more in the current inflationary environment.

Got it. Appreciate the thought. That's all from me.

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

Hi, afternoon everyone. Congrats on the quarter and thanks for taking my question. You have a target of $200 to $300 million of asset sales. Can you elaborate on how that number is derived and what gating factors might cause it to increase?

Great question, David. We set targets last year and exceeded them with thoughtful dispositions. We've had to hold some assets for a period post-spin, and there are other joint venture assets and portfolio assets we're working through. We set a reasonable target and given how hard the team is working, I expect we'll meet or exceed it. Proceeds will give us more optionality to buy back stock, invest in ROI projects, or pay down debt. We've sold 32 assets for just over $1.7 billion in the past and have been very targeted in our approach; this is a continuation of that recycling strategy.

Got it. So the $200 to $300 million is a baseline and complexity and timing are the gating factors?

Yes. Last year, some suggested urban assets would be difficult to move, yet we sold two in San Francisco at pricing comparable to 2019. There's plenty of capital out there — private equity, family offices, and high-net-worth investors — seeking higher returns. We're confident in better days ahead for lodging, and for Park specifically.

That concludes our question-and-answer session. I'd like to hand it back to Tom Baltimore for closing remarks.

We appreciate the opportunity to visit with you today, and we look forward to seeing many of you in upcoming meetings and at NAREIT. Stay safe, be well, and I look forward to seeing you soon.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.