Thank you, operator, and welcome, everyone, to the Park Hotels & Resorts Second 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 future 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 Form 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 yesterday'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 second quarter performance, an outline of Park's strategic priorities, and an outlook for the balance of this year. Sean Dell'Orto, our Chief Financial Officer will provide additional color on second quarter results, an update on our balance sheet and liquidity, while establishing guidance for the third quarter. 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 Q2 performance, with results materially exceeding expectations. We witnessed exceptionally strong performance across our portfolio as the ongoing strength in leisure was augmented by increased business travel, which came in at 95% of 2019 levels and accelerating group demand. On the capital allocation side, we sold approximately $270 million of assets year-to-date and repurchased $157 million in stock at a significant discount to our internal net asset value estimate during the quarter, further strengthening our balance sheet and creating value for our shareholders. And finally, based on our strong second quarter results, we exited the covenant waiver relief period for our credit facilities one quarter earlier than anticipated. Looking closer at our quarterly results, second quarter pro forma RevPAR recovered to 90% of 2019 levels and pro forma hotel adjusted EBITDA came in roughly $30 million ahead of our internal expectations set forth at the beginning of the quarter, highlighting the strong recovery in demand, following the COVID-related slowdown at the start of the year. Pro forma occupancy improved by over 19 percentage points compared to the first quarter, while pro forma average rates finished 8% ahead of the second quarter of 2019. The strongest recovery in the quarter was in urban markets, where our hotels saw an encouraging increase in demand. Occupancy for our urban hotels averaged 64% for the quarter, or a 25 percentage point increase from the first quarter on a pro forma basis, and ADR came in 24% ahead of Q1 and slightly ahead of the second quarter of 2019. Note that our last remaining suspended hotel, the Park 55 San Francisco, reopened on May 19 and quickly exceeded expectations, with June occupancy finishing at 67%. Resort hotel performance remained very strong, growing ADR nearly 27% over the same period in 2019, fueled by our assets in Hawaii, Florida, and Southern California. We were also pleased to see stronger-than-expected group demand for the quarter, with group revenues up 68% compared to the first quarter. Group demand remains very short-term, with pickup for the second quarter representing nearly 44% of the room nights picked up in the quarter for the remainder of 2022. Most of the short-term booking activity was seen in San Francisco and Seattle, while the Hilton Hawaiian Village benefited from positive pickup from better-than-expected citywide participation in May. In terms of business transient demand, we saw a material improvement during the quarter, with business transient revenues totaling 95% of second quarter 2019 revenues. Park's business-oriented hotels, which were open for the entirety of the quarter, recorded mid-week occupancies of approximately 73% for the second quarter, a roughly 30 percentage point sequential improvement from the first quarter. As the portfolio recovers, we continue to make progress on our four key strategic initiatives. First, we remain laser-focused on reaping the benefits from a reimagined operating model, capturing margin improvement from both incremental revenue opportunities and operating efficiencies. On the revenue side, we continue to benefit from the industry's remarkable rate discipline and our operators' rate optimization efforts to help offset inflationary cost pressures as occupancy rebounds. Additionally, our teams continue to focus on driving out-of-room spend, posting impressive results for the second quarter in food and beverage, with revenues exceeding our expectations by over $11 million. At Hilton Hawaiian Village, for example, a reimagined bar concept and aggressive event and menu pricing helped to generate over $3 million of incremental revenue over the same period in 2019, a 24% increase, split evenly by 12% increases in both average check and covers. On the cost savings side, our operational modifications helped to drive pro forma hotel adjusted EBITDA margins of nearly 31% during the second quarter, just 30 basis points below 2019 levels, despite portfolio RevPAR being down 10%. Most of the savings have come on the labor side, with headcount down 23% for managers and 29% for full-time hourly employees compared to 2019 for the quarter within our Hilton-managed hotels. We firmly believe that the operational changes behind many of the staffing reductions are permanent, translating into $85 million in savings or 300 basis points of permanent margin improvement relative to pre-COVID margins on a stabilized basis. Our second key priority is to continue to reshape and improve the quality of the portfolio while remaining active on the capital recycling front. We have made tremendous progress year-to-date by selling $270 million of assets versus our goal of $200 million to $300 million established at the beginning of the year. Overall, hotel sales were executed at or near 2019 valuations, with transaction multiples slightly above 13 times on average, versus the 10 times implied multiple on the $218 million of stock buybacks we executed year-to-date. Despite recent choppiness in the debt markets, interest in hotel real estate remains high. Accordingly, we expect to sell another $300 million to $400 million of assets to reduce leverage and reinvest back in our portfolio. Our third priority is to fortify our balance sheet by continuing to push our maturities, reduce leverage, bolster liquidity, and maintain flexibility as we look to pivot between defense and offense depending on what the markets dictate. Today, our liquidity position is approaching $1.8 billion with no meaningful maturities over the next 12 months. We are also in active discussions with our debt capital partners to address our San Francisco CMBS and revolver, both of which mature in late 2023, and we expect to have those addressed by year-end. Finally, our fourth priority is focused on executing our robust pipeline of value-enhancing ROI projects that will unlock the embedded value of our portfolio. Work is well underway on our Bonnet Creek meeting space expansion platform, with the Waldorf space on schedule to open later this year, and the Signia space expected to be ready by early 2024. We plan to commence work on two major renovations and repositionings within the next six to 12 months. Turning to our outlook, it’s hard to ignore the headlines around increased macroeconomic uncertainty and possible recession. However, at this point, we have not seen evidence of a pullback in demand across our portfolio. Corporate balance sheets remain healthy. Consumers still have nearly $1 trillion of personal savings following the pandemic-related economic stimulus, and business and international inbound demand continues to exist following 2.5 years of depressed activity, which bodes well for the lodging industry and our portfolio in particular. Lodging demand should also be supported by the $1 trillion infrastructure bill Congress passed last year, a key driver of non-residential fixed investment, which is forecast to be 5% in 2022. Supply growth in major markets remains historically low, with Park's markets under 1.5% combined and significant barriers to entry from rising construction costs limiting supply growth over the next three to four years, which we believe will continue to support solid fundamentals over the next several years. With that backdrop, we are very encouraged with the pace of improvement across our major markets and we expect to see incremental improvement throughout the year and into 2023, as leisure markets remain strong and the urban and corporate recovery accelerates. Group pace sits at 66% and 72% for the second half of 2022 and full year 2023, respectively, when comparing to 2019 bookings for similar periods as of June 2019 and June 2018, respectively. Urban market convention calendar for 2023 are pacing well, with Chicago, Boston, and Washington D.C. each above 100%, and Denver and New Orleans above 80%. San Francisco is currently showing over 760,000 room nights on the 2023 calendar, which is 64% of the actual room nights achieved in 2019. Hawaii is expected to continue to outperform expectations, supported by healthy leisure trends and the eventual return of the Japanese traveler, especially in Honolulu, where historically, Japan made up nearly 20% of total demand but has been absent for the last three years. Overall, we remain optimistic about the lodging recovery, and we are laser-focused on creating shareholder value and closing the valuation gap with our 2022 priorities squarely focused on operational excellence, recycling capital to unlock the significant embedded value in our portfolio, and continuing to improve the quality and optionality of our balance sheet to execute on our long-term growth plans. Park remains well-positioned for outsized performance, given our optimal mix of resort, urban, and group-focused hotels, and I'm incredibly excited about the future. And 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 balance sheet and guidance for the third quarter.

Thanks Tom. Overall, we are very pleased with our second quarter performance, with results coming in well ahead of expectations, driven by ongoing strength in leisure coupled with significant gains in both group and business transient. Pro forma RevPAR improved sequentially to $173, as pro forma rate averaged an impressive $244 during the quarter, a 7% sequential improvement over Q1 2022 and 8% above the same period in 2019. Pro forma occupancy improved to 71% for the quarter, a 19 percentage point improvement from Q1 2022. Looking ahead to the third quarter, preliminary results in July look very strong, with hotel occupancy averaging approximately 73%, while average daily rate during the month is projected to be approximately $248 or 12% above 2019. Overall, nearly two-thirds of our consolidated hotels are achieving rates in excess of 2019 rates, with the strength witnessed across most leisure markets in addition to Chicago, New York, Denver, Downtown L.A., and several of our airport hotels. Total pro forma operating revenue for the portfolio was $670 million during the second quarter, while pro forma hotel adjusted EBITDA was $207 million, resulting in pro forma hotel adjusted EBITDA margin of 30.8% or just 30 basis points shy of 2019 operating margins. An impressive result with hotel occupancy still 15 percentage points below 2019 levels, and with one of our largest hotels, the Park 55 San Francisco, suspended for over half of the quarter. Results were driven by incredibly strong rate gains, coupled with operating efficiencies achieved over the course of the last two-plus years. Turning to the balance sheet, our liquidity currently stands at approximately $1.7 billion, including more than $900 million available on our revolver and $758 million of cash on hand while net debt sits at $4 billion, a $200 million decrease from the first quarter. I'm excited to report that Park has exited our credit facility covenant waiver period, one quarter ahead of its scheduled expiration. Additionally, given the material improvement in operating fundamentals for our Hilton Hawaiian Village and Hilton Denver Hotels, both mortgage loans secured by these two properties are expected to exit their cash traps in early August, freeing approximately $90 million of restricted cash and thereby increasing our total liquidity to $1.8 billion. On the capital return front, we continue to take advantage of the dislocation between public and private pricing and repurchased $157 million of stock during the second quarter, taking our total buybacks to $218 million year-to-date, with just over $80 million remaining on our board-authorized buyback program. Overall, buybacks were executed at a material discount to our internal NAV estimate or just 10.3 times 2019 pro forma adjusted EBITDA. Turning to guidance, for Q3, which is traditionally our second weakest quarter of the year, we expect to see a seasonal shift from Q2, with transient revenue mix increasing by 700 basis points, replacing higher-rated group production and its higher margin banquet and catering F&B spend. Accordingly, we are establishing Q3 consolidated RevPAR guidance of $171 to $174, or 92% of 2019 levels at the midpoint, as the portfolio continues to narrow the gap to 2019 with occupancies to continue to improve in Hawaii, New York, Boston, Denver, and Northern California. Adjusted EBITDA guidance for the third quarter will range between $145 million and $165 million, and hotel adjusted EBITDA margins are expected to be between 26% and 27%. Finally, adjusted FFO per share will range between $0.34 and $0.43 for the third quarter. As a reminder, please note that the assets sold year-to-date contributed approximately $5 million to our quarterly earnings. This concludes our prepared remarks. We will now open the line for Q&A.

Our first question comes from Patrick Scholes with Truist Securities. Please go ahead with your question.

Thank you for taking my question. I'd like to hear your latest observations on the return of the international inbound customer. And related to that, how far off are you from pre-COVID levels for that customer? And then perhaps get a little more granular, sort of breaking it down by perhaps three important markets: the East Coast, New York, West Coast, San Francisco, and then certainly Hawaii. Thank you.

Patrick, thank you for the question. If we back up for a second, as I think about inbound international into the US, it was about $79 million in 2019. I believe last year it recovered slightly to about $22 million. We're looking at this year, I believe from the latest reports that I read at about $53 million. I would say across our major markets, we're probably 500 to 750 basis points below 2019 levels. So we see that certainly as a tailwind. I think if you look at Hawaii, I think it's a great example. Our Japanese customers, who represent again 20% of our visitation, have been down 95%, I believe, plus or minus. They historically have been one of our most loyal customers. They stay longer and they spend more. We think for Park, as we move out and this recovery continues to unfold, that’s going to be a real benefit for us. We'll expect Hilton Waikoloa Village to probably be up vis-à-vis 2019 at around 4% to 5% in RevPAR compared to many of our peers that are running at certainly much larger numbers than that. But we also expect this year in Hawaii that we will probably approach an all-time high or close to our all-time high in EBITDA, so we see tremendous upside there. As you think about San Francisco and New York, Chicago, all of whom were probably double-digit historically, 15% to 18%, we're probably in the high-single-digits, low-double-digit across each of those assets. Again, we see that beginning to come back. Obviously, the big gap is really coming out of Asia. And to the extent that the lockdowns subside and we start to see those areas begin to open, we see that as real growth potential for us as we move forward.

Okay. Thank you for the update.

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

Hi. Good morning.

Good morning, Anthony.

Good morning, Tom. Question on the asset sales. Obviously, you did well year-to-date selling assets at good valuations. That said, one was largely to a cash-rich REIT. The other one was to a buyer with a multifamily focus. So as you look to do the remainder this year, do you expect to see the same, I guess, success at achieving valuations, or could you see a bit more of a drop in price, given the buyer pool is seeing higher rates and just tougher time getting leverage?

Yes. It's a great question, Anthony. Look, if you back up and just think about since the spin now, we've sold 36 assets, including 14 international for nearly $2 billion. As you know, many of those were very complicated from Brazil to South Africa to the UK. We sold two assets in San Francisco in the middle of the pandemic, when there was virtually no visibility. So, I would say that our team, Tom Morey and his team on the investment side continue to work really hard to find the right buyers. No doubt that costs are rising. But there's still a tremendous amount of equity on the sideline and interested in hotel real estate. So, we're cautiously optimistic that we'll continue to demonstrate strong results. Whether those come in a little bit that would not be unreasonable, whether that's 25 or 50 basis points on cap rates would not be surprising. But we do expect that the debt market will hopefully begin to loosen up and open up a little more here in the third and fourth quarter, and certainly into next year. We're not a panic seller. We'll be thoughtful. We'll continue to work hard as we've demonstrated, but we are laser-focused on selling another $300 million to $400 million in assets again, using those proceeds to pay down debt, reinvest back into the portfolio, and continuing to build liquidity and make sure the balance sheet is in strong shape, so that we have the optionality to pivot between defense and offense, as we said in our prepared remarks.

Thanks for that. And maybe one more in terms of the guidance. I understand the EBITDA impact of the mix shift in the third quarter, focusing more on the RevPAR growth guidance. It seems like you expect to see RevPAR growth decelerate in August and September. We're having some good stuff from around Labor Day bookings from others. So, I'm curious what you're seeing it was months regarding RevPAR growth?

Yeah. I'll let Sean take the latter part of the question. Anthony, thank you for the question. We sense that many listeners have some concern or comments regarding that. I think it's important to note that if you think about our portfolio, second quarter and fourth quarter are traditionally the two strongest quarters within this portfolio, with the first and third quarters being the softer. The third quarter is traditionally one of the softer group periods that is holding true in this year as well. And so, we're down about 700 basis points in a shift to transient versus group. We make up for a lot of that in the fourth quarter. One example of that is if you think about, we've got about 620,000 room nights in the back half of the year in New Orleans. We're down about 27% in the third quarter and we're up about 40% in the fourth quarter. So, it really is a seasonality and timing issue. We are not seeing any softening, as we said during our prepared remarks, and we are still very bullish on the lodging sector. We certainly wanted to be careful as we provided third quarter guidance. And I'll turn it over to Sean to address your other questions.

Yeah just picking up what Tom said, just being careful with the group base that we have into Q3 and we're certainly seeing good in the quarter for quarter pickup through Q2, just kind of with the way that the business projects out or ultimately runs through the summer time is really not going to count so much on the group in the quarter for the quarter pickup. But certainly, September has opportunity. There is a little bit of a typical kind of thoughts around holidays with Labor Day being a little later in the first week of September and we have the huge holidays in the back half as you compare to 2019. But in the end, I think certainly there's some good potential of picking back up where we saw some of that business level demand in May and June. So, we certainly think that September picks up well. So, I think, certainly I think September has an opportunity to outperform. July right now is probably on level with July and August is a little softer in the middle of the quarter.

Thank you.

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

Hi, guys, thanks for taking my question. Obviously, it appears that you're still about 19% short of your peak occupancy for the quarter relative to 2019. Maybe touch upon Hawaii in some more detail? And how much more growth can we expect in the second half of that year? Is that going to be more fourth quarter ramp? And then also what your prospects look for next year for Hawaii in particular?

Hawaii has been incredible. Throughout Q2 and into the latter part of Q2 and Q3, we continue to see growth in Hawaii, with occupancy levels at both hotels increasing by 200 basis points. We are very pleased to see this strong performance. This will positively impact our rates as they continue to improve compared to 2019, with growth expected in the high single digits to low double digits over the next several months. As Tom mentioned regarding international demand, Japan, one of our major source markets, is currently at only 12% of 2019 levels. As Japanese consumers return to Hawaii, it will provide a significant boost for us moving forward. We have nearly achieved 2019 levels of profitability, primarily driven by domestic business, even without the contribution from Japan. Overall, we expect Hawaii to be a major advantage for us as we head into next year.

And maybe my follow-up in terms of buybacks presumably, you'll look for additional asset sales before you start to buy back some more stock down the road?

Yes, we have made it clear that the most effective use of our capital would be to reinvest in our portfolio, either through ROI projects or stock buybacks. We currently have authorization for up to $300 million. As mentioned earlier, we'll concentrate on generating $300 million to $400 million from additional asset sales to reduce leverage, ensuring we have that flexibility. We will closely monitor market conditions. If dislocation persists, all options remain available, including the buyback. However, in the short term, our priority will be on selling non-core assets, using the proceeds to pay down debt, and addressing the revolver and the San Francisco CMBS that Sean referred to in his remarks.

Thanks, Tom.

Thank you.

Our next question comes from Chris Woronka with Deutsche Bank. Please go ahead with your question.

Hey, guys. Good morning. So maybe we can drill down a little bit on group. I think you gave out data points 66%, 72% for the second half and for 2023. And I know you mentioned a lot of in the quarter for the quarter pickup which is encouraging. But the question is Tom, are you maybe surprised that's not a little bit higher even because you've had people not meet for two years? And also, are you seeing any difference in the size of the groups? Are the associations pushing back on higher rates or anything like that?

Yes. It’s a great question. Obviously, as we look out to next year, what we are seeing is that the booking windows are certainly shorter. We saw that in the second quarter where we had obviously 76%, I believe of 2019 levels. And we look at next year at 72%, we see kind of the same trends that first and second quarter out of the box are pretty strong. I think second quarter is up around 86%. No doubt as companies continue to get back in to return to office as we get, I think, more visibility on the economic climate. No doubt we expect that to continue to accelerate, even in markets like San Francisco where you're seeing some increases in city-wide. So city-wides in Chicago are growing, Orlando growing, city-wides obviously in San Francisco growing, Boston and D.C. are certainly growing. So all of that will certainly help. But really getting those big companies where they have a lot of what we call self-contained, we’re certainly seeing some of that through the association, but we expect through the corporate side for that to continue to accelerate, Chris, as we look forward.

Okay. That's helpful. Thanks, Tom. And then just on capital allocation, right? On paper, the buybacks make a lot of sense. You've sold assets accretively; the market doesn't seem to always reward that, unfortunately. What's the – is something that's on the table selling a significant asset, because most of those assets you've sold have been fairly small? You sell a significant asset for a strong multiple. Is that on the table do you think that can help? Does it even make sense given your level of EBITDA you're at currently?

Yeah. Chris, that's another fair question. Certainly, all options are on the table. Keep in mind these have a low tax basis. Getting debt for one of those big deals is a little more complicated than some of the asset sales that we're trying to do. But rest assured, as we've said, we are open to all options. We are looking at many. We are going to close this valuation gap. We are laser-focused on it. But we also don't think it's prudent to be selling assets like that really at the bottom of the market. So you got to be careful and thoughtful about that. And I think you've seen. Look at the San Francisco asset sales that we did in the middle of the pandemic at very attractive pricing. Look at the asset sales that we've done; all have been accretive, almost all if not all accretive. We still have that as a theme as well and certainly a guiding principle. And we certainly want to be allocating capital and rightsizing the portfolio over time so that we can certainly get a presence in some of the other growth markets as well. But we certainly believe that the urban play has legs as we move forward and then we're going to begin to see the tailwind and we're seeing evidence of that already.

Okay. Got it. That's helpful. Thanks, Tom.

Our next question comes from Dori Kesten with Wells Fargo. Please go ahead with your question.

Thanks. Good morning.

Hey, Dori.

Can you talk about the various options on the table to address your 2022 and 2023 maturities?

Sure. So on the 2022, there's really nothing we view as meaningful. So there's a couple of small mortgages that are out there that we'll look to address with cash on hand. As we've noted, we've got 1.8 – approaching $1.8 billion of liquidity. Half of that is with the cash. So, we’ll just look to take those out as they mature over the next 12 months. On the bigger ones, certainly that kind of towards the end of the year, we're exploring a few different options. One, obviously we have time to do that. We'll be addressing our revolver and certainly standing with our banks. We have great relations with them, long-standing relationships with them, be already coming out of conversations and thinking to the timing of it. We’re confident we'll work through that and get that recast and keep that liquidity intact. And then ultimately, we'll look to address San Francisco, again, weighing our options on that. We have unencumbered assets, including big-sized large-sized assets. And so, we've looked to kind of utilize that potentially as a mortgage on those along with some of the cash on hand to take out CMBS. And obviously, we have access to the high-yield markets which we've demonstrated in the past as well. So we'll look to opportunistically find the best option for us over the next few months and proceed accordingly.

Okay. Thanks.

Yes.

Our next question comes from Neil Malkin with Capital One. Please go ahead with your question.

Hey, good morning everyone.

Good morning Neil.

Thank you for your time today. I want to follow up on Dori's question regarding the assets collateralizing the CMBS in late 2023, specifically Park 55 and Union Square. These are two of your largest hotels, and I believe Park 55 will require a significant amount of capital expenditure. I'm curious about your mention of the disconnect between public and private valuations and whether there are plans for asset sales involving properties like these in San Francisco. This market has its challenges that will likely take years to resolve, but such sales could potentially expedite your deleveraging process or facilitate a larger buyback or reallocation towards more favorable, higher-growth markets, especially in light of the refinancing difficulties you're encountering.

We have mentioned multiple times that we are considering all options. We are prepared to either sell some of our larger assets or enter into joint ventures. It’s important to note that these two assets are interconnected, and the CMBS matures at the end of 2023. We are not feeling panicked. If you recall the most challenging times during the pandemic, we successfully managed several maturities, conducted three bond deals, and extended maturities. We have repaid 97% of our bank debt, and everyone involved benefited from the fees, being very pleased with how we performed during those difficult times. Currently, we have $1.8 billion, which gives us plenty of options. While it's theoretically possible for us to sell one or both assets, securing debt in the near term would be quite challenging given the current instability in the debt markets. We believe there are several options available to us. We have consistently stated that San Francisco, despite lagging behind, is beginning to recover, and we will monitor its trajectory closely.

The commentary mentioned that our business aligns with 2018 levels. It seems that group bookings are on a positive trend and may recover faster than business travel. A larger competitor recently suggested that group travel is likely to bounce back ahead of business transient travel. I'm interested in your perspective on this. While I recognize that both sectors are included in the same portfolios with a focus on group bookings, do you anticipate that business travel will lag behind group recovery? Additionally, do you think some corporate group events may evolve into a new segment considering the continued trend of remote work, with hotels being used as venues for gatherings and reporting?

It's a complex question. Comparing portfolios is challenging due to their different distributions and product sizes. We believe that the group segment will continue to grow, especially as companies recognize the need for bringing employees together more frequently in a remote or hybrid work environment. C-suite leaders are often expressing this need for gatherings that facilitate training, celebrations, and cultural activities, both in smaller and larger groups. We agree with this outlook and believe that Park is well-positioned to meet this demand. The question is when and how exactly this growth will take off. We're already seeing signs of it in smaller groups, and as larger companies navigate the economic landscape, we expect to see further acceleration. I had a conversation with a C-suite leader who is now working remotely in Florida and mentioned he had to make 25 trips back to New York for his home office that were previously unnecessary. This indicates a rise in business travel. Both segments are likely to thrive, especially in the context of leisure travel, where business trips are often extended for personal reasons. I’ve noticed this trend myself, and I believe this segment will continue to expand. The overall industry outlook is positive, as demand is expected to remain strong. Additionally, supply constraints are likely due to inflation and rising material costs, which will limit new development. In the markets we operate, we experience one of the lowest supply impacts in the sector, which we anticipate will enhance our pricing power and overall benefits moving forward.

Appreciate the answer. Thanks.

Yes. Thank you.

Our next question comes from Duane Pfennigwerth with Evercore ISI. Please proceed with your question.

Hey. Thanks for taking my questions.

You’re welcome. It’s good to be in the industry.

Appreciate it. So not sure if you can generalize to a market level. But where do you think you realized a relative RevPAR premium? And what markets do you see the biggest opportunity versus peers?

The first question, I'll let Sean think about that for a moment before we return to it. To answer, when considering Park and its potential, I believe it's both an urban and a group recovery opportunity. Reflecting on our markets, many anticipated that urban and group segments would either not recover or not return until 2025 or 2026. However, based on the increase we observed from the first to the second quarter, with urban occupancy rising by 25%, ADR up by 24%, and group revenues soaring by 68%, we expect these trends to persist. Across our extensive portfolio, we view this as a positive development. Regarding international demand, our strong presence in urban centers is advantageous, and we see recovery as international travel resumes. In 2019, we recorded $79 million in inbound revenue, which dropped to $22 million last year, but we're on track for $50 million to $53 million this year. We anticipate continued improvement as we transition to an endemic phase post-COVID. Additionally, for Hilton Hawaiian Village, we see significant potential. Many competitors have experienced considerable growth in leisure travel, but we have not yet seen the same success. We are approaching profitability levels close to all-time highs, yet we are missing about 20% of our long-standing visitors who haven’t been back for nearly three years. Therefore, we view their return as a significant opportunity as we look toward 2023, 2024, and beyond. Having mentioned these three points, I hope that addresses your question, and I'll let Sean respond to the first part of your inquiry.

Yes. And it is tough to kind of get in through. I mean, it's a market, but it's also the kind of asset as you imagine too. So some of the larger hotels we have in there, it's maybe not so much more of a RevPAR premium exercise but a total RevPAR exercise where you're obviously looking to drive the ancillary spend and be spend everything else with the group activity in some of those. So case in point, talk about our Bonnet Creek asset where we're expanding the meeting space and looking to capture a lot of ancillary revenue through that investment. And as well, looking at Key West, for example, certainly, there's a lot of good competitive assets in that market. We have a good little group base that we have for hotels and costs. We've made the conversions from Waldorf to Curio that should ultimately think we can still drive the same types of RevPARs and rates at those assets, but ultimately have a leaner operating model to drive more profitability. So it's kind of a complicated answer to think about just the focus on RevPAR where you think there's a total RevPAR story and as well as a profitability story.

That's helpful. And then just for my follow-up, when conditions support pivoting to offense, what would that look like? What shape would that take?

Its single assets, its portfolios, its upper upscale and luxury in top 25 markets and premium resort destinations. And clearly, in the Southwest, whether it's Phoenix, parts of Texas, Southeast into Florida, clearly, into Nashville. And I think that there's a lot of supply and the pricing is getting a little lofty, but clearly, continuing to balance out the portfolio is certainly something that you'll see us execute over time.

Thank you.

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

Great, thanks. I wanted to revisit the RevPAR guidance for Q3 and ask about it. I understand your comments regarding the sequential performance from Q2 to Q3. When comparing the period to 2019, which accounts for seasonality and looks at the recovery rate in June, it seems that despite the lower crude mix in Q3, the strength in resort and leisure rates could actually indicate a better recovery relative to 2019. Since Q3 is more of a leisure transient quarter rather than a group quarter, I am curious why you're expecting the quarter to be not as strong as what you observed in June and July. Are you being conservative in your outlook, or are the comparisons becoming more challenging and is rate sensitivity returning for leisure travelers? Thanks.

Thanks Robin. Ultimately, one thing I'd say is in our guidance our top line guide of RevPAR. We are ultimately showing improvement in the area to 2019 levels. We ultimately finished the second quarter at 10% down. We're guiding to be improving upon that by a couple of hundred basis points or so. So I think we are…

Compared to June and July, both months were down about 4% sequentially.

I believe that in August, we experience a dip due to the lack of significant business travel, as many people are returning to school and coming back from vacations during that time. This results in a decline compared to July. However, we expect to see a recovery in September, likely reaching levels similar to July, especially driven by the return of business travel for both transient and group travelers. We anticipate that this could contribute positively to the quarter, although we are taking a cautious perspective. The buildup for this quarter may not mirror the strong performance we saw in Q2, particularly considering the effects of the holiday season as people transition from vacation travel back into September.

It seems like you are being cautious, but I am also interested in your perspective on whether leisure travelers are becoming more sensitive to prices. Another hotel company mentioned that although July RevPAR was up compared to 2019, it was down year-over-year. Are you noticing a shift back to the historical trend where leisure travelers are more sensitive to rates? It appears they haven't been lately, but do you think that might be changing?

I think it's important to note that last year, people had limited travel options, which meant that certain markets didn't experience high demand. In places like Southeast Florida and New Orleans, where hurricane season impacts travel, many individuals may have chosen alternative destinations this year. This has led to some demand pressure in those markets. While year-over-year comparisons indicate a drop in demand, levels remain strong compared to 2019. However, the moderation in demand we see reflects the change in travel options available to people compared to last year.

Okay, great. Thanks very much.

Our next question comes from Chris Darling with Green Street. Please go ahead with your question.

Thanks. Good morning.

Good morning, Chris.

Going back to the Village for a second, can you touch on the second quarter margin print? Maybe give some detail as to what's driving that result? And then looking forward, what's your expectation on margin for that property?

The Hilton Hawaiian Village experienced some accrual as we navigated through labor negotiations. Ultimately, these accruals were released, positively impacting our margins this quarter. Looking ahead, Hilton Hawaiian Village presents a compelling story, particularly as we assess its performance. RevPAR levels have aligned closely with 2019 figures, showing minimal fluctuations between high ADR and low occupancy rates. This situation serves as a good indicator for evaluating our labor initiatives, including the discussed $85 million investment. When analyzing Hawaiian Village, the margin improvements align closely with 2019 levels on the revenue front. For adjusted figures in Q2, we anticipate a margin increase in the range of 200 to 250 basis points compared to 2019, particularly noting that we booked around half of the room nights for group business relative to 2019. This means we're missing some of the higher-margin banquet and catering opportunities compared to that year. Therefore, we see potential for further margin improvements beyond the 200 to 250 basis points I previously mentioned.

Okay. That's helpful.

Hey Chris, the other thing I'd add to what Sean said is, we have been crystal clear that we are laser-focused on reimagining the operating model and taking out $85 million in cost across the entire portfolio 1,200 FTEs, more than half of that are management admin, et cetera. Hilton Village is just going to continue to be an out performer for us in 2022 and beyond.

Got it. Thanks. And then, a little bit higher level, when you just step back and think about some of the challenges that the airlines have been facing around flight capacity, do you see this as a risk at all to the recovery of occupancy in your portfolio, or has that not necessarily had much of an impact?

It hasn't had much of an impact today. I mean, I think when you think about Heathrow and them deciding to have little or no traffic or not taking bookings for two weeks. I mean, these are things unimaginable as we think about it historically. We live in unprecedented times right now. I have to believe that those talented leadership teams will right-size their businesses and get it sorted out. There are just so many other variables to work through right now. But we are seeing probably more in the US. People are probably doing a lot of drive-to, to help compensate and ease their own travel frustration. Clearly, as you think about what's happening in Hawaii and other businesses, we have to take an airlift. We're seeing no shortage there. There's plenty of capacity. And those are desired destinations. As Sean pointed out, a lot of people didn't have a lot of options. Some options are opening up. But despite that and despite the fact that even in Hawaii where we don't have the anchor customer and the Japanese, we're getting plenty of visitation throughout the US and other parts of the world.

I might add on the margin, we're certainly seeing benefit in our airport properties as a dislocation happens. Seattle Airport, Boston Logan, Hilton has certainly seen some pickup, obviously from fuel being unfortunately dislocated or stranded. And on top of that, I'd say anecdotally, as I talk to people who are typically would come in for the day to meet are finding that before to ensure that they're going to get there. So, we're seeing a little bit of benefit of that to people just kind of be a little more cautious and actually staying at night versus doing a day trip.

All right. Thank you.

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

Thanks. Good morning. I would be curious to get your thoughts as business transient obviously, as you know still remains significantly below 2019 levels of accelerating. How do you see that delta in occupancy to 2019 providing a buffer in the event there is a mild recession and BT demand possibly holding up better than it historically has in a recession? Do you think that? And maybe on the flip side, whereas leisure demand is only operating at peak levels, how would you see that potentially faring in the amount recession?

It's a great question. We believe that business transient demand will continue to hold up as the recovery progresses. There remains significant pent-up demand from business leaders who need to travel and connect with customers and peers. Therefore, we expect that if there is a pullback, the impact would likely be less severe given the current stage of the recovery cycle.

And I understand that's sure for business transient. Do you think there's a different impact on leisure demand, doesn't maybe have that buffer of occupancy gap?

Yes. I mean, trees don't grow to the sky. We're all benefiting from elevated leisure travel, largely due to pent-up demand. However, I think there’s an argument to be made for the ongoing trend of travel among people working remotely or in hybrid setups. A more robust leisure market seems likely to continue to grow. That said, I don't believe it can sustain a 50% annual growth in RevPAR. We are getting some advantages, but I think these demand patterns might change as we fully emerge from the pandemic and move ahead.

Got it. And then just one more on the covenant waiver you've now exited, i.e. exiting, what kind of flexibility does that provide you, or what opportunities open up by not being subject to any more, maybe on the external growth side or internally? What does that do for you?

Quite honestly we put a lot of flexibility into the covered relief with lots of buckets for acquisition activity, and everything else. So I would say quite honestly, it doesn't really free up or it doesn't make huge amounts of flexibility for us. I think it kind of existed already, within covering early period thanks to the banks for being flexible for us. So I think it's kind of business as usual. Ultimately, we still have flexibility under elevated leverage targets, as those ramp down over time and interest coverage. We certainly still have a little bit of cushion there to kind of build the portfolio back. But I don't think there's anything, that we see as dramatic just because we booked in a lot of flexibility during the late period.

Got it. Thanks so much.

Thank you.

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

Hi, good afternoon. Thank you for my question. There has been considerable talk about asset sales in the range of $300 million to $400 million. Can you provide more insight into your approach to balancing current valuation with the productivity we’ve discussed regarding selling some assets? I’m trying to understand how aggressive or assertive you are in this context.

I believe we have been among the most active participants over the last three to four years. We have sold 36 assets for $2 billion, engaged in joint ventures, and worked on 14 international deals, many of which were complex, involving locations like Brazil, Germany, the UK, Dublin, South Africa, and the Netherlands, as well as our partnership with Sunstone. We've also managed some smaller self-operated assets. Our continuous effort has been to reshape our portfolio and enhance its quality, and we are going to intensify this effort. There is no cause for panic, and we are not looking at a fire sale; instead, we aim to maximize the sale price and ensure that the transactions are beneficial for our shareholders, which we have shown in the past. While there could be circumstances where we consider selling a non-core asset based on debt market conditions, I believe cap rates may have fluctuated somewhat in this environment. However, the liquidity remains high, with around $370 billion available from private equity and 25 companies holding over $1 billion that need to invest. Our focus is on identifying the proper buyers for the assets we're selling. We are dedicated to reducing debt, reinvesting in our portfolio, and closing the valuation gap, and this commitment will only grow stronger.

That’s perfect. Thank you very much.

Thank you.

And we have reached the end of the question-and-answer session. I'll now turn the call over to Tom Baltimore for closing remarks.

Great to be with you today. I hope everybody has a great remainder of the summer and look forward to seeing you in the coming weeks and months.

And this concludes today's conference, and you may disconnect your lines at this time. Thank you for your participation.