Greetings, and welcome to the Park Hotels & Resorts Second Quarter 2025 Earnings Conference Call. As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Ian Weissman, Senior Vice President of Corporate Communications.

Thank you, operator, and welcome, everyone, to the Park Hotels & Resorts Second Quarter 2025 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 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 yesterday's earnings release as well as in our 8-K filed with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com. Additionally, unless otherwise stated, all operating results will be presented on a comparable hotel basis. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide a review of Park's second quarter performance and strategic initiatives as well as provide an update to our 2025 outlook. Sean Dell'Orto, our Chief Financial Officer, will provide additional color on second quarter results, an update on our balance sheet and 2025 guidance. 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. Overall, I was very encouraged by our second quarter results, driven by continued outperformance from recently completed ROI projects, disciplined cost controls across the portfolio and steady progress on our strategic initiatives. Q2 RevPAR was relatively flat year-over-year when excluding the Royal Palms South Beach in Miami, which suspended operations in mid-May for a transformative renovation and repositioning. Performance was led by strength in several of our resort markets, including Orlando, Key West and Puerto Rico as well as continued improvement in business travel, which drove solid results in urban markets such as New York, San Francisco, Denver and Boston. An aggressive asset management strategy is one of our three guiding principles, and I am incredibly proud of the efforts by our team and our operating partners to drive effective expense controls across our portfolio, resulting in total expense growth of just 40 basis points for the quarter or just 1% when excluding Royal Palm South Beach, marking the second consecutive quarter in which expenses grew by approximately 1% or less. Looking ahead to the remainder of the year, we expect continued low expense growth, driven by cost savings identified through our deep dive analysis and the cost structures in the first half of the year, in addition to the benefits of a sector-leading 25% reduction in property insurance premiums, which will result in an incremental $5 million in savings through year-end. From a capital allocation standpoint, we made meaningful progress toward our goal of $300 million to $400 million in noncore dispositions with the sale of the Hyatt Centric Fisherman's Wharf for $80 million at an impressive multiple of 64x 2024 EBITDA, demonstrating the underlying real estate value supported in the private markets. While the transaction market remains challenging, we are actively engaged in discussions with potential buyers for several noncore assets, and we remain laser-focused on achieving our target by year-end. As a reminder, our strategic initiative to dispose of our remaining 18 noncore hotels is expected to meaningfully enhance the overall quality and long-term growth profile of the company. In line with our strategic priorities, we made the decision to close the 266 room Embassy Suites Kansas City Plaza Hotel by the end of September as the asset is projected to achieve just $73 in 2025 RevPAR and generate very little EBITDA. In connection with the hotel closure, we recently agreed to an early termination of the hotel ground lease, which was set to expire in January 2026. We also made the decision to exit two additional noncore hotels, the DoubleTree Seattle Airport and DoubleTree Sonoma, both of which are subject to a ground lease that will terminate at the end of this year, at which time the properties will revert to the landlord. Removal of these assets will materially enhance the quality of our portfolio, increasing nominal RevPAR by over $5 and margins by nearly 70 basis points, and bring us closer to our core portfolio of 20 consolidated hotels, which represents approximately 90% of the value of our portfolio. This core portfolio remains among the highest quality in the sector, with an average RevPAR of nearly $215 and EBITDA per key exceeding $40,000 based on 2024 performance adjusted for last year's strike disruption. Looking ahead, we expect the core portfolio to outperform the forecasted U.S. average RevPAR growth in the coming years. With respect to capital investments, during the second quarter, we commenced the comprehensive renovation project at our Royal Palm South Beach Resort, which we expect will generate returns of 15% to 20% on our $103 million investment, with the hotel's EBITDA expected to double to nearly $28 million once stabilized. Our in-house design and construction team is working diligently to ensure the hotel opens in Q2 of next year, ahead of the 2026 World Cup, during which Miami is scheduled to host 7 matches in June and July. Additionally, we expect to launch the final phases of room renovation projects for two of our rooms towers in Hawaii this month at Hilton Hawaiian Village. The second and final phase will encompass a full renovation of the remaining 404 guestrooms in the iconic Rainbow Tower and the addition of 14 new guest rooms with a total investment of $48 million. At the Hilton Waikoloa Village, this $36 million phase will fully renovate the remaining 203 guestrooms in the Palace Tower and add 8 new guestrooms. We expect both projects to be completed in early Q1 of next year. Finally, at the Hilton New Orleans Riverside, we are currently underway with the second phase of a three-phase renovation project, investing $31 million to upgrade an additional 428 guestrooms in the main tower, while the remaining 489 guestrooms of the 1,167 room tower are scheduled for renovation in 2026. I'm very excited about the investments we've made in our core portfolio as we continue to enhance asset quality and strategically allocate capital to maximize long-term shareholder value. We are confident that reinvesting in our portfolio is the highest and best use of our capital, positioning us for sustained growth and outperformance. Since 2018, Park will have invested more than $1.4 billion in our core 20 consolidated hotels through 2025, upgrading nearly 8,000 guestrooms and fully repositioning several of our most iconic hotels. Turning to operations, we witnessed continued strength in Orlando with our Bonnet Creek complex delivering record-setting revenue for the second quarter. RevPAR for the complex exceeded expectations, increasing nearly 12% year-over-year, with strong transient demand driven by a surge in advance purchase activity and enhanced commercial strategies. The Waldorf Astoria was particularly strong, reporting a 24% increase in RevPAR year-over-year as demand improved for both group and transient segments, each posting approximately 20% growth compared to last year. Notably, this quarter marked the 15th consecutive quarter of year-over-year group revenue outperformance at the complex. I'm also pleased to share that the Waldorf Astoria Orlando was recently recognized in Travel and Leisure's 2025 World's Best Awards as the Fourth Best Resort in Florida and the top-ranked resort within the Orlando market. Looking ahead, both transient and group demand remain strong at the complex, which is expected to deliver high single-digit RevPAR growth throughout the remainder of the year. Overall results at the Bonnet Creek complex have exceeded our underwriting expectations, with 2025 EBITDA now forecasted to be well over $90 million and nearly 40% above prior peak, further validating our strategy to invest in our core assets. Turning to Key West, our Casa Marina resort reported a nearly 4% year-over-year increase in RevPAR during the quarter, with transient occupancy increasing by over 20% as the hotel continues its position as one of Key West's premier hotels. Food and beverage outlet and ancillary revenue outperformed last year by 8% during the quarter, resulting from the increased transient volume and the newly added El Dorado restaurant that opened in Q3 of 2024. Notably, total food and beverage revenue for our Key West hotels reached a new Q2 record. Looking ahead to the second half of the year, we expect continued strong performance at both hotels, driven by sustained transient room demand and food and beverage activity with total RevPAR projected to grow high single digits over last year. In Puerto Rico, strong leisure and business transient demand drove a nearly 18% increase in RevPAR for the quarter compared to last year. Consistently high occupancy contributed to Caribe Hilton outperforming its comp set and delivering a RevPAR index of 120%, a positive trend we expect to continue, leading to mid- to upper single-digit RevPAR growth expected for the back half of the year. In our urban portfolio, we were particularly pleased with the ongoing strength of business travel during the second quarter, which contributed to solid RevPAR growth in New York, San Francisco, Denver and Boston. At our JW Marriott Hotel in San Francisco, RevPAR growth exceeded 17%, driven by solid transient and group demand as the city benefited from an increase in convention room nights during the quarter. In New York, our Hilton Midtown hotel delivered a nearly 10% RevPAR increase during the quarter, supported by a 16% increase in group revenue and a more than 11% increase in leisure revenue, both of which helped to drive a nearly 230 basis point increase in RevPAR index during the quarter. In Denver, RevPAR growth at our Hilton Denver hotel exceeded 6% during the quarter, fueled by strong performance across both group and leisure segments. Meanwhile, in Boston, an over 22% increase in leisure revenue contributed to a 5% RevPAR gain at our Hyatt Regency Hotel. Turning to Hawaii, while we continue to face some near-term headwinds, we are encouraged by the sequential improvement we are seeing, especially at our Hilton Hawaiian Village, even as inbound international travel has not fully recovered. Combined RevPAR at our two properties declined by approximately 12% during the quarter with Hawaii continuing to be impacted by weaker inbound travel from abroad. With respect to Hilton Hawaiian Village, the resort continues to recover from the Q4 labor strike last year. However, we are encouraged by the hotel's continual improvement in market share, regaining over 1,600 basis points since the beginning of the year and exceeding full share since May. Looking ahead in the near term, we expect the sequential recovery for Hilton Hawaiian Village to continue, evidenced by a strong forecast for July that had occupancy over 90% and RevPAR index above pre-strike levels. However, this momentum is expected to be offset by Hilton Waikoloa's weakest quarter of the year, producing a combined RevPAR decline that is expected to be slightly better than Q2. Beyond Q3, performance in Hawaii is expected to accelerate meaningfully in the fourth quarter as Hilton Hawaiian Village laps the labor strike disruption from last year that drove RevPAR down over 25% in 2024. In addition, combined group pace across our two Hawaii resorts is forecasted to increase by nearly 50%, which we expect will translate into high teens combined RevPAR growth during Q4. Looking ahead, the long-term outlook for Hawaii remains very favorable, supported by very limited new supply expected through at least 2030 and the anticipated improvement of inbound travel from abroad. In our opinion, Hawaii is one of the most dynamic and resilient resort markets in the country with less supply growth forecasted compared to any other U.S. market and with over 3,500 fee simple guestrooms at a huge discount to replacement cost, Park remains well-positioned to deliver above-average long-term growth for shareholders. And finally, I am pleased to report that neither of our Hawaii hotels sustained any damage following the 8.8 magnitude earthquake off the Russian coast on Wednesday and subsequent tsunami alerts throughout the Pacific Ocean. With respect to fundamentals over the back half of the year, the outlook remains mixed as the ongoing uncertainty around tariffs, elevated inflation, and geopolitical issues are expected to continue weighing on travel demand during the third quarter, while easier comps and improved group travel will help to support strong trends during Q4. Overall, July results have been modestly weaker than expected with preliminary RevPAR declining by approximately 4% when you include the nearly 130 basis points of renovation disruption at the Royal Palm South Beach. Recent trends are persisting with continued strength in Orlando, Key West and New York City, offset by modestly softer-than-expected results in Hawaii and Southern California. Based on our current forecast, Q3 RevPAR is expected to decline by approximately 4% to 5%. Our revised forecast reflects softer-than-anticipated group demand with group pace lower by 380 basis points to down 14%, our weakest quarter of the year, coupled with softer leisure transient demand forecasted for Q3, mainly due to heightened economic uncertainty, reduction in government demand and weaker inbound international visitation. We expect a significant improvement during the fourth quarter with group revenue pace increasing 18%, which when combined with significantly easier year-over-year comparisons, we expect RevPAR growth to reaccelerate to 3% to 5% in the fourth quarter. Overall, the improvement is relatively broad-based with outsized gains expected for Hawaii, Denver, Orlando, Key West, Boston, Seattle and Chicago. Additionally, we remain laser-focused on our strategic objectives of reshaping the portfolio through reinvestments in our iconic portfolio to drive long-term value for shareholders, executing noncore asset dispositions and further strengthening our balance sheet by extending maturities and reducing leverage over time. These priorities keep us focused on what we can control and position us to navigate near-term volatility while building a stronger, more resilient platform for sustainable long-term growth. And with that, I'd like to turn the call over to Sean.

Thanks, Tom. Q2 RevPAR was largely in line with expectations with reported results of $196, representing a 160 basis point decline over the prior year period. However, excluding our Hilton Hawaiian Village Hotel, which continues to recover from last year's labor strike and the Royal Palm South Beach, which suspended operations in May for a full-scale renovation, year-over-year RevPAR growth would have exceeded 2% as these two properties together accounted for a 375 basis point drag on portfolio performance. Total hotel revenues for the quarter were $645 million and hotel adjusted EBITDA was $191 million, resulting in hotel adjusted EBITDA margin of 29.6%. Adjusted EBITDA for the quarter was $183 million and adjusted FFO per share was $0.64, both exceeding expectations. Turning to the balance sheet, we are actively working to address our 2026 debt maturities, including the $1.275 billion CMBS loan on our Hilton Hawaiian Village Resort and the $123 million mortgage loan on our Hyatt Regency Boston Hotel. With our strategic priorities in mind, we remain focused on solutions that offer near-term commitments that maximize optionality and minimize cost, and we're currently in the middle of a process to secure the debt and liquidity sufficient to address the $1.4 billion outstanding and are reasonably confident we will complete a transaction in the third quarter. With respect to our dividend, on July 15, we paid our second quarter cash dividend of $0.25 per share and on July 25, we declared a third quarter cash dividend of $0.25 per share to be paid on October 15 to stockholders of record as of September 30. The dividend currently translates to an annualized yield of approximately 9%. Turning to guidance, given some of the near-term headwinds Tom discussed earlier, we are lowering our full year RevPAR forecast by 150 basis points at the midpoint to a new range of negative 2% to flat growth or essentially flat at the midpoint when excluding the Royal Palm South Beach. With respect to earnings, we are increasing our adjusted EBITDA forecast by $2 million at the midpoint to $620 million within a tightened range of $595 million to $645 million, resulting from the improved outlook for annual expense growth that Tom alluded to earlier, helping to offset the softer top line expectations. As a result, hotel adjusted EBITDA margin range is now 26.1% to 27.5% or an increase of 30 basis points at the midpoint versus our prior guidance range. And finally, adjusted FFO per share increases by $0.01 at the midpoint to $1.95 with a range of $1.82 to $2.08 per share. Finally, I wanted to provide a brief update on the status of the two San Francisco hotels, which have been in receivership since October 2023. After a two-year process, I'm very pleased to report that the receiver has made substantial progress toward the sale of the two hotels, with the purchase and sale agreement recently signed and closing expected by October 29. This concludes our prepared remarks. We will now open the line for Q&A. Operator, may we have the first question, please?

Our first question comes from Smedes Rose with Citi.

I wanted to ask you a little bit on your guidance bridge. Looking at the first quarter kind of comp, that guidance for hotels versus the second quarter. It looks like the decline in revenues is almost offset kind of one for one on the expense side, which seemed kind of aggressive. And I'm just wondering if you could sort of talk to that a little bit or maybe the same-store pool is a little bit different for the first quarter versus the second quarter in your guidance? That's my first question.

Yes, Smedes, this is Sean. I'll address that. First and foremost, you're not the only one asking that question. When comparing our first quarter guidance to the second quarter, we need to account for the sale of Fisherman's Wharf. I won't go into all the details, but you can check with Ian and Zach for more information. This relates back to what Tom mentioned about our cost savings. Our asset management approach has been a guiding principle for us. Over the past several months, our asset management team has collaborated closely with our operators at both the corporate and property levels, examining revenue strategies, increasing non-room revenues, and reducing expenses across nearly every line item. As a result of this effort, we've estimated about a $10 million benefit to our ongoing operations. There's significant productivity from these initiatives, and I want to commend everyone involved. We're also looking at another set of hotels to work on during the third quarter, continuing our efforts through July and August. Additionally, our tax team has actively pursued appeals, achieving some wins in the last quarter that were not part of our initial guidance. We realized a $5 million benefit in the second quarter and expect about $2.5 million in savings for the latter half of the year against previous property tax accruals. Moreover, we take pride in our risk management program, which emphasizes protecting our assets. We have assigned first responders to each property and trained them alongside our teams for situations like hurricanes and water leaks. We also invest in technology to safeguard our hotels, particularly in coastal regions. Our efforts in this area have been recognized by our insurance carriers, resulting in a 25% reduction in our annual premiums during our last renewal on June 1. This translates to approximately $1 million in savings for the second quarter and another $5 million in the latter half of the year. Overall, these initiatives have generated about $24 million in bottom line benefits from our efforts over the last several months, which contributes to the positive flow-through pattern you're noticing.

Okay. All right. I just wanted to ask you a little bit. Yes, go ahead, sorry.

Smedes, this is Tom. I just wanted to give a shout out to Sean and Carl Mayfield, heads of design and construction, along with the entire team working on the insurance side. What they have achieved over the past several years is truly remarkable. The discipline and effort we have put into enhancing resiliency have resulted in a 25% reduction, which is unparalleled among our peers. Moreover, no one else possesses the same depth of experience with our internal team working in the way that we do. I feel proud and grateful for this achievement. All of this work, along with a thorough assessment on the operational side, especially in this challenging environment, reflects the strength of our team. Once again, it underscores our commitment to being proactive asset managers. I am extremely pleased with our progress, and I believe it is evident in our results.

I wanted to ask about your slightly weaker expectations for the third quarter and the improvement in the fourth quarter, which seems to be driven by some solid group business coming online. Are you experiencing continued strength in group bookings into 2026? Are there specific markets where you're seeing relative strength or weakness?

Yes. I would say, as we look to '26, I think, probably relatively flat right now. Not unsurprising as we look out to '27, probably up 4% to 5% right now. But key markets in '26 that look particularly strong, Bonnet Creek continues to perform well, that transformation is the gift that keeps giving and probably up 9% or more in '26 there. San Diego, up probably 53% in group pace. Chicago, up 11%. Hilton Caribe, I think, up another, up over 40%. Seattle, up double digits. So we continue to see really strong on the group side there. So it's strong there and looks very good as we look out to '27 as well. And in fourth quarter, it's particularly strong. We're not seeing any softening at all. Again, the third quarter will be tougher, as Sean mentioned, as I had in my prepared remarks, down about 14%. And then obviously, the fourth quarter up about 18% group pace this in the year of 2025.

Our next question comes from the line of Duane Pfennigwerth with Evercore.

This is Peter on for Duane. Sean, could you maybe unpack the comment about the possible refinancing in Q3? And what sort of options you're looking at?

Sure. As I mentioned, we are currently in the process of evaluating our options. I won't go into too many specifics, but we are definitely collaborating with our banks to secure capital that will provide us with the commitments we need for reassurance. As these loans become current later this year, we will have the ability to draw on them next year as we approach maturity. This will allow us to postpone the expected increases in interest rates and access the prepayment windows for these loans. We're managing a combination of a revolver and other financing options, and we have the necessary commitments and liquidity to address these needs. Whether this occurs at the end of this year or early next year, we plan to work on a second phase of this process, which will likely involve securing a mortgage against Bonnet Creek to meet the remaining requirements.

Got it.

Peter, this gives us the optionality of one little friction cost for other strategic things we may explore and then having both properties in Hawaii completely unencumbered. So that's one of the goals that we have through this process. So we are very confident. Sean and the team have done a great job. We're out in front. We've got great banking relationships. And so we don't anticipate any issues, and the process is unfolding very, very well.

And just quickly on the transaction front, can you speak to maybe what kind of feedback you're getting for assets that are currently being marketed? And if possible, what sort of timeline we could be working with for further announcements?

Yes. Great question. Look, it's a challenging environment. Some have used the phrase sort of frozen or stalled. I think it's an environment where we've just got to work a little harder, and we're certainly up to that challenge. I think if you think back, obviously, over the last several years, we have sold or disposed of now 46 assets or north of $3 billion. We were even selling in the worst of times during the pandemic. So we've obviously completed an asset sale, Fisherman's Wharf in San Francisco at $80 million and a multiple, I believe, at about 64x. So there's plenty of liquidity, both on the equity and the debt side. Obviously, buyers are being cautious with their underwriting and being disciplined. And we are in active discussions with a number of hotels of multiple work streams. And we're confident that we will meet our range that we've communicated from the beginning of the year of $300 million to $400 million in asset sales, obviously, using those proceeds to invest back into our core portfolio, reduce debt. And then we'll look opportunistically on potential buybacks. Obviously, we bought back approximately 3 million shares in Q1. We didn't buy back any shares in Q2. But we have purchased, we bought back about 38.5 million shares over the last 3-plus years, about 20% of our float. So we've been very disciplined about recycling capital and particularly given all of our capital allocation decisions, and we'll continue to proceed accordingly.

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

So I guess it wouldn't really be a quarterly conference call if we didn't go to the Hawaii question, but I want to kind of direct it more on the citywide front, on the marketing front and the airlift front. Tom, do you think all the interested parties on the ground level, with the government and the travel people, do you think you're adequately getting enough messaging out there to get folks back, and you think the airlines are any closer to adding more international flights in now?

It's a great question, Chris. Looking at the last 20 years, Oahu's RevPAR growth has surpassed the U.S. average by about 120 basis points. In Key West, Hawaii, the compound annual growth rate has been around 4.5%, while the broader U.S. has been about 3%. Additionally, Oahu has experienced effectively negative supply growth over those two decades. As mentioned in our prepared remarks, we anticipate around 0.3% supply growth over the next five years. With two world-class resorts owned outright, we remain optimistic about Hawaii's long-term prospects. The recovery after the strike has taken longer than we had hoped. We experienced a decline of about 18% in HHV in Q1 and about 13% in Q2, and we expect a recovery of roughly 7% to 8% in Q3, with a very strong Q4 ahead. While we have favorable comparisons, we're also seeing significant group business, with 18% overall and around 50% in Hawaii. Domestic airlift has increased by over 20% since 2019 thanks to airlines like Southwest, Alaska, United, and Delta, which is encouraging. The ramp-up continues, and we aren't concerned about the slower return of Japanese visitors, who peaked at about 1.5 million in the past. This year, we estimate around 700,000 passengers, which is below our expectations, but we forecast a return to about 1 million by 2027 or 2028. This gap is being filled by increased domestic travel, particularly from Canada and other international markets. We're not worried about the medium to long-term outlook. It's worth noting that during the strike, Hilton Hawaiian Village was the only asset in Hawaii affected, and it was a targeted and lengthy process. Now that we've navigated that, we are collaborating effectively to accelerate our recovery.

That's great. As a quick follow-up, you guys got Fisherman's Wharf done, you talked about Kansas City. If we look at the handful of other kind of noncore airport/ground lease hotels, if we isolate those, is there any way to think about how much that can add to comparable RevPAR margins or EBITDA? Just to kind of frame what that could look like going into next year?

Yes, it's a great question. And in my prepared remarks, I made the comment that if you take out sort of our noncore and just look at our core, I think the RevPAR is about $215 and would be certainly as strong as any of our peers. Chris, we've had this conversation many times. As you know, we are laser focused on reshaping the portfolio and candidly getting down to that core portfolio and taking that overhang, if you will. We've sold or disposed of 46 assets. We've got three that we talked about. Obviously, today, the two leases that are expiring, we're not going to extend, and then obviously, the give back in Kansas City. And we've got many other discussions underway. And the sooner that we can reshape and clean that up, we'd love to deal with just one cleanup trade, but the reality is every asset's got its own story with legal and tax in some cases, joint venture and other complexities. But rest assured, the team led by Tom Morey and his great team on the investment side are working really hard to reshape the portfolio and to clean up those noncore as quickly as we can. And you can expect we'll have announcements here in the coming months.

Our next question comes from the line of Floris van Dijkum with Ladenburg.

I wanted to follow up on the disposals. You mentioned 18 noncore hotels, with 3 being ground leases, so that leaves 15. Do you anticipate that all of those hotels will be removed from the portfolio by the end of next year? This would help in understanding the clean EBITDA production. Additionally, do you believe that 2026 will be the year when Hawaii Village stabilizes, or is it more likely to happen in 2027 before we see EBITDA levels return to $185 million?

Yes, those are great questions. I'll answer the first one. We would love to have the noncore hotels resolved by next quarter, as you know how hard we've been working on this. I expect that by the end of next year, we will have made significant progress. There might be one or two stragglers left, but we are doing everything we can to clean this up quickly. We understand there's a small overhang, and we want it removed to focus back on our core portfolio, which offers great optionality and reflects the core value of the Park portfolio. This core portfolio accounts for about 90% of the company's value, and we can clearly see where we're investing those funds. We genuinely believe we can generate higher development yields compared to current acquisition yields. The accomplishments in Orlando and Key West are prime examples of this success. For instance, Orlando, specifically Bonnet Creek and the Waldorf Astoria, has been recognized as the top hotel in the area, thanks to the more than $200 million transformation we invested in the entire complex, and we're seeing impressive performance as a result. We're very proud of this progress and remain focused on our core portfolio. Regarding Hawaii, I believe it's not a question of if, but when. I anticipate that 2026 will be closer to peak EBITDA, reaching around $185 million, although this won't happen in 2025. However, I am optimistic about sequential improvements, and we expect a very strong fourth quarter across the portfolio, particularly due to the favorable comparisons we have in Hawaii for Q4.

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

I'd like to just go back and if we're double or clicking on this, I hope you'll humor me. But what I'd like to understand and just discuss Hawaii a bit. And just to unpack kind of where you are because the sort of demand dynamics are a little bit complex, and there's some work being done there, too. And we've heard some peer reports where Maui went super well for them. And I know everybody's assets are not the same place and the same thing. So that's what I'd like your help with, if you can.

Yes, I think one way to consider this is to take a step back. Over the last 20 years, we've seen strong performance in terms of both demand and overall effectiveness. Supply has been limited, even almost negative, during this time. We anticipate that for the next five years, supply will continue to be limited, at around 0.3%. Additionally, we recently experienced a significant 45-day strike, which negatively impacted demand and our overall pace. While I don't want to excuse this, it did present challenges as we started the year. Looking at the demand patterns, we experienced an 18% decrease in Q1 and a 13% decrease in Q2 at Hilton Hawaiian Village. We expect a further decline of around 7% to 8% in the fourth quarter, followed by a potential increase in the high teens. Operationally, we are not worried. We have also increased our RevPAR index to approximately 102%, though we were in the 115% to 120% range before the strike and below 100% right after. In terms of reviews, we're hoping that as we clear through some of the feedback on TripAdvisor, the more favorable reviews will enhance the destination's appeal. Airlift is continuing to grow, particularly from Canada, although we're disappointed with the lag in Japan. Pre-pandemic, we saw about 1.5 million visitors from Japan, and we initially expected around 770,000 this year, but that forecast has now been lowered to about 700,000. However, we expect to eventually reach about 1 million by 2027 or 2028. I hope this gives you a clearer picture, David. We are not concerned about the intermediate or long-term prospects. Historically, Hawaii has been one of the strongest performers in the U.S. Moreover, since we own both resorts outright, we are investing significant capital into them. The renovated properties, such as the Tapa Tower, have shown remarkable results, with increases of $50 to $70 in average daily rates following renovations.

Our next question comes from the line of Dan Politzer with JPMorgan.

I wanted to go back to the group commentary that you gave, Tom. I think you said 2026 group would be flat, 2027 would be up 4% to 5%. Can you just maybe talk about that dynamic? Has that changed, I guess, from a few months back in terms of what you're seeing? And can you kind of talk about lead volumes? Are there rotations in there? I'm just trying to get a better sense of that dynamic where it feels like Q3 came in a bit lighter on group, next year is going to be flat, but then on the other side, you have fourth quarter in 2027.

Let me outline the situation, using Q4 as an example. Q3 was a bit weaker, down about 14.4% compared to the previous year, which we knew would be challenging due to tough comparisons such as last year's strong performance in Chicago and New Orleans. However, looking at Q4, there's an 18% increase across the board. Hilton Hawaiian Village rose 54%, New York City increased over 19%, and Hilton Chicago went up 14%. New Orleans showed an 11% growth, while Bonnet Creek surged by 45%. Washington, D.C. was up 25%, and San Francisco saw an impressive 214% increase. We're not noticing any pullback; even without Hawaii, we're still up 14% for group bookings in Q4. We're optimistic about 2025, and although 2026 presents some challenges, we expect improvements. As for 2027, we're already ahead by about 4% to 5% compared to the same time last year. Lead volumes appear strong, and both our national sales team and Hilton partners are working diligently. Given the renovations and investment in our core portfolio, we believe we'll keep enhancing these assets. We're optimistic about the group outlook despite some economic uncertainty causing some groups to hold back. While top-line growth is a bit softer and the GDP is around 1.2% when considering the first half of the year, this isn't entirely unexpected, and currently, the situation feels a bit unsettled.

That makes sense. For my follow-up, you have done an impressive job managing your operating expenses, particularly in labor. How should we view those expenses this year? Additionally, as you consider the factors leading up to 2026, what should we expect regarding labor expense growth?

I believe that, considering we have a significant amount of union presence in our portfolio and many agreements were settled last year, the outlook for labor as we approach 2026 remains stable. The initiatives we've implemented should be sustainable, and our team will focus on these during the budgeting process. Additionally, Royal Palm is returning, which will lead to adjustments we are already making this year. Overall, we anticipate continued growth in labor benefits in the range of 4% to 4.5%.

Our next question comes from the line of Cooper Clark with Wells Fargo.

On the Royal Palm, I appreciate the confidence on executing there from a timing perspective. Just wondering how we should think about the ramp-up on that asset sequentially come 2026 in terms of your underwriting assumptions? And how much of that is driven by expected demand from the World Cup games in early to mid-June?

Yes. Let me take the first part of it. We are really excited about this transformation. It's bull's eye real estate, well located, obviously, in South Beach. We've studied it carefully, $103 million investment. We think the internal rate of return unlevered 15% to 20%. And we've said in my prepared remarks about doubling EBITDA. If you think about RevPAR, pre-renovation was about $265, and you look at all of the ultra-luxury that exists in South Beach. And from the Four Seasons, St. Regis and others, and the kind of rates there, we've really underwritten this at inside of $400. And at that level, are confident that we can certainly double, obviously, EBITDA to the $27 million to $28 million range we've communicated. Obviously, you're opening in May, you're sort of late into the season. Obviously, we want to certainly be there for the World Cup, which will be significant. But we certainly don't expect that we'll be double EBITDA, even half of that, given the fact that we're opening in that May time frame. Sean may have some additional thoughts and comments to share on that.

No, I agree with what Tom mentioned. We are missing the peak season, and we anticipate some benefit from the World Cup during the off-peak period. However, I don't think we will achieve the previous EBITDA levels for 2026. We do expect significant growth toward the high 20s EBITDA as we approach 2027.

Great. And then just a follow-up on some of the CapEx projects. Just curious, following the Royal Palm, what the timing is on sort of the next big project? You spoke to some renovations in Hawaii next year where you have a good track record on execution. But just wondering kind of the next big project and what's the right way to think about rental disruption long term, what's the CapEx spend?

It's a great question. Last year marked the next phase, and next year will obviously see the third phase in New Orleans, along with the completion of that tower. We will also continue to focus on the Ali'i Tower in Hawaii, which is a smaller project but still significant for renovation. We have been dedicated to reinvesting in our core assets and are confident that we can achieve better development yields compared to acquisition yields at this time. We plan to assess potential renovations in New York, but I don't anticipate that happening in '26. More updates will come in the future as we complete our current pipeline of ROI projects.

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

I wanted to ask about 2026; you mentioned that labor costs might be up about 4% to 4.5% next year. This year, you've done an amazing job of other offsets between insurance and maybe some tax credits. And I guess, are there other levers for 2026 that we should think about how you could offset that higher wage level next year?

Yes. I have a point to make, and then Sean can add on. When considering wage rates and where people stand, it's important to note that we have some union involvement, and we've established fair and equitable agreements with our labor partners, which is a testament to our operators' negotiation skills. The 4% to 4.5% range for wage increases doesn't seem excessive to us. Moreover, we have complete confidence in our asset management team to effectively reduce costs and approach this differently. Advancements in technology will present opportunities for enhanced efficiency, be it in sales, marketing, or guest experience. We all need to focus on meeting customer needs while also working to lower costs given our operating model. Our competitors are addressing this, and we are also dedicating time to it, encouraging our brands and operators to think outside the box.

Great. No, that's super helpful. And then also, you talked about addressing some debt maturities. Do you need that $300 million to $400 million of asset sales to be completed before we're likely to see the maturities addressed? In other words, there's a lot of your negotiations currently sort of contingent on those asset sales happening?

No. I guess the short answer is no, Robin.

Yes, Robin, we have strong banking relationships. I want to remind everyone about our actions during the pandemic. We completed three bond deals, extended maturities, and repaid all our banks, with everyone earning fees. We have plenty of banks eager to work with us, thanks to Sean's leadership and the team. I'm very confident that we will accomplish this in the third quarter, and it is not dependent on those asset sales at all.

Can I ask for a small clarification regarding Hawaii? When you mentioned the group, you noted that it would be flat overall for next year, but you also pointed out several hotels where the performance was significantly improved. I was surprised that Hawaii did not make the list of locations expected to see significant growth compared to 2025, especially considering the difficulties Hawaii faced in 2025. Do you think it will see an increase but was just not mentioned, or are there still ongoing group challenges in Hawaii?

Hawaii has a smaller percentage, but we don't expect it to change significantly.

I would say that you experienced a 50% increase in Q4, which we will carry forward. The convention center is closed for renovations, which will affect business in 2026, particularly in terms of convention-related activities. There are several factors at play that we need to consider. As Tom mentioned, though, this isn't a major driver of demand for that asset.

Our next question comes from the line of Ken Billingsley with Compass Point.

I wanted to ask about visitor spending. It looks like overall total RevPAR growth has been stronger than hotel RevPAR. Can you talk about where they're spending their dollars out of the room? And any near-term concern just given market conditions?

Sure. I think for one, on the group side, banquet and catering continue to be a strength, inclusive of audiovisual; the group set that we still see strong performance, certainly the in-house groups in their spending related to banquet and catering, which catering contribution was up 5% in Q2. And again, looking against prior forecast, and there's a number of things that we look at and have seen some, obviously, some deterioration, I would say, this is one thing that we're not seeing, which is going to continue to strengthen spend on that side. Outlets, roughly have about 1.5% in Q2, helped by things like Casa Marina was up 18% year-over-year with the help of the addition of El Dorado restaurant and nice oceanfront restaurant. So you're seeing enough spending and sufficient spending in the outlets, especially in the resort areas. Parking was up 9%, continuing a strong trend along with some ancillary fees that we continue to kind of evaluate the market and increase things like facility fees and whatnot; those are up 6% in June, expect them to be up 5% for the year. So yes, I would say overall, across the board, we've got some healthy out-of-room spend across the portfolio.

And to follow up on that, specifically, I know urban RevPAR was strong; bright spot in the quarter. But it looks like total RevPAR for this group has had softer growth. In fact, almost like a decline. Can you talk about maybe what's going on the urban side with out-of-room spend?

I don't think it's a major issue. I would need to follow up and review the details, as I don't have that information available right now regarding where we are noticing some of the softness you're mentioning.

We have no further questions at this time. I'd like to turn the floor back over to management for closing comments.

Well, we appreciate everybody taking time, and we look forward to seeing you at upcoming conferences, and we hope you have a great summer. And please note that the team at Park continues to be laser-focused on our strategic priorities and excited about Q3, Q4, in closing out 2025 on a high note.

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