Greetings, and welcome to the Park Hotels & Resorts Third Quarter 2025 Earnings Conference Call. As a reminder, this conference call is being recorded. It is now my pleasure to introduce your host, Ian Weissman, Senior Vice President, Corporate Strategy. Thank you. You may begin.

Thank you, operator, and welcome, everyone, to the Park Hotels & Resorts Third 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 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 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 an update on Park's strategic initiatives, third quarter performance, and outlook for the remainder of the year. Sean Dell'Orto, our Chief Financial Officer, will provide additional color on third quarter results and 2025 guidance as well as an update on our balance sheet and dividends. 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. Park remained laser-focused on our strategic priorities during the third quarter, fortifying our strong and flexible balance sheet, recycling capital to enhance the quality and growth potential of our core portfolio and driving operational excellence by minimizing costs in a challenging operating environment. Through disciplined execution, we continue to transform Park into an owner of high-quality iconic hotels with compelling growth profiles. We believe this ongoing portfolio refinement combined with unlocking embedded value across our assets, positions us to deliver stronger performance in the years ahead. Because we continue to be proactive with respect to our balance sheet, we successfully extended and upsized our corporate credit facility in September to provide us with committed debt capital that increases our total liquidity to $2.1 billion to address our 2026 debt maturities. I want to thank our bank partners for their continued support and confidence in Park and for giving us the flexible capital to execute our business plan. Turning to our capital allocation initiatives. Our strategy over the past several years has been and continues to be focused on unlocking significant embedded value within our core portfolio to maximize returns for our shareholders. With development returns far exceeding acquisition yields, we continued to lean into high ROI reinvestments, deploying over $325 million across our best-performing assets at returns approaching 20%, including the meeting space expansion and renovations at our Signia and Waldorf Astoria, Bonnet Creek complex in Orlando, the renovation and repositionings at our Casa Marina and Reach Resorts in Key West, and the renovation and upbranding of our Santa Barbara Resort. In May, we launched our six major hotel redevelopments in seven years, a $103 million renovation and repositioning of the Royal Palm located in the heart of South Beach, Miami. This transformational project is expected to generate a 15% to 20% IRR and more than double the hotel's EBITDA from $14 million to nearly $28 million upon stabilization. Importantly, construction remains on schedule and on budget, and we are targeting a reopening ahead of the 2026 World Cup matches in Miami next June. We also have several other major renovation projects underway, including the final phases of guestroom tower renovations at both of our Hawaii hotels expected to be completed in early Q1 2026 as well as the second phase of guestroom renovations at our Hilton New Orleans Riverside Hotel, upgrading another 428 guestrooms in the 1,167-room Main Tower. The remaining 489 guestrooms at New Orleans are expected to be completed over the next 1 to 2 years. In total, we expect to execute approximately $220 million in strategic renovation projects this year, further enhancing the quality of our core portfolio. We remain confident that reinvesting in our assets represents the highest and best use of capital. Since 2018, we have invested approximately $1.4 billion in our core hotels, upgrading nearly 8,000 guestrooms and fully repositioning several of our most strategic assets. We continue to be disciplined and deliberate with our capital recycling efforts, particularly as the transaction market remains episodic. Our goal remains crystal clear: to divest our remaining 15 non-core consolidated hotels and concentrate ownership across 20 high-quality assets in markets with strong growth fundamentals and limited new supply and that account for 90% of the value of our portfolio. Successful execution of this strategy will position us with one of the highest quality portfolios in the sector and among the strongest same-store growth profiles. In line with this plan, we recently closed the 266-room Embassy Suites Kansas City, a property on an expiring ground lease that generated minimal EBITDA. And by year-end, we will exit 2 additional non-core hotels on expiring ground leases, the DoubleTree Seattle Airport and the DoubleTree Sonoma, which are expected to generate a combined EBITDA of just $300,000 this year. Exiting these 3 lower-quality assets will meaningfully enhance our portfolio metrics, increasing nominal RevPAR by nearly $6 and expanding margins by approximately 70 basis points. Despite a challenging environment, we remain laser-focused on executing our strategic objectives with several non-core assets currently being marketed and active discussions underway on multiple transactions, including 2 potential deals under letter of intent. Turning to operations. As we disclosed on our second quarter call, third quarter results were impacted by a meaningful decline in group demand driven by tough year-over-year comparisons following last year's strong citywide calendars across several of our markets, incremental disruption from the second phase of our Hawaii renovations, which began in August, a month earlier than last year, and further challenged by softer leisure and government demand. Overall, RevPAR declined 6% or approximately 5% when excluding Royal Palm South Beach. Despite these headwinds, several of our core markets performed exceptionally well, further demonstrating our ability to unlock value at our hotels. In Orlando, the Bonnet Creek complex delivered nearly 3% RevPAR growth, with both the Signia and Waldorf Astoria hotels achieving their highest third quarter RevPAR and GOP in the complex's history. Looking ahead to Q4, the complex is set to benefit from multiple group buyouts with group revenue pace up 28% and RevPAR growth expected in the mid- to upper single digits. In Key West, RevPAR growth outperformed the broader portfolio, increasing 1% for the quarter, while Casa Marina's RevPAR index reached 110, up nearly 800 basis points year-over-year, driven by very strong group demand. Overall, group room nights increased 28%, driving higher occupancy and stronger overall results. For Q4, we expect continued outperformance supported by ongoing leisure transient strength as we head into the peak season, translating to mid-single-digit RevPAR growth. In New York, RevPAR rose nearly 4% with meaningful share gains across all segments. Meanwhile, in San Francisco, the JW Marriott Union Square delivered RevPAR growth of nearly 14%, supported by strong group and transient demand. Both hotels are expected to maintain strong momentum through year-end, driven by very strong group trends with the group revenue pace up 14% in New York and 160% in San Francisco. Finally, at the Caribe Hilton in Puerto Rico, Q3 RevPAR increased nearly 12% with incremental leisure demand driven by the Bad Bunny residency, which added roughly 1,300 basis points of lift to the quarter. Looking ahead to the fourth quarter, we expect a significant rebound led by a broad-based recovery in group demand coupled with easier year-over-year comparisons in Hawaii as we lap the 45-day labor strike, which began late September last year, the impact of which was endured throughout the fourth quarter last year. Group revenue pace for the fourth quarter is currently up over 12% year-over-year with double-digit increases for several of our largest group houses, including our Bonnet Creek complex in Orlando, our JW Marriott in San Francisco, our Hiltons in New York, New Orleans, Chicago, and Denver, our 2 Hawaii resorts, and the Caribe Hilton Resort in Puerto Rico. That said, the extended government shutdown has impacted both group and transient demand in several of our core markets, more pronounced in Hawaii, D.C., and San Diego, placing additional pressure on fourth quarter results. Through the end of October, we estimate that the shutdown has reduced expectations for room revenue by approximately $2.5 million, resulting in a roughly 180-basis-point drag on this month's RevPAR performance. October RevPAR is now expected to be relatively flat year-over-year for the total portfolio or up approximately 1.5% when excluding the Royal Palm in Miami. Based on our current forecast, which reflects the impact of the shutdown through October only, we expect fourth quarter RevPAR growth to range between negative 1% and plus 2% or positive 1% to positive 4% when you exclude Royal Palm. Sean will provide more detail on our updated full-year guidance in just a moment. Finally, as we turn our attention to 2026, I am confident that the strategic investments we have made will position Park to outperform during the reacceleration of the lodging cycle. While some macro uncertainty persists, particularly for the lower-end consumer facing economic pressure from higher rates, we see the foundation forming for the next cycle of expansion. A more accommodative Fed and easing financial conditions, resulting in lower rates and taxes should support a rebound in business investment. At the same time, sustained public sector and private sector spending, particularly around AI infrastructure and the anticipated productivity gains from AI adoption, together with a modest pickup in inbound international travel, particularly from Japan, should further strengthen lodging fundamentals. Looking ahead, we remain optimistic about 2026 and beyond, supported by expectations for lower interest rates, a more favorable regulatory environment, and a renewed investment cycle, all of which should drive stronger economic and travel growth, along with a meaningful boost from major events, including World Cup events in multiple cities, the Super Bowl in the San Francisco Bay Area, and New York and Boston's 250th anniversary celebrations. With industry supply growth remaining at historic lows, we see a clear path for RevPAR acceleration and sustainable long-term growth, particularly across the segments and markets where our portfolio is concentrated and additional growth from the capital investments we are making in the core portfolio.

Thanks, Tom. For the third quarter, RevPAR was $181, representing a 6% decline over the prior year or down 5% excluding the Royal Palm South Beach, which suspended operations in May for its full-scale renovation. Total hotel revenues were $585 million, and hotel adjusted EBITDA came in at $141 million, translating into hotel adjusted EBITDA margin of 24.1%. Despite the softer top-line results, continued cost discipline by our team and hotel partners held expense growth relatively flat for the quarter, marking the third consecutive quarter with expense growth of 1% or less. Adjusted EBITDA was $130 million, and adjusted FFO per share was $0.35. Turning to the balance sheet. As Tom mentioned, we made significant progress toward addressing our 2026 maturities by amending and upsizing our corporate credit facility. The facility now includes a $1 billion senior unsecured revolver with a fully extended maturity in 2030, a new $800 million senior unsecured delayed draw term loan facility with a fully extended maturity in 2031, and a $200 million senior unsecured term loan maturing in 2027 that was entered into in May of last year. We expect to draw on the new term loan next year to fully repay the $122 million mortgage on the Hyatt Regency Boston and together with a subsequent financing transaction expected in the first half of 2026, fully repay the $1.275 billion mortgage on the Hilton Hawaiian Village by the middle of next year when the par prepayment window opens. With respect to the Hilton San Francisco and Parc 55 hotels, which were placed into receivership in November 2023, we now expect the hotels to be sold by the receiver on or before the 21st of next month as the purchaser has exercised its one-time extension right outlined in the executed purchase and sale agreement. Turning to dividends. On October 23, we declared a fourth quarter cash dividend of $0.25 per share to stockholders of record as of December 31, translating to an annualized yield of approximately 9%. To preserve liquidity for our strategic initiatives to reinvest in the portfolio and deleverage the balance sheet, we do not expect to declare a top-off dividend for 2025, preserving over $50 million based on the midpoint of our updated FFO guidance. And finally, on guidance, based on third quarter results and known impacts from the government shutdown, we are adjusting our full year outlook. We now expect full year RevPAR growth to be down around 2% at the midpoint of a range between negative 2.5% to negative 1.75% or down 1% at the midpoint, excluding the Royal Palm South Beach. Our revised guidance reflects weaker-than-expected third quarter results and continued softness in leisure demand expected for the fourth quarter, further compounded by the impact of the government shutdown in October. Accordingly, we are also lowering our full year adjusted EBITDA forecast by $12.5 million at the midpoint to $608 million, within a tightened range of $595 million to $620 million, resulting in a hotel adjusted EBITDA margin range of 26.3% to 26.9%, a 20-basis-point change versus prior guidance. Adjusted FFO per share is now expected to be $1.91 at the midpoint within a range of $1.85 to $1.97 per share. This concludes our prepared remarks. We will now open the line for Q&A.

Our first question today is coming from Duane Pfennigwerth of Evercore ISI.

I wanted to ask you about the expense performance. Given kind of the lower outlook on 4Q RevPAR, it feels like you're pulling expenses down to a surprising degree to offset that. Can you just talk specifically about where that's coming from and what the planning cycle for those expense pull-downs looks like? How much lead time do you need to do that? It just continues to be a bit surprising given the variance in RevPAR and the lesser variance in EBITDA.

Sure, Duane. This is Sean. I'll address that. We discussed this in the last quarter. Clearly, aggressive asset management is crucial for us, and we collaborate with hotel partners to cut costs in the current environment. We explored this last quarter by examining over a dozen key properties, focusing on revenue and cost opportunities. This involved productivity improvements, staffing adjustments, and reviewing brand standards for assets that might not be appropriate. We are experimenting with various initiatives to reduce operating costs. This has been an ongoing effort throughout the year, and we anticipate seeing benefits from the earlier deep dives we conducted starting in Q1 and Q2, which are reflected in our outlook for Q4. Additionally, we benefited from a 25% reduction in insurance premiums due to a renewal. We're also actively pursuing tax appeals in specific markets, particularly where real estate valuations have decreased since before COVID, and we're seeing positive effects from that. All these factors are integrated into our strategies, especially considering the expectations for Q4. We're making real-time adjustments to staffing based on observed drops in occupancy. Ultimately, these efforts have produced results. When excluding Royal Palm, which is closed, and Hawaiian Village due to anomalies related to the strike, we've observed a decline in expense growth each quarter this year. We started with a 2.7% increase in Q1, and we're now expecting a decrease of about 50 basis points for Q4. This reflects a lot of hard work and good execution on our part.

The next question is coming from Smedes Rose of Citi.

I just wanted to ask you a little bit on the dividend side. You noted that you don't have to pay, or you won't be paying the special dividend in the fourth quarter. And is the remaining quarterly $0.25, is that really just to reflect the required sort of payout from a tax perspective? Or is there anything you could do there on the dividend side sort of as you think about sort of cash retention going forward?

Yes. It's a great question, Smedes. Obviously, we're a little perplexed by the number of calls that we've gotten regarding the dividend. And if I could sort of frame for a second, if you look over the last 3 years, we've returned about $1.3 billion in capital to shareholders, both through dividends, obviously, through buybacks. We bought back about 38.5 million shares. That's about 20% of our float. And if you think about that $1.3 billion, I mean, our equity market cap today is somewhere around $2 billion, plus or minus, at obviously a depressed low and somewhat ridiculous number. When you think about that and we're 60%, 70% of that, we've already returned. And we're already paying a dividend that's 9%, 10%. So there were no liquidity issues at Park. If anything, based on what we've just done and the incredible work led by Sean and by the team and with our credit facility, we've got $2.1 billion of liquidity. So there are no issues at all. And I also remind people, if you think back to the pandemic when we virtually had no revenue and all the discipline and the moves that we made and that we got through that. So clearly, no liquidity issues at all. This was just a conscious effort that we thought a 9% to 10% dividend yield, far in excess of any of our peers was really the right threshold. We do have depreciation. We do have the ability to be able to shield and we really thought that we could deploy that incremental quarter, $0.25 plus or minus, back into strategic investments and/or having it available to pay down leverage. So it was really nothing more than that. And I just want to reinforce, we are very disciplined about our capital allocation. I think we've demonstrated that time and time again, and we'll continue to have that focus and that discipline. And we thought the incremental $0.25 and reallocating that was the right business decision at this point.

Okay. I wanted to ask about the focus turning to 2026. Can you discuss what you’re anticipating for the group side next year regarding the pace of bookings or revenue? Are there specific submarkets where you’re observing notable strength or weakness?

If we look at the group pace for 2026, it's important to note that excluding Hawaii and Royal Palm, which will reopen in May or early June next year, we're essentially flat for 2026. For 2027, we anticipate an increase of about 4.1%. We see strong markets like Signia and Bonnet Creek, potentially up around 9%. Our Hyatt in Boston is expected to see double-digit growth; Caribe might increase by about 39%; Santa Barbara is projected to rise significantly, over 50%; and Casa Marina is likely to see low to mid-single digit growth. Overall, we feel very positive about the outlook. We expect continued activities with our operating partners to strengthen the group base for 2026. There are several encouraging indicators as we consider 2026. We expect a more accommodating Federal Reserve, lower interest rates, reduced tax rates, and increased public and private investment, particularly in AI and infrastructure, which should drive productivity gains. Special events like the World Cup and the Super Bowl in the San Francisco Bay Area will have a significant impact, along with major anniversary celebrations in New York and Boston. Park is well positioned to capitalize on these opportunities. While it would be beneficial for geopolitical tensions and tariffs to ease, we remain optimistic about 2026. We're also excited about our strategic investments in Hawaii, New Orleans, and particularly the transformation in Miami, which we believe will be highly successful and is expected to open in May or early June next year.

The next question is coming from Chris Woronka of Deutsche Bank.

So my first question, Tom, you mentioned asset sales and you got 15 non-core assets. You may have other things with land and such. I guess the question would be, what's your conviction level? What's your confidence level maybe now versus a year ago or 6 months ago in some of these same assets? What needs to happen to get some of these over the finish line? And do you think we start seeing an acceleration in that as we move through into the new year?

Chris, thank you for your question. As a leadership team, we are highly focused. To set the stage, our top 20 assets represent 90% of the company's value. When you look at the core metrics of these 20 assets, our portfolio is as strong as any in the sector. We are committed to selling non-core assets and recycling that capital. It's worth noting that we have sold or disposed of 47 assets worth over $3 billion since the spin-off. Even during challenging times, like the pandemic, we managed to reduce our holdings in San Francisco from six to one asset, selling two during those difficult times. The current environment is tough, but the issue is not about the availability of debt capital or equity capital. Improved visibility and less market volatility would certainly help. We also returned the Kansas City asset and decided not to extend two short-term ground leases, which we will hand back at the end of this year. Currently, we have two other assets under letter of intent and several others at various stages of marketing. We are likely leaning more towards the lower end of our guidance of $300 million to $400 million this year, with some closings potentially extending into early next year. However, we are fully committed and experienced in selling non-core assets, and we've tackled even more complex situations in the past. Each asset has its own challenges, but our team is diligently working to resolve these issues. The quicker we can approach those 20 hotels, the better our optionality will become, and it will allow investors to see the core assets and the significant work we are doing there. We firmly believe that we can achieve higher returns from development yields compared to acquisition yields.

Okay. As a follow-up, I think we heard Hilton last week discussing lower expenses for owners and franchisees, some of which are related to chargebacks. Is there more that can be done in this area? How do you see this impacting you? Will it provide a significant benefit next year? Also, how are you positioning yourselves to maximize opportunities through franchise agreements to minimize costs from the parent companies?

Yes. It's another great question, Chris. We are spending a lot of time with our partners at Hilton and our other operating partners. As Sean so eloquently pointed out, when you think about expenses and what we've done three quarters in a row, if you look at insurance, if you look at the deep dive analysis that you mentioned, we are as good as anybody at really in this environment where you haven't really had the top line growth across the sector, doing everything humanly possible to take cost and really reinvent the operating model where we can. You're going to see that continue, and you're going to see us continue to push and encourage and partner with Hilton, with Marriott, Hyatt, etc., trying to find ways to continue to take cost out of the business. There are huge opportunities there, and I have to think candidly, with the advancement of AI as that continues to expand and that we've got to believe that there are going to be significant savings and productivity gains there as well. I don't think those occur necessarily this week, this month, but I certainly believe over the intermediate and long term, there are going to be real opportunities there.

The next question is coming from David Katz of Jefferies.

What I would love some help with having gone out there earlier this year with yourselves and your peers, Hawaii is still just a confusing market for me. Can you just sort of give us as much insight on sort of what the puts and takes or the drivers, the headwinds are out of Hawaii at this point?

It's a good question, David. We need to consider the situation in Hawaii over the past 20 years. Oahu's RevPAR growth has exceeded the U.S. average by at least 120 basis points. Key West in Hawaii has shown a compound annual growth rate of about 4.5%, compared to the U.S. average of around 3.3%. During this time, supply growth has been negative, at about 0.3% or even less. Looking ahead to the next five years, we expect supply growth in Hawaii to again be around 0.3%, which is very encouraging for us. Domestic air travel has also increased by 20% since 2019. Many owners in Hawaii are working under ground leases, while we own our world-class resorts outright. This gives us a strong advantage. There is some concentration in our assets, ideally we wouldn’t want to see 25% or 30%, but if it has to be anywhere, we feel reassured having it in Hawaii. Demand-wise, historically, Hawaii sees about 9 to 10 million visitors, with roughly 60% from the U.S. and 17% coming from Japan over the last 30 years. This year, Japan’s visitation will likely be around 720,000 to 750,000, a drop from 1.5 million. The ramp-up has been slower due to factors like the strong dollar against the yen, fuel surcharges, and cheaper travel alternatives. Currently, Hawaii's participation in our international demand is about 3% to 4%, down from about 19% in 2019. However, we are optimistic about recent trends. Hawaii has shown improvement over time, despite the challenging environment caused by the strike and its lingering effects. We saw decreases of 18% in the first quarter, 13% in the second, and about 9% in the third quarter, but we expect to see growth of over 20% in the fourth quarter, even with the revised guidance Sean provided. While it's taking time, we remain optimistic about our investments, especially with Tapa Tower and Rainbow Tower, and we are excited about developments at Hilton Waikoloa, despite the complexities of its renovation. However, travel from Canadians and Mexicans, who make up nearly half of the international travel to the U.S., has declined, and we feel that impact in Hawaii and other markets as well. Once trade issues are resolved, we anticipate that travelers will return and that Hawaii will pick up momentum.

A lot going on, but you still like it.

The next question is coming from Patrick Scholes of Truist Securities.

Sorry if I missed this in the prepared remarks. You had noted in your guidance and expectations only expecting the government shutdown through today. It doesn't look like it's going to get resolved today. Why not continue that expectation in your guidance beyond today?

Yes, that’s a great question. When we prepared the guidance, the situation was quite dynamic, and we aimed to share what we understood at the end of October, which indicated an impact of approximately $2.5 million. We factored that into our guidance but took a conservative approach, reflecting the midpoint. If this situation persists, we are prepared based on the lower end of our guidance. I want to emphasize that we based our guidance on this midpoint and feel our projections are sufficient if this continues. Personally, I believe this will be resolved soon; it’s hard to imagine either side allowing this to drag on, especially considering the significant number of people affected, such as the 40 million without food benefits. I hope our leaders in Washington can find a resolution quickly. We are confident in the guidance we've provided, and if we obtain more information or if the situation worsens, we will certainly update our guidance accordingly. We aimed to be transparent about what we knew and the current status of our portfolio.

The next question is coming from Stephen Grambling of Morgan Stanley.

I wanted to ask about the possibility of reallocating the top-off dividend towards investment in the future. Did I miss any details about this? If you do have that opportunity, what are your thoughts on how to approach that capital allocation? Are there any significant projects that you are considering advancing?

Yes, that's a great question. Thank you for asking. As I mentioned earlier, we've been very deliberate about how we allocate capital. Over the past three years, we've returned $1.3 billion to shareholders. Sean, the team, and I concluded that our current dividend at about 9% to 10% is sufficient and certainly competitive within the sector. We will have the flexibility to manage that dividend in the future, and we will approach it thoughtfully. We believe reallocating $50 million towards debt reduction or ongoing strategic investments in our portfolio is more sensible. For instance, in Bonnet Creek, we’ve seen our EBITDA grow from about $55 million, and we expect to exceed $95 million this year. We are seeing significant returns from our development and strategic investments, which outperform what we could achieve through acquisitions. Therefore, we are strong supporters of this approach and believe there is considerable potential within our portfolio.

Got it. And just to be clear then, so I guess the answer in some ways depends on where the dividend yield shakes out and valuation. Is that fair?

Yes, that certainly plays. We've always aimed for around 65% of AFFO. We've managed to exceed that a bit this year, but it's not a liquidity issue; we have ample liquidity. Our 2026 maturities are well addressed, thanks to the efforts of Sean and the team. We're very thoughtful and disciplined in our capital allocation. However, we also recognize that a solid dividend is important, and we are well above our peers in that regard.

The next question is coming from Chris Darling of Green Street.

So Tom, thinking about the impact of the government shutdown, in the past when these events have been resolved, do you typically see demand come back fairly quickly? Or is there historically a lagged recovery? I'm not sure if you have any experience thinking back to draw on.

Yes, I believe there is certainly a possibility of that, Chris. It clearly depends on the situation. While we've observed some cancellations related to government groups, it has primarily affected transient bookings more significantly. Many of these groups are required to meet, so we do expect that they will rebook. The main question is whether this will happen within the quarter or stretch into the next year. It may take a few months to truly gauge the impact. Looking back at the first Trump term, we saw effects that spanned December and January. There was some impact on government spending in January, but we witnessed a significant recovery in February, coinciding with a favorable macro environment. It's challenging to draw firm conclusions based on past events. However, since many people need to travel for these purposes, it's reasonable to anticipate some rebound; it's just a matter of timing.

Chris, I agree with everything that Sean said. The other point I'd make here on our portfolio, obviously, a strong fourth quarter group pace of about 12%. Surprisingly, November and December were double-digit increases and certainly stronger than October. So if we are all lucky and our leaders on both sides of the aisle resolve and reopen the government, we could see increased activity here based on what's on the books already in November and December. So it could be a bit of a green shoot for us there.

The next question is coming from Cooper Clark of Wells Fargo.

I appreciate the earlier comments on the dispositions. Curious if you could speak to the bidder pools and buyers you are actively seeing looking for product in the transaction market today. Wondering what markets, products or yield a buyer is looking for to step in today with what should be a better '26 and '27 demand picture despite some uncertainty?

There's a lot of liquidity available, and the buyer pool is diverse. It includes owner-operators, family offices, small private equity firms, and larger private equity players. We've been successful in matching buyers with specific opportunities and continue to engage in discussions. Some buyers are hesitant, even though debt markets have improved. If they expect rates to keep dropping, they might be more cautious. Additionally, greater visibility on demand, along with clarity on geopolitical issues, trade, and inflation, is needed. Uncertainty can hinder decision-making, which may lead to some buyers being more reserved, and we understand that. From my experience, times of dislocation can present great buying opportunities, especially for those with an intermediate to long-term hold strategy. We're committed to working diligently, and our team has a proven track record. Since the spin, we've reshaped our portfolio, having sold or disposed of 47 assets, with two more in the pipeline and several others at different stages in the process. We are confident we will achieve our goals, and no one is working harder than the dedicated team at Park.

Okay. That's helpful. And then I appreciate it's still early and there's some uncertainty but wondering how you're thinking about the balance of group, business travel, and leisure into '26, just given some of your earlier comments on group pace and also a strong '26 event calendar in various markets.

I'm feeling optimistic. If we can gain clarity on tariffs and trade matters with the President’s return and discussions in China, coupled with the significant investment in AI and the CHIPS Act, there's a lot of potential. A substantial portion of the CHIPS funding is still available, alongside major events like the World Cup and the Super Bowl. This could spark renewed energy in the economy, although we know people in the lower and middle-income brackets are currently cautious and somewhat strained. If these concerns are addressed, especially with the aid of the recent tax bill, we could see positive momentum in 2026 and 2027. Additionally, the current muted supply conditions are reassuring, with only 0.7% supply growth projected for our Park portfolio over the next five years, compared to a long-term average of about 2%. This is encouraging. Our portfolio features unique locations in Hawaii, Bonnet Creek, and Key West, which are difficult to replicate. Therefore, I'm quite optimistic as we look ahead, particularly as we navigate through this year and beyond the uncertainties like the government shutdown. Overall, I'm very hopeful for 2026 and 2027.

The next question is coming from Dan Politzer of JPMorgan.

I wanted to go back to the capital allocation this year, obviously, notwithstanding the dividend, there was some CapEx that I think came down. As you think about preserving more capital to reinvest in the portfolio, the CapEx coming down this year and maybe there's some timing there. Directionally, is there maybe any inkling on how we should think about CapEx for next year, just given it seems like you're focused on reinvesting in the portfolio?

Yes. I think Sean will handle the numbers, but we are not reducing our capital expenditures. In fact, we have been very clear about this. If you consider our efforts in Bonnet Creek, Key West, and currently in Miami, plus what we are doing in Hawaii with two towers nearly finished, and the upcoming completion of Hilton Waikoloa this year, we have actually accelerated and slightly expanded our scope. There are certain elements we needed to revisit and others we decided to enhance. We are fully committed and believe we are making the right choices, and the results reflect that. We are noticing an increase in rates and internal rates of return between 15% and 20%, similar to our outcomes in Santa Barbara. We anticipate better returns from our development initiatives compared to our acquisition strategies.

Yes. I'd just add, it's more so timing. We're probably about $190 million or so through the third quarter on spend, and we certainly expect that to be more ramped up with Royal Palm well underway here for the Q4. But I think in total for the year, we just felt like it's probably a more appropriate range for the actual spend out the door. Projects still remain the same, more going into next year.

Got it. And then just on Hawaii, maybe another one asked differently. I think you're pacing about 70%, 75% of the EBITDA relative to 2023. As you think about the glide path and trajectory into 2026, do you think you can fully close that gap? Or do you think it's going to take a few years?

I think you're back in '27. I think you're still ramping in '26, and you're looking at what's probably low 150s number this year versus 177 and keep in mind that we are finishing the second phase of the Palace Tower in Hilton Waikoloa and then, of course, we've got the Rainbow Tower that we're finishing up here in Hilton Waikoloa, which obviously is one of the premier towers. So we remain steadfast and very confident and certainly believe that those continue to ramp up. And we're also making a number of other operational changes. We are spending a tremendous amount of time with our partners at Hilton, looking at both from a leadership, sales and marketing, all of the commercial engines. It's terribly important to us, but it also is a big fee generation for our partners at Hilton as well.

The next question is coming from Robin Farley of UBS.

I have two small clarifications to make. First, I want to understand your comments regarding the guidance that includes the government shutdown up to today. It sounded like you mentioned that the lower end of your range accounts for the shutdown continuing through the quarter. However, if I understood you correctly about the impact in October, it seems like the range may not be wide enough if it continues. Is government business less of a factor in November and December compared to October? That would make sense if true. Alternatively, do you expect a similar impact for the next two months?

Yes. We think it would be less of an impact, Robin, as we look out. And look, as I said, one person's opinion, I just don't believe that they can allow this to drag out much longer for all the reasons we all know, all of the families and kids and others that are being impacted. And we're all hearing rumors that certainly this should be resolved, hopefully in the very near future. But we also believe that the lower end of that guidance will largely protect us based on the guidance that we've provided.

The next question is coming from Aryeh Klein of BMO Capital Markets.

I had a bit of a bigger picture question. I think historically, non-residential fixed investment has been relatively highly correlated with demand. But now perhaps with AI, that relationship is seemingly not holding up the same way and maybe even distorting the relationship. Curious what you think about that. And if that continues, how does that impact your ability to forecast? And what else are you looking at in terms of helping with things?

Yes. We are all working to determine the right correlation. Historically, that was often linked to GDP growth. Over the last decade, there has been a strong focus on non-residential fixed investment spending. I believe both indicators remain significant, although their relationship has shifted recently. In the short term, GDP and investment spending have been somewhat disconnected. I anticipate this will change, especially as GDP is projected to stabilize in the 3% range, which we expect will create a significant positive effect for our sector. Additionally, the investment spending in areas like energy, data centers, and AI will likely benefit lodging as we look ahead. If non-residential fixed investment spending falls in the 3% to 5% range along with a 3% GDP growth, the operational advantages and benefits for lodging could be substantial. We hope this will make the industry more appealing to investors, as achieving operational leverage becomes more challenging at lower RevPAR levels.

And maybe just on the dividend. I understood you're not paying the top off. But as you think about the yield in that 9% to 10% range, when it comes to next year, is there a thought to maybe reduce that yield?

Yes. We haven't made a decision for next year yet. Historically, we've maintained around 65% of AFFO. We might consider moderating that slightly. However, at this current run rate, we believe a $1 dividend is very healthy, and a yield of 9% to 10% is appreciated by most investors. We've received more interest than we anticipated and want to emphasize that there are no liquidity issues with Park; in fact, we have significant liquidity. We have chosen to allocate resources strategically, aiming to pay down some debt and reinvest in our portfolio. This was a deliberate decision made by our leadership team.

The next question is coming from Ken Billingsley of Compass Point.

My question is regarding comparing total RevPAR to RevPAR growth on a year-to-date basis. A number of markets call smaller total RevPAR growth versus its comparable RevPAR such as New York, Boston, D.C. My question is, is this all group and banquet related? And how is 2026 shaping up in the group business? Will a bump in leisure travel to some of those cities for the 250th anniversary actually negatively impact kind of our total RevPAR expectations for those markets?

We continue to experience strong spending beyond room rates, particularly in relation to group events, banquets, and catering. This trend has persisted into the third quarter, despite a weaker group performance than anticipated. Banquet revenues at our urban resort properties have remained stable. However, outlet revenues fell by about 6% to 7% compared to expectations, largely due to a shift towards discount channels, attracting lower spending guests. Nevertheless, mainstream consumers and group attendees continue to spend on event-related services and outlets, which contributes to our forecast of approximately a 100-basis-point advantage for total RevPAR over room RevPAR this year. We believe this positive trend will extend into next year, especially with major events like the World Cup boosting rates. Significant crowds are expected in these cities for celebrations tied to events, even for those not attending the games, which will drive restaurant and outlet spending within our hotels. As a result, we anticipate continued robust spending beyond room bookings, supporting total RevPAR growth beyond room RevPAR growth.

Thank you. At this time, I would like to turn the floor back over to Mr. Baltimore for closing comments.

On behalf of the Park team, I really appreciate everyone taking time today. We are available for follow-up questions and look forward to seeing many of you in Nareit in Dallas. Safe travels. And please know that the Park team is laser-focused on continuing to create shareholder value.

Thank you. Ladies and gentlemen, this concludes today's event. You may disconnect your lines or log off the webcast at this time and enjoy the rest of your day.