Earnings Call Transcript - PK Q3 2024

Ian Weissman, Senior VP, Corporate Strategy

Thank you, operator, and welcome everyone to the Park, Hotels and Resorts third quarter 2024 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 able 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 for 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 basis. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide a review of Park's third quarter performance and strategic initiatives. Sean Dell’Orto, our Chief Financial Officer, will provide additional color on third quarter results and our fourth quarter dividend. Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Tom.

Tom Baltimore, Chairman and CEO

Thank you, Ian, and welcome, everyone. I'm pleased to report another solid quarter, and business fundamentals remain healthy. We delivered a 3.3% RevPAR growth in the third quarter despite transitory factors that disrupted demand in certain markets in August and September. Our portfolio's performance demonstrates the strong capabilities of our team and those of our operators to execute our business priorities while also adapting and responding to various challenges that presented themselves during the quarter. And for that, I am very proud and grateful. We experienced healthy growth in group and business transient demand throughout the quarter, which helped to offset moderating leisure trends in some markets and highlighted the diversification and continued strength of our portfolio. Resorts were driven by strong convention calendars in several urban markets, including Chicago, New Orleans, and Boston, which contributed to a combined RevPAR increase of 14%. This was further complemented by solid leisure trends across several resort markets, including Orlando, Miami, and San Diego, which collectively generated an 11% RevPAR growth during the quarter. We are particularly pleased with the results from our recent redevelopment projects in Orlando and Key West, both of which are well-positioned to benefit from healthy group and leisure trends. Our recently renovated Waldorf Astoria Orlando has been ranked ninth by Condé Nast Traveler in its prestigious 2024 Reader's Choice Awards for the best resorts in the world. These projects and accolades highlight Park's best-in-class design and development expertise and our ability to unlock significant embedded value within our portfolio, which we anticipate will remain a strategic focus for Park over the next several years as we continue to reshape the portfolio and strive to generate strong returns. Looking ahead, we are actively exploring additional development opportunities in key markets such as Hawaii, Key West, Santa Barbara, and Miami, which have the potential to deliver attractive returns on invested capital similar to our recently completed projects. In Orlando, our Bonnet Creek Complex witnessed RevPAR growth of 22% during the quarter driven by solid group production as the larger meeting platform allowed the hotel to layer in several groups simultaneously, resulting in an incremental 12,000 group room nights over the prior period and representing the highest Q3 group rooms and banquet revenue in Park's history at the complex. In Key West, RevPAR growth was 130% for the quarter driven by our Casa Marina Resort Hotel's renovation displacement compared to the prior year period. Looking ahead to Q4, both of our Key West hotels are expected to pace ahead of 2023. The Casa Marina continues to see positive effects from the comprehensive renovation, while the Reach is projected to achieve mid-single-digit revenue growth due to an anticipated increase in occupancy. In Miami, operating trends remain strong as we continue to witness healthy group and leisure demand trends with RevPAR growth up over 7%. We expect this momentum to continue into the fourth quarter with the hotel forecasted to post mid-single-digit RevPAR gains driven by a robust convention schedule in October and strong leisure transient demand during the holiday season. In New Orleans, the market hosted eight citywide events during the quarter compared to none in the prior year, contributing to nearly a $5 million increase in group room revenues and $2 million of banquet and catering revenue at our Hilton Riverside Hotel during the quarter, driving an almost eight-point increase in occupancy. In Chicago, a healthy convention calendar, including the Democratic National Convention held in August, led to performance exceeding expectations with the Hilton Chicago recording an impressive 20% increase in RevPAR for the quarter as the hotel capitalized on citywide and in-house events driving a 36% surge in group room revenue. Overall, we are encouraged by the revenue in groups, which increased nearly 13% year-over-year to approximately $110 million, coupled with strong banquet and catering revenue improvement of 9%. The 2024 group revenue pace is up over 9% for the year, reaching nearly 100,000 room nights during the quarter, accounting for $10 million of incremental group revenue recognized in the third quarter and $13 million of incremental group revenue anticipated in the fourth quarter. Looking ahead to 2025, group revenue pace continues to be up in the mid to upper single-digit range, driven by a double-digit increase in Orlando, Denver, Key West, and San Francisco, while pace at our Hilton Waikoloa Resort is up nearly 80% compared to the same time last year. Overall, we are particularly encouraged with booking windows further extending into the future, with 2026 pace currently up 10%. Turning to Hawaii, Q3 RevPAR declined by a combined 8% at our two Hawaii hotels, with results negatively impacted by several factors, including disruption from labor strikes at Hilton Hawaiian Village, tough year-over-year comparisons at Hilton Waikoloa, and disruption from multi-phase room renovations at both hotels. In addition, inbound travel from Japan during the quarter was further hampered by three severe weather events in August, which led to widespread flight cancellations and travel disruptions across Japan, and a 17% decline of inbound travel from Japan during the month. Overall, we had been encouraged by the pace of improvement in Japanese travel prior to these storms, averaging over 50% year-to-date through July. From a capital allocation perspective, we remain laser-focused on our strategic priorities to dispose of non-core assets and recycle capital to unlock significant embedded value in our core portfolio through our creative ROI investments while also opportunistically buying back stock at historically deep discounts to net asset value. During the third quarter, we closed on two non-core assets, the Hilton La Jolla Torrey Pines and the Hilton Oakland Airport. We continue to reshape the portfolio and enhance our long-term growth profile. The sale of Torrey Pines, which closed in July, generated our pro rata share of gross sale proceeds of over $40 million and represented nearly a 12 times gross multiple on 2023 EBITDA. Additionally, the transaction helped to further improve our balance sheet with our unconsolidated debt balance reduced by approximately $17 million, while net proceeds were used to partially fund the repurchase of 2.5 million shares of our common stock during the third quarter for $35 million. With respect to the Hilton Oakland Airport Hotel, in late August, we permanently closed the hotel, a non-core asset with less than 10 years remaining on a ground lease. Oakland remains a very challenged market with the hotel recognizing a $3 million loss over the trailing 12 months and reporting RevPAR of just $68. The closure is expected to result in a positive $1 million impact to earnings during the fourth quarter, while also adding approximately $2 to nominal RevPAR and 30 basis points to hotel adjusted EBITDA on an annualized basis. Additionally, during the third quarter, we commenced over $200 million of comprehensive guest room renovations at the iconic Rainbow Tower at the Hilton Hawaiian Village, the Palace Tower at Hilton Waikoloa, and the main tower at Hilton New Orleans Riverside. Phase one of two for both Hawaii renovations is expected to be completed by Q1 2025, while phase one of the room renovation in New Orleans is expected to be completed in Q4 of this year and ahead of the Super Bowl in February 2025. We are particularly excited about the potential impact the reimagined rooms are expected to have on our results, especially in Hawaii. Our recent successful renovation of the thousand-room Tapa Tower at Hilton Hawaiian Village delivered a significant ADR premium compared to other resort room types once it was back online. Turning to guidance, due to the uncertainties surrounding continuing negotiations between our operators and labor unions, related impacts on operating results, which are not factored into our prior guidance, we are not in a position to update full-year 2024 RevPAR and EBITDA guidance at this time. Our operators continue to work toward reasonable solutions that are in the best interest of all parties. Once the appropriate agreements have been ratified, and we have a better understanding of the impacts, we will provide a financial update including an update on earnings guidance. I want to emphasize that we continue to be confident in the core strength of both business and leisure demand trends throughout the balance of the portfolio. With the year-to-date 2024 RevPAR up 4.3% despite some of the challenges we faced towards the end of the third quarter. As we look ahead to 2025, we expect to continue aggressively pruning our non-core portfolio, with proceeds expected to be used to buy back our common stock and fund our growing development and renovation pipeline. In closing, we believe there is simply no better use of our capital than reinvesting it back into our portfolio at returns that far exceed acquisition yields to create long-term value for shareholders. With that, we'll turn the call over to Sean.

Sean Dell’Orto, CFO

Thanks, Tom. Q3 RevPAR for the portfolio was approximately $190, representing year-over-year growth of 3.3%, with occupancy gaining 2.5 percentage points and rates flat year-over-year at $243. When adjusting for roughly 70 basis points of disruption from Hurricane Helene and labor strike activity, RevPAR growth for the quarter would have been 4.0%. Similar activity has impacted October, with RevPAR growth disrupted by Hurricane Milton by roughly 80 basis points. Adjusting for this disruption, we anticipate RevPAR will be relatively flat for the month, despite additional headwinds stemming from the holiday calendar shift and ongoing strike activity at certain hotels for a majority of the month, which were offset by solid performance elsewhere in the resort and urban portfolios. Total RevPAR for the third quarter increased by 3.8%, driven mostly by a 4.4% increase in F&B revenue as group-driven banquet and catering revenue increased nearly 9%. Hotel revenue was $625 million during the quarter, and hotel adjusted EBITDA was $170 million, resulting in a nearly 27.2% hotel adjusted EBITDA margin. Note that the year-over-year margin comparison was negatively impacted by nearly $8 million of property tax benefits and relief grants received last year, in addition to nearly $4 million of hurricane and labor strike disruption in the third quarter of this year. Excluding these items, hotel adjusted EBITDA margin would have been comparable year-over-year. With respect to Hurricanes Helene and Milton, our hotels located in Key West, Miami, and Orlando remain fully operational while sustaining minimal damage and business interruption. Overall, we estimate the total impact from both hurricanes to account for roughly $2 to $3 million of hotel adjusted EBITDA disruption, with most of the impact occurring in Q4. With respect to our dividend, on October 15th, we paid our third quarter cash dividend of $0.25 per share and anticipate paying a fourth-quarter dividend, which is subject to Board approval in accordance with our typical practice of targeting 65% to 70% of our full-year adjusted FFO per share, comprised of a $0.25 fixed quarterly component plus a to-be-determined annual top-off component to meet our target. This concludes our prepared remarks. We will now open the line for Q&A. To address each of your questions, we ask that you limit yourself to one question and one follow-up. Operator, may we have the first question, please?

Smedes Rose, Analyst

Hi, good morning. I wanted to ask just a little bit more, probably predictably, about Hawaii. You saw RevPAR down 8% across the two properties. I think on your second-quarter call, you had talked about maybe a more like 2% to 3% down in the second half. And you mentioned a few things that went on in the quarter. But could you just sort of maybe talk a little bit more about what you were seeing sort of on an underlying basis for leisure demand into Hawaii and how you're thinking about it kind of going forward over the next several quarters, putting aside the strike?

Tom Baltimore, Chairman and CEO

I'd make a couple observations, Smedes. Obviously, we were lapping what happened in Maui. We certainly had gotten benefits there. We knew, as you think about Hilton Waikoloa, obviously, that was going to be really a tough comp. And so we expected that to be choppy. Given what happened with weather-related Japanese travel, we clearly did not expect that as we talked about in the last call. We remain very bullish on Hawaii long term. If you look over the last 20 years, Oahu's RevPAR growth has sort of outpaced the U.S. by nearly 300 basis points, and I think while exceeding other resort markets by about 150 bps. So I think the U.S. CAGR is about 2% and Oahu is north of 5%. This is, in our view, temporary and transitory. We certainly don't see anything that alarms us in terms of the underlying fundamentals. Obviously, the other matter, I've addressed that in my prepared remarks.

Smedes Rose, Analyst

Okay. So just to be clear, I mean, it sounds like, so the difference relative to prior expectations is really driven by weather events in Japan that impacted Japanese travel, but you're not seeing anything that would concern you around kind of the state of the U.S.-based kind of leisure demand relative to what your expectations were?

Tom Baltimore, Chairman and CEO

We are not. We expected at the last call that visitation would be about 770,000, up from 600,000 last year in terms of overall Japanese visitation. I think now that's come down a little bit, largely due to the weather related cancellations, down to about 720,000. So that's still about 22% over last year. And it's still about 54% below 2019, Smedes. So we expect to probably get back to pre-pandemic by 2026-2027 based on current forecast right now.

Sean Dell’Orto, CFO

And Smedes, I would add, we talked about Japan, but you also had Hurricane Helene that came through and I think more so impacted the Big Island and the hurricane activity that was more specific to Hawaii that was disruptive in August as well. So we looked at inbound flights that were tracking, at least in Honolulu, on average about 10% each month, year-over-year, and ultimately dropped about 3% in August. So you can see some of that activity, some of that disruption from weather impacting the market.

Smedes Rose, Analyst

Okay. Like whack-a-mole with these hurricanes, but thank you. Appreciate your comments.

Floris Van Dijkum, Analyst

Hey, guys. I'm going to ask a little bit about the elephant in the room. I know that you're limited to what you can talk about, but is the hotel taking bookings, Hawaii Village I'm talking about, and how quickly can it ramp up should negotiations get settled and how quickly before EBITDA starts to come online there in your best estimate?

Tom Baltimore, Chairman and CEO

First of all, the hotel has never closed and it's continued to provide services to guests, and so that hasn't been an issue at all. I think, as I said in the prepared remarks, obviously due to the uncertainty surrounding the continuing negotiations between our operators and the labor unions, we're just not in a position to update guidance or provide any of those details at this time. As soon as the appropriate agreements have been negotiated and ratified, we'll have a better understanding of the impact and certainly provide an update at that time. But rest assured that the Hilton Hawaiian Village has remained open during the strike.

Floris Van Dijkum, Analyst

And then I guess the follow-up question is, does this, how, you still have call it 14, based on our estimates, 14 non-core hotels, does this make you evaluate your or maybe accelerate some of your plans to dispose of those hotels, or is that dependent on the capital markets activity and the financing availability for potential buyers as you think about focusing more on your top 25 hotels?

Tom Baltimore, Chairman and CEO

Yes, it's a great question, Floris. I mean, I think we've demonstrated we are laser-focused on really continuing to reshape the portfolio. Just to remind listeners, since the spin now, we have sold or disposed of 44 assets for nearly $3 billion, and it's obviously a much stronger portfolio, but we still have another 14 assets, plus or minus, that are non-core, and we will continue to work aggressively to really recycle that capital. And as I said in the prepared remarks, in our view, there's nothing that can create more value than really investing back into our portfolio. And as you think about kind of the Casa Marina as an example and the extraordinary work done there, we're expecting EBITDA this year at about $30 million, plus or minus, and that's about 35% over the pre-pandemic high-water mark. And this is in the first year. We remain very bullish on our core portfolio, on Hawaii, and certainly adding another tower at Hilton Hawaiian Village.

Floris Van Dijkum, Analyst

Thanks, Tom.

Duane Pfennigwerth, Analyst

Hey, thank you. Just on group pace for next year, I wonder if you could go into more detail on key markets you think would outperform key markets that you think would lag in any sense for the composition of the types of groups that are driving the improvement?

Tom Baltimore, Chairman and CEO

As you know, we had a really strong group performance this year, up about 9%. Waikoloa and Bonnet Creek obviously have been strong. Clearly, what we've seen in Chicago and New Orleans has also been very strong. As we look out next year, we expect mid to high single digits, probably 5% to 7% right now. There are a number of tentatives, so we think that’s certainly going to improve. As we think about those markets—Hilton Hawaiian Village, Hilton Waikoloa, which was down 44% this year, we're looking at group pace being up almost 77% next year, which is going to be very encouraging for us as we look out. Denver looks strong, and Bonnet Creek continues to be strong. However, Waikoloa is in the mid-40s. Overall, we're looking at mid to high teens in terms of growth pace there, mid-single digits for New York Midtown. San Francisco, as we consider the Union Square property, looks to be in the 25% to 30% increase, so we are encouraged by those numbers. And as you think about 2026, we're already looking at a group pace that’s up about 10% there, which is promising for our overall portfolio.

Duane Pfennigwerth, Analyst

Thanks, Tom. And maybe just to come back to Orlando, can you help frame the performance that you're seeing versus maybe a pre-renovation baseline? I don't know if you have it handy, and I don't want to put you on the spot, but like a RevPAR index improvement that you may be realizing relative to pre-renovation or maybe 2019? And thanks for taking the questions.

Tom Baltimore, Chairman and CEO

Yes, I'll take a stab. When you think about Orlando, there were about 74 million visitors last year. In comparison, Vegas is probably in the mid-40 range. If you consider Epic Universal and the $5 billion investment opening in the spring of next year, and Disney's talk about spending another $60 billion over the next 10 years, we are very, very bullish on Orlando long term. Last year, there were about 98 citywide events for approximately 1.1 million room nights. Next year, while fewer events, there may be an increase of about 8% in room nights, that's nearly 1.2 million. We believe this bodes well for everyone involved in hospitality there; it's a very exciting market that we are quite optimistic about.

Duane Pfennigwerth, Analyst

Thank you.

Dany Asad, Analyst

Hi. Good morning, everybody. Tom or Sean, when we look at 2025, can you share any insight with us on how your large corporate accounts are shaping up? We've heard from airlines calling out stronger large corporates heading into next year, so just curious to see what you guys are hearing?

Sean Dell’Orto, CFO

Yes. I mean, it's always a little tricky. We're kind of thinking that season right now, and I also say a lot of the contracts over time have gone from just doing your typical, historical fixed, hey, let’s increase it by 4% or 5% to more dynamic pricing such that it's more just a percentage of bar driving it. As you think about where we think rates could go next year, and obviously we're still in the throes and the beginnings of budget discussions, it’s hard to say exactly and pinpoint a kind of range percent. I certainly know it's up. And also, I think when you look at the behavior of the corporate negotiated subsegment, it's been an outperformer this year versus expectations. So we think we've seen about 6% or so plus or minus this year. That bodes well and plays into what you may hear from other industries about likely strong performance for that group remaining continuing into 2025.

Dany Asad, Analyst

Understood. Thank you, Sean. And for my follow-up, we've heard from other owners and some of the brands, including Hilton, that November demand is, you know, just, yes, it could be softer around the edges, especially when we're talking about like the elections and kind of right that period of November specifically, curious to see what you guys are thinking and more importantly, how that feels relative to your expectations from maybe 30 or 60 days ago?

Sean Dell’Orto, CFO

Yes, I think it is having an impact. I would say in general pace is down that week around 13%. I would even say the week after that down about 11%. So I think, not surprisingly, I think people are not looking to travel, make any plans that week. I would say the week after is picking up positively, so that could be something to watch depending on what happens post-election. You're definitely seeing that. And then as you get beyond election timeframe, you start getting into holiday shifts, which I'm sure you guys will pick up as we get through it. But Thanksgiving is on a different week, later week this year, next year. So you're going to have some flip-flops of different weeks that you can really dig into. But overall, November is definitely a weak month of the quarter. Put it all together, though, combining November and December, I think you're looking at similar growth on average between the two, if you were just to combine them relative to comparable to October. But it's definitely a weak November offset by a stronger December.

Tom Baltimore, Chairman and CEO

Dany, if you think about the last election, I think similar sort of framework occurred as well back to 2020 and I think even in 2016. So we're not overly alarmed by it.

Ari Klein, Analyst

Thanks. Maybe just following up on the last question, I think previously you were expecting maybe one, 1%, 2% RevPAR growth in the fourth quarter based on the prior guide. Setting aside the strike impact, is that still a fair expectation or kind of how should we think about the performance this quarter?

Tom Baltimore, Chairman and CEO

Yes, it's hard to decouple, obviously, given what's happening with the other activities. And obviously, you've also had the weather-related activity. So I'd rather wait and provide that information once our operators and the unions have finalized any outstanding agreements and we can provide a clear update. No doubt, as Sean said, as you think about November, certainly the week of the election and probably a little after that—it's going to mean less travel during that period of time. I don't think that's a real surprise. If you look back to 2020 and 2016, I really think that was similar to what we experienced as well.

Ari Klein, Analyst

Understood. And then maybe as we think about 2025, when we're looking at expenses, what is 4% to 5% kind of a reasonable expectation for next year? And if that is the case, what type of RevPAR growth do you think you would need to grow EBITDA?

Tom Baltimore, Chairman and CEO

Yes, we're just beginning the budgetary process. We know it's another—we will provide guidance as we've done historically. Obviously, we're all concerned about the top line as we look forward as well as the corresponding expenses. But we'll have more information on that at a later date. We still feel very good about our portfolio. This is a solid third quarter; probably going to be among sector leading as you think about the top line. If you take out both the strike activity and some of the weather-related impacts, it's probably close to a 4% print. So we feel very good about our portfolio. We're going to continue to focus on selling non-core assets, reinvesting back in the portfolio, reducing leverage, and returning capital to shareholders. We've returned north of $630 million, I think, last year. We're probably going to be somewhere in the $300 million to $350 million this year. That includes buying back 19 million, 19.5 million shares over the last 18 to 20 months. I feel very good about our performance and really our capital allocation decisions.

David Katz, Analyst

Hi, everyone. Good morning.

Tom Baltimore, Chairman and CEO

Hey David.

David Katz, Analyst

Hey, thanks for all the information so far. I wanted to ask kind of a bigger, broader question about the subject of weather and how you think about that in your underwriting, whether that's for capital spending in certain markets that are exposed more so than others or any potential sort of acquisitions down the road. I think Smedes may have used the term whack-a-mole earlier on, and I think it may be apropos, right, where it's a recurring, non-recurring event and the degree to which we sort of contemplate that in underwriting and whether we should keep looking through it or we should be thinking about it too?

Tom Baltimore, Chairman and CEO

Yes, Dave, it's a great question. If you think back over the last few years, at Park, we've been fortunate that we haven't had any direct hits. But we've certainly been impacted by it. And it's an area that we really separate ourselves. A huge credit to Carl Mayfield, who heads our design and construction team. As you think about any of the storms, Helene and Milton, for example, we had first responders on-site within 72 hours of the event. We've set up tiger dams. We’ve also considered the resiliency of our buildings as part of the complete transformation of the Casa Marina, removing building systems that were in the catacombs and below grade. We’ve looked at sand nourishment and what steps we can take to be proactively supportive. You see that reflected in our insurance cost. Sean and Carl have done an extraordinary job. As a result, our insurance costs were down; very few of our peers could say that. It's these proactive measures that we've put in place. We take it seriously, particularly given our portfolio where the demand generators are. It's something to continue to monitor and be proactive. We do factor it into our underwriting. We think about what that risk may be as part of that assessment of opportunity. So it is something where Park has distinguished itself compared to our peers.

David Katz, Analyst

Appreciate it. Thanks very much.

Patrick Scholes, Analyst

Good morning. Thank you. Can you give us a little bit about thoughts on your expectations for the inbound Japanese traveler to Hawaii for Q4 and what potentially next year might look like for that? Thank you.

Tom Baltimore, Chairman and CEO

Yes. I think if you look historically, Japanese travel pre-pandemic was about 1.5 million. That was about 17% of demand. Obviously, in 2023, it was about 600,000, so it's about 60% below pre-pandemic. In 2024, we were expecting it at the beginning of the year to be about 850,000 to 880,000, but that's been revised downward. Part of that's due to the weather-related issues that happened in Japan as well as the three storms. We’re now looking at about 720,000 on an annualized basis, which is about 22% above last year, and still about 50% to 54% below 2019 levels. We think we get back to pre-pandemic levels probably in the 2026 to 2027 timeframe. Where we are in terms of the fourth quarter? I don't have the fourth-quarter data but we’ll follow up with you and make sure you have that.

Patrick Scholes, Analyst

Okay. Thank you. My second question, now that the strikes seem to be dragging on, especially in Hawaii. At this point, is Hilton notifying transient and group guests pre-arrival about the strikes? Thank you.

Tom Baltimore, Chairman and CEO

Yes. Those have been publicly disclosed. I'm sure through their channels, they are making people aware. I do think it's important to note, I’m not going to comment on the specifics of the situation. Obviously, our operators and the unions are in ongoing discussions. When that agreement is reached and ultimately ratified, we'll all get back to normal. We believe this is a transitory matter. We remain, as I've said throughout the call, very bullish on Hawaii in the intermediate and long term. I'd also like to note, as it relates to other markets, for example, Boston, we understand that our operator reached an agreement with the union last evening, and a vote is scheduled for later this week. Our operator has also reached an agreement in San Jose, and that agreement has been ratified. The process lasts as long as it lasts. When our operator and the unions have reached agreement and it’s ratified, we'll move forward.

Patrick Scholes, Analyst

Okay. Thank you.

Chris Woronka, Analyst

Good morning, guys.

Tom Baltimore, Chairman and CEO

Good morning.

Chris Woronka, Analyst

So, Tom, I think it’s kind of implied in your earlier comments. But as you think about all your ROI CapEx projects moving forward, and then I look back to that list you provided in May, you know, all but maybe two of those are kind of in union markets. So these things are going to get settled like you said, can we just assume from your comments that whatever may happen, whatever the outcome is financially, it's not going to deter you at all from these projects? And does it cause you to shift any prioritization in terms of a market that gets CapEx dollars before another?

Tom Baltimore, Chairman and CEO

Yes, Chris, it's a great question. And as I said earlier, as you think about Hawaii, if you look over the last 20 years, I mean, Oahu's RevPAR growth rate has outpaced the U.S. by nearly 300 basis points. Given the difficulty of adding new supply and those barriers to entry, we remain bullish on Hawaii. We are confident that our operator and the unions will reach a resolution, and things will move forward. We remain bullish. We've already started the renovations at the Rainbow Tower at Hilton Hawaiian Village. We’ve begun the renovation of the Palace Tower at Hilton Waikoloa. This is prime real estate that has been strong performers for generations, and we expect them to continue to do so both short-term and long-term. We are more successful today at Hilton Waikoloa as a 600 room hotel than we were as a 1200 room hotel, which I’ve shared with you previously. We look forward to Miami and Royal Palm and, you know, bullseye real estate there on the beach as well. There's a great opportunity to transform that property, similar to the success we’ve had at Casa Marina and the Reach, both of which have seen huge success. We believe that’s part of our strategy to continue to invest in high-quality real estate that can generate higher returns for our investors.

Chris Woronka, Analyst

Okay. Yes, I appreciate that thought, Tom. The follow-up question is, I guess maybe this is where we are at this time of year. I know you're going through the early stages of budgeting and won't be giving any 2025 guidance until early next year, but maybe you can give us a refresher tutorial on how your approach to guidance when you give it, because this year I think we saw the brand companies, their RevPAR guidance evolve a little bit. There were obviously some weather impacts and then calendar shifts that maybe shouldn't have been a surprise. But can you give us a quick refresher on your approach to guidance?

Tom Baltimore, Chairman and CEO

Obviously, Chris, I've been around a long time, so I've experienced the cycles. You had calendar shifts this year and weather that certainly impacted. It’s a detailed and thoughtful process between the owners and operators. You put in a lot of work to try to have the appropriate spread, quarter-to-quarter. Sometimes as an industry, there’s variability. I think this year you had calendar shifts but also significant swings in weather that absolutely impacted performance. Overall, the Park portfolio is holding up well and performing reasonably. As we said earlier, we expected that we would be a 100, probably net of renovation disruption premium compared to our peers, holding true today. So we feel very good about where we stand.

Jay Kornreich, Analyst

Hi. Thank you. Good morning.

Tom Baltimore, Chairman and CEO

Good morning.

Jay Kornreich, Analyst

You mentioned remaining bullish long-term on Hawaii, which has been a great market. How do you think about that market performing in the first three quarters of 2025? We expect some tough comps. Should we expect any RevPAR upside next year? Or should we think about that market in the first three quarters being somewhat down before lapping an easier fourth quarter comp with hopefully the union issue being resolved?

Tom Baltimore, Chairman and CEO

Again, I go back to my earlier statement. For the last 20 years, it's either been the first or second strongest market. Think about the barriers to entry, the improved air lift, the overall beauty, and consider the segments on international visitation. Japanese travelers will return. Historically, we were doing about 150 weddings a year at Hilton Hawaiian Village; currently, we’re doing a small fraction of that. We really haven’t gotten back to pre-pandemic levels when looking at international contributions, with the expanding airlift. I believe Hawaii remains a top market as we invest in the future.

Jay Kornreich, Analyst

Okay. And then as a follow-up, you mentioned at the end of your prepared remarks, I just want to make sure—are you able to give a range for why October RevPAR growth within the portfolio is?

Tom Baltimore, Chairman and CEO

Yes. Sean provided that in prepared remarks. We were trending flat to down 1%. That’s if you were to adjust for Hurricane Milton as well.

Sean Dell’Orto, CFO

Yes, that's the case. And if you clearly had Milton in October, so if you adjust for that hurricane disruption, you're probably in the zone of being flat. We've seen some outperformance in other portfolio parts; obviously experiencing disruption with union activity as well. That general range should hold, but we've only got a few days left in the month. Once we have complete data, we’ll provide an updated view.

Robin Farley, Analyst

Great. Thanks. I wonder if you could help us quantify. When we think about the properties where there's disruption from labor negotiations, what do they represent typically as a percent of your total EBITDA? And then maybe we can take Boston and San Jose out of that when thinking about what percent of your EBITDA is being disrupted?

Tom Baltimore, Chairman and CEO

Yes. We'll stay away from the EBITDA portion of it. But if you were to take Hilton Hawaiian Village and Boston Logan out of Q3, it was about a 240 basis point drag on RevPAR. So, instead of that 3.3% it would have been closer to 5.7%. As we think about October, as Sean noted, you've got about 80 basis points of weather-related impacts, so you'd essentially be flat there. If you take out those properties, you'd probably be over 4% RevPAR plus or minus. The month hasn't closed out yet, but somewhere in that range.

Robin Farley, Analyst

Okay. Thanks. And then looking at your group pace for 2025, it looks like maybe it ticked down a little bit compared to where it was at the end of Q2. Is there something we should think about as seasonal? Or do you think that's the labor disruption impacting that? Or just tougher comps with groups for next year?

Tom Baltimore, Chairman and CEO

Yes, you’ve got two things: tougher comps obviously, with Chicago and New Orleans having really strong years. We expect New Orleans to continue into 2025, while Chicago may drop down. We’re confident. Obviously, Waikoloa has a soft year down about 44%. We're looking at group pace to be up almost 77% heading into next year. We’ve got significant tentatives. It’s a fluid situation, but we are bullish as we look at Bonnet Creek, which has had a strong year this year. We see ourselves beginning 2025 at mid to high single digits, and we see 10% growth in 2026, giving us a strong outlook moving forward.

Robin Farley, Analyst

Great. Thanks. Maybe if I could just squeeze one final thing in on your asset sale plans. Just if you could describe a little bit, I don’t know if, yes, I would assume maybe heading into the election things were a little slower in terms of that. Do you think there's timing, is it waiting for other rate cuts? When you think about potential buyers, is it waiting for additional rate cuts or is it contingent on labor negotiations concluding this year and perhaps into next year? How should we think about your expectation for timing of asset sales?

Tom Baltimore, Chairman and CEO

Yes, I think a lot of that has to do with buyer and seller expectations. Lower rates will be a positive catalyst. The debt markets are open, but I think both sides will accelerate as 2025 evolves. We’ve had no trouble selling or disposing of 44 assets, totaling nearly 3 billion including 14 international properties—many complex with legal and tax impairments. We’ve seen it all. Our talented team is working aggressively and we don’t consider ourselves a distressed seller. We’re seeking fair prices, and focus on continuing to recycle capital and invest back in core markets. Our top 25 assets account for about 90% of company value; that’s where we want to grow.

Robin Farley, Analyst

Great. Thank you.

Chris Darling, Analyst

Thanks. Good morning.

Tom Baltimore, Chairman and CEO

Good morning.

Chris Darling, Analyst

Going back to some of the comments around group pace in 2025, how much of total anticipated group revenue for the next year would typically be on the books at this point in time, just trying to get a better sense of what's baked in for next year?

Sean Dell’Orto, CFO

Yes, Chris, I would say we're probably looking at—I'd put it in relation to kind of our current forecast for this year's group. We're probably around tracking about 70% at this stage. We look to improve that as we approach the end of the year. That's about where we are, consistent with prior years.

Chris Darling, Analyst

Okay. That's helpful.

Tom Baltimore, Chairman and CEO

Thank you.

Dori Kesten, Analyst

Hey, good afternoon now. The Royal Palm isn't currently on your renovation table. What's the likelihood that the project is undertaken in 2025?

Tom Baltimore, Chairman and CEO

There is a greater than high probability that we move forward. We're working through design, a model room, and the permitting process. We're also assessing the right window. It's an opportunity that we're excited about. Given its prime location, we believe there's considerable upside, especially when you factor in potential high-quality developments in the area. This project is one of considerable potential return, and we’re looking to minimize disruption as we proceed.

Dori Kesten, Analyst

Okay. And then just one more on Hawaiian Village. I think that property is about 85% transient, 15% group. Are cancellation policies held or are they put on hold for transient guests when a strike is ongoing?

Tom Baltimore, Chairman and CEO

Yes. Many times, we leave that up to our on-site leadership team based on what they see. It can be a judgment call depending on discounts, whether it's rescheduling or other options. But Hilton Hawaiian Village has remained open throughout this situation and continues to welcome guests.

Floris Van Dijkum, Analyst

Hey, thanks guys for taking my follow-up as well. Hey, Tom. I don’t know whether you have the answer handy or not, but you mentioned something about Oahu outpacing the U.S. hotel market by 300 basis points over the last decade. But I was curious how Hawaii Village did relative over that period. I'm most interested in seeing, because this is something you've been highlighting for as long as I've known you, that your larger assets grow at higher rates than the market. Could you share your view on some numbers there?

Tom Baltimore, Chairman and CEO

Yes, over the past two decades, we've seen growth rates around 4.5% for our Hawaii assets. We’ll confirm this and get back to you. When it comes to Hilton Hawaiian Village and Waikoloa, both properties have been strong performers for many generations.

Floris Van Dijkum, Analyst

Okay. Thanks, Tom.

Tom Baltimore, Chairman and CEO

Thank you.

Operator, Operator

Thank you. As there are no further questions, I would now hand the conference over to Tom Baltimore, Chairman and Chief Executive Officer for his closing comments.

Tom Baltimore, Chairman and CEO

We really appreciate everyone taking time today, and we look forward to seeing many of you in the coming weeks and certainly out at an industry event in Las Vegas. Safe travels, and be well.

Operator, Operator

Thank you. The conference of Park Hotels and Resorts has now concluded. Thank you for your participation. You may now disconnect your lines.