Demand increases across all segments fueled a strong first quarter for hotel-focused real estate investment trust Park Hotels & Resorts, with executives increasing their full-year revenue expectations.
Speaking during the company's first-quarter earnings call Wednesday, Chairman and CEO Thomas Baltimore Jr. said he expects his company to continue to have "sector-leading [revenue per available room] and earnings growth" through the rest of 2024.
"We remain well-positioned to deliver sustained growth throughout the year as we execute against our strategic priorities," he said.
Baltimore said he believes Park has fully turned the page from 2023, which saw drags from renovation work at major properties along with continued pessimism from investors due to ongoing difficulties in San Francisco — a market the company no longer has high exposure to.
"These results highlight the continued upside potential in our portfolio, driven by particularly strong group demand and convention calendars, positive trends in business travel across our key urban markets and the ongoing resiliency of our resorts," he said.
In late 2023, the company officially handed back the keys to two large hotels in San Francisco — the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco — which were both tied to a $725 million loan that matured in November. Baltimore said in hindsight that move remains the right one for the company going forward.
"We believe the decision we made last year to exit the two Hilton San Francisco hotels meaningfully improved our balance sheet and operating metrics and changed the narrative for Park," he said.
The company increased full-year RevPAR projections 25 basis points to a range of 4% to 5.5%, with net income expected in a range of $151 million to $191 million — a $5 million increase at the midpoint. The REIT also increased its projection for adjusted earnings before interest, taxes, depreciation and amortization to between $655 million and $695 million — a $10 million increase.
Asked on the earnings call if his company will be active in the transactions market, Baltimore said Park's investments will likely be more focused on improving its existing portfolio for the time being, with $260 million to $280 million in "strategic investments" planned for 2024. The REIT is also interested in buying back stock, which he added is trading at a significant discount to executives' internally calculated net asset value.
First-Quarter Performance
For the quarter, Park recorded 7.8% year-over-year growth in revenue per available room through a combination of occupancy — up 3.5 percentage points — and average daily rate — up 2.5%. Company officials noted that growth came in comparison to an already strong first quarter 2023, which had a 28% RevPAR increase over the same period the year prior. RevPAR growth for the quarter came in 50 basis points higher than the high range of the company's expectations, Baltimore said.
Baltimore said some of the company's recently renovated or repositioned properties lead the way in terms of performance, headlined by the Casa Marina Key West, Curio Collection in Key West, Florida. That property recorded a 34% increase in RevPAR and a 24% increase in ADR.
Park saw an 11% year-over-year increase in adjusted earnings before interest, taxes, depreciation and amortization to $162 million.
Even with the stronger-than-expected performance metrics, the company recorded a slight decline in total revenue for the quarter, down from $648 million in the first quarter of 2023 to $639 million, although the 2023 figures included the two large San Francisco properties. The company also recorded a 12.1% decrease in net income, which came in at $29 million for the quarter.
As of press time, Park's stock was trading at $16.24 a share, up 6% year to date. The NYSE Composite was up 5.3% for the same period.