Greetings. Welcome to the Park Hotels & Resorts First Quarter 2023 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions]. Please note this conference is being recorded. At this time, I will now turn the conference over to Ian Weissman, Senior Vice President, Corporate Strategy. Mr. Weissman, you may now begin.

Thank you, operator and welcome everyone to the Park Hotels & Resorts first quarter 2023 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. Note that comparisons to prior year periods are on a comparable basis as defined in our earnings release. 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 and could cause actual results to differ from those contained in the forward-looking statements. In 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 this morning’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. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide a review of Park's first quarter performance and capital allocation initiatives as well as an update on our full year 2023 guidance. Sean Dell'Orto, our Chief Financial Officer will provide additional color on first quarter results, an update on our balance sheet and liquidity, and further details on guidance. Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Tom.

Thank you, Ian and welcome everyone. I'm pleased to report another very successful quarter where we delivered impressive top line results and significant margin expansion as we continue to execute against our strategic priorities and benefit from a strong recovery taking shape across our portfolio. We remain optimistic about our outlook and our ability to continue to deliver sector leading results while creating value through our prudent capital allocation including continued debt reduction, stock buybacks, and ROI investments. Turning to operations, first quarter results exceeded expectations driven in large part by ongoing improvements at our urban hotels and sustained strength at our resort markets. Q1 comparable RevPAR increased an impressive 37% year-over-year with occupancy up 1400 basis points to 65% for the quarter and average rate higher by nearly 7% over the same period last year. While all demand segments witnessed year-over-year gains, we were particularly impressed with group trends with revenue up 74% year-over-year to $124 million, recovering to 83% of 2019 levels. Healthy group performance, particularly banquets and catering, coupled with the ongoing benefits from the aggressive cost cutting measures we implemented during the pandemic up to drive exceptional margin gains during the quarter with hotel adjusted EBITDA margin improving approximately 550 basis points year-over-year, a 24.2% or approximately 115 basis points above the midpoint of our guidance, an impressive accomplishment in the face of increased cost pressures. Overall food and beverage revenues exceeded our expectations by over $15 million during the quarter, driven in large part by banquets and catering with notable strength in New Orleans, Orlando, and San Francisco. The acceleration in group demand is expected to be a primary driver of growth for Park in 2023 as group ADR is expected to exceed 2019 by 4%. Q1 group revenues exceeded our forecast by 15% or…

Thanks, Tom. Overall, we were very pleased with our first quarter performance. As Tom noted, Q1 RevPAR came in at approximately $159 with 65% occupancy and strong ADR growth of 7% year-over-year to $244 or 8% above 2019 levels. Hotel revenue was $623 million during the quarter, while hotel adjusted EBITDA was $151 million, resulting in hotel adjusted EBITDA margin of over 24% or 550 basis points above the same period in 2022. Q1 adjusted EBITDA was $146 million and adjusted FFO per share was $0.42 or 25% above the midpoint range of the guidance we set last quarter. Turning to the balance sheet, our current liquidity is approximately $1.8 billion, while net debt is currently $3.9 billion, down approximately $600 million since Q1 2021 when net debt peaked at approximately $4.5 billion. Overall, our balance sheet remains in excellent shape with ample liquidity to execute our strategic priorities regardless of potential shifts in the macro backdrop. In terms of deleveraging, during the second quarter, we expect to repay the $75 million loan secured by the W Chicago City Center. With respect to our $725 million San Francisco CMBS loan maturing in November, we continue to evaluate our options, which includes a potential extension of the current loan and we remain confident we will have a resolution by early summer. Turning to guidance, our RevPAR forecast for the year remains unchanged at $167 to $179 or a year-over-year increase of 10% at the midpoint, while our hotel adjusted EBITDA margin forecast has increased versus prior guidance by 10 basis points to a new range of 26.8% to 27.4%, a roughly 125 basis point improvement at the midpoint over the prior year. Better-than-expected margin gains were driven by solid group contribution as group demand continues to build, a trend we anticipate…

Thank you. [Operator Instructions]. And our first question comes from the line of Smedes Rose with Citi. Please proceed with your questions.

Hi, thank you. I wanted to ask, Tom, if you could talk a little bit more about kind of just what you're seeing in San Francisco through the balance of the year and maybe just any visibility over the next couple of years? And I don't know if you'd be willing to or not, but is there any way you could just kind of ballpark kind of general ranges of EBITDA that you think these properties can generate kind of this year and where you might -- where you'd be happy to see it to move to next year?

Yes. It's a great question, Smedes. I mean obviously, there's a lot to unpack there. I think you know and I think I've shared with listeners before, I mean, I've spent a considerable amount of time out there. I find myself out every four to six weeks, approximately meeting with city officials, SF Travel, other business leaders, operators and obviously with us certainly having a significant presence there, about 15% of sort of pre-pandemic EBITDA, it's important that I'm out there. I'd make the overall observation, we're not expecting San Francisco to be a huge contributor, I would say in the $20 million to $25 million range across the guidance that both Sean and I outlined. So I'd make that comment. So when you think about this year, in particular, with about 675,000 citywide room nights, which is again, significant but certainly below the all-time high in the 2019 level, although if you look historically, I think they ran about 800,000 to 850,000 approximately. So certainly 675,000 is solid performance. About 60% of that is back-loaded to the second half of this year. So we are cautiously optimistic. Obviously, the first quarter was very strong, up 200% and up 140,000 room nights. So it got off to a good start. It is still a challenging environment. When you think about San Francisco, we have no doubt in our view that certainly San Francisco comes back. It's not a matter of if, but when. I would say, given some of the recent reports that probably is being extended a little and perhaps elongated a little. SF Travel is going through a change in leadership. Obviously, the booking pace that they recently communicated was slightly down from expectations to around 500,000 to 550, 000 over the next few years. The narrative has…

Okay, thanks, that's helpful. I just wanted to ask you, too, you mentioned targeting $200 million to $300 million of non-core asset sales. Could you maybe just speak to kind of what you're seeing on valuations in that -- on that side, kind of what you've seen at sort of in cap rates or EBITDA multiples or however you want to frame it?

Yes. I would -- I'd make the observation, obviously, we sold seven assets last year for north of $300 million. Obviously, we've completed the Miami sale earlier this year. I think even in the worst of times, Smedes, as you know, even in the middle of the pandemic, we sold two marquee assets in San Francisco, one Le Meridian for north of $630,000 a key. And obviously, the autograph there, Adagio for almost $500,000 a key. So look, there's still plenty of capital, owner operators, private equity. Obviously, the debt markets are constrained. I would say that asset sales, $100 million or less I think are easier to get done. Clearly, pricing is certainly depending on where you price the debt, and I think around 8% is probably where a lot of the debt is getting priced and perhaps some even higher. We're still confident that we'll be able to achieve the objectives that we've outlined. I think we've met or exceeded all of the noncore asset sales that we've outlined over the years and I think we're now up to 39 assets and about $2.1 billion in recycling noncore assets. And that's, of course, including 14 international assets and many assets that met lots of complications and lots of hair. So the team is very skilled, very experienced and we're confident that we'll get at least $200 million in asset sales done this year, and certainly, if not higher.

Thank you, appreciate it.

Yeah, thank you.

Our next questions come from the line of Duane Pfennigwerth with Evercore ISI. Please proceed with your questions.

Hey, thank you, good morning. Just on San Francisco, obviously, a hotly debated market, but one is you're showing that it is improving. For the investors that are evaluating whether or not you should give the keys back on some of those assets, and you know better than we do, there's a lot of strong opinions on that issue. How do you think about giving the keys back as one of your options and what are the positives and negatives of taking that approach as you see them?

Thank you for the question. First, I would want to say that we are under a confidentiality agreement. We are in discussions with the servicer. All options are being explored and I emphasize all options are being explored, and we expect to have this resolved by the summer. Look, these are never cut and dry. So if we were hypothetically to give back the keys, there's a forgiveness of debt, income that we would have, we're able to shield certainly most of that, but not all of that, it would result in a potential dividend payout of $150 million to $200 million approximately. In theory, it obviously reduces our leverage, but it also takes away a growth story and some optionality in San Francisco, certainly depending on what you believe in its time line. And as I said earlier, based on this AI revolution that I think we kind of all are reading and hearing about, I mean, it is anchored in San Francisco and the spend, again, being six times that level. San Francisco historically is a high beta market, so it goes through these periods of sort of boom and bust. Clearly a tougher period now, but we are seeing it certainly beginning to recover. I think that recovery is going to be a little more elongated but we certainly believe that we are going to carefully examine the options and make no mistake, we're going to do what's in the best interest of shareholders and what creates the most value.

Thank you. Thank you for those detailed thoughts. And then just for my follow-up on New York, I guess it caught my attention that you felt like New York could be above 2019 on EBITDA. Can you talk about the drivers of that, which segments are really leading that, and maybe how sustainable you think that is, are there maybe changes in the operating model or things of that sort? Thank you.

Yes. It's another great question. One of the things, I'm really glad you asked the question. Within the last year or two, we talked a lot about -- we were retooling and we use the pandemic to really imagine -- reimagine the operating model. I'm not sure a lot of investors and a lot of analysts really believed this. But I say confidently that I could not be more prouder of the team, particularly our asset management team and Sean and his leadership in the men and women that have worked so hard. And reminding listeners, we took out 1,200 FTEs, that's about 55% of management and 45% hourly. We removed redundancies, sales and marketing, that was $85 million and about 300 basis points. And I remind people that we were in this challenging environment, margins up north of 500 basis points. I mean that's not by luck, that's by hard work and discipline and really grinding in and looking, using the crisis as a way to have better operations. We reported last quarter that labor costs were 16% lower in 2022 than they were in 2019. In this quarter, we took out -- there were 200 fewer management FTEs than Q1 2019. So the team is working really hard, and I think it's showing and it's showing by the results that we certainly are outlining today. New York is one where you think back the middle of the pandemic and many naysayers out there that New York would never come back and it would be 2027 or 2028 or some sort of silly logic like that, that we heard from some. Again, we were up 113% in RevPAR this quarter. And as we stated, we fully expect that we will exceed 2019 levels in EBITDA. The city is activated. People are going back to the office. It's only -- it's accelerating. And so we are -- you're seeing the city back and no doubt, we feel very good about the outlook in New York, and we feel very good about our positioning. There are only really three large boxes that can take significant group business, and we certainly believe we have the best meeting footprint there and that we're well positioned and an excellent leadership team there on site. So excited about New York and very encouraged. And again, we expect we'll be up double-digit RevPAR growth there in the second quarter. So we feel very good about New York where we are right now.

Thanks Tom.

Thank you.

Our next question is from the line of Floris Van Dijkum with Compass Point. Please proceed with your questions.

Thanks for taking my question guys. Just a quick follow-up here, and I don't want to belabor New York a little bit too much, but I think New York has hotel EBITDA that was negative in the first quarter of $3 million. And I think full year last year was -- or sorry, in 2019 was $47 million. So that implies a pretty steep ramp up, which sort of is in line with your comments, but it's maybe a little bit steeper than people were thinking. Is that the right way to think about it?

Yes. I mean part of it, keep in mind, it's our softest quarter in New York and occupancy about 69% and RevPAR is only like $170 plus or minus, and EBITDA was $3.4 million negative. So that does imply that the balance of the year will be certainly above $50 million. And as we look out today, that's a number that we're comfortable with. And I think as I said, we're also looking at RevPAR that pretty significant. So I said double digits, but substantially more than that as we look at just Q2 as an example of that. Now we've also got group room nights on the books about 180,000. And that's all -- when you can anchor a big hotel like that with group and then layer in your transient really helps the overall profitability. So feel good about that as we look out today. 80% of the demand tends to really be on the domestic front, but the international piece is growing. And we -- historically about 16% to 17%, which is helpful. And as you see, clearly, that travel coming certainly out of Europe is very helpful. Asia is not back yet, but we feel very good about the pace in New York at this point.

Thanks Tom. And maybe my follow-up, I'm thinking, obviously, you bought back 8.8 million shares in the first quarter. You did sell a hotel. How should we think about the percentage -- if you're looking to sell another 200 million before the end of the year, which is what you sort of indicated, should people expect about half of that to be used for share buybacks and half for debt reductions or how do you weigh those two and obviously, you have some redevelopment capital that you probably need to spend as well? Sean Dell’Orto: Hey Floris, it's Sean. I mean I think if you think about it, we want to certainly do in a leverage-neutral basis. So you can kind of, I think, factor in that way as we think about it going forward. And in terms of -- I think certainly, as you talk -- as you mentioned with the ROIs, we certainly have a focus on that as well. So while there still will be some buybacks in play, I think you could probably see us more leaning towards redeployment of within the portfolio or some deleveraging. And just a quick note back on New York just so you have it, I mean, they lost $2 million in Q1 of 2019. So as Tom mentioned, it's a soft quarter. So it's nothing unusual to look at this year.

Thanks guys, that’s it for me.

Our next questions are from the line of Dany Asad with Bank of America. Please proceed with your questions.

Hi, good morning everybody. Thanks for taking my questions. So I guess, Tom, you raised the full year by the amount that you peak in the first quarter, but your comments are actually pretty encouraging here. So I guess my question is, first of all, how is Q2 shaping up compared to where you thought it was going to be 60 to 90 days ago, and should we -- is there some macro or any kind of conservatism that we're baking into the balance of the year, just trying to kind of square how positive your comments are to kind of your -- the underwriting for the year?

Well one Dan, it's great questions. I want to also preface my comments, but think back to the comments that Sean made. You've got some tough comps there and cancellations. And obviously, second quarter was very strong last year. It has historically been our strongest quarter. So we're certainly optimistic and as -- again, the RevPAR that we gave in kind of that 7% to 11%, we're certainly very, very comfortable with that. Group pace looks good as we look out as well. But let's all not kid ourselves here. There's still a lot of uncertainty. We've got a lot of invariables here. As the Fed -- we're getting at the -- we're getting at the peak of the tightening cycle, there's still concerns about a potential credit crunch. None of these is a surprise to you or any of the listeners. Consumer is still strong, with about $1.1 trillion in savings, the savings rate about 6.2%, obviously, low unemployment. So it doesn't look and feel like a recession. But clearly, depending on the signals and direction of the Fed here and then given, obviously, the tightening credit on the banking side, there's certainly a bit of conservatism in there, but there are some tougher comps in there. So we feel good, we are comfortable with the guidance and obviously that pull forward, and we're very comfortable about the Park store. The team has worked incredibly hard. No secret, we were probably dealt one of the more difficult hands in the pandemic and coming out of it. But I would also say, think about the moves that we made, no dilutive equity raise. We did three bond deals and pushed out maturities. We've recycled capital. People forget we were self-operating a bunch of hotels. We had laundry facilities, joint ventures, international hotels. I mean, all of that, a large part of that has been cleaned up. And so we are -- our top 27 assets account for about 90% of the value of the company. So we are laser-focused on continuing to reshape and we are optimistic about Q2 and as we look out. And group is a big part of that. Leisure is another part that feels really strong. People forget just we're still producing eye-popping results in Hawaii that we expect will only get stronger, and we still don't have the Japanese traveler back. So that, again, provides another tailwind. So a few headwinds out there, but there are a number of tailwinds also that really benefit the Park story, I think, very different than many of our peers. And again, up 500 basis points in margins. That doesn't happen without a lot of hard work by the team.

Super helpful, Tom, thank you. And then my follow-up question is a little bit on group. Just -- can you comment a little bit more on that group strength, what's driving that in terms of different segments of group, whether it's association SMERF [ph] and so on? And maybe at the same time, remind us of the profitability of those different segments that we have in the portfolio? Sean Dell’Orto: Hey Dany, this is Sean, I'll take that one. I think there's probably a few key takeaways here with group. Clearly, it's a great story. Park outperformed in Q1 versus as we kind of look at our performance in our markets relative to the market performance. We were certainly up and beating that and taking share in about every market. So with total RevPAR up 40% versus the 30 -- almost 37% on room RevPAR. Clearly, there's an out-of-room spend here component that's driven by group. So I think coming to some of the themes here, it certainly remains near term, 60 days out but it's elongating. We had almost 60% of the room nights booked in March -- were for March or Q2. So again, still somewhat near term, but we also booked 77,000 room nights for 2024, and that's after seeing about 18,000 room nights in each of January and February. So I think meeting planners and starting to trust the ability to book out further, probably see the need to book out further. I think they're generally pretty bullish on having events in person. So you're starting to see that momentum right now. It's a mix shift right now within group, to your point about some of the sub-segments. We're seeing more out of the corporate group as well as the convention really picking up. I think from an in-house corporate group, we expect that to recover pretty quickly throughout the year, seeing it going down from about 20% down in revenue to 2019 in the first quarter to basically being flat to slightly up by Q4. Convention is improving, almost 90% of 2019 levels. Quarter-to-quarter, it's going to be a little bit mixed bag based on the calendars. But again, those two are the bigger components traditionally of this portfolio and certainly the better revenue producers for us. So seeing those coming back and ultimately taking share more of the mix is certainly kind of baked into how we think about the year going forward. I think finally, one last thing to do -- one last takeaway is there's a tailwind here still where relative to service we've seen recently, people still talk about 30% of the canceled COVID events still need to be rebooked. So we think certainly that's a tailwind for our portfolio going certainly into next year as people start to try to rebook those events.

Awesome, thank you very much for that.

Our next question is from the line of Anthony Powell with Barclays. Please proceed with your questions.

Hi, good morning. Good morning Tom. Question on business transient. There's been a lot of very positive data points on group. Just maybe some detail on how BT trended in the quarter and what you're assuming for the back half of this year in terms of recovery there? Sean Dell’Orto: Anthony, it's Sean again. I mean I think BT as a whole is tracking well. And I would say, certainly we would say it's recovered. It was down overall in revenue about 10% to 2019 levels, but we see that improving and actually being up high single digits by the back part of the year, maybe even double digits. Clearly, we get focused on the corporate negotiated a lot where you see within financial services or tech, professional services, I mean that sub-segment has certainly been off. It's down 40% to 19% in Q1. We do see that improving through the year, getting to probably 20% down by the back half. But you've got RAC rate. You've got government and you got local negotiated all kind of helping to kind of pick up the slack a little bit. I mean from a RAC standpoint, I think you've probably heard another commentary certainly from Hilton that you're kind of -- you're going after more of the smaller businesses. And what we're seeing there is the usual comes through in more local as well as RAC. And so RAC's about 30% above corporate negotiated on rate on average. And while local and government are below on rate, about 25%, I would say the vast majority of the pickup on the mix is on the RAC side. So all in all, we think business transient as an overall segment is recovering through this year and getting back to 2019 levels easily by certainly the midpoint of this year or the back half. It's just, again, over -- a lot of attention on the corporate negotiated makes it feel like business transient is down, but it's really not.

Got it. Okay. And maybe one more. I saw that you bought some land in Hawaii next to [indiscernible] talked about doing the tower there. Could you maybe update us on the scope of that project timing, the opportunity there? That would be great.

Anthony, as we've said it would be the opportunity to add a six tower there. We own the land which we're pretty excited about. We're working through the entitlement process. It's probably another 12 to 18-month process, plus or minus. And we're looking at 500 keys plus or minus that possibly could be added. And as you know, that is a world-class resort. We've got nearly 2,900 rooms on five towers. There's also an additional 1,000 units of timeshare, which we don't own. And you look at the extraordinary success that we had last year, again, not having the Japanese traveler down 95%. We did historically about 150 weddings there a year. I think we did less than five last year and Japanese traveler who typically account for about 20% of our business. We expect we'll start to see more visitation in the second half of the year, but we are tracking for probably another all-time high in EBITDA. So I feel very good about what's happening there, not only there, but also on the Big Island. So we think a future investment there is going to be extraordinarily accretive. We also, again, as we are more profitable today in Hilton Waikoloa as a 600-room hotel than we were as a 1,200-room hotel. And in addition to that, we have uncovered that we have the rights for an additional 200 keys that we can add there. So the story in Hawaii for Park only gets better and only gets stronger as we look out.

Alright, thank you.

Our next question is from the line of Aryeh Klein with BMO Capital Markets. Please proceed with your questions.

Thanks and good morning. Maybe as it relates to guidance, it seems to imply about 2% to 3% RevPAR growth in the second half of the year. How would that compare to your expectations on the expense side? And maybe what are the more significant pressures on the expense side from a broader perspective? Sean Dell’Orto: Yes. I think, on the expense side, we certainly -- we see expenses as we talked about Q2 being a little bit higher than revenue. Clearly, we see a little bit of margin year-over-year decline. But once we get into the back half of the year, we see that to be more balanced between revenue and expense growth with slight edge to revenue. So we should expect to see some margin improvement year-over-year. And so I think we feel pretty good about kind of where we are. I mean certainly, the expense side, we think about performance in Q1 on the cost side, as Tom alluded to, with the $85 million of savings you feel that's intact. I mean, wages probably been tracking 5% -- 4% to 5% up year-over-year for the last few years. I think overall payroll is up 20% since 2019, yet in a nominal sense, we're 3% down to just 19% in Q1. From a headcount standpoint, our management FTE positions are down 14% and hourly are down 19% in Q1 relative to 2019. That's versus the 8.5% reduction we've talked about to folks in terms of that $85 million of savings. So we feel good about where that's tracking. And I think we have that in pretty good control. I think where you see some of the pressures as you go into the back half of the year, I think remain insurance and utility costs. Utilities are up 22% since 2019, 40% on a per occupied room basis. It's certainly going to impact some of that savings we've talked about. Insurance is up almost 40% since 2019 or likely to be based on expected renewal rates. Still need to get through that process, but certainly, it's going to impact everybody just with all the losses and some of the cost of capital constraints that the carriers have. So we expect to see some increases there that will be pressuring margin some. But I think when you put all together though, and you can look at those two line items, those things can also come down over time, too. We've certainly seen soft periods on insurance as well as utility costs can soften as well. So that could ultimately be something where we benefit in the future. And we have lower exposure on the insurance side than many, I think, because we haven't had the losses. While we're certainly cat exposed, I think we certainly expect to fare better than most in that just because we haven't any losses in the last few years.

Thanks. And then, Tom, maybe just as you think about the San Francisco market and maybe to the extent you're positioning for a recovery, how much capital do you think is required to invest in the assets you have in that market to remain competitive over the next couple of years?

First, would be the Park 55. We've completed the model rooms. We were prepared to a complete renovation. That's about 1,024 units in that hotel. So that's about $90 million, but probably over a five-year stretch, it's probably approaching $200 million in total. We've renovated the ballroom, the public space, and the San Francisco Hilton. But as you look out over a five-year period, it's probably in the $200 million range, plus or minus. Again, that's 3,000 rooms at those two properties.

Appreciate that, thanks.

Our next question is from the line of Dori Kesten with Wells Fargo. Please proceed with your questions.

Thanks, good morning. Can you talk about the renovation plan, I think it's for the Rainbow Tower in Hawaii for next year, if you just -- if you have expected costs yet and what renovation disruption may be and then the eventual upside you expect?

Yes. We're just in the process of planning that, Dori. We have -- we're going to finish Phase 3 of the Tapa Tower this year. Really excited about the work being done there. Obviously, Rainbow Tower will be next in the queue. And obviously, when you're running, as you know, high 80s to mid-90s occupancy, it's a bit of a high wire act as we manage these renovations. But Carl Mayfield and our design and construction team are really best-in-class and as you saw, obviously, as we talk about the Casa that we're going to take offline and the very modest disruption we're going to have there, these things are really well planned out and well thought out. And I would say the Rainbow Tower will be the same. We will design, we'll get a few model rooms done, we'll organize, we'll find the softest periods we can to complete them with minimal disruption on the operations. But that will be next in queue, and that's probably 2024 or 2025, but don't have any disruption data for you today. We'll follow up as that information becomes more available.

Okay. And you mentioned group revenue pace for 2024 was up 9% year-over-year. I didn't think I caught where, I guess, in the context of -- it is? Sean Dell’Orto: I'm sorry, Dori, what was that last part, we missed a little bit.

I didn't catch where it was in the context of 2019. Sean Dell’Orto: So yes, 2023 pace by ultimately, we think, is around -- ends up like 90% or so I guess that's ex San Francisco, like mid low 80s. So it's going to be upwards of kind of upper 80s based on 2019.

Sorry, that's 2023 or 2024? Sean Dell’Orto: That's 2024, I was giving a little 2023 background, but then giving it to 2024.

Yes. It's -- Dori, it's low 80s. Group pace for 2024, as Sean said, again ex San Francisco, it's 90.2%.

Okay, great, thank you.

Thank you.

Our next question is from the line of Chris Woronka with Deutsche Bank. Please proceed with your questions.

Hey, good morning guys. Tom, so there's obviously a lot of moving parts out in San Francisco. I think there's a lot of hotels for sale, whether publicly or not. And I'm not including any of your stuff in that. But the question is, what do you think happens, there's talk of governments buying those for alternative use or others. How does that impact, do you think there's any chance we see some surprising prints on sale, high or low? And how does that really impact what you guys want to do with the refi and your thoughts on the market longer term in terms of some supply potentially coming out? Thanks.

Yes, it's a great question, Chris. Look, we have studied San Francisco. We've looked at the cycles, and there are a few, I think, big, important takeaways. It's the most supply-constrained market, probably second only to a Key West. You've only got 32,000 keys versus New York at 125,000 to 150,000. It is a high beta market, as we all know. And if you look from that sort of 2008 through 2019, probably first or second best market, lodging market. No doubt, it is a more challenged environment today. And it really comes down to making sure that we are carefully underwriting and understanding the demand flow. Obviously, the recent print from SF Travel was not particularly helpful. Obviously, you're going to have a leadership change there. And obviously, the sooner that selection committee can get at that work, the better. But we have no doubt that San Francisco recovers for the reasons we talked about. When you think about venture capital, you think about education, the natural beauty, you look at the AI spend, again, you got six times the spend in this revolution, it is going to be anchored there. Having said that, we're not probably -- about this. It's going to be an elongated recovery. And again, we are under a confidentiality agreement, we are in discussions, and we will carefully evaluate all options and arrive at the option that creates the most value for shareholders. And the office vacancy rate rising, again, is something that you need to carefully review and understand. The office sector is clearly going to continue to take it on the chin there. But these periods of dislocation also create opportunities. We don't see -- I think it would be difficult for a lot of office to hotel conversions. So we don't…

Yes. Thanks, Tom. Appreciate all the color there. Just as a quick follow-up, in Hawaii and some of the expansion opportunities you have, you covered a few of them. I know planning is not done and it's a little far out, but is there a way you would look to do that in a more capital-light manner given how much construction costs have risen or is there kind of an offset later down the road with more asset sales, just thoughts on how to make that most, I guess, economical?

Yes. It's a great point. We will -- obviously, we're not at that point today. You rest assured, as we demonstrated, we're not going to do any kind of dilutive equity raise and recycling capital. The best use of that recycling capital is to pay down leverage and buy back stock on a leverage-neutral basis and reinvest back in our portfolio. We're investing $300 million and we haven’t talked about the [indiscernible] and what we are doing there. But it is going to be extraordinary when it is completed. The latter part of this year we cannot wait to show the expanded meeting space over water coupled with a completely renovated dog course plus the Waldorf Ballroom which is already in a complete runs we do by both the Insignia as well as the Waldorf Astoria there. So, we are really excited about that as an example. And we will be thoughtful as we think about how and when we capitalize. All options again would be on the table. Fortunately, that’s a few years out until I need to make a decision today and hopefully I am expecting that we are in a more normalized times and apparently the cost of capital was back to a more normalized revilement as well.

Okay, super helpful as always. Thanks Tom.

Thank you, have a great day.

The next question is coming from the line of Patrick Scholes with Truist Securities. Please proceed with your questions.

Hey, good afternoon.

Hey Patrick, how are you?

Great, great, thank you. Tom, can you talk a little bit about the mix of what types of businesses, gay with the group strength in the quarter. And as you look in your group of new crystal balls, the rest of the year and into next year, if that composition of who is strong, who is weak is there change in that all. And my state who is strong is making a financial firms, or marketing firms, etc.? Thank you.

I will let Sean jump in some of the little more granular. But let me just make a couple of macro comments. I mean look, as you think about on a remote work and hybrid work, what we hear from C Suite leaders, men and women as I talk to in various forms, that need to bring people together is even greater. And so when you have a portfolio like ours, that is so well distributed and also with a lot of meeting space we are well positioned to take advantage of that. I mean we began the year with a forecast of about 2.1 million room nights. I think that last quarter we were about 1.4 million in debt finance and we said we needed to make up about 660,000 for that year. Now, at the end of the first quarter here, we are at a definite of about 1.72 million. We need to only make up about 330,000 room nights. So we are very confident that we will be able to meet our targets if not exceed them. And also to the point that Sean made, you are seeing about 30% of company’s plus or minus, it still have pent up demand in group, and New Orleans is seeing obviously the medical conferences come back and that need to be together isn’t going to go away. And as you think about just 2023 to markets, New York and Chicago we have got 180,000 group room nights. New Orleans is 230,000, New York again 180,000, Monte Creek and we are still under a transformational expansion of 170,000. Hilton Hawaiian Village 100,000 and of course the complex in San Francisco north of 180,000. So, just that backdrop it is just a half dozen of our big group houses as well. So we don’t see that at all slowing down and we see that as a real competitive advantage for us. Leisure continues, it moderated in Key West but we anticipated and we said that and we expected to add to add trees don’t go to the sky but we really see the groups got a tail wind as we sort of move forward.

Yeah, I just might add, I wouldn’t say there is any specific verticals that are performed. I think everybody is kind of just find the way back and getting into group settings. And so, the company in house group and the company’s corporate side you are seeing just across the portfolio. Again a lot of it is still very much short-term where you see people coming back, whether it is training or gathering for other things that they haven’t done in the past. I think you have seen that come through. Conventions are clearly getting back on the way, a lot of strength in Chicago, New Orleans first half of this year for the first quarter. San Francisco J.P. Morgan Healthcare Conference plus a couple of others this quarter helped that market as well and out portfolio. And then finally group tour for the quarter at least is certainly was stronger. As you think about things like in group other events like instead of travel and it just took a while for them to kind of get pass the pandemic and start getting back on that cycle. So I think just a matter of that delay and that lag of -- group sub segments absence, SMERF which clearly was one that was [indiscernible] during the pandemic. You have seen that kind of just level off and it has been more in the corporate side and side really coming back.

Okay, great color there. Thank you.

Thank you. Our next question is from the line of David Katz with Jefferies. Please proceed with your questions.

Hi, good morning. Thanks for -- hi, how are you?

Good.

I wanted to just -- you have covered a lot of details, so I just wanted to touch on the target of a couple of 100 million of assets. And any color you can provide us with in terms of what the sort of net proceed is on that might be or what that might look like and I think you may have said earlier obviously looking to improve leverage with those, just any sense around that would help? Thank you.

David, obviously we -- both Sean and I think addressed it earlier. Look it has always been our history of continuing to recycle capital in the north of 300 million last year. We have set the target of 200 million to 300 million. We have obviously already put the print, one print on the board with the Miami sale done earlier in the year. And I would say that generally, assets under $100 million would be easier to get done in this environment. There are no shortage of capital, whether it's owner-operators, family offices, private equity, I mean the private equity real estate, they're sitting on nearly $400 billion of capital, and that's not including the sovereigns. So that capital has got to be put to work. And we will be thoughtful. Tom Morey, our Chief Investment Officer and the team, I think, have done an extraordinary job over the last several years, and we'll continue to look at non-core. Again, our top 27 assets really account for about 90% of the value as we've said. And there's debt capital available. You've just -- you've got to work a little harder and got to find those right buyers. Clearly, a more challenged environment on the debt side right now as the debt markets have tightened. And I wouldn't say we're in a credit crunch, but you certainly have that risk as well. In terms of proceeds, we'll continue to be thoughtful. I mean the highest and best use of -- from a capital allocation standpoint, if we continue to trade at 50%, 60% discount to NAV, you can expect that we will continue to buy back stock as we did in the first quarter. We'll do that on a leverage-neutral basis, and we'll continue to invest back in the portfolio. Those are really the best decisions that we can make as a management team at this point, and we'll continue to do that.

Okay, thank you very much.

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

Great, thanks. I just wanted to circle back on the idea of what's going with business transient. When looking at your urban RevPAR and if we exclude San Francisco, which is kind of has some city-specific issues, it looks like your urban RevPAR was down about 10% versus 2019, which is kind of a little bit or a bit worse than Q4 being down 2% versus 2019. So I know you mentioned that Business Transient is improving, but -- and maybe that's just in the markets outside of your urban portfolio. But can you give a little narrative around what's going on with the urban RevPAR, and this is excluding San Fran, this sort of sequentially in worst looking, and is that just something you're seeing across the board? Thanks. Sean Dell’Orto: No, I would say it's relatively stable, Robin. I think clearly, I mean, obviously, you're looking at it -- the seasonality element against 2019, and it's a sequential decline. But I think even in this -- we sit here today, still trying to recover, I think some of those weaker seasonal time frames end up being a little bit more disproportionately weaker, if you can kind of -- hopefully, that makes sense. But I think you just kind of see a little bit more, I think, a little bit more underperformance in some of those weaker pockets from a seasonality standpoint. So when you look at the Q4 to Q1, I think it's generally in line. I think we certainly expect that as more of an improvement as we get through the -- more through the year.

Okay, thank you.

Our next question comes from the line of Chris Darling with Green Street. Please proceed with your questions.

Thanks, good morning.

Good morning, Chris.

Tom, what's the latest thinking around a potential rebrand of the DoubleTree, San Jose? And anything new you can share as it relates to timing or scope of that project?

Yes. It clearly is in the queue and love the location, the quality of the real estate. We certainly think an upbrand is the right move. And we've got a couple of model rooms done. We continue to study, obviously, all of Northern California and figure out what the right sequencing is. And -- but that one is probably more of a late 2024, 2025. That certainly is not what I would call in the top tier of our conversions at this time.

Okay. Fair enough on that. And then switching gears, just curious if you could discuss some of the highlights from, I guess, it's 12 hotels that you classify under the kind of other market bucket. It looks like that group of properties might have drove some of the outperformance and maybe there was some seasonality there, but curious to understand if there's anything worth calling out. Sean Dell’Orto: I don't think anything specific to call out there. Just I think for most part, those are kind of our, I would say, noncore market areas. I mean there's probably one that sits in there would be, I believe, the Creebay [ph] Hotel, which certainly has been an outperformer for us, and it's a little bit disproportionate contributor given its size relative to a lot of smaller assets we have in that bucket. But they have been -- generally, that group has somewhat outperformed because they're not certainly in those CBD markets, just been general outperformance are not also ones that are in those compressed leisure markets that you've seen a little bit of moderation. So they're kind of in a sweet spot still.

Fair enough, thank you for the time.

Our next question is from the line of Bill Crow with Raymond James. Please proceed with your questions.

Thanks. Thanks for sticking around. Good morning. Tom, what's going on with the Japanese traveler, are they going to other places or I think I had read months ago, they had basically decided to travel or just stay domestic. And I'm just wondering you're optimistic about the recovery. But has there been somewhat of a permanent shift here in their travel?

I don't think so, Bill. I mean, remember, you had the Japanese government relaxed the restrictions on October 11th, including elimination of a daily kind of arrival caps. Look, there's been a long history, if you think back over the last 30 years, that visitation has been pretty consistent and even periods where the Yen was pretty volatile. So I just think, given the history, given the cultural tie-ins, we're not at all sensing that there is going to be any long-term dilution there. And look, there was another flight just added today by Hawaiian Airlines to a fourth destination. So we think the second half of the year starts to show improvement, but really excited as we look out to 2024, 2025 and beyond. And if you think about, again, the comment I made about weddings, a lot of those were Japanese weddings. As you think back to 150 of those a year and single digit last year. So very, very optimistic. Despite that, obviously, you continue to see the air seats into Honolulu I think we're up 21% in the first quarter and over the last year, and I think about 3% below 2019 levels. So look, we would hope and obviously, given your vast experience, if you dig in and take a look, I mean, our Hawaii story is just extraordinary. In terms of the performance, we've retooled the operation at Hilton Hawaiian Village, the work that we did, obviously, at Hilton Waikoloa, shrinking the hotel at 50% capacity, and we're more profitable. And as you look out, we fully expect we're going to be mid -- at least mid-single digit RevPAR increase and probably again, all-time high EBITDA. So it's really good blocking and tackling, but we are excited to welcome back the Japanese traveler. And we certainly think that will begin in earnest in the second half of the year begins, and certainly optimistic about 2024, 2025 as we look out. We see that as a real tailwind for us.

Yes. No, I appreciate it. Sean, one for you. I think it was Duane that earlier asked a question about hitting back the keys in San Francisco. I don't recall you mentioning, but what is the prospective tax hits on the gain and is there any way to either using the 1031 exchange or a special dividend, is there some way that you would be able to avoid the tax hit on that? Sean Dell’Orto: Yes. Sorry if we haven't made it more clear relative to -- we wouldn't expect a tax hit per se, Bill. It's more just a [Multiple Speakers] yes, the gain is just trigger more distribution, it'd be more special dividend, it is what Tom described $100 [ph] million.

Yes. You got to keep in mind, Bill, it's a lot -- it's a very low tax basis. So with that, if we're giving us a debt, we end up with a significant gain. Given the NOLs, we can shield but we still believe we end up with approximately a dividend requirement of about $150 million to $200 million. Now look, you evaluate that in the context of the options. As we said, we're under a confidentiality agreement right now. We are reviewing and studying the situation carefully. We're going to do what's in shareholders' best interest. And as I said, all options are on the table, and they should be on the table.

Okay, that’s it for me. Thank you.

Okay, no thank you.

Okay. Thank you. At this time, we've reached end of our question-and-answer session. And I'll hand the call back to Tom Baltimore for closing remarks.

Thank you all. It's great to visit with you today and look forward to seeing you all at the upcoming conferences and travel well and be safe.

This will conclude today's call. You may disconnect your lines at this time. Thank you for your participation.