Park Hotels & Resorts Signals Steady Post-Renovation Upside

Park Hotels & Resorts ((PK)) has held its Q1 earnings call. Read on for the main highlights of the call.

Park Hotels & Resorts struck an upbeat tone on its latest earnings call, pairing better‑than‑expected operating results with visible progress on its strategic plan. Management pointed to outperformance in RevPAR, strong resort trends, and value‑accretive renovations, while acknowledging near‑term drags from Miami, Hawaii weather disruptions, and cost and interest headwinds.

Portfolio RevPAR Outperformance

Reported portfolio RevPAR topped $191 for the quarter, rising about 2% year over year and roughly 5.5% when excluding the under‑renovation Royal Palm in Miami. Core portfolio RevPAR reached nearly $216 excluding that asset, with momentum building month by month as RevPAR grew about 6.5% in January, 3.5% in February, and 6.5% in March.

Strong Resort and Leisure Demand

Resort and leisure demand remained a standout, with leisure/resort RevPAR up about 7.6% excluding Royal Palm. Flagship resorts such as Bonnet Creek, Key West, Waikoloa, Hilton Santa Barbara, and Hyatt Regency Mission Bay posted mid‑ to high‑single‑digit and, in some cases, double‑digit RevPAR gains, underscoring resilient high‑end leisure travel.

Meaningful EBITDA and Revenue Results

Total hotel revenues climbed to $591 million, up nearly 2% from a year earlier, while hotel adjusted EBITDA reached $152 million with margins around 26%. On a reported basis, EBITDA came in at $143 million and adjusted FFO was $0.45 per share, giving the company room to modestly lift full‑year profitability expectations.

Successful Capital Recycling and Dispositions

Park continued to prune its portfolio, selling noncore assets including Hilton Checkers and the 396‑room Hilton Seattle Airport for a combined $31 million year to date. Management highlighted that, over nine years, it has sold or disposed of 52 hotels for more than $3 billion, reinforcing its strategy of focusing on higher‑quality, higher‑growth assets.

Transformative Renovations Driving Value

The Royal Palm South Beach repositioning is nearing completion, with opening targeted for early June and early group bookings already pacing ahead at notably higher rates. Management expects a powerful payoff, projecting returns on invested capital of 15–20% as stabilized EBITDA doubles from roughly $14 million to about $28 million, or around $69,000 per key.

Hawaii Renovation Progress and Recovery

In Hawaii, Phase Two renovations at the Rainbow and Palace Towers are now complete following an additional investment of about $85 million. Combined RevPAR for the two resorts rose roughly 2%, and management noted that adjusting for storm impacts of about 340 basis points, RevPAR growth would have exceeded 5%, with expectations for full‑year performance at the high end of guidance.

Improving Group Trends and Forward Pace

Group business is firming across the portfolio, with group revenue up about 5% year over year excluding Royal Palm and particularly strong gains in Puerto Rico, New York, and Bonnet Creek. Looking ahead, group pace is up roughly 4% for the second quarter and about 3% for the full year, while 2027 group pace for the core portfolio is already tracking roughly 5.5% higher.

Balance Sheet Actions and Liquidity

The company emphasized its robust liquidity, totaling about $2.0 billion including $156 million of cash and ample undrawn capacity on its revolver and delayed draw term loan. A new $700 million floating‑rate mortgage on Bonnet Creek, upsized by $50 million, helps create roughly $1.5 billion of committed debt capacity and extends average debt maturities to nearly four years.

Guidance Raised and Dividend Maintained

After a stronger‑than‑expected first quarter, Park raised its full‑year RevPAR growth range to 0.5–2.5% and lifted the midpoint of adjusted EBITDA guidance by $7 million to $587–$617 million. The midpoint of AFFO per share guidance also ticked up to $1.74–$1.90, while the board maintained a quarterly cash dividend of $0.25, implying an attractive yield at recent share prices.

Royal Palm Operational Drag

The Royal Palm renovation remains a short‑term earnings headwind as the hotel suspended operations in mid‑May and will generate losses while staffing and demand ramp back up. Management expects the Miami exposure to trim second‑quarter RevPAR by about 100 basis points and anticipates an operating loss of nearly $3 million from the property in the period.

Weather and Market Disruptions in Hawaii

Storm activity and partial disruption tied to the Honolulu Convention Center weighed on results at Hilton Hawaiian Village and Waikoloa, dragging combined RevPAR lower by about 340 basis points. The impact was more pronounced at Hilton Hawaiian Village, though management still sees the Hawaii assets as well positioned once weather and event‑related headwinds subside.

Remaining Noncore Asset Overhang

Despite recent sales, Park still has about 12 noncore hotels on the market, including three tied up in a dispute with a ground‑lease counterparty. These remaining assets contribute roughly $41 million of EBITDA plus about $16 million from the disputed properties, and management conceded that the “last mile” of sales will be difficult in today’s choppy and selective transaction market.

Expense Pressure and Higher OpEx Guidance

Operating costs are creeping higher, with hotel expenses rising about 2.6% in the quarter and management nudging its expense outlook up by around 40 basis points. Labor remains the key driver, as wages are expected to grow about 5% and higher occupancy is leading to increased costs per occupied room, pressuring margins even as revenues rise.

Refinancing Interest Expense Headwind

Debt refinancings and new commitments totaling about $1.5 billion will reduce near‑term maturity risk but come at a cost to earnings. Management estimates these financings will add roughly $28 million of annual interest expense over time, with about $13 million of that drag reflected in the 2026 AFFO outlook, tempering some of the benefits from higher EBITDA.

Geopolitical, Macro, and Demand Volatility

Executives flagged geopolitical tensions and potential oil price spikes as risks that could weigh on consumer travel and corporate demand, especially for long‑haul markets such as Hawaii. Near term, quarterly demand is also choppy, with April RevPAR seen flat, May expected to soften slightly, and June projected to be very strong, leaving some execution risk around the quarterly cadence.

Localized Market Weakness and Event Laps

Results in certain markets were held back by one‑off comparisons, including Washington, D.C., where properties cycled past inauguration‑related demand, and New Orleans, which no longer benefits from last year’s Super Bowl. Markets like Los Angeles and Chicago were also characterized as more challenging for asset sales, limiting disposition options and slowing capital recycling.

Guidance and Outlook

Looking forward, management expects second‑quarter RevPAR to land near the midpoint of its guidance range, with Miami causing about a 100‑basis‑point drag and Royal Palm driving a roughly $3 million loss as it ramps. For 2026, capital spending is projected at $230–$260 million, liquidity remains strong, and while new financings add interest cost, Park sees its repositioned portfolio and group pace as setting up for healthier earnings growth beyond the short‑term noise.

Park Hotels & Resorts delivered a quarter that balanced outperformance and strategic progress against a realistic view of near‑term obstacles. With resort demand robust, high‑return renovations nearing completion, solid group bookings, and a fortified balance sheet, the company appears positioned for steady if uneven growth, though investors will need to monitor cost inflation, interest expense, and ongoing asset sales.