Park Hotels & Resorts executives are hanging their hats on a strategy built around improving profit margins and “grouping up” across their portfolio.
TYSONS, Virginia—Park Hotels & Resorts officials said they enjoyed a strong third quarter even in the face of disruptions, and a large part of that is attributed to what they see as the success as their long-term asset-management strategies.
During the Q3 call with analysts, Park president and CEO Tom Baltimore said his company continues to outpace competitors in terms of growing group business at its properties, and is projecting growth in that segment even in markets that are seeing fewer citywide events in 2019.
“If you look at some isolated markets, in Honolulu group pace is down (for 2019), but we don’t expect to be impacted at all given the strong in-house group we have,” he said. “Orlando is another example where the city will be going down 6%, but we’ll be up 11%. I have to give a lot of credit to our asset-management team.”
Baltimore said those strong growth numbers are the results of the company’s internal strategies and cooperating with Hilton. The real estate investment trust completed a spinoff at the start of 2017 from Hilton but Hilton continues to manage Park’s portfolio.
He said group pace for 2018 is up roughly 5% while pace has improved almost 12% into 2019.
Going forward, Baltimore said the company will focus on making investments in growing where it is already making money and in improving its opportunities with group. That will include adding 70,000 square feet of meetings space at the Hilton Orlando Bonnet Creek.
He said that property could also be in line for investment to convert into a new Hilton “plus” brand that Hilton executives have recently teased could be announced soon.
Baltimore said the company has also seen continued improvement in margins, with hotel adjusted earnings before interest, taxes, depreciation and amortization improving 10 basis points year over year to 27.7% and up 60 basis points year to date.
Analysts continue to wonder aloud when Park will enter the market as a buyer, which Baltimore has previously stated is a long-term goal to improve the company’s brand and operator diversity.
But while that remains in the long-term plans, Baltimore indicated the company’s more immediate concerns will revolve around a new wave of sales of non-core and international properties.
“We have five to eight (potential sales) in various stages,” he said. “But none that we can report out yet.”
He said one reason the company hasn’t been a buyer is because that’s just not where its focus has been of late.
“We’ve really been focused on our internal growth strategy and recycling capital,” he said.
Q3 performance and guidance
Baltimore said performance in the quarter was hurt by hurricanes and the hotel strike in Chicago, which has been resolved at Park’s properties in the market.
The company saw 2.6% year-over-year growth in revenue per available room, but would’ve seen a 3.2% RevPAR increase excluding the impacts of weather and the strike. Baltimore noted his company has not seen a noticeable bump in performance in Chicago from business diverted from hotels still affected by the strike.
He said he expects the fourth quarter to be the second strongest of 2018, led by a particularly strong October. He said preliminary numbers for the month showed year-over-year RevPAR growth in the range of 6%.
The company now projects full-year RevPAR growth between 2.4% and 2.9%, up 0.15% at the midpoint from earlier projections.
As of press time, Park stock was trading at $29.42 a share, up 2.3% year to date. The Baird/STR Hotel Stock Index is down 8.1% for the same period.