Park Hotels & Resorts officials expect to sell as much as $350 million in hotels through the rest of 2020.
TYSONS, Virginia—Park Hotels & Resorts made significant progress in its long-term strategy of diversifying its portfolio in 2019, and executives said the goal in 2020 will be to further refine the portfolio through asset sales.
Speaking during the company’s fourth-quarter and full-year 2019 earnings call, President and CEO Thomas Baltimore, Jr., said he anticipates dispositions totaling $250 million to $350 million for the remainder of 2020 in part because the company continues to trade lower than its internal estimates of net asset value.
“We plan to utilize proceeds from our asset recycling program to reduce debt and to also activate stock buybacks during periods of share price dislocation,” he said.
Baltimore noted the company “nearly reached” its goal of $470 million in assets following the September acquisition of Chesapeake Lodging Trust, a move that expanded the company’s portfolio beyond Hilton flagged-and-managed properties for the first time since its spinoff from Hilton at the beginning of 2017.
The company has made a particular focus of divesting properties outside the U.S., having sold 14 international assets since the spinoff.
Baltimore said his company is actively marketing one property for sale, and he believes now is a good time to sell, although hotel real estate investment trusts like Park have been largely sidelined.
“We still think it’s an active market,” he said. “There’s plenty of equity, and there’s plenty of debt capital, as well.”
The company announced the sales of the Embassy Suites by Hilton Washington DC Georgetown and the Hilton São Paulo Morumbi for $208 million on 19 February.
Coronavirus concerns impact group business
Baltimore said impact from the spread of coronavirus (COVID-19) has been limited to a handful of events in just three markets, but it did lead to cancellations totaling roughly $5 million in business.
“The biggest piece was the Facebook group cancellation in San Francisco, (which was) probably a million and a half dollars, plus or minus,” he said. “There was about a million dollars for a Chinese group in Hawaii, then plus or minus another million dollars in a Chinese crew coming out of New York City.”
He described the impacts as “very isolated” so far.
“Chinese demand in our portfolio is about 0.5%,” he said. “About 50,000 roomnights is what we saw last year, about $10 million to $12 million in revenue.”
But given the geographic makeup of Park’s portfolio, Baltimore said the company has to be mindful of future impacts.
“Given there’s clearly a strong presence in the coastal areas and certainly in Hawaii, we’re watching very carefully,” he said. “We’re in frequent discussions with our operators, and at this point, (the effects have) been minimal.”
He said the spread of the virus does not change anything strategically for Park.
“We don’t see this changing the Park playbook,” Baltimore said.
Park executives expect revenue per available room to remain mostly flat in 2020, projecting a year-over-year change of minus 1% to up 1% compared to 2019. Total RevPAR, which accounts for non-rooms revenue, is expected to be up roughly 2% for the year.
Baltimore said that outlook was colored by “ongoing headwinds” the hotel industry faces, including “slower global growth, a stronger U.S. dollar, increasing wage pressure and the uncertainty of the U.S. election,” in addition to coronavirus concerns.
The company projects net income for the year of between $279 million and $308 million and adjusted earnings before interest, taxes, depreciation and amortization of between $800 million and $830 million.
Park finished 2019 with a year-over-year increase in comparable RevPAR of 1.9% and a 3.2% increase in total RevPAR. RevPAR was up 0.7% for the fourth quarter.
Baltimore pointed out those numbers came in on the high end of the company’s guidance for the year.
The company posted full-year adjusted EBITDA of $786 million and net income of $316 million.
As of press time, Park stock was trading at $18.91 a share, down 26.9% year to date. The Baird/STR Hotel Stock Index was down 20% during the same period.