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Hotel & Resorts

Park Lodges & Resorts Inc. (PK) Q2 2022 Earnings Name Transcript


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Park Lodges & Resorts Inc. (PK -3.15%)
Q2 2022 Earnings Name
Aug 04, 2022, 11:00 a.m. ET

Contents:

  • Ready Remarks
  • Questions and Solutions
  • Name Individuals

Ready Remarks:

Operator

Greetings, and welcome to the Park Lodges & Resorts Inc. second quarter 2022 earnings convention name. [Operator instructions] Please word, this convention is being recorded.I’ll now flip the convention over to your host, Ian Weissman, senior vp of company technique. It’s possible you’ll start.

Ian WeissmanSenior Vice President of Company Technique

Thanks, operator, and welcome, everybody, to the Park Lodges & Resorts second quarter 2022 earnings name. Earlier than we start, I want to remind everybody that lots of the feedback made at this time are thought of forward-looking statements below federal securities legal guidelines. As described in our filings with the SEC, these statements are topic to quite a few dangers and uncertainties that might trigger future outcomes to vary from these expressed, and we aren’t obligated to publicly replace or revise these forward-looking statements. Precise future efficiency, outcomes and outcomes might differ materially from these expressed in forward-looking statements.

Please confer with the paperwork filed by Park with the SEC, particularly the newest studies on Type 10-Okay and 10-Q, which determine vital threat elements that might trigger precise outcomes to vary from these contained within the forward-looking statements. As well as, on at this time’s name, we’ll focus on sure non-GAAP monetary data, resembling FFO and adjusted EBITDA. You will discover this data along with reconciliations to essentially the most straight comparable GAAP monetary measure in yesterday’s earnings launch in addition to in our 8-Okay filed with the SEC and the supplemental data obtainable on our web site at pkhotelsandresorts.com. This morning, Tom Baltimore, our chairman and chief govt officer, will present a assessment of Park’s second-quarter efficiency, a top level view of Park’s strategic priorities and an outlook for the stability of this yr.

Sean Dell’Orto, our chief monetary officer, will present extra coloration on second-quarter outcomes, an replace on our stability sheet and liquidity whereas establishing steering for the third quarter. Following our ready remarks, we’ll open the decision for questions. With that, I want to flip the decision over to Tom.

Tom BaltimoreChairman and Chief Government Officer

Thanks, Ian, and welcome, everybody. I am very happy to report stronger-than-expected Q2 efficiency, with outcomes materially exceeding expectations. We witnessed exceptionally robust efficiency throughout our portfolio as the continued energy in leisure was augmented by elevated enterprise journey, which got here in at 95% of 2019 ranges and accelerating group demand. On the capital allocation facet, we offered roughly $270 million of belongings yr up to now and repurchased $157 million in inventory at a major low cost to our inner internet asset worth estimate throughout the quarter, additional strengthening our stability sheet and creating worth for our shareholders.

And at last, primarily based on our robust second-quarter outcomes, we exited the covenant waiver aid interval for our credit score services one quarter sooner than anticipated. Wanting nearer at our quarterly outcomes. Second-quarter professional forma RevPAR recovered to 90% of 2019 ranges and professional forma resort adjusted EBITDA got here in roughly $30 million forward of our inner expectations set forth at first of the quarter, highlighting the robust restoration in demand following the COVID-related slowdown at the beginning of the yr. Professional forma occupancy improved over 19 proportion factors over the primary quarter whereas professional forma common charges completed 8% forward of second quarter 2019.

The strongest restoration within the quarter was in city markets the place our lodges noticed an encouraging enhance in demand. Occupancy for our city lodges averaged 64% for the quarter or a 25% level enhance from the primary quarter on a professional forma foundation and ADR got here in 24% forward of Q1 and barely forward of the second quarter of 2019. Notice that our final remaining suspended resort, the Parc 55 San Francisco, reopened on Might 19 and rapidly exceeded expectations, with June occupancy ending at 67% with 1,000-plus room resort. Resort resort efficiency remained very robust, rising ADR almost 27% over the identical interval in 2019, fueled by our belongings in Hawaii, Florida and Southern California.

We had been additionally happy to see stronger-than-expected group demand for the quarter with group revenues up 68% in comparison with the primary quarter. Group demand stays very quick time period with pickup for the second quarter representing almost 44% of the room nights picked up within the quarter for the rest of 2022. A lot of the short-term reserving exercise was seen in San Francisco and Seattle, whereas the Hilton Hawaiian Village benefited from optimistic pickup from better-than-expected citywide participation in Might. When it comes to enterprise transient demand, we noticed a fabric enchancment throughout the quarter with enterprise transient revenues totaling 95% of second-quarter 2019 revenues.

Park’s business-oriented lodges opened for everything of the quarter, recorded mid-week occupancies of roughly 73% for the second quarter, a roughly 30 proportion level sequential enchancment from the primary quarter. Because the portfolio recovers, we proceed to make progress on our 4 key strategic initiatives. First, we stay laser-focused on reaping the advantages from a reimagined working mannequin, capturing margin enchancment from each incremental income alternatives and working efficiencies. On the income facet, we proceed to learn from the trade’s outstanding charge self-discipline and our operators’ charge optimization efforts to assist offset inflationary price pressures as occupancy rebounds.

Moreover, our groups proceed to give attention to driving out-of-room spend, posting spectacular outcomes for the second quarter in meals and beverage, with revenues exceeding our expectations by over $11 million. At Hilton Hawaiian Village, for instance, a reimagined bar idea, an aggressive occasion and menu pricing helped to generate over $3 million of incremental income over the identical interval in 2019, a 24% enhance, break up evenly by 12% will increase in each common verify and covers. On the fee financial savings facet, our operational modifications helped to drive professional forma resort adjusted EBITDA margins of almost 31% throughout the second quarter, had been simply 30 foundation factors beneath 2019 ranges regardless of portfolio RevPAR being down 10%. A lot of the financial savings have come on the labor facet with headcount down 23% for managers and 29% for full-time hourly workers in comparison with 2019 for the quarter inside our Hilton managed lodges.

We firmly consider that the operational adjustments behind lots of the staffing reductions are everlasting, translating into $85 million in financial savings or 300 foundation factors of everlasting margin enchancment relative to pre-COVID margins on a stabilized foundation. Our second key precedence is to proceed to reshape and enhance the standard of the portfolio by remaining lively on the capital recycling entrance. Now we have made great progress yr up to now by promoting $270 million of belongings versus our objective of $200 million to $300 million established at first of the yr. Total, resort gross sales had been executed at or close to 2019 valuations with transaction multiples barely above 13x on common, versus the ten instances implied a number of on the $218 million of inventory buybacks we executed yr up to now.

And regardless of current choppiness within the debt markets, curiosity in resort actual property stays excessive. Accordingly, we anticipate to promote one other $300 million to $400 million of belongings to scale back leverage and reinvest again in our portfolio. Our third precedence is to fortify our stability sheet by persevering with to push our maturities, scale back leverage, bolster liquidity and keep flexibility as we glance to pivot between protection and offense, relying on what the markets dictate. Right now, our liquidity place is approaching $1.8 billion with no significant maturities over the subsequent 12 months.

We’re additionally in lively discussions with our debt capital companions to handle our San Francisco CMBS and revolver, each of which mature in late 2023 and anticipate to have these addressed by year-end. Lastly, our fourth precedence. We’re targeted on executing on our sturdy pipeline of value-enhancing ROI initiatives that may unlock the embedded worth of our portfolio. Work is properly underway on our Bonnet Creek assembly area enlargement platform with the Waldorf area on schedule to open later this yr and the Signia area anticipated to be prepared by early 2024.

And we plan to begin work on two main renovations and repositions inside the subsequent 6 to 12 months. Turning to our outlook. It is exhausting to disregard the headlines round elevated macroeconomic uncertainty and potential recession. Nevertheless, at this level, we have now not seen proof in a pullback in demand throughout our portfolio.

Company stability sheets remained wholesome. Shoppers nonetheless have almost $1 trillion of non-public financial savings following the pandemic-related financial stimulus and pent-up enterprise and worldwide inbound demand nonetheless exists following two and a half years of depressed exercise which bodes properly for the lodging trade and our portfolio particularly. Lodging demand also needs to be supported by the $1 trillion infrastructure invoice Congress handed final yr, a key driver of nonresidential mounted funding, which is forecast to be 5% in 2022. Whereas provide progress in main markets stays traditionally low inside Parks markets, below 1.5% mixed and important obstacles to entry from rising development prices, limiting provide progress over the subsequent three to 4 years, which we consider will proceed to assist stable fundamentals over the subsequent a number of years.

With that backdrop, we’re very inspired with the tempo of enchancment throughout our main markets, and we anticipate to see incremental enchancment all year long and into 2023 as leisure markets stay robust and the city and company restoration accelerates. Group tempo sits at 66% and 72% for the second half of 2022 and full yr 2023, respectively, when evaluating to 2019 bookings for related durations as of June 2019 and June 2018, respectively. City market conference calendar for 2023 are pacing properly when evaluating to occasions booked for 2019 as of 2018, with Chicago, Boston and Washington, D.C., every above 100% and Denver, New Orleans above 80%. San Francisco is presently displaying over 760,000 room nights on the 2023 calendar, which is 64% of the particular room nights achieved in 2019.

Hawaii is predicted to proceed to outperform expectations supported by wholesome leisure tendencies and the eventual return of the Japanese traveler, particularly in Honolulu, the place traditionally, Japan makes up almost 20% of whole demand however has been absent over the past three years. Total, we’re bullish concerning the lodging restoration, and we stay laser-focused on creating shareholder worth and shutting the valuation hole with our 2022 priorities squarely targeted on operational excellence, recycling capital to unlock the numerous embedded worth in our portfolio and persevering with to enhance the standard and optionality of our stability sheet to execute on our long-term progress plans. Park stays properly positioned for outsized efficiency, given our optimum mixture of resort, city and group-focused lodges, and I am extremely excited concerning the future. And now I would like to show the decision over to Sean, who will present some extra coloration on operations, together with an replace on our stability sheet and steering for the third quarter.

Sean Dell’Orto

Thanks, Tom. Total, we’re very happy with our second-quarter efficiency with outcomes coming in properly forward of expectations, pushed by ongoing energy in leisure, coupled with important features in each group and enterprise transient. Professional forma RevPAR improved sequentially to $173 as professional forma charge averaged a powerful $244 throughout the quarter, a 7% sequential enchancment over Q1 2022 and eight% above the identical interval in 2019. Professional forma occupancy improved to 71% for the quarter for a 19 proportion level enchancment from Q1 2022.

Looking forward to the third quarter, preliminary leads to July look very robust with resort occupancy averaging roughly 73% and whereas common every day charge throughout the month is projected to be roughly $248 or 12% above 2019. Total, almost two-thirds of our consolidated lodges are attaining charges in extra of 2019 charges with the energy witnessed throughout most leisure markets along with Chicago, New York, Denver, Downtown L.A. and a number of other of our airport lodges. Whole professional forma working income for the portfolio was $670 million throughout the second quarter, whereas professional forma resort adjusted EBITDA was $207 million, leading to professional forma resort adjusted EBITDA margin of 30.8% or simply 30 foundation factors shy of 2019 working margins.

A formidable outcome with resort occupancy nonetheless 15 proportion factors beneath 2019 ranges. And with one in all our largest lodges, the Parc 55 San Francisco, suspended for over half of the quarter. Outcomes had been pushed by extremely robust charge features, coupled with working efficiencies achieved over the course of the final two-plus years. Turning to the stability sheet.

Our liquidity presently stands at roughly $1.7 billion, together with greater than $900 million obtainable on our revolver and $758 million of money available whereas internet debt sits at $4 billion, a $200 million lower from the primary quarter. I am excited to report that Park has exited our credit score facility covenant waiver interval one quarter forward of its scheduled expiration. Moreover, given the fabric enchancment in working fundamentals for our Hilton Hawaiian Village and Hilton Denver lodges, each mortgage loans secured by these two properties are anticipated to exit their money traps in early August, liberating roughly $90 million of restricted money and thereby growing our whole liquidity to $1.8 billion. On the capital return entrance, we proceed to benefit from the dislocation between private and non-private pricing and repurchased $157 million of inventory throughout the second quarter, taking our whole buybacks to $218 million yr up to now with simply over $80 million remaining on our board-authorized buyback program.

Total buybacks had been executed at materials low cost to our inner NAV estimate or simply 10.3 instances 2019 professional forma adjusted EBITDA. Turning to steering. For Q3, which is historically our second weakest quarter of the yr, we anticipate to see a seasonal shift from Q2 with transient income combine growing by 700 foundation factors, changing larger rated group manufacturing and its larger margin banquet and catering F&B spend. Accordingly, we’re establishing Q3 consolidated RevPAR steering of $171 to $174 or 92% of 2019 ranges on the midpoint because the portfolio continues to slim the hole to 2019 with occupancies to proceed to enhance in Hawaii, New York, Boston, Denver and Northern California.

Adjusted EBITDA steering for the third quarter will vary between $145 million and $165 million and resort adjusted EBITDA margins are anticipated to be between 26% and 27%. Lastly, adjusted FFO per share will vary between $0.34 and $0.43 for the third quarter. As a reminder, please word that the belongings offered year-to-date contributed roughly $5 million to our quarterly earnings. This concludes our ready remarks.

We’ll now open the road for Q&A. [Operator instructions] Operator, can we have now the primary query, please?

Questions & Solutions:

Operator

[Operator instructions] Our first query comes from the road of Patrick Scholes with Truist Securities.

Patrick ScholesTruist Securities

I would like to listen to your newest observations on the return of the worldwide inbound buyer? And associated to that, how far off are you from pre-COVID ranges for that buyer? After which maybe get somewhat extra granular kind of breaking it down by maybe, three vital markets, the East Coast, New York, West Coast, San Francisco after which actually Hawaii.

Tom BaltimoreChairman and Chief Government Officer

Patrick, thanks for the query. If we again up for a second, as I take into consideration inbound worldwide into the U.S. was about $79 million in 2019. I consider final yr, it had recovered barely to about $22 million.

We’re taking a look at this yr, I consider, from newest studies that I learn at about $53 million. I’d say throughout our main markets, we’re most likely 500 to 750 foundation factors kind of beneath kind of ’19 ranges. So we see that actually as a tailwind. I believe in the event you have a look at Hawaii, I believe, is a superb instance.

Our Japanese, which symbolize, once more, 20% of our visitation, they have been down 95%, I consider, plus or minus. They traditionally have been one in all our most loyal prospects. They keep longer. They spend extra.

We expect for Park as we transfer out and this restoration continues to unfold, that is going to be an actual profit for us. We’ll anticipate Hilton Waikoloa Village to most likely be up vis-a-vis ’19 at round 4% to five% in RevPAR in comparison with a lot of our friends which might be working at actually a lot bigger numbers than that. However we additionally anticipate this yr in Hawaii that may most likely strategy an all-time excessive or near our all-time excessive in EBITDA. So we see great upside there.

As you consider San Francisco, New York, Chicago, all of whom had been most likely double digit traditionally, 15% to 18%. We’re most likely within the excessive single digits, low double digit throughout every of these belongings. Once more, we see that starting to come back again. Clearly, the massive hole is actually popping out of Asia.

And to the extent that the lockdowns subside and we begin to see these areas to start to open, we see that as actual progress potential for us as we transfer ahead.

Operator

Our subsequent query comes from the road of Anthony Powell with Barclays.

Anthony PowellBarclays Capital — Analyst

Query on the asset gross sales. Clearly, you probably did properly year-to-date promoting belongings at good valuations. That stated, one massive sale was to a cash-rich REIT. The opposite one was to a purchaser with a particular multifamily.

In order you look to do the rest this yr, do you anticipate to see the identical, I assume, success at attaining valuations? Or might you see a bit extra of a drop in worth given the customer pool is seeing larger charges and extra simply harder time getting leverage?

Tom BaltimoreChairman and Chief Government Officer

Sure. It is an excellent query, Anthony. Look, in the event you again up and simply take into consideration because the spin now, we have offered 36 belongings, together with 14 worldwide for almost $2 billion. As you understand, a lot of these had been very difficult from Brazil to South Africa to the U.Okay.

We offered two belongings in San Francisco in the course of the pandemic when there was just about no visibility. So I’d say that our staff, Tom Morey and his staff on the funding facet, proceed to work actually exhausting to search out the precise consumers, little question debt prices are rising. Little doubt, there’s nonetheless an incredible quantity of fairness on the sideline and considering resort actual property. So we’re cautiously optimistic that we’ll proceed to show robust outcomes.

Whether or not these are available somewhat bit, that may not be unreasonable, whether or not that is 25 or 50 bps on cap charges and given the place debt spreads are. However we do anticipate that the debt market will hopefully start to loosen up and open up somewhat extra right here within the third, fourth quarter and definitely into subsequent yr. We’re not a panic vendor. We’ll be considerate.

We’ll proceed to work exhausting as we have demonstrated, however we’re laser-focused on promoting one other $300 million to $400 million in belongings, once more, utilizing these proceeds to pay down debt, reinvest again into the portfolio, persevering with to construct liquidity and ensure the stability sheet is in robust form in order that we have now the optionality to pivot between protection and offense, as we stated in our ready remarks.

Anthony PowellBarclays Capital — Analyst

And perhaps another by way of the steering. I perceive the EBITDA affect of the combination shift within the third quarter, focusing extra on the RevPAR progress steering. It looks like you anticipate to see RevPAR progress decelerate in August, September. We’re listening to some good things from round Labor Day bookings from others.

So I am simply curious what you are seeing in these months relating to RevPAR progress.

Tom BaltimoreChairman and Chief Government Officer

Sure. I am going to let Sean take the latter a part of the query. Anthony, thanks for the query. We sense that many listeners have some concern or feedback relating to that.

I believe it is vital to notice that if you consider our portfolio, second quarter and fourth quarter are historically the 2 strongest quarters inside this portfolio, the primary and third quarters being the softer. Third quarter is historically one of many softer group durations. That’s holding true on this yr as properly. And so we’re down about 700 foundation factors in a shift to transient versus group.

We make up for lots of that within the fourth quarter. One instance of that’s if you consider — we have got about 620,000 room nights within the again half of the yr in New Orleans. We’re down about 27% within the third quarter and we’re up about 40% within the fourth quarter. So it truly is a seasonality and a timing challenge.

And so we’re — we thought it was applicable to be conservative but in addition recognizing the historic tendencies inside this portfolio. We’re not seeing any softening as we stated throughout our ready remarks and are nonetheless very bullish on the lodging sector. However we actually needed to watch out as we supplied third quarter steering. And I am going to flip it over to Sean to handle your different questions.

Sean Dell’Orto

Sure. Simply choosing up what Tom stated, simply being cautious with the group base that we have now into Q3, and we’re actually seeing good within the quarter for the quarter pickup by way of Q2, simply type of with the best way that the enterprise initiatives out or in the end runs by way of the summer season instances are actually not going to rely a lot on the group — within the quarter for the quarter pickup. However actually, September has alternative. There’s a little little bit of a typical type of ideas round holidays with Labor Day being somewhat later within the first week of September, and we have now the Jewish holidays within the again half as you examine of ’19.

However in the long run, I believe actually, there’s some good potential of choosing again up the place we noticed a few of that enterprise degree demand in Might and June. So we actually suppose that September picks up properly. So I believe actually, I believe September has a possibility to outperform July proper now, it is most likely on degree with July and August is somewhat softer in the course of the quarter.

Operator

Our subsequent query comes from the road of Floris Van Dijkum with Compass Level.

Floris Van DijkumCompass Level — Analyst

Clearly, it seems that you are still about 19% wanting your peak occupancy for the quarter relative to ’19. Perhaps contact upon the Hawaii in some extra element? And the way rather more progress we are able to anticipate within the second half of that yr? Is that going to be extra fourth quarter ramp? After which additionally, what your prospects search for subsequent yr for Hawaii particularly?

Sean Dell’Orto

Hawaii goes to be — I imply, it has been unimaginable. Actually, by way of Q2 and into the latter components of Q2 and definitely in Q3, we see continued construct of Hawaii and on the occupancy degree going from throughout each lodges growing 200 foundation factors. So actually, very happy to see how that continues to remain robust. It is actually going to — I believe actually be an enormous plus for us on the speed facet because it continues to enhance its charge relative to ’19, rising to type of excessive single digits to low double digits by way of the course of the subsequent a number of months.

We actually suppose, as Tom talked about, worldwide demand. And as we type of quoted among the issues we have seen not too long ago, I imply, Japan as one in all our main supply markets historically continues to be solely — it is solely at 12% of ’19 ranges. So we simply suppose as these shoppers come again into Hawaii, it is simply going to be an unimaginable tailwind for us going ahead. We have been in a position to obtain just about ’19 ranges of profitability or approaching that.

Once more, with among the margin efforts we have finished, RevPAR recovering simply on home — just about home enterprise alone or actually not — with out the Japanese enterprise. So I believe actually Hawaii actually anticipate to be an enormous tailwind for us going into subsequent yr.

Floris Van DijkumCompass Level — Analyst

And perhaps my follow-up by way of buybacks, presumably, you will search for extra asset gross sales earlier than you begin to purchase again some extra inventory down the street?

Tom BaltimoreChairman and Chief Government Officer

Sure. Floris, we have made it clear, clearly, that the very best and finest use for us from a capital allocation standpoint could be investing again into this portfolio, both by way of ROI initiatives or shopping for again inventory. Now we have a present authorization as much as $300 million. As we stated earlier, we’ll give attention to the $300 million to $400 million of extra asset gross sales to scale back leverage.

So we ensure we have now that optionality. We’ll proceed to look at market situations fastidiously. And to the extent that the dislocation continues, finest assured all choices are on the desk, together with that buyback as properly. However we — actually, within the close to time period, we’ll be targeted on promoting these noncore, taking these proceeds, paying down debt and clearly addressing the revolver after which the San Francisco CMBS that Sean talked about throughout his remarks.

Operator

Our subsequent query comes from the road of Chris Woronka with Deutsche Financial institution.

Chris WoronkaDeutsche Financial institution — Analyst

So perhaps we are able to drill down somewhat bit on group. I believe you gave out information factors 66%, 72% for second half and for ’23. And I do know you talked about numerous within the quarter, for the quarter pickup, which is encouraging. However the query is, Tom, are you might be stunned that is not somewhat bit larger even since you’ve had folks not meet for 2 years.

And in addition, are you seeing any distinction within the measurement of the teams? Are the associations pushing again on larger charges or something like that?

Tom BaltimoreChairman and Chief Government Officer

Sure. It is an excellent query. Clearly, as we glance out to subsequent yr, what we’re seeing is that the reserving home windows are actually shorter. We noticed that within the second quarter the place we had, clearly, 76%, I consider, of ’19 ranges.

And we have a look at subsequent yr at 72%, we see type of the identical tendencies that first and second quarter out of the field are fairly robust. I believe second quarter is up round 86%. Little doubt as corporations proceed to get again in to return to workplace as we get, I believe, extra visibility on the financial local weather. Little doubt, we anticipate that to proceed to speed up even in markets like San Francisco, the place you are seeing will increase in citywides.

So citywides in Chicago are rising, Orlando rising, citywides clearly, in San Francisco rising. Boston and D.C. is actually rising. So all of that may actually assist.

However actually getting these huge corporations the place they’ve numerous what we name self-contained, we’re actually seeing a few of that by way of the affiliation, however we anticipate by way of the company facet for that to proceed to speed up, Chris, as we glance ahead.

Chris WoronkaDeutsche Financial institution — Analyst

OK. That is useful. After which simply on capital allocation, proper? On paper, the buybacks make numerous sense. You’ve got offered belongings accretively, market does not appear to all the time reward that, sadly.

What is the — is one thing that is on the desk promoting a brilliant tanker asset? As a result of most of these belongings you’ve got offered have been pretty small. You promote a brilliant tanker for a extremely robust a number of. Is that on the desk, do you suppose that may assist? Does it even make sense given the place your degree of EBITDA you are at presently?

Tom BaltimoreChairman and Chief Government Officer

Sure. Chris, it one other truthful query. Actually, all choices are on the desk. Bear in mind, they’ve a low tax foundation.

Getting debt for a type of huge offers is a bit more difficult than among the asset gross sales that we’re making an attempt to do. However relaxation assured, as we have stated, we’re open to all choices. We’re taking a look at many. We’re going to shut this valuation hole.

We’re laser-focused on it. However we additionally do not suppose it is prudent to be promoting belongings like that actually on the backside of the market. So you bought to watch out and considerate about that. And I believe you’ve got seen.

Take a look at, once more, the San Francisco asset gross sales that we did in the course of the pandemic, very engaging pricing. Take a look at the asset gross sales that we have finished. All have been accretive, nearly all, if not all, accretive. We nonetheless have that as a theme as properly and definitely a tenet.

However we actually need to be allocating capital and rightsizing the portfolio over time, in order that we are able to actually get a presence in among the different progress markets as properly. However we actually consider that the city play has legs as we transfer ahead, after which we will start to see the tailwind, and we’re seeing proof of that already.

Operator

Our subsequent query comes from the road of Dori Kesten with Wells Fargo.

Dori KestenWells Fargo Securities — Analyst

Are you able to speak concerning the numerous choices on the desk to handle your ’22 and ’23 maturities?

Sean Dell’Orto

Positive. So on the ’22, there’s actually nothing we view as significant. So there’s a few small mortgages which might be on the market that we’ll look to handle with money available. As we have famous, we have got 1.8 — approaching $1.8 billion of liquidity.

Half of that’s with the money. So we’ll simply look to take these out as they mature over the subsequent 12 months. On the larger ones, actually that type of towards the tip of the yr, we’re exploring a couple of totally different choices. One, clearly, we have now time to try this.

We’ll be addressing our revolver and definitely we’re in good standing with our banks. Now we have nice relations with them, long-standing relationships with them, been already type of having conversations and considering to the timing of it. And so we’re assured we’ll work by way of that and get that recast and maintain that liquidity intact. After which in the end, we’ll look to handle San Francisco, once more, weighing our choices on that.

Now we have unencumbered belongings, together with big-sized, large-sized belongings. And so we have regarded to type of make the most of that doubtlessly as a mortgage on these, together with among the money available to take out CMBS. And clearly, we have now entry to the high-yield markets, which we have demonstrated up to now as properly. So we’ll look to opportunistically discover the most suitable choice for us over the subsequent few months and proceed accordingly.

Operator

Our subsequent query comes from the road of Neil Malkin with Capital One.

Neil MalkinCapital One Securities — Analyst

Simply following up on Dori’s query. The belongings or collateralizing that CMBS in late ’23, the Parc 55 and the Union Sq.. Clearly, two of your greatest lodges, each, I believe — at the very least the Parc 55, I consider, wants a good quantity of capex. Simply curious in any respect, you talked about the disconnect between private and non-private valuations.

If asset gross sales round for belongings like that. In San Francisco, clearly, a market that has numerous points, making an attempt to resolve these will most likely take a couple of years and perhaps might allow you to expedite a deleveraging or a bigger buyback or a reallocation to I assume, extra in favor larger progress markets, clearly, once more, overlaying that on a tougher refinancing you are going through.

Tom BaltimoreChairman and Chief Government Officer

I heard the commentary, Neil. Is the query promoting it? I need to ensure I perceive your query earlier than — so I reply appropriately. Sure.

Neil MalkinCapital One Securities — Analyst

Sorry. Sure, it could simply be with all of the — sure, it is a harder surroundings for refinancing, in the event you can simply point out that. And among the belongings which might be collateralizing that want a good quantity of capex. So might promoting be an choice? Or do you intend to try this?

Tom BaltimoreChairman and Chief Government Officer

Look, as we have stated many instances, all choices are on the desk. We actually are ready to, whether or not it is promote among the bigger belongings or three way partnership. Bear in mind, these two belongings are crossed that, as Sean talked about, that CMBS matures on the finish of 2023. We’re not in any respect panicked.

Once more, suppose again to the worst of the pandemic once we had numerous maturities. We did 3 bond offers. We pushed out maturities. We have paid again 97% of the financial institution debt.

Everybody earned charges and couldn’t have I believe been happier with Park given how we executed within the worst of instances. So we have got $1.8 billion. Now we have numerous optionality. We might, sure, in concept, promote one or each belongings.

Once more, getting debt proper now within the close to time period, on condition that the debt markets are very uneven could be a really troublesome execution in three to 6 months. There are a selection of choices that we predict can be found. We actually consider and have stated publicly, and we’re seeing proof that San Francisco, albeit lagging, actually is coming again. And we’ll watch fastidiously as to what we predict the trajectory is for that market.

Neil MalkinCapital One Securities — Analyst

OK. The commentary after which the opposite one is, I believe you talked about that enterprise traveler our enterprise was like 90 plus p.c of 2019. After which it appears group has a bit a bit extra to go, though clearly favorable reserving tendencies, and many others. However a bigger peer who not too long ago reported.

It type of made it look like group goes to most likely get better forward of BT. Simply curious in your view there. Clearly, I perceive the portfolios are the identical, however each group targeted. Do you anticipate BT to really lag the restoration in group? And clearly, do you suppose that perhaps some group will, on the company facet, wind up changing into a brand new section because the do business from home dynamic persists and folks use lodges as a method to convene teams and report, and many others.?

Tom BaltimoreChairman and Chief Government Officer

Pay attention, it is a difficult query. Clearly, it is exhausting to match throughout portfolios as a result of folks have gotten totally different portfolios by way of their distribution, product measurement. Little doubt that we consider that group goes to proceed to speed up and that corporations, given the truth that individuals are working remotely or hybrid, can have a must get folks collectively extra regularly. We hear it from C-suite leaders on a regular basis that now with folks being unfold round, the necessity to convey folks collectively for coaching, for celebration, for cultural actions, smaller teams, bigger teams.

So we actually agree with that thesis. And we predict Park goes to be very properly positioned for that. The problem is, how and when does that start to speed up. We see proof of that in some small teams.

However I believe as you get the larger corporations, as we get by way of and get extra visibility on the financial facet, we actually suppose that is going to speed up. I believe the identical factor applies on the enterprise transient. And I used to be speaking with a C-suite chief a few months in the past who now’s working remotely in Florida. He is now having to make, he stated 25 journeys again to New York for the house workplace that he did not should make traditionally.

I see that as, once more, incremental enterprise transient. So I believe each are going to proceed to be robust. And on this idea of leisure journey that we speak about, the place folks begin out touring partly for enterprise and will get elongated and keep — take an additional day or two for private causes. I discovered myself doing that.

And I believe you will see that section to proceed to develop as properly. So I believe the excellent news for the general trade is that demand goes to proceed to be actually wholesome as we transfer ahead. I believe you even have a backdrop that offer goes to be muted. It is exhausting to think about that you’ll see continued growth given what’s occurring with inflation, rising materials price.

And significantly when you consider our portfolio in among the markets that we’re in, we have got one of many lowest affect of provide throughout the sector. And we predict that is going to learn us and supply pricing energy and a profit for us as we transfer ahead.

Operator

Our subsequent query comes from the road of Duane Pfennigwerth with Evercore ISI.

Duane PfennigwerthEvercore ISI — Analyst

Undecided in the event you can admire — so undecided in the event you can generalize to a market degree. However the place do you suppose you notice a relative RevPAR premium? And what markets do you see the most important alternative versus friends?

Tom BaltimoreChairman and Chief Government Officer

The primary query, I am going to let Sean ponder that for a minute and are available again. When it comes to — I assume I would reply it this fashion. When you consider Park and the case for Park, if you’ll, I’d say it is each an city and a bunch restoration play. As you consider the markets that we have been in and candidly, I believe many thought that each city and group wouldn’t — some did not suppose they’d get better in any respect, and a few thought it could be ’25, ’26.

I believe we are able to see, primarily based on what we noticed simply in — from first quarter to second quarter with the city occupancy rising 25%, ADR rising 24%, group revenues rising 68%. These are going to proceed to speed up. So I believe that throughout our broad portfolio, we see that as a tailwind. I believe on the worldwide demand, given the truth that we’re anchored in lots of the city metropolis facilities and worldwide is coming again.

As I stated, it was $79 million inbound in ’19, $22 million, I believe, final yr, approaching $50 million, $53 million this yr. We see that persevering with because the world begins to get past COVID as we transfer to the endemic section. So we see that as a tailwind. Hilton Hawaiian Village.

We see that as simply an enormous — a lot of our friends have seen parabolic and important progress on the leisure facet. We’ve not seen it there. Once more, we’re nonetheless going to strategy profitability near an all-time excessive, and we do not have 20% of our guests that traditionally have been coming for north of 30 years constantly, they usually have not been there for almost three years. So we see that as, once more, an enormous tailwind for us as we glance out into ’23, ’24 and past.

However I simply, identify it three, hopefully, that solutions your query from that idea, and I am going to let Sean decide up on the half A of your query.

Sean Dell’Orto

Sure. And it’s robust to type of get in by way of. I imply it is a market, nevertheless it’s additionally the type of asset, as you think about, too. So among the bigger lodges we have now in there, it is perhaps not a lot extra of a RevPAR premium train, however a complete RevPAR train the place you are clearly trying to drive the ancillary spend after which kind of — be spend every thing else with the group exercise in a few of these.

So living proof, speak about our Bonnet Creek asset, the place we had been increasing the assembly area and trying to seize numerous ancillary income by way of that funding. And as properly, taking a look at Key West, for instance, actually, there’s numerous good aggressive belongings in that market. Now we have a type of a very good little group base that we have now for lodges and casas. We have made the conversions from Waldorf to Curio, to in the end suppose we are able to nonetheless drive the identical varieties of RevPARs and charges at these belongings, however in the end have a leaner working mannequin to drive extra profitability.

So it is type of an advanced reply to consider simply the give attention to RevPAR, the place you suppose there is a whole RevPAR story and in addition to a profitability story.

Duane PfennigwerthEvercore ISI — Analyst

That is useful. After which only for my follow-up, when situations assist pivoting to offense, what would that appear to be? What form would that take?

Tom BaltimoreChairman and Chief Government Officer

It is single belongings, it is portfolios, it is higher upscale and luxurious in high 25 markets and premium resort locations. And clearly, within the Southwest, whether or not it is Phoenix, components of Texas, Southeast into Florida, clearly into Nashville. And I believe that — I believe there’s numerous provide and the pricing is getting somewhat lofty however clearly persevering with to stability out the portfolio is actually one thing that you’re going to see us execute over time.

Operator

Our subsequent query comes from the road of Robin Farley with UBS.

Robin FarleyUBS — Analyst

I simply needed to return to the RevPAR steering for Q3. Simply to ask somewhat bit about — I perceive your feedback type of sequentially from Q2 to Q3. Once we look evaluating the durations to 2019, so that may type of take out the seasonality, simply trying on the charge of restoration in June. Given what you stated about group combine being decrease in Q3, it seems like with the energy in resort and leisure charges, would not that truly permit Q3 to indicate higher restoration relative to 2019? As a result of it is extra of a leisure transient quarter than a bunch quarter, in order that the outperforming section proper now would — I assume I am simply making an attempt to grasp why you are calling for the quarter to not be as robust as what you’ve got seen in June and July.

Are you simply being conservative? Or is there — or the truth is, are the comps getting harder and charge sensitivity returning to the leisure traveler?

Sean Dell’Orto

Thanks, Robin. Finally, one factor I would say is, in our steering, our high line information of RevPAR. We’re in the end displaying enchancment and narrowing the hole to 2019 ranges. We in the end completed the second quarter at 10% down.

We’re guiding to be bettering upon that by a few hundred foundation factors or so. So I believe we’re…

Robin FarleyUBS — Analyst

I simply meant relative to the June and July, proper? Sorry, simply to be — just like the June, July being down about 4%, each of these months simply by way of — from there sequentially.

Sean Dell’Orto

Sure. And in the end, once more, I believe that is the place type of the — whilst you have August, which is that combined factor the place you do not actually have a ton of enterprise journey per se by way of that month. You even have leisure type of falling again as a result of individuals are clearly going again to — properly, children are going again to high school, you had been coming off a trip type of halfway by way of that — by way of the month. So I believe in the end, you might have somewhat little bit of a despair in a manner in August, relative to type of a QT with June and July stuff a month.

Clearly, we predict we picked again up in September, to type of equate to the place June/July had been and extra pushed by enterprise. The enterprise journey are coming again on transient and group in the end, we predict might have some within the quarter for the quarter, buildup and alternative. And we do suppose, sure, we actually are taking somewhat little bit of a conservative strategy to this as we take into consideration type of, once more, within the quarter for the quarter construct will not essentially be prefer it was in Q2, in addition to among the vacation affect as we take into consideration folks making an attempt to come back off of holidays and journey once more in September.

Robin FarleyUBS — Analyst

And so it does sound such as you’re being conservative, however I am additionally simply curious what your thought is on the leisure traveler being extra worth delicate? Simply given one other resort firm at this time talked about July RevPAR being down yr over yr, nonetheless up versus ’19, however really down yr over yr. So I am simply curious if you’re sensing that kind of return to what — sometimes, the leisure traveler is extra charge delicate traditionally. It does not look like they’ve been currently, however do you’re feeling like that is altering or not, perhaps?

Sean Dell’Orto

I imply, I believe one factor to additionally acknowledge, folks did not have numerous choices journey final yr. So they are going to market, actually tourism would not get numerous that demand. So you consider Southeast Florida, even to some degree in type of New Orleans, different locations the place you might have hurricane season. So I believe you’ve got seen — after which clearly, numerous warmth.

So I believe you’ve got seen lots of people have perhaps alternate options this yr to go elsewhere. And so you might have somewhat little bit of the strain on demand in a few of these markets. So from a yr over yr, which clearly was very elevated. So I believe they continue to be very robust relative to ’19 and in the end, however from a year-to-year comparability, the place folks did not have numerous choices to go, I believe you see somewhat little bit of moderation.

Operator

Our subsequent query comes from the road of Chris Darling with Inexperienced Road.

Chris DarlingInexperienced Road Advisors — Analyst

Going again to the Hilton Hawaiian Village for a second. Are you able to contact on the second-quarter margin print. Perhaps give some element as to what’s driving that outcome? After which trying ahead, what’s your expectation on margin for that property?

Sean Dell’Orto

Sure. The Hilton Hawaiian Village had type of an accrual there as we labored by way of labor negotiations there. And so in the end, there was accruals that had been in the end launched that benefited the margins this quarter. Going ahead, actually, I believe it was an excellent story for Hilton Hawaiian Village, particularly as we have a look at it.

As a result of actually, that is one the place we have seen the RevPAR ranges obtain alongside — just about consistent with ’19 ranges and with out an excessive amount of variation between very elevated ADR and a really low OTA, they’ve considerably been considerably caught up in each respects. It is type of been a very good proxy for us to have a look at a few of our labor initiatives and in the end, that we have talked concerning the $85 million. And so once we have a look at Hawaiian Village and have a look at among the margin enchancment there, once more, considering it is just about on par with ’19 ranges on the highest line. We’re taking a look at type of adjusted for what I simply mentioned for Q2, someplace within the 200, 250 foundation level vary relative to ’19.

And that is with out — that was about half of the room nights booked for group relative to ’19. So we’re lacking out on a few of that larger margin banquet and catering enterprise as we examine to ’19. So I believe there is definitely some higher margin enchancment past the $200 million, $250 million I discussed.

Tom BaltimoreChairman and Chief Government Officer

Chris, the opposite factor I would add to what Sean stated is we have now been crystal clear that we’re laser targeted on reimagining the working mannequin and taking out $85 million in price throughout your entire portfolio, it is about 1,200 FTEs. Greater than half of which might be administration, admin, and many others. And I believe Hilton Hawaiian Village is a superb instance to what Sean was speaking about. I believe we have been in a position to scale back among the administration and extra admin there, 20%, 25%.

In order that’s additionally one other instance of actually the great work between our asset administration staff and our operators to proceed to consider the enterprise in a different way. And we totally anticipate that that is going to proceed. Though, as Sean stated, we did have the onetime profit, however Hilton Hawaiian Village is simply going to proceed to be an outperformer for us in ’22 and past.

Chris DarlingInexperienced Road Advisors — Analyst

Received it. sense. After which somewhat bit larger degree, once you simply step again and take into consideration among the challenges that the airways have been going through round flight capability, do you see this as a threat in any respect to the restoration of occupancy in your portfolio? Or has that not essentially had a lot of an affect?

Tom BaltimoreChairman and Chief Government Officer

It hasn’t had a lot of an affect at this time. I imply I believe when you consider Heathrow and them deciding to have little or no visitors or not taking bookings for 2 weeks. I imply, these are issues unimaginable as we give it some thought traditionally. We stay in an unprecedented instances proper now.

I’ve to consider that these gifted management groups will rightsize their companies and get it sorted out. There’s simply so many different variables to work by way of proper now. However we’re seeing most likely extra within the U.S., individuals are most likely doing numerous drive to, to assist compensate and ease their very own journey frustration. Clearly, as you consider what’s occurring in Hawaii and different companies, we have now to take an airlift.

We’re seeing no scarcity there. There’s loads of capability. And people are desired — actually, locations. As Sean identified, lots of people did not have numerous choices.

Some choices are opening up. However regardless of that and although even in Hawaii, the place we do not have the anchor buyer and the Japanese, we’re getting loads of visitation all through the U.S. and different components of the world.

Sean Dell’Orto

I’d add on the margin, we’re actually seeing profit in our airport properties as that dislocation occurred. Seattle Airport, Boston Logan, Hilton has actually seen some pickup, clearly, from gas being, sadly, dislocated or stranded. And on high of that, I would say anecdotally, as I speak to people who find themselves — sometimes would are available for the day to fulfill are flying the evening earlier than to make sure that they are going to get there. So we’re seeing somewhat little bit of good thing about that to folks simply type of be somewhat extra cautious and truly staying an evening versus doing a day journey.

Operator

Our subsequent query comes from the road of Jay Kornreich with SMBC.

Jay KornreichSMBC Nikko Securities — Analyst

I’d be curious to get your ideas as enterprise transient clearly, as you understand, nonetheless stays considerably beneath 2019 ranges of accelerating. How do you see that delta in occupancy to 2019 offering a buffer within the occasion there’s a gentle recession and BT demand presumably holding up higher than it traditionally has in a recession? Do you suppose that? And perhaps on the flip facet, whereas leisure demand is simply working at peak ranges, how would you see that doubtlessly faring an quantity of recession?

Tom BaltimoreChairman and Chief Government Officer

It is an excellent query. I imply, clearly, anecdotally, we’d consider that enterprise transient would proceed to face up to as a result of the restoration continues to be underway. There’s nonetheless numerous pent-up demand of enterprise leaders. Women and men must get out and ship their groups out to actually join with prospects and friends.

So we’d anticipate that in concept, if there’s some kind of pullback, that there actually could be much less of an affect given the place we’re in that cycle.

Jay KornreichSMBC Nikko Securities — Analyst

And whereas I perceive that is positive for enterprise transient, do you suppose there is a totally different affect on leisure demand, that it does not perhaps have that buffer of occupancy hole?

Tom BaltimoreChairman and Chief Government Officer

Sure. I imply, all people — timber do not develop to the sky. I imply, we’re all benefiting from actually elevated journey on the leisure facet. Numerous that due to the pent-up demand.

And — however I believe you can also make a case for this idea of leisure journey with folks working remotely or hybrid. And I believe {that a} stronger leisure footprint, I believe we are able to make a case that it has legs. Now does it have legs at 50% progress in RevPAR yearly? I do not suppose that is achievable, and we’re getting a few of that profit. However I actually suppose these demand patterns are maybe going to be altered as we totally come out of this pandemic and transfer ahead.

Jay KornreichSMBC Nikko Securities — Analyst

Received it. After which only one extra on the covenant waiver which you’ve got now exited, i.e. exiting, what sort of flexibility does that present you? Or what alternatives open up by not being subjugated to any extra, perhaps on the exterior progress facet or internally? What does that do for you?

Sean Dell’Orto

Fairly truthfully, we put numerous flexibility into the restoration and aid with plenty of buckets for acquisition exercise and every thing else. So I’d say, fairly truthfully, it does not actually liberate or it does not make enormous quantities of flexibility for us. I believe it type of existed already inside the restoration early interval, because of the banks for being versatile for us. So I believe it is type of enterprise as regular.

And in the end, we nonetheless have flexibility below elevated leverage targets as these ramp down over time, and curiosity protection. We actually nonetheless have somewhat little bit of cushion there to type of construct the portfolio again. However I do not suppose there’s something that we see as dramatic simply because we booked in numerous flexibility throughout the late interval.

Operator

And our subsequent query comes from the road of David Katz with Jefferies.

David KatzJefferies — Analyst

There’s been numerous dialogue about asset gross sales within the $300 million to $400 million. Are you able to simply give us somewhat extra depth or coloration round your sensitivity or philosophy of type of balancing valuation within the second with the productiveness that we have all mentioned round getting some issues offered. And kind of I assume I am making an attempt to gauge your aggressiveness or assertiveness meter.

Tom BaltimoreChairman and Chief Government Officer

I assume the primary manner I’d reply it, David, I do not know that anyone has been extra lively over the past three, 4 years than we have now. We have offered 36 belongings for $2 billion, joint ventures, 14 worldwide, half of them extremely difficult with numerous hair, from Brazil, Germany, U.Okay., Dublin, South Africa, the Netherlands to our three way partnership with Sunstone. So — to some small belongings that we had been self-operating. So we have now continually been working exhausting to reshape this portfolio and proceed to enhance the standard of it.

That effort is not going to proceed. We will speed up it. We do not, once more, see the necessity to panic. We do not see but fireplace sale.

We need to get the perfect worth, and we actually need them to be accretive for shareholders, as I believe we have demonstrated. May there be a state of affairs the place relying on the place the debt markets are and an asset that is noncore that we need to — do I believe cap charges have compressed somewhat bit or widen on this surroundings? In all probability. However we’re — once more, there’s a lot liquidity. There are, I believe, $370 billion simply on the non-public fairness facet, and there are 25 corporations with over $1 billion.

So they have to place that cash to work. And so our goal is to search out the precise purchaser for the belongings that we’re promoting. However make no mistake, we’re laser-focused on deleveraging, reinvesting again within the portfolio and shutting this valuation hole. And that effort is simply going to speed up.

Operator

And we have now reached the tip of the question-and-answer session. I am going to now flip the decision over to Tom Baltimore for closing remarks.

Tom BaltimoreChairman and Chief Government Officer

Nice to be with you at this time. I hope all people has an excellent the rest of the summer season and I am going to look ahead to seeing you within the coming weeks and months.

Operator

[Operator signoff]

Length: 0 minutes

Name members:

Ian WeissmanSenior Vice President of Company Technique

Tom BaltimoreChairman and Chief Government Officer

Sean Dell’Orto

Patrick ScholesTruist Securities

Anthony PowellBarclays Capital — Analyst

Floris Van DijkumCompass Level — Analyst

Chris WoronkaDeutsche Financial institution — Analyst

Dori KestenWells Fargo Securities — Analyst

Neil MalkinCapital One Securities — Analyst

Duane PfennigwerthEvercore ISI — Analyst

Robin FarleyUBS — Analyst

Chris DarlingInexperienced Road Advisors — Analyst

Jay KornreichSMBC Nikko Securities — Analyst

David KatzJefferies — Analyst

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