Park Hotels & Resorts Q3 2025: Contradictions Emerge on Group Bookings, Asset Sales, Dividend Strategy, and More

Date of Call: October 31, 2025

Financials Results

• Revenue: $585M total hotel revenues; RevPAR $181, down 6% YOY (down ~5% ex Royal Palm South Beach)
• EPS: $0.35 adjusted FFO per share for Q3 (no GAAP EPS disclosed)
• Operating Margin: 24.1% hotel adjusted EBITDA margin for Q3; full-year hotel adjusted EBITDA margin guidance 26.3%–26.9% (20 bps change vs prior guidance)

Guidance:

• Full-year RevPAR guidance: down ~2% at midpoint (range -2.5% to -1.75%); excluding Royal Palm: ~-1% midpoint.
• Q4 RevPAR expected between -1% and +2% (or +1% to +4% ex Royal Palm).
• Full-year adjusted EBITDA: $608M midpoint (range $595M–$620M); hotel adjusted EBITDA margin 26.3%–26.9%.
• Adjusted FFO per share: $1.91 midpoint (range $1.85–$1.97).
• Q4 cash dividend $0.25; no special/top-off dividend, preserving >$50M for reinvestment/deleveraging.
• Total liquidity increased to ~$2.1B after amended/upsized credit facility.

Business Commentary:

• RevPAR Decline and Operational Challenges:
• Park Hotels & Resorts reported a 6% decline in RevPAR for Q3, or 5% excluding the Royal Palm South Beach.

• The decline was due to a meaningful drop in group demand, impacts from renovations, and softer leisure and government demands.

• Capital Investment and Asset Enhancement:

• The company invested $325 million in strategic capital enhancements, primarily through renovations and expansion projects.

• These investments are aimed at improving the quality and growth potential of core assets, such as the Signia and Waldorf Astoria in Orlando, and mainland projects like Casa Marina in Key West.

• Dividend Strategy and Capital Allocation:

• Park decided not to pay the special dividend for 2025, preserving over $50 million for strategic initiatives and debt reduction.

• This move is part of a strategy to focus on strategic investments and leverage reduction to enhance future growth and shareholder value.

• Non-Core Assets Disposition:

• The company is focused on divesting 15 non-core assets to enhance its portfolio quality.
• This action is expected to meaningfully improve portfolio metrics, enhancing nominal RevPAR and margins by nearly 6% and 70 basis points, respectively.

Sentiment Analysis:

Overall Tone: Neutral

• Management acknowledged near-term pressure—RevPAR declined 6% and guidance was lowered reflecting government-shutdown impacts (~$2.5M October revenue hit)—yet emphasized strategic investments, portfolio refinement and optimism for 2026: "we remain optimistic about 2026...expectations for lower interest rates" and large renovation projects expected to drive multi-year upside.

Q&A:

• Question from Duane Pfennigwerth (Evercore ISI): Can you explain the drivers and timing of the aggressive expense reductions given softer RevPAR and how quickly you can implement them?
  Response: Management: Aggressive asset management and targeted deep dives (staffing/productivity, procurement, insurance reductions and tax appeals) drove expense control; many actions began Q1–Q2 and continue in real time to offset weaker RevPAR.

• Question from Bennett Rose (Citigroup): Why did you forgo the top-off/special dividend and maintain the $0.25 quarterly payout—is this tax-driven or liquidity management?
  Response: Management: Decision was strategic—not liquidity-driven—aimed to redeploy ~ $50M into debt reduction and high-ROI portfolio investments while maintaining a sector-leading ~9% dividend yield.

• Question from Bennett Rose (Citigroup): What is the current group booking pace for 2026 and which submarkets look strongest or weakest?
  Response: Management: Excluding Hawaii and Royal Palm, 2026 group pace is essentially flat today; select markets show strong growth (Bonnet Creek +9%, Hyatt Boston double digits, Caribe +39%, Santa Barbara >50%), with improvement into 2027.

• Question from Chris Woronka (Deutsche Bank): How confident are you about selling the 15 non-core assets and will disposals accelerate into next year?
  Response: Management: High conviction—team has sold 47 assets since spin and is focused on marketing/listed LOIs; expects disposals but some closings could slip into early next year; guidance likely toward low end of $300M–$400M target.

• Question from Chris Woronka (Deutsche Bank): Can brand/fee reductions or chargeback changes from franchisors materially lower owner costs next year?
  Response: Management: Actively engaging with Hilton/Marriott/Hyatt and see opportunities to reduce costs (including via AI-driven efficiencies), but material benefits are more likely over the intermediate term, not immediate.

• Question from David Katz (Jefferies): What are the current drivers and headwinds in Hawaii and outlook for recovery?
  Response: Management: Hawaii fundamentals remain structurally strong (low supply growth, higher domestic airlift) but recovery delayed by lower Japan visitation, a recent labor strike and renovation disruptions; expect continued ramp into 2026–2027 with full recovery nearer 2027.

• Question from Charles Scholes (Truist): Why did guidance only assume the government shutdown impact through October rather than modeling continuation into Q4?
  Response: Management: Guidance reflects known impacts through end‑October (~$2.5M revenue hit); midpoint and low end of guidance incorporate conservatism if shutdown persists, and management believes continuation risk is covered within the range.

• Question from Stephen Grambling (Morgan Stanley): Will the decision to reallocate the top-off dividend recur and how will future capital allocation consider buybacks vs. reinvestment?
  Response: Management: Future dividend and allocation decisions will be flexible; current priority is deleveraging and reinvesting in high‑ROI renovations (development yields > acquisition yields), with opportunistic buybacks considered but secondary.

• Question from Chris Darling (Green Street): Historically how quickly does demand rebound after government shutdowns—is recovery immediate or lagged?
  Response: Management: Some rebound expected but timing varies; groups often rebook (timing may spread months), transient demand is more immediately impacted; November/December group pace is strong so near-term pickup is possible if shutdown resolves.

• Question from Chris Darling (Green Street): If non-core assets are sold, how would proceeds be allocated between buybacks, CapEx and debt paydown?
  Response: Management: Priority is debt paydown and reinvestment in the portfolio; buybacks would be opportunistic after deleveraging and funding renovations.

• Question from Jay Kornreich (Cantor Fitzgerald): Beyond the government shutdown, what drove the Q4 RevPAR deceleration versus prior expectation (3%–5% to ~flat)?
  Response: Management: Mix of broader transient softness (~150 bps), government-related weakness (~100 bps), and specific disruptions (Waikoloa renovation and Chicago National Guard deployment totaling ~100 bps).

• Question from Cooper Clark (Wells Fargo): Who are the active buyers in the market and what’s holding some buyers back?
  Response: Management: Buyer pool is broad (owner-operators, family offices, private equity); hesitancy stems from demand visibility and expectations around interest rates—uncertainty delays decision-making.

• Question from Cooper Clark (Wells Fargo): How do you see the mix of group, business transient and leisure evolving into 2026?
  Response: Management: Encouraged—expect pickup from public/private investment and major events (World Cup, Super Bowl, 250th) and low supply; group and business transient should strengthen, supporting '26–'27 recovery.

• Question from Daniel Politzer (JPMorgan): Will you change CapEx directionally next year given focus on reinvestment?
  Response: Management: Not lowering CapEx—spend is timing-driven; strategic renovations continue (Royal Palm, Hawaii, New Orleans) and projects may accelerate/expand scope, pushing spend into next year.

• Question from Daniel Politzer (JPMorgan): Can Hawaii fully close the EBITDA gap to 2023 levels by 2026 or will it take longer?
  Response: Management: Expecting further ramp in 2026 but full recovery closer to 2027 as renovations complete and international demand reaccelerates.

• Question from Robin Farley (UBS): Is the shutdown impact expected to be smaller in Nov/Dec than Oct, and was Hawaii group pace benefit driven by strike comps?
  Response: Management: Believe shutdown impact likely smaller in Nov/Dec; Hawaii comps include strike lapses and renovation timing—group is a small portion of Hawaii demand, and convention center timing also affects comps.

• Question from Aryeh Klein (BMO Capital Markets): If AI-driven non-residential investment decouples historical correlations, how does that affect forecasting?
  Response: Management: Non-residential investment and GDP remain key drivers; AI and large public/private investments should be tailwinds long-term, but short-term correlations can be noisy—forecasting will incorporate these evolving dynamics.

• Question from Aryeh Klein (BMO Capital Markets): Will you consider moderating the dividend yield next year?
  Response: Management: No final decision; historically targeted ~65% AFFO and the team may consider moderating the payout, but current $1 annual run rate (~9% yield) is sustainable and strategic this year.

• Question from Kenneth Billingsley (Compass Point): Why does total RevPAR sometimes outpace room RevPAR in certain urban markets and how will 2026 events affect that?
  Response: Management: Strong out‑of‑room spend (banquet/catering/outlets) tied to group supports total RevPAR above room RevPAR; major events should boost room rates and ancillary spending, supporting total RevPAR gains.

Contradiction Point 1

Group Booking and Demand Outlook

It involves differing perspectives on the outlook for group bookings and demand recovery in Hawaii, which are crucial for revenue projections and investor expectations.

What are your expectations for group bookings and performance in 2026? - Bennett Rose(Citigroup)

2025Q3: We expect group pace to be flat in '26 and up 4.1% in '27. Strong markets include Bonnet Creek, Hyatt Boston, and Caribe. We expect positive impacts from a more accommodative Fed, easing financial conditions, and major events. - Thomas Baltimore(CEO)

Are 2026 group bookings showing sustained strength, and are there notable market-specific performance variations? - Smedes Rose(Citi)

2025Q2: 2026 group pace is expected to be relatively flat, while 2027 shows potential to grow by 4% to 5%. Key markets like Bonnet Creek, San Diego, Chicago, Hilton Caribe, and Seattle are expected to perform well. Hawaii is expected to recover with a strong Q4, driven by favorable comps and group bookings. - Thomas Baltimore(CEO)

Contradiction Point 2

Non-Core Asset Disposals

It involves differing statements about the timeline and progress of non-core asset disposals, which impact the company's portfolio strategy and potential revenue impacts.

Can you discuss the conviction in selling non-core assets and any hurdles in closing these deals? - Chris Woronka(Deutsche Bank)

2025Q3: We are focused on selling non-core assets to concentrate on our top 20 properties. Despite market volatility, we are committed to completing these sales. We have made significant progress, returning $3 billion from asset sales since the spin. - Thomas Baltimore(CEO)

Will all 18 noncore hotels be divested by year-end 2024, and what will clean EBITDA be post-divestiture? - Floris Gerbrand Hendrik Van Dijkum(Ladenburg)

2025Q2: Our goal is to clean up the noncore portfolio by the end of next year... This will significantly enhance the quality of the portfolio, and we're focused on reinvesting in the core portfolio. - Thomas Baltimore(CEO)

Contradiction Point 3

Asset Sales and Market Conditions

It involves the company's strategy and confidence in selling non-core assets, which affects financial strategy and investor perceptions.

What is the conviction level in selling non-core assets, and what challenges exist in closing these deals? - Chris Woronka (Deutsche Bank AG, Research Division)

2025Q3: We are focused on selling non-core assets to concentrate on our top 20 properties. Despite market volatility, we are committed to completing these sales. - Thomas Baltimore(CEO)

Can you comment on the planned asset sales and current market environment? Are you confident in securing reasonable prices and finding buyers? - Floris Van Dijkum (Compass Point)

2025Q1: We've faced great uncertainty with geopolitical issues like tariffs causing hesitancy. However, our track record shows success in selling 45 hotels since the spin-off. We're cautiously optimistic but won't disclose details until transactions close. - Tom Baltimore(CEO)

Contradiction Point 4

Dividend Strategy and Shareholder Returns

It involves the company's approach to returning capital to shareholders through dividends, which can impact investor expectations and perceptions of financial management.

Is the decision not to pay the special dividend driven solely by tax considerations, or are there other factors? - Bennett Rose(Citigroup Inc., Research Division)

2025Q3: We have returned over $1.3 billion to shareholders since 2020. The current 9%-10% dividend yield is healthy. We think it's appropriate not to declare a top-off dividend for 2025 to preserve liquidity for strategic initiatives and leverage reduction, ensuring $50 million is available for these purposes. - Thomas Baltimore(CEO)

How will the $300–$400 million non-core asset disposition be allocated? What portion will go to ROI projects vs. share repurchases? - Floris Gerbrand van Dijkum(Compass Point)

2024Q4: We will use the proceeds to invest in our core portfolio, pay down debt, and opportunistically buy back shares. We continue to achieve higher yields from development projects over acquisitions at this point. - Thomas Baltimore(CEO)

Contradiction Point 5

Group Pace and Demand Expectations

It involves the company's expectations for group bookings and demand recovery, which can impact revenue projections and strategic planning.

What are your expectations for group bookings and performance in 2026? - Bennett Rose(Citigroup Inc., Research Division)

2025Q3: We expect group pace to be flat in '26 and up 4.1% in '27. - Thomas Baltimore(CEO)

What is the allocation plan for the $300 million to $400 million non-core asset disposition target? What percentage will be allocated to ROI projects versus share buybacks? - Bennett Rose(Citigroup Inc., Research Division)

2024Q4: Group pace for full year 2025 is expected to be approximately 70% of 2019 levels. - Thomas Baltimore(CEO)