Park Hotels & Resorts Inc. ($PK)

Greetings, and welcome to the Park Hotels & Resorts First Quarter 2026 Earnings Conference Call. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce Ian Weissman, Senior Vice President, Corporate Strategy. Please go ahead.

Thank you, operator, and welcome, everyone, to the Park Hotels & Resorts First Quarter 2026 Earnings Call. Before we begin, I would like to remind everyone that many of the comments made today are considered forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements. Please refer to documents filed by Park with the SEC, specifically the most recent reports on Form 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information, such as adjusted FFO and adjusted EBITDA. You can find this information together with reconciliations with the most directly comparable GAAP financial measure in yesterday's earnings release as well in our 8-K filed with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com. Additionally, unless otherwise stated, all operating results will be presented on a comparable hotel basis. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide an update on strategic initiatives and review Park's first quarter performance and outlook for the year, while Sean Dell'Orto, our Chief Financial Officer and Chief Operating Officer, will provide updates on our capital investments and balance sheet management, along with additional color on guidance. Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Tom.

Thank you, Ian, and welcome, everyone. I'm pleased to report that we delivered better-than-expected performance in the first quarter with RevPAR increasing 5.5% year-over-year, excluding our Royal Palm South Beach Hotel, which suspended operations in mid-May 2025 for a comprehensive renovation. I was incredibly impressed by the strong performance throughout the quarter, with RevPAR, excluding the Royal Palm, increasing over 6.5% in January, approximately 3.5% in February, and nearly 6.5% in March. Results were driven by continued strength in leisure demand at our resort properties, where RevPAR increased 7.6%, excluding Rural Palm, along with healthy corporate group demand that helped our urban hotels generate over 2% RevPAR growth during the quarter. From a capital allocation perspective, it was another productive quarter, as we remain laser-focused on enhancing the overall portfolio quality through the disposition of noncore assets, while continuing to unlock embedded value within our core assets through our transformative renovations and further strengthening our balance sheet by addressing upcoming debt maturities. Following the January disposition of the Hilton Checkers in downtown Los Angeles, we recently sold the 396-room Hilton Seattle Airport Hotel, which was on a short-term ground lease, for $18 million, bringing total noncore asset sales for the year to $31 million or 16x 2025 EBITDA when accounting for nearly $36 million of CapEx expected for both properties. Together, these transactions reflect the continued execution of our capital recycling strategy and our commitment to improving the long-term growth profile of the company. We continue to make solid progress on the remaining 12 noncore hotels and remain firmly committed to materially reducing our noncore exposure by year-end. To that end, we have active marketing campaigns underway on several assets, but remain disciplined in our approach to prioritize transactions that improve our portfolio's growth profile and maximize shareholder returns. While the transaction market remains challenging, our track record speaks for itself, having sold or disposed of 52 hotels for more than $3 billion over the last 9 years, materially improving the quality and earnings power of our portfolio. Turning to capital investments. We are making significant progress on our comprehensive repositioning of the Royal Palm in Miami, the pace and execution have been exceptional, especially given the scale and complexity of this project. We remain on track to achieve our target completion date by early June, thanks to the tireless efforts of our best-in-class design instruction team and all of our partners involved in this project. Miami continues to be 1 of the strongest hotel markets in the country, and we remain highly confident in the long-term outlook for this asset. We are already seeing strong group demand with the property securing $1.4 million of group business as of the end of the first quarter for 2027 at an average rate of $460. This represents an increase of $108 or 31% compared to our pace for 2024 at the same point, pre-renovation. Looking ahead, we expect returns on invested capital between 15% to 20%, with EBITDA projected to more than double from approximately $14 million to $28 million upon stabilization. or roughly $69,000 per key, positioning the hotel to be among the most profitable assets in our core portfolio. Turning to operations. The strength of our core portfolio remains evident. Core RevPAR increased 5.4% during the quarter, excluding Royal Palm, which represented nearly a 400 basis point drag on core results. Performance was led by strong leisure demand in Bonnet Creek, Key West and Hawaii, along with a sharp rebound in Southern California, driven by improved group and leisure transient demand. In Orlando, Bonnet Creek once again exceeded expectations, delivering approximately 16% RevPAR growth and a 20% increase in hotel adjusted EBITDA over the prior year period, driven by a 10% increase in transient revenues and a 19% rise in group production, supported by large in-house events and stronger average daily rate. Revenues and earnings reached all-time highs with trailing 12-month EBITDA exceeding $103 million, nearly 60% above pre-renovation levels and $20 million or 24% above our projections, meaningfully exceeding our return expectations on our $220 million investment and further underscoring our ability to unlock embedded value across the portfolio. Adding to the properties momentum, our Waldorf Astoria Orlando was recently recognized on Travel and Leisure's list of the top 500 hotels in the world, 1 of only 2 Orlando properties to receive the honor. In Key West, performance remained strong at both Casa Marina and the reach with RevPAR increasing nearly 9% and capturing meaningful market share during the quarter. Results were driven by increased transient demand and favorable holiday calendar shifts. Like Bonnet Creek, Casa Marina also exceeded our underwriting for the $80 million investment with trailing 12-month EBITDA of nearly $36 million, exceeding our projections by over $4 million or approximately 14%. Southern California results significantly exceeded expectations. At the Hilton Santa Barbara, RevPAR increased nearly 23% as strong transient demand helped to drive a nearly 13 percentage point increase in occupancy and a 3% increase in ADR. The Hyatt Regency Mission Bay also delivered exceptional performance with RevPAR up 12%, supported by continued strength in drive-to leisure demand. Turning to Hawaii. We continue to see a steady rebound in demand following the completion of our comprehensive room renovations with the Rainbow Tower at the Hilton Hawaiian Village hotel and the Palace Tower at the Waikoloa Village that despite the disruption from historical storm activity resulted in a combined RevPAR increase of 2% across the 2 resorts, or approximately 5.4% when accounting for the 340 basis point drag from the storms. Waikoloa Village delivered 6% growth, benefiting from an expanded airline contract and improved ADR following the renovation of the Palace Tower at Hilton Hawaiian Village, which was far more impacted by the storms, RevPAR increased 1% or over 4% when adjusting for the storm disruption driven by higher rate of transient demand in the newly renovated rainbow Tower. Looking ahead, we remain very encouraged on Hawaii demand trends and expect both hotels to perform at the upper end of our guidance range for the year. Easier year-over-year comparisons, coupled with tailwinds from the completion of our tower renovations at both resorts should continue to support the higher rate of customer mix. Group performance in the first quarter also exceeded expectations with portfolio group revenue increasing 5% year-over-year, excluding Royal Palm. Growth was led by double-digit gains in Puerto Rico, New York and our Bonnet Creek complex, driven by a higher rate of group mix and by strong in-house events, along with active citywide calendars in Denver and San Francisco. Looking ahead, group trends remain stable, with second quarter group revenue pace up approximately 4% and full year pace improving to 3% growth, excluding Royal Palm and Hilton Hawaiian Village, which is being impacted by the partial closure of the Honolulu Convention Center. Stronger-than-expected convention demand across several core markets, coupled with the momentum for in-the-year, for-the-year bookings has driven a greater than 180 basis point improvement in the group revenue pace since last quarter. Longer term, Group demand remains healthy with 2027, pace currently up 5.5% for the core portfolio, reflecting continued confidence in the segment. As we look at the balance of the year, we remain cautiously optimistic based on our first quarter outperformance and the underlying strength of demand across the portfolio, but recognize the broader macro setup remains uncertain. We continue to believe fundamentals will be supported by a combination of anticipated macro and lodging-centric tailwinds, fiscal stimulus, including favorable tax policy, deregulation and potential lowering of near-term interest rates, coupled with easier year-over-year comparisons, favorable calendar shifts and incremental demand generators, such as the World Cup and America's 250th anniversary celebrations should promote a continuation of the demand growth we saw in the first quarter. That said, growing geopolitical tensions in the Middle East and their potential impact on consumer discretionary spending and business investment sentiment certainly warrant a continued measured approach. Sean will address this more when he talks about guidance. The first quarter was an encouraging start to the year, and I'm very pleased with the progress we have made thus far to elevate the quality of our assets and strengthen our long-term growth profile. I could not be prouder of our team's ability to execute in a challenging environment for our business. We remain laser-focused on our strategic priorities. We're investing in our iconic properties to drive long-term value. advancing the disposition of noncore hotels and further strengthening the balance sheet through successful maturity extensions and disciplined leverage reduction over time. And with that, I will turn the call over to Sean.

Thanks, Tom. We were very pleased with our first quarter results. RevPAR exceeded $191, up approximately 2% over the prior year period, or approximately 5.5% when excluding Miami, and over 6.2% or another 75 basis points when adjusting for the Hawaii storms that Tom mentioned earlier. Total hotel revenues for the quarter were $591 million, up nearly 2% and hotel adjusted EBITDA was $152 million, resulting in a hotel adjusted EBITDA margin of approximately 26%. Hotel operating expenses increased 2.6%, reflecting continued cost discipline and overall earnings came in ahead of expectations with adjusted EBITDA of $143 million and adjusted FFO per share of $0.45. Core portfolio performance remained strong with RevPAR increasing 5.4% to nearly $216, excluding Royal Palm, while gains were partially offset by typical comparisons at both of our D.C. area hotels following last year's presidential inauguration in addition to a 170 basis point drag on the core portfolio as our Hilton New Orleans Riverside hotel lapped last year's Super Bowl. As Tom mentioned, we continue to make significant progress on our comprehensive transformation of the Royal Palm South Beach Hotel in Miami. As we look ahead to the second quarter, we expect the hotel to remain a partial drag on operating results as the property ramps up at staffing ahead of its opening and rebuild its demand through Q3. Overall, we are forecasting a nearly $3 million loss for Q2, but expect the resort to ramp up quickly over the back half of the year. During the first quarter, we also completed the second and final phase of Destin renovations at both the Rainbow Tower and the Palace Tower, bringing the total investment for Phase 2 across both Hawaii properties to approximately $85 million. In addition, we completed the second of 3 phases of room renovations, totaling more than $30 million, at the Hilton New Orleans Riverside this past January. The third and final phase scheduled for completion in the fourth quarter of this year. Looking ahead over the balance of 2026, we expect a lower level of capital investment this year with $230 million to $260 million of planned spend, including the completion of Royal Palm and the launch of the Ali'i Tower renovation at Hilton Hawaiian Village. This project will encompass all 351 guest rooms, the tower lobby, its private pool and the addition of 3 new keys. Total investment for the project is expected to be approximately $96 million. We expect renovation-related disruption at Hilton Hawaiian Village to have a modest impact in 2026 with the towers closure expected to have less than a $2 million impact on 2026 hotel adjusted EBITDA and representing just a 10 basis point impact to portfolio RevPAR. Once complete, nearly 80% of the resort rooms will be newly renovated, significantly enhancing the iconic hotel's long-term competitive positioning. Turning to the balance sheet. Our liquidity at the end of the first quarter was approximately $2 billion, including $156 million of cash, plus $1.8 billion of available capacity under our $1 billion revolving credit facility and $800 million delayed draw term loan. With respect to our 2026 maturities, we have made significant progress over the past 2 months to raise a $700 million floating rate delayed draw mortgage on Bonnet Creek, which is expected to close this week. The loan, which was upsized $50 million based on the complex strong results, will bear interest at SOFR plus 225 basis points. When combined with the $800 million delayed draw term loan, this $1.5 billion of new debt capital commitments provide us with certainty while also allowing for the flexibility to fund within par prepayment windows and closer to the maturities. Accordingly, we expect to execute a partial draw under the delayed draw term loan in June to fully repay the $121 million Hyatt Regency Boston mortgage, which matures in July. We then expect to draw the remaining capacity in September, along with fully drawing proceeds from the Bonnet Creek mortgage financing to fully repay the $1.275 billion CMBS loan on the Hilton Hawaiian Village, which matures in early November with additional proceeds to be used for corporate purposes. We are grateful for the continued support of our bank group whose confidence in Park's credit profile and strength of our portfolio has been instrumental in executing these transactions. Their commitment is a clear validation of our balance sheet strategy and underscores our ability to address all 2026 debt maturities in a comprehensive and highly effective manner. Upon completion of these transactions, we will have meaningfully enhanced our financial flexibility, unencumbering the Hilton Hawaiian Village, extending our weighted average debt maturity to nearly 4 years and eliminating any significant maturities for approximately 2 years. On an annualized basis, these refinancings are expected to increase interest expense by approximately $28 million, with roughly $13 million reflected in our 2026 AFFO guidance based on the timing of these transactions. With respect to our dividend, on April 15, we paid our first quarter cash dividend of $0.25 per share. And on April 24, our Board of Directors approved a second quarter cash dividend of $0.25 per share to be paid on July 15 to stockholders of record as of June 30. The dividend currently translates to an annualized yield of approximately 9% based on recent trading levels. Turning to guidance. While we remain mindful of the geopolitical uncertainties and the potential impact of higher oil prices on both business and leisure travel, we were very encouraged by the strength observed in Q1 demand trends continuing into the second quarter. April RevPAR is expected to be flat, but up 3%, excluding Miami, with performance led by a continued strength in Hawaii, Bonnet Creek and Key West as well as solid spring break leisure transient demand in Santa Barbara. And while we expect performance to modestly soften in May, June looks very strong, driven by strong group demand up nearly 10% and favorable year-over-year comparisons across several key markets, including Hawaii, Orlando, Key West and New York. Overall, we expect Q2 RevPAR to come in around the midpoint of our guidance range with roughly a 100 basis point drag from Miami. For the year, with Q1's outperformance we are increasing our RevPAR growth guidance by 50 basis points at the midpoint to a new range of 0.5% to 2.5% and adjusted EBITDA guidance by $7 million at the midpoint to a new range of $587 million to $617 million, while AFFO increases by $0.01 at the midpoint to a new range of $1.74 to $1.90 per share. It's also worth noting that the recently sold Hilton Seattle Airport Hotel was expected to contribute approximately $3 million in EBITDA for the remainder of the year. This concludes our prepared remarks. We will now open the line for Q&A. To address each of your questions, we ask that you limit yourself to one question and one follow-up. Operator, may we have the first question, please?

[Operator Instructions] Our first question is from Floris Van Dijkum with Ladenburg Thalmann.

Glad to be on these calls again with you guys. If you can give us a little bit more of an update on the disposition. I think one of the key things, I think, the market is having some trouble understanding is the quality of the portfolio that's being shielded by the lower 10% of your assets. If you can talk a little bit about where the -- I know that you have pretty much all of those presumably in the market. What's the status on that? Are you having some detailed discussions. What's the pushback that you're getting from the market? And are you going to hold out for the last dollar on those assets?

Well, Floris, it's great to have you back and appreciate the question. If I could sort of frame it for a second. Keep in mind, if you think about the remaining 12 assets that we have, we currently have 33 assets in the portfolio. We have sold or disposed of 52 assets, as I said in the prepared remarks, for north of $3 billion. We have 12 assets that we're defining as sort of noncore. Three of those assets obviously rest with the dispute with Safehold, which will resolve itself, if not this year, certainly next year. The EBITDA from those assets is about $16 million, plus or minus. The remaining 9 assets account for about $41 million in EBITDA and candidly, probably, 45% of that relates to 1 asset in Florida. So we're generally dealing with 8 assets that are small. Some have short-term ground leases, some are joint venture, some have various challenges. And I would say, obviously, the last mile is always the most difficult. I would hope the market would give us credit for the perseverance, the discipline, our ability to reshape the portfolio over the last 9 years. We are very confident we're going to make substantial progress this year on those noncore assets. And our collective team are working their tails off. We have work streams underway on all of them, and it's going to be a little lumpy and choppy. I think you'll see more reported as the year unfolds. And believe me, no shortage of effort and focus. We realize it's, while a small overhang, it's an overhang. It clearly is less. If you look at the $41 million, certainly less than 5%, 6% of overall EBITDA. But it is a drain when you think about operating metrics. And so we're working hard to get the assets sold as quickly as we can. We're not holding out for the last dollar, but we certainly want to have counterparties who can execute and who can move to the process. And we certainly are always focused on creating value for shareholders.

Maybe a follow-up question on the [World Cup]. I know that your Royal Palm asset, I think, is opening up in June. Are you -- is that -- and that is a market potentially that could get impacted by the demand for the World Cup. What's the -- if you can talk broadly about what the impact is going to be? Or are you seeing so far I think it's everybody's sort of muted on the World Cup impact, but if you can give us a little bit more color on that, that would be great.

Yes. It's a lot to unpack there, Floris, but I'm happy to take it. I think most importantly, if we step back and think about the Royal Palm at 15 and Collins, 393 keys, we're expanding to 404, putting in approximately $112 million. We could not be more excited. We could not be prouder. We had, obviously, a group there. We can't wait to get more analysts and more investors in. I couldn't be more grateful to Carl Mayfield, who has our design and construction team who is literally spending 3 or 4 days of his week in Miami, leading. And we also have the operator -- a lead operator from Davidson, who's been on site since we launched construction in last May. As of this morning, we had 417 men and women on site, and that includes from owners reps to general contractor to subs to owners teams to operations folks. And we are currently targeting that construction will be substantially complete by early June. And the -- what we would call the stocking and training TCO would begin in target sort of in mid-May. You've got a few weeks of testing all the fire alarm and life safety issues that have got to work through. and we're probably looking at a target public occupancy TCO and hoping for sort of mid-June. So when you think about where that all unfolds as it relates to the World Cup, we have included in our guidance that Sean outlined in his prepared remarks, we have no contribution coming from Miami in that process. at this time. So if we are able to get open, I think the 2 prominent games in Miami will be July 11 and July 18. We are cautiously optimistic that we should be open in time for those, and that's what we're all working our tails off to make sure that, that occurs. Again, we don't have anything in the current guidance. So we've been quite conservative in that intentionally just given all of the geopolitical but also the complexity of the inspection and regulatory process as we close out the job. You may recall, other projects in the months, and in some cases, years, I think that this, again, speaks to the core competency, the leadership that we have at Park, our experience, the extraordinary success that we're having, obviously, at Bonnet Creek and also what we're seeing also in Key West, and we feel the same way about Royal Palm as we look out. So we're very, very bullish and excited about this project, and I think we're going to have a tremendous success there over time.

Our next question is from Smedes Rose with Citi.

I wanted to ask you, in your guidance, it looks like the expense expectations moved up around 40 basis points versus your prior guidance. And I was just kind of wondering what was behind that.

Yes, Smedes, we -- this is Sean. Obviously, in Q1, we had some outperformance top line. A lot of that was occupancy based. So we certainly naturally see while cost product grade room solid in terms of basically 50 basis points or so growth with the extra occupancy expense growth was a little more than expected as well. So we're kind of carrying that through much we do with the top line. into the expense. Certainly, it's expected the rest of the year expenses that kind of operate as we expect, much like we're thinking out the top line kind of expecting that to perform as we expected for Q2 through Q4.

Okay. Yes. That's helpful. And then, Tom, you mentioned that you think the Hawaii assets this year can trend towards the upper end of your expected ranges. Can you just remind us what that range was for this year?

Well, I think ultimately, you're talking about the upper end of our guidance range. So certainly -- yes. So 2.5%, so somewhere in that zone or a little better.

We said you didn't provide any EBITDA outlook.

Yes, Smedes, the other part is we do have, obviously, some favorable comps coming up the heels of renovations and certainly some softening activity that we saw last year in Hawaii. So to Sean's point, we feel good about that. And if anything, it's conservative, but that's intentional given all the uncertainty right now.

Our next question is from Duane Pfenningwerth with Evercore ISI.

This is Peter on for Duane. I think I'd like to maybe just piggyback off Smedes last question on Hawaii. And bigger picture, Tom, if you could just kind of lay out the building blocks of the recovery in Hawaii getting back to kind of pre-strike levels. What do you need to see happen? And what kind of the cadence of that recovery look like?

Yes. Pete, it's a fair question. I would just again kind of frame it a little bit. If you look historically, O'ahu is as RevPAR growth has always outpaced the U.S. pretty consistently by about 120 basis points. And I think Key West and Hawaii, both are around a CAGR of about 4.5% versus certainly 3.3%. And Obviously, you got very limited supply growth in Hawaii through 2030. And again, the investment that we're making that we continue to make and after we have finished the Ali'i Tower, at least 80% of the rooms at Hilton Hawaiian Village in particular will be renovated. And we've been looking to sort of reposition if you think about the Japanese traveler. We're about 750,000 visitation versus about 1.5 million historically. So we've been seeing that shift away, and we've been really repositioning the business to account for that. So Japanese travel are really accounting for about 3% of our business approximately, which it was probably high teens, 18% to 20% kind of pre-pandemic. So as we look out, we're still very encouraged. Obviously, right now, you do have current headwinds. Obviously, given what's happening on the -- with the conflict and the impact it's going to have on fuel and fuel surcharges and obviously, the strong dollar versus the yen. And candidly, some cheaper alternatives. Having said that, when you look at the investment we've made, if you think about the favorable comps that we have, we think there's an opportunity for certainly Hawaii to be to perform on the higher end of our guidance, if not exceed that. Don't want to get ahead of ourselves, but we're certainly very, very bullish over the intermediate and long term. We still, last year, generated north of $140 million in EBITDA, plus or minus. If you think about the highs, it was about $185 million, plus or minus coming off the pandemic. So with that backdrop and some of those headwinds, we're really not that far. We continue to think about repositioning and get back some of the higher-end business. And certainly, as the convention center is also done, we also see that as another tailwind for us as we look out in the outer years. So we remain very, very encouraged for Hawaii over the intermediate and long term. And as it relates to Waikoloa, we are just very, very bullish, obviously, completing the Palace Tower renovation you look at the second half of this year and what we're lapping, we had 20,000 out-of-order rooms last year. That also is going to think, be a favorable dynamic for us as we finish '26 and look to '27 and beyond.

Great. And then my follow-up, you mentioned group pace improving from the beginning of the year, group pace ex Hawaii and Miami. Could you highlight maybe some markets that you saw some sequential improvement and the flavor of those bookings? Is it corporate groups in the year for the year? Is it convention blocks booking up? Some details there would be helpful.

Yes. So jumping in on this. I would say from a -- what we saw for Q1, we saw some help in New York on group where we had a nurses strike there. And then ultimately, we're at a table taking some of the temporary labor at a group block there for a few weeks. So that was really helpful. We've seen some of the disruptive forces in Mexico and the Middle East, allowed some groups to transition or change out and come into markets like Hawaii. So we've seen some benefit there and some of that will be in future periods. So I think those are kind of the bigger things. I think we've seen revaluations across the portfolio for group be stronger where groups are outperformed their blocks. And so we've seen a little bit of that across the board in both in-house group and ultimately convention.

Our next question is from Aryeh Klein with BMO Capital Markets.

Maybe following up on Hawaii. First, I guess, is that market benefiting from some rotation from Mexico? Maybe it's also a benefit Puerto Rico. And then, Tom, you kind of touched on this, but if oil prices do materially impact airline prices, do you think that disproportionately impact Hawaii relative to the rest of your portfolio?

Yes. I mean, look, you have to believe. I think it's a fair question. If we get a prolonged supply shock and the conflict continues indefinitely, you certainly have to believe that it's going to have an impact, not only on long air travel, but certainly on air travel broadly and certainly affect the sector. So I'm certainly not going to argue that point. I would think as you think about sort of rerouting, one of the things that I think would be important to point out is if you think about inbound traffic into the U.S., we still haven't gotten back to pre-pandemic. We were about 79% million. I think today we're somewhere in the 67%, 68% million. We're about 86%. And if you think about outbound from the U.S., I mean that had gotten up to about 110% to 112%. I think given the conflict, if anything, you might see some of that reroute and people start to onshore themselves, if you will, to the U.S. And I think Hawaii could certainly benefit from that. as well as certainly the Caribbean and seeing Puerto Rico benefit from that. So obviously, in Mexico, I think we are already as an industry seeing sort of rerouting and seeing certainly Florida, the Caribbean, Certainly, we're seeing that in Puerto Rico. Puerto Rico is off to had a great first quarter. We're very encouraged about second quarter as well. And certainly seeing that and those benefits also in California and other parts of the U.S. So to me, those are sort of natural, and I think we're seeing certainly some evidence of that. If you think about all the various cycles over the last 30-plus years, Hawaii has always been a fan favorite generations, families, both domestic and international. We certainly think that there's no risk of that changing materially. The mix may change and we're certainly spending our time as we make these big investments and you think about Ali'i is a great example, a hotel within a hotel and the amount of investment that we're going to make and that really flagship with its own check in its own pool, an elevated experience. We think that just continues to help us as we continue to reposition Hilton Hawaiian Village over the future. We also have the opportunity in Waikoloa, which is by way of right to certainly continue not only as we've renovated, but certainly add additional keys when market dynamics certainly makes sense for us. So very -- remain bullish on Hawaii. And as I said, if you look historically, from a CAGR standpoint, it certainly has been among, if not one of the top performers certainly over the last 20-plus years, and I think the evidence would support that.

And then I just had 2 clarifications on group pace. For the fourth quarter, I think previously it was down 8% and it was going to be a headwind. Just curious with the improvement, what that now looks like. And then on 2027, the 5.5% growth in case, does that also exclude Hawaii and Royal Palm?

It does not. I mean -- yes, it includes Hawaii and Royal Palm. So if you think about 2027, just for a second, I mean, it's as Sean said in his prepared remarks, I think the core was up 5.5%. But I mean you've got New York up mid-teens. You've got New Orleans up mid-teens. You got Hilton Waikoloa up 17%, Bonnet Creek up mid-single digits, Key West up significant north of 20%. So we're -- Hilton Hawaiian Village is down in part slightly there. And you also keep in mind that you've got the convention center that will be under renovation at that point. But it's broad-based, and we're very, very bullish as we look out to '27.

And I'd just add on Q4, we were thinking about pace down 8% last time around, we're about down 4% now.

Our next question is from Chris Woronka with Deutsche Bank.

So first question, I was hoping maybe we could spend a minute going back to the transactional market and good progress so far to date. The question would kind of be, are you seeing a difference in the buyer pool in terms of broadening out or being more institutional as opposed to local or owner operator?

Chris, it's a great question. I would say, candidly, for these types of assets, and again, as I try to frame for listeners, I mean, we're dealing -- as you think about the 8% for a second, these are smaller assets, not big EBITDA contributors, more attractive, I would say, generally to owner operators, entrepreneurial could be small PE firms, clearly experienced and see value and see the opportunity to reposition in some cases. So no shortage of interested parties. Some markets are more attractive. No secret. L.A. certainly wouldn't be at the top of anybody's list given some of the challenges there. And I'd say Chicago, generally a more tougher market. But certainly, as you look across in the assets that we're marketing, we've got a healthy buyer pool and interested parties. It's just really working through the process, which the last mile is always the toughest. Many of these assets were assets that had been in the old Hilton portfolio. And they weren't a high priority for obvious reasons. And then after when Hilton was sold, it wasn't a high priority to that buyer. And the Park team has the challenge. We accept the challenge. No excuses, we own it. And we've got to make it happen, and we're going to do that. And I think we've demonstrated that. And keep in mind, again, the long track record, we've sold assets before the pandemic, during the pandemic, after the pandemic. That also included 14 international. All of those assets and all of these assets have some are legal issues, some are joint ventures, some are tax-related issues, whatever it is, we're up to the challenge, and we're going to get it solved, and you're going to see significant progress this year.

Okay. And as a follow-up -- follow-up on Miami, the Royal Palm. I think you guys have outlined kind of EBITDA expectations fully ramped and timing of opening. So my question is when that thing opens and inserts the ramp, -- how much does the composition of the earnings change to get to your EBITDA target in terms of -- this has been a heads-in-bed strategy don't tell Miami market. But in terms of ancillary and getting the higher rate and maybe some on a beach club there, things like that. So just maybe how does the conversation look versus what it had been pre-renovation?

Yes. It's -- I don't have all of that with me other than to just tell you how excited. If you think about the ADR pre-renovation, I think we were $265. I think we've underwritten this at around $400. I think in the prepared remarks, I talked about business that we're already getting at $460, plus or minus. And when you see it and you see the second floor, which had had a pool and now it's got outdoor really entertainment space, plus as we're bringing all 3 of the buildings together, all of the opportunities for an elevated guest experience. And we're planning to really tuck underneath when you think about the Albers and Rosewood and the [ Aman and Andaz ] and the Delano and all of those and where they're going to be priced at $600, $700, $800 or more and us underwriting at $400, I personally believe that we'll exceed that. I think there's a significant opportunity for us in just the response that we're getting is really exceeding expectations. So we are very, very bullish and very excited about it. And again, I would draw your attention to the success that we're having at Bonnet Creek. We've taken that already from $60 million in EBITDA to north of $100 million. And you think about, obviously, the success that we're having at Casa. I think it really speaks, we believe passionately, and I think the track record is demonstrating that we can generate higher returns on development deals than we can on acquisition deals. And I think it's a real core competency for the team. So we're excited to finish it and then to have an event and have analysts and investors down to see it and to see what what an incredible transformation really looks like. So we got to get it done. We know that. As I mentioned, we've got north of 400 people on site right now working 2 shifts and really to get the construction completed and to get as much of the World Cup as we can, but also keeping in mind we didn't plan for any benefit in the World Cup as part of our guidance as it relates to Miami Royal Palm. So anything we get, we think is going to be incremental gravy and we're pretty excited about the challenge and look forward to getting it done.

Our next question is from David Katz with Jefferies.

So I feel like we always cover the quarters quite well, and I wanted to ask something a little longer term. Ian always reminds us about the pipeline of longer-term repositionings. Clearly, Royal Palm gets done Hawaii, I think you've given pretty good updates on it. Do you have -- or can you talk about in qualitative terms, some of the ones that might be next and how we think about sort of building the portfolio a little longer term?

Yes. There are a few, obviously, that come to mind. Obviously, Santa Barbara, we think, obviously, that there is just significant upside. And we have a proposal to add approximately 70 keys, plus or minus. And so we've been working through sort of the entitlement process there. Really excited. And when you think about, obviously, that's unencumbered and will be unencumbered. We have a great JV partner, but unencumbered in terms of its visibility and views. So pretty excited about that as we sort of look out. As you think about, obviously, Hawaii in like Waikoloa. By way of right, we have the opportunity to add another 200 keys. I wouldn't say that, that would be on the front burner. And so obviously, we see the market recovered enough to where that makes sense. But it certainly is in the pipeline. We have the ability, obviously, with our Doubletree in Crystal City. Not sure that the market conditions warrant that right now. But when you think about just bull's-eye real estate and where it sits in the location at the front of the Amazon headquarters to certainly pretty excited about that over the long term. I don't think that, that's something intermediate as we sort of look out right now. The one that we continue to noodle and study, and we're working on obviously some of the elevator modernization in New York. But there's no doubt, as we think about New York and how to reposition that. That certainly is also a priority and one that certainly needs to be addressed within the portfolio. We know that is just trying to figure out what's going to make the most sense for that asset over the intermediate and long term. We certainly think that there is significant value as you think about just the sheer scale of it. It continues to certainly improve from a performance standpoint. And we certainly think that there are opportunities, different things that can certainly occur with that asset over time. So just to give you a few that are sort of on the mine and ones that we certainly think about.

Our next question is from Dan Politzer with JPMorgan.

I just had a quick follow-up on the second quarter. I think you mentioned RevPAR in that range, but I think you had a comment on May and how it's tracking. I was wondering if you could just kind of give a little bit more detail on what is driving that because I think you kind of characterized it as mix.

Yes. Ultimately, to just talk to the second quarter, April, obviously, almost finished here, just kind of looking -- we probably have about a week or so of data to get in and kind of get real time. But like I say, tracking flattish might be a little bit better there, certainly better than expectations, so it kind of continues from Q1. May is the weakest, I think, set up right now for the quarter with group pace just down slightly, transient, we ultimately need there to make the kind of the numbers we're thinking, which are kind of a flattish type of result. But there's some risk there. So we kind of hold that out as the one where we're going to monitor May, but June is really strong. So June makes the quarter as we look at it right now, pace is up double digits for group Obviously, we've got some things related to World Cup and June teenth and other activities going on around that month. Certainly, we think it's going to be a good performer. But altogether, just kind of April kind of be flattish May, where we see a little bit of risk and then June strong kind of comes together to be plus or minus kind of the midpoint of the guide for the year.

Got it. And just for my follow-up. I know we spent a lot of time talking about the World Cup as it relates to Miami. But I guess more broadly, as you think about where your footprint is and across the portfolio, have you seen kind of a change in terms of the demand for World Cup maybe versus, say, 3 or 6 months ago?

Nothing -- I mean, nothing dramatic. I think for us, you put Royal Palm aside, Miami aside, Tom talked to that. Really, the 2 big markets for us are New York and Boston. And these are 2 markets that typically have been 90% occupied during this time frame in June and July. So it's really kind of a rate play. I think the positioning right now is good in those 2 markets around the matches. I think it remains to be seen. Clearly, there's a lot of uncertainty around this event. But right now, we think we try to have a good position. I wouldn't say it's -- we would say it's fantastic like people have thought coming into the year. But we said about that impact between those 2. I would say those 2 markets considerably make up the most of the impact for the year for the portfolio. It's probably -- we probably said 35 or so plus or minus basis points, might come off a little bit from that from our expectations today. But still a demand generator still a positive, but I wouldn't say it's dramatic as we thought necessary as we go into it. We'll see. It could change, but I think there's a lot of things and a lot of unknowns around this event right now.

Our next question is from Chris Darling with Green.

Quick one, circling back to Hilton Hawaiian Village, maybe framing the trajectory there in a different way. Can you update us on where your RevPAR index share is and where you see that metric heading over time as you sort of realize the benefit of the capital you've invested over the last few years?

Yes. The RevPAR index or so is kind of tracking in that 95 to just around 100 kind of -- and I think we've seen that -- but last year and this year, as we kind of started the year because we've had some of that work going on at the Rainbow Tower. What we've seen last year is once we got past kind of first quarter, we saw that kind of pick up a little bit more. But in terms of kind of recovery, where we see it going from there is really kind of back to that historical levels of 110 to 115 range. That's where we kind of we're sitting ahead of the renovation and some of the other events like the strike -- but I think that's kind of where we want to ultimately see it come back to. And certainly, we can get there more on a rate profile as well that's going to certainly help the bottom line given the renovation work.

Okay. Understood. And you may not have a perfect answer to this, but just -- how are you thinking about the timing in terms of that index share? Is that a 1-year time line, 3-year time line? And maybe you can't quantify?

Because we would hope that just if you look historically in the amount of investment that we've made the corporate resources that we're devoting in addition to our operating partners at Hilton, we would expect that ramp-up to accelerate. And again, once we get the Ali'i Tower done, and again, that's somewhat isolated and self-contained. So we think that's going to help. And obviously, we project, obviously, there's going to be minimal disruption. But when you get that done and you got 80% of the campus done, we think that's just going to really continue to reposition and candidly give us the opportunity to change the customer mix as well. So very excited, remain committed to it. And also when we pay off the mortgage, keep in mind, we'll have to marquee assets in Hawaii completely unencumbered, very rare. Most of those resorts in many of the assets owned or under long-term ground leases. That's not the case with Parks portfolio. So that's a real benefit for us, too, and gives us a lot of optionality.

Our next question is from Cooper Clark with Wells Fargo.

Great. Could you just talk us through some of the building blocks for the updated OpEx guide for the full year and what you're expecting to see from a growth perspective on wages and benefits, insurance and utilities?

Sure. Like I mentioned before, we have a range right now kind of in the mid-2s to mid-3s labor and wage growth. Should be kind of in that 5% plus or minus as you kind of go throughout the year on average. We've got some of the offsets to that fundamentally, our insurance, we do embedded in our kind of budgets, favorable premium reduction, certainly continues to be a good market for the insureds, as we look to renew, we renew on June 1. So we'll get the continuation of our reduction from last year through May and then ultimately pick up for the next 7 months what we expect to be a favorable outcome, and we'll give more color to that when we know more in the back part of the year. Real estate taxes. Once again, we kind of find ourselves with probably about 5% increase right now for the budget process, but we'll appeal processes in place and don't haven't fully factored that into any guidance because we just don't know in terms of outcomes, amounts, timing and the like. So I'd say labor wage is clearly the big driver on the growth side, but certainly some good offsets and continue to kind of work with our asset management teams and the operators define those meaningful ways to further offsets.

Great. And then a quick follow-up. Just curious how much, if any, impact the Hilton Seattle sale had on the RevPAR guidance raise?

RevPAR guidance ratio was obviously a growth and its comparable growth. So we ultimately removed that from the portfolio on a like-for-like basis, so no impact. Clearly, from a nominal RevPAR, you'll see a nice increase.

Our next question is from Robin Farley with UBS.

Great. Most of my questions have been answered. I wonder if you could just on the -- can you hear me okay?

Yes, we can. Go ahead.

Okay. Great, sir. Yes, most of my questions have been covered. Just going back to the Ali'i Tower Tower in Hawaii. I wonder if you could walk us through a little bit about what you're expecting in terms of returns and change in RevPAR kind of the way you -- I think you've given great color on Royal Palm. Just kind of what you're expecting from that Hawaii tower.

Yes. Well, we would certainly think, again, the opportunity is to take it from 351 keys to probably pick up 3 keys, incremental budgeting approximately about $96 million. Any of these transformations, we've got to be returns in the 15% to 20%. And again, if you think about Bonnet Creek and Key West that we've talked about already confidently exceeding that. The opportunity here is it's really a hotel within a hotel. You've got your own separate check-in. You've got obviously an embedded pool, given its premier location on the village just really, really excited about and it hasn't had really that sort of upgrade for some time. So we're excited about it. Again, we'll start that later this year and expect to finish that in the middle of next year, plus or minus. And given the experience that we've had, the success that we've had with the Tapa Tower there, obviously, the Rainbow Tower. This is really the next in line to really reposition and again, take the opportunity to change the customer mix, and we're pretty excited about it.

And are there any limits on brand there in terms of do you have to stay with something Hilton branded? Or could you do something completely different?

It would have to stay within the Hilton family. And we've looked at do you want to rename? But the reality given the fact that Hilton Hawaiian Village is iconic. When you think about that north of 60 years, plus or minus, and Ali'i Tower, obviously, has its own following. So we think really just the repositioning and the upgrade is really the right answer there. But we'll continue to look and continue to study it. But at this point, we've concluded really just the repositioning in the upgrade. And we're getting a phenomenal response not only from Tapa but also the Rainbow Tower in the room product and the quality of the renovation and how thoughtful we were about it. So again, really excited and thank, obviously, to the point that Sean was making about RevPAR index, getting the whole village back into that 110 and above range. We certainly think is within our eyesight. And that will be accelerated once we get this final tower done.

There are no further questions at this time. I would like to turn the floor back over to Tom Baltimore for any closing remarks.

I appreciate everybody taking time and look forward to seeing many of you at upcoming meetings, one hosted by Wells Fargo, JPMorgan and of course, NAREIT. Safe travels, and I look forward to seeing you all.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.