Park Hotels & Resorts Inc. (PK) Earnings Call Transcript & Summary

Greetings, and welcome to the Park Hotels & Resorts Second Quarter 2026 Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to your host, Ian Weissman. Please go ahead.

Thank you, operator, and welcome, everyone, to the Park Hotels & Resorts Second 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 performance, outcomes and results may differ materially from those expressed in forward-looking statements. Please refer to the documents filed by Park with the SEC, specifically the most recent reports on Forms 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 to the most directly comparable GAAP financial measure in yesterday's earnings release as well as 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 our strategic initiatives and review Park's second 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 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 am pleased to report that Park delivered another outstanding quarter. with results meaningfully exceeding our expectations and demonstrating the continued strength and resilience of our portfolio. RevPAR increased nearly 7% year-over-year, excluding Royal Palm South Beach, with growth accelerating from approximately 4% in April to 5% in May and over 11% in June. Performance was driven by strong group demand and higher-rated leisure travel across the portfolio, highlighted by the exceptional strength in Hawaii. As a result, resort RevPAR increased more than 9%, excluding Royal Palm, while our urban portfolio delivered nearly 4% RevPAR growth. These results reflect both the pace of demand across our markets and the benefits of our disciplined capital investment strategy. Notably, our strongest performance continues to come from assets where we have invested significant capital in recent years, including Orlando, Key West and Hawaii, underscoring the value creation and outsized returns generated by our targeted reinvestment initiatives. Hawaii was among the top performers with RevPAR increasing approximately 9% year-over-year and accelerating meaningfully from the first quarter. Performance improved sequentially each month, driven by a significant increase in leisure demand and strong in-house group activity which more than offset the loss of citywide business resulting from the partial closure of the Honolulu Convention Center, which is expected to remain closed through 2027. Hilton Hawaiian Village was the clear standout with RevPAR increasing nearly 12% and EBITDA growing more than 13%. Property continued to gain market share throughout the quarter, ending June with a RevPAR index of 117, representing a 4-point improvement compared to June 2024 or prior to the commencement of the Rainbow Tower renovation. The hotel's momentum continued into July with occupancy of 98% or a nearly 700 basis point improvement year-over-year and preliminary RevPAR growth of over 6%. Both Hilton Hawaiian Village and Hilton Waikoloa Village are benefiting from our recent capital investments as the renovated rainbow and Palace towers are generating strong guest demand and meaningful rate premiums. Hawaii is demonstrating why it remains one of the most attractive resort markets in the country, demand trends are healthy, with the Hawaii Tourism Board recently raising its 2026 visitor arrivals forecast by a full percentage point to nearly 2%, supported by growth from East Coast markets, and improving international trends. Several major airlines, including Alaska, Delta and Southwest have also announced increased airlift to Hawaii for the remainder of the year. We remain confident that both hotels still have significant runway for future growth as they recover back to their 2023 peak earnings levels. With the Rainbow Tower and Palace Tower renovations now complete and the LeesiTower renovation at Hilton Hawaiian Village about to commence, we believe this setup for 2027 and beyond is exceptionally strong. Turning to Florida. Our Bonnet Creek complex and Key West properties once again delivered outstanding results with RevPAR growth of 13% and 10%, respectively, underscoring the strength of our capital investments and the sustained demand for Florida's Premier resort destinations. At Bonnet Creek, the complex achieved record second quarter rooms and food and beverage revenue for the third consecutive year further validating the significant investments we have made in the assets. Both the [indiscernible] story Orlando and the Cigna by Hilton Orlando Bonnet Creek contributed exceptional performance with RevPAR increasing nearly 15% and 12%, respectively. Remarkably, Water Pastoria's food and beverage revenue surpassed last year's record by 24%, driven by strong outlet performance and meaningful group contributions. We were also pleased to see the [indiscernible] for store Orlando recognized on travel and leisure 2026 World's Best list. In Key West, second quarter rooms and food and beverage revenue also reached new record levels, supported by strong leisure demand, and continued growth in group business. Casa Marina led performance with RevPAR increasing more than 14% year-over-year as the properties repositioning continue to drive gains in market share, which was up over 8 points in the quarter to a RevPAR index of over 120. The resort also delivered record food and beverage results with a 36% year-over-year increase, benefiting from enhanced restaurant offerings and the continued success of Dorado highlighting the strong returns generated by our recent investments. Our urban portfolio was another source of strength during the quarter. Washington D.C. led the way with nearly 17% RevPAR growth as government-related demand increased. Chicago delivered nearly 12% RevPAR growth, supported by a strong group and transient demand, an exceptionally strong banquet and catering results, which drove meaningful profit growth, while Hyatt Regency Boston benefited from continued strength in group and citywide business along with demand associated with the Boston Marathon and World Cup matches, resulting in nearly 9% RevPAR growth. Turning to group demand, which was a major contributor to our second quarter out performance. Group rooms revenue increased 9.5% year-over-year, led by strength in Washington, D.C., Orlando and Chicago while June group revenue increased nearly 23%. Full year 2026 group revenue pace is now up nearly 6% compared with the same time last year, representing a meaningful improvement from last month, our third quarter group pace is up over 15%. We remain encouraged by overall group booking trends for the balance of the year, supported by continued strength in corporate groups, in-house events and citywide activity across several of our core markets. Looking ahead to 2027, group revenue pace for our core portfolio is up over 6%, with double-digit increases in Hawaii, New York, Key West and San Francisco, providing us with further confidence in the continued strength of group demand. On the capital allocation front, we continue to execute our strategy of recycling capital out of underperforming non-core assets while enhancing the quality and long-term growth profile of our portfolio. Since our May earnings call, we have completed 3 additional dispositions. In May, we sold our ownership interest in an unconsolidated joint venture that owns and operates the 288-room Embassy Suites Old Town Alexandria for gross proceeds of $29 million. In June, we exited the 262-room Embassy Suite to Austin through the termination of the short-term ground lease and sale of the hotel's operating assets, generating approximately $6 million of proceeds. Most recently in July, completed the sale of the 314 room Hilton Short Hills for $12 million. These transactions represent another step forward towards simplifying the company, lowering future capital needs and concentrating our portfolio on higher-quality assets with stronger growth prospects and more durable earnings. Since announcing our plan in early 2025 to exit our remaining non-core assets, we have sold or disposed of 10 of the 19 identified hotels generating nearly $200 million of proceeds at an average multiple of approximately 12.5x EBITDA. And since the spin, we have now sold or disposed of 55 assets for more than $3 billion. We continue to make solid progress with the remaining non-core hotels, which today account for less than 5% of the portfolio's value and remain firmly committed to materially reducing our exposure by year-end with active marketing efforts underway for several assets. As always, we remain disciplined and laser-focused on executing transactions that strengthen our earnings, improve the long-term growth profile of the portfolio and maximize shareholder value. Turning to capital investments. We are thrilled to have officially reopened the Royal Palm South Beach on July 22, following the successful completion of its transformative redevelopment, which was completed in just 15 months as planned. More than $100 million project included the comprehensive renovation of all 393 existing guestrooms, the addition of 11 new keys, a complete re-imagination of the lobby and public spaces, 4 new food and beverage concepts and significant enhancements to the hotel's meeting and event facilities. We believe Royal Palm is now exceptionally well positioned to capitalize on ongoing strength of the South Florida market and compete more effectively within the upper upscale and luxury segments. Upon stabilization, which we expect could occur over the next 2 years, we believe this investment has the potential to double the hotel's EBITDA. More importantly, it serves as another compelling example of our unique ability to create substantial shareholder value through targeted capital investments that enhance asset quality, strengthen competitive positioning and unlock meaningful earnings growth. I'd also like to recognize our design and construction team for their exceptional execution of this complex project. Their efforts further demonstrate Park's core competency to diligently evaluate and timely execute complex capital projects that will unlock embedded value across our portfolio. As we look at the balance of the year, I remain encouraged by the continued strength across our portfolio. Despite some geopolitical and macroeconomic headwinds U.S. economy continues to show strength, benefiting from a resilient consumer, a stable labor market and ongoing business investment supporting demand across both leisure and group travel, combined with the reopening of the Royal Palm South Beach and strong group booking momentum, we believe Park is well positioned to deliver solid results through the remainder of 2026 and beyond. I'm also incredibly proud of the progress our team has made, strengthening the portfolio through disciplined capital allocation, active capital recycling and proactive balance sheet management, which has strengthened Park's earnings power and long-term growth profile while enhancing our financial flexibility. Beyond this year, I am equally optimistic following the planned completion of the Elite Tower renovation at Hilton Hawaiian Village expected in early 2027, we will have completed nearly $350 million of transformative capital investments across our Hawaii portfolio. As a result, our Hawaiian resorts will be exceptionally well positioned to capitalize on the continued recovery in the market and further narrow the approximately $60 million EBIT -- EBITDA gap relative to your 2023 peak earnings level. At the same time, as operations at Royal Palm South Beach ramp, we expect the property pound stabilization to contribute approximately $28 million of EBITDA over the next few years. Together with the continued benefits of our capital recycling program and core portfolio focus, these catalysts reinforced our confidence in Park's ability to drive meaningful earnings growth and create substantial long-term value for shareholders. With that, I will turn the call over to Sean.

Thanks, Tom. We are very pleased with our second quarter results, which came in well ahead of expectations. Total portfolio RevPAR increased nearly 6% to $217. And as Tom noted earlier, increased nearly 7% year-over-year, excluding Royal Palm. Total hotel revenue increased 6% during the quarter, while hotel adjusted EBITDA increased nearly 9% to $204 million, resulting in a hotel adjusted EBITDA margin of nearly 32%, up 80 basis points year-over-year. Adjusted EBITDA totaled $198 million and adjusted FFO per share was $0.70. The quarter's outperformance was driven by a balance of increasing group and leisure demand. As Tom noted earlier, group was up 9.5%, exceeding expectations by 700 basis points, with strong in the quarter for the quarter pickup, in the in-house corporate and smart segments while the leisure transient segment grew by over 13% and exceeded expectations by nearly 500 basis points. This pickup translated to stronger-than-expected operating results at the Hilton Hawaiian Village, our Bonnet Creek complex and Casa Marina as well as at our hotels in Chicago, Santa Barbara and Washington, D.C., each of which generated double-digit year-over-year RevPAR growth during the quarter. We also realized a modest benefit from the FIFA World Cup across our host city markets of New York, Boston and San Francisco, consistent with the lower end of our expectations, contributing roughly 30 basis points towards full year portfolio RevPAR growth, essentially offsetting the 30 basis point drag expected from Royal Palm this year. Turning to capital investments. During the second quarter, we invested a total of $64 million in capital improvements with full year CapEx expected to range between $230 million and $260 million. In Hawaii, we are set to commence the comprehensive renovation of the 348-room Ali'i Tower at Hilton Hawaiian Village this month. This investment of approximately $100 million will include a complete renovation of all guestrooms and the addition of 3 more keys within the premium oceanfront tower, along with enhancements to food and beverage outlets, including the Tropics bar and grill and the poolside outlet mix bar, all of which are expected to be completed early next year. Upon completion, nearly 80% of the guest rooms across the nearly 3,000 room Hilton Hawaiian Village complex will have been fully renovated. And finally, in New Orleans, we commenced the third and final phase of the main tower guest room renovation in May, encompassing the remaining 489 guest rooms and expected to be completed by mid-October. Upon completion, all 1,600-plus guest rooms will have been fully renovated, significantly enhancing the quality and competitiveness of one of our most important convention-oriented assets. Turning to the balance sheet. We ended the second quarter with net debt of approximately $3.7 billion, translating to a net debt-to-EBITDA ratio of 6.1x, roughly 0.2 of a turn lower than last quarter. Liquidity was $2.6 billion, including $260 million in cash, $1 billion of available capacity under our revolver under our delayed draw term loan and the $700 million Bonnet Creek delayed draw financing. During the quarter, we drew $200 million under the delayed draw term loan and used a portion of the proceeds to repay the $120 million Hyatt Regency Boston mortgage ahead of its July maturity. Looking ahead, we intend to use the remaining delayed draw terminal capacity together with the Bonnet Creek proceeds to fully repay the $1.27 billion Hilton Hawaiian Village mortgage in September and also plan to refinance the Hilton Santa Barbara mortgage later this year. These transactions are expected to meaningfully extend our debt maturities and and further enhance our financial flexibility. With respect to our dividend, on July 15, we paid our second quarter cash dividend of $0.25 per share. And on July 31, the Board approved a third quarter cash dividend of $0.25 per share to be paid on October 15 to stockholders of record as of September 30. The dividend currently translates to an annualized yield of approximately 6.5% based on recent trading levels. Turning to guidance. We are increasing both our RevPAR and earnings guidance ranges to reflect our second quarter outperformance and strong start to the third quarter as demand trends continue to exceed expectations across our portfolio. Accordingly, we are raising our full year RevPAR outlook by approximately 225 basis points at the midpoint to a new range of 3% to 4.5%. This updated outlook reflects the roughly 370 basis points of outperformance delivered during the second quarter as well as stronger-than-anticipated results at the start of the third quarter with July RevPAR increasing 8.5% driven by continued strength in Hawaii, Key West, Austin, Santa Barbara and Washington, D.C. Based on current booking trends and recent operating performance, we now expect third quarter RevPAR growth to trend toward the upper end of our revised guidance range and exceed prior expectations. From an earnings perspective, we are increasing adjusted EBITDA guidance by approximately $25 million at the midpoint to a new range of $617 million to $637 million, while adjusted FFO guidance increases by approximately $0.13 per share at the midpoint to a new range of $1.90 to $2 per share. This increase to guidance also reflects an assumed increase in expenses of 3% to 4%, with a stronger demand environment and higher occupancy expectations across the portfolio driving increases in variable costs such as labor and utilities, partially offset by reductions in fixed costs with $11 million in benefits achieved from successful property tax appeals in the second quarter and a 20% reduction in property insurance premiums achieved during the June 1 renewal of our program. In addition, with respect to Royal Palm, our outlook assumes only a modest earnings contribution from the hotel in the back half of the year with more meaningful earnings growth expected in 2027 and 2028 as the hotel ramps towards stabilization. We are encouraged by initial booking trends with group and transient ADRs for the balance of this year, up 21% and 53%, respectively, compared to pre-renovation levels and tracking ahead of our expectations. These early results reinforce our confidence in the property's long-term earnings potential. Royal Palm is one of South Florida's premier lifestyle resort assets, and we continue to expect meaningful earnings growth as occupancy, ADR and ancillary revenues billed through the stabilization period. We look forward to welcoming many of you to the property during our November investor tour and showcasing the exceptional transformation firsthand. Finally, the recently completed dispositions of the 3 non-core assets Tom spoke to earlier, are expected to reduce second half EBITDA by approximately $3.5 million, which has been reflected in our updated guidance. This concludes our prepared remarks. We will now open the line for Q&A. [Operator Instructions] Operator, may we have the first question, please?

[Operator Instructions] And our first question will come from Floris Van Dijkum with Ladenburg Thalmann.

So obviously, results are solid, and the sale of non-core makes it easier to see the quality of the portfolio. You've outlined in the past sort of upside in EBITDA. I think you said about $100 million of EBITDA over 25 levels simply from Hawaii and the Royal -- and the Royal Palm Beach. And then there's an incremental potential other $100 million probably from urban and from Orlando and other assets that you have. Maybe talk a little bit about the timing of when you think that potential $200 million of EBITDA could hit the bottom line in the portfolio?

Floris, thank you for your question. I appreciate all the listeners. I think the $200 million might be a little overstated. We've really focused more around $100 million. That would be sort of the $60 million to $70 million sort of recovery of Hawaii. And then, of course, as both Sean and I mentioned in our prepared remarks, about $28 million, plus or minus upon stabilization for Royal Palm. So I would sort of anchor you in that, and I would just step back and think again about what we've been saying for several quarters and the last few years, and we've been laser focused on reshaping the portfolio. We've sold or disposed of now 55 assets for north of $3 billion. We're really down to 21 core hotels and that's 9 sort of remaining non-core that only account for less than 5% of value of the company. I think that's important. 3 of those 9 are part of the dispute, which don't really require a lot of discussion at this point and only about $16 million in EBITDA. The other 6 assets account for approximately $35 million in EBITDA, and we've got work streams underway. So we are making, as promised, significant progress, and we expect to be substantially complete by the end of the year. And then secondarily, we have been laser-focused and relentless on and really demonstrating our track record with these transformative renovations. We've said before and we'll say again, we think we can generate higher development yields over acquisition yields. And if you think about Bonnet Creek and the extraordinary success we're having with that property, if you think about the Key West 2 assets in our portfolio there, again, outstanding an outsized results, Hilton Hawaiian Village with Tapa Tower, the Rainbow Tower. And what's amazing about Hawaii when you step back, the market was largely flat, but we grew at Hilton Hawaiian Village up 12% in Hilton Waikoloa even though down slightly because it's coming back online after renovating the Palace tower, again, still gaining share at Hilton Hawaiian Village pretty dramatically there. And then again, as you think about New Orleans and the work that we've got underway there in the third phase, Royal Palm, as we mentioned, having that completed on time. So very, very bullish as we think about the future, and I think strong execution on part of the team across the board, whether it's selling the non-core, whether it's obviously the transformative renovations, we continue to create value and a lot of that being organic, and we think that is a way that Park can really separate itself as we move forward.

My follow-up is actually regarding the capital allocation towards redevelopment or ROI projects. I mean you guys have done -- had a really strong track record of getting, call it, 20-ish percent returns on invested capital in Orlando and in Key West. You've got a number of other potential projects in the pipeline as well. Could you maybe touch on the A and B Tower, the additional tower in Hawaii Village, Santa Barbara and I believe Waikoloa and how investors should think about investment and deployment into those assets over the next 2 or 3 years?

Yes. I would, again, make the kind of broad statement. I think we have an underappreciated iconic portfolio and when you step back and look at it, there really are improving fundamentals and I think outsized growth opportunities from 2026, the second half really through 2028, and those are markets in Hawaii, that's Miami, that's Key West, that's Orlando. And if you step back and think about Hawaii again, the Ali'i Tower, Oceanfront Premium Tower, a hotel within a hotel that's got its own check in. We're going to close that down 348 keys here in the coming weeks with the expectation that we will reopen that in early next year. I could not be more excited. I think it will again demonstrate Carl Mayfield and his design and construction team at Park and their extraordinary work, so we're excited. And again, the whole objective is closing that $60 million to $70 million gap that we've been talking about in Hawaii. Royal Palm, as we mentioned, is now open. And I would also reemphasize open largely onetime as we communicated, as we planned. There are many hoteliers, some in our space and others outside that there are $4 billion plus or minus in development projects in Miami. The fact that we were on time, largely on budget is a real credit to our unique ability to both plan and execute these types of projects. As you think about Bonnet Creek, we've continue to get growth and market share gains there. We've taken Bonnet Creek from $62 million in EBITDA. We're tracking towards $105 million to $110 million this year, and we are still not at fair share. Let me repeat that again. So we're up 60% to 70% in cash flow but we are still not at fair share, very competitive comp set, but it still gives us the opportunity for additional growth there, which addresses your issue about us continuing to grow cash flow. So really excited about that. Key West continues to outperform as we outlined across the board, and again, very strong RevPAR index performance there as well. And Hilton Santa Barbara is another that we look at along with our partner that we think a comprehensive renovation there could generate outsized returns as well. So those are what I would call in the lineup, outsized opportunities for significant growth. The AMB tower really don't want to talk about. Our plan there is to get it entitled. We do not think it makes sense to move forward with that at any point in the near future and are more focused on existing towers at this time. So with that, I'll stop. And so I know we've got other people in the queue.

Our next question will come from Duane Pfennigwerth with Evercore ISI.

Just given the sell-down of noncore hotels and the completion of the Miami asset, the Royal Palm, can you just speak to the longer-term trajectory of capital spending? Is this an above-average year should it been down? Or is this a level we should think about sustaining going forward?

Duane, this is Sean. I mean I think it's safe to say it's something that we would think is coming down. From a maintenance CapEx standpoint, and clearly, it's elevated because you've done some of these big ROI projects like Royal Palm, proceeding that, we've clearly done a lot of investment in Florida between Bonnet Creek and Casa Marina over the last couple of years prior to this year. So in the end, I think you kind of see it more of a -- on any big ROI projects. It's more of a maintenance CapEx that's going to be south of $200 million kind of on a run rate basis. As we think about some of these projects and certainly think about an overall capital allocation strategies and ultimately what the market is kind of driving, maybe if we ultimately see a different project that makes sense from an ROI perspective, could increase from there. But from a baseline, I would say it's coming down to the below $200 million.

And then just with respect to the upgrading guidance and across the sector, probably some of this is just good job expectation setting by the CFOs. But I guess what was your biggest surprise as you look at your own portfolio in 2Q. And specifically, what's embedded in the second half, maybe it's the same answer, maybe it's a different answer. What was the biggest surprise relative to your own internal expectations?

Look, I would say it was a broad-based surprise in a sense. I think the portfolio overall performed really well. I mean clearly, in Q1 earnings, we were talking about guidance, we still kind of -- we're looking at somewhat of an uncertain world. And with gas prices going up and all the things we know about, you certainly had some hesitation there and some uncertainty. So the surprise to see the resilience in the consumer and seeing [indiscernible], which translated to good leisure growth in the quarter for the quarter pickup really drive group for us, 700 basis points better than expected. So it was across the board. We do see early good start to Q3, and we certainly think that can continue some of these baseline macro elements here. That said, we will certainly want to be -- make sure that we're continuing to exceed expectations. So we're setting things appropriately.

And Duane, I would agree with everything Sean noted. I would also echo that that we're in the World Cup, we didn't think World Cup would be a big contributor to Park, and it essentially performed as expected. We think, again, that sets us up for '27 not having some of those difficult comps that perhaps others may have.

And we'll go next to Smedes Rose with Citi.

I wanted to ask you first, Tom, you mentioned group pace is up 6% for 2027. Could you just talk a little bit more about that? Is that bookings, is that revenues? And kind of where are you now, I guess, in terms of percent of rooms sort of on the books for next year kind of relative to your expectations?

Yes. I would -- Smedes, if you look at '26, as Sean said, we're 5.5%, 6% for the balance of '26. We were up 9.5% in the second quarter. We're looking to be up 15% is our pace in the third quarter, which is very strong. About 96% of our business is on the books, plus or minus. And I would say it's broad-based as we look just Q3, Hilton Hawaiian Village is strong, Casa is strong. Hilton Caribe, Santa Barbara, Denver, New York, Chicago. So again, we continue to see broad-based there. As we look in '27 and just focus on the core, it's really over 6% and New York City is strong, double-digit, Key West, Miami off the charts, obviously, is part of the reopening. Hawaii double-digit, San Francisco double digit. So very encouraged as we sort of look out. And even beyond that, as we look to early '28, '28 looks encouraging as well. So we are very bullish. And again, we've been intentional. We've been really sharp shooters on the capital allocation front, making sure that we're investing in our core portfolio where we can make money. And particularly, if we can take the big boxes and anchor them with significant group allows us to better yield those assets in much better profitability. And I think you're seeing results the last few quarters are great examples of that. Second quarter and we remain very bullish on the third quarter. But as Sean mentioned, we're going to be cautious. And I think certainly, our guidance reflects that.

And I would just add, too, in terms of the breakdown, I would say this year, group pace is more so on the occupancy side, but next year is more balance between [indiscernible] and rate.

Great. And Sean, can I just ask you to -- so you mentioned on the release of $11 million of positive real estate tax appeals. Are those kind of onetime? Or would you expect the property level EBITDA to be enhanced now with kind of a lower run rate tax basis going forward? Or maybe you could just sort of talk about the impact of those appeals.

Yes. I would say large part -- I mean, maybe a couple of more onetime. But really, the biggest driver of that was Chicago. I think those who kind of follow Chicago enough, there's probably some in a few of us in our peer set to have exposure in Chicago, where it's kind of an annual routine in a sense where you kind of are sealing each year essentially and ultimately, getting a benefit somewhere in the Q2 to Q3 time frame. If you recall, last year, we had about a $5 million benefit from an appeals win in Chicago. This year, it's about $6 million. So a little bit better than that, embedded in that $11 million. The other ones were ultimately onetime in a sense in nature, one of them which was for an asset that we sold recently Short Hills. So in a sense, if you look at our comp portfolio, which shores [indiscernible]no longer in, the net year-over-year impact is not that dramatic. And I would say, when we think about the basis point margin expansion we have for the quarter, it was 80% overall, but excluding that, it was about still 40-plus basis points better. So it will -- as we look at kind of -- let's say, fixed cost in general because that's certainly what we can kind of directly influence that a lot more -- work being done in a number of -- not only on the tax side and working on the deals, but also on the insurance side. As you look at first half, we were probably on average about 1.5 points down year-over-year on fixed cost. And with insurance helping us in the back half of the year, it's still probably about 0.5 point below. So we continue a benefit and an offset to any other cost increases we're seeing elsewhere in the operations. for the rest of '26.

And we'll hear next from Dan Politzer with JPMorgan.

I was hoping we could maybe parse out, there's a lot of moving pieces, obviously, in '26, but maybe it's a bridge to '27. Maybe just kind of the big kind of building blocks between Royal Palm, Hawaii, the non-core dispositions and the property tax, if you can kind of run through that, I think it would be helpful.

Certainly, a lot to discuss there. I would say, as you think about, I mean, '27, we'll just kind of maybe keep it pretty broad here. Ultimately, we talked about group pace. I think that's a kind of a core foundation of visibility into next year. And certainly, we don't want to get too detailed now we're thinking about guidance in any way, shape or form year. But group pace being up 6% for the core portfolio, a good balance in terms of resort and urban exposure to that. Tom talked about some of the certain markets that look pretty good. So we've got that as a foundation for the portfolio. Royal Palm ramp is certainly going to be a big story for us, and we're very happy how the product turned out and how it's certainly getting some early looks and positive feedback. I would think as we think about its impact for next year, if you just kind of take what it did in essentially before we put it under renovation last year. You kind of add that to our performance and think about '27. It's probably about 150 to 200 basis points positive impact to tailwind, just if you take, again, its performance in '24. Clearly, we want to exceed that as we ramp up into next year. I won't be fully stabilized, but you can certainly see potential for doing better than that in terms of helping the portfolio out next year. In terms of Hawaii, group pace for next year is combined 12.5%, [indiscernible] is up over 20%. We're seeing great lift and good momentum from Waikoloa coming off the Palace Tower renovation. We expect to see Q2 rate was up 11%, again, benefiting from that. HHV, of course. We've got the Ali'i Tower being renovated, as we mentioned. We'll come off of that in the later part of Q1 and certainly expect to see the benefits of that like we're seeing with rainbow. And certainly, it's lapping the back half of '27 would ultimately be rooms out of order for Ali'i Tower in the back half of '27. So positive momentum, I think, as we kind of go kind of Q2, the back half of the year, on the Hawaii side. I think even beyond '27, I think from a Hawaii standpoint, in a good Waikoloa story is the property recently took in some business from a -- from an incentive group for the year that basically represents 10% of the revenue expected to generate this year. So a big program, a big win for the team as we kind of think about the Hawaii recovery story over the next couple of years and certainly a good nugget there for Waikoloa.

Got it. I know that's a mouthful, there's a lot there. I guess kind of more high-level question, you've made good progress on the non-core asset sales. as you kind of wind that down and there's fewer and fewer left and the contribution becomes smaller, is there any thought as to just kind of collapsing the non-core into the core and just kind of having one kind of clean number on a go forward?

It's a fair question. It's one that we'll study. I think, candidly, will depend on sort of where we are at the end of the year. We remain committed to cleaning up the portfolio and reshaping it. And I do think as you look at the core, there's about a 63% difference, obviously, in RevPAR from about $215 plus or minus to $131. And if you look at margins on core, it's about 30%, 31% versus about 16%. So pretty significant difference there. We're confident we're going to continue to make significant progress and get to the point where really the non-core is really in materials as we sort of move forward.

Our next question will come from Patrick Scholes with Truist Securities.

A similar question I've been asking other companies on earnings calls. And that's what percent of your hotels do you believe would qualify for Hilton's new RISE program or Marriott's equivalent program?

Well, clearly, this is a program that Hilton's rolled out this franchise and ownership community. When you think about our portfolio as we talk about, our portfolio is certainly heavily Hilton and call it, 85% to 90% of our business is coming from Hilton. So I'd say that's clearly the lion's share. We've got the rest kind of mix kind of evenly between Marriott and Hyatt. So certainly, it's the [indiscernible] prize program that's kind of for us. I mean, I'd say, in [indiscernible], the immediate benefits, I think, are certainly helpful, but I'd say kind of marginal as kind of as noted. And as we know, there are gating criteria that will -- franchisees like us will have to meet and we're kind of -- I think, like us, franchisees want to evaluate feasibility and timing to achieve the potential of the benefits that they're giving. So we expect it to evolve over time. I mean, clearly, Hilton is looking at ways to address owner profitability, and we certainly appreciate their focus on that. We believe and expect that this is one of many ways to do that, and they're certainly working to identify the ways to improve the operating model and owning profitability.