Greetings, and welcome to Park Hotels & Resorts First Quarter 2018 Earnings Conference Call. At this time all participants will be in a listen-only mode. A brief question-and-answer will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. I would now like to turn the conference over to Ian Weissman, Senior Vice President, Corporate Strategy. Please go ahead.

Thank you, operator, and welcome, everyone to the Park Hotels & Resorts first quarter 2018 earnings call. Before we begin, I would like to remind everyone that many of our 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. In addition, on today's call, we will discuss certain non-GAAP financial information such as FFO and adjusted EBITDA. You will 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 Web site at pkhotelsandresorts.com. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide an update on capital activity during the quarter, a review of our first quarter 2018 operating results and an update to 2018 guidance. Sean Dell'Orto, our Chief Financial Officer, will provide further detail on our first quarter financial results, an update to our balance sheet and additional color on our value-add CapEx projects and Caribe insurance claim. Rob Tanenbaum, our Executive Vice President of Asset Management, will be joining for Q&A. 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 announce another successful quarter during which we actively demonstrated significant progress toward our strategic goals. Specifically during the quarter, we successfully executed on two of our corporate guiding principles of operational excellence and prudent capital allocation by delivering better than expected RevPAR and margin performance While redeploying the capital from our non-core assets sales to buy back stock at a significant discount to net asset value. These achievements highlight our unwavering focus on creating shareholder value and delivering meaningful returns. Turning to operational results. Q1 came in better than we had expected with comparable portfolio RevPAR increase of 1.1% and relatively flat margins down just 10 basis points. Expense growth came in at just 0.5% during Q1, highlighting the positive impact the asset management team continues to have on margins despite rising labor cost and higher property taxes. In addition, reported adjusted EBITDA of $173.6 million came in above our internal expectations. Results during the quarter were driven by the continued strength across our Florida properties and Orlando in particular. This strength was largely offset by softness in Chicago and San Francisco as well as renovation disruption in New York, San Francisco and Santa Barbara. Excluding renovation displacement, our Q1 comparable RevPAR would have increased 2%. Diving into our major markets, our Orlando hotels continued their outperformance from 2017. Our Bonnet Creek Complex benefited from strong group production and healthy transient demand resulting in RevPAR growth of 7.2% and food and beverage revenue growth of nearly 15%. Due to strong banquets and catering revenues, which were up roughly 20% during the quarter, hotel margins improved 365 basis points across the complex. Staying in Florida, I'm happy to report that our two Key West properties have recovered ahead of schedule following the…

Thank you, Tom. Looking at our results for the first quarter, we reported total revenues of $668 million, an adjusted EBITDA of $174 million, while our adjusted FFO was $137 million or $0.65 per diluted share. Turning to our core operating metrics, our comparable portfolio produced a RevPAR of $166 or an increase of 1.1% during the first quarter. Our occupancy for the quarter was 78.5% which was flat year-over-year, while our average daily rate was $211 or an increase of 1% versus the prior year. These top-line trends resulted in hotel adjusted EBITDA of $159 million for our comparable portfolio, while our hotel adjusted EBITDA margin was 26.9% or just a 10 basis point decrease from the prior year. With respect to CapEx, we invested $48 million in our hotels during the first quarter including $30 million spent on guest rooms, lobbies and other guest spacing areas. As we recently announced, we completed the $14 million renovation, rebranding and repositioning of our Doubletree Fess Parker hotel located in Santa Barbara to the Hilton Santa Barbara beachfront resort. The scope of work until the remodel of the hotel's 360 guest rooms and bathrooms and a full renovation of the hotel's 40,000 square feet of meeting space, while further enhancing the arrival experience, entirely new flooring, soft seating and case goods throughout the lobby. In February, we completed the final phase of guest room renovations at the Hilton San Francisco Union Square. The $16 million project includes a full renovation of 407 existing guest rooms while converting excess office space into two additional keys. And in New York, we recently wrapped up an additional phase of rooms renovation which included 371 keys for a total spend of $26 million. We are excited about these upgrades particularly the upbranding of our hotel…

Yes, thank you. Your first question comes from the line of Rich Hightower with Evercore ISI. Please go ahead with your question.

Hey, good morning guys.

Good morning, Rich. How are you?

I'm doing well. It's been a busy week for us. Thank you for asking. So, I would like a little more color if you can give it on the sort of second phase of asset sales, which is sort of news to the market here this morning. Just any further color on the characteristics of those assets, I know you gave out the EBITDA contribution. And then, secondarily if you think about sources of funds obviously the 10.31 proceeds would be included there. But how do you feel about your cost of equity capital now that a lot of the noise is out of the way, the stock has performed well post H&A and you guys are in a better position than you were 90 days ago. Just how do we think about all the different moving parts there?

Great. All questions, Rich. On the last question regarding, how do we feel about our stock price, cost of equity certainly better today than it was 90 days ago. I will still say that I'm a net buyer of our stock than I am a seller of our stock. Look, we are laser focused on continuing to demonstrate really those core values that we talked about time and time again that is of the operational excellence being a big allocator, prudently managing our balance sheet. Obviously as you know, we also talked about our internal growth strategy, cycling capital, our live project, improving margins and of course grouping up and we think by continuing to execute that, hope and expectation is that we're going to continue to improve our cost of equity that will [indiscernible] move up and allow us to go more aggressively on an offense. So with that sort of backdrop. Looking at our portfolio really the top 25 assets, it counts from really north of 85% of our EBITDA plus or minus. So look at the success of the first phase and again the 12 that we sold for $379 million. We effectively used that to anchor the H&A, secondary to buyback 40 million shares at $24.85. I think by all accounts, it was a seamless, flawless execution fully benefit of the stock from that standpoint. Also improve the overall metrics of the portfolio. Look at the second phase, again, we're looking at another five days assets RevPAR those approximately a $112. They are 33% to 35% below the portfolio average margins much lower and also capital intensive. So our view is prudent case here to continue to market and sell those and use those proceeds most effectively, mostly U.S. assets and at 10.31, so that we could use the opportunity to both brand -- diversify both brand and by operator. And we certainly like their natural families of brands both Marriott and Hyatt come to mind among others. Certainly want to grow and expand our relationship with and we think that's important. Really over time, we want a diversify that. You'll see that more and more work and a lot of effort towards that in the coming months and with our hope and expectation that that we can add another flag to the portfolio calendar year 2018.

Okay. great. That's a helpful color, Tom. My second question here since I get to, just given the size of the asset and the contribution to the pie. To talk about Hawaiian village really quickly, how long will the runway so to speak be on the air lift changes in Hawaii that sort of impacted that asset in the first quarter, when do you sort of expect that effect to anniversary?

Talking about Waikoloa? Are you talking about Hawaiian village?

No. I'm talking Hawaiian village. That was the one that was negatively impacted, yes.

Yes. I mean, listen, Hawaiian village is -- my humble opinion is, I think one of the most iconic assets in all of the lodging REIT space. When you think about, it's still running, I think 94% occupancy in the first quarter. If you look historically, it runs mid 90s, five towers, nearly 3000 guest rooms, 145,000 square feet of retail, 96,000 square feet of green space. The tower this year will celebrate I think its fiftieth anniversary. We're looking at -- there is an out parcel that we're looking at getting control of and efficiency looking at over time, continuing to master plan, just irreplaceable from that standpoint. So really the isolated issue was just first quarter, the team is working aggressively to continue to build our Asian wholesale business and we're confident we'll be able to replace that if you look at the group pace. In the second quarter, I believe it's up 14%. So without question believe we'll be back at getting to the ground aggressively and strong performance will probably finish the year in low to mid-single digit RevPAR growth. I feel great about that asset and I don't know of an asset that contributes more EBITDA, in fact that size of -- size of some of our peers, so I will put in that perspective.

Got it. Thanks Tom.

Our next question is from the line of Smedes Rose with Citi. Please proceed with your question.

Hi, good morning. It looks like Hilton. Good, thank you. It looks like Hilton is going to follow Marriott in reducing commissions paid to third party intermediaries for group bookings? Could you talk about what percent of your group bookings come through these third parties now?

I would say approximately Rob correct me, I think approximately good commissions are about 45% I think comparable to many of our peers. We think this move by both Marriott is prudent, it's appropriate when you look at the acquisition costs across the business and across the industry. We got to continue way, there is an industry that continues to lower our cost of acquisitions. So we thought this was a prudent, necessary and a wise move and we wholeheartedly support it.

Yes. Make sense. The other thing I just want to ask you on the special dividend from the asset sale in Berlin. Is it cash dividend requirement or would you have a choice or an option of doing 10.31 exchanges with that or because it's in Europe or some other rules that it would be a cash distribution?

Couple of things. It's in Europe and it's also a stock sale. And so we've framed it, we've studied it carefully both our internal and external advisers. And we estimate again that a special dividend is the most appropriate course. Again, in an aggregate $80 million to $90 million range subject of course to Board approval. And again, I think it shows further evidence, think about the -- both assets that we sold and how efficiently we went through and insulated from a tax standpoint there and minimized any tax payments and use those proceeds again to buy back stock. You see this is a prudent allocation about -- think about an asset, we only own 40% of it. It shrinks really our international portfolio which is kind of desired to do and returns to capital and I think under a -- hasn't closed yet, but under very, very attractive pricing for the benefit of shareholders

Okay. Thank you. Appreciate it.

Our next question comes from the line of Anthony Powell with Barclays. Please proceed with your question.

Hi, good morning everyone.

Good morning, Anthony.

Good morning. Tom I think you mentioned some corporate transient weakness in your prepared remarks mostly other peers have talked about stronger than expected corporate transient. So was your corporate business impacted by some property specific issues? And what's your view on that for the rest of the year?

I think it's really isolated Anthony and like many of our peers look we are encouraged when you think about deregulation and think about tax reform, look at unemployment come down to probably an 18-year low, consumer confident up to perhaps an 18-year high. So I think there's a backdrop. Fiscal spending and improving about [$300 billion] [ph] I think over the next two years. So we see all of that being incredibly positive for the industry and for our portfolio on particular. Couple of things that I would note is, as you know as we talked about our internal growth strategy we have been laser focused on grouping up. Look at this portfolio, hard portfolio, our Top 10 assets or 65% to 70% of our EBITDA. And we've got 10 assets with over 125,000 square feet of meeting space. We concluded with the framework of our asset management team and Rob Tanenbaum and really and our partners at Hilton that it makes most sense to group up. So we've made a commitment to grow our top 25 hotels from 31% to up to about 35%. Both across the portfolio we're seeing evidence of that even in first quarter that group was 33% percent and transient around 60% of our overall portfolio. We also grew our contract business by almost 18%. Our group pays for 2018is up nearly 3.6 for 2019 again approaching 7%. Again, if you look at the second quarter, we're looking at a very strong quarter, our group pace is up nearly 16%, we expect RevPAR will probably be in the mid-single digit range. But we look at a San Francisco group of pace up 40% percent, New York City up 33%, Chicago Hawaii, Key West all up double-digit. So we're very, very encouraged. Transient is still flat to slightly negative. But in part that's because we're so focused on grouping up. We're confident that seeing some evidence of improving transient. Like many of our peers and expect that's going to continue to benefit the intermediate and long-term by anchoring our portfolio long group and contract business will allow us to yield our business that are -- throw the ancillary forms of revenue. And most importantly margins and cash flow. So we're very encouraged that we're making progress based on all the things that we've said all the initiatives that we put in place.

Got it. Thanks for that. And you've been pretty vocal about your desire to consolidate the lodging REIT sector, but you said in the past that you need to hear multiple to increase before you would, you answered Rich's question implies that you still want a higher multiple but if you could just comment on your approach to M&A generally right now.

I wouldn't be here. If I didn't believe passionately that hard platform [indiscernible] a great opportunity for long-term growth for all the stakeholders for our associates, our investors and I think the opportunity to be a participant and what I hope will be a consolidation of our segment. It's highly fragmented and in appropriate time, we certainly want to be a part of that discussion and on multiple currencies not in the position today that really allows us to take advantage. We are working hard to improve that. And I think look carefully at our performance over the last year show, see the evidence that we're doing everything we said we would do.

Right. Got it. That's clear. Thank you.

Our next question is from the line of Robin Farley with UBS. Please proceed with your question

Hi. Thanks. This is actually [indiscernible] for Robin. Could you maybe talk about flow through on full year basis in terms of EBITDA. RevPAR is going out 50 basis points and it seems like margins are going up as well but EBITDA went by $5 million and we would have thought that flow through would have been a little bit higher. Is it getting harder to hold margin despite your RevPAR rate being higher than last year?

Let me provide some little bit of comment and then turn over to Rob Tanenbaum. I am really proud of our performance in the first quarter, when you think about again we are up by RevPAR 1.1% and all of those renovations [indiscernible] really on expense growth only up about 0.5%. Our asset management team partnership with property partners that had a lot of credit. I think that's very strong performance all things considered. And now we're confident as we demonstrated last year margins and we are confident that on a relative basis, we will be able to deliver that 75 basis points of incremental margin improvement this year as well. Rob, do you want to add?

Thanks Tom. I would say that the -- from a GOP perspective our flow through was 83.5% on the incremental revenues during the quarter, which is phenomenal. I can credit to our team or team partnership and dealt in. We spent a great deal of time focused on our revenue management strategies and look at new ways to achieve success. And I'll give you one great example. We recently updated our rooms categories that are at Park 55 Hotel. We have 83 rooms that were originally standard entry level rooms for us and walking through the property, the team recognized that we can convert that to a premium level room with a $30 to $40 rate premium associated with that. And if you think about that on a multiple basis, the run rate, that's a significant opportunity. So as we look through the portfolio day in and day out working in partnership with [indiscernible], we believe it's great opportunity for us to further improve our and exceed our margins.

Thank you. That's helpful. One of your competitors yesterday talked about flat margins with 2% RevPAR growth. As you broadly look at good business and transient trends today and kind of look at 2019 and everything you're doing on the cost cutting front and increasing group business as a percentage of mix. Do you feel that something that you could echo that you could have a flatter margins with 2% RevPAR next year?

I would answer though. I think probably a RevPAR and the 2% to 2.5% range that I think that is achievable. But there are a lot of variables that come into play there. But I think that range and given the hard work it's again I think the first quarter is a great illustration. Five was made from last year and your laser focus again on the internal growth story and we are part of that.

Thank you very much.

Thank you. Our next question is from the line of Floris van Dijkum with Boenning. Please proceed with your question.

Great. Thanks for taking my question guys. Tom you talked a little bit about the size and magnitude of the Hawaiian village and if your stock continues to trade at a discount, would you consider potentially JV being that asset to raise capital to diversify away from Hilton?

It's a great question. Look we are really blessed, when you think about the iconic nature of this portfolio, I think provides a lot of optionality for us. There are assets that could make sense to put into a joint venture that provide growth capital at very favorable terms by allowing us to retain control. That's certainly something that will be on the table of options that we explore. Right now more than anything else is laser focus began long-term growth story continuing to recycle capital, continuing find ways to activate the real estate through our return on investment opportunities. What we did at Santa Barbara is a great example of that. What we're planning to do at Bonnet Creek add additional meeting space another example, all the margin initiatives that both Rob and I've talked about, and again continuing to group up. But, listen, all options are on the table to create shareholder value. What you saw in -- how we so efficiently and effectively leveraged the rise that we've had through H&A. Recycle that capital and buy back stock is very attractive pricing sample. So this team is very seasoned, very skilled and make sure that we're allocators. We will not be launching and facing equity at this price and I'm a buyer for a stock at this price. I'm not a seller.

Thanks Tom. One follow-up I guess, Tom maybe talk a little bit more mention the -- I believe you have specialist sales group that would be impact of pursuing group sales and how is that bearing fruit, what do you think the impact is going to be going forward?

Let me first give credit to Rob and team. We have been working in partnership with Hilton and credit to Rob and management team has been proactive in a lot of the concept.

Great. First, the 100 concept, we added four business development managers on June 5, 2107. Last year the team generated over $2 million of incremental business for us. And this quarter alone Q1, we are almost 5000 rooms that's almost $1 million. Our goal for 2018 for this particular group is $6 million dollars, which is three-fold what we had in 2017.

Great. Thanks.

Thank you. Our next question is from the line of Shaun Kelley with Bank of America. You proceed with your question.

Hi, good morning everyone. Thank you for taking my question.

Tom, how are you?

I'm good, Tom. Thank you. I just wanted to ask, I think in the prepared remarks you mentioned a little bit about some of the non-room revenue initiatives you guys have underway specifically, I think you talk a little bit about parking and urban amenities. Can you talk a bit more about that and sort of what inning or what stage you are at rolling out some of those initiatives across the portfolio?

Shaun, we continue to maximize our resort the opportunities looking at how we're priced in the market and the amenities that we're providing for those fees. So we're looking -- we're continually moving the speed and we are very successful of doing that. Throughout the portfolio, we're also renegotiating our parking contract for example at By Creek, we had a new parking arrangement started on May 1, which would yield quite great return for U.S. renegotiating and terminating previous operator with new operator. We're also looking at retail leases. We had a director of retail, a senior director of retail leasing, who does a phenomenal job of driving new revenues for us could be a small of rooftop antenna or our car rental agreement at desk. Everything that we're working through the hotels, we feel like we're in the middle innings here with some additional room to grow. And in fact, in this quarter alone our ancillary revenue grew 12% or $5 million

Shaun, I would point out as you, looks the team has been together now. This is the second year since I rejoined Hilton to spin this out. But really 14-15 months as a new independent public company and already showing great progress. Again, it moves 47 basis points last year and $12.5 million of various initiatives, got another $20 million, so I will just identified a bunch of those 75 basis points for this year. So we are really acting on all of the comments, I know [indiscernible] about all those initiatives and showing progress against each and every one of that.

And these type of initiatives, I mean, the first thing is, you are talking especially leases and parking fees. I would assume that these are probably pretty high margin in terms of both flow through and overall. Are they enough to impact the overall company wide margins at this stage and can they be?

Shaun absolutely. From a margin perspective, it's a very high margin proposition for us. And as we go work through each and every hotel here, one of the items, [indiscernible] last year at Key West was through maybe some biographic on an additional 21 parking space available to us at Casa Marina resort, and if you can take in a run rate on that that's a huge opportunity for us. Thank you very much.

Great. Thank you very much.

Thank you. Ladies and gentlemen, we've reached the end of the question-and-answer session and I'd now like to turn the call back to Mr. Tom Baltimore for closing remarks.

Thank all of you for taking time today and look forward to seeing many of you in the coming weeks. And certainly see all in NAREIT. Safe Travel. Happy Spring.

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