Greetings and welcome to the Park Hotels & Resorts Third Quarter 2019 Earnings Conference Call. [Operator Instructions] As a reminder this conference is being recorded. It is now my pleasure to introduce your host; Ian Weissman, Senior Vice President, Corporate Strategy. Thank you Mr. Weisman you may begin.

Thank you operator and welcome everyone to the Park Hotels & Resorts Third Quarter 2019 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 law. 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 the 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 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 file with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com. This morning, Tom Baltimore, our Chairman and Chief Executive Officer will provide an update on the Chesapeake acquisition and integration review of our third quarter 2019 operating results, a summary of our capital recycling efforts; and finally an update on 2019 earnings guidance. Sean Dell'Orto, our Chief Financial Officer will provide further detail on our third quarter financial results, an additional color on our earnings guidance. Rob Tanenbaum, our Executive Vice President of Asset Management will be joining for Q&A. Following our prepared remarks, we will open the call up for questions. Please note that most operational results focus on the legacy Park portfolio due to the fact that we only owned the Chesapeake assets for 13 days in the quarter. With that I would like to turn the call over to Tom.

Thank you Ian. And welcome everyone. The third quarter was a transformative quarter for Park. Less than three years after launching the company, we successfully executed on our long-term strategic plan by completing the acquisition of Chesapeake Lodging Trust, a $2.5 billion transaction that accelerates our progress towards achieving several long-term goals. First, bolting on Chesapeake to the Park platform provides instant brand, operator and geographic diversity. Second, it improves the overall quality of our portfolio. Third, it enhances our scale providing us with a larger platform to enact asset management initiatives and best practices, while also diversifying our earnings base. And fourth, the acquisition helps to increase our portfolio-wide growth rate, giving us more levers to pull for asset-specific growth strategies. Overall when factoring in Chesapeake's strong group calendar coupled with the $8 million of net operating synergies we underwrote, we expect Chesapeake's portfolio to add approximately 80 basis points to overall RevPAR growth in 2020. Despite softer industry-wide trends, we believe Park is very well positioned to take advantage of several identified opportunities within the Chesapeake portfolio to create value and outperform on a relative basis while reaping the benefits of scale, liquidity and value accretion over the long term. I remind listeners that Park has established a solid track record of executing on our strategic goals as evidenced by the superior margin growth delivered over the last two years, while generating among the sector's highest total return including returning over $2.1 billion of capital to shareholders since spinning out of Hilton in January 2017. By applying a similar asset management playbook to Chesapeake, we expect to unlock significant embedded value within that portfolio. As we move through the remainder of this year and into 2020, we are cognizant of the ever-changing macro backdrop, but we are also…

Thank you, Tom. Looking at our results for the third quarter, we reported total hotel revenue of $650 million and adjusted EBITDA of $180 million. Adjusted FFO was $140 million or $0.68 per diluted share. Turning to our core operating metrics which exclude Chesapeake, the comparable portfolio produced a RevPAR of $184 or an increase of 1.9% compared to the third quarter of 2018. Our occupancy for the quarter was flat at 83.7%, while our average daily rate was $219 up 1.9% year-over-year. These topline trends resulted in hotel adjusted EBITDA of $172 million for our comparable portfolio. While our comparable hotel adjusted EBITDA margin was 28.1%, which is a 20 basis point improvement over the prior year. In addition to the choppiness Tom discussed earlier, third quarter results were negatively impacted by a 28% increase in insurance premiums, although overall expense growth for the full year 2019 is expected to remain around 3%. Further indicative of our ability to control expense growth despite industry-wide wage pressures and rising property tax and insurance costs. With respect to out-of-room performance, we continue to drive mid to upper single-digit growth in ancillary income including resort fees and parking revenues. While as Tom noted, food and beverage revenues increased by 12% this quarter. Further on guidance, we're adjusting our 2019 earnings guidance to include the Chesapeake acquisition which closed on September 18th. Accordingly, we are increasing our full year adjusted EBITDA guidance by $30 million at the midpoint to a new range of $768 million to $788 million while our new FFO per share range moderate slightly to $2.80 and $2.90 per share given some of the weakness we are seeing across several of our core markets. Additionally, we are reducing our full year comp margin guidance by 60 basis points at the…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Gregory Miller with SunTrust Robinson Humphrey. Please proceed with your question.

Thank you very much. Good morning.

Good morning, Greg. How are you?

Tom, I'm fine. I’m on line for Patrick Scholes. First question is a high level question on revenue management strategy. Chesapeake in our view historically had very high occupancies, which can be commendable in many respects. However, there could be some opportunities from your end to mix shift to push an overall higher rated customer perhaps with some occupancy loss, but you may be able to drive both RevPAR and then therefore profit growth. So assuming that these assumptions are reasonable, how material do you view this incremental revenue opportunity and especially in today's low RevPAR growth environment?

It's a great question, Greg and certainly one that we studied intently. And Rob Tanenbaum and our great team -- great asset management team have met with all the operators. We're now beginning the budgeting process. And we should think about one of the fundamental tenets that we talked about after we announced the deal, and again in my prepared remarks we talked about the 80 basis points of incremental growth. And if you step back and think about those categories there are operational initiatives grouping up, remixing the mix. There's a very favorable convention calendar particularly on the assets from Chesapeake there were Baltimore, Chicago, San Diego, Boston, D.C., Denver and Miami. There's also the renovation tailwind that we're going to see coming from Hilton Checkers Hotel, Indigo in San Diego, Seattle and High Emission Bay. In addition, sort of, revenue management strategy. So all of that and -- while I want to isolate on your question, I also want to point out that there's a lot of work and thought into this process in our underwriting. So we've reaffirmed the underwriting and we're confident that we can achieve that upside, of which remixing the mix is a component of that. Rob anything you want to add incrementally to that?

Sure. Greg -- one of our hotels we were looking at and we bought in early October. And this past week, we were able to grow share over 28% of this hotel by reducing occupancy 2%, while growing the rate over 37%. So it's just an example of what we see available to us. This is again only one week but in working in partnership with our hotel teams, we believe there's opportunities throughout the portfolio.

Great. Thanks very much for all the color. And this is just a quick follow-up question. We've got a number of questions from investors asking about any demand impact in the California markets from the various buyers. Is there -- are you seeing any of that in your hotels? And if so is there any impact reflected in guidance?

No. It's minimal. The Doubletree Sonoma had was I think about 22 miles away. We picked up some incremental demand but it's certainly not significant for our portfolio.

Okay, great. Thanks very much.

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

Hi, good morning, everyone.

Hi, Anthony.

Hi. Just a question on 2020, you mentioned that your group pace was about flat given the kind of weaker transient environment, what does that imply for overall just RevPAR growth potential next year to some of your initiatives like remixing the mix result in growth next year or is kind of flat more of an appropriate assumption?

No, it's a great question Anthony. I think the reality probably high behind right now I think the rhetoric that both Hilton and Marriott provided a kind of 0% to 1% or 0% to 2% range. I would say that I would certainly expect wherever we land with guidance that Park would be on the higher end of that range given the incremental growth that we expect obviously as part of the Chesapeake bolt-on. As I mentioned there are a series of initiatives there's a natural benefit obviously given their commission footprints, given also the fact that there's also the renovation tailwind on a number of assets. So asking today, I think that 0% to 2% range seems reasonable. As we think about group, I would not read too much into those numbers. I'd like to step back and remind listeners that we think our internal growth strategies of both recycling capital where we've had a lot of success ROI projects improving margins and grouping up is really an all-weather strategy and it will work for whatever phase we are in the logic cycle. So as we look to 2020 we are cautiously optimistic that we are obviously in a late cycle. We don't think we're end of cycle. We don't think we're on the verge of a recession in our view based on the data as we interpreted at this point and still think that Park is well prepared to relatively outperform our peers.

Got it. Thanks. And in San Francisco, the transient demand environment seems to have gotten incrementally worse starting in the summer maybe a bit more worse than the nation as an average. It could be due to technology company issues homeless issues and press around that. Do you agree with that? And what can you do to mitigate some of those challenges? If that you're indeed seeing more transient weakness in that market?

Yeah, I would say if you step back and think about San Francisco, we all ended the year thinking this is about $1.2 million in city-wides. I don't know where it actually ended up in terms of actual demand probably inside of that would be our best guess at this point. And if you think about sort of third quarter for us we ended up obviously at 1.9. We really entered the quarter thinking that we were going to be north of 4% and expect that obviously given the group base that we have both in San Francisco and New York. We did see a slight falloff on the group side more in New York. New York we thought we'd be around 65% and sell down to about 47% plus or minus but it was really a falloff on the transient side. And I think candidly, it's businesses being more cautious more careful. Business confidence has certainly been softened. And clearly business investment I think is probably a bigger issue here as it involves, not only an impact there in San Francisco, but another key urban markets as well. So we're still bullish on San Francisco, the huge presence that we have there, the barriers to entry, the job growth, we think long-term it's certainly a market that we want to continue to invest in and grow in. Are there some social challenges in San Francisco among other markets? Absolutely. We believe that the leaders there in San Francisco are aware of it and that are working in good faith with other business leaders in that region and particularly on the lodging side. City-wides and conventions are a huge part of the economic growth for that city. And we know they understand that and we know that they're working on plans to address it.

Great. Thank you.

Our next question comes from the line of Rich Hightower with Evercore ISI. Please proceed with your question.

Hey, good morning guys.

Good morning.

Good Morning, Tom. So I want to go back to some of the comments on the dividend policy and just try to think through maybe some of the mechanics there. So historically and this is a vestige, obviously, of the spin-out from Hilton. But historically, Park has run at a pretty higher than average payout ratio relative to free cash flow. And I'm just trying to square up the idea of kind of maintaining a relatively high payout ratio. I know that you get to reset the basis in the Chesapeake assets but you've got some asset sales going against that? And then thinking about where buybacks enter into the capital allocation equation. So just trying to think through all of those moving parts in terms of the stability of the dividend and whether that is even a goal that really matters to investors in terms of dividend policy for Park?

There's a lot of sub issues there Rich. Let me focus on a couple of things. As I said in our prepared remarks priority number one is integrating the Chesapeake portfolio. At the end of the day we've -- two of those assets were already sold as you know we're marketing another three. So at the end of the day we end up with about 15 core assets. This is not a difficult assignment for us to be able to bolt-on those 15 assets. We're eliminating obviously the G&A. So we feel very confident Rob and the team are already out in front. Next is to sell the non-core assets to get the -- to shore up the balance sheet which we are making great progress. I also remind listeners again that we've already sold 18 assets when there were a lot of naysayers who didn't think that we could sell. These were very complicated. 11 of those 18 were international assets: South Africa, two in Germany, Amsterdam several in the U.K. very complicated joint venture in Dublin that we now have a contract and an asset in Brazil. So we've continued to execute and do everything that we said we would do. So again integrate Chesapeake, sell the non-core assets, reduce leverage. Those are the priorities we're confident as both Sean and I said in our prepared remarks that we can get that down to four times. We will look opportunistically, if there is excess cash, particularly given at huge discounts NAV that we're trading. We think it's a prudent capital allocation slightly looking at that and then protect the dividend. Part of that dividend as you know is that a bit high payout today in part in terms of the yield is driven by the discount that where we're trading. Chesapeake gives us optionality by bolting on. And obviously that allowed us to increase the basis. So we do have more flexibility there. But we think return of capital including a healthy dividend as an important tenet for Park and something that we manage. Now if that has to come in a little we will certainly address that. But based on how we've performed based on our outlook for 2020, we're confident that we should be able to maintain that dividend.

Okay. That's helpful, Tom. And maybe switching gears for a second. So you guys are inheriting three Ws with the Chesapeake portfolio. And I'm just curious for your take on what Marriott is trying to do in terms of revamping that brand?

It's a great question Rich. And we've had discussions, early discussions with Marriott. I think the biggest signals Marriott buying Union Square and paying north of $200 million for that asset and then saying publicly that they want to continue to reinvigorate that brand. I know that W is doing incredibly well internationally. It certainly -- it's in need of a refresh and a relaunch if you will. I know they're committed to that. We plan to meet with them and learn what their vision is and are excited about the three Ws that we have. You see that again it's incremental upside for this portfolio. I would also add when you think about W it's a 20-year-old brand. It's matured. And I think a little bit of refresh is in order. But I'm also confident that the team at Marriott is committed they're out in front of us. I also think that there are near-term opportunities. The Ws that we have particularly in Chicago have underperformed. We see that an opportunity that even before the upgrade the new plan the new vision for W was implemented, we certainly have opportunities here in the near-term for improved performance.

Okay. Great. Thanks.

Our next question comes from the line of David Katz with Jefferies. Please proceed with your question.

Hi, good morning, everyone. I wanted to go back to some of your opening remarks Tom, where you made reference to assertive or aggressive asset management. I don't want to put adjectives around it but you talked about asset management strategies to drive value here. I'd love some more detail around what kinds of strategies those are? And what kinds of levers you're thinking about pulling on the asset management side?

David let me give you an overall view and I think this again will reinforce the comment that I made earlier and then Rob can give you a little more granular. But look, we believe passionately, and this is important for listeners. That is that our internal growth strategies again on recycling capital of ROI projects, improving margins and grouping up. These are strategies that work at any phase of the lodging cycle and we have demonstrated that. When we first respun out of Hilton there were a lot naysayers, who didn't believe that we could sell a lot of the non-core assets. We sold them, sold them efficiently at very attractive pricing. We're going to continue to do that as we bolt-on through Chesapeake. There were a number of ROI projects that are underway converting our Hilton in Santa Barbara from a DoubleTree. We're getting a tremendous upside and lift from that. We've closed the Reach, which will be reopen here in another 30 days -- excuse me less than 30 days. We've said December 1st and we're working hard to achieve that. And we think we expect we're going to get lift there. On the margin front and the first year out of the box I think we improved margins $12.5 million incremental there, 47 basis points in year two. We picked up another 60 basis of incremental margin. So these are things that we're passionate about moving up. We think that the real strength to our success and our benefit of our performance has been also the grouping up and the fact that we were able to move the needle over the last few years. These were concentrated decisions that we made and that we're going to continue using that same playbook with Chesapeake. At the end of the day we'll end up with 15 assets because we've sold two -- Chesapeake sold two and we're going to be selling another three. This is not a difficult execution if the Park team focuses and delivers like we've done in the past. In terms of some of the more granular on the revenue side Rob will give you a little bit of flavor of that.

David in terms of -- as Tom spoke about reducing occupancy's drive rate, really reduces the burden on the hotel team allows us to drive the incremental revenues with a higher-rated guest. But to give you some very specific examples, offering premium room types we found at one hotel there's 26 rooms available to us that can be recategorized. At another hotel we have a tower of rooms that can be further monetized given that the types have not been realized at this point. We think upselling at the time of check-in really gives us the opportunity as we go forward here. And even throughout Reach Resort – excuse me, we really believe there's specific plans to increase our flow-through in small changes in hours of operation to fit the customer needs. We're looking at altering our menus, we're increasing our menu pricing, maximizing paid parking, enhancing our retail. There's so many opportunities within each individual hotel. But what we found that so far is that the partnership with these properties has really been well received and we're very excited about what we have for coming going forward.

Thank you for that. And if I may as my follow-up. After the non-core sales are done right? And the portfolio as we see it today is "set" what opportunities or holes are might there be in the portfolio either from a brand or change scale perspective or geography perspective? Would you think about trying to fill it at that point?

It's great question. I'd answer it this way. When you think about the portfolio now bolting on Chesapeake we've got 66 assets. Our top 10 will account for about 56% of that EBITDA, our top 42 assets will account for about 90% that will also include 11 joint ventures that will be down to 10 joint ventures after we complete the sale of Dublin. My point David is that as I said, these strategies that we talk about recycling capital never ends. So we will continue to work to sell non-core assets and really shrink the footprint to those core assets that we want to hold. I don't think there'll be any huge gaps in markets that we'll be missing. We will continue to look for assets of scale. We're strong believers, obviously, in both the Hilton and Marriott family of brands, as well as Hyatt. We think they're a very formidable player and we will look opportunistically to continue to grow. We won't have the pressing need for an M&A unless something were to present itself and we were very attracted. We want to bolt-on the Chesapeake portfolio integrate this, execute, earn our stripes and continue to prove ourselves like we did before. The market doesn't seem to give us credit for that today, but we get it. Now we've got to earn it and we accept that challenge and we'll be working our tails off to deliver.

We concur. Thanks very much.

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

Hi. Thanks.

Good morning.

Good morning. I just wanted to ask on your outlook for the year. So, obviously, we can back into the fourth quarter implications. Could you talk a little bit about what your expectations are for the legacy Park portfolio versus what the contribution from Chesapeake is expected to be in the fourth quarter?

Sure, Smedes. This is Sean. We kind of talked about in our release kind of a flattish quarter, overall, combined. And really, I mean, for Park legacy it's kind of pretty much zero. It may be a little bit better. If you want to kind of put a pin around a number and Chesapeake's probably kind of down a little less than 1%. Again, it's only contributed about 20% of the portfolio. So in the end it's just kind of a rounding error and it's really just a flash quarter for the combined portfolio on the RevPAR sense.

So, Smedes, a couple of other points. I agree with everything that Sean said. But if you think about fourth quarter we've got combining Chesapeake, group is up about 4.11%. What we're seeing on the transient side is probably down 3% plus or minus as we look sort of 90 days out. And again, a lot of that coming in softer; San Francisco, Chicago, New York. Those are the big that -- we still see growth obviously in San Francisco on the group side and we're going to have a strong, because we're up 34%. As we think about transient, we continue to see that softening right now. Hence the reason that we said it's flat for the fourth quarter.

Okay. And then, I just wanted to ask, while you mentioned about $550 million of asset sales, do you have the ballpark of kind of how much EBITDA would be associated with those sales in total?

Yes. It's approximately $35 million to $40 million.

$35 million to $40 million. Okay. And I guess, some of that is already in your updated guidance?

Yes. No, we are including in our guidance all of the assets that we own all 66 at this time or an interest in. So we will adjust to the extent that any asset sales are completed. The only one that's likely Dublin should close this month and that incremental for the fourth quarter is going to be $1 million $1.5 million plus or minus. So it's not significant.

All right. Thanks. Thanks a lot.

Our next question comes from the line of Bill Crow with Raymond James. Please proceed with your question.

Hey, Bill.

Good morning, Tom. We all like to focus on the top line and I appreciate the 0% to 2% kind of embrace you gave for next year. What do you see from the expense side? Can you do better than 3% growth next year?

That's a great question Bill. And look, I don't want to -- I certainly don't want to be held to the 0% to 2%, I think directionally based on where we sit right now, seems reasonable. We'll be watching all of the macro signals and we'll see how the fourth quarter unfolds, particularly on the transient side. I want to congratulate our team, our asset management team, our finance team and also working in conjunction with our large partners, Hilton and others. I think keeping the expense growth at 3%, given this low RevPAR environment, I think, is impressive. We are going to continue to work our tails off to continue to be able to maintain that. Can we come inside of that? Perhaps, on the margin, but I'll tell you if we can achieve that 3% that's pretty darn good in this environment. When you -- historically the RevPAR of 2.5% plus or minus to be able to breakeven on a margin standpoint.

Yes.

Clearly, there's pressure on the labor side, as you know but we've sort of renegotiated a lot of those contracts who were sort of set through the vast majority of the portfolio, insurance were up and then property taxes continue to be a wildcard. These municipalities want to continue to overtax commercial property owners. And I don't see that going away.

Yes. I appreciate that. If I could just follow-up on San Francisco, beating on a dead horse here, but you indicated that the group pace for next year is down pretty sharply but you also talked about deterioration in the transient side. So do you see that market as negative next year from a RevPAR perspective, or maybe your portfolio just positioned differently than the market, overall, more exposure?

Yes. Bill, we don't see that as negative at all. Look, you're still looking approximately a million room nights plus or minus. Certainly, down from the 1.2 million, although I don't think the 1.2 million was realized, as I said earlier. I still think that San Francisco is going to be a strong market. We will be as strong as where we're going to end up this year. Probably not -- I mean, we're -- 6% to 8% is probably where we end the year, which is pretty strong. But I would certainly see low single digits next year in San Francisco.

Great. That’s it for me. Thank you.

Our next question comes from the line of Neil Malkin with Capital One Securities. Please proceed with your question.

Hey. Good morning, guys.

Good morning, Neil.

Your three biggest markets, San Francisco, Hawaii, Orlando, a lot of exposure there and in a lot of ways can significantly swing how a quarter or a year goes. So I was wondering if maybe you could give just, I don't know, what kind of level of detail, but how you're thinking about those three markets as we head into next year, just given some of the Boeing issues some of the renovations in Orlando, any kind of help on that would be great just, again, because it's such a large percentage of your NOI.

Yes. First, if we talk about Hawaii, I mean, I think last quarter is an indication. Hilton Waikoloa Village again running at 95% occupancy. If you think about Southwest, Southwest is reallocating and moving a lot of their equipment from various markets on the East Coast to focus largely in the Bay Area and Hawaii. And as you think about demand, we expect that that's only going to continue to grow and we are well positioned to benefit from that. Waikoloa, as you know, will be given back the incremental 500-plus rooms, the balance of that. So we'll end up with $600 million. I think the EBITDA, Sean can correct me, but I think the EBITDA impact there is approximately $15 million.

15. Yes.

Yes. If memory serves me correctly there. But, look, we are we are well positioned in Hawaii, love our position there, excited about the growth opportunities there. Obviously, we will not -- don't expect to have the kind of buyout, multi-week buyout that we had this year at Waikoloa. That hotel will no longer -- will also not be a comp hotel next year. So it won't be impacting from that standpoint. And San Francisco remain bullish. We'll end up with bolting on Chesapeake about 4200 rooms. I love our position there. And in Orlando, we're making a big bet there. They're looking at visitation now approaching close to $75 million and growing in that direction. Bonnet Creek, we think is world-class. We're going to be expanding the meeting space there, both at the Hilton and then we're going to be upgrading that to Signia. And of course, the Waldorf, we'll be adding incremental 10,000 square foot ballroom there as well over the next two years. So those -- if you think about the West Coast and Florida, then that's about 67% of our EBITDA but there are a lot of markets, that's including Hawaii, San Francisco, L.A., San Diego, Orlando, Miami and Key West. So one of the benefits of -- again, of the Chesapeake bolt-on is that we get both brand and operator diversification, but the geographic footprint, it lessens our exposure. So we go from Hawaii from 24% down to about 20%. So, again, another reason why this transaction of the intermediate and the long-term makes sense for the Park platform.

Appreciate that. Last one for me. Just given that the recent trade tariff rhetoric has actually been incrementally positive, what do you think about the fact that things could still remain weak for the business, traveler business demand just given that next year, it's an election year and maybe companies continue to wait and see what the environment look like post election? And then also, you could comment about Marriott and Hilton RevPAR guidance. I guess what gives you confidence that you'll be on the higher end considering you're in the coastal larger markets where you have the most impact from international travel demand and elevated supply?

Well, there's a number of embedded questions there. Let me try to address both international. If you think about international inbound, I think it's down about 1% plus or minus $79 million going to remain flat. If you look at some of the recent reports, we're now forecasting that growth rate to increase possibly at about 2.2% compound annual growth rate for the next five years plus or minus taking this up north of $90 million. If you look at our portfolio, international are down about 1.5%. So, if the trade war that issue subsides and reducing that uncertainty, we think that helps from an international standpoint inbound and that will address. I think part of the issue what we're seeing both for urban markets in the top 25 markets. So, we see that as a net positive, anything that can be done to remove uncertainty, improving business confidence and getting men and women leaders to start to invest in it. The biggest concern that I have is really around business investment spending, high correlation between room demand and non-residential fixed investment spending. And if we can see that turn, it's been negative in the last two quarters. If we can see that improve, I think that will be a really positive catalyst for us. So back to the comment of why Park? Well, Park has outperformed again this quarter even though it's 1.9%. When you look at legacy far better than most of our peers and certainly is far better than Smith Travel. When we bolt-on Chesapeake, as I said earlier in the call, we're confident in the 80 incremental basis points and that's across our entire portfolio. Part of that is some of the renew initiatives that Rob walked through, a lot of that is a favorable convention calendar. We've got renos that Chesapeake and a number of assets that are on a renovation this year. We think they end the year at 1% this year that sets us up now as the new owner for incremental benefit in 2020 as we move forward.

Thank you.

Our next question comes from the line of Chris Woronka with Deutsche Bank. Please proceed with your question.

Hi, Chris.

Hey. Good morning, Tom. So I was hoping to dive into a little bit on the margin front on the Chesapeake portfolio. And the question is kind of -- has there been any kind of margin disruption this year associated with the transition which I know is very recent? And have you -- is there any potential disruption contemplated in your kind of margin uplift guidance next year as you begin to initiate or implement some of these initiatives which you never know right there could be pushback from some customers. I mean how -- what level of conviction do you have in that margin uplift for 2020?

We have a great deal of conviction on our underwriting which we have reaffirmed. Obviously, the incremental $24 million. $17 million of that, as I remind listeners, is the elimination of G&A by bolting those 18 soon to be 15 assets from Chesapeake. So, we have a high degree of confidence from that standpoint. We also don't anticipate a lot of disruption from renovations in the Chesapeake portfolio. They had a number of renovations underway in 2019. Again, we see that as a tailwind as we move forward. As Rob and the team continue to dig in, of course, there are going to be some pluses and minuses. We'll continue to evaluate management companies, and we'll make any prudent decisions. We'll be thoughtful. But we are confident. I can't say that strongly enough. We're confident in the underwriting we know that we have to execute. We have to deliver. We've got to earn our stripes, and we accept that challenge and we're working hard to demonstrate that in the coming quarters.

Okay. Fair enough. And then, just wanted to pivot over a couple of Chesapeake assets, I know that the W Lakes were ahead at one time not too long ago been considered for alternative use. And then in Miami, I think there's -- Chesapeake had always thought that maybe there was another option for branding at the Tribute Hotel or maybe just an update on your thoughts on both of those hotels.

Again, so back to my earlier comment in terms of the part playbook of recycling capital ROI opportunities improving margins and grouping up, we think those are strategies that we use at any phase of the lodging cycle and we will look if there are alternative uses. That is a large W. The W, I'll make sure that you're referring to we'll assess that. But we think right now focuses on operational initiatives and I don't disagree more upon, that was down 14% in the third quarter. We are confident that we can improve that performance as we head into 2020 and beyond. We think it's a bull's eye real estate mid beach. Before we could talk about branding, we need to be the right the ship today and we're working hard to do that.

Okay, very good. Thanks, Tom.

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

This is Jake on for Robin. I just wanted to ask with your continued focus on grouping up, what's group mix for the combined portfolio right now? And I guess how does that compare to Chesapeake group mix? And what kind of upside do you see from the Chesapeake assets and the combined portfolio going forward?

Yeah. The combined Sean will grab that in a second. Park is about 30% to 31% approximately. And Chesapeake is about 20% group. We've set a goal to move at 150 to 200 basis points. So the weighted average of those two, which is probably in the 27%, 28% group across the entire portfolio as we bolt-on Chesapeake.

That's helpful. And then as far as the transient weakness, can you kind of parse that out between leisure and business transient?

Well, if you look at third quarter, obviously we were down 4.8%. And those were comparable, having one down 4.4% on the leisure side and the business down 4.9%. As we think now in that 3%, I'd say more weighted towards the business transient what we're seeing right now in the fourth quarter.

Great. Thank you.

This concludes our Q&A session. I'd like to turn the call back to management for closing comments.

We really appreciate the opportunity to visit with you today, and look forward to seeing many of you next week out at NAREIT and safe travels.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time, and have a wonderful day.