Greetings and welcome to the Park Hotels & Resorts Fourth Quarter and Full year 2019 Earnings Conference Call. At this time, all participants are in a listen-only mode. [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, you may begin.

Thank you, operator, and welcome everyone to the Park Hotels & Resorts fourth quarter and full year 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. 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. I would like to call out our enhanced disclosure in the supplemental package where we now break out property level detail for 30 core hotels which accounts for nearly 85% of our hotel adjusted EBITDA further highlighting the overall quality of the Park portfolio. This morning, Tom Baltimore, our Chairman and Chief Executive Officer will provide a brief review of our fourth quarter and full year 2019 operating results, additional color on our integration of the Chesapeake portfolio and update on our capital recycling efforts as well as established guidance for 2020. Sean Dell'Orto our Chief Financial Ifficer will provide further detail on our fourth quarter financial results and 2020 guidance in addition to an update to our CapEx plan and balance sheet initiatives. 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. 2019 was another outstanding year for Park and I am incredibly proud of all that we've accomplished. We achieved a significant milestone in Parks evolution, as we not only executed on our operational objectives and portfolio recycling goals, but also positioned Park for long-term success. Most notably, we completed our $2.5 billion acquisition of Chesapeake transaction, which is accretive to both earnings and portfolio quality, and it enhances a long-term growth profile of our company. We are energized and excited about the incremental opportunity for our portfolio and we look forward to sharing our ongoing progress. Operationally, Park once again outperformed the RevPAR growth tapping the full service hotel REIT sector by 30 basis points. As we continue to make progress on narrowing, the margin gap at our peers. We also continue to recycle capital in 2019 completing the sale of eight non-core hotels for total proceeds of 497 million of terminating the ground lease of the Hilton Sheffield. In addition, we closed on two non-core sales this month, which takes our total non-core dispositions over the last two years to 24 assets and over $1.2 billion in proceeds. Finally, in 2019, we've returned over 420 million of capital shareholders, taking our three year total to nearly 2.3 billion the highest in the sector. Before I discuss our priorities for 2020, I would like to address the recent management changes at Park. I want to emphasize that I couldn't be prouder of the team we've built since spinning out of Hilton three years ago. Park is assembled an incredibly talented group of men and women, who have each played an integral role in the Company's achievements. Together we have worked tirelessly to drive results while also fostering a supportive and respectful culture for all…

Thanks, Tom, and welcome everyone. Looking at our results for the fourth quarter, we reported better than expected results for both RevPAR and earnings. As Tom mentioned, RevPAR growth for the quarter was 0.7% versus the flat growth we had expected as of Q3, while adjusted EBITDA was nearly $223 million and our adjusted FFO $173 million or $0.72 per diluted share. On a full year basis, which includes Chesapeake since the September 18th closing, we reported total revenues of approximately $2.8 billion, adjusted EBITDA of $786 million, and adjusted FFO of $613 million, or $2.88 per diluted share. Turning to our core operating metrics, for the fourth quarter, we reported comparable RevPAR of $178 and total RevPAR of $276. Our occupancy for the quarter was 80.9%or 80 basis points higher than prior year, while our average dealer rate end the quarter at $221 or a decrease of 30 basis points year-over-year. These top line results produce comparable hotel adjusted EBITDA of $211 million while our comparable margins decreased 40 basis points to 28.3%. For the full year 2019, our pro forma comparable portfolio which includes the results from the Chesapeake assets for the fourth quarter only produced a RevPAR of $183 and total RevPAR of $284. Our occupancy for the year was at 82.6%, up 50 basis points while our average daily rate was $222 or an increase of 1.2% versus the prior year. These top-line results produced a pro forma comparable hotel adjusted EBITDA of $769 million with margins falling just 10 basis points year-over-year to 29.2%. Looking more closely at our performance across our core markets, Hawaii was a standout market for us with RevPAR up 8.7% in the fourth quarter and 5.5% for the year, driven by incredibly strong results at our Waikoloa Village resort. RevPAR…

Thank you. We will now be conducting a question-and-answer session. [Operator Instructions] Our first question comes from line as David Katz with Jefferies. Please proceed with your question. Mr. Katz, your line is live. Mr. Katz, perhaps you have your line on mute. Our next question comes from line of Anthony Powell with Barclays. Please proceed with your question.

Question on the coronavirus impacts you outlined in the prepared remarks. Where specifically was that impact? And did it relate either group cancellations or leisure transients? And generally would you expect there will be more impact on group versus leisure in your portfolio?

As we outlined in our remarks -- in our prepared remarks Anthony, we're seeing about $5 million, the biggest piece was the Facebook group cancellation in San Francisco. So, accounting for probably a $1.5 million plus a minus, there was about $1 million for Chinese group in Hawaii. And then a plus or minus, another million dollars and what we saw in sort of a Chinese crew coming out of New York City, again, very isolated, perhaps frame for listeners. Chinese demand in our portfolio is about 0.5%. It's about 50,000 room nights what we saw last year, about 10 million to 12 million in revenue. As you think about what's happening in Japan is example, certainly Japan accounts for about 3% of our overall demand, about 250,000 room nights and probably at about 90% of that coming into Hawaii. As you think about our portfolio, given the fact that, clearly a strong presence on the coastal and the totally in Hawaii, we were watching carefully, we were in frequent discussions with our operators. At this point, it's been minimal as we've outlined. We thought it was important to be transparent and to share what we know at this time. We don't see this changing the part playbook, what we're focused on and priorities that we outlined in our prepared remarks.

Maybe a separate question, you mentioned that you could activate a share repurchase activity this year given the current dislocation in stock and the 9% yield. Does it make sense to maybe accelerate some of those repurchases and fund later via asset sales?

It's a great question. And again, as we outlined in our prepared remarks and consistent with what the playbook that I've shared with many analysts and some of the many of investors, the priorities are going to remain the same based on where we sit today and that is integrating Chesapeake portfolio, continuing to sell noncore assets and reduce leverage and activate the buyback. Clearly at these levels, in fact that we're trading at such a huge discount NAV, clearly you can expect us to be more active on that front. We also are committing to maintain the dividend and we certainly believe that we can do all of this on a leverage neutral basis. So that's the plan and that we plan on maintaining that as we proceed through the year.

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

I guess really just to follow up on both of Anthony's questions there. The first one, just to clarify, in terms of the coronavirus impact that's embedded within guidance, is it -- it sounds like those were either past events or events that are known on the books, and so you can sort of quantify it within that 5 million EBITDA impact. Is that to say that there is no sort of assumed unknown future impact to forward bookings or whatever that are included in that number?

That is correct. We want it to be transparent and to share what we know at this time.

I think that answers that then. And just on a follow-up to the capital allocation question. As your view of the Company's NAV changed at all in the past 6 to 12 months, as we talk about sort of discounts to NAV, it's varying degrees, maybe given outside of coronavirus just the changing sort of fundamental picture in lodging over that time? And how does that factor into the repurchase decision?

That's a great question. Rich, I think it's important to sort of step back and think about part when spun out, right? 67 largely Hilton branded hotel sort of a barbell. We had a top 10 or 15, and then of course, we got a collection of other assets. This team has worked tirelessly as you know in helping to recycle capital. We have sold 24 assets including 14 International and putting assets in South Africa, Germany and the UK, and Brazil, which obviously we concluded a joint venture in Dublin. So, we've really been able to reshape the portfolio coupled with bolting on the Chesapeake portfolio. So, as Ian noted in his prepared remarks, we're providing an increased selling disclosure and information on the top 30 assets. We would respectfully submit those top 30 assets or as a high quality, high RevPAR and comparable to any of the high quality portfolios in our sector. They account for about 85% of our EBITDA and north of 90% of the value. So if anything, we think that portfolio is clearly close to best-in-class, you will see us continue to recycle capital, so that we can use those proceeds to continue to reduce debt and activate the buyback. We certainly are well aware of our stock performance and the discounted NAV. You can argue whether that any of these come in slightly or not, but the reality is that we clearly are trading at a significant discount NAV.

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

I wanted to ask you, what are you seeing in terms of the pace of wage and benefits growth in 2020? And just since I think your portfolio has a little more heavy union presence, can you give any -- do you have any sense of -- is this a peak year or what does 2021 look like?

Yes, we ran -- we assumed about 3.8% of wages and benefits, Smedes. In '19, we're assuming about the same run rate. I think the one benefit in our portfolio recognizing, we're about 60% Union, as most of those union contracts were negotiated last year. So we can expect as we move forward in terms of wage rates and benefits peaking, I would say that it's going to peak certainly this year and 3.8% to 4% range.

And then, I just wanted to ask you, if you take the low end of your guidance and make some assumptions on maintenance CapEx. I know you said it's using a percent of revenues. I mean, it looks like the dividend becomes kind of tight. I mean, would you be willing to fund it with debt on a short term basis? Or do you think you could cut back on maybe some of the maintenance CapEx spending?

No, we remain committed to the dividend as the current levels. We do not believe consistent with what Sean said in the past, paying out our FFO in that 67% range that we are comfortable, we do not see risk at all. And we can maintain our, I mean, this CapExin in that 5.5% 6% range.

Next question comes from line of Gregory Miller with SunTrust. Please proceed with your question.

So first question I have is on Bonnet Creek. I apologize if I missed this, but do you have an update on the timing of the Signia blockchain? And how are you and Hilton are working together to market that new brand, both to the transients and the group guests?

Hey, Greg, it's Sean. The Signia brand should ultimately come through around kind of late 2021 we believe. Obviously, we've got a few things to do within the asset to achieve that brand conversion as well as kind of tie off things related to the construction of additional just the meeting space, so more kind of towards the back end of the next year on that. [Johnny] is doing plenty of great marketing on the meeting space. Certainly, you've got a lot of good traction on booking into that main space beyond it's opening in mid 2022, right now. But I think it's probably a little bit more premature to kind of be marketing as a second year right now. But it's really been working closely with those and they kind of ramp up those efforts in due course.

Greg, one of the things that we've heard from both Hilton and our onsite operators that we needed more meeting capacity to certainly be competitive in that market. As you know, it's certainly one of the top convention markets, top leisure markets, 75 million visitors. We are really blessed to have a reserve of 350 acres championship golf course plus having both the building and the Waldorf brand. So, we're making that long-term investment. We believe this is a great ROI project that will generate high tunes returns and the booking pace in this feedback that we're hearing from many planners and others has been overwhelmingly positive. Hilton I believe has a pipeline of several Signias and I know that it's a real focus for them to particularly on the group side that have well-positioned assets that had sort of elevated, if you will something depressed, compete with the JW Marriott brand as an example. So, we are really excited about it. We think there is huge upside in our portfolio and this clearly is a world-class accent that is also possibly with the business.

Same things for all the great color there, I do want to keep going further south for the follow-up question and ask about the Caribe. Given what you've guided for this year, how much of the challenge do you see is driven by a perhaps supply or demand issues in the Caribbean in general versus say challenges and attracting demand to Puerto Rico specifically?

I would say, Greg, it's really a ramp up. I mean keep in mind the trauma that the Iowa's experienced post hurricane Maria as we all know in a week took 18 months to rebuild and to prelaunch. And there are many assets that are still in that renovation or the restoration phase. So it's really beginning to get better air lift, better visitation. We believe greatly in the Island, greatly in the asset, and are very optimistic. We just think the ramp ups going to take a little longer, hence the reason that you see relatively flat in 2020.

Our next question comes from the line of Ari Klein with BMO Capital Markets. Please proceed with your question.

Little surprise that perhaps there wasn't perhaps a better comparable margin outlook considering the synergy. Can you provide some color on the underlying assumptions on expense growth? I know you mentioned wage growth, but was there any anything else in there that's worth calling out?

Klein, I would probably say it worked well that our group pace for the portfolio is down or almost flattish versus kind of the group activity we had last year, so kind of the extra F&B revenue that we benefited from last year. The growth is a little bit lower this year. So I think that's going to continue kind of the course of the other spend as you do the RevPAR to the margin type of equation. Cool, that's equation and part of the equation that, people don't discuss a lot, they try to do RevPAR down to that. But our spend and certainly, we're seeing that in parking and you're facing great growth there, but at least a little bit -- a little lower than in the past just given the setup for this year.

Okay. And then maybe just on total RevPAR growth, as you mentioned, you expect to see some lighter F&B growth, but how do you expect total RevPAR growth relative to RevPAR growth for 2020?

Certainly higher, it's probably kind of circa 2% plus or minus.

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

I have two quick ones. This is our Arpine for Robin. Good morning. Others have mentioned tougher pricing environment and that's perhaps for sellers and tougher for buyers. Could you remind us what remains of your disposition plan and whether you're actively marketing and assets now?

Robin, we've got, as we said in our prepared remarks another $250 million to $360 million in assets. We currently are marketing one asset now and expect obviously to receive a real time bps here in the very near future. We still think it's an active market, there's plenty of equities. There's plenty of big capital as well. And I think as we've indicated, by selling eight assets last year in terminating our, the ground lease in Sheffield in the UK, we've had great success continuing to sell a non-core asset. So, there's an active market out there. Whether that is temporarily disrupted or different, a little more cautious we'll see. We're not hearing that as we, as we've talked with prospective buyers, about assets that we are marketing or are considering the market. So we remain cautiously optimistic. And we will also bring it back to our track record of really having, I think, demonstrated our ability to sell non-core assets, many of which has been very compensated from both our legal, tax, restructuring, particularly given the fact that we've unloaded 14 International assets, many of those with foreign buyers.

And then, transit business obviously seems softer, but does that get worse on year-over-year basis versus Q3 or sort of continue to weaker trends in terms of what you're seeing in transit business?

No, clearly October was really soft. November came back, so in December we're strong. As Sean mentioned in his prepared remarks, obviously first quarter and to remind listeners, will be our --- we believe our softest quarter given the fact that we're lapping RevPAR growth last year for 4.2%, and I believe group up well north of 20% in the first quarter of last year. So, we would expect first quarter to probably be down in another 1% to 2% range or RevPAR. But with obviously stronger back half of the year, we're expecting transients, clearly leisure continues to be stronger than what we've seen in business transient and although we did this is what causes on December front.

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

I wanted to ask on the -- obviously, you guys have given us a lot of color about the Chesapeake synergies. I wanted to ask with the some of the recent changes to the Marriott, to put the Bonvoy program at those hotels. Could you see additional upside from some of those changes? Or is that kind of baked into your prior synergy and upside guide?

Yes, it's a great question, Chris. We are continuing to study at ourselves. We think back to the original plan and the 24 million largely weighted towards replacing and eliminating, honestly the G&A, we've done that. The opportunity to renegotiate management contracts, we've done that. And as we said in our prepared remarks, we're very confident in the 20 million out of the 24 million. As we think about other opportunities, clearly remixing the mix as we talked about in the early feedback that we're getting there, it's really encouraging. We also think that we'd be benefits from having a favorable convention calendar and many of those markets coupled with renovation tailwinds. As we sort of dig in, I'll take the two in Chicago is Newcastle this week, dig in there and we've huddled with work with our partners, with Marriott. We are seeing other opportunities to performance there. And I do think the Bonvoy Marriot has got 137 million members and they continue to think creative ways to monetize it. We're studying carefully to see whether or not those costs in fact are rising versus decreasing, not only for Bonvoy but across the coating system as well. So the jury's still out. We continue to study and monitor that ourselves and we'll certainly have more to report back in the future.

And then just wanted to ask you about New York and realizing one hotel, 5% or 6% of EBITDA for the Company, but any change in kind of your secular long-term view there as we've seen a lot of your public peers moved to reduce their exposure to the market?

Yes, it's a great question. We all struggle. As you think about New York, one of the great cities of the world, we all have to believe that it's going to come back, but it's really miss the cycle. And as we think about again, putting down 4.7% in the quarter and another 1.8% and then watching sort of cash flow continue to erode and it's quite frustrating. A supply I would tell you is the biggest issue. And I would encourage the brands to haul on it. Enough is enough in New York is a very direct comment there on that. And I also think we need to think about what's happening with shadow supply. You think back to 2011, there were a super compression days there was a man in the city North of 95% about 141 days. We estimate this year we'll beat down probably mid teens as an example. So really a road and the pricing integrity in New York and made it a very typical environment. And now as we all hear about, potential owners who are in jeopardy. I personally believe that that is going to expand over time. That's not going to shrink. And I think a lot of that is driven by too much supply. We benefit, we believe, by having the best group house in the city, given the status, given the size, given the meeting space of platform. And so we're not throwing in the hotel, and we continue to work hard with our partners, have build and continue to drive value. But clearly it's been frustrating quite frustrating as we think about this decade and this cycle for New York.

Next question comes from one of Bill Crow with Raymond James. Please proceed with your question.

Apologize I got a little bit late, if you've covered it just move on, but you tend to have embraced the crew business, the contract business a little bit more than maybe some other owners. And I'm wondering how bigger impact you're seeing from coronavirus cancel flights in the particular San Francisco, Hawaii, New York? Is that really a headwind for you?

It is not, Bill. As we -- early in the Q&A, you may have missed. We talk a little bit about some Chinese food business and what we've seen in New York. But if you think about Hawaii, particularly with what's happening with Southwest and their expansion plans and the relationship we have with them, we're not seeing it all, any kind of fall off in that respect. The crew contracts about 5% as you know, really part of the strategy for Park was to anchor our business with group layer in some contract, and then really yield to transient. We've had success in our short duration since we respond out. So we continue to see us use that playbook as we move forward.

No impact from San Francisco from the group business thus far.

It's not at this time. We've seen obviously the Facebook cancellation and you said earlier about $5 million, and it's largely coming San Francisco to Hawaii in New York, where we seen in the canvas, it's really been minimal and you think about the scope of our operation.

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

Good morning, everyone. Apologies, we're dancing back and forth among a number of things this morning. So, my guess is that we have discussed the near term impact fairly thoroughly, but I want to ask your opinion about is. We have more and more discussions about owners contemplating the notion of third party managers rather than using the brands as managers. Can you just philosophize a bit about that and the boundaries and circumstances under which you think through those alternatives?

David, it's a great question. I think back to my past life when, at peak we had 16 to 17 different management companies, including all of the brands coupled with a lot of independent operators. And what I would tell you is that, we might make up that we have today, meaning having 7 to 8 financial companies including Hilton and Marriott, our partners our at Hyatt plus independent. And what we find is that sometimes there are, the right operator for the right situation. Clearly, you would think of the big convention center hotels of the big resorts. Generally by and large, the brands management companies have the wherewithal having scope and capacity and the resources to be able to support those. Other hotels that may be 300 rooms urban, largely rooms boss with limited food and beverage and limited brew. You could have a more nimble management company that may have a particular brand focus or regional or an asset tight focus. So I think finding the right situation makes sense for us, obviously, given the fact that we were spun out of Hilton. Clearly I should think about our top 10 assets and those iconic assets. Those are obviously under the long-term management agreements. But I would say that we have a very healthy working relationship and there's a good push and pull and I think that the system works right. We should make them a better manager and they should make us a better owner and we have a wonderful partnership and it's worked well from that standpoint. And are there some situations where, it may make sense to take out a brand manager from our independent, absolutely. We continue to explore many of the assets that we've been selling. We have been able to sell those that are unencumbered by flagging in for management. So that's clearly something that we'll continue to evaluate it over time, but make no mistake I think. I think having multiple managers and looking at best practices and being able to use that and push and encourage your management companies is really a good thing. We are incorporating that into the asset management tool.

If I may follow that up, would a circumstance like New York, right, where there is general pressure and searching for best outcomes with those kinds of circumstances be one where you'd be more inclined, obviously not with big box flagship hotels. But would that be a circumstance where you've looked more into third party opportunities?

I think New York unfortunately, oftentimes it's sort of split beyond whether or not you're an existing union shop or not because I think if you have an existing union operation, more than likely you would need to find a management company, who operates under that framework. Other cities clearly, And I think Sam Cisco's example where we have, again, multiple operators given six hotels up there and being able to share best practices, looking at revenue management strategies, thinking about different ways to manage the yield there. It's been really, really helpful to us. So, we see that being a positive, but no doubt in New York, I think all things are on the table. I think the biggest issue, among the biggest issues is that we just had too much supply. That's a road in any kind of pricing integrity coupled with the shadow supply and enough is enough, and I think brands have got step forward and show leadership in that regard.

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

Just kind of on the West Coast. Have you seen any incremental cancellations of group, just from your maybe larger accounts inkling or kind of asking you about either deferring it or canceling this due to corona fears?

Nothing more than what we've shared.

And then just related to the dividend, you said 60% to 70% payout. I'm assuming you're talking about FFO because in terms of AFFO, I think it's much higher, like 85% plus. So I think that's the question someone was asking before about what you would do in terms of either labor or CapEx to preserve that, because if EBITDA drops high-single digits around 10% or something like that, I think you'd be at breakeven. So just curious to hear kind of what potential contingency plans would be and if you stress tested the balance sheet in that way?

We, of course, have stress tested the balance sheet and I will restate what I said earlier that we remain committed to the dividend at the current level and believe that we have plenty of cushion in that phase.

Next question comes from line of Lukas Hartwich with Green Street Advisors. Please proceed with your question .

I just have a quick clarification question. Earlier, you mentioned in the discussion on non-room revenue and total revenue. I think you said 2% growth in '20 and I just didn't catch it that was the non-room revenue line or total revenue line?

2% is plus or minus of total revenue.

Okay. So, it sounds like relative to where this year shook out that kind of implies a bit of a pickup in terms of data room spending. Is that right?

No. Little bit. Little bit to be little bit lower, I think on out of room spend.

Mr. Baltimore, we have no further questions at this time. I would now like to turn the floor back over to you for closing comments.

Thank you. We enjoyed our discussion today. We look forward to seeing many of you at the Citi Conference, next week. Safe travels. Look forward to seeing you.

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