Greetings, and welcome to Park Hotels & Resorts Inc. First Quarter 2020 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. You may begin.

Thank you, operator, and welcome, everyone, to the Park Hotels & Resorts' First Quarter 2020 Earnings Call. Before we begin, I would like to remind everyone that many of the comments made today are considered forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements.In addition, on today's call, we will discuss certain non-GAAP financial information, such as adjusted EBITDA. You will find this information together with reconciliations to the most directly comparable GAAP financial measure in this morning's earnings release as well as in our 8-K filed with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com.This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will discuss the state of Park as a company, including the proactive steps the company has taken to weather the pandemic and the team's deep experience during these difficult times. We will also provide an update on Park's current operations and the various contingency plans in place as well as a brief review of our first quarter 2020 operating results and thoughts on the industry moving forward. Sean Dell'Orto, our Chief Financial Officer, will provide detail on corporate level measures that have been taken to ensure liquidity and viability for an extended period of time in addition to providing more details on our cash analysis. 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 want to start by saying that I hope all of you that are listening are safe, healthy and well. Goes without saying that this is an unprecedented time for all of us. Life, as we know it, has been disrupted in an unimaginable way, and we are all adjusting and doing the best we can to navigate this crisis. Since our last call in early March, the impact of COVID-19 on the hotel industry has completely changed the operating landscape with stay-at-home orders issued across the nation, many of which are still in place. First and foremost, our top priority has been ensuring the safety of our employees and guests at our hotels as well as our corporate employees in the midst of the fluid state ordinances and changing regulations. This has involved constant communication with our operating partners, reviewing local guidelines and restrictions and discussions with local union partners and the implementation of various proactive measures at our properties. Our hearts are with those at our hotels, who either are facing health or financial risk or have temporarily lost their jobs as a result of this pandemic.Second, I want to remind listeners that Park has a very experienced management team. And we have navigated several disruptive events throughout our careers, including natural disasters, 9/11 and the Great Recession. Nothing has been more challenging than our current operating environment. However, once the scope of the global pandemic began to unfold domestically, Park was among the first hotel REITs to pivot and respond accordingly by showing up our balance sheet and aggressively cutting costs across the portfolio, a trademark of a seasoned and experienced team. Sean will provide specifics later about our actions to increase liquidity and minimize our cash burn rate. But I…

Thanks, Tom. Over the last several weeks, we have proactively undertaken several key initiatives to improve the company's liquidity and capital position, including fully drawing down on our $1 billion revolver in March. Suspending our quarterly dividend following the payment of our first quarter dividend, slashing our 2020 CapEx budget by roughly 75% to $50 million, reducing our corporate cash G&A by 13% and working with our operators to aggressively cut hotel expenses by approximately 75% during the month of April when a majority of our hotels were suspended.Taking into account the significantly reduced cost structures of the hotels, short-term carrying costs for benefits for furloughed hotel employees and corporate G&A and debt service, we developed a burn rate estimate of approximately $70 million per month based on an extreme scenario where all of the company's hotels suspend operations. Taking the $1.2 billion of cash currently on the balance sheet against this burn rate estimate, we believe we have approximately 17 months of liquidity under the most extreme scenario.From a capital structure standpoint, I'm very pleased to report that we successfully amended our revolving credit facility and term loans, which were finalized last week. In the amendment, we accomplished 3 key objectives: first, we secured the extension options for the revolver, pushing its maturity to December 2021.Second, we suspended the testing of financial covenants through Q1 of 2021. With some additional flexibility to accommodate our portfolio's recovery after the suspension period over the subsequent 4 quarters and into 2022. And third, we built in flexibility to manage the business and access capital market should we need additional liquidity. I would like to personally thank the members of our bank group for their continued support of the company and their efforts to provide us with this critical amendment as we navigate this extremely challenging environment. That concludes our prepared remarks. We will now open the line for Q&A. [Operator Instructions].Operator, can we have the first question please?

[Operator Instructions]. Our first question comes from the line of Smedes Rose with Citi.

I guess -- you talked about just a little bit in your opening remarks, changing different operating model going forward. And I guess just kind of bigger picture, could you maybe talk about changes if any to your strategy that here -- before now have been you talked a lot about overall sort of grouping up of assets including the Chesapeake property? And then just as a kind of follow-up to that, could you maybe talk about how you see labor costs trending as the business reopens?

Certainly appreciate the question. Regarding our core strategy for Park, intermediate in the long term that certainly hasn't changed. We think that obviously this portfolio -- as we mentioned in our prepared remarks, obviously we continue to reshape and improve it. Our top 30 hotels which obviously are urban, convention center, resorts, the operating metrics of that, I think play very well against our peers and, again, account for about 87% of our EBITDA and about 90% of our value. We see long-term value in net core portfolio, that hasn't changed. Obviously you should recall that we were spun out. We thought given the natural advantage for some of our conventional hotels, it really made sense to group up and anchor our business we've grouped and layer in contract and we could therefore yield our transient more efficiently.We certainly believe in that long term. Obviously given the unprecedented circumstances that we find ourselves in today, we obviously are going to need to adjust. As Sean mentioned in his remarks about obviously drive-to markets, there are about 12,000 -- 12,500 of our rooms that are effectively in drive-to markets, where we think in the interim as we work our way through this recession and ultimate recovery, that we can certainly be competitive. We certainly are going to have to continue to find ways to fill rooms, given the fact that group is likely to lag. As we said in our prepared remarks, we would expect leisure to come back, followed by corporate transient. And then, obviously, group and corporate group would certainly lag that. The reality is a lot of it depends on what happens vis-à-vis medical solutions here. If we get continued therapies and if we get vaccines, and obviously, there's a global race underway, which certainly can also expedite the pace of the recovery as well.As it relates to labor, we are spending a tremendous amount of our time working with our operating partners, our peers, and I really think across the industry in thinking about what's important as we reopen. Clearly, safety and cleanliness are of paramount importance to our guests right now. Social distancing will continue to be an issue as we unfold. And as I mentioned in my prepared remarks, you can see a scenario where the housekeeping model changes. And perhaps, it's -- there's no housekeeping during stay-overs. You can see the room service model being altered. You can see that food and beverage being reduced significantly. Our obsession here is making sure that both the safety and cleanliness issues are addressed, but also that we figure out a way during the crisis to rightsize the model. The business has been out of balance, and I think there's a unique opportunity now. And I do think the brands are very open to finding a better balance as move forward.

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

Just on that question on the balance between brands and owners and operating costs. Do you need to make progress on reducing operating cost for your hotels before some of them open? For example, markets like New York where you're closed, do you need to have that kind of in place or kind of there will be an interim kind of step there?

Yes. Well, Anthony, you hit -- obviously, the most difficult, given the fact that the pandemic, the epicenter of it in the U.S. has been New York, clearly, that's the most challenging operating environment, as we all know, it has underperformed the -- this last cycle pretty dramatically. We clearly expect that, that hotel, New York Hilton, probably would not be opening until late second quarter, third quarter.And clearly, rightsizing and finding the right operating model will be a critical component of that certainly before we reopen that asset. Many of the other assets, we have work plans already in place. We can reopen it in a matter of days. But you've got to make sure that, one, the stay-at-home orders have been lifted. Any other local requirements have also been relaxed. The corporate travel policies have sort of reopened visibility into current demand. What's on the books, what's in the pipeline, cancellation risk. And all of that will go into the processes we reopen. We try to be very transparent in the added disclosures so that both investors and analysts understood exactly where we are today, but also understand that we have very detailed reopening plans that we're also in a position to reopen in a matter of days assuming the demand justifies. And when we reopen, that will be a slow ramp up. We don't expect that we'll be reopened to full capacity. So you've got to rightsize the business model to make sure that it makes economic sense. New York, of course, will be the most complicated just given the devastation that's occurred and the imbalance. There's been too much supply in New York, it is underperformed, there's no rate growth, there's no rate integrity. We have to make sure that the model makes sense in New York before we reopen the hotel there.

Got it. And on Hawaii, there's been some, I guess, headlines about restrictions and other kind of, I would say, negative kind of sentiment towards travel there. What's your sense of the governor and other authority position on getting travel restarted to Hawaii, is that high on the priority list? And could there be a delay there if they take kind of an anti-travel approach?

Anthony, it's a great question. Hawaii is also very complicated. It's -- obviously, it's dependent on the airlift. But there's a 14-day quarantine in place for any visitor, I think it was implemented in late March. We understand that, that could be lifted at the end of May. And possible reopening could occur in, say, mid-June. I think some of the airlines are planning to begin operations in sort of early to mid-June, which is an important component. But I think Hawaii is a great example of what's happening in our great country right now. You've had about 630 cases approximately of COVID-19 across the islands. You've only had 17 deaths. Any loss of life is horrible and very sad. But in the context, 17 is a very small number based on what we're seeing in other jurisdictions. You've got unemployment that's rising at 40% to 50%. And you have a state deficit that's at $1.5 billion and rising. And so at some point, we need to find a better balance.And I suspect as part of this that the governor's leadership and encouragement from other business leaders and other men and women in that, that we will begin to reopen. I can say if you look historically at Hawaii visitation, 8.5 to 9 million, obviously, north of 60% of that coming out of the U.S., about 17% of that coming, 1.5 million visitors coming out of Japan. That's been pretty consistent for almost 30 years. There's a lot of pent-up demand. So we're actually very encouraged as we think of beginning third quarter, but certainly fourth quarter -- that Hawaii could surprise to the upside, obviously, we need the leadership there to reopen and to begin that process. But I want to provide that incremental detail, so people understand this is a very common situation of balancing really the health risk with the economic realities. And I think that will serve as a catalyst to begin, perhaps even accelerate that reopening process there.

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

So back to the question earlier related to the relationship between owners and brands. So everybody is operating in an environment right now sort of in extremis, and you make decisions in that light that might change as the world reopens. So Tom, how do you view some of those extreme cost-cutting measures that are allowed by the brands at this particular moment? How do you view that evolving over time as the world reopens and amenity creep or whatever you want to call it, what's going to be the balance 12 months from now, 24 months from now versus what we see today and what you envision, if you could expand on that?

Yes. Rich, thanks. I think it's a great question. And I think it's not going to surprise you and the other listeners that the business has been out of balance. I would respectfully submit that certainly the brands based on their need and all the actions to raise additional liquidity. Their business models don't work, but they don't have a healthy owner community and I also think that they also got a bit of a wake-up call when your business model doesn't work, when your owners have no revenue, therefore, no fees. And so I think that there's a natural reset and a reboot, if you will, that's really forced them and owners to come together and talk about ways that, one, we can address the immediate concerns, which are safety and cleanliness which have got to be addressed as quickly as possible. And there's probably an incremental cost to raise that level of cleanliness.So therefore, how do we take out incremental cost? I think housekeeping is a natural, where you've got really a consensus building throughout the industry that perhaps no additional, you get a clean room, it's certified or whatever various the brands are going to use thereafter that. Perhaps there's been no one else enters your room for the duration of that stay unless you opt in or some other benefit as part of that. If you think about food and beverage, the same issue. Room service typically is not profitable and a very high cost center. We at the New York Hilton, given our urban kitchen, certainly one of the first to eliminate room service and more of a delivery and using biodegradable and other environmentally friendly measures there. And that's a model that I think you could see that getting expanded throughout.Think of buffets probably…

Okay. That's very helpful color, Tom. Maybe shifting gears for a second. Just putting on the lens of the hotel transactions market, such as it is right now. Where do you sort of -- and maybe comparing to the deals for Park that closed in February. Where do you see the impact to unlevered asset values between sort of mid-February and where we sit today. Any color there?

Yes, it's a great question. Rich, you know that we've had a lot of success in selling our noncore. It was a real priority since we were spun out. Really proud that we sold 24 assets and clearly the 14 international and reminding listeners, those were deals in South Africa, 2 in Germany, 7 in the U.K., Brazil, a joint venture in Dublin. Every one of those deals had tax, legal, tons of heir on them. But we were able to successfully get through that and allowed us to continue to reshape this portfolio, continuing to sell noncore is still a priority for Park. We have been engaged with all of the natural buyers, sovereigns, private equity, family offices, all the types of buyers, private equity, all of those that can move quickly and also they don't need debt and they can close all cash. I would say that to be brutally honest, I'd say that the COVID-19 discount gap is too wide right now. I think you see sellers would probably like to sell with a 10%, perhaps even 15% discount depending on their individual needs. But I think buyers are looking for somewhere north of 30%, even 40%. So I think there's plenty of liquidity trying to get in the sector, recognizing that now is a good window to begin to build up a portfolio. But I think the gap is too wide to really expedite any sort of transaction, as you've seen the number of deals that have blown up here in the last few weeks.I think in the next couple of months, as we begin to get more operating clarity, you will begin to see that market reopen. And clearly, a priority for Park will be to continue to explore noncore asset sales. We have significant liquidity. We've got runway room. We don't feel the need and desire to sell at huge discounts and to sell it at values that don't make sense for our shareholders. So we will be thoughtful and we'll wait for more clarity before we really think a lot of those deals will start to move forward.

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

Tom, obviously, the commentary around balancing between owners and brands is now the topical and engaging. I wanted to just follow-on that from the perspective that the third-party management industry is sort of moving in a direction, and we have seen instances with other owners where assets have switched from brand management to third party. Just broadly speaking, how do you think about the dynamics in that market and sort of driving competition, if you will? And where that's really all headed 1 day?

It's a great question, David. I'd say a couple of things. Look, we have one of the real benefits of the Chesapeake deal. Again, it gave us brand and operator diversification. It gave us geographic diversification. On the operator side, we now have 8 operators. Getting that best intel, those best practices, seeing the things that are happening not only across the brand operators, but those independent third-party operators is always something that, that I believed in and the team here at Park is believed in, that competition is a good thing. I think you think about our portfolio, there are natural situations where having brand management for big convention center hotels or big resort hotels with national sales and complicated purchasing power where the brands make sense. There are other hotels that are more nimble, whether they're an autograph or lifestyle brand don't have the big group component.We are clearly having an independent operator is perhaps the rightsizing that manager for that business opportunity. We are constantly looking at that. That's one of the -- again, one of the benefits that we have of having a very diverse portfolio. So I think that will continue to evolve. I have been saying for many years, having worked for Hilton twice and having worked for 3 of the Marriott companies that I think there are natural areas that, that the big brands should stay in. And I think the conventions in hotels, in luxury hotels, resorts are really, I think, better suited for the wheelhouse versus those more nimble opportunities that can occur elsewhere. And I think you're just going to see that continue to accelerate as we unfold.

Our next question comes from the line of Patrick Scholes with SunTrust.

There's some industry chatter out there that we could see many hotel rooms in major markets, especially New York, convert to affordable housing for homeless housing as the highest and best use. What are your thoughts on that?

I think it's a fair question. I would think markets like New York would probably be the most likely. As we all know, New York is badly underperformed and badly underperformed because there's too much supply. And if you think back 9 years ago, 2011, New York had 141, what we call, super compression days, where market demand was over 95%. And I think we ended 2019 with about 30, and we were forecasting 2020 in sort of low single digits. The amount of supply, and the brands are largely responsible, has decimated that market. And I think given the core nature of what's happening there operationally and the fact that it probably remains closed, it would not surprise us at Park if you had many hotels that never reopen and perhaps converting those to other uses, it makes a lot of sense, particularly given the incredible need right now and that those could make more economic sense. You would need, in many cases, the brands to cooperate and work. And I would encourage them to do so to help reduce the supply, the pain and suffering that's occurring to owners in that market.

I guess, taking the follow-up step on that, would that possibly happen to one of your hotels in New York?

We own the New York Hilton, obviously, the second largest hotel in the market. And obviously, one of the big convention center hotels, 1 of the 3 there. We think we have a natural role there. And that over the intermediate and long term, it can regain its place and be a significant contributor and be a strong platform. Obviously, in this environment right now, as I've said earlier, given the devastation that's occurred and being at the epicenter of COVID-19 here in the U.S., we would expect that, that would be among the last in our portfolio to reopen. But again, we will continue to manage the health, what we hear, both from the governor, from the city, from health providers and get a sense for demand patterns as the reopening process begins in New York.

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

I'm going to stick with -- stick with New York for a second. We're hearing from some office brokers that the tenants are leaning towards a post Labor day return to the office and also hearing that Broadway may not reopen until January or possibly Christmas season in December. I'm just wondering if those states were true, how does that impact your decision to restart, I think you said, toward the end of June, New York, the Hilton?

Yes. Bill, it's a -- that's a great question. Let me clarify. I thought I said that most likely in New York, we would be opening in sort of third quarter just given the reality now. I think the data point that you brought out are terribly important. I think first and foremost, you got to look at what we're hearing from the governor, from the mayor in terms of their stay-at-home orders and how that process unfolds and then what happens with both travel patterns and booking, what happens locally in terms of -- to the point you made about the Broadway opens later, whether companies continue to allow people to work from home, which is you can understand given the devastation that's occurred there. And William as I said, I would expect that New York Hilton would be among the last in our portfolio to open. We have been working over many years and continuing to rightsize that business.As you know, there's very little food and beverage. We have the urban kitchen. We have room service delivery. So there are a number of things that have been underway in that hotel. It's still a very tough operating environment and decimator. As I said earlier, if you have the city remaining closed, and let's take your time line, that's extended to third quarter, fourth quarter, I think it only drives home the point that there are probably many operators who -- owner operators who have levered up at 65%, 70% or more who probably don't reopen. Park has the luxury of having a large, diversified portfolio, significant liquidity. We will get through this. We will get to the other side, and that gives us a lot more optionality. But in terms of finding other sources of demand, everything is open, depending on what universities do. They are reaching out and talking to hoteliers about taking students, depending on how they reopen and when they reopen. So there're -- there are pockets of demand. Clearly, the group component will lag, as we've talked about. In this case, New York is probably the market that will be the toughest over the next several months for all the reasons that we're all aware of.

Yes. I appreciate that. And as a follow-up and not necessarily specific to New York. But how does the decision-making process change on opening or going back away is closing the hotels based on the -- whether it's a union hotel or a nonunion hotel?

Yes. It's a great question, Bill. I think it's another benefit of having a large organization and having a portfolio of scale. The men and women on our asset management team have just done a phenomenal job. Look, the hospitality business that we all love and admire, we never closed, right? We're open 365 days a year other than a natural disaster. Obviously, we get a global pandemic that none of us planned for. So we had to work tirelessly with all of our stakeholders, trying to find the right balance to close down. Obviously, we've shut down or suspended asset, 85% of our rooms, could not be prouder of the interface between our asset management team and our various operating, whether those are the brand partners or whether those are the independent management companies and we have eight across our portfolio. At the same time, we've now made the pivot to begin the reopening process.So we have work plans. Again, developed in conjunction with our asset management team and our local operating partners, we look and try to anticipate what are the current state and local government regulations? When do we think they're going to begin to relax? We can be up and running in those situations in a matter of days, and that's not weeks, but days. But we also have to make sure that we've got visibility into current demand, what's on the books, what's in the pipeline, how do we think the ADR. We have to rightsize because we're not going to reopen at full capacity. So you have to stage as to when and how you're going to bring employees back to make sure that it makes economic sense. That's a little more complicated, as you would imagine, on the union side. But I would say that our union partners have recognized the difficulty of the situation given the fact that many of them have significant reserves available through the health and welfare.We've also been accommodating to work through those types of issues. Of course, the government, the government programs are providing unemployment on steroids has also been helpful. So the good news is that people are getting bridged. None of us can go forever without revenue across industries. But I do think that we are as a nation beginning this reopening process and every city will have its own time line. Obviously, the drive-to markets, strong demand in South Florida in Key West, where obviously, we are well represented. In parts of California, we think, obviously, strong drive to Orlando. So all of this fits together, where there's still going to be a lot of demand, there will just be certain markets that certainly are going to be tougher to figure out and probably will be delayed. And I think New York, again, it's going to be the most likely scenario there.

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

Just first question, I wanted to focus on the group side, obviously, a pretty sizable part of your business. Can you give us a sense of what first half 2020 cancellations have rebooked either for the back half of this year or early next year? And then secondly, are there any indicators or things that you kind of look for that would allow you to see or be able to ascertain the likelihood that the second half of this year, group reservations will actually wind up coming and not just canceling later?

Neil, it's Sean. I hope you're doing well here. Just kind of to your first question about just kind of activity and rebooking. We had about kind of at a certain point in time, about $130 million of room revenue from group. That was, again, primarily is March through June, that canceled. I would say about 40% of that is in various stages of booking, have booked or in discussions going on right now. I would say the majority of that is beyond 2020. There might be some that rebooked into Q4. But I'd say the majority is beyond this year. There's probably about 50% of that has kind of been -- had kind of been -- in kind of waiting stage, certainly could be booked in the future. Hilton -- majority of this work is obviously going through Hilton sales, in marketing and in process. But we're certainly hopeful that they will continue to place that back into our hotels in other stages.In terms of how we think about the back half of the year, the [indiscernible] on the books haven't changed dramatically. I think it's probably consistent with others that have talked about this, where people are kind of having option here, and they can kind of wait to see how things materialize and -- so we don't place quite honestly a lot of faith in the back half, certainly Q3 bookings that's there, there for group. Clearly, as Tom mentioned, solutions around vaccines and medicines, treatments play a role to this and acceleration of that. How the brands come together and put the cleanliness programs in place, I think, really gives us advantage to retain those groups or attracting others for future business. But as we look at this and see how over the last several weeks and even months, we've seen kind of a window here where say 6 to 8 weeks out, you start seeing degradation as a group business. I think that holds for a while. So I don't think we have a lot of faith in what's on the books right now in the back half of the year.

Okay. The other one I have is, maybe just a broader or longer-term view. If you kind of look at the disparity between the coastal markets versus Sunbelt, and you kind of look at the governors in those states and their willingness to sort of get the economy back up and running. Various hurdles, various things you're hearing on a legislative side, political side. Does that make you shift or rethink how you -- what the portfolio looks like? Or what's your allocation priorities look like over the next five years or so in terms of maybe Sunbelt markets over the -- tough to operate unionized coasts?

Yes. It's a great question. I think the reality is that if you think historically about this business and no different for part than and our peers, we really want to follow the demand. We are well positioned overall. And when you think through the fact that we are in center city, iconic assets impossible to replicate, we're probably today trading 185,000 key plus or minus, and to rebuild our portfolio, replacement cost is somewhere probably north of $700,000 from Hawaii or San Francisco, L.A., Chicago, DC, Boston, et cetera. So it's hard to imagine that we're in a world where you still don't have a significant job growth, and therefore, the sources of revenue. Having said that, there's no doubt that there are very investor-friendly markets. Nashville is one, Austin is another, although the secret of Austin is certainly out. You can see other parts of Texas over time [indiscernible]. Some might say San Antonio. Houston always tends to sort of ebb and flow depending on what's happening with oil. We're now seeing the pain there, and that probably continues. Clearly, Florida continues to explode as you look at the population growth there. So I would say you see a balancing, but at the end of the day, it really is about where is the demand, where the barriers to entry and where can you generate the appropriate risk-adjusted returns.

Our next question comes from the line of Brandt Montour with JPMorgan.

And so I realize I might be splitting hairs here, but on the cash -- the monthly cash burn estimate that you guys gave. Just given that some of the larger brands even today sort of made it sound like nationwide trends in the U.S. may have bottomed here, can you maybe just give us a cash burn estimate, a monthly cash burn estimate for April? Or where you see it now if today's trends continue into the future?

Brandt, yes, I mean, as we kind of looked at it -- when we started out with it, we kind of had about a $90 million conservative estimate kind of in March, if you're going to pull this together. April, looking at April's results, just kind of what's driven us to what we've reported today of about $70 million, I'd say of that -- the $90 million, I would say -- let me just clarify, $90 million included the CapEx and $70 million does not. We want to -- as some people were pointing out and as you guys are looking at it, I think we've kind of excluded CapEx. So it's really about a $15 million difference. And $10 million of that really came from the hotel operating side.So again, as we looked at, our preliminary estimates were based on talking open in great detail as we looked at the operating model at a kind of a low asking level versus shutting down or suspending operations. We looked at various other proxies where we had our Caribe Hilton for 1, where we shut down post-Hurricane Maria, we looked at kind of the carrying cost for that asset. We just triangulated around what we thought was a pretty good estimate with some -- obviously, reducing it to kind of take a conservative view. Knowing that April will be a great proxy for this, given that April will probably be the one where -- April, May certainly will have the state of 38 assets being suspended and certainly, the ones that are open aren't producing a ton of revenue, but certainly being profitable on a marginal sense. We ultimately come down to what we think is a good level here at $70 million a month burn rate, $50 million for the hotel side and kind of $10 million or $20 million for corporate level and debt service-related fixed costs. So we feel good about that. We do think that there's always room for improvement, and we're going continue to do that and May will be the next test for us, but I think that's kind of how we look -- look at it going forward.

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

I was hoping to get your view on how directionally you think the recovery ultimately unfolds on the rate side because I think what's different this downturn versus prior ones, maybe not totally different, but you have a significant downturn right in group and corporate that might continue for some time, but you might have pretty solid leisure demand, which a lot of times leans into the third-party channels, yet the brands have done a ton of work to build loyalty and get reservations directly. So how do you see that all playing out on the rate front? Do you think there can be any rate integrity as we start to see demand recover?

Chris, it's a great question, and I certainly hope so. To the point you made, if you -- if you think back, in fact, this is the week that I rejoined Hilton 4 years ago to partner with Sean and the team and spin out Park. If you think then, Hilton had 53 million members in their loyalty program. I think now they're at 106 million plus or minus, and they're getting north of 60% of their occupancy from members. I think Marriott is somewhere in the 140 million range. So when you think about the strength of the brands, and the access that they add to those customers to induce demand, to have direct conversation and to be able to stimulate, you hope that and their desire same as our desire to make sure that we are getting the appropriate and the highest possible rate that we can. I do think that there's an opportunity there. However, if you look historically in this business, sometimes we have the race to bottom, people, heads and beds and trying to fill at any price.I think given the devastation and given the fact that people are working together and understand the revenue is so critical here, that hopefully we'll have more rate integrity. I would also say when you think about the recovery, a lot of it's going to depend on the medical side. As we know right now, it really is about safety and cleanliness and trust, brands and well-run brands, and we have them in our industry. They're about trust and a promise. I think they understand the need to address those immediate issues, but I have to believe, as Warren Buffett said, "Don't bet against America, we will get through this " And the fact that we have this global race underway to find the medical solutions, they really are the game changer. Because once we have those in place, it erases a lot of the fear. We have so much fear today. I think people want to get out. They want to get out of the bunker. You're seeing it all over the country. You're seeing the reopening process. It's going to be uneven. It's going to be choppy. But I do think that we could get back to '19 levels. It wouldn't surprise me if we were back in '22. I know some push it out to '23, '24, '25. It's -- we're not believers in that. We think that it will ramp up sooner.

Great. I appreciate that, Tom. And just a quick follow-up. What percentage of your hotels in Florida are kind of drive-to demand?

I don't have the Florida piece off hand right now. I'd say about 12,000, 12,500, about 40% of our overall -- of our rooms are in leisure markets. So that's Key West, it's Miami, that's Orlando, Santa Barbara and California, L.A., San Diego. You can make the case for Chicago, a wonderful city, certainly in season where people are going to be driving to and gas is cheap. So I think where people may have done the normal commute of 6 to 7, 8 hours, that might get extended until, again, the medical solutions are in place and people feel a little more comfortable. I do think you're going to have people accepting longer drives. But clearly, there's significant kind of demand for people to get out and certainly plan vacations with their loved ones.

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

Great. This maybe is a little too early to ask, but do you see with all the changes going on in the world that maybe there's opportunity for consolidation among modern REITs?

As you know, Robin, I've certainly been among the most vocal advocates for that for north of a decade, and we, at Park, are laser-focused on the priorities that we've outlined, cash preservation, our burn rate, showing up the balance sheet, working with the brands and our operating partners to make sure that we can rightsize the business as we reopen. I -- it would not surprise me, but you will not see Park in that dialogue right here in the near term. But it wouldn't surprise me coming out of this, depending on the individual situations of keys, on companies, whether they chose to find a [indiscernible].

But you're saying Park not interested in those discussions on either end? Is that correct?

Park is not interested in that at this time. We are laser-focused on all the initiatives that we've outlined, laser-focused on getting through the recession so that we are well positioned when the recovery begins.

And then maybe just 1 follow-up. You talked about the transaction market for assets, and you talked about kind of waiting to sell some noncore things because you're not in a hurry, you don't need to sell at a big discount. Do you have any thoughts on like, are there opportunities for assets that you might want to buy that are cheaper now and maybe on your radar screen?

Yes. But again, we're more focused on the balance sheet and cash preservation and rightsizing the operating model. I think there will be plenty of time as the process unfolds for single assets, small portfolios that may be available, but not a focus for park at this time to be a buyer.

Our next question comes from the line of Lukas Hartwich with Green Street Advisors.

I'm just curious, Tom, do you have any thoughts on the potential for a lasting impact on hotel demand as a result of this pandemic?

As I said earlier, Lukas, I mean obviously, we are all living through unprecedented circumstances that none of us planned for. And you see the devastation that's occurring and the ultimate shutdown that we're all living through, which has never happened before. I believe in our great country. I believe in our American Spirit. I do believe we'll get through this. Clearly, there are going to be industries that are going to be disrupted, possibly impaired. I do think as we think about lodging and the role that we play, lodging survives. I don't know about listeners, but I can speak from my own experience being on so many Zoom calls and WebEx. I can't wait to the days that we could have board meetings and industry meetings in person. I can't wait to be able to resume the normal life of vacations and business travel that we all appreciate and everywhere, all the people that I'm talking to feel the same way. Clearly, in the interim, life is going to change.And it's going to get adjusted as we work through making sure that people are safe, the cleanliness issues are addressed, social distancing is adhered to. But when we get on the other side of this, people are excited about beginning to resume their lives. No doubt there will be secular industries, where I think there will be some permanent change. I do think there are certain markets in lodging, where there's too much supply. New York, we've talked about extensively in this call, where there are hotels in New York and other markets that probably will not reopen, and perhaps alternative uses will be the best outcome for them.

Great. And then just maybe thinking out a couple of years when the transaction markets functioning again. I'm just curious, do you think there will be an increased risk premium applied to hotel real estate? Do you think cap rates will be permanently wider relative to other asset classes as a result of this? I mean this the third downturn in a row now, where it's just been a severe impact to hotel fundamentals. And perhaps the private market pricing has historically not reflected the risk of hotel real estate. So I'm curious, do you think there'll be a lasting impact on cap rates and valuation?

I do not, Lukas. And I would also say, as you know, I mean rates have been coming down for a long time. And look, rates are going to remain low indefinitely. And so when you think about those pensioners that -- think about those retirees who need yield, real estate, in particular, hotels, provide a wonderful alternative for that. I don't think that's going to decline. Obviously, it's -- we've -- it's been a tough environment in the last 20 years. But there is still significant value that can be created both through the public markets, the private markets, and there's been no shortage of inbound calls and discussions that we've had. There's plenty of liquidity looking for hotel real estate.

That is all the time we have for questions. I'd like to hand it back to Tom Baltimore for closing remarks.

Thank you very much. It was great to talk to all of you today. Stay safe, be well. We look forward to our next earnings call, and hopefully, we can meet in person at some point over the next few months.

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.