Greetings and welcome to Park Hotels & Resorts Inc. Second Quarter 2021 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [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 Second Quarter 2021 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 may discuss certain non-GAAP financial information, such as adjusted EBITDA. You can find this information together with reconciliations to the most directly comparable GAAP financial measure in last night's earnings release as well as in our 8-K filed with the SEC and the supplemental information available on our website at pkhotelsandresorts.com. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide an overview of the industry as well as a review of Park's second quarter performance and thoughts on the balance of this year. Sean Dell'Orto, our Chief Financial Officer, will provide additional color on second quarter results as well as more detail on our balance sheet and liquidity. Following our prepared remarks, we will open the call for questions. With that, I would like to turn the call over to Tom.

Thank you, Ian, and welcome, everyone. I am pleased to report that widespread leisure demand accelerated during the second quarter, leading to stronger-than-expected operating performance, which ultimately drove breakeven results at the corporate level, during the month of June, well ahead of expectations. We continue to make progress on strengthening our balance sheet, raising an additional $750 million of attractively priced senior secured notes, and announcing nearly $480 million of asset sales with net proceeds being used to repay debt. Given the meaningful improvements to both operations and the balance sheet, we are in a great position to once again prioritize growth opportunities, including ROI projects and selective acquisitions. On the macro front, the combination of strong economic growth and stimulus, high personal savings, widespread availability of vaccines and the corresponding easing of COVID-related restrictions has fueled a resurgence in leisure travel. The pace of economic growth has accelerated meaningfully since our last call. GDP reached an all-time high during the second quarter and is now forecast to increase 6.6% for 2021. Nonresidential fixed investment, which is highly correlated with lodging demand is estimated to grow by 8.4% this year, 60 basis points higher than our last call and by an additional 6% in 2022. U.S. savings sat at $1.7 trillion as of June. And with roughly two-thirds of the U.S. population over 12 years old now vaccinated, all signs do point to a return to in-person schooling and work for many people post Labor Day assuming for now that the Delta variant does not alter this progression. The ongoing return of normalcy is an important catalyst for our industry's recovery. While we have all benefited from strong leisure demand in recent months, this next step should allow for the resumption of business travel, corporate group and convention business. None…

[Operator Instructions] Our first question comes from the line of David Katz with Jefferies.

Tom, it sounded in some of your opening commentary that we heard some appetite on both the buy side and the sell side. Any chance you can elaborate and maybe set some boundaries or give us just a little bit more color on what Park would find compelling in either direction?

David, it's a great question. I would remind listeners, if you think back to the journey over the last sort of five years, we have worked really hard to reshape the Park portfolio. So, we have sold now 30 assets for about $1.7 billion. Obviously, we bought 18 assets, obviously, as part of the Chesapeake deal for $2.5 billion. So, we have been very active in toggling between, obviously, both the sale and repositioning as well as on the buy side. I think the message that I'd really like to leave with you and with listeners today is, we are laser-focused on reopening hotels as we talked about. We've got the three remaining. And again, we'll wait for the right conditions to open those. We have worked tirelessly on reimagining the operating model and are confident that we've been able to pull out $85 million in cost savings. And I think Hilton's announcement about opt-in on housekeeping is a great example. But, as we mentioned on the last call, we've taken out about 1,200 FTEs, that's resulting in about 8% of the workforce plus or minus at the property level. And we've also, again, really been thinking out of the box. And what we shared in our prepared remarks about Hawaii is a great example, taking a great leader in Debbie Bishop and having her over both properties and again, taking another $1.5 million in admin out of those two great assets as an example. So, you'll see -- you'll continue to see those types of initiatives, those will certainly continue to grow cash flow. And then, there are many options available within our portfolio for embedded ROI opportunities. Obviously, the Bonnet Creek that we've talked about that has been reactivated. We're really excited about that. One, the name change;…

And as my follow-up, I just wanted to ask about the Chesapeake portfolio. If we can go back in time, a part of the thesis was the opportunity to grow margins with less through the OTA channel. I realize it may be a little bit of an unfair comparison. But, can you just talk about progress to that end, if it's available at this stage?

Yes. There's no doubt that it still remains available, David. Look, we stand by the Chesapeake acquisition. We believed then, as we do now, that it really improves the overall portfolio quality. We have brand and operator diversification. It gave us geographic diversification. It improved our growth profile. And again, embedded value both from ROI opportunities, margin and grouping up. So Sean and the asset management team continue to work on those initiatives. We have sold some of the assets in the Chesapeake portfolio. But candidly, those were assets in almost every situation, but 1 where really those were not really compliant with our intermediate or long-term asset goals. So we are -- we've got 11 remaining out of the 18 and are confident that all of those provide the kind of opportunities that we underwrote initially. And you may recall that right before getting hit by the Asteroid, we had $21 million of the $24 million in synergies really already identified and accounted for. So, still very, very bullish on the Chesapeake acquisition as we look forward.

Our next question comes from the line of Floris Van Dijkum with Compass Point.

Tom, I loved hearing your view on not issuing equity below NAV. Maybe if you could give us some of your thoughts on NAV. And obviously, it's an evolving target. But presumably, with some of the transactions that have occurred and some of the increased activity that we're seeing in the market right now, what do you think -- I mean, how should we think about your NAV right now going forward? And also, how is that -- how much has that increased since the dark days in January, February?

Floris, it's a great question. You can imagine, we feel a lot better today than certainly 16 months ago, and I'm sure our peers feel the same way as we were in the dark days, obviously, of the pandemic. I think, our consensus NAV is somewhere in the $27 a share. The reality is pre-pandemic, we were probably closer to $30, if not above that. There's been about $3 of scarring from the pandemic in terms of the amount of cash that we had to really expand in terms of the carry during that period of time. We've recovered significantly as you look at our balance sheet and the moves that we've made, a lot of credit to Sean, our finance team and just how proactive. This is a very seasoned and experienced team. We knew what to do. We went into action. We never panicked. We didn't panic then. We're certainly not going to panic now. And I think it ties into your comment about dilutive equity moves. We avoided. We were crystal clear and firm in our position that we wouldn't do a dilutive equity trade, and that still applies today. So we traded probably 1 of the widest discounts at NAV today. And so, we clearly are not going to be looking to do any kind of equity offer, any kind of ATM program. It doesn't -- in our view, for Park, doesn't make sense at all to be selling equity at such a huge discount. Again, this portfolio provides such great optionality. And I alluded to it in the question that David asked is, look, we can recycle assets out of certain other markets. We could joint venture assets. The market, and we've demonstrated and we've shown, there's so much liquidity on the private side, we can get NAV or above NAV. So, it makes no sense to be selling equity in our view. And you'll see us continue to be creative and thoughtful. But rest assured, we will create value, either the public markets will recognize our value or the private markets, but we will create value for shareholders.

If I can follow up on that vein. In terms of, obviously, you've got a couple of irreplaceable assets, multibillion dollar assets, particularly in Hawaii. That was, I believe, institutionally owned in the past. Would you consider selling a stake in Hawaii Village to a large institutional investor or one of your other trophy assets?

Yes, I think we would clearly explore with a trophy asset. Obviously, the last on that list, as you can imagine, would be Hilton Hawaiian Village. We get calls all the time. I would respectfully submit that I can’t imagine that there is a REIT asset across any sector as valuable as Hilton Hawaiian Village, 22 acres, 5 towers. We're working on the 6th tower and getting the optionality of adding another tower there, world renowned. But, we will do what's in shareholders' best interest, and we will create value for shareholders.

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

Tom, I want to follow up on the investment question. And you sold two San Francisco assets for reasons, I think, all on this call, we understand. But, I'm curious for your longer term expectations for that market, knowing that it's always going to be a relatively low supply market and demand is going to grow eventually once we get out of COVID here, maybe back to prior peak levels, whenever that happens. So, how do you sort of pair the income and the value foregone from selling those assets versus maybe what you're looking at currently in terms of future acquisitions as we think about a use of proceeds there?

Yes. It's a great question, Rich. And the reality is, we love the San Francisco market long term. When you think to the point that you made, you've got one, huge barriers to entry and real supply constraints there. You've got multiple sources of demand, corporate, convention and clearly on the leisure front. And we do believe that San Francisco will come back. I would not bet against them. Great cities of the world. And I clearly would put San Francisco in that bucket. For us, it became really two issues. It was both, a concentration issue. San Francisco is about 17%. We'd really like to be sort of inside of 15%. And candidly, the need to delever. We thought it was really important to have the optionality on the balance sheet. And so, we looked at the 6 holdings, the 6 assets that we owned in the CBD and concluded, obviously, Adagio was better hands in private equity, given the adjacent parcel and the optionality there and sort of a small box. And Le Meridien in a perfect world and normalized conditions, probably one that we would have liked to keep. But, when you compare that against the other assets, we really thought that, one, it had a lot of optionality. We could achieve a really respectable pricing comparable to 2019. You do recall, a year ago, Rich, everybody said there was going to be all this distress and assets were going to be trading at 30%, 40% discounts. I think you will recall and listeners will recall, I was crystal clear in saying that Park would not participate, and we wouldn't sell assets at that kind of pricing. We waited prudently and appropriately and, obviously, we realized in both assets, attractive pricing. So, proud of the team, proud of the discipline. We certainly made the right move. Regarding other markets, everybody is chasing the southeast now. We've been to this movie before. Remember, 10 years ago, when everybody wanted lifestyle hotels in New York, and everybody ran to buy lifestyle and, I'd respectfully submit that didn't work out so well. I think here, in -- what's happening in the Southwest and what's happening in the Southeast, we certainly agree to business-friendly. We've seen the change in population growth and demand growth. Those markets are going to be attractive. It's going to be competitive. We are well positioned in Florida right now. But we too will be looking opportunistically and we'll have to evaluate the pricing in the situation and where it makes sense. I think, investors need to understand that we have great optionality in our portfolio. Just not sure we're getting the credit that people understand that there's lots we can do with this portfolio to continue to create tremendous value for shareholders.

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

I wanted to ask you a little bit more about the $85 million of cost savings. With the recent investments as Hilton made around housekeeping, is that factored into those cost savings, or do you think there could be upside to that, or does it just give you more kind of certainty around meeting that number? Sean Dell’Orto: Yes. Smedes, this is Sean. The recent Hilton policy change there or locking an opt-in housekeeping is not included in the $85 million. The $85 million is an exercise of us looking at department head roles, manager roles within what they call it, front desk, or ultimately, F&B outlets and whatnot. So, it was kind of going kind of position by position within each property and kind of thinking through the org chart and not so much about brand initiatives. So, certainly some upside potential there with Hilton's opt-in change going forward.

Yes. No, it seems like there would be. I mean, do you have any sense -- any way to kind of quantify it a little bit, or is it too early? Sean Dell’Orto: I think, it's too early to tell. Certainly, we got to get into -- you got to kind of get the business traveler back here to kind of get a sense. We certainly sort of have looked and seen how the CleanStay program has worked over the last couple of quarters. It's not exact science, it's not perfect. But, we certainly think that we've seen gains in and above the upfront expense of having to clean the room with additional protocols and whatnot each time there's a checkout, which clearly that's coming off in the opt-in kind of strategy remaining. So, I think certainly, we'll see some benefits going forward from it. But still a little bit early to kind of quantify at this point.

And then, I also just wanted to ask you, you mentioned you'll be cash flow positive in the third quarter, but fourth quarter is left out. And is that -- do you think you'll be cash flow negative in the fourth quarter, or is it, again, too early to tell? And maybe just can talk a little bit about how the transition, I guess, from the leisure season into a more business travel group centered season, how that's scaling or kind of what you see in the near term? Sean Dell’Orto: Sure. I think -- certainly, we look -- it's more kind of near-term focus for us just to kind of look at the cash positions for Q3. It certainly had a very strong July. And we'll see as we transition with -- from August, which obviously will be a little bit -- could be a little bit lighter as people think about going back to school and getting prepared to go back to the office. We certainly see that leisure could ultimately be slowing down a little bit. Traditionally, it does. And we're certainly seeing August kind of holding its own. But for the most part, July was certainly a very strong month for us. So we feel good about the quarter overall. Going to Q4, we certainly think there's a leisure component that really comes back around the holidays. And so, the question really remains around the business transient, which we've certainly seen great business transient. We think progress over the last several months. We've kind of looked at midweek occupancies across non-resort oriented hotels in our portfolio, a couple of dozen or so. We've seen it go from about 35% to 65% from April through mid-July. So, we certainly feel that there is some data that kind of goes along with some of the anecdotes we've seen and experienced ourselves with people coming to visit us and having meetings from externally. So, I think there's people out there traveling ahead of their offices reopening. We certainly expect that to continue and pick up as we get into the September and post Labor Day months, I should say. But ultimately, we've got to certainly be respectful of the fact that the Delta variant could ultimately have some impact as well. So certainly still a lot of visibility for us to kind of -- get better visibility on as we get into Q4. So not so much to say that we don't think Q4 is that way, just kind of more keeping it near-term focused.

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

Maybe on the optionality within the portfolio, you noticed some opportunities. But, how are you thinking about timing there, especially for some of the bigger ones. When could we expect to see more progress on those?

We continue to evaluate opportunities. You'll hear more, probably as we get third, fourth quarter and beyond, these things tend to be opportunistic. And candidly, that will depend on how the overall demand patterns unfold. I think, it will depend on discussions that we have. We get lots of inbound calls all the time about different ways to work together. There's no shortage of private capital. And there's no shortage of obviously, private capital is prepared to pay NAV or above. And the public markets are dragging. We've been to this movie before. As we get more visibility, we think the public markets will catch up. We're certainly not going to wait. We're going to continue to execute the initiatives that we talked about, both on continuing to rightsize the operating model, looking at embedded ROI and then other ways that we can unlock. So, it could be that we sell some additional assets and recycle capital. It could be that we look to partner and unlock capital that way. Some of the tax implications of the spin go away here at the end of the year. So, that makes it a lot, gives us even more optionality as we get into 2022. The other thing to keep in mind. And again, I don't think the market always appreciates just the complexity of the spin. We sold 30 assets, 14 of those international. We inherited the laundry business. We've gotten rid of that. We had four assets that we had to self-operate as part again some of the requirements of the spin. We've now solved that problem, and we got third-party operator. So, the Park team has been incredibly busy. Proud of our work. Obviously, none of us expected to get hit by the Asteroid and the pandemic. We quickly retooled. We've managed it. Our balance sheet is in outstanding shape, and we have a lot of optionality. And we can toggle between defense and offense. But you can certainly begin to see us positioning to offense. We've got scale, and we will be a player. So, make no mistake about that.

Thanks. And then, on the group side, as businesses book events, are there any new trends or differences that you're seeing relative to how the groups would look previously? And then, are they asking for different things? And are you seeing like-for-like events booked for fewer people, and especially as you look out to 2022?

Yes. I'd say, a couple of things. I think, we all can expect that your -- I was out at Elis. [Ph] Obviously you had the mask mandate out in L.A. But I think what we're going to continue to see is, you're going to see more of a return to normal. Like we saw on the leisure front, it accelerated lots of pent-up demand. I think you're going to see the same thing on both the business and on the group side. For even those companies that have people working remotely, what I hear from CEOs and other business leaders, men and women that they're going to look to get their people together more frequently. So, you may see people getting together in smaller groups or larger groups for training, for innovation, for team building. That need to be together isn't going to go away. You have to believe that advances in technology and hybrid meetings that there'll be applications. I don't know that anybody has perfected it yet. I'm on Zoom calls, in combination Zoom meetings and they worked fine and they worked fine during the pandemic because we had no other alternative. Now, people want to be together. They see the benefit of it. And I think things will accelerate closer back to where we were than I think people realize. I want to be on the road. I've been on the road. I'm getting more inbounds of people that want to come in. And once we get a return to office, once we get schools reopened, once we get past this Delta wave and the more people we can get vaccinated the sooner, the better it's going to be for all of us. But, there's no -- there's been no real change. And you can expect some hybrid stuff on the margin, but we're not going to be doing hybrid meetings. I just don't -- I don't see that as a new standard as we move forward.

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

Just a question on Hilton, both going to opt-in housekeeping and also changing some of the breakfast benefits for elite members. You have a lot of full-service Hiltons, and I'm guessing some of the customers may be used to daily housekeeping and a generous breakfast. How has that been received by customers? And do you worry about any kind of long-term impact to customer satisfaction from these changes?

No. I'll jump in here, Anthony, and then Sean can jump in. First of all, as I said in my prepared remarks, I really applaud Hilton. We have got to use the crisis as an opportunity to reimagine the operating model. I think, the opt-in was the right move. I think the changing the credit for elite members was also, I think, a more efficient. And I think we're going to continue to see changes in food and beverage. And whether that's room service or whether that's grab-and-go or eliminating three-meal restaurants that are unprofitable. We have to think about the business differently. This crisis was painful for all of us, particularly owners, but also for the brands as well. If they don't have a healthy owner community, they're not going to continue getting that distribution as they'd like to see and need to see. So, I think the moves were the right moves as we move forward. Clearly, the luxury product and luxury customer, I think we'll be less likely to make those changes. But, we continue to evaluate it. And I think on the margin, there have been modest or small complaints. But the reality is, I think people are accepting where we are right now. Sean Dell’Orto: Yes. And I would just here quickly add that in the end, as I mentioned before, I mean, we still need to kind of see a good return of that business customer too, to kind of test this out. But, we certainly early on have not seen many complaints and certainly not have heard from our friends at Hilton around that. Certainly, they're very focused on making sure they maintain their market share and market premiums. So, we're certainly in conversation around any of the brand standards as they are thought about being brought back with that in mind, but also within, obviously, the bottom line as well as we're certainly having great conversations as we kind of layer things back in or think about it. So, I think we're encouraged about how that -- these things work going forward, but we have to kind of see and test it out over the next several months.

And one more on CapEx. You guys have been pretty consistent in your CapEx as a percent of revenue, I guess, up to the pandemic. I know you have -- you're working on Signia in Orlando. Maybe an update on the New Orleans I guess, Convention Center expansion there, other projects and just general CapEx levels over the next few years, and do you think you need to up CapEx going forward, or is that 7% still kind of where you want to be?

Yes. Anthony, we've been kind of at 6.5% to 7%. I know Sean and the team are looking at possibly increasing that slightly. We've got the three ROI projects that I mentioned. Those are probably about $200 million in capital. And we think the returns are probably 14% to 15%, and you're probably looking at EBITDA somewhere in the $30 million range. That does not include New Orleans. New Orleans is certainly more complex. But keep in mind, we've got the well locked that we often referred to. We've got 8 acres, plus or minus, and we've got 5 million square feet of additional FAR adjacent to the convention center. That's clearly a longer term project and one that we would look for a development partner and others as we proceed. But, we see huge, huge upside. I mean, that could be another sort of L.A. Live type execution there in New Orleans. We want to find the right timing for it, but we see huge upside. Again, none of that is factored into NAV or future growth, but it's land that was land banked 25-plus years ago. And obviously, we appreciate having that benefit for the future shareholders of Park.

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

Tom, I was hoping we could circle back to the acquisition topic for just a minute. And obviously, you guys took on the Chesapeake portfolio, you've sold a bunch of mostly single assets, including some of the Chesapeake hotels. And you mentioned that you could potentially JV some of your assets and free up a fair amount of capital. So, should we triangulate that to mean you might have a preference for chunkier deals or portfolios going forward as opposed to lot of your peers focusing on a one-off acquisition strategy?

Yes. It's a great question, Chris. I would say, it's really to be opportunistic. We want to be nimble enough and we are nimble enough, whether it's a single asset that's chunky. I mean, we clearly want upper upscale or luxury assets, top 25 markets. By definition, we think those will probably be acquisitions that are certainly north of $100 million or more. So, they by definition will be chunky. But we were also not opposed to portfolio or larger deals, and we're also not opposed to M&A. We don't think M&A is -- the timing is right today for all the obvious reasons. But we still believe that having 15, 16 lodging REITs, at some point, we hope that investors and we hope that analysts will start to encourage, we're the most fragmented segment in all of lodging. So at some point, that discussion will make sense. Again, not something that we are looking at today, not something we're spending time. One, we think it's more important to execute the initiatives and priorities that I already outlined, but we certainly believe long term that you will see the sector consolidate at some point.

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

We've heard some indications on the airline front that they're seeing a greater than seasonal decline in forward ticket sales. And I assume that would be related mostly to the latest Delta outbreak. But, anything you're seeing from a cancellation front or reservations over the next, call it, 30 days that we might be entering a little bit of an air pocket? Sean Dell’Orto: Yes. Bill, it's Sean. We have seen in select spots, some cancellations. It's kind of concentrated in, as you would expect, markets like Orlando and Florida and New Orleans. I would say that it's also kind of really concentrated in kind of this month and kind of up to mid-September in terms of some cancellation activity. It's a few -- and certainly, notably too, it's been a majority of what we've seen, which has not been a lot. It's kind of actually been medical groups, so. But in the end, it's interesting because a lot of stuff we saw in Orlando is medical groups, but we haven't seen much impact in our Bonnet Creek complex. We've seen some other assets we have in Orlando. So, a little bit of activity there. And certainly, we're seeing a little bit of kind of pause, wait and see on some prospecting for groups that might be looking to kind of hold off and make a decision in a few weeks to see how things play out. So, potential, slight air pocket, Bill, but I would say that I think people -- most people generally think this kind of peaks pretty quickly. And I think we just will probably get back to regular activity probably as we get to the end of the month here in early September.

Bill, it's Tom. The other thing I would say, as Sean said, look, it's probably small air pockets. We're not overly concerned. And I think, we all believe we're going to get to the other side. We need the speed of vaccinations accelerate. We need people to get their shots. And we need candidly, as I said in my speech out at Elis, [ph] we need leaders to lead, and we need companies and governments to mandate. I think that's the only way we're going to get to the other side, and we're beginning to see people do that now, which is encouraging. But, I would also say, if you look at our non-resort markets, and if you look at, say, through mid-April to sort of mid-July, we saw an uptick in occupancy going from, say, 35% up to probably 65%. So, we're seeing business transient. And again, these are the non-resorts. This is not Hawaii or Florida or New Orleans and the other markets where we're getting just that prolific growth, we were seeing that sort of midweek Tuesday, Wednesday, occupancy grow. So, that's an encouraging sign. And I think the other side of it is, look, we all need to live with the facts and circumstances, get vaccinated, put your mask on and get moving. And I think people are moving forward. You're not going to see massive lockdowns, you're not going to see the -- we believe the panic and hysteria. We got to get moving. And I think you're going to continue to see that.

I appreciate that. Tom, you led me right into my follow-up questions -- question on mandates. Today, United Airlines announced they were going to mandate vaccinations for their employees. So, I'm wondering how much pressure you're able to put on Hilton to enforce a mandate to -- introduce and enforce a mandate.

Well, I certainly am not going to try to speak for my good friend, Chris. He's more than capable to speak and to set that tone, and he's a dynamic leader. And I would expect that he will arrive at the right conclusion. I was crystal clear in my remarks out at Elis, [ph] and I'll say it again. We're not going to get to the other side until we have leaders leading in mandating, and we're doing it at Park, and I'm doing it and saying it on this call and any form I get. And look, there are going to be exceptions, whether it's for medical or religious. But, the reality is, we've got to get shots in arms to move forward. So, I've said my piece.

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

Yes. Just thinking about the Delta variant and things that are potentially being implemented or things that are being canceled. One of the things about Delta is that its clinical breakthrough rate is pretty significant in terms of people who get it, been vaccinated with the original vaccine. So, given those things, and you're starting to see companies delay back to work. And I'm just wondering, I guess, what do you expect, or what's your view on, if like the UN assembly or Fashion Week Broadway stuff is held up as an example. And what's your kind of view on if vaccine passports are mandated in some of your bigger markets, like, call it, New York and California. How do you think that winds up playing out in terms of both business and leisure demand near term?

Yes. A couple of things. And Neil, I'm not a medical professional. But from what I read, obviously, the suite of vaccines that we have available are holding up really well. The problems are largely, I mean, 99% are with people that are unvaccinated. So, I think it's important to sort of level set. And I think the more pressure, encouragement that we get from both, the federal government and local governments, business leaders, those men and women and those companies sort of mandating vaccines, the faster we're going to get to the other side. I don't think you're going to see widespread lockdowns. We've been there, done that. I just don't think the nation is ready, prepared or willing to do that in my view. And we're watching demand patterns carefully. Part of the reason why New York is -- certainly remains closed is we want to make sure that we open at the right time, given the size and complexity of that asset among the other large asset that we have in San Francisco. So, we'll continue to study it. I suspect if anything, you might see a few companies delay. But, I think the vast majority of people, assuming schools are reopening, some of the child care issues are addressed that people want to get back to being with their colleagues and continuing to interact in person. So, maybe it gets pushed back a few weeks, maybe it gets pushed back a month. But, I do think that becomes the exception rather than the rule.

Okay, great. And then, just kind of looking at -- I understand booking windows are short. But, in terms of business transient and group, let's call it, post Labor Day or into the fourth quarter. What do you expect demand to be, or what's a reasonable level of demand for the business transient and group segments relative to '19 levels in sort of later in this year. Is 50% a good bogey, or if you could just talk about that, maybe Sean, that would be helpful in kind of gauging how things are going to progress and modeling? Sean Dell’Orto: Yes, I think that's a fair bogey. When you think about kind of our mix, which you kind of -- as we kind of look out, I think we certainly see try and getting into mix back to kind of when we think about group and business transient kind of to where it happen -- what it was back in '19. So I think it's a fair thing to say about 50% of normal.

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

I just have one question on the dividend. As we think about how you guys are going to deleverage naturally in '22 and '23, and the free cash flow associated with the business. What -- how is the Board thinking about re-implementing the dividend under -- from the context of what do you think you might need to pay over those two years versus what you might want to pay from a REIT perspective versus just a corporate finance perspective?

We're certainly going to see whatever the REIT obligations are. Obviously, coming through this window gives us, again, a lot of optionality, given some of the NOLs that we have, and allow us to redirect capital to some of the ROI projects and other initiatives that we've talked about. So, we do appreciate having that flexibility that we candidly did not have at the start of the spin, just given the relatively low tax basis for part of the original portfolio. So, we clearly want to reinstate the dividend, probably more at a very modest level and then have it -- we'll top it off at the end of the year, but you would expect that our dividend would certainly be lower than what we had historically.

Our next question comes from the line of Gregory Miller with Truist.

I'm hoping to follow up on the topic from your prepared remarks. I appreciate visibility may be limited. But what are your current expectations of the timing and trajectory of the recovery of the Japanese consumer to Oahu and Hawaiian Village? Perhaps how you see '22 playing out at this point?

Well, Greg, it's a great question. If you think historically, visitation in Hawaii has been 8.5 million, 9 million, about 62% of that coming from the U.S., 17% of that coming from Japanese travelers. This will be probably the second year that they have been down. Those trends coming out of Japan have been pretty consistent over the last 30 years. So, about 30% of visitation in Hilton Hawaiian Village international, about 60% of that coming from Japanese travelers. So, about 223,000 room nights. So, we would fully expect, as you see vaccinations ramp up and international begin to that to start. To see a ramp up, I would say, the second half of '22 and then see that just explode into '23. And part of that is again, you will have had two seasons where that very loyal traveler who visits Japan, visits Hawaii often. And again, given that 30-year history, we would expect just a really strong resumption, so do that revenge spending that reclaim, recapture what they've lost and effectively would have been away from almost two years from Hawaii. And we're not getting any of that today, as you know. But, because you're not seeing the international travel, we're getting all the domestic travel. So, we see that as just another leg in continued growth for Hawaii. We think Hawaii will continue to outperform, and it's 25%, 30% of our revenue.

Makes a lot of sense. I'd like to follow up on -- also on the international front. This is more of a higher-level question. But since you mentioned leaders leading, I think you're well suited to address this question. Yes, I would be interested to hear your thoughts on the travel infrastructure today to induce international demand to your gateway markets as corridors start to reopen. And I think in particular about how local cities are communicating to international travelers, given very policies and cities and states on items such as indoor mask requirements or perhaps presenting vaccination cards at restaurants. I'm not sure if the confusion may impact near-term interest to visit the U.S. or if this is just a nonissue. How concerned are you that travelers may be confused? And what do you think can be done to improve these potential communication issues? Should the efforts be at the local CVB level from hotels and the airlines, perhaps more on a national basis? Maybe I'm overstepping the issue here, but I'd be curious to hear your thoughts about it.

Yes. It's a great question. I don't know that we've got enough time because we could spend 30, 40 minutes on it. And I’d go back to my earlier comment. I think the first is, we've got to get people vaccinated, both domestically and I think abroad. And the sooner we get that, that's going to provide people with the confidence and protection. And then, we've got to reopen borders. And I think part of it is you've got to have a consistent. I know we've dealt in markets like Chicago, where you had the governor had one point of view and the mayor had another. And until they were aligned, we really couldn't reopen there. And I think the same thing applies to many of the other cities. And I also think if you had the travel industry, and you're seeing it now, you're seeing united. I suspect the other companies or airlines are going to follow suit. I mean, leaders should lead and we've got to have a consistent message, have the mandate, have a strict policy of mask until we can get to the herd immunity and get to the point and then have some sort of vaccination card. I think, many years ago, many of us had it as we were -- I'm older than probably a lot of people on the call, but we had a record of the vaccinations, and we needed to go to school. I just think we're going to have to figure out a way and a process, and we're going to have to live with the Delta variant or others until it's eradicated, and we can accelerate that and the risk by getting people vaccinated. So, I'll stop there just in the interest of time. But I welcome the opportunity to have a sidebar with you at your convenience.

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

So, for the unconsolidated portfolio, are there any opportunities to reduce or increase stakes there?

Yes. In terms of buying and taking an increased interest in them -- Lukas, you broke up a little bit. I want to make sure I understand the question.

Yes. Sorry. Yes, the unconsolidated portfolio, there's some assets in there, some held by owners that arguably have higher levels of leverage, may need access to capital. So I'm just curious if there's any opportunity to increase stakes in some of those or maybe even sell stakes potentially?

Yes, all the above. And we continue to engage in discussions. Keep in mind, our top core portfolio accounts for 90% of the value. All of those remaining 10 joint ventures have different legal and tax complexities. Some of that will be easier for us to address here, once we get out of the remaining -- the fifth year sort of threshold on the spin. So that will give us increased optionality next year to continue to accelerate. Some of them have short-term ground leases that have to either be extended or modified as well. So, everyone has a unique story. But rest assured that the men and women at Park are working hard on that like you've seen us clean up in terms of the 30 assets that we've sold and including the international, getting rid of the laundry business, getting out of the management business. We've got work streams underway on many of those assets.

There are no further questions in the queue. I'd like to hand the call back to management for closing remarks.

Thank you. We really appreciate everybody taking time today. Hope you enjoy the remaining part of your summer. And we look forward to seeing many of you in person in September, October and look forward to our next call in early November. Stay safe.

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.