Ladies and gentlemen, greetings and welcome to the Park Hotels & Resorts Inc. Third Quarter 2022 Earnings Conference Call. At this time, all participants are in a listen-only mode. A brief 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 VP, Corporate Strategy. Please go ahead, sir.

Thank you, operator, and welcome everyone to the Park Hotels & Resorts third quarter 2022 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. Actual future performance, outcomes and results may differ materially from those expressed in forward-looking statements. Note also that all comparisons to prior year periods are on a pro forma basis. Please refer to the documents filed by Park with the SEC, specifically the most recent reports on Form 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in 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 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 a review of Park's third quarter performance, an outline of Park's strategic priorities and an outlook for the balance of this year. Sean Dell'Orto, our Chief Financial Officer will provide additional color on third quarter results, an update on our balance sheet and liquidity, and guidance for the fourth quarter. 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 another strong quarter, where we delivered solid performance across our portfolio as we saw strength across all demand segments. Lodging fundamentals continued their positive momentum into the third quarter supported by a strong labor market and healthy consumer and corporate balance sheets, which translated into steady growth in business transient demand and stronger than expected group demand in the quarter, especially post Labor Day as we witnessed some broad-based return to office trends and despite headline risk over increasing macro uncertainty, we currently do not see weakness in our business with continued improvements to group, business transient and international demand for the fourth quarter and beyond. Also for the quarter, we remain laser-focused on our capital recycling priorities, and I'm pleased to report that we closed on three non-core asset sales since July for total proceeds of approximately $58 million, taking our year-to-date net proceeds to approximately $317 million from the sales of our interest in seven hotels. And despite recent choppiness in the debt markets, interest in hotel real estate remains high, and we expect to execute on additional non-core asset sales, including potential deals in excess of $100 million, and these would bring our total net amount of closed and pending dispositions for the year to over $500 million well within our expanded target discussed last quarter. Once closed, our liquidity position would exceed $2 billion, which we believe will give us the optionality to pivot between defense and offense, during these uncertain economic times. From an operations standpoint, we continue to benefit from the efficiency measures we implemented over the last two years, with total labor cost pacing below 2019 levels despite increases to both wage rates and benefits, translating into an expected 15% reduction in…

Thanks Tom. Overall, we are pleased with third quarter results, which were in line with expectations as leisure continues to lead performance along with ongoing improvements across our urban markets, the trend we expect to continue throughout the fourth quarter and accelerate into 2023. Pro forma RevPAR for the third quarter was $171, 8.8% below 2019 levels, driven by widespread improvements in demand with pro forma occupancy improving sequentially by 80 basis points to 71.7% and pro forma rates continuing to improve to $239 for the quarter or 7% above the same period in 2019. Looking ahead to the fourth quarter, preliminary results in October look strong, with occupancy averaging approximately 74%, a nearly 200 basis point sequential improvement over September, while average daily rate during the month is projected to be approximately $243 or 4% above 2019. Overall, preliminary RevPAR for the month of October stands at $179 or less than 10% below 2019 levels. Although, if you were to exclude San Francisco, October RevPAR is 0.4% above 2019. Total pro forma hotel revenues for the portfolio were $642 million during the third quarter, while pro forma hotel adjusted EBITDA was $166 million, resulting in pro forma hotel adjusted EBITDA margin of nearly 26%. Margins were negatively impacted by demand softness in San Francisco, where our hotels have relatively higher fixed costs, which drove a 200 basis point drag on the portfolio. Finally, damage and disruption to operations from Hurricanes Fiona and Ian, were minimal with Q3 RevPAR impacted by 20 basis points and adjusted EBITDA impacted by less than $2 million. Our hurricane preparedness team's efforts to protect our guests', hotel employees and assets, allowed operations to resume safely and quickly after the storms had passed. Turning to the balance sheet. We have continued to make meaningful enhancements…

[Operator Instructions] Our first question is from the line of Smedes Rose from Citi. Please go ahead.

Hi, thanks. I just…

Hi, Smedes.

Good morning. You mentioned that the forward group bookings for '23 are running at about 75% of 2019 levels a little bit of a sequential improvement. I was just wondering is that rooms on the books or is that a revenue number? And then could you just talk a little bit more about what you're hearing from corporate clients and kind of maybe a little bit about the booking window?

Great question Smedes. I hope you're well. As we mentioned during the prepared remarks so group pace is up for '23 at about 75.4%. It's about 300 basis points increase, that represents revenue. And if you think back to some of the markets obviously San Francisco, Florida across our portfolio New York, New Orleans, Chicago, Hawaii all continue to show really strong performance. So it's very encouraging from that standpoint. In terms of corporate negotiated rates, I mean obviously those are ongoing and occurring now. I know some of our peers have used numbers in the 7% to 9% range. And we certainly would find that to be reasonable. But again, those discussions are ongoing now as we prepare obviously for the budgeting season. But we're very encouraged by what we're seeing on the group side. And again, sequentially that's an improvement. And fully expect that that's going to continue to accelerate as we move out into later this quarter and certainly into 2023.

Okay. Thanks. And then Sean maybe could you just talk a little bit more about how you're thinking about the refinancing of the debt on the San Francisco assets? You mentioned, it comes due next year. And maybe sort of help us think about the cost versus the 4% or so that's in place now?

Sure. Yes. We're certainly looking at a few different market Smedes and some other options as well in terms of working with the current situation. So, I would say that as we look at the markets, whether it's bank, financing or call it CMBS, anything that's kind of in that, kind of high single-digit debt yields, you're probably looking at call it $350 million to $400 million over SOFR. So, that's kind of in the ballpark of kind of the cost. And again, we're looking at more so probably a mortgage type of situation with an unencumbered assets, like the Bone Creek complex as a solution. Clearly, we'll continue to monitor the bond market as well. Obviously not pricing what we would be looking to do now. But if things kind of calm down and normalize a little bit maybe you can see that as an opportunity, but I think more focused on kind of a mortgage route going forward with the pricing I just discussed.

Okay. Thanks for that color.

Yes.

Thank you. Our next question comes from the line of Dany Asad from Bank of America. Please go ahead.

Hey. Good morning, everybody.

Good morning, Dany.

Good morning, Tom. I have a couple questions. So, my first one is on RevPAR. Maybe just help us kind of think through -- you gave us the full Q4 RevPAR guide of down 8% versus 2019. And then, we know October downtown. Can you just help us walk through kind of how you expect November and December to progress sequentially?

We've kind of -- we've talked through 7% to 9% down Dany. Obviously, we'll look at October being down closer to call it 10%. Again, we mentioned on our call -- or on the script I should say that Francisco is certainly a good drag there and ultimately, without it we being up slightly. So I think as you look kind of into November and December, I think you see a sequential improvement down to the mid-single-digits clearly as we go through the quarter.

Got it. And then my other one is on margins. So, if you kind of look at the -- if we adjust for the BI proceeds in 2019, you're kind of shaking out to somewhere that directionally looks like it's about 100 basis points lower versus 2019 in Q4 compared to Q3. Can you maybe just help us understand how much of that is seasonality? How much of that is as the urban cores of the country kind of recover, if there's a little bit of mix shift going on and just kind of how to understand how that is going to progress?

Yes. As you think about mix shift, we're roughly down 300 basis points in group relative to -- Q2 was down 140. That was certainly a better quarter at similar shift to 2019 as Q3. But as you think kind of a flow-through, I think we'll continue to kind of see improving flow-through as we bring some occupancy back. And so, I think for the most part, we feel pretty good about where the markets are going but obviously, it's a tough comp given Q4, given the San Francisco drag as well as the BI that we saw for CreeBay, especially in Q4 2019 as you mentioned.

Got it. Thank you.

Thank you. Our next question comes from the line of Dori Kesten from Wells Fargo. Please go ahead.

Thanks. Good morning, everyone.

Good morning, Dori.

Hey, Tom. What would you expect to spend over the next two years on maintenance and ROI? And what returns are you expecting on the ROI projects you mentioned in your prepared remarks?

Generally, we're on a normalized basis Dori about 6% of revenue. We've always been on the higher end, just given the nature of the portfolio. Revenue is that's one starting point. Obviously, that was disrupted obviously during the pandemic. If you think about what's in the pipeline right now. Obviously, we're wrapping up Bonnet Creek. There's another $80 million that we talked about in the $70 million. So you're a few hundred million. Back of the envelope, I think would be a good planning for what's in the pipeline. We are laser focused as we've said in terms of priorities. Selling non-core, we're making really good progress there. You'll continue to hear more about that in the coming weeks and using those proceeds to delever, but at the same time reinvest back into the portfolio, particularly with our ROI projects and quite optimistic and really encouraged by that. And then of course, we'll look for other capital allocation that could also include buybacks on a leverage-neutral basis. But obviously, the priority is getting down the leverage and certainly reinvesting back into the portfolio. So a few hundred depending on how many other projects we launch. We've got the DoubleTree project in San Jose and converting that. It's in a planning phase now. Given the uncertainty, we clearly are committed to getting the Bonnet Creek resort and that expansion done, it's well underway. And as we mentioned, the Waldorf ballroom will open next month. And obviously, the Hilton, Signia in about another 13 months plus or minus. And then we're also are completely renovating the guest rooms the public space and of course our world-class golf course as well. Casa Marina, we've had enormous success with the reach the sister property there. We expect that we will have at least that if not better with a complete renovation of the Casa Marina as well.

Okay. Thanks. And just digging into two of your larger markets. Given what you know about the convention calendar in San Francisco for next year and hopefully, the pending return of Japanese travelers to Honolulu, what kind of tailwinds you imagine that there could be as a result in RevPAR for 2023?

Yeah, it's a great question. I mean, if you think about San Francisco, I mean I realize there's a lot of energy around it. I'm in fact leaving here and headed out west and been out there many times as many know, but we are cautiously optimistic. I mean, if you think about the Park 55 didn't reopen until May of this year. Obviously, the Hilton was also not until the end of 2021. So you've got both of those sort of ramping up. And we had RevPAR down 90% at the beginning of the year. And as we said we expect that RevPAR will be down probably inside of 30% by the end of the year. That is ramping up quite nicely. And when you think about the citywides, there's $640,000 room nights expected. It's about 63% of really the all-time high in 2019 coupled with probably 130,000 room nights approximately already on the books at that complex. So we would certainly expect a pretty dramatic increase. With a market like that with only 30,000 rooms and clearly our complex there accounts for 10% of it. Having that -- having anchored with city-wides coupled with internal group allows us the great opportunity to really yield out the transient. So I don't have a revenue RevPAR figure for you today, but it really sets up nicely for a significant tailwind there. Hawaii is -- if you look about Hilton Hawaiian Village, it's just an extraordinary, I would respectfully submit certainly one of the more valued assets in all of lodging. When we think about that asset where we still don't have the Japanese traveler back but we're -- and we're probably going to be flat to RevPAR this year, we're still expecting to be at/or near an all-time high in EBITDA. So we are very encouraged by what we're seeing there. Now a lot of that has been certainly domestic travel, but it's also been in other international. International is normally about 30% of that asset. It's about 10% this year is what we're tracking. And the Japanese traveler now will have been gone for nearly three years. And historically they stay longer and spend more. So we think that there's a tremendous tailwind. Waikoloa has been 20% to 30% increase in RevPAR and if you think about Hilton Hawaiian Village, which essentially will end the year it was up 7% I believe in the third quarter but we'll probably end the year probably just flat to slightly negative. So I certainly would expect a double-digit increase in RevPAR as we look out assuming obviously the economy remains -- the economy remains healthy, which is what we believe today absent any significant changes.

Okay. Thank you.

Thank you.

Thank you. Our next question comes from the line of Anthony Powell from Barclays. Please go ahead.

Hi, good morning.

Good morning Anthony.

Good morning Tom. Just a question on New York. I mean, I think you highlighted how the market is recovering very strongly and the revenues are coming back very quickly. Question on margins there, I still see that the margins are trailing. What's the opportunity left there to, kind of, maybe improve the operating structure of that property? I know that was a big topic of discussion pre-COVID. So where are we in that process now?

That's a great question Anthony. I mean, look we have spent a lot of time and a great credit to our asset management team. We've been working with our operating partners and looking for ways to continue to streamline operations. And room service is a great example where it's more of a knock and drop, or we have limited food and beverage. Obviously we've got significant food and beverage as it relates to the group meeting and the banquet business, but really thinking about the business differently. The pandemic forced all of us to better communication, better collaboration among the brands, as well as the management companies. And we're anchored as we've said in the $85 million in savings and the 1200 jobs that have been eliminated. And a lot of that is really in food and beverage and taking out assistant managers, and taking out sales and marketing costs that candidly had become a bit accelerated over time. So clearly as you see occupancy continue to rise, we'll see the full benefit of those margin improvements, but it's a really different operating structure than what we have today. We are very encouraged by what's happening in New York. I would remind listeners everyone was, sort of, writing off I think both New York and San Francisco and other urban markets six months ago, a year ago through the pandemic. And I think New York is a great indication that it's coming back, and I think coming back pretty strongly. I mean we were -- if you think about where we were at the first quarter of occupancy, I think, it was in the low 30s second quarter at 69%. Obviously the third quarter at 74% and we're expecting probably Q4 to be in the low to mid-80s as an example. So I'd say that's ramping up nicely. And as we communicated on the San Francisco store continue to see that as well though, certainly San Francisco is lagging for the reasons that we've noted, but New York is coming roaring back and the city has been fully activated. And having really one of only three big boxes in the city really gives us a really a competitive advantage and a foothold there. So we are quite optimistic about New York as we move forward.

And I would just quickly add that we certainly expect things to improve for Q4. As Tom mentioned with occupancy, kind of, improving. We saw occupancy down 26 points in Q3 and we expected to be down more closer to 11 points in Q4. So getting the occupancy up we'll certainly improve the margins. I think we'll still slowly have a gap. But also as we look at Q4, we're still down 20% on group revenue. So you got to get the occupancy up and got to get the group mix more normalized to kind of get to the margins. But I would say that, we're looking at middle to high double-digits or teens, I should say, for Q4 margins versus what was kind of high single digits for Q3.

Thanks for that. And maybe on San Francisco. Can you remind us how important business transient is to that market? And where BT is right now could there be any risk of some headwinds there next year. We keep seeing layoff, kind of, announcements from Twitter strike and whatnot there's maybe a BT kind of slowdown or reversal in the market could that maybe offset some of the strength you're seeing in group next year?

Yes. I think, Anthony if you look, historically, I mean I think the real benefit of San Francisco was having obviously supply constrained, a great convention market and following, having a strong leisure and a strong business transient. So I wouldn't say, it's clearly one-third, one-third, one-third. So I don't have the data in front of me. But if you look historically it's been a strong market as any. And particularly as I think back to 2006 through 2019, certainly was among the top three markets. And really it was those strong sources of demand. No doubt that given what's happening on the tech-side, certainly will be felt a little more in San Francisco. But the fundamentals of getting the convention market back getting kind of return to office. We know that that's lagging. I know that the mayor and others are really pushing, but I wouldn't write off San Francisco over the intermediate and long-term. I've said that before and so we stand by it. We continue to monitor and study the market carefully. And we're not bearing our head in the sand. We are out there and we are seeing some green shoots and some positive things. We certainly want to see that accelerate in 2023 and beyond.

Thank you.

Yes.

Thank you. Our next question comes from the line of Duane Pfennigwerth from Evercore ISI. Please go ahead.

Hi. Thank you for the time.

Hey, Duane, good talking to you.

Hey. Same here, thank you. On the Japanese inbound traveler, I wonder historically, are there any differences in sort of the peak seasonality of that traveler, or does it line up pretty closely with peaks in Hawaii overall?

Duane, it's a great question. If you think historically, it's been about $9 million $8 million to $10 million, let's use $9 million is kind of inbound into why about 60%, 62% coming from the US second largest market really coming out of Japan, kind of $1.5 million plus or minus. And look, it's been consistent for 30 years plus or minus, particularly into that asset. And you've got generations coming they tend to stay longer and pay more. In terms of seasonality, I think it's been pretty consistent. I don't know, whether Sean's got additional data on it. But obviously, the tour operators have been a good, good part of it. But I think it really dovetails nicely. And given the capacity, we clearly have the capacity to accommodate that demand whenever it comes.

I think you see a little bit of blip in the spring around Golden Week on Japan. But I think as Tom said, generally pretty consistent across travel normal kind of vacation times.

Thanks. The reason, I ask it's – we've seen some airlines try and launch Hawaii service some successfully some less successfully, and it just tends to be – I think the learning is it tends to be a longer lead time purchase consideration. To your point, you don't go to Hawaii for a weekend, most of the time you go for a longer period of time. And so I would expect, there's a longer lead time in those purchase decisions as we think about travel restrictions going away. So it may just be a little too early to measure the success or failure of those easing travel restrictions. My follow-up –

Duane, if I could just to unpack that a little bit. I think it's a great point. But as I said you've got north of 30 years, if not more are really consistent. I mean, if you look at those travel patterns coming out of Japan, it's been a loyal consistent easy-to-get-to on a relative basis. And so when you look at that pattern now this will have been the third year where they've been virtually shut out. So I mean I would respectfully submit that as we saw in the US, with that sort of pent-up demand, I would expect similar behavior. So the airlines will respond to that demand as we saw, certainly respond here in the US, although, some did it better than others, but we're quite encouraged. And despite that, I mean, obviously we've got a resort here that continues to be an extraordinary performer. And we would expect when we get the Japanese traveler back that we will – it will continue to accelerate that RevPAR growth. And we really haven't seen the RevPAR growth at some of our other leisure markets that other of our peers have seen. So we see that as a real tailwind for Park as – as we move into 2023 and beyond.

That makes sense. Thank you for those thoughts. And then just I apologize, if you've covered this in another question. But Sean, could you maybe just give us CapEx or capital spending 2022, 2023?

I mean, ultimately, Tom covered that. I'll let Tom kind of –

Yeah. We've certainly, Duane, you always had 6% of revenues certainly higher than normal in part just given the nature of this portfolio. And as I said, we've got pending ROI projects that are active. And I said for planning, it's certainly a few hundred million dollars is a good base number to use and that can flex depending on when we accelerate the Casa Marina, with the complete transformation that we're planning for next summer. And of course, closing out the additional $80 million to finish up Bonnet Creek, which is going to be a complete rooms redo of the golf course, which we're quite excited about is we really position that world-class resort there in Orlando and certainly be as competitive, as any other property there.

Thanks very much.

Thank you.

Thank you. Our next question comes from the line of Chris Woronka from Deutsche Bank. Please go ahead.

Hi, good morning, guys. Thanks for all the

Good morning, Chris.

Detail – morning. First question was I don't know maybe we can zoom in on San Francisco Group a little bit, Tom. I think you've given us a lot of data points and some encouraging, but I think on the rate side right not where we want it to be. Is this some kind of structural issue where San Francisco from a group perspective has become more of a value city and the higher dollar has gone to Vegas. And the question in that is, it kind of matters for you guys, right? You need you want the higher-rated premium groups to really drive the EBITDA recovery there.

Yes. I'm not sure, that I would agree with that thesis, Chris. I mean look, Vegas works I think for certain groups. But if you think about some of the high-end educational base pharma, and you think about the audience in San Francisco, I mean they've historically had -- if you think back to 2006 through 2019 in Vegas was still strong at that point. San Francisco more than held its own. I would think it's been the pandemic, the unfortunate negative narrative that got away from the city. I do think the city is correcting, whether it's street conditions or homeless some of the safety and security issues. And you know, that many of us have been out there and many other business leaders men and women have also, I certainly know that the city gets that and I think they're moving in the right direction. So, I certainly would not -- and given the fact that you've got a market that has 30,000 rooms in the CBD, take New York it's 120,000 or more, so you have natural opportunity for real compression there. Obviously, for our portfolio and our complex it certainly makes sense to have citywides anchored with in-house group, and then the ability to really yield that transient. So we are encouraged. I mean the group pace this year is in the low 30% group pace, next year it's north of 50%. I think about 130,000 room nights, because I think the number that I gave in citywides are at about 640,000, which is about 63% of 2019, which was an all-time high. So, encouraging. Look, we need San Francisco that performance to continue to accelerate. As I reminded listeners, remember that Park 55 was closed for 27 months. It didn't open until May of this year. And there were many who made the comment that New York and San Francisco and others, wouldn't be back until 2025 2026 or later. I think it's fair to say that based on what we're seeing in New York and even the early signals here in San Francisco, that we certainly think that's going to happen before then.

Yes. I mean one thing I would add Chris is if you look at Q1 -- certainly start with Q1 pace for 2023 relative to pre-pandemic levels we were up part of the complex 8% on rate or pace. So, I think again coming from where it's been I think it's very encouraging and it's -- and I think what's also encouraging is what we saw the activity for -- in the month of September for booking for 2023 for San Francisco, which really represented about 14% of the total rooms added that month and ultimately 20% of the revenue. So, we got average rates of $433 booked for San Francisco for all of 23%. I think some of that obviously is probably going into Q1 for JPMorgan. But in the end it's an average rate of $433 which is 30% higher than the numbers we're seeing on the 8% pace I talked to you about -- I just mentioned. So, I think again encouraging and in the right direction with Francisco on the group side.

Sure. Great. Super helpful. Just as a follow-up how do we think about some of the puts and takes on margins going forward? I mean we're going to have higher occupancy next year hopefully rate mix could be I guess depends on your perspective could be positive could be negative. And really what I'm asking is whether it's kind of group margins on some of the ancillary stuff or even some brand initiatives I don't know if you're continuing to work with Hilton and I guess the other brands to a lesser extent on further things whether it's cost of loyalty or other that could be helpful going forward?

I think it's a number of things, Chris if you think about building this back. I mean clearly occupancy you're at a level where you're ranging in that 70%. So, you, kind of, get into that point where you're going to have a lot of your layered fixed cost and then you're going to basically with added volume just flow that better. I think we continue to see rate growth in certain markets. Obviously, you think about San Francisco going to drag that it is. I mean if you think about it coming back so it's going to certainly lift our RevPAR to 2019 in our rates. And so I think as you think about the flow-through for our business, again, getting the mix in there with group which is continually about 300 basis points less than what it's been in 2019 and therefore, getting the banquet and cading revenue coming through. I think you certainly see a lot of opportunity for this to continue to grow and obviously go beyond where we were in 2019 as we've discussed with the changes we made -- and the staffing changes that we've made. So, I think we certainly see continue to see growth obviously with the business still performing and we'll put the side the macro discussion for the moment with this. But I think in the end we have certainly a path here towards getting to certainly higher margins that we're seeing here today.

Okay, very good. Thanks guys.

Thank you. Our next question comes from the line of Neil Malkin from Capital One Securities. Please go ahead.

Thanks. Good morning everyone.

Hey Neil. Good morning.

Hey good morning. Just maybe some clarity on the potential additional dispositions that you've talked about. Can you maybe highlight or give us some color on -- are those just sort of the non-core maybe not the upper upscale full service? Are they the one-off markets JVs maybe potentially a reshuffling of the portfolio reducing some exposure to troubled unionized markets that lag? Any help on that side of the ledger would be great.

Neil, it's a fair question, but let me also just say, we've got a number of people in the queue here and we want to try to answer as many questions as we can. And I know we're stacked up with a lot of other companies reporting today.

Respect for the time.

Yes. No team has sold and moved more assets than we have since the spin. We're up to 38 assets now and $2 billion international 14 of those as you know South Africa, Brazil, Germany, seven in the UK, a joint venture in Dublin. I mean, we've seen it all and done it all. So we've worked on a lot of credit to our men and women on our development team and investment team and have worked really hard. Every one of the deals has legal tax, other complexities. So it's a combination. We are constantly working on reshaping portfolio. So I would say that there are assets over $100 million. They're non-core to what we would say long-term holding. We are not looking at this point if your question is about some of the big urban boxes, we don't think now is the time. They're big. They're complicated. There are tax and legal issues with the debt markets where they are. We think there are other assets that are marketable non-core plenty of debt sources in private equity and/or owner operators and family offices. And I think we've shown a real skill in being able to sell and also do it efficiently and at pricing that makes sense. We're not a distressed seller. We're doing this thoughtfully and prudently and we set a goal of $200 million to $300 million. We've already exceeded that. We've raised it now to $500 million and we're confident, we'll be able to deliver that and continue to use those proceeds to certainly delever and reinvest back into the portfolio.

Okay. Thanks.

Okay. Thank you.

Thank you. Our next question comes from the line of Robin Farley from UBS. Please go ahead.

Great. Thanks.

Hi, Robin.

I just wanted to ask -- hi, how are you? In your release you talked about the asset sales and how given that you've been successful at selling more than you had targeted that you might pivot between being defensive and offensive. And I'm just curious is that suggesting that maybe you would be thinking about making acquisitions, or I don't know if that was more just about reducing leverage and reinvestment? But it sounded like pivoting between defense and offense could mean you're potentially interested in making an acquisition?

Yes. We'd love to make an acquisition at the right time, Robin. Remind listeners again we've sold the 38 assets for $2 billion, we obviously bolted on Chesapeake for those 18 hotels for $2.5 billion. So we've really been a net acquirer. It's just been silent here as we work through the pandemic. The priorities are again getting the revolver done. Sean and team are making great progress there, selling non-core, reinvesting back into our portfolio. And then, again, as I said, we will have -- as we have done we'll look at buybacks depending on where the share price is. And clearly, we trade at a huge discount today. And if we can do some buybacks on a leverage-neutral basis, we'll certainly continue to look there. And not lost on us given all of the uncertainty. Part of the reason why we want to continue to build tremendous liquidity is that there will be a time when pivoting to go on offense makes sense and Park will be ready and Park will be active at that time. We don't think that that is necessarily today this quarter.

Okay. Great. Thank you.

Thank you.

Thank you. Our next question comes from the line of Patrick Scholes from Truist. Please go ahead.

Great. Good afternoon, everyone.

Good afternoon.

There've been a number of sizable acquisitions amongst your public REIT peers over the last several quarters. I noticed your folks have not been terribly active in the acquisition market. And I'm just curious as to your thoughts and rationale, why you've decided to perhaps take a pass. And again this is not saying that's right or wrong. I'm just curious as to what is your internal thinking of why you have not been active in that. Thank you.

Yes. Well thanks Patrick. As you know I'm not going to comment on other deals and I'll let them speak for themselves. I think we've been pretty, pretty consistent in what the priorities are for Park. And we really wanted to use the pandemic and the post-pandemic to reimagine the operating model. As Sean pointed out, as we get occupancy back and we get later in this recovery, we are confident that we're going to see permanent savings and real value there. We want to continue to reshape the portfolio in selling and recycling that capital and we've sold 38. We'll continue to sell some of the non-core. Our top 27 assets really account for about 90% of the value of the portfolio. So cleaning it up, we think that makes sense. And the highest and best use of those proceeds is really reinvesting back into our portfolio whether that's through the ROI or that's through targeted buybacks on a neutral – leverage neutral basis. There will come a time when we will be a buyer. We just don't think that time makes sense right now for Park. And if you think about since the spin, we really have been more of a net buyer than seller, given the fact that we bought $2.5 billion versus selling the $2 billion. And then also obviously, we've had a ton of buybacks over that period of time as well. So I'll stop there and hopefully that answers your question.

It does. Thank you for the color, yes.

Thank you. Our next question comes from the line of Bill Crow from Raymond James. Please go ahead.

Good morning, Tom.

Good morning, Bill. How are you?

I am good. There's little I'd like discussion better with you than some of the big picture issues. I'm just curious whether we might be talking about group and the recovery in San Francisco or Chicago or D.C. If that's not maybe missing the point here that we might be undergoing a larger paradigm shift and where groups might be heading. And I'm thinking about markets like Tampa, Nashville, Austin, Denver and whether we're thinking about some of these old entrenched group markets. Maybe that's just wrong going forward. I'd just love to get your opinion on that.

Yes. Bill, I'd love and I'd love to schedule a follow-up and you have this discussion with you. I just don't think they're mutually exclusive. I mean I don't disagree with you that there are some really compelling things happening in Nashville or Phoenix and Austin. As you know we – our past life, one of the largest owners of hotels in Austin, so I know it well. But I would also say that there are true and tried markets and infrastructure capacity in Chicago, in Boston, in San Francisco and Atlanta that have worked and are really part of the rotation DC. And there are reasons why those associations and/or those groups need to be or want to be in those markets with great airlift and other reasons. So, I don't think they're mutually exclusive. And I think we're going to have to see over time. And I would respectfully submit that, if you look historically at some of those top markets and I put Orlando in that there's a cycle and a rotation and I would fully expect the Bostons and DCs in San Franciscos and Chicagos to continue to be part of that. Now, there's no doubt and we won't get an argument here Bill about, there are some structural challenges in some of these cities that need to be addressed. No doubt about that. And I think you and I have had it. And I would respectfully submit that I've tried to be constructive and I've been a voice and written letters and made lots of comments on the subject I think as you know.

No I do. And I appreciate your advocacy for the industry. So that was it for me. I appreciate the time.

But I will schedule time will you be able to continue this.

All right. Sounds good.

All right. Good. Be well and always good talking with you.

Thank you. Our next question comes from the line of Jay Kornreich from SMBC. Please go ahead.

Hey, thanks very much. Good morning. Can you provide some additional color on how you see the F&B revenue trending in 4Q and then, the strength you see in this segment in 2023 as group demand and the convention calendar continues to ramp up?

I lost the first part of the question. We couldn't hear you. So, if you could just repeat the first part again?

Yes, sure. I was asking about, if you can provide some additional color about the -- how you see the F&B revenue trending in 4Q. And then the strength of F&B in 2023 as group demand and the convention calendar continue to ramp up?

Yes. F&B will ultimately come through certainly better than we saw in Q3 as we look at Q4. Clearly, you kind of get into the season of -- holiday season whatnot. You see a little bit of some ramp-up in banquet and catering. It should ultimately kind of get to a point where it's rivaling Q2 F&B revenue. So, I think certainly, as you see -- clearly as you see that mix more normalized on the group side, as certainly our pace would demonstrate that we're continuing to see improvement year-over-year. Certainly, you're going to see the F&B side grow. So we're certainly down significantly without the group mix in place there. So, I think certainly as we go into next year we'll certainly see the group mix normalize and F&B revenues certainly more normalized to 2019 levels as well.

Okay. Thanks so much. I’ll stop there.

Thank you.

Thank you. Our next question is from the line of Chris Darling from Green Street. Please go ahead.

Thanks. Good morning. Tom, I appreciate the comments you gave on the transaction market already, but I'm just curious, whether you could comment on any value changes you may have seen over the past couple of months, obviously, being an active seller in the market. And then I wonder, if possible, if you could delineate any of those changes across some of your major markets.

Yes. It's a fair question. Obviously, given rising rates, cap rates come in, they expanded 25 bps maybe 50 bps depending on, but we're still seeing a really healthy market for hotel real estate. I know the private equity funds and I may be off a little bit on my numbers, but I think are sitting on about $400 billion of capital. You've got family offices. You've got owner-operators. So there's clearly demand. And as you look for yield, I would believe that lodging and expect the lodging is going to continue to be an attractive asset class. You can’t do so many industrial residential three cap deals you can do and I think they get harder to do given where rates are. So we haven't seen any sort of slowdown. I do think that deals that have a story that also have an opportunity that, for perhaps with management or unencumbered, tend to have perhaps a more bidding audience, but that's not always true. If it's a trophy asset, I think, those fully encumbered are expected. So it really depends on the submarket and the asset, but we're not having any issues or resistance in transacting. And, I think, we've been as active as anybody. We're thoughtful about it. We go through a process. We certainly are committed to make sure that we're maximizing value for shareholders. But we really are also committed to recycling capital and cleaning up the portfolio and it's been a lot of hard work. People forget that we also had a laundry platform that we've also disposed of and we had four assets that we were self-operating. All of that has been cleaned up and great credit to Tom Morey, our Chief Investment Officer; and Nancy Vu, our General Counsel; and the men and women on those teams have been working tirelessly over the last few years, as we continue to reshape the portfolio. So it is a much stronger portfolio than where we were six plus years ago when we were spun out.

Got it. Thanks for the comments and appreciate the time.

No, my pleasure. Look forward to seeing you soon.

Thank you. Ladies and gentlemen, we have reached the end of the question-and-answer session. And I would like to turn the conference to Mr. Tom Baltimore, Chairman, President and CEO, for closing comments.

Thank you. We appreciate everybody taking time today. We look forward to seeing many of you at NAREIT and stay safe and we'll see you hopefully out in San Francisco.

Thank you. The conference of Park Hotels & Resorts Inc. has now concluded. Thank you for your participation. You may now disconnect your lines.