Park Hotels & Resorts Inc

NYSE:PK

Earnings Call Analysis

Park Hotels Reports Robust 2023, Optimistic Outlook

In 2023, Park Hotels & Resorts delivered a strong performance, with revitalized markets such as Hawaii fueling nearly 16% RevPAR growth in urban hotels and an 8.5% yield on dividends. An aggressive capital allocation strategy resulted in share repurchases worth $180 million and divestitures from non-core hotels targeted to raise $100-$250 million for debt reduction and reinvestment. Looking ahead to 2024, the company expects to build on solid group and transient demand, with projected full-year RevPAR growth of 3.5%-5.5%, translating to $185-$188, and anticipates adjusted EBITDA between $645 million to $685 million and adjusted FFO per share of $2.02 to $2.22.

A Year of Sector-Leading Performance and Promising Outlook for Park

Park Hotel & Resorts showcased an impressive track record in 2023, managing to not only meet but exceed their operational goals. The company achieved strong performance across key markets, seeing a nearly 16% RevPAR growth in their urban hotel portfolio compared to the previous year, driven by solid demand in New York, Boston, Denver, and Chicago. Going further, the company adopted a sharp approach to capital allocation, investing nearly $300 million in their properties and repurchasing 15 million shares at a value of $180 million. Moreover, they returned over $450 million to shareholders through dividends, highlighting a dedication to shareholder value.

Continued Momentum in Hawaii and Strategic Investments Fuelling Growth

Park also sees a sunny forecast for the year ahead, particularly in Hawaii, predicting another robust year at Hilton Hawaiian Village thanks to strong domestic demand and an anticipated boost from Japanese tourism. Their Hawaii properties are projected to experience low single-digit RevPAR growth in 2024. The revitalization of their portfolio through strategic exits and investments sets a favorable stage for continued success, especially with a healthier U.S. economy and a resilient leisure travel market.

Solid Financial Fundamentals Reinforcing Park's Market Position

Park presents solid financial foundations, with RevPAR at $178 reflecting a rise due to an occupancy surge to 71% and an ADR increase to $251 — 15% above 2019 levels. Their commitment to prudent capital management is well-established, with over $1.3 billion in liquidity and a significant reduction in net debt. Park's credit standing has also improved, exemplified by a two-notch upgrade from S&P Global, from B to BB-, a nod to their meticulous balance sheet and credit enhancements.

Strategic Renovations to Improve Competitive Edge and Guest Experience

In pursuit of enhancing guest experiences and property appeal, Park has undertaken several renovation projects with nearly $300 million in capital spent in 2023. These renovations aim to improve ROI and include substantial revamps of their significant resorts. For 2024, Park anticipates spending around $230 million to $250 million on CapEx, focused mainly on guest-facing improvements. However, these renovations will impart a temporary impact on RevPAR and margins, yet it's an investment in the future vitality of Park's portfolio.

Guidance for Growth Amidst Temporary Headwinds

Looking forward, Park establishes a RevPAR guidance of $185 to $188, corresponding to a growth of 3.5% to 5.5%. The company anticipates adjusted EBITDA to be within $645 million to $685 million and adjusted FFO per share between $2.02 and $2.22. While renovations will bring a temporary drag on performance, specifically affecting Hawaii's properties, Park expects to offset these impacts with solid performance across the portfolio. The company also signals a cautious but optimistic stance for the year, citing potential conservatism built into their guidance. Moreover, their urban core hotels, especially those in New York, are positioned advantageously due to their ability to handle large groups, offering a clear competitive edge.

Wage Increases and Portfolio Sales Under Consideration

Wage and benefit costs continue to be a critical focus for Park's management, with estimates hovering around a 4% to 5% increase based on previous year trends. Negotiations are ongoing, and there's a commitment to maintaining strong relationships with their partners. Furthermore, Park plans to pursue sales of non-core hotels, with projected dispositions ranging from $100 million to $250 million. The proceeds from these sales will further enhance their financial flexibility and portfolio strength.

Earnings Call Transcript 2023-Q4

[Operator]

Greetings, and welcome to the Park Hotels & Resorts Inc. Fourth Quarter 2023 Earnings Conference Call. [Operator Instructions] Please note this conference is being recorded. I will now turn the conference over to Ian Weissman, Senior Vice President of Corporate Strategy. Thank you. You may begin.

[Ian Weissman, executive]

Thank you, operator, and welcome, everyone, to the Park Hotels & Resorts Fourth Quarter and Full Year 2023 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. Please refer to the documents filed by Park with the SEC, specifically the most recent reports on Form 10-K and 10-Q, which identify important risk factors that could cause actual results to differ from those contained in the forward-looking statements.

In addition, on today's call, we will discuss certain non-GAAP financial information, such as FFO and adjusted EBITDA. You can find this information together with reconciliations to the most directly comparable GAAP financial measure in yesterday's earnings release as well as in our 8-K filed with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com.

Additionally, unless otherwise stated, all operating results will be presented on a comparable hotel basis with a comparable view excluding the 2 Hilton San Francisco hotel. This morning, Tom Baltimore, our Chairman and Chief Executive Officer; will provide a review of Park's fourth quarter performance and the outlook for 2024. Sean Dell'Orto, our Chief Financial Officer, will provide additional color on fourth quarter results, an update on our balance sheet and liquidity and further details on guidance. Following our prepared remarks, we will open the call for questions.

With that, I would like to turn the call over to Tom.

[Thomas Baltimore, executive]

Thank you and welcome, everyone. 2023 was a year of outstanding accomplishments for Park as we executed on our strategic objectives, exceeded our operational goals, and meaningfully strengthened our balance sheet while delivering sector-leading total returns for shareholders. Our strong operational performance was broad-based as we witnessed ongoing strength in Hawaii as well as an acceleration in group demand across several of our core markets, including New York, Boston, Denver and Chicago, which helped to drive RevPAR growth of nearly 16% versus 2022 in our urban hotel portfolio.

On the capital allocation front, we remain laser-focused on targeting the highest returns on our invested capital, having strategically invested nearly $300 million across our iconic portfolio at expected returns well above acquisition yields. We also took advantage of the spread between public and private market valuations, buying back nearly 15 million shares for $180 million in 2023 at a significant discount to net asset value. In addition, we returned over $450 million of capital to shareholders in the form of dividends with dividends from operations totaling $1.38 per share or an attractive 8.5% yield based on our most recent share price.

I'm also incredibly excited about our relative position in 2024. The investments we made in our portfolio over the last 2 years, along with the repositioning achieved by the effective exit from the 2 San Francisco hotels combined with the current backdrop of a healthier than expected U.S. economy, strong convention and group activity in our key markets, and the ongoing resilience of leisure travel create a favorable set-up for Park. Prudent capital allocation remains a top priority as we anticipate continuing our initiative to sell more non-core hotels with net proceeds used to reduce debt and reinvest in our core portfolio with an expected disposition target of $100 million to $250 million this year.

Furthermore, we will continue to strengthen our balance sheet by extending maturities, all while maintaining sufficient liquidity to opportunistically acquire assets until capital market conditions improve.

Turning to operations. As we previously reported, I am incredibly pleased with our results for both the quarter and full year 2023, exceeded expectations. RevPAR growth increased 4.1% for the fourth quarter and 8.7% for the full year or 50 basis points higher than the midpoint of our full year guidance. Excluding the impact from renovation, primarily at Bonnet Creek and Casa Marina, RevPAR increased an impressive 6% and nearly 11%, respectively. Total RevPAR growth of nearly 5% in the fourth quarter was supported by an 8% increase in food and beverage spend driven by solid banquet and catering in our urban and resort markets, translating into an incremental $3.5 million increase in EBITDA in the fourth quarter.

With respect to group, we saw a continued trend of accelerating performance throughout the quarter, with comparable group revenues for the fourth quarter up nearly 9% year-over-year, or a sequential 12% improvement over the third quarter, while Q4 results represented the first quarter since the start of the pandemic for group revenue the past 2019's quarterly results. Looking ahead to 2024, we expect group to remain very healthy. Group revenue paced up 13% year-over-year and total group revenues forecasted to exceed 2019 levels this year, driven by a material pickup in group demand at our Bonnet Creek complex in Orlando, where our meeting space expansion project was completed recently, coupled with strong citywide calendars across several of our core markets including Chicago, Honolulu, New Orleans, San Diego and Miami, all of which are expected to produce double-digit increase in convention room nights 2024.

Focusing on a few key markets. New York continued to benefit from impressive recovery of both group and leisure demand, which when combined with a nearly 9% decrease in hotel supply since 2019, translated into a material increase in compression room nights during the quarter. Specifically, our Hilton New York Midtown recorded 45 sellout nights in the quarter, almost double the same period last year and most notably, the highest quarterly revenue in the property's history, rounding out a great year for the asset, which grew RevPAR by over 30% versus 2022.

Boston also delivered a very strong quarter with our Hyatt Regency Hotel benefiting from better-than-expected group demand, helping to lift rate with ADR up 10% year-over-year or 12.5% above 2019. Turning to our resort portfolio. Excluding disruption primarily from the Casa Marina and Waldorf Bonnet Creek renovation, RevPAR for the fourth quarter exceeded 2022 by over 6%, led once again by the sustained demand in Hawaii, specifically at the Hilton Hawaiian Village, RevPAR increased 5%, driven by increased group room nights and ADR improvements from continued domestic leisure strength.

Total air available seats into [indiscernible] grew by 11% over 2022 during the fourth quarter with domestic improving by 5% and international available seats increasing by nearly 30%, although still pacing 28% below 2019 level. We saw particular strength at our Hilton Waikoloa Village, which achieved a 22% increase in RevPAR during the quarter, driven by exceptionally strong group demand. Group revenues were up more than 145% over 2022, including increased demand from several groups relocating their programs from [indiscernible] to Big Island during the fourth quarter.

Even without the benefit of the still recovering international demand, both hotels reported record profits in 2023. With Hilton Hawaiian Village, adjusted EBITDA up 15% over 2019 to $188 [indiscernible], while Hilton Waikoloa Village [indiscernible] 2019 by 12% to $56 million despite having 600 fewer rooms.

Looking ahead to 2024, Park remains well positioned to generate solid year-over-year RevPAR gains driven by tailwinds from our ROI investments, the ongoing strength of our resort markets and an acceleration of group, business transient demand in markets which stand to benefit strong convention calendar. At our Bonnet Creek Orlando complex, feedback from meeting planners has been incredibly positive. 2024 group revenue forecast to be a record year for the complex with revenue on the books facing over 30% ahead of 2023 and hotel adjusted EBITDA forecasted to exceed 2023 by over 20%, while group revenue pace versus 2019 is currently ahead by 30%.

At Casa Marina in Key West, Momentum is building since the hotel fully reopened its rooms at mid-December, revenue on the books 2024, up 65%. The property forecasted to generate full year RevPAR growth in excess of 70%. Collectively, we expect renovation tailwinds from both the Casa and Bonnet Creek to add approximately 150 basis points lift to the full year 2024 RevPAR to our overall portfolio.

In Hawaii, we anticipate Hilton Hawaiian Village to have another strong year, driven by healthy domestic travel, while inbound tourism from Japan, is expected to improve throughout the year. The latest forecast from the Hawaii Tourism Board suggest a material increase in airlift direct to Honolulu from Japan, visitor arrival is expected to increase 50% this year and exceed 2019 levels by 2026. Between the 2 properties, we are forecasting our Hawaii hotels to deliver low single-digit RevPAR growth in 2024, partially impacted by phased room renovations that both resorts that Sean will discuss shortly.

We are very bullish on the future outlook for both markets in Hawaii. Japanese travel should continue to build over the next 12 to 18 months. We anticipate increased domestic airlift to both islands is up over 15% in 2019 and should help to support ongoing strong domestic demand. Additional growth drivers in 2024 includes strong performance across our urban portfolio with Boston, New York, Denver and Chicago expected to deliver RevPAR growth in excess of 5% on average as both group and business transient demand trends continue to improve.

In summary, 2023, we accomplished some key objectives that have set us up to deliver solid growth, the tailwinds from recent ROI investments and a meaningfully improved balance sheet. Additionally, continued strength in Hawaii, well-positioned urban portfolio, supported by strong convention calendars and encouraging momentum in our group business give us optimism in our outlook.

With that, I'd like to turn the call over to Sean, who will provide further details on our performance as well as providing additional details on the first quarter expectations.

[Sean Dell'Orto, executive]

Thanks, Tom. Overall, we were very pleased with our fourth quarter performance. Q4 RevPAR was $178, with occupancy up 150 basis points to 71% and with ADR increasing nearly 2% to $251 or 15% above 2019. Q4 comparable hotel revenue was $619 million, while comparable hotel adjusted EBITDA was $171 million, resulting in comparable hotel adjusted EBITDA margin of 27.5%. Q4 adjusted EBITDA was $163 million and adjusted FFO per share was $0.52.

Turning to the balance sheet. Our current liquidity is over $1.3 billion, including approximately $350 million of cash, while net debt currently stands at $3.4 billion or down over $500 million versus where we stood over a year ago with net debt to adjusted EBITDA lower by 1.5 turns to under 5.2x following our effective exit from the 2 Hilton San Francisco hotels.

Overall, our balance sheet is in great shape with just over $700 million of debt maturing through 2025 or less than 20% including our $650 million 7.5% corporate bonds that come due in June 2025. With respect to balance sheet priorities, we continue to evaluate options to push out in pending maturities while using proceeds from potential asset sales to delever and provide further financial flexibility. Furthermore, I'm delighted to announce that S&P Global recently upgraded Park Hotel's corporate credit rating by 2 notches, elevating it from a single B rating from BB-. This marks a significant advancement for the company and reflects the agency's acknowledgment of our dedicated efforts over the past 4 years to strengthen our balance sheet and credit metrics.

Turning to capital expenditures. We substantially completed several strategic projects in 2023, including the $220 million full-scale renovation and meeting space expansion at our 1,500-room Cigna and Waldorf Astoria Bonnet Creek Resort Complex in Orlando as well as the $80 million renovation of our Casa Marina resort in Key West, the $85 million complete rooms renovation of the 1,021 room Capa tower at Hilton Hawaiian Village, the $11 million complete rooms renovation of the 455 room Riverside tower at our Hilton New Orleans hotel and the $5 million renovation of a 30,000 square foot grand ballroom at the New York Hilton.

In total, we spent nearly $300 million of capital in 2023, 1/3 of which were targeted ROI projects. In 2024, our total CapEx spend will be approximately $230 million to $250 million, of which nearly 60% will be focused on guest-facing areas, including renovations for nearly 850 rooms. Key projects this year, including multiphase rooms renovation at Hilton New Orleans Riverside, where we will renovate all 1,167 keys in the main tower over the next few years with 250 key targeted for completion in 2024.

In addition, we will also launch phase room renovations at both of our Hawaii hotels, including approximately $45 million to be spent at Hilton Hawaiian Village, where we will renovate nearly half of the 796 rooms in the Rainbow Tower this year while adding 26 key with the balance expected to be completed in 2025. We also plan to renovate nearly half of the room product in the 400-room Palace Tower at Hilton Waikoloa Village for a total investment of $31 million, also adding 11 keys with the balance of the room is expected to be completed by early 2026.

Renovation displacement in Hawaii this year is expected to be approximately $8 million placing a nearly 180 basis points drag on Hawaii RevPAR performance or a 40 basis point drag on total portfolio results, while negatively impacting total portfolio margin by 20 basis points for the year.

Turning to guidance, we are establishing a full year 2024 RevPAR guidance of $185 to $188 or a year-over-year growth of 3.5% to 5.5%, while hotel EBITDA margin is expected to be between 26.8% and 27.8%. With respect to earnings, we are forecasting adjusted EBITDA to be in the range of $645 million to $685 million and adjusted FFO per share guidance is forecast to be between $2.02 to $2.22.

With respect to full year hotel adjusted EBITDA margin, which is forecast to be down 50 basis points at the midpoint, prior year comparisons will be impacted by last year's favorable property tax appeals and other nonrepeating items which will negatively impact margin by approximately 40 basis points. The first quarter has had an exceptional start with RevPAR growth up 13.4% in January and positive trends continued in February with [indiscernible] RevPAR forecast to be up over 8% or a pickup of over 250 basis points of year-over-year growth relative to our forecast at the beginning of the month.

We have witnessed solid performance across much of the portfolio with outsized gains driven by our urban core, including New York, Chicago, New Orleans and Denver, while we expect RevPAR in Hawaii to increase by 10% through the first 2 months of this year. Additionally, renovation tailwinds at both Casa Marina and [indiscernible] Bonnet Creek are translating into solid RevPAR gains at these properties with results in January and estimates for February projected up 20% and 19%, respectively.

Looking ahead to March, we have tougher year-over-year comparisons, especially on the group side, which witnessed exceptionally strong performance last year. While the Easter calendar shift is an additional headwind to March performance. Consequently, we currently anticipate low single-digit RevPAR growth for March to balance out the quarter, yielding expectations for Q1 RevPAR growth in the range of 6.3% to 7.3%.

Turning to the Q1 dividend. Given our positive outlook for the year, we recently declared a quarterly dividend of $0.25 per share which is a 67% increase over the $0.15 quarterly dividend paid last year and translates to an annualized dividend yield of 6.2% based on recent trading levels. As we stated last quarter, we expect to resume our targeted payout ratio in the range of 65% to 70% adjusted FFO per share for the full year, which based on our current guidance would translate into an incremental top-off dividend at the end of the year. This concludes our prepared remarks. We will now open the line for Q&A. To address each of your questions, we ask that you limit yourself to one question and one follow-up. Operator, may we have the first question, please?

[Operator]

[Operator Instructions] Our first question is from Floris Van Dijkum with Compass Point.

[Floris Gerbrand van Dijkum, analyst]

Pretty, pretty impressive. As I look at this, I still see a $47 million hotel EBITDA gap in your results. Just curious as to when you think that the portfolio is going to exceed 2019 levels. And the $47 million, obviously, your hotel EBITDA relative to 2019 levels. And maybe if you could touch on specifically Hawaii Village because that asset is just -- it keeps -- it's a gift, I guess, that keeps giving because it's within touching distance of getting to $200 million of EBITDA. And despite the disruption that you expect in '24, I mean, 6% EBITDA growth essentially puts you over the 200 mark. Is it possible within the next calendar year to be able to achieve something like that?

[Thomas Baltimore, executive]

So it's great. It's always good to talk with you. As you know, there was a lot to unpack there. Let me -- on the Hawaii piece, I think as Sean put, as he noted in his prepared remarks, Hawaii has been a phenomenal and really strong performer. And despite the fact that the Japanese traveler isn't back, it's -- depending on I think last year, about 600,000 visitors versus -- so if you look over the last 30 years, I think about $1.5 million. So you're still 50%, 60% plus or minus below normalized levels.

We do think, as we noted, that we'll get back to 1.5 million visitors probably in that 2026 time frame. So it continues to provide, I think, incredible tailwinds for us. There's nothing like Hilton Hawaiian Village. When you think about 22 acres, 5 towers, you've had generations that continue to go there. It's not ultra luxury. And so it appeals to the masses. It's got, obviously, the long history with Hawaii [indiscernible]. So it is special. To answer your question as to whether or not we eclipse 6% or $200 million. I don't know whether it's this year or next year, but I certainly think it's in our future.

As we said in our prepared remarks, we're probably looking at low single digits this year, given the fact that we're going to try to complete half of the renovation of Rainbow Tower this year. If you look at Tapa and huge credit to Carl Mayfield and his team, the design and construction side. I mean we were picking up $75 an additional ADR from that renovation. We expect we'll do something comparable, if not more, what we're planning, obviously at Rainbow Tower. So we are very, very bullish as we look out in Hawaii, Hilton [indiscernible] Village. But let's also not forget Hilton Waikoloa which had a phenomenal year, up 146% in group revenue last year despite the fact that, that property, again, has half the inventory that it had pre-spin, we're generating, I think, $85,000 in EBITDA per guestroom. So it just continues to be a phenomenal performer.

Our asset management team working in conjunction with our operating partners out there. The strong leadership that we've got at Hilton Hawaiian Village, Debbie Bishop and her team just doing a phenomenal job. So very, very bullish on Hawaii as we look out. And as you know, we're also working on [indiscernible] tower. So we think there's even more upside in Hawaii as we look out, it would be impossible, and I emphasize impossible to replicate what we have at Hilton Hawaiian Village. And that also does not include the 1,000 units of timeshare that we don't own -- but at any point, you're looking at guests at 10,000 to 11,000 or more on site at the village. So it is truly iconic and special, and I'm not sure there's another REIT asset across any of the sectors that generates the kind of EBITDA that we do at Hilton Hawaiian Village. So very proud and very bullish and grateful for the hard work there.

Now regarding your question across the portfolio and that the gap that exists. It's pretty interesting when you think about the fact that take January as an example, fourth quarter, we said we were up group 16%. But if you look at just January, urban was up 20%, resort up 10% and -- if you think about our group pace, our group pace in January, up 29%, February, up 26% and it's broad-based, as we noted, Chicago was up 38%. Denver, up 34%. San Jose in business out there close to [indiscernible] and others up 35%. New Orleans, up 52%. New York up 21% and despite the fact that we finished last year, up 31% for the year. So you're really seeing the urban group come back and you're also seeing, obviously, the tailwind on the upper of scale. And so we -- as we look at our portfolio, obviously, we -- as Sean noted, March will soften, but very, very bullish as we look out for '24 and beyond.

[Operator]

Our next question is from Dany Asad with Bank of America.

[Dany Asad, analyst]

Tom, I just wanted to unpack a little bit your -- like the RevPAR guide, especially in your prepared remarks, you guys mentioned that the renovations will be adding 150 basis points to RevPAR. So it just feels like the 2 to 4 that you're kind of implying, compared it to the 6% to 7% that we're going to do in the first quarter. Is there a touch of conservatism into the rest of the year? Or kind of what's driving that -- like how do we think about that decel relative to the first quarter?

[Thomas Baltimore, executive]

A couple of points of clarification, Dany. We're 3.5% to 5.5% and guidance RevPAR. So obviously, a midpoint of about 4.5 and they were looking at about 150 basis points of tailwind coming out of Casa and then obviously coming out of Bonnet Creek. Admittedly, obviously, January and February, very, very strong based on the trends that we're seeing. There will be a decel in March for all the reasons that we pointed out. Group is going to be down. And of course, you've got the Easter shift will clearly impact. So yes, there's -- January and February don't make a year. So there's certainly conservatism built into that. But look, we are very pleased. I think you are seeing, as I said previously, you're seeing now -- we had, obviously, the pent-up demand from leisure coming out of the pandemic. You're seeing, obviously, group urban really beginning to gain momentum. And that shouldn't surprise anyone.

Also keep in mind when you look at our portfolio and take New York, I think, is a great example. You've got a 9% reduction in supply there. You've got a lot of people that we're selling and sort of writing off the city. We were not in that camp. You've only got 3 large hotels that can handle large groups. We look at New York and see more upside, not less. So we see real tailwind in that market in particular as we look out. And Obviously, we think we're incredibly well positioned there.

[Sean Dell'Orto, executive]

[indiscernible] I'd also add, there is a headwind of a 50 basis point renovation impact to RevPAR this year, most of it will be in Hawaii, which we pointed out. And I would also say that's concentrated in the back part of the year. So as you think about -- as you go through the rest of the year and maybe some of the conservatism and thinking around that clearly are going to a little more impact disproportionate impact in the back part of the year.

[Dany Asad, analyst]

Got it. Got it. And then if I could just follow up. Your outlook for like total RevPAR, let's call it, like the hotel revenues outside of the HGV portion of it, is about 50 basis points ahead of your RevPAR outlook. How should we think about the incremental growth that flows through from that to the bottom line?

[Sean Dell'Orto, executive]

Yes. I would say that on the whole, you probably have, from a total revenue standpoint -- well, let me just back up and say, from an out-of-room spend or additional to RevPAR about 30 to 50 basis points, I would say. I would say it's balanced. You've got more kind of outlet revenue coming through than banquet and catering, certainly in the first part of this year. That's a little bit lower flow-through than you might see the banquet and catering. We have -- we're not counting on as much cancellation, which is obviously a full flow-through. So on the balance, I would say that wouldn't count a lot more flow -- incremental flow-through from that incremental 30 to 50 basis point add to RevPAR.

[Operator]

Our next question is from Smedes Rose with Citi.

[Bennett Rose, analyst]

I just wanted to ask a little bit about what you're layering in for wages and benefits expectations for 2024 across the portfolio? And maybe specifically, if you talk about those assumptions in Hawaii, if they're meaningfully different from the broader portfolio?

[Thomas Baltimore, executive]

Yes. Smedes, as you can imagine, there will be some negotiations and we certainly don't want to forecast where we think those negotiations will end. I think if you look sort of last year, wage increases were in that sort of 4% to 5% range. But to forecast anything beyond that, it would really be inappropriate at this point.

Look, we are -- we have enjoyed, I think, very strong relations with our partners. We've got [indiscernible], if you will. And I think we had a very successful outcome in 2023, and we would expect something similar here in 2024 and beyond as we look out.

[Bennett Rose, analyst]

Okay. Okay. So we'll wait and see on that front. But it sounds like in your guidance that 4% to 5% is what's kind of factored in at least for right now until we have better information.

[Thomas Baltimore, executive]

Yes. I think if you look at overall expenses, we're probably in that range. That's probably the better way, I think, to look at it right now.

[Bennett Rose, analyst]

Okay. And then can I just ask you, you mentioned hoping to execute on sales in the range of $100 million to $250 million. Just broadly, what sort of EBITDA would you expect to be selling in that range? I guess either multiple or absolute dollar amount? Or how should we think about that, which I assume is not [indiscernible] guidance.

[Thomas Baltimore, executive]

Yes. A couple of things to keep in mind. Smedes, we've got -- if you think since the spin -- we have disposed nearly 42 assets, sold or disposed 42 assets for just south of $3 billion. Last year, obviously, one asset sale and then another small kind of leasehold interest that we ended up selling as well. So we've set a target of $100 million to $250 million. Tom Morey and his team have done an exceptional job every year. We're not certainly a desperate seller. So we'll be disciplined. We'll be thoughtful about it. And we will look to recycle that capital. We're confident in our ability to be able to sell assets. I think we continue to demonstrate that.

But we'll use those proceeds, obviously, and recycle that back for ROI projects. We'll use it also for reduced leverage, could be opportunistically to buy an asset if something were priced right or to buy back shares. I mean it's really been the playbook that we've used the last several years. The other comment that I would make is, keep in mind, our top 25 assets really account for about 90% of the value of the company. So the remaining 10% to answer your question directly, that would be a small portion of that 10% as we sort of look at, if you want to kind of frame it between that $100 million to $250 million.

[Operator]

Our next question is from Patrick Scholes with Truist Securities.

[Charles Scholes, analyst]

A little bit more color on the strength in groups. What changes have you seen as far as the composition of these groups -- and related to that propensity or lack of propensity, but it sounds like it's propensity to spend outside of the room. What types of groups are sort of shipping in and what are being shifted out.

[Sean Dell'Orto, executive]

Yes, Patrick, it's Sean. I think you're continuing to see, I think, for one, groups are getting bigger as we kind of naturally thought as we came out of the pandemic, we started with the small groups and now gone to larger in-house groups. You now got to the point where convention is, I think, the leader in the clubhouse as we look at this year in terms of growth. We've talked a lot about our [indiscernible] calenders being in our favor in a lot of our markets with Chicago, up strong 65%; D.C., up almost 50%; Honolulu is up 30% and so down the line between New Orleans and San Diego and other markets are also kind of either flat or slightly up to about 20% up.

So again, all across the board, I think we're seeing convention being much stronger in this. So I think it's leading to larger certainly room blocks for us. I think corporate still remains strong through this year. And I think that certainly leads itself to, again, just getting bigger and they're outperforming. We're seeing revals up. I think that's contributed to some of the strength we've seen in January and February. So more are showing up than we anticipated, and that's leading to better certainly F&B spend.

I would say the characteristics, I think kind of leading aside from just the size of them getting larger. I think it's just more getting into your more traditional, what it professional technology, the kind of the more traditional groups we've had in the past are kind of coming back. And importantly, too, is if you think about some of the success recently here as we're picking up things like Tom had just briefly mentioned, but Apple has been a big contributor now in the short-term pickup in our market out in the Bay Area. So it's been encouraging to see a place like Cupertino, and our Juniper Cupertino and then to some extent, San Jose picking up some short-term group business as I think these technology firms are coming back more and bringing people back to the office and bringing people together to kind of train and kind of ultimately get back to normal business.

[Thomas Baltimore, executive]

Patrick, the other thing -- the one thing that I would just say I agree with everything that Sean outlined, but just the natural need to bring your people together, whether that's for training, whether that's for celebration, you got to think this is a -- it sort of makes sense. Everybody was sort of focused initially on pent-up demand and leisure, but as you're getting back people back in the office, they need to be together. And what's really pleasing to see is that we all expected it, but we're beginning to see it accelerate and it's broad-based. And citywide is obviously being the leader in the clubhouse here, but you're also seeing it on the group side, the in-house group side. So very, very encouraging as we look out.

[Charles Scholes, analyst]

And my follow-up question actually has to do with booking out. Any initial observations or perhaps statistics that you can give on how '25 is pacing at this point?

[Thomas Baltimore, executive]

Yes. I would just say '25 group pace is about 97% of 2019 levels as we look out right now and with rate -- very strong increase in rate, near double-digit increase in rate.

[Sean Dell'Orto, executive]

Say 10% right now.

[Charles Scholes, analyst]

You say pace, just to be clear, that's a revenue pace for next year versus 2024, 10%?

[Sean Dell'Orto, executive]

Yes. You look out at the same time, same kind of time frame for 2025, you're up 10% for revenue base, yes.

[Operator]

Our next question is from Duane Pfennigwerth with Evercore ISI.

[Duane Pfennigwerth, analyst]

On group revenue pace, I just wanted to try and ask the question in a different way. What percentage of the group revenue that you expect to generate this year is on the books? And if you have it, how does that percentage compare to this time last year into 2023?

[Sean Dell'Orto, executive]

Duane, I would say the -- what we have relative to forecast, 78% is relative to what we have forecasted on the books already. That compares to 74% last year. As you think of the first half of this year right now, we're 90% booked for what we're expecting for the first half of this year.

[Duane Pfennigwerth, analyst]

That's super helpful. And then just Hawaii, I guess, a longer-term question. It's obviously off to a strong start. I think you've commented in the past like expectations for the year. How should we be thinking about Hawaii in its entirety for the year?

[Thomas Baltimore, executive]

We said in our prepared remarks sort of low single digits for Hawaii. Just given as Sean noted, obviously, we've got the -- coming off of a strong year, but we've got the renovation, obviously, in the back half of the year. Now we're up 10%. And so far, it's doing well, but we clearly would guide you more to that low single digits as we think about for the year.

[Operator]

Our next question is from Dori Kesten with Wells Fargo.

[Dori Kesten, analyst]

I know you just laid out your '24 CapEx plans, but can you give us a sense of what's on deck for '25? And just should we be considering '25 a year still with net renovation tailwinds.

[Thomas Baltimore, executive]

Yes. It's a great question. Obviously, we would -- we began Rainbow Tower, obviously, a key tower in Hawaii, expect to finish that next year, sort of in the queue as we're working on Royal Palm, obviously, in Miami and South Beach, Bullseye real estate, about 393 keys, so our design and construction team are working on another transformative renovation for certainly that asset.

Santa Barbara is another one that we're working with our partner, adding potentially going through the entitlement process, but adding another 80 keys there as we look out and clearly, continuing the renovation on New Orleans, but also be in the queue as well. So just few of the assets, but we are really focused -- laser-focused on spending money where we're making money. And you can see already the benefits that we're getting and really, we think candidly better than acquisition yields and what we can get in the marketplace.

[Dori Kesten, analyst]

Okay. And I may have missed this, but how apprised are you kept on the plans for your 2 former San Francisco assets at this point?

[Thomas Baltimore, executive]

The question again, Dori, I'm sorry, you broke up.

[Dori Kesten, analyst]

How apprised are you being kept on the plans for your 2 former San Francisco assets?

[Thomas Baltimore, executive]

Again, we have the receivers in control. As a courtesy, I know that Sean occasionally and other members of the team are reaching out if they've questions or anything that we can do, but the reality is that we're not involved in the day-to-day. We have no economic benefit and no economic risk moving forward. And -- and I think given how San Francisco has played out, I think we would all agree that, that was a very wise and very prudent decision, while difficult, certainly the right decision for Park and for our shareholders.

[Operator]

Our next question is from Jay Kornreich with Wedbush Securities.

[Jay Kornreich, analyst]

Just to follow up on the strong start to the year. RevPAR growth in the fourth quarter was about 4% and January jump to 13%, February was up 8%. So I'm just curious what caused this kind of upward hockey stick level of growth to start the year? And is this something you foresaw? Or did it kind of come by surprise at all?

[Thomas Baltimore, executive]

I see it as a pleasant surprise. As we pointed out, obviously, group was up 16%, obviously, in the fourth quarter. We saw sequential, I think, about 12% increase between third and fourth quarter. So -- and I think we've all been talking about and expecting obviously the group in urban would really begin to accelerate. So I think it's a natural progression. We just sort of got the pickup a little sooner in terms of its acceleration in January and February.

As Sean noted and I noted earlier, obviously, Apple and Cupertino is a great example of we got some short-term business there. Obviously, you had some onetime events of the sugar bowl in New Orleans. But again, New Orleans was up north of 50%. Look at San Jose, obviously, had an event, but up 35%. So you're really starting to see obviously that those business travelers really get back on the road. Again, that need to connect to be together, build those relationships, that need is never going to go away. So really, this is a natural progression. And given the fact that if you think about our portfolio, we've got such small and certainly below the long-term average in terms of supply impact, that's going to continue to benefit us as we move forward.

New York, again, you're taking supply out of the market. There hasn't been, I think, a permit approved since 2021. So we look at New York and are very, very bullish. And obviously, we had a great '23 and very encouraged about '24 as we look out, just to give another example. Chicago, again, we knew there was going to be a very strong citywide almost near record and up 65%, close to about 780,000 room nights as we look out there, but there was a strong group business in January, which also gave us an additional tailwind there. So it is broad win.

[Operator]

Our next question is from Anthony Powell with Barclays.

[Anthony Powell, analyst]

I guess a question on your remaining, I guess, California exposure. The hotels in San Francisco, [indiscernible] and Silicon Valley that Sean talked about [indiscernible] properties. So maybe talk about what you're seeing there? And are those hotels still core to your portfolio?

[Thomas Baltimore, executive]

Yes, Anthony, it's a great question. I would say, look, having 3% exposure in San Francisco. And look, it's important to have a diversified portfolio. I would respectfully submit that those groups that say, I'm going to be leisure only. I'm not sure that's really a sustainable or those that are going to be -- I'm going to focus on urban and group, having that diversified portfolio, I think, is really showing significant benefit to us. So as we think about San Francisco, I've said I certainly expect that, that market is going to come back. I just think that it's going to be elongated and pushed out for the 2 assets that we own there, obviously, the JW Marriott and also the Hyatt Centric. Certainly, assets that, at this point, we continue to expect to hold as we think about San Jose and Cupertino again, 2 attractive assets. Downtown L.A., I think, is a different story. They're in a different, complex, challenging situation, not dissimilar to what's happening in San Francisco and we'll continue to evaluate that submarket and see what we do in the future.

[Anthony Powell, analyst]

Got it. I think Tom, you also talked about acquisitions. If the capital markets just cooperate, can you maybe expand on that? What do you mean by capital markets? Is it equity, debt capital and remind us what your target leverage ratio is right now?

[Thomas Baltimore, executive]

Yes. I mean look, we've always said from the moment of the spin that we wanted to be leveraged kind of 3 to 5x and we'd certainly like to be closer to 4x. I think in the context of capital markets, it's really beginning to get rerated EBITDA multiple and getting our stock up and something close to the net asset value. I think even the worst of times, we didn't do a dilutive equity raise. We're not going to do one now. We've been, I think, passionate and laser-focused on recycling capital. We've sold assets. We've used that to reinvest back in the portfolio and to buy back stock and reduce leverage. I'd say that we would be anchored in those same goals and principles, but we're always looking opportunistically. And if there are unique situations that are accretive, we certainly are going to continue to underwrite and explore. But we'll see. We'll see how the year unfolds, but we certainly want to be on offense at the appropriate time.

Right now, and last year was a great example of that buying back 15 million shares at an average price of $12 or inside of that was a very prudent decision for shareholders in our view.

[Operator]

Our next question is from David Katz with Jefferies.

[David Katz, analyst]

We've been hearing obviously, from peers and other sources that there isn't a lot of -- there isn't a lot to buy in the market these days. And it sounds like you have what to buy. Is -- what is your assessment of the market at the moment? Is there a bid-ask spread issue, underwriting conviction should be better, I would think, but I'd love to hear yours.

[Thomas Baltimore, executive]

Yes. I would open -- David, it's great to talk with you, first of all. But I think also, keep in mind that uncertainty is the enemy of decision-making. I think part of what we're all waiting for, we believe the Fed tightening cycle is over. I think we all expect that at some point, whether you're in 3 reductions this year in interest rates or is the Fed funds rate or is it 4, 5 or 6. I certainly think people are looking for that to rerate and certainly would expect, obviously, the debt markets to continue to open up.

Banks got their own regulatory challenges, but there's certainly plenty of private capital, private credit capital in particular out there. So deals are getting done, albeit at a slower pace. But I think in the second half of the year, you'll begin as we get better visibility, you'll begin to see that open up. There are a lot of people out there who believe that there's going to be tremendous distress. I think you'll see, in my view, probably more of that on the office side, I think you'll see on the lodging side, and there'll be some assets that need to be recapitalized. But this is not the GFC and what we saw back in that period of time. And we'll continue to be thoughtful. We'll continue to reinvest in our portfolio.

Again, we think we can generate higher yields there. And if the gap remains between our share price and NAV, we'll recycle capital and buy back shares. I mean we're not -- we're definitely not going to look to raise equity in this environment right now given where we're trading. And we're hoping that our continued outperformance will get noticed and that we'll see -- begin to see that rating in our stock price.

[Operator]

Our next question is from Bill Crow with Raymond James.

[William Crow, analyst]

The 2 [indiscernible] hotels in Chicago, I'm interested in because W seems like they're really trying to rebuild the brand, and it's a very different product type than the traditional Ws. Do you have any immediate plans to either kind of reinvest in those properties or divest those properties?

[Thomas Baltimore, executive]

Yes, it's a great question, Bill. Look, we -- we know, obviously, given the work that Marriott is doing that they're trying to reinvent, if you will, and I think to elevate the W brand, and we certainly support that. We're not sure that either of those assets are what we would call as pure Ws as we move forward. And we are actually in discussions about repositioning. And we think a soft brand play may make the most sense there. And I'll stop there. But -- but we are carefully exploring our options and ways to create more value with those 2 well-located assets.

[William Crow, analyst]

Great. And then the other one I wanted to ask you about was I look forward to your event down in Orlando. I'm wondering what the one or 2 things you're hoping The Street takes away from that event?

[Thomas Baltimore, executive]

Yes, it's a great question. I could not be prouder Bill, when you see just the magnitude of the work done and the complete transformation of not only adding 100,000 square feet over suspended over water for the Signia ballroom, but then the CV event [indiscernible] and to see, obviously, the additional ballroom that we added adjacent to the Waldorf and now the ability to be able to layer in groups and accommodate multiple groups and to have a few hundred thousand square feet of meeting space there and renovated golf course. That complete experience and to have really a world-class resort, 350 acres. And Bill, you've heard me say this before. I mean we're right next to the Four Seasons, which is a fabulous asset, best in the market. I'm not sure what was paid for it, $1.3 million, $1.4 million a key. We're trading at [indiscernible] a key, maybe slightly above that. I think we're a pretty good value. So I think that's something else I'd like and hope that shareholders take away, but we hope you can join us, and we look forward to seeing you.

[Operator]

Our next question is from Chris Darling with Green Street Advisors.

[Chris Darling, analyst]

I just have one follow-up question on guidance. When I look at what's implied by the 2024 outlook, I calculate expense growth for the year between 5.5% and 6% at the low and high end, which is just a $10 million range, it looks like. Can you help me understand what gives you confidence in projecting that relatively tight range of outcomes?

[Sean Dell'Orto, executive]

I think it's a matter of, as you think through going -- just the various ins and outs that happen when you think about elevated growth on the high end with room production as well as out-of-room production versus kind of the other side of it. I think ultimately, you're going to cut -- cut expenses as well as you lower revenues. And ultimately, so I think we get generally comfortable with it. I don't think not quite that much of a range. But I think certainly, I think feel pretty good about our guidance. I mean it is at the higher end of 5% nominally -- when you think about the adjustments for the fact that we're lapping, we're adding a bunch of expenses because we're reopening Casa this year relative to last year as well as lapping some of the things that we had to our benefit in Q3, which are onetime in nature or ultimately a prior year tax appeal in Chicago, it's about 100 basis points lower, call it, high 4s when you think about kind of -- kind of a more run rate kind of growth prospect.

[Operator]

And our final question is from [indiscernible] with Wolfe Research.

[Unknown Analyst]

Just one for me. Just wondering if we could kind of dive in a little bit more to your expected contribution from Hawaii in the first quarter of the year and then full year '24. It would be really helpful.

[Sean Dell'Orto, executive]

Well, I think as Tom noted, it's kind of lower single digits for Hawaii. It's really broken out. I mean, Hawaiian Village, I would say, is more kind of in line with the portfolio performance. If you kind of adjust for the disruption we expect in the back part of the year, it's really Waikoloa that has paces down 30-plus percent for the year. And so we expect kind of a negative growth pattern for that, like mid-single digits down. But certainly, it's a drag towards Hawaii overall as a market.

That said, I think -- and I think it's probably back half of the year, it's more we see the group down for Waikoloa on top of disruption. So I think we certainly expect that it's better performance in the first half of the year. We certainly thought [indiscernible] would be a little bit softer coming into the year, and it's performed really well. It's picked up short term, I think there's some benefits still from Maui displacement. We're seeing for the first half of the year, airlift is positive into that market. It's up 5% domestically and 50% up from Japan in the Big Island. And in Honolulu, while it's down a little bit domestically, it's up almost 100% for the first half as we look kind of forward bookings for airlines.

So I think we feel pretty good about where we'll kind of go for the first half of the year. I think just the back half of the year that kind of softens a little bit for that market. But I think going forward, if somebody asked about '25 pace, Hawaii is up another 25%. Honolulu is up [indiscernible] 25% and then Waikoloa is up 55% in '25. So I think you're going to have a rebound here as well as you get into '25 for these assets.

[Operator]

We have reached the end of our question-and-answer session. I would like to turn the conference back over to Tom Baltimore for closing remarks.

[Thomas Baltimore, executive]

I appreciate all of you taking time today. Look forward to seeing many of you at the Citi Conference next week. Safe travels.

[Operator]

Thank you. This will conclude today's conference. You may disconnect your lines at this time, and thank you for your participation.