Greetings, and welcome to The Park Hotels & Resorts first quarter 2026 earnings conference call. It is now my pleasure to introduce Ian Weissman, Senior Vice President, Corporate Strategy. Please go ahead.
Thank you, operator, and welcome everyone to the Park Hotels & Resorts first quarter 2026 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 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 adjusted FFO and adjusted EBITDA. You can find this information together with reconciliations with the most directly comparable GAAP financial measure in yesterday's earnings release, as well in our Form 8-K filed with the SEC and the supplemental financial information available on our website at pkhotelsandresorts.com. Unless otherwise stated, all operating results will be presented on a comparable hotel basis. This morning, Thomas J. Baltimore, Jr., our Chairman and Chief Executive Officer, will provide an update on strategic initiatives and review Park's first quarter performance and outlook for the year. While Sean M. Dell'Orto, our Chief Financial Officer and Chief Operating Officer, will provide updates on our capital investments and balance sheet management, along with additional color 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.
Thank you, Ian, and welcome everyone. I'm pleased to report that we delivered better than expected performance in the first quarter, with RevPAR increasing 5.5% year-over-year, excluding our Royal Palm South Beach Hotel, which suspended operations in mid-May 2025 for a comprehensive renovation. I was incredibly impressed by the strong performance throughout the quarter, with RevPAR excluding the Royal Palm, increasing over 6.5% in January, approximately 3.5% in February, and nearly 6.5% in March. Results were driven by continued strength in leisure demand at our resort properties, where RevPAR increased 7.6% excluding Royal Palm, along with healthy corporate group demand that helped our urban hotels generate over 2% RevPAR growth during the quarter.
From a capital allocation perspective, it was another productive quarter as we remain laser-focused on enhancing the overall portfolio quality through the disposition of non-core assets while continuing to unlock embedded value within our core assets through our transformative renovations, and further strengthening our balance sheet by addressing upcoming debt maturities. Following the January disposition of the Hilton Checkers in downtown L.A., we recently sold the 396-room Hilton Seattle Airport Hotel, which was on a short-term ground lease for $18 million, bringing total non-core asset sales for the year to $31 million or 16 times 2025 EBITDA when accounting for nearly $36 million of CapEx expected for both properties. Together, these transactions reflect the continued execution of our capital recycling strategy and our commitment to improving the long-term growth profile of the company.
We continue to make solid progress on the remaining 12 non-core hotels and remain firmly committed to materially reducing our non-core exposure by year-end. To that end, we have active marketing campaigns underway on several assets but remain disciplined in our approach to prioritize transactions that improve our portfolio's growth profile and maximize shareholder returns. While the transaction market remains challenging, our track record speaks for itself. Having sold or disposed of 52 hotels for more than $3 billion over the last 9 years, materially improving the quality and earnings power of our portfolio. Turning to capital investments, we are making significant progress on our comprehensive repositioning of the Royal Palm South Beach. The pace and execution have been exceptional, especially given the scale and complexity of this project.
We remain on track to achieve our target completion date by early June, thanks to the tireless efforts of our best-in-class design and construction team and all of our partners involved on this project. Miami continues to be one of the strongest hotel markets in the country, and we remain highly confident in the long-term outlook for this asset. We are already seeing strong group demand, with the property securing $1.4 million of group business as of the end of the first quarter for 2027 at an average rate of $460. This represents an increase of 108 or 31% compared to our pace for 2024 at the same point pre-renovation.
Looking ahead, we expect returns on invested capital between 15%-20%, with EBITDA projected to more than double from approximately $14 million to $28 million upon stabilization, or roughly $69,000 per key, positioning the hotel to be among the most profitable assets in our core portfolio. Turning to operations, the strength of our core portfolio remains evident. Core RevPAR increased 5.4% during the quarter, excluding Royal Palm, which represented nearly a 400 basis point drag on core results. Performance was led by strong leisure demand in Bonnet Creek, Key West, and Hawaii, along with a sharp rebound in Southern California, driven by improved group and leisure transient demand.
In Orlando, Bonnet Creek once again exceeded expectations, delivering approximately 16% RevPAR growth and a 20% increase in hotel adjusted EBITDA over the prior year period, driven by a 10% increase in transient revenues and a 19% rise in group production, supported by large in-house events and stronger average daily rate. Revenues and earnings reached all-time highs, with trailing twelve-month EBITDA exceeding $103 million, nearly 60% above pre-renovation levels and $20 million or 24% above our projections, meaningfully exceeding our return expectations on our $220 million investment and further underscoring our ability to unlock embedded value across the portfolio. Adding to the property's momentum, our Waldorf Astoria Orlando was recently recognized on Travel + Leisure's list of the top 500 hotels in the world, one of only two Orlando properties to receive the honor.
In Key West, performance remained strong at both Casa Marina and The Reach, with RevPAR increasing nearly 9% and capturing meaningful market share during the quarter. Results were driven by increased transient demand and favorable holiday calendar shifts. Like Bonnet Creek, Casa Marina also exceeded our underwriting for the $80 million investment, with trailing twelve-month EBITDA of nearly $36 million, exceeding our projections by over $4 million or approximately 14%. Southern California results significantly exceeded expectations. At the Hilton Santa Barbara, RevPAR increased nearly 23% as strong transient demand helped to drive a nearly 13 percentage point increase in occupancy and a 3% increase in ADR. The Hyatt Regency Mission Bay also delivered exceptional performance with RevPAR up 12%, supported by continued strength in drive to leisure demand.
Turning to Hawaii, we continue to see a steady rebound in demand following the completion of our comprehensive room renovations for the Rainbow Tower at the Hilton Hawaiian Village Hotel and the Palace Tower at the Waikoloa Village that, despite the disruption from historical storm activity, resulted in a combined RevPAR increase of 2% across the two resorts, or approximately 5.4% when accounting for the 340 basis point drag from the storms. Waikoloa Village delivered 6% growth benefiting from an expanded airline contract and improved ADR following the renovation of the Palace Tower. At Hilton Hawaiian Village, which was far more impacted by the storms, RevPAR increased 1% or over 4% when adjusting for the storm disruption driven by higher rated transient demand in the newly renovated Rainbow Tower.
Looking ahead, we remain very encouraged on Hawaii demand trends and expect both hotels to perform at the upper end of our guidance range for the year. Easier year-over-year comparisons, coupled with tailwinds from the completion of our tower renovations at both resorts, should continue to support a higher rate of customer mix. Group performance in the first quarter also exceeded expectations, with portfolio group revenue increasing 5% year-over-year, excluding Royal Palm. Growth was led by double-digit gains in Puerto Rico, New York, and our Bonnet Creek complex, driven by a higher-rated group mix and by strong in-house events along with active citywide calendars in Denver and San Francisco.
Looking ahead, group trends remain stable, with second quarter group revenue pace up approximately 4% and full year pace improving to 3% growth, excluding Royal Palm South Beach and Hilton Hawaiian Village. Which is being impacted by the partial closure of the Honolulu Convention Center. Stronger than expected convention demand across several core markets, coupled with the momentum for in the year, for the year bookings, has driven a greater than 180 basis point improvement in the group revenue pace since last quarter. Longer term, group demand remains healthy, with 2027 pace currently up 5.5% for the core portfolio, reflecting continued confidence in the segment. As we look at the balance of the year, we remain cautiously optimistic based on our first quarter outperformance and the underlying strength of demand across the portfolio, but recognize the broader macro setup remains uncertain.
We continue to believe fundamentals will be supported by a combination of anticipated macro and lodging centric tailwinds, fiscal stimulus, including favorable tax policy, deregulation, and potential lowering of near-term interest rates, coupled with easier year-over-year comparisons, favorable calendar shifts, and incremental demand generators such as the World Cup and America's 250th Anniversary Celebrations should promote a continuation of the demand growth we saw in the first quarter. Growing geopolitical tensions in the Middle East and their potential impact on consumer discretionary spending and business investment sentiment certainly warrant a continued measured approach. Sean will address this more when he talks about guidance. The first quarter was an encouraging start to the year, and I'm very pleased with the progress we have made thus far to elevate the quality of our assets and strengthen our long-term growth profile.
I could not be prouder of our team's ability to execute in a challenging environment for our business. We remain laser focused on our strategic priorities. We're investing in our iconic properties to drive long-term value, advancing the disposition of non-core hotels, and further strengthening the balance sheet through successful maturity extensions and disciplined leverage reduction over time. With that, I will turn the call over to Sean.
Thanks, Tom. We were very pleased with our first quarter results. RevPAR exceeded $191, up approximately 2% over the prior year period, or approximately 5.5% when excluding Miami, and over 6.2% or another 75 basis points when adjusting for the Hawaii storms that Tom mentioned earlier. Total hotel revenues for the quarter were $591 million, up nearly 2%, and hotel adjusted EBITDA was $152 million, resulting in a hotel adjusted EBITDA margin of approximately 26%. Hotel operating expenses increased 2.6%, reflecting continued cost discipline and overall earnings came in ahead of expectations, with adjusted EBITDA of $143 million and adjusted FFO per share of $0.45.
Core portfolio performance remained strong, with RevPAR increasing 5.4% to nearly $216, excluding Royal Palm, while gains were partially offset by typical comparisons at both of our D.C. area hotels following last year's presidential inauguration. In addition to a 170 basis point drag on the core portfolio as our Hilton New Orleans Riverside Hotel lapped last year's Super Bowl. As Tom mentioned, we continue to make significant progress on our comprehensive transformation of the Royal Palm South Beach Hotel in Miami. As we look ahead to the second quarter, we expect the hotel to remain a partial drag on operating results as the property ramps up its staffing ahead of its opening and rebuilds its demand through Q3.
Overall, we are forecasting a nearly $3 million loss for Q2, but expect the resort to ramp up quickly over the back half of the year. During the first quarter, we also completed the second and final phase of guest room renovations at both the Rainbow Tower and the Palace Tower, bringing the total investment for phase 2 across both Hawaii properties to approximately $85 million. In addition, we completed the second of 3 phases of room renovations totaling more than $30 million at the Hilton New Orleans Riverside this past January, with the third and final phase scheduled for completion in the fourth quarter of this year.
Looking ahead over the balance of 2026, we expect a lower level of capital investment this year, with $230 million-$260 million of planned spend, including the completion of Royal Palm and the launch of the Alii Tower renovation at Hilton Hawaiian Village. This project will encompass all 351 guest rooms, the tower lobby, its private pool, and the addition of 3 new keys. Total investment for the project is expected to be approximately $96 million. We expect renovation related disruption at Hilton Hawaiian Village to have a modest impact in 2026, with the tower's closure expected to have less than a $2 million impact on 2026 hotel adjusted EBITDA and representing just a 10 basis point impact to portfolio RevPAR.
Once complete, nearly 80% of the resort's rooms will be newly renovated, significantly enhancing the iconic hotel's long-term competitive positioning. Turning to the balance sheet, our liquidity at the end of the first quarter was approximately $2 billion, including $156 million of cash, plus $1.8 billion of available capacity under our $1 billion revolving credit facility and $800 million delayed draw term loan. With respect to our 2026 maturities, we have made significant progress over the past two months to raise a $700 million floating rate delayed draw mortgage on Bonnet Creek, which is expected to close this week. The loan, which was upsized $50 million based on the complex strong results, will bear interest at SOFR plus 225 basis points.
When combined with the $800 million delayed draw term loan, this $1.5 billion of new debt capital commitments provide us with certainty while also allowing for the flexibility to fund within par prepayment windows and closer to the maturities. Accordingly, we expect to execute a partial draw under the delayed draw term loan in June to fully repay the $121 million Hyatt Regency Boston mortgage, which matures in July. We expect to draw the remaining capacity in September, along with fully drawing proceeds from the Bonnet Creek mortgage financing to fully repay the $1.275 billion CMBS loan on the Hilton Hawaiian Village, which matures in early November, with additional proceeds to be used for corporate purposes.
We are grateful for the continued support of our bank group, whose confidence in Park's credit profile and strength of our portfolio has been instrumental in executing these transactions. Their commitment is a clear validation of our balance sheet strategy and underscores our ability to address all 2026 debt maturities in a comprehensive and highly effective manner. Upon completion of these transactions, we will have meaningfully enhanced our financial flexibility, unencumbering the Hilton Hawaiian Village, extending our weighted average debt maturity to nearly 4 years, and eliminating any significant maturities for approximately 2 years. On an annualized basis, these refinancings are expected to increase interest expense by approximately $28 million, with roughly $13 million reflected in our 2026 AFFO guidance based on the timing of these transactions.
With respect to our dividend, on April 15th, we paid our first quarter cash dividend of $0.25 per share. On April 24th, our board of directors approved a second quarter cash dividend of $0.25 per share to be paid on July 15th to stockholders of record as of June 30th. The dividend currently translates to an annualized yield of approximately 9% based on recent trading levels. Turning to guidance. While we remain mindful of the geopolitical uncertainties and the potential impact of higher oil prices on both business and leisure travel, we were very encouraged by the strength observed in Q1, with solid demand trends continuing into the second quarter.
April RevPAR is expected to be flat, but up 3% excluding Miami, with performance led by a continued strength in Hawaii, Bonnet Creek, and Key West, as well as solid spring break leisure transient demand in Santa Barbara. While we expect performance to modestly soften in May, June looks very strong, driven by strong group demand up nearly 10% and favorable year-over-year comparisons across several key markets, including Hawaii, Orlando, Key West, and New York. Overall, we expect Q2 RevPAR to come in around the midpoint of our guidance range with roughly a 100 basis point drag from Miami.
For the year, with Q1's outperformance, we are increasing our RevPAR growth guidance by 50 basis points at the midpoint to a new range of 0.5%-2.5%, and adjusted EBITDA guidance by $7 million at the midpoint to a new range of $587 million-$617 million, while AFFO increases by $0.01 at the midpoint to a new range of $1.74-$1.90 per share. It's also worth noting that the recently sold Hilton Seattle Airport Hotel was expected to contribute approximately $3 million in EBITDA for the remainder 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?
We'll now be conducting a question and answer session. If you'd like to ask a question, please press star one on your telephone keypad. A confirmation tone will indicate your line is in the question queue. For participants using speaker equipment, it may be necessary to pick up the handset before pressing the star keys. One moment please while we poll for questions. Thank you. Our first question is from Floris van Dijkum with Ladenburg Thalmann.
Hey, guys.
Hi, Floris.
Thanks.
Morning.
It's Tom. Glad to be on these calls again with you guys. If you can give us a little bit more of an update on the disposition. I think one of the key things I think the market is having some trouble understanding is the quality of the portfolio that's being shielded by, you know, the lower 10% of your assets. If you can talk a little bit about where I know that you have pretty much all of those presumably in the market. What's the status on that? Are you having some detailed discussions? What's the pushback that you're getting from the market? Are you gonna hold out for the last dollar on those assets?
Well, Floris, it's great to have you back, and appreciate the question. If I could sort of frame it for a second, keep in mind, if you think about the remaining 12 assets that we have, we currently have 33 assets in the portfolio. We have sold or disposed of 52 assets, as I said in the prepared remarks, for north of $3 billion. We have 12 assets that we're defining as sort of non-core. Three of those assets obviously rest with the dispute with Safehold, which will, you know, resolve itself.
If not this year, certainly next year. The EBITDA from those assets is about $16 million plus or minus. The remaining nine assets account for about $41 million in EBITDA, and candidly, probably 45% of that relates to one asset in Florida. You know, we're generally dealing with eight assets that are small. Some have short-term ground leases, some are a joint venture. Some have various challenges. I would say, obviously, the last mile is always the most difficult. I would hope the market would give us credit for the perseverance, the discipline, our ability to reshape the portfolio over the last nine years. We are very confident we're gonna make substantial progress this year on those non-core assets, and our collective team are working their tails off.
We have work streams underway on all of them, and it's gonna be a little lumpy and choppy. I think you'll see more reported as the year unfolds. Believe me, no shortage of effort and focus. We realize it's, while a small overhang, it's an overhang. It clearly is less, if you look at the $41 million, certainly less than 5%-6% of overall EBITDA. It is a drain when you think about operating metrics. We're working hard to get the assets sold as quickly as we can. We're not holding out for the last dollar, but we certainly wanna have counterparties who can execute, and who can move through the process, and we certainly are always focused on creating value for shareholders.
Thanks. Maybe a follow-up question on the World Cup.
Sure.
I know that your Royal Palm asset, I think, is opening up in June. That is a market potentially that could get impacted by the demand for the World Cup. What's the impact if you can talk broadly about what the impact is going to be or are you seeing so far? Everybody's sort of muted on the World Cup impact. If you can give us a little bit more color on that would be great.
It's a lot to unpack there for us, but I'm happy to take it. I think most importantly, if we step back and think about the Royal Palm at 15 and Collins, 393 keys, we're expanding to 404, putting in approximately $112 million. We could not be more excited. We could not be prouder. We had, obviously, a group there. We can't wait to get more analysts and more investors in. I couldn't be more grateful to Carl Mayfield, who heads our design and construction team, who is literally spending three or four days of his week in Miami leading. We also have the operator, lead operator from Davidson who's been on site since we launched construction in last May.
As of this morning, we had 417 men and women on site, and that includes from owners' reps to general contractor to subs to owners' teams to operations folks. We are currently targeting that construction will be substantially complete by early June. What we would call the stocking and training TCO would begin in target sort of in mid-May. You've got a few weeks of testing all the fire alarm and life life safety issues that have got to work through. We're probably looking at a target public occupancy TCO and hoping for sort of mid-June.
When you think about where that all unfolds as it relates to the World Cup, we have included in our guidance that Sean outlined in his prepared remarks, we have no contribution coming from Miami in that process at this time. If we are able to get open, I think the two prominent games in Miami will be July eleventh and July eighteenth. We are cautiously optimistic that we should be open in time for those, and that's what we're all working our tails off to make sure that that occurs. Again, we don't have anything in the current guidance, so we've been quite conservative in that intentionally, just given all of the geopolitical, but also the complexity of the inspection and regulatory process as we close out the job.
You may recall other projects, and the months, in some cases, years. I think that this again speaks to the core competency, the leadership that we have at Park, our experience, the extraordinary success that we're having, obviously, at Bonnet Creek and also what we're seeing also in Key West, and we feel the same way about Royal Palm as we look out. We're very, very bullish and excited about this project and think we're gonna have a tremendous success there over time.
Thanks, Tom.
Thank you.
Sorry.
Our next question is from Smedes Rose with Citi.
Hi, thank you.
Hi, Smedes.
Hi. I wanted to ask you, in your guidance, it looks like the expense expectations moved up around 40 basis points versus your prior guidance, and I was just kind of wondering what was behind that.
Yes, Smedes. We, this is Sean. Obviously, in Q1, we had some outperformance top line, a lot of that was occupancy based. We certainly naturally see, while cost per occupied room, solid, in terms of, you know, basically 50 basis points or so growth, you know, with the extra occupancy, expense growth was a little more than expected as well. We're kind of carrying that through much like we're doing with the top line, into the expense. Certainly, it's expected the rest of the year, expenses that we, you know, kind of operate as we expect, much like we're thinking about the top line kind of, you know, expecting that to perform as we expected, you know, for Q2 and through Q4.
Thanks. That's helpful. Tom, you've mentioned that you think the Hawaii assets this year can trend towards the upper end of your expected ranges. Can you just remind us what that range was for this year?
Well, I think ultimately, you're talking about the, you know, the upper end of our guidance range.
The guidance range. Okay.
Yeah. 2.5%, somewhere in that zone or a little better.
You know, as we said, the favorable-
Oh, okay. Sorry. You didn't provide an EBITDA outlook. Okay.
Yeah. Smedes, the other part is we do have obviously some, you know, favorable comps coming off the heels of renovations and certainly some softening activity that we saw last year in Hawaii. To Sean’s point, we feel good about that. If anything, it’s conservative, but that’s intentional given all the uncertainty right now.
Okay. Thank you. Appreciate it.
All right. Thank you.
Our next question is from Duane Pfennigwerth with Evercore ISI.
Yeah. Hi, this is Peter on for Duane. Thanks for taking the question. I think I'd like to maybe just piggyback off Smedes' last question on Hawaii and bigger picture, Tom, if you could just kind of lay out the building blocks of, you know, the recovery in Hawaii getting back to kind of pre-strike levels, what do you need to see happen, and what could kind of the cadence of that recovery look like?
Yeah. Peter, it's a fair question. I would just again, kind of frame it a little bit. If you look historically, you know, Oahu is RevPAR growth has always outpaced the U.S. pretty consistently by about 120 basis points. I think Key West and Hawaii both are around a CAGR of about 4.5% versus certainly 3.3%. Obviously, you got very limited supply growth in Hawaii through 2030. Again, the investment that we're making, that we continue to make and after we have finished the Ali'i Tower, you know, at least 80% of the rooms at Hilton Hawaiian Village in particular will be renovated. You know, we've been looking to sort of reposition.
If you think about the Japanese traveler, you know, we're about 750,000 visitation versus about 1.5 million historically. We've been seeing that shift away, and we've been really repositioning the business to account for that. Japanese traveler really accounting for about 3% of our business, approximately, which it was probably high teens, 18%-20%, kind of pre-pandemic. As we look out, we're still very encouraged. Obviously right now, you do have current headwinds, obviously, given what's happening on the with the conflict and the impact it's gonna have on fuel and fuel surcharges and obviously the strong dollar versus the yen, and, you know, candidly some cheaper alternatives.
Having said that, when you look at the investment we've made, if you think about the favorable comps that we have, we think there's an opportunity for certainly Hawaii to be a to perform on the higher end of our guidance, if not exceed that. Don't wanna get ahead of ourselves, we're certainly very, very bullish over the intermediate and long term. We still last year generated north of $140 million in EBITDA ±. You think about the highs, it was about $185 million ± coming out the pandemic. You know, with that backdrop and some of those headwinds, we're really not that far. We continue to think about repositioning and get back some of the higher end business.
Certainly as the convention center is also done, we also see that as another tailwind for us as we look out in the outer years. Remain very, very encouraged for Hawaii over the intermediate and long term. As it relates to Waikoloa, we are just very, very bullish. Obviously, completing the palace tower renovation. If you look at the second half of this year and what we're lapping, we had 20,000 out of order rooms last year. That also is gonna, I think, be a favorable dynamic for us as we finish 2026 and look to 2027 and beyond.
Great. Thanks for the detail. My follow-up, you know, you mentioned group pace improving from the beginning of the year, group pace ex Hawaii and Miami. Could you highlight maybe some markets that you saw some sequential improvement and, you know, the flavor of those bookings? Is it corporate groups in the year for the year? Is it convention blocks booking up? Some details there would be helpful. Thanks for the time.
Sure. Jump in on this. I would say from what we saw for Q1, we saw some help in New York on group, where we had a nurses strike there, and then ultimately we're able to take in some of the temporary labor as a group block there for a few weeks. That was really helpful. We've seen some of the, you know, disruptive forces in Mexico and the Middle East, allow some groups to transition or change out and come into markets like Hawaii. We've seen some benefit there, and some of that will be in future periods. I think those are kind of the bigger things.
I think we've seen revaluations across the portfolio for group be stronger, where groups have outperformed their blocks. We've seen a little bit of that across the board in both in-house group and ultimately convention.
Thank you. Our next question is from Ari Klein with BMO Capital Markets.
Thanks, good morning. Maybe following up on Hawaii. First, I guess, is that market benefiting from some rotation from Mexico? Maybe it's also benefit Puerto Rico. Then, Tom, you kind of touched on this, but if oil prices do materially impact airline prices, do you think that disproportionately impacts Hawaii relative to the rest of your portfolio? Thanks.
Yeah. I mean, look, you have to believe, Ari, I think it's a fair question. If we get a prolonged supply shock and the conflict continues indefinitely, you certainly have to believe that it's gonna have an impact not only on long air travel, but certainly on air travel broadly and certainly affect the sector. Certainly not gonna argue that point. I would think as you think about sort of rerouting, you know, one of the things that I think would be important to point out is, if you think about inbound traffic into the U.S., you know, we still haven't gotten back to pre-pandemic. We were about $79 million. I think today we're, you know, somewhere in the $67 million, $68 million. We're about 86%.
If you think about outbound from the U.S., I mean, that had gotten up to about 110% to 112%. I think given the conflict, if anything, you might see some of that reroute and people start to, you know, onshore themselves, if you will, to the U.S. I think Hawaii could certainly benefit from that, as well as certainly the Caribbean and seeing Puerto Rico benefit from that. Obviously in Mexico, I think we are already as an industry seeing sort of rerouting and seeing certainly Florida, the Caribbean. Certainly, we're seeing that in Puerto Rico. Puerto Rico's off to had a great first quarter.
We're very encouraged about second quarter as well, and certainly seeing that, and those benefits also in California and other parts of the U.S. To me, those are sort of natural, and I think we're seeing certainly some evidence of that. If you think about all the various cycles over the last 30-plus years, Hawaii has always been a fan favorite, generations, families, both domestic and international. We certainly think that there's no risk of that changing materially. The mix may change, and we're certainly spending our time as we make these big investments, and we think about Ali'i as a great example, a hotel within a hotel and the amount of investment that we're gonna make.
That really flagship, with its own, check-in, its own pool, it's an elevated experience. We think that just continues to help us as we continue to reposition Hilton Hawaiian Village over the future. We also have the opportunity in Waikoloa, just by way of right, to certainly continue not only, as we've renovated, but certainly add additional keys when market dynamics certainly make sense for us. Very remain bullish on Hawaii. As I said, if you look historically from a CAGR standpoint, it certainly has been among, if not one of the top performers certainly over the last 20-plus years, and I think the evidence would support that.
Thanks. I just had two clarifications on group pace. For the fourth quarter, I think previously it was down 8%, and it was gonna be a headwind. Just curious, with the improvement, what that now looks like. On 2027, the 5.5% growth in pace. Does that also exclude Hawaii and Royal Palm?
It does not. I mean, it includes Hawaii and Royal Palm. If you think about 2027 just for a second, I mean, it's as Sean said in his prepared remarks, I think the core was up 5.5%. I mean, you've got New York up mid-teens. You've got New Orleans up mid-teens. You got Hilton Waikoloa up 17%. Bonnet Creek up mid-single digits. Key West up significant, you know, north of 20%. We're Hilton Hawaiian Village is down in parts slightly there. You also keep in mind that you've got the convention center that will be under renovation at that point. It's broad-based, and we're very, very bullish as we look out to 27.
I'd just add on Q4, we were thinking about pace down 8% last time around. We're about down 4% now.
Thank you.
Our next question is from Chris Woronka with Deutsche Bank.
Hey, good morning, guys. Thanks for taking the question.
Morning.
Morning. Yeah, first question, I was hoping maybe we could spend a minute going back to the transactional market and, you know, good progress so far to date. The question would kind of be, are you seeing a difference in the buyer pool in terms of it broadening out or being more institutional as opposed to, you know, local or owner operator?
Yeah, Chris, it's a great question. I would say candidly for these types of assets, again, as I try to frame for the listeners, I mean, we're, you know, we're dealing. As you think about the 8 for a second, these are smaller assets, not big EBITDA contributors. More attractive, I would say, generally to owner-operators. Entrepreneurial, could be small PE firms. Clearly experienced and see value and see the opportunity to reposition in some cases. No shortage of interested parties. Some markets are more attractive. No secret, L.A. certainly wouldn't be at the top of anybody's list given some of the challenges there. I would say Chicago generally a more tougher market.
Certainly as you look across in the assets that we're, that we're marketing, we're, we've got a healthy buyer pool and interested parties. It's just really working through the process, which the last mile is always the toughest. You know, many of these assets were assets that had been in the old Hilton portfolio, and they weren't a high priority for obvious reasons. Then after when Hilton was sold, it wasn't a high priority to that buyer. You know, the Park team has the challenge. We accept the challenge. No excuses, we own it, and we've got to make it happen, and we're gonna do that. I think we've demonstrated that. Keep in mind, again, the long track record, we've sold assets before the pandemic, during the pandemic, after the pandemic.
That also included 14 international. You know, all of those assets and all of these assets have, you know, some are legal issues, some are joint ventures. Some are tax-related issues. You know, whatever it is, we're up to the challenge, and we're gonna get it solved, and you're gonna see significant progress this year.
Okay. Thanks, Tom.
Yeah.
As a follow-up on Miami.
Yep.
On the Royal Palm, I think you guys have outlined kind of, you know, EBITDA expectations, fully ramped and timing of opening. My question is, when that thing opens and it starts to ramp, how much does the composition of the earnings change to get to your EBITDA target in terms of this had been a heads-in-bed strategy hotel. Miami is a high-oc market. In terms of ancillary and getting the higher rate and maybe some, I don't know if you're doing a beach club there, things like that. Just maybe how does the composition look versus what it did pre-renovation? Thanks.
Yeah. Yeah, it's, I don't have all of that with me other than to just tell you how excited. If you think about the ADR pre-renovation, I think we were $265. I think we've underwritten this at around $400. I think in the prepared remarks, I talked about business that we're already getting at $460, plus or minus.
When you see it and you see the second floor, which it had a pool and now it's got outdoor really entertainment space, plus as we're bringing all 3 of the buildings together, all of the opportunities for an elevated guest experience, and we're planning to really tuck underneath when you think about the Auberge and Rosewood and the Aman and Andaz and the Delano and all of those and where they're gonna be priced at $600, $700, $800 or more. Us underwriting at $400, I personally believe that we'll exceed that. I think there's a significant opportunity for us. Just the response that we're getting, is really exceeding expectations. We are very, very bullish and very excited about it.
Again, I would draw your attention to, you know, the success that we're having at Bonnet Creek. We've taken that already from $60 million in EBITDA to north, to north of $100 million. You think about obviously the success that we're having at Casa. I think it really speaks, we believe passionately, and I think the track record's demonstrating that we can generate higher returns on development deals than we can on acquisition deals. I think it's a real core competency for the team. We're excited to finish it and then to have an event and have analysts and investors down to see it and to see what an incredible transformation really looks like. We gotta get it done. We know that.
As I, as I mentioned, we've got north of 400 people on site right now working two shifts, and really to get the construction completed and to get as much of the World Cup as we can. Keeping in mind, we didn't plan for any benefit in the World Cup as part of our guidance as it relates to Miami Royal Palm. Anything we get, we think is gonna be incremental gravy, and we're pretty excited about the challenge and look forward to getting it done.
Okay. Very good. Thanks, Tom.
Thank you. Yep.
Our next question is from David Katz with Jefferies.
Hey, David.
Hi, everyone. Hey, how are you? Thanks for taking my question.
Good.
I, you know, I feel like we always cover the quarters, you know, quite well, and I wanted to ask something a little longer term. Ian always reminds us about, you know, the pipeline of, you know, long-term, longer term repositionings. You know, clearly Royal Palm gets done. You know, Hawaii, I think you've given enough, you know, pretty good updates on it. Do you have, or can you talk about in qualitative terms some of the ones that might be next? How we think about sort of building the portfolio, you know, little longer term.
There are a few that come to mind. Santa Barbara. We think there is just significant upside and we have a proposal to add approximately 70 keys, plus or minus. We've been working through sort of the entitlement process there. Really excited. When you think about that's unencumbered and will be unencumbered, we have a great JV partner, but unencumbered in terms of its visibility and views. Pretty excited about that as we sort of look out. As you think about Hawaii, Hilton Waikoloa, you know, by way of right, we have the opportunity to add another 200 keys.
You know, I wouldn't say that that would be on the, on the front burner until obviously we see the market recover enough to where that makes sense. It certainly is in the pipeline. We have the ability obviously with our DoubleTree in Crystal City. I'm not sure that the market conditions warrant that right now, but when you think about just bull's eye real estate and where it sits in the location at the front of the Amazon headquarters 2, certainly pretty excited about that over the long term. I don't think that that's something intermediate as we sort of look out right now. Yeah.
You know, the, the one that we continue to noodle and study and we're working on obviously some of the elevator modernization in New York. There's, there's no doubt as we think about New York and how to reposition that certainly is also a priority and one that certainly needs to be addressed within the portfolio. We know that. It's just trying to figure out what's gonna make the most sense for that asset over the intermediate and long term. We certainly think that there is significant value as you think about just the sheer scale of it. It continues to certainly improve from a performance standpoint. We certainly think that there are opportunities, different things that can certainly occur with that asset over time. Just to give you a few that are sort of, on the mind and ones that we certainly think about.
Okay. Thank you. I appreciate it. Gotten a lot done. That's it for me.
Okay. Thanks, David.
Our next question is from Daniel Politzer with JPMorgan.
Hey, good afternoon, everyone. Thanks for the question. I just had a quick follow-up on the second quarter. I think you mentioned RevPAR in that range, you know, I think you had a comment on May and how it's tracking. I was wondering if you could just kind of give a little bit more detail on what was driving that, because I think you kind of characterized it as mixed.
Yeah, ultimately, you know, to just talk to the second quarter, April, obviously almost finished here. Just kinda looking, you know, we probably have about a week or so of data to get in and kind of get real-time. But, you know, like I say, tracking flattish might be a little bit better there. Certainly better than expectations, so it kinda continues from Q1. May is the weakest, I think setup right now for the quarter, with group pace just down slightly. Transient, we ultimately need there to make the, you know, kind of the numbers we're thinking, which are kind of a flattish type of result. There's some risks there, so we kind of hold that out as the one where we're gonna monitor May, but June's really strong.
June makes the quarter. As we look at it right now, pace is up double digits for group. Obviously we've got some things related to World Cup and Juneteenth and other activities going on around that month. Certainly, we think it's gonna be a good performer. All together, just kind of April kind of be flattish, May, where we see a little bit of risk, and then June strong kind of comes together to be, you know, plus or minus kind of the midpoint-ish of the guide for the year.
Got it. Thanks. Just for my follow-up, I know we've spent a lot of time talking about World Cup as it relates to Miami, but I guess more broadly, as you think about, you know, where your footprint is and across the portfolio, have you seen kind of a change in terms of the demand, you know, for World Cup maybe versus, say, 3 or 6 months ago?
Nothing. I mean, nothing dramatic. I think, you know, for us, you know, you put Royal Palm aside, Miami aside, you know, Tom talked to that. Really the 2 big markets for us are New York and Boston, and these are 2 markets that typically have been 90% occupied during this timeframe of June and July. It's really kind of a rate play. I think the positioning right now is good in those 2 markets around the matches. I think it remains to be seen. Clearly, there's a lot of uncertainty around this event. Right now we think we kind of, you know, have a good position. I wouldn't say it's, you know, we would say it's fantastic like people thought coming into the year. We said about, you know, that impact between those 2.
I would say those two markets considerably make up the most of the impact for the year for the portfolio. It's probably, you know, we probably said 35 or so plus or minus basis, which might come off a little bit from that from our expectations today, but still a demand generator, still a positive. I wouldn't say it's dramatic as we thought necessarily as we go into it. We'll see. Could change, but I think there's a lot of things and a lot of unknowns around this event right now.
Got it. Thanks so much.
Thank you.
Our next question is from Chris Darling with Green Street.
Hi, thanks. Good morning.
Chris.
Hey, Tom. Quick one, circling back to Hilton Hawaiian Village, maybe framing the trajectory there in a different way. Can you update us on where your RevPAR index share is today and where you see that metric heading over time as you sort of realize the benefit of the capital you've invested over the last few years?
The RevPAR index or so is kinda tracking in that 95-100, kinda, you know, I think we've seen that last year and this year if you kinda started the year, because we've had some of that, you know, work going on at the Rainbow Tower. What we've seen last year was once we got past kinda first quarter, we saw that kinda pick up a little bit more. You know, in terms of kinda the recovery, where we see it going from there is really kinda back to that historical levels of 110-115 range. That's where we kinda were sitting ahead of the renovation and some of the other events like the strike.
I think that's kinda where we wanna, you know, ultimately see it come back to. Certainly, if we can get there more and on a rate profile as well, that's gonna certainly help the bottom line given the renovation work.
Okay, understood. You know, you may not have a perfect answer to this, but just how are you thinking about the timing in terms of that index share? Is that, you know, a 1-year timeline, 3-year timeline, and maybe you can't quantify?
'Cause we would hope that just if you look historically and the amount of investment that we've made, the corporate resources that we're devoting in addition to our operating partners at Hilton, we would expect that ramp up to accelerate. Again, once we get the Ali'i Tower done, and again, that's somewhat isolated and self-contained, so we think that's gonna help, and obviously we project, obviously, there's gonna be minimal disruption. When you get that done and you've got 80% of the campus done, we think that's just gonna really continue to reposition and candidly give us the opportunity to change the customer mix as well. Very excited, remain committed to it.
When we pay off the mortgage, keep in mind we'll have two marquee assets in Hawaii completely unencumbered. Very rare. You know, most of those resorts and many of the assets owned are under long-term ground leases. That's not the case with Park's portfolio. That's a real benefit for us too, and gives us a lot of optionality.
All right, appreciate the thoughts. That's all for me.
Yep.
Yep. Thank you.
Our next question is from Cooper Clark with Wells Fargo.
Great. Thanks for taking the question. Could you just.
Sure
talk us through some of the building blocks for the updated OpEx guide for the full year and what you're expecting to see from a growth perspective on wages and benefits, insurance, and utilities?
Sure. Like I mentioned before, we have a range right now, kind of in the mid 2s to mid 3s. Labor and wage growth should be kind of in that 5% ± as you kind of go throughout the year on average. We've got some of the offsets to that fundamentally are insurance. We do and have embedded in our kind of budgets, favorable premium reduction, certainly continues to be a good market for the insureds as we look to renew.
We renew on June first, so we'll get the continuation of our reduction from last year through May, and then ultimately pick up for the next seven months, you know, what we expect to be a favorable outcome, and we'll give more color to that when we know more in the back part of the year. Real estate taxes, you know, once again, we kind of find ourselves with, you know, probably about 5% increase right now through the budget process, but multiple appeal processes in place and haven't really factored that into any guidance because we just don't know in terms of outcomes, amounts, timing and the like.
I'd say, you know, labor and wages clearly, you know, the big driver on the growth side, but certainly some good offsets and continue to kinda work with our asset management teams and the operators, you know, to find those meaningful ways to offset, you know, further offsets.
Great. Thanks. A quick follow-up. Just curious how much, if any, impact the Hilton Seattle sale had on the RevPAR guidance raise.
RevPAR guidance raise was obviously a growth. It's comparable growth. We'd hopefully remove that from the portfolio on a like for like basis, so no impact. Clearly, from a nominal RevPAR, you're seeing a nice increase.
Great. Thank you.
Our next question is from Robin Farley with UBS.
Great. Thank you. Most of my questions have been answered. I wonder if you could.
Hi, Robin.
... on the... Oh, can you hear me okay?
We can. Go ahead.
Okay, great. Sorry. Yeah, most of my questions have been covered. Just going back to the Ali'i Tower in Hawaii, I wonder if you could walk us through a little bit about what you're expecting in terms of returns and change in RevPAR, kind of the way you know, I think you've given great color on Royal Palm, just kind of what you're expecting from that Hawaii tower. Thanks.
Well, we would certainly think, again, the opportunity is to take it from 351 keys to probably pick up 3 keys incremental, budgeting approximately about $96 million. Any of these transformations, we've got to be returns in the 15%-20%. And again, if you think about Bonnet Creek in Key West that we've talked about already confidently exceeding that, the opportunity here is it's really a hotel within a hotel. You've got your own separate check-in. You've got, obviously, an embedded pool, given its premier location on the Village. Just really, really excited about it, and it hasn't had really that sort of upgrade for some time. We're excited about it.
We'll start that later this year and expect to finish that in the middle of next year ±. You know, given the experience that we've had, the success that we've had with the Tapa Tower there, obviously the Rainbow Tower, this is really the next in line to really reposition and again, take the opportunity to change the customer mix. We're pretty excited about it.
Are there any limits on brand there in terms of do you have to stay with something Hilton branded or could you do something completely different?
It would have to stay within the Hilton family and, you know, we've looked at do you want to rename? The reality, given the fact that Hilton Hawaiian Village is iconic when you think about that and, you know, north of 60 years plus or minus, Ali'i Tower obviously has its own following. We think really just the repositioning and the upgrade is really the right answer there. You know, we'll continue to look and continue to study it, but at this point we've concluded really just the repositioning and the upgrade. You know, we're getting a phenomenal response not only from Tapa but also the Rainbow Tower, in the room product and the quality of the renovation and how thoughtful we were about it.
Again, really excited and think obviously to the point that Sean was making about RevPAR index, getting the whole village back into that 110 and above range, we certainly think is within our eyesight and that'll be accelerated once we get this final tower done.
Okay, great. Thank you.
Thank you.
Thank you. There are no further questions at this time. I would like to turn the floor back over to Tom Baltimore for any closing remarks.
Appreciate everybody taking time and look forward to seeing many of you at upcoming meetings, one hosted by Wells Fargo, JP Morgan, and of course, Nareit. Safe travels, and I look forward to seeing you all.
This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.