Greetings and welcome to the Park Hotels & Resorts Third Quarter 2026 Earnings Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. If anyone should require operator assistance, please press star zero on your telephone keypad. As a reminder, this conference is being recorded. 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 Third 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 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 Forms 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 to the most directly comparable GAAP financial measure in yesterday's earnings call, as well in our 8-K file 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. This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide an update on our strategic initiatives and review Park's third quarter performance and outlook for the year, while Sean Dell’Orto, our Chief Financial Officer and Chief Operating Officer, will provide updates on our capital investments and 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 am pleased to report that Park delivered another outstanding quarter with results meaningfully exceeding our expectations. RevPAR increased 8.4% year-over-year, with growth accelerating from 9% in July to more than 13% in September, despite weather-related disruptions in Hawaii during August and September. Results reflected broad-based strength across the portfolio, supported by continued momentum in group, leisure, and higher-rated business transient demand. RevPAR increased nearly 7% across both our resort and urban hotels, while our airport and suburban hotels grew approximately 20% and 14% respectively. Turning to our major markets, Hawaii continues to be one of the most compelling growth opportunities in our portfolio. RevPAR across our two resorts increased an impressive 7% despite the temporary disruption from three hurricanes, which we estimate reduced combined RevPAR growth for the two resorts by nearly 280 basis points during the quarter.
Demand rebounded as conditions improved, with September representing the strongest month of the quarter, and RevPAR across our Hawaii resorts increased nearly 14%. Group was the primary driver of performance at both hotels in the third quarter, with group rooms revenue more than doubling year-over-year, which helped to drive a 110% increase in banquet and catering revenue. At Hilton Hawaiian Village, RevPAR increased 5% during the quarter, with occupancy reaching nearly 90%, allowing for compression to drive stronger rates, particularly in September, when the average daily rate increased approximately 9% compared to last year. The resort also continued to gain market share, achieving a RevPAR Index of 105% for the quarter, up four points from last year, with gains across both occupancy and rate. Importantly, the index remains nearly 14 points below 2021.
The resort's renovated outlets and enhanced programming also helped drive record third quarter food and beverage performance, with banquet and catering and outlet revenue each growing 14% year-over-year. Orlando also delivered another strong quarter, with RevPAR increasing more than 5%, led by continued outperformance at Bonnet Creek. The complex delivered another record-breaking quarter, generating its highest third quarter revenue ever. Transient revenue increased nearly 19% year-over-year, supported by premium-rated luxury demand at the Waldorf, further underscoring the exceptional quality of these properties. Signia by Hilton Orlando Bonnet Creek and Waldorf Astoria Orlando were recently ranked the number two and number three resorts in Orlando, respectively, in Condé Nast Traveler's 2026 Readers' Choice Awards. Bonnet Creek's continued strength following our significant investment demonstrates how targeted capital can elevate an asset, strengthen its competitive positioning, and drive sustained earnings growth.
EBITDA of the complex has grown from approximately $60 million to a level we expect to exceed $108 million this year, and we believe there is further upside as the complex continues to gain market share. Our urban portfolio was another important source of strength, led by Washington D.C., Chicago, and Boston. Across our two D.C. metro hotels, RevPAR increased by nearly 33% year-over-year, supported by a nine-point increase in occupancy and ADR growth of 16%. Group room nights increased 139%, creating meaningful compression and supporting transient ADR growth of more than 17%. At our Hilton Chicago hotel, RevPAR increased more than 15%, benefiting from a particularly strong citywide and event calendar and excellent transient pricing. Boston also delivered strong results, with portfolio RevPAR increasing approximately 13%, supported by meaningful ADR growth, strong citywide demand, and high occupancy.
Finally, we are very excited about the early progress at Royal Palm South Beach following its approximately $110 million transformational renovation. The hotel welcomed its first guests in late July, making the third quarter very much a ramp-up period. Even at this early stage, rate performance has been very encouraging, with third quarter ADR of approximately $244, up nearly $60 and more than 30% above the comparable period in 2024, with September increasing to $264, or over 40% better than pre-renovation results. The team has also been focused on building awareness of the reimagined hotel, hosting leading travel media, Marriott sales leaders from around the world, and key industry groups, while benefiting from broad support from Marriott and our operating partners.
Looking ahead, the demand backdrop is encouraging, with eight citywide events scheduled for Miami Beach in the fourth quarter, expected to generate approximately 56,000 room nights, up 70% compared to last year. We are also seeing strong early validation of the hotel's repositioning across both group and food and beverage. At the end of the third quarter, 2027 group revenue on the books totaled approximately $3.9 million, already matching the comparable pace for 2024, the hotel's best year, with an average daily rate that is $136 higher, or up nearly 40%. During the third quarter alone, the hotel booked more than 8,000 future group room nights at $461 average daily rate, representing approximately $3.7 million of rooms revenue, more than triple the amount booked during the same period in 2024.
Banquet and catering has also been particularly strong, booking nearly $1.7 million during the third quarter versus less than $200,000 booked during the same period in 2024. Together, these early results demonstrate the opportunity to drive significantly higher rates and meaningfully higher total revenue across the property. These results also reinforce our confidence that Royal Palm will become a meaningful contributor to Park's earnings growth over the next couple of years. On the capital allocation front, we continue to make meaningful progress executing on our non-core disposition strategy. In October, we completed the sale of The Wade, a 520-room hotel in Chicago, for approximately $19 million. The hotel was expected to generate an operating loss of approximately $1.3 million in 2026, with a forecasted loss of approximately $1.3 million in the fourth quarter, making the sale immediately accretive to earnings while further enhancing the quality of our portfolio.
Our remaining non-core hotels now represent 3%-4% of total portfolio value, and we remain committed to further reducing that exposure by year-end, with active workstreams on a number of assets underway. We are extremely pleased with our progress since launching the strategy late last year. Of the 19 hotels originally identified as non-core, we have sold or otherwise disposed of 11 hotels, generating approximately $220 million in gross proceeds at an average multiple of more than 16x EBITDA. These transactions have reduced our exposure to lower-growth assets and enabled us to focus our capital and resources on our highest-quality hotels and markets. The result is a higher-quality portfolio with stronger margins, a better growth profile, and greater long-term earnings potential. We believe this transformation has positioned Park to deliver sustained earnings growth and create long-term shareholder value.
As we look at the balance of the year and into 2027, I remain encouraged by the strength across our portfolio. Despite continued geopolitical and macroeconomic uncertainty, the U.S. economy and consumer remain resilient. Healthy business activity and investment, including significant spending related to AI, should continue to support lodging demand, while historically low levels of new hotel supply provide a favorable backdrop for continued pricing power. Against this backdrop, we expect to finish the year strong and enter 2027 with considerable momentum. Core group revenue pace is up nearly 6%, and we have several distinct growth drivers, including our recently completed capital investments, which are expected to provide meaningful embedded earnings growth. In Miami, 2027 will mark its first full year of operations at the transformed Royal Palm South Beach.
Early performance continues to reinforce our high confidence in the hotel's ramp toward approximately $28 million of stabilized hotel-Adjusted EBITDA by 2028, compared with approximately $3 million expected this year. For 2027, we currently expect earnings to at least return to pre-renovation levels of approximately $14 million of EBITDA, with Royal Palm alone expected to contribute approximately 200 basis points to total portfolio RevPAR growth. Hawaii represents another substantial opportunity. With the Ali’i Tower renovation expected to be completed in early 2027, we will have invested approximately $350 million to strengthen the competitive positioning of our two resorts. With the major renovation activity behind us, solid group pace already on the books, and significant upside from recovering market share, we believe our Hawaii portfolio is well-positioned to continue closing the approximately $60 million EBITDA gap to its 2023 peak earnings over the next few years.
As a result, I believe Park is uniquely positioned to deliver outsized earnings growth over the next several years. We have strengthened the portfolio through disciplined capital allocation and active capital recycling, invested substantially in our highest return opportunities, and enhanced our financial flexibility through proactive balance sheet management. We are now positioned to realize the earnings benefit of that work, creating a compelling path to higher EBITDA and meaningful long-term value creation for our shareholders. With that, I'll turn the call over to Sean.
Thanks, Tom. Overall, we were very pleased with our third quarter results, which once again exceeded expectations, with RevPAR increasing 8.4% to $201 and hotel adjusted EBITDA increasing 8% year-over-year, with hotel adjusted EBITDA margin expanding by 50 basis points to 25.7%. Adjusted EBITDA was $135 million for the quarter, while adjusted FFO per share was $0.39, an increase of over 11%. We were also pleased to see broad-based strength across the portfolio. Group room revenue increased more than 18%, while transient revenue grew over 5%, reflecting healthy demand across multiple customer segments. RevPAR growth was also well-balanced, with occupancy increasing 2.4 percentage points and ADR up 5%. Expenses increased 5% during the quarter, compared with just under 4% in the first half of the year, with the reopening of the Royal Palm adding roughly 85 basis points of operating expense growth versus prior year.
Excluding Royal Palm, cost per occupied room increased 3.7% in the quarter, including an approximately 80 basis point impact from increased utility cost pressures, which, combined with higher occupancy and along with revenue-based variable costs, drove the expense growth for the quarter, but partially offset by a reduction in fixed costs, mostly due to lower property insurance premiums from our annual policy renewal this past June. Turning to capital investments. During the third quarter, we invested a total of $57 million in capital improvements, with full-year CapEx expected to range between $270 million- $280 million.
In Hawaii, we commenced a comprehensive renovation of the 348-room Ali’i Tower at Hilton Hawaiian Village in August, a $100 million project that includes a complete renovation of all guest rooms, plus the addition of three guest rooms within the premium oceanfront tower, and enhancements to Food and Beverage outlets, including the Tropics Bar & Grill and the poolside outlet Mīx Bar, all of which are expected to be completed early next year. Upon completion, 80% of the guest rooms across the nearly 3,000-room resort will have been fully renovated. In New Orleans, we commenced the third and final phase of the main tower guest room renovation in May, encompassing the remaining 489 guest rooms, and expect the project to be completed by mid-November.
Upon completion, all 1,600+ guest rooms will have been fully renovated, significantly enhancing the quality and competitiveness of one of our most important convention-oriented assets. Turning to the balance sheet, we entered the third quarter with net debt of approximately $3.7 billion, translating to a trailing 12-month net debt-to-EBITDA ratio of just under 6x , a reduction of two-tenths of a turn since the beginning of the year. Liquidity was $1.3 billion, including $295 million in cash and $1 billion of available capacity under our Revolver. In September, we fully repaid the $1.275 billion CMBS loan secured by the Hilton Hawaiian Village resort, using the remaining $600 million capacity under our 2025 Delayed Draw Term Loan, together with proceeds from the $700 million delayed draw mortgage loan secured by the Bonnet Creek complex.
This transaction meaningfully extended our debt maturities by roughly one and a half years, and we now have no significant maturities until Q4 of 2028. We also finalized terms on a $205 million refinancing of the Hilton Santa Barbara Resort, which will be used to repay the existing $150 million mortgage maturing in December, and provide for future funding advances towards the property's comprehensive renovation currently planned for late 2028. We expect to close this refinancing by the end of this month. With respect to our dividend, on October 15th, we paid our third quarter cash dividend of $0.25 per share, and on October 29th, the board approved a fourth quarter cash dividend of $0.25 per share to be paid on January 15th to stockholders of record as of December 31st.
The dividend currently translates to an annualized yield of approximately 6% based on recent trading levels. Turning to guidance. Following another stronger-than-expected quarter, we are increasing both our RevPAR and earnings guidance ranges to reflect our third quarter results and our updated expectations for the fourth quarter. Accordingly, we are raising our full-year RevPAR outlook by 200 basis points at the midpoint to a new range of 5.5%-6%, which implies a fourth quarter growth rate between 5.5%-7.5%. This updated outlook reflects the nearly 400 basis points of outperformance delivered during the third quarter, as well as stronger-than-anticipated results at the start of the fourth quarter, with preliminary October RevPAR increasing nearly 11%, driven by a 120 basis point lift from Miami, coupled with double-digit gains at Bonnet Creek, Key West, and Washington D.C.
From an earnings perspective, we are increasing adjusted EBITDA guidance by approximately $13 million at the midpoint to a new range of $635 million-$645 million, while adjusted FFO guidance increases by approximately $0.08 per share at the midpoint to a new range of $2-$2.05 per share. This increase to guidance also reflects an assumed annual increase in expenses of approximately 4.5% year-over-year, and 5.5%-6.5% for the fourth quarter, with an approximate 150 basis point impact from the reopening of Royal Palm. Expenses are being driven by the stronger demand environment and higher occupancy expectations across the portfolio, driving increases in variable costs such as labor and utilities.
In addition, with respect to Royal Palm, we expect fourth quarter hotel adjusted EBITDA at the property to be approximately $4 million, with full-year EBITDA of approximately $3 million. We very much look forward to welcoming many of you to the property next week when we host an investor tour and showcase the exceptional transformation firsthand. 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?
Thank you. Our first question is from Floris van Dijkum with Ladenburg Thalmann.
Hey, guys. Thanks. Look forward to seeing your Miami Beach asset next week with you guys. Just wanted to talk about Hawaiian Village, which is the most valuable hotel, I believe, in the world. You've invested $350 million in that. Presumably, you're going to get your 15% stabilized returns on that. In your view, when can we expect that that asset could get to $200 million of EBITDA? Obviously, not forecasting for next year, et cetera, because the latest renovation won't be finished or fully stabilized yet. But you should see some pretty heady growth in Hawaii based on the capital you spent, plus the markets recovering. Maybe if you can walk us through some of that, please.
First of all, Floris, thank you for the question, and thank you for taking time, and look forward to seeing you and many others next week. I think if you step back and just think about Hawaii, really over the last 20 years or more, Oahu in particular has really outpaced the U.S. by about 120 basis points. I think you really start with that embedded tailwind. If you look at Hawaii, I think their RevPAR CAGR has been about 4.5% versus about 3.3% for the broader U.S. I certainly think that that's going to be a real benefit to us as we look to the future. The other thing, which not only applies to Hawaii, but even broader, really limited supply growth through 2030. Near impossible to add new supply in Hawaii, and having two iconic resorts there, particularly Hilton Hawaiian Village, we are really excited.
As Sean noted in his remarks, and completing Ali’i, we will have north of 80% of really the core rooms renovated. We certainly think that's going to continue to be a real tailwind for us. If you think about HHV, I mean, we're running an index, RevPAR Index of about 105%. So, when we get Ali’i done, as we sort of look out, we would certainly expect here in the next couple of years that we have bridged that gap that we talk about, that recapturing that $60± million in EBITDA in Hawaii that really gets us back to the 2023 peak levels. Very encouraged. If you think about the success that we've had with our transformational renovations, whether it's Bonnet Creek or Key West, and I certainly put Royal Palm in that category, that we're very, very confident and very, very optimistic.
We certainly think that Hawaii is going to continue that track record, and we're really excited about the future at both assets, and particularly Hilton Hawaiian Village.
Thanks, Tom. Maybe a follow-up. Something that people don't or tend to forget about, but ancillary revenue is obviously a big driver of trying to maximize value at each of your assets. I think the investors are probably somewhat familiar, and certainly travelers, with resort fees as well as paid parking. Presumably, I don't know if there's an asset in your portfolio that does not have resort fees today, but maybe talk about some of the other things that you can do to drive revenue and EBITDA at hotels, including things like billboards, et cetera.
Yeah. Listen, we are, as you can imagine, Floris, looking all issues are on the table to drive incremental revenue. You've captured many of them, clearly resort fees. Keep in mind, we've got 150,000 sq ft of retail space there, provides incremental. We've got incremental parking there. At any one time, you've probably got 15,000 people. You've got 1,000 timeshare rooms. So all of that provides for a unique experience, but it also provides for really broad sources of revenue for us at Hilton Hawaiian Village. To your earlier comment, it's also owned all fee simple. Many ground leases in Hawaii for both of our properties, they're fee simple with huge optionality. That gives us tremendous confidence, not only in the interim, but certainly over the long term in terms of the great upside that we have at those assets.
Our next question is from Duane Pfennigwerth with Evercore ISI.
Yeah. Hi, this is Pete on for Duane. Thanks for taking the question. Just on Miami, for the $4 million EBITDA outlook in the fourth quarter, if you can share just what level of occupancy is assumed within that outlook, and remind us, is the hotel 100% open across all the amenities and outlets? Just love to hear any highlights that you can share now that it's up and running.
Yes, sure. This is Sean. I'll take that. Think that Q4, I would say Royal Palm is probably going to be somewhere in that kind of critical 60%± occupancy , set up for Q4. Certainly, trailing what it did in 2024 from an occupancy standpoint, but we certainly, our thesis is to not necessarily drive as much occupancy as we did, and more so driving the rate. So, we'll certainly see a better rate projected for Q4 relative to 2024, lower occupancy, getting pretty close to what we would have achieved from a bottom line in 2024, so pre-renovation. Feel good about that. From an overall operations standpoint, everything's open. We did have a third-party leased restaurant that we'll be working to bring online over the coming months.
But for the most part, the outlets that we've baked in into our underwriting, and obviously all rooms are all open and operational.
Gotcha. Then just quickly. Oh, go ahead, Tom.
No, I was just going to just build on Sean's point. On the renovation, all guest rooms, all public space, reimagined lobby, breezeway, pool, four food and beverage outlets, upgraded meeting space, all of that is done. Most importantly, and those of you that are with us next week will see, really integrating three separate buildings so that they look and feel as one. We could not be prouder, and Condé Nast obviously did a recent feature that perhaps many of you have seen, and I think it really speaks to the quality of design work and the finishes, and that we're terribly excited about it. We're incredibly excited about it and can't wait to show it next week, and can't wait, most importantly, for its performance in the coming months and years.
Gotcha. Appreciate the color. One quick follow-up on the 11% RevPAR growth in October. What level of total Rev did you see for the month, and what do you kind of expect between the balance between RevPAR growth and TRevPAR growth in fourth year? Thanks for taking the questions.
Well, I would say for the quarter specifically, we would expect to see TRevPAR be a little more in line with RevPAR. Certainly more in line than what we saw for Q3. If you think about our implied guided range for the quarter for RevPAR, kind of 5.5%-7.5%, I would certainly see that we would expect total RevPAR, TRevPAR kind of being, maybe it is more towards the lower end of that range, but certainly kind of closer to RevPAR.
Our next question is from Smedes Rose with Citi.
Hey, Smedes.
Hi, thanks. I wanted to ask you a little more about the group booking pace that you mentioned for 2027. It looks like very healthy, +6%. I was just curious if you could talk a little bit about kind of what you are seeing maybe on the composition of that in terms of corporate versus sort of larger maybe association-type business, or anything you can just kind of share in terms of the patterns you are seeing.
Well, as we mentioned, approximately 6%, obviously that is largely core, which again is about 97% of the value, and I think represents also EBITDA for the portfolio. Hilton Hawaiian Village obviously is coming back on and still ramping up from the and lapping obviously favorable comps there, think up about 12%. Bonnet Creek, as you know, has been a tremendous success for us. We are looking at probably another 10% in the group pace for next year. Obviously, Miami, a very high number, 900% effectively because it was closed the last 15 months, but it is going to be significant. Key West, looking at about 22%. Casa in particular up about 25%. Chicago around 8%. New Orleans in that 7%-8% range. San Francisco 10%. So broad-based.
We do have a good citywide calendar as well that I certainly think is going to benefit as we sort of look out and create some compression. So it is set up, I think, for a very strong group year. And obviously coming on as we finish 2026, up about 6% is what we expect to finish the year. Obviously 18% in third quarter, slightly negative in fourth quarter, but really making up with that with really strong transient as we look out, Smedes.
Thanks. I appreciate that. I wanted to ask you just one question on the New York Hilton during the third quarter. I am just curious. I mean, it looks like the EBITDA declined pretty significantly with some margin compression there. It is just something if you could talk about. Was it just ascribed to maybe the way that the booking patterns worked over the quarter, or is that to do with the higher expenses at the property level? Or maybe just talk about what is going on there.
Yeah, I would say, no, I think we kind of generally contemplated for Q3, and I would not say it holds. We have one kind of big group that kind of has come through in a repeating group in Q3 that ultimately did not spend as much kind of outside the room. So I do not necessarily think it is kind of a pattern in any sense. It is probably a little bit of an anomaly, but in the end, I think that kind of should be more kind of a common theme across the quarter in a way is in terms of TRevPAR being less than RevPAR in terms of growth.
Still solid, still some good growth, but in the end, I think where New York is concerned, I think just kind of did not have the F&B kind of out-of-room production to kind of offset some of the cost structure that quarter.
Our next question is from Jamie Feldman with Wells Fargo.
Hi, thank you. This is Connor on with Jamie. On New Orleans with the last phase of rooms wrapping up this quarter, how should we think about 4Q displacement and then the ramp in 2027? Any color on the citywide calendar, how it looks there next year?
Yeah. We are really excited to bring those. This is the last phase of the main tower, so about 489 rooms scheduled to return to service, I believe on the 13th of November, plus or minus. As we think about 2027, we are very encouraged. Group pace up about ±6.5% . Citywide, there are, I think, 26 events and a little over 500,000 room nights expected. So a solid year in New Orleans. Very, very encouraged. Obviously, it is a tough Q3, but a lot of that has to do lack of citywide in the city, and also for us in particular, we obviously have been under renovation, so certainly impact there. Q4, we are looking probably low single digits, 1%-2% RevPAR as we sort of look out. Transient revenue growing some, so a couple million dollars there.
But in terms of disruption, don't think it is going to be significant as we look out in Q4.
Thank you. Really appreciate the color. Maybe a separate follow-up. Group rooms revenue was up over around 18%, but F&B only up around 2%, with banquet flat. Should we think of that as seasonality or mostly mix? For 2027 group on the book, how should we think about out-of-room spend versus this year?
Yeah, I would say Q3 is not necessarily the norm here. What we had in Q3, and again, as expected, was a few room-only blocks that were pretty sizable. I think that ultimately helped drive the good group pace and group production in the quarter. It didn't translate obviously to higher banquet and catering, since obviously that wasn't linked to the block. I don't think these are repeating elements either for next year. I think it's going to be more, I think, more return to normal, as you think about the banquet and catering production from a group standpoint going forward.
Thanks.
Our next question is from Michael Hirsch with JP Morgan.
Hi, thank you for taking my question. With five non-core hotels left to sell, could you speak to the current state of the transaction market and timing, pricing, and how the buyer financing shaping up for the remaining sales?
Well, first of all, I couldn't be prouder of the team and how hard we've worked. If you step back and just remind listeners, we have sold or disposed of 56 assets since the spin now for about $3.1 billion, $3.2 billion, including 14 international. We've seen a little bit of everything. There are eight remaining assets, as you pointed out, EBITDA of about $50 million. Three of those are in the Safehold portfolio as part of our dispute with them. Obviously, those are not being marketed at this time. That's about $16 million of EBITDA. The remaining five assets are about $34 million of EBITDA. One of those, Lake Buena Vista in Orlando, is about $20 million of that. You really got four assets that have about $14 million. These are small assets, small contributors.
All of them are complicated, like many of the others, with tax, legal, some joint venture. We're working through. We've got work streams underway. We've dealt with this for many years. We've made significant progress. The remaining assets, with the exception of Lake Buena Vista, candidly, are insignificant in terms of their contribution to overall EBITDA. We are evaluating, just given the strength of Orlando, does it make sense for us to fold that back in and renovate that, given the extraordinary success that we've had with Bonnet Creek? The other four assets all have work streams. Many of them are at various stages of that, and we're confident that we will make significant progress before year-end, and could spill a little bit into early 2027, but we expect to have that really behind us in the very near future.
Thank you. For my follow-up, I appreciate it's early, but how should we think about CapEx in 2027 compared with the $275 million plan for this year, which I believe you raised your CapEx guide a bit from your prior guidance?
Yeah. We're certainly in a position where we're bringing that CapEx number down clearly this year with Royal Palm finishing up and bringing the Ali’i Tower project, which, as we mentioned, is $100 million. We had some kind of day two work on Royal Palm, went back and kind of did a few other things, so added a little scope there, and also kind of as we started with the Ali’i, I think a little bit of scope addition there, and ultimately some timing of starting on some projects for 2027 that were identified for 2027 earlier to kind of get the ball rolling as we head into 2027. There's a little bit of timing, a little bit of scope for some of the big projects there that kind of resulted in the increase in the guidance range.
But I would say going forward into next year, we're kind of bringing the annual spend down to a more normalized level of, call it, $185 million or so, $175 million-$185 million. So that's ultimately, you'll see that kind of, we'll have a little bit of carrying in and layering over from 2026 into 2027 as we go through, but ultimately getting down to that more normalized approach going forward.
Our next question is from Rich Hightower with Barclays.
Good morning, guys. Just one for me.
Good morning, Rich.
I've covered a lot. Hey, Tom. How are you? I was wondering, I know you've quantified the interest expense headwind within the 2026 guidance, but as I think about 2027, you've got $1.7 billion of floating rate. Obviously, you've had a lot of refinancing activity. What does that kind of year-on-year headwind look like for 2027 as we think about modeling?
Yeah, I mean, I think the easiest way, Rich, looking at it is we obviously kind of took, we kind of replaced about $1.5 billion of debt this year between the two mortgages we took out that were kind of at the lowest 4% and replaced it with debt that's kind of trading more so kind of in the six to low sixes right now. So, kind of 200 basis points on that. So, it's a $30 million type of headwind annually. I would say that as we kind of bring leverage down, we'll see reductions in the spread grid in our term loans. So, we'll get some relief there, we would expect. We certainly, as you look at our guide and kind of hold net debt to where it is, you kind of get certainly below 6 , closer to 5.8x .
That'll bring us a notch down, and as we go through next year, bringing Royal Palm back online, getting recovery from Hawaii, of course, and the like, and certainly expect some continued growth in the portfolio, we should start to continue to bring that down to the next layer. So, there'll be a little bit of a tailwind too to that offset in some of the headwind next year, we would expect.
Sean, how does the pricing grid on the floating rate change if you go down below six?
It goes down about 25 basis points.
Okay, great. Thank you.
Our next question is from David Katz with Jefferies.
Hi, David.
Thank you. Hey, good morning. Thank you for taking my question. You have talked a decent amount in different parts and so forth with respect to 2027. Just looking at the portfolio this year, I think each one has sort of its own story. But if we were to pile up some of the headwinds or calendar issues or whatever the case may be from this year and what we are seeing in this quarter and roll them into next year, I think Ian obviously does a copious job with us offline about it, but I wanted to get a sense for what 2027 could be when we start to walk across the opportunity set and some of the internal headwinds that you have had here, and just be a little clearer about what the upside could totally be, to the degree that you can.
I know you are not maybe guiding today, but any help, we will take it.
Yeah, David, I appreciate the question. It is always good to get your thoughtful and insightful perspective. I would make a couple observations for you and for the broader listeners. One, I think Park is incredibly well-positioned for 2027. If you start with Miami and Royal Palm, hopefully you are able to join us next week and you will see for yourself.
Yeah.
As we said in our remarks, there is about 200 basis points, again, impact to total RevPAR growth rate. So, I think, candidly, we start with a stronger position than perhaps many of our peers there. We really did not get the benefit from the World Cup. We were about 26 to 30± basis points , pretty insignificant. America 250, not significant for us as well. A little bit of activity in D.C. in one particular situation, but that is it. So, you start with a real strong tailwind there. You also, if you look across our portfolio, we have got over the next really four years, not only does the industry benefit, but I think Park in particular benefits from really muted supply growth. Cannot stress enough the importance of that.
We haven't had a situation like that over the last 10 years or so, where we're looking three, four, perhaps five years where you're sub 1%. I think for Park, we're at probably 0.7%, 0.8%. Also keep in mind, if you look at the long-term average, obviously I've been around for a minute or two, David, as you know, it's probably historically been 2.2% over the last 20, 30 years. That and across our portfolio, I think gives us a benefit. One of the things that we can't lose sight of is just the AI trade and the investment cycle, non-residential fixed investment spending and a really high correlation, about 90%± in hotel room demand. That's probably been as high as ever. The recent print was 12.7%, and that's lapping in the second quarter about 9%. That is significant.
If you have anything even remotely like that, we think that's going to continue to be a tailwind for the sector and certainly for Park as well. Group pace, as one of the earlier questions I got, group pace of about 6%, a solid citywide calendar in the Park portfolio. Again, the Hawaii ramp-up, having renovated now 80% of the rooms when the Ali’i is done, coupled with the fact that we're at about 105% Hilton Hawaiian Village in RevPAR Index, but we're only going to be at about 90% for Hilton Waikoloa. So, getting back to fair share and getting back to where we were historically with Hilton Hawaiian Village really, again, provides us with a tailwind and really momentum as well. Then continued growth at Bonnet Creek.
I mean, we've taken Bonnet Creek from $60 million to, as we said in our remarks, probably at $108 million, if not more this year. We can all do the math. It's been a phenomenal success, but we're still barely at fair share. The Signia is about 99.5% Index, and the Waldorf is about 94%, 95%. So you still have growth opportunity. I think when you add all of that up and we don't have the tough comp that perhaps some of our peers will have, I think it really positions Park to be in a strong position in 2027 as we look out. Katz, sorry for the long, but I think it's important that I frame that and that people understand that there's a lot of optionality and significant tailwinds for Park as we look out over 2027 and beyond.
Noted. To the same end on my follow-up, maybe Sean could just touch on what the cost landscape is going to look like for you. That would help. Thanks.
Yeah. I mean, I still think we're going to be in a situation where cost per occupied room is kind of in that low to mid threes range. It's going to be kind of dependent on the growth, dependent on mix of OCC and of ADR, of course. I certainly expect, and as Tom noted on group pace as maybe a proxy, you're certainly seeing more pricing power and rate in that segment, and certainly expect it in other segments as well going forward. So a little more rate side than an occupancy growth side. So that could ultimately keep expenses a little bit more not growing as much as they have this year. Royal Palm does add about 100 basis points to expenses for the first half of the year, lapping being closed for the first half of this year.
So you're going to have that element that kind of bleeds into what we're seeing now and bleeding into the first half of next year, and then it'll kind of come back down and lap its reopening and ramp up in the back half of the year. So again, probably ± 25, 30 basis points of CPOR, cost per occupied room impact by Royal Palm. But I think in the end, from the net standpoint, you're probably looking across the portfolio in that kind of 3-3.5 Range, kind of as a base cost expense. Then from there, depending on occupancy and staffing labor and everything else, you'll have that, and then you'll have offsets in the first half of the year to the 20% down on insurance.
We'll continue to find, fight the fight on the fields with property tax, keep fixed costs in check as an offset, and then ultimately variable costs based on revenues are what they are as we think about growth next year.
Thank you. Super.
Our next question is from Chris Woronka with Deutsche Bank.
Hey. Good morning, guys. Thanks for taking the question.
Morning.
I just had one question, and it is a little bit granular, but you guys, there has been a lot of talk about RevPAR versus TRevPAR this year, and you guys and others have explained some very legitimate reasons why. The question is, as you think about next year, do you think the composition of the groups changes to the point where maybe TRevPAR goes back above RevPAR? Also, on the transient side, on the BT side, have you guys seen any, and I guess we could include leisure if you want, but have you seen any changes in customer behavior in terms of utilization of the primary F&B outlets or other ancillary? Thanks.
Obviously, Chris, you got a lot to unpack there. Let me take a first stab, and then Sean can jump in. I know some of the listeners are concerned about, obviously, third quarter. I think it is important for people to keep in mind, we had in the third quarter three major storms in Hawaii. Fortunately, none were a direct hit, but the impact that it has, and so we ended up with some room-only blocks, so you are not getting the out-of-room spend. You had some displaced, obviously, residents, which obviously impacts. So, it is sort of a one-time. Sean and I went back and looked, and September is more normalized.
We expect the same and the strong, obviously, performance that we are seeing in October. It is a daily leasing business. You are going to be impacted by weather and different events and one-time. That clearly contributed to what we saw. Regarding BT and whether F&B, I mean, I also think that's sort of a case-by-case. BT is improving. We all see that as a stronger growth segment, but the reality is, I'd say BT mix is improving. Aggregate BT is still below where we were in 2019.
There's probably been some modest impact on that. Although your mix and how you market and how you maximize value, I think, gives you great opportunity. We're not at all alarmed. In fact, we're encouraged. We're encouraged by the strong demand that we're seeing and that the sector is seeing. We've obviously had a solid year, and we think 2027 is only going to be stronger for what we control. There are obviously geopolitical and macro issues we don't control.
As we look out, and for the long list that I walked through in terms of the benefits in 2027, Park is very, very well positioned in 2027 and 2028 as we look out.
Yeah.
Okay.
Chris, what I would add too is, real fast, if I could, is that Tom kind of touched on channel mix. I would say, as we look across pretty much all the sub-segments, you've seen strong ADR growth in those segments. You've seen, for corporate negotiated and for leisure, you've seen the rate growth kind of sequentially increase from throughout the year thus far through the first three quarters. But I think more importantly, what you've seen is you've seen moving out of things like government and discount leisure and into higher-rated business, corporate negotiated, higher-rated leisure business. So, having that ability, just given with the broad-based demand, we're kind of getting in that position where, and I think people are adapting to it at this point, is optimizing the mix and hopefully focusing on the right channels.
I think if you think about last year, you had the pipeline for group drying up or in the quarter or the year for the year, with tariffs and people kind of sitting on their hands, not making decisions. You had reduced government spend. You had Canadians not wanting to travel to the U.S. You had a number of things. Now that you come into this year and you've got a lot broad-based demand here. Last year, you were trying to induce demand. Now you've got it coming in all directions. You got to find a way to optimize it. I think teams are navigating that and adjusting.
Certainly, as I think about the budgets being rolled up, our asset managers are certainly pushing them in their commercial strategies and telling them to kind of be confident, be more confident, now you think about pricing as you go into next year. I think it's all revolving here through in a good way as we go through the year here.
Okay. Super helpful. Much appreciated. Thanks, guys.
Thank you.
Our next question is from Michael Herron with Green Street.
Hi, good morning.
Michael.
Thanks for taking the question. Morning. Maybe just going back to Hawaii and the discussion there. I'm just curious your thoughts. With the strength of premium travel in the U.S. this year and putting aside the market share gains that you expect, how do you think the Honolulu market fits into that fold going forward from a domestic travel perspective, especially as international travel continues to remain depressed?
I think it fits very well as you think about, you made the point about international. Let's sort of start there for a second. I mean, inbound international is about 87% of where we were in 2019. So obviously, given the change in leadership in government, obviously, the recent elections, maybe we start to see improvement there. That would be pretty significant if you think historically, the visitation that we've had in Hawaii, we're still down as it relates to the Japanese traveler, but we're also down across many other countries as well. To the extent that you see international improve, I certainly think that's going to be a benefit. Airlift into Hawaii has only been growing from Southwest Airlines and Alaska Airlines and United Airlines and many others. So, we are very encouraged. Obviously, as we noted, we were up 7% in third quarter.
You take out the hurricane impact, you're at 10%. As we think about just even October alone, Hilton Waikoloa, I think, was up about 55%, 60%. So very, very encouraged in Hawaii. It is a special location. It's been generational. We don't expect that to be changing, and we're very encouraged as we think about the future there.
I appreciate the thoughts. Maybe one other just on, sorry, to the transaction market and given the health of the market generally, I was curious to maybe your thoughts on the appetite for potentially capitalizing on selling some of your core assets, just given the strength in pricing that we've seen in some cases.
I think I've been pretty clear. This management team, leadership team is not entrenched. Our board is not entrenched. To the extent compelling offers are made for assets or the entity, we certainly will do what's in shareholders' best interest. We're not actively marketing any of those, but we do get calls occasionally, and we assess and evaluate whether or not they're credible or whether they're real. If something's real, we certainly have an obligation and a responsibility to evaluate it.
Thank you. There are no further questions at this time. I'd like to hand the floor back over to Tom Baltimore for any closing comments.
Appreciate everybody taking time, and we look forward to seeing many of you Monday, Tuesday on the investor tour down in South Florida in Miami and Key West. If we don't see you there, we hope to see many of you at Nareit in Atlanta. Safe travels.
This concludes today's conference call. You may disconnect your lines at this time. Thank you again for your participation.