Park Hotels & Resorts has “shifted to the recovery phase” as it begins the process of reopening its hotels. The real estate investment trust said that it does not expect to see a “meaningful increase in demand” for its portfolio until there are COVID-19 medical solutions in place, whether that is vaccines and/or therapeutics.
At the end of the second quarter the group had 53 percent of its total room count open and said that it expected to increase that to 80 percent in the third quarter.
Tom Baltimore, chairman, president and CEO, told analysts the second half of 2020 would continue to be a challenge for the company. “If anything, given what's happening, you could make a case that [the] leisure demand could get extended into the third quarter.”
Baltimore estimated that around 14,000 rooms—or about 47 percent of the REIT's portfolio—are in drive-to destinations. “So we do expect, as people want to get out, that [we] will certainly benefit from that. But no doubt, the second half of the year will continue to be challenged until those medical solutions are in place and confidence is restored.”
Baltimore said that the group had moved “quickly” in March and April, suspending operations at 38 of its 60 hotels, reducing its capital spend by more than 75 percent and drawing down $1 billion from its revolver.
The REIT ended the quarter with over $1.6 billion of liquidity available, which the CEO said equated to over two years of runway “under the most severe circumstances.”
Park reported a 96 percent decline in revenue per available room for the quarter. For the hotels that remained open, it saw slightly better results each month, with occupancy averaging 14 percent in April, 20 percent in May and increasing to 30 percent in June.
Baltimore said that the group would continue to sell noncore assets, commenting on a “COVID discount” of around 20 percent, having improved from 30 percent to 40 percent “as we get closer and there's more evidence that there will be therapies and vaccines.”
This article originally appeared on Hospitality Insights.