Park Hotels & Resorts CEO Tom Baltimore said that the COVID-19 crisis is “forcing a reset and a wake-up call” for the brands. Baltimore said that the relationship between brands and owners was “getting out of balance right before COVID.”
Baltimore said: “Our wonderful brand partners, they create brands and they're all about distribution.
“While their businesses are capital-light, their businesses are also dependent on having a really healthy ownership community. The owners and the franchisees have been hurt and they've been hurt hard. I suspect that you will see these supply numbers continue to reduce over the near and intermediate timeframe. I think you're going to see less development. And so I would respectfully refute some of those pretty optimistic growth scenarios they have.”
The CEO said that Park had been working with its brand partners “to identify ways to eliminate cost from the business model, including revisiting both operational and capex brand standards, complexing positions, reinventing the food and beverage model and reducing above property expense allocations.”
Baltimore said that Park was “aggressively asset managing the portfolio,” including the “responsible suspension and subsequent reopening of hotels.” The company has reopened 16 hotels since June, increasing the total number of hotels open to 48 of 60 hotels, representing 80 percent of the portfolio.
“During the third quarter as we witnessed pockets of increased demand across our portfolio and moved closer toward a recovery," Baltimore told analysts. “In terms of the remaining suspended hotels, four are in San Francisco. The city's lengthy restrictions on travel has suppressed leisure demand and its irresponsible healthy building ordinance has added unreasonable incremental cost. And with higher occupancy thresholds needed in New York and Chicago coupled with little or no business across these markets during the winter months, the New York Hilton Midtown and the Hilton Chicago will remain suspended through the rest of the year and likely through most of Q1 in 2021.
“We do not expect to see a meaningful increase in demand until vaccines and therapeutics become widely available. Given this current situation, we remain disciplined in our approach to hotel reopenings, moving forward only when the economic benefits outweigh the cost in order to preserve our liquidity.”