Park Hotels & Resorts Inc (PK) 2018 Q1 法說會逐字稿

Greetings, and welcome to Park Hotels & Resorts First Quarter 2018 Earnings Conference Call. (Operator Instructions) As a reminder, this conference is being recorded.

I would now like to turn the conference over to Ian Weissman, Senior Vice President, Corporate Strategy. Please go ahead.

Thank you, operator, and welcome, everyone, to the Park Hotels & Resorts First Quarter 2018 Earnings Call.

Before we begin, I'd like to remind everyone that many of the comments made today are considered forward-looking statements under our 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.

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

This morning, Tom Baltimore, our Chairman and Chief Executive Officer, will provide an update on capital activity during the quarter, a review of our first quarter 2018 operating results and an update to 2018 guidance. Sean Dell'Orto, our Chief Financial Officer, will provide further detail on our first quarter financial results, an update to our balance sheet and additional color on our value-add CapEx projects and our Caribe insurance claim. Rob Tanenbaum, our Executive Vice President of Asset Management, will be joining for Q&A. 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 announce another successful quarter. During which, we actively demonstrated significant progress toward our strategic goals. Specifically, during the quarter, we successfully executed on 2 of our corporate guiding principles of operational excellence and prudent capital allocation by delivering better-than-expected RevPAR and margin performance, while redeploying the capital from our noncore asset sales to buy back stock at a significant discount to net asset value. These achievements highlight our unwavering focus on creating shareholder value and delivering meaningful returns.

Turning to operational results. Q1 came in better than we had expected with comparable portfolio RevPAR increase of 1.1% and relatively flat margins, down just 10 basis points. Expense growth came in at just 0.5% during Q1, highlighting the positive impact the asset management team continues to have on margins despite rising labor cost and higher property taxes. In addition, reported adjusted EBITDA of $173.6 million came in above our internal expectations.

Results during the quarter were driven by the continued strength across our Florida properties, in Orlando in particular. This strength was largely offset by softness in Chicago and San Francisco as well as renovation disruption in New York, San Francisco and Santa Barbara. Excluding renovation displacement, our Q1 comparable RevPAR would have increased 2%.

Diving into our major markets. Our Orlando hotels continued their outperformance from 2017. Our Bonnet Creek complex benefited from strong group production and healthy transient demand, resulting in RevPAR growth of 7.2% and food and beverage revenue growth of nearly 15% due to strong banquets and catering revenues, which were up roughly 20% during the quarter. Hotel margins improved 365 basis points across the complex.

Staying in Florida, I'm happy to report that our 2 Key West properties have recovered ahead of schedule following the effects of Hurricane Irma. RevPAR was up a combined 3.3% for our 2 hotels, outperforming the Key West market by 220 basis points. We are encouraged by the fundamentals in Key West and are confident that the island will be back to normal visitation levels in the coming months.

Our New Orleans Riverside hotel also recorded healthy RevPAR growth of 3.2%, outperforming the market by 380 basis points and the comp set by 590 basis points despite some softness on the group side. We were particularly impressed with the increase in transient demand at our property and are encouraged by the changes implemented by the new leadership at this property.

In Hawaii, our Hilton Hawaiian Village hotel recorded a 0.9% RevPAR growth for the quarter. A softer group quarter and declines in Asian inbound wholesale business resulted in choppy demand, though the property team did a phenomenal job replacing this demand, resulting in an approximate 94% occupancy for quarter. Additionally, we continue to benefit from the increased airlift to Kona both from the east and west, resulting in a 9.5% increase in RevPAR at the Hilton Waikoloa resort during the first quarter. Our 2 Hawaiian teams continue to drive new business to their respective hotels, and we are further encouraged with this market as Southwest Airlines is scheduled to begin flying to the Hawaiian islands as early as late 2018.

In San Francisco, our 2 hotels recorded a combined RevPAR decline of 0.7%, which outperformed the San Francisco market by 160 basis points and the San Francisco market street track by 370 basis points. Our hotels were impacted by the weak February citywide convention performance and 1 group cancellation, but were fortunately able to shift the mix to partially offset group production with permanent and transient business. In addition, as previously noted, we decided to accelerate the final phase of the Hilton San Francisco renovation, which was completed in early February. The renovation negatively impacted the hotel's RevPAR results by 130 basis points during the quarter. Excluding this impact, Q1 RevPAR for the 2 combined hotels would have increased 90 basis points to 0.2% growth. With the Hilton San Francisco hotel rooms now fully renovated, we are expecting very strong group performance in the second quarter, up nearly 40%.

In New York, ongoing renovations at our Hilton Midtown hotel negatively impacted results by 280 basis points, with RevPAR growth for the quarter coming in at negative 1%. Although I am pleased to report that more than 80% of the rooms of the hotel have now been renovated, with the next and final phase set for Q1 2019. Despite weakness on the transient side, food and beverage revenues were up 4.5% during the quarter, while newly instituted urban fees translated into an incremental $1 million of income during Q1. As we look ahead over the balance of 2018, we expect a healthy recovery in fundamentals of this hotel, especially in Q2, given the 30% increase in group bookings expected in the quarter.

Finally, we had a soft quarter at our Hilton Chicago property, which experienced a RevPAR decline of 7.2% as we faced challenging year-over-year comparisons. The hotel was also impacted by the loss of contract business during the quarter. However, for the balance of the year, group pace is up 10.4%, and we expect stronger performance for the year for the remainder of 2018.

In terms of business mix, ongoing strength in leisure transient helped to offset weakness in corporate transient demand and a short-term challenge on the group side. As we expected, Q1 presented a challenge with group revenues falling 2.2%, driven by a 6% decline in corporate demand. Fortunately, much of this group weakness was offset by strong growth in permanent demand, which was up 17.6% in the quarter, fueled by our 2 San Francisco assets. More importantly, group trends improved as the group pace for the year increased to 3.6%, up 60 basis points from our last quarterly call; while our 2019 group pace is trending up 220 basis points to 6.8%. The increase in group pace for both years is a very encouraging trend for group fundamentals.

Our first quarter operating performance saw the benefits of our asset management initiatives. As previously mentioned, expense growth of just 50 basis points led to a better-than-expected margins for the quarter despite RevPAR growth of only 1.1%. The asset management team, along with our partners at Hilton, have done a terrific job at containing cost by further improving on rooms expenses, initiating additional food and beverage expense controls, consolidating management positions and continuing to refine the management teams throughout the portfolio.

On the revenues side, grouping up remains our primary focus over the next few years, with the team already making great progress. During Q1, our above-property group initiative added approximately 5,000 room nights, accounting for nearly $1 million of incremental revenues with the overall 2018 booking goal of $6 million, up threefold on the prior year. Additionally, other sources of income include resort fees, which were up 34% year-over-year; room upsells, up 17%; and parking revenue, up nearly 9% year-over-year; collectively accounting for an incremental $5 million of revenue in the quarter.

In summary, we are very pleased with our performance this quarter, and we feel very confident in our ability to realize 75 basis points of relative margin improvement in 2018.

Looking forward to the second quarter, we anticipate stronger performance stemming from a strong group quarter with group pace up in the high-teens across our portfolio, driven by Honolulu, San Francisco, Chicago, New York and Key West. In terms of the broader economic environment, we remain encouraged by the improved sentiment since the passage of tax reform late last year. With consumer confidence at a near 18-year high and economic indicators for nonresidential fixed investment and corporate profits estimated in the mid-single digits for 2018 and 2019, we feel optimistic that fundamentals will continue to fuel hotel demand across key segments.

Now I'd like to turn to our capital recycling efforts and the superb execution by our team over the last several months. As announced on our last call, we sold 12 noncore hotels in the first quarter with gross proceeds of approximately $379 million, an exercise which helped to meaningfully improve the overall quality of our portfolio. With portfolio RevPAR increasing $7 to $169, we determined that the best use of proceeds from our noncore asset sales was to take advantage of the dislocation in our stock, buying back 14 million shares from HNA as part of their secondary offering in early March at a significant discount to net asset value. This highly successful transaction was accretive to earnings, eliminated the perceived equity overhang on our stock, broadened our shareholder base and ultimately helped to narrow the valuation gap with our peers.

Continuing our success, I am pleased to report that we recently entered into a contract to sell the Hilton Berlin, a hotel we owned in a joint venture. Pricing was very strong, and with the sale expected to generate gross proceeds of roughly $367 million or a 19.8x 2017 EBITDA multiple, equating to a 4.5% cap rate before adjusting for CapEx requirements. Closing is expected to occur in the coming weeks with net proceeds to Park expected to be approximately $140 million, with Park likely to declare a special dividend in the aggregate range of $80 million to $90 million, subject to board approval. Following the sale, Park will have an ownership interest in just 4 hotels outside of the U.S., accounting for approximately 1% of EBITDA, down from 14 hotels and 5%, respectively, held at the beginning of the year.

I am incredibly proud of the results achieved by our team since we initiated marketing of our noncore portfolio last fall and our seamless execution on multiple sales. Given the strong institutional demand for lodging real estate and the success of our Phase 1 disposition program, we are currently initiating a second phase of potential sales, which could include another 5 to 8 noncore assets accounting for $30 million to $40 million of EBITDA. Our plan would be to recycle proceeds, utilizing a 1031 exchange to acquire properties with a focus on improving overall portfolio quality, while enhancing brand and operative diversity. We will provide more color in the coming months.

Turning to guidance. Given our better-than-expected results in Q1, coupled with slightly stronger-than-expected operating trends over the balance of the year, we are adjusting our guidance range for 2018. Specifically, we are increasing our full year earnings guidance with EBITDA increasing by $5 million at the midpoint to a new range of $710 million to $750 million, while our FFO guidance increases by $0.02 per share at the midpoint to a new range of $2.76 to $2.92 per share. Additionally, given what we expect to be a very strong second quarter, we are increasing our full year RevPAR guidance range by 50 basis points at the midpoint to a new range of 0.5% to 2.5%, while margins increase by 10 basis points at the midpoint to a new range of negative 70 basis points to a positive 30 basis points improvement.

With that, I will turn the call over to Sean.

Thank you, Tom. Looking at our results for the first quarter, we reported total revenues of $668 million and adjusted EBITDA of $174 million, while our adjusted FFO was $137 million or $0.65 per diluted share.

Turning to our core operating metrics. Our comparable portfolio produced a RevPAR of $166 or an increase of 1.1% during the first quarter. Our occupancy for the quarter was 78.5%, which was flat year-over-year, while our average daily rate was $211 or an increase of 1% versus the prior year. These top line trends resulted in hotel adjusted EBITDA of $159 million for our comparable portfolio, while our hotel adjusted EBITDA margin was 26.9% or just a 10 basis point decrease from the prior year.

With respect to CapEx, we invested $48 million in our hotels during the first quarter, including $30 million spent on guestrooms, lobbies and other guest-facing areas. As we recently announced, we completed the $14 million renovation, rebranding and repositioning of our Doubletree Fess Parker hotel located in Santa Barbara to the Hilton Santa Barbara Beachfront Resort. The scope of work entailed a remodel of the hotel's 360 guestrooms and bathrooms and a full renovation of the hotel's 40,000 square feet of meeting space, while further enhancing the arrival experience with entirely new flooring, soft seating and case goods throughout the lobby.

In February, we completed the final phase of guestroom renovations at the Hilton San Francisco Union Square. The $16 million project includes a full renovation of 407 existing guestrooms, while converting excess office space into 2 additional keys. And in New York, we recently wrapped up an additional phase of rooms renovation, which included 371 keys for a total spend of $26 million. We are excited about these upgrades, particularly the upbranding of our hotel in Santa Barbara, and believe these all lead to increasing competitiveness by our hotels in their respective markets.

Moving to our balance sheet. Park remains in very solid financial shape following the most recent asset sales and stock buyback, with nearly $270 million of cash as of quarter-end and $1 billion available under our revolving credit facility. Net leverage is currently at 3.9x, which is at the midpoint of our targeted range of 3 to 5x.

Turning to the dividend. On April 16, we paid our first quarter cash dividend of $0.43 per share. And as of last Friday, our board declared our second quarter dividend of $0.43 per share to be paid on July 16 to stockholders of record as of June 29. This dividend currently translates into an applied yield north of 6%, maintaining our position as one of the highest-yielding stocks in the lodging REIT sector.

Finally, we wanted to provide a brief update on our Caribe Hilton hotel, which is undergoing an extensive renovation following last fall's hurricane. First and foremost, we have assembled a dedicated and talented team who are working diligently on the restoration of this iconic asset, and we remain confident that the hotel will be ready for a soft opening by December of 2018.

On the insurance claim front, we are still working to finalize the formal submission. However, based on the work completed to date, we remain confident that our insurance coverage is sufficient to cover the vast majority of the total cost of restoration and business interruption in excess of our $11 million deductible. We continue to work with our insurance representatives and other advisers to process the claim in an efficient and timely manner.

For modeling purposes, we wanted to note that the full year EBITDA projected for the property pre-Maria was $8 million. To date, we have not received business interruption proceeds. However, we expect to recover a portion in Q2 with the balance of total BI claim expected to be received over the next 12 months. Our 2018 guidance still assumes receipt of BI recoveries that replaced the lost counter year EBITDA of $8 million, a portion of which is carryover from 2018.

That concludes our prepared remarks. And at this point, operator, we'd like to open it up for questions. (Operator Instructions)

Your first question comes from the line of Rich Hightower with Evercore ISI.

So I would like a little more color, if you can give it, on the sort of second phase of asset sales, which is sort of news to the market here this morning. Just any further color on the characteristics of those assets? I know you gave out the EBITDA contribution. And then secondarily, I -- as you think about sources of funds, obviously, the 1031 proceeds would be included there. But how do you feel about your cost of equity capital now that a lot of the noise is out of the way. The stock has performed well post-HNA, and you guys are in a better position than you were 90 days ago. Just how do we think about all the different moving parts there?

All great questions, Rich. I'd say on the last question regarding how do we feel about our stock price through cost of equity, it's certainly better today than it was 90 days ago. I would still say that I'm a net buyer of our stock than I am a seller of our stock. Look, we are laser-focused on continuing to demonstrate, really, those core values that we've talked about time and time again. And that is, obviously, operational excellence, being a prudent capital allocator, prudently managing our balance sheet. Obviously, as you know, we've also talked about our internal growth strategy, recycling capital on our live projects, improving margins and of course, grouping up. And we think by continuing to execute that, our hope and expectation is that we're going to continue to do and improve our cost of equity, that our multiple will move up and allow us to go more aggressively on offense. So with that sort of backdrop.

And if you look at our portfolio, really, the top 25 assets account for really north of 85% of our EBITDA, plus or minus. So if you look at the success of the first phase, and again, the 12 that we sold for $379 million, we effectively used that to anchor the HNA secondary to buy back 14 million shares at $24.85. I think by all accounts, it was a seamless, flawless execution. It really benefited the stock from that standpoint. It also improved the overall metrics of the portfolio.

If we look at the second phase, again, we're looking at another 5-day assets, RevPAR goes approximately $112. They're 33% to 35% below the portfolio average. Margins are much lower and also capital-intensive. So in our view, the prudent case here, we need to continue to market and sell those, use those proceeds most effectively, they're mostly U.S. assets, in a 1031, so that we could use the opportunity to both brand -- diversify both by brand and by operator. I mean, we certainly like they're natural families of brands; both the Marriott and the Hyatt come to mind, among others. We certainly want to grow and expand our relationship with, and we think that's important. And fairly, over time, we want to diversify the platforms. So you'll see that more work and a lot of effort towards that in the coming months, and with our hope and expectation that we can add another flag to the portfolio here in calendar year 2018.

Okay, great. That's helpful color, Tom. My second question here since I get 2. Just given the size of the asset and the contribution to the pie, to talk about Hawaiian Village really quickly, how long will the runway, so to speak, be on the airlift changes in Hawaii that sort of impacted that asset in the first quarter? When do you sort of expect that effect to anniversary?

You're talking about Waikoloa? Are you talking about Hilton Hawaiian Village?

No, I'm talking Hawaiian Village. The one that was negatively impacted, yes.

Yes, I mean, I -- listen, Hilton Hawaiian Village is a -- in my humble opinion, I think, one of the most iconic assets in all of the lodging REIT space. When you think about it, it's still running, I think, 94% occupancy in the first quarter. If you look historically, it runs mid-90s. 5 towers, nearly 3,000 guestrooms, 145,000 square feet of retail and 96,000 square feet of meeting space. The tower this year will celebrate, I think, its 50th anniversary. We're looking at -- there's an out parcel there we're looking at getting control of, in addition to looking at over time, continuing the master plan. It's just irreplaceable from that standpoint. So really, the isolated issue was just first quarter. The team is working aggressively to continue to build our Asian wholesale business, and we're confident we'll be able to replace that. If you look at the group pace in second quarter, I believe it's up 14%. So we, without question, believe will be back to hitting the ground aggressively in strong performance. We'll probably finish the year in low- to mid-single-digit RevPAR growth. I feel great about that asset. And I don't know of an asset that contributes more EBITDA. The fact that size of that is, in some cases, is the size of some of our peers. So I'll put it in that perspective.

Our next question is from the line of Smedes Rose with Citi.

It looks like Hilton is going to follow Marriott in reducing commissions paid to third-party intermediaries for group bookings. Could you talk about what percent of your group bookings come through these third parties now?

I would say, approximately -- Rob, can you correct me? But I think, approximately, group commissions are about 45%. I think, comparable to many of our peers, we think this move by both Hilton and Marriott is prudent. It's an appropriate -- when you look at the acquisition cost across the business and across the industry, we've got to continue waves. It's an industry that continue to lower our cost of acquisition. So we thought this was a prudent and necessary and a wise move, and we wholeheartedly support it.

Yes, it makes sense. The other thing I just sort of want to ask you on the special dividends from the asset sale in Berlin. Is the cash dividend a requirement? Or do you -- would you have a choice or an option of doing a 1031 exchange with that? Or is it because it's in Europe, or some of the rules that it would be a cash distribution?

There's a couple of things. It's in Europe, and it's also a stock sale. And so we've framed it. We've studied it carefully, both with our internal and external advisers. And we estimate again that a special dividend is the most appropriate course, again in that aggregate $80 million to $90 million range, subject, of course, to board approval. And again, I think it shows further evidence that when you think about the 12 assets that we sold and how efficiently we went through and insulate it from a tax standpoint there and minimize any tax payments. And we used those proceeds to, again, buy back stock. We see this as a prudent allocation. If we think about an asset, we only own 40% of it. It shrinks, really, our international portfolio, which we got a desire to do. And it returns capital. And I think under a -- it hasn't closed yet, but under very, very attractive pricing to the benefit of shareholders.

The next question comes from the line of Anthony Powell with Barclays.

Tom, I think you mentioned some corporate transient weakness in your prepared remarks. Most of your other peers have talked about stronger-than-expected corporate transients. So was your corporate business impacted by some property-specific issues? And what's your view on that for the rest of the year?

Yes. I think it's really isolated, Anthony. And like many of our peers, look, we are encouraged when you think about deregulation, when you think about tax reform. If you look at unemployment, now down to probably an 18-year low. Consumer confidence up to perhaps an 18-year high. So I think there's a backdrop fiscal spending and improving about $300 billion, I think, over the next 2 years. So we see all of that be incredibly positive for the industry and for our portfolio in particular.

A couple of things that I would note is, as you know, as we talked about our internal growth strategy, we have been laser-focused on grouping up. If you look at this portfolio, Park portfolio, our top 10 assets are 65% to 70% of our EBITDA, and we've got 10 assets with over 125,000 square feet of meeting space. We concluded, with the big work of our asset management team and Rob Tanenbaum and really in our partners at Hilton, that it makes most sense to group up. So with that, we made a commitment to grow our top 25 hotels from 31% to up to about 35%. And if you look across the portfolio, we're seeing evidence of that. Even in first quarter, our group was 33%, and transient about 60% of our overall portfolio. We also grew our contract business by almost 18%. Our group pace for 2018 is up nearly 3.6%. For '19, again approaching 7%. But then if you look at the second quarter, we're looking at a very strong quarter. Our group pace is up nearly 16%. We expect RevPAR will probably be in the mid-single-digit range. But when you look at San Francisco, group up -- group pace, up 40%. New York City, up 33%. Chicago, Hawaii, Key West, all up double digit. So we're very, very encouraged. Transient's still flat to slightly negative. But in part, that's because we're so focused on grouping up. We're confident that seeing some evidence of improving transient, unlike many of our peers, and expect that, that's going to continue to benefit of the intermediate and long term. But by anchoring our portfolio with strong group and contract business will really allow us to yield our business better, grow the other ancillary forms of revenue, and most importantly, margins and cash flow. So we're encouraged that we're making progress based on all the things that we've said, all the initiatives that we put in place.

Got it. And you've been pretty vocal about your desire to consolidate the lodging REIT sector. But you said in the past that you maybe need your multiple to increase before you would. Your answer to Rich's question implies that you still want a higher multiple. But if you could, just comment on your approach to M&As generally right now.

I wouldn't be here if I didn't believe passionately that Park's platform lays a great opportunity for long-term growth for all the stakeholders, for our associates, our investors. And I think that the opportunity to be a participant in what I hope will be a consolidation of our segment. It's highly fragmented. And in the appropriate time, we certainly want to be part of that discussion, and our multiple and our currency is not in a position today that really allows us to take advantage. We're working hard to improve that. And I think if you look carefully at our performance over the last year, it show -- you'll see the evidence that we're doing everything we said we would do.

Our next question is from the line of Robin Farley with UBS.

This is actually [Artina] in for Robin. Could you maybe talk about flow-through on a full year basis in terms of EBITDA? RevPAR is going up 50 basis points, and it seems like margins are going up as well. But EBITDA went up by $5 million. And we would have thought that flow-through would have been a little bit higher. Is it getting harder to hold margin despite your RevPAR rate being higher than last year?

So let me provide some opening comments, and turn it over to Rob Tanenbaum. I'm really proud of our performance in the first quarter. When you think about it again, we're up RevPAR 1.1%. You have all those renovations, kept the lid really on expense growth, only up about 0.5%. You have our asset management team in partnership with our operating partners that are building a lot of credit. I think that's very strong performance, all things considered. And we're confident, as we've demonstrated last year, in margins. And we're confident that, on a relative basis, we'll be able to deliver the 75 basis points of incremental margin improvement this year as well. So Rob, anything you want to add?

Thanks, Tom. I would say that the -- from a GOP perspective, our flow-through was 83.5% on EBITDA revenues during the quarter, which is phenomenal. I give credit to our team working and working in partnership with Hilton. We spend a great deal of time focused on our revenue management strategies and looking at new ways to achieve success. And I'll give you one great example. We've recently updated our rooms categories at our -- at the Parc 55 Hotel. We have 83 rooms that were originally standard entry-level rooms for us. And we walk into the property, the team recognize that we can convert that to a premium-level room with a $30 to $40 rate premium associated with that. And if you think about that on a multiple basis, the run rate is a significant opportunity. For the -- as we look through the portfolio day in and day out, working in partnership with Hilton, we believe it's a great opportunity for us to further improve our margin.

That's helpful. One of your competitors yesterday talked about flat margins with 2% RevPAR growth. As you broadly look at group business and transient trends today and kind of look at 2019 and everything you're doing on the cost-cutting front and increasing group business as a percentage of mix, do you feel that's something that you could echo, that you could in fact, have a flat margin with 2% RevPAR next year?

I would answer that I think probably a RevPAR in the 2% to 2.5% range. That, I think, that is achievable. But there are a lot of variables that come into play there. I'll leave it at that. But I think that range and given the hard work, and again, I think, the first quarter is a great illustration of the progress we made last year. And you're laser-focused again on that internal growth story, and margin is an important part of that.

Our next question is from the line of Floris van Dijkum with Boenning.

Tom, you talked a little bit about the size and magnitude of Hawaiian Village. And if your stock continues to trade at a discount, would you consider potentially JV-ing that asset to raise capital to diversify away from Hilton?

It's a great question. Look, we're really blessed when you think about the iconic nature of this portfolio as I think it provides a lot of optionality for us. There are assets that could make sense to put into a joint venture that provide a growth capital at very favorable terms, while allowing us to retain control. That's certainly something that will be on the table of options that we explore. Right now, more than anything else, it's laser-focused again on an internal growth story, continuing to recycle capital, continuing to find ways to activate the real estate through our return on investment opportunities than what we did at Santa Barbara's a great example of that. What we're planning to do at Bonnet Creek, add additional meeting space is another example. All the margin initiatives that both Rob and I talked about, and again, continuing to group up. But listen, all options are on the table to create shareholder value. What you saw and how we so efficiently and effectively leveraged the rights that we had through HNA, recycle that capital and buy back stock at very attractive pricing is an example of that. So this team is very seasoned, very skilled, and we're making sure that we're capital allocators. And we'll not be launching and raising equity at this price. I'm a buyer of the stock at this price, I'm not a seller of it

Tom, one follow-up, I guess. Maybe talk a bit more -- mentioned the -- I believe you have a specialist sales group. And with any of the impact of pursuing group sales, how is that bearing fruit? And what do you think the impact is going to be going forward?

Let me first give credit to Rob and team. We have been working in partnership with Hilton, and credit to Rob and our Asset Management team on being proactive on the Hilton concept.

Right, Floris. So the Hilton concept, we added 4 business development managers on June 5, 2017. Last year, the team generated over $2 million of incremental business for us. In this quarter alone, Q1, we had almost 5,000 rooms at almost $1 million. Our goal for 2018 for this particular group is $6 million, which is threefold of what we had in 2017.

Our next question is from the line of Shaun Kelley with Bank of America.

I just wanted to ask, I think in the prepared remarks, you mentioned a little bit about some of the nonroom revenue initiatives you guys have underway. Specifically, I think you talked a little bit about parking and urban amenity fee. Could you talk a little bit more about that. And specifically, sort of what inning or what stage you're at rolling out from those initiatives across the portfolio?

Sure, Shaun. So we continue to maximize our resorts, the opportunities, looking at how we're priced in the market and the amenities that we're providing for those fees. So we're looking -- we're continually moving those fees up, and we've been very successful in doing that. Throughout the portfolio, we were also renegotiating our parking contracts. For example, at Bonnet Creek, we had the new parking arrangement start on May 1, which will yield quite a great return for us. We're renegotiating it, and terminating previous operator with the new operator. We're looking at our retail leases. We have a director of retail, a senior director of retail leasing who does a phenomenal job driving new revenues for us. It could be as small as a rooftop antenna or a car rental agreement at desk. But everything that we're working through is through the hotels. We feel like we're in the middle innings here. We still have additional room to grow. And this -- in fact, this quarter alone, our ancillary revenue grew 12% or $5 million.

I'll also point out that, Shaun. Shaun, I would point out, as you know, look, this team has been together now. This is the second year since I rejoined the Hilton to spin this out. But really, 14, 15 months as a new, independent public company, and already showing great progress. Again, 40 basis points last year, about $12.5 million of various initiatives. We've got another $20 million, which Rob just identified a bunch of those, and that was 75 basis points for this year. So we are really acting on all of the comments. And I know

(technical difficulty)

leaves we'd do about those. All of those initiatives have been showing progress against each and every one of them.

And are these initiatives -- I mean, the types of things you're talking about, especially leases and parking fees. I would assume that these are probably pretty high margin in terms of both flow-through and overall? Are they enough to impact kind of overall company-wide margin at this stage and can they be?

Yes, Shaun. Absolutely. From a margin perspective, it's a very high margin proposition for us. And as we go and work through each and every hotel, one of the items that we just recently found late last year at Key West was through removing some bike racks, we found additional 21 parking spaces available to us at our Casa Marina resort. And if you can't take in the run rate on that, that's a huge opportunity for us.

Thank you. Ladies and gentlemen, we've reached the end of the question-and-answer session. And I would now like to turn the call back to Mr. Tom Baltimore for closing remarks.

We thank all of you for taking time today and look forward to seeing many of you in the coming weeks, and certainly see you all in Nareit. Safe travel. Happy spring.

This concludes today's conference. You may disconnect your lines at this time. Thank you for your participation.