On Jan. 4, Hilton’s new REIT, Park Hotels & Resorts, officially started trading. As the second largest lodging REIT ever at launch—boasting 67 hotels and 35,000 rooms—Hilton had to ensure that it was in good hands right from the very beginning. That is why the company brought in Tom Baltimore as CEO. This is not Baltimore’s first job at Hilton; he worked for the company back in the ’90s, before he left to launch RLJ Lodging Trust with Bob Johnson in 2000. He served as CEO of RLJ for 16 years, but when Hilton came knocking, Baltimore knew he had an amazing opportunity on his hands. Less than two weeks after Park’s official launch, Baltimore talked to LODGING about what he expects to achieve at the new REIT.
What steps did you take to fulfill Hilton’s vision for Park Hotels & Resorts? I know priority number one was really building out a seasoned and experienced team. No man or woman succeeds alone. I make that statement often, and I believe in it passionately. It’s important to have the right team, the right skill set, and to really have what I call the alignment of interest and shared values. So the key is finding the perfect balance. We launched with about 75 professionals. Probably a third of the team consists of people we lifted from Hilton. I set my sights on professionals who had experience, knowledge, and great reputations, but who also shared this vision of putting together a best-in-class team that could work toward the goal of making Park the preeminent lodging REIT.
What’s the feeling now that you’ve officially launched? I couldn’t be prouder. We had the privilege of ringing the opening bell at the New York Stock Exchange on [Jan. 11]. I took approximately 50 people with me, including members of our management team and their families. We had a wonderful celebration. And, overall, the team is gelling very nicely. The communication and the chemistry is exceeding my expectations. It’s a strong team with a lot of experience not only in lodging, but in public REITs, and also a lot of experience with public companies.
How are you measuring success in these early days? We’re working hard to deliver operational excellence and top-of-the-line performance, particularly the first few quarters. It’s important that we have strong results to continue to build credibility with our external stakeholders. And, because we have to distribute at least 90 percent of our taxable income and dividends, we have to prove to investors that we’re going to be a prudent allocator of capital. We’re not going to be raising equity any time soon. If you don’t do the first, meaning perform, then the second of being able to raise capital becomes much more difficult.
What sets Park’s portfolio apart from the competition? It all ties back to our assets. Park has an iconic portfolio, and our top 10 assets account for more than 60 percent of our EBITDA. These are assets like the Hilton Hawaiian Village, the New York Hilton, the Chicago Hilton, the New Orleans Hilton Riverside, and the San Francisco Hilton, irreplaceable assets. When you look at that kind of portfolio, you start with a significant heft.
How are you leveraging that heft? It represents a huge competitive advantage. So I set out to really study those assets. And by doing so, I realized that there are four levers of growth for us. The first is that we have embedded return on investment opportunities within the portfolio. The second is the opportunity for single asset acquisitions. We’re going to be focused on assets of scale—assets with a purchase price of more than $100 million. Our strategy is to continue to assemble a portfolio of upper-upscale and luxury assets in top 25 markets and premium resort destinations. Third, we think over time we’ll be exploring M&A opportunities. Fourth, the opportunity to expand both brand and operator diversification. We will be looking to add other brand families to our portfolio. Using those four levers, I believe we’ll be able to grow this business significantly.