Park Hotels & Resorts Inc. Reports Second Quarter 2023 Results


TYSONS, Va., Aug. 02, 2023 (GLOBE NEWSWIRE) -- Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE: PK) today announced results for the second quarter ended June 30, 2023 and provided an operational update.

Selected Statistical and Financial Information

References to Park's "Current" hotels and "Current" financial metrics include all 41 consolidated hotels owned as of June 30, 2023, including the 1,921-room Hilton San Francisco Union Square and 1,024-room Parc 55 San Francisco – a Hilton Hotel (collectively, the "Hilton San Francisco Hotels"). References to Park's "Comparable" hotels and "Comparable" financial metrics exclude the Hilton San Francisco Hotels.

(unaudited, amounts in millions, except RevPAR, ADR, Total RevPAR and per share data)

 Three Months Ended June 30,  Six Months Ended June 30,  
 2023  2022  Change(1)  2023  2022  Change(1)  
Current Hotels:                  
Current RevPAR$183.46  $174.20   5.3% $171.33  $145.54   17.7% 
Current Occupancy 74.4%  70.5%  3.9%pts 69.7%  60.7%  9.0%pts
Current ADR$246.45  $247.05   (0.2)% $245.94  $239.95   2.5% 
                   
Current Total RevPAR$287.15  $273.43   5.0% $274.43  $230.32   19.2% 
                   
Comparable Hotels:                  
Comparable RevPAR$191.03  $181.45   5.3% $177.05  $154.32   14.7% 
Comparable Occupancy 76.9%  73.6%  3.3%pts 72.2%  64.4%  7.8%pts
Comparable ADR$248.33  $246.31   0.8% $245.38  $239.81   2.3% 
                   
Comparable Total RevPAR$301.74  $287.38   5.0% $286.81  $245.75   16.7% 
                   
Net (loss) income$(146) $154   (194.8)% $(113) $98   (215.3)% 
Net (loss) income attributable to stockholders$(150) $150   (200.0)% $(117) $93   (225.8)% 
                   
Operating (loss) income$(98) $119   (182.3)% $(18) $120   (114.7)% 
Operating (loss) income margin (13.7)%  17.1%  (3,080)bps (1.3)%  10.2%  (1,150)bps
                   
Current Hotel Adjusted EBITDA$191  $202   (5.7)% $341  $285   19.6% 
Current Hotel Adjusted EBITDA margin 27.7%  30.8%  (310)bps 26.0%  25.9%  10 bps
                   
Comparable Hotel Adjusted EBITDA$192  $199   (3.6)% $337  $294   14.6% 
Comparable Hotel Adjusted EBITDA margin 29.9%  32.6%  (270)bps 27.7%  28.2%  (50)bps
                   
Adjusted EBITDA$187  $207   (9.7)% $333  $289   15.2% 
Adjusted FFO attributable to stockholders$129  $139   (7.2)% $221  $157   40.8% 
                   
(Loss) earnings per share – Diluted(1)$(0.70) $0.66   (206.1)% $(0.54) $0.40   (235.0)% 
Adjusted FFO per share – Diluted(1)$0.60  $0.61   (1.6)% $1.01  $0.68   48.5% 
Weighted average shares outstanding – Diluted 215   228   (13)  218   232   (14) 


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(1)Amounts are calculated based on unrounded numbers.


Thomas J. Baltimore, Jr., Chairman and Chief Executive Officer, stated, "I am very pleased by our second quarter results as we continue to benefit from ongoing improvements across our portfolio, especially in key urban and resort markets and the continued acceleration of group business. Comparable RevPAR for the second quarter of 2023 increased an impressive 5% compared to the second quarter of 2022, with Comparable Occupancy increasing 330 basis points and Comparable ADR increasing nearly 1% despite facing a difficult year-over-year comparison. Highlights during the quarter include a 14% increase in Comparable RevPAR across our urban portfolio driven by the New York Hilton Midtown where RevPAR increased over 26% and our Chicago and Washington D.C. hotels where RevPAR increased 23%, coupled with continued exceptional performance at our two Hawaii hotels with a RevPAR increase nearly 11% compared to the second quarter of 2022. Group performance also continues to accelerate, with Comparable group revenues for the second quarter of 2023 returning to 92% of 2019 levels, and forward bookings continue to increase, with 2024 Comparable Group Revenue Pace up 21% compared to the same time last year.

"During the quarter we continued to execute important strategic capital allocation initiatives, including the commencement of a comprehensive renovation and ROI repositioning of the Casa Marina Key West, Curio Collection, and the repayment of the $75 million W Chicago – City Center mortgage loan. Further, we made the difficult, but necessary, decision to cease making payments toward the $725 million non-recourse CMBS loan secured by our two Hilton San Francisco Hotels, a first step towards removing the hotels from our portfolio, which we believe is in the best interest of shareholders as it will meaningfully reduce our exposure to the city and strengthen our balance sheet considerably. We remain laser-focused on creating long-term value for our shareholders, and with over $1.7 billion of liquidity, we are better positioned to execute on our strategic initiatives, including reshaping our portfolio, investing in strategic ROI projects and opportunistically repurchasing stock and/or acquiring assets."

Additional Highlights

  • In June 2023, ceased making debt service payments toward the $725 million non-recourse CMBS loan, which is scheduled to mature in November 2023 and secured by Park's two Hilton San Francisco Hotels ("SF Mortgage Loan"). As such, Park has received a notice of default from the servicer. Park is currently working in good faith with the servicer to determine the most effective path forward, which is expected to result in ultimate removal of the Hilton San Francisco Hotels from Park's portfolio;
  • In June 2023, fully repaid the $75 million mortgage loan secured by the 403-room W Chicago – City Center;
  • In June 2023, the ground lessor terminated the ground lease for the 182-room Embassy Suites Phoenix Airport hotel prior to its scheduled expiration in November 2031. Park received an early termination fee of approximately $4 million, and the hotel was removed from Park's portfolio upon termination. The Embassy Suites Phoenix Airport hotel contributed less than 0.2% of Park's 2022 Current Hotel Adjusted EBITDA; and
  • In May 2023, suspended operations at the 311-room Casa Marina Key West, Curio Collection, for a full-scale renovation of its guest rooms, public spaces and certain hotel infrastructure, which is expected to be completed in the fourth quarter of 2023.

Operational Update

Changes in Park's 2023 Current ADR, Occupancy and RevPAR compared to the same periods in 2022, and 2023 Current Occupancy were as follows:

 Current ADR  Current Occupancy  Current RevPAR   Current Occupancy 
 2023 vs. 2022  2023 vs. 2022  2023 vs. 2022   2023 
Q1 2023 6.7%  14.1%pts 36.5%   64.8%
             
April 2023 2.4   4.3   8.7    73.9 
May 2023 0.7   6.1   9.8    73.2 
June 2023 (3.2)  1.3   (1.5)   76.3 
Q2 2023 (0.2)  3.9   5.3    74.4 
             
Preliminary July 2023 (3.6)  3.2   0.7    75.9 


Changes in Park's 2023 Current ADR, Occupancy and RevPAR for the three and six months ended June 30, 2023 compared to the same periods in 2022, and 2023 Current Occupancy for the three and six months ended June 30, 2023 by hotel type were as follows:

 Three Months Ended June 30, 
 Current ADR  Current Occupancy  Current RevPAR   Current Occupancy 
 2023 vs. 2022  2023 vs. 2022  2023 vs. 2022   2023 
Resort (2.7)%  1.0%pts (1.5)%   79.8%
Urban (0.1)  7.9   12.5    70.9 
Airport 6.1   (1.9)  3.5    76.1 
Suburban 3.7   2.7   7.8    71.0 
All Types (0.2)  3.9   5.3    74.4 


 Six Months Ended June 30, 
 Current ADR  Current Occupancy  Current RevPAR   Current Occupancy 
 2023 vs. 2022  2023 vs. 2022  2023 vs. 2022   2023 
Resort (1.7)%  5.5%pts 5.5%   80.0%
Urban 6.0   13.1   33.7    63.0 
Airport 9.9   3.3   15.1    71.9 
Suburban 8.2   9.8   28.1    63.1 
All Types 2.5   9.0   17.7    69.7 


The Current Rooms Revenue mix for the three and six months ended June 30, 2023 and 2022 were as follows:

 Three Months Ended June 30,  Six Months Ended June 30, 
 2023  2022  Change  2023  2022  Change 
Group 29.9%  29.0%  0.9%  31.3%  27.7%  3.6%
Transient 62.7   64.6   (1.9)  61.3   65.8   (4.5)
Contract 5.2   4.1   1.1   5.2   4.4   0.8 
Other 2.2   2.3   (0.1)  2.2   2.1   0.1 


Park continued to see improvements in demand as business travel accelerated and group demand continued to return to its urban hotels. During the second quarter of 2023, Comparable group bookings for 2023 increased by $33 million, or over 150,000 room nights, as compared to the end of March 2023, of which $9 million was recognized during the second quarter. As of the end of June 2023, Comparable group bookings for 2023 were 85% of what 2019 group bookings were as of the end of June 2019, an increase of over 160 basis points from the end of March 2023, with average Comparable group rates exceeding 2019 average group rates by nearly 7% for the same time period. In addition, Comparable Group Revenue Pace for 2023, as of the end of June 2023, was 91% as compared to 2019 as of the end of June 2019.

Results for Park's Current hotels in each of the Company’s key markets are as follows:

(unaudited)     Current ADR  Current Occupancy Current RevPAR 
 Hotels Rooms  2Q23 2Q22 Change(1)  2Q23 2Q22 Change 2Q23 2Q22 Change(1) 
Hawaii2  3,507  $300.71 $290.53  3.5%  93.1% 87.0% 6.1%pts $280.11 $253.01  10.7%
San Francisco4  3,605   229.92  260.48  (11.7)  57.7  50.9  6.8    132.55  132.52  0.0 
Orlando3  2,325   231.00  236.42  (2.3)  68.4  67.7  0.7    158.12  160.25  (1.3)
New Orleans1  1,622   214.74  218.12  (1.5)  73.3  69.2  4.1    157.46  151.07  4.2 
Boston3  1,536   264.23  244.62  8.0   82.4  80.5  1.9    217.79  197.01  10.5 
New York1  1,878   308.51  306.08  0.8   86.8  69.2  17.6    267.78  211.77  26.4 
Southern California5  1,773   239.42  252.82  (5.3)  77.8  78.0  (0.2)   186.29  197.17  (5.5)
Chicago3  2,467   248.86  231.18  7.6   70.3  61.3  9.0    174.93  141.81  23.4 
Key West2  461   516.68  544.96  (5.2)  42.8  74.9  (32.1)   221.08  408.25  (45.8)
Denver1  613   209.98  196.11  7.1   75.0  71.9  3.1    157.53  141.02  11.7 
Miami1  393   245.71  290.89  (15.5)  81.6  78.9  2.7    200.52  229.49  (12.6)
Washington, D.C.2  1,085   197.56  173.70  13.7   80.8  74.8  6.0    159.66  130.00  22.8 
Seattle2  1,246   167.61  163.56  2.5   69.8  74.5  (4.7)   117.06  121.90  (4.0)
Other11  3,862   201.89  202.23  (0.2)  71.8  71.0  0.8    144.90  143.44  1.0 
All Markets41  26,373  $246.45 $247.05  (0.2)%  74.4% 70.5% 3.9%pts $183.46 $174.20  5.3%


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(1)Calculated based on unrounded numbers.


San Francisco Market Update

While Park continues its discussions with the servicer of the SF Mortgage Loan, the Hilton San Francisco Hotels remain in its portfolio. Park expects that the two Hilton San Francisco Hotels will ultimately be removed from its portfolio. Therefore, Park is providing the below Comparable results, which exclude these hotels.

Results for Park's Comparable hotels, which excludes the two Hilton San Francisco Hotels, compared to its Current hotels for the three and six months ended June 30, 2023 are as follows:

 Three Months Ended June 30, 2023  Six Months Ended June 30, 2023  
 Comparable Hotels  Current Hotels  Difference(1)  Comparable Hotels  Current Hotels  Difference(1)  
RevPAR$191.03  $183.46   4.1% $177.05  $171.33   3.3% 
Occupancy 76.9%  74.4%  2.5%pts 72.2%  69.7%  2.5%pts
ADR$248.33  $246.45   0.8% $245.38  $245.94   (0.2)% 
Hotel Adjusted EBITDA margin 29.9%  27.7%  220 bps 27.7%  26.0%  170 bps


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(1)Calculated based on unrounded numbers.


Results for Park's Comparable urban hotels, which excludes the two Hilton San Francisco Hotels, compared to its Current urban hotels for the three and six months ended June 30, 2023 are as follows:

 Three Months Ended June 30, 2023  Six Months Ended June 30, 2023  
 Comparable Urban
Hotels
  Current Urban
Hotels
  Difference(1)  Comparable Urban
Hotels
  Current Urban
Hotels
  Difference(1)  
RevPAR$186.82  $171.58   8.9% $156.11  $148.86   4.9% 
Occupancy 76.0%  70.9%  5.1%pts 67.2%  63.0%  4.2%pts
ADR$245.98  $242.17   1.6% $232.31  $236.12   (1.6)% 
Hotel Adjusted EBITDA margin 26.0%  21.3%  470 bps 18.8%  16.0%  280 bps


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(1)Calculated based on unrounded numbers.


Monthly RevPAR results for Park's Comparable hotels, which excludes the two Hilton San Francisco Hotels, compared to its Current hotels are as follows:

 2023 Comparable Hotels  2022 Comparable Hotels  2023 vs 2022(1)  2023
Current Hotels
  2022
Current Hotels
  2023 vs 2022(1)  2023 Comparable vs Current(1) 
April$187.76  $176.55   6.4% $183.04  $168.31   8.7%  2.6%
May 184.59   169.83   8.7   176.08   160.30   9.8   4.8 
June 200.97   198.34   1.3   191.51   194.45   (1.5)  4.9 
Q2 191.03   181.45   5.3   183.46   174.20   5.3   4.1 
                     
July(2) 192.02   191.56   0.2   185.12   183.83   0.7   3.7 


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(1)Calculated based on unrounded numbers.
(2)July 2023 Comparable and Current RevPAR are preliminary.


Balance Sheet and Liquidity

As of June 30, 2023, Park's Net Debt was $3.8 billion. In June 2023, Park fully repaid the $75 million mortgage loan secured by the W Chicago – City Center. Additionally, in June 2023, Park ceased making debt service payments toward the $725 million SF Mortgage Loan, which is scheduled to mature in November 2023. As such, Park has received a notice of default from the servicer. Park is currently working in good faith with the SF Mortgage Loan's servicer to determine the most effective path forward, which is expected to result in ultimate removal of the Hilton San Francisco Hotels from Park's portfolio. The disposal of the Hilton San Francisco Hotels is expected to trigger a required additional distribution to stockholders of approximately $162 million (the midpoint of the anticipated $150 million to $175 million dividend amount), resulting in Net Debt excluding the SF Mortgage Loan as of June 30, 2023 of $3.3 billion. Excluding the SF Mortgage Loan, Park has no other significant maturities until June 2025.

As of June 30, 2023, the weighted average maturity of Park's consolidated debt, excluding the SF Mortgage Loan, is 3.9 years. Park's current liquidity is over $1.7 billion, including approximately $950 million of available capacity under the Company's revolving credit facility ("Revolver").

Park had the following debt outstanding as of June 30, 2023:

(unaudited, dollars in millions)     
Debt Collateral Interest Rate Maturity Date As of June 30, 2023 
Fixed Rate Debt         
Mortgage loan Hilton Denver City Center 4.90% December 2023(1) $55 
Mortgage loan Hilton San Francisco Union Square, Parc 55 San Francisco – a Hilton Hotel 7.11%(2) November 2023  725 
Mortgage loan Hyatt Regency Boston 4.25% July 2026  129 
Mortgage loan DoubleTree Hotel Spokane City Center 3.62% July 2026  14 
Mortgage loan Hilton Hawaiian Village Beach Resort 4.20% November 2026  1,275 
Mortgage loan Hilton Santa Barbara Beachfront Resort 4.17% December 2026  161 
Mortgage loan DoubleTree Hotel Ontario Airport 5.37% May 2027  30 
2025 Senior Notes   7.50% June 2025  650 
2028 Senior Notes   5.88% October 2028  725 
2029 Senior Notes   4.88% May 2029  750 
Total Fixed Rate Debt   5.54%(3)    4,514 
          
Variable Rate Debt         
Revolver(4) Unsecured SOFR + 2.10% December 2026   
Total Variable Rate Debt   7.26%     
          
Add: unamortized premium        1 
Less: unamortized deferred financing costs and discount      (25)
Total Debt(5)   5.54%(3)   $4,490 


________________________________________
(1)The loan matures in August 2042 but is callable by the lender with six months of notice. As of June 30, 2023, Park had not received notice from the lender.
(2)In June 2023, Park ceased making debt service payments toward the SF Mortgage Loan, and Park has received a notice of default. The stated rate is 4.11%, however, beginning June 1, 2023, the default interest rate on the loan is 7.11%. Additionally, beginning June 1, 2023, the loan accrues a monthly late payment administrative fee of 3% of the monthly amount due. As a result, the lenders may seek any and all remedies legally available, including foreclosure. Park is currently working in good faith with the SF Mortgage Loan's servicer to determine the most effective path forward, which is expected to result in ultimate removal of these hotels from Park's portfolio.
(3)Calculated on a weighted average basis.
(4)Park has approximately $950 million of available capacity under the Revolver.
(5)Excludes $169 million of Park’s share of debt of its unconsolidated joint ventures.


Capital Investments

During the second quarter of 2023, Park spent $70 million on capital improvements at its hotels. Park expects to invest approximately $340 million to $365 million in capital improvements during 2023, consisting of $110 million to $115 million on return on investment projects and $230 million to $250 million on maintenance projects. Key current and upcoming projects are summarized below:

(dollars in millions)           
 Hotel - Project Scope of Work Budget Current Quarter Incurred Total Incurred Start DateEstimated
Completion Date
Waldorf Astoria Orlando and Signia by Hilton Orlando Bonnet Creek Complex   
Meeting space expansion To add more than 100,000 sq. ft. of meeting and event space $118 $9 $85 Q4 2019
(Paused in 2020)
Waldorf Astoria
(Completed Q4 2022)

Signia (Q1 2024)
Guestroom, existing meeting space & lobby renovations         
  Waldorf Astoria Orlando Guestroom, existing meeting space, lobby and other public space renovations  51  7  29 Q3 2022Q4 2023
  Signia by Hilton Orlando Bonnet Creek Existing meeting space and lobby renovations  18  -  17 Q4 2019Q4 2022
(Substantially complete)
    Guestroom renovations  25  -  25 Q2 2019Q4 2019
Golf course renovations Two phases of golf course renovations  9  1  4 Phase 1 (Q2 2022)
Phase 2 (Q2 2023)
Phase 1 (Completed Q4 2022)
Phase 2 (Q4 2023)
Recreational amenities Adding additional amenities, primarily at the pool  6  -  1 Q3 2022Q1 2024
Total 227  17  161   
              
Hilton Hawaiian Village Waikiki Beach Resort   
Guestroom Renovations Three phases of guestroom renovations in the 1,020-room Tapa Tower  84  -  61 Phase 1 (Q3 2019)
Phase 2 (Q3 2022)
Phase 3 (Q3 2023)
Phase 1 (Completed Q4 2021)
Phase 2 (Completed Q4 2022)
Phase 3 (Q4 2023)
Casa Marina Key West, Curio Collection   
Complete renovation Complete renovation of all 311 guestrooms, public spaces and certain hotel infrastructure  79  17  27 Q1 2023Q4 2023
Hilton New Orleans Riverside   
Guestroom renovations Two phases of guestroom renovations in the 455-room Riverside building  11  2  6 Q3 2019
(Paused in 2020)
Q3 2023
New York Hilton Midtown   
Ballroom renovations Renovation of the Grand Ballroom  6  2  3 Q2 2023Q3 2023


Dividends

Park declared a second quarter 2023 cash dividend of $0.15 per share to stockholders of record as of June 30, 2023. The second quarter 2023 cash dividend was paid on July 17, 2023.

Park currently expects to declare a third quarter 2023 cash dividend of $0.15 per share in September 2023, subject to approval by its Board of Directors.

Full-Year 2023 Outlook

Despite ongoing strength in Park's Hawaii market and an acceleration of group business, Park is revising its full-year outlook largely resulting from the continued underperformance of the two Hilton San Francisco Hotels. Park expects full-year 2023 operating results to be as follows:

(unaudited, dollars in millions, except per share amounts and RevPAR)             
                
  Full-Year 2023 Outlook  Full-Year 2023 Outlook    
  as of August 2, 2023  as of May 1, 2023  Change at 
Metric Low  High  Low  High  Midpoint 
                
Current RevPAR $168  $177  $167  $179  $(1)
Current RevPAR change vs. 2022  7%  13%  7%  14%  (0.5)%
                
Net (loss) income $(109) $(51) $113  $191  $(232)
Net (loss) income attributable to stockholders $(119) $(61) $101  $178  $(230)
(Loss) earnings per share – Diluted(1) $(0.55) $(0.28) $0.47  $0.82  $(1.06)
Operating income $112  $172  $324  $404  $(222)
Operating income margin  4.3%  6.2%  12.8%  14.5%  (8.4)%
                
Adjusted EBITDA $619  $679  $624  $704  $(15)
Current Hotel Adjusted EBITDA margin(1)  26.0%  26.5%  26.8%  27.4%  (0.8)%
Current Hotel Adjusted EBITDA margin change vs. 2022(1)  10 bps   60 bps   90 bps   150 bps   (80) bps 
Adjusted FFO per share – Diluted(1) $1.76  $2.02  $1.76  $2.12  $(0.05)


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(1)Amounts are calculated based on unrounded numbers.


Park's outlook is based in part on the following assumptions:

  • Assumes that the two Hilton San Francisco Hotels will remain in Park's portfolio for the remainder of 2023. Adjusted FFO excludes an incremental $15 million of default interest and late payment administrative fees associated with default of the SF Mortgage Loan, which is required to be recognized in interest expense;
  • Fully diluted weighted average shares are expected to be 217 million;
  • Full-year 2023 outlook as of May 1, 2023 included the Embassy Suites Phoenix Airport hotel, which was subsequently removed from Park's portfolio in June 2023 upon the termination of its ground lease by the lessor;
  • The mortgage loan secured by the Hilton Denver City Center is not called by the lender during 2023;
  • Includes $14 million of Hotel Adjusted EBITDA disruption from a full-scale renovation at the Casa Marina Key West, Curio Collection, which is expected to be completed in the fourth quarter of 2023. Full-year Current RevPAR, excluding the disruption from the renovation, is expected to be between $170 and $179; and
  • Current portfolio as of August 2, 2023 and does not take into account potential future acquisitions and dispositions, which could result in a material change to Park’s outlook.

Park's full-year 2023 outlook is based on a number of factors, many of which are outside the Company's control, including uncertainty surrounding macro-economic factors, such as inflation, increases in interest rates, supply chain disruptions and the possibility of an economic recession or slowdown, as well as the assumptions set forth above, all of which are subject to change.

Supplemental Disclosures

In conjunction with this release, Park has furnished a financial supplement with additional disclosures on its website. Visit www.pkhotelsandresorts.com for more information. Park has no obligation to update any of the information provided to conform to actual results or changes in Park’s portfolio, capital structure or future expectations.

Conference Call

Park will host a conference call for investors and other interested parties to discuss second quarter 2023 results on August 3, 2023 beginning at 11 a.m. Eastern Time. Participants may listen to the live webcast by logging onto the Investors section of the website at www.pkhotelsandresorts.com. Alternatively, participants may listen to the live call by dialing (877) 451-6152 in the United States or (201) 389-0879 internationally and requesting Park Hotels & Resorts’ Second Quarter 2023 Earnings Conference Call. Participants are encouraged to dial into the call or link to the webcast at least ten minutes prior to the scheduled start time.

A replay of the webcast will be available within 24 hours after the live event on the Investors section of Park’s website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements related to the anticipated effects of Park's decision to cease payments on its $725 million SF Mortgage Loan, as well as Park’s current expectations regarding the performance of its business, financial results, liquidity and capital resources, including anticipated repayment of certain of the Company's indebtedness, the completion of capital allocation priorities, the expected repurchase of the Company's stock, the impact to the Company's business and financial condition and that of its hotel management companies, the impact from macroeconomic factors (including inflation, increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts), the effects of competition and the effects of future legislation or regulations, the expected completion of anticipated dispositions, the declaration and payment of future dividends and other non-historical statements. Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as the words “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates,” “hopes” or the negative version of these words or other comparable words. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond the Company’s control and which could materially affect its results of operations, financial condition, cash flows, performance or future achievements or events.

Forward-looking statements are based on current expectations of management and therefore involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements and Park urges investors to carefully review the disclosures Park makes concerning risk and uncertainties in Item 1A: “Risk Factors” in Park’s Annual Report on Form 10-K for the year ended December 31, 2022, as such factors may be updated from time to time in Park’s filings with the SEC, which are accessible on the SEC’s website at www.sec.gov. Except as required by law, Park undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

Park presents certain non-GAAP financial measures in this press release, including Nareit FFO attributable to stockholders, Adjusted FFO attributable to stockholders, EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA, Hotel Adjusted EBITDA margin and Net debt. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of its operating performance. Please see the schedules included in this press release including the “Definitions” section for additional information and reconciliations of such non-GAAP financial measures.

About Park

Park is one of the largest publicly-traded lodging REITs with a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value. Park's portfolio currently consists of 45 premium-branded hotels and resorts with over 29,000 rooms primarily located in prime city center and resort locations. Visit www.pkhotelsandresorts.com for more information.

 
PARK HOTELS & RESORTS INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in millions, except share and per share data)
 
 June 30, 2023  December 31, 2022 
 (unaudited)    
ASSETS     
Property and equipment, net$8,002  $8,301 
Intangibles, net 43   43 
Cash and cash equivalents 797   906 
Restricted cash 45   33 
Accounts receivable, net of allowance for doubtful accounts of $2 and $2 134   129 
Prepaid expenses 83   58 
Other assets 35   47 
Operating lease right-of-use assets 205   214 
TOTAL ASSETS (variable interest entities – $241 and $237)$9,344  $9,731 
LIABILITIES AND EQUITY     
Liabilities     
Debt$4,490  $4,617 
Accounts payable and accrued expenses 279   220 
Due to hotel managers 131   141 
Other liabilities 203   228 
Operating lease liabilities 228   234 
Total liabilities (variable interest entities – $220 and $219) 5,331   5,440 
Stockholders' Equity
       
Common stock, par value $0.01 per share, 6,000,000,000 shares authorized, 216,425,670 shares issued and 215,738,036 shares outstanding as of June 30, 2023 and 224,573,858 shares issued and 224,061,745 shares outstanding as of December 31, 2022 2   2 
Additional paid-in capital 4,221   4,321 
(Accumulated deficit) retained earnings (165)  16 
Total stockholders' equity 4,058   4,339 
Noncontrolling interests (45)  (48)
Total equity 4,013   4,291 
TOTAL LIABILITIES AND EQUITY
$9,344  $9,731 


 
PARK HOTELS & RESORTS INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(unaudited, in millions, except per share data)
 
 Three Months Ended June 30,  Six Months Ended June 30, 
 2023  2022  2023  2022 
Revenues           
Rooms$442  $433  $824  $725 
Food and beverage 178   173   359   283 
Ancillary hotel 72   70   137   131 
Other 22   19   42   35 
Total revenues 714   695   1,362   1,174 
                
Operating expenses             
Rooms 117   98   224   183 
Food and beverage 128   119   255   206 
Other departmental and support 165   158   323   291 
Other property-level 63   65   123   115 
Management fees 34   32   64   54 
Impairment and casualty loss 203   1   204   1 
Depreciation and amortization 64   68   128   137 
Corporate general and administrative 16   16   32   32 
Other 22   18   42   34 
Total expenses 812   575   1,395   1,053 
                
(Loss) gain on sales of assets, net    (1)  15   (1)
            
Operating (loss) income (98)  119   (18)  120 
             
Interest income 10   1   20   1 
Interest expense (61)  (62)  (121)  (124)
Equity in earnings from investments in affiliates 3   5   7   5 
Other gain, net 3   92   4   97 
            
(Loss) income before income taxes (143)  155   (108)  99 
Income tax expense (3)  (1)  (5)  (1)
Net (loss) income (146)  154   (113)  98 
Net income attributable to noncontrolling interests (4)  (4)  (4)  (5)
Net (loss) income attributable to stockholders$(150) $150  $(117) $93 
              
(Loss) earnings per share:           
(Loss) earnings per share – Basic$(0.70) $0.66  $(0.54) $0.40 
(Loss) earnings per share – Diluted$(0.70) $0.66  $(0.54) $0.40 
            
Weighted average shares outstanding – Basic 215   228   217   232 
Weighted average shares outstanding – Diluted 215   228   218   232 


 
PARK HOTELS & RESORTS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
EBITDA AND ADJUSTED EBITDA
 
(unaudited, in millions)Three Months Ended June 30,  Six Months Ended June 30, 
 2023  2022  2023  2022 
Net (loss) income$(146) $154  $(113) $98 
Depreciation and amortization expense 64   68   128   137 
Interest income (10)  (1)  (20)  (1)
Interest expense 61   62   121   124 
Income tax expense 3   1   5   1 
Interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates 2   4   5   5 
EBITDA (26)  288   126   364 
Loss (gain) on sales of assets, net    1   (15)  1 
Gain on sale of investments in affiliates(1) (3)  (92)  (3)  (92)
Share-based compensation expense 5   5   9   9 
Impairment and casualty loss 203   1   204   1 
Other items 8   4   12   6 
Adjusted EBITDA$187  $207  $333  $289 


________________________________________
(1)Included in other gain, net.


 
PARK HOTELS & RESORTS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
CURRENT AND COMPARABLE HOTEL ADJUSTED EBITDA AND
CURRENT AND COMPARABLE HOTEL ADJUSTED EBITDA MARGIN
 
(unaudited, dollars in millions)Three Months Ended  Six Months Ended 
 June 30,  June 30, 
 2023  2022  2023  2022 
Adjusted EBITDA$187  $207  $333  $289 
Less: Adjusted EBITDA from investments in affiliates (8)  (11)  (15)  (16)
Add: All other(1) 13   12   26   24 
Hotel Adjusted EBITDA 192   208   344   297 
Less: Adjusted EBITDA from hotels disposed of (1)  (6)  (3)  (12)
Current Hotel Adjusted EBITDA 191   202   341   285 
Less: Adjusted EBITDA from the Hilton San Francisco Hotels 1   (3)  (4)  9 
Comparable Hotel Adjusted EBITDA$192  $199  $337  $294 
            
 Three Months Ended  Six Months Ended 
 June 30,  June 30, 
 2023  2022  2023  2022 
Total Revenues$714  $695  $1,362  $1,174 
Less: Other revenue (22)  (19)  (42)  (35)
Less: Revenues from hotels disposed of (3)  (20)  (10)  (40)
Current Hotel Revenues 689   656   1,310   1,099 
Less: Revenues from the Hilton San Francisco Hotels (46)  (43)  (94)  (57)
Comparable Hotel Revenues$643  $613  $1,216  $1,042 


 Three Months Ended  Six Months Ended  
 June 30,  June 30,  
 2023  2022  Change(2)  2023  2022  Change(2)  
Total Revenues$714  $695   2.8% $1,362  $1,174   16.0% 
Operating (loss) income$(98) $119   (182.3)% $(18) $120   (114.7)% 
Operating (loss) income margin(2) (13.7)%  17.1%  (3,080)bps (1.3)%  10.2%  (1,150)bps
                   
Current Hotel Revenues$689  $656   5.0% $1,310  $1,099   19.2% 
Current Hotel Adjusted EBITDA$191  $202   (5.7)% $341  $285   19.6% 
Current Hotel Adjusted EBITDA margin(2) 27.7%  30.8%  (310)bps 26.0%  25.9%  10 bps
                   
Comparable Hotel Revenues$643  $613   5.0% $1,216  $1,042   16.7% 
Comparable Hotel Adjusted EBITDA$192  $199   (3.6)% $337  $294   14.6% 
Comparable Hotel Adjusted EBITDA margin(2) 29.9%  32.6%  (270)bps 27.7%  28.2%  (50)bps


________________________________________
(1)Includes other revenues and other expenses, non-income taxes on TRS leases included in other property-level expenses and corporate general and administrative expenses in the consolidated statements of operations.
(2)Percentages are calculated based on unrounded numbers.


 
PARK HOTELS & RESORTS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
NAREIT FFO AND ADJUSTED FFO
 
(unaudited, in millions, except per share data)
     
 Three Months Ended June 30,  Six Months Ended June 30, 
 2023  2022  2023  2022 
Net (loss) income attributable to stockholders$(150) $150  $(117) $93 
Depreciation and amortization expense 64   68   128   137 
Depreciation and amortization expense attributable to noncontrolling interests (1)  (1)  (2)  (2)
(Gain) loss on sales of assets, net    1   (15)  1 
Gain on sale of investments in affiliates(1) (3)  (92)  (3)  (92)
Impairment loss 202      202    
Equity investment adjustments:           
Equity in earnings from investments in affiliates (3)  (5)  (7)  (5)
Pro rata FFO of investments in affiliates 5   8   10   10 
Nareit FFO attributable to stockholders 114   129   196   142 
Casualty loss 1   1   2   1 
Share-based compensation expense 5   5   9   9 
Other items 9   4   14   5 
Adjusted FFO attributable to stockholders$129  $139  $221  $157 
Nareit FFO per share – Diluted(2)$0.53  $0.57  $0.90  $0.61 
Adjusted FFO per share – Diluted(2)$0.60  $0.61  $1.01  $0.68 
Weighted average shares outstanding – Diluted 215   228   218   232 


________________________________________
(1)Included in other gain, net.
(2)Per share amounts are calculated based on unrounded numbers.


 
PARK HOTELS & RESORTS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
NET DEBT
 
(unaudited, in millions)        
 Current
June 30, 2023
  SF Mortgage Loan Adjustments(1)  Comparable
June 30, 2023(1)
 
Debt$4,490  $(725) $3,765 
Add: unamortized deferred financing costs and discount 25      25 
Less: unamortized premium (1)     (1)
Debt, excluding unamortized deferred financing cost, premiums and discounts 4,514   (725)  3,789 
Add: Park's share of unconsolidated affiliates debt, excluding unamortized deferred financing costs 169      169 
Less: cash and cash equivalents (797)  162   (635)
Less: restricted cash (45)  13   (32)
Net debt$3,841  $(550) $3,291 


________________________________________
(1)Comparable Net Debt as of June 30, 2023 excludes the $725 million SF Mortgage Loan and $13 million of cash that became restricted upon default, and assumes the removal of the Hilton San Francisco Hotels from Park's portfolio, which is expected to trigger a required additional distribution to stockholders of $162 million (the midpoint of the anticipated $150 million to $175 million dividend amount) following the disposition of the hotels.


 
PARK HOTELS & RESORTS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
OUTLOOK – EBITDA, ADJUSTED EBITDA, CURRENT HOTEL ADJUSTED EBITDA
AND CURRENT HOTEL ADJUSTED EBITDA MARGIN
 
 Year Ending 
(unaudited, in millions)December 31, 2023 
 Low Case  High Case 
Net loss$(109) $(51)
Depreciation and amortization expense 263   263 
Interest income (31)  (31)
Interest expense 261   261 
Income tax expense 4   6 
Interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates 8   8 
EBITDA 396   456 
Gain on sale of assets, net (15)  (15)
Gain on sale of investments in affiliates (3)  (3)
Share-based compensation expense 17   17 
Impairment and casualty loss 204   204 
Other items 20   20 
Adjusted EBITDA 619   679 
Less: Adjusted EBITDA from investments in affiliates (24)  (24)
Add: All other 53   53 
Current Hotel Adjusted EBITDA$648  $708 
      
 Year Ending 
 December 31, 2023 
 Low Case  High Case 
Total Revenues$2,589  $2,769 
Less: Other revenue (96)  (96)
Current Hotel Revenues$2,493  $2,673 
      
 Year Ending 
 December 31, 2023 
 Low Case  High Case 
Total Revenues$2,589  $2,769 
Operating income$112  $172 
Operating income margin(1) 4.3%  6.2%
      
Current Hotel Revenues$2,493  $2,673 
Current Hotel Adjusted EBITDA$648  $708 
Current Hotel Adjusted EBITDA margin(1) 26.0%  26.5%


________________________________________
(1)Percentages are calculated based on unrounded numbers.


 
PARK HOTELS & RESORTS INC.
NON-GAAP FINANCIAL MEASURES RECONCILIATIONS
OUTLOOK – NAREIT FFO ATTRIBUTABLE TO STOCKHOLDERS AND
ADJUSTED FFO ATTRIBUTABLE TO STOCKHOLDERS
 
 Year Ending 
(unaudited, in millions except per share data)December 31, 2023 
 Low Case  High Case 
Net loss attributable to stockholders$(119) $(61)
Depreciation and amortization expense 263   263 
Depreciation and amortization expense attributable to noncontrolling interests (4)  (4)
Gain on sale of assets, net (15)  (15)
Gain on sale of investments in affiliates (3)  (3)
Impairment loss 202   202 
Equity investment adjustments:     
Equity in earnings from investments in affiliates (10)  (10)
Pro rata FFO of equity investments 13   13 
Nareit FFO attributable to stockholders 327   385 
Casualty loss 2   2 
Share-based compensation expense 17   17 
Other items(1) 34   34 
Adjusted FFO attributable to stockholders$380  $438 
Adjusted FFO per share – Diluted(2)$1.76  $2.02 
Weighted average diluted shares outstanding 217   217 


________________________________________ 
(1)Includes $15 million of default interest and late payment administrative fees associated with the default of the SF Mortgage Loan.
(2)Per share amounts are calculated based on unrounded numbers.
  
 
PARK HOTELS & RESORTS INC.
DEFINITIONS

Hilton San Francisco Hotels

Park's Hilton San Francisco Hotels represent the 1,921-room Hilton San Francisco Union Square and 1,024-room Parc 55 San Francisco – a Hilton Hotel.

Current

The Company presents certain data for its consolidated hotels on a Current basis as supplemental information for investors: Current Hotel Revenues, Current RevPAR, Current Total RevPAR, Current Occupancy, Current ADR, Current Hotel Adjusted EBITDA and Current Hotel Adjusted EBITDA Margin. The Company presents Current hotel results to help the Company and its investors evaluate the ongoing operating performance of its hotels. The Company’s Current metrics exclude results from property dispositions that have occurred through June 30, 2023 and include results from property acquisitions as though such acquisitions occurred on the earliest period presented.

Comparable

Park's Comparable hotels represent its Current hotels excluding the two Hilton San Francisco Hotels as the Company expects these hotels to ultimately be removed from its portfolio.

EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin

Earnings before interest expense, taxes and depreciation and amortization (“EBITDA”), presented herein, reflects net income (loss) excluding depreciation and amortization, interest income, interest expense, income taxes and interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates.

Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude the following items that are not reflective of Park's ongoing operating performance or incurred in the normal course of business, and thus, excluded from management's analysis in making day-to-day operating decisions and evaluations of Park's operating performance against other companies within its industry:

  • Gains or losses on sales of assets for both consolidated and unconsolidated investments;
  • Costs associated with hotel acquisitions or dispositions expensed during the period;
  • Severance expense;
  • Share-based compensation expense;
  • Impairment losses and casualty gains or losses; and
  • Other items that management believes are not representative of the Company’s current or future operating performance.

Hotel Adjusted EBITDA measures hotel-level results before debt service, depreciation and corporate expenses of the Company’s consolidated hotels, which excludes hotels owned by unconsolidated affiliates, and is a key measure of the Company’s profitability. The Company presents Hotel Adjusted EBITDA to help the Company and its investors evaluate the ongoing operating performance of the Company’s consolidated hotels.

Hotel Adjusted EBITDA margin is calculated as Hotel Adjusted EBITDA divided by total hotel revenue.

EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin are not recognized terms under United States (“U.S.”) GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S. GAAP. In addition, the Company’s definitions of EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin may not be comparable to similarly titled measures of other companies.

The Company believes that EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin provide useful information to investors about the Company and its financial condition and results of operations for the following reasons: (i) EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin are among the measures used by the Company’s management team to make day-to-day operating decisions and evaluate its operating performance between periods and between REITs by removing the effect of its capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from its operating results; and (ii) EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in the industry.

EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss) or other methods of analyzing the Company’s operating performance and results as reported under U.S. GAAP. Because of these limitations, EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA should not be considered as discretionary cash available to the Company to reinvest in the growth of its business or as measures of cash that will be available to the Company to meet its obligations.

Nareit FFO attributable to stockholders, Adjusted FFO attributable to stockholders, Nareit FFO per share – diluted and Adjusted FFO per share – diluted

Nareit FFO attributable to stockholders and Nareit FFO per diluted share (defined as set forth below) are presented herein as non-GAAP measures of the Company’s performance. The Company calculates funds from (used in) operations (“FFO”) attributable to stockholders for a given operating period in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), as net income (loss) attributable to stockholders (calculated in accordance with U.S. GAAP), excluding depreciation and amortization, gains or losses on sales of assets, impairment, and the cumulative effect of changes in accounting principles, plus adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect the Company’s pro rata share of the FFO of those entities on the same basis. As noted by Nareit in its December 2018 “Nareit Funds from Operations White Paper – 2018 Restatement,” since real estate values historically have risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For these reasons, Nareit adopted the FFO metric in order to promote an industry-wide measure of REIT operating performance. The Company believes Nareit FFO provides useful information to investors regarding its operating performance and can facilitate comparisons of operating performance between periods and between REITs. The Company’s presentation may not be comparable to FFO reported by other REITs that do not define the terms in accordance with the current Nareit definition, or that interpret the current Nareit definition differently. The Company calculates Nareit FFO per diluted share as Nareit FFO divided by the number of fully diluted shares outstanding during a given operating period.

The Company also presents Adjusted FFO attributable to stockholders and Adjusted FFO per diluted share when evaluating its performance because management believes that the exclusion of certain additional items described below provides useful supplemental information to investors regarding the Company’s ongoing operating performance. Management historically has made the adjustments detailed below in evaluating its performance and in its annual budget process. Management believes that the presentation of Adjusted FFO provides useful supplemental information that is beneficial to an investor’s complete understanding of operating performance. The Company adjusts Nareit FFO attributable to stockholders for the following items, which may occur in any period, and refers to this measure as Adjusted FFO attributable to stockholders:

  • Costs associated with hotel acquisitions or dispositions expensed during the period;
  • Severance expense;
  • Share-based compensation expense;
  • Casualty gains or losses; and
  • Other items that management believes are not representative of the Company’s current or future operating performance.

Net Debt

Net debt, presented herein, is a non-GAAP financial measure that the Company uses to evaluate its financial leverage. Net debt is calculated as (i) long-term debt, including current maturities and excluding unamortized deferred financing costs; and (ii) the Company’s share of investments in affiliate debt, excluding unamortized deferred financing costs; reduced by (a) cash and cash equivalents; and (b) restricted cash and cash equivalents.

The Company believes Net debt provides useful information about its indebtedness to investors as it is frequently used by securities analysts, investors and other interested parties to compare the indebtedness of companies. Net debt should not be considered as a substitute to debt presented in accordance with U.S. GAAP. Net debt may not be comparable to a similarly titled measure of other companies.

Occupancy

Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels. Occupancy measures the utilization of the Company’s hotels’ available capacity. Management uses Occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help management determine achievable Average Daily Rate (“ADR”) levels as demand for rooms increases or decreases.

Average Daily Rate

ADR (or rate) represents rooms revenue divided by total number of room nights sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the hotel industry, and management uses ADR to assess pricing levels that the Company is able to generate by type of customer, as changes in rates have a more pronounced effect on overall revenues and incremental profitability than changes in Occupancy, as described above.

Revenue per Available Room

Revenue per Available Room (“RevPAR”) represents rooms revenue divided by the total number of room nights available to guests for a given period. Management considers RevPAR to be a meaningful indicator of the Company’s performance as it provides a metric correlated to two primary and key factors of operations at a hotel or group of hotels: Occupancy and ADR. RevPAR is also a useful indicator in measuring performance over comparable periods.

Total RevPAR

Total RevPAR represents rooms, food and beverage and other hotel revenues divided by the total number of room nights available to guests for a given period. Management considers Total RevPAR to be a meaningful indicator of the Company’s performance as approximately one-third of revenues are earned from food and beverage and other hotel revenues. Total RevPAR is also a useful indicator in measuring performance over comparable periods.

Group Revenue Pace

Group Revenue Pace represents bookings for future business and is calculated as group room nights multiplied by the contracted room rate expressed as a percentage of a prior period relative to a prior point in time.

Investor Contact1775 Tysons Boulevard, 7th Floor
Ian WeissmanTysons, VA 22102
+ 1 571 302 5591www.pkhotelsandresorts.com
  


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