Business context and reporting period
Park Hotels & Resorts Inc. filed this Form 10-K for the fiscal year ended December 31, 2022. It is a lodging REIT owning premium-branded U.S. hotels and resorts; its portfolio was 46 properties and 29,210 rooms as of February 23, 2023. The filing reports annual results, not a standalone fourth-quarter period.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $2.501 billion | $1.362 billion |
| Operating income (loss) | $296 million | $(179) million |
| Net income (loss) | $173 million | $(452) million |
| Net income (loss) attributable to stockholders | $162 million; $0.71 per diluted share | $(459) million; $(1.95) per diluted share |
| Hotel Adjusted EBITDA | $630 million | $177 million |
| Adjusted FFO attributable to stockholders | $352 million; $1.54 per diluted share | $(136) million; $(0.57) per diluted share |
| Net cash from (used in) operating activities | $409 million | $(137) million |
| Net cash from investing activities | $87 million | $394 million |
| Net cash used in financing activities | $(320) million | $(475) million |
Operating income was 11.8% of revenue in 2022, versus an operating loss in 2021. These margins are calculated from reported figures. At year-end, cash and cash equivalents were $906 million, restricted cash was $33 million, total assets were $9.731 billion, and debt was $4.617 billion. Debt carried a reported weighted-average rate of about 5.1%; approximately 99% was fixed rate. The filing does not provide a conventional current ratio.
Material changes versus the prior comparable period
- Revenue increased 84% year over year, reflecting continued recovery in hotel demand and the reopening of all previously suspended hotels by May 2022. Revenue growth was led by rooms, up $689 million, and food and beverage, up $355 million.
- Hotel Adjusted EBITDA rose to $630 million from $177 million, and the company returned to GAAP profitability. Results benefited from improved occupancy and rates, including stronger demand in Hawaii, Florida, Boston, and New Orleans.
- Operating cash flow improved by $546 million to $409 million. Investing cash flow was lower than in 2021, when asset-sale proceeds were higher; 2022 investing cash flow included $168 million of capital expenditures.
- Interest expense declined 4.3% to $247 million. Debt at year-end was down from $4.672 billion in 2021; the company repaid its $78 million remaining term-facility balance in December.
- Cash increased to $906 million from $688 million. The company repurchased approximately 12.7 million shares for $227 million and reinstated its quarterly dividend during 2022.
Outlook, commentary, risks and unusual items
Management said it expected the recovery to continue through 2023 based on demand trends, including improvement in leisure, group, and business transient travel. It did not provide numerical earnings, revenue, or RevPAR guidance. Management cited inflation, higher interest rates, potential economic slowdown or recession, and geopolitical conflicts as sources of uncertainty, and said active asset management helped mitigate inflationary pressures.
- In December 2022, the company amended its revolving credit facility, extending maturity to December 2026 and increasing commitments to $950 million. It reported about $900 million of availability at year-end. The agreement includes financial covenants and restrictions on certain transactions and distributions.
- Debt maturities include $725 million secured by the San Francisco Hilton properties due in November 2023 and a $75 million W Chicago–City Center mortgage due in August 2023. Management said it expected to address the San Francisco loan before the third quarter of 2023 and planned to repay the Chicago loan in May 2023 using cash.
- After year-end, Park sold the 508-room Hilton Miami Airport for gross proceeds of $118.25 million and used part of the net proceeds to repay the $50 million revolver balance. It also repurchased approximately 2.5 million shares for $30 million in January 2023 and authorized a new $300 million repurchase program in February.
- Unusual 2022 items included a $92 million gain on selling the company’s interests in the Hilton San Diego Bayfront joint ventures, a $9 million gain related to the sale of the DoubleTree Hotel Las Vegas Airport by its joint ventures, and $5 million of hurricane-related casualty losses. The San Diego transaction materially contributed to the $96 million reported in other gain, net.
- Risks include concentration in a limited number of markets: Florida, San Francisco, and Hawaii together represented 48% of 2022 revenue. Other key exposures include hotel cyclicality, labor and operating-cost inflation, dependence on third-party managers and Hilton brands, climate and insurance risks, and REIT qualification and debt-covenant requirements.
- The company reported ordinary-course litigation and an approximately $8 million reserve related to litigation concerning an Australian tax authority audit of Hilton. Management did not expect the overall litigation matters to have a material adverse effect, while noting an unfavorable resolution could affect results in a particular period.
Important facts for investors to verify
- Progress and financing terms for the $725 million San Francisco mortgage maturity, the $75 million W Chicago loan, and other scheduled debt maturities.
- Whether hotel demand, occupancy, and rates sustain recovery in 2023, and how inflation and labor costs affect property-level profitability.
- Cash available after capital spending, dividends, debt service, asset sales, and any further share repurchases.
- The sustainability of reported earnings and FFO excluding the material joint-venture sale gain and other adjustments to non-GAAP measures.
- Capital commitments of approximately $121 million, including $57 million for projects at the Bonnet Creek complex, and the timing and returns of those investments.