Park Hotels & Resorts Inc. — FY2021 Form 10-K
Reporting period: Year ended December 31, 2021; filed February 18, 2022. This is an annual report, not a standalone quarterly filing. Park is a U.S.-focused lodging REIT with 54 hotels and resorts and approximately 31,925 rooms as of February 18, 2022; more than 86% of rooms are luxury or upper-upscale. The portfolio is concentrated in major urban, convention, and resort markets and is predominantly affiliated with Hilton brands.
Financial performance and liquidity
| Metric | 2021 | 2020 |
|---|---|---|
| Total revenue | $1.362 billion | $852 million |
| Operating loss | $179 million | $1.202 billion |
| Net loss | $452 million | $1.444 billion |
| Net loss attributable to stockholders | $459 million; $1.95 per diluted share | $1.440 billion; $6.11 per diluted share |
| Hotel Adjusted EBITDA (non-GAAP) | $177 million | $(147) million |
| Net cash used in operating activities | $137 million | $438 million |
| Capital expenditures | $54 million | $86 million |
Revenue increased about 60% year over year as hotels reopened and travel improved, but remained well below 2019 revenue of $2.844 billion. Rooms revenue rose to $870 million from $526 million; transient rooms revenue increased to $690 million, while group rooms revenue declined to $114 million from $136 million. Hotel Adjusted EBITDA was positive for the final three consecutive quarters of 2021. The filing does not provide a single consolidated operating-margin measure; reported operating loss was approximately 13% of revenue and net loss approximately 33% of revenue.
Results still reflect pandemic-related disruption. The 2021 net loss included $9 million of impairment and casualty losses, versus $696 million in 2020, including $607 million of goodwill impairment and $90 million of property impairment. Interest expense rose to $258 million from $213 million, partly reflecting new note issuance.
At December 31, 2021, cash and cash equivalents were $688 million and restricted cash was $75 million. Debt was $4.672 billion, with a reported weighted-average rate of about 5.0%; approximately 99% was fixed-rate. The Revolver had been fully repaid, and $78 million remained outstanding under the 2019 Term Facility. Only 2% of total debt was stated to mature in 2022. Debt maturities were concentrated in 2023 ($830 million), 2025 ($657 million), and 2026 ($1.562 billion). The company reported $4.7 billion of debt excluding its approximately $225 million share of affiliate debt.
Operating cash flow remained negative despite improving by $301 million year over year. Investing activities provided $394 million, principally from $454 million of net hotel-sale proceeds; financing activities used $475 million, including $1.2 billion of debt repayments partly offset by $750 million of 2029 note issuance. Dividends were suspended after the first-quarter 2020 payment. Management was evaluating a possible $0.01-per-share quarterly distribution, subject to board approval and financing restrictions.
Material changes and operating trends
- Five consolidated hotels were sold in 2021 for $477 million gross proceeds, above the company’s stated $300–$400 million asset-sale goal. Proceeds were used to repay Revolver borrowings and reduce the 2019 Term Facility.
- Pro forma fourth-quarter 2021 RevPAR was 37.6% below fourth-quarter 2019, despite being 297.9% above the pandemic-affected fourth quarter of 2020. Fourth-quarter pro forma occupancy was 52.5%, 28.1 percentage points below 2019.
- Transient recovery led the revenue rebound; group business remained weak. Omicron-related cancellations and cautious business travel sentiment affected late 2021 and early 2022.
- All but two previously suspended hotels had reopened by year-end 2021. As of February 18, 2022, 46 of 48 consolidated hotels were open; all six unconsolidated hotels were open.
- The company completed an internal reorganization to an UPREIT structure effective January 1, 2022.
Outlook, risks, and unusual items
Management expected a broader recovery to continue beginning in the second quarter of 2022, with improving leisure trends and group bookings. It gave no quantified 2022 revenue, earnings, or cash-flow guidance and cautioned that pandemic effects, including variants and travel restrictions, made results difficult to predict. Management expected cash flows through at least the first quarter of 2022 to remain significantly below pre-pandemic levels and said cost reductions could not fully or materially offset revenue losses.
Key risks include a renewed decline in travel demand; delayed group and business travel recovery; inflation, labor shortages, and operating costs; portfolio and market concentration; dependence on Hilton and third-party managers; refinancing, covenant, and secured-debt risks; and exposure to storms, climate impacts, insurance availability, and property-level contingencies. The company noted that a significant concentration of rooms is in New York City, Chicago, San Francisco, Boston, New Orleans, Florida, and Hawaii. Fixed hotel costs can amplify earnings declines when revenue falls.
At year-end, the company had approximately $94 million of contracted property capital commitments, including $72 million for the Bonnet Creek expansion; contracts permit cancellation of some or all work, subject to incurred costs. It recorded an approximately $8 million reserve related to litigation over an Australian Tax Office claim involving Hilton’s sale of the Hilton Sydney, and paid Hilton approximately $11 million in 2021 toward a required deposit and expenses. Management said ordinary-course litigation was not expected to have a material adverse effect, while noting outcomes remain uncertain.
In February 2022, subsequent to year-end, credit-facility amendments extended certain covenant-testing waivers, extended a $200 million minimum-liquidity covenant through March 2023, and permitted share repurchases up to $250 million if the Revolver balance is zero. These amendments also changed certain investment, capital-spending, and debt-prepayment terms. The financial statements received an unqualified audit opinion; management and the auditor reported effective internal control over financial reporting at December 31, 2021.
Most important facts for investors to verify
- Whether occupancy, ADR, RevPAR, and group bookings continue to recover, particularly against 2019 levels, and whether reopened hotels remain operational.
- Cash burn, unrestricted liquidity, covenant-waiver conditions, and the ability to meet upcoming maturities—especially the 2023 and 2026 debt concentrations.
- The terms and timing of any dividend reinstatement, given the suspension, REIT distribution obligations, and debt-document limits.
- Returns and funding needs for the Bonnet Creek expansion and other deferred or planned capital projects.
- Progress and proceeds from asset sales, and the effects of portfolio concentration and Hilton brand dependence.
- Developments in the Australian tax litigation and other indemnification, legal, insurance, and property contingencies.