Park Hotels & Resorts Inc. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023; comparisons are primarily with 2022. Park is a U.S.-focused lodging REIT. Its portfolio was 43 premium-branded hotels and resorts with 26,093 rooms as of February 28, 2024; the two San Francisco hotels in receivership are excluded from that count.
Financial performance and liquidity
| Metric | 2023 | 2022 |
|---|---|---|
| Total revenue | $2.698 billion | $2.501 billion |
| Net income attributable to stockholders | $97 million | $162 million |
| Diluted EPS | $0.44 | $0.71 |
| Hotel Adjusted EBITDA | $686 million | $630 million |
| Adjusted FFO attributable to stockholders | $439 million | $352 million |
| Cash from operating activities | $503 million | $409 million |
- Revenue rose about 8%, and Hotel Adjusted EBITDA rose about 9%; reported net income fell about 40%. Results include significant San Francisco receivership-related and other unusual items, described below. These measures are not directly interchangeable: Hotel Adjusted EBITDA and FFO are non-GAAP measures.
- Operating income was $343 million, versus $296 million. Total expenses rose to $2.591 billion from $2.218 billion, including a $204 million impairment and casualty loss compared with $6 million in 2022.
- Cash and cash equivalents were $717 million at year-end, plus $33 million restricted cash. The company reported approximately $946 million of available Revolver capacity, with about $4 million of standby letters of credit outstanding.
- Debt was $3.765 billion, excluding the separate $725 million San Francisco mortgage loan in default; Park also disclosed approximately $164 million as its share of affiliate debt. Outstanding debt excluding the San Francisco loan was fixed-rate, with a weighted average rate of 5.2%. No significant maturities were expected before June 2025, excluding the defaulted loan.
- Capital expenditures and land acquisitions were $296 million. Financing cash outflow was $475 million, including $180 million of share repurchases, $152 million of dividends paid, and $133 million of debt repayments.
- Management did not provide a clear numerical forecast for 2024 revenue, earnings, or cash flow. It expected positive demand momentum to continue through 2024, citing current trends, city-wide events, and improving international travel.
Material changes and unusual items
- San Francisco loan default and receivership: Park stopped debt-service payments on the $725 million non-recourse CMBS loan in June 2023. The lender appointed a receiver in October, leaving Park with no further economic interest in the two secured hotels. The receiver may sell them by November 1, 2024; if not sold, the court order contemplates foreclosure by December 2, 2024.
- Park removed the hotels from its consolidated balance sheet when the receiver took control and recorded a $221 million gain, along with a $760 million contract asset representing liabilities it expects to be released when the loan is finally resolved. The $725 million loan remains recorded as a liability pending final resolution. Park also recorded a $202 million impairment loss and $28 million of income-tax expense associated with the effective exit.
- The exit triggered a required distribution. Park declared a $0.77-per-share special dividend, included in the $1.70 per share paid in January 2024. Total 2023 dividends declared were $2.15 per share, including the special distribution.
- Operating cash flow increased partly because Park stopped paying interest on the San Francisco loan; interest paid fell to $215 million from $245 million. Therefore, the increase in operating cash flow should not be viewed solely as improvement in hotel operations.
- Park repurchased approximately 14.6 million shares for $180 million during 2023. The February 2023 program authorized up to $300 million through February 2025; $150 million remained available at year-end.
- Comparable hotel performance improved in several markets, including Hawaii, New York, Chicago, New Orleans, Washington, D.C., and Boston. The Casa Marina Key West was partially or fully suspended for renovations from May through December, reducing its reported revenue and expenses.
Risks and management commentary
- Management cited inflation, elevated interest rates, possible economic slowdown or recession, geopolitical conflicts, labor costs, and sensitivity of travel demand to consumer and business conditions.
- Portfolio concentration is material: Florida and Hawaii each represented more than 13% of room count and together 37% of 2023 revenue. Florida, Hawaii, Chicago, New York City, New Orleans, and Boston accounted for approximately 60% of rooms.
- Other key exposures include the San Francisco loan resolution, debt covenants and refinancing, fixed hotel costs, renovation execution and spending, ground-lease expirations, competition, reliance on third-party managers and Hilton brands, natural disasters and climate-related risks, insurance availability, and cybersecurity risks.
- Park reported effective disclosure controls and internal control over financial reporting. The auditor issued unqualified opinions on the financial statements and internal controls; impairment valuation was identified as a critical audit matter.
Investor facts to verify
- Progress and final accounting for the $725 million San Francisco loan, the $760 million contract asset, and any sale or foreclosure of the hotels.
- Whether 2024 demand and hotel-level operating results support management’s qualitative outlook, and how results compare on a comparable-hotel basis.
- Liquidity after dividends, repurchases, renovation spending, and scheduled debt payments—especially the $650 million of 7.5% senior notes due June 2025.
- Capital expenditure requirements and returns from major renovations, including Bonnet Creek and Casa Marina Key West.
- Dividend and repurchase decisions relative to cash generation, debt covenants, and REIT distribution requirements.