Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE:PK)
today announced that it completed the previously announced sale of
the Le Meridien San Francisco. The Company also provided an
operational and liquidity update.
Recent Highlights
- Closed on the sale of the 360-room Le Meridien San Francisco on
August 31, 2021, for total proceeds of $221.5 million, or
approximately $615,000 per key. When adjusted for Park’s
anticipated capital expenditures (“capex”), the sale price
represents a 5.9% capitalization rate on 2019 net operating income
(6.5% excluding capex), or 15.0x 2019 EBITDA (13.7x excluding
capex). Proceeds from the sale were used to repay Park’s sole
remaining term loan, leaving just $78 million outstanding;
- Pro-forma occupancy preliminarily estimated to be 49.9% in
August 2021 for Park’s 48 consolidated hotels, with a decrease in
rate and RevPAR of 5.8% and 45.0%, respectively, when compared to
the same period in 2019;
- Pro-forma occupancy preliminarily estimated to be 56.4% for
Park’s 45 consolidated hotels open during the entirety of August,
with a decrease in rate and RevPAR of just 3.8% and 35.6%,
respectively, when compared to the same period in 2019;
- Generated Pro-forma Hotel Revenues of $157 million and positive
Pro-forma Hotel Adjusted EBITDA of $44 million in July 2021, with
36 of its 45 consolidated hotels that were open during July 2021
generating positive Pro-forma Hotel Adjusted EBITDA; and
- Despite witnessing exceptionally strong results during the
summer, the Company now anticipates fundamentals to be weaker than
expected through at least October as the spread of the Delta
variant has tempered group and business transient demand across its
portfolio.
“I am pleased to announce that our previously disclosed sale of
the Le Meridien San Francisco is completed. Proceeds from the sale
have been used to reduce debt and further strengthen our balance
sheet. With nearly $1.8 billion in liquidity, Park is well
positioned to pursue internal and external growth strategies as we
enter the post COVID cycle,” said Thomas J. Baltimore, Jr.,
Chairman and CEO of Park. “On the operations side, I am very
pleased with the positive momentum in demand that we saw in July
and August in several of our markets. Our portfolio witnessed very
strong growth in occupancy and ADR in July, and demand trends
continued into August, with two of our hotels surpassing August
2019 occupancy rates and 17 of our hotels surpassing August 2019
average daily rates. As expected, demand trends moderated somewhat
in August based on seasonal declines in leisure travel as well as
some disruption from the Delta variant. As case counts remain
elevated, and some office reopenings are delayed, we expect
business demand to remain choppy in the near term; however, we
remain confident in the overall trajectory of the recovery,
particularly as we look to strong fundamentals for 2022.”
Operational UpdatePro-forma Occupancy, ADR and
RevPAR for certain periods in 2021 and changes compared to the same
periods in 2019 for Park’s 48 consolidated hotels were as
follows:
|
Pro-forma Occupancy |
|
Pro-forma ADR |
|
Pro-forma RevPAR |
|
|
2021 |
|
2021 vs. 2019 |
|
2021 |
|
2021 vs. 2019 |
|
2021 |
|
2021 vs. 2019 |
|
Q1 |
26.6 |
% |
(50.7) |
% pts |
$ |
155.60 |
|
(32.3) |
% |
$ |
41.32 |
|
(76.7) |
% |
Q2 |
42.2 |
|
(43.4) |
|
|
185.74 |
|
(18.3) |
|
|
78.44 |
|
(59.7) |
|
July |
56.8 |
|
(29.0) |
|
|
220.00 |
|
(1.8) |
|
|
125.00 |
|
(34.9) |
|
August |
49.9 |
|
(35.6) |
|
|
203.67 |
|
(5.8) |
|
|
101.62 |
|
(45.0) |
|
Pro-forma Occupancy, ADR and RevPAR for certain periods in 2021
and changes compared to the same periods in 2019 for only the
consolidated hotels open during the entirety of each period were as
follows:
|
Number ofConsolidatedHotels Open |
|
Pro-forma Occupancy |
|
Pro-forma ADR |
|
Pro-forma RevPAR |
|
|
|
2021 |
|
2021 vs. 2019 |
|
2021 |
|
2021 vs. 2019 |
|
2021 |
|
2021 vs. 2019 |
|
Q1 |
40 |
|
37.2 |
% |
(41.1) |
%
pts |
$ |
155.81 |
|
(28.8) |
% |
$ |
58.00 |
|
(66.1) |
% |
Q2 |
41 |
|
55.8 |
|
(28.5) |
|
|
188.54 |
|
(11.1) |
|
|
105.19 |
|
(41.1) |
|
July |
45 |
|
64.2 |
|
(20.8) |
|
|
220.00 |
|
2.0 |
|
|
141.29 |
|
(22.9) |
|
August |
45 |
|
56.4 |
|
(27.9) |
|
|
203.67 |
|
(3.8) |
|
|
114.87 |
|
(35.6) |
|
The Company also witnessed improvements in mid-week occupancy
(Tuesday and Wednesday), increasing to 52% in July on a Pro-forma
basis, or nearly 2,000 basis points higher than the second quarter.
Preliminary Pro-forma August mid-week occupancy softened somewhat
to 47% with expected seasonality. Overall, these mid-week trends
provide an encouraging indicator that travel continues to expand
beyond leisure demand. In addition, Park continues to see
increasing trends in group pickup for 2022 across its portfolio,
with roughly $32 million in group revenue picked up year-to-date
for next year.
COVID-19: Impact of Delta VariantDespite
witnessing exceptionally strong results in July and August, the
Company now anticipates fundamentals to be softer than expected
through at least October as the spread of the Delta variant has
tempered demand. Markets meaningfully impacted include Hawaii, San
Francisco and Orlando with most of the attrition related to group
cancellations. Despite the near-term weakness, however, demand
trends for November and December (55% of estimated Q4 EBITDA
combined) remain steady, as group bookings and leisure demand
continue to hold.
Hurricane IdaThe 1,622-room Hilton New Orleans
Riverside hotel sustained minimal damage from Hurricane Ida and the
category 4 storm’s impact and effects on the region. Minor physical
damage included limited water intrusion and cosmetic exterior
damage. The hotel is now operating with permanent power and water
supply, and is currently accommodating emergency first responders,
displaced residents and hotel staff. With respect to Park’s assets
in the Northeast, there was no damage to any of its hotels in the
New York or Boston metro areas as the remnants of Hurricane Ida
moved across the region.
Liquidity UpdateFollowing the sale of the Le
Meridien San Francisco, the Company has just $78 million
outstanding on its sole remaining corporate term loan. As of August
31, 2021, Park had estimated liquidity of approximately $1.8
billion, including estimated cash and cash equivalents of $769
million and $1.075 billion of available capacity remaining under
the Company’s revolving credit facility.
Forward-Looking StatementsThis 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
Park’s current expectations regarding the performance of and impact
to the Company’s business and financial conditions. 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. Currently, one of the most
significant factors continues to be the adverse effect of COVID-19,
including possible resurgences, on the Company’s financial
condition, results of operations, cash flows and performance, its
hotel management companies and its hotels’ tenants, and the global
economy and financial markets. COVID-19 has significantly affected
the Company’s business, and the extent to which COVID-19 continues
to affect the Company, its hotel managers, tenants and guests at
the Company’s hotels will depend on future developments, which are
highly uncertain and cannot be predicted with confidence, including
the scope, severity and duration of the pandemic, the actions taken
to contain the pandemic or mitigate its effect, the emergence of
virus variants, the efficacy, availability and deployment of
vaccinations and other treatments to combat COVID-19, including
public adoption rates of COVID-19 vaccines, additional closures
that may be mandated or advisable even after the reopening of
certain of the Company’s hotels on a limited basis, whether due to
an increased number of COVID-19 cases or otherwise, and the direct
and indirect economic effects of the pandemic and containment
measures, among others. Moreover, investors are cautioned to
interpret many of the risks identified in the risk factors included
in the Company’s Annual Report on Form 10-K for the year ended
December 31, 2020 as being heightened as a result of the ongoing
and numerous adverse impacts of COVID-19.
Forward-looking statements involve risks, uncertainties and
assumptions. Actual results may 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, 2020, 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.
About Park Hotels &
ResortsPark is the second largest publicly traded
lodging REIT with a diverse portfolio of market-leading hotels and
resorts with significant underlying real estate value. Park’s
portfolio currently consists of 55 premium-branded hotels and
resorts with over 32,000 rooms primarily located in prime city
center and resort locations. Visit www.pkhotelsandresorts.com for
more information.
PARK HOTELS & RESORTS
INC.NON-GAAP FINANCIAL MEASURES
RECONCILIATIONSHOTEL EBITDA, PRO-FORMA HOTEL
ADJUSTED EBITDA ANDPRO-FORMA HOTEL
REVENUES
(unaudited, in millions) |
|
|
|
|
Month EndedJuly 31, 2021 |
Hotel net income |
|
$ |
13 |
|
Depreciation and amortization expense |
|
|
23 |
|
Interest expense |
|
|
9 |
|
Hotel
EBITDA |
|
|
45 |
|
Gain on sale of assets |
|
|
(1 |
) |
Hotel Adjusted
EBITDA |
|
|
44 |
|
Less: Adjusted EBITDA from hotels disposed of |
|
− |
Pro-forma Hotel Adjusted
EBITDA |
|
$ |
44 |
|
(unaudited, in millions) |
|
|
|
|
Month EndedJuly 31, 2021 |
Total Revenues |
|
$ |
165 |
|
Less: Other revenue |
|
|
(5 |
) |
Less: Revenues from hotels disposed of |
|
|
(3 |
) |
Pro-forma Hotel
Revenues |
|
$ |
157 |
|
PARK HOTELS & RESORTS
INC.DEFINITIONS
EBITDA and Hotel Adjusted EBITDA
Hotel earnings before interest expense, taxes and depreciation
and amortization (“Hotel EBITDA”), presented herein, reflects net
income excluding depreciation and amortization, interest income,
interest expense and income taxes of the Company’s consolidated
hotels. Hotel Adjusted EBITDA is Hotel EBITDA further adjusted to
exclude items that management believes are not representative of
the Company’s consolidated hotels current or future operating
performance and is a key measure of the Company’s consolidated
hotels 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 EBITDA and Hotel Adjusted EBITDA are not recognized terms
under United States (“U.S.”) GAAP and should not be considered as
an alternative to net income or other measures of financial
performance or liquidity derived in accordance with U.S. GAAP. In
addition, the Company’s definition of Hotel EBITDA and Hotel
Adjusted EBITDA may not be comparable to similarly titled measures
of other companies.
The Company believes that Hotel EBITDA and Hotel Adjusted EBITDA
provides useful information to investors about the Company and its
financial condition and results of operations for the following
reasons: (i) Hotel EBITDA and Hotel Adjusted EBITDA 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)
Hotel EBITDA and Hotel Adjusted EBITDA are frequently used by
securities analysts, investors and other interested parties as
common performance measures to compare results or estimate
valuations across companies in the industry.
Hotel EBITDA and Hotel Adjusted EBITDA 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.
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. Room nights available to guests have not been
adjusted for suspended or reduced operations at certain of Park’s
hotels as a result of COVID-19. 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 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. Room nights available to guests have not
been adjusted for suspended or reduced operations at certain of
Park’s hotels as a result of COVID-19. 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.
Pro-forma
The Company presents certain data for its consolidated hotels on
a pro-forma hotel basis as supplemental information for investors:
Pro-forma Hotel Revenues, Pro-forma RevPAR, Pro-forma Occupancy,
Pro-forma ADR and Pro-forma Hotel Adjusted EBITDA. The Company
presents pro-forma hotel results to help the Company and its
investors evaluate the ongoing operating performance of its hotels.
The Company’s pro-forma metrics exclude results from property
dispositions that have occurred through September 7, 2021 and
include results from property acquisitions as though such
acquisitions occurred on the earliest period presented.
For more information, contact:Ian
WeissmanSenior Vice President, Corporate
Strategy571-302-5591iweissman@pkhotelsandresorts.com
For additional information or to receive press
releases via e-mail, please visit our website
atwww.pkhotelsandresorts.com
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