Park Hotels & Resorts Inc. Reports Third Quarter 2019 Results

TYSONS, Va.--(BUSINESS WIRE)-- Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE: PK) today announced results for the third quarter ended September 30, 2019. Highlights include:

Third Quarter 2019 Highlights

• Park Comparable RevPAR was $183.51, an increase of 1.9% from the same period in 2018;
• Park Comparable RevPAR increased 2.6% from the same period in 2018, excluding Florida renovation displacement and disruption from Hurricane Dorian;
• Park Comparable Total RevPAR was $274.95, an increase of 4.9% from the same period in 2018;
• Net income was $9 million and net income attributable to stockholders was $5 million;
• Adjusted EBITDA was $180 million;
• Park Comparable Hotel Adjusted EBITDA margin was 28.1%, an increase of 20 bps from the same period in 2018;
• Adjusted FFO attributable to stockholders was $140 million;
• Diluted earnings per share was $0.02;
• Diluted Adjusted FFO per share was $0.68; and
• Completed the $2.5 billion acquisition of Chesapeake Lodging Trust (“Chesapeake”) on September 18, 2019.

Thomas J. Baltimore, Jr., Chairman, President and Chief Executive Officer, stated, “I am pleased to announce results for another solid quarter with Park Comparable RevPAR increasing 1.9%, and RevPAR index share increasing by an impressive 350 basis points driven by our strong group base and diversified platform that helped offset a challenging transient demand environment. Despite these challenges, the portfolio is still delivering margin growth due in part to relentless efforts from our aggressive asset management initiatives. I am also extremely excited by our strategic acquisition of Chesapeake Lodging Trust. We acquired an exceptional portfolio of 18 hotels, which accelerates the Company’s strategic goals of upgrading the quality of the portfolio and achieving brand, operator and geographic diversity. This exciting acquisition positions the Company to drive superior, risk-adjusted earnings growth as we apply the success we have demonstrated within the legacy Park portfolio to this high-quality portfolio.”

Selected Statistical and Financial Information

The amounts below, except Park comparable metrics, include the results from the 18 hotels acquired from Chesapeake for the 13 days in the third quarter following the acquisition. For additional information regarding the operating performance of the 18 Chesapeake hotels and total pro-forma comparable metrics, see Pro-forma Selected Statistical and Financial Information later in this release.

(unaudited, dollars in millions, except RevPAR and ADR)

Park Comparable Hotels by Market

Highlights of the Company’s key markets, excluding the 18 hotels acquired from Chesapeake, include:

• Hawaii: RevPAR increased 13.0% for the quarter and 4.5% year-to-date, primarily due to an increase in rate and occupancy from both group and transient business at the Hilton Waikoloa Village which previously experienced disruption caused by the 2018 volcanic activity on the Big Island;
• Northern California: RevPAR decreased 3.1% for the quarter primarily as a result of a decrease in transient revenue resulting from lower rates, partially offset by an increase in group business. On a year-to-date basis, RevPAR increased 5.3% primarily due to a combined 23.0% increase in group revenue at the Hilton San Francisco Union Square and Parc 55 San Francisco;
• Florida: RevPAR decreased 6.0% for the quarter and 0.9% year-to-date primarily due to renovation displacement at The Reach, a Waldorf Astoria Resort, which is undergoing a conversion to a Curio branded hotel and rooms renovation at the Hilton Orlando Bonnet Creek in connection with its conversion to a Signia Hilton branded hotel. The decrease in transient revenue at Park’s Florida hotels was partially offset by an increase in group revenue at the Waldorf Astoria Orlando due to an increase in group demand and an increase in transient demand at Casa Marina, A Waldorf Astoria Resort for the quarter and year-to-date as well as an increase in group demand for the quarter;
• New Orleans: RevPAR increased 10.8% for the quarter and 1.3% year-to-date primarily due to an increase in group revenue as a result of an increase in demand and rate;
• Chicago: RevPAR decreased 4.8% during the quarter and 3.6% year-to-date as a result of a decrease in transient revenue;
• New York: RevPAR increased 1.3% for the quarter primarily due to an increase in both group and contract revenue as a result of an increase in demand, and decreased 0.5% year-to-date primarily due to a decline in rate as a result of a decrease in transient demand;
• Southern California: RevPAR increased 4.0% for the quarter and 10.6% year-to-date primarily as a result of an increase in occupancy and rate at the Hilton Santa Barbara Beachfront Resort following the renovation and repositioning of the hotel completed in April 2018; and
• Washington, D.C.: RevPAR increased 5.5% for the quarter and 1.1% year-to-date primarily due to an increase in transient rate.

Insurance Update

In September 2017, Hurricanes Irma and Maria caused damage and disruption at the Caribe Hilton in San Juan Puerto Rico and Park’s two hotels in Key West, Florida. The Caribe Hilton, which was closed throughout 2018, reopened on June 19, 2019.

For the third quarter, Park recognized $6 million in business interruption proceeds for the Caribe Hilton for a total of $8 million of business interruption proceeds year-to-date. To date, Park has received approximately $137 million of insurance proceeds for the Caribe Hilton and $8 million of insurance proceeds related to property damage for both the Key West hotels. Park expects to finalize the insurance claims related to its Puerto Rico and Key West hotels by the end of 2019.

Capital Investments

Excluding the redevelopment of the Caribe Hilton, Park invested $48 million in the third quarter on capital improvements at its hotels, including $30 million on improvements made to guest rooms, meeting spaces and other guest-facing areas. Key projects for the quarter included:

• Hilton Orlando Bonnet Creek: $12 million primarily on meeting room and guest room renovations as part of its planned conversion to a Signia Hilton branded hotel, which is expected to occur by early 2021;
• Hilton Hawaiian Village Waikiki Beach Resort: $7 million primarily on guest room renovations in the Tapa Tower;
• Hilton New Orleans Riverside: $4 million primarily on guest room renovations;
• The Reach, a Waldorf Astoria Resort: $4 million primarily on guest room renovations in anticipation of conversion of the hotel to the Curio brand, which is expected to be completed by the end of 2019; and
• Hilton Boston Logan Airport: $3 million primarily on guest room renovations.

Dispositions

In November 2019, Park executed an agreement to sell the 182-room Ace Hotel and Theater Downtown Los Angeles for a sales price of $117 million, or $643,000 per key. Park also executed an agreement to sell the 503-room Hilton São Paulo Morumbi for a sales price of approximately $125 million, or $249,000 per key. Both of these hotel sales will be payable in cash at closing and are subject to customary closing adjustments.

In October 2019, Park executed an agreement to terminate the ground lease on the Hilton Sheffield Hotel. The termination is expected to occur prior to January 31, 2020.

In July 2019, Park and other owners of the entity that owns the Conrad Dublin, entered into an agreement to sell their ownership interests in the entity for a gross sales price of approximately $127 million. Park’s pro-rata share of the gross sales price is approximately $61 million. Proceeds are payable in cash at closing and are subject to customary pro rations and adjustments. The sale is currently anticipated to close in November 2019.

Upon the sales of the Conrad Dublin and the Hilton Sao Paulo Morumbi, and the termination of the Hilton Sheffield Hotel ground lease, Park will no longer have any international hotels in its portfolio.

Acquisitions

On September 18, 2019, Park completed the acquisition of Chesapeake for total consideration of approximately $2.5 billion, including acquisition costs, and acquired a 100% ownership interest in the following 18 hotels:

Pro-forma Selected Statistical and Financial Information

(unaudited, dollars in millions, except RevPAR and ADR)

Balance Sheet and Liquidity

Park had the following debt outstanding as of September 30, 2019, which includes debt issued and assumed as part of the acquisition of Chesapeake:

Total cash and cash equivalents were $364 million as of September 30, 2019, including $43 million of restricted cash.

Dividends

Park declared a third quarter 2019 cash dividend of $0.45 per share to stockholders of record as of September 30, 2019. The third quarter 2019 cash dividend was paid on October 15, 2019.

Park plans to declare its fourth quarter dividend before the end of 2019 and currently expects such dividend to be in the range of $0.50 per share and $0.60 per share, subject to approval by its Board of Directors.

Full-Year 2019 Outlook

The 2019 outlook includes projected Chesapeake results from the date of acquisition through the remainder of 2019 for net income, EBITDA and FFO. Hilton Waikoloa Village is included in Park’s 2019 comparable hotels as its room count is expected to remain consistent throughout 2019 as compared to 2018. Park expects the full-year 2019 operating results to be as follows:

Full-year 2019 guidance is based in part on the following assumptions:

• General and administrative expenses are projected to be $43 million, excluding $65 million of acquisition costs, $16 million of non-cash share-based compensation expense, $4 million of disposition costs and $1 million of severance expense;
• Fully diluted weighted average shares are expected to be 212.7 million;
• Comparable RevPAR for the fourth quarter of 2019 is expected to be flat compared to the fourth quarter of 2018;
• Includes $8 million of Adjusted EBITDA from the Caribe Hilton representing a partial year of operations, for which Park expects to be covered by business interruption insurance resulting from the hotel being closed for a portion of 2019 following the damage caused by Hurricane Maria; and
• Does not take into account potential future acquisitions and dispositions, including those currently under contract, which could result in a material change to Park’s outlook.

Park’s full-year 2019 guidance is based on many factors, many of which are outside the Company’s control and all of which are subject to change. Park may change the guidance provided during the year as actual and anticipated results vary from these assumptions.

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 third quarter 2019 results on Thursday, November 7, 2019 beginning at 10:00 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’ Third Quarter 2019 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 and transcript 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 Park’s current expectations regarding the performance of its business, financial results, liquidity and capital resources, the effects of competition and the effects of future legislation or regulations, 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” or the negative version of these words or other comparable words.

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, 2018, 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, and Hotel Adjusted EBITDA margin. 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 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 66 premium-branded hotels and resorts with over 35,000 rooms primarily located in prime city center and resort locations, which includes 18 hotels with approximately 6,000 rooms acquired in the Chesapeake Lodging Trust acquisition. Visit www.pkhotelsandresorts.com for more information.