Park Hotels & Resorts Inc. Reports Second Quarter 2018 Results

Park Hotels & Resorts Inc. (“Park” or the “Company”) (NYSE: PK) today
announced results for the second quarter ended June 30, 2018. Highlights

Second Quarter 2018 Highlights

Thomas J. Baltimore, Jr., Chairman, President and Chief Executive
Officer, stated, “I am extremely pleased to announce a very strong
quarter, which highlights the benefits of a robust group base for our
portfolio. We continue to execute against our internal growth strategies
of grouping up, improving margins and recycling capital. Group pace
continues to accelerate, up almost 5% for the year and improving to over
9% for 2019, while margins increased 150 bps during the quarter. We
continue to take advantage of strong demand for hotel real estate by
selling our JV interest in the Hilton Berlin at a significant EBITDA
multiple of 20x, while initiating the second phase of our non-core hotel
sales. Overall, we are encouraged by our results and while we expect our
second quarter to be our strongest this year, our outlook remains
positive for the second half with fundamentals continuing to improve and
the transaction market accelerating.”

Selected Statistical and Financial Information(unaudited,
amounts in millions, except per share data, Comparable RevPAR and
Comparable ADR)


Top 10 Hotels

RevPAR at Park’s Top 10 Hotels, which account for approximately 70% of
Hotel Adjusted EBITDA, increased 6% during the quarter and 3.8%
year-to-date, primarily due to increases in occupancy and rate, as
compared to the same period in 2017. Highlights within the Top 10 Hotels

Total Consolidated Comparable Hotels

Comparable RevPAR increased 4.3% for the quarter and 2.8% year-to-date
primarily due to a 3.1% and 2.1% increase in rate, respectively, and
1.0% pts and 0.5% pts increase in occupancy, respectively, as compared
to the same periods in 2017. Group rooms revenue increased 4.2% for the
quarter and 2.6% year-to-date, offset by a 4.7% and 1.8% decline in
transient rooms revenue, respectively, as compared to the same periods
in 2017. The overall increase in RevPAR was a result of both increases
in occupancy and ADR at Park’s Northern California, Hawaii, Chicago, and
New York hotels during those periods, primarily attributable to
increases in group business at urban and resort hotels in these markets.
The overall increase in RevPAR for Park’s comparable hotels during both
periods was partially offset by a decline in RevPAR for its Southern
California hotels primarily from renovation displacement at the Hilton
Santa Barbara Beachfront Resort; these renovations were completed in
April 2018.

Hurricanes Irma and Maria

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. Park expects the Caribe Hilton to remain
closed for almost all of 2018 and the results of operations of that
property are presented as non-comparable. Full year 2017 EBITDA at the
Caribe Hilton, prior to the hurricanes, was projected to be $8 million.

Park expects that insurance proceeds, excluding any applicable insurance
deductibles, will be sufficient to cover a significant portion of the
property damage to the hotels and loss of business. To date, Park has
received $65 million of insurance proceeds for both Key West hotels and
the Caribe Hilton, including $25 million received in the second quarter.
These insurance proceeds included $7 million received for business
interruption at the Caribe Hilton in the second quarter, which, when
netted against fees and expenses, equates to approximately $5 million of
Adjusted EBITDA for the second quarter. An additional advance of $25
million for the Caribe Hilton has been submitted, and Park expects to
receive cash proceeds during the third quarter.


During the six months ended June 30, 2018, Park completed the sale of
the following 12 consolidated hotels in four separate transactions (the
results of these hotels are presented as non-comparable), and its
interests in one unconsolidated joint venture:


Balance Sheet and Liquidity

Park had the following debt outstanding as of June 30, 2018:

June 30, 2018

Commercial mortgage-backed securities loan

Commercial mortgage-backed securities loan


Total cash and cash equivalents were $438 million as of June 30, 2018,
including $17 million of restricted cash.

Capital Investments

Park invested $33 million in the second quarter (and $81 million
year-to-date) on capital improvements at its hotels, including $16
million on improvements made to guest rooms, lobbies and other
guest-facing areas. Key projects include:


Park declared a second quarter 2018 cash dividend of $0.43 per share to
stockholders of record as of June 29, 2018. Additionally, in May 2018,
following the sale of the Hilton Berlin, Park declared a special cash
dividend of $0.45 per share to stockholders of record as of June 29,
2018. Both the second quarter 2018 dividend and the special dividend
were paid on July 16, 2018.

On July 26, 2018, Park declared a third quarter 2018 cash dividend of
$0.43 per share to be paid on October 15, 2018 to stockholders of record
as of September 28, 2018.

Full Year 2018 Outlook

Park has updated its 2018 guidance that was previously provided on May
3, 2018. Park now expects the full year 2018 operating results to be as

as of August 1, 2018

as of May 3, 2018

Full year 2018 guidance is based in part on the following assumptions:

Supplemental Disclosures

In conjunction with this release, Park has furnished a financial
supplement with additional disclosures on its website. Visit
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 second quarter 2018 results on Thursday, August 2,
2018 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
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’ Second Quarter 2018 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

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, the expected completion of anticipated acquisitions and
dispositions, the declaration and payment of future dividends 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, 2017, as such factors may be updated from time to time in
Park’s periodic filings with the SEC, which are accessible on the SEC’s
website at
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 a leading lodging REIT with a diverse portfolio of hotels and
resorts with significant underlying real estate value. Park’s portfolio
consists of 54 premium-branded hotels and resorts with over 32,000
rooms, a majority of which are located in prime United States markets
with high barriers to entry.

Common stock, par value $0.01 per share, 6,000,000,000 shares
authorized, 201,253,015 shares issued and 201,178,717 shares
outstanding as of June 30, 2018 and 214,873,778 shares issued and
214,845,244 shares outstanding as of December 31, 2017

Interest expense, income tax and depreciation and amortization
included in equity in earnings from investments in affiliates


Included in other gain (loss), net.

(1) Includes other revenue and other expense,
non-income taxes on REIT leases included in other
property-level expense and corporate general and
administrative expense.


Depreciation and amortization expense attributable to
noncontrolling interests



Interest expense, income tax and depreciation and amortization
included in equity in earnings from investments in affiliates


Depreciation and amortization expense attributable to
noncontrolling interests



EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and
Hotel Adjusted EBITDA Margin

Earnings before interest expense, taxes and depreciation and
amortization (“EBITDA”), presented herein, reflects net income excluding
depreciation and amortization, interest income, interest expense, income
taxes and interest expense, income tax and depreciation and amortization
included in equity in earnings from investments in affiliates.

Adjusted EBITDA, presented herein, is calculated as EBITDA, as
previously defined, further adjusted to exclude:

Hotel Adjusted EBITDA measures hotel-level results before debt service,
depreciation and corporate expenses of the Company’s consolidated
hotels, including both comparable and non-comparable hotels but
excluding hotels owned by unconsolidated affiliates, and is a key
measure of the Company’s 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 Adjusted EBITDA margin is calculated as Hotel Adjusted EBITDA
divided by total hotel revenue.

EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA
margin are not recognized terms under United States (“U.S.”) GAAP and
should not be considered as alternatives to net income (loss) or other
measures of financial performance or liquidity derived in accordance
with U.S. GAAP. In addition, the Company’s definitions of EBITDA,
Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin
may not be comparable to similarly titled measures of other companies.

The Company believes that EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA
and Hotel Adjusted EBITDA margin provide useful information to investors
about the Company and its financial condition and results of operations
for the following reasons: (i) EBITDA, Adjusted EBITDA, Hotel Adjusted
EBITDA and Hotel Adjusted EBITDA margin 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) EBITDA, Adjusted EBITDA, Hotel Adjusted
EBITDA and Hotel Adjusted EBITDA margin are frequently used by
securities analysts, investors and other interested parties as a common
performance measure to compare results or estimate valuations across
companies in the industry.

EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA
margin 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.

NAREIT FFO attributable to stockholders, Adjusted
FFO attributable to stockholders NAREIT FFO per share – diluted and
Adjusted FFO per share – diluted

NAREIT FFO attributable to stockholders and NAREIT FFO per diluted share
(defined as set forth below) are presented herein as non-GAAP measures
of the Company’s performance. The Company calculates funds from
operations (“FFO”) attributable to stockholders for a given operating
period in accordance with standards established by the National
Association of Real Estate Investment Trusts (“NAREIT”), as net income
or loss attributable to stockholders (calculated in accordance with U.S.
GAAP), excluding depreciation and amortization, gains or losses on sales
of assets, impairment, and the cumulative effect of changes in
accounting principles, plus adjustments for unconsolidated joint
ventures. Adjustments for unconsolidated joint ventures are calculated
to reflect the Company’s pro rata share of the FFO of those entities on
the same basis. As noted by NAREIT in its April 2002 “White Paper on
Funds From Operations,” since real estate values historically have risen
or fallen with market conditions, many industry investors have
considered presentation of operating results for real estate companies
that use historical cost accounting to be insufficient by themselves.
For these reasons, NAREIT adopted the FFO metric in order to promote an
industry-wide measure of REIT operating performance. The Company
believes NAREIT FFO provides useful information to investors regarding
its operating performance and can facilitate comparisons of operating
performance between periods and between REITs. The Company’s
presentation may not be comparable to FFO reported by other REITs that
do not define the terms in accordance with the current NAREIT
definition, or that interpret the current NAREIT definition differently.
The Company calculates NAREIT FFO per diluted share as NAREIT FFO
divided by the number of fully diluted shares outstanding during a given
operating period.

The Company also presents Adjusted FFO attributable to stockholders and
Adjusted FFO per diluted share when evaluating its performance because
management believes that the exclusion of certain additional items
described below provides useful supplemental information to investors
regarding the Company’s ongoing operating performance. Management
historically has made the adjustments detailed below in evaluating its
performance and in its annual budget process. Management believes that
the presentation of Adjusted FFO provides useful supplemental
information that is beneficial to an investor’s complete understanding
of operating performance. The Company adjusts NAREIT FFO attributable to
stockholders for the following items, which may occur in any period, and
refers to this measure as Adjusted FFO attributable to stockholders:


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.
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. 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 for comparable hotels.

References to RevPAR and ADR are presented on a currency neutral basis
(prior periods are reflected using current period exchange rates),
unless otherwise noted.

Comparable Hotels

The Company presents certain data for its consolidated hotels on a
comparable hotel basis as supplemental information for investors. The
Company defines its comparable hotels as those that: (i) were active and
operating in its portfolio since January 1st of the previous year; and
(ii) have not sustained substantial property damage, business
interruption, undergone large-scale capital projects or for which
comparable results are not available. The Company presents comparable
hotel results to help the Company and its investors evaluate the ongoing
operating performance of its comparable hotels. Of the 46 hotels that
are consolidated as of June 30, 2018, 44 hotels have been classified as
comparable hotels. Due to the conversion, or planned conversions, of a
significant number of rooms at the Hilton Waikoloa Village in 2017 to
HGV timeshare units, and due to the effects of the hurricane at the
Caribe Hilton in Puerto Rico and the expected continued effects from
business interruption in 2018, the results from these properties were
excluded from comparable hotels. The Company’s comparable hotels also
exclude the 12 consolidated hotels that were sold in January and
February 2018.

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