Park Hotels & Resorts Inc. 10-K

Item 5. Market for Regist rant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock trades on the NYSE under the symbol "PK". Shareholder Information At February 11, 2022, we had 12 holders of record of our common stock. However, because our common stock is held by brokers and other institutions on behalf of stockholders, we believe there are substantially more beneficial holders of our common stock than record holders. In order to comply with certain requirements related to our qualification as a REIT, subject to certain exceptions, our amended and restated certificate of incorporation provides that no person may own, or be deemed to own by virtue of the attribution provisions of the Code, more than 9.8% (in value or by number of shares, whichever is more restrictive) of our outstanding common stock or more than 9.8% (in value or by number of shares, whichever is more restrictive) of any outstanding class or series of our preferred stock. Distribution Information In order to maintain our qualification for taxation as a REIT, we intend to distribute annually at least 90% of our REIT taxable income (determined without regard to the deduction for dividends paid and excluding any net capital gain). To avoid paying tax on our income, we intend to make distributions of all, or substantially all, of our REIT taxable income (including net capital gains) to our stockholders. Prior to the COVID-19 pandemic, we regularly declared quarterly cash dividends. However, in light of COVID-19, after the payment of the first quarter 2020 dividend, we suspended our quarterly dividend. We are currently evaluating the reinstatement of a quarterly cash distribution of $0.01 per share, subject to approval by our Board of Directors. Any such distribution and any future distributions will be at the sole discretion of our Board of Directors. When determining the amount of future distributions, we expect that our Board of Directors will consider, among other factors, (1) the amount required to be distributed to maintain our status as a REIT, (2) limitations on our ability to make distributions contained in the indentures for the Senior Secured Notes and in our credit facilities, which restrict our ability to make distributions subject to limited exceptions, including permitting us to make cash distributions of $0.01 per share per fiscal quarter and distributions to the extent required to maintain our status as a REIT, (3) the amount of cash generated from our operating activities, (4) our expectations of future cash flows, (5) our determination of near-term cash needs for debt repayments, existing or future share repurchases, and selective acquisitions of new properties, (6) the timing of significant capital investments and expenditures and the establishment of any cash reserves, (7) our ability to continue to access additional sources of capital, and (8) the sufficiency of legally available assets. 32 Share Performance Graph The following graph compares our cumulative total stockholder return since January 4, 2017 (the day our stock began “regular way” trading on the NYSE) against the cumulative total returns of the National Association of Real Estate Investment Trust (“Nareit”) Equity Index and the Standard and Poor’s MidCap 400 Index (“S&P 400 Index”). The graph assumes an initial investment of $100 in our common stock and each of the indexes on January 4, 2017, and that all dividends and other distributions were reinvested. 1/4/2017 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 Park Hotels and Resorts Inc. $ 100.00 $ 111.56 $ 108.81 $ 117.89 $ 84.45 $ 92.97 S&P 400 Index 100.00 112.07 98.07 121.65 136.02 167.59 Nareit Equity Index 100.00 105.23 100.36 126.45 116.34 166.64 This performance graph shall not be deemed "filed" for the purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing by us under the Securities Act, except as shall be expressly set forth by specific reference in such filing. Unregistered Sales of Equity Securities We did not sell any equity securities during the fiscal year ended December 31, 2021 that were not registered under the Securities Act of 1933, as amended. Use of Proceeds from Registered Securities We did not receive any proceeds from registered securities during the fiscal year ended December 31, 2021. 33 Purchases of Equity Securities by the Issuer and Affiliate Purchasers Record Date Total number of shares purchased (1) Weighted average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of common shares that may yet be purchased under the plans or programs (3) (in millions) January 1, 2021 through January 31, 2021 3 $ 17.15 — $ 234 February 1, 2021 through February 28, 2021 95,565 $ 20.91 — $ 234 March 1, 2021 through March 31, 2021 392 $ 21.15 — $ — April 1, 2021 through April 30, 2021 230 $ 21.82 — $ — May 1, 2021 through May 31, 2021 58 $ 22.31 — $ — June 1, 2021 through June 30, 2021 50 $ 20.52 — $ — July 1, 2021 through July 31, 2021 168 $ 20.33 — $ — August 1, 2021 through August 31, 2021 31 $ 17.63 — $ — September 1, 2021 through September 30, 2021 6,659 $ 19.42 — $ — October 1, 2021 through October 31, 2021 42 $ 19.92 — $ — November 1, 2021 through November 30, 2021 21 $ 19.61 — $ — December 1, 2021 through December 31, 2021 — $ — — $ — 103,219 — (1) The number of shares purchased represents shares of common stock surrendered by certain of our employees to satisfy their federal and state tax obligations associated with the vesting of restricted common stock. (2) The weighted average price paid per share for shares of common stock surrendered by certain employees is based on the closing price of our common stock on the trading date immediately prior to the date of delivery of the shares. (3) The stock repurchase program authorized in February 2019 for the repurchase of up to $300 million of the Company’s common stock expired on February 28, 2021. Stock Repurchase Program In February 2019, our Board of Directors approved a stock repurchase program allowing us to repurchase up to $300 million of our common stock over a two-year period, which ended in February 2021. Stock repurchases were made through open market purchases, in privately negotiated transactions, or in such other manner that complied with applicable securities laws. The timing of stock repurchases and the number of shares repurchased were dependent upon prevailing market conditions and other factors. During the three months ended March 31, 2020, we repurchased 4.6 million shares of our common stock for a total purchase price of $66 million. No additional common stock was repurchased during 2020 or in the first two months of 2021 prior to the expiration of this stock repurchase program. We may make future stock repurchases, subject to the approval of a new stock repurchase program by our Board of Directors. Item 6. [Reserved] 34 Item 7. Management’s Discuss ion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements, related notes included thereto and Item 1A., “Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K. For the discussion and analysis of our 2019 financial condition and results of operations compared to 2020, refer to Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2020. Overview We have a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value. We currently hold investments in entities that have ownership or leasehold interests in 54 hotels, consisting of premium-branded hotels and resorts with approximately 32,000 rooms, of which over 86% are luxury and upper upscale and all are located in prime U.S. markets and its territories. Our high-quality portfolio includes hotels in major urban and convention areas, such as New York City, Washington, D.C., Chicago, San Francisco, Boston, New Orleans and Denver; premier resorts in key leisure destinations, including Hawaii, Orlando, Key West and Miami Beach; and hotels adjacent to major gateway airports, such as Los Angeles International, Boston Logan International and Miami International, as well as hotels in select suburban locations. Our objective is to be the preeminent lodging real estate investment trust (“REIT”), focused on consistently delivering superior, risk-adjusted returns to stockholders through active asset management and a thoughtful external growth strategy while maintaining a strong and flexible balance sheet. As a pure-play real estate company with direct access to capital and independent financial resources, we believe our enhanced ability to implement compelling return on investment initiatives within our portfolio represents a significant embedded growth opportunity. Finally, given our scale and investment expertise, we believe we will be able to successfully execute single-asset and portfolio acquisitions and dispositions to further enhance the value and diversification of our assets throughout the lodging cycle, including potentially taking advantage of the economies of scale that could come from consolidation in the lodging REIT industry. We operate our business through two operating segments, our consolidated hotels and unconsolidated hotels. Our consolidated hotels operating segment is our only reportable segment. Refer to Note 14: “Geographic and Business Segment Information” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information regarding our operating segments. Basis of Presentation The consolidated financial statements reflect our financial position, results of operations and cash flows, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Refer to Note 2: “Basis of Presentation and Summary of Significant Accounting Policies” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information. 35 COVID-19 Operational Update The global outbreak of a novel strain of coronavirus and the disease it causes (“COVID-19”) has had and continues to have a significant effect on the lodging industry and our business. We cannot presently determine the extent or duration of the overall operational and financial effects that COVID-19 will have on our business. In March and April 2020, travel restrictions and mandated closings of non-essential businesses were imposed, which resulted in temporary suspensions of operations at a majority of our hotels, all except two of which have now reopened. Temporary closings of restaurants and hotels as well as travel restrictions across entire regions also contributed to severely reduced overall lodging demand. The effects of COVID-19 continue to have a significant adverse effect on the hospitality industry, including our business; however, the increase in vaccination rates across the country and the easing or removal of restrictions, quarantining, and “social distancing” mandates resulted in increased travel and hospitality spending beginning in the second quarter of 2021 as compared to the same period in 2020. In December 2021, the rapid rise in COVID-19 cases from the Omicron variant resulted in additional group cancellations and cautious business travel sentiment during the first quarter of 2022, labor disruptions throughout the travel industry resulting in widespread airline cancellations and hotel staff shortages, and re-imposed restrictions on gatherings and business events by an increasing number of jurisdictions. Despite the near-term reduction in demand due to the seasonal decline in leisure travel following the holiday season and the delay in return of business travel, coupled with concerns over the spread of the Omicron variant and related travel restrictions, we expect a broader based recovery to continue beginning in the second quarter of 2022 a s leisure demand trends and group booking activity continue to improve. We expect to see a return of group demand beginning in the second quarter of 2022 in select markets as groups continued to push out meetings originally scheduled for the second half of 2021 into 2022. Beginning in March 2020, we experienced a significant decline in occupancy, Average Daily Rate (“ADR”) and Revenue per Available Room (“RevPAR”) associated with the COVID-19 pandemic throughout our consolidated portfolio, which has resulted in a decline in our operating cash flow. As distribution of the COVID-19 vaccine continues, we have seen improvement in traveler sentiment, and as a result, an improvement in occupancy, ADR and RevPAR during 2021. Changes in our 2021 pro-forma metrics, which exclude results from properties disposed of and include results from properties acquired as of February 18, 2022, as compared to the same periods in 2019 and 2020, respectively, and pro-forma occupancy are as follows: Change in Pro-forma ADR Change in Pro-forma Occupancy Change in Pro-forma RevPAR 2021 vs. 2020 2021 vs. 2019 2021 vs. 2020 2021 vs. 2019 2021 vs. 2020 2021 vs. 2019 2021 Pro-forma Occupancy Q1 2021 (28.9 )% (30.6 )% (35.0 )% pts (50.7 )% pts (69.3 )% (76.2 )% 26.6 % Q2 2021 44.8 (16.7 ) 36.1 (43.4 ) 897.0 (58.9 ) 42.2 Q3 2021 50.0 (7.0 ) 32.2 (33.0 ) 301.6 (43.4 ) 51.3 October 2021 51.9 (13.8 ) 26.9 (34.3 ) 226.5 (48.7 ) 50.4 November 2021 59.3 (6.1 ) 32.4 (29.1 ) 321.8 (39.8 ) 52.1 December 2021 53.7 8.0 36.5 (20.9 ) 356.9 (21.7 ) 55.0 Q4 2021 55.8 (4.2 ) 31.9 (28.1 ) 297.9 (37.6 ) 52.5 We believe demand will remain significantly reduced as long as mandatory travel restrictions, “social distancing” and cost-saving or other measures, such as the postponing or cancelling of non-essential business travel, remain in place or if these restrictions tighten or demand for travel continues to be depressed due to virus variants. Although we were able to recommence operations at all except two of our previously suspended hotels by the end of 2021, there remains considerable uncertainty as to both the time it will take to see travel and demand for lodging and travel-related experiences to fully recover. If demand does not recover, or if virus variants increase or travel restrictions tighten, we may be required to suspend operations at additional hotels. Further, uncertainty as to the timing of when remaining restrictions will be removed generally will make it more difficult to execute on our external growth strategy . The uncertainties surrounding the COVID-19 pandemic recovery, including new variants, make it difficult to predict operating results for our hotels in 2022, thus there can be no assurances that we will not experience further declines in hotel revenues or earnings at our hotels. We and our hotel managers have taken various actions to mitigate the effects of the COVID-19 pandemic, including temporarily suspending operations at a majority of our hotels beginning in March 2020, limiting capacity at our open hotels, deferring approximately $150 million of capital expenditures planned for 2020, reducing capital expenditures for maintenance projects to approximately $44 million for 2021 and suspending our dividend after the first quarter of 2020. Additionally, as a precautionary measure to increase liquidity and preserve financial flexibility, we fully drew on our revolving credit facility ("Revolver") in 2020 and completed three corporate bond offerings totaling $2.1 billion in 2020 and 2021 and five asset sales in 2021, the proceeds of which were used to fully repay the Revolver and our term loan due December 2021 ("2016 Term Loan"), as well as a majority of our unsecured delayed draw term loan facility ("2019 Term Facility"). 36 Since originally suspending operations, we have commenced the phased reopening of all except two of our hotels. The timing of the reopening of these remaining hotels will depend primarily on government restrictions imposed or re-imposed and recovery in demand. The status of our hotels as of February 18, 2022 is as follows: Status Number of Hotels Total Rooms Consolidated Open 46 26,551 Consolidated Suspended 2 1,338 Total Consolidated 48 27,889 Unconsolidated Open 6 4,036 Total Hotels 54 31,925 In addition, the operating environment for us and our hotel managers has improved as government restrictions are lifted and demand for travel returns. Economic indicators such as GDP growth, corporate earnings, consumer confidence and employment are highly correlated with lodging demand and have generally returned to pre-pandemic levels. We expect the significance of the COVID-19 pandemic, including the extent of its effect on our financial and operational results, to be dictated by, among other things, its duration, the success of efforts to contain it, the emergence of virus variants, efficacy, availability and deployment of vaccinations and other treatments to combat COVID-19, including public adoption rates of COVID-19 vaccines, and the effect of actions taken in response (such as travel advisories and restrictions and social distancing), including the extent and duration of such actions. The extent and duration of the effects of COVID-19 are not yet clear. Despite cost reduction initiatives, we do not expect to be able to fully, or even materially, offset revenue losses from the COVID-19 pandemic. In addition, we cannot predict whether our reopened hotels will be forced to suspend operations again in the future or be subjected to operating restrictions following further outbreaks or variants of COVID-19. Principal Components of and Factors Affecting Our Results of Operations Revenues Revenues from our hotels are primarily derived from two categories of customers: transient and group, which historically have accounted for approximately two thirds and one third, respectively, of our rooms revenue. Transient guests are individual travelers who are traveling for business or leisure. Group guests are traveling for group events that reserve rooms for meetings, conferences or social functions sponsored by associations, corporate, social, military, educational, religious or other organizations. Group business usually includes a block of room accommodations, as well as other ancillary services, such as meeting facilities, catering and banquet services. A majority of our food and beverage sales and other ancillary services are provided to customers who also are occupying rooms at our hotels. As a result, occupancy affects all components of revenues from our hotels. Due to the effects of COVID-19, we have experienced a greater shift to transient business as a result of the cancellation or postponement of business conferences and other group events. Principal Components Rooms . Represents the sale of room rentals at our hotels and accounts for a substantial majority of our total revenue. Food and beverage . Represents revenue from group functions, which may include both banquet revenue and audio and visual revenue, as well as revenue from outlets such as restaurants and lounges at our hotels. Ancillary hotel. Represents revenue for guest services provided at our hotels, including parking, telecommunications, golf course and spa. Also includes tenant leases and other rental revenue. Other. Primarily related to support services we provide to Hilton Grand Vacations (“HGV”) timeshare properties that have a presence within or adjacent to certain of our hotels, which include cost reimbursements for the costs of providing housekeeping, landscaping, general maintenance and other services plus a fee representing a percentage of cost reimbursements. Also included in the comparative period, revenue from our laundry business prior to permanent suspension of operations in 2020. Factors Affecting our Revenues Consumer demand . Consumer demand for our products and services is closely linked to the performance of the general economy and is sensitive to business and personal discretionary spending levels. Leading indicators of demand include gross domestic product, non-residential fixed investment and the consumer price index. Declines in consumer demand due to adverse general economic conditions, reductions in travel patterns, lower consumer confidence, outbreaks of pandemic or contagious diseases, and adverse political conditions can lower the revenues and profitability of our hotels. Further, competition for guests and the supply of 37 services at our hotels affect our ability to sustain or increase rates charged to customers at our hotels. As a result, changes in consumer demand and general business cycles have historically subjected and could in the future subject our revenues to significant volatility. In addition, leisure travelers currently make up the majority of our transient demand. Therefore, we will be significantly more affected by trends in leisure travel than trends in business travel. Supply . New room supply is an important factor that can affect the lodging industry’s performance. Room rates and occupancy, and thus RevPAR, tend to increase when demand growth exceeds supply growth. The addition of new competitive hotels and resorts affects the ability of existing hotels and resorts to sustain or grow RevPAR, and thus profits. New development is determined largely by construction costs, the availability of financing and expected performance of existing hotels and resorts. Expenses Principal Components Rooms . These costs include housekeeping, reservation systems, room supplies, laundry services at our hotels and front desk costs. Food and beverage . These costs primarily include food, beverage and the associated labor and will correlate closely with food and beverage revenues. Other departmental and support . These costs include labor and other costs associated with other ancillary revenue, such as parking, telecommunications, golf course and spa, as well as labor and other costs associated with administrative departments, sales and marketing, repairs and minor maintenance and utility costs. Additionally, these costs include franchise fees and are generally computed as a percentage of rooms revenues. Refer to Item 1: “Business – Our Principal Agreements,” included elsewhere in this Annual Report on Form 10-K for additional information on franchise fees. Other property-level . These costs consist primarily of real and personal property taxes, other local taxes, ground rent, equipment rent and property insurance. Management fees . Base management fees are computed as a percentage of gross revenue. Incentive management fees generally are paid if specified financial performance targets are achieved. Refer to Item 1: “Business – Our Principal Agreements,” included elsewhere in this Annual Report on Form 10-K for additional information. Impairment and casualty loss, net. Impairment losses are non-cash expenses that are recognized when circumstances indicate that the carrying value of a long-lived asset is not recoverable. An impairment loss is recognized for the excess of the carrying value over the fair value of the asset. Casualty losses are expenses that represent losses incurred resulting from property damage or destruction caused by any sudden, unexpected or unusual event such as a hurricane. Casualty gains are insurance proceeds for property damage claims that are in excess of any associated impairment loss recognized and clean-up and recovery costs incurred, less any insurance deductible. Depreciation and amortization . These are non-cash expenses that primarily consist of depreciation of fixed assets such as buildings, furniture, fixtures and equipment at our hotels, as well as amortization of finite lived intangible assets. Corporate general & administrative. These costs include general and administrative expenses, including costs associated with the potential disposition of hotels. General and administrative expenses consist primarily of compensation expense for our corporate staff and personnel supporting our business, professional fees, travel and entertainment expenses, and office administrative and related expenses. Acquisition costs. These costs include expenses associated with our hotel acquisitions. Other. These costs include costs to provide support services to certain HGV timeshare properties. Also included in the comparative period, expenses for our laundry business prior to permanent suspension of operations in 2020. Factors Affecting our Costs and Expenses Variable expenses . Expenses associated with our room expense and food and beverage expense are mainly affected by occupancy and correlate closely with their respective revenues. These expenses can increase based on increases in salaries and wages, as well as on the level of service and amenities that are provided. Additionally, food and beverage expense is affected by the mix of business between banquet, catering and outlet sales. 38 Fixed expenses . Many of the other expenses associated with our hotels are relatively fixed. These expenses include portions of rent expense, property taxes and insurance. Since we generally are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, any resulting decline in our revenues can have a greater adverse effect on our net cash flow, margins and profits. This effect can be especially pronounced during periods of economic contraction or slow economic growth. The effectiveness of any cost-cutting efforts is limited by the amount of fixed costs inherent in our business. As a result, we may not be able to successfully offset revenue reductions through cost cutting. The individuals employed at certain of our hotels are party to collective bargaining agreements with our hotel managers that may also limit the manager’s ability to make timely staffing or labor changes in response to declining revenues. In addition, any efforts to reduce costs, or to defer or cancel capital improvements, could adversely affect the economic value of our hotels. We have taken steps to reduce our fixed costs to levels we believe are appropriate to maximize profitability and respond to market conditions without jeopardizing the overall customer experience or the value of our hotels. Changes in depreciation and amortization expense . Changes in depreciation expense are due to renovations of existing hotels, acquisition or development of new hotels, the disposition of existing hotels through sale or closure or changes in estimates of the useful lives of our assets. As we place new assets into service, we will be required to recognize additional depreciation expense on those assets. Key Business Metrics Used by Management 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 our hotels as a result of COVID-19. Occupancy measures the utilization of our 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 us determine achievable 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 we use ADR to assess pricing levels that we are 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 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 our hotels as a result of COVID-19. We consider RevPAR to be a meaningful indicator of our 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. Comparable Hotels Data Historically, we have presented certain data for our hotels on a comparable hotel basis as supplemental information for investors. We defined our comparable hotels as those that: (i) were active and operating in our portfolio since January 1st of the previous year; and (ii) have not sustained substantial property damage or business interruption, have not undergone large-scale capital projects or for which comparable results are not available. We presented comparable hotel results to help us and our investors evaluate the ongoing operating performance of our comparable hotels. However, given the significant effect of COVID-19 on most of our hotels and the lack of comparability to prior periods, we do not believe this supplemental information is useful to us or our investors at this time. Under “Results of Operations” below, we have provided information on the effects from dispositions and other factors to our results of operations for the year ended December 31, 2021 as compared to the year ended December 31, 2020. Change from other factors primarily relates to the effects of COVID-19. Non-GAAP Financial Measures We also evaluate the performance of our business through certain other financial measures that are not recognized under U.S. GAAP. Each of these non-GAAP financial measures should be considered by investors as supplemental measures to GAAP performance measures such as total revenues, operating profit and net income. 39 EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA EBITDA, presented herein, reflects net income (loss) excluding depreciation and amortization, interest income, interest expense, income taxes and also interest expense, income tax and depreciation and amortization included in equity in earnings (losses) from investments in affiliates. Adjusted EBITDA, presented herein, is calculated as EBITDA, further adjusted to exclude: • Gains or losses on sales of assets for both consolidated and unconsolidated investments; • Costs associated with hotel acquisitions or dispositions expensed during the period; • Severance expense; • Share-based compensation expense; • Impairment losses and casualty gains or losses; and • Other items that we believe are not representative of our current or future operating performance. Hotel Adjusted EBITDA measures hotel-level results before debt service, depreciation and corporate expenses for our consolidated hotels, which excludes hotels owned by unconsolidated affiliates, and is a key measure of our profitability. We present Hotel Adjusted EBITDA to help us and our investors evaluate the ongoing operating performance of our consolidated hotels. EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA are not recognized terms under 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, our definitions of EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA may not be comparable to similarly titled measures of other companies. We believe that EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA are among the measures used by our management team to make day-to-day operating decisions and evaluate our operating performance between periods and between REITs by removing the effect of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results; and (ii) EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA 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 our industry. EBITDA, Adjusted 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 our operating performance and results as reported under U.S. GAAP. Some of these limitations are: • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect our interest expense; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect our income tax expense; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations; and • other companies in our industry may calculate EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA differently, limiting their usefulness as comparative measures. We do not use or present EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA as measures of our liquidity or cash flow. These measures have limitations as analytical tools and should not be considered either in isolation or as a substitute for cash flow or other methods of analyzing our cash flows and liquidity as reported under U.S. GAAP. Some of these limitations are: • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the cash requirements necessary to service interest or principal payments, on our indebtedness; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the cash requirements to pay our taxes; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and 40 • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized will often have to be replaced in the future, and EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect any cash requirements for such replacements. Because of these limitations, EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations. The following table provides a reconciliation of Net loss to Hotel Adjusted EBITDA: Year Ended December 31, 2021 2020 (in millions) Net loss $ (452 ) $ (1,444 ) Depreciation and amortization expense 281 298 Interest income (1 ) (2 ) Interest expense 258 213 Income tax expense (benefit) 2 (6 ) Interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates 11 16 EBITDA 99 (925 ) Loss (gain) on sales of assets, net 5 (62 ) Gain on sale of investments in affiliates (1) — (1 ) Acquisition costs — 10 Severance expense — 33 Share-based compensation expense 19 20 Impairment and casualty loss, net 9 696 Other items (2) 10 35 Adjusted EBITDA 142 (194 ) Less: Adjusted EBITDA from investments in affiliates (7 ) 3 Add: All other (3) 42 44 Hotel Adjusted EBITDA $ 177 $ (147 ) (1) Included in other (loss) gain, net. (2) For the year ended December 31, 2020, includes a $12 million reserve related to ongoing claims in connection with our obligation to indemnify Hilton under the spin-off agreements. Refer to Note 15: “Commitments and Contingencies” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information. (3) Includes other revenues and other expenses , non-income taxes on TRS leases included in other property-level expenses and corporate general and administrative expenses. Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders We present Nareit FFO attributable to stockholders and Nareit FFO per diluted share (defined as set forth below) as non-GAAP measures of our performance. We calculate funds from (used in) 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 (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 our pro rata share of the FFO of those entities on the same basis. As noted by Nareit in its December 2018 “Nareit Funds from Operations White Paper – 2018 Restatement,” 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. We believe Nareit FFO provides useful information to investors regarding our operating performance and can facilitate comparisons of operating performance between periods and between REITs. Our 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 than we do. We calculate Nareit FFO per diluted share as our Nareit FFO divided by the number of fully diluted shares outstanding during a given operating period. 41 We also present Adjusted FFO attributable to stockholders and Adjusted FFO per diluted share when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. Management historically has made the adjustments detailed below in evaluating our performance and in our annual budget process. We believe that the presentation of Adjusted FFO provides useful supplemental information that is beneficial to an investor’s complete understanding of our operating performance. We adjust Nareit FFO attributable to stockholders for the following items, which may occur in any period, and refer to this measure as Adjusted FFO attributable to stockholders: • Costs associated with hotel acquisitions or dispositions expensed during the period; • Severance expense; • Share-based compensation expense; and • Other items that we believe are not representative of our current or future operating performance. The following table provides a reconciliation of net loss attributable to stockholders to Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders: Year Ended December 31, 2021 2020 (in millions) Net loss attributable to stockholders $ (459 ) $ (1,440 ) Depreciation and amortization expense 281 298 Depreciation and amortization expense attributable to noncontrolling interests (4 ) (4 ) Loss (gain) on sales of assets, net 5 (62 ) Gain on sale of investments in affiliates (1) — (1 ) Impairment loss 5 697 Equity investment adjustments: Equity in losses from investments in affiliates 7 22 Pro rata FFO of investments in affiliates 2 (10 ) Nareit FFO attributable to stockholders (163 ) (500 ) Casualty loss (gain), net 4 (1 ) Severance expense — 33 Acquisition costs — 10 Share-based compensation expense 19 20 Other items (2) 4 49 Adjusted FFO attributable to stockholders $ (136 ) $ (389 ) Nareit FFO per share - Diluted (3) $ (0.69 ) (2.12 ) Adjusted FFO per share - Diluted (3) $ (0.57 ) (1.65 ) (1) Included in other (loss) gain, net . (2) For the year ended December 31, 2020, includes $37 million of tax expense on hotels sold during 2020. (3) Per share amounts are calculated based on unrounded numbers. Results of Operations The following items have had a significant effect on the year-over-year comparability of our operations and are illustrated further in the table of Hotel Revenues and Operating Expenses below: • Property Dispositions: Between January 1, 2020 and December 31, 2021, we disposed of seven consolidated hotels. As a result of these dispositions, our revenues and operating expenses decreased for the year ended December 31, 2021 as compared to the same period in 2020. The results of operations during our period of ownership of these hotels are included in our consolidated results. • COVID-19 : Beginning in March 2020, we experienced a significant decline in ADR, occupancy and RevPAR due to COVID-19. The economic contraction resulting from the spread of COVID-19 has and is expected to continue to significantly affect our business. As discussed in "Overview — COVID-19 Operational Update," since April, 2021, we have seen increases in ADR, occupancy and RevPAR each month compared to 2020. Consequently, the results of our portfolio during the year ended December 31, 2021 will not be comparable to the same period in 2020. 42 Hotel Revenues and Operating Expenses Year Ended December 31, 2021 2020 Change Change from Property Dispositions Change from Other Factors (1) (in millions) Rooms revenue $ 870 $ 526 $ 344 $ (12 ) $ 356 Food and beverage revenue 251 189 62 (3 ) 65 Ancillary hotel revenue 190 108 82 (2 ) 84 Rooms expense 254 193 61 (2 ) 63 Food and beverage expense 208 173 35 (3 ) 38 Other departmental and support expense 423 359 64 (7 ) 71 Other property-level expense 191 258 (67 ) (5 ) (62) (2) Management fees expense 59 30 29 (1 ) 30 (1) Change from other factors primarily relates to the effects of COVID-19, except as otherwise noted. The increase in revenues and expenses was primarily due to the reopening of most of our hotels that were suspended during 2020 and improved occupancy due to an increase in leisure travel as compared to 2020. (2) The reduction is primarily a result of $30 million of severance expense incurred in 2020 that was not incurred in 2021 and a reduction of real estate taxes of $15 million compared to 2021. Group, transient, contract and other rooms revenue for the year ended December 31, 2021, as well as the change for each segment compared to 2020 are as follows: Year Ended December 31, 2021 2020 Change Change from Property Dispositions Change from Other Factors (1) (in millions) Group rooms revenue $ 114 $ 136 $ (22 ) $ (4 ) $ (18 ) Transient rooms revenue 690 330 360 (8 ) 368 Contract rooms revenue 50 48 2 — 2 Other rooms revenue 16 12 4 — 4 Rooms revenue $ 870 $ 526 $ 344 $ (12 ) $ 356 (1) Change from other factors primarily relates to the effects of COVID-19. The increase in revenues was primarily due to the reopening of most of our hotels that were suspended during 2020 and improved traveler sentiment as vaccine distribution significantly increased and operating restrictions were lifted throughout 2021. 43 Other revenue and Other expense During the second half of 2020, we permanently closed operations at all three of our laundry facilities resulting in a decrease in both laundry revenue and laundry expense. The increases in support services revenue and expense are due to the reopening of our hotels that have service arrangements with HGV, which were suspended for a majority of 2020. Year Ended December 31, 2021 2020 Percent Change (in millions) Support services revenue $ 51 $ 27 88.9 % Laundry revenue — 2 (100.0 )% Total other revenue $ 51 $ 29 75.9 % Year Ended December 31, 2021 2020 Percent Change (in millions) Support services expense $ 48 $ 26 84.6 % Laundry expense 1 10 (90.0 )% Total other expense $ 49 $ 36 36.1 % Corporate general and administrative Year Ended December 31, 2021 2020 Percent Change (in millions) General and administrative expenses $ 43 $ 40 7.5 % Share-based compensation expense 19 20 (5.0 ) Disposition costs — 1 (100.0 ) Severance expense — 2 (100.0 ) Total corporate general and administrative $ 62 $ 63 (1.6 )% Acquisition costs During the year ended December 31, 2020, we incurred $10 million of acquisition costs, primarily as a result of $9 million of transfer tax in connection with the Merger with Chesapeake based on new information received during 2020. Impairment and casualty loss, net During the year ended December 31, 2021, we recognized an impairment loss of $5 million related to one of our hotels classified as held for sale as of June 30, 2021. We also recognized $4 million of casualty losses as a result of damage caused by Hurricane Ida at one of our hotels. During the year ended December 31, 2020, we recognized a net loss of $696 million primarily as a result of $607 million of impairment losses related to our goodwill and $90 million of impairment losses primarily related to one of our hotels, and our inability to recover the carrying value of the asset because of COVID-19. (Loss) Gain on sales of assets, net During the year ended December 31, 2021, we recognized a net loss of $5 million primarily as a result of the sales of five of our consolidated hotels. During the year ended December 31, 2020, we recognized a net gain of $62 million primarily as a result of the sale of two of our consolidated hotels. 44 Non-operating Income and Expenses Interest expense Interest expense increased during the year ended December 31, 2021 compared to the same period in 2020 as a result of the issuances of $2.1 billion of Senior Secured Notes during the second and third quarters of 2020 and May 2021, partially offset by a decrease in interest expense as a result of the full repayment of the 2016 Term Loan in September 2020, partial repayment of the 2019 Term Facility during the second and third quarters of 2021 and the full repayment of the Revolver during 2021. Interest expense associated with our debt for the years ended December 31, 2021 and 2020 were as follows: Year ended December 31, 2021 2020 Percent Change (in millions) SF and HHV Mortgage Loans (1) $ 85 $ 85 — % Other Mortgage Loans 24 22 9.1 % 2016 Term Loan — 15 NM (2) 2019 Term Facility 12 20 (40.0 )% Revolver 10 19 (47.4 )% 2025 Senior Secured Notes (3) 49 29 69.0 % 2028 Senior Secured Notes (3) 43 12 258.3 % 2029 Senior Secured Notes (3) 23 — NM (2) Other 12 11 9.1 % Total interest expense $ 258 $ 213 21.1 % (1) In October 2016, we entered into a $725 million CMBS loan secured by the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco (“SF Mortgage Loan”) and a $1.275 billion CMBS loan secured by the Hilton Hawaiian Village Waikiki Beach Resort (“HHV Mortgage Loan”). (2) Percentage change is not meaningful. (3) In May and September 2020, Park Intermediate Holdings LLC (our “Operating Company”), PK Domestic Property LLC, an indirect subsidiary of the Company (“PK Domestic”), and PK Finance Co-Issuer Inc. (“PK Finance”) issued an aggregate of $650 million of senior secured notes due 2025 (“2025 Senior Secured Notes”) and an aggregate of $725 million of senior secured notes due 2028 (“2028 Senior Secured Notes”), respectively. Additionally, in May 2021, our Operating Company, PK Domestic and PK Finance issued an aggregate of $750 million of senior secured notes due 2029 (“2029 Senior Secured Notes,” collectively with the 2025 Senior Secured Notes and 2028 Senior Secured Notes, the “Senior Secured Notes”). Our current debt outstanding is approximately $4.7 billion at a weighted average interest rate of 5.0%, of which approximately 99% is fixed-rate debt, refer to Item 7A: “Interest Rate Risk” and Note 7: “Debt” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information. Other (loss) gain, net During the year ended December 31, 2021, we recognized a net loss of $7 million, which is primarily due to $5 million related to the loss on extinguishment of debt during the year. During the year ended December 31, 2020, we recognized a net loss of $15 million, which is primarily due to an additional $12 million reserve related to ongoing claims in connection with our obligation to indemnify Hilton under the spin-off agreements. Income tax (expense) benefit Year Ended December 31, 2021 2020 Percent Change (in millions) Income tax (expense) benefit $ (2 ) $ 6 NM (1) (1) Percentage change is not meaningful. Income tax expense for the year ended December 31, 2021, primarily consists of $6 million of income tax expense related to our taxable REIT subsidiaries, partially offset by $4 million of state tax benefits from utilizing state NOLs and a $1 million benefit from the derecognition of deferred tax liabilities. 45 Income tax benefit for the year ended December 31, 2020 includes a TRS income tax benefit of $24 million from utilizing the NOL carryback provisions of the CARES Act and $22 million of a net tax benefit from the derecognition of deferred tax liabilities, partially offset by $37 million of income tax expense from hotels sold during the period. Liquidity and Capital Resources Overview We seek to maintain sufficient amounts of liquidity with an appropriate balance of cash, debt and equity to provide financial flexibility. As of December 31, 2021, we had total cash and cash equivalents of $688 million and $75 million of restricted cash. Restricted cash primarily consists of cash restricted as to use by our debt agreements and reserves for capital expenditures in accordance with certain of our management agreements. We currently have higher than historical balances in restricted cash due to certain of our mortgage loans that require deposits of excess cash with the lender when certain financial ratios are not met, which occurred during the period as a result of the effect from COVID-19 on operating results at the associated hotels. As a result of the economic uncertainty resulting from the effects of COVID-19, including decreased occupancy, ADR and RevPAR at our hotels, as described above under “COVID-19 Operational Update”, we expect our cash flows through at least the first quarter of 2022 to be significantly lower than prior to COVID-19. We have taken several steps to preserve capital and increase liquidity, including drawing $1 billion from our Revolver in March 2020 (which we subsequently fully repaid), issuing $650 million of 2025 Senior Secured Notes in May 2020 (a portion of which was used to partially repay amounts outstanding under our Revolver and 2016 Term Loan), issuing $725 million of 2028 Senior Secured Notes in September 2020 (a portion of which was used to repay the 2016 Term Loan in full as well as a portion of the Revolver), issuing $750 million of 2029 Senior Secured Notes in May 2021 (a portion of which was used to partially repay the Revolver and the 2019 Term Facility), suspending our dividend following the payment of the first quarter 2020 dividend and implementing various cost saving initiatives at our hotels including temporary suspension of operations at certain hotels and selected restaurants and other businesses and outlets and reductions in capital expenditures for maintenance projects to approximately $44 million for 2021. We will continue to assess when the deferred capital expenditures will resume or if any of the deferred expenditures will be cancelled. In 2021, we sold five consolidated hotels, the W New Orleans – French Quarter, the Hotel Indigo San Diego Gaslamp Quarter, the Courtyard Washington Capitol Hill Navy Yard, the Hotel Adagio, Autograph Collection and the Le Meridien San Francisco. Net proceeds from the sales of these hotels were used to repay $37 million outstanding under the Revolver, which currently has no remaining balance outstanding, and to partially repay $419 million of the 2019 Term Facility. We generated positive Hotel Adjusted EBITDA for the quarter ended December 31, 2021, the third consecutive quarter since the start of the pandemic. With the availability under our Revolver and existing cash and cash equivalents as a result of net proceeds from the offering of our Senior Secured Notes and the proceeds from the sales of two consolidated hotels in 2020 and the sale of five consolidated hotels in 2021, we have sufficient liquidity to pay our debt maturities and to fund other liquidity obligations over the next year and beyond. Only 2% of our total outstanding debt is maturing in 2022. We are maintaining higher than historical cash levels due to the continued uncertainty surrounding COVID-19, and we intend to do so until markets stabilize and demand in the lodging industry significantly recovers. In addition, we also may take other actions to improve our liquidity, such as the issuance of additional debt, equity or equity-linked securities, if we determine that doing so would be beneficial to us. However, there can no assurance as to the timing of any such issuance, which may be in the near term, or that any such additional financing will be completed on favorable terms, or at all. In 2020, we amended our credit facilities, which in addition to providing enhanced liquidity, extending the maturity of the Revolver and extending the waiver period for the testing of the financial covenants, placed certain restrictions on the Company, including limitations on our ability to make dividends and distributions (except to the extent required to maintain REIT status, the ability to pay a $0.01 per share per fiscal quarter dividend and certain other agreed exceptions). In February 2022, we further amended our credit and term loan facilities, including extending the waiver period for the testing of the financial covenants, refer to “Note 17: “Subsequent Events" in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information. 46 Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including reimbursements to our hotel manager for payroll and related benefits, costs associated with the operation of our hotels, interest and scheduled principal payments on our outstanding indebtedness, capital expenditures for renovations and maintenance at our hotels, corporate general and administrative expenses, and, when resumed, dividends to our stockholders. Many of the other expenses associated with our hotels are relatively fixed, including portions of rent expense, property taxes and insurance. Since we generally are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, the resulting decline in our revenues can have a greater adverse effect on our net cash flow, margins and profits. Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, capital improvements at our hotels (to the extent not cancelled or deferred), and costs associated with potential acquisitions. Despite the effect of COVID-19 on the global economy and our business, we were able to access the debt capital markets during the past two years to complete three separate offerings of our Senior Secured Notes. Our commitments to fund capital expenditures for renovations and maintenance at our hotels will be funded by cash and cash equivalents, restricted cash to the extent permitted by our lending agreements and cash flow from operations. We have construction contract commitments of approximately $94 million for capital expenditures at our properties, of which $72 million relates to the expansion project at the Bonnet Creek complex. The Bonnet Creek expansion project includes additional meeting space for the Signia by Hilton Orlando Bonnet Creek and the Waldorf Astoria Orlando. Our contracts contain clauses that allow us to cancel all or some portion of the work. Additionally, we have established reserves for capital expenditures (“FF&E reserve”) in accordance with our management and certain debt agreements. Generally, these agreements require that we fund 4% of hotel revenues into an FF&E reserve, unless such amounts have been incurred. Our cash management objectives continue to be to maintain the availability of liquidity, minimize operational costs, make debt payments and fund our capital expenditure programs and future acquisitions. Further, we have an investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments. Stock Repurchase Program In February 2019, our Board of Directors approved a stock repurchase program allowing us to repurchase up to $300 million of our common stock over a two-year period, which ended in February 2021. Stock repurchases were made through open market purchases, in privately negotiated transactions, or in such other manner that complied with applicable securities laws. The timing of stock repurchases and the number of shares repurchased were dependent upon prevailing market conditions and other factors. During the three months ended March 31, 2020, we repurchased 4.6 million shares of our common stock for a total purchase price of $66 million. No additional common stock was repurchased during 2020 or in the first two months of 2021 prior to the expiration of this stock repurchase program. We may make future stock repurchases, subject to the approval of a new stock repurchase program by our Board of Directors. Sources and Uses of Our Cash and Cash Equivalents The following tables summarize our net cash flows and key metrics related to our liquidity: Year Ended December 31, 2021 2020 Percent Change (in millions) Net cash used in operating activities $ (137 ) $ (438 ) 68.7 % Net cash provided by investing activities 394 119 231.1 % Net cash (used in) provided by financing activities (475 ) 914 NM (1) (1) Percentage change is not meaningful. Operating Activities Cash flow from operating activities are primarily generated from the operating income generated at our hotels. The $301 million decrease in net cash used in operating activities for the year ended December 31, 2021 compared to the year ended December 31, 2020 was primarily due to an increase in cash from operations as a result of the increase in occupancy as our hotels continue to recover from the effects of COVID-19, partially offset by an increase in cash paid for interest of $55 million and an increase in cash paid for taxes of $8 million. Investing Activities The $394 million in net cash provided by investing activities for the year ended December 31, 2021 was primarily attributable to $454 million of net proceeds from the sale of five of our consolidated hotels, partially offset by $54 million in capital expenditures. 47 The $119 million in net cash provided by investing activities for the year ended December 31, 2020 was primarily attributable to the $207 million in net proceeds received from the sale of hotels, partially offset by $86 million in capital expenditures. Financing Activities The $475 million in net cash used in financing activities for the year ended December 31, 2021 was primarily attributable to $1.2 billion of debt repayments and $15 million of debt issuance costs, partially offset by the issuance of $750 million of 2029 Senior Secured Notes. The $914 million in net cash provided by financing activities for the year ended December 31, 2020 was primarily attributable to borrowings of $1 billion from our Revolver as a result of COVID-19, the issuance of our $650 million 2025 Senior Secured Notes and $725 million of 2028 Senior Secured Notes, partially offset by $1.1 billion of debt repayments, $241 million in dividends paid and the repurchase of 4.6 million shares of our common stock for $66 million. Dividends As a REIT, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, and after utilization of any NOL carryforward to our stockholders on an annual basis. Therefore, as a general matter, it is unlikely that we will be able to retain substantial cash balances that could be used to meet our liquidity needs from our annual taxable income. Instead, we will need to meet these needs from external sources of capital and amounts, if any, by which our cash flow generated from operations exceeds taxable income. However, as a precautionary measure in light of COVID-19, after the payment of the first quarter dividend in 2020, we suspended our quarterly dividend. In addition, except for certain exceptions described above under “—Overview,” our ability to pay dividends is restricted pursuant to our amended credit facility. As described above under Item 5: “Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities—Distribution Information,” we are currently evaluating the reinstatement of a quarterly cash distribution of $0.01 per share, subject to approval by our Board of Directors. Any such distribution and any future distributions will be at the sole discretion of our Board of Directors. Debt As of December 31, 2021, our total indebtedness was approximately $4.7 billion, including approximately $2.1 billion of our Senior Secured Notes, as disclosed above, and excluding approximately $225 million of our share of debt from investments in affiliates. Substantially all the debt of such unconsolidated affiliates is secured solely by the affiliates’ assets or is guaranteed by other partners without recourse to us. Refer to Note 7: “Debt” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information. Critical Accounting Estimates The preparation of our financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in our historical consolidated financial statements and accompanying footnotes. We believe that of our significant accounting policies, which are described in Note 2: “Basis of Presentation and Summary of Significant Accounting Policies” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K, the following accounting policies are critical because they involve a higher degree of judgment, and the estimates required to be made were based on assumptions that are inherently uncertain. As a result, these accounting policies could materially affect our financial position, results of operations and related disclosures. On an ongoing basis, we evaluate these estimates and judgments based on historical experiences and various other factors that are believed to reflect the current circumstances. While we believe our estimates, assumptions and judgments are reasonable, they are based on information presently available. Actual results may differ significantly from these estimates due to changes in judgments, assumptions and conditions as a result of unforeseen events or otherwise, which could have a material effect on our financial position or results of operations. Acquisitions We evaluate each of our acquisitions to determine if it is as an asset acquisition or a business combination. An asset acquisition occurs when substantially all the fair value of an acquisition is concentrated in a single identifiable asset or a group of similar identifiable assets. In an acquisition of assets, the total cash consideration, including transaction costs is allocated to the individual assets acquired and liabilities assumed, respectively, on a relative fair value basis. In a business combination, the assets acquired and liabilities assumed are measured at fair value. We evaluate several factors, including market data for similar assets, expected future cash flows discounted at risk-adjusted rates and replacement cost for the assets to determine an appropriate fair value of the assets. Changes to these factors could affect the measurement of assets and liabilities. 48 Impairment of Long-Lived Assets with Finite Lives We evaluate the carrying value of our property and equipment and intangible assets with finite lives by comparing the expected undiscounted future cash flows to the net book value of the assets if we determine there are indicators of potential impairment. If it is determined that the expected undiscounted future cash flows are less than the net book value of the assets, the excess of the net book value over the estimated fair value is recorded in our consolidated statements of comprehensive (loss) income as an impairment loss. As part of the process described above, we exercise judgment to: • determine if there are indicators of impairment present. Factors we consider when making this determination include assessing the overall effect of trends in the hospitality industry and the general economy, historical experience, capital costs and other asset-specific information; • determine the projected undiscounted future cash flows when indicators of impairment are present. Judgment is required when developing projections of future revenues and expenses based on estimated growth rates over the expected hold period of the asset group. These estimated growth rates are based on historical operating results, as well as various internal projections and external sources; and • determine the asset fair value when required. In determining the fair value, we often use internally-developed discounted cash flow models. Assumptions used in the discounted cash flow models include estimating cash flows, which may require us to adjust for specific market conditions, as well as capitalization rates, which are based on location, property or asset type, market-specific dynamics and overall economic performance. The discount rate takes into account our weighted average cost of capital according to our capital structure and other market specific considerations. Changes in estimates and assumptions used in our impairment testing of property and equipment and intangible assets with finite lives could result in future impairment losses, which could be material. We did not identify any additional property and equipment and intangible assets with finite lives with indicators of impairment for which an additional 10% change in our estimates of undiscounted future cash flows or other significant assumptions would result in material impairment losses. Income Taxes We use a prescribed more-likely-than-not recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return if there is uncertainty in income taxes recognized in the financial statements. Assumptions and estimates are used to determine the more-likely-than-not designation. Changes to these assumptions and estimates can lead to an additional income tax expense (benefit), which can materially change our consolidated financial statements. Consolidations We use judgment when evaluating whether we have a controlling financial interest in an entity, including the assessment of the importance of rights and privileges of the partners based on voting rights, as well as financial interests in an entity that are not controllable through voting interests. If the entity is considered to be a variable interest entity (“VIE”), we use judgment determining whether we are the primary beneficiary, and then consolidate those VIEs for which we have determined we are the primary beneficiary. If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interest in the entity. Changes to judgments used in evaluating our partnerships and other investments could materially affect our consolidated financial statements. 49 Item 7A. Quantitative and Qua litative Disclosures About Market Risk. We are exposed to market risk primarily from changes in interest rates, which may affect our future income, cash flows and fair value, depending on changes to interest rates. In certain situations, we may seek to reduce cash flow volatility associated with changes in interest rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. We continue to have exposure to such risks to the extent they are not hedged. Interest Rate Risk We are exposed to interest rate risk on our variable-rate debt. Interest rates on our variable-rate debt discussed below are based on one-month LIBOR, so we are most vulnerable to changes in this rate. The following table sets forth the contractual maturities and the total fair values as of December 31, 2021 for our financial instruments that are materially affected by interest rate risk: Maturities by Period 2022 2023 2024 2025 2026 Thereafter Carrying Value Fair Value (in millions, excluding average interest rate) Liabilities: Fixed-rate debt (1) $ 67 $ 830 $ 85 $ 657 $ 1,562 $ 1,475 $ 4,676 $ 4,772 Average interest rate 4.80 % 4.13 % 4.49 % 7.47 % 4.20 % 5.37 % 5.03 % Variable-rate debt $ 30 $ — $ — $ — $ — $ — $ 30 $ 30 Average interest rate 3.25 % — % — % — % — % — % 3.25 % (1) Excludes finance lease obligations with a carrying value of $1 million as of December 31, 2021. Refer to Note 7: “Debt” in our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. 50 Item 8. Fin ancial Statements and Supplementary Data. INDEX TO CONSOLIDATED FINANCIAL STATEMENTS Page Management’s Report on Internal Control Over Financial Reporting 52 Reports of Independent Registered Public Accounting Firm (PCAOB ID: 42 ) 53 Consolidated Balance Sheets as of December 31, 2021 and 2020 56 Consolidated Statements of Comprehensive (Loss) Income for the Years Ended December 31, 2021, 2020 and 2019 57 Consolidated Statements of Cash Flows for the Years Ended December 31, 2021, 2020 and 2019 58 Consolidated Statements of Equity for the Years Ended December 31, 2021, 2020 and 2019 59 Notes to Consolidated Financial Statements 60 Schedule III – Real Estate and Accumulated Deprecation 82 51 Management’s Report on Internal C ontrol Over Financial Reporting Management of Park Hotels & Resorts Inc. (the “Company”) is responsible for establishing and maintaining adequate internal control over financial reporting as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with U.S. generally accepted accounting principles. The Company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the Company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the Company are being made only in accordance with authorizations of the Company’s management and directors; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of assets of the Company that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. Management has assessed the effectiveness of the Company’s internal control over financial reporting as of December 31, 2021. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in Internal Control—Integrated Framework (2013). Based on this assessment, management determined that the Company maintained effective internal control over financial reporting as of December 31, 2021. Ernst & Young LLP, the independent registered public accounting firm that has audited the consolidated financial statements included in this Annual Report on Form 10-K, has issued an attestation report on the Company’s internal control over financial reporting as of December 31, 2021. The report is included herein. 52 Report of Independent Regist ered Public Accounting Firm To the Stockholders and Board of Directors of Park Hotels & Resorts Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Park Hotels & Resorts Inc. (the Company) as of December 31, 2021 and 2020, the related consolidated statements of comprehensive (loss) income, cash flows, and equity for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with U.S. generally accepted accounting principles. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control ¬ Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) and our report dated February 18, 2022 expressed an unqualified opinion thereon. Basis for Opinion These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. Critical Audit Matter The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. 53 Valuation of Property and Equipment Description of the Matter At December 31, 2021, the Company’s property and equipment, net balance was $8,511 million and the Company recognized impairment charges totaling $5 million on property and equipment during the year ended December 31, 2021. As discussed in Note 2 of the consolidated financial statements, property and equipment is evaluated for recoverability based on expected future cash flows if there are indicators of potential impairment. Auditing management’s assessment of potential impairment of property and equipment was complex and highly judgmental due to the significant estimation required in determining the estimated hold period, expected future cash flows, and capitalization rates for the properties subject to a recoverability test and/or a fair value measurement. In particular, the expected future cash flows are based on assumptions, including the projections of revenues and expenses based on estimated growth rates that are forward looking, could be affected by future economic and market conditions, and sensitive to capitalization rate changes. How We Addressed the Matter in Our Audit We obtained an understanding, evaluated the design and tested the operating effectiveness of controls over the Company’s review process over impairment testing of property and equipment, including controls over management’s review of the significant assumptions described above. Our testing of the Company’s impairment assessment included, among other procedures, evaluating the significant assumptions and testing the completeness and accuracy of the underlying data used by the Company to develop the expected future cash flows, if applicable, for their properties. We compared the significant assumptions used by management to current industry and economic trends, changes to the Company’s strategy and other relevant factors. For example, we compared estimates of future income growth and capitalization rates used in the undiscounted cash flow models to market data. We assessed the historical accuracy of management’s estimates and performed sensitivity analyses of significant assumptions to evaluate changes in the expected undiscounted future cash flows that would result from changes in the assumptions. We held discussions with management about the current status of potential transactions and about management’s judgments to understand the probability of future events that could affect the hold period and other cash flow assumptions for the properties. We searched for and evaluated information that corroborates and/or contradicts the Company’s assumptions. /s/ Ernst & Young LLP We have served as the Company’s auditor since 2016. Tysons, Virginia February 18, 2022 54 Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Park Hotels & Resorts Inc. Opinion on Internal Control Over Financial Reporting We have audited Park Hotels & Resorts Inc.’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework) (the COSO criteria). In our opinion, Park Hotels & Resorts Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on the COSO criteria. We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2021 and 2020, the related consolidated statements of comprehensive (loss) income, cash flows, and equity for each of the three years in the period ended December 31, 2021, and the related notes and financial statement schedule listed in the Index at Item 15 and our report dated February 18, 2022 expressed an unqualified opinion thereon. Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements. Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. /s/ Ernst & Young LLP Tysons, Virginia February 18, 2022 55 PARK HOT ELS & RESORTS INC. CONSOLIDATED BALANCE SHEETS (in millions, except share and per share data) December 31, 2021 2020 ASSETS Property and equipment, net $ 8,511 $ 9,193 Investments in affiliates 15 14 Intangibles, net 44 45 Cash and cash equivalents 688 951 Restricted cash 75 30 Accounts receivable, net of allowance for doubtful accounts of $ 2 and $ 3 96 26 Prepaid expenses 35 39 Other assets 69 60 Operating lease right-of-use assets 210 229 TOTAL ASSETS (variable interest entities - $ 237 and $ 229 ) $ 9,743 $ 10,587 LIABILITIES AND EQUITY Liabilities Debt $ 4,672 $ 5,121 Accounts payable and accrued expenses 156 147 Due to hotel managers 111 88 Deferred income tax liabilities 9 10 Other liabilities 165 134 Operating lease liabilities 227 244 Total liabilities (variable interest entities - $ 219 and $ 213 ) 5,340 5,744 Commitments and contingencies - refer to Note 15 Stockholders' Equity Common stock, par value $ 0.01 per share, 6,000,000,000 shares authorized, 236,888,804 shares issued and 236,483,990 shares outstanding as of December 31, 2021 and 236,217,344 shares issued and 235,915,749 shares outstanding as of December 31, 2020 2 2 Additional paid-in capital 4,533 4,519 (Accumulated deficit) retained earnings ( 83 ) 376 Accumulated other comprehensive loss — ( 4 ) Total stockholders' equity 4,452 4,893 Noncontrolling interests ( 49 ) ( 50 ) Total equity 4,403 4,843 TOTAL LIABILITIES AND EQUITY $ 9,743 $ 10,587 Refer to the notes to the consolidated financial statements. 56 PARK HOT ELS & RESORTS INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE (LOSS) INCOME (in millions, except per share data) Year Ended December 31, 2021 2020 2019 Revenues Rooms $ 870 $ 526 $ 1,764 Food and beverage 251 189 743 Ancillary hotel 190 108 260 Other 51 29 77 Total revenues 1,362 852 2,844 Operating expenses Rooms 254 193 467 Food and beverage 208 173 518 Other departmental and support 423 359 638 Other property-level 191 258 219 Management fees 59 30 139 Impairment loss and casualty (gain) loss, net 9 696 ( 18 ) Depreciation and amortization 281 298 264 Corporate general and administrative 62 63 62 Acquisition costs — 10 70 Other 49 36 78 Total expenses 1,536 2,116 2,437 (Loss) gain on sales of assets, net ( 5 ) 62 19 Operating (loss) income ( 179 ) ( 1,202 ) 426 Interest income 1 2 6 Interest expense ( 258 ) ( 213 ) ( 140 ) Equity in (losses) earnings from investments in affiliates ( 7 ) ( 22 ) 14 Other (loss) gain, net ( 7 ) ( 15 ) 45 (Loss) Income before income taxes ( 450 ) ( 1,450 ) 351 Income tax (expense) benefit ( 2 ) 6 ( 35 ) Net (loss) income ( 452 ) ( 1,444 ) 316 Net (income) loss attributable to noncontrolling interests ( 7 ) 4 ( 10 ) Net (loss) income attributable to stockholders $ ( 459 ) $ ( 1,440 ) $ 306 Other comprehensive income (loss), net of tax expense: Currency translation adjustment, net of tax expense of $ 0 , $ 0 and $ 4 $ — $ 4 $ 3 Change in fair value of interest rate swap, net of tax expense of $ 0 2 ( 5 ) — Loss from interest rate swap reclassified into earnings 2 — — Total other comprehensive income (loss) 4 ( 1 ) 3 Comprehensive (loss) income ( 448 ) ( 1,445 ) 319 Comprehensive (income) loss attributable to noncontrolling interests ( 7 ) 4 ( 10 ) Comprehensive (loss) income attributable to stockholders $ ( 455 ) $ ( 1,441 ) $ 309 (Loss) Earnings per share: (Loss) Earnings per share - Basic $ ( 1.95 ) $ ( 6.11 ) $ 1.44 (Loss) Earnings per share - Diluted $ ( 1.95 ) $ ( 6.11 ) $ 1.44 Weighted average shares outstanding - Basic 236 236 212 Weighted average shares outstanding - Diluted 236 236 213 Refer to the notes to the consolidated financial statements. 57 PARK HOTELS & RESORTS INC. CONSOLIDATED ST ATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2021 2020 2019 Operating Activities: Net (loss) income $ ( 452 ) $ ( 1,444 ) $ 316 Adjustments to reconcile net (loss) income to net cash (used in) provided by operating activities: Depreciation and amortization 281 298 264 Loss (gain) on sales of assets, net 5 ( 62 ) ( 19 ) Impairment loss and casualty (gain) loss, net 9 696 ( 18 ) Equity in losses (earnings) from investments in affiliates 7 22 ( 14 ) Other loss (gain), net 7 15 ( 45 ) Share-based compensation expense 19 20 16 Amortization of deferred financing costs 12 9 5 Distributions from unconsolidated affiliates — 5 22 Deferred income taxes ( 1 ) ( 30 ) 5 Changes in operating assets and liabilities: Accounts receivable, net ( 70 ) 152 ( 3 ) Prepaid expenses 4 44 6 Other assets ( 12 ) ( 22 ) ( 20 ) Accounts payable and accrued expenses — ( 51 ) ( 28 ) Due to hotel managers 23 ( 71 ) 7 Other liabilities 27 ( 21 ) 10 Other 4 2 ( 5 ) Net cash (used in) provided by operating activities ( 137 ) ( 438 ) 499 Investing Activities: Acquisitions, net of cash and restricted cash acquired — — ( 914 ) Capital expenditures for property and equipment ( 54 ) ( 86 ) ( 240 ) Proceeds from asset dispositions, net 454 207 429 Proceeds from the sale of investments in affiliates, net — 1 51 Insurance proceeds for property damage claims 4 1 39 Contributions to unconsolidated affiliates ( 6 ) ( 4 ) — Purchase of investment security, net ( 4 ) — — Net cash provided by (used in) investing activities 394 119 ( 635 ) Financing Activities: Proceeds from issuance of Senior Secured Notes 750 1,376 — Borrowings from credit facilities — 1,000 850 Repayments of credit facilities ( 1,193 ) ( 1,099 ) ( 232 ) Proceeds from the issuance of mortgage debt 14 — — Repayments of mortgage debt ( 20 ) ( 6 ) — Debt issuance costs ( 15 ) ( 39 ) ( 11 ) Dividends paid — ( 241 ) ( 494 ) Distributions to noncontrolling interests, net ( 6 ) ( 1 ) ( 9 ) Tax withholdings on share-based compensation ( 5 ) ( 10 ) ( 7 ) Repurchase of common stock — ( 66 ) — Net cash (used in) provided by financing activities ( 475 ) 914 97 Net (decrease) increase in cash and cash equivalents and restricted cash ( 218 ) 595 ( 39 ) Cash and cash equivalents and restricted cash, beginning of period 981 386 425 Cash and cash equivalents and restricted cash, end of period $ 763 $ 981 $ 386 For supplemental disclosures, refer to Note 16: “Supplemental Disclosures of Cash Flow Information” Refer to the notes to the consolidated financial statements. 58 PAR K HOTELS & RESORTS INC. CONSOLIDATED STATEMENTS OF EQUITY (in millions) Retained Accumulated Additional Earnings Other Non- Common Stock Paid-in (Accumulated Comprehensive controlling Shares Amount Capital Deficit) (Loss) Income Interests Total Balance as of December 31, 2018 201 $ 2 $ 3,589 $ 2,047 $ ( 6 ) $ ( 46 ) $ 5,586 Issuance of common stock 38 — 978 — — — 978 Share-based compensation, net — — 8 — — — 8 Net income — — — 306 — 10 316 Other comprehensive income — — — — 3 — 3 Dividends and dividend equivalents (1) — — — ( 423 ) — — ( 423 ) Distributions to noncontrolling interests — — — — — ( 9 ) ( 9 ) Cumulative effect of change in accounting principle — — — ( 8 ) — — ( 8 ) Balance as of December 31, 2019 239 2 4,575 1,922 ( 3 ) ( 45 ) 6,451 Share-based compensation, net 1 — 10 — — — 10 Net loss — — — ( 1,440 ) — ( 4 ) ( 1,444 ) Other comprehensive loss — — — — ( 1 ) — ( 1 ) Dividends and dividend equivalents (1) — — — ( 106 ) — — ( 106 ) Repurchase of common stock ( 4 ) — ( 66 ) — — — ( 66 ) Distributions to noncontrolling interests — — — — — ( 1 ) ( 1 ) Balance as of December 31, 2020 236 2 4,519 376 ( 4 ) ( 50 ) 4,843 Share-based compensation, net — — 14 — — — 14 Net (loss) income — — — ( 459 ) — 7 ( 452 ) Other comprehensive income — — — — 4 — 4 Distributions to noncontrolling interests — — — — — ( 6 ) ( 6 ) Balance as of December 31, 2021 236 $ 2 $ 4,533 $ ( 83 ) $ — $ ( 49 ) $ 4,403 (1) Dividends declared per common share were $ 1.90 and $ 0.45 for the years ended December 31, 2019 and December 31, 2020, respectively. Refer to the notes to the consolidated financial statements. 59 PARK HOTELS & RESORTS INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1 : Organization and Recent Events Organization Park Hotels & Resorts Inc. (“we,” “us,” “our” or the “Company”) is a Delaware corporation that owns a portfolio of premium-branded hotels and resorts primarily located in prime city center and resort locations. On January 3, 2017, Hilton Worldwide Holdings Inc. (“Hilton” or "Parent") completed the spin-off of a portfolio of hotels and resorts that established Park Hotels & Resorts Inc. as an independent, publicly traded company. On May 5, 2019, the Company, PK Domestic Property LLC, an indirect subsidiary of the Company (“PK Domestic”), and PK Domestic Sub LLC, a wholly-owned subsidiary of PK Domestic (“Merger Sub”) entered into a definitive Agreement and Plan of Merger (the “Merger Agreement”) with Chesapeake Lodging Trust (“Chesapeake”). On September 18, 2019, pursuant to the terms and subject to the conditions set forth in the Merger Agreement, Chesapeake merged with and into Merger Sub (the “Merger”) and each of Chesapeake’s common shares of beneficial interest, $ 0.01 par value per share, was converted into $ 11.00 in cash and 0.628 of a share of our common stock. No fractional shares of our common stock were issued in the Merger. The value of any fractional interests to which a Chesapeake shareholder would otherwise have been entitled was paid in cash. We are a real estate investment trust (“REIT”) for United States (“U.S.”) federal income tax purposes. We have been organized and operated, and we expect to continue to be organized and operate, in a manner to qualify as a REIT. From the date of our spin-off from Hilton, Park Intermediate Holdings LLC (our “Operating Company”), directly or indirectly, has held all our assets and has conducted all of our operations. Park Parent owned 100 % of the interests in our Operating Company until December 31, 2021 when the business undertook an internal reorganization transitioning our structure to a traditional umbrella partnership REIT structure ("UPREIT"). Effective January 1, 2022, Park Parent became the sole general partner and a limited partner of our Operating Company and PK Domestic REIT Inc., a direct subsidiary of Park Parent, became a limited partner. In the future, we may from time-to-time issue limited partnership units ("OP Units") through our Operating Company in connection with acquiring hotels, financing, compensation or other purposes. As of December 31, 2021, Park Parent and PK Domestic REIT Inc. collectively owned 100 % of the limited partnership interests of our Operating Company. COVID-19 Update The novel strain of coronavirus and the disease it causes (“COVID-19”) has had and continues to have a significant effect on the hospitality industry and our business. The effects of COVID-19, including government restrictions such as mandated closings of non-essential businesses and travel restrictions, have severely reduced overall lodging demand. Beginning in March 2020, we experienced a significant decline in occupancy and Revenue per Available Room (“RevPAR”) associated with COVID-19 throughout our portfolio, which resulted in a decline in our operating cash flow. The increase in vaccination rates across the country and the easing or removal of government restrictions, quarantining and “social distancing” mandates have resulted in increased travel and hospitality spending beginning in the second quarter of 2021. However, the seasonal decline in leisure travel following the holiday season and the delay in return of business travel, coupled with concerns over the spread of the Omicron variant, have reduced near-term demand. We and our hotel managers have taken various actions to mitigate the effects of COVID-19, including temporarily suspending operations at certain of our hotels beginning in March 2020, limiting capacity at our open hotels, deferring approximately $ 150 million of capital expenditures planned for 2020, reducing capital expenditures for maintenance projects to approximately $ 44 million for 2021, suspending our dividend after the first quarter of 2020, and, as a precautionary measure to increase liquidity and preserve financial flexibility, drawing on our revolving credit facility (“Revolver”) and completing three corporate bond offerings totaling $ 2.1 billion in 2020 and 2021. We have since commenced a phased reopening of all except two of our hotels as restrictions are removed and demand returns. The timing of fully reopening our two remaining suspended hotels will depend primarily on government restrictions imposed or re-imposed, recommendations of health officials and market demand. We are committed to using our liquidity to support our hotels’ operations during the COVID-19 pandemic and subsequent recovery, while being focused on continuing to maintain and enhance our stockholders’ value. Note 2: Basis of Presentation and Summary of Significant Accounting Policies Basis of Presentation Principles of Consolidation The consolidated financial statements include the accounts of the Company, our wholly owned subsidiaries and entities in which we have a controlling financial interest, including variable interest entities (“VIEs”) where we are the primary beneficiary. The consolidated financial statements reflect our financial position, results of operations and cash flows, in conformity with U.S. generally 60 accepted accounting principles (“U.S. GAAP”). All significant intercompany transactions and balances within these consolidated financial statements have been eliminated. Use of Estimates The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Summary of Significant Accounting Policies Property and Equipment Property and equipment are recorded at cost, and interest applicable to major construction or development projects is capitalized. Costs of improvements that extend the economic life or improve service potential are also capitalized. Capitalized costs are depreciated over their estimated useful lives. Costs for normal repairs and maintenance are expensed as incurred. Depreciation is recorded using the straight-line method over the assets’ estimated useful lives, which are generally as follows: buildings and improvements ( 8 to 40 years ); furniture and equipment ( 3 to 8 years ); and computer equipment and acquired software ( 3 years). Leasehold improvements are depreciated over the shorter of the estimated useful life, based on the estimates above, or the lease term. We evaluate the carrying value of our property and equipment if there are indicators of potential impairment. We perform an analysis to determine the recoverability of the asset’s carrying value by comparing the expected undiscounted future cash flows to the net book value of the asset. If it is determined that the expected undiscounted future cash flows are less than the net book value of the asset, the excess of the net book value over the estimated fair value is recorded in our consolidated statements of comprehensive (loss) income within impairment losses. Fair value is generally estimated using valuation techniques that consider the discounted cash flows of the asset using discount and capitalization rates deemed reasonable for the type of asset, as well as prevailing market conditions, appraisals, recent similar transactions in the market and, if appropriate and available, current estimated net sales proceeds from pending offers. If sufficient information exists to reasonably estimate the fair value of a conditional asset retirement obligation, including environmental remediation liabilities, we recognize the fair value of the obligation when the obligation is incurred, which is generally upon acquisition, construction or development and/or through the normal operation of the asset. Assets Held for Sale We classify a property as held for sale when we commit to a plan to sell the asset, the sale of the asset is probable within one year, and it is unlikely that action to complete the sale will change or that the sale will be withdrawn. When we determine that classification of an asset as held for sale is appropriate, we cease recording depreciation for the asset and value the property at the lower of depreciated cost or fair value, less costs to dispose. Further, the related assets and liabilities of the held for sale property will be classified as assets held for sale in our consolidated balance sheets. Any gains on sales of properties are recognized at the time of sale or deferred and recognized in net (loss) income in subsequent periods as any relevant conditions requiring deferral are satisfied. Investments in Affiliates The consolidated financial statements include entities in which we have a controlling financial interest, including VIEs where we are the primary beneficiary. The determination of a controlling financial interest is based upon the terms of the governing agreements of the respective entities, including the evaluation of rights held by other interests. If the entity is considered to be a VIE, we determine whether we are the primary beneficiary, and then consolidate those VIEs for which we have determined we are the primary beneficiary. If the entity in which we hold an interest does not meet the definition of a VIE, we evaluate whether we have a controlling financial interest through our voting interests in the entity. We consolidate entities when we own more than 50 percent of the voting shares of a company or otherwise have a controlling financial interest. References in these financial statements to net (loss) income attributable to stockholders do not include non-controlling interests, which represent the outside ownership interests of our consolidated, non-wholly owned entities and are reported separately. We hold investments in affiliates that primarily own or lease hotels. Investments in affiliates over which we exercise significant influence, but lack a controlling financial interest, are accounted for using the equity method. We account for investments using the equity method when we have the ability to exercise significant influence over the entity, typically through a more than minimal investment. Our proportionate share of earnings (losses) from our equity method investments is presented as equity in (losses) earnings from investments in affiliates in our consolidated statements of comprehensive (loss) income. Distributions from investments in affiliates 61 are presented as an operating activity in our consolidated statements of cash flows when such distributions are a return on investment. Distributions from investments in affiliates are recorded as an investing activity in our consolidated statements of cash flows when such distributions are a return of investment. We assess the recoverability of our equity method investments if there are indicators of potential impairment. If an identified event or change in circumstances requires an evaluation to determine if an investment may have an other-than-temporary impairment, we assess the fair value of the investment based on accepted valuation methodologies, which include discounted cash flows, estimates of sales proceeds and external appraisals. If an investment’s fair value is below its carrying value and the decline is considered to be other-than-temporary, we will recognize an impairment loss in equity in (losses) earnings from investments in affiliates in our consolidated statements of comprehensive (loss) income. Non-controlling Interests We present the portion of any equity that we do not own in entities that we have a controlling financial interest (and thus consolidate) as non-controlling interests and classify those interests as a component of total equity, separate from total stockholders’ equity, on our consolidated balance sheets. For consolidated joint ventures with pro rata distribution allocations, net income or loss is allocated between the joint venture partners based on their respective stated ownership percentages. In addition, we include net income (loss) attributable to the noncontrolling interest in net (loss) income in our consolidated statements of comprehensive (loss) income. Goodwill Goodwill represents the future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. We do not amortize goodwill, but rather evaluate goodwill for potential impairment on an annual basis or at other times during the year if events or circumstances indicate that the carrying amount may not be recoverable. We typically evaluate the carrying value of our goodwill annually. However, due to the effects of COVID-19, including (i) the significant decline in our common stock price, (ii) negative operating cash flows in the first quarter of 2020, (iii) the suspension of operations at certain of our hotels, and (iv) significant declines in occupancy and demand, we assessed goodwill during the first quarter of 2020. We had two reporting units, consolidated and unconsolidated hotels, to which goodwill has been allocated. Certain of the entities that are included in our consolidated financial statements were consolidated subsidiaries of our Parent at the time of its predecessor’s merger with an affiliate of The Blackstone Group L.P. (“Blackstone Merger”) . Our Parent allocated goodwill to us based on the relative fair value of our properties compared to that of Parent’s ownership segment as of the date of the Blackstone Merger. We reviewed the carrying value of goodwill by comparing the carrying value of a reporting unit to its fair value, as determined by us. The valuation was based on internal projections of expected future cash flows and operating plans, as well as market conditions relative to the operations of our reporting unit. We determined that the carrying value of our consolidated and unconsolidated hotel reporting units exceeded their respective estimated fair value and fully impaired our remaining goodwill balance, recognizing an impairment loss of $ 607 million in the first quarter of 2020 included within impairment and casualty loss, net in our consolidated statements of comprehensive (loss) income. Intangible Assets Intangible assets with finite useful lives primarily include an air rights contract. The air rights contract value is based on the present value of the difference between the contractual rental amounts and the market rental rates for similar contracts, measured over a period equal to the remaining non-cancellable term of the contract. Intangible assets are amortized using the straight-line method over the remaining term of the contract. We review all finite lived intangible assets for impairment when circumstances indicate that their carrying amounts may not be recoverable. If the carrying value of an asset group is not recoverable, we recognize an impairment loss for the excess of the carrying value over the fair value in our consolidated statements of comprehensive (loss) income. Asset Acquisitions We consider an asset acquisition to occur when substantially all the fair value of an acquisition is concentrated in a single identifiable asset or a group of similar identifiable assets. In an acquisition of assets, we are not required to expense our acquisition-related costs, and goodwill is not assigned. We will account for the properties purchased as asset acquisitions by allocating the total cash consideration, including transaction costs, to the individual assets acquired and liabilities assumed, respectively, on a relative fair value basis. Business Combinations We consider a business combination to occur when we take control of a business by acquiring its net assets or equity interests. We record the assets acquired, liabilities assumed and non-controlling interests at fair value as of the acquisition date, including any contingent consideration. We evaluate factors, including market data for similar assets, expected future cash flows discounted at 62 risk-adjusted rates and replacement cost for the assets to determine an appropriate fair value of the assets. Acquisition-related costs, such as due diligence, legal and accounting fees, are expensed in the period incurred and are not capitalized or applied in determining the fair value of the acquired assets. Cash and Cash Equivalents Cash and cash equivalents include all highly liquid investments with original maturities, when purchased, of three months or less. Restricted Cash Restricted cash includes cash balances established as lender reserves required by our debt agreements and reserves for capital expenditures in accordance with certain of our management agreements. Allowance for Doubtful Accounts An allowance for doubtful accounts is provided on accounts receivable when losses are probable based on historical collection activity and current business conditions. Leases We consider an arrangement to contain a lease if it conveys the right to control the use of an identified asset for a period of time in exchange for compensation. Right-of-use (“ROU”) assets represent our right to use an underlying asset for the lease term and lease liabilities represent the present value of our fixed payment obligations. Leases with a term of 12 months or less are not recorded on the balance sheet. We use our estimated incremental borrowing rate to determine the present value of our lease obligations. Our operating leases may require fixed payments, variable payments based on a percentage of revenue or income, or payments equal to the greater of a fixed or variable payment. Variable payments are excluded from the ROU assets and lease liabilities and are recognized in the period in which the obligation is incurred. Operating lease expense is recognized on a straight-line basis over the lease term. Our lease terms include renewal options that we are reasonably certain to exercise, and renewal options controlled by the lessor. Fair Value Measurements—Valuation Hierarchy Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date (an exit price). We use the three-level valuation hierarchy for classification of fair value measurements. The valuation hierarchy is based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. Inputs refer broadly to the assumptions that market participants would use in pricing an asset or liability. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from independent sources. Unobservable inputs are inputs that reflect our own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-level hierarchy of inputs is summarized below: • Level 1—Valuation is based upon quoted prices (unadjusted) for identical assets or liabilities in active markets. • Level 2—Valuation is based upon quoted prices for similar assets and liabilities in active markets, or other inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the instrument. • Level 3—Valuation is based upon other unobservable inputs that are significant to the fair value measurement. The classification of assets and liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement in its entirety at the end of each reporting period. Derivative Instruments We may use derivative instruments as part of our overall strategy to manage our exposure to market risks associated with fluctuations in interest rates. We will regularly monitor the financial stability and credit standing of the counterparties to our derivative instruments. Under the terms of certain loan agreements, we may be required to maintain derivative financial instruments to manage interest rates. We do not enter into derivative financial instruments for trading or speculative purposes. We record all derivatives at fair value. On the date the derivative contract is entered, we designate the derivative as one of the following: a hedge of a forecasted transaction or the variability of cash flows to be paid (“cash flow hedge”); a hedge of the fair value of a recognized asset or liability (“fair value hedge”); or an undesignated hedge instrument. Changes in the fair value of a derivative that is qualified, designated and highly effective as a cash flow hedge or net investment hedge are recorded in other comprehensive (loss) income in the consolidated statements of comprehensive (loss) income until they are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings. Changes in the fair value of a derivative that is qualified, designated and highly effective as a fair value hedge, along with the gain or loss on the hedged asset or liability that is attributable to the hedged risk, are recorded in current period earnings. Changes in the fair value of undesignated derivative instruments and the 63 ineffective portion of designated derivative instruments are reported in current period earnings. Cash flows from designated derivative financial instruments are classified within the same category as the item being hedged in the consolidated statements of cash flows. Cash flows from undesignated derivative financial instruments are included as an investing activity in our consolidated statements of cash flows. If we determine that we qualify for and will designate a derivative as a hedging instrument, at the designation date we formally document all relationships between hedging activities, including the risk management objective and strategy for undertaking various hedge transactions. This process includes matching all derivatives that are designated as cash flow hedges to specific forecasted transactions and linking all derivatives designated as fair value hedges to specific assets and liabilities in our consolidated balance sheets. To the extent we have designated a derivative as a hedging instrument, each reporting period we assess the effectiveness of our designated hedges in offsetting the variability in the cash flows or fair values of the hedged assets or obligations using the Hypothetical Derivative Method. This method compares the cumulative change in fair value of each hedging instrument to the cumulative change in fair value of a hypothetical hedging instrument, which has terms that identically match the critical terms of the respective hedged transactions. Thus, the hypothetical hedging instrument is presumed to perfectly offset the hedged cash flows. Ineffectiveness results when the cumulative change in the fair value of the hedging instrument exceeds the cumulative change in the fair value of the hypothetical hedging instrument. We discontinue hedge accounting prospectively, when the derivative is not highly effective as a hedge, the underlying hedged transaction is no longer probable, or the hedging instrument expires, is sold, terminated or exercised. Revenue Recognition Our results of operations primarily consist of room rentals, food and beverage sales and other ancillary goods and services from hotel properties. Other revenues primarily relate to support services we provide to Hilton Grand Vacations (“HGV”), in addition to revenue from our laundry business prior to permanently suspending operations in 2020. Hotel operating revenues are disaggregated into room revenue, food and beverage revenue, ancillary hotel revenue and other revenue on the consolidated statements of comprehensive (loss) income to illustrate how economic factors affect the nature, amount and timing, and uncertainty of revenue and cash flows. Rooms revenue is recognized over time when rooms are occupied and food and beverage revenue is recognized at a point in time when goods and services have been delivered or rendered. Ancillary hotel revenue and other revenue is generally recognized at a point in time as goods and services are delivered or rendered. We assess if we are the principal or agent for certain ancillary services provided by third parties. If we are the principal, we recognize revenue based on the gross sales price. If we are the agent, we recognize revenue net of costs paid to service providers. Payment received for a future stay or event is recognized as an advance deposit, which is included in other liabilities on our consolidated balance sheet. Advance deposits are recognized as revenue when rooms are occupied or goods or services have been delivered or rendered to our customer. Our advance deposit balance as of December 31, 2021 and 2020 w as $ 87 million a nd $ 46 million, respectively, and are generally recognized as revenue within a one-year period. Additionally, we collect sales, use, occupancy and similar taxes at our hotels, which we present on a net basis (excluded from revenues) in our consolidated statements of comprehensive (loss) income. Share-based Compensation We recognize the cost of services received in share-based payment transactions with employees and non-employee directors as services are received and recognize a corresponding increase in additional paid-in capital for equity classified awards. We account for any forfeitures when they occur. The measurement objective for these equity awards is the estimated fair value at the grant date of the equity instruments that we will be obligated to issue when employees have rendered the requisite service and satisfied any other conditions necessary to earn the right to benefit from the instruments. The compensation expense for an award classified as an equity instrument is recognized ratably over the requisite service period. The requisite service period is the period during which an employee is required to provide service in exchange for an award. Income Taxes We are a REIT for U.S. federal income tax purposes. We have been organized and operated, and we expect to continue to be organized and operate, in a manner to qualify as a REIT. To qualify as a REIT, we must satisfy requirements related to, among other things, the real estate qualification of sources of our income, the real estate composition and values of our assets, the amounts we distribute to our stockholders annually and the diversity of ownership of our stock. To the extent we continue to remain qualified as a REIT, we generally will not be subject to U.S. federal income tax on taxable income generated by our REIT activities that we distribute annually to our stockholders. Accordingly, no provision for U.S. federal income taxes has been included in our accompanying consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 related to our REIT activities other than taxes related to our built-in gain property (representing property held by us with an excess of fair value over tax basis on 64 January 4, 2017). We were subject to U.S. federal income tax on taxable sales of built-in gain property during the five-year period following the date of our spin-off, which ended in January 2022. In addition, we are subject to non-U.S. income tax on foreign held REIT activities and certain sales of foreign investments. Further, our taxable REIT subsidiaries (“TRSs”) are generally subject to U.S. federal, state and local, and foreign income taxes (as applicable). We account for income taxes using the asset and liability method. The objectives of accounting for income taxes are to recognize the amount of taxes payable or refundable for the current year, to recognize the deferred tax assets and liabilities that relate to tax consequences in future years, which result from differences between the respective tax basis of assets and liabilities and their financial reporting amounts, and tax loss and tax credit carry forwards. Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which the respective temporary differences or operating loss or tax credit carry forwards are expected to be recovered or settled. The realization of deferred tax assets and tax loss and tax credit carry forwards is contingent upon the generation of future taxable income and other restrictions that may exist under the tax laws of the jurisdiction in which a deferred tax asset exists. Valuation allowances are provided to reduce such deferred tax assets to amounts more likely than not to be ultimately realized. We use a prescribed recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken in a tax return. For all income tax positions, we first determine whether it is “more-likely-than-not” that a tax position will be sustained upon examination, including resolution of any related appeals or litigation processes, based on the technical merits of the position. If it is determined that a position meets the more-likely-than-not recognition threshold, the benefit recognized in the financial statements is measured as the largest amount of benefit that is greater than 50 percent likely of being realized upon settlement. Note 3 : Dispositions and Acquisitions Dispositions During the year ended December 31, 2021, we sold the five consolidated hotels listed in the table below, received total gross proceeds of approximately $ 477 million and recognized a net $ 5 million los s due to selling costs, which is included in (loss) gain on sales of assets, net in our consolidated statements of comprehensive (loss) income. In addition, we recognized a $ 5 million impairment loss from the classification of the Hotel Adagio, Autograph Collection, as held for sale at June 30, 2021, as the selling costs reduced the gross proceeds to less than the net book value of the property, which is included in impairment and casualty loss, net in our consolidated statements of comprehensive (loss) income. Hotel Location Month Sold W New Orleans – French Quarter New Orleans, Louisiana April 2021 Hotel Indigo San Diego Gaslamp Quarter (1) San Diego, California June 2021 Courtyard Washington Capitol Hill Navy Yard (1) Washington, D.C. June 2021 Hotel Adagio, Autograph Collection San Francisco, California July 2021 Le Meridien San Francisco San Francisco, California August 2021 (1) Sold as a portfolio in the same transaction. Net proceeds from the sales of these hotels were used to repay $ 37 million under the Revolver, which currently has no remaining balance outstanding, and partially repay $ 419 million of our term loan facility due in 2024 (“2019 Term Facility”). In February 2020, we sold the Embassy Suites Washington DC Georgetown and our interests in the entity that owns the Hilton São Paulo Morumbi for total gross proceeds of $ 208 million and recognized a gain, net of selling costs, of $ 63 million on these hotels, which is included in (loss) gain on sales of assets, net i n our consolidated statements of comprehensive (loss) income. Additionally, the net gain includes the reclassification of a currency translation adjustment of $ 7 million from accumulated other comprehensive loss into earnings concurrent with the sale of the Hilton São Paulo Morumbi. 65 During the year ended December 31, 2019, we sold seven consolidated hotels listed in the table below, received total gross proceeds of $ 436 million and recognized a total gain, net of selling costs, of $ 19 million on these hotels which is included in (loss) gain on sales of assets, net in our consolidated statements of comprehensive (loss) income. Hotel Location Month Sold Pointe Hilton Squaw Peak Resort Phoenix, Arizona February 2019 Hilton Nuremberg Nuremberg, Germany March 2019 Hilton Atlanta Airport Atlanta, Georgia June 2019 Hilton New Orleans Airport (1) New Orleans, Louisiana June 2019 Embassy Suites Parsippany (1) Parsippany, New Jersey June 2019 Ace Hotel Downtown Los Angeles Los Angeles, California December 2019 Le Meridien New Orleans New Orleans, Louisiana December 2019 (1) Sold as a portfolio in the same transaction. Additionally, in November 2019, we and the other owners of the entity that own the Conrad Dublin sold our ownership interest in the entity that owns the hotel for a gross sales price of approximately $ 128 million, before customary closing adjustments and debt repayment, of which our pro rata share was approximately $ 61 million. We recognized a net gain of approximately $ 44 million, which is includ ed in other (loss) gain, net in our consolidated statements of comprehensive (loss) income. Additionally, on December 16, 2019, we terminated the ground lease for the Hilton Sheffield. Acquisitions Merger with Chesapeake For the year ended December 31, 2020 , we incurred an additional $ 9 million in acquisition costs in connection with the Merger, primarily related to transfer taxes based on new information received during 2020. For the year ended December 31, 2019 , we incurred $ 70 million in acquisition costs in connection with the Merger primarily related to severance, transfer tax and fees for financial advisors, legal, accounting, tax and other professional services. The Merger-related costs noted above are included in acquisition costs in our consolidated statements of comprehensive (loss) income. The following unaudited condensed pro-forma financial information presents the results of operations as if the Merger had taken place on January 1, 2019. The unaudited condensed pro-forma financial information is not necessarily indicative of what our actual results of operations would have been assuming the Merger had taken place on January 1, 2019, nor is it indicative of the results of operations for future periods. The unaudited condensed pro-forma financial information is as follows: For the year ended December 31, 2019 (unaudited) (in millions) Total revenues $ 3,250 Operating income 504 Net income 359 From the date of the Merger through December 31, 2019, we recognized $ 156 million of total revenues, $ 20 million of operating income and $ 16 million of net income related to the hotels acquired in connection with the Merger. Note 4 : Property and Equipment Property and equipment were: December 31, 2021 2020 (in millions) Land $ 3,333 $ 3,429 Buildings and leasehold improvements 6,606 6,951 Furniture and equipment 1,005 1,042 Construction-in-progress 82 52 11,026 11,474 Accumulated depreciation and amortization ( 2,515 ) ( 2,281 ) $ 8,511 $ 9,193 66 Depreciation of property and equipment was $ 281 million, $ 297 million and $ 262 million during the years ended December 31, 2021, 2020 and 2019, respectively. For the year ended December 31, 2021 , we recognized $ 5 million of impairment losses related to one of our hotels, which was classified as held for sale as of June 30, 2021, and subsequently sold in July 2021, as the estimated selling costs were expected to reduce the gross proceeds below the net book value of the property. For the year ended December 31, 2020 , we recognized $ 90 million of impairment losses, primarily related to one of our hotels, and our inability to recover the carrying value of the a sset because of COVID-19. Transactions with HGV In October 2016, we completed the sale of 600 rooms at the Hilton Waikoloa Village to HGV in connection with timeshare projects. The net book value of these assets was approximately $ 177 million. Due to our continuing involvement, this transaction was not recognized as a sale and was accounted for as a sales-leaseback liability under the financing method. Pursuant to an arrangement representing a lease, we reserved exclusive rights to occupy and operate these rooms beginning on the date of transfer and continuing until the end of the lease term, which expired on December 31, 2019 . During 2017, 134 of the 600 rooms at the Hilton Waikoloa Village previously transferred to HGV and leased back by us were released to HGV; accordingly, we derecognized $ 38 million of property and equipment, net, and the related $ 39 million liability due to HGV. During 2018, we transferred a restaurant at the Hilton Waikoloa Village to HGV and derecognized $ 3 million of property and equipment, net and $ 3 million of the related liability due to HGV. On December 31, 2019, the remaining 466 rooms at the Hilton Waikoloa Village were released to HGV and we derecognized $ 123 million of property and equipment, net, and the related $ 135 million liability due to HGV, and recognized a gain of $ 12 million within o ther (loss) gain, net in our consolidated statements of comprehensive (loss) income. Hurricanes Irma and Maria In September 2017, Hurricanes Irma and Maria caused damage and disruption at certain of our hotels in Florida and the Caribe Hilton in Puerto Rico. The Caribe Hilton remained closed throughout 2018 and reopened on May 15, 2019. Our insurance coverage provides us with reimbursement for the replacement cost for the damage to these hotels, which includes certain clean-up and repair costs, exceeding the applicable deductibles, in addition to loss of business. Claims related to the Hilton Caribe were fully settled in December 2019, and claims related to our Florida hotels were fully settled in January 2021. During the year ended December 31, 2019, w e recognized $ 70 million of insurance recoveries, of which $ 39 million related to property damage, $ 28 million related to business interruption, and $ 3 million related to expense reimbursements. Business interruption proceeds are included within ancillary hotel revenue in our consolidated statements of comprehensive (loss) income. Additionally, we recognized a net gain of $ 18 million within impairment and casualty loss, net in our consolidated statements of comprehensive (loss) income, which includes a gain of $ 27 million for amounts recovered from insurance in excess of the insurance receivable and a loss of $ 9 million relating to property damage at certain of our hotels that we may not recover from insurers. Note 5 : Consolidated Variable Interest Entities ("VIEs") and Investments in Affiliates Consolidated VIEs We consolidate VIEs that own three hotels in the U.S. We are the primary beneficiary of these VIEs as we have the power to direct the activities that most significantly affect their economic performance. Additionally, we have the obligation to absorb their losses and the right to receive benefits that could be significant to them. The assets of our VIEs are only available to settle the obligations of these entities. Our consolidated balance sheets include the following assets and liabilities of these entities: December 31, 2021 2020 (in millions) Property and equipment, net $ 209 $ 216 Cash and cash equivalents 18 8 Restricted cash 6 2 Accounts receivable, net 3 1 Prepaid expenses 1 1 Other assets — 1 Debt 208 207 Accounts payable and accrued expenses 7 5 Due to hotel managers 1 — Other liabilities 3 1 67 Unconsolidated Entities Investments in affiliates were: December 31, Ownership % 2021 2020 (in millions) Hilton San Diego Bayfront 25 % 11 11 All others (5 and 6 hotels) (1) 20 % - 50 % 4 3 $ 15 $ 14 (1) The ground lease for the Embassy Suites Secaucus Meadowla nds expired on October 31, 2021 and the property was turned over to the ground lessor on that date. The affiliates in which we own investments accounted for under the equity method had total debt of approximately $ 943 million as of December 31, 2021 and 2020 , respectively. Substantially all the debt is secured solely by the affiliates’ assets or is guaranteed by other partners without recourse to us. Note 6 : Goodwill and Intangibles Due to the effects of COVID-19, we assessed goodwill for impairment during the first quarter of 2020. We determined that the carrying value of our consolidated and unconsolidated hotel reporting units exceeded their respective estimated fair value. As a result, we fully impaired our remaining goodwill balance, recognizing an impairment loss of $ 607 million in the first quarter of 2020. Refer to Note 8: “Fair Value Measurements” for additional information. Intangible assets were: December 31, 2021 2020 (in millions) Air rights contract 45 45 Other 8 8 Accumulated amortization ( 9 ) ( 8 ) $ 44 $ 45 As of December 31, 2021, we estimated our future amortization expense for our intangible assets to be: Year (in millions) 2022 $ 1 2023 1 2024 1 2025 1 2026 1 Thereafter 39 $ 44 68 Note 7 : Debt Debt balances and associated interest rates as of December 31, 2021 were: Principal balance as of Interest Rate at December 31, 2021 Maturity Date December 31, 2021 December 31, 2020 (in millions) SF Mortgage Loan 4.11 % November 2023 $ 725 $ 725 HHV Mortgage Loan 4.20 % November 2026 1,275 1,275 Other mortgage loans Average rate of 4.21 % 2022 to 2026 (1)(2) 503 509 2019 Term Facility (3) L + 2.65 % August 2024 78 670 Revolver (3) L + 3.00 % 2021 to 2023 (4) — 601 2025 Senior Secured Notes 7.50 % June 2025 650 650 2028 Senior Secured Notes 5.88 % October 2028 725 725 2029 Senior Secured Notes 4.88 % May 2029 750 — Finance lease obligations 3.07 % 2021 to 2022 — 1 4,706 5,156 Add: unamortized premium 4 3 Less: unamortized deferred financing costs and discount ( 38 ) ( 38 ) $ 4,672 $ 5,121 (1) Assumes the exercise of all extensions that are exercisable solely at our option. The mortgage loan for Hilton Denver City Center matures in 2042 but is callable by the lender beginning August 2022 . (2) In November 2021, we modified the $ 75 million mortgage loan secured by the W Chicago City Center to require interest only payments until its maturity date. (3) In May 2020, we amended our credit and term loan facilities to add a LIBOR floor of 25 basis points . (4) In September 2020, we inc reased our aggregate commitments under the Revolver by $ 75 million to $ 1.075 billion and extended the maturity date with respect to $ 901 million of the aggregate commitments for two years to December 2023 , including all $ 75 million of the increased Revolver commitments. The maturity date for the remaining $ 174 million of commitments under the Revolver was December 2021 . Mortgage Loans In October 2016, we entered into a $ 725 million CMBS loan secured by the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco (“SF Mortgage Loan”) and a $ 1.275 billion CMBS loan secured by the Hilton Hawaiian Village (“HHV Mortgage Loan”). Both the SF Mortgage Loan and the HHV Mortgage Loan bear interest at a fixed-rate and require interest-only payments through their respective maturity dates. The SF Mortgage Loan is currently able to be partially or fully repaid, without penalty, and the HHV Mortgage Loan may be partially or fully prepaid, subject to prepayment penalties. Our mortgage loans, which are associated with our three consolidated VIEs and mortgage loans acquired through the Merger, bear interest at either a fixed-rate or variable rate. Our mortgage loans associated with our VIEs require interest-only loan payments through their respective maturity dates and most of the mortgage loans associated with the Merger require payments of principal and interest on a monthly basis . We are required to deposit with lenders certain cash reserves for restricted uses. As of December 31, 2021 and December 31, 2020, our consolidated balance sheets included $ 60 million and $ 10 million of restricted cash, respectively, related to our mortgage loans. We currently have higher than historical balances in restricted cash due to certain of our mortgage loans that require deposits of excess cash with the lender when certain financial ratios are not met, which occurred during the period as a result of the effect from COVID-19 on operating results at the associated hotels. Credit Facilities 2016 Term Loan and Revolver In December 2016, we entered into a credit agreement (“Credit Agreement”) with Wells Fargo Bank, National Association as administrative agent, and certain others financial institutions party thereto as lenders. The facility included a $ 1 billion revolving credit facility ("Revolver), which was increased to $ 1.075 billion in September 2020, and a term loan due December 2021 ("2016 Term Loan") , which was fully repaid in September 2020. The Revolver and 2016 Term Loan borrowings bear interest at variable rates at our option, based upon either a base rate or LIBOR rate, plus an applicable margin based on our leverage ratio. We incur an unused facility fee on the Revolver of between 0.2 % and 0.3 %, based on our level of usage. The Credit Agreement also contains certain financial covenants including a maximum leverage ratio, minimum fixed charge coverage ratio, maximum secured leverage ratio, maximum unsecured indebtedness to unencumbered asset value ratio and minimum unencumbered adjusted net operating income to 69 unsecured interest coverage ratio. Additionally, the Revolver permits one or more standby letters of credit, up to a maximum aggregate outstanding balance of $ 50 million, to be issued on behalf of us. Any outstanding standby letters of credit reduce the available borrowings on the Revolver by a corresponding amount. In March 2020, we fully drew down our $ 1 billion Revolver as a precautionary measure to increase liquidity and preserve financial flexibility in connection with the economic effect of COVID-19. We subsequently repaid the Revolver in full using proceeds from: i) the issuance of $ 2.1 billion of senior secured notes, ii) the sales of consolidated hotels and iii) existing cash. We also used proceeds from the issuance of the $ 725 million of senior secured notes due 2028 (“2028 Senior Secured Notes”) to repay all of the amounts outstanding under our 2016 Term Loan. In May 2020, in order to maintain compliance under our credit and term loan facilities in future quarters, we amended our credit and term loan facilities to suspend compliance with all existing financial covenants tested through and including March 31, 2021 and to adjust the levels of particular financial covenants after such period. In September 2020, we further amended our Revolver and our unsecured delayed draw term loan facility (“2019 Term Facility”), as discussed in more detail below, to extend the waiver period for the testing of the financial covenants to the date the financial statements are delivered for the quarter ended March 31, 2022. As part of the amendment process, we (i) increased commitments under the Revolver by $ 75 million to $ 1.075 billion and extended the maturity date with respect to $ 901 million of the aggregate commitments for two years to December 2023 , including all $ 75 million of the increased Revolver commitments, (ii) extended the temporary periods for which certain financial covenants are adjusted once quarterly testing of financial covenants resumes, (iii) increased the mandatory repayment carve out for equity issuances from $ 500 million to $ 1 billion, so long as proceeds from the issuances are used for capital expenditures and hotel acquisitions that become part of the unencumbered pool, (iv) maintained the existing guarantees by certain Park-affiliated entities until repayment of the Revolver and 2019 Term Facility and existing pledges of equity interests in Park-affiliated entities owning certain unencumbered assets during the extended waiver period and until the ratio of net debt to EBITDA falls below 6.50x for two consecutive quarters, (v) extended the minimum liquidity covenant through December 2022 , (vi) obtained the ability to pay a $ 0.01 per share per fiscal quarter dividend during the extended waiver period and (vii) modified certain restrictions and covenants for the duration of the extended waiver period, including certain mandatory prepayments. The September 2020 amendment also contained limitations on our ability to make dividends and distributions (except to the extent required to maintain REIT status, the ability of the Park Parent to pay a $ 0.01 per share per fiscal quarter dividend and certain other agreed exceptions). In February 2022, we further amended our credit and term loan facilities, including extending the waiver period for the testing of the financial covenants, refer to “ Note 17: “Subsequent Events" for additional information. 2019 Term Facility In advance of the Merger, in August 2019, the Company, our Operating Company and PK Domestic entered into the 2019 Term Facility with Bank of America, N.A. as administrative agent, and certain other financial institutions party thereto as lenders. The 2019 Term Facility provided for $ 950 million unsecured delayed draw term loan commitments to fund the Merger. The 2019 Term Facility included a $ 100 million two-year delayed draw term loan tranche, which was unfunded and the commitments thereunder terminated on September 18, 2019, and a $ 850 million five-year delayed draw term loan tranche, which has a scheduled maturity date of August 2024 . On September 18, 2019, the five-year tranche was fully drawn to fund the Merger of which $ 180 million was prepaid in December 2019. Borrowings from the 2019 Term Facility bear interest at variable rates at our option, based upon either a base rate or LIBOR rate, plus an applicable margin based on our leverage ratio. Beginning in August 2019, we accrued an unused commitment fee equal to 0.25 % per annum of the undrawn portion of the 2019 Term Facility, which was paid on September 18, 2019 when the 2019 Term Facility was fully drawn. Additionally, we incurred upfront financing fees of $ 9 million associated with the 2019 Term Facility, of which $ 3 million was expensed in connection with the terminated commitments and the $ 180 million prepayment in December 2019. During the year ended December 31, 2021, we repaid $ 592 million of the 2019 Term Facility using proceeds from the issuance of $ 750 million of senior secured notes due 2029 (“2029 Senior Secured Notes) and from the sales of consolidated hotels during 2021. The 2019 Term Facility agreement includes the option to increase the size of the 2019 Term Facility and enter into additional incremental term loan credit facilities, subject to certain limitations and obtaining additional commitments, in an aggregate amount not to exceed $ 400 million for all such increases. The 2019 Term Facility agreement contains certain financial covenants relating to our maximum leverage ratio, minimum fixed charge coverage ratio, maximum secured leverage ratio, maximum unsecured indebtedness to unencumbered asset value and minimum unencumbered adjusted net operating income to unsecured interest coverage. If an event of default exists, we generally are not permitted to make distributions to stockholders, other than those required to qualify for and maintain REIT status and certain other limited exceptions. In connection with the Merger, we assumed an interest rate swap from Chesapeake, which is designated as a cash flow hedge, to hedge the interest rate risk on a portion of the 2019 Term Facility. The interest rate swap requires us to pay fixed interest of 1.86 % per annum maturing on April 21, 2022 on a notional amount of $ 225 million, in exchange for floating rate interest equal to one-month LIBOR. In September 2021, following partial repayments of the 2019 Term Facility, we partially terminated the swap to reduce the 70 notional amount to $ 78 million, the current outstanding balance of the 2019 Term Facility, and removed the designation of the swap as a cash flow hedge. Senior Secured Notes 2025 Senior Secured Notes In May 2020, our Operating Company, PK Domestic and PK Finance issued an aggregate of $ 650 million of senior secured notes due 2025 ("2025 Senior Secured Notes"). We used $ 219 million of the net proceeds to partially repay the Revolver, $ 69 million to partially repay the 2016 Term Loan and the remainder was used for general corporate purposes. The 2025 Senior Secured Notes bear interest at a rate of 7.500 % per annum, payable semi-annually in arrears on June 1 and December 1 of each year, beginning December 1, 2020. The 2025 Senior Secured Notes will mature on June 1, 2025 . We capitalized $ 13 million of issuance costs during the year ended December 31, 2020. We may redeem the 2025 Senior Secured Notes at any time prior to June 1, 2022 , in whole or in part, at a redemption price equal to 100 % of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after June 1, 2022, we may redeem the 2025 Senior Secured Notes, in whole or in part, at the applicable redemption prices set forth in the indenture. On or after June 1, 2024 , we may redeem the 2025 Senior Secured Notes at 100 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, before June 1, 2022, we may redeem up to 40 % of the 2025 Senior Secured Notes with the net cash proceeds from certain equity offerings at a redemption price of 107.500 % of the principal amount redeemed. 2028 Senior Secured Notes In September 2020, our Operating Company, PK Domestic LLC and the PK Finance issued an aggregate of $ 725 million of 2028 Senior Secured Notes. The 2028 Senior Secured Notes bear interest at a rate of 5.875 % per annum, payable semi-annually in arrears on April 1 and October 1 of each year beginning April 1, 2021. Net proceeds were used to repay the 2016 Term Loan in full and to repay $ 80 million of our outstanding balance under the Revolver, which may be redrawn. We capitalized $ 13 million of issuance costs during the year ended December 31, 2020. We may redeem the 2028 Senior Secured Notes at any time prior to October 1, 2023 , in whole or in part, at a redemption price equal to 100 % of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after October 1, 2023, we may redeem the 2028 Senior Secured Notes, in whole or in part, at the applicable redemption prices set forth in the indenture. On or after October 1, 2025 , we may redeem the 2028 Senior Secured Notes at 100 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, before October 1, 2023, we may redeem up to 40 % of the 2028 Senior Secured Notes with the net cash proceeds from certain equity offerings at a redemption price of 105.875 % of the principal amount redeemed. 2029 Senior Secured Notes In May 2021, our Operating Company, PK Domestic and PK Finance issued an aggregate of $ 750 million of 2029 Senior Secured Notes. Net proceeds were used to repay $ 564 million of our outstanding balance under the Revolver, which may be redrawn, and $ 173 million of the 2019 Term Facility. The 2029 Senior Secured Notes bear interest at a rate of 4.875 % per annum, payable semi-annually in arrears on May 15 and November 15 of each year, beginning November 15, 2021. The 2029 Senior Secured Notes will mature on May 15, 2029 . We capitalized $ 13 million of issuance costs during the year ended December 31, 2021. We may redeem the 2029 Senior Secured Notes at any time prior to May 15, 2024 , in whole or in part, at a redemption price equal to 100 % of the principal amount thereof plus accrued and unpaid interest, if any, to the redemption date plus a make-whole premium. On or after May 15, 2024, we may redeem the 2029 Senior Secured Notes, in whole or in part, at the applicable redemption prices set forth in the indenture. On or after May 15, 2026 , we may redeem the 2029 Senior Secured Notes at 100 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date. In addition, before May 15, 2024, we may redeem up to 40 % of the 2029 Senior Secured Notes with the net cash proceeds from certain equity offerings at a redemption price of 104.875 % of the principal amount redeemed. Indentures The 2025 Senior Secured Notes, 2028 Senior Secured Notes and 2029 Senior Secured Notes (collectively, the “Senior Secured Notes”) are guaranteed by us and by the subsidiaries of our Operating Company that also guarantee indebtedness under our credit facilities. The guarantees are full and unconditional and joint and several. The Senior Secured Notes are secured, subject to permitted liens, by a first priority security interest in all of the capital stock of certain wholly-owned subsidiaries of certain of the guarantors and 71 PK Domestic, which collateral also secures the obligations under our credit and term loan facilities on a first priority basis. The indentures governing the Senior Secured Notes contain customary covenants that limit the issuers’ ability and, in certain instances, the ability of the issuers’ subsidiaries, to borrow money, create liens on assets, make distributions and pay dividends on or redeem or repurchase stock, make certain types of investments, sell stock in certain subsidiaries, enter into agreements that restrict dividends or other payments from subsidiaries, enter into transactions with affiliates, issue guarantees of indebtedness, and sell assets or merge with other companies. These covenants are subject to a number of exceptions and qualifications, including the ability to declare or pay any cash dividend or make any cash distribution to us to the extent necessary for us to fund a dividend or distribution by us that we believe is necessary to maintain our status as a REIT or to avoid payment of any tax for any calendar year that could be avoided by reason of such distribution, and the ability to make certain restricted payments not to exceed $ 100 million, plus 95 % of our cumulative Funds From Operations (as defined in the indentures), plus the aggregate net proceeds from (i) the sale of certain equity interests in, (ii) capital contributions to, and (iii) certain convertible indebtedness of the Operating Company. In addition, the indentures require our Operating Company to maintain total unencumbered assets as of each fiscal quarter of at least 150 % of total unsecured indebtedness, in each case calculated on a consolidated basis. Debt Maturities The contractual maturities of our debt, assuming the exercise of all extensions that are exercisable solely at our option, as of December 31, 2021 were: Year (in millions) 2022 $ 97 2023 830 2024 85 2025 657 2026 1,562 Thereafter (1) 1,475 $ 4,706 (1) Assumes the exercise of all extensions that are exercisable solely at our option. Note 8 : Fair Value Measurements We did not elect the fair value measurement option for our financial assets or liabilities. The fair values of our other financial instruments not included in the table below are estimated to be equal to their carrying amounts. The fair value of our debt and the hierarchy level we used to estimate fair values are shown below: December 31, 2021 December 31, 2020 Hierarchy Level Carrying Amount Fair Value Carrying Amount Fair Value (in millions) Liabilities: SF Mortgage Loan 3 $ 725 $ 733 $ 725 $ 708 HHV Mortgage Loan 3 1,275 1,282 1,275 1,195 2019 Term Facility 3 78 76 670 661 Revolver 3 — — 601 596 2025 Senior Secured Notes 1 650 688 650 705 2028 Senior Secured Notes 1 725 761 725 774 2029 Senior Secured Notes 1 750 771 — — Other mortgage loans 3 503 491 509 480 72 During the year ended December 31, 2020, we recognized impairment losses for goodwill and for certain assets resulting from a significant decline in market value of those assets due to the effects from the COVID-19 pandemic. The estimated fair values of these assets that were measured on a nonrecurring basis were: December 31, 2020 Fair Value Impairment Loss (in millions) Property and equipment (1) $ 24 $ 90 Goodwill (2) — 607 Total $ 24 $ 697 (1) Fair value of our property and equipment as of December 31, 2020 was measured using significant unobservable inputs (Level 3). We estimated fair value of the assets using discounted cash flow analyses, with an estimated stabilized growth rate of 3 %, a discounted cash flow term between 1.7 to 10 years, terminal capitalization rate ranging from 7.25 % to 7.75 %, and discount rates ranging from 9.5 % to 12.5 %. The discount and terminal capitalization rates used for the fair value of the assets reflected the risk profile of the markets where these properties are located. (2) F air value of our consolidated and unconsolidated hotel reporting units was measured using significant unobservable inputs (Level 3), which included discounted cash flows, terminal capitalization rates, and discount rates. Note 9 : Leases We lease hotel properties, land and equipment under operating and financing leases. We are subject to ground leases on 14 of our consolidated properties. Our leases expire, including options under lessor control, at various dates through 2083 , with varying renewal options, and the majority expire before 2032 . Our operating leases may require minimum rent payments, variable rent payments based on a percentage of revenue or income or rent payments equal to the greater of a minimum rent or variable rent. In addition, we may be required to pay some, or all, of the capital costs for property and equipment in the hotel during the term of the lease. The future minimum rent payments under our current leases, due in each of the next five years and thereafter as of December 31, 2021, were: Operating Leases Year (in millions) 2022 $ 29 2023 24 2024 24 2025 24 2026 14 Thereafter 327 Total minimum rent payments 442 Less: imputed interest 215 Total operating lease liabilities $ 227 As of December 31, 2021 and 2020, the weighted average remaining operating lease term was 26.9 years and 26.5 years, respectively, and the weighted average discount rate used to determine the operating lease liabilities was 5.3 % for both periods. The components of rent expense, which are primarily included in other property-level expenses in our consolidated statements of comprehensive (loss) income, as well as supplemental cash flow and non-cash information for all operating leases were: Year Ended Year Ended Year Ended December 31, 2021 December 31, 2020 December 31, 2019 (in millions) Operating lease expense $ 29 $ 30 $ 30 Variable lease expense 4 2 13 Operating cash flows for operating leases 30 28 36 Right-of-use assets obtained in exchange for lease obligations (1) — — 278 (1) For the year ended December 31, 2019, balance represents right-of-use assets recognized upon adoption of ASC 842, Leases, on January 1, 2019, and right-of-use assets assumed in connection with the Merger. 73 Note 10: Income Taxes We are a REIT for U.S. federal income tax purposes. We have been organized and operated, and we expect to continue to be organized and operate in a manner to qualify as a REIT. To qualify as a REIT, we must satisfy requirements related to, among other things, the real estate qualification of sources of our income, the real estate composition and values of our assets, the amounts we distribute to our stockholders annually and the diversity of ownership of our stock. To the extent we continue to remain qualified as a REIT, we generally will not be subject to U.S. federal income tax on taxable income generated by our REIT activities that we distribute annually to our stockholders. Accordingly, no provision for U.S. federal income taxes has been included in our accompanying consolidated financial statements for the years ended December 31, 2021, 2020 and 2019 related to our REIT activities other than taxes related to our built-in gain property (representing property held by us with an excess of fair value over tax basis on January 4, 2017). We were subject to U.S. federal income tax on taxable sales of built-in gain property during the five-year period following the date of our spin-off, which expired on January 3, 2022. In addition, we are subject to non-U.S. income tax on foreign held REIT activities and certain sales of foreign investments. Further, our taxable REIT subsidiaries (“TRSs”) are generally subject to U.S. federal, state and local, and foreign income taxes (as applicable). The Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”) was enacted on March 27, 2020 and included several tax provisions that may affect us and our subsidiaries, including: • the ability for our TRSs to carry back net operating losses (“NOLs”) arising in 2020 to all post spin-off taxable years preceding the taxable year of the loss; • an increase of the business interest limitation under Internal Revenue Code (“Code”) section 163(j) from 30 percent to 50 percent of adjusted taxable income for taxable years beginning in 2019 and 2020 and the addition of an election by taxpayers to use their 2019 adjusted taxable income as their adjusted taxable income in 2020 for purposes of applying the limitation; and • a “technical correction” amending Code section 168(e)(3)(E) to add “qualified improvement property” to “15-year property” and assigning a class life of 20-years under section 168(g)(3)(B) to qualified improvement property under section 168(e)(3)(E)(vii). Our tax provision includes U.S. federal, state and foreign income taxes payable. The domestic and foreign components of (loss) income before income taxes were: Year Ended December 31, 2021 2020 2019 (in millions) U.S. (loss) income before tax $ ( 450 ) $ ( 1,449 ) $ 350 Foreign (loss) income before tax — ( 1 ) 1 (Loss) income before income taxes $ ( 450 ) $ ( 1,450 ) $ 351 The components of our provisio n (benefit) for income taxes were: Year Ended December 31, 2021 2020 2019 (in millions) Current: U.S. Federal $ 5 $ 1 $ 16 State ( 2 ) 3 3 Foreign — 20 11 Total current 3 24 30 Deferred: U.S. Federal ( 1 ) ( 29 ) 3 Foreign — ( 1 ) 2 Total deferred ( 1 ) ( 30 ) 5 Total provision (benefit) for income taxes $ 2 $ ( 6 ) $ 35 74 Reconciliations of our tax provision at the U.S. statutory rate to the pro vision (benefit) for income taxes were: Year Ended December 31, 2021 2020 2019 (in millions) Statutory U.S. federal income tax (benefit) provision $ ( 94 ) $ ( 306 ) $ 74 State income taxes, net of U.S. federal tax benefit — 1 2 Foreign income tax expense, net — 19 13 Change in deferred tax asset valuation allowance ( 22 ) 71 2 Tax rate change — ( 7 ) — REIT income not subject to tax 116 221 ( 69 ) Derecognition and remeasurement of deferred taxes ( 1 ) ( 35 ) 13 Recognized built-in gain tax — 29 — Other 3 1 — Provision (benefit) for income taxes $ 2 $ ( 6 ) $ 35 Deferred income taxes represent the tax effect of the differences between the book and tax bases of assets and liabilities plus carryforward items. The composition of net deferred tax balances were as follows: December 31, 2021 2020 (in millions) Deferred income tax assets (1) $ 1 $ 1 Deferred income tax liabilities ( 9 ) ( 10 ) Net deferred tax liability $ ( 8 ) $ ( 9 ) (1) Included within other assets in our consolidated balance sheets, net of valuation allowance. The tax effects of the temporary differences and carryforwards that give rise to our net deferred tax liability were: December 31, 2021 2020 (in millions) Deferred tax assets: Net operating loss carryforwards $ 51 $ 74 Deferred income 5 5 Accrued compensation 2 1 Other 7 6 Total gross deferred tax assets 65 86 Less: valuation allowance ( 55 ) ( 77 ) Deferred tax assets 10 9 Deferred tax liabilities: Property and equipment ( 4 ) ( 4 ) Investments ( 9 ) ( 10 ) Accrued compensation ( 5 ) ( 4 ) Deferred tax liabilities ( 18 ) ( 18 ) Net deferred tax liability $ ( 8 ) $ ( 9 ) As of December 31, 2021, we had U.S. federal and state net operating loss carryforwards of approximately $ 2 billion, which resulted in deferred tax assets of $ 51 million. Our U.S. federal and state net operating loss carryforwards of approximately $ 984 million and $ 1.1 billion begin to expire in 2038 and 2025 , respectively. For periods ended prior to January 4, 2017, Hilton filed income tax returns for us, with U.S. federal, state and foreign jurisdictions. Hilton is under regular and recurring audit by the Internal Revenue Service on open tax positions. The timing of the resolution of tax audits is highly uncertain, as are the amounts, if any, that may ultimately be paid upon such resolution. Changes may result from the conclusion of ongoing audits, appeals or litigation in U.S. federal, state, local, and foreign tax jurisdictions or from the resolution of various proceedings between the U.S. and foreign tax authorities. Hilton is no longer subject to U.S. federal income tax examination for years through 2004. As of December 31, 2021, Hilton remains subject to U.S. federal examinations from 2005 through 2017, state examinations from 2005 through 2017 and foreign examinations of their income tax returns for the years 1996 through 2017. We will be subject to U.S. federal, state and foreign examinations for periods ending after January 4, 2017. 75 For U.S. federal income tax purposes, we made no cash distributions to our stockholders in 2021. The cash distributions to stockholders in 2020 are characterized as follows: Year Ended December 31, 2020 Common distributions (per share): Ordinary dividends $ 0.244571 Capital gain distributions (1) 0.205429 (1) Capital gain distribution disclosure pursuant to Treasury Regulation §1.1061-6(c). The following additional information relates to the capital gain distribution for calendar year 2020, as reported on Park Hotels & Resorts Inc. Form 1099-DIV, Box 2a. For purposes of Internal Revenue Code Section 1061, which is generally applicable to direct and indirect holders of “applicable partnership interests,”: (i) the “One Year Amounts” are $ 0.205429 per share, and (ii) the “Three Year Amounts” are $ 0.205429 per share, with respect to the 2020 capital gain distribution. Note 11 : Share-Based Compensation We issue equity-based awards to our employees pursuant to the 2017 Omnibus Incentive Plan (“2017 Employee Plan”) and our non-employee directors pursuant to the 2017 Stock Plan for Non-Employee Directors (as amended and restated from time to time, the “2017 Director Plan”). The 2017 Employee Plan provides that a maximum of 8,000,000 shares of our common stock may be issued, and as of December 31, 2021, 2,914,000 shares of comm on stock remain available for future issuance. As amended and approved by our stockholders in April 2021, the 2017 Director Plan provides that a maximum of 950,000 shares of our common stock may be issued, and as of December 31, 2021, 491,394 shares of common stock remain available for future issuance. For the years ended December 31, 2021, 2020 and 2019, we recognized $ 19 million, $ 20 million and $ 16 million of share-based compensation expense, respectively. As of December 31, 2021, unrecognized compensation expense was $ 18 million, which is expected to be recognized over a weighted-average period of 1.7 years. The total fair value of shares vested (calculated as the number of shares multiplied by the vesting date share price) during the years ended December 31, 2021, 2020 and 2019 was $ 18 million, $ 27 million and $ 21 million, respectively. Restricted Stock Awards Restricted Stock Awards (“RSAs”) generally vest in annual installments between one and three years from each grant date. The following table provides a summary of RSAs for the years ended December 31, 2021, 2020 and 2019: Number of Shares Weighted-Average Grant Date Fair Value Unvested at January 1, 2019 585,106 $ 26.89 Granted 302,506 31.24 Vested ( 312,462 ) 26.99 Forfeited ( 17,905 ) 29.58 Unvested at December 31, 2019 557,245 29.10 Granted 672,689 18.18 Vested ( 333,685 ) 25.67 Forfeited ( 61,991 ) 28.97 Unvested at December 31, 2020 834,258 21.68 Granted 434,486 20.52 Vested ( 456,357 ) 19.08 Forfeited ( 23,065 ) 22.45 Unvested at December 31, 2021 789,322 $ 22.52 76 Performance Stock Units Performance Stock Units (“PSUs”) generally vest at the end of a three-year performance period and are subject to the achievement of a market condition based on a measure of our total shareholder return relative to the total shareholder return of the companies that comprise the FTSE Nareit Lodging Resorts Index (that have a market capitalization in excess of $ 1 billion as of the first day of the applicable performance period). The number of PSUs that may become vested ranges from zero to 200 % of the number of PSUs granted to an employee, based on the level of achievement of the foregoing performance measure. Additionally, in November 2020, we granted special awards with vesting of these awards subject to the achievement of eight increasing levels of our average closing sales price per share, from $ 11.00 to $ 25.00 , over a consecutive 20 trading day period (“Share Price Target”). One-eighth of PSUs will vest at each date a Share Price Target is achieved and any PSUs remaining after a four-year performance period will be forfeited. As of December 31, 2021 , six of the eight Share Price Targets were achieved and thus 75 % of the awards granted were vested. The following table provides a summary of PSUs for the years ended December 31, 2021, 2020 and 2019: Number of Shares Weighted-Average Grant Date Fair Value Unvested at January 1, 2019 537,936 $ 31.16 Granted 314,858 34.28 Vested ( 277,325 ) 31.25 Forfeited ( 672 ) 42.05 Unvested at December 31, 2019 574,797 32.82 Granted 1,641,117 14.39 Vested ( 973,891 ) 20.00 Forfeited ( 163,468 ) 17.34 Unvested at December 31, 2020 1,078,555 18.70 Granted 327,416 27.16 Vested ( 428,255 ) 16.33 Forfeited ( 5,642 ) 20.29 Unvested at December 31, 2021 972,074 $ 22.59 The grant date fair values of the awards that are subject to the achievement of market conditions based on total shareholder return were determined using a Monte Carlo simulation valuation model with the following assumptions: Year Ended December 31, 2021 2020 2019 Expected volatility (1) 60.0 % 22.0 % - 65.0 % 19.5 % - 21.5 % Dividend yield (2) — — — Risk-free rate 0.2 % - 0.3 % 0.3 % - 1.5 % 1.8 % - 2.4 % Expected term 3 years 1 - 4 years 3 years (1) The weighted average expected volatility for the years ended December 31, 2021, 2020 and 2019 was 60.0 % , 46.2 % and 20.5 % , respectively. (2) Dividends are assumed to be reinvested in shares of our common stock and dividends will not be paid unless shares vest. 77 Note 12 : Earnings Per Share The following table presents the calculation of basic and diluted earnings per share (“EPS”): Year Ended December 31, 2021 2020 2019 (in millions, except per share amounts) Numerator: Net (loss) income attributable to stockholders $ ( 459 ) $ ( 1,440 ) $ 306 Earnings attributable to participating securities — — ( 1 ) Net (loss) income attributable to stockholders, net of earnings allocated to participating securities $ ( 459 ) $ ( 1,440 ) $ 305 Denominator: Weighted average shares outstanding – basic 236 236 212 Unvested restricted shares — — 1 Weighted average shares outstanding – diluted 236 236 213 (Loss) Earnings per share - Basic (1) $ ( 1.95 ) $ ( 6.11 ) $ 1.44 (Loss) Earnings per share - Diluted (1) $ ( 1.95 ) $ ( 6.11 ) $ 1.44 (1) Per share amounts are calculated based on unrounded numbers and are calculated independently for each period presented. Certain of our outstanding equity awards were excluded from the above calculation of EPS for the years ended December 31, 2021, 2020 and 2019 because their effect would have been anti-dilutive. Note 13 : Hotel Management Operating and License Agreements Management and Franchise Fees We have management agreements, whereby we pay a base fee equal to a percentage of total revenues, as defined, as well as an incentive fee if specified financial performance targets are achieved. Our managers generally have sole responsibility for all activities necessary for the operation of the hotels, including establishing room rates, processing reservations and promoting and publicizing the hotels. Our managers also generally provide all employees for the hotels, prepare reports, budgets and projections, and provide other administrative and accounting support services to the hotels. We have consultative and limited approval rights with respect to certain actions of our managers, including entering into long-term or high value contracts, engaging in certain actions relating to legal proceedings, approving the operating budget, making certain capital expenditures and the hiring of certain management personnel. Our management agreements have initial terms ranging from 5 to 30 years and allow for one or more renewal periods. Assuming all renewal periods are exercised by our hotel managers, the total term of our management agreements range from 5 to 70 years . We also have franchise agreements for 9 hotels. The franchise agreements have an initial term of 13 to 20 years and cannot be extended without the franchisor’s consent. Marketing Fees Additionally, the management and franchise agreements generally require a marketing fee equal to a percentage of rooms revenues. Total marketing fees were $ 26 million, $ 15 million and $ 53 million for the years ended December 31, 2021, 2020 and 2019, respectively, and were included in other departmental and support expense in our consolidated statements of comprehensive (loss) income. Employee Cost Reimbursements We are responsible for reimbursing our managers for certain employee related costs outside of payroll. These costs include contributions to a defined contribution 401(k) Retirement Savings Plan administered by our managers, union-sponsored pension plans and other post-retirement plans. All of these plans are the responsibility of our managers and our obligation is only for the reimbursement of these costs for individuals who work at our hotel properties. Total employee cost reimbursements were $ 55 million, $ 57 million and $ 133 million for the years ended December 31, 2021, 2020 and 2019 , respectively, and were included in the respective operating expenses line item in our consolidated statements of comprehensive (loss) income based upon the nature of services provided by such employees. 78 Note 14 : Geographic and Business Segment Information As of December 31, 2021 , we have two operating segments, our consolidated hotels and unconsolidated hotels. Our unconsolidated hotels operating segment does not meet the definition of a reportable segment, thus our consolidated hotels is our only reportable segment. We evaluate our consolidated hotels primarily based on hotel adjusted earnings (loss) before interest expense, taxes and depreciation and amortization (“EBITDA”). Hotel Adjusted EBITDA is calculated as EBITDA from hotel operations, adjusted to exclude: • Gains or losses on sales of assets for both consolidated and unconsolidated investments; • Costs associated with hotel acquisitions or dispositions expensed during the period; • Severance expense; • Share-based compensation expense; • Impairment losses and casualty gains or losses; and • Other items that we believe are not representative of our current or future operating performance. The following table presents revenues for our consolidated hotels reconciled to our consolidated amounts and net loss to Hotel Adjusted EBITDA: Year Ended December 31, 2021 2020 2019 (in millions) Revenues: Total consolidated hotel revenue $ 1,311 $ 823 $ 2,767 Other revenues 51 29 77 Total revenues $ 1,362 $ 852 $ 2,844 Net (loss) income $ ( 452 ) $ ( 1,444 ) $ 316 Other revenues ( 51 ) ( 29 ) ( 77 ) Impairment loss and casualty (gain) loss, net 9 696 ( 18 ) Depreciation and amortization expense 281 298 264 Corporate general and administrative expense (1) 62 61 61 Acquisition costs — 10 70 Other operating expenses 49 36 78 Loss (gain) on sales of assets, net 5 ( 62 ) ( 19 ) Interest income ( 1 ) ( 2 ) ( 6 ) Interest expense 258 213 140 Equity in losses (earnings) from investments in affiliates 7 22 ( 14 ) Income tax expense (benefit) 2 ( 6 ) 35 Other loss (gain), net 7 15 ( 45 ) Severance expense — 33 2 Other items 1 12 15 Hotel Adjusted EBITDA $ 177 $ ( 147 ) $ 802 (1) Excludes severance expense . The following table presents total assets for our consolidated hotels, reconciled to total assets: December 31, 2021 2020 (in millions) Consolidated hotels $ 9,724 $ 10,568 All other 19 19 Total assets $ 9,743 $ 10,587 79 The following table presents total revenues and property and equipment, net for each of the geographical areas in which we operate: As of and for the Year Ended December 31, 2021 2020 2019 Revenues Property and Equipment, net Revenues Property and Equipment, net Revenues Property and Equipment, net (1) (in millions) United States (2) $ 1,362 $ 8,511 $ 849 $ 9,193 $ 2,804 $ 9,594 All other — — 3 — 40 — $ 1,362 $ 8,511 $ 852 $ 9,193 $ 2,844 $ 9,594 (1) Excludes $ 62 million of property and equipment, net classified as held for sale as of December 31, 2019. (2) Includes revenues of $ 2 million and $ 11 million for the years ended December 31, 2020 and 2019 from our laundry operations, which was not part of our segment and was permanently closed as of December 31, 2020. Also includes property and equipment, net of $ 2 million, $ 2 million and $ 5 million as of December 31, 2021, 2020 and 2019 , respectively, from our laundry operations. Note 15 : Commitments and Contingencies As of December 31, 2021, we had outstanding commitments under third-party contracts of approximately $ 94 million for capital expenditures at our properties, of which $ 72 million relates to the expansion project at the Bonnet Creek complex. The Bonnet Creek expansion project includes additional meeting space for the Signia by Hilton Orlando Bonnet Creek and the Waldorf Astoria Orlando. Our contracts contain clauses that allow us to cancel all or some portion of the work. If cancellation of a contract occurred, our commitment would be any costs incurred up to the cancellation date, in addition to any costs associated with the discharge of the contract. We are involved in litigation arising from the normal course of business, some of which includes claims for substantial sums, and may make certain indemnifications or guarantees to select buyers of our hotels as part of a sale process. We are also involved in claims and litigation that is not in the ordinary course of business in connection with the spin-off from Hilton. The spin-off agreements indemnify us from certain of these claims as well as require us to indemnify Hilton for other claims. In addition, losses related to certain contingent liabilities could be apportioned to us under the spin-off agreements. In connection with our obligation to indemnify Hilton under the spin-off agreements, we have reserved approximately $ 8 million as of December 31, 2021 related to litigation with respect to an audit by the Australian Tax Office (“ATO”) of Hilton related to the sale of the Hilton Sydney in June 2015. In February 2021, we were required to make a payment to Hilton of approximately $ 11 million representing our share of the deposit required by the ATO of Hilton to further defend against the claim and for certain out-of-pocket expenses incurred by Hilton. This amount could change as the litigation of the ATO’s claim progresses. Note 16: Supplemental Disclosures of Cash Flow Information Interest paid during the years ended December 31, 2021, 2020 and 2019, was $ 242 million, $ 187 million and $ 135 million, respectively. We paid $ 31 million, $ 23 million and $ 15 million in income taxes during the years ended December 31, 2021, 2020 and 2019, respectively. Capital expenditures included within accounts payable and accrued expenses in our consolidated balance sheets were $ 11 million, $ 6 million, and $ 26 million d uring the years ended December 31, 2021, 2020 and 2019, respectively. The following non-cash investing and financing activities were excluded from the consolidated statements of cash flows: During the year ended December 31, 2019: • We issued $ 978 million of common stock and assumed $ 310 million of mortgage loans in connection with the Merger. • We transferred rooms at the Hilton Waikoloa Village to HGV and accordingly derecognized $ 123 million of property and equipment, net and $ 135 million of the related liability due to HGV. • We declared $ 136 million of dividends that were unpaid and accrued as of December 31, 2019. 80 Note 17 : Subsequent Events In February 2022, we amended our credit and term loan facilities to extend the waiver period for the testing of the financial covenants to the date the financial statements are delivered for the quarter ended September 30, 2022 (except for the minimum fixed charge coverage ratio, which waiver period for such covenant will end as of the date the financial statements are delivered for the quarter ended June 30, 2022), in each case, unless Park elects an earlier date, and to adjust the required ratio levels of particular financial covenants after such waiver periods. As part of the amendment process, we (i) extended the temporary periods for which calculation of certain financial covenants are annualized once quarterly testing of financial covenants resumes, (ii) extended the minimum liquidity covenant of $ 200 million through March 2023 , (iii) obtained the ability to repurchase up to $ 250 million of shares as long as the Revolver balance is $ 0 , (iv) increased the amount of non-recourse debt allowed to be incurred during the waiver period to $ 500 million from $ 350 million, (v) obtained the ability during the waiver period to voluntarily prepay certain debt maturing in 2022 and 2023 , (vi) removed the limitation applied during the waiver period on capital expenditures within the portfolio, (vii) increased the ability during the waiver period to acquire investments to $ 1 billion from $ 200 million, with an option to expand to $ 1.5 billion with a corresponding increase of the minimum liquidity covenant to $ 300 million, and (viii) removed any restrictions on asset sales that applied during the waiver period. In addition, we amended the mandatory prepayment requirements that apply during the waiver period to, among other things, only require mandatory repayments from specified events if and to the extent the Revolver balance exceeds $ 600 million (and no prepayment of the 2019 Term Facility being required). 81 Park Hotels & Resorts Inc. Sched ule III Real Estate and Accumulated Depreciation (Dollars in millions) December 31, 2021 Initial Cost Gross Amounts at Which Carried at Close of Period Hotel Property Encumbrances Land Building & Improvements Furniture, Fixtures & Equipment Costs Capitalized Subsequent to Acquisition Land Building & Improvements Furniture, Fixtures & Equipment Total Accumulated Depreciation Date of Construction Date Acquired (1) Life Upon Which Depreciation is Computed Caribe Hilton $ — $ 38 $ 56 $ 7 $ 85 $ 40 $ 111 $ 35 $ 186 $ ( 42 ) 1949 10/24/2007 3 - 40 years DoubleTree Hotel Durango — — — 2 6 — 3 5 8 ( 6 ) 1985 10/24/2007 3 - 40 years DoubleTree Hotel Ontario Airport 30 14 58 3 19 13 63 18 94 ( 35 ) 1974 10/24/2007 3 - 40 years DoubleTree Hotel San Diego—Mission Valley — — — 2 17 — 10 9 19 ( 13 ) 1989 10/24/2007 3 - 40 years DoubleTree Hotel San Jose — 15 67 5 26 16 81 16 113 ( 42 ) 1980 10/24/2007 3 - 40 years DoubleTree Hotel Seattle Airport — — — 11 27 — 11 27 38 ( 31 ) 1969 10/24/2007 3 - 40 years DoubleTree Hotel Sonoma Wine Country — — — 4 11 — 6 9 15 ( 11 ) 1977 10/24/2007 3 - 40 years Embassy Suites Austin Downtown South Congress — — 45 2 18 — 57 8 65 ( 35 ) 1983 10/24/2007 3 - 40 years Embassy Suites Phoenix—Airport — — 15 1 ( 16 ) — — — — — 1986 10/24/2007 3 - 40 years Hampton Inn & Suites Memphis—Shady Grove — 1 13 2 4 1 15 4 20 ( 9 ) 1999 10/24/2007 3 - 40 years Hilton Boston Logan Airport — — 108 6 30 — 129 15 144 ( 50 ) 1999 10/24/2007 3 - 40 years Hilton Chicago — 69 233 12 158 69 354 49 472 ( 159 ) 1927 10/24/2007 3 - 40 years Hilton Garden Inn LAX/El Segundo — 13 14 2 4 13 16 4 33 ( 10 ) 2000 10/24/2007 3 - 40 years Hilton Hawaiian Village Waikiki Beach Resort 1,275 925 807 17 358 963 1,050 94 2,107 ( 476 ) 1961 10/24/2007 3 - 40 years Hilton McLean Tysons Corner — 50 82 3 ( 14 ) 23 55 43 121 ( 66 ) 1987 10/24/2007 3 - 40 years Hilton New Orleans Riverside — 89 217 3 90 90 262 47 399 ( 132 ) 1977 10/24/2007 3 - 40 years Hilton Oakland Airport — — 13 3 2 — 10 8 18 ( 11 ) 1970 10/24/2007 3 - 40 years Hilton Salt Lake City Center — — — 10 19 — 8 21 29 ( 23 ) 2002 10/24/2007 3 - 40 years Hilton San Francisco Union Square 725 (2) 113 232 16 133 113 339 42 494 ( 144 ) 1964 10/24/2007 3 - 40 years Hilton Santa Barbara Beachfront Resort 165 71 50 2 38 71 72 18 161 ( 37 ) 1986 10/24/2007 3 - 40 years Hilton Seattle Airport & Conference Center — — 70 3 15 — 80 8 88 ( 39 ) 1961 10/24/2007 3 - 40 years Hilton Short Hills — 59 54 3 ( 92 ) 13 10 1 24 ( 1 ) 1988 10/24/2007 3 - 40 years Hilton Waikoloa Village — 160 340 25 ( 72 ) 106 288 59 453 ( 160 ) 1988 10/24/2007 3 - 40 years New York Hilton Midtown — 1,096 542 13 133 1,043 653 88 1,784 ( 279 ) 1963 10/24/2007 3 - 40 years DoubleTree Hotel Washington DC—Crystal City — 43 95 2 49 43 127 19 189 ( 64 ) 1982 12/14/2007 3 - 40 years Hilton Miami Airport — 64 36 3 37 64 60 16 140 ( 38 ) 1984 12/14/2007 3 - 40 years DoubleTree Hotel Spokane City Center 14 3 24 2 11 3 30 7 40 ( 14 ) 1986 1/1/2010 3 - 40 years Hilton Orlando Lake Buena Vista — — 137 10 39 — 156 30 186 ( 68 ) 1983 8/30/2010 3 - 40 years Hilton Garden Inn Chicago/Oak Brook — 1 6 2 2 1 7 3 11 ( 4 ) 1999 8/5/2011 3 - 40 years Hilton Suites Chicago/Oak Brook — 1 10 4 4 1 12 6 19 ( 9 ) 1988 8/5/2011 3 - 40 years Embassy Suites Kansas City—Plaza — — 26 1 4 — 28 3 31 ( 19 ) 1973 7/25/2014 3 - 40 years Signia by Hilton Orlando Bonnet Creek — 15 377 31 48 18 421 32 471 ( 81 ) 2009 2/12/2015 3 - 40 years 82 Park Hotels & Resorts Inc. Schedule III Real Estate and Accumulated Depreciation (Dollars in millions) December 31, 2021 Initial Cost Gross Amounts at Which Carried at Close of Period Hotel Property Encumbrances Land Building & Improvements Furniture, Fixtures & Equipment Costs Capitalized Subsequent to Acquisition Land Building & Improvements Furniture, Fixtures & Equipment Total Accumulated Depreciation Date of Construction Date Acquired (1) Life Upon Which Depreciation is Computed Parc 55 San Francisco - A Hilton Hotel $ — (2) $ 175 $ 315 $ 32 $ 16 $ 175 $ 325 $ 38 $ 538 $ ( 91 ) 1984 2/12/2015 3 - 40 years Waldorf Astoria Orlando — 34 274 29 9 34 275 37 346 ( 88 ) 2009 2/12/2015 3 - 40 years Casa Marina, A Waldorf Astoria Resort — 164 174 9 6 164 177 12 353 ( 42 ) 1920 2/17/2015 3 - 40 years The Reach Key West, Curio Collection — 57 67 3 18 57 79 9 145 ( 16 ) 1970 2/17/2015 3 - 40 years Juniper Hotel Cupertino, Curio Collection — 40 64 8 3 40 64 11 115 ( 21 ) 1973 6/2/2015 3 - 40 years Boston Marriott Newton — 24 74 15 — 24 74 15 113 ( 11 ) 1969 9/18/2019 3 - 40 years Hilton Checkers Los Angeles 26 19 44 7 2 19 46 7 72 ( 5 ) 1927 9/18/2019 3 - 40 years Hilton Denver City Center 58 14 163 21 — 14 163 21 198 ( 17 ) 1982 9/18/2019 3 - 40 years Homewood Suites by Hilton Seattle Convention Center Pike Street — 5 75 7 — 5 75 7 87 ( 7 ) 1990 9/18/2019 3 - 40 years Hyatt Centric Fisherman’s Wharf — 33 122 11 1 33 123 11 167 ( 15 ) 1990 9/18/2019 3 - 40 years Hyatt Regency Boston 135 — 177 14 — — 177 14 191 ( 20 ) 1985 9/18/2019 3 - 40 years Hyatt Regency Mission Bay Spa and Marina — 5 118 15 1 5 119 15 139 ( 14 ) 1961 9/18/2019 3 - 40 years JW Marriott San Francisco Union Square — — 191 13 1 — 192 13 205 ( 16 ) 1987 9/18/2019 3 - 40 years Royal Palm South Beach Miami, a Tribute Portfolio Resort — 16 139 12 3 16 141 13 170 ( 14 ) 1926 9/18/2019 3 - 40 years W Chicago – City Center 75 20 76 14 — 20 76 14 110 ( 9 ) 1928 9/18/2019 3 - 40 year s W Chicago – Lakeshore — 22 58 8 1 22 58 9 89 ( 10 ) 1965 9/18/2019 3 - 40 years Total $ 2,503 $ 3,468 $ 5,858 $ 430 $ 1,254 $ 3,332 $ 6,688 $ 990 $ 11,010 $ ( 2,504 ) (1) On October 24, 2007, a predecessor to our Parent became a wholly owned subsidiary of an affiliate of The Blackstone Group L.P. following the completion of the Blackstone Merger . (2) Single $ 725 million CMBS loan secured by Hilton San Francisco Union Square and Parc 55 San Francisco – A Hilton Hotel. 83 Park Hotels & Resorts Inc. Schedule III Real Estate and Accumulated Depreciation—(continued) (Dollars in millions) December 31, 2021 Notes: (A) The change in total cost of properties for the fiscal years ended December 31, 2021, 2020 and 2019 is as follows: Year Ended December 31, 2021 2020 2019 (in millions) Balance at beginning of period $ 11,376 $ 11,566 $ 9,921 Additions during period: Acquisitions — — 2,220 Capital expenditures 62 66 248 Transfer to real estate assets (1) 83 — — Deductions during period: Transfers to assets held for sale — — ( 86 ) Dispositions, including casualty losses and impairment loss on planned dispositions ( 511 ) ( 250 ) ( 734 ) Foreign exchange effect — ( 6 ) ( 3 ) Balance at end of period $ 11,010 $ 11,376 $ 11,566 (1) During 2021, management of the Select Hotels was transitioned to a third-party hotel management company. (B) The change in accumulated depreciation for the fiscal years ended December 31, 2021, 2020 and 2019 is as follows: Year Ended December 31, 2021 2020 2019 (in millions) Balance at beginning of period $ 2,241 $ 2,038 $ 2,011 Additions during period: Depreciation expense 280 294 256 Transfer to real estate assets (1) 30 — — Deductions during period: Transfers to assets held for sale — — ( 24 ) Dispositions, including casualty losses ( 47 ) ( 89 ) ( 206 ) Foreign exchange effect — ( 2 ) 1 Balance at end of period $ 2,504 $ 2,241 $ 2,038 (1) During 2021, management of the Select Hotels was transitioned to a third-party hotel management company. (C) The aggregate cost of real estate for U.S. federal income tax purposes is approximately $ 6.288 billion as of December 31, 2021 . 84 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure. None.