What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2023-02-23 compared with 2022-02-18 · 376 added, 535 removed, 1153 unchanged (44% of the section changed)

7 unchanged sentences

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.

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 our stockholders on an annual basis.

Therefore, as a general matter, we intend to make distributions of all, or substantially all, of our REIT taxable income (including net capital gains) to our stockholders, and as a result, we will not be required to pay tax on our income.

After the payment of the first quarter dividend in 2020, we suspended our quarterly dividend as a precautionary measure in light of COVID-19.

In March 2022, our Board approved and reinstated our quarterly cash dividend.

Our future distributions will be at the sole discretion of our Board.

When determining the amount of future distributions, we expect that our Board 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 our senior notes and credit facility, which restrict our ability to make distributions subject to limited exceptions, (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.

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.

The following graph compares our cumulative total stockholder return since December 31, 2017 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 December 31, 2017, and that all dividends and other distributions were reinvested.

Park Hotels and Resorts Inc.

2 unchanged sentences

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

Unregistered Sales of Equity Securities and Use of Proceeds

We did not sell any equity securities during the fiscal year ended December 31, 2022 that were not registered under the Securities Act of 1933, as amended.

29 unchanged sentences

December 1, 2022 through December 31, 2022

(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.

(1) The number of shares purchased represents shares of common stock repurchased under the stock repurchase program authorized in February 2022 as well as 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.

The weighted average price paid per share for shares repurchased excludes commissions paid.

(3) The stock repurchase program authorized on February 25, 2022 allowing for the repurchase of up to $300 million of our common stock, which was set to expire on February 23, 2024, was terminated on February 17, 2023 upon the authorization of a new $300 million stock repurchase program, which expires on February 21, 2025.

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.

In February 2022, our Board authorized and approved a stock repurchase program allowing us to repurchase up to $300 million of our common stock over a 24-month period, ending in February 2024 (the "February 2022 Stock Repurchase Program").

During the year ended December 31, 2022, we repurchased approximately 12.7 million shares of our common stock for a total purchase price of $227 million, and as of December 31, 2022, $73 million remained available for stock repurchases under the February 2022 Stock Repurchase Plan.

Additionally, in January 2023, we repurchased approximately 2.5 million shares of our common stock for a total purchase price of $30 million under the February 2022 Stock Repurchase Plan.

On February 17, 2023, our Board terminated the February 2022 Stock Repurchase Program and authorized and approved a new stock repurchase program allowing us to repurchase up to $300 million of our common stock over a two-year period, starting on February 21, 2023 and ending on February 21, 2025, subject to any applicable limitations or restrictions set forth in our credit facility and indentures related to our senior notes.

Stock repurchases may be made through open market purchases, including through Rule 10b5-1 trading programs, in privately negotiated transactions, or in such other manner that would comply with applicable securities laws.

The timing of any future stock repurchases and the number of shares to be repurchased will depend upon prevailing market conditions and other factors, and we may suspend the repurchase program at any time.

No stock repurchases have been made to date under the new program.

Management’s Discuss ion and Analysis of Financial Condition and Results of Operations.

4 unchanged sentences

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.

We currently hold investments in entities that have ownership or leasehold interests in 46 hotels, consisting of premium-branded hotels and resorts with over 29,000 rooms, of which approximately 88% are luxury and upper upscale and 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 high-quality portfolio includes hotels mostly in major urban and convention areas, such as New York City, Washington, D.C., Chicago, San Francisco, Boston, New Orleans and Denver;

and premier resorts in key leisure destinations, including Hawaii, Orlando, Key West and Miami Beach;

as well as hotels in select airport and 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.

4 unchanged sentences

Refer to Note 14:

“Geographic and Business Segment Information”

“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.

6 unchanged sentences

in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information.

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

Pro-forma Occupancy

November 2021

December 2021

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").

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:

Number of Hotels

Consolidated Open

Consolidated Suspended

Total Consolidated

Unconsolidated Open

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.

The novel strain of coronavirus and the disease it causes (“COVID-19”) have continued to affect the hospitality industry and our business.

The increase in vaccination rates and easing or removal of COVID-19 restrictions have increased travel and hospitality spending, improving occupancy, Average Daily Rate (“ADR”) and Revenue per Available Room (“RevPAR”) at our hotels, resulting in the reopening of all our previously suspended hotels as of May 2022.

The COVID-19 pandemic triggered economic challenges that affected discretionary spending and travel, including supply chain disruptions and increased inflation.

Inflationary concerns have been counteracting the lodging industry's recovery from the COVID-19 pandemic and may affect consumer sentiment and decrease demand for travel.

Inflation may also increase labor or other costs to maintain or operate hotels that cannot be reduced without adversely affecting business growth or hotel value.

However, we have relied on the performance of our hotels and active asset management to mitigate the effects of inflation and current macroeconomic uncertainty.

During 2022, we have continued to experience improvements in leisure, group and business transient demand, including our urban hotels.

While there can be no assurances that we will not experience further fluctuations in hotel revenues or earnings at our hotels due to inflation and other macroeconomic factors, such as increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts, we expect to continue to recover through 2023 based on current demand trends.

Recent Events

In December 2022, we amended and restated our revolving credit facility ("Revolver"), which extended its maturity date to December 2026 and increased our aggregate commitments to $950 million, of which $50 million, together with cash on hand, was used to fully repay the $78 million balance on our unsecured delayed draw term loan facility ("2019 Term Facility").

In February 2023, we sold the 508-room Hilton Miami Airport for gross proceeds of $118.25 million, or $233,000 per key, and utilized a portion of the net proceeds to fully repay the $50 million outstanding under our Revolver.

Principal Components of and Factors Affecting Our Results of Operations

6 unchanged sentences

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

6 unchanged sentences

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

3 unchanged sentences

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

services at our hotels affect our ability to sustain or increase rates charged to customers at our hotels.

Further, competition for guests and the supply of 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.

25 unchanged sentences

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 and impairment loss, net.

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.

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.

Depreciation and amortization .

3 unchanged sentences

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.

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.

These costs include costs to provide support services to certain HGV timeshare properties located at some of our hotel properties.

Factors Affecting our Costs and Expenses

18 unchanged sentences

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.

We use 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.

5 unchanged sentences

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:

1 unchanged sentence

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

3 unchanged sentences

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:

Adjusted EBITDA, presented herein, is calculated as EBITDA, further adjusted to exclude the following items that are not reflective of our ongoing operating performance or incurred in the normal course of business, and thus, excluded in management's analysis in making day-to-day operating decisions and evaluations of our operating performance against other companies within our industry:

Gains or losses on sales of assets for both consolidated and unconsolidated investments;

27 unchanged sentences

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:

The following table provides a reconciliation of Net income (loss) to Hotel Adjusted EBITDA:

Year Ended December 31,

(in millions)

Net income (loss)

Depreciation and amortization expense

1 unchanged sentence

Interest expense

Income tax expense (benefit)

Income tax expense

Interest expense, income tax and depreciation and

1 unchanged sentence

investments in affiliates

Loss (gain) on sales of assets, net

(Gain) loss on sales of assets, net (1)

Gain on sale of investments in affiliates (2)

Acquisition costs

Severance expense

Share-based compensation expense

Impairment and casualty loss, net

Other items (2)

Casualty and impairment loss, net

Adjusted EBITDA

2 unchanged sentences

Hotel Adjusted EBITDA

(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.

(1) For the year ended December 31, 2022, includes a gain of $9 million on the sale of the DoubleTree Las Vegas Hotel included in equity in earnings (losses) from investments in affiliates.

(2) Included in other gain (loss), net.

(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.

18 unchanged sentences

Share-based compensation expense;

Casualty gains or losses;

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:

The following table provides a reconciliation of net income (loss) attributable to stockholders to Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders:

Year Ended December 31,

(in millions)

Net loss attributable to stockholders

(in millions, except per share amounts)

Net income (loss) attributable to stockholders

Depreciation and amortization expense

1 unchanged sentence

noncontrolling interests

Loss (gain) on sales of assets, net

(Gain) loss on sales of assets, net

Gain on sale of investments in affiliates (1)

1 unchanged sentence

Equity investment adjustments:

Equity in losses from investments in affiliates

Equity in (earnings) losses from investments in affiliates

Pro rata FFO of investments in affiliates

Nareit FFO attributable to stockholders

Casualty loss (gain), net

Severance expense

Acquisition costs

Casualty loss, net

Share-based compensation expense

Other items (2)

Adjusted FFO attributable to stockholders

1 unchanged sentence

Adjusted FFO per share - Diluted (2)

(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.

(1) Included in other gain (loss), net .

(2) Per share amounts are calculated based on unrounded numbers.

2 unchanged sentences

Property Dispositions:

Between January 1, 2020 and December 31, 2021, we disposed of seven consolidated hotels.

Since January 1, 2021, we have disposed of ten consolidated hotels.

The results of operations of these hotels are included in our consolidated results only during our period of ownership.

As a result of these dispositions, our revenues and operating expenses decreased for the year ended December 31, 2022 as compared to the same period in 2021.

The results of operations during our period of ownership of these hotels are included in our consolidated results.

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.

Ongoing COVID-19 Recovery :

Travel and hospitality spending began to improve beginning in the second quarter of 2021 as vaccination rates increased, which resulted in improved occupancy and ADR, and we reopened additional previously suspended hotels throughout 2021 and into the second quarter of 2022.

Consequently, the results of our portfolio during the year ended December 31, 2022 will not be comparable to the same period in 2021.

10 unchanged sentences

Management fees expense

(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.

(1) Change from other factors primarily relates to the effects of our ongoing COVID-19 recovery, including the market-specific conditions discussed below.

Group, transient, contract and other rooms revenue for the year ended December 31, 2022, as well as the change for each segment compared to 2021 are as follows:

6 unchanged sentences

Rooms revenue

(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.

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,

Percent Change

(in millions)

Support services revenue

Laundry revenue

Total other revenue

Year Ended December 31,

Percent Change

(in millions)

Support services expense

Laundry expense

Total other expense

(1) Change from other factors primarily relates to the effects of our ongoing COVID-19 recovery, including the market-specific conditions discussed below.

Market-Specific Conditions

The increases in hotel revenues and operating expenses from other factors were primarily a result of significant occupancy increases in certain of our largest markets combined with the resumption of operations at our remaining hotels during 2021 and 2022.

Combined occupancy at our two Hawaii hotels increased 26.3 percentage points for the year ended December 31, 2022 compared to same period in 2021 as a result of an increase in domestic transient demand and the return of group demand, while ADR for the same period increased 15.9%.

Increases in both group and transient demand at our Florida hotels resulted in an increase in combined occupancy of 13.4 percentage points for the year ended December 31, 2022 compared to the same period in 2021, while ADR for the same period increased 7.5%.

Our Boston hotels also benefited from an increase in both group and transient demand, with combined occupancy and ADR increasing 23.4 percentage points and 30.4%, respectively, for the year ended December 31, 2022 compared to the same period in 2021.

Occupancy and ADR at the Hilton New Orleans Riverside increased 10.4 percentage points and 68.5%, respectively, for the year ended December 31, 2022 compared to the same period in 2021 primarily due to an increase in group demand with the return of city-wide events such as Mardi Gras and the NCAA Final Four Tournament.

Several of our more significant hotels had suspended operations until various points throughout 2021 and 2022.

As those hotels resumed operating, we saw increases in hotel revenues and operating expenses for the year ended December 31, 2022 compared to the same period in 2021.

These include the New York Hilton Midtown, where operations were suspended until October 2021, the Hilton San Francisco Union Square and the Parc 55 San Francisco - a Hilton Hotel, where operations were suspended until May 2021 and May 2022, respectively, and the Hilton Chicago and the W Chicago - City Center, where operations were suspended until June 2021 and May 2021, respectively.

Other revenue and Other operating expense

During the year ended December 31, 2022, other revenue increased by $24 million and other operating expense increased by $23 million primarily due to increases in support services revenue and expense from the reopening of our hotels that have service arrangements with HGV to full capacity following their suspension of operations during 2020.

Corporate general and administrative

4 unchanged sentences

Share-based compensation expense

Disposition costs

Severance expense

Other items (1)

Total corporate general and administrative

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

(1) Consists primarily of disposition costs and amortization of upfront cloud-computing costs.

Casualty and impairment loss, net

In September 2022, Hurricanes Ian and Fiona caused minimal damage and disruption at our hotels in Florida and Puerto Rico, respectively, and we recognized a casualty loss of approximately $5 million for costs to repair and remediate damage at these hotels for the year ended December 31, 2022.

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.

Gain (loss) on sales of assets, net

During the year ended December 31, 2022, we recognized a net gain of $13 million primarily as a result of the sales of our consolidated hotels.

During the year ended December 31, 2021, we recognized a net loss of $5 million primarily as a result of the sales of our consolidated hotels.

Non-operating Income and Expenses

Interest income

Interest income increased $12 million during the year ended December 31, 2022 compared to the same period in 2021 as a result of an increase in cash coupled with an increase in interest rates.

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 decreased during the year ended December 31, 2022 compared to the same period in 2021 primarily as a result of (i) the partial repayment of our 2019 Term Facility during the second and third quarters of 2021, (ii) the full repayment of our 2019 Term Facility in December 2022, (iii) the full repayment of the then outstanding balance under our Revolver during 2021, partially offset by the issuance of $750 million of 4.875% senior notes due 2029 ("2029 Senior Notes") in May 2021 and (iv) $50 million of borrowings under our Revolver in December 2022.

Interest expense associated with our debt for the years ended December 31, 2022 and 2021 were as follows:

4 unchanged sentences

Other mortgage loans

2016 Term Loan

2019 Term Facility (2)

2025 Senior Secured Notes (3)

2028 Senior Secured Notes (3)

2029 Senior Secured Notes (3)

2025 Senior Notes (3)

2028 Senior Notes (3)

2029 Senior Notes (3)

Total interest expense

(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.

(2) In December 2022, we fully repaid our 2019 Term Facility.

(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”).

(“PK Finance”) issued an aggregate of $650 million of senior notes due 2025 (“2025 Senior Notes”) and an aggregate of $725 million of senior notes due 2028 (“2028 Senior Notes”), respectively (collectively with the 2029 Senior Notes, the "Senior Notes").

Our current debt outstanding is approximately $4.6 billion at a weighted average interest rate of 5.1%, of which approximately 99% is fixed-rate debt, refer to Item 7A:

2 unchanged sentences

in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information.

Other (loss) gain, net

Other gain (loss), net

During the year ended December 31, 2022 , we recognized a gain of $96 million, which is primarily due to the sale of our ownership interests in the joint ventures that own and operate the Hilton San Diego Bayfront.

Refer to Note 3:

"Dispositions and Acquisitions" in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information.

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,

Percent Change

(in millions)

Income tax (expense) benefit

(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.

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

2 unchanged sentences

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.

Throughout 2022, we continued to experience improvements in leisure, group and business transient demand across our portfolio and expect to continue to recover through 2023 based on current demand trends.

During 2022, we mitigated the effects of macroeconomic and inflationary pressures through active asset management.

In December 2022, we amended and restated our Revolver, which extended its maturity date to December 2026 and increased our aggregate commitments to $950 million, of which $50 million, together with cash on hand, was used to fully repay the $78 million balance on our 2019 Term Facility.

The amended agreement adjusted certain financial covenants to revised levels through the end of

the first quarter of 2024, allows us to conduct share repurchases, subject to compliance with the financial covenants, and released all collateral securing the Revolver and Senior Notes.

It also placed restrictions on the Company, including our ability to grant liens on certain properties, mergers, affiliate transactions, asset sales and the payment of dividends and distributions (except to the extent required to maintain REIT status and certain other agreed exceptions).

With approximately $950 million of availability under our Revolver and existing cash and cash equivalents, we have sufficient liquidity to pay our debt maturities and to fund other liquidity obligations over the next year and beyond.

We have no significant maturities in 2023, except for the $725 million mortgage loan secured by the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco due in November 2023, which we expect to address before the third quarter of 2023.

We fully repaid the $26 million mortgage loan secured by the Hilton Checkers Los Angeles in December 2022 and expect to fully repay the $75 million mortgage loan secured by the W Chicago –

City Center due in August 2023 in May 2023 with available cash on hand.

Additionally, in February 2023, we fully repaid the $50 million outstanding under our Revolver with net proceeds from the sale of the Hilton Miami Airport, which was sold for gross proceeds of $118.25 million, with the remaining proceeds to be used for general corporate purposes.

We may also take 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.

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.

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 contractually due principal payments on our outstanding indebtedness, capital expenditures for in-progress renovations and maintenance at our hotels, corporate general and administrative expenses and dividends to our stockholders.

After suspending our quarterly dividend in 2020, we declared dividends of $0.28 during 2022 and expect to declare a first quarter dividend of $0.15 per share in March 2023, subject to approval by our Board.

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 long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, capital improvements at our hotels, and costs associated with potential acquisitions.

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.

We have construction contract commitments of approximately $121 million for capital expenditures at our properties, of which $57 million relates to projects at the Bonnet Creek complex, including the meeting space expansion project and renovating guestrooms, existing meeting space, lobbies and golf course.

Our contracts contain clauses that allow us to cancel all or some portion of the work.