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Item 5. Market for Registrant’s Common Equity

2024-02-28 compared with 2023-02-23 · 13 added, 1480 removed, 49 unchanged (97% of the section changed)

Market for Regist rant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.

Market Information

6 unchanged sentences

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.

1 unchanged sentence

Share Performance Graph

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 following graph compares our cumulative total stockholder return since December 31, 2018 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, 2018, and that all dividends and other distributions were reinvested.

12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023

Park Hotels and Resorts Inc.

$ 100.00 $ 108.34 $ 77.61 $ 85.44 $ 53.47 $ 73.36

S&P 400 Index 100.00 124.05 138.70 170.89 146.14 167.26

3 unchanged sentences

We did not sell any equity securities during the fiscal year ended December 31, 2023 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, 2022.

Purchases of Equity Securities by the Issuer and Affiliate Purchasers

Total number of

Period Total number of

purchased (1)

5 unchanged sentences

announced plans

Maximum number

or programs Maximum number

(or approximate

16 unchanged sentences

December 1, 2023 through December 31, 2023 — $ — — $ 150

(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.

Total 14,752,036 14,575,466

____________________________________________________________________________________

(1) The number of shares purchased represents shares of common stock repurchased under the applicable previously announced stock repurchase programs 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.

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 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.

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 2020 financial condition and results of operations compared to 2021, 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, 2021.

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 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 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.

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:

“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.

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

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.

Principal Components

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.

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.

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 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.

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.

Principal Components

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.

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 .

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.

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

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.

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 represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels.

Occupancy measures the utilization of our hotels’

available capacity.

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.

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.

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.

Non-GAAP Financial Measures

We also evaluate the performance of our business through certain other financial measures that are not recognized under U.S.

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.

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 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;

Costs associated with hotel acquisitions or dispositions expensed during the period;

Severance expense;

Share-based compensation expense;

Impairment losses and casualty gains or losses;

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.

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.

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;

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.

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;

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 income (loss) to Hotel Adjusted EBITDA:

Year Ended December 31,

(in millions)

Net income (loss)

Depreciation and amortization expense

Interest income

Interest expense

Income tax expense

Interest expense, income tax and depreciation and

amortization included in equity in earnings from

investments in affiliates

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

Gain on sale of investments in affiliates (2)

Share-based compensation expense

Casualty and impairment loss, net

Adjusted EBITDA

Adjusted EBITDA from investments in affiliates

All other (3)

Hotel Adjusted EBITDA

(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.

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.

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;

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 income (loss) attributable to stockholders to Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders:

Year Ended December 31,

(in millions, except per share amounts)

Net income (loss) attributable to stockholders

Depreciation and amortization expense

Depreciation and amortization expense attributable to

noncontrolling interests

(Gain) loss on sales of assets, net

Gain on sale of investments in affiliates (1)

Impairment loss

Equity investment adjustments:

Equity in (earnings) losses from investments in affiliates

Pro rata FFO of investments in affiliates

Nareit FFO attributable to stockholders

Casualty loss, net

Share-based compensation expense

Adjusted FFO attributable to stockholders

Nareit FFO per share - Diluted (2)

Adjusted FFO per share - Diluted (2)

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

(2) 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:

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.

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.

Hotel Revenues and Operating Expenses

Year Ended December 31,

(in millions)

Rooms revenue

Food and beverage revenue

Ancillary hotel revenue

Rooms expense

Food and beverage expense

Other departmental and support expense

Other property-level expense

Management fees expense

(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:

Year Ended December 31,

(in millions)

Group rooms revenue

Transient rooms revenue

Contract rooms revenue

Other rooms revenue

Rooms revenue

(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

Year Ended December 31,

Percent Change

(in millions)

General and administrative expenses

Share-based compensation expense

Other items (1)

Total corporate general and administrative

(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.

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 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:

Year ended December 31,

Percent Change

(in millions)

SF and HHV Mortgage Loans (1)

Other mortgage loans

2019 Term Facility (2)

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) 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 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:

“Interest Rate Risk”

“Debt”

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

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.

Liquidity and Capital Resources

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, 2022, we had total cash and cash equivalents of $906 million and $33 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.

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.

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, 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 $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.

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.

(3) The stock repurchase program authorized on February 25, 2022, which allowed for the repurchase of up to $300 million of our common stock, 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

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.

In February 2023, our Board terminated a previous $300 million stock repurchase program that was approved in February 2022 (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 ending in February 2025 (the "February 2023 Stock Repurchase Program" and collectively with the February 2022 Stock Repurchase Program the "Stock Repurchase Programs"), subject to any applicable limitations or restrictions set forth in our credit facility and indentures related to our senior notes.

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

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,

Percent Change

(in millions)

Net cash provided by (used in) operating activities

Net cash provided by investing activities

Net cash used in financing activities

Operating Activities

Cash flow from operating activities are primarily generated from the operating income generated at our hotels.

The $546 million increase in net cash provided by operating activities for the year ended December 31, 2022 compared to the year ended December 31, 2021 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.

Investing Activities

The $87 million in net cash provided by investing activities for the year ended December 31, 2022 was primarily attributable to $244 million of net proceeds from the sale of five of our consolidated hotels and our ownership interests in the joint ventures that own and operate one hotel in addition to $11 million in distributions from the joint venture that sold one of our unconsolidated hotels, partially offset by $168 million in capital expenditures.

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.

Financing Activities

The $320 million in net cash used in financing activities for the year ended December 31, 2022 was primarily attributable to the repurchase of approximately 12.7 million shares of our common stock for $227 million and $142 million of debt repayments, partially offset by $50 million of borrowings under our Revolver and $30 million of proceeds from refinanced mortgage debt for one of our consolidated joint ventures.

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 Notes.

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, 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.

Consequently, before consideration of the use of any NOL carryforward, 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.

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.

We declared the following dividends to holders of our common stock during 2022:

Dividend per Share

March 31, 2022

April 15, 2022

June 30, 2022

July 15, 2022

September 30, 2022

October 17, 2022

December 30, 2022

January 17, 2023

As of December 31, 2022, our total indebtedness was approximately $4.6 billion, including approximately $2.1 billion of our Senior Notes, as disclosed above, and excluding approximately $169 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.

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.

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 income (loss) 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;

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.

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.

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.

Interest Rate Risk

We are exposed to interest rate risk on our variable-rate debt.

The interest rate on our variable-rate debt discussed below is based on the secured overnight financing rate ("SOFR"), 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, 2022 for our financial instruments that are materially affected by interest rate risk:

Maturities by Period

(in millions, excluding average interest rate)

Fixed-rate debt

Average interest rate

Variable-rate debt

Average interest rate

Refer to Note 7:

“Debt”

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

Fin ancial Statements and Supplementary Data.

INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

Management’s Report on Internal Control Over Financial Reporting

Reports of Independent Registered Public Accounting Firm (PCAOB ID:

Consolidated Balance Sheets as of December 31, 2022 and 2021

Consolidated Statements of Comprehensive Income (Loss) for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Cash Flows for the Years Ended December 31, 2022, 2021 and 2020

Consolidated Statements of Equity for the Years Ended December 31, 2022, 2021 and 2020

Notes to Consolidated Financial Statements

Schedule III –

Real Estate and Accumulated Deprecation

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, 2022.

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, 2022.

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, 2022.

The report is included herein.

Report of Independent Registered 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, 2022 and 2021, the related consolidated statements of comprehensive income (loss), cash flows and equity for each of the three years in the period ended December 31, 2022, 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, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, 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, 2022, 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 23, 2023 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.

Valuation of Property and Equipment

Description of the Matter

At December 31, 2022, the Company’s property and equipment, net balance was $8,301 million.

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 23, 2023

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, 2022, 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, 2022, 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, 2022 and 2021, the related consolidated statements of comprehensive income (loss), cash flows and equity for each of the three years in the period ended December 31, 2022, and the related notes and financial statement schedule listed in the Index at Item 15 and our report dated February 23, 2023 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.

/s/ Ernst & Young LLP

Tysons, Virginia

February 23, 2023

PARK HOT ELS & RESORTS INC.

CONSOLIDATED BALANCE SHEETS

(in millions, except share and per share data)

Property and equipment, net

Investments in affiliates

Intangibles, net

Cash and cash equivalents

Restricted cash

Accounts receivable, net of allowance for doubtful accounts of $ 2 and $ 2

Prepaid expenses

Operating lease right-of-use assets

TOTAL ASSETS (variable interest entities –

$ 237 and $ 237 )

LIABILITIES AND EQUITY

Accounts payable and accrued expenses

Due to hotel managers

Other liabilities

Operating lease liabilities

Total liabilities (variable interest entities –

$ 219 and $ 219 )

Commitments and contingencies –

refer to Note 15

Stockholders' Equity

Common stock, par value $ 0.01 per share, 6,000,000,000 shares

authorized, 224,573,858 shares issued and 224,061,745 shares outstanding as of

December 31, 2022 and 236,888,804 shares issued and 236,483,990

shares outstanding as of December 31, 2021

Additional paid-in capital

Retained earnings (accumulated deficit)

Total stockholders' equity

Noncontrolling interests

TOTAL LIABILITIES AND EQUITY

Refer to the notes to the consolidated financial statements.

PARK HOT ELS & RESORTS INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions, except per share data)

Year Ended December 31,

Food and beverage

Ancillary hotel

Total revenues

Operating expenses

Food and beverage

Other departmental and support

Other property-level

Management fees

Casualty and impairment loss, net

Depreciation and amortization

Corporate general and administrative

Acquisition costs

Total expenses

Gain (loss) on sales of assets, net

Operating income (loss)

Interest income

Interest expense

Equity in earnings (losses) from investments in affiliates

Other gain (loss), net

Income (loss) before income taxes

Income tax (expense) benefit

Net income (loss)

Net (income) loss attributable to noncontrolling interests

Net income (loss) attributable to stockholders

Other comprehensive income (loss), net of tax expense:

Currency translation adjustment, net of tax expense of $ 0

Change in fair value of interest rate swap, net of tax expense

Loss from interest rate swap reclassified into earnings

Total other comprehensive income (loss)

Comprehensive income (loss)

Comprehensive (income) loss attributable to noncontrolling

Comprehensive income (loss) attributable to stockholders

Earnings (loss) per share:

Earnings (loss) per share –

Weighted average shares outstanding –

Refer to the notes to the consolidated financial statements.

PARK HOTELS & RESORTS INC.

CONSOLIDATED ST ATEMENTS OF CASH FLOWS

(in millions)

Year Ended December 31,

Operating Activities:

Net income (loss)

Adjustments to reconcile net income (loss) to net cash provided by (used in)

operating activities:

Depreciation and amortization

(Gain) loss on sales of assets, net

Casualty and impairment loss, net

Equity in (earnings) losses from investments in affiliates

Other (gain) loss, net

Share-based compensation expense

Amortization of deferred financing costs

Distributions from unconsolidated affiliates

Deferred income taxes

Changes in operating assets and liabilities:

Accounts receivable, net

Prepaid expenses

Accounts payable and accrued expenses

Due to hotel managers

Other liabilities

Net cash provided by (used in) operating activities

Investing Activities:

Capital expenditures for property and equipment

Proceeds from asset dispositions, net

Proceeds from the sale of investments in affiliates, net

Insurance proceeds for property damage claims

Distributions from unconsolidated affiliates

Contributions to unconsolidated affiliates

Purchase of investment security, net

Net cash provided by investing activities

Financing Activities:

Proceeds from issuance of Senior Notes

Borrowings from credit facilities

Repayments of credit facilities

Proceeds from issuance of mortgage debt

Repayments of mortgage debt

Debt issuance costs

Dividends paid

Distributions to noncontrolling interests, net

Tax withholdings on share-based compensation

Repurchase of common stock

Net cash (used in) provided by financing activities

Net increase (decrease) in cash and cash equivalents and restricted cash

Cash and cash equivalents and restricted cash, beginning of period

Cash and cash equivalents and restricted cash, end of period

For supplemental disclosures, refer to Note 16:

“Supplemental Disclosures of Cash Flow Information”

Refer to the notes to the consolidated financial statements.

PAR K HOTELS & RESORTS INC.

CONSOLIDATED STATEMENTS OF EQUITY

(in millions)

Comprehensive

(Loss) Income

Balance as of December 31, 2019

Share-based compensation, net

Other comprehensive loss

Dividends and dividend equivalents (1)

Repurchase of common stock

Distributions to noncontrolling

Balance as of December 31, 2020

Share-based compensation, net

Net (loss) income

Other comprehensive income

Distributions to noncontrolling

Balance as of December 31, 2021

Share-based compensation, net

Dividends and dividend equivalents (1)

Repurchase of common stock

Distributions to noncontrolling

Balance as of December 31, 2022

(1) Dividends declared per common share were $ 0.45 and $ 0.28 for the years ended December 31, 2020 and December 31, 2022, respectively.

Refer to the notes to the consolidated financial statements.

PARK HOTELS & RESORTS INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Organization and Recent Events

Park Hotels & Resorts Inc.

(“we,”

“us,”

“our”

or the “Company”

and, exclusive of any subsidiaries, "Park Parent") 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 of 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 managing member of our Operating Company and PK Domestic REIT Inc., a direct subsidiary of Park Parent, became a member of our Operating Company.

We may, in the future, issue interests in (or from) our Operating Company in connection with acquiring hotels, financings, issuance of equity compensation or other purposes.

The novel strain of coronavirus and the disease it causes (“COVID-19”) presented ongoing challenges in 2022;

however, we have witnessed widespread improvements across our portfolio throughout the year.

We have relied on the performance of our hotels and active asset management to mitigate the effects of inflation and continued to experience improvements in leisure, group and business transient demand, including improvement in our urban hotels during 2022.

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 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.

Reclassifications

Certain line items on the condensed consolidated balance sheets as of December 31, 2021 have been reclassified to conform to the current period presentation.

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 income (loss) 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 income (loss) 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 income (loss) 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 earnings (losses) from investments in affiliates in our consolidated statements of comprehensive income (loss).

Distributions from investments in affiliates 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 earnings (losses) from investments in affiliates in our consolidated statements of comprehensive income (loss).

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 income (loss) in our consolidated statements of comprehensive income (loss).

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 had 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 casualty and impairment loss, net in our consolidated statements of comprehensive income (loss).

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 income (loss).

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 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.

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 income (loss) in the consolidated statements of comprehensive income (loss) 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 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 income (loss) 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, 2022 and 2021 was $ 103 million and $ 87 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 income (loss).

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.

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, 2022, 2021 and 2020 related to our REIT activities other than taxes related to our sale of 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 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 to recognize 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.

Dispositions and Acquisitions

During the year ended December 31, 2022, we sold th e five consolid ated hotels listed in the table below and received total gross proceeds of approximatel y $ 149 millio n.

We recognized a net gain of approximate ly $ 15 million, which is included in gain (loss) on sales of assets, net in our consolidated statements of comprehensive income (loss).

Hampton Inn & Suites Memphis –

Memphis, Tennessee

Hilton Chicago/Oak Brook Suites

Chicago, Illinois

Homewood Suites by Hilton Seattle Convention Center Pike Street

Seattle, Washington

Hilton Garden Inn Chicago/Oakbrook Terrace

Chicago, Illinois

Hilton Garden Inn LAX/El Segundo

El Segundo, California

September 2022

In June 2022, we sold our ownership interests in the joint ventures that own and operate the Hilton San Diego Bayfront for gross proceeds of $ 157 million.

Our gross proceeds were reduced by $ 55 million for our share of the mortgage debt in the joint venture.

We recognized a gain of approximately $ 92 million, net of selling costs, which is included in other gain (loss), net in our consolidated statements of comprehensive income (loss).

Additionally, in Octobe r 2022, the joint ventures that own and operate the DoubleTree Hotel Las Vegas Airport sold the hotel for gross proceeds of approximately $ 22 million, and our pro-rata share of the gross proceeds was approximately $ 11 million.

We recognized a gain of approximately $ 9 million, which is included in equity in earnings (losses) from investments in affiliates in our consolidated statements of comprehensive income (loss).

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 loss due to selling costs , which is included in gain (loss) on sale of assets, net in our consolidated statements of comprehensive income (loss).

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 casualty and impairment loss, net in our consolidated statements of comprehensive income (loss).

W New Orleans –

French Quarter

New Orleans, Louisiana

Hotel Indigo San Diego Gaslamp Quarter (1)

San Diego, California

Courtyard Washington Capitol Hill Navy Yard (1)

Washington, D.C .

Hotel Adagio, Autograph Collection

San Francisco, California

Le Meridien San Francisco

San Francisco, California

(1) Sold as a portfolio in the same transaction.

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 gain (loss) on sales of assets, net in our consolidated statements of comprehensive income (loss).

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.

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.

which is included in acquisition costs in our consolidated statements of comprehensive income (loss).

Property and Equipment

Property and equipment were:

(in millions)

Buildings and leasehold improvements

Furniture and equipment

Construction-in-progress

Accumulated depreciation and amortization

Depreciation of property and equipment was $ 268 million, $ 281 million and $ 297 million during the years ended December 31, 2022, 2021 and 2020, respectively.

For the year ended December 31, 2021 , we recognized $ 5 million of impairment losses related to one of our hotels classified as held for sale as of June 30, 2021, which was 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, which was triggered based on the effects of COVID-19 and our forecasted cash flows were insufficient to cover the carrying value of the asset.

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:

(in millions)

Property and equipment, net

Cash and cash equivalents

Restricted cash

Accounts receivable, net

Prepaid expenses

Accounts payable and accrued expenses

Due to hotel manager

Other liabilities

Unconsolidated Entities

Investments in affiliates were:

(in millions)

Hilton San Diego Bayfront (1)

All others (4 and 5 hotels) (2)

(1) In June 2022, we sold our ownership interests in the joint ventures that own and operate the Hilton San Diego Bayfront.

Refer to Note 3:

"Dispositions and Acquisitions " for additional information.

(2) In October 2022, the joint ventures that own and operate the DoubleTree Hotel Las Vegas Airport sold the hotel.

Refer to Note 3:

"Dispositions and Acquisitions " for additional information.

The affiliates in which we own investments accounted for under the equity method had total debt of approximately $ 721 and $ 943 million as of December 31, 2022 and 2021 , respectively.

Substantially all the debt is secured solely by the affiliates’

assets or is guaranteed by other partners without recourse to us.

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.

Intangible assets were:

(in millions)

Air rights contract

Accumulated amortization

As of December 31, 2022, we estimated our future amortization expense for our intangible assets to be:

(in millions)

Debt balances and associated interest rates as of December 31, 2022 were:

Principal balance as of

Interest Rate

at December 31, 2022

Maturity Date

December 31, 2022

December 31, 2021

(in millions)

SF Mortgage Loan

November 2023

HHV Mortgage Loan

November 2026

Other mortgage loans (1)

Average rate of 4.35 %

2023 to 2027 (2)

SOFR + 2.10 %

December 2026

2019 Term Facility (4)

2025 Senior Notes

2028 Senior Notes

2029 Senior Notes

unamortized premium

unamortized deferred financing costs and

(1) In December 2022, we fully repaid the $ 26 million mortgage loan secured by the Hilton Checkers Los Angeles .

(2) 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 with six months of notice.

As of December 31, 2022, Park had not received notice from the lender.

(3) As of December 31, 2022, we had approximately $ 900 million of available capacity under our revolving credit facility ("Revolver").

(4) In December 2022, the 2019 Term Facility was fully repaid.

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.

Certain of our mortgage loans require interest-only loan payments through their respective maturity dates, and the remaining mortgage loans require payments of both principal and interest on a monthly basis .

We are required to deposit with lenders certain cash reserves for restricted uses.

As of December 31, 2022 and December 31, 2021, our consolidated balance sheets included $ 6 million and $ 60 million of restricted cash, respectively, related to our mortgage loans.

The $ 92 millio n held by the lenders of the HHV Mortgage Loan and the mortgage loan secured by the Hilton Denver City Center was released to us during the third quarter upon submission of the certificates reflecting compliance with financial ratios of these loans.

Credit Facilities

2016 Term Loan and Revolver

In December 2016, we entered into a credit agreement (“Original 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 Revolver, which was increased to $ 1.075 billion in September 2020, and a term loan due December 2021 ("2016 Term Loan") .

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 fully repaid the then outstanding balance under our Revolver using proceeds from:

(i) the issuance of $ 2.1 billion of senior notes, (ii) the sales of consolidated hotels and (iii) existing cash.

We also used proceeds from the issuance of the $ 725 million of senior notes due 2028 (“2028 Senior Notes”) to repay all of the amounts outstanding under our 2016 Term Loan.

In September 2020, we extended $ 901 million of the commitments under the Revolver to December 2023 , and the remaining $ 174 million of commitments under the Revolver matured in December 2021 .

In December 2022, we amended and restated the Original Credit Agreement ("Credit Agreement").

The Credit Agreement provides aggregate commitments of $ 950 million for the Revolver, which can be increased by up to $ 500 million with lender approval, and matures on December 1, 2026 , with the ability to extend its maturity by one year as (i) a one-year extension or (ii)

two six-month extensions .

Borrowings under the R evolver bear interest based upon the secured overnight financing rate ("SOFR") plus a credit spread adjustment of 0.1 %, 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 unsecured interest coverage ratio, certain of which were adjusted to revised levels through the end of the first quarter of 2024.

The Credit Agreement allows us to conduct share repurchases, subject to compliance with the financial covenants, and released all collateral securing the Revolver and Senior Notes.

The Credit Agreement restricts activities of 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).

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.

As of December 31, 2022, we had approximately $ 4 million outstanding on a standby letter of credit.

We used $ 50 million of the Revolver, together with cash on hand, to fully repay the $ 78 million balance on our 2019 Term Facility.

We capitalized $ 9 million of issuance costs during the year ended December 31, 2022.

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.

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 notes due 2029 ("2029 Senior Notes") and from the sales of consolidated hotels during 2021.

In December 2022, we used $ 50 million of the Revolver, together with cash on hand, to fully repay the $ 78 million balance on our 2019 Term Facility.

In connection with the Merger, we assumed an interest rate swap from Chesapeake, which was designated as a cash flow hedge, to hedge the interest rate risk on a portion of the 2019 Term Facility.

The interest rate swap, which matured on April 2022 , required us to pay fixed interest of 1.86 % per annum 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 notional amount to $ 78 million (the then outstanding balance of the 2019 Term Facility) and removed the designation of the swap as a cash flow hedge.

2025 Senior Notes

In May 2020, our Operating Company, PK Domestic and PK Finance issued an aggregate of $ 650 million of senior notes due 2025 ("2025 Senior Notes").

We used $ 219 million of the net proceeds to repay a portion of the then outstanding balance under our Revolver, $ 69 million to partially repay the 2016 Term Loan and the remainder was used for general corporate purposes.

The 2025 Senior 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 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 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 Notes at 100 % of the principal amount, plus accrued and unpaid interest, if any, to, but excluding, the redemption date.

2028 Senior Notes

In September 2020, our Operating Company, PK Domestic LLC and the PK Finance issued an aggregate of $ 725 million of 2028 Senior Notes.

The 2028 Senior 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 the then outstanding balance under our Revolver.

We capitalized $ 13 million of issuance costs during the year ended December 31, 2020.

We may redeem the 2028 Senior 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 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 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 Notes with the net cash proceeds from certain equity offerings at a redemption price of 105.875 % of the principal amount redeemed.

2029 Senior Notes

In May 2021, our Operating Company, PK Domestic and PK Finance issued an aggregate of $ 750 million of 2029 Senior Notes.

Net proceeds were used to repay $ 564 million of the then outstanding balance under our Revolver and $ 173 million of the 2019 Term Facility.

The 2029 Senior 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 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 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 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 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 Notes with the net cash proceeds from certain equity offerings at a redemption price of 104.875 % of the principal amount redeemed.

The 2025 Senior Notes, 2028 Senior Notes and 2029 Senior Notes (collectively, the “Senior Notes”) are guaranteed by us and by the subsidiaries of our Operating Company that also guarantee indebtedness under our credit facility.

The guarantees are full and unconditional and joint and several.

The Senior Notes are no longer secured following the amendment and restatement of the Original Credit Agreement in December 2022, at which time all collateral securing the Revolver and Senior Notes was released.

The indentures governing the Senior 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, 2022 were:

(in millions)

Thereafter (1)

(1) Assumes the exercise of all extensions that are exercisable solely at our option.

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, 2022

December 31, 2021

(in millions)

SF Mortgage Loan

HHV Mortgage Loan

Other mortgage loans

2019 Term Facility

2025 Senior Notes

2028 Senior Notes

2029 Senior Notes

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, 2022, were:

(in millions)

Total minimum rent payments

imputed interest

Total operating lease liabilities

As of December 31, 2022 and 2021, the weighted average remaining operating lease term was 26.0 years and 26.9 years, respectively, and the weighted average discount rate used to determine the operating lease liabilities was 5.6 % and 5.3 %, respectively.

The components of rent expense, which are primarily included in other property-level expenses in our consolidated statements of comprehensive income (loss), as well as supplemental cash flow and non-cash information for all operating leases were:

December 31, 2022

December 31, 2021

December 31, 2020

(in millions)

Operating lease expense

Variable lease expense

Operating cash flows for operating leases

Operating lease right-of-use asset reassessment (1)

(1) For the year ended December 31, 2022, amount represents a reduction to our right-of-use assets and lease liability due to a change in

discount rate upon a lease remeasurement.

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 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 qualifying REIT activities that we distribute annually to our stockholders.

Accordingly, no provision for U.S.

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).

Our tax provision includes U.S.

federal, state and foreign income taxes payable.

The domestic and foreign components of income (loss) before income taxes were:

Year Ended December 31,

(in millions)

income (loss) before tax

Foreign loss before tax

Income (loss) before income taxes

The components of our provisio n (benefit) for income taxes were:

Year Ended December 31,

(in millions)

Total current

Total deferred

Total provision (benefit) for income taxes

Reconciliations of our tax provision at the U.S.

statutory rate to the pro vision (benefit) for income taxes were:

Year Ended December 31,

(in millions)

Statutory U.S.

federal income tax provision (benefit)

State income taxes, net of U.S.

federal tax benefit

Foreign income tax expense, net

Change in deferred tax asset valuation allowance

Tax rate change

REIT income not subject to tax

Derecognition and remeasurement of deferred taxes

Recognized built-in gain tax

Provision (benefit) for income taxes

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:

(in millions)

Deferred income tax assets (1)

Deferred income tax liabilities (2)

Net deferred tax liability

(1) Included within other assets in our consolidated balance sheets, net of valuation allowance.

(2) Included within other liabilities in our consolidated balance sheets.

The tax effects of the temporary differences and carryforwards that give rise to our net deferred tax liability were:

(in millions)

Deferred tax assets:

Net operating loss carryforwards

Deferred income

Accrued compensation

Total gross deferred tax assets

valuation allowance

Deferred tax assets

Deferred tax liabilities:

Property and equipment

Accrued compensation

Deferred tax liabilities

Net deferred tax liability

As of December 31, 2022, we had U.S .

federal and state net operating loss carryforwards of approximately $ 1.8 billion, which resulted in deferred tax assets of $ 53 million.

federal net operating loss carryforwards of approximately $ 696 million are not subject to expiration.

state net operating loss carryforwards of approximately $ 1.1 billion will begin to expire in 2025 .

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.

As of December 31, 2022, Hilton remains subject to U.S.

federal examinations from 2005 through 2017.

Various income tax returns for Hilton filed with state, local and foreign jurisdictions remain subject to examination by the applicable taxing authorities.

We may be subject to U.S.

federal, state and foreign examinations for periods ending after January 4, 2017.

We made no cash distributions to our stockholders in 2021.

The cash distributions to stockholders in 2022 and 2020 are characterized, for U.S.

federal income tax purposes, as follows:

Year Ended December 31,

Common distributions (per share):

Ordinary dividends

Capital gain distributions (1)

(1) Capital gain distribution disclosure pursuant to Treasury Regulation §1.1061-6(c).

The following additional information relates to the capital gain distributions for calendar year 2022 and 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 $ 0.000000 and $ 0.205429 per share, and (ii) the “Three Year Amounts”

are $ 0.000000 and $ 0.205429 per share, with respect to the 2022 and 2020 capital gain distributions, respectively.

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, 2022, 2,312,448 shares of common stock remain available for future issuance.

The 2017 Director Plan provides that a maximum of 950,000 shares of our common stock may be issued, and as of December 31, 2022, 395,081 shares of common stock remain available for future issuance.

For the years ended December 31, 2022, 2021 and 2020, we recognized $ 17 million, $ 19 million and $ 20 million of share-based compensation expense, respectively.

As of December 31, 2022, unrecognized compensation expense was $ 17 million, which is expected to be recognized over a weighted-average period of 1.4 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, 2022, 2021 and 2020 was $ 7 million, $ 18 million and $ 27 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, 2022, 2021 and 2020:

Number of Shares

Weighted-Average

Unvested at January 1, 2020

Unvested at December 31, 2020

Unvested at December 31, 2021

Unvested at December 31, 2022

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, 2022, 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, 2022, 2021 and 2020:

Number of Shares

Weighted-Average

Unvested at January 1, 2020

Unvested at December 31, 2020

Unvested at December 31, 2021

Unvested at December 31, 2022

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,

Expected volatility (1)

22.0 % - 65.0 %

Dividend yield (2)

Risk-free rate

0.2 % - 0.3 %

0.3 % - 1.5 %

Expected term

(1) The weighted average expected volatility for the years ended December 31, 2022, 2021 and 2020 was 57.5 % , 60.0 % and 46.2 % , respectively.

(2) Dividends are assumed to be reinvested in shares of our common stock and dividends will not be paid unless shares vest.

Earnings Per Share

The following table presents the calculation of basic and diluted earnings per share (“EPS”):

Year Ended December 31,

(in millions, except per share amounts)

Net income (loss) attributable to stockholders, net of earnings

allocated to participating securities

Weighted average shares outstanding –

Unvested restricted shares

Weighted average shares outstanding –

Earnings (loss) per share –

(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, 2022, 2021 and 2020 because their effect would have been anti-dilutive.

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 4 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 $ 45 million, $ 26 million and $ 15 million for the years ended December 31, 2022, 2021 and 2020, respectively, and were included in other departmental and support expense in our consolidated statements of comprehensive income (loss).

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 $ 117 million, $ 55 million and $ 57 million for the years ended December 31, 2022, 2021 and 2020 , respectively, and were included in the respective operating expenses line item in our consolidated statements of comprehensive income (loss) based upon the nature of services provided by such employees.

Business Segment Information

As of December 31, 2022 , 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, presented herein, is calculated as EBITDA from hotel operations, 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;

Costs associated with hotel acquisitions or dispositions expensed during the period;

Severance expense;

Share-based compensation expense;

Impairment losses and casualty gains or losses;

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 income (loss) to Hotel Adjusted EBITDA:

Year Ended December 31,

(in millions)

Total consolidated hotel revenue

Other revenues

Total revenues

Net income (loss)

Other revenues

Casualty and impairment loss, net

Depreciation and amortization expense

Corporate general and administrative expense (1)

Acquisition costs

Other operating expenses

(Gain) loss on sales of assets, net

Interest income

Interest expense

Equity in (earnings) losses from investments in affiliates

Income tax expense (benefit)

Other (gain) loss, net

Severance expense

Hotel Adjusted EBITDA

(1) Excludes severance expense .

The following table presents total assets for our consolidated hotels, reconciled to total assets:

(in millions)

Consolidated hotels

Commitments and Contingencies

As of December 31, 2022, we had outstanding commitments under third-party contracts 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.

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 provide that Hilton will 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, 2022 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.

This amount could change as the litigation of the ATO’s claim progresses.

In February 2021, we were required to make a payment to Hilton of approximately $ 11 million representing our share of:

(i) the deposit required from Hilton by the ATO to further contest the claim and (ii) certain out-of-pocket expenses incurred by Hilton.

Supplemental Disclosures of Cash Flow Information

Interest paid during the years ended December 31, 2022, 2021 and 2020, was $ 245 million, $ 242 million and $ 187 million, respectively.

We paid $ 7 million, $ 31 million and $ 23 million in income taxes during the years ended December 31, 2022, 2021 and 2020, respectively.

Capital expenditures included within accounts payable and accrued expenses in our consolidated balance sheets were $ 33 million, $ 11 million and $ 6 million d uring the years ended December 31, 2022, 2021 and 2020, respectively.

The following non-cash financing activity was excluded from the consolidated statements of cash flows:

During the year ended December 31, 2022:

We declared $ 56 million of dividends that were unpaid and accrued as of December 31, 2022.

Subsequent Events

In January 2023, we repurchased an additional 2.5 million shares of our common stock for a total purchase price of $ 30 million.

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.

Park Hotels & Resorts Inc.

Sched ule III

Real Estate and Accumulated Depreciation

(Dollars in millions)

December 31, 2022

Gross Amounts at Which Carried at Close of Period

Hotel Property

Building & Improvements

Furniture, Fixtures & Equipment

Costs Capitalized Subsequent to Acquisition

Building & Improvements

Furniture, Fixtures & Equipment

Accumulated Depreciation

Date of Construction

Date Acquired (1)

Caribe Hilton

DoubleTree Hotel Durango

DoubleTree Hotel Ontario Airport

DoubleTree Hotel San Diego –

DoubleTree Hotel San Jose

DoubleTree Hotel Seattle Airport

DoubleTree Hotel Sonoma Wine Country

Embassy Suites Austin Downtown South

Embassy Suites Phoenix—Airport

Hilton Boston Logan Airport

Hilton Chicago

Hilton Hawaiian Village Waikiki

Hilton McLean Tysons Corner

Hilton New Orleans Riverside

Hilton Oakland Airport

Hilton Salt Lake City Center

Hilton San Francisco Union Square

Hilton Santa Barbara Beachfront Resort

Hilton Seattle Airport & Conference

Hilton Short Hills

Hilton Waikoloa Village

New York Hilton Midtown

DoubleTree Hotel Washington DC –

Hilton Miami Airport

DoubleTree Hotel Spokane City Center

Hilton Orlando Lake Buena Vista

Embassy Suites Kansas City –

Signia by Hilton Orlando Bonnet Creek

Park Hotels & Resorts Inc.

Real Estate and Accumulated Depreciation

(Dollars in millions)

December 31, 2022

Gross Amounts at Which Carried at Close of Period

Hotel Property

Building & Improvements

Furniture, Fixtures & Equipment

Costs Capitalized Subsequent to Acquisition

Building & Improvements

Furniture, Fixtures & Equipment

Accumulated Depreciation

Date of Construction

Date Acquired (1)

Parc 55 San Francisco –

A Hilton Hotel

Waldorf Astoria Orlando

Casa Marina Key West, Curio Collection

The Reach Key West, Curio Collection

Juniper Hotel Cupertino, Curio Collection

Boston Marriott Newton

Hilton Checkers Los Angeles

Hilton Denver City Center

Hyatt Centric Fisherman’s Wharf

Hyatt Regency Boston

Hyatt Regency Mission Bay Spa and Marina

JW Marriott San Francisco Union Square

Royal Palm South Beach Miami, a Tribute

Portfolio Resort

W Chicago –

(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.

Park Hotels & Resorts Inc.

Real Estate and Accumulated Depreciation—(continued)

(Dollars in millions)

December 31, 2022

(A) The change in total cost of properties for the fiscal years ended December 31, 2022, 2021 and 2020 is as follows:

Year Ended December 31,

(in millions)

Balance at beginning of period

Additions during period:

Capital expenditures

Transfer to real estate assets (1)

Deductions during period:

Dispositions, including casualty losses and impairment loss on

planned dispositions

Foreign exchange effect

Balance at end of period

(1) During 2021, four of our hotels that were previously managed by us were transitioned to a third-party hotel management company.

(B) The change in accumulated depreciation for the fiscal years ended December 31, 2022, 2021 and 2020 is as follows:

Year Ended December 31,

(in millions)

Balance at beginning of period

Additions during period:

Depreciation expense

Transfer to real estate assets (1)

Deductions during period:

Dispositions, including casualty losses

Foreign exchange effect

Balance at end of period

(1) During 2021, four of our hotels that were previously managed by us were transitioned to a third-party hotel management company.

federal income tax purposes is approximately $ 6.288 billion as of December 31, 2022 .

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.

During the year ended December 31, 2023, we repurchased in aggregate under the Stock Repurchase Programs approximately 14.6 million shares of our common stock for a total purchase price of $180 million, and as of December 31, 2023, $150 million remained available for stock repurchases under the February 2023 Stock Repurchase Program.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity