What changed in this filing

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Item 7. Management’s Discussion and Analysis

2025-02-20 compared with 2024-02-28 · 89 added, 95 removed, 354 unchanged (34% of the section changed)

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We have a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value.

We currently have interests in 43 hotels consisting of premium-branded hotels and resorts with over 26,000 rooms, of which over 86% are luxury and upper upscale and are located in prime U.S.

We currently have interests in 40 hotels consisting of premium-branded hotels and resorts with approximately 25,000 rooms, of which over 87% are luxury and upper upscale and are located in prime U.S.

markets and its territories.

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"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.

Economic disruptions, including as a result of supply chain disruptions, elevated interest rates and elevated rates of inflation, may adversely affect our business.

Inflationary concerns can affect both consumer sentiment and demand for travel, as well as 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, which is expected to continue to stabilize, and current macroeconomic uncertainty.

During 2023, we continued to experience improvements in overall demand across our portfolio, although ADR growth has slowed as the industry recovery has stabilized and seasonal patterns have normalized.

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, local economic factors and demand, a potential economic slowdown or a recession and geopolitical conflicts, we expect the positive momentum to continue for the remainder of 2024 based on current demand trends, expected increases in city-wide events and as demand from international travel continues to improve.

Recent Events

In October 2023, the trustee for the $725 million non-recourse CMBS loan ("SF Mortgage Loan") secured by two of our San Francisco hotels – the 1,921-room Hilton San Francisco Union Square and the 1,024-room Parc 55 San Francisco – a Hilton Hotel (collectively, the "Hilton San Francisco Hotels"), filed a lawsuit against the borrowers under the SF Mortgage Loan.

In connection with the lawsuit, the court appointed a receiver to take control of the Hilton San Francisco Hotels and their operations, and thus, we have no further economic interest in the operations of the hotels.

receiver will operate and has authority over the hotels and, until no later than November 1, 2024, has the ability to sell the hotels.

The court order contemplates that the receivership will end with a non-judicial foreclosure by December 2, 2024, if the hotels are not sold within the predetermined sale period.

The effective exit from the Hilton San Francisco Hotels resulted in a required distribution.

Thus, our Board of Directors (the "Board") declared a special cash dividend of $0.77 per share on October 27, 2023, which was paid on January 16, 2024 to stockholders of record as of December 29, 2023.

Economic disruptions, including as a result of elevated interest and inflation rates, may adversely affect our business by affecting consumer sentiment and demand for travel.

However, inflationary concerns have moderated and further interest rate reductions may continue.

In addition, during the fourth quarter of 2024, the hotel operators for four of our hotels negotiated long-term labor agreements with labor organizations representing their hotel employees following strikes and other labor activity that affected our operating results beginning in late September 2024.

Any future labor disruptions may result in increases in labor or other costs to maintain or operate hotels.

During 2024, we have relied on the performance of our hotels and active asset management to mitigate the effects of current macroeconomic uncertainty and recent labor disruptions.

Additionally, we continued to experience improvements in overall demand across our portfolio, although ADR growth has slowed as the industry recovery has stabilized and seasonal patterns have normalized.

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, local economic factors and demand, a potential economic slowdown or a recession and geopolitical conflicts, we expect the positive momentum to continue for 2025 based on current demand trends, expected increases in city-wide events and as demand from international travel continues to improve.

Principal Components of and Factors Affecting Our Results of Operations

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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.

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.

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We present comparable hotel results to help us and our investors evaluate the ongoing performance of our comparable hotels.

Our comparable hotels data includes results from hotels that were active and operating in our portfolio since January 1st of the previous year and excludes results from property dispositions that have occurred through December 31, 2023.

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 (loss).

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.

EBITDA, presented herein, reflects net income excluding depreciation and amortization, interest income, interest expense, income taxes and also interest income and expense, income tax and depreciation and amortization included in equity in earnings 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 from management's analysis in making day-to-day operating decisions and evaluations of our operating performance against other companies within our industry:

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EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA are not recognized terms under U.S.

GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance with U.S.

GAAP and should not be considered as alternatives to net income 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.

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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.

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.

Some of these limitations are:

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• 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.

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

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Interest expense associated with hotels in receivership (1)

Income tax expense 38 —

Interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates 8 9

Income tax (benefit) expense (61) 38

Interest income and expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates 10 8

EBITDA 685 653

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____________________________________________________________________________________

(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) For the year ended December 31, 2023, represents the gain from derecognizing the Hilton San Francisco Hotels from our consolidated balance sheet in October 2023, when the receiver took control of the hotels.

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

(1) For the year ended December 31, 2024, represents accrued interest expense associated with the default of the SF Mortgage Loan, which is offset by a gain on derecognition for the corresponding increase of the contract asse t on our consolidated balance sheets, as we expect to be released from this obligation upon final resolution with the lender.

For the year ended December 31, 2023, represents accrued interest expense associated with the default of the SF Mortgage Loan and the gain from derecognizing the Hilton San Francisco Hotels from our consolidated balance sheet in October 2023, when the receiver took control of the hotels.

(2) For the year ended December 31, 2024, includes a gain of $19 million on the sale of the Hilton La Jolla Torrey Pines included in equity in earnings from investments in affiliates .

For the year ended December 31, 2023, the $3 million gain on sale of investments in affiliates is included in other (loss) gain, net.

(3) Includes other revenues and other expenses , non-income taxes on TRS leases included in other property expenses and corporate general and administrative expenses.

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Gain on sales of assets, net (8) (15)

Gain on sale of assets, net, attributable to noncontrolling interests

Gain on derecognition of assets (1)

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Interest expense associated with hotels in receivership (1)

Release of deferred tax valuation allowance

Other items (4)

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____________________________________________________________________________________

(1) For the year ended December 31, 2023, represents the gain from derecognizing the Hilton San Francisco Hotels from our consolidated balance sheet in October 2023, when the receiver took control of the hotels.

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

(3) Reflects incremental default interest expense and late payment administrative fees associated with the default of the SF Mortgage Loan beginning in June 2023 and all interest expense that has accrued since the Hilton San Francisco Hotels were placed into receivership at the end of October 2023.

(4) For the year ended December 31, 2023, includes $28 million of income tax expense associated with the effective exit from the Hilton San Francisco Hotels.

For the year ended December 31, 2023, reflects incremental default interest expense and late payment administrative fees associated with the default of the SF Mortgage Loan beginning in June 2023 and the gain from derecognizing the Hilton San Francisco Hotels from our consolidated balance sheet in October 2023, when the receiver took control of the hotels.

(2) For the years ended December 31, 2024 and 2023, the gain on sale of investments in affiliates is included in equity in earnings from investments in affiliates and other (loss) gain, net , respectively.

(3) For the year ended December 31, 2024, the gain of $19 million on the sale of the Hilton La Jolla Torrey Pines is presented within gain on sale of investments in affiliates above.

(4) For the year ended December 31, 2023, includes $28 million of income tax expense primarily associated with the effective exit from the Hilton San Francisco Hotels, of which $19 million was reversed during the year ended December 31, 2024 as it is no longer expected to be incurred.

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

Results of Operations

Property dispositions have had a significant effect on the year-over-year comparability of our operations as further illustrated in the table of Hotel Revenues and Operating Expenses below.

Our non-comparable hotels consists of one hotel sold and one hotel returned to the lessor upon early termination of the ground lease during 2023, five consolidated hotels sold during 2022 and the two Hilton San Francisco Hotels, which were placed into receivership at the end of October 2023.

Our non-comparable hotels consist of two hotels sold and two hotels returned to the lessor upon termination of the ground leases since January 1, 2023.

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

Changes in our operating revenues and expenses from these non-comparable hotels are shown below.

Additionally, our non-comparable hotels also consist of the two Hilton San Francisco Hotels, which are excluded from our consolidated results beginning in October 2023 as a result of the hotels being placed into receivership and had a significant effect on the year-over-year comparability of our operations as further illustrated in the table of Hotel Revenues and Operating Expenses below.

Hotel Revenues and Operating Expenses

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2024 2023 Change Change from Comparable Hotels (1)

Change from the San Francisco Hotels Change from Other Non-Comparable Hotels

Change from the Hilton San Francisco Hotels Change from Other Non-Comparable Hotels

(in millions)

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(1) Change from our comparable hotels primarily relates to the market-specific conditions discussed below.

Group, transient, contract and other rooms revenue for the year ended December 31, 2023, as well as the change for each segment compared to 2022 are as follows:

Group, transient, contract and other rooms revenue for the year ended December 31, 2024, as well as the change for each type of rooms revenue compared to 2023 are as follows:

Year Ended December 31, Change from Non-Comparable Hotels

2024 2023 Change Change from Comparable Hotels (1)

Change from the San Francisco Hotels Change from Non-Comparable Hotels

Change from the Hilton San Francisco Hotels Change from Non-Comparable Hotels

(in millions)

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Market-Specific Conditions

The increases in hotel revenues and operating expenses from our comparable hotels were primarily a result of significant occupancy increases in certain of our largest markets.

During the year ended December 31, 2023, our Hawaii, New York, Chicago, New Orleans, Washington, D.C.

and Boston markets experienced the most significant changes compared to the same period in 2022.

Combined occupancy and ADR at our two Hawaii hotels increased 5.8 percentage points and 3.8%, respectively, for the year ended December 31, 2023 compared to same period in 2022, driven by increases in group and domestic transient demand primarily at the Hilton Hawaiian Village Waikiki Beach Resort, which experienced increases in both occupancy and ADR of 5.4 percentage points and 5.0%, respectively.

The New York Hilton Midtown benefited from increases in group and transient demand resulting in increases in occupancy of 18.9 percentage

points for the year ended December 31, 2023 compared to the same period in 2022.

Combined occupancy at our Chicago hotels increased 6.5 percentage points for the year ended December 31, 2023 compared to the same period in 2022 due to increases in transient and group demand, which also drove a 25% increase in food and beverage revenue at the Hilton Chicago.

Occupancy at our New Orleans hotel increased 4.3 percentage points for the year ended December 31, 2023 compared to the same period in 2022 driven by increases in group demand, which also resulted in an increase in food and beverage revenue of 25%.

Combined occupancy and ADR at our Washington D.C.

hotels increased 8.4 percentage points and 12.2%, respectively, for the year ended December 31, 2023 compared to the same period in 2022 driven by increases in both group and transient demand.

Combined occupancy and ADR at our Boston hotels increased 4.4 percentage points and 7.1%, respectively for the year ended December 31, 2023 compared to the same period in 2022 driven by increases in both group and transient demand.

During the year ended December 31, 2023, hotel revenues and operating expenses for the Casa Marina Key West, Curio Collection, decreased $31 million and $11 million, respectively, for the year ended December 31, 2023 compared to the same period in 2022 as the hotel's operations were suspended, or partially suspended, due to renovations from May 2023 through December 2023.

Other revenue and Other operating expense

During the year ended December 31, 2023, other revenue increased by $10 million and other operating expense increased by $11 million due to an increase in business and related costs that are allocated to HGV pursuant to service arrangements with certain of our hotels.

The increases in hotel revenues and operating expenses for our comparable hotels during the year ended December 31, 2024, as compared to the same period in 2023, were primarily attributable to our hotels in the Orlando, Key West, New York, Chicago and Boston markets.

Our Orlando hotels both benefited from the comprehensive renovation and expansion projects completed in early 2024, which drove a 25% increase in food and beverage revenue for the year ended December 31, 2024 compared to the same period in 2023 and resulted in increases in occupancy and ADR of 3.0 percentage points and 6.1%, respectively, at the Signia by Hilton Orlando Bonnet Creek and increases in occupancy and ADR of 11.5 percentage points and 5.6%, respectively, at the Waldorf Astoria Orlando for the year ended December 31, 2024 compared to the same period in 2023.

The increase in the Key West market was driven by the Casa Marina Key West, Curio Collection, where operations were suspended for a comprehensive renovation that started in May 2023, with all rooms reopening by December 2023.

The New York Hilton Midtown and the Hilton Chicago both benefited from increases in group and transient demand, which drove increases in food and beverage revenue of 13% and 6%, respectively.

Occupancy and ADR at the New York Hilton Midtown increased 1.8 percentage points and 1.6%, respectively, while occupancy and ADR at the Hilton Chicago increased 6.2 percentage points and 1.5%, respectively, for the year ended December 31, 2024 compared to the same period in 2023.

Combined occupancy and ADR at our Boston hotels increased 2.4 percentage points and 3.8%, respectively, for the year ended December 31, 2024 compared to the same period in 2023 also due to increases in group and transient demand.

These increases were partially offset by decreases in hotel revenues and operating expenses at our two Hawaii hotels where combined occupancy decreased 7.1 percentage points for the year ended December 31, 2024 compared to the same period in 2023 due to disruptions from strike and related labor activity that began in September 2024 and resolved during October and November 2024.

Corporate general and administrative

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Share-based compensation expense 19 18 5.6 %

Other items 2 3 (33.3) %

Other corporate expenses 4 2 100.0 %

Total corporate general and administrative $ 69 $ 65 6.2 %

Impairment and casualty loss

During the year ended December 31, 2024, we recognized impairment losses of approximately $12 million related to two of our hotels subject to ground leases and our inability to recover the carrying value of the assets over the remaining lease term.

Refer to Note 8:

"Fair Value Measurements" 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, 2023, we recognized an impairment loss of approximately $202 million.

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

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.

Gain (loss) on sales of assets, net

During the years ended December 31, 2023 and 2022, we recognized a net gain of $15 million and $13 million, respectively, primarily as a result of the sales of our consolidated hotels.

Gain on sale of assets, net

During the years ended December 31, 2024 and 2023, we recognized a net gain of $8 million and $15 million, respectively, primarily from the sales of our consolidated hotels.

Gain on derecognition of assets

During the year ended December 31, 2024, we recognized a gain of $60 million from the accrued interest expense associated with the default of the SF Mortgage Loan, which resulted in a corresponding increase of the contract asset in our consolidated balance sheets, as we expect to be released from this obligation upon final resolution with the lender.

During the year ended December 31, 2023, we recognized a gain of $221 million from the derecognition of the Hilton San Francisco Hotels from our consolidated balance sheet in October 2023, when the receiver took control of the hotels.

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Interest income

Interest income increased $25 million during the year ended December 31, 2023 compared to the same period in 2022 as a result of an increase in interest rates, which more than offset a decrease in average cash balances.

Interest income decreased $17 million during the year ended December 31, 2024 compared to the same period in 2023 primarily as a result of a decrease in average cash balances.

Interest expense

Interest expense decreased $10 million during the year ended December 31, 2023 compared to the same period in 2022 due to the full repayments in December 2022 of our unsecured delayed draw term loan facility ("2019 Term Facility") and the $26 million mortgage loan secured by the Hilton Checkers, as well as the full repayment of the $75 million mortgage loan secured by the W Chicago - City Center in June 2023, partially offset by $50 million of borrowings under our Revolver in December 2022, which was subsequently repaid in February 2023.

Interest expense increased $7 million during the year ended December 31, 2024 compared to the same period in 2023 due to the issuance of the $550 million of senior notes due in 2030 ("2030 Senior Notes") and the $200 million senior unsecured term loan due May 2027 ("2024 Term Loan"), partially offset by the repurchase and redemption of all the $650 million senior notes due in 2025 ("2025 Senior Notes").

Interest expense associated with our debt for the years ended December 31, 2024 and 2023 were as follows:

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Revolver 3 4 (25.0) %

2019 Term Facility (2)

2024 Term Loan

2025 Senior Notes (2)

19 49 (61.2) %

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(1) In October 2016, we entered into 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.

Additionally, in May 2021, our Operating Company, PK Domestic and PK Finance issued an aggregate of $750 million senior notes due 2029 ("2029 Senior Notes," collectively with the 2025 Senior Notes and 2028 Senior Notes, the "Senior Notes").

Our current debt outstanding is approximately $3.8 billion, excluding the SF Mortgage Loan, at a weighted average interest rate of 5.2%, all of which is fixed-rate debt, refer to Item 7A:

(2) In May 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 2025 Senior Notes, all of which were repurchased or redeemed during the second quarter of 2024.

Our Operating Company, PK Domestic and PK Finance also issued an aggregate of $725 million of senior notes due 2028 (“2028 Senior Notes”) in September 2020, an aggregate of $750 million of senior notes due 2029 ("2029 Senior Notes") in May 2021 and an aggregate of $550 million of 2030 Senior Notes in May 2024.

Our current debt outstanding is approximately $3.8 billion, excluding the SF Mortgage Loan, at a weighted average interest rate of 5.2%, of which 95% is fixed-rate debt, refer to Item 7A:

“Interest Rate Risk” and Note 7:

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Interest expense associated with hotels in receivership

Interest expense on the SF Mortgage Loan increased $15 million due to accrued default interest beginning in June 2023 when we ceased making payments on the loan.

Interest expense on the SF Mortgage Loan increased $15 million as compared to 2023 due to accrued default interest not beginning until June 2023 when we ceased making payments on the loan.

The stated rate on the loan is 4.11%, however, beginning June 1, 2023, the default interest rate on the loan is 7.11%.

Additionally, beginning June 1, 2023, the loan accrues a monthly late payment administrative fee of 3% of the monthly amount due.

Other gain (loss), net

During the year ended December 31, 2023, we recognized a gain of approximately $4 million primarily due to an early termination fee received from the lessor to terminate the lease for the Embassy Suites Phoenix Airport hotel.

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:

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

Income tax expense

Other (loss) gain, net

During the year ended December 31, 2024, we recognized a loss of approximately $4 million, which was primarily related to the write-off of the remaining unamortized deferred financing costs associated with the repurchase and redemption of all the 2025 Senior Notes.

During the year ended December 31, 2023, we recognized a gain of approximately $4 million for an early termination fee received from the lessor to terminate the lease for the Embassy Suites Phoenix Airport hotel.

Equity in earnings from investments in affiliates

Equity in earnings from investments in affiliates increased $20 million for the year ended December 31, 2024 primarily due to a $19 million gain from the sale of the Hilton La Jolla Torrey Pines.

Income tax benefit (expense)

During the year ended December 31, 2024, we recognized an income tax benefit of $61 million, which was primarily related to the release of $54 million of the valuation allowance on our deferred tax assets that we now believe to be realizable and $19 million of income tax expense that is no longer expected to be incurred primarily associated with the effective exit from the Hilton San Francisco Hotels.

These benefits were offset by expense primarily generated from the taxable income of our TRSs.

During the year ended December 31, 2023, we recognized income tax expense of $38 million, primarily related to the effective exit from the Hilton San Francisco Hotels in October 2023, which resulted in incremental income tax expense of $28 million.

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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 2023, we continued to experience improvements in overall demand across our portfolio and expect the improvement to continue through 2024 based on current demand trends, including an increase in city-wide events and from international travel.

During 2024, we continued to experience improvements in overall demand across our portfolio and expect the improvement to continue through 2025 based on current demand trends, including an increase in city-wide events and from international travel.

We continue to mitigate the effects of macroeconomic and inflationary pressures through active asset management.

With approximately $950 million available under our Revolver and $717 million in existing cash and cash equivalents, we have sufficient liquidity to pay our debt maturities and to fund other liquidity obligations over the next 12 months and beyond.

We fully repaid the $75 million mortgage loan secured by the W Chicago - City Center in June 2023 and the $50 million of borrowings under our Revolver in February 2023.

Excluding the SF Mortgage Loan for which we ceased to make debt service payments in June 2023 and is in default, we have no significant maturities until June 2025.

With $950 million available under our revolving credit facility ("Revolver") and $402 million in existing cash and cash equivalents, we have sufficient liquidity to pay our debt maturities and to fund other liquidity obligations over the next 12 months and beyond.

Excluding the SF Mortgage Loan for which we ceased to make debt service payments in June 2023 and is in default, and following the issuance of the 2030 Senior Notes and borrowings under the 2024 Term Loan, the proceeds from which collectively were used to repurchase or redeem all of the 2025 Senior Notes and for other general corporate purposes, we have no significant maturities until the fourth quarter of 2026.

Refer to Note 7:

"Debt" in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information on the SF Mortgage Loan.

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

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.

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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.

During 2023, we declared dividends of $2.15 per share, including dividends of $1.70 per share during the fourth quarter of 2023, which was paid on January 16, 2024, consisting of a special cash dividend of $0.77 per share from the effective exit from the Hilton San Francisco Hotels and our fourth quarterly dividend of $0.93 based on 2023 operating results.

During 2024, we declared dividends of $1.40 per share, including our fourth quarter dividend of $0.65 that was paid on January 15, 2025 to stockholders of record as of December 31, 2024 based on 2024 operating results.

In addition, we declared a first quarter dividend of $0.25 per share in February 2025 to be paid on April 15, 2025 to stockholders of record as of March 31, 2025.

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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 $90 million for capital expenditures at our properties, of which $16 million relates to projects at the Bonnet Creek complex, including the meeting space expansion project and renovation of guestrooms, existing meeting space, lobbies, golf course and other recreational amenities, and $10 million relates to the complete renovation of all guestrooms, public spaces, and certain hotel infrastructure at the Casa Marina Key West, Curio Collection.

We have construction contract commitments of approximately $95 million for capital expenditures at our properties, of which $25 million relates to guestroom and lobby renovations at the Hilton Hawaiian Village Waikiki Beach Resort, $15 million relates to guestroom renovations at the Hilton New Orleans Riverside and $13 million relates to guestroom and lobby renovations at the Hilton Waikoloa Village.

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

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Stock Repurchase Program

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.

In February 2025, our Board terminated a previous $300 million stock repurchase program that was approved in February 2023 (the "February 2023 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 2027 (the "February 2025 Stock Repurchase Program"), 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.

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.

During the year ended December 31, 2024, we repurchased approximately 8.0 million shares of our common stock under the 2023 Stock Repurchase Program for a total purchase price of $116 million, and as of December 31, 2024, prior to the termination of the February 2023 Stock Repurchase program, $34 million remained available for stock repurchases.

As of February 20, 2025, no shares of our common stock have been repurchased under the new February 2025 Stock Repurchase Program.

Sources and Uses of Our Cash and Cash Equivalents

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Net cash provided by operating activities $ 429 $ 503 (14.7) %

Net cash (used in) provided by investing activities (217) 87 349.4 %

Net cash used in investing activities (166) (217) (23.5) %

Net cash used in financing activities (573) (475) 20.6 %

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

The $94 million increase in net cash provided by operating activities for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to an increase in cash from operations as a result of an increase in occupancy at our hotels, a decrease in cash paid for interest of $30 million, primarily due to the cessation of debt service payments toward the SF Mortgage Loan, and an increase in interest income of $25 million due to an increase in interest rates.

The $74 million decrease in net cash provided by operating activities for the year ended December 31, 2024 compared to the year ended December 31, 2023 was primarily due to an increase in cash paid for taxes of $8 million, a decrease in interest received of $17 million due to a decrease in average cash balances and timing of receipts from our customers and payments to our vendors and other third parties.

Investing Activities

The $217 million in net cash used in investing activities for the year ended December 31, 2023 was primarily attributable to $296 million in capital expenditures and land acquisitions and a $30 million reduction of restricted cash associated with the derecognition of the Hilton San Francisco hotels, partially offset by $116 million of net proceeds from the sale of one of our hotels.

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 $166 million in net cash used in investing activities for the year ended December 31, 2024 was primarily attributable to $227 million of capital expenditures, partially offset by $30 million of net distributions from unconsolidated affiliates primarily related to the sale of the Hilton La Jolla Torrey Pines and $31 million of net proceeds from the sale of the DoubleTree Hotel Spokane City Center.

The $217 million in net cash used in investing activities for the year ended December 31, 2023 was primarily attributable to $296 million of capital expenditures and land acquisitions and a $30 million reduction of restricted cash associated with the derecognition of the Hilton San Francisco hotels, partially offset by $116 million of net proceeds from

the sale of one of our hotels.

Financing Activities

The $475 million in net cash used in financing activities for the year ended December 31, 2023 was primarily attributable to the repurchase of approximately 14.6 million shares of our common stock for approximately $180 million, $152 million of dividends paid and $133 million of debt repayments.

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 $573 million in net cash used in financing activities for the year ended December 31, 2024 was primarily attributable to $672 million of debt repayments, $512 million of dividends paid and the repurchase of approximately 8.0 million shares of our common stock for $116 million, offset by the issuance of $550 million of 2030 Senior Notes and the $200 million 2024 Term Loan.

The $475 million in net cash used in financing activities for the year ended December 31, 2023 was primarily attributable to the repurchase of approximately 14.6 million shares of our common stock for $180 million, $152 million of dividends paid and $133 million of debt repayments.

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 gains, to our stockholders on an annual basis.

Therefore, as a general matter, after consideration of the allowable use of our net operating loss carryforward, 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 generally not be required to pay tax on our income.

Consequently, before consideration of the use of any net operating loss 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.

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 generally not be required to pay tax on our REIT income.

Consequently, 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.

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January 15, 2025

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(1) Of the full $1.70 per share payment, $0.93 per share represented the quarterly dividend for the fourth quarter based on 2023 results of operations.

The remaining $0.77 per share was attributable to the required distribution from the effective exit from the Hilton San Francisco Hotels.

As of December 31, 2023, our total indebtedness was approximately $3.8 billion, including approximately $2.1 billion of our Senior Notes, and excluding both the $725 million SF Mortgage Loan on which we ceased making debt service payments in June 2023 and approximately $164 million of our share of debt from investments in affiliates.

As of December 31, 2024, our total indebtedness was approximately $3.8 billion, including over $2 billion of our Senior Notes and excluding the $725 million SF Mortgage Loan (that we ceased making debt service payments in June 2023) and 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.

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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.

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.

1 unchanged sentence

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:

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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.

Changes in estimates and assumptions used, including with respect to the anticipated holding period, 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 account for income taxes using the asset and liability method under which deferred tax assets and liabilities are recognized for the estimated future tax consequences attributable to the differences between the financial statement carrying amounts of existing assets and liabilities and their respective income tax bases, and for net operating loss, capital loss and tax credit carryforwards.

The deferred tax assets and liabilities are measured using the enacted income tax rates in effect for the year in which those temporary differences are expected to be realized or settled.

Deferred tax assets are recognized only to the extent that it is more likely than not that they will be realized based on consideration of all available evidence, including the future reversals of existing taxable temporary differences, future projected taxable income and tax planning strategies.

Valuation allowances are provided if, based upon the weight of available evidence, it is more likely than not that some or all of the deferred tax assets will not be realized.

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.

7 unchanged sentences

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 7. Management’s Discussion and Analysis