Park Hotels & Resorts Completes Sale of Le Meridien San Francisco for $221.5M

TYSONS, VA – September 7, 2021 – Park Hotels & Resorts Inc. today announced that it completed the previously announced sale of the Le Meridien San Francisco. The Company also provided an operational and liquidity update.

Recent Highlights

• Closed on the sale of the 360-room Le Meridien San Francisco on August 31, 2021, for total proceeds of $221.5 million, or approximately $615,000 per key. When adjusted for Park’s anticipated capital expenditures (“capex”), the sale price represents a 5.9% capitalization rate on 2019 net operating income (6.5% excluding capex), or 15.0x 2019 EBITDA (13.7x excluding capex). Proceeds from the sale were used to repay Park’s sole remaining term loan, leaving just $78 million outstanding;
• Pro-forma occupancy preliminarily estimated to be 49.9% in August 2021 for Park’s 48 consolidated hotels, with a decrease in rate and RevPAR of 5.8% and 45.0%, respectively, when compared to the same period in 2019;
• Pro-forma occupancy preliminarily estimated to be 56.4% for Park’s 45 consolidated hotels open during the entirety of August, with a decrease in rate and RevPAR of just 3.8% and 35.6%, respectively, when compared to the same period in 2019;
• Generated Pro-forma Hotel Revenues of $157 million and positive Pro-forma Hotel Adjusted EBITDA of $44 million in July 2021, with 36 of its 45 consolidated hotels that were open during July 2021 generating positive Pro-forma Hotel Adjusted EBITDA; and
• Despite witnessing exceptionally strong results during the summer, the Company now anticipates fundamentals to be weaker than expected through at least October as the spread of the Delta variant has tempered group and business transient demand across its portfolio.

“I am pleased to announce that our previously disclosed sale of the Le Meridien San Francisco is completed. Proceeds from the sale have been used to reduce debt and further strengthen our balance sheet. With nearly $1.8 billion in liquidity, Park is well positioned to pursue internal and external growth strategies as we enter the post COVID cycle,” said Thomas J. Baltimore, Jr., Chairman and CEO of Park. “On the operations side, I am very pleased with the positive momentum in demand that we saw in July and August in several of our markets. Our portfolio witnessed very strong growth in occupancy and ADR in July, and demand trends continued into August, with two of our hotels surpassing August 2019 occupancy rates and 17 of our hotels surpassing August 2019 average daily rates. As expected, demand trends moderated somewhat in August based on seasonal declines in leisure travel as well as some disruption from the Delta variant. As case counts remain elevated, and some office reopenings are delayed, we expect business demand to remain choppy in the near term; however, we remain confident in the overall trajectory of the recovery, particularly as we look to strong fundamentals for 2022.”

Operational Update
Pro-forma Occupancy, ADR and RevPAR for certain periods in 2021 and changes compared to the same periods in 2019 for Park’s 48 consolidated hotels were as follows:

Pro-forma Occupancy, ADR and RevPAR for certain periods in 2021 and changes compared to the same periods in 2019 for only the consolidated hotels open during the entirety of each period were as follows:

The Company also witnessed improvements in mid-week occupancy (Tuesday and Wednesday), increasing to 52% in July on a Pro-forma basis, or nearly 2,000 basis points higher than the second quarter. Preliminary Pro-forma August mid-week occupancy softened somewhat to 47% with expected seasonality. Overall, these mid-week trends provide an encouraging indicator that travel continues to expand beyond leisure demand. In addition, Park continues to see increasing trends in group pickup for 2022 across its portfolio, with roughly $32 million in group revenue picked up year-to-date for next year.

COVID-19: Impact of Delta Variant
Despite witnessing exceptionally strong results in July and August, the Company now anticipates fundamentals to be softer than expected through at least October as the spread of the Delta variant has tempered demand. Markets meaningfully impacted include Hawaii, San Francisco and Orlando with most of the attrition related to group cancellations. Despite the near-term weakness, however, demand trends for November and December (55% of estimated Q4 EBITDA combined) remain steady, as group bookings and leisure demand continue to hold.

Hurricane Ida
The 1,622-room Hilton New Orleans Riverside hotel sustained minimal damage from Hurricane Ida and the category 4 storm’s impact and effects on the region. Minor physical damage included limited water intrusion and cosmetic exterior damage. The hotel is now operating with permanent power and water supply, and is currently accommodating emergency first responders, displaced residents and hotel staff. With respect to Park’s assets in the Northeast, there was no damage to any of its hotels in the New York or Boston metro areas as the remnants of Hurricane Ida moved across the region.

Liquidity Update
Following the sale of the Le Meridien San Francisco, the Company has just $78 million outstanding on its sole remaining corporate term loan. As of August 31, 2021, Park had estimated liquidity of approximately $1.8 billion, including estimated cash and cash equivalents of $769 million and $1.075 billion of available capacity remaining under the Company’s revolving credit facility.