While the company faces no maturities early in the year, Park Hotels & Resorts officials said one of the company's key challenges in 2023 will be deciding how to handle a $725 million mortgage loan maturing in the fourth quarter.
Speaking during the hotel-focused real estate investment trust's fourth-quarter and full-year 2022 earnings call, President and CEO Thomas Baltimore promised to "study the situation carefully" in deciding how to move forward with the loan tied to the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco.
"Rest assured, we will have it solved by the third quarter if not sooner," he told analysts. "And we've got optionality. We could put debt on an asset or a combination of assets. We could extend. We could reach out to the servicer. There are a number of different things that we can do here, so we're not at all alarmed."
Asked why the company wouldn't dip into its significant amount of cash on hand — the company currently has $1.9 billion in liquidity — CFO Sean Dell'Orto said that is not likely the path forward.
"You know, $725 million is a lot of money," he said. Paying down with cash "is certainly going to be part of the solution, but I wouldn't say we're looking to pay it off completely today with that cash we have on our balance sheet."
Baltimore said getting through the pandemic, along with the wealth of experience in the industry on Park's leadership team, should give investors confidence that they'll figure out the best path forward.
"At the beginning of the pandemic when everything was closed and we had debt maturities and the world thought Park wasn't going to be around much longer, we didn't panic," he said. "We did three bond deals. We pushed out maturities. We paid off 98% of the bank debt. You'll note that when we went to recast our revolver, the banks welcomed us with open arms. It was done quickly and efficiently, and we were one of the few that were able to upsize in that environment. So we've got a very seasoned and experienced team here. We know how to handle the situation."
Park's Empire State Building
When analysts asked about the continued outsize performance of the company's flagship property — the 2,860-room Hilton Hawaiian Village Waikiki Beach Resort in Honolulu — Baltimore attributed part of its success to being a globally iconic property not just for the hotel industry but for all real estate.
"It's a world-class resort," he said. "There is not, in my humble opinion, another REIT asset across any other sector — maybe the Empire State Building would be comparable — that is worth more, that has as much of a story and history and has much of a following where people continue to go back generation after generation."
In the fourth quarter, Park's two Hawaiian properties, the Hilton Hawaiian Village and the Hilton Waikoloa Village, generated revenue per available room of $305.20 with occupancy over 80%. Baltimore said the earnings contribution of the Hawaiian Village property alone is comparable to the entire portfolios of some of their hotel REIT peers.
The company is currently investing $85 million in a guest room renovation at the property, and Baltimore said there is significant room for revenue growth there as international travelers from Asia begin to return to Hawaii.
"The Japanese traveler had been going there for 30 years or more and consistently had accounted for 15% to 17% of the demand, and while they stay longer, they also spend more," he said.
Earnings Performance
In the company's latest earnings release, Park reported RevPAR of $162.81, a 46.7% increase from the final quarter of 2021. RevPAR came in at $156.38 for full-year 2022, an 85% increase from 2021 The full-year increase was seemingly driven in both by increases in occupancy — up 22.8 percentage points from 2021 — and average daily rate, which was up 20.7%.
The company reported $173 million in net income for the year, a significant reversal from a $452 million loss in 2021. Adjusted earnings before interest, taxes, depreciation and amortization was up 326.8% for the year to $606 million.
As of press time, Park's stock was trading at $13.95 a share, up 18.3% year to date. The NYSE Composite was up 2.6% for the same period.