Park Hotels & Resorts Inc. Reports Second Quarter 2018 Results

Park Hotels & Resorts Inc. ("Park" or the "Company") PK today announced results for the second quarter ended June 30, 2018. Highlights include:

Second Quarter 2018 Highlights

• Comparable RevPAR was $185.58, an increase of 4.3% from the same period in 2017;
• Net income was $218 million and net income attributable to stockholders was $216 million;
• Adjusted EBITDA was $228 million, an increase of 5.1% over the same period in 2017;
• Adjusted FFO attributable to stockholders was $187 million, an increase of 8.1% over the same period in 2017;
• Diluted earnings per share was $1.07;
• Diluted Adjusted FFO per share was $0.93, an increase of 14.8% over the same period in 2017;
• Comparable Hotel Adjusted EBITDA margin was 31.9%, an increase of 150 bps from the same period in 2017;
• Completed the sale of a joint venture ownership interest in the Hilton Berlin at an EBITDA multiple of 20x, for which Park's pro rata share of the sales price was $140 million.

Thomas J. Baltimore, Jr., Chairman, President and Chief Executive Officer, stated, "I am extremely pleased to announce a very strong quarter, which highlights the benefits of a robust group base for our portfolio. We continue to execute against our internal growth strategies of grouping up, improving margins and recycling capital. Group pace continues to accelerate, up almost 5% for the year and improving to over 9% for 2019, while margins increased 150 bps during the quarter. We continue to take advantage of strong demand for hotel real estate by selling our JV interest in the Hilton Berlin at a significant EBITDA multiple of 20x, while initiating the second phase of our non-core hotel sales. Overall, we are encouraged by our results and while we expect our second quarter to be our strongest this year, our outlook remains positive for the second half with fundamentals continuing to improve and the transaction market accelerating."

Selected Statistical and Financial Information
(unaudited, amounts in millions, except per share data, Comparable RevPAR and Comparable ADR)

Top 10 Hotels

RevPAR at Park's Top 10 Hotels, which account for approximately 70% of Hotel Adjusted EBITDA, increased 6% during the quarter and 3.8% year-to-date, primarily due to increases in occupancy and rate, as compared to the same period in 2017. Highlights within the Top 10 Hotels include:

• Hilton Hawaiian Village Waikiki Beach Resort: RevPAR growth was 3.3% for the quarter and 2.1% year-to-date from an increase in both group business, which was up over 9% from the second quarter last year, and transient business;
• New York Hilton Midtown: RevPAR increased 5.0% for the quarter and 2.5% year-to-date, from an increase in group business of more than 33% versus the second quarter last year;
• Hilton San Francisco Union Square / Parc 55 San Francisco – a Hilton Hotel: Combined RevPAR increased 13.7% for the quarter and 6.3% year-to-date from increases in group business of over 60% combined for the quarter, following the partial completion of renovations at the Moscone Center and increased transient rate;
• Hilton Waikoloa Village: Despite some disruption caused by the eruption of the Kilauea volcano, RevPAR growth was 6.9% for the quarter and 8.4% year-to-date from increases in both group and transient rates over the same periods in the prior year;
• Hilton New Orleans Riverside: RevPAR growth was 2.2% for the quarter and 2.7% year-to-date from an increase in occupancy from transient business;
• Hilton Chicago: RevPAR increased 10.5% during the quarter and 4.7% year-to-date benefiting from a more than 20% increase in group business from the second quarter of last year;
• Hilton Orlando Bonnet Creek / Waldorf Astoria Orlando: Combined RevPAR decreased 3.1% for the quarter and increased 2.5% year-to-date. The decrease in the second quarter resulted from a decrease in occupancy at both hotels, offset by an increase in group rate during the quarter and overall group business year-to-date;
• Casa Marina, A Waldorf Astoria Resort: RevPAR declined 2.4% during the quarter and 1.3% year-to-date from disruptions following the start of the next phase of renovations during the second quarter related to Hurricane Irma and from Tropical Storm Alberto over Memorial Day weekend resulting in declines in transient business, which was partially offset by an increase in group business.

Total Consolidated Comparable Hotels

Comparable RevPAR increased 4.3% for the quarter and 2.8% year-to-date primarily due to a 3.1% and 2.1% increase in rate, respectively, and 1.0% pts and 0.5% pts increase in occupancy, respectively, as compared to the same periods in 2017. Group rooms revenue increased 4.2% for the quarter and 2.6% year-to-date, offset by a 4.7% and 1.8% decline in transient rooms revenue, respectively, as compared to the same periods in 2017. The overall increase in RevPAR was a result of both increases in occupancy and ADR at Park's Northern California, Hawaii, Chicago, and New York hotels during those periods, primarily attributable to increases in group business at urban and resort hotels in these markets. The overall increase in RevPAR for Park's comparable hotels during both periods was partially offset by a decline in RevPAR for its Southern California hotels primarily from renovation displacement at the Hilton Santa Barbara Beachfront Resort; these renovations were completed in April 2018.

Hurricanes Irma and Maria

In September 2017, Hurricanes Irma and Maria caused damage and disruption at the Caribe Hilton in San Juan, Puerto Rico and Park's two hotels in Key West, Florida. Park expects the Caribe Hilton to remain closed for almost all of 2018 and the results of operations of that property are presented as non-comparable. Full year 2017 EBITDA at the Caribe Hilton, prior to the hurricanes, was projected to be $8 million.

Park expects that insurance proceeds, excluding any applicable insurance deductibles, will be sufficient to cover a significant portion of the property damage to the hotels and loss of business. To date, Park has received $65 million of insurance proceeds for both Key West hotels and the Caribe Hilton, including $25 million received in the second quarter. These insurance proceeds included $7 million received for business interruption at the Caribe Hilton in the second quarter, which, when netted against fees and expenses, equates to approximately $5 million of Adjusted EBITDA for the second quarter. An additional advance of $25 million for the Caribe Hilton has been submitted, and Park expects to receive cash proceeds during the third quarter.

Dispositions

During the six months ended June 30, 2018, Park completed the sale of the following 12 consolidated hotels in four separate transactions (the results of these hotels are presented as non-comparable), and its interests in one unconsolidated joint venture:

Balance Sheet and Liquidity

Park had the following debt outstanding as of June 30, 2018:

Total cash and cash equivalents were $438 million as of June 30, 2018, including $17 million of restricted cash.

Capital Investments

Park invested $33 million in the second quarter (and $81 million year-to-date) on capital improvements at its hotels, including $16 million on improvements made to guest rooms, lobbies and other guest-facing areas. Key projects include:

• New York Hilton Midtown: $6 million primarily on phase four of guest room renovations;
• Hilton Santa Barbara Beachfront Resort: $5 million primarily on the conversion from a DoubleTree to a Hilton; which was completed in April 2018;
• Hilton Boston Logan Airport: $3 million primarily on phase one of guest room renovations;
• Hilton Waikoloa Village: $2 million primarily on restaurant renovations;
• Hilton San Francisco Union Square: $2 million primarily on the final phase of guest room renovations; and
• Hilton Short Hills: $1 million primarily on renovations to add 10 new rooms to the property, new bathrooms and soft goods.

Dividends

Park declared a second quarter 2018 cash dividend of $0.43 per share to stockholders of record as of June 29, 2018. Additionally, in May 2018, following the sale of the Hilton Berlin, Park declared a special cash dividend of $0.45 per share to stockholders of record as of June 29, 2018. Both the second quarter 2018 dividend and the special dividend were paid on July 16, 2018.

On July 26, 2018, Park declared a third quarter 2018 cash dividend of $0.43 per share to be paid on October 15, 2018 to stockholders of record as of September 28, 2018.

Full Year 2018 Outlook

Park has updated its 2018 guidance that was previously provided on May 3, 2018. Park now expects the full year 2018 operating results to be as follows:

Full year 2018 guidance is based in part on the following assumptions:

• General and administrative expenses are projected to be $44 million, excluding $16 million of non-cash share-based compensation expense, $4 million of transition expense and $1 million of severance expense;
• Fully diluted weighted average shares are expected to be 203.8 million;
• Includes $8 million of Adjusted EBITDA from the Caribe Hilton representing a full year of operations, of which $5 million was recognized during the second quarter, for which Park expects to be covered by business interruption insurance resulting from the hotel being closed for most of 2018 following the damage caused by Hurricane Maria; and
• Excludes potential future acquisitions and dispositions, which could result in a material change to Park's outlook.

Supplemental Disclosures

In conjunction with this release, Park has furnished a financial supplement with additional disclosures on its website. Visit www.pkhotelsandresorts.com for more information. Park has no obligation to update any of the information provided to conform to actual results or changes in Park's portfolio, capital structure or future expectations.

Conference Call

Park will host a conference call for investors and other interested parties to discuss second quarter 2018 results on Thursday, August 2, 2018 beginning at 10:00 a.m. Eastern Time.

Participants may listen to the live webcast by logging onto the Investors section of the website at www.pkhotelsandresorts.com. Alternatively, participants may listen to the live call by dialing (877) 451-6152 in the United States or (201) 389-0879 internationally, and requesting Park Hotels & Resorts' Second Quarter 2018 Earnings Conference Call. Participants are encouraged to dial into the call or link to the webcast at least ten minutes prior to the scheduled start time.

A replay and transcript of the webcast will be available within 24 hours after the live event on the Investors section of Park's website.

Forward-Looking Statements

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. Forward-looking statements include, but are not limited to, statements related to Park's current expectations regarding the performance of its business, financial results, liquidity and capital resources, the effects of competition and the effects of future legislation or regulations, the expected completion of anticipated acquisitions and dispositions, the declaration and payment of future dividends and other non-historical statements. Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as the words "outlook," "believes," "expects," "potential," "continues," "may," "will," "should," "could," "seeks," "projects," "predicts," "intends," "plans," "estimates," "anticipates" or the negative version of these words or other comparable words.

Forward-looking statements involve risks, uncertainties and assumptions. Actual results may differ materially from those expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements and Park urges investors to carefully review the disclosures Park makes concerning risk and uncertainties in Item 1A: "Risk Factors" in Park's Annual Report on Form 10-K for the year ended December 31, 2017, as such factors may be updated from time to time in Park's periodic filings with the SEC, which are accessible on the SEC's website at www.sec.gov. Except as required by law, Park undertakes no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.

Non-GAAP Financial Measures

Park presents certain non-GAAP financial measures in this press release, including NAREIT FFO attributable to stockholders Adjusted FFO attributable to stockholders, EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA, and Hotel Adjusted EBITDA margin. These non-GAAP financial measures should be considered along with, but not as alternatives to, net income (loss) as a measure of its operating performance. Please see the schedules included in this press release including the "Definitions" section for additional information and reconciliations of such non-GAAP financial measures.

About Park

Park is a leading lodging REIT with a diverse portfolio of hotels and resorts with significant underlying real estate value. Park's portfolio consists of 54 premium-branded hotels and resorts with over 32,000 rooms, a majority of which are located in prime United States markets with high barriers to entry.

PARK HOTELS & RESORTS INC.
DEFINITIONS

EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA Margin

Earnings before interest expense, taxes and depreciation and amortization ("EBITDA"), presented herein, reflects net income excluding depreciation and amortization, interest income, interest expense, income taxes and interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates.

Adjusted EBITDA, presented herein, is calculated as EBITDA, as previously defined, further adjusted to exclude:

• Gains or losses on sales of assets for both consolidated and unconsolidated investments;
• Gains or losses on foreign currency transactions;
• Transition expense related to the Company's establishment as an independent, publicly traded company;
• Transaction expense associated with the potential disposition of hotels or acquisition of a business;
• Severance expense;
• Share-based compensation expense;
• Casualty and impairment losses; and
• Other items that management believes are not representative of the Company's current or future operating performance.

Hotel Adjusted EBITDA measures hotel-level results before debt service, depreciation and corporate expenses of the Company's consolidated hotels, including both comparable and non-comparable hotels but excluding hotels owned by unconsolidated affiliates, and is a key measure of the Company's profitability. The Company presents Hotel Adjusted EBITDA to help the Company and its investors evaluate the ongoing operating performance of the Company's consolidated hotels.

Hotel Adjusted EBITDA margin is calculated as Hotel Adjusted EBITDA divided by total hotel revenue.

EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin are not recognized terms under United States ("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. In addition, the Company's definitions of EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin may not be comparable to similarly titled measures of other companies.

The Company believes that EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin provide useful information to investors about the Company and its financial condition and results of operations for the following reasons: (i) EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin are among the measures used by the Company's management team to make day-to-day operating decisions and evaluate its operating performance between periods and between REITs by removing the effect of its capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from its operating results; and (ii) EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin 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 the industry.

EBITDA, Adjusted EBITDA, Hotel Adjusted EBITDA and Hotel Adjusted EBITDA margin 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 the Company's operating performance and results as reported under U.S. GAAP.

NAREIT FFO attributable to stockholders, Adjusted FFO attributable to stockholders NAREIT FFO per share - diluted and Adjusted FFO per share - diluted

NAREIT FFO attributable to stockholders and NAREIT FFO per diluted share (defined as set forth below) are presented herein as non-GAAP measures of the Company's performance. The Company calculates funds from 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 or 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 the Company's pro rata share of the FFO of those entities on the same basis. As noted by NAREIT in its April 2002 "White Paper on Funds From Operations," 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. The Company believes NAREIT FFO provides useful information to investors regarding its operating performance and can facilitate comparisons of operating performance between periods and between REITs. The Company's 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. The Company calculates NAREIT FFO per diluted share as NAREIT FFO divided by the number of fully diluted shares outstanding during a given operating period.

The Company also presents Adjusted FFO attributable to stockholders and Adjusted FFO per diluted share when evaluating its performance because management believes that the exclusion of certain additional items described below provides useful supplemental information to investors regarding the Company's ongoing operating performance. Management historically has made the adjustments detailed below in evaluating its performance and in its annual budget process. Management believes that the presentation of Adjusted FFO provides useful supplemental information that is beneficial to an investor's complete understanding of operating performance. The Company adjusts NAREIT FFO attributable to stockholders for the following items, which may occur in any period, and refers to this measure as Adjusted FFO attributable to stockholders:

• Gains or losses on foreign currency transactions;
• Transition expense related to the Company's establishment as an independent, publicly traded company;
• Transaction expense associated with the potential disposition of hotels or acquisition of a business;
• Severance expense;
• Share-based compensation expense;
• Casualty losses;
• Litigation gains and losses outside the ordinary course of business; and
• Other items that management believes are not representative of the Company's current or future operating performance.

Occupancy

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 the Company's hotels' available capacity. Management uses occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help management determine achievable Average Daily Rate ("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 management uses ADR to assess pricing levels that the Company is 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

Revenue per Available Room ("RevPAR") represents rooms revenue divided by the total number of room nights available to guests for a given period. Management considers RevPAR to be a meaningful indicator of the Company's 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 for comparable hotels.

References to RevPAR and ADR are presented on a currency neutral basis (prior periods are reflected using current period exchange rates), unless otherwise noted.

Comparable Hotels

The Company presents certain data for its consolidated hotels on a comparable hotel basis as supplemental information for investors. The Company defines its comparable hotels as those that: (i) were active and operating in its portfolio since January 1st of the previous year; and (ii) have not sustained substantial property damage, business interruption, undergone large-scale capital projects or for which comparable results are not available. The Company presents comparable hotel results to help the Company and its investors evaluate the ongoing operating performance of its comparable hotels. Of the 46 hotels that are consolidated as of June 30, 2018, 44 hotels have been classified as comparable hotels. Due to the conversion, or planned conversions, of a significant number of rooms at the Hilton Waikoloa Village in 2017 to HGV timeshare units, and due to the effects of the hurricane at the Caribe Hilton in Puerto Rico and the expected continued effects from business interruption in 2018, the results from these properties were excluded from comparable hotels. The Company's comparable hotels also exclude the 12 consolidated hotels that were sold in January and February 2018.

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