Executive Summary / Key Takeaways

• Strategic Transformation Underway: Park Hotels & Resorts (PK) is executing a focused strategy to enhance portfolio quality by divesting non-core assets and aggressively reinvesting in its high-value, iconic properties, aiming to drive superior, risk-adjusted returns.
• Robust Capital Allocation: The company is committed to generating higher development yields from its ROI projects than from acquisitions, evidenced by significant investments in properties like Royal Palm South Beach and the Hawaiian Village, which are expected to double EBITDA or deliver 15-20% unlevered IRRs.
• Disciplined Financial Management: PK demonstrates strong operational efficiency with remarkably low expense growth (0.4% in Q2 2025) driven by deep-dive cost controls, property tax appeals, and a sector-leading 25% reduction in property insurance premiums.
• Resilient Performance Amid Headwinds: Despite macroeconomic uncertainties and specific market disruptions like the Hawaii labor strike, PK's core portfolio shows strength, with key resort and urban markets delivering solid RevPAR growth and an optimistic outlook for Q4 2025.
• Strengthening Balance Sheet: With significant liquidity and proactive management of upcoming debt maturities, coupled with ongoing non-core asset sales (targeting $300-$400 million in 2025), PK is fortifying its financial position for long-term growth and shareholder returns.

The Strategic Canvas of Park Hotels & Resorts

Park Hotels & Resorts Inc. (PK) stands as a prominent lodging real estate investment trust (REIT), distinguished by its portfolio of premium-branded hotels and resorts. These assets are strategically located in prime city centers and coveted resort destinations across the U.S. and its territories. The company's overarching objective is to deliver superior, risk-adjusted returns to stockholders through active asset management, a thoughtful external growth strategy, and the maintenance of a robust balance sheet.

PK operates primarily through its consolidated hotels segment, which represents the vast majority of its asset value and operational focus. The company's competitive landscape includes other major lodging REITs like Host Hotels & Resorts Inc. and global hotel brand companies such as Marriott International Inc. , Hilton Worldwide Holdings Inc. , and Hyatt Hotels Corporation (H). While PK's ownership model provides greater control over property customization and localized operational efficiency, it generally lags larger brand companies in terms of overall scale and technological innovation. For instance, competitors like Marriott and Hilton leverage AI-driven personalization tools and apps for faster check-ins, areas where PK's digital booking tools are qualitatively less advanced. PK's strategic response to this competitive dynamic is to focus on the intrinsic value of its real estate and operational excellence within its owned assets.

The broader lodging industry is influenced by macroeconomic factors, including inflation, interest rates, and geopolitical stability, which can impact consumer sentiment and travel demand. Despite these uncertainties, the industry benefits from underlying trends such as increasing domestic airlift and the long-term appeal of premier leisure destinations. PK's portfolio, with over 87% of its rooms classified as luxury and upper upscale, is positioned to capture demand from resilient segments of the travel market.

A History Forged in Value Creation

Park Hotels & Resorts was established on January 3, 2017, as an independent, publicly traded company following a spin-off from Hilton Worldwide Holdings Inc. . From its inception, PK adopted an umbrella partnership REIT (UPREIT) structure, with its Operating Company holding and managing its assets. A foundational element of PK's strategy has been aggressive asset management and continuous portfolio reshaping. This is evident in the disposition of 45 hotels for nearly $3 billion since 2017, a concerted effort that has significantly upgraded the portfolio's overall quality.

A key growth milestone occurred on September 18, 2019, with the acquisition of Chesapeake Lodging Trust, further expanding PK's footprint in the premium segment. Concurrently, the company embarked on a period of significant capital investment in its core assets, committing over $1.4 billion to its 20 consolidated hotels through 2025. This strategy is rooted in the belief that PK can generate higher development yields from these targeted investments than from external acquisitions. The successful redevelopments at Bonnet Creek Resort in Orlando and Casa Marina Resort in Key West serve as prime examples, delivering exceptional performance and increased EBITDA post-improvement.

The company has also demonstrated a willingness to make tough strategic decisions to enhance portfolio quality. In June 2023, PK ceased debt service payments on the SF Mortgage Loan secured by the Hilton San Francisco Hotels, leading to these assets being placed into receivership by October 2023. This move, while challenging, was part of a broader effort to shed non-core liabilities. A purchase and sale agreement for these hotels was executed in July 2025, with a closing expected by October 2025, signaling a clear path to resolution. Other challenges included a 45-day labor strike at Hilton Hawaiian Village in late 2024, which, combined with renovation disruption, temporarily impacted RevPAR. PK's response has been characterized by disciplined cost controls and a proactive approach to asset management, including a sector-leading 25% reduction in property insurance premiums in 2024.

Operational Excellence and Financial Discipline

Park Hotels & Resorts' recent financial performance underscores its strategic focus on operational efficiency and asset management. For the second quarter of 2025, RevPAR was relatively flat year-over-year. However, excluding the Hilton Hawaiian Village, which is recovering from a labor strike, and the Royal Palm South Beach, which suspended operations for renovation, comparable RevPAR would have exceeded 2%. This performance was primarily driven by strength in resort markets such as Orlando, Key West, and Puerto Rico, alongside solid contributions from urban centers like New York, San Francisco, Denver, and Boston, benefiting from improved business travel.

A standout achievement in Q2 2025 was the company's disciplined cost control. Total expense growth was a mere 40 basis points for the quarter, or just 1% when excluding the Royal Palm South Beach. This marks the second consecutive quarter where expenses grew by approximately 1% or less, a testament to PK's aggressive asset management strategy. These savings include an estimated $10 million benefit from deep-dive analyses into cost structures across the portfolio, a $5 million benefit from successful property tax appeals in Q2, and an additional $2.5 million in projected savings for the second half of 2025. Furthermore, PK achieved a sector-leading 25% reduction in its annual property insurance premiums, contributing an incremental $1 million in Q2 and an expected $5 million in the latter half of the year.

Non-rooms revenue also showed strength, growing approximately 200 basis points ahead of RevPAR in Q1 2025. This was largely due to a robust 9% increase in group catering contribution and a favorable shift towards in-house group business, which typically yields better food and beverage production. While depreciation expense increased by approximately $56 million in Q2 2025 due to accelerated depreciation related to the Royal Palm South Beach renovation, this is a planned impact of the company's strategic reinvestment. PK also recognized gains of $16 million in Q2 2025 (and $32 million year-to-date) from accrued interest expense associated with the default of the SF Mortgage Loan, reflecting the anticipated release from this obligation upon final resolution.

Strategic Reinvestment: Unlocking Embedded Value

PK's core investment thesis is deeply rooted in its strategy of reinvesting in its iconic portfolio to unlock significant embedded value. The company has committed over $1.4 billion to its core 20 consolidated hotels through 2025, upgrading nearly 8,000 guestrooms and repositioning several key properties. This approach aims to generate higher development yields than acquisition yields, a critical differentiator in the current market.

A prime example of this strategy is the transformative $100 million renovation of the Royal Palm South Beach Miami, which commenced in May 2025. This comprehensive project, encompassing a full refurbishment of all 393 guestrooms (with 11 new additions), reimagined public spaces, and expanded meeting areas, is expected to generate an unlevered IRR of 15% to 20%. Management anticipates this investment will double the hotel's EBITDA to nearly $28 million once stabilized, with reopening planned for Q2 2026, strategically ahead of the 2026 World Cup matches in Miami.

Further investments are underway in Hawaii and New Orleans. The final phases of room renovations at Hilton Hawaiian Village (Rainbow Tower: 404 guestrooms + 14 new rooms, $48 million) and Hilton Waikoloa Village (Palace Tower: 203 guestrooms + 8 new rooms, $36 million) are launching in July 2025, with completion expected by early Q1 2026. At the Hilton New Orleans Riverside, the second phase of a three-phase renovation involves a $31 million investment to upgrade 428 guestrooms in the main tower. These projects are designed to enhance guest experience, drive ADR premiums, and solidify the properties' competitive standing.

Portfolio Reshaping and Capital Allocation

PK is relentlessly focused on refining its portfolio, targeting $300 million to $400 million in non-core dispositions by year-end 2025. This initiative aims to materially enhance portfolio quality, increase nominal RevPAR by over $5, and boost margins by nearly 70 basis points. A significant step in this direction was the May 2025 sale of the Hyatt Centric Fisherman's Wharf in San Francisco for $80 million, representing an impressive 64x 2024 EBITDA multiple and demonstrating strong underlying real estate value in private markets.

Further portfolio adjustments in 2025 include the decision to close the 266-room Embassy Suites Kansas City Plaza Hotel by September due to its low projected RevPAR ($73) and minimal EBITDA generation, alongside an early termination of its ground lease. Additionally, PK plans to exit the DoubleTree Seattle Airport and DoubleTree Sonoma, as their ground leases expire at the end of 2025, with properties reverting to the landlord. These strategic exits underscore PK's commitment to focusing on its core portfolio of 20 consolidated hotels, which represents approximately 90% of the company's value.

The proceeds from these dispositions, combined with strong operating cash flow, are strategically allocated across three key priorities: reinvesting in high-return ROI projects, reducing debt, and opportunistically repurchasing stock. In the six months ended June 30, 2025, PK repurchased 3.5 million shares for $45 million under its new $300 million stock repurchase program authorized in February 2025. The company maintains a robust liquidity position, with $319 million in cash, $28 million in restricted cash, and $950 million available under its revolving credit facility as of June 30, 2025. This strong liquidity, coupled with proactive management of its 2026 debt maturities (including a $1.275 billion CMBS loan on Hilton Hawaiian Village and a $123 million mortgage loan on Hyatt Regency Boston), ensures financial flexibility. Management is confident in securing sufficient debt and liquidity in Q3 2025 to address the $1.4 billion outstanding, leveraging strong banking relationships and aiming for unencumbered Hawaiian properties.

Navigating the Macro Landscape: Outlook and Guidance

PK's outlook for 2025 reflects a cautious yet optimistic stance amidst ongoing macroeconomic uncertainties. The company revised its full-year RevPAR forecast to a range of negative 2% to flat growth, a 150 basis point reduction at the midpoint. Excluding the Royal Palm South Beach renovation displacement, the forecast is essentially flat at the midpoint. This adjustment accounts for a softer-than-anticipated Q3, where RevPAR is expected to decline by 4% to 5% due to softer group demand (group pace down 14%) and weaker leisure transient demand, influenced by heightened economic uncertainty, reduced government demand, and lower inbound international visitation.

However, management anticipates a significant improvement in Q4 2025, with RevPAR growth expected to reaccelerate to 3% to 5%. This rebound is supported by an 18% increase in Q4 group revenue pace and significantly easier year-over-year comparisons, particularly in Hawaii, which was impacted by a labor strike in Q4 2024. The full-year Adjusted EBITDA forecast was increased by $2 million at the midpoint to $620 million, within a tightened range of $595 million to $645 million. This improvement is attributed to the strong expense control measures implemented, offsetting the softer top-line expectations. Hotel Adjusted EBITDA margin is now projected to be between 26.1% and 27.5%. Adjusted FFO per share is expected to be $1.95 at the midpoint, ranging from $1.82 to $2.08.

The sequential recovery for Hilton Hawaiian Village is expected to continue, with July showing occupancy over 90% and RevPAR index above pre-strike levels. While Q3 combined RevPAR decline is expected to be slightly better than Q2, performance is set to accelerate meaningfully in Q4 with high teens combined RevPAR growth. The long-term outlook for Hawaii remains very favorable, supported by limited new supply (0.3% over the next 5 years) and anticipated improvement in inbound international travel, particularly from Japan, which is expected to return to the 1 million visitor range by 2027-2028.

Competitive Dynamics and Differentiators

Park Hotels & Resorts operates in a highly competitive lodging market, positioning itself as a focused REIT with a portfolio of high-quality, premium-branded assets. Against its direct REIT competitor, Host Hotels & Resorts (HST), PK's portfolio is slightly smaller, and HST generally exhibits stronger financial health with higher gross and net profit margins (HST's 40-45% gross margin vs. PK's 17.43% TTM; HST's 12% net margin vs. PK's 2.25% TTM) and lower debt-to-equity (HST's 0.85 vs. PK's 0.06 TTM, noting the significant difference in reported D/E for PK in the TTM data vs. annual). However, PK's strategic focus on resorts allows it to exploit HST's urban bias, particularly in leisure travel.

Compared to global brand companies like Marriott (MAR) and Hilton (HLT), PK's ownership model provides greater direct control over property management and guest experience, leading to efficient localized strategies. For instance, PK's resort operations can achieve lower operating costs per room due to optimized staffing models. However, MAR and HLT possess significant advantages in scale, global presence, and technological innovation. Marriott's AI-driven personalization tools and Hilton's advanced digital platforms offer notably faster check-in processes and enhanced customer loyalty, areas where PK acknowledges a lag in innovation speed and R&D investment. While PK makes "investments in technology to protect both the inside and outside the hotels" and seeks "advances in technology" for efficiency, it does not possess a proprietary core technology that provides a unique competitive moat in the same vein as a tech company. Its technological application is primarily geared towards operational support and asset hardening, rather than direct customer-facing innovation that drives market share.

PK's strength lies in its prime locations and strong brand partnerships, which translate into pricing power and robust customer loyalty. The Waldorf Astoria Orlando, for example, was recognized as the top-ranked resort in Orlando by Travel and Leisure's 2025 World's Best Awards, demonstrating PK's ability to drive outperformance through strategic renovations. The Casa Marina in Key West continues to position itself as a premier hotel, benefiting from its comprehensive renovation. Despite the competitive pressures, PK's strategy of divesting non-core assets and reinvesting in its top-tier properties aims to enhance its competitive standing by focusing on assets with the highest potential for outsized returns and operational efficiency.

Conclusion

Park Hotels & Resorts is in the midst of a profound strategic transformation, shedding non-core assets and aggressively reinvesting in its most valuable properties. This disciplined approach, coupled with a relentless focus on cost control and operational excellence, is designed to unlock significant embedded value and drive superior, risk-adjusted returns for shareholders. While macroeconomic uncertainties and specific market disruptions present near-term headwinds, the company's core portfolio demonstrates resilience and strong growth potential, particularly in its revitalized resort and key urban markets.

The commitment to high-ROI capital projects, such as the transformative Royal Palm South Beach renovation and ongoing upgrades in Hawaii, positions PK for sustained long-term growth. The proactive management of its balance sheet, including strategic debt refinancing and ongoing non-core asset dispositions, further strengthens its financial foundation. Investors should recognize PK's unique blend of high-quality real estate, disciplined asset management, and a clear roadmap for value creation, making it a compelling opportunity as it purifies its portfolio and capitalizes on its strategic advantages.