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What changed in Park Hotels & Resorts Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Park Hotels & Resorts Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+265 added−261 removedSource: 10-K (2024-02-28) vs 10-K (2023-02-23)

Top changes in Park Hotels & Resorts Inc.'s 2023 10-K

265 paragraphs added · 261 removed · 216 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

61 edited+11 added−8 removed74 unchanged
Biggest changeThe Tax Matters Agreement also provides for cross-indemnities with respect to tax matters that, except as otherwise provided in the Tax Matters Agreement, are principally designed to place financial responsibility for the tax-related obligations and liabilities of each business with the appropriate company. 10 Ground Leases The following table summarizes the remaining primary term, renewal rights and purchase rights as of February 23, 2023, associated with land underlying our hotels and meeting facilities that we lease from third parties: Property Rooms Current Lease Term Expiration Renewal Rights / Purchase Rights Leases of Wholly-Owned Properties Embassy Suites Phoenix Airport 182 November 30, 2031 None Portfolio of Five Hotels (1) 2,053 December 31, 2025 2 x 5 years (2) Embassy Suites Austin Downtown South Congress 262 February 28, 2029 1 x 10 years (3) Hilton Oakland Airport 360 January 19, 2034 None Hilton Orlando Lake Buena Vista 814 January 31, 2034 1 x 25 years Hilton Boston Logan Airport 604 September 30, 2044 2 x 20 years Hilton Seattle Airport & Conference Center 396 December 31, 2046 Purchase Rights (4) Renewal Rights 2 x 10 years; 1 x 5 years Hyatt Regency Mission Bay Spa and Marina 438 January 31, 2056 None Embassy Suites Kansas City Plaza 266 January 30, 2076 (5) Renewal Rights (5) 2 x 25 years JW Marriott San Francisco Union Square 344 January 14, 2083 None Leases of Properties by Joint Ventures Hilton La Jolla Torrey Pines 394 June 30, 2067 1 x 10 years; 1 x 20 years (6) (1) Reflects the terms of a master lease agreement pursuant to which we lease the following five hotels: the Hilton Salt Lake City Center; the DoubleTree Hotel Seattle Airport; the DoubleTree Hotel San Diego—Mission Valley; the DoubleTree Hotel Sonoma Wine Country; and the DoubleTree Hotel Durango.
Biggest changeGround Leases The following table summarizes the remaining primary term, renewal rights and purchase rights as of February 28, 2024, associated with land underlying our hotels and meeting facilities that we lease from third parties: Property Rooms Current Lease Term Expiration Renewal Rights / Purchase Rights Leases of Wholly-Owned Properties Portfolio of Five Hotels (1) 2,054 December 31, 2025 2 x 5 years (2) Embassy Suites Austin Downtown South Congress 262 February 28, 2029 1 x 10 years (3) Hilton Oakland Airport 360 January 19, 2034 None Hilton Orlando Lake Buena Vista 814 January 31, 2034 1 x 25 years Hilton Boston Logan Airport 604 September 30, 2044 2 x 20 years Hilton Seattle Airport & Conference Center 396 December 31, 2046 Purchase Rights (4) Renewal Rights 2 x 10 years; 1 x 5 years Hyatt Regency Mission Bay Spa and Marina 438 January 31, 2056 None Embassy Suites Kansas City Plaza 266 January 30, 2076 (5) Renewal Rights (5) 2 x 25 years JW Marriott San Francisco Union Square 344 January 14, 2083 None Leases of Properties by Joint Ventures Hilton La Jolla Torrey Pines 394 June 30, 2067 1 x 10 years; 1 x 20 years (6) ____________________________________________________________________________________ (1) Reflects the terms of a master lease agreement pursuant to which we lease the following five hotels: the Hilton Salt Lake City Center; the DoubleTree Hotel Seattle Airport; the DoubleTree Hotel San Diego—Mission Valley; the DoubleTree Hotel Sonoma Wine Country; and the DoubleTree Hotel Durango.
Park Intermediate Holdings LLC (our “Operating Company”) continues to directly or indirectly hold all of our assets and conduct all of our operations. Park Parent owned 100% of the interests in our Operating Company until December 31, 2021 when the business undertook an internal reorganization transitioning our structure to a traditional umbrella partnership REIT structure ("UPREIT").
Park Intermediate Holdings LLC (our “Operating Company”) continues to directly or indirectly hold all of our assets and conduct all of our operations. Park Parent owned 100% of the interests in our Operating Company until December 31, 2021 when the business undertook an internal reorganization transitioning our structure to a traditional umbrella partnership REIT ("UPREIT") structure .
Examples of Shared Contingent Liabilities may include uninsured losses arising from actions (including derivative actions) against current or former 9 directors or officers of Hilton in respect of acts or omissions occurring prior to the distribution date, or against current or former directors or officers of any of Hilton, HGV or us, arising out of, in connection with, or otherwise relating to, the spin-offs and the distribution, subject to certain exceptions described in the Distribution Agreement.
Examples of Shared Contingent Liabilities may include uninsured losses arising from actions (including derivative actions) against current or former directors or officers of Hilton in respect of acts or omissions occurring prior to the distribution date, or against current or former directors or officers of any of Hilton, HGV or us, arising out of, in connection with, or otherwise relating to, the spin-offs and the distribution, subject to certain exceptions described in the Distribution Agreement.
Fees Our franchise agreements require that we pay a royalty fee on gross rooms revenue at rates ranging from 4.5% to 6%, plus a percentage of food and beverage revenue for certain hotels, which in most cases is 3%. We must also pay certain marketing, reservation, program and other customary fees.
Fees Our franchise agreements require that we pay a royalty fee on gross rooms revenue at rates ranging from 5% to 6%, plus a percentage of food and beverage revenue for certain hotels, which in most cases is 3%. We must also pay certain marketing, reservation, program and other customary fees.
From time to time, we may also be required to manage, abate, remove or contain mold, lead, asbestos-containing materials, radon gas or other hazardous conditions found in or on our properties. We have implemented an on-going operations and maintenance plan that seeks to identify and remediate these conditions as appropriate.
From time to time, we may also be required to manage, abate, remove or contain mold, lead, asbestos-containing materials, radon gas, or other hazardous substances or conditions found in or on our properties. We have implemented an on-going operations and maintenance plan that seeks to identify and remediate these conditions as appropriate.
We may, in the future, re-flag existing properties, acquire additional properties that operate under other brands and/or engage other third-party hotel managers and franchisors. Below is a general overview of our management and franchise agreements. 7 Management Agreements Our hotel managers control the day-to-day operations of our hotels that are subject to a management agreement.
We may, in the future, re-flag existing properties, acquire additional properties that operate under other brands and/or engage other third-party hotel managers and franchisors. Below is a general overview of our management and franchise agreements. Management Agreements Our hotel managers control the day-to-day operations of our hotels that are subject to a management agreement.
We continually evaluate our practices related to diversity, equity and inclusion through internal and external resources. For example, since 2021, we have included a gender and ethnic diversity analysis to our annual corporate compensation review, which continues to reflect no pay disparity based on any gender or ethnic group.
We continually evaluate our practices related to diversity, equity and inclusion through internal and external resources. For example, since 2021, we have included a gender and ethnic diversity analysis to our bi-annual corporate compensation review, which continues to reflect no pay disparity based on any gender or ethnic group.
The franchise agreements specify operational, record-keeping, accounting, reporting and marketing standards and procedures with which we must comply, and will promote consistency across the brand by outlining standards for guest services, products, signage and furniture, fixtures and equipment, among other 8 things.
The franchise agreements specify operational, record-keeping, accounting, reporting and marketing standards and procedures with which we must comply, and will promote consistency across the brand by outlining standards for guest services, products, signage and furniture, fixtures and equipment, among other things.
Term Our management agreements have initial terms ranging from 5 to 30 years and most allow for one or more renewal periods. Assuming all renewal periods are exercised by our hotel managers, the total term of our management agreements range between 5 and 70 years.
Term Our management agreements have initial terms ranging from 5 to 30 years and most allow for one or more renewal periods. Assuming all renewal periods are exercised by our hotel managers, the total term of our management agreements range from 5 to 70 years.
To qualify as a REIT, we must satisfy requirements related to, among other things, the real estate qualification of sources of our income, the real estate composition and values of our assets, the amounts we 12 distribute to our stockholders annually and the diversity of ownership of our stock.
To qualify as a REIT, we must satisfy requirements related to, among other things, the real estate qualification of sources of our income, the real estate composition and values of our assets, the amounts we distribute to our stockholders annually and the diversity of ownership of our stock.
Some of these entities may have substantially 11 greater financial resources than we do and may be able and willing to accept more risk than we believe we can prudently manage.
Some of these entities may have substantially greater financial resources than we do and may be able and willing to accept more risk than we believe we can prudently manage.
As a pure-play lodging real estate company with significant financial resources and an extensive portfolio of large, multi-use assets, including 8 hotels with 125,000 square feet of meeting space or more, we believe our ability to implement compelling return on investment initiatives represents a significant embedded growth opportunity.
As a pure-play lodging real estate company with significant financial resources and an extensive portfolio of large, multi-use assets, including 7 hotels with 125,000 square feet of meeting space or more, we believe our ability to implement compelling return on investment initiatives represents a significant embedded growth opportunity.
We have published our 2022 Annual Corporate Responsibility Report on our website, which discloses our environmental and social programs and performance, our risk management strategy and our governance and oversight practices. The report also includes our Task Force Report on Climate-Related Financial Disclosures ("TCFD") as well as our Sustainability Accounting Standards Board ("SASB") and Global Reporting Index ("GRI") indices.
We have published our 2023 Annual Corporate Responsibility Report on our website, which discloses our environmental and social programs and performance, our risk management strategy and our governance and oversight practices. The report also includes our Task Force Report on Climate-Related Financial Disclosures ("TCFD") as well as our Sustainability Accounting Standards Board ("SASB") and Global Reporting Index ("GRI") indices.
Hotel employee health and safety factors are designed into projects, which include alarm systems cameras, first aid 14 locations and personal alert devices.
Hotel employee health and safety factors are designed into projects, which include alarm systems cameras, first aid locations and personal alert devices.
The following charts summarize the gender and ethnic diversity of our workforce as of December 31, 2022: Our commitment to enhancing diversity, equity and inclusion is reflected both in the actions we take within our Company and our efforts in our larger community, such as through recruitment, employee development, mentorship, education, advocacy and community outreach.
The following charts summarize the gender and ethnic diversity of our workforce as of December 31, 2023: Our commitment to enhancing diversity, equity and inclusion is reflected both in the actions we take within our Company and our efforts in our larger community, such as through recruitment, employee development, mentorship, education, advocacy and community outreach.
We will continue to opportunistically seek to expand our presence in target markets and further diversify over time, including by acquiring hotels that are affiliated with leading hotel brands and operators. • Maintaining a Strong and Flexible Balance Sheet . We intend to maintain a strong and flexible balance sheet.
We will continue to opportunistically seek to expand our presence in target markets and further diversify over time, including by acquiring hotels that are affiliated with leading hotel brands and operators. • Maintaining a Strong and Flexible Balance Sheet .
We use and store hazardous and toxic substances, such as cleaning materials, pool chemicals, heating oil and fuel for back-up generators at some of our facilities, and we generate certain wastes in connection with our operations.
We use and store hazardous and toxic substances and petroleum products, such as cleaning materials, pool chemicals, heating oil and fuel for back-up generators at some of our facilities, and we generate certain wastes in connection with our operations.
Since our spin-off, we have sold or otherwise disposed of 39 hotels, most of them located in lower growth domestic and 5 international markets for a combined sales price of over $2 billion, which provided us with additional liquidity to de-leverage our balance sheet and to execute on a variety of strategic corporate initiatives.
Since our spin-off, we have sold or otherwise disposed of 42 hotels, most of them located in lower growth domestic and international markets for a combined sales price of over $2 billion, which provided us with additional liquidity to de-leverage our balance sheet and to execute on a variety of strategic corporate initiatives.
Item 1. Business Our Company We are the second largest publicly-traded lodging real estate investment trust (“REIT”) with a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value. On January 3, 2017, Hilton Parent completed the spin-off of a portfolio of hotels and resorts that established us as an independent, publicly traded company.
Item 1. Business Our Company We are one of the largest publicly-traded lodging real estate investment trusts (“REIT”) with a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value. On January 3, 2017, Hilton Parent completed the spin-off of a portfolio of hotels and resorts that established us as an independent, publicly traded company.
The committee is dedicated to enhancing our focus on activities that increase awareness and take actions in support of equality, and it seeks to 13 develop partnerships and adopt new initiatives that support systematic change related to racism and diversity.
This committee is dedicated to enhancing our focus on activities that increase awareness and take actions in support of equality, and it seeks to develop partnerships and adopt new initiatives that support systematic change related to racism and diversity.
Spin-Off Related Agreements On January 3, 2017, Hilton Parent completed the spin-off that resulted in our establishment as an independent, publicly traded company. Distribution Agreement We entered into a distribution agreement (“Distribution Agreement”) with Hilton Parent regarding the principal actions taken or to be taken in connection with the spin-off.
Spin-Off Related Agreements On January 3, 2017, Hilton Parent completed the spin-off that resulted in our establishment as an independent, publicly traded company. 9 Table of Contents Distribution Agreement We entered into a distribution agreement (“Distribution Agreement”) with Hilton Parent regarding the principal actions taken or to be taken in connection with the spin-off.
Each ESG initiative begins with analysis and work by one of the three working committees, each of which specializes in specific ESG matters.
Each ESG initiative begins with analysis and work by one of the three working subcommittees, each of which specializes in specific ESG matters.
We will focus on maintaining sufficient liquidity with minimal short-term maturities and intend to have a mix of debt that will provide us with the flexibility to prepay debt when desired, dispose of assets, pursue our value enhancement strategies within our existing portfolio, and support acquisition activity.
We expect to maintain sufficient liquidity with minimal short-term maturities and intend to have a mix of debt that will provide us with the flexibility to prepay debt when desired, dispose of assets, pursue our value enhancement strategies within our existing portfolio, and support acquisition activity.
Refer to “—Ground Leases,” Item 2: “Properties,” and Note 9: “Leases” in our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. (2) Four of our hotels are owned by unconsolidated joint ventures in which we hold an interest.
Refer to “—Ground Leases,” Item 2: “Properties,” and Note 9: "Leases" in our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. (2) Four of our hotels are owned by unconsolidated joint ventures in which we hold an interest. Refer to Item 2: “Properties” for the percentage ownership in such unconsolidated joint ventures.
Competition is often specific to the individual markets in which our hotels are located and includes competition from existing and new hotels operated under brands primarily in the upper upscale chain scale segments.
Competition is often 11 Table of Contents specific to the individual markets in which our hotels are located and includes competition from existing and new hotels operated under brands primarily in the upper upscale chain scale segments.
As of December 31, 2022, we had 91 employees. We believe relations are positive between us and our employees. Our hotel managers are generally responsible for hiring and maintaining the labor force at each of our hotels.
As of December 31, 2023, we had 90 employees. We believe relations are positive between us and our employees. Our hotel managers are generally responsible for hiring and maintaining the labor force at each of our hotels.
The committee has also spent significant time focusing on actions and commitments that impact Park internally such as recruitment and retention practices, policy and process updates, training and increased communication and awareness programs. All our employees are encouraged to take part in initiatives implemented by the Diversity & Inclusion Steering Committee. Additionally, our Chief Executive Officer, Thomas J.
The committee has also spent significant time focusing on actions and commitments that impact Park internally such as recruitment and retention practices, policy and process updates, training and increased communication and awareness programs. All our employees are encouraged to take part in initiatives implemented by the Diversity & Inclusion Steering Committee and the Park Cares Committee.
Baltimore, Jr. serves as one of the three co-chairs of NAREIT's Dividends Through Diversity, Equity & Inclusion CEO Council, which supports the recruitment, inclusion, development, and advancement of women, Black professionals, other people of color, ethnically diverse individuals, and members of other under-represented groups in REITs and the publicly traded real estate industry.
Additionally, our Chief Executive Officer, Thomas J. Baltimore, Jr. serves as one of the three co-chairs of NAREIT's Dividends Through Diversity, Equity & Inclusion CEO Council, which supports the recruitment, inclusion, development, and advancement of women, Black professionals, other people of color, ethnically diverse individuals, and members of other under-represented groups in REITs and the publicly traded real estate industry.
As a result, Park's Diversity & Inclusion Steering Committee works in concert with our Park Cares Committee to partner with local organizations that provide services and resources to underserved populations and those in need of social, economic, educational, mental and physical support in our community.
To accomplish this goal, Park's Diversity & Inclusion Steering Committee works in concert with our Park Cares Committee to partner with local organizations that provide services and resources to underserved populations and those in need of social, economic, educational, mental and physical support in our community.
These laws and regulations govern our operations including any associated air emissions; the use, storage and disposal of hazardous and toxic substances and petroleum projects; and wastewater disposal.
These laws 12 Table of Contents and regulations govern our operations including any associated air emissions; the use, storage and disposal of hazardous and toxic substances and petroleum products; and wastewater disposal.
As of February 23, 2023, our portfolio consists of 46 premium-branded hotels and resorts with over 29,000 rooms, located in prime United States (“U.S.”) markets with high barriers to entry. Approximately 88% of our rooms are luxury and upper upscale and all of our rooms are located in the U.S. and its territories.
As of February 28, 2024, our portfolio consists of 43 premium-branded hotels and resorts with over 26,000 rooms, located in prime United States (“U.S.”) markets with high barriers to entry. Approximately 86% of our rooms are luxury and upper upscale and all of our rooms are located in the U.S. and its territories.
To monitor our compliance, the franchise agreements specify that we must make the hotel available for quality inspections by the franchisor. Term Our franchise agreements contain an initial term of between 13 and 20 years and require the franchisor’s consent to be extended.
To monitor our compliance, the franchise agreements specify that we must make the hotel available for quality inspections by the franchisor. Term Our franchise agreements have initial terms ranging from 13 to 20 years and require the franchisor’s consent to be extended.
We have a skilled and highly diverse board of eight independent directors, two of whom are gender diverse. It is Park's policy to consider diversity in Board nominations. In addition, our executive team is comprised of six members, two of whom are gender diverse and three of whom are racially diverse.
We have a skilled and highly diverse board, including nine independent directors (the "Board"), three of whom are gender diverse. It is Park's policy to 13 Table of Contents consider diversity in Board nominations. In addition, our executive team is comprised of seven members, two of whom are gender diverse and three of whom are racially diverse.
The executive-level ESG committee provides oversight of Park's three dedicated ESG working committees – the Green Park Committee, the Park Cares Committee and the Diversity & Inclusion Steering Committee. Additionally, ESG performance targets were embedded into executive performance objectives and compensation.
Our executive-level Environmental, Social and Governance ("ESG") committee provides oversight of Park's three dedicated corporate responsibility working subcommittees – the Green Park Committee, the Park Cares Committee and the Diversity & Inclusion Steering Committee. Additionally, ESG performance targets were embedded into executive performance objectives and compensation.
The following table sets forth our portfolio by brand affiliations and chain scale segment: Brand Chain Scale Number of Properties Total Rooms Hilton Hotels & Resorts Upper Upscale 21 19,127 DoubleTree by Hilton Upscale 8 3,543 Signia by Hilton Upper Upscale 1 1,009 Embassy Suites by Hilton Upper Upscale 4 998 Hyatt Regency Upper Upscale 2 940 W Hotels Luxury 2 923 Curio - A Collection by Hilton Upper Midscale 3 685 Waldorf Astoria Hotels & Resorts Luxury 1 502 Marriott Upper Upscale 1 430 Marriott Tribute Portfolio Upper Upscale 1 393 JW Marriott Luxury 1 344 Hyatt Centric Upper Upscale 1 316 Total 46 29,210 Type of Property Interest The following table sets forth our properties according to the nature of our real estate interest: Types of Interest Number of Properties Total Rooms Fee Simple (1) 28 20,835 Ground Lease 14 5,719 42 26,554 Unconsolidated Joint Ventures (2) Fee Simple 3 2,262 Ground Lease 1 394 4 2,656 Total 46 29,210 (1) Includes certain properties that, while primarily owned fee simple, are subject to ground lease in respect of certain portions of land or facilities.
The following table sets forth our portfolio by brand affiliations and chain scale segment: Brand Chain Scale Number of Properties Total Rooms Hilton Hotels & Resorts Upper Upscale 19 16,192 DoubleTree by Hilton Upscale 8 3,543 Signia by Hilton Upper Upscale 1 1,009 Hyatt Regency Upper Upscale 2 940 W Hotels Luxury 2 923 Embassy Suites by Hilton Upper Upscale 3 816 Curio – A Collection by Hilton Upper Midscale 3 685 Waldorf Astoria Hotels & Resorts Luxury 1 502 Marriott Upper Upscale 1 430 Marriott Tribute Portfolio Upper Upscale 1 393 JW Marriott Luxury 1 344 Hyatt Centric Upper Upscale 1 316 Total 43 26,093 6 Table of Contents Type of Property Interest The following table sets forth our properties according to the nature of our real estate interest: Types of Interest Number of Properties Total Rooms Fee Simple (1) 26 17,890 Ground Lease 13 5,538 39 23,428 Unconsolidated Joint Ventures (2) Fee Simple 3 2,271 Ground Lease 1 394 4 2,665 Total 43 26,093 ____________________________________________________________________________________ (1) Includes certain properties that, while primarily owned in fee simple, are subject to ground lease in respect of certain portions of land or facilities.
Additionally, we have developed standardized procedures to be undertaken during and immediately following an extreme weather event or other emergency, including communication guidance, life safety and foreseen event preparedness instructions and guidance on how to manage environmental hazards, among other risk-related topics.
Additionally, we have developed standardized procedures to be undertaken during and immediately following an extreme weather event or other emergency, including communication guidance, life safety and foreseen event preparedness instructions and guidance on how to manage environmental hazards, among other risk-related topics. Community Engagement Our Park Cares Committee focuses on engagement with local communities and spearheads volunteer work.
In addition, as a current and former owner of property, we could be subject to investigation and remediation liabilities that could arise under local, state and federal environmental laws, as well as personal injury, property damage, fines or other claims by third parties associated with environmental compliance or the presence of contamination.
In addition, as a current and former owner or operator of property, we could be subject to investigation and remediation liabilities that could arise under local, state and federal environmental laws, as well as personal injury, property damage, fines or other claims by third parties associated with environmental compliance or the presence, release, disposal or impacts of hazardous or toxic substances or petroleum products arising at or from our current or former properties.
Refer to Item 2: “Properties” for the percentage ownership in such unconsolidated joint ventures. 6 Sustainability We incorporate sustainability into our investment and asset management strategies, with a focus on minimizing environmental impact. When we evaluate the acquisition of new properties, we assess both sustainability opportunities and climate change-related risks as part of our due diligence process.
Sustainability We incorporate sustainability into our investment and asset management strategies, with a focus on minimizing environmental impact. When we evaluate the acquisition of new properties, we assess both sustainability opportunities and climate change-related risks as part of our due diligence process.
We also seek to increase awareness and understanding through Company-wide trainings on diversity and inclusion, unconscious bias and other social issues, as well as an annual anti-bribery/anti-corruption training. We require a separate, mandatory training on diversity, equity, inclusion and unconscious bias for corporate employees, as well as training on social issues to include modern slavery/human trafficking awareness.
We also seek to increase awareness and understanding through mandatory Company-wide trainings on diversity and inclusion, unconscious bias and other social issues, as well as an annual anti-bribery/anti-corruption training and modern slavery/human trafficking awareness. All employees also participate in anti-harassment and compliance training at least once a year.
The Tax Matters Agreement specifies the portion, if any, of this tax liability for which we bear responsibility, and each party has agreed to indemnify the other against any amounts for which they are not responsible. The Tax Matters Agreement also provides special rules for allocating tax liabilities in the event that the spin-off is not tax-free.
The Tax Matters Agreement specifies the portion, if any, of this tax liability for which we bear responsibility, and each party has agreed to indemnify the other against any amounts for which they are not responsible.
For additional information on the above matters, please review our 2022 Annual Corporate Responsibility Report on our website. Corporate Information Our principal executive offices are currently located at 1775 Tysons Boulevard, 7th Floor, Tysons, Virginia 22102. Our telephone number is (571) 302-5757. Our website is located at www.pkhotelsandresorts.com .
Corporate Information Our principal executive offices are currently located at 1775 Tysons Boulevard, 7th Floor, Tysons, Virginia 22102. Our telephone number is (571) 302-5757. Our website is located at www.pkhotelsandresorts.com .
Termination Events Subject to certain qualifications, notice requirements and applicable cure periods, the management agreements generally are terminable by either party upon a material casualty or condemnation of the hotel or the occurrence of certain customary events of default, including, among others: the bankruptcy or insolvency of either party; the failure of either party to make a payment when due, and failure to cure such non-payment after late payment notice; or breach by either party of covenants or obligations under the management agreement.
We also pay certain service fees to our hotel managers and generally reimburse our hotel managers for salaries and wages of their employees at our hotels, as well as for certain other expenses incurred in connection with the operation of the hotel. 8 Table of Contents Termination Events Subject to certain qualifications, notice requirements and applicable cure periods, the management agreements generally are terminable by either party upon a material casualty or condemnation of the hotel or the occurrence of certain customary events of default, including, among others: the bankruptcy or insolvency of either party; the failure of either party to make a payment when due, and failure to cure such non-payment after late payment notice; or breach by either party of covenants or obligations under the management agreement.
We intend to leverage our scale, liquidity and transaction expertise to create value throughout all phases of the lodging cycle through opportunistic acquisitions and dispositions, which we believe will enable us to further diversify our portfolio. In September 2019, we completed the $2.5 billion acquisition of Chesapeake, which helped us to increase our scale and achieve greater diversification.
We intend to leverage our scale, liquidity and transaction expertise to create value throughout all phases of the lodging cycle through opportunistic 5 Table of Contents acquisitions and dispositions and/or corporate transactions, in addition to value-enhancing return on investment projects, which we believe will enable us to further diversify our portfolio.
We encourage our employees to participate in our employee engagement survey, which is administered by a third party, and undertake initiatives to improve areas identified in the survey. As a direct result of the survey, each department Executive Committee leader conducts feedback sessions with their respective teams, and Company-wide action plans are created and implemented by our Human Resources department.
As a direct result of the survey, each department Executive Committee leader conducts feedback sessions with their respective teams, and Company-wide action plans are created and implemented by our Human Resources department. In addition, each department also creates departmental action plans and implements them accordingly.
Our Green Park Sustainability Playbook outlines the Company’s sustainability expectations and processes for its brand and management partners on a variety of topics, including HVAC equipment, LED lighting and water efficiency. Park's Engineering Renovation Guidelines address opportunities for incorporating sustainable building attributes during renovations, such as the use of green materials and efficiency standards for HVAC systems, toilets and showers.
Park's Engineering Renovation Guidelines address opportunities for incorporating sustainable building attributes during renovations, such as the use of green materials and efficiency standards for HVAC systems, toilets and showers.
We also make our Code of Conduct, and any amendments or waivers thereto, for our directors, officers and employees available on our website on the Corporate Governance – Governance Documents page under the Investors section of our website.
We also make our Code of Conduct, and any amendments or waivers thereto, for our directors, officers and employees available on our website on the Corporate Governance – Governance Documents page under the Investors section of our website. 15 Table of Contents Availability of Reports The SEC maintains a website ( http://www.sec.gov ) that contains reports, proxy statements, information statements, and other information regarding issuers that file electronically with the SEC.
We have implemented sustainability checklists where appropriate, and efficiency projects related to end-of-life equipment replacements or upgrades are routinely conducted. With these projects, we are often able to notably decrease our environmental impact by replacing older equipment with more efficient options.
With these projects, we are often able to notably decrease our environmental impact by replacing older equipment with more efficient options.
Our senior management team has extensive experience managing capital structures over multiple lodging cycles and has extensive and long-standing relationships with numerous lending institutions and financial advisors to address our capital needs. Our Properties The following tables provide summary information regarding our portfolio as of February 23, 2023.
We expect to reduce our level of secured debt over time, which will provide additional balance sheet flexibility. Our senior management team has extensive experience managing capital structures over multiple lodging cycles and has extensive and long-standing relationships with numerous lending institutions and financial advisors to address our capital needs.
Brand Affiliations and Chain Scale We own and lease hotels and resorts primarily in the upper upscale chain scale segment.
Our Properties The following tables provide summary information regarding our portfolio as of February 28, 2024. Brand Affiliations and Chain Scale We own and lease hotels and resorts primarily in the upper upscale chain scale segment.
All employees also participate in anti-harassment and compliance training at least once a year. Additionally, we provide employees at corporate headquarters with leadership development programs, management development series programs, corporate technical “lunch and learn” trainings, REIT tax training, executive coaching and emotional intelligence training.
Additionally, we provide employees at corporate headquarters with leadership development programs, management development series programs, corporate technical “lunch and learn” trainings, REIT training, executive coaching and emotional intelligence training. Our leadership team encourages employees to continue education and professional certifications with time away from work and training budgets.
Additionally, in 2022, we were recognized by Newsweek as one of America's Most Responsible Companies for the third consecutive year, ranking in the top third of all selected companies, and we received the 2022 Nareit Leader in the Light Award for the hospitality sector, further highlighting our commitment to superior and sustained sustainability practices.
We also received the 2023 Nareit Leader in the Light Award for the hospitality sector for the second year in a row, further highlighting our commitment to superior and sustained sustainability practices.
In 2022, we supported 15 organizations and/or programs through charitable contributions, sponsorships and scholarships contributing a total of $303,000 in cash donations. The hotels within our portfolio are also extremely involved with their respective communities, raising money or donating supplies, food or services as well as contributing countless hours to many worthwhile causes.
The hotels within our portfolio are also extremely involved with their respective communities, raising money or donating supplies, food or services as well as contributing countless hours to many worthwhile causes. For additional information on the above matters, please review our 2023 Annual Corporate Responsibility Report on our website.
As we continued to progress toward recovery, we strategically reopened all previously suspended hotels as of May 2022. We continue to identify revenue-enhancement opportunities and drive cost efficiencies to maximize the operating performance, cash flow and value of each property.
We are focused on continually improving property-level operating performance and profitability of each of our hotels and resorts through our proactive asset management efforts. We continue to identify revenue-enhancement opportunities and drive cost efficiencies to maximize the operating performance, cash flow and value of each property.
We also began conducting intensive energy efficiency audits of our portfolio in order to generate a long-term strategy for increased efficiencies and decarbonization. Our pilot audit performed at one of our hotels in 2021 resulted in planned investments that are projected to reduce our GHG emissions by 15% in one year.
We continued to conduct intensive energy efficiency audits of our portfolio in order to generate a long-term strategy for increased efficiencies and decarbonization, completing the survey of 20 of our hotels since 2021, with a goal to audit our entire portfolio by no later than 2025.
In February 2023, we fully repaid the $50 million outstanding under our Revolver with net proceeds from the sale of the Hilton Miami Airport. We expect to reduce our level of secured debt over time, which will provide additional balance sheet flexibility.
In February 2023, we fully repaid the $50 million outstanding under our amended and restated revolving credit facility ("Revolver") with net proceeds from the sale of the Hilton Miami Airport, and in June 2023, we fully repaid the $75 million mortgage loan secured by the W Chicago – City Center, which was due in August 2023.
Community Engagement Our Park Cares Committee, a committee comprised of employees at our corporate headquarters, focuses on engagement with local communities and spearheads volunteer work. In 2022, Park Cares sponsored two community service initiatives where employees were invited to participate with in-kind donations or by volunteering their time, of which 85 of our employees participated.
In 2023, Park Cares sponsored three community service initiatives where employees were invited to participate with in-kind donations or by volunteering their time, of which 75 of our employees participated. In 2023, we supported 17 organizations and/or programs through charitable contributions, sponsorships and scholarships contributing a total of approximately $322,000 in cash donations.
Five of our properties were awarded the ENERGY STAR® Certification for Superior Energy Efficiency, including our largest hotel, the Hilton Hawaiian Village Waikiki Beach Resort, and 85% of our portfolio was Google Eco-certified via Hilton's LightStay program. Additionally, we have continued to invest in efficiency projects and implemented efficiency best practices for our capital projects.
Also, 83% of our portfolio was Google Eco-certified via Hilton's LightStay program. Additionally, we have continued to invest in efficiency projects and implemented efficiency best practices for our capital projects. We have implemented sustainability checklists where appropriate, and efficiency projects related to end-of-life equipment replacements or upgrades are routinely conducted.
To support employee development, we provide regular and consistent feedback to our corporate employees through our continuous feedback performance management model. Regular one-on-one feedback sessions are conducted to ensure feedback is current and to reinforce positive performance.
Regular one-on-one feedback sessions are conducted to ensure feedback is current and to reinforce positive performance. We encourage our employees to participate in our employee engagement survey, which is administered by a third party, and undertake initiatives to improve areas identified in the survey.
Our leadership team encourages employees to continue education and professional certifications with time away from work and training budgets. Our Corporate Strategy and Design & Construction departments also participate in sustainability training, including Nareit’s ESG JumpStart workshop and REITworks conference.
Our Corporate Strategy and Design & Construction departments also participate in sustainability training, including Nareit’s ESG JumpStart workshop and REITworks conference. 14 Table of Contents To support employee development, we provide regular and consistent feedback to our corporate employees through our continuous feedback performance management model.
Seventeen additional audits were performed with a goal to audit our entire portfolio no later than 2025. Our Principal Agreements In order for us to continue to qualify as a REIT, independent third parties must operate our hotels.
The results of these audits also provide a roadmap for budgeting efficiency-related capital expenditures for the current and future years. Our Principal Agreements In order for us to continue to qualify as a REIT, independent third parties must operate our hotels.
As part of our ongoing stakeholder engagement and transparency efforts, we participated in the 2022 Global Real Estate Sustainability Benchmark ("GRESB") assessment, ranking in the top 35% of all GRESB participant companies, and increased our score compared to our pre-pandemic 2020 results.
As part of our ongoing stakeholder engagement and transparency efforts, we participated in the 2023 Global Real Estate Sustainability Benchmark ("GRESB") assessment for the fourth consecutive year, receiving our highest score thus far, ranking in the top third of all publicly listed GRESB participant companies in the Americas and registering a three-point increase over 2022, continuing the Company's trend of enhancing its overall corporate responsibility program and making meaningful improvements toward decarbonization.
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We are focused on continually improving the operating performance and profitability of each of our hotels and resorts through our proactive asset management efforts. The novel strain of coronavirus and the disease it causes (“COVID-19”) presented ongoing challenges in 2022; however, we have witnessed widespread improvements across our portfolio throughout the year.
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Recently completed projects include the over $220 million of projects at our Bonnet Creek complex, including the meeting space expansion project and renovation of guestrooms, existing meeting space, lobbies, golf course and other recreational amenities, which was completed in January 2024, $80 million of renovations to all guestrooms, public spaces, and certain hotel infrastructure at the Casa Marina Key West, Curio Collection, which was substantially completed during 2023, and the $85 million of guestroom renovations at the Tapa Tower of the Hilton Hawaiian Village Waikiki Beach Resort, which was completed in December 2023.
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During 2020, we temporarily halted operations at a majority of our hotels located in challenged markets where hotel lodging demand remained muted; consolidated demand into fewer hotels in markets where we have multiple assets; reduced available rooms at hotels to help mitigate expenses; consolidated or eliminated managerial positions to reduce payroll; and reimagined the operating model such as through limiting food and beverage operations and adjusting housekeeping availability for both safety considerations and cost controls.
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We intend to maintain a strong and flexible balance sheet that will enable us to navigate the various seasons of the lodging cycle.
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In December 2022, we amended and restated our revolving credit facility ("Revolver"), which extended its maturity date to December 2026 and increased our aggregate commitments to $950 million, of which $50 million, together with cash on hand, was used to fully repay the remaining $78 million balance on our unsecured delayed draw term loan facility ("2019 Term Facility").
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Additionally, in June 2023, we ceased making debt service payments on the $725 million SF Mortgage Loan secured by the Hilton San Francisco Hotels, which was due November 2023, and in October 2023, the Hilton San Francisco Hotels were placed into receivership. We have no significant maturities until June 2025.
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Compared to 2021, our ranking declined slightly due to drastic fluctuations in utility consumption across our portfolio from properties reopening and being utilized to a greater capacity.
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Additionally, we were recognized by Newsweek as one of America's Most Trustworthy Companies for 2023 and recently, recognized as one of America's Most Responsible Companies in 2024, the fourth time Park has been included in the annual survey.
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As highlighted in our report, in 2022, we formalized and strengthened oversight over our environmental, social and governance ("ESG") activities by renaming two of our Board of Directors ("Board")-level committees to more accurately reflect how ESG is embedded in our governance practices and establishing an executive-level ESG committee to develop, implement and monitor Park's ESG initiatives and policies.
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Our Green Park Sustainability Playbook outlines the Company’s sustainability expectations and processes for its brand and 7 Table of Contents management partners on a variety of topics, including HVAC equipment, LED lighting and water efficiency.
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We also pay certain service fees to our hotel managers and generally reimburse our hotel managers for salaries and wages of their employees at our hotels, as well as for certain other expenses incurred in connection with the operation of the hotel.
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We were named an ENERGY STAR ® Partner of the Year in 2023 for Energy Management for our outstanding contributions in the transition to clean energy economy, and six of our properties earned the ENERGY STAR ® Certification for Superior Energy Performance, including our largest hotel, the Hilton Hawaiian Village Waikiki Beach Resort.
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In addition, each department also creates departmental action plans and implements them accordingly. Also, in 2022 we conducted two pulse surveys, in addition to our annual engagement survey, to ensure we are providing programs and initiatives that support our culture of communication and collaboration and ensure our employees feel valued and heard through our rewards and recognition programs.
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The Tax Matters Agreement also provides special rules for allocating tax 10 Table of Contents liabilities in the event that the spin-off is not tax-free.
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Availability of Reports The SEC maintains a website ( http://www.sec.gov ) that contains reports, proxy statements, information statements, and other information regarding issuers that file electronically with the SEC.
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The Tax Matters Agreement also provides for cross-indemnities with respect to tax matters that, except as otherwise provided in the Tax Matters Agreement, are principally designed to place financial responsibility for the tax-related obligations and liabilities of each business with the appropriate company.
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We may incur liability for investigation and remediation of such substances or products regardless of whether we knew of, or caused, the presence or release of such substances or products, and such liability may be joint and several.
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The presence of these substances or products, or the failure to promptly remediate them, may adversely affect our ability to sell or develop a property or to borrow using the property as collateral or result in restrictions on or interruptions of operations at our properties.
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Also, in 2023, we conducted two pulse surveys, in addition to our annual engagement survey targeted at creating a diverse and welcoming work environment for our employees and developing the leadership skills of our managers who support and empower our employees.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeCOVID-19 and its aftermath have disrupted and have had a significant adverse effect on, and may continue to adversely impact and disrupt, our business, financial performance and condition, operating results and cash flows. The effects of the pandemic on the hotel industry were unprecedented. Global demand for lodging was drastically reduced and occupancy levels reached historic lows in 2020.
Biggest changeAdditionally, the effects of the recent global pandemic on the hotel industry were unprecedented, and another pandemic in the future could have similar affects, including a drastic reduction in global demand for lodging and historically low occupancy levels. These challenges may adversely impact and disrupt, our business, financial performance and condition, operating results and cash flows.
In addition, public disclosure or loss of customer or proprietary information could result in damage to the hotel manager’s reputation, a loss of confidence among hotel guests, reputational harm for our hotels, potential litigation and increased regulatory oversight, including governmental investigations, enforcement actions, and regulatory fines, any of which may have a material adverse effect on our business, financial condition and results of operations.
In addition, public disclosure or loss of customer or proprietary information could result in damage to the hotel manager’s reputation, a loss of confidence among hotel guests, reputational harm for our hotels, potential litigation and increased regulatory oversight, including governmental investigations, enforcement actions, and regulatory fines, any of which may have a material adverse effect on our business, reputation, financial condition and results of operations.
Our amended and restated certificate of incorporation also contains other limitations, including the 27 Ownership Limitation, and prohibits any person from: (1) beneficially or constructively owning, as determined by applying certain attribution rules of the Code, our stock if that would result in us being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT; (2) beneficially or constructively owning shares of our stock that would cause any person, including Hilton Parent, to fail to qualify as our eligible independent contractor; (3) transferring stock if such transfer would result in our stock being owned by fewer than 100 persons; and (4) beneficially owning shares of our stock to the extent such ownership would result in our failing to qualify as a “domestically controlled qualified investment entity” within the meaning of Section 897(h) of the Code.
Our amended and restated certificate of incorporation also contains other limitations, including the Ownership Limitation, and prohibits any person from: (1) beneficially or constructively owning, as determined by applying certain attribution rules of the Code, our stock if that would result in us being “closely held” under Section 856(h) of the Code or otherwise cause us to fail to qualify as a REIT; (2) beneficially or constructively owning shares of our stock that would cause any person, including Hilton Parent, to fail to qualify as our eligible independent contractor; (3) transferring stock if such transfer would result in our stock being owned by fewer than 100 persons; and (4) beneficially owning shares of our stock to the extent such ownership would result in our failing to qualify as a “domestically controlled qualified investment entity” within the meaning of Section 897(h) of the Code.
Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers, and we cannot predict whether we will be able to sell any hotel we desire to for the price or on the terms set by us or acceptable to us, or the length of time needed to find a willing buyer and to 16 close the sale of the hotel.
Our ability to dispose of properties on advantageous terms depends on factors beyond our control, including competition from other sellers and the availability of attractive financing for potential buyers, and we cannot predict whether we will be able to sell any hotel we desire to for the price or on the terms set by us or acceptable to us, or the length of time needed to find a willing buyer and to close the sale of the hotel.
Although we do not expect to be liable for any obligations that are not allocated to us under the Distribution Agreement, a court could disregard the allocation agreed to between the parties and require that we assume 24 responsibility for obligations allocated to Hilton Parent or HGV (for example, tax and/or environmental liabilities), particularly if Hilton Parent or HGV Parent were to refuse or were unable to pay or perform the allocated obligations.
Although we do not expect to be liable for any obligations that are not allocated to us under the Distribution Agreement, a court could disregard the allocation agreed to between the parties and require that we assume responsibility for obligations allocated to Hilton Parent or HGV (for example, tax and/or environmental liabilities), particularly if Hilton Parent or HGV Parent were to refuse or were unable to pay or perform the allocated obligations.
We could be materially and adversely affected if any third-party hotel manager fails to provide quality services and amenities, fails to maintain a quality brand name or otherwise fails to manage our hotels in our best interest, and could be held financially responsible for the actions and inactions of our third-party hotel managers pursuant 17 to our management agreements.
We could be materially and adversely affected if any third-party hotel manager fails to provide quality services and amenities, fails to maintain a quality brand name or otherwise fails to manage our hotels in our best interest, and could be held financially responsible for the actions and inactions of our third-party hotel managers pursuant to our management agreements.
If any of our hotels are foreclosed on due to a default, our ability to pay cash distributions to our stockholders will be limited. 23 We may be able to incur substantially more debt and enter into other transactions, which could further exacerbate the risks to our financial condition described above.
If any of our hotels are foreclosed on due to a default, our ability to pay cash distributions to our stockholders will be limited. We may be able to incur substantially more debt and enter into other transactions, which could further exacerbate the risks to our financial condition described above.
If our leases are not respected as true leases for U.S. federal income tax purposes, we will fail to qualify as a REIT. 26 If any third-party hotel managers do not qualify as “eligible independent contractors” or if our hotels are not “qualified lodging facilities,” we will fail to qualify as a REIT.
If our leases are not respected as true leases for U.S. federal income tax purposes, we will fail to qualify as a REIT. If any third-party hotel managers do not qualify as “eligible independent contractors” or if our hotels are not “qualified lodging facilities,” we will fail to qualify as a REIT.
Our outstanding debt and other contractual obligations could have important consequences, including requiring a substantial portion of cash flow from operations to be dedicated to debt service payments, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures, distributions to stockholders and to pursue future business opportunities and limiting our flexibility in planning for, or reacting to, changes in our business or market conditions, increasing our vulnerability to adverse economic, industry or competitive developments and placing us at a competitive disadvantage compared to our competitors who may be better positioned to take advantage of opportunities that our leverage prevents us from exploiting.
Our outstanding debt and other contractual obligations could have important consequences, including requiring a substantial portion of cash flow from operations to be dedicated to debt service payments, thereby reducing our ability to use our cash flow to fund our operations, capital expenditures, distributions to stockholders and to pursue future business 23 Table of Contents opportunities and limiting our flexibility in planning for, or reacting to, changes in our business or market conditions, increasing our vulnerability to adverse economic, industry or competitive developments and placing us at a competitive disadvantage compared to our competitors who may be better positioned to take advantage of opportunities that our leverage prevents us from exploiting.
Additional factors that would negatively impact our ability to successfully operate during or following another pandemic, or that could otherwise significantly adversely impact and disrupt our business, financial performance and condition, operating results and cash flows, include: • sustained negative consumer or business sentiment, economic metrics (including inflation, unemployment levels, discretionary spending and declines in personal wealth) or demand for travel, which could further adversely impact demand for lodging; • limited opportunities to acquire new properties or the need to dispose of properties to meet liquidity needs; • the scaling back or delay of a significant amount of planned capital expenditures, including planned renovation projects, which could adversely affect the value of our properties and guest experience at our properties; • our ability to obtain bank lending or access the capital markets could deteriorate, or declines in our business performance or the general economy; • our increased indebtedness, including increases in interest rates as a response to increased inflation, and decreased operating revenues, which could increase our risk of default on our loans; • we may require additional indebtedness, which may contain even more restrictive covenants than our existing indebtedness or may require incremental collateral; • our dependence on our hotel managers, who may be facing similar challenges; • disruptions as a result of corporate employees working remotely, including risk of cybersecurity incidents and disruptions to internal control procedures; and • benefits of government action to provide financial support to affected industries, including the travel and hospitality industry, may not be available to us or our operators.
Other factors that would negatively impact our ability to successfully operate during or following another pandemic, or that could otherwise significantly adversely impact and disrupt our business, financial performance and condition, operating results and cash flows, include: • sustained negative consumer or business sentiment, economic metrics (including inflation, unemployment levels, discretionary spending and declines in personal wealth) or demand for travel, which could further adversely impact demand for lodging; • limited opportunities to acquire new properties or the need to dispose of properties to meet liquidity needs; • the scaling back or delay of a significant amount of planned capital expenditures, including planned renovation projects, which could adversely affect the value of our properties and guest experience at our properties; • our ability to obtain bank lending or access the capital markets could deteriorate; • declines in our business performance or the general economy; • new indebtedness that may contain more restrictive covenants, including as a result of sustained elevated interest rates as a response to increased inflation, than our existing indebtedness or may require new or incremental collateral, and decreased operating revenues, which could increase our risk of default on our loans; • our dependence on our hotel managers, who may be facing similar challenges; • disruptions as a result of corporate employees working remotely, including risk of cybersecurity incidents and disruptions to internal control procedures; and • benefits of government action to provide financial support to affected industries, including the travel and hospitality industry, may not be available to us or our operators.
These information networks and systems can be vulnerable to threats such as system, network or internet failures; computer hacking or business disruption, including through network- and email-based attacks as well as social engineering; cyber-terrorism; cyber extortion; viruses, worms or other malicious software programs; and employee error, negligence or fraud.
These information networks and systems can be vulnerable to threats such as system, network or internet failures; computer hacking or business disruption, including through network- and email-based attacks as well as social engineering; cyber-terrorism; cyber extortion; viruses, worms or other malicious software programs; software vulnerabilities and misconfigurations; and employee error, negligence or fraud.
Such claims and the need to investigate, remediate or otherwise address hazardous, toxic or unsafe conditions could adversely affect our operations, the value of any affected real property, or our ability to sell, lease or assign our rights in any such property, or could otherwise harm our business or reputation.
Such claims and the presence of, or need to investigate, remediate or otherwise address hazardous, toxic or unsafe conditions could adversely affect our operations, the value of any affected real property, or our ability to develop, sell, lease or assign our rights in any such property, or could otherwise harm our business or reputation.
As a result of the IRS’s ruling policy at the time of Hilton Parent’s submission, with respect to transactions under Section 355 of the Code, the IRS Ruling is limited to specified aspects of the spin-off under Section 355 of the Code and does not represent a determination by the IRS that all of the requirements necessary to obtain tax-free treatment to holders of Hilton Parent’s common stock and to Hilton have been satisfied.
As a result of the IRS’s ruling policy at the time of Hilton Parent’s submission, with respect to transactions under 24 Table of Contents Section 355 of the Code, the IRS Ruling is limited to specified aspects of the spin-off under Section 355 of the Code and does not represent a determination by the IRS that all of the requirements necessary to obtain tax-free treatment to holders of Hilton Parent’s common stock and to Hilton have been satisfied.
Any of the foregoing indemnification obligations or shared contingent liabilities could negatively affect our business, financial condition, results of operations and cash flows. See “Spin-off Related Agreements—Distribution Agreement” and “—Tax Matters Agreement.” In connection with the spin-offs, Hilton and HGV indemnified us for certain liabilities.
Any of the foregoing indemnification obligations or shared contingent liabilities could negatively affect our business, financial condition, results of operations and cash flows. See “Spin-off Related Agreements—Distribution Agreement” and “—Tax Matters Agreement.” 25 Table of Contents In connection with the spin-offs, Hilton and HGV indemnified us for certain liabilities.
We may be required to expend significant attention and financial resources to protect these technologies and systems against physical or cybersecurity incidents and even then, our security measures may subsequently be deemed to have been inadequate by regulators or courts given the lack of prescriptive measures in data security and cybersecurity laws.
We may be required to expend significant attention 18 Table of Contents and financial resources to protect these technologies and systems against physical or cybersecurity incidents and even then, our security measures may subsequently be deemed to have been inadequate by regulators or courts given the lack of prescriptive measures in data security and cybersecurity laws.
To the extent we cannot meet our future debt service obligations, we will also risk losing to foreclosure some or all of our hotels that may be pledged to secure our obligation.
To the extent we cannot or do not meet our future debt service obligations, we will also risk losing to foreclosure some or all of our hotels that may be pledged to secure our obligation.
Any delay or failure on our part to identify, negotiate, finance on favorable terms, consummate and integrate such acquisitions could materially increase our costs or impede our growth. We may continue to seek to sell certain hotels as we seek to pursue growth and diversification through prudent capital allocation.
Any delay or failure on our part to identify, negotiate, finance on favorable terms, consummate and integrate such acquisitions could materially increase our costs or impede our growth. We may continue to seek to sell or otherwise dispose of certain hotels as we seek to pursue growth and diversification through prudent capital allocation.
The risk of a security breach or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, nation-state affiliated actors and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. We rely on our hotel managers to protect proprietary and customer information from these threats.
The risk of a cybersecurity incident or disruption, particularly through cyber-attack or cyber intrusion, including by computer hackers, nation-state affiliated actors and cyber terrorists, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from around the world have increased. We rely on our hotel managers to protect proprietary and customer information from these threats.
If we fail to qualify as a REIT in any tax year, then: • we would be taxed as a C corporation, which under current laws, among other things, means being unable to deduct dividends paid to stockholders in computing taxable income and being subject to U.S. federal income tax on our taxable income at corporate income tax rates; • any resulting tax liability could be substantial and could have a material adverse effect on our value and financial condition; • unless we were entitled to relief under applicable statutory provisions, we would be required to pay income taxes, and thus, our cash available for distribution to stockholders would be reduced for each of the years during which we did not qualify as a REIT; and • we generally would not be eligible to requalify as a REIT for the subsequent four taxable years.
If we, or any of our subsidiary entities qualifying as REITS, fail to qualify as a REIT in any tax year, then: • we, or such subsidiary entity, would be taxed as a C corporation, which under current laws, among other things, means being unable to deduct dividends paid to stockholders in computing taxable income and being subject to U.S. federal income tax on our taxable income at corporate income tax rates; • any resulting tax liability could be substantial and could have a material adverse effect on our value and financial condition; • unless we, or such subsidiary entity, were entitled to relief under applicable statutory provisions, we, or such subsidiary entity, would be required to pay income taxes, and thus, our cash available for distribution to stockholders would be reduced for each of the years during which we, or such subsidiary entity, did not qualify as a REIT; and • we, or such subsidiary entity, generally would not be eligible to requalify as a REIT for the subsequent four taxable years.
Moreover, we may agree to guarantee indebtedness incurred by a joint venture or co-venturer or provide standard indemnifications to lenders for loss liability or damage occurring as a result of our actions or actions of the joint venture or other co-venturers.
Moreover, we may agree to guarantee indebtedness incurred by a joint venture or co-venturer or provide standard 20 Table of Contents indemnifications to lenders for loss liability or damage occurring as a result of our actions or actions of the joint venture or other co-venturers.
Item 1A. R isk Factors. Owning our common stock involves a number of significant risks. You should consider carefully the following risk factors.
Item 1A. Risk Factors. Owning our common stock involves a number of significant risks. You should consider carefully the following risk factors.
We cannot assure you that we will be able to comply with our financial or other covenants and, if we fail to do so, we may not be able to obtain waivers from the lenders and/or amend the covenants.
We cannot assure you that we will be able to comply with our financial or other covenants and, if we fail to do so, we may not be able to obtain waivers from the lenders or noteholders, as applicable, and/or amend the covenants.
If our properties are not updated to meet guest preferences or brand standards under our management and franchise agreements, if properties under development or renovation are delayed in opening as scheduled, or if renovation investments adversely affect or fail to improve performance, our operations and financial results could be negatively affected.
If our properties are not 19 Table of Contents updated to meet guest preferences or brand standards under our management and franchise agreements, if properties under development or renovation are delayed in opening as scheduled, or if renovation investments adversely affect or fail to improve performance, our operations and financial results could be negatively affected.
An economic downturn, an increase in hotel supply, a force majeure event, a natural disaster, changing weather patterns and other physical effects of climate change (including supply chain disruptions), a terrorist attack or similar event in any one of these markets likely would cause a decline in the hotel market and adversely affect occupancy rates, the financial performance of our hotels in these markets and our overall results of operations, which could be material, and could significantly increase our costs.
An economic downturn, an increase in hotel supply, a change in guest preferences for certain geographic locations or markets, a force majeure event, a natural disaster, changing weather patterns and other physical effects of climate change (including supply chain disruptions), a terrorist attack or similar event in any one of these markets likely would cause a decline in the hotel market and adversely affect occupancy rates, the financial performance of our hotels in these markets and our overall results of operations, which could be material, and could significantly increase our costs.
We cannot predict the outcome of any arbitration or litigation related to such agreements, the effect of any negative judgment against us or the amount of any settlement that we may enter into with any third-party.
We cannot predict the outcome of any arbitration or litigation related to such agreements, the effect of any negative judgment 17 Table of Contents against us or the amount of any settlement that we may enter into with any third-party.
From time to time, we may be required to remediate such substances or remove, abate or manage asbestos, mold, radon gas, lead or other hazardous conditions at our properties.
From time to time, we may be required to remediate such substances or remove, abate or manage asbestos, mold, radon gas, lead, underground storage tanks, or other hazardous substances or conditions at our properties.
We also face significant competition for attractive investment opportunities, which may impact our ability acquire certain hotels or portfolios that we deem attractive at a favorable price, pursuant to acceptable terms, or at all.
We also face significant competition for 16 Table of Contents attractive investment opportunities, which may impact our ability acquire certain hotels or portfolios that we deem attractive at a favorable price, pursuant to acceptable terms, or at all.
Heightened focus on corporate responsibility, specifically related to environmental, social and governance (“ESG”) factors, may constrain our business operations, impose additional costs and expose us to new risks that could adversely impact our results of operations, financial condition and the price of our securities. We are committed to sustainability and corporate responsibility, specifically related to ESG factors.
Heightened focus on corporate responsibility, specifically related to ESG factors, may constrain our business operations, impose additional costs and expose us to new risks that could adversely impact our results of operations, financial condition and the price of our securities. We are committed to corporate responsibility, specifically related to ESG factors.
Environmental laws may also impose potential liability on a current or former owner or operator of real property for, among other things, investigation, removal or remediation of hazardous or toxic substances at our currently or formerly owned or leased real property, regardless of whether or not we knew of, or caused, the presence or release of such substances.
Environmental laws may also impose potential liability on a current or former owner or operator of real property for, among other things, investigation, removal or remediation of hazardous or toxic substances or petroleum products at our currently or formerly owned or leased real property, regardless of whether or not we knew of, or caused, the presence or release of such substances, and such liability may be joint and several.
These stock ownership limits, including the Ownership Limitation, might delay or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders. 28 Item 1B. Unresolve d Staff Comments. None.
These stock ownership limits, including the Ownership Limitation, might delay or prevent a transaction or a change in our control that might involve a premium price for our common stock or otherwise be in the best interests of our stockholders. Item 1B. Unresolved Staff Comments. None. 28 Table of Contents
The lodging industry is highly competitive. Our principal competitors are other owners and investors in upper upscale, full-service hotels, including other lodging REITs, as well as major hospitality chains with well-established and recognized brands. Our hotels face competition for individual guests, group reservations and conference business.
Risks Related to Our Industry We operate in a highly competitive industry. The lodging industry is highly competitive. Our principal competitors are other owners and investors in upper upscale, full-service hotels, including other lodging REITs, as well as major hospitality chains with well-established and recognized brands. Our hotels face competition for individual guests, group reservations and conference business.
New or revised laws and regulations or new interpretations of existing laws and regulations, such as those related to climate change, could affect the operation of our properties or result in significant additional expense and operating restrictions on us or our hotel managers.
New or revised laws and regulations or new interpretations of existing laws and regulations, such as those related to climate change, could affect the operation of our properties or result in significant additional expense and operating restrictions on us or our hotel managers or adversely affect our ability to sell properties or to use properties as collateral.
Our failure to comply with any such laws, including any required permits or licenses, or publicity resulting from actual or alleged compliance failures, could result in substantial fines or possible revocation of our authority to conduct some of our operations or otherwise have an adverse effect on our business.
The cost to comply with environmental laws may be substantial, and our failure to comply with any such laws, including any required permits or licenses, or publicity resulting from actual or alleged compliance failures, could result in substantial fines or possible revocation of our authority to conduct some of our operations or otherwise have an adverse effect on our business.
Furthermore, the credit agreements that govern our senior unsecured credit facility and senior notes contain certain affirmative covenants that require us to be in compliance with certain leverage, liquidity and other financial ratios, and the mortgage-backed loans of our subsidiaries also require them to maintain certain debt service coverage ratios and minimum net worth requirements.
Furthermore, the credit agreement that governs our senior unsecured credit facility and indentures that govern our senior notes contain certain affirmative covenants that require us to be in compliance with certain leverage, liquidity and other financial ratios, and the loan documents governing the mortgage-backed loans of our subsidiaries also require them to maintain certain debt service coverage ratios and minimum net worth requirements.
The presence or release of such toxic or hazardous substances at our currently or formerly owned or leased properties could result in limitations on or interruptions to our operations or in third-party claims for personal injury, property or natural resource damages, business interruption or other losses, including liens in favor of the government for costs the government incurs in cleaning 22 up contamination.
The presence or release of such toxic or hazardous substances or petroleum products at or from our currently or formerly owned or leased properties could result in substantial investigation and remediation costs, limitations on or interruptions to our operations or in third-party claims for personal injury, property or natural resource damages, business interruption or other losses, including liens in favor of the government for costs the government incurs in cleaning up contamination.
Furthermore, should peer companies outperform us in such metrics, potential or current investors may elect to invest with our competitors and employees, vendors and business partners may choose not to do business with us, or potential guests may choose to stay at competitor hotels, which could have an adverse impact on us or the price of our securities. 21 Risks Related to Our Industry We operate in a highly competitive industry.
Furthermore, should peer companies outperform us in such metrics, potential or current investors may elect to invest with our competitors and employees, vendors and business partners may choose not to do business with us, or potential guests may choose to stay at competitor hotels, which could have an adverse impact on us or the price of our securities.
Unless we purchase a fee interest in the land and improvements at our properties subject to our ground leases or extend the terms of these leases before their expiration, we will lose our right to operate these properties and we will not have any economic interest in the land or improvements at the expiration of our ground leases; therefore, we generally will not share in any increase in value of the land or improvements beyond the term of a ground lease, notwithstanding our capital outlay to purchase our interest in the hotel or fund improvements thereon, and will lose our right to use the hotel.
Unless we purchase a fee interest in the land and improvements at our properties subject to our ground leases or extend the terms of these leases before their expiration, we will lose our right to operate these properties and we will not have any economic interest in the land or improvements at the expiration of our ground leases; therefore, we generally will not share in any increase in value of the land or improvements beyond the term of a ground lease, notwithstanding our capital outlay to purchase our interest in the hotel or fund improvements thereon, and will lose our right to use the hotel. 21 Table of Contents We can provide no assurances that we will be able to renew any ground lease upon its expiration at all or on favorable terms.
The hotel industry is subject to extensive U.S. federal, state and local governmental regulations, including those relating to the service of alcoholic beverages, the preparation and sale of food, building and zoning requirements and data protection, cybersecurity and privacy.
Governmental regulation may adversely affect the operation of our properties and our Company as a whole. The hotel industry is subject to extensive U.S. federal, state and local governmental regulations, including those relating to the service of alcoholic beverages, the preparation and sale of food, building and zoning requirements and data protection, cybersecurity and privacy.
As of December 31, 2022, hotels in Florida, San Francisco, Hawaii, Chicago, New York City, New Orleans and Boston represented approximately 66% of our room count, with our hotels in Florida, San Francisco and Hawaii alone each representing greater than 12% of our room count and 48% of our total revenue in 2022.
As of December 31, 2023, hotels in Florida, Hawaii, Chicago, New York City, New Orleans and Boston represented approximately 60% of our room count, with our hotels in Florida and Hawaii alone each representing greater than 13% of our room count and 37% of our total revenue in 2023.
Our ability to access external capital could be hampered by a number of factors, including, but not limited to, macroeconomic changes, changes in market perceptions of our growth potential, fluctuations in the market price of our common stock, and changes in the terms of our indebtedness, any of which may be outside of our control, and which, individually or in combination, could prevent us from being able to obtain the external capital we require on terms that are acceptable to us, or at all, which could have a material adverse effect on our ability to finance our future growth, our cost of capital, our liquidity and our financial condition and results of operations. 20 We are subject to risks associated with the employment of hotel personnel, particularly with hotels that employ unionized labor, which could increase our operating costs, reduce the flexibility of our hotel managers to adjust the size of the workforce at our hotels and could materially and adversely affect our revenues and profitability.
Our ability to access external capital could be hampered by a number of factors, including, but not limited to, macroeconomic changes, changes in market perceptions of our growth potential, fluctuations in the market price of our common stock, and changes in the terms of our indebtedness, any of which may be outside of our control, and which, individually or in combination, could prevent us from being able to obtain the external capital we require on terms that are acceptable to us, or at all, which could have a material adverse effect on our ability to finance our future growth, our cost of capital, our liquidity and our financial condition and results of operations.
If any of the foregoing were to occur, it could materially and adversely affect us. Cyber threats and the risk of data breaches or disruptions of our hotel managers’ or our own information technology systems could materially adversely affect our business.
If any of the foregoing were to occur, it could materially and adversely affect us. Cyber threats and the risk of cybersecurity incidents affecting our hotel managers' or our own information technology and systems, including third-party service providers, could materially adversely affect our business.
Some of these entities may have substantially greater financial resources than we do and may be able and willing to accept more risk than we believe we can prudently manage, which may reduce the number of suitable investment opportunities available to us or increase pricing.
Some of these entities may have substantially greater financial resources than we do and may be able and willing to accept more risk than we believe we can prudently manage, which may reduce the number of suitable investment opportunities available to us or increase pricing of assets. 22 Table of Contents The lodging industry is subject to seasonal volatility, which is expected to contribute to fluctuations in our financial condition and results of operations.
Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as adequate for our operations. 18 In addition, increased regulation of data collection, use and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm the Company.
In addition, increased regulation of data collection, use and retention practices, including self-regulation and industry standards, changes in existing laws and regulations, enactment of new laws and regulations, increased enforcement activity, and changes in interpretation of laws, could increase our cost of compliance and operation, limit our ability to grow our business or otherwise harm the Company.
The effects of climate change may also affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable in areas most vulnerable to such events.
The effects of climate change may also affect our business by increasing the cost of (or making unavailable) property insurance on terms we find acceptable in areas most vulnerable to such events. There can be no assurance that climate change will not have a material adverse effect on our hotels, operations or business.
In addition, we may give full or partial guarantees to lenders of mortgage debt on behalf of the entities that own our hotels. When we give a guarantee on behalf of an entity that owns one of our hotels, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity.
When we give a recourse guarantee on behalf of an entity that owns one of our hotels, we will be responsible to the lender for satisfaction of the debt if it is not paid by such entity or if certain loan provisions are violated.
Although we were able to recommence operations at all previously suspended hotels as of May 2022, there can be no assurances that we will not experience further fluctuations in hotel revenues or earnings at our hotels due to the uncertainty of COVID-19 and other macroeconomic factors, such as inflation, increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts.
There can also be no assurances that we will not experience future fluctuations in hotel revenues or earnings at our hotels due to macroeconomic factors, such as inflation, increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts.
If we do not have other funds available in these situations, we may be unable to distribute substantially all of our taxable income as required by the REIT provisions of the Code. In addition, we may be subject to limitations on the ability to use our net operating loss carryovers to offset taxable income that we do not distribute.
If we do not have other funds available in these situations, we may be unable to distribute substantially all of 26 Table of Contents our taxable income as required by the REIT provisions of the Code.
Our labor or other costs may also rise due to inflation, and there can be no assurance that we will be able to pass cost increases on to travelers through higher rates.
Inflation can affect consumer sentiment and decrease demand for travel, which can cause fluctuations in hotel revenues or earnings at our hotels. Our labor or other costs may also rise due to inflation, and there can be no assurance that we will be able to pass cost increases on to travelers through higher rates.
See “Forward-Looking Statements.” Risks Related to Our Business Continued economic disruptions, including from the COVID-19 pandemic and the impact from inflation, has significantly adversely impacted and disrupted, and may continue to adversely impact and disrupt, our business, financial performance and condition, operating results and cash flows.
See “Forward-Looking Statements.” Risks Related to Our Business Economic disruptions, including the impact from inflation or a future pandemic, may adversely impact and disrupt, our business, financial performance and condition, operating results and cash flows. Economic disruptions, including as a result of supply chain disruptions and increased inflation, may adversely impact our business.
Notwithstanding the availability of cure provisions in the Code, we could fail to meet various compliance requirements, which could jeopardize our REIT status. Furthermore, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT.
Furthermore, new tax legislation, administrative guidance or court decisions, in each instance potentially with retroactive effect, could make it more difficult or impossible for us to qualify as a REIT.
Although the incidents that we have experienced to date have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future. While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses.
Although the cybersecurity incidents that we and our third-party partners have experienced to date have not had a material effect on our business, financial condition or results of operations, such incidents could have a material adverse effect on us in the future.
The 100% tax may apply, for example, to the extent that we were found to have charged our TRS lessees rent in excess of an arm’s-length rent.
The Code imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis. The 100% tax may apply, for example, to the extent that we were found to have charged our TRS lessees rent in excess of an arm’s-length rent.
Our transactions with our TRSs may cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms. The Code imposes a 100% excise tax on certain transactions between a TRS and its parent REIT that are not conducted on an arm’s-length basis.
These options could increase our costs or reduce our equity. Our transactions with our TRSs may cause us to be subject to a 100% penalty tax on certain income or deductions if those transactions are not conducted on arm’s-length terms.
We believe that the properties that are leased to our TRS lessees are qualified lodging facilities. Although we intend to monitor future acquisitions and improvements of properties, REIT provisions of the Code provide no or only limited guidance for making determinations under the requirements for qualified lodging facilities, and there can be no assurance that these requirements will be satisfied.
Although we intend to monitor future acquisitions and improvements of properties, REIT provisions of the Code provide no or only limited guidance for making determinations under the requirements for qualified lodging facilities, and there can be no assurance that these requirements will be satisfied. 27 Table of Contents Risks Related to Ownership of Our Common Stock Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that stockholders might consider favorable.
The lodging industry is subject to seasonal volatility, which is expected to contribute to fluctuations in our financial condition and results of operations. The lodging industry is typically seasonal in nature. The periods during which our properties experience higher revenues vary from property to property, depending principally upon location and the customer base served.
The lodging industry is typically seasonal in nature. The periods during which our properties experience higher revenues vary from property to property, depending principally upon location and the customer base served. This seasonality can be expected to cause periodic fluctuations in a hotel’s rooms revenues, occupancy levels, room rates and operating expenses.
For tax purposes, a foreclosure of any of our hotels would be treated as a sale of the hotel for a purchase price equal to the outstanding balance of the debt secured by the mortgage.
See Note 7: "Debt" in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for further details. For tax purposes, a foreclosure of any of our hotels would be treated as a sale of the hotel for a purchase price equal to the outstanding balance of the debt secured by the mortgage.
Market forces beyond our control could limit the scope of the insurance coverage that we can obtain or may otherwise restrict our ability to buy insurance coverage at reasonable rates.
There are also other risks that may fall outside the general coverage terms and limits of our policies, including losses related to cybersecurity incidents, natural disaster or climate change. Market forces beyond our control could limit the scope of the insurance coverage that we can obtain or may otherwise restrict our ability to buy insurance coverage at reasonable rates.
We can provide no assurances that we will be able to renew any ground lease upon its expiration at all or on favorable terms. In addition, if we are found to be in breach of certain of our third-party ground leases, we could lose the right to use the applicable hotel.
In addition, if we are found to be in breach of certain of our third-party ground leases, we could lose the right to use the applicable hotel.
Thus, we could be required to borrow funds, raise additional equity capital, sell a portion of our assets at disadvantageous prices, issue securities or find another alternative to make distributions to stockholders. These options could increase our costs or reduce our equity.
In addition, we may be subject to limitations on the ability to use our net operating loss carryovers to offset taxable income that we do not distribute. Thus, we could be required to borrow funds, raise additional equity capital, sell a portion of our assets at disadvantageous prices, issue securities or find another alternative to make distributions to stockholders.
There can be no assurance that climate change will not have a material adverse effect on our hotels, operations or business. 19 If the insurance that we carry does not sufficiently cover damage or other potential losses or liabilities involving our properties, including as a result of terrorism and climate change, our profits could be reduced.
If the insurance that we carry does not sufficiently cover damage or other potential losses or liabilities involving our properties, including as a result of terrorism and climate change, our profits could be reduced. Because certain types of losses are uncertain, including natural disaster, the effects of climate change or other catastrophic losses, they may be uninsurable or prohibitively expensive.
Park’s REIT status is also dependent upon the ongoing qualification of subsidiary entities qualifying as REITs or TRSs, as applicable, as a result of its substantial ownership interest in those entities. We may face other tax liabilities that reduce our cash flows.
Notwithstanding the availability of cure provisions in the Code, we could fail to meet various compliance requirements, which could jeopardize our REIT status. Our REIT status is also dependent upon the ongoing and historic qualification of subsidiary entities qualifying as REITs or TRSs, as applicable, as a result of its substantial ownership interest in those entities.
Risks Related to Ownership of Our Common Stock Anti-takeover provisions in our organizational documents and Delaware law might discourage or delay acquisition attempts for us that stockholders might consider favorable. Our amended and restated certificate of incorporation and bylaws contains provisions that may make the merger or acquisition of our company more difficult without the approval of our Board.
Our amended and restated certificate of incorporation and bylaws contain provisions, as provided for under Delaware law, that may make the merger or acquisition of our company more difficult without the approval of our Board.
This seasonality can be expected to cause periodic fluctuations in a hotel’s rooms revenues, occupancy levels, room rates and operating expenses. We can provide no assurances that our cash flows will be sufficient to offset any shortfalls that occur as a result of these fluctuations.
We can provide no assurances that our cash flows will be sufficient to offset any shortfalls that occur as a result of these fluctuations. Consequently, volatility in our financial performance resulting from the seasonality of the lodging industry could adversely affect our financial condition and results of operations.
In addition, if we fail to qualify as a REIT, we will not be required to make distributions to stockholders. 25 Park would incur adverse tax consequences if Chesapeake or any of Park or Chesapeake’s subsidiary REITs failed to qualify as a REIT for U.S. federal income tax purposes.
In addition, if we fail to qualify as a REIT, we will not be required to make distributions to stockholders. We may face other tax liabilities that reduce our cash flows.
Removed
The outbreak of COVID-19 and its aftermath have had and continue to have, and another pandemic in the future could similarly have, significant repercussions across regional and global economies and financial markets.
Added
If our hotel managers' information networks and systems, our corporate technologies and systems, or third-party information systems on which we rely suffer severe damage, disruption or shutdown, and our business continuity plans do not effectively resolve the issues in a timely manner, we may lose revenue and profits as a result of our inability to provide services or invoice and collect payments, and we could experience delays in reporting our financial results.
Removed
The global impact of the outbreak and resulting control measures, including states of emergency, mandatory quarantines, border closures, and other travel and large gatherings restrictions, as well as declines in overall willingness to travel due to the risk of COVID-19 transmission, significantly decreased the demand for travel to our hotel properties.
Added
While we have purchased cybersecurity insurance, there are no assurances that the coverage would be adequate in relation to any incurred losses. Moreover, as cyberattacks increase in frequency and magnitude, we may be unable to obtain cybersecurity insurance in amounts and on terms we view as adequate for our operations.
Removed
We were negatively affected by these and other governmental regulations and travel advisories to fight the pandemic, including recommendations by the U.S. Department of State, the Center for Disease Control and Prevention and the World Health Organization.
Added
We are subject to risks associated with the employment of hotel personnel, particularly with hotels that employ unionized labor, which could increase our operating costs, reduce the flexibility of our hotel managers to adjust the size of the workforce at our hotels and could materially and adversely affect our revenues and profitability.
Removed
As vaccination rates across the country increased and COVID-19 related restrictions were eased or removed, travel and hospitality spending increased beginning the second quarter of 2021; however, the COVID-19 pandemic triggered a global economic contraction, which was followed by other economic challenges that affected 15 discretionary spending and travel, including supply chain disruptions and increased inflation.
Added
For example, in June 2023, we ceased making debt service payments on the $725 million SF Mortgage Loan secured by the Hilton San Francisco Hotels, which was due November 2023, and in October 2023, the Hilton San Francisco Hotels were placed into receivership.
Removed
Inflationary concerns have been counteracting the lodging industry's recovery from the COVID-19 pandemic and may affect consumer sentiment and decrease demand for travel, which can cause fluctuations in hotel revenues or earnings at our hotels.
Added
In October 2023, our effective exit from the two Hilton San Francisco Hotels that secured the SF Mortgage Loan resulted in such required distribution of our REIT taxable income. See Note 7: "Debt" in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for further details.
Removed
Beginning in late February 2020, we experienced a significant decline in occupancy and RevPAR associated with COVID-19 disruption throughout our portfolio. Travel, especially business and leisure travel in the United States, where all of our hotels are located, was adversely affected as a result of COVID-19.
Added
In addition, we may give full or partial recourse guarantees to lenders of mortgage debt on behalf of the entities that own our hotels.
Removed
Because certain types of losses are uncertain, including natural disaster, the effects of climate change or other catastrophic losses, they may be uninsurable or prohibitively expensive. There are also other risks that may fall outside the general coverage terms and limits of our policies.
Added
We believe that the properties that are leased to our TRS lessees are qualified lodging facilities.
Removed
Consequently, volatility in our financial performance resulting from the seasonality of the lodging industry could adversely affect our financial condition and results of operations. Governmental regulation may adversely affect the operation of our properties and our Company as a whole.
Removed
Park accepted that Chesapeake qualified as a REIT for U.S. federal income tax purposes prior to the Merger and that Park will be able to continue to qualify as a REIT following the Merger.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeOur Properties The following table provides a list of our portfolio as of February 23, 2023: Location Type (1) Ownership Percentage Rooms Arizona Embassy Suites Phoenix Airport GL 100% 182 California Hilton San Francisco Union Square FS 100% 1,921 Parc 55 San Francisco – a Hilton Hotel FS 100% 1,024 DoubleTree Hotel San Jose FS 100% 505 DoubleTree Hotel Ontario Airport FS 67% 482 Hyatt Regency Mission Bay Spa and Marina GL 100% 438 Hilton La Jolla Torrey Pines JV, GL 25% 394 Hilton Santa Barbara Beachfront Resort FS 50% 360 Hilton Oakland Airport GL 100% 360 JW Marriott San Francisco Union Square GL 100% 344 Hyatt Centric Fisherman's Wharf FS 100% 316 DoubleTree Hotel San Diego – Mission Valley GL 100% 300 DoubleTree Hotel Sonoma Wine Country GL 100% 245 Juniper Hotel Cupertino, Curio Collection FS 100% 224 Hilton Checkers Los Angeles FS 100% 193 Colorado Hilton Denver City Center FS (2) 100% 613 DoubleTree Hotel Durango GL 100% 159 District of Columbia Capital Hilton JV, FS 25% 550 Florida Hilton Orlando JV, FS 20% 1,424 Signia by Hilton Orlando Bonnet Creek FS 100% 1,009 Hilton Orlando Lake Buena Vista GL 100% 814 Waldorf Astoria Orlando FS 100% 502 Royal Palm South Beach Miami – a Tribute Portfolio Resort FS 100% 393 Casa Marina Key West, Curio Collection FS 100% 311 The Reach Key West, Curio Collection FS 100% 150 Hawaii Hilton Hawaiian Village Waikiki Beach Resort FS (2) 100% 2,860 Hilton Waikoloa Village FS (2) 100% 647 29 Location Type (1) Ownership Percentage Rooms Illinois Hilton Chicago FS 100% 1,544 W Chicago – Lakeshore FS 100% 520 W Chicago – City Center FS 100% 403 Louisiana Hilton New Orleans Riverside FS (2) 100% 1,622 Massachusetts Hilton Boston Logan Airport GL 100% 604 Hyatt Regency Boston FS 100% 502 Boston Marriott Newton FS 100% 430 Missouri Embassy Suites Kansas City Plaza GL 100% 266 New Jersey Hilton Short Hills FS 100% 314 New York New York Hilton Midtown FS (2) 100% 1,878 Puerto Rico Caribe Hilton FS (2) 100% 652 Texas Embassy Suites Austin Downtown South Congress GL 100% 262 Utah Hilton Salt Lake City Center GL 100% 499 Virginia DoubleTree Hotel Washington DC – Crystal City FS 100% 627 Hilton McLean Tysons Corner FS 100% 458 Embassy Suites Alexandria Old Town JV, FS (2) 50% 288 Washington DoubleTree Hotel Seattle Airport GL 100% 850 Hilton Seattle Airport & Conference Center GL 100% 396 DoubleTree Hotel Spokane City Center FS 10% 375 Total 29,210 (1) “FS” refers to fee simple ownership interest; “GL” refers to ground lease; “JV” refers to unconsolidated joint venture.
Biggest changeOur Properties (1) The following table provides a list of our portfolio as of February 28, 2024: Location Type (2) Ownership Percentage Rooms California DoubleTree Hotel San Jose FS 100% 505 DoubleTree Hotel Ontario Airport FS 67% 482 Hyatt Regency Mission Bay Spa and Marina GL 100% 438 Hilton La Jolla Torrey Pines JV, GL 25% 394 Hilton Santa Barbara Beachfront Resort FS 50% 360 Hilton Oakland Airport GL 100% 360 JW Marriott San Francisco Union Square GL 100% 344 Hyatt Centric Fisherman's Wharf FS 100% 316 DoubleTree Hotel San Diego – Mission Valley GL 100% 300 DoubleTree Hotel Sonoma Wine Country GL 100% 245 Juniper Hotel Cupertino, Curio Collection FS 100% 224 Hilton Checkers Los Angeles FS 100% 193 Colorado Hilton Denver City Center FS (3) 100% 613 DoubleTree Hotel Durango GL 100% 159 District of Columbia Capital Hilton JV, FS 25% 559 Florida Hilton Orlando JV, FS 20% 1,424 Signia by Hilton Orlando Bonnet Creek FS 100% 1,009 Hilton Orlando Lake Buena Vista GL 100% 814 Waldorf Astoria Orlando FS 100% 502 Royal Palm South Beach Miami – a Tribute Portfolio Resort FS 100% 393 Casa Marina Key West, Curio Collection FS 100% 311 The Reach Key West, Curio Collection FS 100% 150 Hawaii Hilton Hawaiian Village Waikiki Beach Resort FS (3) 100% 2,860 Hilton Waikoloa Village FS (3) 100% 647 Illinois Hilton Chicago FS 100% 1,544 W Chicago – Lakeshore FS 100% 520 W Chicago – City Center FS 100% 403 Louisiana Hilton New Orleans Riverside FS (3) 100% 1,622 Massachusetts Hilton Boston Logan Airport GL 100% 604 Hyatt Regency Boston FS 100% 502 Boston Marriott Newton FS 100% 430 Missouri Embassy Suites Kansas City Plaza GL 100% 266 30 Table of Contents Location Type (2) Ownership Percentage Rooms New Jersey Hilton Short Hills FS 100% 314 New York New York Hilton Midtown FS (3) 100% 1,878 Puerto Rico Caribe Hilton FS (3) 100% 652 Texas Embassy Suites Austin Downtown South Congress GL 100% 262 Utah Hilton Salt Lake City Center GL 100% 500 Virginia DoubleTree Hotel Washington DC – Crystal City FS 100% 627 Hilton McLean Tysons Corner FS 100% 458 Embassy Suites Alexandria Old Town JV, FS (3) 50% 288 Washington DoubleTree Hotel Seattle Airport GL 100% 850 Hilton Seattle Airport & Conference Center GL 100% 396 DoubleTree Hotel Spokane City Center FS 10% 375 Total 26,093 ____________________________________________________________________________________ (1) Excludes the two Hilton San Francisco Hotels that were placed into receivership in October 2023.
(2) Certain portions of land or facilities are subject to lease.
(2) “FS” refers to fee simple ownership interest; “GL” refers to ground lease; “JV” refers to unconsolidated joint venture. (3) Certain portions of land or facilities are subject to lease.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeSee “Spin-off Related Agreements – Distribution Agreement” and “– Tax Matters Agreement” and Note 15: “Commitments and Contingencies” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information. Item 4. M ine Safety Disclosures. Not applicable. 30 PART II
Biggest changeSee “Spin-off Related Agreements – Distribution Agreement” and “– Tax Matters Agreement” and Note 15: "Commitments and Contingencies" in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information. Item 4. Mine Safety Disclosures. Not applicable. 31 Table of Contents PART II
Item 3. Leg al Proceedings. We are involved in various claims and lawsuits arising in the ordinary course of business, some of which include claims for substantial sums, including proceedings involving tort and other general liability claims, employee claims and consumer protection claims. Most occurrences involving liability, claims of negligence and employees are covered by insurance with solvent insurance carriers.
Item 3. Legal Proceedings. We are involved in various claims and lawsuits arising in the ordinary course of business, some of which include claims for substantial sums, including proceedings involving tort and other general liability claims, employee claims and consumer protection claims. Most occurrences involving liability, claims of negligence and employees are covered by insurance with solvent insurance carriers.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeUse of Proceeds from Registered Securities We did not receive any proceeds from registered securities during the fiscal year ended December 31, 2022. 32 Purchases of Equity Securities by the Issuer and Affiliate Purchasers Period Total number of shares purchased (1) Weighted average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of common shares that may yet be purchased under the plans or programs (3) (in millions) January 1, 2022 through January 31, 2022 — $ — — N/A February 1, 2022 through February 28, 2022 106,694 $ 19.38 — $ 300 March 1, 2022 through March 31, 2022 3,409,949 $ 17.99 3,409,949 $ 239 April 1, 2022 through April 30, 2022 230 $ 19.52 — $ 239 May 1, 2022 through May 31, 2022 8,542,542 $ 18.33 8,542,542 $ 82 June 1, 2022 through June 30, 2022 20 $ 18.45 — $ 82 July 1, 2022 through July 31, 2022 189 $ 13.57 — $ 82 August 1, 2022 through August 31, 2022 44 $ 15.31 — $ 82 September 1, 2022 through September 30, 2022 92 $ 13.94 — $ 82 October 1, 2022 through October 31, 2022 — $ — — $ 82 November 1, 2022 through November 30, 2022 30 $ 12.39 — $ 82 December 1, 2022 through December 31, 2022 795,584 $ 11.64 795,584 $ 73 Total 12,855,374 12,748,075 (1) The number of shares purchased represents shares of common stock repurchased under the stock repurchase program authorized in February 2022 as well as shares of common stock surrendered by certain of our employees to satisfy their federal and state tax obligations associated with the vesting of restricted common stock.
Biggest changeUnregistered Sales of Equity Securities and Use of Proceeds We did not sell any equity securities during the fiscal year ended December 31, 2023 that were not registered under the Securities Act of 1933, as amended. 33 Table of Contents Purchases of Equity Securities by the Issuer and Affiliate Purchasers Period Total number of shares purchased (1) Weighted average price paid per share (2) Total number of shares purchased as part of publicly announced plans or programs Maximum number (or approximate dollar value) of common shares that may yet be purchased under the plans or programs (3) (in millions) January 1, 2023 through January 31, 2023 2,536,900 $ 11.64 2,536,900 $ 43 February 1, 2023 through February 28, 2023 174,848 $ 13.78 — $ 300 March 1, 2023 through March 31, 2023 6,278,600 $ 11.93 6,278,600 $ 225 April 1, 2023 through April 30, 2023 105 $ 12.17 — $ 225 May 1, 2023 through May 31, 2023 236 $ 12.40 — $ 225 June 1, 2023 through June 30, 2023 332 $ 13.74 — $ 225 July 1, 2023 through July 31, 2023 253 $ 13.16 — $ 225 August 1, 2023 through August 31, 2023 5,760,165 $ 13.00 5,759,966 $ 150 September 1, 2023 through September 30, 2023 315 $ 12.83 — $ 150 October 1, 2023 through October 31, 2023 57 $ 12.00 — $ 150 November 1, 2023 through November 30, 2023 225 $ 12.89 — $ 150 December 1, 2023 through December 31, 2023 — $ — — $ 150 Total 14,752,036 14,575,466 ____________________________________________________________________________________ (1) The number of shares purchased represents shares of common stock repurchased under the applicable previously announced stock repurchase programs as well as shares of common stock surrendered by certain of our employees to satisfy their federal and state tax obligations associated with the vesting of restricted common stock.
When determining the amount of future distributions, we expect that our Board will consider, among other factors, (1) the amount required to be distributed to maintain our status as a REIT, (2) limitations on our ability to make distributions contained in the indentures for our senior notes and credit facility, which restrict our ability to make distributions subject to limited exceptions, (3) the amount of cash generated from our operating activities, (4) our expectations of future cash flows, (5) our determination of near-term cash needs for debt repayments, existing or future share repurchases, and selective acquisitions of new properties, (6) the timing of significant capital investments and expenditures and the establishment of any cash reserves, (7) our ability to continue to access additional sources of capital, and (8) the sufficiency of legally available assets. 31 Share Performance Graph The following graph compares our cumulative total stockholder return since December 31, 2017 against the cumulative total returns of the National Association of Real Estate Investment Trust (“Nareit”) Equity Index and the Standard and Poor’s MidCap 400 Index (“S&P 400 Index”).
When determining the amount of future distributions, we expect that our Board will consider, among other factors, (1) the amount required to be distributed to maintain our status as a REIT, (2) limitations on our ability to make distributions contained in the indentures for our senior notes and credit facility, which restrict our ability to make distributions subject to limited exceptions, (3) the amount of cash generated from our operating activities, (4) our expectations of future cash flows, (5) our determination of near-term cash needs for debt repayments, existing or future share repurchases, and selective acquisitions of new properties, (6) the timing of significant capital investments and expenditures and the establishment of any cash reserves, (7) our ability to continue to access additional sources of capital, and (8) the sufficiency of legally available assets. 32 Table of Contents Share Performance Graph The following graph compares our cumulative total stockholder return since December 31, 2018 against the cumulative total returns of the National Association of Real Estate Investment Trust (“Nareit”) Equity Index and the Standard and Poor’s MidCap 400 Index (“S&P 400 Index”).
(3) The stock repurchase program authorized on February 25, 2022 allowing for the repurchase of up to $300 million of our common stock, which was set to expire on February 23, 2024, was terminated on February 17, 2023 upon the authorization of a new $300 million stock repurchase program, which expires on February 21, 2025.
(3) The stock repurchase program authorized on February 25, 2022, which allowed for the repurchase of up to $300 million of our common stock, was terminated on February 17, 2023, upon the authorization of a new $300 million stock repurchase program, which expires on February 21, 2025.
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 not be required to pay tax on our 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 income. Our future distributions will be at the sole discretion of our Board.
On February 17, 2023, our Board terminated 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, starting on February 21, 2023 and ending on February 21, 2025, subject to any applicable limitations or restrictions set forth in our credit facility and indentures related to our senior notes.
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.
Item 5. Market for Regist rant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock trades on the NYSE under the symbol "PK". Shareholder Information At February 17, 2023, we had 13 holders of record of our common stock.
Item 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities. Market Information Our common stock trades on the NYSE under the symbol "PK". Shareholder Information At February 23, 2024, we had 14 holders of record of our common stock.
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. No stock repurchases have been made to date under the new program. Item 6. [Reserved] 33
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.
The graph assumes an initial investment of $100 in our common stock and each of the indexes on December 31, 2017, and that all dividends and other distributions were reinvested. 12/31/2017 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 Park Hotels and Resorts Inc. $ 100.00 $ 97.54 $ 105.68 $ 75.70 $ 83.34 $ 52.15 S&P 400 Index 100.00 87.50 108.55 121.36 149.53 127.88 Nareit Equity Index 100.00 95.38 120.17 110.56 158.36 119.78 This performance graph shall not be deemed "filed" for the purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing by us under the Securities Act, except as shall be expressly set forth by specific reference in such filing.
The graph assumes an initial investment of $100 in our common stock and each of the indexes on December 31, 2018, and that all dividends and other distributions were reinvested. 12/31/2018 12/31/2019 12/31/2020 12/31/2021 12/31/2022 12/31/2023 Park Hotels and Resorts Inc. $ 100.00 $ 108.34 $ 77.61 $ 85.44 $ 53.47 $ 73.36 S&P 400 Index 100.00 124.05 138.70 170.89 146.14 167.26 Nareit Equity Index 100.00 126.00 115.92 166.04 125.58 142.83 This performance graph shall not be deemed "filed" for the purposes of Section 18 of the Exchange Act, or incorporated by reference into any filing by us under the Securities Act, except as shall be expressly set forth by specific reference in such filing.
During the year ended December 31, 2022, we repurchased approximately 12.7 million shares of our common stock for a total purchase price of $227 million, and as of December 31, 2022, $73 million remained available for stock repurchases under the February 2022 Stock Repurchase Plan.
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. Item 6. [Reserved] 34 Table of Contents
Removed
After the payment of the first quarter dividend in 2020, we suspended our quarterly dividend as a precautionary measure in light of COVID-19. In March 2022, our Board approved and reinstated our quarterly cash dividend. Our future distributions will be at the sole discretion of our Board.
Removed
Unregistered Sales of Equity Securities and Use of Proceeds We did not sell any equity securities during the fiscal year ended December 31, 2022 that were not registered under the Securities Act of 1933, as amended.
Removed
Stock Repurchase Program In February 2022, our Board authorized and approved a stock repurchase program allowing us to repurchase up to $300 million of our common stock over a 24-month period, ending in February 2024 (the "February 2022 Stock Repurchase Program").
Removed
Additionally, in January 2023, we repurchased approximately 2.5 million shares of our common stock for a total purchase price of $30 million under the February 2022 Stock Repurchase Plan.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

75 edited+29 added−22 removed56 unchanged
Biggest changeBecause 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. 38 The following table provides a reconciliation of Net income (loss) to Hotel Adjusted EBITDA: Year Ended December 31, 2022 2021 (in millions) Net income (loss) $ 173 $ (452 ) Depreciation and amortization expense 269 281 Interest income (13 ) (1 ) Interest expense 247 258 Income tax expense — 2 Interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates 9 11 EBITDA 685 99 (Gain) loss on sales of assets, net (1) (22 ) 5 Gain on sale of investments in affiliates (2) (92 ) — Share-based compensation expense 17 19 Casualty and impairment loss, net 6 9 Other items 12 10 Adjusted EBITDA 606 142 Less: Adjusted EBITDA from investments in affiliates (25 ) (7 ) Add: All other (3) 49 42 Hotel Adjusted EBITDA $ 630 $ 177 (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.
Biggest changeThe following table provides a reconciliation of Net income to Hotel Adjusted EBITDA: Year Ended December 31, 2023 2022 (in millions) Net income $ 106 $ 173 Depreciation and amortization expense 287 269 Interest income (38) (13) Interest expense 207 217 Interest expense associated with hotels in receivership 45 30 Income tax expense 38 — Interest expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates 8 9 EBITDA 653 685 Gain on sales of assets, net (1) (15) (22) Gain on derecognition of assets (2) (221) — Gain on sale of investments in affiliates (3) (3) (92) Share-based compensation expense 18 17 Impairment and casualty loss 204 6 Other items 23 12 Adjusted EBITDA 659 606 Less: Adjusted EBITDA from investments in affiliates (24) (25) Add: All other (4) 51 49 Hotel Adjusted EBITDA $ 686 $ 630 ____________________________________________________________________________________ (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.
However, there can no assurance as to the timing of any such issuance, which may be in the near term, or that any such additional financing will be completed on favorable terms, or at all.
However, there can be no assurance as to the timing of any such issuance, which may be in the near term, or that any such additional financing will be completed on favorable terms, or at all.
Investing Activities 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 $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.
Occupancy levels also help us determine achievable ADR levels as demand for rooms increases or decreases. 36 Average Daily Rate ADR represents rooms revenue divided by total number of room nights sold in a given period.
Occupancy levels also help us determine achievable 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.
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.
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).
Substantially all the debt of such unconsolidated affiliates is secured solely by the affiliates’ assets or is guaranteed by other partners 45 without recourse to us. Refer to Note 7: “Debt” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information.
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. Refer to Note 7: "Debt" in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information.
Refer to Item 1: “Business – Our Principal Agreements,” included elsewhere in this Annual Report on Form 10-K for additional information on franchise fees. 35 Other property-level . These costs consist primarily of real and personal property taxes, other local taxes, ground rent, equipment rent and property insurance. Management fees .
Refer to Item 1: “Business – Our Principal Agreements,” included elsewhere in this Annual Report on Form 10-K for additional information on franchise fees. Other property . These costs consist primarily of real and personal property taxes, other local taxes, ground rent, equipment rent and property insurance. Management fees .
Item 7. Management’s Discuss ion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements, related notes included thereto and Item 1A., “Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K.
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations. The following discussion and analysis of our financial condition and results of operations should be read in conjunction with the accompanying consolidated financial statements, related notes included thereto and Item 1A., “Risk Factors,” appearing elsewhere in this Annual Report on Form 10-K.
We operate our business through two operating segments, our consolidated hotels and unconsolidated hotels. Our consolidated hotels operating segment is our only reportable segment. Refer to Note 14: “Business Segment Information” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information regarding our operating segments.
We operate our business through two operating segments, our consolidated hotels and unconsolidated hotels. Our consolidated hotels operating segment is our only reportable segment. Refer to Note 14: "Business Segment Information" in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information regarding our operating segments.
We believe that of our significant accounting policies, which are described in Note 2: “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, the following accounting policies are critical because they involve a higher degree of judgment, and the estimates required to be made were based on assumptions that are inherently uncertain.
We believe that of our significant accounting policies, which are described in Note 2: "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, the following accounting policies are critical because they involve a higher degree of judgment, and the estimates required to be made were based on assumptions that are inherently uncertain.
Financing Activities 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 $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 46 Table of Contents 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.
Dividends 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 gain, to our stockholders on an annual basis.
Dividends 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.
Basis of Presentation The consolidated financial statements reflect our financial position, results of operations and cash flows, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Refer to Note 2: “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.
Basis of Presentation The consolidated financial statements reflect our financial position, results of operations and cash flows, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). Refer to Note 2: "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.
For the discussion and analysis of our 2020 financial condition and results of operations compared to 2021, refer to Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2021.
For the discussion and analysis of our 2021 financial condition and results of operations compared to 2022, refer to Item 7., “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of our Annual Report on Form 10-K for the year ended December 31, 2022.
Our high-quality portfolio includes hotels mostly in major urban and convention areas, such as New York City, Washington, D.C., Chicago, San Francisco, Boston, New Orleans and Denver; and premier resorts in key leisure destinations, including Hawaii, Orlando, Key West and Miami Beach; as well as hotels in select airport and suburban locations.
Our high-quality portfolio currently includes hotels mostly in major urban and convention areas, such as New York City, Washington, D.C., Chicago, Boston, New Orleans and Denver; and premier resorts in key leisure destinations, including Hawaii, Orlando, Key West and Miami Beach; as well as hotels in select airport and suburban locations.
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.
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 37 Table of Contents 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.
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.
We evaluate several factors, including market data for similar assets, expected future cash flows discounted at risk-adjusted rates and replacement cost 47 Table of Contents for the assets to determine an appropriate fair value of the assets. Changes to these factors could affect the measurement of assets and liabilities.
Other gain (loss), net 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.
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.
Base management fees are computed as a percentage of gross revenue. Incentive management fees generally are paid if specified financial performance targets are achieved. Refer to Item 1: “Business – Our Principal Agreements,” included elsewhere in this Annual Report on Form 10-K for additional information. Casualty and impairment loss, net.
Base management fees are computed as a percentage of gross revenue. Incentive management fees generally are paid if specified financial performance targets are achieved. Refer to Item 1: “Business – Our Principal Agreements,” included elsewhere in this Annual Report on Form 10-K for additional information. Casualty and impairment gains or losses.
Primarily related to support services we provide to Hilton Grand Vacations (“HGV”) timeshare properties that have a presence within or adjacent to certain of our hotels, which include cost reimbursements for the costs of providing housekeeping, landscaping, general maintenance and other services plus a fee representing a percentage of cost reimbursements. Factors Affecting our Revenues Consumer demand .
Other. Primarily related to support services we provide to HGV timeshare properties that have a presence within or adjacent to certain of our hotels, which include cost reimbursements for the costs of providing housekeeping, landscaping, general maintenance and other services plus a fee representing a percentage of cost reimbursements. Factors Affecting our Revenues Consumer demand .
Expenses Principal Components Rooms . These costs include housekeeping, reservation systems, room supplies, laundry services at our hotels and front desk costs. Food and beverage . These costs primarily include food, beverage and the associated labor and will correlate closely with food and beverage revenues. Other departmental and support .
Expenses Principal Components Rooms . These costs include housekeeping, reservation systems, room supplies, laundry services at our hotels and front desk costs. 36 Table of Contents Food and beverage . These costs primarily include food, beverage and the associated labor and will correlate closely with food and beverage revenues. Other departmental and support .
Consequently, before consideration of the use of any NOL 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.
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.
Our 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 than we do.
Our 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 40 Table of Contents definition differently than we do.
(“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 (collectively with the 2029 Senior Notes, the "Senior Notes").
(“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.
Casualty and impairment loss, net 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 for the year ended December 31, 2022.
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.
On February 17, 2023, our Board terminated 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, starting on February 21, 2023 and ending on February 21, 2025, subject to any applicable limitations or restrictions set forth in our credit facility and indentures related to our Senior Notes.
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.
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 not be required to pay tax on our income.
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.
We believe that EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA are among the measures used by our management team to make day-to-day operating decisions and evaluate our operating performance between periods and between REITs by removing the effect of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results; and (ii) EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA 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 our industry. 37 EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA 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 our operating performance and results as reported under U.S.
We believe that EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA are among the measures used by our management team to make day-to-day operating decisions and evaluate our operating performance between periods and between REITs by removing the effect of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results; and (ii) EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA 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 our industry.
With approximately $950 million of availability under our Revolver and existing cash and cash equivalents, we have sufficient liquidity to pay our debt maturities and to fund other liquidity obligations over the next year and beyond.
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.
Some of these limitations are: • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the cash requirements necessary to service interest or principal payments, on our indebtedness; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the cash requirements to pay our taxes; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and • 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.
Some of these limitations are: • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the cash requirements necessary to service interest or principal payments, on our indebtedness; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the cash requirements to pay our taxes; • EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect historical cash expenditures or future requirements for capital expenditures or contractual commitments; and • 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. 39 Table of Contents 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.
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 in management's analysis in making day-to-day operating decisions and evaluations of our operating performance against other companies within our industry: • Gains or losses on sales of assets for both consolidated and unconsolidated investments; • Costs associated with hotel acquisitions or dispositions expensed during the period; • Severance expense; • Share-based compensation expense; • Impairment losses and casualty gains or losses; and • Other items that we believe are not representative of our current or future operating performance.
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: • Gains or losses on sales of assets for both consolidated and unconsolidated investments; • Costs associated with hotel acquisitions or dispositions expensed during the period; • Severance expense; • Share-based compensation expense; • Impairment losses and casualty gains or losses; and • Other items that we believe are not representative of our current or future operating performance. 38 Table of Contents Hotel Adjusted EBITDA measures hotel-level results before debt service, depreciation and corporate expenses for our consolidated hotels, which excludes hotels owned by unconsolidated affiliates, and is a key measure of our profitability.
Our current debt outstanding is approximately $4.6 billion at a weighted average interest rate of 5.1%, of which approximately 99% is fixed-rate debt, refer to Item 7A: “Interest Rate Risk” and Note 7: “Debt” in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information.
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: “Interest Rate Risk” and Note 7: "Debt" in our audited consolidated financial statements included elsewhere within this Annual Report on Form 10-K for additional information.
Gain (loss) on sales of assets, net During the year ended December 31, 2022, we recognized a net gain of $13 million primarily as a result of the sales of our consolidated hotels. During the year ended December 31, 2021, we recognized a net loss of $5 million primarily as a result of the sales of our consolidated 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.
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.
We present Hotel Adjusted EBITDA to help us and our investors evaluate the ongoing operating performance of our consolidated hotels. 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.
Interest expense associated with our debt for the years ended December 31, 2022 and 2021 were as follows: Year ended December 31, 2022 2021 Percent Change (in millions) SF and HHV Mortgage Loans (1) $ 85 $ 85 — % Other mortgage loans 21 24 (12.5 )% Revolver 3 10 (70.0 )% 2019 Term Facility (2) 3 12 (75.0 )% 2025 Senior Notes (3) 49 49 — % 2028 Senior Notes (3) 43 43 — % 2029 Senior Notes (3) 36 23 56.5 % Other 7 12 (41.7 )% Total interest expense $ 247 $ 258 (4.3 )% (1) In October 2016, we entered into a $725 million CMBS loan secured by the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco (“SF Mortgage Loan”) and a $1.275 billion CMBS loan secured by the Hilton Hawaiian Village Waikiki Beach Resort (“HHV Mortgage Loan”).
Interest expense associated with our debt for the years ended December 31, 2023 and 2022 were as follows: Year Ended December 31, 2023 2022 Percent Change (in millions) HHV Mortgage Loan (1) $ 55 $ 55 — % Other mortgage loans 19 21 (9.5) % Revolver 4 3 33.3 % 2019 Term Facility (2) — 3 (100.0) % 2025 Senior Notes (3) 49 49 — % 2028 Senior Notes (3) 43 43 — % 2029 Senior Notes (3) 36 36 — % Other 1 7 (85.7) % Total interest expense $ 207 $ 217 (4.6) % ____________________________________________________________________________________ (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”).
Liquidity and Capital Resources Overview We seek to maintain sufficient amounts of liquidity with an appropriate balance of cash, debt and equity to provide financial flexibility. As of December 31, 2022, we had total cash and cash equivalents of $906 million and $33 million of restricted cash.
The remaining income tax expense is primarily related to our TRSs. Liquidity and Capital Resources Overview We seek to maintain sufficient amounts of liquidity with an appropriate balance of cash, debt and equity to provide financial flexibility. As of December 31, 2023, we had total cash and cash equivalents of $717 million and $33 million of restricted cash.
(2) Per share amounts are calculated based on unrounded numbers. Results of Operations The following items have had a significant effect on the year-over-year comparability of our operations and are illustrated further in the table of Hotel Revenues and Operating Expenses below: • Property Dispositions: Since January 1, 2021, we have disposed of ten consolidated hotels.
(5) Per share amounts are calculated based on unrounded numbers. 41 Table of Contents 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.
Increases in both group and transient demand at our Florida hotels resulted in an increase in combined occupancy of 13.4 percentage points for the year ended December 31, 2022 compared to the same period in 2021, while ADR for the same period increased 7.5%.
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.
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, such as increases in interest rates, potential economic slowdown or a recession and geopolitical conflicts, we expect to continue to recover through 2023 based on current demand trends.
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.
During the year ended December 31, 2022, we repurchased approximately 12.7 million shares of our common stock for a total purchase price of $227 million, and as of December 31, 2022, $73 million remained available for stock repurchases under the February 2022 Stock Repurchase Plan.
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.
Management historically has made the adjustments detailed below in evaluating our performance and in our annual budget process. We believe that the presentation of Adjusted FFO provides useful supplemental information that is beneficial to an investor’s complete understanding of our operating performance.
We believe that the presentation of Adjusted FFO provides useful supplemental information that is beneficial to an investor’s complete understanding of our operating performance.
No stock repurchases have been made to date under the new program. 44 Sources and Uses of Our Cash and Cash Equivalents The following tables summarize our net cash flows and key metrics related to our liquidity: Year Ended December 31, 2022 2021 Percent Change (in millions) Net cash provided by (used in) operating activities $ 409 $ (137 ) 398.5 % Net cash provided by investing activities 87 394 (77.9 )% Net cash used in financing activities (320 ) (475 ) (32.6 )% Operating Activities Cash flow from operating activities are primarily generated from the operating income generated at our hotels.
Sources and Uses of Our Cash and Cash Equivalents The following tables summarize our net cash flows and key metrics related to our liquidity: Year Ended December 31, 2023 2022 Percent Change (in millions) Net cash provided by operating activities $ 503 $ 409 23.0 % Net cash (used in) provided by investing activities (217) 87 349.4 % Net cash used in financing activities (475) (320) 48.4 % Operating Activities Cash flow provided by operating activities are primarily generated from the operating income generated at our hotels.
Changes to these assumptions and estimates can lead to an additional income tax expense (benefit), which can materially change our consolidated financial statements. 46 Consolidations We use judgment when evaluating whether we have a controlling financial interest in an entity, including the assessment of the importance of rights and privileges of the partners based on voting rights, as well as financial interests in an entity that are not controllable through voting interests.
Consolidation We use judgment when evaluating whether we have a controlling financial interest in an entity, including the assessment of the importance of rights and privileges of the partners based on voting rights, as well as financial interests in an entity that are not controllable through voting interests.
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. After the payment of the first quarter dividend in 2020, we suspended our quarterly dividend as a precautionary measure in light of COVID-19.
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.
The results of operations of these hotels are included in our consolidated results only during our period of ownership.
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.
The following table provides a reconciliation of net income (loss) attributable to stockholders to Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders: Year Ended December 31, 2022 2021 (in millions, except per share amounts) Net income (loss) attributable to stockholders $ 162 $ (459 ) Depreciation and amortization expense 269 281 Depreciation and amortization expense attributable to noncontrolling interests (4 ) (4 ) (Gain) loss on sales of assets, net (13 ) 5 Gain on sale of investments in affiliates (1) (92 ) — Impairment loss — 5 Equity investment adjustments: Equity in (earnings) losses from investments in affiliates (15 ) 7 Pro rata FFO of investments in affiliates 12 2 Nareit FFO attributable to stockholders 319 (163 ) Casualty loss, net 6 4 Share-based compensation expense 17 19 Other items 10 4 Adjusted FFO attributable to stockholders $ 352 $ (136 ) Nareit FFO per share - Diluted (2) $ 1.40 $ (0.69 ) Adjusted FFO per share - Diluted (2) $ 1.54 $ (0.57 ) (1) Included in other gain (loss), net .
The following table provides a reconciliation of Net income attributable to stockholders to Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders: Year Ended December 31, 2023 2022 (in millions, except per share amounts) Net income attributable to stockholders $ 97 $ 162 Depreciation and amortization expense 287 269 Depreciation and amortization expense attributable to noncontrolling interests (4) (4) Gain on sales of assets, net (15) (13) Gain on derecognition of assets (1) (221) — Gain on sale of investments in affiliates (2) (3) (92) Impairment loss 202 — Equity investment adjustments: Equity in earnings from investments in affiliates (11) (15) Pro rata FFO of investments in affiliates 14 12 Nareit FFO attributable to stockholders 346 319 Casualty loss 2 6 Share-based compensation expense 18 17 Interest expense associated with hotels in receivership (3) 20 — Other items (4) 53 10 Adjusted FFO attributable to stockholders $ 439 $ 352 Nareit FFO per share – Diluted (5) $ 1.61 $ 1.40 Adjusted FFO per share – Diluted (5) $ 2.04 $ 1.54 ____________________________________________________________________________________ (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.
We calculate Nareit FFO per diluted share as our Nareit FFO divided by the number of fully diluted shares outstanding during a given operating period. 39 We also present Adjusted FFO attributable to stockholders and Adjusted FFO per diluted share when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance.
We also present Adjusted FFO attributable to stockholders and Adjusted FFO per diluted share when evaluating our performance because we believe that the exclusion of certain additional items described below provides useful supplemental information to investors regarding our ongoing operating performance. Management historically has made the adjustments detailed below in evaluating our performance and in our annual budget process.
Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders We present Nareit FFO attributable to stockholders and Nareit FFO per diluted share (defined as set forth below) as non-GAAP measures of our performance.
(4) Includes other revenues and other expenses , non-income taxes on TRS leases included in other property expenses and corporate general and administrative expenses. Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders We present Nareit FFO attributable to stockholders and Nareit FFO per diluted share (defined as set forth below) as non-GAAP measures of our performance.
Group business usually includes a block of room accommodations, as well as other ancillary services, such as meeting facilities, catering and banquet services. A majority of our food and beverage sales and other ancillary services are provided to customers who also are occupying rooms at our hotels. As a result, occupancy affects all components of revenues from our hotels.
A majority of our food and beverage sales and other ancillary services are provided to customers who also are occupying rooms at our hotels. As a result, occupancy affects all components of revenues from our hotels. Principal Components Rooms . Represents the sale of room rentals at our hotels and accounts for a substantial majority of our total revenue.
Refer to Note 3: "Dispositions and Acquisitions" 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, 2021, we recognized a net loss of $7 million, which is primarily due to $5 million related to the loss on extinguishment of debt during the year.
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. 44 Table of Contents Income tax expense 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.
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.
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. 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.
After suspending our quarterly dividend in 2020, we declared dividends of $0.28 during 2022 and expect to declare a first quarter dividend of $0.15 per share in March 2023, subject to approval by our Board. Many of the other expenses associated with our hotels are relatively fixed, including portions of rent expense, property taxes and insurance.
In addition, we declared a first quarter dividend of $0.25 per share in February 2024 to be paid on April 15, 2024 to stockholders of record as of March 29, 2024. Many of the other expenses associated with our hotels are relatively fixed, including portions of rent expense, property taxes and insurance.
The $546 million increase in net cash provided by operating activities for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to an increase in cash from operations as a result of the increase in occupancy as our hotels continue to recover from the effects of COVID-19.
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.
Our Boston hotels also benefited from an increase in both group and transient demand, with combined occupancy and ADR increasing 23.4 percentage points and 30.4%, respectively, for the year ended December 31, 2022 compared to the same period in 2021.
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.
Represents revenue for guest services provided at our hotels, including parking, telecommunications, golf course and spa. Also includes tenant leases and other rental revenue. Other.
Food and beverage . Represents revenue from group functions, which may include both banquet revenue and audio and visual revenue, as well as revenue from outlets such as restaurants and lounges at our hotels. Ancillary hotel. Represents revenue for guest services provided at our hotels, including parking, telecommunications, golf course and spa. Also includes tenant leases and other rental revenue.
Transient guests are individual travelers who are traveling for business or leisure. Group guests are traveling for group events that reserve rooms for meetings, conferences or social functions sponsored by associations, corporate, social, military, educational, religious or other organizations.
Group guests are traveling for group events that reserve rooms for meetings, conferences or social functions sponsored by associations, corporate, social, military, educational, religious or other organizations. Group business usually includes a block of room accommodations, as well as other ancillary services, such as meeting facilities, catering and banquet services.
We currently hold investments in entities that have ownership or leasehold interests in 46 hotels, consisting of premium-branded hotels and resorts with over 29,000 rooms, of which approximately 88% are luxury and upper upscale and are located in prime U.S. markets and its territories.
Overview 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. markets and its territories.
The $394 million in net cash provided by investing activities for the year ended December 31, 2021 was primarily attributable to $454 million of net proceeds from the sale of five of our consolidated hotels, partially offset by $54 million in capital expenditures.
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.
We have construction contract commitments of approximately $121 million for capital expenditures at our properties, of which $57 million relates to projects at the Bonnet Creek complex, including the meeting space expansion project and renovating guestrooms, existing meeting space, lobbies and golf course. Our contracts contain clauses that allow us to cancel all or some portion of the work.
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.
Combined occupancy at our two Hawaii hotels increased 26.3 percentage points for the year ended December 31, 2022 compared to same period in 2021 as a result of an increase in domestic transient demand and the return of group demand, while ADR for the same period increased 15.9%.
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.
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 2022, we continued to experience improvements in leisure, group and business transient demand across our portfolio and expect to continue to recover through 2023 based on current demand trends.
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.
Our cash management objectives continue to be to maintain the availability of liquidity, minimize operational costs, make debt payments and fund our capital expenditure programs and future acquisitions. Further, we have an investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments.
Further, we have an investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments.
Group, transient, contract and other rooms revenue for the year ended December 31, 2022, as well as the change for each segment compared to 2021 are as follows: Year Ended December 31, 2022 2021 Change Change from Property Dispositions Change from Other Factors (1) (in millions) Group rooms revenue $ 403 $ 114 $ 289 $ — $ 289 Transient rooms revenue 1,052 690 362 (20 ) 382 Contract rooms revenue 71 50 21 (1 ) 22 Other rooms revenue 33 16 17 — 17 Rooms revenue $ 1,559 $ 870 $ 689 $ (21 ) $ 710 (1) Change from other factors primarily relates to the effects of our ongoing COVID-19 recovery, including 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: Year Ended December 31, Change from Non-Comparable Hotels 2023 2022 Change Change from Comparable Hotels (1) Change from the San Francisco Hotels Change from Non-Comparable Hotels (in millions) Group rooms revenue $ 480 $ 403 $ 77 $ 67 $ 15 $ (5) Transient rooms revenue 1,043 1,052 (9) 31 (7) (33) Contract rooms revenue 92 71 21 19 5 (3) Other rooms revenue 38 33 5 5 1 (1) Rooms revenue $ 1,653 $ 1,559 $ 94 $ 122 $ 14 $ (42) ____________________________________________________________________________________ (1) Change from our comparable hotels primarily relates to the market-specific conditions discussed below.
In February 2023, we sold the 508-room Hilton Miami Airport for gross proceeds of $118.25 million, or $233,000 per key, and utilized a portion of the net proceeds to fully repay the $50 million outstanding under our Revolver. 34 Principal Components of and Factors Affecting Our Results of Operations Revenues Revenues from our hotels are primarily derived from two categories of customers: transient and group, which historically have accounted for approximately two thirds and one third, respectively, of our rooms revenue.
Principal Components of and Factors Affecting Our Results of Operations Revenues Revenues from our hotels are primarily derived from two categories of customers: transient and group, which historically have accounted for approximately two thirds and one third, respectively, of our rooms revenue. Transient guests are individual travelers who are traveling for business or leisure.
Additionally, we have established reserves for capital expenditures (“FF&E reserve”) in accordance with our management and certain debt agreements. Generally, these agreements require that we fund 4% of hotel revenues into an FF&E reserve, unless such amounts have been incurred.
Generally, these agreements require that we fund 4% of hotel revenues into an FF&E reserve, unless such amounts have been incurred. 45 Table of Contents Our cash management objectives continue to be to maintain the availability of liquidity, minimize operational costs, make debt payments and fund our capital expenditure programs and future acquisitions.
Market-Specific Conditions The increases in hotel revenues and operating expenses from other factors were primarily a result of significant occupancy increases in certain of our largest markets combined with the resumption of operations at our remaining hotels during 2021 and 2022.
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.
Corporate general and administrative Year Ended December 31, 2022 2021 Percent Change (in millions) General and administrative expenses $ 43 $ 40 7.5 % Share-based compensation expense 17 19 (10.5 )% Other items (1) 3 3 — % Total corporate general and administrative $ 63 $ 62 1.6 % (1) Consists primarily of disposition costs and amortization of upfront cloud-computing costs.
Corporate general and administrative Year Ended December 31, 2023 2022 Percent Change (in millions) General and administrative expenses $ 45 $ 43 4.7 % Share-based compensation expense 18 17 5.9 % Other items 2 3 (33.3) % Total corporate general and administrative $ 65 $ 63 3.2 % Impairment and casualty loss During the year ended December 31, 2023, we recognized an impairment loss of approximately $202 million.
We declared the following dividends to holders of our common stock during 2022: Record Date Payment Date Dividend per Share March 31, 2022 April 15, 2022 $ 0.01 June 30, 2022 July 15, 2022 $ 0.01 September 30, 2022 October 17, 2022 $ 0.01 December 30, 2022 January 17, 2023 $ 0.25 Debt As of December 31, 2022, our total indebtedness was approximately $4.6 billion, including approximately $2.1 billion of our Senior Notes, as disclosed above, and excluding approximately $169 million of our share of debt from investments in affiliates.
We declared the following dividends to holders of our common stock during 2023: Record Date Payment Date Dividend per Share March 31, 2023 April 17, 2023 $ 0.15 June 30, 2023 July 17, 2023 $ 0.15 September 29, 2023 October 16, 2023 $ 0.15 December 29, 2023 January 16, 2024 (1) $ 1.70 ____________________________________________________________________________________ (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 $475 million in net cash used in financing activities for the year ended December 31, 2021 was primarily attributable to $1.2 billion of debt repayments and $15 million of debt issuance costs, partially offset by the issuance of $750 million of 2029 Senior Notes.
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.
RevPAR is also a useful indicator in measuring performance over comparable periods. Non-GAAP Financial Measures We also evaluate the performance of our business through certain other financial measures that are not recognized under U.S. GAAP.
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. GAAP.
Non-operating Income and Expenses Interest income Interest income increased $12 million during the year ended December 31, 2022 compared to the same period in 2021 as a result of an increase in cash coupled with an increase in interest rates. 42 Interest expense Interest expense decreased during the year ended December 31, 2022 compared to the same period in 2021 primarily as a result of (i) the partial repayment of our 2019 Term Facility during the second and third quarters of 2021, (ii) the full repayment of our 2019 Term Facility in December 2022, (iii) the full repayment of the then outstanding balance under our Revolver during 2021, partially offset by the issuance of $750 million of 4.875% senior notes due 2029 ("2029 Senior Notes") in May 2021 and (iv) $50 million of borrowings under our Revolver in December 2022.
Non-operating Income and Expenses 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. 43 Table of Contents 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.
Consequently, the results of our portfolio during the year ended December 31, 2022 will not be comparable to the same period in 2021. 40 Hotel Revenues and Operating Expenses Year Ended December 31, 2022 2021 Change Change from Property Dispositions Change from Other Factors (1) (in millions) Rooms revenue $ 1,559 $ 870 $ 689 $ (21 ) $ 710 Food and beverage revenue 606 251 355 (1 ) 356 Ancillary hotel revenue 261 190 71 (2 ) 73 Rooms expense 408 254 154 (7 ) 161 Food and beverage expense 449 208 241 (1 ) 242 Other departmental and support expense 613 423 190 (11 ) 201 Other property-level expense 223 191 32 (6 ) 38 Management fees expense 115 59 56 (1 ) 57 (1) Change from other factors primarily relates to the effects of our ongoing COVID-19 recovery, including the market-specific conditions discussed below.
Hotel Revenues and Operating Expenses Year Ended December 31, Change from Non-Comparable Hotels 2023 2022 Change Change from Comparable Hotels (1) Change from the San Francisco Hotels Change from Other Non-Comparable Hotels (in millions) Rooms revenue $ 1,653 $ 1,559 $ 94 $ 122 $ 14 $ (42) Food and beverage revenue 696 606 90 98 2 (10) Ancillary hotel revenue 264 261 3 6 (1) (2) Rooms expense 449 408 41 48 2 (9) Food and beverage expense 501 449 52 58 — (6) Other departmental and support expense 635 613 22 40 (1) (17) Other property expense 241 223 18 21 1 (4) Management fees expense 126 115 11 11 1 (1) ____________________________________________________________________________________ (1) Change from our comparable hotels primarily relates to the market-specific conditions discussed below.
Occupancy and ADR at the Hilton New Orleans Riverside increased 10.4 percentage points and 68.5%, respectively, for the year ended December 31, 2022 compared to the same period in 2021 primarily due to an increase in group demand with the return of city-wide events such as Mardi Gras and the NCAA Final Four Tournament.
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%.
Inflation may also 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 and current macroeconomic uncertainty.
Outlook 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.
We have no significant maturities in 2023, except for the $725 million mortgage loan secured by the Hilton San Francisco Union Square and the Parc 55 Hotel San Francisco due in November 2023, which we expect to address before the third quarter of 2023.
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.
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Overview We have a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value.
Added
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.
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Outlook The novel strain of coronavirus and the disease it causes (“COVID-19”) have continued to affect the hospitality industry and our business.
Added
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.
Removed
The increase in vaccination rates and easing or removal of COVID-19 restrictions have increased travel and hospitality spending, improving occupancy, Average Daily Rate (“ADR”) and Revenue per Available Room (“RevPAR”) at our hotels, resulting in the reopening of all our previously suspended hotels as of May 2022.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

3 edited+2 added−1 removed0 unchanged
Biggest changeThe following table sets forth the contractual maturities and the total fair values as of December 31, 2022 for our financial instruments that are materially affected by interest rate risk: Maturities by Period 2023 2024 2025 2026 2027 Thereafter Carrying Value Fair Value (in millions, excluding average interest rate) Liabilities: Fixed-rate debt $ 863 $ 7 $ 657 $ 1,563 $ 30 $ 1,474 $ 4,594 $ 4,217 Average interest rate 4.18 % 4.21 % 7.47 % 4.20 % 5.37 % 5.37 % 5.04 % Variable-rate debt $ — $ — $ — $ 50 $ — $ — $ 50 $ 50 Average interest rate — % — % — % 6.22 % — % — % 6.22 % Refer to Note 7: “Debt” in our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. 47
Biggest changeThe following table sets forth the contractual maturities and the total fair values as of December 31, 2023 for our financial instruments: Maturities by Period 2024 (1) 2025 2026 2027 2028 Thereafter Carrying Value Fair Value (in millions, excluding average interest rate) Liabilities: Fixed-rate debt $ 61 $ 657 $ 1,563 $ 30 $ 725 $ 750 $ 3,786 $ 3,626 Average interest rate 4.83 % 7.47 % 4.20 % 5.37 % 5.88 % 4.88 % 5.24 % ___________________________________________________________________________________ (1) Excludes the SF Mortgage Loan.
Item 7A. Quantitative and Qua litative Disclosures About Market Risk. We are exposed to market risk primarily from changes in interest rates, which may affect our future income, cash flows and fair value, depending on changes to interest rates.
Item 7A. Quantitative and Qualitative Disclosures About Market Risk. We are exposed to market risk primarily from changes in interest rates, which may affect our future income, cash flows and fair value, depending on changes to interest rates.
In certain situations, we may seek to reduce cash flow volatility associated with changes in interest rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. Interest Rate Risk We are exposed to interest rate risk on our variable-rate debt.
In certain situations, we may seek to reduce cash flow volatility associated with changes in interest rates by entering into financial arrangements intended to provide a hedge against a portion of the risks associated with such volatility. 48 Table of Contents Interest Rate Risk As of December 31, 2023, there was no variable rate debt outstanding as we have no outstanding borrowings under our Revolver, which is our only variable-rate debt.
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The interest rate on our variable-rate debt discussed below is based on the secured overnight financing rate ("SOFR"), so we are most vulnerable to changes in this rate.
Added
Borrowings under our Revolver bear interest based on the secured overnight financing rate ("SOFR"). Our future interest rate risk may be affected by any future borrowings under our Revolver prior to the December 1, 2026 maturity date.
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Refer to Note 7: "Debt" in our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for additional information. 49 Table of Contents

Other PK 10-K year-over-year comparisons