Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
The following discussion and analysis of the financial condition and results of operations of Park Hotels & Resorts Inc. (“we,” “us,” “our” or the “Company”) should be read in conjunction with the accompanying unaudited condensed consolidated financial statements, related notes included elsewhere in this Quarterly Report on Form 10-Q, and with our Annual Report on Form 10-K for the year ended December 31, 2025.
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (“Securities Act”), and Section 21E of the Securities Exchange Act of 1934, as amended (“Exchange Act”). Forward-looking statements include, but are not limited to our current expectations regarding the performance of our business, our financial results, our liquidity and capital resources, including the use of the remaining $600 million under our senior unsecured delayed draw term loan facility (“2025 Delayed Draw Term Loan”) and our $700 million delayed draw loan facility (“Bonnet Creek Mortgage Loan”), which will be secured by the 1,009-room Signia by Hilton Orlando Bonnet Creek and the 502-room Waldorf Astoria Orlando and associated golf course (collectively, the “Bonnet Creek complex”) when drawn upon, and the anticipated repayment of certain of our indebtedness, the completion of capital allocation priorities, the expected repurchase of our stock, the impact from macroeconomic factors (including elevated inflation and interest rates, potential economic slowdown or a recession and geopolitical conflicts or trends, including trade policy, travel barriers or changes in travel preferences for U.S. destinations, including as a result of another government or agency shutdown), the effects of competition, the effects of future legislation, executive action or regulations, tariffs, the expected completion of anticipated dispositions, including of our Non-Core hotels (as defined below), the declaration, payment and any change in amounts of future dividends and other non-historical statements. Forward-looking statements include all statements that are not historical facts, and in some cases, can be identified by the use of forward-looking terminology such as the words “outlook,” “believes,” “expects,” “potential,” “continues,” “may,” “will,” “should,” “could,” “seeks,” “projects,” “predicts,” “intends,” “plans,” “estimates,” “anticipates”, “hopes” or the negative version of these words or other comparable words. You should not rely on forward-looking statements since they involve known and unknown risks, uncertainties and other factors which are, in some cases, beyond our control and which could materially affect our results of operations, financial condition, cash flows, performance or future achievements or events.
All such forward-looking statements are based on current expectations of management and therefore involve estimates and assumptions that are subject to risks, uncertainties and other factors that could cause actual results to differ materially from the results expressed in these forward-looking statements. You should not put undue reliance on any forward-looking statements and we urge investors to carefully review the disclosures we make concerning risks and uncertainties in Item 1A: “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2025, as such factors may be updated from time to time in our periodic filings with the Securities and Exchange Commission (“SEC”), which are accessible on the SEC’s website at www.sec.gov, as well as risks, uncertainties and other factors discussed in this Quarterly Report on Form 10-Q. Except as required by law, we undertake no obligation to update or revise publicly any forward-looking statements, whether as a result of new information, future events or otherwise.
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 30 hotels, consisting of premium-branded hotels and resorts with over 21,000 rooms, located in prime U.S. markets and its territories. Our strategic focus is on our “Core” portfolio, which consists primarily of hotels and resorts that cater to group and leisure demand and includes 20 of our consolidated hotels that contribute over 90% of our Hotel Adjusted EBITDA as well as one unconsolidated joint venture. Over 96% of rooms in our Core portfolio are luxury and upper upscale, and our Core hotels are located 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.
Our objective is to be the preeminent lodging real estate investment trust (“REIT”), focused on consistently delivering superior, risk-adjusted returns to stockholders through active asset management and a thoughtful external growth strategy while maintaining a strong and flexible balance sheet. As a pure-play real estate company with direct access to capital and independent financial resources, we believe our enhanced ability to implement compelling return on investment initiatives represents a significant embedded growth opportunity, particularly for our Core portfolio. Finally, given our scale and investment expertise, we believe we will be able to successfully execute single-asset and portfolio acquisitions
and dispose of all nine remaining “Non-Core” hotels, to further enhance the value and diversification of our assets throughout the lodging cycle.
We operate our business through three operating segments, our consolidated Core hotels, consolidated Non-Core hotels and unconsolidated hotels, following the shift in our business strategy to dispose of all Non-Core hotels. Only our consolidated Core hotels and consolidated Non-Core hotels are reportable segments. Refer to Note 11: “Business Segment Information” in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information regarding our operating segments. Core and Non-Core hotel financial data presented is based on our consolidated hotels only.
Outlook
Geopolitical conflicts and trends, coupled with economic disruptions, including as a result of elevated interest and inflation rates, may adversely affect our business by affecting consumer sentiment and demand for both domestic and international travel. Additionally, heightened uncertainty due to ongoing changes to trade policy, tax policy and disruptions to government spending has resulted in inflationary concerns and changes in demand and travel preferences, which may affect the lodging industry. Recently, we have relied on the performance of our hotels, including benefits from demand from the World Cup and the 250th anniversary celebrations of the U.S., as well as active asset management to mitigate the effects of current macroeconomic uncertainty. 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, geopolitical conflicts or trends, disapproval of U.S. foreign or domestic policy, or another government or agency shutdown, we are cautiously optimistic for the remainder of 2026. This outlook is based on anticipated benefits from transformative renovations at certain of our hotels, including the recently completed comprehensive renovation and repositioning of the Royal Palm South Beach Miami, a Tribute Portfolio Resort (“Royal Palm”), which reopened in July 2026, and the benefits of divesting of our Non-Core hotels.
Key Business Metrics Used by Management
Occupancy
Occupancy represents the total number of room nights sold divided by the total number of room nights available at a hotel or group of hotels. Occupancy measures the utilization of our hotels’ available capacity. We use occupancy to gauge demand at a specific hotel or group of hotels in a given period. Occupancy levels also help us determine achievable Average Daily Rate (“ADR”) levels as demand for rooms increases or decreases.
Average Daily Rate
ADR represents rooms revenue divided by total number of room nights sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the hotel industry, and we use ADR to assess pricing levels that we are able to generate by type of customer, as changes in rates have a more pronounced effect on overall revenues and incremental profitability than changes in occupancy, as described above.
Revenue per Available Room
Revenue per available room (“RevPAR”) represents rooms revenue divided by the total number of room nights available to guests for a given period. We consider RevPAR to be a meaningful indicator of our performance as it provides a metric correlated to two primary and key factors of operations at a hotel or group of hotels: occupancy and ADR. RevPAR is also a useful indicator in measuring performance over comparable periods.
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. 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).
EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA
EBITDA, presented herein, reflects net income (loss) excluding depreciation and amortization, interest income, interest expense, income taxes and also interest income and expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates.
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.
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. 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. In addition, our definitions of EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA may not be comparable to similarly titled measures of other companies.
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.
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. GAAP. Some of these limitations are:
•EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect our interest expense;
•EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect our income tax expense;
•EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations; and
•other companies in our industry may calculate EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA differently, limiting their usefulness as comparative measures.
We do not use or present EBITDA, Adjusted EBITDA and Hotel Adjusted EBITDA as measures of our liquidity or cash flow. These measures have limitations as analytical tools and should not be considered either in isolation or as a substitute for cash flow or other methods of analyzing our cash flows and liquidity as reported under U.S. GAAP. 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. 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.
The following table provides a reconciliation of Net income (loss) to Hotel Adjusted EBITDA:
| | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| | | | | | | |
| (in millions) |
| Net income (loss) | $ | 50 | | | $ | (2) | | | $ | 62 | | | $ | (59) | |
| Depreciation and amortization expense | 66 | | | 122 | | | 130 | | | 191 | |
| Interest income | (2) | | | (2) | | | (3) | | | (5) | |
| Interest expense | 52 | | | 53 | | | 103 | | | 105 | |
Interest expense associated with hotels in receivership(1) | — | | | 16 | | | — | | | 32 | |
| Income tax expense | 5 | | | 1 | | | 6 | | | 2 | |
| Interest income and expense, income tax and depreciation and amortization included in equity in earnings from investments in affiliates | 1 | | | 2 | | | 1 | | | 4 | |
| EBITDA | 172 | | | 190 | | | 299 | | | 270 | |
Gain on sales of assets, net(2) | (2) | | | (1) | | | (1) | | | (1) | |
Gain on derecognition of assets(1) | — | | | (16) | | | — | | | (32) | |
| | | | | | | |
| Share-based compensation expense | 6 | | | 5 | | | 10 | | | 9 | |
| Impairment and casualty loss | 22 | | | — | | | 27 | | | 70 | |
| Other items | — | | | 5 | | | 6 | | | 11 | |
| Adjusted EBITDA | 198 | | | 183 | | | 341 | | | 327 | |
| Less: Adjusted EBITDA from investments in affiliates | (5) | | | (5) | | | (11) | | | (13) | |
Add: All other(3) | 15 | | | 13 | | | 29 | | | 28 | |
| Hotel Adjusted EBITDA | 208 | | | 191 | | | 359 | | | 342 | |
| Less: Adjusted EBITDA from Non-Core hotels | (26) | | | (25) | | | (36) | | | (32) | |
| Core Hotel Adjusted EBITDA | $ | 182 | | | $ | 166 | | | $ | 323 | | | $ | 310 | |
_____________________________________
(1)For the three and six months ended June 30, 2025, represents accrued interest expense associated with the default of the $725 million non-recourse CMBS loan (“SF Mortgage Loan”), which was offset by a gain on derecognition for the corresponding increase of the contract asset on our condensed consolidated balance sheets. The SF Mortgage Loan was assumed by the buyer of 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”), which were sold by the court-appointed receiver in November 2025.
(2)For the three and six months ended June 30, 2026, includes a $4 million gain on the sale of our ownership interest in the Embassy Suites by Hilton Alexandria Old Town included in other gain (loss), net in our condensed consolidated statements of operations.
(3)Includes other revenues and other expenses, non-income taxes on leases with our taxable REIT subsidiaries 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. We calculate funds from (used in) operations (“FFO”) attributable to stockholders for a given operating period in accordance with standards established by the National Association of Real Estate Investment Trusts (“Nareit”), as net income (loss) attributable to stockholders (calculated in accordance with U.S. GAAP), excluding depreciation and amortization, gains or losses on sales of assets, impairment, and the cumulative effect of changes in accounting principles, plus adjustments for unconsolidated joint ventures. Adjustments for unconsolidated joint ventures are calculated to reflect our pro rata share of the FFO of those entities on the same basis. As noted by Nareit in its December 2018 “Nareit Funds from Operations White Paper – 2018 Restatement,” since real estate values historically have risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For these reasons, Nareit adopted the FFO metric in order to promote an industry-wide measure of REIT operating performance. We believe Nareit FFO provides useful information to investors regarding our operating performance and can facilitate comparisons of operating performance between periods and between REITs. 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. 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.
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. 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 adjust Nareit FFO attributable to stockholders for the following items, which may occur in any period, and refer to this measure as Adjusted FFO attributable to stockholders:
•Costs associated with hotel acquisitions or dispositions expensed during the period;
•Severance expense;
•Share-based compensation expense;
•Casualty gains or losses; and
•Other items that we believe are not representative of our current or future operating performance.
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: | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | Six Months Ended June 30, |
| 2026 | | 2025 | | 2026 | | 2025 |
| | | | | | | |
| (in millions, except per share amounts) |
| Net income (loss) attributable to stockholders | $ | 47 | | | $ | (5) | | | $ | 58 | | | $ | (62) | |
| Depreciation and amortization expense | 66 | | | 122 | | | 130 | | | 191 | |
| Depreciation and amortization expense attributable to noncontrolling interests | (1) | | | (1) | | | (2) | | | (2) | |
Gain on sales of assets, net(1) | (2) | | | (1) | | | (1) | | | (1) | |
Gain on derecognition of assets(2) | — | | | (16) | | | — | | | (32) | |
| | | | | | | |
| Impairment loss | 20 | | | — | | | 25 | | | 70 | |
| Equity investment adjustments: | | | | | | | |
Equity in earnings from investments in affiliates | (1) | | | (2) | | | (2) | | | (2) | |
| Pro rata FFO of investments in affiliates | 3 | | | 4 | | | 3 | | | 5 | |
| Nareit FFO attributable to stockholders | 132 | | | 101 | | | 211 | | | 167 | |
| | | | | | | |
| Share-based compensation expense | 6 | | | 5 | | | 10 | | | 9 | |
Interest expense associated with hotels in receivership(2) | — | | | 16 | | | — | | | 32 | |
| Other items | 2 | | | 7 | | | 9 | | | 13 | |
| Adjusted FFO attributable to stockholders | $ | 140 | | | $ | 129 | | | $ | 230 | | | $ | 221 | |
Nareit FFO per share – Diluted(3) | $ | 0.66 | | | $ | 0.51 | | | $ | 1.05 | | | $ | 0.83 | |
Adjusted FFO per share – Diluted(3) | $ | 0.70 | | | $ | 0.64 | | | $ | 1.15 | | | $ | 1.10 | |
_____________________________________
(1)For the three and six months ended June 30, 2026, includes a $4 million gain on the sale of our ownership interest in the Embassy Suites by Hilton Alexandria Old Town included in other gain (loss), net in our condensed consolidated statements of operations.
(2)For the three and six months ended June 30, 2025, represents accrued interest expense associated with the default of the SF Mortgage Loan, which was offset by a gain on derecognition for the corresponding increase of the contract asset on our condensed consolidated balance sheets. The SF Mortgage Loan was assumed by the buyer of the Hilton San Francisco Hotels, which were sold by the court-appointed receiver in November 2025.
(3)Per share amounts are calculated based on unrounded numbers.
Results of Operations
Since January 1, 2025, we disposed of seven consolidated Non-Core hotels. The results of operations of these Non-Core hotels are included in our consolidated results only during our period of ownership.
Hotel Revenues and Operating Expenses
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Non-Core Hotels |
| 2026 | | 2025 | | Change | | Change from Core Hotels | | Change from Remaining Non-Core Hotels | | | | Change from Disposed Hotels |
| | | | | | | | | | | | | |
| (in millions) |
| Rooms revenue | $ | 401 | | | $ | 401 | | | $ | — | | | $ | 20 | | | $ | 3 | | | | | $ | (23) | |
| Food and beverage revenue | 188 | | | 180 | | | 8 | | | 13 | | | — | | | | | (5) | |
| Ancillary hotel revenue | 67 | | | 68 | | | (1) | | | 2 | | | — | | | | | (3) | |
| Rooms expense | 104 | | | 105 | | | (1) | | | 5 | | | 1 | | | | | (7) | |
| Food and beverage expense | 125 | | | 122 | | | 3 | | | 7 | | | — | | | | | (4) | |
| Other departmental and support expense | 149 | | | 152 | | | (3) | | | 6 | | | 1 | | | | | (10) | |
| Other property expense | 42 | | | 50 | | | (8) | | | (1) | | | (4) | | | | | (3) | |
| Management fees expense | 33 | | | 31 | | | 2 | | | 2 | | | — | | | | | — | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | | | Non-Core Hotels |
| 2026 | | 2025 | | Change | | Change from Core Hotels | | Change from Remaining Non-Core Hotels | | | | Change from Disposed Hotels |
| | | | | | | | | | | | | |
| (in millions) |
| Rooms revenue | $ | 757 | | | $ | 764 | | | $ | (7) | | | $ | 24 | | | $ | 7 | | | | | $ | (38) | |
| Food and beverage revenue | 370 | | | 362 | | | 8 | | | 18 | | | (1) | | | | | (9) | |
| Ancillary hotel revenue | 127 | | | 131 | | | (4) | | | 1 | | | — | | | | | (5) | |
| Rooms expense | 201 | | | 205 | | | (4) | | | 8 | | | 1 | | | | | (13) | |
| Food and beverage expense | 247 | | | 245 | | | 2 | | | 11 | | | (1) | | | | | (8) | |
| Other departmental and support expense | 294 | | | 303 | | | (9) | | | 8 | | | 1 | | | | | (18) | |
| Other property expense | 96 | | | 107 | | | (11) | | | — | | | (4) | | | | | (7) | |
| Management fees expense | 63 | | | 61 | | | 2 | | | 3 | | | — | | | | | (1) | |
Group, transient, contract and other rooms revenue for the three and six months ended June 30, 2026, as well as the change for each type of rooms revenue compared to the same periods in 2025 were as follows:
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended June 30, | | | | Non-Core Hotels |
| 2026 | | 2025 | | Change | | Change from Core Hotels | | Change from Remaining Non-Core Hotels | | | | Change from Disposed Hotels |
| | | | | | | | | | | | | |
| (in millions) |
| Group rooms revenue | $ | 129 | | | $ | 121 | | | $ | 8 | | | $ | 9 | | | $ | 3 | | | | | $ | (4) | |
| Transient rooms revenue | 245 | | | 250 | | | (5) | | | 9 | | | — | | | | | (14) | |
| Contract rooms revenue | 18 | | | 21 | | | (3) | | | 2 | | | — | | | | | (5) | |
| Other rooms revenue | 9 | | | 9 | | | — | | | — | | | — | | | | | — | |
| Rooms revenue | $ | 401 | | | $ | 401 | | | $ | — | | | $ | 20 | | | $ | 3 | | | | | $ | (23) | |
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, | | | Non-Core Hotels | | |
| 2026 | | 2025 | | Change | | Change from Core Hotels | Change from Remaining Non-Core Hotels | | Change from Disposed Hotels | | |
| | | | | | | | | | | | |
| (in millions) | | |
| Group rooms revenue | $ | 254 | | | $ | 245 | | | $ | 9 | | | $ | 11 | | $ | 5 | | | $ | (7) | | | |
| Transient rooms revenue | 449 | | | 464 | | | (15) | | | 9 | | — | | | (24) | | | |
| Contract rooms revenue | 36 | | | 38 | | | (2) | | | 4 | | 1 | | | (7) | | | |
| Other rooms revenue | 18 | | | 17 | | | 1 | | | — | | 1 | | | — | | | |
| Rooms revenue | $ | 757 | | | $ | 764 | | | $ | (7) | | | $ | 24 | | $ | 7 | | | $ | (38) | | | |
The changes in hotel revenues and operating expenses for our Core hotels during the three and six months ended June 30, 2026 compared to the same periods in 2025 were primarily attributable to increases at the Hilton Hawaiian Village Waikiki Beach Resort, Bonnet Creek complex, Casa Marina Key West, Curio Collection, New York Hilton Midtown and the Hilton Santa Barbara Beachfront Resort in Southern California, partially offset by decreases at our hotels in Miami and New Orleans.
The Hilton Hawaiian Village Waikiki Beach Resort benefited from the completion of the final phase of guestroom renovations at the Rainbow Tower and experienced an increase in food and beverage revenue of 29%, or approximately $6 million, and 20%, or approximately $8 million, for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025. Additionally, the Hilton Hawaiian Village Waikiki Beach Resort benefited from an over 13% increase in group demand for the three months ended June 30, 2026 and an approximately 10% increase in transient demand for both the three and six months ended June 30, 2026, resulting in an increase in occupancy of 12.0 percentage points and 8.3 percentage points, respectively, compared to the same periods in 2025.
The Waldorf Astoria Orlando benefited from a 40% increase in transient demand, resulting in increases in occupancy and ADR of 9.1 percentage points and 2.2%, respectively, for the three months ended June 30, 2026, while benefiting from increases in both group and transient demand for the six months ended June 30, 2026, resulting in increases in occupancy and ADR of 9.7 percentage points and 3.1%, respectively, compared to the same periods in 2025. The Signia by Hilton Orlando Bonnet Creek benefited from an approximately 20% increase in group demand for both the three and six months ended June 30, 2026, resulting in increases in occupancy and ADR of 6.0 percentage points and 3.1%, respectively, for the three months ended June 30, 2026 and 6.1 percentage points and 4.2%, respectively, for the six months ended June 30, 2026, compared to the same periods in 2025. Additionally, the Waldorf Astoria Orlando and the Signia by Hilton Orlando Bonnet Creek experienced a combined increase in food and beverage revenue of 10%, or over $3 million, and 13%, or approximately $9 million for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025 as a result of continued benefits derived from the comprehensive renovation and expansion projects at the Bonnet Creek complex completed in early 2024.
The Casa Marina Key West, Curio Collection, benefited from increases in group demand of 44% and 14% for the three and six months ended June 30, 2026, respectively, and increases in transient demand of 10% and 12%, respectively, compared to the same periods in 2025, resulting in increases in occupancy of 12.3 percentage points and 8.7 percentage points, respectively, as well as increases in food and beverage revenue of 36% and 23%, respectively.
The New York Hilton Midtown benefited from an increase in transient demand for the three months ended June 30, 2026, resulting in an increase in ADR of 2.2%, while benefiting from a 10% increase in group demand for the six months ended June 30, 2026, resulting in an increase in occupancy of 2.9 percentage points, compared to the same periods in 2025. Food and beverage revenue also increased by 15% and 10% for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025.
The Hilton Santa Barbara Beachfront Resort benefited from increases in group demand of 36% and 24% for the three and six months ended June 30, 2026, respectively, and increases in transient demand of 20% and 21%, respectively, compared to the same periods in 2025, resulting in increases in occupancy of 17.7 percentage points and 15.2 percentage points, respectively, in addition to increases in ADR of 1.4% and 2.2%, respectively. The hotel also experienced an increase in food and beverage revenue of 20% and 22% for the three and six months ended June 30, 2026, respectively, compared to the same periods in 2025.
These increases were offset by decreases in hotel revenues at our hotels in Miami and New Orleans. The Royal Palm in Miami suspended operations for a transformative renovation that began in May 2025 and reopened in July 2026. The Hilton New Orleans Riverside experienced decreases in group and transient demand for the six months ended June 30, 2026, primarily driven by the Super Bowl that was held in February 2025, with ADR decreasing 8.7% compared to the same period in 2025.
Impairment and casualty loss
During the six months ended June 30, 2026, we recognized impairment losses of approximately $5 million related to the Hilton Seattle Airport & Conference Center, which was sold in April 2026, and approximately $2 million related to the Hilton Short Hills, which was sold in July 2026, as the respective gross proceeds were less than the net book value of each Non-Core hotel. Additionally, during the three months ended June 30, 2026, we recognized an impairment loss of approximately $18 million related to two of our Non-Core hotels, due to our inability to recover the carrying value of the assets. During the six months ended June 30, 2025, we recognized an impairment loss of approximately $70 million related to the Hyatt Centric Fisherman’s Wharf, which was sold in May 2025, as the gross proceeds were less than the net book value of the Non-Core hotel. Refer to Note 7: “Fair Value Measurements” in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.
Depreciation and amortization
Depreciation expense for the three and six months ended June 30, 2025 includes accelerated depreciation of approximately $56 million recognized in connection with the full-scale renovation at the Royal Palm South Beach Miami, a Tribute Portfolio Resort, which began in May 2025 and was completed in July 2026.
Corporate general and administrative
| | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2026 | | 2025 | | Percent Change | | 2026 | | 2025 | | Percent Change |
| | | | | | | | | | | |
| (in millions) | | | | (in millions) | | |
| General and administrative expenses | $ | 13 | | | $ | 13 | | | — | % | | $ | 26 | | | $ | 26 | | | — | % |
| Share-based compensation expense | 6 | | | 5 | | | 20.0 | | | 10 | | | 9 | | | 11.1 | |
| Other corporate expenses | 1 | | | 1 | | | — | | | 2 | | | 2 | | | — | |
| Total corporate general and administrative | $ | 20 | | | $ | 19 | | | 5.3 | % | | $ | 38 | | | $ | 37 | | | 2.7 | % |
Gain on derecognition of assets
During the three and six months ended June 30, 2025, we recognized a gain of $16 million and $32 million, respectively, from the accrued interest expense associated with the default of the SF Mortgage Loan, which resulted in a corresponding increase of the contract asset in our condensed consolidated balance sheets. We ceased accruing interest expense when the SF Mortgage Loan was assumed by the buyer of the Hilton San Francisco Hotels, which were sold by the court-appointed receiver in November 2025.
Non-operating Income and Expenses
Interest income
Interest income decreased $2 million during the six months ended June 30, 2026 compared to the same period in 2025 primarily as a result of a decrease in average cash balances as we have reinvested cash into our Core portfolio, including the full-scale renovation of the Royal Palm.
Interest expense
Interest expense associated with our debt for the three and six months ended June 30, 2026 and 2025 were as follows: | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | | |
| Three Months Ended
June 30, | | Six Months Ended
June 30, |
| 2026 | | 2025 | | Percent Change | | 2026 | | 2025 | | Percent Change |
| | | | | | | | | | | |
| (in millions) | | | | (in millions) | | |
HHV Mortgage Loan(1) | $ | 14 | | | $ | 14 | | | — | % | | $ | 27 | | | $ | 27 | | | — | % |
Other mortgage loans(2) | 4 | | | 5 | | | (20.0) | | | 8 | | | 8 | | | — | |
Revolver(3) | 1 | | | 1 | | | — | | | 2 | | | 2 | | | — | |
2024 Term Loan(4) | 3 | | | 3 | | | — | | | 6 | | | 6 | | | — | |
2025 Delayed-Draw Term Loan(2) | 1 | | | — | | | 100.0 | | | 1 | | | — | | | 100.0 | |
| | | | | | | | | | | |
2028 Senior Notes(5) | 10 | | | 10 | | | — | | | 21 | | | 21 | | | — | |
2029 Senior Notes(5) | 9 | | | 9 | | | — | | | 18 | | | 18 | | | — | |
2030 Senior Notes(5) | 9 | | | 9 | | | — | | | 19 | | | 19 | | | — | |
| Other | 1 | | | 2 | | | (50.0) | | | 1 | | | 4 | | | (75.0) | |
| Total interest expense | $ | 52 | | | $ | 53 | | | (1.9) | % | | $ | 103 | | | $ | 105 | | | (1.9) | % |
_____________________________________
(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”).
(2)Our $800 million 2025 Delayed Draw Term Loan was incurred in September 2025. In June 2026, we drew $200 million from our 2025 Delayed Draw Term Loan to fully repay the $120 million mortgage loan secured by the Hyatt Regency Boston, which was scheduled to mature on July 1, 2026, with the remaining proceeds to be used for general corporate purposes.
(3)As of June 30, 2026, we had $1 billion of available capacity under our senior unsecured revolving credit facility (“Revolver”).
(4)The $200 million senior unsecured term loan (“2024 Term Loan”) was incurred in May 2024.
(5)Park Intermediate Holdings LLC, PK Domestic Property LLC, an indirect subsidiary of the Company, and PK Finance Co Issuer Inc. issued an aggregate of $725 million of senior notes due 2028 (“2028 Senior Notes”) in September 2020, an aggregate of $750 million of senior notes due 2029 (“2029 Senior Notes”) in May 2021 and an aggregate of $550 million of senior notes due 2030 (“2030 Senior Notes”) in May 2024.
Interest expense associated with hotels in receivership
During the three and six months ended June 30, 2025, interest expense of $16 million and $32 million, respectively, represents accrued interest associated with the default of the SF Mortgage Loan. We ceased accruing interest expense when the SF Mortgage Loan was assumed by the buyer of the Hilton San Francisco Hotels, which were sold by the court-appointed receiver in November 2025.
Other gain (loss), net
During the three and six months ended June 30, 2026, we recognized a net gain of $9 million for both periods primarily related to the proceeds of $4 million from the sale of our ownership interest in the unconsolidated joint venture that owns and operates the Embassy Suites by Hilton Alexandria Old Town and the $6 million payment received associated with the ground lease termination of the Embassy Suites by Hilton Austin Downtown South Congress.
Income tax expense
Income tax expense increased $4 million during both the three and six months ended June 30, 2026, compared to the same periods in 2025, primarily related to an increase in the year-to-date ordinary income that our estimated annual effective tax rate is applied to.
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 June 30, 2026, we had total cash and cash equivalents of $264 million and $38 million of restricted cash. 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.
With $1 billion available under our Revolver, $600 million available under our $800 million 2025 Delayed Draw Term Loan and our undrawn $700 million Bonnet Creek Mortgage Loan, in addition to the $264 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. In June 2026, we drew $200 million from our 2025 Delayed Draw Term Loan to fully repay the $120 million mortgage loan secured by the Hyatt Regency Boston, which was scheduled to mature on July 1, 2026, with the remaining proceeds to be used for general corporate purposes. We intend to further draw upon the 2025 Delayed Draw Term Loan as well as the Bonnet Creek Mortgage Loan during the third quarter to fund the repayment of the $1.3 billion HHV Mortgage Loan maturing in the fourth quarter of 2026. Following the repayment of the HHV Mortgage Loan, we have no significant maturities until the fourth quarter of 2028. Refer to Note 6: “Debt” in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information. 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. 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.
Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including reimbursements to our hotel managers for payroll and related benefits, costs associated with the operation of our hotels, interest and contractually due principal payments on our outstanding indebtedness, capital expenditures for in-progress renovations and maintenance at our hotels, corporate general and administrative expenses and dividends to our stockholders. In April 2026, we declared a second quarter dividend of $0.25 per share that was paid on July 15, 2026 to stockholders of record as of June 30, 2026. In addition, we declared a third quarter dividend of $0.25 per share in July 2026 to be paid on October 15, 2026 to stockholders of record as of September 30, 2026. Many of the other expenses associated with our operations are relatively fixed, including portions of rent expense, property taxes, insurance and interest expense on our debt. Since we generally are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, the resulting decline in our revenues can have a greater adverse effect on our net cash flow, margins and profits. Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, capital improvements at our hotels, and costs associated with potential acquisitions.
Our commitments to fund capital expenditures for renovations and maintenance at our hotels will be funded by cash and cash equivalents, restricted cash to the extent permitted by our lending agreements and cash flow from operations. We have construction contract commitments of approximately $137 million for capital expenditures at our properties, and our contracts contain clauses that allow us to cancel all or some portion of the work. Refer to Note 12: “Commitments and Contingencies” in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information. 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.
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.
Stock Repurchase Program
In February 2025, our Board of Directors authorized and approved a stock repurchase program allowing us to repurchase up to $300 million of our common stock over a two-year period ending in February 2027, subject to any applicable limitations or restrictions set forth in our credit facility and indentures related to our senior notes. Stock repurchases may be made through open market purchases, including through Rule 10b5-1 trading programs, in privately negotiated transactions, or in such other manner that would comply with applicable securities laws. 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. As of June 30, 2026, $275 million remained available for stock repurchases.
Sources and Uses of Our Cash and Cash Equivalents
The following tables summarize our net cash flows and key metrics related to our liquidity:
| | | | | | | | | | | | | | | | | |
| Six Months Ended June 30, |
| 2026 | | 2025 | | Percent Change |
| | | | | |
| (in millions) | | |
| Net cash provided by operating activities | $ | 200 | | | $ | 194 | | | 3.1 | % |
| Net cash used in investing activities | (116) | | | (45) | | | 157.8 | |
| Net cash used in financing activities | (46) | | | (242) | | | (81.0) | |
Operating Activities
Cash flow from operating activities are primarily generated from the operating income generated at our hotels. The $6 million increase in net cash provided by operating activities for the six months ended June 30, 2026 compared to the six months ended June 30, 2025 was primarily due to increases in occupancy across a majority of our portfolio and timing of interest paid, offset by timing of receipts from our customers and payments to our vendors and other third parties, as well as the loss of cash from operations from the Royal Palm, which suspended operations in May 2025 for a full-scale renovation and reopened in July 2026.
Investing Activities
The $116 million in net cash used in investing activities for the six months ended June 30, 2026 was attributable to $147 million of capital expenditures, partially offset by $31 million of net proceeds from the disposal of the Hilton Checkers Los Angeles, Hilton Seattle Airport & Conference Center and Embassy Suites by Hilton Alexandria Old Town.
The $45 million in net cash used in investing activities for the six months ended June 30, 2025 was attributable to $120 million of capital expenditures, partially offset by $75 million of net proceeds from the sale of the Hyatt Centric Fisherman’s Wharf.
Financing Activities
The $46 million in net cash used in financing activities for the six months ended June 30, 2026 was primarily attributable to $174 million of mortgage loan and credit facility repayments, including the mortgage loan secured by the Hyatt Regency Boston, and $100 million of dividends paid, partially offset by $250 million drawn from our credit facilities.
The $242 million in net cash used in financing activities for the six months ended June 30, 2025 was primarily attributable to $181 million of dividends paid and the repurchase of approximately 3.5 million shares of our common stock for $45 million.
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. 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 REIT income. Consequently, 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. 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.
We declared the following dividends to holders of our common stock during 2026:
| | | | | | | | | | | | | | |
| Record Date | | Payment Date | | Dividend per Share |
| March 31, 2026 | | April 15, 2026 | | $ | 0.25 | |
| June 30, 2026 | | July 15, 2026 | | $ | 0.25 | |
| September 30, 2026 | | October 15, 2026 | | $ | 0.25 | |
| | | | |
Debt
As of June 30, 2026, our total indebtedness was approximately $3.9 billion, including over $2 billion of our Senior Notes, and excluding our share of debt from investments in affiliates. Substantially all the debt of the unconsolidated affiliate is secured solely by the affiliate’s assets or is guaranteed by other partners without recourse to us. Refer to Note 6: “Debt” in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.
Critical Accounting Estimates
The preparation of our financial statements in accordance with U.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in our unaudited condensed consolidated financial statements and accompanying footnotes. We have discussed those estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report on Form 10-K for the year ended December 31, 2025, filed with the SEC on February 20, 2026. There have been no material changes to our critical accounting policies or the methods or assumptions we apply.