TYSONS, VA—Park Hotels & Resorts Inc. has reported results for the second quarter ended June 30, 2020, and provided an operational update on COVID-19. Pro-forma RevPAR was $7.85, a decrease of 95.9% from the same period in 2019, and occupancy for Park’s 18 consolidated hotels open during the entirety of the second quarter was 20.8%.
“Without a doubt, the last five months have been the most challenging period our industry has ever faced as we continue to deal with widespread fear and uncertainty over COVID-19,” said Thomas J. Baltimore, Jr, chairman/president/CEO of Park. “Despite these headwinds, I am incredibly proud of the team’s proactive efforts, as we worked diligently alongside our partners to dramatically reduce operating expenses, while having the unwavering support from our lenders to help shore up our balance sheet. The focus has since shifted to the recovery phase, as we thoughtfully and methodically work to safely reopen hotels. While we cannot predict the path of the recovery, with $1.6 billion of liquidity available, Park remains well positioned to navigate the disruption from the COVID-19 pandemic.”
Q2 financial highlights:
- Net loss was $261 million and net loss attributable to stockholders was $259 million.
- Adjusted EBITDA was $122 million.
- Adjusted FFO attributable to stockholders was $175 million.
- Diluted loss per share was $1.10.
- Diluted Adjusted FFO per share was $0.75.
“Generally speaking, there are a number of factors we consider in determining when to reopen a hotel and at what capacity, including state and local audiences, demand and booking trends, airlift capacity, the potential to consolidate operations with neighboring Park hotels, and ultimately, the cost-benefit of opening versus remaining closed,” Baltimore said. “Accordingly, as restrictions started to ease in June, we reopened 10 hotels during the month, followed by another 10 hotels in July, all of which were done relatively quickly and with minimal start-up cost. Currently, we have 42 of our 60 hotels open, accounting for approximately 53% of our total room count.”
Park plans to open an additional 11 hotels by Sept. 30, which would bring the total number of properties open to 53 or 80% of its room count.
“We also continue to look aggressively at each department to improve efficiency and reduce costs as we seek to rightsize the operating model for the future, more specifically,” Baltimore said. “We are in the process of complexing operations across several key markets, looking to partner with neighboring hotels with similar operators to consolidate management positions where it makes sense.”
- Issued an aggregate $650 million of senior secured notes and utilized the net proceeds to repay $219 million of the company’s revolving credit facility $69 million of the term loan the company entered into in 2016. Park also repaid $100 million of the Revolver with existing cash.
- Increased total liquidity by $300 million, from $1.3 billion as of March 31, 2020 to $1.6 billion as of June 30, 2020
- Amended the company’s credit and term loan facilities to suspend all financial covenants through March 31, 2021 and exercised options to extend the Revolver maturity date to December 2021
- Amended certain mortgage loan agreements to defer interest and principal payments for three to six months and obtain temporary suspensions from required cash reserves
- Commenced the phased reopening of 20 of its previously suspended hotels, increasing the total number of hotels open to 42, or 53% of total room count
- Continued to take proactive measures to preserve cash and improved Park’s baseline cash burn rate to approximately $65 million from its original estimate in March of $85 million per month assuming all hotels have suspended operations
COVID-19 Action Plan Update
The following is an update on the actions Park and its hotel managers have taken to mitigate the effects of COVID-19 on its business:
- Continued pursuit of alternative sources of revenue, including but not limited to housing for applicable government authorities and hospitals, professional sports leagues and its media crews, as well as colleges and universities to house students for their upcoming school year as they look to mitigate potential COVID-19 exposures within their student population
- Issued an aggregate $650 million of Senior Secured Notes, further increasing liquidity to $1.6 billion (including the $0.3 billion of available capacity remaining under the Revolver)
- Commenced the phased reopening of 10 hotels during the second quarter of the 38 hotels previously suspended, increasing availability by 2,348 rooms, an additional 10 hotels and 2,885 rooms in July 2020, and selected restaurants and other outlets within the hotels
- Opened an additional 1,855 rooms at hotels that remained open throughout the second quarter
- Expects to have all but one of the current hotels open by the end of 2020