Park Hotels Earnings: Makes Progress Toward Exiting Two Financially Underwater San Francisco Hotels

Third-quarter results for Park Hotels and Resorts were relatively in line with our expectations, leading us to reaffirm our $26.50 fair value estimate for the no-moat company. Occupancy increased 250 basis points year over year to 73.9% in the third quarter, though that is below the 84.5% occupancy figure the company reported for the same portfolio of hotels in the third quarter of 2019. Average daily rate fell 0.5% year over year, though is up 6.9% over the third quarter of 2019. As a result, revenue per available room increased 3.0% year-over-year, which is slightly below our estimate of 6.1% growth and is now just 6.4% below the figure reported in the third quarter of 2019. The company reported same-store revenue growth of 3.9%, hotel EBITDA margin growth of 30 basis points to 26.3%, and hotel EBITDA growth of 5.0% for the quarter. This led to Park reporting adjusted funds from operations of $0.51 per share in the third quarter, a penny better than our $0.50 estimate and nine cents better than the $0.42 figure the company reported in the third quarter of 2022.