Park Hotels (PK) Q2 FFO Beats by 237%

Park Hotels & Resorts (PK -3.94%), a real estate investment trust (REIT) focused on large-scale hotels in key urban and resort markets, posted its Q2 2025 earnings on July 31. The release showcased a notable outperformance on its adjusted funds from operations (FFO) per share, coming in at $0.64, well above analyst estimates of $0.19 (non-GAAP). Revenue (GAAP) reached $672 million. However, revenue fell (2.0%) year-over-year. Operational results showed some softness, with metrics like comparable revenue per available room (RevPAR) dipping (1.6%) year over year. Despite this, the quarter's performance demonstrated effective cost control, steady progress on asset sales, and a maintained quarterly dividend of $0.25 per share.

Source: Analyst estimates provided by FactSet. Management expectations based on management's guidance, as provided in Q1 2025 earnings report.

Company Overview and Strategic Focus

Park Hotels & Resorts operates 39 hotel properties with around 25,000 rooms as of February 20, mainly in the upper-upscale and luxury segments. Its portfolio includes well-known brands such as Hilton, Marriott, and Hyatt, offering a mix of urban, resort, and conference-focused locations. Park’s business centers on generating cash flow from hotel operations and increasing the value of its properties through renovations, asset sales, and selective acquisitions.

The company’s current strategy highlights several priorities. It continues to recycle capital by selling non-core assets and reinvesting in high-return projects, such as comprehensive renovations at signature properties. A strong focus on cost control and maintaining a conservative balance sheet has become even more critical, given the sector’s exposure to market cycles and high fixed costs. These efforts support the company's ability to fund dividends, pay down debt, and pursue growth opportunities.

Quarter in Detail: Financials, Operations, and Asset Moves

The earnings announcement for the quarter showed both strengths and areas under pressure. Adjusted FFO per share, a key REIT profitability measure, was $0.64 (non-GAAP), outperforming consensus by $0.45 (non-GAAP) but fell compared to last year as a result of lower comparable RevPAR and the impact of suspended operations at Royal Palm South Beach Miami for a major renovation.

Comparable RevPAR was $195.68, down (1.6%) from last year. RevPAR is calculated as rooms revenue divided by the total number of room nights available. Excluding properties closed for renovation, comparable RevPAR was nearly flat, decreasing by 0.6%, reflecting a stabilizing but not expanding business. The company’s urban hotel portfolio provided a bright spot, generating a 3% increase in comparable RevPAR. Key contributors included the JW Marriott San Francisco Union Square, which saw a 17% increase in comparable RevPAR, and Hilton New York Midtown (up 10%) in comparable RevPAR. On the resort side, the Waldorf Astoria Orlando achieved a sharp post-renovation RevPAR increase of nearly 24% compared to Q2 2024, while Hilton Caribe in Puerto Rico posted an 18% rise in RevPAR compared to the prior year. Conversely, the Hilton Hawaiian Village Waikiki Beach Resort continued to recover from labor strikes in late 2024, posting a significant year-over-year decline in the first quarter.

Asset management was active during the period. The company completed the sale of Hyatt Centric Fisherman’s Wharf in San Francisco for $80 million, representing a 64.0x 2024 EBITDA multiple. It also announced the permanent closure of Embassy Suites Kansas City Plaza, which had a limited financial impact. Major renovation projects are underway, including the $103 million overhaul of Royal Palm South Beach Miami, which began in the second quarter. Operations at the property have been suspended since mid-May, with reopening scheduled for May 2026. Management estimates a $17 million disruption to Hotel Adjusted EBITDA related to the closure for FY2025.

Capital expenditure totaled nearly $45 million in the second quarter, with up to $330 million in capital expenditures planned for the full year. Ongoing renovations at key properties in Hawaii, New Orleans, and Miami aim to drive higher future returns -- for example, the Royal Palm renovation, which commenced in the second quarter and is expected to reopen in May 2026, is projected to deliver a 15% to 20% return on investment after reopening. The company's asset sale program remains a focus, with additional non-core hotels being marketed for sale.

The quarter marked ongoing progress in capital allocation. Over recent years, the company has repurchased more than 15% of its outstanding shares over the last three years, and the board maintained the regular quarterly dividend at $0.25 per share, resulting in an annualized yield near 9% as of late July 2025, based on Park’s closing stock price as of July 29, 2025. This payout underscores management’s confidence in ongoing earnings and cash flow, even as select operational metrics contract.

On the balance sheet, liquidity was approximately $1.3 billion as of June 30, supported by a $950 million undrawn revolving credit facility as of June 30. Net debt (non-GAAP) stood at $3.7 billion as of June 30, with an average maturity of 2.7 years as of June 30, but high leverage remains an area to watch. A notable near-term item is the $1.3 billion mortgage maturing on the Hilton Hawaiian Village Waikiki Beach Resort in November 2026. Management expressed confidence in its ability to address the Hilton Hawaiian Village mortgage maturity, as discussed on the first quarter earnings call, though this will remain a focus given current debt levels and broader interest rate trends.

Outlook and What to Watch

Looking ahead, management revised its full-year guidance to reflect lower expectations for comparable RevPAR, now estimated at $184–$187 (down from $185–$191 in June), on a non-GAAP basis. This outlook assumes a (2.0)% to flat change in comparable RevPAR compared to 2024. At the same time, the forecast for adjusted EBITDA remains $595–$645 million, and adjusted FFO per share is projected at $1.82–$2.08. Comparable hotel adjusted EBITDA margins are expected to be between 26.1% and 27.5% (non-GAAP), with a modest midpoint improvement over previous forecasts. This guidance already factors in the anticipated $17 million Hotel Adjusted EBITDA impact from renovation activity at Royal Palm Miami and excludes the potential effects of further sales or financings.

Management communicated ongoing caution regarding macroeconomic and industry factors influencing demand, including uneven market recoveries and continued renovation-related disruptions. Investors should monitor developments in Hawaii, where RevPAR has lagged due to previous labor actions and slower international travel recovery. The successful refinancing of upcoming debt maturities, as well as progress on strategic asset sales and reinvestments into high-yielding renovations, remain central to the company's financial health in the coming quarters. The quarterly dividend was maintained at $0.25 per share for both Q2 and Q3.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.