Interesting after a correction

1. Levent Yilmaz, 4 January 2017
Park Hotels & Resorts
Park Hotels & Resorts (PK) is a leading lodging real estate company with a diverse portfolio of market-
leading hotels and resorts with significant underlying real estate value. Its portfolio consists of 67
premium-branded hotels and resorts with over 35,000 rooms located in prime U.S. and international
markets with high barriers to entry. Over 85% of its rooms are luxury and upper upscale and nearly 90%
are located in the United States, including 14 of the top 25 markets. Over 70% of our rooms are located
in the central business districts of major cities and
resort/conference destinations. Park Hotels has a long-standing and mutually beneficial relationship
with Hilton. It is focused on driving premium long-term total returns by continuing to enhance the value
of its existing properties and utilizing its scale to efficiently allocate capital to drive growth while
maintaining a strong and flexible balance sheet. With $2.7 billion of revenue, $817 million of Adjusted
EBITDA and $299 million of net income in 2015, Park Hotels will be one of the largest lodging REITs and
expect to have significant liquidity. Its top 10 properties contributed more than 60% of its Hotel
Adjusted EBITDA in 2015 and achieved an average RevPAR of $201.78.
Park Hotels & resorts debt to market value is slightly higher than the average of the peer group. But net
debt to EBITDA is slightly lower than the competitors. With an EV / EBITDA of 11.3x, it is lower valued
than the average peer group of 12.7x. But its fixed charge coverage is only half as high as the
competition. When it comes to P/FFO, it is slightly lower valued than peer group. Park Hotels & resorts
has also a higher payout ratio and dividend yield than the peer group average.
Park Hotels & Resorts estimates a portfolio replacement cost of $18.5bn. This a 50% discount to
replacement cost at current EV of $9.1bn. But I don’t think that the gap will be much smaller during this
economic cycle. We are ruther at the end of the growth cycle.
It will acquire companies going forward and a further consolidation is likely. Smaller players should
benefit in the long run when prices come down a bit.
Company
Price
Januar 3 ,
2017
Debt to
Market Value
Net Debt to
EBITDA
EV / EBITDA
Fixed
Charge
Coverage
2016E
P/FFO
2016EFFO
Payout
Dividend
Yield
Ashford Hospitality Trust $7.92 72.71% 9.1x 12.8x 1.5x 5.1x 31.0% 6.1%
Apple Hospitality REIT, Inc. $20.21 22.91% 3.3x 14.3x 10.2x 11.5x 68.1% 5.9%
Diamond Rock Hospitality Company $11.66 23.23% 2.6x 11.7x 6.9x 11.5x 49.4% 4.3%
FelCor Lodging Trust Inc. $8.15 47.39% 5.5x 11.7x 2.3x 9.1x 26.9% 3.0%
Hospitality Properties Trust $32.10 35.41% 4.2x 11.9x 4.0x 9.1x 57.6% 6.4%
Host Hotels $19.13 20.71% 2.7x 13.8x 8.4x 11.6x 48.5% 4.2%
Hersha Hospitality Trust $21.46 46.36% 6.4x 14.9x 2.4x 8.7x 45.7% 5.2%
LaSalle Hotel Properties $30.79 23.49% 2.3x 10.7x 7.2x 10.6x 62.1% 5.8%
Pebblebrook Hotel Trust $30.08 32.56% 3.7x 11.6x 4.8x 11.1x 56.1% 5.0%
RLJ Lodging Trust $24.54 34.11% 3.6x 11.3x 6.8x 9.4x 50.3% 5.3%
Sunstone Hotel Investors $15.44 22.39% 1.8x 11.6x 6.2x 13.2x 180.6% 13.8%
Park Hotels & Resorts $30.50 34.78% 3.8x 11.3x 3.5x 10.2x 68.0% 6.7%
Lodging REIT weighted Average 31.70% 3.3x 12.7x 6.8x 10.8x 63.1% 5.7%
ex. Park Hotels & Resorts