Analyst Note
| Kevin Brown, CFA |Park Hotels & Resorts' second-quarter results were better than anticipated, though we currently don’t anticipate any material changes to our $25.50 fair value estimate for the no-moat company. Occupancy improved to 71.0%, which was better than the 41.7% Park reported in the second quarter of 2021 but still below the prepandemic level of 85.6% in the second quarter of 2019. However, average daily rate was up 33.9% year over year and 8.3% compared with the second quarter of 2019. As a result, revenue per available room year was up 119.7% year over year, better than our estimate of 93.3% growth and only 10.2% below 2019 levels. What really surprised us this quarter is that hotel EBITDA margins climbed to 30.8%, up from just 13.9% this time last year, to be in line with the 31.1% that Park reported in the second quarter of 2019. Strong revenue and EBITDA growth led to reported adjusted funds from operations of $0.61 per share in the quarter, far higher than the $0.16 loss reported last year and much closer to the $0.81 reported in the second quarter of 2019.