$2.85
$11.68
bear $2.85
base $7.27
bull $11.68
margin of safety $4.50
market price* $15.91
Park Hotels & Resorts owns large American hotels and resorts and pays other companies, mainly Hilton, to run them. After a run of sales it now holds 20 core hotels it intends to keep, one core joint venture (the Hilton Orlando), and nine non-core hotels it is trying to sell. Most of the value sits in a handful of irreplaceable properties: Hilton Hawaiian Village on 22 acres of Waikiki beachfront, Hilton Waikoloa Village on the Big Island, the Signia by Hilton and Waldorf Astoria at Bonnet Creek inside Walt Disney World, the 1,622-room Hilton New Orleans Riverside, New York Hilton Midtown, Hilton Chicago, the Caribe Hilton in San Juan, Casa Marina in Key West and the Royal Palm South Beach in Miami. The business is simple in shape and hard in practice. Revenue is room rates times occupancy plus food, beverage and meeting spending; out of that come wages, management fees, property taxes and insurance, and then the very large sums these buildings need every year to stay on brand. Park spent an average of about 8 percent of revenue on its hotels in the nine years since the spin-off, roughly double the 4 to 5 percent furniture-and-fixture reserve its management contracts require. We treat all of that spending as the cost of staying in business, not optional growth: Park has not added rooms (it had 67 hotels at its 2017 spin-off and has about 30 today), and a big hotel that skips its refurbishment does not keep earning, it loses its brand standard and its rate. In 2021 and 2022 a mechanical split would have called much of the spending growth investment because revenue rebounded; that rebound was guests returning to hotels that already existed, so we did not credit it. We also excluded every non-cash write-down and gain - $696 million of impairments in 2020, $204 million in 2023 and $318 million in 2025, and the $221 million and $58 million gains from walking away from the San Francisco mortgage - because they say nothing about what the remaining hotels earn. The habit they represent is carried in the bear case instead. How we measured earning power. Because Park carries about $3.9 billion of debt, we value the hotels first, before paying lenders, and then subtract what is owed. The cash the hotels produced before interest, after all renovation spending and stock compensation, was about $422 million in 2022, $311 million in 2023, $312 million in 2024 and $236 million in 2025. We use those four years, which describe today's smaller portfolio, higher wage base and post-pandemic travel pattern; earlier years were a 50-to-60-hotel company and 2020-2021 were government-ordered closures, which we use only as evidence for how bad a downturn gets. The middle of that window is about $310 million a year, or roughly $1.55 a share before interest. 2025 was well below it for named reasons: the Royal Palm was closed from mid-May 2025 for a full rebuild (losing about $14 million of hotel profit while absorbing roughly $75 million of its capital spending), Hawaii guestroom renovations cost about $85 million, and room revenue per available room fell 2 percent. The year-on-year change in 2025 was a fall of about 24 percent. We start 2026 at about $305 million, higher than 2025, for reasons that are in the filings rather than hopes: the Royal Palm reopened in July 2026, Park's own 2026 capital budget of $230 to $260 million is below 2025's $296 million, and first-half 2026 operating cash flow was $200 million against $194 million a year earlier, with Hilton Hawaiian Village's second-quarter hotel profit up 13 percent. That puts 2026 back at the normal level, not above it. The debt. At June 30, 2026 Park owed $3.93 billion: $725 million of 5.88 percent notes due 2028, $750 million of 4.88 percent notes due 2029, $550 million of 7.00 percent notes due 2030, $400 million of unsecured term loans, about $230 million of hotel mortgages, and the $1.275 billion Hilton Hawaiian Village mortgage at 4.20 percent. Since then Park has repaid the Hawaii mortgage in full - one of the two things we said we wanted to see in our previous analysis - using a new $700 million mortgage on the Bonnet Creek complex (floating at one-month SOFR plus 2.25 percent, due April 2029 with two one-year extensions) and a $600 million draw on its term loan. Total debt is therefore little changed, but roughly $1.3 billion that cost 4.2 percent now costs closer to 6 percent, which Park itself puts at about $13 million of extra interest in late 2026 alone and roughly $25 million a year after that. After holding back some cash to run the hotels, we count net debt at about $3.78 billion. The low-coupon 2029 notes and the high-coupon 2030 notes roughly offset each other against a 6 percent yardstick, so we made no further adjustment. Note that most of the debt is now unsecured or secured on Bonnet Creek and Hawaii - Park's best assets - so the option it used in San Francisco, handing a single over-borrowed hotel to its lender, offers very little protection. Base case. Room rates keep pace with costs roughly, the Royal Palm returns to and holds its pre-renovation profit, the Ali'i Tower renovation at Hilton Hawaiian Village (about $100 million, starting the third quarter of 2026) is paid for out of the normal capital budget, and the non-core hotels are sold at around their written-down values, with proceeds simply replacing the debt and earnings they carry. Business cash flow runs at about $305 million in 2026 and $315 million thereafter, with no growth credited: Park has no record of adding hotels or rooms, so there is no proven, repeatable growth engine to put in the bag. The hotels are worth about $5.24 billion on that path; less $3.78 billion of net debt leaves about $1.46 billion, or about $7.27 a share. Bull case. Park's own levers execute well. The rebuilt Royal Palm, which added 11 rooms and reopened in July 2026, meets its goal of roughly doubling its pre-renovation $14 million of profit; Hilton Hawaiian Village keeps the double-digit revenue gains it showed in the second quarter of 2026 into the newly renovated rooms; and the remaining non-core hotels sell for more than they earn, adding about $100 million of value as debt is retired. Business cash flow reaches about $320 million in 2026, $350 million in 2027 and holds at about $365 million. The hotels are worth about $6.13 billion; after debt, about $11.68 a share. Bear case. This is a full hotel recession with debt attached, built from the 2008-2010 downturn, when US full-service hotel revenue per room fell about 17 percent in 2009 and took two to three years to recover, not from today's improving conditions. We assume a downturn in 2028 and 2029 that cuts Park's room revenue 15 to 20 percent: group business in Orlando, New Orleans and Chicago is cancelled and Hawaii is hit by weaker Japanese travel or another strike like the one that closed both Hawaii hotels' operations in part for nearly two months in late 2024. Hotel profit falls from about $630 million toward $450 million while the renovation bill, which is contractual under the Hilton agreements, stays near $240 million, so cash before interest falls to about $160-180 million - below the roughly $215 million interest bill for two years. That cannot be carried on positive equity without consequences, so the bear case pays for it: the $725 million 2028 notes and the Bonnet Creek and term-loan debt are refinanced at spreads about 3 percentage points wider (about $60 million a year of extra interest for five years, worth about $225 million today), the dividend is suspended as it was in 2020, and Park raises about $200 million of new equity at trough prices, adding roughly 40 million shares. Afterwards the business recovers only to about $280 million a year, below today's level, consistent with how cash generation has drifted down since 2018 as wages and interest outran room rates. The hotels are worth about $4.49 billion; after debt and the refinancing penalty, plus the new equity, about $690 million is left for owners, spread over about 241 million shares - roughly $2.85 a share. Equity remains positive in this case because the hotels themselves are hard assets on land that cannot be reproduced; what is lost is most of the owners' slice above the debt, not the buildings. The margin of safety price. How sure are we of the earnings level? Moderately. The four-year window ties exactly to the cash flow statements and 2026 is tracking at it, but the figure that reaches owners after interest is thin - about $100 million, or 50 cents a share, against $3.9 billion of debt - so small changes in room rates, wages or interest move it a lot. The worst plausible outcome is a recession that arrives while the 2028 notes are being refinanced, together with a Hawaii shock; Park's structure would survive it, as it survived 2020 by borrowing, but with dilution, a suspended dividend and permanently higher interest, which is what our bear case prices at about $2.85. The things we are most likely to be wrong about are the true renovation cost of these old, very large buildings (if it is 9 or 10 percent of revenue rather than 8, the middle estimate falls toward $5), the price the non-core hotels fetch, and refinancing costs on the 2028-2030 notes; on the unfavourable side of all three the shares are worth roughly $4 to $5. Over the holding period, Park pays $1.00 a share a year in dividends, but only about half of that is covered by cash after renovation spending; the rest is funded by hotel sales, so we treat roughly 50 cents a year as the sustainable income. At $4.50, that sustainable payout is an 11 percent yield, and a move toward our $7.27 middle estimate over about three years adds roughly 17 percent a year, so from that price the base case implies more than a 20 percent annual return with room for a meaningful miss; in the bear case the implied loss from $4.50 is about a third, rather than the more than half it would be from a higher price. The margin-of-safety price is therefore $4.50 a share. What changed since our previous analysis. The Hilton Hawaiian Village mortgage has been repaid and the near-term maturity wall is gone, the Royal Palm has reopened, four non-core hotels have been sold or exited, and Park raised its own 2026 expectations on stronger Hawaii and core-hotel results. Against that, the replacement debt costs more than the 4.2 percent Hawaii loan it replaced. Our previous figures were prepared on a different basis and are not comparable to these. What could not be reconciled. Park does not disclose a split of its capital spending between routine replacement and genuinely new investment, so we treated all of it as routine and said why. Everything else ties to the filed accounts.