PARK HOTELS & RESORTS INC. The following discussion and analysis of the financial condition and results of operations ofPark Hotels & Resorts Inc. ("we," "us," "our" or the "Company") should be read in conjunction with the accompanying unaudited condensed consolidated financial statements, related notes included elsewhere in this Quarterly Report on Form 10-Q, and with our Annual Report on Form 10-K for the year endedDecember 31, 2021 .
Forward-Looking Statements
This Quarterly Report on Form 10-Q contains forward-looking statements within
the meaning of Section 27A of the Securities Act of 1933, as amended
("Securities Act"), and Section 21E of the Securities Exchange Act of 1934, as
amended ("Exchange Act"). Forward-looking statements include, but are not
limited to, statements related to our expectations regarding the performance of
our business, our financial results, our liquidity and capital resources,
including expected dates that our hotels will reopen, break even or achieve
positive Hotel Adjusted EBITDA , the impact to our business and financial
condition and that of our hotel management companies, measures being taken in
response to COVID-19, the impact from macroeconomic factors (including inflation
and geopolitical conflicts), the effects of competition, the effects of future
legislation or regulations, the expected completion of anticipated dispositions,
the declaration and payment of future dividends and other non-historical
statements. Forward-looking statements include all statements that are not
historical facts, and in some cases, can be identified by the use of
forward-looking terminology such as the words "outlook," "believes," "expects,"
"potential," "continues," "may," "will," "should," "could," "seeks," "projects,"
"predicts," "intends," "plans," "estimates," "anticipates", "hopes" or the
negative version of these words or other comparable words. You should not rely
on forward-looking statements since they involve known and unknown risks,
uncertainties and other factors which are, in some cases, beyond our control and
which could materially affect our results of operations, financial condition,
cash flows, performance or future achievements or events. Currently, one of the
most significant factors is the adverse effect of COVID-19, including actions
taken to contain the pandemic or mitigate its effects, the emergences of virus
variants and resurgences, on our financial condition, results of operations,
cash flows and performance, our hotel management companies and our hotels'
tenants, and the global economy and financial markets. Investors are cautioned
to interpret many of the risks identified in the risk factors included in our
Annual Report on Form 10-K for the year ended December 31, 2021 as being
heightened as a result of the ongoing and numerous adverse impacts of COVID-19.
All such forward-looking statements are based on current expectations of
management and therefore involve estimates and assumptions that are subject to
risks, uncertainties and other factors that could cause actual results to differ
materially from the results expressed in the statements. You should not put
undue reliance on any forward-looking statements and we urge investors to
carefully review the disclosures we make concerning risks and uncertainties in
Item 1A: "Risk Factors" in our Annual Report on Form 10-K for the year ended
December 31, 2021 , as such factors may be updated from time to time in our
periodic filings with the SEC , which are accessible on the SEC's website at
www.sec.gov, as well as risks, uncertainties and other factors discussed in this
Quarterly Report on Form 10-Q. Except as required by law, we undertake no
obligation to update or revise publicly any forward-looking statements, whether
as a result of new information, future events or otherwise.
Overview
We have a diverse portfolio of iconic and market-leading hotels and resorts with significant underlying real estate value. We currently hold investments in entities that have ownership or leasehold interests in 53 hotels, consisting of premium-branded hotels and resorts with approximately 32,000 rooms, of which over 87% are luxury and upper upscale (as defined bySmith Travel Research ) and are located in primeU.S. markets and its territories. Our high-quality portfolio includes hotels in major urban and convention areas, such asNew York City ,Washington, D.C. ,Chicago ,San Francisco ,Boston ,New Orleans andDenver ; premier resorts in key leisure destinations, includingHawaii ,Orlando ,Key West andMiami Beach ; and hotels adjacent to major gateway airports, such asLos Angeles International ,Boston Logan International andMiami International , as well as hotels in select suburban locations. Our objective is to be the preeminent lodging real estate investment trust ("REIT"), focused on consistently delivering superior, risk-adjusted returns to stockholders through active asset management and a thoughtful external growth strategy while maintaining a strong and flexible balance sheet. As a pure-play real estate company with direct access to capital and independent financial resources, we believe our enhanced ability to implement compelling return on investment initiatives within our portfolio represents a significant embedded growth opportunity. Finally, given our scale and investment expertise, we believe we will be able to successfully execute single-asset and portfolio acquisitions and dispositions to further enhance the value and diversification of our assets throughout the lodging cycle, including potentially taking advantage of the economies of scale that could come from consolidation in the lodging REIT industry. 14 -------------------------------------------------------------------------------- We operate our business through two operating segments, our consolidated hotels and unconsolidated hotels. Our consolidated hotels operating segment is our only reportable segment. Refer to Note 9: "Business Segment Information" in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information regarding our operating segments.
COVID-19 Operational Update
The global outbreak of a novel strain of coronavirus and the disease it causes
("COVID-19") had a significant effect on the lodging industry and our business.
We cannot presently determine the extent or duration of the overall operational
and financial effects that COVID-19 will have on our business. Beginning in
March 2020 , travel restrictions and mandated closings of non-essential
businesses were imposed, which resulted in temporary suspensions of operations
at a majority of our hotels. We have reopened all our hotels except the
1,024-room Parc 55 San Francisco - a Hilton Hotel , the reopening of which has
been accelerated to May 19, 2022 , based on improving demand trends in the San
Francisco market. Temporary closings of restaurants and hotels as well as travel
restrictions across entire regions also contributed to severely reduced overall
lodging demand. The effects of COVID-19 continue to have an adverse effect on
the hospitality industry, including our business; however, the increase in
vaccination rates across the country and the easing or removal of restrictions,
quarantining, and "social distancing" mandates resulted in increased travel and
hospitality spending beginning in the second quarter of 2021. Despite a
near-term reduction in demand due to concerns over the spread of the Omicron
variant in January 2022 , which resulted in additional group cancellations and
cautious business travel sentiment, coupled with the seasonal decline in leisure
travel following the holiday season and the delay in return of business travel,
we saw a broad based recovery beginning in March 2022 as leisure demand was
robust and group demand strengthened. We expect leisure demand to remain strong
and group demand to accelerate during the remainder of 2022.
We believe the distribution of the COVID-19 vaccine during 2021 drove the
improvement in traveler sentiment we experienced and resulted in an improvement
in occupancy, Average Daily Rate ("ADR") and Revenue per Available Room
("RevPAR") during the second quarter of 2021. Changes in our 2022 pro-forma
metrics, which exclude results from properties disposed of and include results
from properties acquired as of March 31, 2022 , as compared to the same periods
in 2021 and 2019, and 2022 occupancy are as follows:
Change in Pro-forma ADR Change in Pro-forma Occupancy Change in Pro-forma RevPAR
2022 vs. 2021 2022 vs. 2019 2022 vs. 2021 2022 vs. 2019 2022 vs. 2021 2022 vs. 2019 2022 Occupancy
Jan 2022 49.5 % (10.7 )% 18.6 % pts (31.8 )% pts 179.7 % (50.3 )% 40.0 %
Feb 2022 45.8 2.0 27.6 (25.0 ) 204.9 (30.8 ) 52.9
Mar 2022 40.3 6.0 30.0 (19.4 ) 168.2 (18.9 ) 62.9
Q1 2022 44.2 0.1 25.3 (25.4 ) 181.7 (32.8 ) 51.9
We believe demand will remain somewhat reduced as long as mandatory travel
restrictions and cost-saving or other measures, such as the postponing or
cancelling of non-essential business travel, remain in place or if these
restrictions tighten or demand for travel becomes depressed due to the emergence
of virus variants. Although we were able to recommence operations at all except
one of our previously suspended hotels and further restrictions have been lifted
following the spread of the Omicron variant, if demand does not fully recover,
or if virus variants increase or travel restrictions tighten, we may be required
to suspend operations at additional hotels. Further, uncertainty as to when
demand will fully recover generally will make it more difficult to execute on
our external growth strategy. The uncertainties surrounding the COVID-19
pandemic recovery, including new variants, make it difficult to predict
operating results for our hotels for the remainder of 2022, thus there can be no
assurances that we will not experience further fluctuations in hotel revenues or
earnings at our hotels.
The operating environment for us and our hotel managers has improved as
government restrictions were lifted and demand for travel returned. Economic
indicators such as GDP growth, corporate earnings, consumer confidence and
employment are highly correlated with lodging demand and have generally returned
to pre-pandemic levels. We expect the significance of the COVID-19 pandemic,
including the extent of its effect on our financial and operational results, to
be dictated by, among other things, its duration, the success of efforts to
contain it, the emergence of virus variants, efficacy, availability of
treatments to combat COVID-19, including public adoption rates of COVID-19
vaccines, and the effect of actions taken in response (such as travel advisories
and restrictions and social distancing), including the extent and duration of
such actions.
Key Business Metrics Used by Management
Occupancy
Occupancy represents the total number of room nights sold divided by the total
number of room nights available at a hotel or group of hotels. Room nights
available to guests have not been adjusted for suspended or reduced operations
at certain of our hotels as a result of COVID-19. Occupancy measures the
utilization of our hotels' available capacity. We use occupancy to gauge demand
at a specific hotel or group of hotels in a given period. Occupancy levels also
help us determine achievable ADR levels as demand for rooms increases or
decreases.
15
--------------------------------------------------------------------------------Average Daily Rate
ADR (which we also refer to as rate) represents rooms revenue divided by total number of room nights sold in a given period. ADR measures average room price attained by a hotel and ADR trends provide useful information concerning the pricing environment and the nature of the customer base of a hotel or group of hotels. ADR is a commonly used performance measure in the hotel industry, and we use ADR to assess pricing levels that we are able to generate by type of customer, as changes in rates have a more pronounced effect on overall revenues and incremental profitability than changes in occupancy, as described above.
Revenue per
RevPAR represents rooms revenue divided by the total number of room nights available to guests for a given period. Room nights available to guests have not been adjusted for suspended or reduced operations at certain of our hotels as a result of COVID-19. We consider RevPAR to be a meaningful indicator of our performance as it provides a metric correlated to two primary and key factors of operations at a hotel or group of hotels: occupancy and ADR. RevPAR is also a useful indicator in measuring performance over comparable periods.
Comparable Hotels Data
Historically, we have presented certain data for our hotels on a comparable hotel basis as supplemental information for investors. We defined our comparable hotels as those that: (i) were active and operating in our portfolio sinceJanuary 1st of the previous year; and (ii) have not sustained substantial property damage or business interruption, have not undergone large-scale capital projects or for which comparable results are not available. We presented comparable hotel results to help us and our investors evaluate the ongoing operating performance of our comparable hotels. However, given the significant effect of COVID-19 on most of our hotels and the lack of comparability to prior periods, we do not believe this supplemental information is useful to us or our investors at this time. Under "Results of Operations" below, we have provided information on the effects from dispositions and other factors to our results of operations for the three months endedMarch 31, 2022 as compared to the same period in 2021. Change from other factors primarily relates to the effects of COVID-19 and subsequent ongoing recovery.
Non-GAAP Financial Measures
We also evaluate the performance of our business through certain other financial measures that are not recognized underU.S. GAAP. Each of these non-GAAP financial measures should be considered by investors as supplemental measures to GAAP performance measures such as total revenues, operating profit and net income.
EBITDA, Adjusted EBITDA and
EBITDA, presented herein, reflects net income (loss) excluding depreciation and amortization, interest income, interest expense, income taxes and also interest expense, income tax and depreciation and amortization included in equity in earnings (losses) from investments in affiliates.
Adjusted EBITDA, presented herein, is calculated as EBITDA, further adjusted to exclude:
•
Gains or losses on sales of assets for both consolidated and unconsolidated investments;
•
Costs associated with hotel acquisitions or dispositions expensed during the period;
• Severance expense;
•
Share-based compensation expense;
•
Impairment losses and casualty gains or losses; and
•
Other items that we believe are not representative of our current or future operating performance.
Hotel Adjusted EBITDA measures hotel-level results before debt service, depreciation and corporate expenses for our consolidated hotels, which excludes hotels owned by unconsolidated affiliates, and is a key measure of our profitability. We presentHotel Adjusted EBITDA to help us and our investors evaluate the ongoing operating performance of our consolidated hotels. EBITDA, Adjusted EBITDA andHotel Adjusted EBITDA are not recognized terms underU.S. GAAP and should not be considered as alternatives to net income (loss) or other measures of financial performance or liquidity derived in accordance withU.S. GAAP. In addition, our definitions of EBITDA,Adjusted EBITDA and Hotel Adjusted EBITDA may not be comparable to similarly titled measures of other companies. We believe that EBITDA, Adjusted EBITDA andHotel Adjusted EBITDA provide useful information to investors about us and our financial condition and results of operations for the following reasons: (i) EBITDA,Adjusted EBITDA and Hotel Adjusted 16 -------------------------------------------------------------------------------- EBITDA are among the measures used by our management team to make day-to-day operating decisions and evaluate our operating performance between periods and between REITs by removing the effect of our capital structure (primarily interest expense) and asset base (primarily depreciation and amortization) from our operating results; and (ii) EBITDA, Adjusted EBITDA andHotel Adjusted EBITDA are frequently used by securities analysts, investors and other interested parties as a common performance measure to compare results or estimate valuations across companies in our industry. EBITDA, Adjusted EBITDA andHotel Adjusted EBITDA have limitations as analytical tools and should not be considered either in isolation or as a substitute for net income (loss) or other methods of analyzing our operating performance and results as reported underU.S. GAAP. Some of these limitations are:
•
EBITDA, Adjusted EBITDA and
•
EBITDA, Adjusted EBITDA and
•
EBITDA, Adjusted EBITDA andHotel Adjusted EBITDA do not reflect the effect on earnings or changes resulting from matters that we consider not to be indicative of our future operations; and
•
other companies in our industry may calculate EBITDA, Adjusted EBITDA and
We do not use or present EBITDA, Adjusted EBITDA and
•
EBITDA, Adjusted EBITDA and
•
EBITDA, Adjusted EBITDA and
•
EBITDA, Adjusted EBITDA and
•
EBITDA, Adjusted EBITDA and
•
although depreciation and amortization are non-cash charges, the assets being
depreciated and amortized will often have to be replaced in the future, and
EBITDA, Adjusted EBITDA and
Because of these limitations, EBITDA, Adjusted EBITDA andHotel Adjusted EBITDA should not be considered as discretionary cash available to us to reinvest in the growth of our business or as measures of cash that will be available to us to meet our obligations. The following table provides a reconciliation of Net loss toHotel Adjusted EBITDA : Three Months Ended March 31, 2022 2021 (in millions) Net loss $ (56 ) $ (191 ) Depreciation and amortization expense 69 74 Interest expense 62 63 Income tax expense - 1 Interest expense, income tax and depreciation and amortization
included in equity in earnings from investments in affiliates
1 1
EBITDA 76 (52 )
Share-based compensation expense 4 6
Other items 2 (3 )
Adjusted EBITDA 82 (49 )
Less: Adjusted EBITDA from investments in affiliates (5 ) 2
Add: All other(1) 12 11
Hotel Adjusted EBITDA $ 89 $ (36 )
(1) Includes other revenues and other expenses, non-income taxes on TRS leases included in other property-level expenses and corporate general and administrative expenses.
17
--------------------------------------------------------------------------------Nareit FFO attributable to stockholders and Adjusted FFO attributable to stockholders
We present Nareit FFO attributable to stockholders and Nareit FFO per diluted
share (defined as set forth below) as non-GAAP measures of our performance. We
calculate funds from (used in) operations ("FFO") attributable to stockholders
for a given operating period in accordance with standards established by the
National Association of Real Estate Investment Trusts ("Nareit"), as net income
(loss) attributable to stockholders (calculated in accordance with U.S. GAAP),
excluding depreciation and amortization, gains or losses on sales of assets,
impairment, and the cumulative effect of changes in accounting principles, plus
adjustments for unconsolidated joint ventures. Adjustments for unconsolidated
joint ventures are calculated to reflect our pro rata share of the FFO of those
entities on the same basis. As noted by Nareit in its December 2018 "Nareit
Funds from Operations White Paper - 2018 Restatement," since real estate values
historically have risen or fallen with market conditions, many industry
investors have considered presentation of operating results for real estate
companies that use historical cost accounting to be insufficient by themselves.
For these reasons, Nareit adopted the FFO metric in order to promote an
industry-wide measure of REIT operating performance. We believe Nareit FFO
provides useful information to investors regarding our operating performance and
can facilitate comparisons of operating performance between periods and between
REITs. Our presentation may not be comparable to FFO reported by other REITs
that do not define the terms in accordance with the current Nareit definition,
or that interpret the current Nareit definition differently than we do. We
calculate Nareit FFO per diluted share as our Nareit FFO divided by the number
of fully diluted shares outstanding during a given operating period.
We also present Adjusted FFO attributable to stockholders and Adjusted FFO per
diluted share when evaluating our performance because we believe that the
exclusion of certain additional items described below provides useful
supplemental information to investors regarding our ongoing operating
performance. Management historically has made the adjustments detailed below in
evaluating our performance and in our annual budget process. We believe that the
presentation of Adjusted FFO provides useful supplemental information that is
beneficial to an investor's complete understanding of our operating performance.
We adjust Nareit FFO attributable to stockholders for the following items, which
may occur in any period, and refer to this measure as Adjusted FFO attributable
to stockholders:
•
Costs associated with hotel acquisitions or dispositions expensed during the period;
• Severance expense;
•
Share-based compensation expense; and
•
Other items that we believe are not representative of our current or future operating performance.
The following table provides a reconciliation of net loss attributable to
stockholders to Nareit FFO attributable to stockholders and Adjusted FFO
attributable to stockholders:
Three Months Ended March 31,
2022 2021
(in millions, except per share amounts)
Net loss attributable to stockholders $ (57 ) $ (190 )
Depreciation and amortization expense 69 74
Depreciation and amortization expense
attributable to noncontrolling interests (1 ) (1 ) Equity investment adjustments: Equity in losses from investments in affiliates - 4 Pro rata FFO of investments in affiliates 2 (2 ) Nareit FFO attributable to stockholders 13 (115 ) Share-based compensation expense 4 6 Other items 1 (4 ) Adjusted FFO attributable to stockholders $ 18 $ (113 ) Nareit FFO per share - Diluted(1) $ 0.05 $ (0.49 ) Adjusted FFO per share - Diluted(1) $ 0.08 $ (0.48 )
(1) Per share amounts are calculated based on unrounded numbers.
18
--------------------------------------------------------------------------------Results of Operations
The following items have had a significant effect on the year-over-year
comparability of our operations and are illustrated further in the table of
•
Property Dispositions: SinceJanuary 1, 2021 , we disposed of five consolidated hotels. As a result of these dispositions, our revenues and operating expenses decreased for the three months endedMarch 31, 2022 as compared to the same period in 2021. The results of operations during our period of ownership of these hotels are included in our consolidated results.
•
Ongoing COVID-19 Recovery: Travel and hospitality spending began to improve beginning in the second quarter of 2021 as vaccination rates increased, and we reopened additional previously suspended hotels throughout 2021. Consequently, the results of our portfolio during the three months endedMarch 31, 2022 will not be comparable to the same period in 2021.
Three Months Ended March 31,
Change from Change
Property from Other
2022 2021 Change Dispositions Factors(1)
(in millions)
Rooms revenue $ 292 $ 106 $ 186 $ (3 ) $ 189
Food and beverage revenue 110 22 88 - 88
Ancillary hotel revenue 61 29 32 - 32
Rooms expense 85 35 50 (1 ) 51
Food and beverage expense 87 21 66 - 66Other departmental and support
expense 133 78 55 (3 ) 58 Other property-level expense 50 48 2 (2 ) 4 Management fees expense 22 7 15 - 15 (1) Change from other factors primarily relates to the effects of COVID-19. The increase in revenues and expenses for the three months endedMarch 31, 2022 was primarily due to the reopening of additional hotels that were suspended during the same period in 2021 and improved occupancy due to an increase in demand as compared to the same period in 2021.
Group, transient, contract and other rooms revenue for the three months ended
Three Months Ended March 31,
Change from Change
Property from Other
2022 2021 Change Dispositions Factors(1)
(in millions)
Group rooms revenue $ 73 $ 8 $ 65 $ - $ 65
Transient rooms revenue 199 86 113 (2 ) 115
Contract rooms revenue 14 11 3 - 3
Other rooms revenue 6 1 5 - 5
Rooms revenue $ 292 $ 106 $ 186 $ (2 ) $ 188
(1) Change from other factors primarily relates to the effects of COVID-19. The
increase in revenues for the three months ended March 31, 2022 was primarily due
to the reopening of additional hotels that were suspended during the same period
in 2021 and improved occupancy due to an increase in demand as compared to the
same period in 2021.
19
--------------------------------------------------------------------------------Other revenue and Other expense
The increases in other revenue and other expense are primarily due to increases in support services revenue and expense from the reopening of our hotels that have service arrangements with Hilton Grand Vacations to full capacity following their suspension of operations during 2020.
Corporate general and administrative
Three Months Ended March 31,
2022 2021 Percent Change
(in millions)
General and administrative expenses $ 12 $ 12 - %
Share-based compensation expense 4 6 (33.3 )
Total corporate general and administrative $ 16 $ 18
(11.1 )%
Non-operating Income and Expenses
Interest expense
Interest expense decreased during the three months endedMarch 31, 2022 compared to the same period in 2021 as a result of the partial repayment of our unsecured delayed draw term loan facility ("2019 Term Facility") during the second and third quarters of 2021 and the full repayment of our revolving credit facility ("Revolver") during 2021, partially offset by the issuance of$750 million of 4.875% senior secured notes due 2029 ("2029 Senior Secured Notes") inMay 2021 . Interest expense associated with our debt for the three months endedMarch 31, 2022 and 2021 were as follows: Three Months Ended March 31, 2022 2021 Percent Change (in millions) SF and HHV Mortgage Loans(1)$ 21 $ 21 - % Other Mortgage Loans 5 5 - 2019 Term Facility 1 5 (80.0 ) Revolver 1 5 (80.0 ) 2025 Senior Secured Notes(3) 12 12 - 2028 Senior Secured Notes(3) 11 11 - 2029 Senior Secured Notes(3) 9 - NM(2) Other 2 4 (50.0 ) Total interest expense$ 62 $ 63 (1.6 )% (1) InOctober 2016 , we entered into a$725 million CMBS loan secured by theHilton San Francisco Union Square and the Parc 55Hotel San Francisco ("SF Mortgage Loan") and a$1.275 billion CMBS loan secured by theHilton Hawaiian Village Waikiki Beach Resort ("HHV Mortgage Loan").
(2) Percentage change is not meaningful.
(3) In May andSeptember 2020 ,Park Intermediate Holdings LLC (our "Operating Company"),PK Domestic Property LLC , an indirect subsidiary of the Company ("PK Domestic"), andPK Finance Co-Issuer Inc. ("PK Finance") issued an aggregate of$650 million of senior secured notes due 2025 ("2025 Senior Secured Notes") and an aggregate of$725 million of senior secured notes due 2028 ("2028 Senior Secured Notes"), respectively (collectively with the 2029 Senior Secured Notes, the "Senior Secured Notes").
Liquidity and Capital Resources
Overview
We seek to maintain sufficient amounts of liquidity with an appropriate balance of cash, debt and equity to provide financial flexibility. As ofMarch 31, 2022 , we had total cash and cash equivalents of$639 million and$78 million of restricted cash. Restricted cash primarily consists of cash restricted as to use by our debt agreements and reserves for capital expenditures in accordance with certain of our management agreements. We currently have higher than historical balances in restricted cash due to certain of our mortgage loans that require deposits of excess cash with the lender when certain financial ratios are not met, which occurred as a result of the effect from COVID-19 on operating results at the associated hotels. As a result of the economic uncertainty resulting from the effects of COVID-19, as described above under "COVID-19 Operational Update", we expect our cash flows through at least the second quarter of 2022 to be lower than prior to COVID-19. We and our hotel managers took various actions to mitigate the effects of COVID-19, including drawing$1 billion from our Revolver inMarch 2020 (which we subsequently fully repaid), issuing$650 million of 2025 Senior Secured Notes inMay 2020 (a portion of 20 -------------------------------------------------------------------------------- which was used to partially repay amounts outstanding under our Revolver and our term loan dueDecember 2021 ("2016 Term Loan"), issuing$725 million of 2028 Senior Secured Notes inSeptember 2020 (a portion of which was used to repay the 2016 Term Loan in full as well as a portion of the Revolver), issuing$750 million of 2029 Senior Secured Notes inMay 2021 (a portion of which was used to partially repay the Revolver and the 2019 Term Facility), suspending our dividend following the payment of the first quarter 2020 dividend (which was recently reinstated for the first quarter of 2022), and implementing various cost saving initiatives at our hotels including temporary suspension of operations at certain hotels (all of which have reopened except one) and selected restaurants and other businesses and outlets and reductions in capital expenditures for maintenance projects to approximately$44 million for 2021. We generated positiveHotel Adjusted EBITDA for the quarter endedMarch 31, 2022 , the fourth such consecutive quarter since the start of the pandemic. With$901 million of availability under our Revolver and existing cash and cash equivalents, we have sufficient liquidity to pay our debt maturities and to fund other liquidity obligations over the next year and beyond. Only 1% of our total outstanding debt is maturing in 2022. We may also take actions to improve our liquidity, such as the issuance of additional debt, equity or equity-linked securities, if we determine that doing so would be beneficial to us. However, there can no assurance as to the timing of any such issuance, which may be in the near term, or that any such additional financing will be completed on favorable terms, or at all. In 2020, we amended our credit facilities, which in addition to providing enhanced liquidity, extended the maturity of the Revolver and placed certain restrictions on the Company, including limitations on our ability to make dividends and distributions (except to the extent required to maintain REIT status, the ability to pay a$0.01 per share per fiscal quarter dividend and certain other agreed exceptions). InFebruary 2022 , we further amended our credit and term loan facilities, including extending the waiver period for the testing of the financial covenants, obtaining the ability to repurchase up to$250 million of shares as long as there is no outstanding balance on the Revolver (with the amount of any such repurchases increasing the minimum liquidity covenant, dollar for dollar, resulting in a minimum liquidity covenant amount as ofMarch 31, 2022 of$261 million ), and removing or decreasing certain restrictions on the Company related to capital expenditures, acquisitions and asset sales. Refer to Note 5: "Debt" in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information. Our known short-term liquidity requirements primarily consist of funds necessary to pay for operating expenses and other expenditures, including reimbursements to our hotel manager for payroll and related benefits, costs associated with the operation of our hotels, interest and scheduled principal payments on our outstanding indebtedness, capital expenditures for renovations and maintenance at our hotels, corporate general and administrative expenses and dividends to our stockholders. Many of the other expenses associated with our hotels are relatively fixed, including portions of rent expense, property taxes and insurance. Since we generally are unable to decrease these costs significantly or rapidly when demand for our hotels decreases, the resulting decline in our revenues can have a greater adverse effect on our net cash flow, margins and profits. Our long-term liquidity requirements primarily consist of funds necessary to pay for scheduled debt maturities, capital improvements at our hotels (to the extent not cancelled or deferred), and costs associated with potential acquisitions. Our commitments to fund capital expenditures for renovations and maintenance at our hotels will be funded by cash and cash equivalents, restricted cash to the extent permitted by our lending agreements and cash flow from operations. We have construction contract commitments of approximately$118 million for capital expenditures at our properties, of which$70 million relates to the expansion project at theBonnet Creek complex.The Bonnet Creek expansion project includes additional meeting space for the Signia byHilton Orlando Bonnet Creek and the Waldorf Astoria Orlando. Our contracts contain clauses that allow us to cancel all or some portion of the work. Additionally, we have established reserves for capital expenditures ("FF&E reserve") in accordance with our management and certain debt agreements. Generally, these agreements require that we fund 4% of hotel revenues into an FF&E reserve, unless such amounts have been incurred. Our cash management objectives continue to be to maintain the availability of liquidity, minimize operational costs, make debt payments and fund our capital expenditure programs and future acquisitions. Further, we have an investment policy that is focused on the preservation of capital and maximizing the return on new and existing investments.
Stock Repurchase Program
InFebruary 2022 , our Board of Directors authorized and approved a stock repurchase program allowing us to repurchase up to$300 million of our common stock over a 24-month period, ending inFebruary 2024 . Stock repurchases would be made through open market purchases, including through Rule 10b5-1 trading programs, in privately negotiated transactions, or in such other manner that would comply with applicable securities laws and subject to compliance with existing debt agreements (which currently limits the repurchase of common stock to$250 million ). The timing of any future stock repurchases and the number of shares to be repurchased will depend upon prevailing market conditions and other factors. During the three months endedMarch 31, 2022 , we repurchased approximately 3.4 million shares of our common stock for a total purchase price of$61 million . As ofMarch 31, 2022 ,$239 million remained available for stock repurchases. 21 --------------------------------------------------------------------------------
Sources and Uses of Our Cash and Cash Equivalents
The following tables summarize our net cash flows and key metrics related to our
liquidity:
Three Months Ended March 31,
2022 2021 Percent Change
(in millions)
Net cash provided by (used in) operating activities
(71 ) 162.0 %
Net cash used in investing activities (21 ) (3 ) 600.0 %
Net cash used in financing activities (69 ) (7 ) NM(1)
(1) Percentage change is not meaningful.
Operating Activities
Cash flow from operating activities are primarily generated from the operating income generated at our hotels.
The$115 million increase in net cash provided by operating activities for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 was primarily due to an increase in cash from operations as a result of the increase in occupancy as our hotels continue to recover from the effects of COVID-19.
Investing Activities
The$18 million increase in net cash used in investing activities for the three months endedMarch 31, 2022 compared to the three months endedMarch 31, 2021 was primarily due to a$16 million increase in capital expenditures, of which$6 million related to the expansion project at theBonnet Creek complex.
Financing Activities
The$62 million increase in net cash used in financing activities for the three months endedMarch 31, 2022 was primarily attributable to the repurchase of 3.4 million shares of our common stock for$61 million .
Dividends
As a REIT, we are required to distribute at least 90% of our REIT taxable income, determined without regard to the deduction for dividends paid and excluding net capital gain, and after utilization of any NOL carryforward to our stockholders on an annual basis. To avoid paying tax on our income, we intend to make distributions of all, or substantially all, of our REIT taxable income (including net capital gains) to our stockholders. Therefore, as a general matter, before consideration of the use of any NOL carryforward, it is unlikely that we will be able to retain substantial cash balances that could be used to meet our liquidity needs from our annual taxable income. Instead, we will need to meet these needs from external sources of capital and amounts, if any, by which our cash flow generated from operations exceeds taxable income. After the payment of the first quarter dividend in 2020, we suspended our quarterly dividend as a precautionary measure in light of COVID-19; inMarch 2022 , our Board of Directors approved and reinstated our quarterly cash dividend.
We declared the following dividends to holders of our common stock during 2022:
Record Date Payment Date Dividend per Share
0.01
Debt
As ofMarch 31, 2022 , our total indebtedness was approximately$4.7 billion , including approximately$2.1 billion of our Senior Secured Notes, as disclosed above, and excluding approximately$225 million of our share of debt from investments in affiliates. Substantially all the debt of such unconsolidated affiliates is secured solely by the affiliates' assets or is guaranteed by other partners without recourse to us. Refer to Note 5: "Debt" in our unaudited condensed consolidated financial statements included elsewhere within this Quarterly Report on Form 10-Q for additional information.
Critical Accounting Policies and Estimates
The preparation of our financial statements in accordance withU.S. GAAP requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of our financial statements, the reported amounts of revenues and expenses during the reporting periods and the related disclosures in our unaudited condensed consolidated financial statements and accompanying footnotes. We have discussed those policies and estimates that we believe are critical and require the use of complex judgment in their application in our Annual Report on Form 10-K for the year endedDecember 31, 2021 , filed with theSecurities and Exchange Commission onFebruary 18, 2022 . There have been no material changes to our critical accounting policies or the methods or assumptions we apply. 22
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