Host Hotels & Resorts: Strategic Moves and Updated Guidance

Recent Financial Performance

Host Hotels & Resorts' recent financial performance shows a cautious outlook with forward-looking statements highlighting risks and uncertainties. The company uses non-GAAP measures to report performance and maintains financial flexibility through compliance with covenants. Historical luxury segment growth and strategic acquisitions are expected to drive elevated EBITDA and free cash flow.

"HOST HOTELS & RESORTS, INC.Notes to Financial Information FORECASTS Our forecast of net income, earnings per diluted share, NAREIT and Adjusted FFO per diluted share, EBITDA, EBITDAre, Adjusted EBITDAre and comparable hotel results are forward-looking statements and are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause actual results and performance to differ materially from those expressed or implied by these forecasts." --- (HST, press release, 2024/05/01)

"HOST HOTELS & RESORTS, INC.Notes to Financial Information FORECASTS Our forecast of net income, earnings per diluted share, NAREIT and Adjusted FFO per diluted share, EBITDA, EBITDAre, Adjusted EBITDAre and comparable hotel results are forward-looking statements and are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause actual results and performance to differ materially from those expressed or implied by these forecasts." --- (HST, press release, 2024/07/31)

"Non-GAAP Financial Measures We use certain “non-GAAP financial measures,” which are measures of our historical financial performance that are not calculated and presented in accordance with GAAP, within the meaning of applicable SEC rules." --- (HST, sec filing, 2024/Q2)

"Our financial flexibility, including our ability to incur debt, pay dividends, make distributions and make investments, is contingent on our ability to maintain compliance with the financial covenants of our credit facility and senior notes indentures, which include, among other things, the allowable amounts of leverage, interest coverage and fixed charges." --- (HST, sec filing, 2024/Q2)

"From the period of time 2019 to '23, luxury CAGR was 4.7% versus upper upscale 1.3%.So we expect that we're going to continue to be able to drive this type of performance from the acquisitions we made, which will lead to elevated EBITDA growth and elevated free cash flow, which will allow us to continue to take those proceeds and invest in our portfolio or pivot to other capital allocation decisions and opportunities that might be out there.Now to get back to your question, I don't think that we are contemplating doing additional acquisitions this year or even early next year." --- (HST, earning call, 2024/Q2)

Recent Acquisitions and Divestitures

Host Hotels & Resorts' recent acquisitions are expected to generate significant adjusted EBITDA, contributing $22 million and $29 million respectively, and are included in the 2024 guidance. These strategic moves have brought the company halfway to its $2 billion EBITDA target, with $1.5 billion in iconic real estate acquired.

"They will be included starting in the third quarter. These 2 acquisitions are expected to generate $22 million of adjusted EBITDA for our ownership period, which is included in our adjusted EBITDAre and FFO guidance for 2024.Looking back on our transaction activity in 2024, we have acquired $1.5 billion of iconic and irreplaceable real estate at a blended 13.6x EBITDA multiple based on estimated 2024 results, which represents over $100 million of estimated full year EBITDA that we expect to grow as the assets stabilize.In May of 2023, we laid out a path to $2 billion of EBITDA at our Investor Day. With these acquisitions, we are halfway toward our target of" --- (HST, earning call, 2024/Q2)

"Looking back at the path to $2 billion of EBITDA we laid out just over a year ago at our investor day, we are halfway toward our target of $3 billion of acquisitions at a lower blended EBITDA multiple than assumed." --- (HST, press release, 2024/07/31)

"The acquisition is expected to generate $29 million of adjusted EBITDA for our ownership period, which is included in our adjusted EBITDAre and FFO guidance for 2024." --- (HST, earning call, 2024/Q1)

Operational Strategies and Initiatives

Host Hotels & Resorts has implemented various operational strategies, including post-renovation improvements yielding a 7-point RevPAR index gain, resilience and decarbonization initiatives, talent investments, and inclusive economic opportunities. Additionally, they are collaborating on marketing campaigns with local authorities and addressing impacts on EBITDA margins through operational improvements.

"Of the 14 hotels that have stabilized post renovation operations to date, the average RevPAR index share gain is 7 points, which is well in excess of our targeted gain of 3 to 5 points. Earlier this week, we released our 2024 corporate responsibility report, which details our CR program and strategy, our ESG initiatives and our industry-leading accomplishments." --- (HST, earning call, 2024/Q2)

"This mindset applies to everything we do—including our initiatives around resilience, decarbonization and conservation; our investments in talent; and our efforts to promote inclusion across our value chain while creating economic opportunity within local communities." --- (HST, press release, 2024/07/30)

"As noted above, the current outlook for the lodging industry remains uncertain; therefore, there can be no assurances as to the continued recovery in lodging demand for any number of reasons, including, but not limited to, slower than anticipated return of group and business travel or deteriorating macroeconomic conditions. Strategic Initiatives" --- (HST, sec filing, 2024/Q1)

"We estimate a 30 basis point impact to full year EBITDA margin from Maui relative to our prefire estimate, a 40 basis point impact from insurance and property taxes and a 110 basis point impact from wage and benefit rate increases, which is partially offset by a 90 basis point benefit from operational improvements. Our revised 2024 full year adjusted EBITDAre midpoint is $1.645 billion, a $25 million or a 1.5% decrease over the prior midpoint." --- (HST, earning call, 2024/Q2)

"Our properties are collaborating with local tourism authorities and government officials to create a clear, well-supported marketing campaign that will launch this fall after the anniversary of the tragic fires. These state and local efforts are in addition to sales and marketing efforts by our managers." --- (HST, earning call, 2024/Q2)

Market Positioning

Host Hotels & Resorts leverages unique positioning and capital allocation strategies to create shareholder value. The company remains strategic in managing its balance sheet and liquidity, monitors market opportunities for asset disposals, and benefits from improving international and business transient demand, enhancing its growth profile.

"Host is uniquely positioned. And as we have demonstrated, we are able to access many capital allocation levers to create shareholder value.With that, I will now turn the call over to Sourav to discuss additional operational detail and our revised 2024 outlook." --- (HST, earning call, 2024/Q2)

"As always, future dividends are subject to approval by the company's Board of Directors.We will continue to be strategic and opportunistic in managing our balance sheet and liquidity position as we move through the remainder of 2024.To conclude, we remain optimistic about the future of travel as the headwinds facing our portfolio are not indicative of a weakening consumer." --- (HST, earning call, 2024/Q2)

"So we’ll keep an eye on the market as we always do. And if we think there are opportunities to continue to enhance the overall growth profile of the portfolio, by disposing of assets, that’s certainly something we will consider going forward. Operator: The next question is from Chris Woronka from Deutsche Bank." --- (HST, earning call, 2024/Q2)

"So we’ll keep an eye on the market as we always do. And if we think there are opportunities to continue to enhance the overall growth profile of the portfolio, by disposing of assets, that’s certainly something we will consider going forward." --- (HST, earning call, 2024/Q2)

"The improving international demand imbalance, the continued improvement in business transient demand and increased activity in the transactions market." --- (HST, earning call, 2024/Q1)

Competitive Advantages

Host Hotels & Resorts is leveraging its unique position to gain a competitive edge, as highlighted in their recent earnings call. The company is strategically positioned to capitalize on its advantages, ensuring it remains ahead in the market.

"So I think that is the biggest gating issue. And that puts Host in a really competitive advantage." --- (HST, earning call, 2024/Q1)

"We’re in a unique position. And we’re going to take advantage of the position that we’re in." --- (HST, earning call, 2024/Q1)

Risk Management and ESG Initiatives

Host Hotels & Resorts has secured $18-$22 million in business interruption proceeds for the Maui wildfires, reflecting proactive risk management. Additionally, measures to distinguish revenue and expense changes aid in assessing operational performance, further supporting their risk management framework.

"Our risk management team has reached an agreement with our insurance carriers and we are now including between $18 million and $22 million of business interruption proceeds related to the Maui wildfires and our full year 2024 guidance." --- (HST, earning call, 2024/Q1)

"In particular, these measures assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at comparable hotels (which represent the vast majority of our portfolio) or from other factors." --- (HST, sec filing, 2024/Q1)