Host Hotels & Resorts(HST) - 2022 Q4 - Annual Report

Portfolio Overview - The consolidated lodging portfolio consists of 78 luxury and upper-upscale hotels with approximately 42,200 rooms, primarily located in the U.S.[27] - The company owns a portfolio of 78 hotels, with 73 located in the United States and five in Brazil and Canada, generating approximately 1% of revenues from foreign hotels in 2022[69] - The total number of rooms in the consolidated hotel portfolio is 42,214, with Marriott brands contributing 60.4% of revenues, followed by Hyatt at 21.0% and Hilton at 2.9%[74] - The consolidated portfolio includes 28 hotels with more than 500 rooms, and the average age of the properties is 35 years, with 87% managed by brand managers[73] Financial Performance - Total revenues increased by $2,017 million, or 69.8%, compared to 2021, driven by strong leisure demand and recovery in business travel[191] - Host Inc. reported a net income of $643 million for 2022, an increase of $654 million from the prior year, leading to diluted earnings per share of $0.88[196] - NAREIT FFO per diluted share increased by 198.3% to $1.79 in 2022, reflecting significant recovery in profitability[188] - Total revenues for Host Inc. reached $4,907 million in 2022, a 69.8% increase from $2,890 million in 2021[220] - Rooms revenue increased by $1,156 million, or 62.2%, driven by higher average room rates and occupancy[222] - Food and beverage revenue surged by $744 million, or 110.4%, due to increased outlet spend per occupied room and recovering group business[223] - Other revenues rose by $117 million, or 32.7%, primarily from attrition and cancellation fees, as well as strong golf and spa revenues[224] Capital Allocation and Investments - The company plans to continue its disciplined capital allocation approach in 2023, focusing on acquisitions of iconic properties with sustainable competitive advantages[34] - Host Inc. plans to continue disciplined capital allocation to strengthen its portfolio and may pursue acquisitions of upper-upscale and luxury properties[204] - The company has invested $35 million in a joint venture with Noble Investment Group, focusing on upper-upscale and luxury chain scales, and has a $150 million capital commitment to the next Noble fund[78][81] - Capital expenditures for 2023 are projected to be between $600 million and $725 million, including $250 million to $300 million for ROI projects[215] Market Strategy and Competition - The strategy includes maintaining a geographically diverse portfolio in major urban and resort destinations, targeting markets with high barriers to entry and favorable supply-demand dynamics[29] - The company competes primarily in the luxury and upper upscale categories, with competition from online short-term rentals and other hotel management companies[88] - The company aims to position its portfolio to capitalize on changes in market trends and customer travel patterns[89] Operational Structure and Management - Management agreements for hotels typically have an initial term of 10 to 25 years, with managers receiving a base management fee of 2-3% of annual gross revenues and an incentive management fee of 10-20% of operating profit after the owner's priority return[60] - The operating structure includes leasing hotels to taxable REIT subsidiaries (TRS) to comply with tax laws, allowing TRS to manage hotel operations and engage in non-qualifying income activities[67] - The company is dependent on third-party managers for hotel operations, limiting direct control over strategic business decisions[121] Economic and Industry Factors - The lodging industry is influenced by economic indicators such as GDP growth, business investment, and employment growth, which affect lodging demand[49] - The lodging industry is highly cyclical, with performance affected by economic conditions, including inflation and interest rates[101] - The COVID-19 pandemic has had lasting effects on operations, with potential future variants posing risks to bookings and financial performance[106] Employee and Labor Relations - As of February 17, 2023, the company had 165 employees with a voluntary turnover rate of 6% in 2022[93] - The workforce consists of 44% men and 56% women, with 43% of management positions held by women[94] - Approximately 26% of the total room count is covered by collective bargaining agreements at 17 hotels managed by third-party hotel managers[96] - The company is subject to risks associated with unionized labor, which could lead to increased labor costs and operational disruptions[125] Environmental and Regulatory Compliance - The company is committed to responsible investment strategies, emphasizing environmental stewardship, social responsibility, and governance[44] - The company is subject to various environmental laws and may incur costs related to hazardous substances, although no material claims are currently pending[91] - Compliance with the Americans with Disabilities Act and other regulations may incur substantial capital expenditures, impacting financial condition[157] - The company is subject to various REIT laws that restrict certain business activities, including the ownership of hotels not leased to a taxable REIT subsidiary[137] Risks and Challenges - The company faces inherent risks with real estate investments, including illiquidity and potential inability to sell hotels at favorable terms[112] - The company may incur additional indebtedness if operations decline, impacting cash flow available for working capital and dividends[114] - Cyber threats pose significant risks to the company's operations, with past breaches resulting in fines, such as Marriott being fined £18.4 million for a data breach[131][132] - The company faces risks associated with natural disasters and climate change, which could lead to increased repair costs and damage to properties[138][139] Shareholder Returns and Stock Performance - The five-year cumulative total stockholder return for Host Inc. was $93.13 in 2022, compared to $156.88 for the S&P 500 Index[172] - Host Inc. increased its share repurchase program from $371 million to $1 billion, allowing for flexible repurchases depending on market conditions[173] - The company declared dividends totaling $0.53 per share for 2022, including a special dividend of $0.20 per share in the fourth quarter[218]