Host Hotels & Resorts(HST) - 2024 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported adjusted EBITDAre of $476 million for Q2 2024, representing a 6.7% increase year-over-year, excluding business interruption proceeds [4] - Adjusted FFO per share was $0.57, which includes $21 million in business interruption proceeds related to Maui RevPAR and $9 million for Hurricane Ian [4] - Comparable hotel total RevPAR improved by 50 basis points year-over-year, while comparable hotel RevPAR was up 10 basis points [4] Business Line Data and Key Metrics Changes - Group room revenue increased by approximately 8% in Q2, driven by rate and demand growth, with 315,000 group room nights booked for the year [7] - Business transient revenue grew by 4%, supported by both demand and rate growth, with domestic leisure demand moderating as consumers opted for international destinations [7] - Transient rates at comparable resorts were up 51% compared to 2019, indicating strong financial health among affluent consumers [7] Market Data and Key Metrics Changes - U.S. international outbound travel grew to 119% of pre-pandemic levels, while international inbound travel remained at 88% [8] - Airline capacity to Maui was down 16% year-over-year, although this was an improvement from previous months [6] - Food and beverage revenue drove total RevPAR growth, with banquet and catering leading the way [8] Company Strategy and Development Direction - The company announced the acquisition of 1 Hotel Central Park for approximately $265 million, expected to rank among the top 10 assets based on 2024 results [9] - The acquisition of Ritz-Carlton O'ahu Turtle Bay for $630 million was also completed, with expectations for stabilization between 10x to 12x EBITDA by 2027 to 2029 [11] - The company aims to reach $2 billion of EBITDA by 2025, with a focus on strategic acquisitions and capital allocation [12] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about the state of travel despite the slower recovery in Maui and moderating domestic leisure demand [16] - The company anticipates comparable hotel RevPAR growth between negative 1% and positive 1% for 2024, with a focus on group business remaining strong [21] - The impact of the Maui wildfires is expected to affect full-year comparable hotel total RevPAR by 120 basis points [22] Other Important Information - The company has $1.4 billion in total available liquidity and a net leverage ratio of 2.7x [13] - Capital expenditure guidance for 2024 is set between $500 million and $600 million, with significant investments in redevelopment and ROI projects [14] - The company has repurchased $258 million of stock since 2022, demonstrating a commitment to returning capital to shareholders [13] Q&A Session Summary Question: Prospects for further acquisitions - Management is satisfied with the three acquisitions made this year and is not currently contemplating additional acquisitions in the near term, focusing instead on integrating the new properties [26][29] Question: Role of incremental dispositions - Management has explored disposition pricing but is under no pressure to sell assets, only considering it if pricing is fair relative to hold value [32] Question: Long-term vision for 1 Hotels - Management is pleased with the performance of 1 Hotels and sees potential for continued growth, but no current plans for co-branding [35][36] Question: Aspects of guidance agreement - Confidence in guidance stems from strong group booking pace, although there are concerns about leisure transient demand [38][42] Question: Understanding guests at Maui properties - New channels are being pursued to attract guests back to Maui, with a coordinated marketing campaign planned for mid-September [45][46] Question: Trends in leisure transient demand - Management is extrapolating trends from Q2 into Q3, with expectations for a similar mix of leisure demand [51] Question: Indicators of a weakening economy - Management believes that the high-end consumer remains strong, with potential weakness seen in lower-end leisure demand [68] Question: Wage and benefit increases outlook - Wage increases for 2025 are expected to be lower due to controlled inflation, with estimates around 3% to 4% [70]