Host Hotels & Resorts(HST) - 2023 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - The company reported a comparable hotel RevPAR growth of 3.8% during the quarter, with adjusted EBITDAre of $446 million and adjusted FFO per share of $0.53 [58] - Comparable hotel EBITDA margin for Q2 was 32.7%, exceeding 2019 levels, marking the fifth consecutive quarter of performance above pre-pandemic metrics [33][74] - Total comparable expenses grew by 7.5% over 2019, while total comparable revenues increased by 7.8% [50] Business Line Data and Key Metrics Changes - Transient revenue was up 80 basis points compared to Q2 2022, driven by rate growth despite a slight decrease in demand [47] - Business transient revenue was 16% above Q2 2022, with a 10% rate increase and nearly 6% increase in demand [48] - Group room revenues were up 4% compared to Q2 2022, fully driven by rate growth [73] Market Data and Key Metrics Changes - Total group revenue pace is up 13.5% compared to the same time last year and up 1.5% compared to 2019 [43] - Specific markets showing strong group revenue momentum include Atlanta, Chicago, New Orleans, New York, Phoenix, San Diego, Seattle, and Washington, D.C. [8] - International outbound air travel grew to 110% of pre-pandemic levels, while international inbound was only 80% [62] Company Strategy and Development Direction - The company plans to continue its opportunistic capital deployment strategy, focusing on transformational renovations to capture market share [5][44] - The company has completed renovations at seven of eight targeted assets, with an average RevPAR index share gain of 8.8 points [69] - The company expects to maintain a sustainable dividend level while considering macroeconomic factors [78] Management's Comments on Operating Environment and Future Outlook - Management remains optimistic about the state of travel, citing improvements in group business and strong leisure rates at resorts [36][37] - The company anticipates that international demand will be a tailwind going forward, despite current softness in leisure business due to increased international travel by U.S. consumers [12][36] - Management noted that they are not seeing evidence of a weakened consumer at their hotels, with food and beverage spend up 6% year-over-year [37] Other Important Information - The company expects insurance expenses to rise by approximately 40% year-over-year, equating to about $61 million for 2023 [21] - The company has received $113 million in insurance proceeds related to Hurricane Ian, with an expected total recovery of approximately $310 million [67] Q&A Session Summary Question: Can you provide insights on leisure normalization and demand? - Management anticipated a decrease in rates, which occurred, with leisure rates down about 7% but still 61% higher than Q2 2019 [11][12] Question: What markets are seeing group booking momentum? - Group revenue pace is ahead of 2019 by 1.5%, with strong activity in Atlanta, Chicago, New Orleans, New York, Phoenix, San Diego, Seattle, and Washington, D.C. [7][8] Question: How is the company managing labor costs? - Insurance expenses are expected to increase by about 40% year-over-year, while wage rate growth is anticipated to be around 5% [21][104] Question: What is the outlook for the second half of the year? - Management expects year-over-year comparable hotel RevPAR changes in the second half to be flat to up low single digits, primarily driven by occupancy [98] Question: How does the company view the impact of international inbound travel? - International inbound travel is seen as a potential tailwind for future performance, with current levels at 80% of pre-pandemic [80][106]