Host Hotels & Resorts(HST) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q3 2025, adjusted EBITDAre was $319 million, a decrease of 3.3% year-over-year, while adjusted FFO per share was $0.35, down 2.8% compared to 2024 [4][19] - Year-to-date, adjusted EBITDAre and adjusted FFO per share were up 2.2% and 60 basis points, respectively, compared to 2024 [4][19] - Comparable hotel total RevPAR improved by 80 basis points compared to 2024, with a 20 basis points increase attributed to better transient demand and higher rates [5][19] Business Line Data and Key Metrics Changes - Transient revenue grew by 2%, driven by double-digit growth at resort properties, particularly in Maui, San Francisco, New York, and Miami [6][21] - Group room revenue decreased approximately 5% year-over-year due to renovation disruptions and the Jewish holiday calendar shift [7][25] - Ancillary spending remained strong, with other revenue up 7%, including growth in golf and spa services [8][22] Market Data and Key Metrics Changes - Total group revenue pace in Maui is up 13% for 2026, indicating continued recovery momentum [6][7] - Business transient revenue was down 2% in Q3, primarily due to a reduction in government room nights [7][24] - Group revenue pace for 2026 is approximately 5% ahead of the same time last year, driven by rate, room nights, and banquet contributions [26][60] Company Strategy and Development Direction - The company is focusing on capital allocation decisions that enhance long-term shareholder value, including significant investments in transformational renovations [19][41] - The company has completed 23 transformational renovations since 2018, achieving an average RevPAR index share gain of over 8.5 points [16][41] - The company is targeting stabilized annual cash on cash returns in the mid-teens through RevPAR index share gains and enhanced owner priority returns [14][19] Management Comments on Operating Environment and Future Outlook - Management expressed confidence in the continued outperformance of upper upscale and luxury hotels, benefiting from a bifurcated consumer market [19][66] - The company raised its full-year adjusted EBITDAre guidance to $1.73 billion, reflecting strong performance and improved expectations for Q4 [19][29] - Management noted that the absence of major storms on the Gulf Coast could provide tailwinds for growth in 2026 [92][96] Other Important Information - The company collected $5 million in business interruption proceeds for Hurricanes Helene and Milton in Q3, totaling $24 million for the year [10][29] - The company has a strong balance sheet with $2.2 billion in total available liquidity and a leverage ratio of 2.8 times [31][32] - The company is not prioritizing asset acquisitions in the current market environment, focusing instead on internal investments [85][86] Q&A Session Summary Question: Can we expect more asset trading in the market based on current performance? - Management indicated they will be opportunistic with capital allocation and highlighted successful asset sales, suggesting potential for future transactions [36][40] Question: How are you selecting hotels and markets for investment? - Management emphasized a thorough screening process for capital allocation, focusing on transformational renovations that reposition properties for better performance [48][50] Question: What is the outlook for group booking pace in 2026? - Management reported a positive group revenue pace for 2026, with significant increases in group room nights and rates expected [55][60] Question: How are wage and benefits increases expected to impact 2026? - Wage rate growth is anticipated to be lower in 2026, with only New York having significant labor contract negotiations upcoming [88][89] Question: What tailwinds can be expected from the absence of storms on the Gulf Coast? - Management noted that properties like the Don Cesar and Ritz Naples are performing well, and the absence of storms could enhance growth potential in 2026 [92][96]