Host Hotels Earnings: Total Revenue Growth Solid on Group Business but Offset by High Expense Growth

Third-quarter results for Host Hotels & Resorts were slightly worse than we expected, though we didn't see anything in the quarter that would materially change our $24 fair value estimate for the no-moat company. Same-store occupancy fell 20 basis points year over year to 71.7% while average room rates increased 1.0%. As a result, Host reported same-store revenue per available room of just 0.8% in the third quarter, slightly worse than our estimate of 2.5% growth. While strong group bookings drove significant growth for food and beverage revenue and other revenue, leading to total revenue growth of 3.3%, the company also saw 4.5% higher operating expenses. As a result, hotel EBITDA margins fell 130 basis points to 25.3% and hotel EBITDA grew just 0.2% in the third quarter, worse than our estimate of hotel EBITDA growing 3.7%. Host reported adjusted funds from operations of $0.36 per share in the third quarter, three cents below our $0.39 estimate and five cents below the $0.41 figure the company reported in the third quarter of 2023.