Company Reports

Host Hotels & Resorts is the largest lodging real estate investment trust in the United States. Hotels have one of the highest betas among all REITs and trade up or down on any indication that the US economy is picking up or slowing down, respectively. People need to travel for business when the economy is expanding and want to travel when jobs and income are steady, but travel is one of the first things cut as confidence in the economy falls. Since hotel lease terms are for a single night, occupancy and rates get reset each day and quickly reflect changes in the economy. Prior economic cycles have seen two to three years of falling revenue per available room during a recession, followed by five to six years of high-single- to low-double-digit revPAR growth. Typically, as growth slows, the economy enters a new recession, and the pattern repeats.

Host Hotels & Resorts reported adjusted funds from operations of $0.63 per share and comparable hotel EBITDA growth of 7.8% for the second quarter.

Host Hotels & Resorts, the largest lodging real estate investment trust in the United States, has entered an unprecedented mature stage of its growth cycle. Hotels have one of the highest betas among all REITs and trade up or down on any indication that the US economy is picking up or slowing down, respectively. People need to travel for business when the economy is expanding and want to travel when jobs and income are steady, but travel is one of the first things cut as confidence in the economy falls. Since hotel lease terms are for a single night, occupancy and rates get reset each day and quickly reflect changes in the economy. Prior economic cycles have seen two to three years of falling revenue per available room during a recession, followed by five to six years of high-single- to low-double-digit revPAR growth. Typically, as growth slows, the economy enters a new recession, and the pattern repeats.

Host Hotels & Resorts reported adjusted funds from operations of $0.67 per share and comparable hotel EBITDA growth of 7.0% for the first quarter.

Host Hotels & Resorts, the largest lodging real estate investment trust in the United States, has entered an unprecedented mature stage of its growth cycle. Hotels have one of the highest betas among all REITs and trade up or down on any indication that the US economy is picking up or slowing down, respectively. People need to travel for business when the economy is expanding and want to travel when jobs and income are steady, but travel is one of the first things cut as confidence in the economy falls. Since hotel lease terms are for a single night, occupancy and rates get reset each day and quickly reflect changes in the economy. Prior economic cycles have seen two to three years of falling revenue per available room during a recession, followed by five to six years of high-single- to low-double-digit revPAR growth. Typically, as growth slows, the economy enters a new recession, and the pattern repeats.

Host Hotels & Resorts reported adjusted funds from operations of $0.51 per share and comparable hotel EBITDA growth of 4.1% for the fourth quarter.

Host Hotels & Resorts reported adjusted funds from operations of $0.35 per share and a comparable hotel EBITDA decline of just 1.3% for the third quarter.

Host Hotels & Resorts, the largest lodging real estate investment trust in the United States, has entered an unprecedented mature stage of its growth cycle. Hotels have one of the highest betas among all REITs and trade up or down on any indication that the US economy is picking up or slowing down, respectively. People need to travel for business when the economy is expanding and want to travel when jobs and income are steady, but travel is one of the first things cut as confidence in the economy falls. Since hotel lease terms are for a single night, occupancy and rates get reset each day and quickly reflect changes in the economy. Prior economic cycles have seen two to three years of falling revenue per available room during a recession, followed by five to six years of high-single- to low-double-digit revPAR growth. Typically, as growth slows, the economy enters a new recession, and the pattern repeats.

Host Hotels & Resorts reported adjusted funds from operations of $0.58 per share and comparable hotel EBITDA growth of just 0.4% for the second quarter.

Host Hotels & Resorts, the largest lodging real estate investment trust in the United States, has entered an unprecedented mature stage of its growth cycle. Hotels have one of the highest betas among all REITs and trade up or down on any indication that the US economy is picking up or slowing down, respectively. People need to travel for business when the economy is expanding and want to travel when jobs and income are steady, but travel is one of the first things cut as confidence in the economy falls. Since hotel lease terms are for a single night, occupancy and rates get reset each day and quickly reflect changes in the economy. Prior economic cycles have seen two to three years of falling revenue per available room during a recession, followed by five to six years of high-single- to low-double-digit revPAR growth. Typically, as growth slows, the economy enters a new recession, and the pattern repeats.

Host Hotels & Resorts reported adjusted funds from operations of $0.64 per share and comparable hotel EBITDA growth of 5.8% for the first quarter.

Performance of the REIT sector remains negatively correlated with interest rate movements with performance over the past three years demonstrating strong statistical relationship with 10-year US Treasury movements.

Host Hotels & Resorts, the largest lodging real estate investment trust in the United States, has entered an unprecedented mature stage of its growth cycle. Hotels have one of the highest betas among all REITs and trade up or down on any indication that the US economy is picking up or slowing down, respectively. People need to travel for business when the economy is expanding and want to travel when jobs and income are steady, but travel is one of the first things cut as confidence in the economy falls. Since hotel lease terms are for a single night, occupancy and rates get reset each day and quickly reflect changes in the economy. Prior economic cycles have seen two to three years of falling revenue per available room during a recession followed by five to six years of high-single- to low-double-digit revPAR growth. Typically, as growth slows, the economy enters a new recession and the pattern repeats.

Host Hotels & Resorts reported fourth-quarter results that were better than anticipated, but 2025 guidance came in below expectations. Taken together, we do not anticipate a material change to our $23 fair value estimate for the no-moat company. Same-store occupancy was relatively flat, down 20 basis points year over year to 67.1%. Meanwhile, average room rates were up 3.3% in the fourth quarter, leading to Host reporting revenue per available room growth of 3.0% that was better than our estimate of 1.5% revPAR growth. Similarly, same-store revenue growth was 3.4% while operating expenses were up 2.9%. Therefore, same-store hotel EBITDA margins improved 40 basis points as same-store hotel EBITDA increased 4.6% in the quarter, which was significantly better than our estimate of a 1.4% decline. As a result, Host reported adjusted funds from operations of $0.44 per share in the fourth quarter, 4 cents better than our $0.40 estimate and in line with the $0.44 figure the company reported in the fourth quarter of 2023.

Over the past few years, we have observed an inverse relationship between share prices in the REIT sector and interest-rate movements. We believe a major reason is that all commercial real estate valuations are connected to interest rates. Capitalization rates directly indicate the return expectations for a real estate investment and expectations for risk and growth. Historically, we have observed that commercial real trades at cap rates consistently spread above the 10-year US Treasury. If interest rates rise, investors will require a higher return, and thus a higher cap rate, to accept the risk associated with an investment in a real estate asset. Since return expectations have held relatively steady for most real estate sectors over the past few years, higher cap rates translate to falling prices for real estate.

Host Hotels & Resorts, the largest lodging real estate investment trust in the United States, has entered an unprecedented mature stage of its growth cycle. Hotels have one of the highest betas among all REITs and trade up or down on any indication that the US economy is picking up or slowing down, respectively. People need to travel for business when the economy is expanding and want to travel when jobs and income are steady, but travel is one of the first things cut as confidence in the economy falls. Since hotel lease terms are for a single night, occupancy and rates get reset each day and quickly reflect changes in the economy. Prior economic cycles have seen two to three years of falling revenue per available room during a recession followed by five to six years of high-single- to low-double-digit revPAR growth. Typically, as growth slows, the economy enters a new recession and the pattern repeats.

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.

The REIT sector in the US offers many companies that should see relatively stable cashflow growth over the next several years. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years with many reaching historical levels of net operating income growth, the REIT sector underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that is due to the sector’s negative correlation with interest rates, as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. Still, we still view many of companies in the US REIT sector as being undervalued as the companies should continue to produce solid long-term growth.

Despite a rally over the past two months, we still view the US REIT sector as being undervalued. While the pandemic hurt REIT valuations in 2020, the recovery of fundamentals across most sectors led combined with low interest rates led to strong total returns in 2021 and early 2022. However, despite fundamentals continuing to perform well over the past three years, with many reaching historical levels of net operating income growth, the REIT sector has underperformed the broader equity markets in 2023 and into the first half of 2024. We believe that the cause has been due to the sector's negative correlation with interest rates as income-oriented investors rotate out of the sector, higher rates lower the value REITs can create with external growth, and property valuations fall in line with higher rates. However, interest rates have fallen since the end of July, leading to a rally for the REIT sector. We believe that US REITs will continue to see share price movements that are inverse of interest rate movements.

No-moat Host Hotels & Resorts reported mixed second-quarter results compared with our estimates, but we don’t anticipate any material changes to our $24 fair value estimate. Occupancy increased only 10 basis points year over year to 74.4%, while average room rates were flat, leading to revenue per available room growth of just 0.1% compared with our estimate of 3.0% growth. However, hotel operating expenses were up 0.7% in the quarter, well below our estimate of 5.5% growth. Therefore, while hotel EBITDA and EBITDA margins were flat in the quarter, that is better than our estimate of a 2.9% decline in hotel EBITDA and EBITDA margins falling to 30.7%. Host reported adjusted funds from operations of $0.57 per share in the quarter, which was better than our $0.55 estimate and the $0.53 reported in the second quarter of 2023.