Analyst Note| Kevin Brown |
While Host Hotels & Resorts' bottom line remained negative in the fourth quarter, the company's operating results were in line with our expectations, which leads us to reaffirm our $15.50 fair value estimate for the no-moat company. Occupancy for the total portfolio was just 19.4% in the fourth quarter, down significantly from the 76.2% level in the fourth quarter of 2019 but up modestly from the 17.1% figure host reported in the third quarter of 2020, which we view as a significant positive given that the fourth quarter typically sees an occupancy drop and the fourth quarter saw a higher coronavirus case count across the country than any prior quarter. While average daily rates fell 20.4% year over year, that is smaller than the decline seen in either of the second or third quarters. As a result, revenue per available room fell 79.7% year over year, which is slightly better than the declines seen in the second and third quarters of 2020. Fortunately, Host was also able to reduce operating expenses by 65.4%, leading to a hotel EBITDA loss of $62 million that was in line with our estimates and far better than the $294 million combined hotel EBITDA loss Host experienced across the prior two quarters.