Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. — 2022 Form 10-K
Reporting period: Fiscal year ended December 31, 2022; comparisons are primarily with fiscal 2021. This is an annual filing, not a standalone fourth-quarter report. Host Inc. is a REIT and the general partner of Host L.P.; the entities operate as one enterprise, with financial statements that are substantially the same.
Business context and performance
Host owns luxury and upper-upscale hotels and generally relies on third-party managers to operate them. At year-end it owned 78 hotels with about 42,200 rooms, primarily in the United States. Marriott-managed or franchised hotels represented about 60% of 2022 revenue. Leisure demand remained strong, while group and business-transient travel recovered, particularly in the second half.
Key financial metrics
| Metric | 2022 | 2021 |
|---|---|---|
| Total revenue | $4.907 billion | $2.890 billion |
| Operating profit (loss) | $775 million | ($250 million) |
| GAAP operating margin | 15.8% | (8.7%) |
| Net income (loss), consolidated | $643 million | ($11 million) |
| Net income (loss) attributable to Host Inc. | $633 million | ($11 million) |
| Diluted EPS, Host Inc. | $0.88 | ($0.02) |
| Adjusted EBITDAre | $1.498 billion | $532 million |
| Adjusted FFO per diluted share | $1.79 | $0.61 |
| Net cash from operating activities | $1.416 billion | $292 million |
| Capital expenditures | $504 million | $427 million |
| Total debt at year-end | $4.215 billion | $4.891 billion |
- All Owned Hotel RevPAR rose 63.2% year over year, with occupancy up 19.1 percentage points and average room rate up 15.8%. Total RevPAR increased 68.9%. These are non-GAAP/management-defined portfolio measures that include acquisition and disposition adjustments.
- All Owned Hotel EBITDA margin improved to 31.8% from 23.55%. Full-year Total RevPAR remained 2.7% below 2019, although the second through fourth quarters exceeded 2019 levels.
- Cash and cash equivalents were $667 million, with $200 million in FF&E replacement reserves and $1.5 billion of available revolver capacity. Cash, cash equivalents and restricted cash totaled $874 million in the cash flow statement.
- Weighted-average debt interest rate was 4.4% and weighted-average maturity was 5.2 years. About 76% of debt was fixed-rate; reported leverage and coverage ratios were within covenant limits.
Material changes versus 2021
- Revenue rose 69.8% as hotel demand recovered; food-and-beverage revenue grew 110.4%, rooms revenue 62.2%, and other revenue 32.7%.
- Property-level costs increased 32.6%, partly reflecting higher activity and staffing. Wage and benefit costs in rooms, food and beverage, and other departmental/support expenses rose 58%.
- Operating cash flow increased by $1.124 billion. Debt declined by $676 million, including repayment of the remaining $683 million drawn on the revolving facility in February 2022.
- Net income improved substantially, but 2021 included $306 million of other gains, principally gains on asset sales, compared with $17 million in 2022. The company sold four hotels for a total stated sales price of $672 million in 2022 and acquired the Four Seasons Resort and Residences Jackson Hole for $315 million.
- Common dividends resumed in 2022 after suspension during the pandemic. Host Inc. declared $0.53 per share for the year, including a $0.20 special dividend; it also repurchased $27 million of stock.
Outlook, risks and unusual items
- Management forecast 2023 comparable hotel RevPAR growth of 2%–8%. It expected margins to decline versus 2022 because of wage inflation, more normalized staffing, higher insurance and utility costs, lower attrition/cancellation fees, and occupancy below 2019 levels. The filing does not provide broader earnings or revenue guidance.
- Management budgeted 2023 capital expenditures of $600–$725 million, including $250–$300 million for ROI projects, $250–$300 million for renewal and replacement, and $100–$125 million for Hurricane Ian restoration.
- Hurricane Ian caused significant damage at The Ritz-Carlton, Naples and Hyatt Regency Coconut Point. The Ritz-Carlton remained closed at filing time, with phased reopening targeted to start summer 2023. Estimated property damage and remediation costs were $200–$220 million; the filing recorded a $105 million insurance receivable and reported approximately $50 million of proceeds received by February 17, 2023. Recovery and reopening timing remain uncertain.
- Key risks include lodging-cycle and recession exposure, persistent inflation and higher interest rates, labor shortages and union negotiations, reliance on third-party managers and Marriott, concentrated exposure to major urban and resort markets, required hotel renovations, natural disasters and insurance limitations, and access to external capital. Management cited collective bargaining agreements due to expire at hotels in New Jersey and Chicago in 2023.
- Subsequent to year-end, the company amended and restated its $2.5 billion credit facility, extending maturity dates and replacing LIBOR with SOFR-based pricing. It also authorized up to $1 billion of senior-note repurchases in February 2023. These are post-period events, not 2022 operating results.
- KPMG issued unqualified opinions on the financial statements and Host Inc.’s internal controls. The audit identified hotel-property recoverability assessments as a critical audit matter because cash-flow and expected-hold-period assumptions require judgment. The company recorded $92 million of impairment expense in 2021 and none in 2022.
Important facts for investors to verify
- Track the recovery of urban, group and business-transient demand against the company’s 2%–8% 2023 comparable RevPAR outlook, noting that the 2022 All Owned Hotel comparisons use adjusted portfolio data.
- Verify Hurricane Ian restoration costs, insurance proceeds and timing of reopening for the two affected resorts, especially The Ritz-Carlton, Naples.
- Assess whether operating margins can withstand wage, insurance and utility inflation while the company funds its planned $600–$725 million 2023 capital program.
- Review debt maturity, interest-rate exposure and covenant headroom. Management estimates a 100-basis-point change in rates on variable-rate debt would change 2023 interest expense by about $10 million.
- Consider the scale and terms of the $413 million in bridge loans issued to buyers of two sold hotels, including their collateral, repayment status and extensions.
- Distinguish GAAP results from non-GAAP measures such as Adjusted EBITDAre, FFO and All Owned Hotel statistics; the filing cautions these are not substitutes for cash flow or GAAP earnings.