Host Hotels & Resorts, Inc. — Q1 2024 10-Q
Reporting period: Three months ended March 31, 2024; unaudited. Host Inc. is a REIT operating through Host L.P. At quarter-end, the portfolio comprised 77 hotels, with 76 included in comparable-hotel results.
Financial and operating performance
| Metric | Q1 2024 | Q1 2023 | Change |
|---|---|---|---|
| Total revenue | $1.471 billion | $1.381 billion | +6.5% |
| Operating profit / GAAP margin | $291 million / 19.8% | $248 million / 18.0% | +17.3% / +180 bps |
| Net income attributable to Host Inc. | $268 million | $287 million | -6.6% |
| Diluted earnings per share | $0.38 | $0.40 | -5.0% |
| NAREIT FFO / adjusted FFO per diluted share | $0.60 / $0.60 | $0.54 / $0.55 | +11.1% / +9.1% |
| Comparable RevPAR / Total RevPAR | -1.2% / +0.5% | — | Year-over-year |
| Comparable hotel EBITDA margin | 31.2% | 32.6% | -140 bps |
Revenue gains reflected strong group business, higher food-and-beverage and other revenue, and the reopening of The Ritz-Carlton, Naples, which was closed during the first half of 2023 after Hurricane Ian. Comparable RevPAR declined as room rates softened while occupancy was flat; stronger group and ancillary revenue supported Total RevPAR. Comparable hotel EBITDA fell 2.9% to $435 million, with wage and insurance cost increases weighing on margins. GAAP operating margin improvement included $31 million of insurance-settlement gains.
Net income was lower primarily because Q1 2023 included a $69 million gain on the sale of The Camby; Q1 2024 insurance gains partly offset the comparison. Adjusted EBITDAre, a non-GAAP measure, rose 8.8% to $483 million. Adjusted FFO per share also benefited from higher adjusted EBITDAre, partly offset by higher interest expense excluding debt-extinguishment costs.
Cash flow, debt and liquidity
- Operating cash flow was $365 million, compared with $308 million; investing cash outflow was $100 million and financing cash outflow was $44 million. Cash, cash equivalents and restricted cash increased $219 million to $1.582 billion, including $231 million held in the FF&E replacement fund. Balance-sheet cash and cash equivalents were $1.349 billion.
- Quarter-end total debt was $4.510 billion, with a 4.6% weighted-average interest rate, 3.9-year weighted-average maturity and 71% fixed-rate debt. The company drew $300 million on its revolver in Q1; $1.2 billion of revolver capacity remained at March 31.
- After quarter-end repayment of $400 million of senior notes and net $85 million of revolver repayments, management estimated debt at approximately $4.0 billion, a 4.7% weighted-average interest rate and 4.3-year weighted-average maturity. Revolver capacity was then $1.3 billion. These figures precede or should be considered alongside the subsequent $530 million hotel acquisition.
- The company reported compliance with its credit-facility and senior-note covenants. The next significant debt maturity was $500 million due in June 2025. Only one consolidated hotel was encumbered by mortgage debt.
- Q1 capital expenditures were approximately $103 million. The company paid $316 million in common-stock dividends during the quarter. The declared $0.20-per-share quarterly dividend was paid April 15; future dividends remain subject to Board approval.
Outlook, significant events and risks
- Management expects full-year 2024 comparable hotel RevPAR growth of 2.0%–4.0%. It cited normalized lodging demand, recovering group and business travel, and below-average expected hotel supply growth, but emphasized a wide range of potential outcomes.
- Expected 2024 capital expenditures are $500 million–$605 million, including $225 million–$280 million for return-on-investment projects, $250 million–$300 million for renewals and replacements, and $25 million for final Hurricane Ian restoration. Management expects to invest $125 million–$200 million annually over the next three to four years in a Hyatt-related transformational program.
- Wage and benefit rate inflation is expected to be approximately 5% in 2024. Management cited tight monetary policy, inflation, possible economic slowdown, geopolitical instability, volatile oil prices, labor costs and shortages, and softening short-term leisure demand as risks.
- Comparable performance remains pressured by Maui wildfire impacts and weather-related weakness at some resort properties. The collapse of part of Highway 1 led to the temporary closure of Alila Ventana Big Sur; it will leave the comparable set beginning in Q2.
- After quarter-end, Host acquired 1 Hotel Nashville and Embassy Suites by Hilton Nashville Downtown for $530 million. It also repaid the $400 million Series G notes at maturity. Hurricane Ian restoration and remediation costs are estimated at $300 million–$320 million; as of May 1, the company had received $263 million of an expected approximately $310 million in insurance recovery.
- Management reported immaterial accruals for ordinary-course legal matters and no known matters requiring disclosure of a reasonably possible material loss. The filing notes that interim results may be affected by seasonality and are not necessarily indicative of full-year performance.
Important facts for investors to verify
- Whether the 2.0%–4.0% comparable RevPAR outlook is achieved, particularly given Maui recovery, transient-demand softness and broader economic uncertainty.
- How the Nashville acquisition performs and how its $530 million purchase price affects cash, debt and future returns.
- Progress on Hurricane Ian insurance recoveries and remaining restoration costs, including the timing and accounting for additional proceeds.
- Whether wage, insurance and other property-level cost growth continues to pressure comparable hotel margins.
- Capital-spending requirements, debt maturities and liquidity after acquisitions and distributions; note that FFO, EBITDAre and comparable-hotel measures are non-GAAP measures and should be considered with GAAP results.