Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. — 2020 Form 10-K
Reporting period: Fiscal year ended December 31, 2020. This is an annual report, not a standalone fourth-quarter filing; quarterly figures below are included where stated. Host Inc. is a REIT and owns and operates its lodging business through Host L.P.
Business context
Host owns luxury and upper-upscale hotels, principally in the United States, operated by third-party managers. At year-end it had 79 consolidated hotels; as of February 19, 2021, the portfolio was 80 hotels with approximately 46,300 rooms. Marriott-managed or -franchised hotels generated about 70% of 2020 revenue. COVID-19 sharply reduced travel, particularly group and business demand, and some properties suspended operations.
Financial and operating performance
| Metric | 2020 | 2019 |
|---|---|---|
| Total revenue | $1.620 billion | $5.469 billion |
| Net income (loss) | $(741) million | $932 million |
| Operating profit (loss) | $(953) million | $799 million |
| GAAP operating margin | (58.8)% | 14.6% |
| Net cash from (used in) operations | $(307) million | $1.250 billion |
| Capital expenditures | $499 million | $558 million |
| Adjusted EBITDAre | $(168) million | $1.534 billion |
| Adjusted FFO per diluted share | $(0.17) | $1.78 |
- Revenue fell 70.4%; rooms revenue declined 71.6% and food-and-beverage revenue declined 74.1%. Fourth-quarter revenue was $267 million; fourth-quarter operating cash flow was $(143) million.
- Pro forma RevPAR declined 70.3% and Total RevPAR declined 69.4%. Average occupancy was 26.0%, versus 78.6% in 2019.
- All-owned hotel pro forma EBITDA was $(137) million, with an (8.5)% margin, versus $1.493 billion and a 28.8% margin in 2019.
- Year-end cash and cash equivalents were $2.335 billion; total debt was $5.541 billion, up from $3.794 billion. Debt had a 3.0% weighted average interest rate and 5.0-year weighted average maturity; 55% was fixed-rate. No significant debt maturities were due until 2023.
- Interest expense was $194 million, down from $222 million. Cash used in operations plus capital expenditures was approximately $806 million; cash and cash equivalents increased during the year, substantially supported by borrowing and other financing.
Material changes and unusual items
- The pandemic drove the collapse in hotel demand and operating results. The company reduced hotel operating costs by over 50% versus 2019, excluding severance, and cut corporate expenses by 16.8%.
- Host drew substantially all of its $1.5 billion revolver to bolster liquidity and issued $750 million of 3.5% Series I senior notes. It used proceeds in part to retire its remaining 4.75% Series C notes, including premiums and costs.
- Asset-sale gains totaled $208 million, mainly from the Newport Beach Marriott sale and Phoenician-adjacent land sales. The company recorded a $220 million income tax benefit, primarily related to taxable-subsidiary losses and CARES Act net operating loss carryback provisions.
- Hotel-level severance costs were $65 million; managers recorded approximately $39 million of Employee Retention Credit benefits related to hotel employees. The company itself did not file for CARES Act relief.
- Regular quarterly common dividends and share repurchases were suspended after the first quarter. 2020 dividends were $0.20 per share, compared with $0.85 in 2019; repurchases were also halted after $147 million of first-quarter purchases.
Outlook, liquidity, and key risks
- Management did not provide a full-year 2021 RevPAR forecast, citing exceptional uncertainty. It expected gradual, uneven recovery, with corporate and group travel likely to recover more slowly than leisure demand; it also anticipated below-historical-average hotel supply growth.
- 2021 capital expenditures were forecast at $375 million to $475 million, including $275 million to $325 million of ROI projects. Management said spending could be reduced by approximately $150 million to conserve cash.
- Credit-facility financial maintenance covenants were waived through the reporting date for the second quarter of 2022, with a subsequent phase-in. The amended facility requires minimum monthly liquidity of $400 million during the relief period, increases borrowing costs, and restricts debt incurrence, dividends, repurchases, acquisitions and certain capital expenditures.
- Although management said cash reserves were sufficient for near-term needs, the revolver was substantially utilized, only $12 million of capacity remained, and the company was below the senior-note 1.5x EBITDA-to-interest coverage test required to incur additional debt. The credit facility also required excess proceeds from certain debt issuances and asset sales to repay borrowings, subject to exceptions.
- Principal risks include prolonged pandemic effects, slow recovery in group and business travel, high leverage and restricted financing flexibility, fixed property costs, concentration in major urban markets, dependence on third-party operators—especially Marriott—and climate, insurance, labor, legal and REIT-qualification risks.
- KPMG issued an unqualified opinion on the financial statements and, for Host Inc., internal controls. Hotel-property recoverability was identified as a critical audit matter because impairment assessments depended on uncertain pandemic recovery and cash-flow assumptions; the company reported no 2020 hotel impairment expense.
Important facts for investors to verify
- Hotel demand, occupancy, RevPAR and cash burn trends after year-end, including whether suspended properties have reopened and how group and business bookings are progressing.
- Cash availability after restricted funds, required liquidity levels, remaining revolver capacity, and any mandatory debt repayments from asset sales or financing.
- Compliance with senior-note coverage restrictions and the planned credit-covenant phase-in beginning in 2022.
- Actual 2021 capital spending versus the $375 million–$475 million range, and whether planned reductions affect hotel competitiveness or recovery.
- Timing and conditions for restoring dividends or repurchases; future distributions remain board-dependent and covenant-limited.
- Assumptions behind hotel-property recoverability and the sustainability of tax benefits, including CARES Act carryback refunds and taxable-subsidiary loss carryforwards.