Host Hotels & Resorts, Inc. and Host Hotels & Resorts, L.P. — 2023 Form 10-K
Reporting period: Fiscal year ended December 31, 2023. This is an annual filing, not a standalone fourth-quarter report; quarterly results are not clearly provided in the filing text. Host Inc. is a REIT and conducts substantially all operations through Host L.P. At year-end, the portfolio comprised 77 hotels with approximately 42,000 rooms, primarily luxury and upper-upscale properties, operated by third parties.
Key financial results
| Metric | 2023 | 2022 | Change |
|---|---|---|---|
| Total revenue | $5.311 billion | $4.907 billion | +8.2% |
| Operating profit | $827 million | $775 million | +6.7% |
| GAAP operating margin | 15.6% | 15.8% | -20 bps |
| Net income | $752 million | $643 million | +17.0% |
| Net income attributable to Host Inc. | $740 million | $633 million | +16.9% |
| Diluted EPS | $1.04 | $0.88 | +18.2% |
| Adjusted EBITDAre | $1.629 billion | $1.498 billion | +8.7% |
| Adjusted FFO per diluted share | $1.92 | $1.79 | +7.3% |
| Comparable hotel EBITDA margin | 30.1% | 31.8% | -170 bps |
Adjusted EBITDAre, FFO and comparable-hotel measures are non-GAAP supplemental metrics and should not be treated as substitutes for GAAP results or cash flow.
Revenue and hotel operations
- Comparable RevPAR increased 8.1% and Total RevPAR increased 8.3%. Comparable occupancy rose 4.1 percentage points; average room rate increased 1.8%.
- Rooms revenue was $3.244 billion (+7.6%); food and beverage revenue was $1.582 billion (+11.6%); other revenue was $485 million (+2.1%).
- Growth reflected stronger convention and downtown demand, group recovery, and easier comparisons with early 2022. Comparable RevPAR growth was led by Boston, Washington, D.C., New York and Houston.
- Comparable hotel EBITDA grew 2.4%, slower than comparable revenue growth, as staffing normalized and wages, insurance, utilities and property taxes increased. Wage and benefit costs across major departmental expenses rose 13%.
Cash flow, capital spending and liquidity
- Cash provided by operating activities was $1.441 billion, versus $1.416 billion in 2022.
- Capital expenditures were $646 million: $195 million for ROI projects, $274 million for renewal and replacement, and $177 million for hurricane restoration. Net cash used in investing activities was $183 million; net cash used in financing activities was $771 million.
- Year-end cash and cash equivalents were $1.144 billion; the FF&E replacement fund held $217 million. The company reported $1.5 billion of available revolver capacity and stated it expected sufficient liquidity for near-term obligations.
- Gross debt was $4.209 billion, with 76% fixed-rate, a 4.5% weighted-average interest rate and 4.2-year weighted-average maturity. Interest expense rose 22.4% to $191 million, principally due to higher rates on floating-rate debt. A 100-basis-point change in variable rates was estimated to affect 2024 interest expense and cash flow by about $10 million.
- The credit-agreement leverage ratio was 1.9x against a 7.25x maximum; the company reported compliance with debt covenants. One $400 million senior-note maturity was due in April 2024. Only one consolidated hotel was encumbered by mortgage debt.
Material changes and capital returns
- Revenue growth did not translate into comparable margin growth: comparable EBITDA margin fell 170 basis points, reflecting cost inflation and staffing recovery. GAAP operating margin declined 20 basis points.
- Net income benefited from improved hotel operations, asset-sale gains and insurance gains. The company recorded $86 million of insurance-settlement gains, including business-interruption proceeds; the filing gives different detail in different sections, so the precise business-interruption component should be checked against the financial-statement notes.
- The company sold The Camby for $110 million and recorded a $69 million gain; it provided the buyer a $72 million loan. Two loans to buyers of hotels sold in 2022, totaling $413 million, were repaid in 2023.
- Host Inc. repurchased 11.4 million shares for approximately $181 million at an average $15.93 per share. It declared $0.90 per share in 2023 dividends, including a $0.25 special dividend. A regular $0.20 quarterly dividend was announced for payment in April 2024.
Outlook, risks and unusual items
- Management forecast 2024 comparable RevPAR growth of 2.5%–5.5% and expected margins to decline, citing wage growth of 4%–5%, higher insurance costs and real estate taxes. 2024 capital spending was budgeted at $500–$605 million, including $125–$150 million for the new Hyatt transformational program.
- Management described economic and lodging-industry conditions as uncertain, citing tight monetary policy, possible slower growth, geopolitical instability, oil-price volatility and election-related uncertainty. Demand recovery in some urban markets, including San Francisco and Seattle, remained slower; Maui demand faced continuing disruption after the 2023 wildfires.
- The Maui wildfires did not physically damage Host’s hotels, but management estimated they reduced full-year comparable RevPAR by about 50 basis points and Total RevPAR by about 70 basis points. Hurricane Ian restoration costs were estimated at $300–$320 million; expected potential insurance recovery was $310 million, with no assurance of full collection. The Ritz-Carlton, Naples reopened in July 2023.
- Other principal risks include lodging cyclicality, inflation and interest rates, labor availability and union negotiations, heavy reliance on third-party operators (Marriott represented about 62% of revenue), concentrated exposure to major markets, climate and natural-disaster losses, insurance limitations, cybersecurity risks, and REIT qualification requirements. Collective bargaining agreements at hotels in Seattle, San Francisco and Washington, D.C. were due to expire in 2024.
- KPMG issued unqualified opinions on the financial statements and, for Host Inc., internal control over financial reporting. Hotel-property impairment evaluation was identified as a critical audit matter; the company reported no impairment charge for 2023.
Important facts for investors to verify
- Whether the $400 million April 2024 senior notes were repaid or refinanced, and the resulting cost and maturity profile.
- Actual 2024 RevPAR, operating margins and wage, insurance and property-tax expense trends relative to guidance.
- Collections and final covered costs for Hurricane Ian claims, and continuing operating effects of the Maui wildfires.
- Delivery, cost and expected returns of the $550–$600 million Hyatt renovation program and the broader 2024 capital plan.
- How share repurchases, dividends and any future acquisitions or dispositions affect liquidity, leverage and per-share FFO.