Host Hotels & Resorts, Inc. — FY2021 Form 10-K
Reporting period: Fiscal year ended December 31, 2021. The filing covers Host Hotels & Resorts, Inc. and its operating partnership, Host Hotels & Resorts, L.P. Host is a lodging REIT focused on luxury and upper-upscale hotels; it reported 80 hotels as of February 2022 and operated all hotels through third-party managers.
Financial and operating performance
| Metric | 2021 | 2020 |
|---|---|---|
| Revenue | $2.890 billion | $1.620 billion |
| Operating loss | $250 million | $953 million |
| Net loss attributable to Host Inc. | $11 million; diluted loss per share $0.02 | $732 million; diluted loss per share $1.04 |
| Operating loss margin | (8.7)% | (58.8)% |
| Cash from operating activities | $292 million | Cash used: $307 million |
| Capital expenditures | $427 million | $499 million |
| Adjusted EBITDAre | $532 million | Loss of $168 million |
| Adjusted FFO per diluted share | $0.61 | Loss of $0.17 |
- Revenue increased 78.4% year over year, led by recovery in leisure demand, particularly at resort hotels, and a partial return of business and group travel in the second half. Fourth-quarter revenue was $998 million, the strongest quarter of the year.
- All-owned-hotel pro forma RevPAR rose 87.6% from 2020, reflecting higher occupancy and a 6.8% increase in average room rate. However, it remained 43.2% below 2019; Total RevPAR was 44.9% below 2019. Miami Total RevPAR was 9.3% above 2019, while San Francisco/San Jose and New York remained particularly weak.
- All-owned-hotel pro forma EBITDA was $636 million, with a 21.7% margin, compared with a $129 million loss and negative 7.7% margin in 2020. These are non-GAAP property-level measures, not consolidated GAAP profit.
- Results included $306 million of other gains, primarily gains on asset sales, and $92 million of impairment expense. The impairment related to reduced expected holding periods; the company said no properties were impaired solely due to operating declines from the pandemic.
Debt, liquidity and capital allocation
- Year-end debt was $4.891 billion, down from $5.541 billion in 2020. Approximately 66% was fixed-rate; weighted-average interest rate was 3.1%, and weighted-average debt maturity was 5.1 years. One consolidated hotel was secured by mortgage debt.
- Year-end cash and cash equivalents were $807 million; the FF&E replacement fund held $144 million, and $812 million was available under the revolver. The company repaid the remaining $683 million revolver balance in February 2022, leaving reported debt of approximately $4.2 billion.
- Operating cash flow turned positive from 2020. Cash and cash equivalents plus restricted cash and FF&E reserve cash totaled $953 million at year-end, down from $2.476 billion. Investing activities used $1.158 billion, principally reflecting acquisitions and capital expenditures.
- The company acquired seven hotels and golf-course assets in 2021, with reported acquisition cash outflows of $1.458 billion, and sold six hotels for $748 million in total sale price. It issued $450 million of 2.9% senior notes due 2031, using proceeds to redeem $400 million of 3.75% notes due 2023.
- Host suspended common dividends after the first quarter of 2020 and paid none in 2021. In February 2022, it announced a quarterly dividend of $0.03 per share. No common-stock repurchases occurred in 2021. It issued approximately 7.8 million shares through its at-the-market program for net proceeds of $138 million.
Outlook, commentary and material risks
- Management anticipated year-over-year RevPAR growth in 2022 but did not provide a full-year numerical forecast, citing uncertainty around COVID-19 variants, inflation, labor and supply-chain constraints, and the pace of business and group travel recovery.
- Planned 2022 capital expenditures were $500–$600 million, including $325–$375 million for ROI projects and $175–$225 million for renewal and replacement. Management said spending could be reduced by nearly $100 million if needed to conserve cash.
- Management expected wage and benefit cost inflation of 4%–5% in 2022 and noted that hotel operating costs should rise as properties move toward more normal staffing and spending. Portfolio-wide pro forma hotel operating costs were nearly 40% below 2019 in 2021.
- Key exposures include prolonged weakness in corporate and group travel; operating-cost inflation and labor shortages; dependence on third-party operators, particularly Marriott; debt, covenant and refinancing risk; and real-estate illiquidity and ongoing renovation needs. Approximately 34% of debt was floating-rate, and the filing estimated a 100-basis-point rate change would affect 2022 interest expense and cash flows by about $17 million.
- Other risks include natural disasters and potentially limited insurance recoveries, climate-related costs, cybersecurity and data-security incidents, REIT qualification and regulatory requirements. Collective bargaining agreements at hotels in San Francisco and Seattle were due to expire in 2022. Legal proceedings were described as ordinary-course matters, with immaterial accruals and no known reasonably possible material loss contingency.
- KPMG issued unqualified opinions on the consolidated financial statements and Host Inc.’s internal control over financial reporting. The audit highlighted recoverability assessments and expected holding periods for certain hotel properties as a critical audit matter.
Investor verification points
- Confirm the pace and breadth of recovery versus 2019, especially in urban markets and in group and business travel, and distinguish reported results from pro forma/non-GAAP measures.
- Review liquidity after the February 2022 revolver repayment, covenant headroom, debt maturities beginning in 2024, and exposure to floating rates and the LIBOR transition.
- Assess whether 2022 capital spending, planned acquisitions and the reinstated dividend are supportable by operating cash flow and available liquidity.
- Examine the assumptions behind the $92 million impairment, asset-sale gains, and cash proceeds from dispositions, including the $163 million bridge loan associated with the Sheraton Boston sale.
- Track labor costs and staffing, Marriott and other operator performance, and the business impact of labor negotiations, insurance limitations and pandemic-related demand uncertainty.