The paragraph is an introduction to the Host Hotels & Resorts Third Quarter 2024 Earnings Conference Call. The operator introduces Jamie Marcus, the Senior Vice President of Investor Relations, who describes the presence of forward-looking statements and non-GAAP financial information in the discussion. Jamie Marcus then introduces Jim Risoleo, the President and CEO, who acknowledges the impact of Hurricanes Helene and Milton, expressing sorrow for the loss of life and damage but noting that the company's hotel employees remained safe.

In response to the impacts of Hurricanes Helene and Ian, the company partnered with several organizations to provide disaster relief and faced temporary closures of properties, with The Don CeSar experiencing the most significant damage and expected to begin phased reopening in early 2025. Despite challenges, resilience investments at the Ritz-Carlton, Naples, like elevated critical equipment and enhanced flood-proofing, minimized water intrusion and allowed for a quick reopening. The company plans to prioritize similar investments across its portfolio and invites readers to consult its 2024 Corporate Responsibility Report for further details on its resilience and ESG efforts.

In the third quarter, the company reported an adjusted EBITDAre of $324 million and adjusted FFO per share of $0.36. This was a 10% decrease compared to the previous year, which had benefited from $54 million in business interruption insurance. Excluding these proceeds, adjusted EBITDAre increased over 5%, and adjusted FFO per share rose by 9%. The comparable hotel portfolio saw a 3.1% increase in total RevPAR, with an 80 basis point rise in comparable hotel RevPAR despite adverse weather in Florida. The Maui location's RevPAR decline, attributed to wildfires, negatively impacted the quarter's overall results by 190 basis points. The company has engaged in efforts to boost tourism, including promoting a marketing campaign called Ho'okipa, which translates to the spirit of hospitality.

The paragraph discusses the successful marketing efforts and economic recovery of Maui's tourism, highlighting increased revenue for Maui resorts, particularly during Thanksgiving and festive periods. Key initiatives included collaborations with entities like the Los Angeles Rams and promotional campaigns in Southern California. Group room night revenue showed minor growth despite stable bookings, with future bookings for 2024 also promising. Business transient revenue increased by 5% due to rate growth influenced by market and customer dynamics. In the leisure sector, international demand remained steady, with a 4% rise in transient room nights sold at Maui resorts and a significant increase in transient room rates, indicating the strong financial position of affluent consumers.

The paragraph discusses the strong out-of-room spending trends by group and affluent consumers, contributing to a 3% growth in total RevPAR in the third quarter, the largest spread in six quarters. It highlights that nearly 40% of revenue in 2023 came from food, beverage, and other sources, with similar expectations for 2024. The company repurchased 3.5 million shares in the quarter for $57 million and has repurchased $315 million worth since 2022, with $685 million remaining for future repurchases. It acquired $1.5 billion in real estate at a 13.6 times EBITDA multiple for 2024, and these properties are performing as expected. The 2024 capital expenditure is projected at $485-$580 billion, including investments in redevelopment, renewal, and property damage reconstruction.

The paragraph discusses various projects and financial activities of Host, including the Hyatt Transformational Capital Program, which is progressing slightly under budget. The program received $2 million in operating guarantees in the third quarter with an expectation of an additional $3 million this year, totaling $9 million by 2024. Host is also investing $50 million to $60 million in a 40-unit residential condo development at Four Seasons Resort Orlando, with sales launching soon and closings in late 2025. Since 2018, they completed 24 renovations, significantly boosting RevPAR index share gains, thus enhancing their portfolio. Host remains strong due to its investment-grade balance sheet and diversified portfolio, and intends to continue strategic capital allocation to add shareholder value. Sourav Ghosh then begins to detail third-quarter operations and updated 2024 guidance.

In the third quarter, Host's hotel food and beverage revenue rose 6%, primarily due to strong performance in banquet and catering. Transient guests increased their spending, with spa and room revenues showing growth. Recovery in Maui contributed to a slight increase in transient room revenue, despite a 19% drop in its RevPAR. Maui is anticipated to lead holiday performance in the fourth quarter, with an uptick in transient revenue pace for Thanksgiving and the festive season. Business transient revenue increased by 5% due to rate trends, although overall demand decreased by 2% due to fewer government bookings. Group revenue experienced a 1% growth, driven by rate increases and demand in key cities, despite a negative impact from Maui.

The paragraph discusses the company's positive performance in group bookings for 2024 and 2025, with higher group room nights and revenues compared to the previous year, particularly in cities like San Francisco, where citywide room nights are up 40%. However, third-quarter hotel EBITDA margins have decreased by 130 basis points compared to last year due to rising wages and benefits and impacts from business interruptions caused by Hurricane Ian. Despite challenges from recent hurricanes, the company's outlook for 2024 remains largely unchanged, with expectations for flat RevPAR growth and a comparable hotel EBITDA margin of approximately 29%, slightly lower than in 2023. The Maui wildfires are projected to impact total RevPAR and EBITDAre significantly.

The paragraph discusses the financial impact of various factors on the company's 2024 EBITDA guidance, including a decline due to hurricanes in Florida and cost increases in wages and benefits, partially offset by operational improvements. The revised EBITDAre guidance is $1.630 billion, a slight decrease from previous estimates. It highlights the performance of specific properties like The Ritz-Carlton Naples, Alila Ventana Big Sur, and The Don CeSar, which are excluded from comparable hotel guidance. The paragraph also outlines financial activities in the third quarter, such as issuing $700 million in senior notes to partially repay credit facility debts, and reports a leverage ratio of 2.7 times with $2.3 billion in available liquidity. Additionally, the company paid a $0.20 per share quarterly dividend, with future dividends pending board approval.

The paragraph concludes a financial discussion, expressing satisfaction with the portfolio's performance and future plans to enhance EBITDA growth and shareholder value. During a Q&A session, Stephen Grambling from Morgan Stanley inquires about the transaction market and acquisition activities. Jim Risoleo responds by noting that previously, both buyers and sellers were inactive due to a significant bid-ask spread, but conditions are improving. With the recent election concluded, economic policies are expected to stabilize, and debt capital markets are becoming more favorable for transactions. Interest rates and spreads have decreased, SASB financing is available, and private equity is expected to re-enter the market soon, with some transactions already under evaluation.

The paragraph discusses Host's recent successful deals and emphasizes its strong balance sheet as a competitive advantage. The company anticipates more market transactions in the future due to the absence of rushed sales, indicating a robust business environment. Host plans to test the market with some non-core assets that require significant capital investments, aiming to optimize its portfolio for free cash flow generation. If attractive pricing is achieved, Host will consider selling these assets.

The paragraph discusses the company's financial strategy and current investments. They aim to continue being net acquirers and have a leverage of 2.7 times, providing them with ample resources to invest in their portfolio. They've experienced a 7-point yield index gain on average and have bought back $57 million in stock and $1.5 billion in assets this year. They prefer non-competitive acquisitions but are open to competition if necessary. The conversation shifts to Sourav Ghosh, who confirms the underlying EBITDA target of $1.75 billion, breaking it down by adjusting the current guidance of $1.63 billion, with deductions for business interruption (BI) from the Maui wildfires and additions from investments in Turtle Bay, 1 Hotel Central Park, and Nashville.

The paragraph discusses the financial recovery and future outlook for tourism in Maui, focusing on the adjusted EBITDAre, which is expected to reach $1.750 billion. It highlights that while there is encouraging transient travel activity for Thanksgiving, Christmas, and New Year’s, the group bookings are slower to recover due to earlier uncertainty about the island being open for business. Group bookings, accounting for about 30% of room nights and 20% of revenue, are expected to pick up from next year as meeting planners gain confidence. Overall, the trends are positive, but full recovery, especially for group bookings at hotels like the Hyatt, will take more time.

The paragraph is an exchange between Michael Bellisario and Sourav Ghosh during a Q&A session. Bellisario asks for a clean run rate of the portfolio, excluding one-time events, and how it might change by 2025. Ghosh responds that the current clean run rate is $1.750 billion, factoring in the missing $75 million to $80 million in EBITDA from Maui. He mentions uncertainty about 2025's top line and expenses due to the absence of budgets but notes strong group booking trends for 2025 with 2.8 million group room nights already booked and a 5% increase in total group revenue. However, Ghosh indicates that recovery in Maui might take more time, with uncertainty around reclaiming the missing EBITDA from there.

Michael Bellisario asks Sourav Ghosh about the growth rates of their portfolio, focusing on RevPAR (Revenue per Available Room) and expenses, excluding one-time items, for the current year and looking ahead to 2025. Sourav Ghosh explains that they would have achieved a RevPAR growth rate of about 3% this year, allowing for some margin expansion due to their Transformation Capital Program and index share gains, if not for the Maui wildfires impacting results. Overall, they expected to outperform the industry, but the wildfires affected their performance. Smedes Rose from Citi asks about the expected EBITDA in Maui this year, excluding business interruption proceeds, to understand the financial impact compared to the projected $75 million to $80 million for next year.

The paragraph is from a conversation about financial strategies, specifically related to managing group room nights and transient rates in the hotel industry. Sourav Ghosh explains that decisions about group bookings are made on an asset-by-asset basis. Although the overall group segmentation mix is not expected to change significantly, there is a focus on strategic group bookings and contract business to fill potential gaps. Certain cities, such as San Francisco, New York, San Antonio, Orlando, and DC, are already showing strong future bookings, exceeding 40% of their group room nights for 2025. There is optimism about continuing strong corporate group bookings, along with the associated banquet and catering services, to enhance EBITDA. Smedes Rose thanks Sourav, and the operator opens the line for David Katz from Jefferies, who shifts the discussion toward labor market commentary.

In the paragraph, Jim Risoleo discusses the labor situation and future outlook for their hospitality assets, managed primarily by Marriott and Hyatt. He expresses optimism about staffing levels post-pandemic and does not foresee labor issues as they approach 2025. In response to David Katz's inquiry about leisure travel trends, Risoleo suggests that although international travel is strong, travelers are not choosing their properties, but there is no resistance to the current Average Daily Rates (ADR) in their leisure transient segment.

The paragraph discusses the performance of leisure transient ADRs (Average Daily Rates) which have increased by 50% over the third quarter of 2019 and maintained that level for 10 consecutive quarters. This indicates continued high spending by affluent consumers, both on accommodations and other services like spa and golf. It also mentions the potential for a more balanced international travel pattern once conditions normalize, noting that international inbound travel is at 90% of 2019 levels, potentially affected by a strong dollar. The conversation then shifts to a Q&A session where Chris Darling of Green Street asks about the Orlando condo development's budget and sales assumptions. Jim Risoleo states the construction budget is between $150 million to $170 million, with construction having started in mid-July. Sales are expected to begin in mid to late November, and the completion of the mid-rise condos is targeted for the fourth quarter of 2025.

The paragraph discusses a real estate project involving nine villas set to be completed by mid-2026, with a total of 40 units expected to yield mid to high-teens cash-on-cash returns. The project is on schedule and within budget. Jim Risoleo mentions a promising opportunity adjacent to The Ritz-Carlton, O'ahu, Turtle Bay, consisting of a 49-acre oceanfront parcel ideal for residential development, potentially yielding 250 units. The plan may involve selling the land or joint venturing due to the scale of the project, with at least 50% of the units participating in the rental pool due to Hawaiian law.

The paragraph discusses a company's expectations about making a profit from land sales or development, particularly at a resort, and seeing benefits from rental units and additional revenue from dining, golf, and spa services. They're also considering residential development at another resort, although it's in early stages. Chris Darling acknowledges the information, and another question comes from Ari Klein of BMO Capital Markets, who asks about the RevPAR expectations in Maui following a slight improvement. Sourav Ghosh confirms an improvement, noting a reduction in the expected RevPAR impact from 250 to 220 basis points, citing increased transient bookings for Thanksgiving and the festive period. However, the group booking segment is recovering more slowly compared to the transient segment, currently down by about 20% in room nights.

The paragraph discusses the performance and future prospects of key hotels in Maui and The Ritz-Carlton O'ahu. The hotels in Maui are currently seeing a decline in group bookings, although individual bookings are recovering to pre-fire levels. The focus is on improving group booking numbers into next year. Meanwhile, The Ritz-Carlton O'ahu is performing as expected following its conversion, with no immediate capital expenditure needs and good booking pace for the festive season and beyond. Additionally, the speaker is comparing current occupancy rates of around 72% to a previous level of over 79% in 2019, highlighting a decrease in occupancy.

In the paragraph, Jim Risoleo addresses a question about the impact of shadow supply and new supply on hotel occupancy. He asserts that the challenges in occupancy are neither due to shadow supply, like Airbnb, nor new supply, as the development rate is favorable. Instead, they attribute some occupancy gaps to the slow return to office culture in certain markets post-pandemic. He sees this as an opportunity for growth, with significant companies like Salesforce and Amazon mandating a return to office, which is expected to enhance business travel and eventually close the occupancy gap compared to pre-2019 levels. The discussion then shifts to Robin Farley from UBS, who asks for more clarity on leisure rates, but the text cuts off before an answer is provided.

The paragraph discusses the current and projected state of the leisure travel market. Sourav Ghosh explains that on a year-over-year basis, the market has been relatively flat or slightly down compared to 2019 levels, though demand improved as the year progressed. For 2025, there's optimism due to consumer strength and better macroeconomic clarity, with expectations that the leisure market will stabilize without degradation in rate or demand. Additionally, Robin Farley seeks clarification on a $1.75 billion run rate, asking if it includes potential recovery from business disruptions in Maui.

The paragraph is a conversation during a conference call, discussing financial and business specifics. Sourav Ghosh clarifies that a $1.75 billion figure includes a $75 million to $80 million assumption, representing a long-term run rate not specific to 2025. Robin Farley seeks clarification on this point. The conversation then shifts to Duane Pfennigwerth asking about San Francisco, where room night pacing is up 40%. Sourav Ghosh comments on citywide pacing, noting approximately 220,000 group room nights are booked, a 30% increase year-over-year, though still below 2019 levels. There's optimism for 2025, especially with events like the World Cup and Super Bowl in 2026. Pfennigwerth also inquires about capital allocation preferences for future investments, acquisitions, or stock buybacks, given the company's recent experiences.

Jim Risoleo emphasizes the focus on investing in their existing portfolio, particularly through the Hyatt Transformational Capital Program, and mentions plans for completion next year. He also discusses looking for opportunities to allocate funds to ROI projects and buy back stock, having repurchased 3.5 million shares worth $57 million in the last quarter. Jim notes they are exploring acquisitions if they align with their strategy, and highlights their current leverage of 2.7 times, with the capability to increase this comfortably to 3-3.25 times. This provides them with significant capital flexibility. The paragraph concludes with Jim expressing gratitude for the chance to discuss quarterly results and looking forward to upcoming conferences.

This summary was generated with AI and may contain some inaccuracies.