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The Ritz-Carlton O’ahu, Turtle Bay – Image Credit Host Hotels & Resorts
Bryan Wroten of CoStar reports that despite outperforming expectations in Q1, Host Hotels & Resorts is adopting a cautious outlook for the rest of the year, citing potential for deteriorating lodging fundamentals. The company has slightly reduced its total RevPAR outlook due to moderating trends in group lead volume, but is staying prepared for potential downturns.
Host Hotels & Resorts’ Outlook
Despite a strong Q1 that surpassed expectations, Host Hotels & Resorts has adopted a cautious stance for the rest of the year. According to CEO Jim Risoleo, while current demand trends seem steady, the potential for deteriorating lodging fundamentals has increased. Despite this, Host maintains its hotel revenue per available room (RevPAR) outlook range, with a minor reduction in its total RevPAR outlook due to moderating trends in group lead volume.
The company’s previous and current full-year comparable hotel RevPAR guidance ranges from 0.5% to 2.5% growth. However, the comparable hotel TRevPAR, previously projected at 1% to 3% growth, is now expected to range from 0.7% to 2.7%, marking a decrease of 30 basis points.
Preparation for Potential Downturns
In preparing for potential downturns that may significantly impact the hotel industry, Host Hotels & Resorts provides an updated outlook. The company has stated that for every 100-basis-point change in RevPAR, it expects a $32 million to $37 million change in adjusted earnings before interest, taxes, depreciation, amortization, and real estate costs.
CEO Risoleo has reassured stakeholders that Host is well-positioned to weather any environment and continue to thrive due to its strong investment-grade balance sheet, 2.8 times leverage ratio, access to capital, size and scale, diversified business and geographic mix, and ongoing reinvestment in its portfolio.
Performance of Hotel RevPAR
In Q1, Host’s hotel RevPAR growth was better than expected, driven by increases in room rates. The company saw particularly strong performances in Washington, D.C., New York City, New Orleans, Los Angeles, and Maui. Leisure transient demand continued to drive Maui’s resorts during the quarter, with transient rooms sold growing about 70% year over year.
Business Transient and Group RevPAR
Business transient RevPAR grew by 2%, driven by rate growth as Host saw a favorable market mix and continued shift from government to corporate-negotiated customers. Group RevPAR for the quarter was up 7% year over year, driven by special events, the Easter holiday shift, and strong corporate group bookings in major markets.
Deals Outlook
Regarding acquisition opportunities, Risoleo stated that the general mood is to wait and see. However, Host will continue to be opportunistic with potential deals and invest in its portfolio, citing positive results from the 16 Marriott-branded hotels and eight other hotels that have undergone transformational renovations.
