Host Hotels & Resorts, Inc. (NYSE:HST) Q1 2018 Earnings Conference Call Transcript

May 03, 2018 • 10:00 am ET

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Host Hotels & Resorts, Inc. (NYSE:HST) Q1 2018 Earnings Conference Call Transcript

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Presentation
Executive
James F. Risoleo

initiatives we identified in our underwriting. We are encouraged by early results and look forward to enhancing performance and value at these fantastic properties.

Looking forward, we are maintaining our disciplined approach to capital allocation and are not including any additional purchases in our revised full-year guidance. We anticipate closing on the previously announced sale of the W New York this month for $190 million. Please note that we have included one additional asset sale in our revised guidance for 2018. This sale will result in the expected loss of $6 million of EBITDA.

As it relates to investing in our portfolio, we spent approximately $115 million on CapEx in the first quarter, which is consistent with our plan to spend between $475 million to $550 million this year on total CapEx. The most notable repositioning projects include the completion at The Phoenician and the start of a comprehensive renovation at the San Francisco Marriott Marquis, in addition to significant facade and other work occurring at The Ritz-Carlton, Naples Beach Resort.

As I mentioned, our first quarter exceeded expectations on both the top and bottom line, particularly given the difficult comparison of 3.8% domestic RevPAR growth in quarter one 2017, which benefited from the inauguration and Women's March in Washington, D.C.

These results are a testament to Host's scale and platform, particularly our asset management and enterprise analytics teams. While Michael will describe the quarter in greater detail, here are some of the highlights. While we expected to see some impact from the Passover holiday shift from April to March, and the earlier timing of the Easter holiday, transient demand significantly exceeded our expectations to the upside.

As a result, on a constant currency basis, comparable hotel RevPAR improved 1.7% in the first quarter to $177, driven by a 170 basis point increase in occupancy, partially offset by a 60 basis point decrease in average rate. For the quarter, occupancy for our comparable hotel properties was 77.6%, the highest first quarter occupancy for the Company in more than 15 years. This translated into adjusted EBITDAre of $370 million for the quarter and adjusted FFO per share of $0.43; both were significantly above consensus estimates.

Transient demand increased 5.2% in the quarter, some of which was due to the holiday shift, but materially higher than we anticipated. Although average rate was relatively flat, this consistent demand throughout the first quarter resulted in transient revenues increasing 5.2%.

As mentioned on our last call, we begin to see signs that business travel was picking up in the fourth quarter of 2017. This positive trend accelerated in the first quarter, and we estimate that both business travel revenue for the comparable portfolio grew over 6.5%. This growth occurred in most markets and was driven largely by the consulting, technology, and pharma sectors. While it is a bit early to predict where this trend is going for the remainder of 2018, we are optimistic that business travel will continue to strengthen over the course of