HOST HOTELS & RESORTS, INC. Q4 FY2024 earnings call

• 2024 was a busy year with operational improvements driven by rate growth and out-of-room spending. - Acquired $1.5 billion of iconic real estate across four properties, three in new markets. - Reinvested in the portfolio through capital expenditures and resiliency investments. - Made progress on the Hyatt Transformational Capital Program and condo development at Four Seasons Resort, Orlando. - Returned significant capital to stockholders via dividends and share repurchases. - In 2024, finished above guidance with adjusted EBITDAre of $1.656 million and adjusted FFO per share of $1.97. - Fourth quarter saw adjusted EBITDAre of $373 million and adjusted FFO per share of $0.44. - Business mix in the fourth quarter was driven by over 3% rate growth, with transient revenue growing 8% and leisure in Maui, New York, and Oahu performing strongly. - Maui's leisure recovery underway with total RevPAR up 6.4% in the fourth quarter and transient rooms sold increasing. - 2024 included $1.5 billion in acquisitions, $107 million in share repurchases, and total capital returned to stockholders over $844 million. - 2025 capital expenditure guidance range is $580 million to $670 million, including property damage reconstruction and redevelopment projects. - Continues to be recognized as a global leader in corporate responsibility with four properties achieving LEED certification in 2024.

For the full year, Host Hotels & Resorts delivered adjusted EBITDAre of $1.656 million, a 1.7% increase over 2023. Adjusted FFO per share was $1.97, a 2.6% increase year-over-year. In the fourth quarter, adjusted EBITDAre was $373 million and adjusted FFO per share was $0.44. Comparable hotel total RevPAR grew 2.1% for the full year, with a 3.3% improvement in the fourth quarter compared to the fourth quarter of 2023. Comparable hotel RevPAR grew 90 basis points in 2024 and 3% in the fourth quarter. Comparable hotel EBITDA margin was 29.2% in 2024, down 60 basis points versus 2023, and improved by 30 basis points year-over-year to 28.1% in the fourth quarter. Transient revenue drove the outperformance in the fourth quarter, growing 8%, with leisure in Maui, New York, and Oahu contributing significantly. Our three Maui resorts accounted for nearly half of the transient room revenue growth in the fourth quarter. Group room revenue for the quarter was down approximately 5% year-over-year due to tough comparisons. Ancillary spend saw growth, with F&B revenue growing nearly 3% in the quarter and 3.6% for the full year.

• 2025 comparable hotel RevPAR growth expected between 50 basis points and 2.5% over 2024. - Adjusted EBITDAre midpoint for 2025 is $1.620 million. - Capital expenditure guidance for 2025 is $580 million to $670 million, including $70 million to $80 million for property damage reconstruction. - First quarter comparable hotel RevPAR growth anticipated at 9.5%, with remaining quarters expected to have low-single-digit growth. - Anticipates comparable hotel EBITDA margins to be down 210 basis points to down 150 basis points year-over-year in 2025. - Expects approximately $9 million of business interruption proceeds related to Hurricanes Helene and Milton in 2025. - $25 million of estimated EBITDA from the Four Seasons condo development expected in 2025.

• Labor cost pressures with overall wage and benefit expenses expected to increase over 6% in 2025. - Uncertainty in international travel demand imbalance which impacts RevPAR and margins. - Uncertainty in Maui's recovery, including the pace of group business recovery and timing of insurance proceeds. - Uncertainty in property damage reconstruction insurance claims timing and amounts.

Q: Good morning, everyone. Just on your guidance, I know you mentioned Maui and cross-border travel were kind of the high-low sensitivities. But I guess, what else have you assumed at the high-end, low-end just from a macro backdrop perspective and then maybe what have you derisked and where might we see upside materialize as the year progresses?

A: Sure. From a macro perspective, we have effectively worked on the best knowledge we have as of today in terms of GDP growth and non-residential fixed investment. Obviously, that can change throughout the year, but it's just based on information - best information available as of today. In terms of where there could be upside, group is certainly strong. Our group pace is very strong for the year. Group rate is at 4% year-over-year. We already have 3.2 million group room nights, which is 2.7% better than last year from a pace standpoint. And our total group revenue pace was 5.6% versus last year. So we do expect that there could be further strengthening of group. Right now the way it's pacing, our first quarter and the fourth quarter group pace are extremely strong. There certainly is room in the second and third quarter in the year, for the year bookings. And I would say, tied to the group pace, there is certainly potential in terms of driving more banquet and catering business. That's, I think, where the upside is on the group side. On the business transient side, depending on business sentiment remaining strong for the remainder of the year, there certainly could be tailwinds that we see from the large corporations really traveling again, an increase in BT volume.

Q: Hi, thank you. I wanted to maybe ask you a little bit more about Maui. If you take out the business interruption insurance for '24, it looks like you came in around $95 million. Could you just maybe kind of level set what you think the ranges at the high end the low end could be for $95 million and maybe other factors that might have positively impacted '24 that perhaps won't be repeated in '25?

A: Yes. I think that's a great question because there are a lot of moving pieces with respect to Maui. And I think, Sourav has a bridge that we're prepared to talk through right now. Sourav Ghosh: So going through the bridge, Smedes, you're right, it's about $97 million of EBITDA that we achieved in 2024 net of BI. That is a sorting point. I would deduct about $17 million for non-recurring relief and recovery rooms that we saw in 2024. I'll also deduct about $8 million for one-time attrition and cancellation revenues that we received. So that brings your restated 2024 Maui EBITDA to $72 million. So that effectively excludes your one-time items. Now from that $72 million, you should deduct about $7 million for about a 7% increase in wage and benefits that we are seeing in 2025 versus 2024. And then I would add about $15 million to $30 million estimate of improvement in operations. So that's where we're seeing actually improvement in operations. That would get you effectively to $80 million to $95 million for 2025. If you do the math, that's sort of the low to high.