Q2 2022 Host Hotels & Resorts Inc Earnings Call
Good morning, and welcome to the host hotels <unk> resorts second quarter 2022 earnings Conference call Today's conference is being recorded.
At this time I would like to turn the call over to Jamie market Senior Vice President of Investor Relations.
Thank you and good morning, everyone. Before we begin please note that many of the comments made today are considered to be forward looking statements under federal Securities laws.
As described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed.
And we are not obligated to publicly update or revise these forward looking statements.
In addition on today's call, we will discuss certain non-GAAP financial information, such as <unk> and <unk>.
Adjusted EBITDA.
And hotel level result.
You can find this information together with reconciliations to the most directly comparable GAAP information.
In Yesterdays earnings press release and.
In our 8-K filed with the SEC and in the supplemental financial information on our website at host hotels Dot com.
With me on today's call will be Jim <unk>, President and Chief Executive Officer, and Sara <unk> Executive Vice President and Chief Financial Officer.
With that I would like to turn the call over to Jim.
Thank you, Jamie and thanks to everyone for joining us this morning.
Once again, we delivered significant outperformance during the second quarter and substantially beat all consensus metrics.
During the second quarter, our adjusted EBITDA was $500 million.
And our adjusted <unk> per share was <unk> 58.
Are all owned hotel EBITDA of $510 million in the second quarter was 19% above 2019, driven by an accelerating recovery in our urban and downtown markets and continued strength in sunbelt markets.
In addition to exceeding 2019 levels, our second quarter adjusted EBITDA. He was also the highest in host history.
All owned hotel revenues in the second quarter increased three 7% over the second quarter of 2019, while owned hotel operating expenses were down three 8%.
The increase in revenues was driven by strong rates across the portfolio, coupled with stronger than usual other revenues.
All of our owned hotel Revpar for the second quarter was $219, a 31% improvement over the first quarter.
This represents the first time, our quarterly Revpar has exceeded 2019 levels since the onset of the pandemic.
Our recent acquisitions dispositions and renovated properties.
<unk> to contribute to our performance, which I will discuss in a few minutes.
Preliminary all owned hotel Revpar for July is expected to be approximately $195, which is slightly above July of 2019.
System with historical seasonal trends and shifting business end market mix, we expect third quarter nominal revpar to be below that of the second quarter.
While macroeconomic concerns have been dominating the headlines we are not seeing any signs of a weakening consumer and our business.
As we look to history. It is worth discussing why we think today's macroeconomic environment with respect to lodging is different.
First.
Certain segments of the lodging industry are still recovering and we believe there is meaningful room for growth, particularly in the business transient and group segments.
Even more encouraging.
Hotels benefit from the ability to reprice rooms on a nightly basis ahead of rising costs, even during periods of high inflation as was the case in the 19 seventies.
Second consumers and businesses have significantly more cash on hand, with leverage and debt service ratios better than they were prior to the great financial crisis in 2008.
The labor market is also exceptionally strong with over 3 million more jobs open that we have is ahead of the last expansion.
Unemployment rate hovering near a five decade low.
In addition, we have continued to benefit from a consumer spending rotation away from goods into services, including travel and we expect this trend to continue.
Lastly, we expect to benefit from exceptionally low supply growth for the next several years.
The total pipeline has fallen by 11% since the start of the pandemic and the number of rooms and construction is down 30%.
As a result industry projections suggest annual supply growth of just over 1% through 2023.
Well below the long term average of one 8% in.
In contrast <unk>.
High growth at the start of the last three downturns was running at over two 5%.
The market way to supply growth for host portfolio is projected to be approximately 1% as we will benefit from exceptionally low growth in places like San Diego, Hawaii and San Francisco.
Despite these tailwind many are concerned about the potential impact to our business, which is still in a demand recovery mode.
In the second quarter group demand was 9% below 2019, while business transient demand was 25% below 2019.
These factors could mean that any softening in demand simply prolongs the trajectory of the lodging recovery.
Set up leading to an absolute decline in occupancy and rate.
Irrespective of potential future macroeconomic challenges, we believe that host is well positioned to outperform the broader industry.
We have dramatically improved the quality of our portfolio through our capital allocation efforts, we have invested in our assets and we have an investment grade balance sheet.
Further we believe the current rising interest rate environment could create opportunities for host.
As other buyers may step to the sidelines.
Our 2021 acquisitions continued to perform substantially ahead of our underwriting expectations.
Based on updated performance for full year 2022, EBITDA from our seven new hotel acquisitions is expected to be 77% above our underwriting expectations.
Already putting us within our disclosed stabilization range 10 to 12 times EBITDA.
Looking back on our transaction activity since 2018, we have acquired $3 $2 billion of assets at a 14 times EBITDA multiple and disposed of $4 9 billion of assets at <unk> 17 times, EBITDA multiple including $938 million of estimated.
<unk> capital expenditures.
Impairing all owned hotel 2019 results for our portfolio to 2017.
We have increased the revpar of our assets by 11%.
EBITDA per key by 25% EBITDA margins by 190 basis points and avoid a considerable business disruption associated with capital projects.
Turning to second quarter operations.
Are all owned hotel revenue was up nearly 4% second quarter 2019, driven by 15% rate growth.
Transient revenue was up 10% compared to the second quarter 2019, and rate was up 22% with growth driven by significant demand across our urban and downtown markets.
Our resort properties continue to outperform with transient revenue up more than 50% to second quarter 2019, driven by 70% transient rate growth.
We had five resorts with transient rates above $1000 for the quarter and of those five the two highest rates were at hotels, we acquired in 2021.
The four seasons resort Orlando at Walt Disney World Resort had a second quarter transient average rate that exceeded $500 and the <unk> had a transient average rate of over $2000.
Providing some detail on a few of our urban markets.
San Francisco saw continued positive momentum throughout the second quarter with many groups performing at pre pandemic levels on peak nights.
Leisure picking up on weekends and business transient picking up with the return of Big Tech and consulting companies.
In addition, San Francisco citywide throughout the quarter created compression on peak nights for our downtown hotels.
In New York second quarter, Revpar was flat to 2019 and business transient rooms sold increased more than 75% compared to the first quarter.
2022 group pace for our New York hotels is up over 5% to 2019, and our New York Marriott Marquis is on track to exceed 2019 group room nights driven by two significant bookings within the past 60 days.
In total these two groups booked 17000 room nights and are expected to contribute approximately $5 million in the second half of 2022.
Turning to group business surged back at our hotels during the second quarter group.
Group revenue was down just 3% second quarter 2019, driven by 6% rate growth.
In the second quarter, our hotels saw $1 1 million group room nights, a 64% increase over the first quarter and we continue to be encouraged by net booking activity in the quarter for the quarter.
Looking forward to our expectations for group in 2022, we currently have $3 5 million definite group nights on the books with $1 7 million coming in the second half.
This is a meaningful increase to the 3 million group room nights, we have on the books for 2022.
As of the first quarter and it represents approximately 80% of 2019 actual group room nights up from 70% last quarter.
For comparison at the end of the second quarter of 2019, we had 94% of 2019 actual group room nights on the books group rate on the books for 2022 is up 5% for the same time 2019, a 30 basis point increase over last quarter.
For the remainder of the year total group revenue pace is down just 30 basis points to the same time 2019.
As we look forward to 2023, we currently have $2 2 million definite group room nights on the books, which is down 16% to the second quarter of 2019.
Our operator saw an acceleration in group bookings during the second quarter for 2023.
Is that meeting planners are not hitting pause on future bookings.
That said, we do expect the short term nature of group bookings to continue over the near term.
In addition to delivering significant operational improvements we continue to execute on our three strategic objectives.
All of which are aimed at elevating the EBIT growth profile of our portfolio.
As a reminder, our objectives include redefining the hotel operating model with our managers gaining.
Gaining market share in hotels through comprehensive renovations and strategically allocating capital to development ROI projects, we have.
We're targeting a range of 147% to $222 million of incremental stabilized EBITDA on an annual basis from the initiatives and projects underlying our three strategic objectives.
So Rob will get into more detail on business mix markets and redefining our operating model in a few minutes.
We have completed 12 out of 16 properties in the Marriott transformational capital program and we expect to substantially complete three additional properties by the end of this year we.
We believe these renovations allow us to capture incremental market share.
As is the case at the Newark Marriott Marquis.
It is evident that the renovated hotel is attracting new groups.
Booking activity in the year for the year is two five times to three year pre Covid average and year to date group room revenue is 24% higher than 2019.
In addition to the positive momentum we are seeing at the New York Marriott Marquis we have seen a revpar index share gain of eight eight points at the Ritz Carlton Amelia Island on a trailing 12 month basis compared to its pre renovation index.
12, seven point gain at the New York Marriott downtown and at 11, nine point gain as J W. Marriott bucket, all far exceeding our targeted range of three to five points of Revpar index gains and renovated assets.
In addition to the 16 Marriott transformational capital program assets.
<unk> eight hotels, where we have completed are in the process of completing major renovations.
One of these is the Hyatt Regency, Maui, where we have seen a revpar index share gain up eight five points since completed the transformational renovation in December of 2020.
This hotel is expected to contribute $80 million in EBITDA in 2022 and is expected to be the largest EBITDA contributor to our portfolio. This year.
In total the <unk>.
<unk> Marriott transformational capital program assets, the eight hotels, where we have completed or completing comprehensive renovations and the seven hotels. We recently acquired are expected to comprise over 50% of our 2022 all owned hotel EBITDA.
From 2020 through the end of this year, we will have invested approximately $1 5 billion and our hotels, which equates to $35000 per key.
This compares favorably to our lodging REIT peer average of just $19000 per key.
We believe are meaningful investments throughout the pandemic and the recovery position our portfolio to outperform.
When the 2000 and for comprehensive renovations are complete the average age of our guest rooms will have decreased by over 25%.
As it stands today over the next five years, we estimate that less than a quarter of our portfolio will require disruptive guest room renovations.
In closing, we believe we are very well positioned to outperform as the lodging recovery continues.
We have significantly improved the quality of our portfolio through our capital allocation efforts meaningfully reinvested in our assets and maintained a strong investment grade balance sheet.
As macroeconomic concerns play out.
We will continue to be opportunistic and position our portfolio outperformance with that I will now turn the call over to Rob.
Thank you Jim and good morning, everyone building on Jim's comments I will go into detail on our second quarter operations and full year guidance before wrapping up on our balance sheet, our stock repurchase program and our dividend.
Starting with top line performance.
Quarter, all owned hotel Revpar of $219 exceeded 2019 for the first time since the onset of the pandemic.
Even more encouraging is that all three months in the quarter exceeded 2019 levels.
It continues to drive the Revpar upside, especially at our Sunbelt and Hawaii hotels, the rate was up more than 27% for the second quarter of 2019.
Our urban and downtown hotels are showing a rapid improvement as well with rates just 2% below the second quarter of 2019.
For context this is.
As a 30% improvement over the first quarter paired with a 73% sequential increase in rooms sold in these markets.
Turning to paint and mix overall transient revenue was up 10% over the second quarter of 2019, driven by 22% rate growth.
Holidays in the second quarter had steady growth in both Camden to occupancy and rate over the second quarter of 2019.
Memorial Day weekend achieved 76% occupancy the highest holiday occupancy since the start of the pandemic.
Our sunbelt hotels, and resorts achieved strong occupancy and rates with six markets exceeding 85% occupancy.
Our urban and downtown hotels achieved the highest occupancy within our portfolio over the fourth of July weekend, driven by hotels in Chicago, New York and Philadelphia.
Business transient revenue.
Was down 24% to the second quarter of 2019, the increased 66% over the fourth quarter driven by a 48% increase in rooms sold.
Business transient rooms sold grew progressively throughout the quarter and June set a new high watermark with more than 112000 rooms sold beating the prior record set in May.
The mix of business transient has now shifted to urban and downtown markets, where rates exceeded sunbelt markets and rooms sold grew 75% over the first quarter.
In the second quarter top 10 traditional accounts represented 56% of all business transient room nights compared to 60% in 2019.
In addition for the first time since the onset of the pandemic.
Occupancy for our total portfolio surpassed the weekend occupancy.
Another sign of a return to normalcy.
Turning to group revenue in the quarter was just 3% below the second quarter of 2019, driven by a 6% increase in rate.
More than half of the 64% increase in group homes sold over the first quarter came from our urban markets, including Washington D C. San Francisco, New York and Chicago.
Further illustrating the surge in group demand group revenue in June was up approximately 3% over 2019.
Net in the quarter for the quarter group rooms booked.
77% higher than the second quarter of 2019.
This is evidenced of the continued short term booking nature of group business and the basis for our optimistic outlook on group for the remainder of the year.
Corporate group revenue was down just 5% compared to the second quarter of 2019, driven by a 1% improvement in rates.
Corporate group rooms sold were up 56% over the fourth quarter and both the rate and room nights were driven by growth in New York and San Francisco.
Association Group revenue was down 13% for the second quarter of 2019 aided by a 2% improvement in rates. However Association group rooms sold were up 74% to the first quarter of 2022 with most of the growth in Washington D C San Francisco and Chicago.
No.
Short term association business is becoming more active attendance increases and we expect bookings in this segment to accelerate over time.
Wrapping up on group with social military educational religious and paternal smurf groups revenue was up 25% compared to the second quarter of 2019 driven.
Early evenly by rooms sold and rates.
Most of the increase in gold sold over the first quarter occurred in urban and downtown markets.
Shifting gears to expenses Paul owned hotel expenses were down three 8% to second quarter 2019, while all owned hotel revenues were up three 7%.
Expense declines were driven by wages and benefits savings down 7% for the second quarter of 2019.
Our properties have worked to insulate operations from rising costs and thus far we are not seeing a discernible impact on overall controllable operating costs.
At this time any expense growth is concentrated at our resorts, where strong demand is driving increased rates and higher out of room spend.
Turning to staffing and wages.
Staffing at our hotels remains at approximately 94% of desired level based on business volume compared to 97% historically.
While our operators still several thousand open positions during the quarter lag between demand and staffing levels still exist at certain hotels.
We expect this lag to gradually diminished to continued hiring and normal seasonal market and mix shift in the second half of the year.
Wrapping up on expenses, we continue to expect our annual wage and benefit rate inflation for 2021% to 2022 to be in the 4% to 5% range.
Taking our strong top line and expense controls together, our second quarter. All owned hotel EBITDA margin came in at 37, 1%, which is 480 basis points better than the second quarter of 2019, and the highest of all owned hotel EBITDA margin and host history.
Yeah.
Margins improved in both sunbelt and urban markets across all operating departments, driven by strong rates and increased other revenues on the top line combined with expense efficiencies and hiring challenges in certain markets.
Our operators have achieved approximately 70% of the $100 million to $150 million that is expected to come from potential long term cost savings based on 2019, all owned hotel revenues.
As other revenues normalize on hiring continues we expect margins will moderate while remaining above 2019 levels.
Moving on to our outlook for 2022.
We are pleased to be able to reinstate full year guidance as we are now seeing more normal seasonal trends in our portfolio.
We expect full year 2022, all owned hotel Revpar for our portfolio to be between 191 to $195 or down four 5% to down two 5% to full year 2019.
As you think about the quarterly Revpar cadence, we expect third and fourth quarter operations to be slightly above 2019.
As a reminder, the first quarter of 2022 was severely impacted by Amazon.
Which drives our full year revpar range slightly below 2019.
This range implies an adjusted EBITDA of $1 billion $445 million to $1.510 billion.
And all owned hotel EBITDA margin of 31, 5% to 32, 1%.
For reference the midpoint of this range is slightly above our 2019, all owned hotel results as presented on pages 22, and 'twenty three of our supplemental financial information.
These estimated ranges are driven by normal seasonality at our sunbelt hotels and resorts alongside continued growth at our urban and downtown hotels as group and business transient demand continues to pick up at a meaningful pace.
Additional guidance details can be found in the recent deletions of our second quarter 2022 earnings release.
Turning to our balance sheet and liquidity position.
Our weighted average maturity is five years at a weighted average interest rate of three 7%.
And we have no significant maturities until 2024.
As of quarter end, we had $2 4 billion in total available liquidity comprised of approximately $699 million of cash $179 million of <unk> reserves.
The full availability of our $1 5 billion credit facility.
Subsequent to quarter end, our board of directors authorized an increase in our share repurchase program, increasing our total authorization back to $1 billion, which is consistent with our previous authorization.
As of the case with our ATM program, we view our share repurchase program is another capital allocation tool to help us maximize financial flexibility.
Wrapping up I am pleased to share that our board of directors authorized a third quarter dividend of <unk> 12 per share on host common stock.
100% increase over the prior quarter and the second time, we have doubled our dividend this year.
All future dividends are subject to approval by the company's board of directors, but we expect to be able to maintain our quarterly dividend at a sustainable level taking into consideration potential macroeconomic factors too.
To conclude we believe the operating improvements we have seen this year signal a robust lodging cycle ahead.
As we have seen quarter after quarter during this recovery our portfolio, our balance sheet and our team are differentiated and well positioned to continue outperforming in any macroeconomic environment.
With that we would be happy to take your questions to ensure we have time to address as many questions as possible. Please limit yourself to one question.
The floor is now open for questions. If you have any questions or comments. Please press star one on your phone at this time, we ask that while posing your question. Please pickup your handset is listening on a speaker phone to provide optimum sound quality. Please hold just a moment wildly poll for questions.
Your first question is coming from Neil Malkin with capital One Securities. Please pose your question your line is live.
Hey, everyone. Good morning, fantastic quarter across the board well done.
The question on <unk> I mean it.
I think it's clear that it's well ahead of schedule meaningfully outperforming.
Can you just talk about.
Kind of what Youre seeing as far as.
The group impact.
You mentioned briefly youre getting some new groups.
But can you just talk about how you see the.
The strategic renovations at the sort of bigger more complex hotels.
Is going to.
You expect it to drive group <unk>.
Seemingly to new levels, given your comments about how far below associations are.
And being down just eight or 9% from 2019 and you can help us at all quantify that.
In terms of run rate or anything like that that obviously would be helpful. Thank you.
Yes Neil.
But we couldnt be happier with the performance, we're seeing out of our empty CP.
Hotels as well as other hotels that we have.
Embarked on transformational comprehensive renovations.
We think that it was a.
Very good time to be renovating our properties.
By the end of this year.
We will have invested $1 5 billion.
And our asset that equates to roughly $35000 a key.
And relative to the REIT peer group.
Where they spent $19 a key.
We believe that that puts our portfolio in that in the pole position to outperform going forward. So.
In addition to the few.
Properties that we referenced on the call today with respect to Revpar Index, Let me remind you that.
We have talked about gaining three to five points of market share that's how we underwrite our investments.
In the <unk> assets.
We are blowing through those numbers.
<unk>.
In addition to the New York Marriott downtown which is up $12 seven.
And J W. Buckhead, which is up 11, 9%.
Coronado Islands ups over seven points now that <unk> is up over five points.
Close to six points.
And the others that are coming back online is a little too soon to really.
Look back to the baseline because we don't have enough running room, yet, but I think the New York Mare Marquee is excellent example of.
Of what a fully refreshed and renovated hotel will do for you because the booking activity and the level of group room nights that we've seen at that property are off the charts. So we expect as we get back to a sense of.
Normalcy, which is clearly a direction were heading.
And the in the business in general that our properties are going to continue to take more market share there.
There are just a lot of hotels out there that haven't had any capital invested in them.
And.
Regardless of whether or not.
Properties are renovated.
And they suffer the attendant disruption will pick that up.
And if theyre not renovated while the mark keys at the flagship that we can point to.
Thank you.
Your next question is coming from Ari Klein with BMO capital markets. Please pose your question your line is live.
Thanks, and good morning.
On the group side can you talk a little bit about what youre seeing on rates for new bookings and then the quarter group bookings.
Well above 2019 for you and the industry can you talk a little bit about why that might be sustainable and is that something that could be disproportionately impacted if the macro were to worsen.
Sure.
On the group side, the right story has been really strong and.
What I'll say is for the second half of the year.
Actually picked up 30 basis points in rate relative to what we had at the end of Q1, so right for the balance of the year is.
Four 7% and that holds true not only for the second half of the year, but also looking out into 2023, where our rates are up close to 5% as well what's super encouraging on the group side I think a good stat to really look at is most recently so despite all the macro noise.
<unk>.
If you look at what we picked up in June for Q2. So we picked up 121000 group room nights in the quarter for the quarter, which is 77% above 2019.
In the second quarter for Q3, and Q4, we picked up about 319000 room night, and that's 40% above 2019.
And when you look at just June again.
Sure.
The second half we picked up 126000 room nights at a 61% over 19. So these are obviously meaningful.
Pick up.
Most recently not only for Q2, but at the end of Q2 in June which really indicate.
Sort of strength in the group business, particularly I would say corporate group and then association as.
Following right behind it as well and picking up with the second half and the rates thus far is super encouraging.
Again for June relative to 19, right group rate was actually up 44%.
Thanks, and then just on the sustainability of in quarter, four or quarter, but for the quarter bookings is that something you'd expect to continue.
Sure.
We do it.
I mean, it probably tempered a little bit I mean, it's very difficult to say because its such short term business how much.
In the quarter for the quarter business will get or how much in the month for the month, but based on the trends. We saw in Q2 in April May June we would expect again meaningful amount I don't know if its going to be exactly what we saw in Q2, but certainly a meaningful amount of short term business pick up in the third and fourth quarters.
Yes.
One comment on 2023.
One of the very encouraging.
We can point to is that meeting planners have not hit pause.
We're still seeing strong booking activity.
Into 2023 with $2 2 million deafness on the books for 2023 and.
The total group revenue pace continues to improve its down 9% now to 2019.
With strong ADR growth so.
Hotels booked I think 253000 group room nights in the quarter for 2023.
That activity was about 83% of 2019 levels, which is about on par with where it was in quarter. One so very encouraging as we look out beyond even 2022.
Thanks.
Your next question is coming from Chris <unk> with Deutsche Bank. Please pose your question your line is live.
Hey, good morning, guys.
Jim.
Realizing that you don't solve for occupancy and understanding your data points about how much corporate and group.
Occupancy is still.
Possibly to be capture going forward, but do you think we're headed for structurally lower occupancy given the rates that you're able to get on the business you have and the fact that the labor market might be tight for a while and you might not be able to get as much labor as you need at the price you want to do.
Do you think we're going to end up 300 basis points or something lower on an ocwen. We peak this cycle.
Yes, a lot in that question Chris.
With respect to labor, let me touch on that first and.
Sure.
We talked about.
It's been quarter over quarter that we're running at roughly 94% of optimal.
Levels compared to 97% pre pandemic.
The 97% number.
In and of itself is a little inflated because we took the opportunity.
Early in the pandemic to really.
Zero based budget every hotel.
And we've taken.
A number of positions out of the properties, allowing the properties to become more efficient.
And increased productivity and you're seeing that come through in our margin performance as well. So I think the labor situation is going to stabilize as we as we've said before and we look at this on a regular basis, we anticipate.
Wage growth this year, 4% to 5%.
Probably four 5% to 5% debt to be a little more tight and the range. So.
So it's not off the charts.
With respect to <unk>.
Occupancy.
The trends are growing solidly in the right direction on.
The group segment and the business transient segment. So we continue to pick up business transient room nights and not seeing any softness there whatsoever.
I think it's just a matter of time, it's going to evolve and it's not going to evolve evenly across the country are there going to be some markets that are going to take longer to get back to.
2019 levels and others that are that are roaring back right now. So the short answer is we fully anticipate that we're going to see a recovery to prior peak occupancy levels, both on the BT side and on the group side.
Great. Thanks, Jim.
Your next question is coming from Duane <unk> with Evercore ISI. Please pose your question your line is live.
A little bit about holiday bookings out of those bookings look relative to what you.
Normally have on the books at this time and any new patterns emerging.
I think.
I think you were asking about holiday bookings.
Looking out into out.
Thanks, giving and Christmas.
Exactly how does that look relative to what you normally have on the books at this time realize it.
It's a long way out but.
But clearly the trend on <unk> as a rotation from leisure to more corporate and group dependent but as we look to kind of fourth quarter and beyond.
How do your holiday bookings look.
Very strong.
Very very very strong.
If you look at.
Total host.
I would tell you that were up.
Into the double digits in terms of total revenue for Thanksgiving and.
Actually.
For Christmas, we are seeing a solid pick up as well.
Obviously being driven by the.
Sunbelt markets and Maui.
But that.
That stat in and of itself gives us comfort that.
There is not going to be the pullback in.
In consumer spending at our resort properties.
<unk>.
That some folks have talked about.
I appreciate that and then maybe just one quick one on one quick follow up on group I know you alluded to some very large events that came close in in New York.
But how is the average group size trending as that as that book builds.
The average deal size is actually very similar to what we saw back in 19.
It's not necessarily lower they will certainly whats happening is certainly certain groups are contracting for less but then ending up.
Increasing the minimum and actually spending more or less four youll see sort of a banquet and catering business pick up meaningfully well as well.
Thank you that's not just across the board and just a quick stat on labor day.
Jim touched upon Thanksgiving and Christmas our transient occupancy pace is ahead by 20% and our rate is a pace is ahead by 17% to 19.
Okay.
Transient often right.
Thank you for the thoughts.
Okay.
Your next question is coming from Bill Crow at Raymond James. Please pose your question your line is live.
Good morning.
A couple of questions apologize for that more than one here, but what are you seeing on.
Shoulder nights on Thursdays Sundays that may or may not be indicative of any changes to the consumer's appetite.
We are actually seeing in the second quarter, particularly as you saw in May and June things are returning to very similar patterns of what we saw in 2019.
Of weekday and weekend.
And now the weekday occupancy as we talked about has exceeded weekend occupancy for the portfolio. Its about a six point difference when you look at the second quarter's weak.
Weekday occupancy that 76% versus weekend at <unk>, when you look at sort of sunbelt.
In Hawaii.
About a five point difference in the urban it's about eight point difference urban at right now at 76% and we cannot 69, so as we get back to a more normalized mix of business and as the urban downtown hotels.
Occupancy were seeing very very similar sort of weekday and weekend patterns relative to 19.
Okay, So maybe fewer long weekends.
The what we had seen before is that fair.
That's fair yes.
Okay.
Two parter on 'twenty, three and then I'll be done.
The first part is on your Sunbelt rewards kind of limited that to Florida and Arizona.
And as you think about 'twenty, one and the comps do you think revpar is going to be up at those properties versus 'twenty. One certainly there is versus 19, but in the second part of the question is Jim I'm going to take the other side of the year your argument on group.
For next year and I'm just curious.
How we should should we really celebrate being down I think you said 16 points or 16% of demand.
Versus this time in 2019, if we haven't had beatings for two years, but there is always pent up demand.
You're talking about 23, Bill, yes, Im talking about 'twenty, three but in both cases.
Sunbelt leisure comp to 'twenty, one or excuse me the 22.
The.
And where the group paces.
Yes.
Again, the trends are moving in the right direction on the group pace when we talk about that first.
Fact that we were able to book.
<unk> hundred 53000 group room nights in the quarter for 2023.
And.
Activity was about 83% of 2019 levels.
I think that.
We're not seeing anything that would lead us to believe.
That group is not going to continue to come back I mean, there is a lot of pent up demand there and based on conversations that.
Our asset managers and revenue managers are having.
With that or.
Property managers and media planners, everyone intends to get back to normal I mean keep in mind what happened this year in the first quarter with omicron.
It really put a damper on things and we're seeing that business recover.
And feel pretty good about how 2023 is going to play out. So we're down 9% on the group revenue pace I think we'll see that gap continue moving.
To close so.
Group revenue is pacing ahead.
Same time in 2019.
For markets like the Florida Gulf Coast, Hawaii.
New Orleans, and San Antonio So we are seeing some positives in individual markets and we expect that that will continue going forward.
With respect to resort Adr's.
We talked about this on the last call and.
We do have some seasonality involved here.
With respect to our properties, but the fact that we drove.
$1000 transient ADR is at five resorts and.
Q2 is very positive we're not seeing the consumer pullback whatsoever, and we intend to continue to ask for a rate going forward.
We're optimistic that we're going to be able to continue to drive rate maybe not at the same levels as we did.
In 2021, and this year, but we'll continue to ask for rate going forward as long as the demand is there.
Okay. Thank you.
Your next question is coming from Floris Van <unk> with Compass point. Please post your question your line of sight.
Hey, guys.
On capital allocation with the increased authority to buyback stock.
And maybe if you can talk about sort of how you.
Weigh all the options of buybacks versus refurbishment versus new acquisitions, and maybe touch upon what youre seeing right now in the in the acquisitions market and we haven't seen a whole lot of hotels trade.
What your view is and whether that provides a competitive advantage to host.
And could we expect something activity there or will you look at your own stock trading at a pretty substantial discount to consensus NAV.
And look to.
To invest in what is going to be the trigger for those decisions.
We are of course, we are uniquely positioned.
As a.
As a buyer of assets in this marketplace.
Where the debt capital markets are today, the fact that it is.
Virtually impossible to get meaningful levels of debt.
On the acquisition front, so we're tracking a lot of transactions.
And we will balance.
Whether or not.
The rate decision is to invest in an asset.
Given where our cost of capital is today.
And with the underwriting requirements would have to be.
Versus buying back our stock.
Over over the course of the balance of this year and into next year. So.
There hasnt been a.
<unk>.
Broad repricing of buyer asks.
Our seller asked out there on on hotels that are actively in the market and you are right that a lot have been traded for I think that's one reason why the second reason why is it's just very challenging for <unk>.
Buyers to access the debt markets today so.
The liquidity we have today.
The availability of a $1 billion revolver.
And the.
The incremental cash that we're going to generate over the balance of this year.
This business continues to churn along we.
We'll be in the pole position.
We will always invest in our assets.
We can quantify the ROI, we're seeing it play out.
And.
Transformational comprehensive renovations or ROI projects, we think thats a good a good place to put our capital and then there'll be a balance between share buybacks and.
Investing in hotels.
Thanks, Jeff I appreciate it.
Your next question is coming from Michael Bilerman with Citi. Please pose your question your line is live.
Great. Thanks, Jim just sticking with the share buyback for a moment.
I guess, how did you think about sizing the $1 billion relative to the prior authorization and I guess, what triggered the company sort of re up that and increase it to the side.
And maybe just a little bit about your consideration during the quarter. When those discussions were going on about taking advantage of the volatility that occurred in <unk>.
How if you didn't do it then how are you thinking about.
Doing it in the future.
In terms of.
Buybacks.
Well we took the.
Buy back authorization to where it was pre pandemic, Michael we had had.
At $1 billion authorization.
We had $371 million remaining on it.
So we took it back to $1 billion and.
Okay.
We will continue to watch.
Where our stock trades.
Relative to our view of.
The business environment.
<unk>.
How 2022 is going to play out how we're feeling about 2023.
As we get in a little further into this year and start thinking about budgets next year.
And if there is a disconnect between.
The value of our stock price and.
How we think the company is going to perform then we will take advantage of that dislocation and.
Entered the capital markets, we view the share buyback.
Activity as another capital allocation tool.
And Jim how did you think about obviously in the quarter. There was a fair amount of volatility your stock has performed exceptionally well.
January through early June , but obviously then went from 21%.
Hello.
Were you blacked out at that point or was your view of like I don't know, where this market's going in despite knowing how well your assets were performing based on all the investments you've made in the assets in your operating platforms.
Assets you own relative to once you sold I guess why wouldn't you have acted.
And I know hindsight's 2020.
I'm just trying to understand.
From the board's mentality during that time, when you've re upped and the price was.
Off significantly from its recent highs.
Well, we certainly hope that the price doesn't.
It doesn't go down from here.
But.
Alright.
At times, Michael It just pays to be patient and as things.
Things were.
We're playing out with that.
Geopolitical events.
The price of oil.
And with Boeing.
Quantitative tightening.
We just felt that it was more prudent at this point in time too.
Preserve cash to sit back.
And to see what other opportunities might present themselves. So.
As I said, it's a it's real time.
There's a famous saying out there when the tax change your opinion changes.
Keep in mind.
How things are playing out.
I remind myself with that on a ratings too.
To stay active in the facts change I.
Appreciate that Jim Thanks for the time.
Hey.
Your next question is coming from David Katz with Jefferies. Please proceed your question your line is live.
Hi, good morning, everyone.
Thanks for taking my question.
Just looking at.
Host is a platform and an enterprise I know that you've historically been somewhat of a leader in putting forth analytics.
Resources, and so forth you've covered an awful lot of operating ground, but I'd love to hear you talk about some of those and what you've added and how youre utilizing those in the current environment.
Sure David.
Really we can go on for an hour in terms of answering that question because.
Our analytics platform as you well know.
Is extremely comprehensive and it's really ingrained in any capital allocation decision be made whether it's <unk>.
Alright from identifying markets that are going to grow grid.
Greater than our portfolio as well as looking at all the data that we have our existing assets and trying to understand where we have opportunity to really drive incremental value of those assets upon acquisition and we'd actually identify that even prior to acquisition.
To see where we can unlock value.
Not only from an operating standpoint, but also ROI opportunities.
We have a very very robust.
Capex team as well so when we are identifying because it's not only from the revenue opportunity side, but also analyzing the cost metrics of what an ROI opportunity looks like and feeling confident about the returns that we'll get on any ROI opportunities, we invest and the same goes for when we are looking at doing.
Asset management, our enterprise analytics team, particularly our revenue management and <unk> worked very closely with our managers.
To identify opportunities to do a lot of proof of concepts.
At our properties and we are always first to market, whether thats related to technology, leveraging new technology to drive productivity improvement or is it just coming up with new ways.
To really sell the hotel.
Major managers to really drive that change so I can get more granular certainly on this topic as you know I am passionate about this.
Being are you able to prove to yourselves.
This shows an advantageous asset in the current environment.
100%.
We have data down to every account level detail and I would say, it's not just quantitative data frankly, we have done a lot of qualitative analysis on what I mean by that is our revenue management teams have the teams actually go out to the properties every single property that we have in our portfolio and understand the actual organization.
The structure and the various processes that they have in place and it really is a partnership with our managers to drive improvements at our assets and so we have a lot of best practices.
We are aware of which we can certainly apply anytime we make an acquisition.
Thank you.
And our final question from Anthony Powell at Barclays. Please ask your question your line is live.
Thank you for fitting me in here just a question on development overall I mean, if you could give us an update on the prospects for the golf course development of Maui, maybe even more broadly I know wholesale you simply don't develop but you guys are having.
Lot of data you have a lot of expertise in construction.
We wanted a better position to develop and we've seen the premium for newer assets in the market in terms of rate. So the cycle would it make more sense explore more development opportunities.
Got it.
Cycle continues and we will recover.
Yes.
We're not typically a developer per se.
We have.
Developed properties.
Over the course of time, most recently on an excess parking lot.
Our western Carolyn in Phoenix, we built an AC hotel.
And we will work through the entitlement process.
And.
Look to add value at the golf courses in Maui and continue to really drive ROI projects like we did with the <unk>.
19 villas at the Andaz Wailea and other properties like that but I don't think you.
Should expect us to be a greenfield developer we're out.
Doing big ground up deals. We just don't think that that is a good use of our capital.
And I might add that.
As part of the <unk> investment, we do have the ability to participate.
In a development fund with.
With noble and bring our expertise to bear.
And not tie up all of our capital on our balance sheet. So that's one of the reasons we.
Made the strategic investment in <unk>.
Thank you, ladies and gentlemen, the Q&A session has concluded I would now like to turn the floor back over to Jim Wilson for any closing remarks.
Well I'd like to thank everyone for joining us on our call today, we appreciate the opportunity to discuss our quarterly results with you.
Hope you enjoy the rest of your summer and look forward to seeing many of you in person. This fall. Thank you for your continued support.
Thank you ladies and gentlemen, this does conclude today's conference call. You may disconnect. Your phone lines at this time and have a wonderful day. Thank you for your participation.
Okay.