Q3 2023 Host Hotels & Resorts Inc Earnings Call
[music].
Good morning, and welcome to the host hotels <unk> resorts third quarter 2023 earnings conference call.
Today's conference is being recorded.
At this time I would like to turn the call over to Jamie Marcus Senior Vice President of Investor Relations.
Yeah.
Yeah.
One moment, please I'm, having a slight technical difficulty.
For a moment.
Yeah.
Okay.
[music].
Yeah.
Yeah.
[music].
Yes.
Yeah.
Okay.
Yeah.
Okay.
Yeah.
Okay.
Okay.
Okay.
Ladies and gentlemen, thank you for standing by please hold them all what we are experiencing a brief technical issue. Once again. Please standby one moment today's conference call will begin soon.
[music].
Before we begin please note that many of the comments made today are considered to be forward looking statements under federal Securities law.
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> adjusted EBITDA R E and comparable hotel level.
You can find this information together with reconciliations to the most directly comparable GAAP information in Yesterdays earnings press release.
In our 8-K filed with the SEC.
And in the supplemental financial information on our website at those hotels Dot com.
With me on today's call are generally, though Leo President and Chief Executive Officer.
And sorry August 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.
Before we turn to the quarter I want to take a moment to acknowledge the devastating wildfires that occurred on the island of Maui. This past August.
All of us at host, we're deeply saddened by the loss of life and heartbreaking impact on local communities.
As the largest hotel real estate owner on Maui for over 20 years post has long shared a connection to the island and helping to support the community through this difficult time is important to our company.
We are proud to have aided recovery and rebuilding efforts donating more than $250000 to emergency response to relief organizations as well as providing direct financial assistance and relief to our hotels' employees.
We also provided food and shelter to these employees their families and emergency response teams.
The strength and resilience of the Maui community inspires us and we are committed to supporting them as the recovery continues.
Now, let's move to our results for the quarter.
Please note that the results presented on today's call represent the comparable hotel portfolio, which includes all three Maui resorts and continues to exclude the Ritz Carlton Naples, and Hyatt Regency coconut point.
When applicable we will provide estimated impacts from Maui to certain results to provide a more comprehensive view of business trends in the quarter.
During the third quarter, we delivered a comparable hotel revpar improvement of one 8% compared to the third quarter of 2022.
Our revpar performance for the quarter was driven by an occupancy increase of 150 basis points led by our convention hotels in downtown locations.
Overall, Maui had less of an impact on our results than we initially expected as we were able to replace high rated transient business with recovery and relief route business, which impacted our dynamics this quarter.
We delivered adjusted EBITDA, Ari a $361 million, which includes $54 million of business interruption proceeds from hurricane Ian It delivered adjusted <unk> per share up 41 sets, beating consensus on both metrics.
Third quarter comparable hotel EBITDA margin of 26.6% exceeded 2019 by 10 basis points and this marks the sixth consecutive quarter since the onset of the pandemic that we have achieved revpar revpar comparable hotel EBITDA and margins.
I head of 2019 levels.
Comparable hotel Revpar for October is expected to be approximately $229, a 2.4% improvement over 2022.
We estimate that the Maui wildfires that impacted third quarter comparable hotel revpar by 60 basis points comparable hotel Revpar by 120 basis points and comparable hotel EBITDA by $4.5 million, our risk management team is continuing to engage with our insurers about.
Potential business interruption coverage and the timing and amount of any potential proceeds are not yet no.
Despite the wildfires on Maui, which we expect will impact our full year revpar guidance by 50 basis points, we maintained the midpoint of our previous full year expected comparable hotel revpar growth at 8% and tightened our full year revpar growth guidance range to 7.2.
5% to 8.75%.
At the midpoint of our guidance full year 2023 comparable hotel EBITDA is forecasted to be 825% above 2019 with comparable hotel revpar growth by 0.6% greater than 2019.
As we look at the current macro picture, we continue to be optimistic about the state of travel for several reasons.
First group business continues to improve.
During the quarter, we booked 245000 group rooms through 2023, and total group revenue pace is now 6.7% ahead of the same time 2019.
Up from 4.2 per said as of the second quarter.
Even without the recovery really groups on Maui total group revenue would have been above.
Both 2022 and 2019.
The group booking window continues to extend and we are pleased with the base we have on the books for next year.
Second business transient demand continued its gradual improvement during the third quarter.
Business transient revenue was up approximately 9% due 2022 and demand improved 5% compared to the third quarter of 2022.
Overall business transient revenue was down approximately 16% compared to 2019 with room nights down approximately 20%.
Room nights have gradually improved throughout the year in January we were down nearly 23% to 2019 and in September we were down just 17% 2018, we see the continued evolution of business travel as a tailwind in the future.
Third leisure rates at our resorts remained well above 2019 levels. Despite continued moderation in the third quarter as expected for context transient rates at our resorts were 56% above 2019 in the third quarter.
Which is particularly impressive when considering that this excludes the benefits from our two newly renovated non comparable hotels in Florida and includes the impact from our three resorts on Maui.
Fourth we expect international demand to be a positive trend going forward.
International inbound air traffic increased to 88% of 2019 levels in September.
Up from 80% in June.
At the same time international outbound air traffic increased to 118% of 2019 levels after hovering near 108% since January.
Which indicates that consumers continue to prioritize travel.
As evidenced by recent booking volume trends for U S Airlines, the international imbalance is likely to revert to 2019 levels overtime.
Most importantly, we are not seeing evidence of a weakened consumer at our hotels food.
Food and beverage outlet revenues remained both above 2022 in 2019, driven by resorts in our resorts are light, which is encouraging given that occupancy still lags 2019 levels.
Golf and Spa revenues also remains significantly ahead of pre pandemic levels take.
Taken together, we believe this indicates that consumers continue to desire and ability to spend on experiences at our hotels.
Moving to our reconstruction efforts following hurricane in the newly transformed Ritz Carlton Naples has been very well received since its reopening in July and we are optimistic that the resort is set up to exceed our underwriting expectations.
Transient raised for 75% above 2019 for the second half of this year driven by the increased sweet mix and the new Vanderbilt tower.
Looking forward the festive season club level room night booking pace is up more than 20% over the same time in 2019 within ADR premium of almost $900 and sweep bookings are pacing up 125% with a more than 1300 dollar rate increase.
<unk> over 2019.
We are proud of the well deserved attention the Ritz Carlton Naples is receiving including regaining the coveted AAA five diamond designation and we look forward to seeing the results it delivers in the years to come.
In terms of insurance proceeds related to hurricane Ian to date, we have received $208 million at the expected potential insurance recovery of approximately $310 million for cupboard costs.
During the third quarter, we received $54 million of business interruption proceeds and we expect to receive an additional $26 million of business interruption proceeds in the fourth quarter.
Turning to group revenue exceeded 2022 by 10% in the third quarter, marking the fifth consecutive quarter group revenue exceeded 2019.
Definite group room nights on the books for 2023 increased <unk> 4 million in the third quarter, which represents approximately 110% our comparable full year 2022, actual group room nights up from 103% as of the second quarter.
For full year 2023, total group revenue pace is up approximately 20% to the same time last year and up six 7% to the same time 2019 in part due to recovery in really relief groups on Maui.
Group rate on the books is up 7% at the same time last year, a 40 basis point increase since the second quarter.
Looking ahead to 2024, we have 2.6 million indefinite group room nights on the books, a 15% increase since the second quarter.
Total group revenue pace is up 13% at the same time last year.
Driven fairly evenly by room nights and rate.
We are encouraged by the ongoing strength of group as evidenced by increasing pace lengthening booking windows and improving citywide calendars.
Moving to portfolio reinvestment, we are excited to announce that we reached an agreement with Hyatt to complete transformational reinvestment capital projects at six properties in our portfolio.
The properties include the Grand Hyatt Atlanta, the Grand Hyatt, Washington D C. The Grand Hyatt San Diego, the Hyatt Regency, Austin, the Hyatt Regency Capitol Hill, and the Hyatt Regency Reston.
Building on the success of the Marriott transformational capital program. We believe these portfolio investments will position the targeted hotels to compete better in their respective markets, while enhancing long term performance.
Hyatt has agreed to provide us with priority returns on these investments. Additionally, Hyatt will provide $40 million and operating profit guarantees as protection for the anticipated disruption associated with the incremental investment.
Our total investment is expected to be approximately $550 million to $600 million two thirds of which we were planning to invest as part of our capital plan over the next few years.
We expect to invest between 125 and $200 million per year over the next three to four years on this program.
We are targeting stabilized annual cash on cash returns in the low double digits on our incremental investment through a combination of enhanced owners' priority returns and Revpar index share gains.
Turning to our capital expenditure guidance for 2023, we tightened the range to $615 million to $695 million, which includes approximately $200 million to $230 million of investment for redevelopment repositioning and ROI projects and 100.
$50 million to $175 million for Hurricane restoration work.
Major capital expenditure projects, including the December completion of a transformational renovation at the Fairmont Kea Lani as well as the start of construction at the Phoenician Canyon suites villas and our luxury condominium development at four seasons resort Orlando at Walt Disney World Resort.
Lastly, we are well underway with our repositioning renovation at the Hilton singer Island, which is expected to be complete in the first quarter of 2024, and we are working with hilton's a soft brand the hotel as a curio collection resort we.
We are targeting a stabilized cash on cash return in the mid teens on our repositioning investments.
As we have said many times before our exceptional balance sheet puts us in a position to execute on multiple fronts, which is what you saw was due during the third quarter.
We continue to reinvest in our portfolio and we believe our comprehensive renovations as well enhance the EBITDA growth of our portfolio well into the future.
We announced an exciting transformational capital program with Hyatt repurchased approximately $100 million of stock and returned capital to shareholders through a 20% increase in our quarterly dividend. We continue to be optimistic about the state of travel. We believe host is very well positioned to outperform in.
The current economic environment.
With that I will 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 third quarter operations, our updated 2023 guidance, our balance sheet and our dividend.
Starting with business mix, we estimate that Maui impacted overall transient revenue by 450 basis points, which skewed the comparison this quarter, resulting in transient revenue down 330 basis points to the third quarter of 2022.
We were encouraged that transient rates at resorts remained 56% higher than 2019, despite the impact from Maui and the renovation at the one hotel South Beach, which contributed to the decline over last year.
As expected during the third quarter, we continued to see a normalization in transient rates at resorts compared to 2022.
Business transient revenue was approximately 9% above the third quarter of 2022.
Business transient rooms sold remain approximately 20% below 2019 levels, but it's worth noting that in New York, San Francisco and Denver three of our largest business transient markets were within 10% of 2019 room nights in the third quarter.
Looking at top business transient customers.
<unk> consulting and audit firms continue to drive the biggest share of business travel room nights, but there are also the largest contributor to room night decline compared to 2019.
Encouragingly during the third quarter, the large technology companies showed room night growth compared to 2019.
Turning to group group room revenues were 10% above the third quarter of 2022, driven by a rate increase of 8%.
It is worth noting that these results were skewed higher by the recovery in the leaf groups at our Maui resorts, which positively impacted group room revenue.
In the quarter for the quarter group room night bookings were up 49% compared to last year and 85% compared to 2019 with growth driven by New York, Phoenix and San Francisco as a convention hotels continued to focus on building a strong in house group base.
Maui also contributed to the strong in the quarter for the quarter bookings.
But results would still have been up meaningfully excluding its contribution.
We are encouraged by the continued recovery of international arrivals, San Francisco, which stood at 87% of 2019 levels in the third quarter up from 76% in the fourth quarter driven by increased airlift from Asia.
With respect to group mix corporate group room revenue was up 8% in the third quarter, driven by 7% rate growth.
Association Group revenue was down 11% in the third quarter compared to last year led by a decline in room nights as the citywide recovery remains uneven.
Social military education, religious and fraternal or Smurf group revenue was up 39% in the third quarter, driven by recovery and relief room nights O'malley, which are designated in this more category, excluding Maui room night growth in this category would still have been up over seven.
<unk> led by our hotels in New York, and Washington D C.
Looking ahead, our 2024 total group revenue pace is 13% ahead of the same time last year and we continue to be encouraged by the citywide booking pace in markets, such as Seattle, New Orleans, and San Diego, all of which have citywide group room nights meaningfully ahead of the same time last year.
Shifting gears to margin performance, our third quarter comparable hotel EBITDA margin came in at 26, 6%, which is 10 basis points above the third quarter of 2019.
Total comparable expenses grew five 5% over 2019, while total comparable revenues were up five 6%.
As we have said many times before we are encouraged that comparable hotel EBITDA margin remains above 2019, despite elevated expense inflation over the past four years and occupancy is still eight points below 2019.
As Jim mentioned, despite the impact of the wildfires in Mali, we maintained the midpoint of our previous full year expected comparable hotel revpar growth at 8% and tightened our full year revpar growth guidance range to $7, two 5% to 8.75%.
Our guidance range continues to contemplate varying degrees of moderating growth in the fourth quarter, we would expect year over year comparable hotel revpar percentage changes in the fourth quarter to be down low single digits at the bottom end to up low single digits at the top end with the range driven primarily by.
By the evolving nature of demand on the mountain.
We expect fourth quarter operational results to roughly follow 2019 quarterly seasonal trends as provided on page 17 of our supplemental financial information, which at the midpoint of our guidance implies slightly positive fourth quarter Revpar growth.
At the midpoint, we would expect full year adjusted EBITDA of $1 billion $620 million.
Please note that our adjusted EBITDA guidance includes $54 million of business interruption proceeds, which we received in the third quarter and an additional $26 million, which we expect to collect in the fourth quarter all of which is related to hurricane Ian.
Excluding the impact of business interruption, our revised full year comparable hotel EBITDA midpoint, only declined $8 million versus the second quarter. Despite a full year estimated impact of $25 million for Malibu.
It is important to remember that although business interruption proceeds are onetime in nature, we expect the Ritz Carlton Naples, and Hyatt Regency coconut point to contribute a full year of EBITDA in 2024.
As a reminder, comparable hotel EBITDA and comparable hotel EBITDA margin are not affected by operational results or business interruption proceeds related to these two resorts as they are considered non comparable at this time.
Shifting to margins.
As we have discussed over the past few quarters year over year, we expect comparable hotel EBITDA margins to be down 210 basis points at the low end of our guidance to down to 170 basis points at the high end due to.
Stable staffing levels at our hotels higher utility and insurance expenses and lower attrition and cancellation fees.
For these reasons, we do not believe 2022 represents.
Stabilized comparison for margins.
Relative to 2019, which we believe is a more representative year for margin comparison.
We expect margins this year to be up 20 basis points at the low end of our guidance to up 60 basis points at the high end.
This margin expansion is despite impacts from Maui occupancy is still meaningfully below 2019 levels moderating attrition in cancellation revenue and expense inflation.
Turning to our balance sheet and liquidity position.
The $163 million loan to the buyer of the Sheraton Boston was repaid in full during the third quarter.
Our weighted average maturity is 4.5 years.
At a weighted average interest rate of four 6%.
We have a balanced maturity schedule with our next maturity of $400 million coming due in April 2024.
We ended the third quarter at two one times leverage and we have $2 $6 billion of total available liquidity.
Which includes $218 million of FSA need reserves and full availability of our $1 5 billion dollar credit facility.
In addition, we repurchased six 3 million shares at an average price of $15 90 per share, bringing our total repurchases for the quarter to $100 million.
Year to date, we have repurchased nine 5 million shares at an average price of $15.82.
Bringing our total repurchases for the year to $150 million.
We have approximately $823 million of remaining capacity under our repurchase program and we will continue to be opportunistic when executing share repurchases.
We paid a quarterly cash dividend of <unk> 18 per share an increase of <unk> or 20% over our second quarter dividend.
Though we expect to maintain our quarterly dividend at a sustainable level, taking into consideration potential macroeconomic factors all future dividends are subject to approval by the company's board of directors.
We remain optimistic on the future of our bill.
Business and travel overall, we believe our portfolio our balance sheet and our team are well positioned to continue outperforming as.
As we have shown who else can do it all and we will continue to be strategic in the current 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.
Okay.
Thank you at this time, we will be conducting our question and answer session. If you would like to ask a question. Please press star one on your telephone keypad account.
A confirmation tone will indicate your line is in the question queue.
You May press Star two if you would like to remove your question from the queue.
And for participants using speaker equipment, it may be necessary to pick up your handset before pressing the star keys.
One moment, please while we poll for questions.
Thank you.
Our first question is coming from Ari Klein with BMO. Your line is life.
Thanks, Ed and good morning, maybe.
Maybe just the on the group booking pace is up 13% for next year curious what you're seeing from the end of the quarter for the quarter booking.
And do you think that book that booking pace for next year, ultimately narrows as maybe bookings booking windows extend.
And then if you could just touch on which which market loved strongest to weakest for next year from that from a group standpoint.
Jewelry.
So we saw meaningful in the quarter for the quarter, our bookings for the third quarter that trend seems to be pretty consistent we actually picked up 85% more relative to <unk> 19 in Q3 in the quarter for the quarter.
When we looked at the 245000 group room nights that Jim spoke to that we picked up in Q3 for Q3 and Q4 about 46% of that was a pick up for Q3 and about 54% of that was about kyat pickup for Q4 are going into next year as the booking window extends our we do X.
That to moderate somewhat just because there wouldn't be any capacity left frankly at the hotel so to put that into perspective are in the quarter or for the quarter booking window extended by about 10 days, which effectively was it was 80 days before and it's like 90 days now and then all future arrival that extended by <unk>.
15 days, so we're definitely seeing that that extend for in the year for the year as well as for future years.
So you will see that moderation into next year as it relates to market that we expect will do well.
For next year, we're certainly seeing a strength for our portfolio, that's meaningful that San Diego Orlando and E. E. Overall citywide pace for 2024 is strong.
In Seattle, Boston, New Orland.
Miami is well what's interesting is right now when you look at 'twenty 'twenty four the citywide citywide room night pace of vaccine, 90% of 2019, actual which is up from 83%, which we thought at the end of Q2.
Thanks appreciate the color.
Thank you.
Our next question is coming from Michael Bellisario with Baird. Your line is life.
Thanks, Good morning, everyone.
Uh huh.
On the Hyatt capital program for those six hotels, maybe just on average, but when were they all last renovated.
What's the current Revpar penetration index and then do you expect to get the same three to five point lift that you had under wrote for the Marriott program. Thank you.
Yeah, Mike.
We'll be happy to gather that information, specifically and share with you.
But suffice it to say that.
We add Hyatt both believe that these properties were in need of a transformational comprehensive renovation.
We were going to undertake.
Work at all six of these hotels.
About two thirds of the work that.
We agreed to with Hyatt.
In return for the enhanced owner priorities and the $40 million.
Guaranteed it to support the disruption.
So we see a.
Our returns in the.
You know that the low teens.
As we saw with the Marriott transformational capital program and that that will be driven by the.
The enhanced owner priority as well as the yield index gains. So I think that we have a very high degree of comfort given the performance of the assets are in the Marriott program that just to refresh your recollection that was 16 properties.
They're not all of them.
Stabilized yet.
Due to.
Where we are but due to certain properties and certain competitive states like New York in particular are having been closed for a longer time.
Then our property, but the assets that we have seen have delivered.
Truly outsized.
Yield index gains, we had underwritten three to five points and we're meaningfully above that so we're excited to be able to partner with Hyatt as their largest owner and.
Really looking forward to getting on with this program, which we will complete over the next three to four years.
Thank you. Our next question is coming from Bill Crow with Raymond James Your line is live.
Thanks, Good morning, Jim's Rob.
Point of clarification, Rob is it fair to say you still have about $40 million in potential recoveries that could occur next year $250 million through the third quarter plus some in the fourth.
And then the gap to 310 is the right way to think about it.
Yes, we still plan to get to the three plan, we're working with our insurers right now there will be an allocation between b I on property. So far what the letter we have got from our insurers that we will be they are okay with the $80 million of SDI. That's why we have $26 million of B I in our forecast we are still working with you.
Sure. It is to collect on the balanced don't know what that number exactly is going to be it won't be all of the remaining to get to the free 10, but certainly.
More than the 80 million. So we do expect some b I next year of that amount, we are still working with our insurers as to what that is going to be.
Alright, Thanks, and then my question really is here.
The comparison of the margins versus 2019, instead of 2022 in a few months, we're gonna be talking about 24 versus 23 and I'm thinking the question I've been asking the number of the Reits is what sort of top line growth and we'll make our own decision about what that is and how much do you need before you could get.
EBITDA margins next year is that a is it a 4% number.
That's the question is really difficult to answer given where we are with respect to the budgeting process.
What I can share with you at this time is.
We would anticipate wage growth next year.
In the 4% to 5% range.
<unk>.
Where insurance costs are going to come in there are certainly baked.
Through next June.
The renewal was that is year to year and every news June one of every year. Our July went up every year I guess through June 30th So you know.
A question Mark will be with what happens at insurance renewal.
There are a lot of variables that can impact that.
And you know as we get granular.
Each hotel budget, we will look for opportunities to continue to enhance improve.
Improvements in productivity add.
And utilize technology as we have been doing so we will do everything possible to come.
Command and control expenses.
Expenses going forward.
I do think it's a.
It is important that we kind of level set.
The stage as to what.
Is our true base of EBITDA.
Going into next year, and I would like to did you share a couple of numbers.
With you.
I don't want people to think that you know the $80 million of business interruption that we received this year is a one time event and.
It's really not a onetime event from the perspective that the Ritz Carlton Naples, and the Hyatt Regency coconut point are going to be back online full time next year.
Sure.
Yeah, just to expand on that Bill I think the way to think about it first just level set the base before we even get into the growth of EBITDA for next year. When you think about the midpoint of our guidance at 16 20, right now that already has a $30 million negative impact from Maui, which it is made up of 25.
5 million from the hotels, and then 5 million from the timeshare. So let's assume for a second that we still have about a similar impact into next year at Maui recovers.
And then you think about that $80 million of V. I that proceeds for this year with Jim mentioned that effectively majority of that we would have received as EBITDA from the Ritz Carlton Naples, and the Hyatt coconut point, if it was not for hurricane Ian So that as EBITDA, we would be receiving for next year. So in other words, if you think about it.
The pace before any growth is starting off at 1 billion six plus if that makes sense and then of course as Jim mentioned in terms of expenses and everything else. We are working through and we have many initiatives that we're working on so while there will be inflationary expense crashes, we fully anticipate to mitigate.
Those pressures with productivity enhancements and various initiatives that we have going on at the hotels and we will provide you with next.
Next year guidance.
As we typically do in February at the February call.
Great. Thank you guys.
Thank you. Our next question is coming from Duane <unk> with Evercore ISI. Your line is life.
Hey, Thanks, Good morning, I thought that was a good.
Question by Bill and in response by you. So I'll just I'll just ask another Hawaii question maybe.
Maybe.
Could you just play back the recovery why things were a little bit better than you anticipated.
In the third quarter and then maybe just since since the Delta on the fourth quarter guidance is it's really about Hawaii. It sounds like what what would get you to the high end what would get you to the low end in terms of what needs to happen.
Sure Duane.
Let me start by saying that the were it not for Maui I think our guidance range for the full year would have been tighter than it is but we we have a wide range at this at this point in time because of some of the uncertainties surrounding how Hawaii is how Maui is going to recover.
Either there or the west side of Maui kind of poly just reopened to tourists on November 1st yesterday. So it's.
It's going to take some time to see the cadence of.
Our people are going to come back.
To the west side and I do believe it will take some time as well.
For people to get.
Get comfortable are rebooking their stays down and the way they area, where our other two resorts are we did see a lot of cancellations.
In the fourth quarter due to some pronouncements that were made by the governor and we fully support the reconstruction and relief efforts because what happened on Maui is just that a terrible horrible disaster and we.
We.
Fully support the fact that you've got to take care of the people first and that's what's happened.
The reason that our performance in the third quarter was better than we initially anticipated as the.
As a result of a recovery.
First responders are taking rooms at our property as well as providing.
Providing housing that was subsidized by Demma.
Were displaced residents and.
You know that that really caused a material pick up pick up better than we anticipated.
You did see a decline in trip par in the quarter by.
An amount that was directly attributable to what happened on Maui I think the out of room spend that trip her spend was impacted by a 120 basis points. So we're optimistic for the long term future of Maui, It's a great place and.
Great place to be and you know.
We will do what we can to support the recovery.
Thanks, Jim maybe just to put a finer point on it the delta in the fourth quarter. The range is that a function of the duration of first responder in housing or the rate of just sort of organic leisure recovery.
Yeah, it's a little difficult to look at November and December It really is a disaster recovery business and how that will taper off as the west side of the island opened up with actually it opened up as of yesterday November of course.
So it's that's what we're trying to gauge the property the product gauge of what that demand pick up looks like and how they will replace sort of the regular business with the demand recovery business. So.
So that's what's driving the Delta what I will say is if it was not.
For that the Maui impact while we you know we put out October numbers that two 4% our fourth quarter numbers would have been slightly higher than the two or 2.4% if it wasn't for the Maui impact.
Important factors to kind of wrap this up weight.
Our anticipated.
The anticipated impact on comparable hotel revpar.
And comparable hotel EBITDA from Maui is 50 basis points.
Off the top line.
And $25 million for the full year at the bottom line. So in essence had Maui not occurred we would have been talking about a guidance raise on this call.
Because we were able to keep the midpoint at 8%, we would've been talking about an eight 5%.
Our guide for this year.
Understood. Thank you.
Thank you. Our next question is coming from Jay Kornreich with Wedbush Your line is life.
Hey, good morning.
You know you made some comments on the urban business transient demand profile accelerating and September getting doctors 70, 17% cap to 2019. So I'm wondering if you could just provide some more color on how much you think that gap to narrow in 2024 and maybe within that.
Your peers have been diminishing their exposure to San Francisco, maybe just provide some color on how you see your assets in that market trending over the next year or two.
Sure I'll take the the San Francisco piece of it Jay and then.
Rob can talk a bit about the business transient.
San Francisco.
We think for the long term is a great place to be particularly given the assets that we own which we believe are.
The best located in the market.
And.
Excellent physical condition.
San Francisco Mosconi Marriott has been.
For quite some time now.
Building, a solid base of in House group business.
If it is in terrific condition. It was the first asset that we completed as part of the Marriott transformational capital program.
Completed in 2019.
And.
The results are paying off relative to the competitive set. It is it is outpacing I think everyone is set today.
The Grand Hyatt on Union Square also in great physical condition and a great location. So.
You know we are seeing.
A return of business travel in San Francisco in particular.
In September.
San Francisco and it's one of our top business travel.
Markets.
We're down just about 10% in total room nights relative to where we were in 2019, so it's slow and steady and I think 2024 will be a challenge year for San Francisco from a citywide perspective, but.
As we get beyond 2024, we're optimistic about how the market is going to evolve.
Yeah, and I don't know I'll add on the San Francisco piece or whether it is encouraging as our lead volume.
At the San Francisco Marriott, Marquis is actually up.
The five 5% to last year, and you know Guadeloupe right our room nights there was up.
Almost 85% year over year as well so and in November if they believe when APAC or Asia Pacific Economic conference system that should be really good percent Venezuela.
August 24, as Jim mentioned the city Wides.
Our week, but that's why we are really making up.
Sort of effort to get quality in house group at that hotel.
As it relates to your question on V P.
It's been a very very slow recovery from a room night perspective, obviously, we had the strength of the special corporate rates this year, almost double digit, but the room night recovery across the board for the portfolio still down around 20% call. It.
That said the major markets as we spoke about in our prepared remarks, a San Francisco New York Denver is down only 10% to 19 are which is pretty impressive in terms of 'twenty 'twenty four we expect more of the same in terms of BT, we expect certain market too.
To recover let's do continue recover but just at a very slow pace. The reality is is we will come back in a meaningful way when there is more macroeconomic certainty and there is two economic growth. We believe there is a pretty close relation with nonresidential fixed investment growth and Revpar and wasn't that comes.
Back in a meaningful way and GDP growth comes back in a meaningful way we expect.
That gap to reduce.
Alright, I'll really helpful. Thank you very much.
Thank you. Our next question is coming from Smedes Rose with Citi. Your line is live.
Hi, Thanks, I just wanted to ask you you mentioned sequence 6 million.
Group room nights on the books for next year.
So how does that compare to where you would sort of normally be in terms of group bookings for the before calendar year when you're in.
It.
This late in the year.
Yeah, when we compare that to 2019 were about 10% down relative to 2019.
Okay. Okay. So catching up and then can you just mentioned.
You mentioned the.
The Sheraton Boston you mentioned, the silicon that loan was repaid in full any update on the Sheraton times square loan.
Yeah that loan was due to be paid off on October 18.
We worked with the borrower and.
Entered into a forbearance agreement and.
He paid there that brought the effective rate all in to a 15%. So they are in the final stages of.
Completing the documentation necessary.
To have.
The loan paid off by next Wednesday.
Great. Thank you.
Thank you. Our next question is coming from Dori Kesten with Wells Fargo. Your line is life.
Good morning Nathan.
Based on what your school marketing for sale today and in the Shadow pipeline and be able to hear about when you expect to be a net buyer.
Dori I sure hope so.
I really do I mean, clearly our balance sheet.
Is a differentiating factor for host.
We've said we.
We have the ability to allocate capital across many fronts.
As you saw us do in the third quarter.
And sitting here at two one times leverage.
And the ability to do do deals all cash.
And it didn't get them done quickly.
It's something that I don't think theres anyone else in this market can do today.
What we're seeing today, though is still a fairly significant bid ask spreads in the marketplace.
There there just isn't a lot of quality product.
In the pipeline.
We are talking to a lot of people.
A lot of hotel owners and we'll.
We will just have to wait and see.
Oh, how pricing trends as we get into 2024.
But we clearly have the capability to not only continue to buy.
Buyback stock, which we believe is very undervalued relative to our assets and the quality of our EBITDA.
And invest in our assets and pay a sustainable dividend and also.
Be acquisitive.
Let's get let's keep our fingers crossed that we have an opportunity next year to do that.
Okay. Thank you.
Thank you.
Our next question is coming from Meredith Jensen, which H S. P. C. Your line of sight.
Yeah. Thank you I have two quick questions first looking at T. Revpar, our comparable Revpar, if you could speak a little bit about what you're seeing in out of room spend and how we might think about that in the near and longer term and then secondly, I recall a couple of months ago, maybe at the analyst meeting.
You spoke about some strategic moves you might make other time working with managers to identify some of the brand standards.
It'd be modified and as you you know startup collection sample sets to Q.
Trailed down on those and given where cost pressures are I was curious if there's anything meaningful there we could we could think about thanks very much.
Okay.
Sure on the food and beverage front banquet and catering contribution which has effectively been growing catering and a revenue on a per group room night basis still remains pretty strong I mean last quarter, we just had.
A lot of pent up group demand from.
Groups that are canceled during COVID-19. So it is very difficult to compare the Q3 results to Q3 results of this year when it comes to food and beverage just because the excess amount of group that we had so even in our internal forecast without the impact of malware you were actually expecting food and beverage revenues to be down that said.
That really has moderated in terms of food and beverage revenue. There we are still getting meaningful amount of <unk>.
Growing catering contribution and.
Outlet revenues on a per occupied room or are significantly higher than they were back in 2019.
Piece that is certainly going to moderate as we get into next year is attrition in cancellation revenue right that had you saw had an impact in the third quarter third quarter with a N C revenue being down literally about half of what it was last year, so that in putting into perspective in 2022 received close.
The $100 million of attrition cancellation revenue, we think that's been a moderate somewhere around the $50 million to $55 million range. That's just one thing to keep a lookout on.
And sorry, your second question was.
It just started.
It was a sort of a strategic question on working with managers on brand standards is there any modifications that could be made over time on.
Looking post COVID-19.
Well, we are constantly working with our managers to evaluate brand standards that are relevant.
And frankly.
Particularly I would say Marriott and Hyatt both made meaningful changes into them.
And for the brand standards post pandemic really figuring out which ones, we should modify which wants to eliminate the ones, which truly drive value to the guest it's always a continuing conversation.
And we believe as technologies evolve and we can leverage technologies, which not only helped from a productivity standpoint.
But also enhance customer experience.
We will keep on doing proof of concept and piloting those technologies to drive incremental value to the bottom line.
Super Thank you.
Thank Keith.
Our next question is coming from tighter Batori with Oppenheimer. Your line is life.
Thank you and good morning, everyone.
Questions on the leisure and resort commentary are you seeing any divergence within your portfolio between some of the higher rated resort properties and those that are a little bit lower at a different price points and.
And then when you look at the holidays talk about your your book position I know, it's still a little early there, but curious kind of what youre seeing in terms of demand Thanksgiving and Christmas and then the third part of this question you talked about transient resort rate, so 56% above 2019.
You know, what what sort of guidepost or what sort of expectations do you have for those rates.
Q4, and kind of going forward, certainly commentary and the expectation is that that number should slow, but just trying to get a sense of your best guess, perhaps.
How much.
Where growth could end up growing.
The next couple of quarters here.
Sure Let me, let me start with the.
The last question that you asked with respect to leisure transient rates.
We're very happy there.
And third in the third quarter, our Elysian leisure transient rates.
We're 56% above where they were in the third quarter of 2019.
For reference that's down about five percentage points from where we were in the second quarter. We were second quarter, we were 61% ahead.
And the fact that.
That the 56% number it takes into account.
The three comparable resorts are on Maui.
To the negative.
And it excludes our Ritz Carlton Naples, and our Hyatt Regency coconut point does give us a substantial level of comfort that.
Our properties are going to continue to be able to.
Charge a rate that customers are willing to pay.
Just given the nature of the assets that we own. So we're not really seeing a divergence across the 16 resorts, we have they're all very high quality properties.
And we're optimistic that as.
As we get into the fourth quarter and as we get into next year will continue to be able to drive.
Strong performance at all of these assets I think the the Ritz Naples, what we're seeing with respect to.
Booking pace across every room category at that property.
It is very very impressive and we're very optimistic that we're going to be able to.
Outperform our underwriting expectations on the expansion of the Vanderbilt Tower, I think we underwrote a 12% cash on cash return.
On that investment and we're going to do much better going forward. So we are not seeing any signs of weakness as we move into the holiday season, you know I would just I would just caveat that by saying, but for the unknown surrounding whats going to happen in Maui This year.
And on the question of holidays, and how things are pacing.
When you have to keep in mind Q4 holidays somewhat present.
A tough comp to last year, because last year was the first time the country was really opened for broader travel during the holiday season.
But that said us specifically for like a Christmas time, right now and this is much more direction of what we have our revenue on the books.
Let's Maui is effectively flat, which we think is very encouraging and for Thanksgiving, it's slightly off but you have to remember it's.
That timing, what the top timing when you compare to last year. So we were off less how Maui down.
Down about 67%.
In pace, but Christmas.
Christmas is effectively flat right now pacing flat in terms of revenue.
Thank you. Our next question is coming from Anthony Powell with Barclays. Your line is life.
Hi, good morning.
And then one of your newer markets Austin, Texas Revpar has been down in the past few quarters is that all technology business travel being down and just more broadly I mean, there's a convention center renovation there starting next year, well that'd be disruptive and how's your experience been in that market relative to kind of a more traditional coastal business at urban markets.
Yeah.
Anthony I think that the oxygen.
Austin, we have two properties in Austin, we had the hotel being there and we had the Hyatt Regency Austin.
Just to remind you the Hyatt regency was the <unk>.
First asset that we.
Purchased.
During the pandemic I think it was the first hotel hotel deal that was done during the pandemic.
That asset is doing actually quite.
Quite well.
<unk> is.
It's doing quite well given the fact that we were able to take in house group given the meeting space platform there.
As well as its location across the lake.
Van Zandt is more of a leisure driven property and I don't know if you've been to Austin recently.
But there is an incredible amount of construction.
Around the vans and in that particular sub market the Rainey Street district.
And that has really.
Impacted our business at that property. So for the long term I think it's gonna be great going forward, because it's a myriad of of new development is occurring there.
Residential as well as office.
But in the short term it is.
Until we get the cranes are out of there and the streets open up the business again, so and tech has had a bit of an impact as well in the near term on that asset. So you're absolutely right with respect to you know plans for the Convention Center.
Host as well as other hotel owners, who have a presence in Austin had been meeting.
With the the appropriate officials are in.
In Austin.
You talk about.
Whether or not there.
I'm going to go forward with a closure of the Convention center.
Or a staged out.
The renovation and expansion and I was also talking about ways that we can mitigate any impact that our actions taken with the convention center.
We will have on business in the Austin market, So we're being proactive and are.
Doing everything that we can do.
No.
To mitigate any potential issues surrounding the conversion of the center going forward.
Okay. Thank you for that.
Okay.
Thank you our.
Our final question today will be coming from crisp, where ranke with Deutsche Bank. Your line is life.
Hey, good morning, guys.
Good morning, Thanks for taking my call. Good morning, Thanks second question.
It's talking about acquisitions, Jim you know I know you mentioned that there's a big pipeline out there.
Well you know, we think theres going to be stuff that might come available next year, that's related to debt refinancing as you guys look at the potential pipeline a lot of deals a lot of the acquisitions you've done last couple of years have been one off assets bigger bigger EBITDA assets.
What's your willingness to do either a portfolio type of deal or something where there's you know a lot of capex involved upfront are you willing to do different kinds of deals and kind of what you've done in the last few years.
Chris is the short answer is it really is transaction dependent and.
If we we.
We see a portfolio that we believe is accretive to shareholder value.
And you know if assets needed to be repositioned in a.
They have capex needs and we can see our way clear too.
You know performance in the in the near term.
We would do that I mean, I think a great example of an asset that.
It has performed extremely well for us that needed to be repositioned as the Venetian.
And we bought that asset in 2015 and completely re imagined the property and invested I think $120 million.
To reposition it including.
New amenities and new Spa and fitness center.
New lobby bar.
And the complete renovation of all the Guestrooms and the asset is doing exceptionally well so if I could find another Venetian.
That is something that we would.
Certainly be interested and excited about doing with respect to you know portfolio deals.
We will look at.
We look at everything Thats out there and we look at it with an open mind.
And if there is a.
A transaction that we believe is accretive we would certainly take it down.
Okay. Thanks, Jim.
Sure.
Banking, we have reached the end of our question and answer session. So I will now turn the call back over to Mr. <unk> for his closing remarks.
Well I'd like to thank everyone for joining us on our third quarter call. Today, we appreciate the opportunity as always to discuss our quarterly results with you.
And we look forward to seeing many of you in person at NAREIT and other conferences in the coming weeks.
Have a great day. Thank you.
Thank you. This concludes today's conference and you may disconnect. Your lines at this time and we thank you for your participation.