Q4 2024 Host Hotels & Resorts Inc Earnings Call
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Good morning and welcome to the Host Hotels and Resorts fourth quarter 2024 earnings conference call. Today's conference is being recorded. At this time, I'd like to turn the call over to Jamie Marcus, Senior Vice President of Investor Relations. Please go ahead.
Speaker Change: 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.
Speaker Change: 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.
Speaker Change: In addition, on today's call, we will discuss certain non-GAAP financial information such as FFO, adjusted EBITDA RE, and comparable hotel-level results.
Speaker Change: With me on today's call are Jim Risoleo, President and Chief Executive Officer, and Sourav Ghosh, Executive Vice President and Chief Financial Officer.
Speaker Change: With that, I would like to turn the call over to Jim.
Speaker Change: Thank you, Jamie, and thanks to everyone for joining us this morning.
Speaker Change: three of which are in new markets for hosts. We continue to reinvest in our portfolio through capital expenditures and resiliency investments.
Speaker Change: We made progress on the Hyatt Transformational Capital Program and the condo development at the Four Seasons Resort Orlando at Walt Disney World Resort.
Speaker Change: We returned significant capital to stockholders in the form of dividends and share repurchases and we maintained an investment grade balance sheet and continue to position hosts to take advantage of potential opportunities in the future.
Turning to our results.
Speaker Change: We finished 2024 above our most recent guidance estimates. For the full year, we delivered adjusted EBITDA RE of $1,656,000,000, a 1.7% increase over 2023, and adjusted FFO per share of $1.97, a 2.6% increase year-over-year.
Speaker Change: Comparable Hotel Total Repar grew 2.1% while Comparable Hotel Repar grew 90 basis points compared to 2023.
Speaker Change: Comparable hotel EBITDA margin of 29.2% was down 60 basis points versus 2023. Primarily due to increased wages, fixed expense pressures, and performance in Maui following the wildfires in 2023.
Speaker Change: During the fourth quarter, we delivered adjusted EBITRE of $373 million and adjusted FFO per share of 44 cents.
Speaker Change: driven by strong transient demand including improving leaser transient demand in Maui and increased ancillary revenues.
Speaker Change: Comparable hotel, even a margin, improved by 30 basis points year over year to 28.1 percent. Driven by improvements in rate, increases in ancillary spending, sustained productivity improvements, and certain one-time items.
Speaker Change: As a reminder, the operational results discussed today refer to our 78 hotel comparable portfolio in 2024, which excludes the Ritz-Carlton Naples, Alila Ventana Big Sur, and the Don Cesar.
Speaker Change: In 2025, our 79-hotel comparable portfolio only excludes Alila Ventana, Big Sur, and the Don Cesar, as the Ritz-Carlton Naples is comparable in 2025.
Speaker Change: Turning to business mix, red part growth in the fourth quarter was better than expected, driven by over 3% rate growth.
Speaker Change: Transient Revenue drove the outperformance in the quarter, growing 8%, which is the highest improvement in the last six quarters.
Speaker Change: Revenue growth was led by Leisure in Maui, New York, and Oahu, which all had strong festive seasons. Notably, our three Maui resorts accounted for nearly half of the transient room revenue growth in the fourth quarter.
Speaker Change: Excluding Maui, transient rates at our comparable resorts were in line with recent quarters.
Speaker Change: Business transient revenue grew approximately 6% driven by strong rate growth as we saw a favorable market mix and a continued shift from government to the corporate negotiated segment.
Speaker Change: As expected, group room revenue for the quarter was down approximately 5% year-over-year due to tough comparisons in San Francisco and Maui, as Maui benefited from recovery and relief group room nights in 2023.
Speaker Change: Our property sold 960,000 group room nights in the fourth quarter, bringing our total group room nights sold for 2024 to $4.3 million, or 101% of comparable 2023 group room nights.
Digging deeper into Mali, the leisure recovery is underway.
Speaker Change: Total REVPAR at our three Maori resorts was up 6.4% in the fourth quarter. As leisure guests, total spend exceeded recovery and relief group business last year.
Speaker Change: Transient rooms sold were up approximately 50% year-over-year at our two Wailea resorts, and transient rooms sold at the higher Regency Maui and Kanapali were up 325%.
Speaker Change: The leisure gas continues to spend at our F&B outlets, bars, and golf courses, leaving us encouraged by the leisure recovery that is beginning to take shape in Maui.
Speaker Change: For the full year, we estimate that Maui impacted our comparable hotel total REBPAR by 110 basis points, REBPAR by 160 basis points, and even a margin by 20 basis points, including the business interruption proceeds received during the year.
Speaker Change: Turning to ancillary spend, we continue to see improvements in food and beverage revenues and out-of-room spending.
Speaker Change: F&B revenue grew nearly 3% in the quarter driven by outlets at our resorts. Notably, banquet revenue increased despite a decrease in group room nights driven by growth in banquet revenue per group room night.
Speaker Change: Other revenue grew 8% despite an expected moderation of attrition and cancellation revenue.
Speaker Change: For the full year, F&B revenue grew 3.6%, driven by an increase in banquet contribution and an improvement in group room night volume.
Speaker Change: Taken together, we continue to see the strength of the affluent customer across properties in our portfolio.
Speaker Change: Moving to our reconstruction efforts at the Don Cesar. We have substantially completed our remediation efforts and our focus has shifted to rebuilding compromised infrastructure to increase resilience.
Speaker Change: including elevating critical equipment and systems as we did at the Ritz-Carlton-Naples. We expect a phased reopening of the property beginning late in the first quarter.
Speaker Change: We currently estimate our total property damage and remediation costs at the Don Cesar will be between $100 and $110 million. And our total insurance deductible is $20 million.
Additionally, we expect to collect business interruption proceeds.
Speaker Change: We have included approximately $9 million of business interruption proceeds in our 2025 adjusted EBITRE guidance, which we expect to receive in the first half of the year, but it is still too early to estimate the timing or amounts of additional payments.
Speaker Change: In total, we estimate that Hurricanes Helene and Milton negatively impacted our adjusted EBITDA RE by $15 million in 2024.
Speaker Change: Turning to capital allocation, in 2024 we completed one and a half billion dollars of acquisitions across four hotels, including the One Hotel Nashville and Embassy Suites by Hilton Nashville downtown, the One Hotel Central Park, and the Ritz-Carlton Oahu Turtle Bay.
Speaker Change: Thus far, our new acquisitions are performing in line with our underwriting expectations.
Speaker Change: In addition to successfully allocating capital through acquisitions, we also return capital to stockholders through share repurchases and dividends. In 2024, we repurchased 6.3 million shares at an average price of $16.99 per share, for a total of $107 million.
Speaker Change: Since 2022, we have repurchased $315 million of stock at an average repurchase price of $16.27 per share, and we have $685 million of remaining capacity under our share repurchase program.
Speaker Change: In the fourth quarter, we declared a quarterly cash dividend of $0.20 per share and announced a special dividend of $0.10 per share, bringing the total dividends declared for the year to $0.90 per share.
Speaker Change: Turning to portfolio reinvestment, in 2024, we invested nearly $550 million in capital expenditures and resiliency investments.
Speaker Change: We completed renovations to approximately 2,100 guest rooms, 213,000 square feet of meeting space, and approximately 93,000 square feet of public space.
Speaker Change: In addition, we completed the repositioning renovation at the Singer Oceanfront Resort, as well as made progress on the Hyatt Transformational Capital Program.
Speaker Change: We also completed vertical construction on the mid-rise condominium building at the Four Seasons Resort, Orlando, at Walt Disney World Resort, marking a significant milestone in the development.
Speaker Change: Sales efforts for the condos started in November of 2024 and we have deposits and purchase agreements for 14 of the 40 units.
Speaker Change: In 2025, our capital expenditure guidance range is $580 to $670 million, which includes between $70 and $80 million for property damage reconstruction, the majority of which we expect to be covered by insurance.
Speaker Change: Our TAPx guidance also reflects approximately $270 to $315 million of investment for redevelopment, repositioning, and ROI projects.
Speaker Change: Within the Hyatt Transformational Capital Program, we expect to start renovations at the Hyatt Regency Washington on Capitol Hill, the Manchester Grand Hyatt San Diego, and the Hyatt Regency Austin.
Speaker Change: As a reminder, we expect to benefit from approximately $27 million of operating profit guarantees in 2025 related to the HIA Transformational Capital Program, which we expect will offset the majority of the EBITDA disruption at those properties.
Speaker Change: Other major ROI projects for 2025 include the construction of the Phoenician Canyon Suites Villa Expansion and the Don Cesar Ballroom Expansion, which we expect to complete in the fourth quarter of 2025.
Speaker Change: In addition to our capital expenditure investment, we expect to spend $75 to $85 million on the condo development at the Four Seasons Resort Orlando at Walt Disney World Resort this year.
Speaker Change: More broadly, we have completed 24 transformational renovations since 2018, which we believe will continue to provide meaningful tailwinds for our portfolio.
Speaker Change: Of the 16 hotels that have stabilized post-renovation operations to date, the average REDPAR index share gain is over 7.5 points, which is well in excess of our targeted gain of 3 to 5 points.
Speaker Change: We continue to be recognized as a global leader in corporate responsibility over the course of 2024. Last month, Post was named to Newsweek's list of America's most responsible companies for the sixth year in a row.
Speaker Change: The annual ranking analyzes data from more than 2,000 of the largest public companies in the United States before selecting the most responsible.
Speaker Change: The final list for 2024 recognizes the top 600 most responsible companies spanning dozens of industries.
Speaker Change: Both landed at spot number 88 and is ranked number 4 in the real estate and housing industry.
Speaker Change: We also continue to make progress on our sustainability goals with four properties achieving LEED certification during the year, bringing the total to 20.
Speaker Change: Importantly, we achieved a new milestone in our sustainability efforts for renewable energy use and green building certifications.
Speaker Change: resulting in the maximum pricing benefit under our credit facility which reduced the interest rate for the outstanding term loans by five basis points.
Speaker Change: Wrapping up, we are proud of our accomplishments in 2024, including the iconic portfolio we have assembled and the investment-grade balance sheet we have maintained.
Speaker Change: We are encouraged by the state of travel, as affluent consumers continue to prioritize experience, and the supply picture for our markets and chain scales remains below historical levels.
Speaker Change: We continue to believe that HOST is well positioned due to our geographically diversified portfolio.
Our continued reinvestment in our assets.
Speaker Change: and our Fortress balance sheet, and we are confident in the opportunities for continued shareholder value creation in 2025.
Sourav Ghosh: With that, I will now turn the call over to Sourav.
Sourav Ghosh: Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our fourth quarter operations, full year 2025 guidance, and our balance sheet.
Sourav Ghosh: Starting with total revenue trends, total rep par growth continued to outpace rep par growth as both group and transient guests maintained elevated levels of out-of-room spending.
Sourav Ghosh: Comparable hotel food and beverage revenue grew approximately 3% in the quarter, driven by 5% growth in resort outlet revenue per occupied room.
Sourav Ghosh: Approximately half of the resort outlet revenue per occupied room growth came from Maui.
Sourav Ghosh: It is worth noting that our newly repositioned Singer Resort achieved a 50% increase in outlet revenue per occupied room compared to the pandemic highs, which were achieved in the fourth quarter of 2022.
Sourav Ghosh: Banquet and catering revenue grew 2% in the fourth quarter as banquet contribution per group room night rose up 7% more than offset for your group rooms sold year over year.
Speaker Change: Notable group strength at the Manchester Grand Hyatt San Diego Orlando World Center are Phoenix Resorts and the Four Seasons Orlando Bolstered Banquet revenue growth.
Speaker Change: Other revenues grew 8% despite the expected moderation of attrition and cancellation revenues.
Speaker Change: Spa revenue was up 18% driven by the newly expanded spa at the Ritz-Carlton Amelia Island.
Speaker Change: Golf revenue was up 6% when adjusting for the operational change at the Ritz-Carlton Oahu Turtle Bay.
Speaker Change: To put golf's lasting popularity into perspective, full-year 2024 golf revenue was 70% above pre-pandemic levels.
Speaker Change: Shifting to rooms revenues, overall transient revenue was up by 8% compared to the fourth quarter of 2023 driven by improving leisure transient demand in Maui as well as strong rate growth across the portfolio.
Speaker Change: Looking at holidays in the fourth quarter, Thanksgiving Rev Par grew 8% and festive season Rev Par grew 12% driven by Maui and the New York Marriott Marquis in both cases.
Speaker Change: Maui Rep Park for the festive season actualized 42% ahead of last year which is further evidence of the meaningful leisure recovery that is beginning to take shape.
Speaker Change: Looking ahead to holidays in 2025, the Easter shift from late March to late April makes spring break comparisons difficult.
Speaker Change: Using the months of March and April combined as an indication, transient revenue pace is up approximately 4% compared to the same time last year.
Speaker Change: Business transient revenue grew 6% versus the fourth quarter of 2023, driven primarily by rate growth, which is consistent with the trends we saw for the full year.
Speaker Change: In 2025, we expect further business transient demand growth driven by large corporate accounts.
Speaker Change: Group room revenue in the fourth quarter was down 5% year-over-year due to expected top comparisons including APEC in San Francisco and the recovery and relief group rooms in Maui last year.
Speaker Change: Corporate groups continue to show strength with revenue up 6% driven fairly evenly by room nights and rate.
Speaker Change: Looking ahead to 2025, we have 3.2 million definite room nights on the books, representing a 16% increase since the third quarter, putting us nearly 3% ahead of where we were this time last year.
Speaker Change: Total group revenue pace is up 5.6% over the same time last year, driven by widespread rate growth across the portfolio, coupled with demand growth.
Speaker Change: More specifically, we are seeing growth in San Francisco, San Antonio, and New York.
Speaker Change: Notably, our San Francisco hotels booked over 70% more group rooms for 2025 in the fourth quarter versus the same time last year.
Speaker Change: We continue to be encouraged by the ongoing strength of group business as evidenced by strong portfolio pace as well as citywide room-night pace in key markets such as San Francisco, San Antonio, New Orleans, and Denver.
Speaker Change: Shifting gears to margins, full year 2024 comparable hotel EVRA margin of 29.2% was 60 basis points below 2023.
Speaker Change: The decrease was driven primarily by wages and benefits, fixed expense pressures, as well as the impacts from Maui.
Speaker Change: Turning to our outlook for 2025, the midpoint of our guidance contemplates a stable operating environment with a continued improvement in group business, a continued gradual recovery in business transient, and steady leisure demand.
Speaker Change: We have assumed a gradual improvement at our Maui properties this year and the continuation of the international demand imbalance.
Speaker Change: At the low end of our guidance, we have assumed a slow recovery in Maui and a deterioration of the international demand imbalance, and at the high end, we have assumed a faster recovery at our Maui resorts and an improvement in the international demand imbalance.
Speaker Change: For full year 2025, we anticipate comparable hotel REFPA growth of between 50 basis points and 2.5% over 2024.
Speaker Change: We expect comparable hotel EBITDA margins to be down 210 basis points year-over-year at the low end of our guidance to down 150 basis points at the high end.
Speaker Change: In terms of Reptar growth cadence for the year, we anticipate mid-single-digit growth in the first quarter, with January-comparable hotel Reptar growth up 9.5%.
Speaker Change: For the remaining three quarters, we anticipate growth in the low single digits.
Speaker Change: As a reminder, the second quarter faces difficult comparisons to 2024 as a result of the Easter holiday shift into April, and we have a lack of visibility into how the international travel imbalance will trend this summer.
At the midpoint of our guidance,
Speaker Change: We anticipate comparable hotel REFPA growth of 1.5% compared to 2024 and a comparable hotel EBITDA margin of 27.5%, which is 180 basis points below 2024.
Speaker Change: As we think about bridging our 2024 results to 2025, we estimate a 110 basis point impact to full-year comparable hotel EBITDA margin from wage and benefit rate increases, a 40 basis point impact from lower business interruption proceeds, and a 30 basis point impact for Maui operations given the one-time benefits in 2024.
Speaker Change: In 2025, we expect overall wage and benefit expenses to increase over 6%. For context, in 2024, overall wages and benefits grew 5.4% and comprise approximately 57% of our total hotel operating expenses.
Our 2025 full-year adjusted EBITDA RE midpoint is $1,620,000,000.
Speaker Change: On a year-over-year basis, this reflects an expected $140 to $160 million headwind from wages and benefits. The dances are Maui, lower business interruption proceeds, and lower interest income.
Speaker Change: It includes approximately $9 million of business interruption proceeds related to Hurricanes Céline and Milton, which we expect to receive in the first half of the year.
Speaker Change: It is important to note that we expect to receive additional business interruption proceeds for the Don Cesar, but it is still too early to estimate the timing and the amounts of any additional payments.
Our 2025 Full-Year Adjusted EBITDA RE Midpoint.
Speaker Change: also includes $25 million of estimated EBITDA from the Four Seasons Condo development.
Speaker Change: which we expect to recognize concurrent with condo sale closings in the fourth quarter.
Speaker Change: and $24 million of restricted stock-based compensation, which we are adding back to adjusted EBITDA RE beginning in 2025, consistent with industry practice.
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Speaker Change: Lastly, our midpoint includes an estimated $3 million loss at the Don Cesar and an estimated $12 million contribution from operations at Alila Ventana Big Sur, both of which are excluded from our comparable hotel set in 2025.
Speaker Change: Turning to our balance sheet and liquidity position, our weighted average maturity is 5.2 years at a weighted average interest rate of 4.7%.
Speaker Change: We have a balanced maturity schedule with our next maturity of $500 million coming due in June of this year. We are closely monitoring the debt capital markets and we believe our balance sheet provides us with ample optionality and flexibility.
Speaker Change: We ended 2024 at a leverage ratio of 2.7 times, and we have $2.3 billion in total available liquidity, which includes $242 million of FF&E reserves and $1.5 billion of availability on our credit facility.
Speaker Change: Wrapping up, in January, we paid a quarterly cash dividend of $0.20 per share and a special dividend of $0.10, bringing the total dividends declared in 2024 to $0.90 per share.
Speaker Change: The Board of Directors authorized a quarterly cash dividend of 20 cents on our common stock to be paid on April 15th, 2025 to stockholders of record on March 31st, 2025.
Speaker Change: As always, future dividends are subject to approval by the company's Board of Directors.
Speaker Change: To conclude, we are pleased with our achievements in 2024 and we believe our diversified portfolio and strong balance sheet leave us uniquely positioned to capitalize on opportunities in the future.
Speaker Change: Thank you. We will now begin the question-and-answer session. If you have dialed in and would like to ask a question, please press star 1 on your telephone keypad to raise your hand and join the queue. If you would like to withdraw your question, simply press star 1 again.
We'll go first to Michael Bellisario at Baird.
Thanks. Good morning, everyone.
Speaker Change: Sure. So, from a macro perspective, we have effectively worked on the best knowledge we have as of today in terms of
Speaker Change: GDP growth and non-residential fixed investment. Obviously, that can change throughout the year, but it's just based on information, best information available as of today.
In terms of where there could be upside.
Speaker Change: Group is certainly strong. Our group pace is very strong for the year. Our group rate is at 4%.
Speaker Change: Year-over-year, we already have 3.2 million group room nights, which is 2.7%.
better than last year from a pay standpoint.
Speaker Change: And our total group revenue pace is 5.6% versus last year.
Speaker Change: So, we do expect that there could be further strengthening of group. Right now, the way it's pacing, our first quarter and the fourth quarter group pace are extremely strong. There certainly is room in the second and third quarter for in the year for the year bookings.
And I would say...
Speaker Change: tied to the group pace, there is certainly potential in terms of driving more banquet.
catering business. That's, I think, where the upside is.
on the group side, on the business transient side.
We'll go next to Smead's Rose at Citigroup.
Rose: Hi, thank you. I wanted to maybe ask you a little bit more about Maui. If you take out the business interruption insurance for 24, it looks like you came in around 95 million. Could you just maybe kind of level set what you think the ranges at the high and the low end could be for 95 and maybe other factors that might have
Speaker Change: Yeah, Smeeth, I think that's a great question because there are a lot of moving pieces with respect to Maui, and I think Sourav has a bridge that we're prepared to talk through right now.
Sourav Ghosh: So, going through the bridge needs, you're right. It's about $97 million of EBITDA that we achieved in 2024 net of BI.
Speaker Change: Use that as a starting point. I would deduct about seventeen million dollars for non-recurring relief and recovery rooms that we saw in twenty twenty four also deduct about eight million dollars for one time attrition and cancellation revenue that we received.
Speaker Change: So that brings your restated 2024 Maui EBITDA to $72 million.
So, that effectively excludes your one-time.
items. Now, from that, $72 million...
Speaker Change: You should deduct about $7 million for about a 7% increase in wage and benefits that we are seeing in 2025 versus 2024. And then I would add about $15 to $30 million estimate of improvement in operations.
Speaker Change: So that's where we're seeing actually improvement in operation. That would get you effectively to $80 to $95 million for 2025. If you do the math, that's sort of the low to high.
Thank you.
Thank you.
We'll go next to Chris Rewonka at Deutsche Bank.
Chris Rewonka: Good morning, guys. Thanks for taking the question. Jim, I guess if we...
Speaker Change: Look back to 24, obviously Leisure and Maui, you know, we're kind of what caused me to be off versus initial but if we think about Groot
and BT
Speaker Change: a year ago and how they actualized. I mean, is it fair to say both of those were better and you're, you know, you're starting from a, from a fairly
Speaker Change: You know, just thinking about, you know, which parts of the business get better in 25 and leisure, Maui, especially getting better is really not something you're contemplating in guidance, but just just kind of how 24 shook out versus initial on the group in BT.
Speaker Change: Yeah, I Chris BT is Continuing a slow steady climb We saw a 6% increase in BT revenues
Last year, we anticipate that there could be some tailwind.
Speaker Change: On the business transient side of the business, we have the big consulting companies and tech companies are getting back on the road.
Speaker Change: Businesses are back traveling. Businesses are back in the office, in many instances. So, we feel good about how BT performed in 24 and are optimistic with respect to how BT will perform in 25.
Speaker Change: The same on the group side as business in the the the piece of group that continues to
Speaker Change: perform exceptionally well is out-of-room spend. Bank-wide catering revenues continue to climb to new highs.
Speaker Change: It's a testament to the affluent consumer who is booking the group business, particularly for incentive groups.
Speaker Change: that they're not holding back on F&B offerings and AV offerings and the like and and spend actually at
the spa and at golf courses.
Speaker Change: We feel good about how group is set up this year. We're headed where we were at the same time last year.
Obviously, it's a little too soon to...
to really
Speaker Change: drill down on how it's going to perform this year, but I will tell you we had an incredible festive season.
at
Speaker Change: We're optimistic going forward that we're going to continue to see business come back to Mali.
It's going to take a little bit of time for...
Speaker Change: incentive group to come back only because there's a you know six plus month booking window
Speaker Change: to get that type of business on the books. And as you know, you know, Maui just, quote, recently reopened for business in the last quarter or so, and we're starting to see meeting planners visit the island and
and come away very optimistically.
Yeah, very good. Thanks, Jim.
Shabbat Shalom.
We'll take our next question from David Katz at Jeffries.
Good morning, everybody. Thanks for taking my question.
Speaker Change: You know, I wanted to go back to a release a while back regarding selling some selling some non-core Assets and you know, I think we've had a little more debate around you know, how fertile
Speaker Change: you know, the asset trading market, you know, is going to be right now, you know, how should we, you know, think about that, you know, I know there isn't a specific timing on it, but, you know, just a commitment to do so and whatever updated thoughts. Thanks.
Speaker Change: Well, David, the release was a rumor that one of the online services published. There, you know, I think that that article indicated that we had hired an advisor to assist us in the sale of a portfolio of hotels. In fact, we did not hire an advisor.
Speaker Change: And we always test the market with different groups of assets to see what sort of pricing might be available to us.
Speaker Change: Let me level set and say that we're very very comfortable with the portfolio that we have today. It's a great
Great physical condition. We continue to invest in our assets.
Speaker Change: We're continuing to pick up significant share gains on the 24 transformational renovations that we completed. We're almost eight points ahead in yield index.
Speaker Change: relative to underwriting of three to five points. So, you know, HOST is in a unique position where if we...
Speaker Change: have an opportunity to sell something that we feel is good value for our shareholders, we will, but we're certainly under no compulsion to do so. And that's how we will continue to approach the market. With respect to the transaction market generally, there is
Speaker Change: You know it hasn't it hasn't opened up as much as I think a lot of us thought that it would
Speaker Change: You know, I think we're still seeing a bit of a damper given where the 10-year...
Treasury is trading right now and there is still a
Thank you.
Speaker Change: sellers and buyers, particularly with respect to sellers who don't have to sell. So that is actually good for us, given our balance sheet and the liquidity that we have. If we were to see an opportunity in the marketplace that made sense for us, we certainly could transact.
We'll move next to Wayne Sendingworth at Evercore ISI.
Thank you very much.
Hey, thanks. Good morning.
Speaker Change: And sorry I missed Hawaii, it was in the middle of a...
Speaker Change: our other earnings season, but so look, 4Q surprised positively. We can do it again, Dwayne. That's all right. Great. Let's talk about that offline. I might take you up on that. So look, 4Q surprised positively.
Speaker Change: 1Q is surprising positively from a top-line perspective, at least relative to our estimates.
Speaker Change: And it looks like your guidance assumes meaningful D-cell that you don't actually see. So maybe you could just comment on that. Do you actually see this D-cell or you don't see it yet? It might happen. It might not happen. It might happen.
Speaker Change: And then, you know, if REVPAR growth does play out better, can you just help us think about how we should think about flow-through to the bottom line? How have you positioned your portfolio for flow-through to the bottom line if the top line actually does play out better?
Sourav Ghosh: I'll take the first part of the question and I'll let Sourav address flow-through.
Sourav Ghosh: It's early in the year from a guidance perspective and I think we really want to sit back and see how Maui recovers.
and also see if there is a shift.
Either way in the international
outbound, inbound, demand, and balance. So, you know, our midpoint...
Sourav Ghosh: Our assumptions regarding international inbound at this point assume that it remains static as where it is today, which is basically 125 percent
Sourav Ghosh: international outbound flights over 94% of international inbound. And that actually, that statistic actually
Sourav Ghosh: weakened a bit from the last quarter. We were at 120% in the last quarter, so we're still seeing the affluent American consumers wanting to travel to Europe and elsewhere.
Sourav Ghosh: We felt that it was prudent to just be thoughtful about those two drivers.
of our forecast. And as we see
Sourav Ghosh: The year of all, we will address it accordingly. So, yeah, I don't want to be a dead horse on.
Sourav Ghosh: our comfort level with how group is set up and how BT is set up. But you'll note that I don't talk, we don't talk about those when it comes to the drivers of our range of REPPAR guidance and total REPPAR guidance for the year.
And to that, I will also add.
Sourav Ghosh: In January, you know, we achieved a report of 9.5%. Remember, we do have a meaningful presence in D.C. And inauguration really helped January, and D.C. was up 77%. So when you actually take...
Sourav Ghosh: DC out, January was up six percent. So, obviously a meaningful delta. And then, as I spoke to earlier, our pace was set up really well. Group pace was very much
Speaker Change: Q1 loaded. And also think about sort of the Easter shift that's taking place. So Q1 will perform better. And Q2 is going to be challenged with Easter being in late April, in addition to all the things that Jim mentioned.
Speaker Change: From a flow-through standpoint, the way to think about it is, you know, at the midpoint of our guidance at one and a half percent,
a Reptile Growth. Our total expense, hotel expense growth is
4.3%.
And that...
Speaker Change: accounts for the B.I. delta between the two years, so the $31 million.
Speaker Change: Delta between 2024 and 25, because remember we had about 40 million of business interruption proceeds in 24, and we are in our current guidance have 9 million for 2025. So that's obviously getting impacted because that shows up as a contract.
Speaker Change: contract expense in our income statement. So if you adjust for BI then the total hotel expense growth is only 3.7% despite the wage and benefit growth that we talked about being just over 6% for the portfolio.
Speaker Change: So, in other words, if you do the math, if you're including the BIPs, if we get to a 4.3% REPFAR growth, then you would effectively, you know, break even on the margin front. And if you want to exclude the BI, then all you need is 3.7% of REPFAR growth to break even.
We'll move next to Chris Darley at Green Street.
Thanks. Good morning, everyone.
Speaker Change: Jim, how are you thinking about labor availability today, given some of the rhetoric coming out of the current administration? And then maybe more broadly, can you speak to some of the tools that your operators have available to mitigate labor-related challenges going forward from here?
Speaker Change: Sure Chris, I think we're positioned very well on the labor front given that
We have two of the best-in-class managers.
Speaker Change: running most of our hotels in Marriott and Hyatt. And we have not heard of any concerns across the portfolio with respect to availability of labor. You know, the.
Speaker Change: people want to go to work if they want a career in hospitality and and we
always want to make certain that we have
the best and the most capable people.
I don't know.
at each of our properties.
Speaker Change: And we've worked closely with our managers over the years to make certain that that is the case. So, no concern on the labor front. You know, with respect to productivity enhancements, I'll let Sourav talk a little bit about how we view productivity. But, you know, one of the really interesting things that is starting to evolve,
Speaker Change: And I think it can be exciting going forward is the use of artificial intelligence to assist customers at the hotels.
Thank you.
Speaker Change: to book out-of-room spend, whether it's outlet revenue, whether it's spa, you know, whether it's golf, whether it's experiences off property, and that just further leverages the labor force that we have in place.
Speaker Change: So, I think there are a lot of good things to come, you know, we continue to talk about
Thank you very much.
Total Red Park
Speaker Change: The total REBPAR is very important to the host portfolio. We have about 40% of our revenues.
Speaker Change: this year that are going to be non-rooms revenues and, you know, while we don't necessarily make the same margin on non-rooms revenues, a dollar of EBITDA is a dollar of EBITDA, so we will we will push hard to continue to make that happen.
On the productivity side, I would just say that, obviously,
The major managers have
Speaker Change: really strong tools. Marriott, for example, uses Atlas and, you know, the focus really is making sure that they are utilizing best-in-class labor standards as they figure out scheduling.
Speaker Change: and tying that appropriately with the forecast that we have for the property and that's how we can drive productivity. And I would say they use a multitude of tools to also attract and retain talent, which has never really been a challenge, as Jim said, for our major managers.
We'll take our next question from Robin Farley at UBS.
Robin Farley: Great, thanks. Just to clarify, the $25 million in condo sales proceeds, are you including in guidance just the condos for which you have deposits or in other words could there be upside to that? And also, I apologize if you said this already, we have so many companies reporting today, did you say what you're expecting the corporate negotiated rate increase?
to be for 25. Thanks.
Speaker Change: Sure. On the condo sales, Robin, we are assuming more right now than the 14 deposits that we have already received.
Speaker Change: And that's an assumption that you're making as we go through the year, we expect to close on, or I should say get deposits on more condos, but it is right now the guidance includes more than the 14 condos that we have received deposits on. The other thing I will say is, I would not expect any.
Speaker Change: EBITDA from the condo until the fourth quarter of this year. Just keep that in mind, because we actually have to hand over the keys to the owners before we can recognize the revenue from the sales.
Speaker Change: And then our next question in terms of sort of negotiated rates, I'm sure you heard sort of Marriott's call, is effectively close to the mid-single digit number.
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Bye!
We'll go next to Ari Klein at BMO Capital Markets.
Ari Klein: You previously noted that GROUP will take longer to recover in Maui. Just curious what your expectations are around that for 2025, and if you're starting to see that pick up for 2026. And then maybe just from a bridging standpoint as it relates to Maui, do some of the wage headwinds that you're seeing impact that $175 million or so number, or does that come down a little bit?
Ari Klein: Sorry, say the last part of your question again, Orin, which number came down?
Speaker Change: It just in terms of the ultimate recovery number getting back to where it was, I think it was around $175 million, so you had around an $80 million gap to make up. Does that come down a little bit, you know, as you think about the potential opportunity given higher wage costs?
You know, over time, I think there is still...
potential to get back to the $172 million for sure.
We'll move to our next question.
Speaker Change: Sorry, you did ask about Maui's Roofs and I did want to mention quickly on
Speaker Change: We are definitely seeing group picking up for Maui. It is encouraging to see not only in the year for the year group pickup, but also 26 and beyond. And certainly seeing more activity than earlier. As a matter of fact, we picked up a meaningful amount of group room nights in the fourth quarter for 2025 and encouraging science in January as well.
Speaker Change: We'll move to our next question from Jay Cornridge at Wedbush Securities.
Speaker Change: Hi, thank you. Just curious about how you're thinking about deploying capital at this point in 2024. You know, you put a significant amount in acquisitions, buying back stock, internal ROI projects. So just curious about how you're thinking about capital deployment in 2025.
Speaker Change: Sure Jay, I would say think about it from an opportunistic perspective and you know the fact that we
Speaker Change: are sitting here with an investment grade balance sheet of 2.7 times leverage gives us a lot of flexibility to deploy capital across a number of different areas.
Speaker Change: including buying back stock, including additional acquisitions if something presented that made sense to us.
Speaker Change: and continuing to invest in our portfolio. We have seen very, very good results from both the Marriott Transformational Capital Program and the other
eight assets that we repositioned with transformational renovations.
And we're focused this year on...
of the Hayat Transformational Capital Program.
We're excited about that.
Speaker Change: We have a number of projects that we're going to start in 2025.
including
Speaker Change: There are other properties that we think could pick up meaningful market share if we were to reposition them. So we continue to have conversations with our brand partners along those lines.
Speaker Change: We think that's a good place to put some money to work.
We'll move next to Forrest Vandekum at Compass Point.
Thank you. Thank you. Thank you.
Morning guys
Speaker Change: Just a quick question. Could you remind us, you ended the year, I think your full year occupancy was 67.5% for your domestic portfolio. What was it at the peak for a year, and could you distinguish between resorts and urban hotels in particular, what the deltas are potentially to get back to peak occupancy?
And we'll go next to Smith Rose at Citigroup.
Smith Rose: Hi, thanks. I just wanted to follow up maybe on capital deployment.
Smith Rose: And, you know, obviously forecasts are going to go down for 25 based on your updated guidance versus what was out there on consensus. But, you know, even lowering those forecasts, I mean, it looks at least to us that, I mean, the stock is trading at like, you know, I don't know, 10, 10 and a half times EBITDA. You know, cap rate is pretty high relative to certainly what we see in the private market for those transactions that are available, which you've seen.
Speaker Change: What is the argument for not having a more sort of holistic approach to buying back your own stock here? And you've talked about being opportunistic, but I mean it's very difficult to predict your own share price, so why not...
Speaker Change: just sort of assign a certain amount of capital on a quarterly basis to bring down your share count here and be buying at what look like fairly compelling valuations.
Speaker Change: Well, Smeet, I agree with you that the stock is underpriced and it's a good value and as we look at our capital allocation opportunities across the board stock buybacks will certainly be one of them, but you know in terms of
Speaker Change: If you're suggesting some sort of programmatic plan to buy back stock, that's not something we're in favor of doing. I mean, we have to keep one eye on operations and what's happening at our properties, one eye on the balance sheet as well. So, you know, the investment grade balance sheet is sacrosanct to us.
Speaker Change: Buy back shares. We've proved to you and to the street that we will buy back shares.
Speaker Change: The fourth quarter, we would have bought back stock given where it traded, but.
Speaker Change: Unfortunately, we went into blackout and, you know, we're in blackout today as a good example because we haven't fought our 10k. So there are...
Speaker Change: And that concludes our Q&A session. I will now turn the conference back over to James Risoleo for closing remarks.
James Risoleo: Well, thank you for joining us today. We really appreciate the opportunity to discuss our quarterly results and our 2025 Outlook with you, and I'm sure I'll see many of you at conferences in the coming weeks and months. Have a good day.
James Risoleo: And this concludes today's conference call. Thank you for your participation. You may now disconnect.
Please wait. The conference will begin shortly.