Q2 2025 Host Hotels & Resorts Inc Earnings Call
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Operator: Good morning and welcome to the Host Hotels and Resorts Q2 2025 earnings conference call. Today's conference is being recorded. At this time, I would like to turn the call over to Jaime Marcus, Senior Vice President of Investor Relations. Please go ahead.
Jaime Marcus: Thank you and good morning, everyone. Before we begin, please note that many of the comments made today are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information, such as FFO, adjusted EBITDA-RE, and comparable hotel-level results. You can find this information, together with reconciliations to the most directly comparable GAAP information, in yesterday's earnings press release, in our 8K filed with the SEC, and in the supplemental financial information on our websites at hosthotels.com. With me on today's call are Jim Risoleo, President and Chief Executive Officer, and Sourav Ghosh, Executive Vice President and Chief Financial Officer.
Good morning and welcome to The Host Hotel and Resort second quarter 2025 earnings conference call. Today's conference is being recorded at this time. I would like to turn the call over to Jamie Marcos senior, vice president of investor relationships. Please go ahead.
Thank you and good morning everyone.
Before we begin, please note that many of the comments made today are considered to be forward-looking statements under Federal Securities laws.
As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed.
And we are not obligated to publicly update or revise, these forward-looking statements.
In addition on today's call we will discuss certain non-gaap financial information such as ffo adjusted Eva re and comparable hotel level results.
You can find this information together with reconciliations to the most directly comparable gaap information in yesterday's earnings press release.
In our 8K filed, with the SEC.
and in the supplemental financial information on our website at Host, hotels.com
Jaime Marcus: With that, I would like to turn the call over to Jim.
With me on today's call are Jim rosolio president and chief executive officer and sarov. Gosh Executive Vice President and Chief Financial Officer.
With that. I would like to turn the call over to Jim.
Jim Risoleo: Thank you, Jaime, and thanks to everyone for joining us this morning. We are proud to have achieved another strong quarter of operating and financial results, leading to outperformance in the first half of 2025. In the second quarter, we delivered adjusted EBITDA-RE of $496 million, an increase of 3.1% over last year, and adjusted FFO per share of $0.58, an increase of 1.8% over last year. The second quarter's adjusted EBITDA-RE and adjusted FFO per share benefited from $9 million of business interruption proceeds related to Hurricanes Helene and Milton, while the second quarter of 2024 benefited from $30 million of business interruption proceeds related to Hurricane Ian and the Maui wildfires. Comparable hotel total reparations improved 4.2% compared to the second quarter of 2024, and comparable hotel reparations improved 3%, driven by stronger transient demand, higher ADR, and more ancillary spend.
Thank you. Jamie and thanks to everyone for joining us this morning.
We are proud to have achieved another strong quarter of operating and financial results, leading to outperformance in the first half of 2025.
In the second quarter, we delivered adjusted ebit of 496 million, an increase of 3.1% over last year and adjusted ffo per share of 58 cents. An increase of 1.8% over last year.
Second quarter, adjusted, Evita re and adjusted ffo per share. Benefited from 9 million of business. Interruption proceeds related to hurricanes Helen and Milton.
On the second quarter of 2024 benefited from 30 million of business, Interruption proceeds related to Hurricane Ian and the Maui wildfires.
Jim Risoleo: Comparable hotel EBITDA margin declined by 120 basis points year-over-year to 31%, driven by a 120 basis point impact from business interruption proceeds that were received last year for the Maui wildfires. The operational results discussed today refer to our 78 hotel comparable portfolio in 2025, which excludes the Elina Ventana Big Sur, the Don Cesar, and the Westin Cincinnati, which we sold in June. Turning to business mix, reparations growth in the second quarter was better than expected, driven by leisure transient demand and rate growth, despite a continuation of the international demand imbalance. We saw particularly strong performance in Maui, Miami, Orlando, Atlanta, New York, the Florida Gulf Coast, and San Francisco. Transient revenue grew by 7%, driven by both the Easter calendar shift and the ongoing recovery in Maui, the latter of which accounted for approximately 40% of the transient revenue growth in the quarter.
Comparable Hotel, total red par improved 4.2% compared to the second quarter of 2024 in comparable hotel. Red par improved 3% driven by stronger transient demand, higher ADR and more ancillary spend,
Comparable Hotel, IBA margin declined by 120, basis points year-over-year to 31%.
Driven by a 120 basis, point impact from business, Interruption proceeds that were received last year for the Maui wildfires.
The operational results discussed today, refer to our 78 Hotel comparable portfolio in 2025 which excludes the alila Ventana. Big Sir the Don CeSar and the Westin Cincinnati which we sold in June.
Turning to business mix repart growth in the second quarter was better than expected driven by Leisure transient demand and rate growth, despite a continuation of the international demand imbalance.
We saw particularly strong performance in Maui, Miami Orlando, Atlanta, New York, the Florida Gulf Coast, and San Francisco.
Jim Risoleo: Digging into Maui, the leisure transient demand recovery continued, driving Maui's strong results for the second quarter. Maui's 19% reparations growth provided a 100 basis point benefit to portfolio reparations growth in the quarter. Total reparations at our three Maui resorts was also up 19%, driven by robust growth in F&B outlets as well as golf and spa revenue, a clear indication that the recovery in Maui is well underway. Turning to business transient, revenue was relatively flat in the second quarter as demand decreases were nearly offset by rate. As expected, group room revenue decreased 5% year-over-year, driven primarily by the Easter calendar shift, planned renovation disruption from the Hyatt Transformational Capital program, business mix shifting from group to transient in Maui, and reduced group pickup.
Transient Revenue grew by 7% driven by both the eastern calendar shift and the ongoing recovery in Maui the latter of which accounted for approximately 40% of the transient Revenue growth in the quarter.
Digging into Maui, the Leisure Transit demand, recovery continued driving Maui's strong results for the second quarter.
Maui's 19%, repar growth. Provided a 100 basis point benefit to portfolio red par growth in the quarter.
As well as golf and spa revenue, a clear indication that the recovery in Maui is well underway.
Turning to business Transit Revenue was relatively flat in the second quarter as the manned decreases were nearly offset by rate.
As expected.
Jim Risoleo: Our properties actualized 1.1 million group room nights in the second quarter, and our definite group room nights on the books increased to 3.8 million for 2025. Total group revenue pace is up 1.6% to the same time last year. Ancillary spending by guests at our properties remained strong, as illustrated by our 4% total reparations growth in the second quarter. F&B revenue was up 4%, driven by outlet revenues. Banquet revenue grew by 1% as contribution per group room night outpaced absolute group room night declines. We also saw particularly strong growth in other revenue, which was up 13%, including golf and spa. Turning to the Don Cesar, during the second quarter, we completed the North Pool and Pool Bar. In early July, we completed the marketplace and lower-level retail spaces.
Group room, Revenue, decreased 5%, year-over-year driven primarily by the Easter calendar, shift planned renovation disruption, from the highest transformational Capital program, business mix shifting from group to transient in Maui and reduced group pickup.
Our properties actualize, 1.1 million group room nights in the second quarter and our definite group room nights on the books increased to 3.8 million for 2025.
Total group, Revenue pace is up 1.6% to the same time last year.
Ancillary spending by guests at our properties remain, strong as illustrated by our 4% total red Park growth in the second quarter.
FNB Revenue was up 4% driven by Outlet revenues, banquet Revenue. Grew by 1% as contribution per group room night, outpaced, absolute group room night declines.
We also saw particularly strong growth in other Revenue, which was up 13%, including Golf and Spa.
Turning to the Don CeSar.
During the second quarter, we completed the North Pole and pool bar.
Jim Risoleo: In the third quarter, we expect to complete the final phase of reconstruction, including the lower-level kitchen and two F&B outlets. Since the reopening, we are seeing better-than-expected near-term transient pickup, higher F&B capture and average checks, and increased group bookings, which allowed us to raise our full-year expectations for the resort to $3 million from negative $1 million. We collected $9 million of business interruption proceeds for Hurricanes Helene and Milton in the second quarter, bringing the total business interruption proceeds collected to $19 million for the first half of the year. We also collected an additional $5 million of business interruption proceeds in July related to those two hurricanes, which are included in our updated guidance. While we expect to collect additional business interruption proceeds, the timing and amounts of additional payments are subject to stabilization of the asset and ongoing discussions with our insurance carriers.
In early July, we completed the marketplace and lower level retail spaces.
In the third quarter. We expect to complete the Final Phase of reconstruction, including the lower level kitchen and 2 FNB Outlets
Since the reopening we are seeing better than expected near-term, transient pickup, higher, FNB capture, and average, tax and increased group bookings, which allowed us to raise our full year. Expectations for the resort to 3 million dollars from negative - 1 million.
We collected 9 million of business, Interruption proceeds per hurricane, to lean, and Milton. In the second quarter, bringing the total business, Interruption proceeds collected to 19 million for the first half of the year.
We also collected an additional $5 million of business interruption proceeds in July related to those two hurricanes, which are included in our updated guidance.
Jim Risoleo: Turning to capital allocation, in June, we sold the 456-key leasehold interest in the Westin Cincinnati for $60 million, or 14.3 times trailing 12-month EBITDA. When calculating the EBITDA multiple, we included $54 million of estimated disrupted capital expenditures over the next five years. Since 2018, we have disposed of approximately $5.1 billion of hotels at a blended 17.2 times EBITDA multiple, including estimated foregone capital expenditures of $1 billion, which compares favorably to our $4.9 billion of acquisitions over the same period at a blended 13.6 times EBITDA multiple. In addition to dispositions, we repurchased 6.7 million shares of common stock during the second quarter at an average price of $15.56 per share for a total of $105 million, bringing our total repurchases to $205 million year to date at an average price of $15.68 per share.
While we expect to collect additional business, Interruption precedes, the timing and amounts of additional payments are subject to stabilization of the asset and ongoing discussions with our insurance carriers.
Attorney to Capital allocation in June. We sold the 456 key. Leasehold interest and the Westin Cincinnati for millions or 14.3 times trailing 12-month Ava.
When calculating the even and multiple we included 54 million of estimated disrupted, Capital expenditures over the next 5 years.
Since 2018, we have disposed of approximately 5.1 billion dollars of hotels at a blended 17.2 times even to multiple, including estimated foregone, Capital expenditures of 1 billion dollars which compares favorably to our 4.9 billion dollars of Acquisitions. Over the same period at a blended 13.6 times even to multiple
In addition to dispositions, we repurchased 6.7 million shares of common stock during the second quarter.
Jim Risoleo: Since 2022, we have repurchased $520 million of stock at an average repurchase price of $16.03 per share, and we have $480 million of remaining capacity under our share repurchase program. Turning to portfolio reinvestment, as of the second quarter, the Hyatt Transformational Capital program is approximately 50% complete and is tracking on time and under budget. We completed the guest rooms renovations at the Grand Hyatt Washington, DC, and paused the remaining public space renovations to accommodate group business on the books while we complete the comprehensive renovations at Hyatt Regency Capitol Hill. We also started comprehensive renovations at the Manchester Grand Hyatt San Diego, the final property in the Hyatt Transformational Capital program, which we expect to complete in early 2027.
At an average price of $15.56 per share for a total of 105 million. Bringing our total repurchases to 205 million year to date at an average price of $15.68 per share.
Since 2022, we have repurchased 520 million of stock, and an average we purchase price of $16.03 per share, and we have 480 million of remaining capacity under our share repurchase program.
Turning to portfolio reinvestment. As of the second quarter, the highest transformational Capital program is approximately 50% complete and is tracking on time and under budget.
We completed the guest rooms Renovations at the Grand Hyatt Washington DC and pause the remaining public space renovations to accommodate Group business on the books while we complete the comprehensive Renovations at higher, Regency Capitol Hill.
Jim Risoleo: We continue to make progress on value-enhancing development projects, including the Don Cesar Ballroom expansion and the Phoenician Canyon Villa Suites, both of which we expect to complete in the fourth quarter of 2025. We also made progress on the condo development at the Four Seasons Resort Orlando at Walt Disney World Resort. We expect to complete the mid-rise condominium building and begin closing on sales in the fourth quarter of this year. We now have deposits and purchase agreements for 20 of the 40 units, including eight of the nine villas. In 2025, our capital expenditure guidance range is $590 to $660 million, which includes between $70 and $80 million for property damage reconstruction, the majority of which we expect to be covered by insurance. Our CapEx guidance also reflects approximately $270 to $305 million of investment for redevelopment, repositioning, and ROI projects.
Grand Hyatt, San Diego, the final property in the Hyatt transformational Capital program, which we expect to complete in early 2027.
We continue to make progress on value, enhancing development projects, including the Don CeSar Ballroom expansion and the Phoenician's Canyon Villa Suites, both of which we expect to complete in the fourth quarter of 2025.
We also made progress on the condo development at the 4 Seasons Resort or Lando at Walt Disney World Resort.
We expect to complete the mid-rise condominium building and begin closing on sales in the fourth quarter of this year.
We now have the deposits and purchase agreements for 20 of the 40 units, including 8 of the 9 Villas.
In 2025, our capital expenditure guidance range is 590 to 660 million which includes between 70 and 800 million per property damage reconstruction majority of which we expect to be covered by insurance.
Jim Risoleo: As part of our Climate Risk and Resiliency Program, we purchased flood barriers for nine high-risk properties, with measures being put in place for the 2025 hurricane season. We also developed a resiliency ROI method and expanded the program to new hotels with a focus on emergency power and wildfire risks. Within the Hyatt Transformational Capital program, we expect to complete renovations at the Hyatt Regency Austin and the Hyatt Regency Capitol Hill in the second half of this year. As a reminder, we expect to benefit from approximately $27 million of operating profit guarantees related to the Hyatt Transformational Capital program in 2025, which we expect will offset the majority of the EBITDA disruption at those properties. 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.
Our capex guidance also reflects approximately 270 to 305 million of investment for redevelopment repositioning in an Roi projects.
As part of our climate risk and resiliency program, we purchase flood barriers for 9, high risk, properties, with measures being put in place for the 2025 hurricane season.
We also developed a resiliency Roi method and expanded the program to new hotels with a focus on emergency power and Wildfire risk.
Within the higher transformational Capital program. We expect to complete Renovations at the higher Regency, Austin and the higher Regency Capitol Hill in the second half of this year.
As a reminder, we expect to benefit from approximately 27 million of operating profit guarantees related to the higher transformational Capital program in 2025,
which we expect will offset, the majority of the ibida disruption at those properties.
Jim Risoleo: Looking back at prior transformational renovations, we completed investments in 24 properties between 2018 and 2023, which are continuing to provide meaningful tailwinds for our portfolio. Of the 20 hotels that have stabilized post-renovation operations to date, the average reparations index share gain is over 8.7 points, which is well in excess of our targeted gain of 3 to 5 points. Turning to our outlook for 2025, despite the heightened macroeconomic uncertainty, we continue to outperform our expectations in the second quarter. As a result of our strong performance in the first half of the year, we are increasing our comparable hotel reparations and total reparations guidance ranges. As Sourav will discuss in more detail, the low end of our guidance range contemplates softer demand in the second half of the year, while the high end assumes a more stable macroeconomic environment.
In addition to our capital expenditure investment, we expect to spend 75 to 85 million, on the condo development. At the 4 Seasons Resort Orlando at Walt Disney World Resort this year.
Looking back at prior, transformational Renovations, we completed investments in 24 properties, between 2018 and 2023, which are continuing to provide meaningful Tailwind for our portfolio.
Of the 20s that have stabilized post-renovation operations to date, the average rep part index share gain is over 8.7 points, which is well in excess of our targeted gain of 3 to 5 points.
Turning to our outlook for 2025. Despite the heightened macroeconomic uncertainty, we continue to outperform our expectations in the second quarter.
As a result of our strong performance, in the first half of the year, we are increasing our comparable hotel, repar and total repar guidance ranges.
Jim Risoleo: Similar to last quarter, we are also providing an approximate rule of thumb for the current environment based on how our portfolio is positioned today. For every 100 basis point change in reparations, we would expect to see a $32 to $37 million change in adjusted EBITDA-RE, which is consistent with the range we provided last quarter. As we have said many times before, Host is well-positioned to weather any environment because of our fortress investment-grade balance sheet, a leverage ratio of 2.8 times, our size and scale, our diversified business and geographic mix, and our continued reinvestment in our portfolio. We will continue to use our competitive advantages to create value for our shareholders and position Host to outperform over the long term. With that, I will now turn the call over to Sourav.
As sarago discussed in more detail, the low end of our guidance range contemplates. Softer demand in the second half of the Year, while the high-end assumes, a more stable, macroeconomic environment.
Similar to last quarter. We are also providing an approximate rule of thumb for the current environment based on how our portfolio is positioned today.
For every 100 basis point change in revpar, we would expect to see a 32 to 37 million change and adjusted ebit to re which is consistent with the range we provided last quarter.
As we have said, many times before, host is well, positioned to whether any environment because of our Fortress investment grade balance sheet, a leverage ratio of 2.8 times.
Our size and scale our Diversified business and Geographic mix and our continued reinvestment in our portfolio.
We will continue to use our competitive advantages to create value for our shareholders and position host to outperform over the long term.
With that, I will now turn the call over to Sir Rob.
Sourav Ghosh: Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our second quarter operations, updated 2025 guidance, and our balance sheet. Starting with total revenue trends, comparable hotel total reparations growth outpaced reparations growth as both group and transient guests maintained elevated levels of out-of-room spend. Comparable hotel food and beverage revenue grew 4% in the quarter, driven by outlets. Outlet revenue grew 9%, driven by transient room night growth in Maui, as well as recently repositioned outlets, including The View at the New York Marriott Marquis, Aviv at the One Hotel South Beach, and outlets at the Singer Oceanfront Resort. Properties in Orlando, Nashville, and Naples also contributed to outlet growth. Banquet revenue grew 1% as increases in banquet and catering contribution per group room night outpaced decreases in group room night volume.
Thank you, Jim and good morning, everyone.
Building on Jim's comments. I will go into detail on our second quarter operations.
Updated 2025 guidance and our balance sheet.
Growth as both group and training guests maintained elevated levels of out-of-room spending.
Comparable Hotel food and beverage Revenue grew 4% in the quarter driven by Outlets.
Outlet Revenue, grew 9% driven by transient room night growth in Maui, as well as recently repositioned Outlets including the view at the New York Marriott. Marquee Aviv at the 1, South Beach and outlets at the singer Oceanfront Resort.
Properties in Orlando, Nashville and Naples. Also contributed to our growth.
Banquet and catering contribution was up 7% in the quarter, signaling the continued health of group spending. Growth was driven by our large group hotels in San Diego, San Francisco, New York, Orlando, and Naples. Other revenue grew 13% in the second quarter as golf and spa revenues continued to grow. This is further indication that the high-end consumer is prioritizing spending on premium experiences. Shifting to business mix, overall transient revenue was up 7% compared to the second quarter of 2024, driven by higher rates and the continued growth of transient room nights at our resorts led by Maui. During the second quarter, our resorts saw modest transient rate growth year-over-year, alongside 21% transient room night growth, which benefited from the Easter calendar shift and the recovery in Maui.
banquet Revenue, grew 1% as increases in banquet and catering contribution per group room night, outpace decreases in group room night volume,
Banquet and catering contribution was up 7% in the quarter.
Signaling, the continued health of group spending?
Growth was driven by our large group hotels in San Diego, San Francisco, New York, Orlando and Naples.
Other Revenue groups 13% in the second quarter as Golf and Spar revenues continue to grow.
This is further indication that the high-end consumer is prioritizing spending on premium experiences.
Shifting to business. Mix overall, transient Revenue was up 7% compared to the second quarter of 2024 driven by higher rates and the continued growth of transient room nights at our Resorts led by Maui.
During the second quarter, our Resorts saw modest transient rate growth year-over-year alongside 21% transient room night growth, which benefited from the Eastern calendar shift and the recovery in Maui.
Excluding Maui, transient revenue at our resorts was up in the mid-teens, driven by our resorts in Orlando, Oahu, and Miami.
Looking at recent holidays revenue for Memorial Day. Weekend was up over 2% driven by our resorts in Maui, Miami Orlando and Naples.
Revenue for July, 4th was down 1% for the comparable portfolio.
Our Resorts were up 6%, but storms over the holiday weekend, heavily impacted short-term pickups at many of our properties.
Business changing Revenue was relatively flat to the second quarter of 2024. As 6% rate growth nearly offset business, transient luminite declines,
It is worth noting that corporate negotiated room night volumes were down slightly which is in line with recent quarters.
As a reminder, we expect business transient revenue to remain flat for the remainder of this year due to the uncertain macroeconomic environment.
Turning to group as expected Revenue was down 5% year-over-year driven by planned renovation disruption from the higher, transformational Capital program and business. Mix shifting from group to transient in Maui.
Group room revenue also faced headwinds from the Easter calendar shift and reduced group pickup.
Despite these headwinds a property in San Francisco achieved group Revenue growth of more than 30% driven by meaningful city-wide recovery.
Our Ritz calls and resorts in Naples. Florida also benefited by strategically adding high-quality groups in the quarter.
Portfolio 2025 we have over 3.8 million definite group room knives. On the books. Representing a 6% increase since the first quarter as Jim mentioned, total group Revenue pays is up 1.6% over the same time last year.
As we discussed last quarter, we have seen software short-term group pickup, particularly for the third quarter due to macroeconomic uncertainty that said, rate continued to grow across the portfolio for booking made in the second quarter for the rest of 2025.
We also continue to see double digit Citywide booking Pace in many of our key markets, including San Francisco San Antonio and New Orleans.
Shifting gears to margins comparable Hotel. Ibra margin of 31% was 120 basis points below the second quarter of 2024, which includes a 120 basis point impact from business. Interruption proceeds, we received for the Maui wildfires last year
Headwinds from elevated wage rate growth.
We continue to expect negative U over year margin comparisons for the remainder of the Year primarily driven by elevated wages and benefits.
On the Insurance Fund, our June 1st property renewal came in meaningfully better than expected, down 4% compared to last year, which equates to a $14,000 expense reduction compared to our prior guidance.
This savings has been reflected in our updated guidance.
Turning to our outlook for 2025. As Jim mentioned, we are increasing our comparable hotel, revpar and total rep Pro guidance ranges as a result of our outperformance in the first half of the year.
As a reminder, we have assumed a gradual improvement at our Maui properties this year and no improvement in the international demand imbalance.
At the low end of our guidance. We have assumed softer demand in the second half of the year. And at the high end, we have assumed improvements in the overall macroeconomic environment driven by Clarity on trade and other policies.
A full year 2025 guidance, contemplates comparable, Hotel ref, paw growth of between 1 and a half percent and 2 and a half percent over 2024.
We expect comparable Hotel IBA margins to be down 90 basis points year over year at the low end of our guidance to down 60 basis points at the high end.
a 16-basis-point improvement over our prior guidance at the midpoint.
Consistent with our prior guidance. We expect negative year-over-year. Rev par in the third quarter.
Driven by software, short-term group volume and slightly positive rep for growth in the fourth quarter.
the midpoint assumes comparable Hotel revpar growth of 2% compared to 2024 and the comparable Hotel IA, margin of 28.6%, which is 70 basis points below 2024,
As we think about bridging, our 2024 results to 2025.
We estimate a 100 basis point impact to full year comparable Hotel, ibida, margin from wage and benefit rate increases and a 40 basis. Point impact from lower business, Interruption proceeds in the comparable portfolio, which are partially offset by an estimated 70 basis. Point benefit from operational improvements.
For the full year, we continue to expect overall wage and benefit expenses to increase 6%.
Which comprises approximately 50% of our total Hotel operating expenses.
Our 2025 full year adjusted ebita re midpoint is 1,705 million. This represents a $60 million or 3.6% improvement over our prior guidance, midpoint driven by outperformance in the first half of the year.
This includes $19 million of business interruption proceeds that were received in the first half of the year for Hurricanes Helen and Milton, and an additional $5 million of business interruption proceeds that were received in July.
Our 2025 full year adjusted ebita re midpoint also includes 25 million of estimated ibida from the 4th, which we expect to recognize concurrent with condo sale, closings in fourth quarter.
Lastly, our midpoint includes an estimated $3 million contribution at the dawn of Cesar.
and Improvement of 4 million dollars, since the last quarter and an estimated 13 million contribution from the operations at alila Ventana, Big Sur, both of which are excluded from our comparable Hotel set in 2025
Turning to a strong balance sheet and liquidity position in Maine. You redeemed, the million dollar Series E notes which matured in June. With proceeds from the recent 500 million 5.7% Series M notes issuance
our weighted average maturity is now 5.4 years at a weighted average interest rate of 4.9%
We currently have 2.3 billion dollars in total available liquidity, which includes 20079 million of FFN ever reserves and 1.5 billion dollars available under the revolver portion of the credit facility.
A quarter end. Leverage ratio was 2.8 times.
We will continue to be strategic in managing our balance sheet and liquidity position as we move through the rest of the year.
Wrapping up, we believe our strong investment grade balance sheet as well as our size scale, and diversification uniquely position host to execute in the current environment, while capitalizing on opportunities, for growth in the future.
With that, we would be happy to take your questions to ensure. We have time to address as many questions as possible. Please limit your yourself to 1 question.
As a reminder to ask a question, press star 1 on your telephone keypad.
Your first question comes from the line of Dwayne.
Benning work with evercore, isi, please go ahead.
Of room nights on the books up 6%, uh, sequentially versus the last quarter and, and your 32, uh, group commentary. I assume. This means you're seeing groups further out, uh, for 26 and Beyond, uh, continue to book. But maybe you could just talk a little bit about, uh, the group dynamics that you're seeing, you know, second half and then, and then longer term.
Hey, hey Dwayne, it's Jim. Uh, can you say can you say the question over? We didn't catch the first part of it. Uh, I think you're on mute. So if you if you wouldn't mind restating it, we'd appreciate it.
Sorry about that. Yeah just um help us match up the commentary of room nights on the books up 6% uh versus last quarter.
Versus the 3Q commentary that you're making. I assume that means you're seeing group bookings further out into 26 and Beyond.
Um hey, do I have? Sorry off. So yes. Um, just to put it into perspective. When we started off the year, we had an expectation of achieving about 4.3 million group room nights and you may recall last quarter. Um, we took our forecast for overall group room night, stand by about 100 thousand group room nights. So we were at about 4.2 um, based on what we are seeing in terms of softening sort of short-term group pickup, uh we looked at the second half, particularly the third quarter and took out about another 75 to 77,000 group room nights. So we are 3.8 million group room nights which we have on the books. And now our expectation for the full year is approximately 4.1 million group room nights. Um that said uh when you look out into the future, as you were saying our 26th to 28th, we had a message last time, that that group pays was in the higher single digits. Um, that
Actually improved slightly from the last quarter. So yes, we see groups continuing to book out into the future. It's more. The short-term pickup particularly in the third quarter um that we have taken some risk off the table and just to put some numbers around a sort of what we picked up in the second quarter for the remainder of the year. Uh, we picked up 215,000 group room nights for the remainder of the year and about 20% call, it was for Q2 and 80% of that was for the rest of the year.
Um, and if if you look at your compared to 2024 that was about 31,000 group from tonight. So definitely somewhat softening in terms of the third quarter. But as we look at particularly into the future, uh it's strong and the only other thing I'd add is the group rate that we booked into the second half is extremely strong as well. So that continues um uh to really show up
Thank you.
Your next question comes from the line of Chris w***** with Deutsche Bank, please go ahead.
Hey, good morning guys. Uh, thanks for taking the question. Um, Jim or or Sam? I was hoping you could. You could dive in a little bit further on on Hawaii. And, you know, I think I think more widely we've been getting these messages, um, you know, through through the various news sources about what's going on there. Can you can you make me shed a little bit light of light on what you're seeing within your your portfolio and and you know how confident you feel about that for the the back half of the year and maybe any early thoughts of 26? Thanks.
Yeah, Chris. I I'll start and start Kim. Feel free to jump in. If he has additional color, he wants to add. But, uh, we are, uh,
Resorts um, that was matched by 19%. Uh uh out of room spend, as well really, uh, driven by Outlet growth. Um, uh, the the recovery is being fueled by Leisure transient and uh, it's a uh, somewhat of a, a new phenomenon for Maui uh, because the booking window uh, is very short term.
you know, we had said that, um,
We anticipated Maui uh to contribute a hundred million dollars of ibida. Uh, this year uh for the portfolio. Um, you know, we are not assuming that the Maui Resorts will contribute $110 million, so we're seeing, you know, very positive momentum. Um, there's no question about it. Uh, going forward. Uh, you know, I, I think this is fueled in large part, uh, by a marketing campaign that a group of Hotel owners, uh, banded together to undertake, uh, marketing, individual properties, uh, combined with the, uh, state of Hawaii, led by the governor, uh, who, uh, endorsed and, and sponsored a, uh, I think about a 6.3 million dollar marketing campaign as well. So when people see what is happening on the island, uh, and you were there, uh, in February, uh, you know, you know that, uh, uh, it
It it's open for business. And, you know, wha is a great place to be, uh, you know, the, the west side where the higher Regency is, um, is, uh, is is a, a great place to visit as well. It's a, it's I think the probably the best group Hotel on the island. And that's, uh, that's what we have to see happen, uh, to really, uh, get back to where we were pre-fire levels. Uh, we have to start seeing, uh, the, um, the incentive groups. Come back to Hawaii and, uh, we're we're getting good traction with Meeting Planners, uh, they're, uh, they're taking trips, uh, called fam trips fam familiarization trips. So they can just go see what is happening on the island. Um, there's a long lead time for uh, uh incentive group bookings, uh to occur. It's at least 6 months, and it can be, you know, a year or longer in some instances. So we expect to see uh, the group Pace pick up uh as
As we get into 2026 and 27, uh, and Beyond. Uh, but Maui is definitely open for business. And uh, we're we're really pleased with what we're seeing. The other thing that it has to happen. Uh, Chris is we have to uh, uh
Uh, see additional airlift made available. Uh, you know, it's a, it's a bit of a chicken, and an egg, uh, situation where the airlines are not going to want to bring additional capacity back online until, uh, they, uh, have a, a good, uh, feeling about, uh, their ability to fill those seats. Uh, you know, and, and vice versa, you know, we we
We don't want, uh, our customers to want to come to Hawaii and not be able to find a seat on an airplane. So, uh, compared to where we were pre Wildfire, uh, in terms of Airline capacity in the Maui, we're down about 20%. So, um, you know, we're, we're hopeful that that's going to change over time. Uh, the the recovery is well underway. Uh, you know, in addition to the outlet Revenue, uh, we saw a meaningful pickup in spa, spa revenue and golf Revenue as well. So people are definitely coming in their spending.
Okay. Thanks. Jim.
Your next question comes from the line of David Katz with Jefferies. Please go ahead.
Just had to get my cell phone muted. Um, I I thanks for checking my question. I wanted to ask about uh, about more about Hawaii, and in particular, as you know, Jim uh the Turtle Bay um sort of caught my caught my
Fancy can, can you just give us an update on how you're doing with that? What's, you know, what's been sort of the best surprise? Maybe if there's any negative surprises, you know, with it. Um, and you know, I I I just want to be clear about how we're comping that hotel in the revpar, right? It it, that was sort of out for 2q, I believe, right? And is that sort of done by 3Q and in there those are my sort of 2 questions. Thanks.
So, you know, it's been well received, uh, uh, into the Ritz Carlton system. Uh, Bonvoy, uh, is driving a lot of business to the property. Uh, it, uh,
I I wouldn't say that there are any negative surprises uh with respect to Hotel Ops uh at all the property is performing well. Uh, we've had a change of plans with respect to uh, our repositioning and uh uh, renovation of the Fazio golf course, you may recall from your visit that there are 2 golf courses on property. The Fazio and the Palmer, uh, you know, we have least the Palmer Course to, uh, the developer that, um, that is developing some residential, uh, units adjacent, uh, to the prop, uh, to the resort itself, Arte development. Uh and um, and we own continue to own, uh, the Fazio course, uh, for a number of reasons, we've made the decision that we're not going to reposition and uh, and upgrade the Fazio course, at this point in time. Uh, but we are going
To spend the time really preparing. Um,
The, uh, site for potential, uh, future development, uh, while we have the opportunity to do that. So, if you're seeing a shortfall in operating performance for the resort in total, uh, it's as a result of the gulf, it's not as a result of the hotel and I'll let sarava dress your other question, uh, regarding comp non-comp
Uh, yeah, it is actually in our comparable results. Um, we did not own the hotel. However, we do have the actual numbers and performance from that hotel. So it is not comparable numbers; you just have to look at the comp tables.
Got it. Okay. So it's in 2K. It's a page 10, I believe.
Okay, perfect. Thank you.
Your next question comes from.
Smith East Rose with Citigroup. Please go ahead.
Hi. Thank you. Um, I wanted to ask a little more about, um, wages and benefits you mentioned that they're tracking up 6% for this year. Um, can you maybe, um, throw out, just give some thoughts on be interesting to see what are the components of that like labor versus, you know, benefits, um, to employees and kind of how you're thinking about my Pace into next year.
Um, sure. Uh, when you think about, sort of overall, it really is obviously market dependent. It is being driven by where there was CBA negotiations finalized, and that's driving a big piece of the increase for this year, just given the front-loading impact. Um, for next year, all I can tell you is that it is going to be overall lower than where it is this year; that's the expectation. But it's too early to tell, frankly, because we haven't seen budgets from a manager yet, and we will not see that until later. Um, so I can't really comment on an exact number. But the expectation is that the growth should be slightly lower than this year. What that is, um, I can't comment right now.
Okay, thank you.
Your next question comes from Ari, Kline with BMO Capital markets, please go ahead.
Thank thanks, and good morning. Um, Can can you talk a little bit about the uh Cadence for revpar growth? Um, in the second half of the year and specifically, what my drive, um, do for growth relative to the third quarter. And then, just a clarification on the insurance savings is, the 14 million in annualized, number or or just what you expect to save this year. Thanks.
Hey, all right. The 14 million is just what we expect to save for for this year.
So that's what we have effectively. You would take out with use from our prior guidance of, uh, which we had at $1.645 billion. Um, it's a savings of $14 million from that number. So just this year,
Week before and a week after elections, nobody was really booking. So that's actually uplifting your uh, Q4 uh Pace numbers as as well. So the expectation of fourth quarter is is better as a result of that. So those are sort of the 3 components.
Thanks.
Your next question comes from the line of Robin Farley with UBS. Please go ahead.
Great, thanks. Um, can you talk a little bit about the um, transaction environment? Just, you know, you sold an asset, just sort of broadly, what the environment is like for that and also any opportunities to buy and then I I do have 1 quick followup. Thanks.
Sure Robin, uh, let me start by saying that uh, the debt Capital markets are wide open. Um, cmbs Market is wide open, it's very active at this point in time. Uh, we've seen a uh, notable pickup in transaction activity over the last 90 days or so, uh, it's certainly not, I wouldn't characterize it as robust. Uh, it's certainly not at the levels that it has been in the past. Uh, you know, there is still a fairly significant uh bid ass spread uh between buyers and sellers. Uh however in certain instances we have seen that uh bid ask spread uh narrow and uh transactions.
Um, uh, get done. So, uh, I will, we'll see what happens as we get a bit more certainty. On the macro picture, uh, over the, uh, the remainder of this year. Uh, and uh, into 2026, I think that, uh, you know, the it's it's still somewhat difficult, um, to underwrite, uh, uh, ah, a potential acquisition, uh, aggressively, uh, given the macro uncertainty right now and that may be holding some people back at this point in time. But our belief is that, you know, a number of assets have uh, uh, have not been, uh, invested in, uh, you know, uh, since since Co days. So we're talking 5 years now, uh, and that the properties are in in dire need of capital of capex. And uh, you know, those that there's something is going to have to happen with those assets. Uh going forward.
So I mean we were in the really fortunate position as you know that uh we had the balance sheet that allowed us to uh invest in our assets. Uh and over uh the last 6 years, we have invested 1.7 billion dollars in Roi capex, uh, in our properties, uh, completed 24 transformation, Renovations uh, although it's 24 properties, 20 have stabilized operations and we picked up close to 9.6.
And yield index. And that is uh, that's 1 of the reasons why we continue to outperform. Uh, it's really our Capital allocation decisions, uh, that that have been made from 2017 forward. So, you know,
To answer the second part of your question, you know, are we interested in, uh,
Uh, in buying hotels you know I'll never say, never, but I will tell you, as we sit here today, it's not at the top of our list. Uh, you know, we think that, uh, uh, the, the better use of our Capital. Uh, certainly in the second quarter, uh, in the first half of this year has been investing in our assets, uh, so that we can continue to drive the types of returns that we're seeing, uh, you know, paying a sustainable dividends subject to the approval of, uh, our board of directors and, uh, you know, buying back shares. Uh, we bought back 205 Million worth of stock in the first half of the year. Uh, and we think the stock is a, uh, a screaming bargain today, uh, given where it's valued relative to the quality of our portfolio and our Fortress balance sheet.
Right, that's super helpful. Thank you. Uh, just just 1, quick clarification, following up and maybe 1 for throughout, um, with the guidance. You know, you're getting a little more cautious on that sort of close in, um, you know, Q3 group, bookings. And, and I know that's relative to, you know, what you said, 3 months ago, some have sort of pointed to things picking up a little bit in July, are you?
Seeing, at least, you know, in the very near term, um, something maybe a little bit,
Better than than the sort of Delta you're talking about versus April.
Oh, well, relative to our expectations. So could it get better? There is certainly a possibility but it's it's really tough because these groups or sometimes really booking 1 week out, or even a couple of days out. So, um, you know, want to make sure we appropriately cautious as we were doing our forecast.
Great, thank you very much.
Your next question comes.
From the line of Dan Pulitzer with JP Morgan. Please go ahead.
Hey, good morning everyone. And thanks for taking my question. Um I I I just want to follow up on the group commentary. Um,
Give me more detail in terms of leave volumes, you know, corporate versus association. And then are you seeing actual changes in terms of the spending patterns from these groups in terms of some of that ancillary or F&B?
Yeah, so it's very similar to what we had talked about in on the first quarter in terms of where we are seeing some of the weakness in groups. Um, it's certainly is a little more on the association side, um, particularly, um, as it relates to associations, that either rely on Government funding or somehow tied, uh, to Government funding. Um, in terms of the folks that are actually showing up to the hotels, they're spending well, so if you look at our second quarter results, group volume was down, but our banker and Catering Revenue was actually up. And we look at uh, the, you know, banquet and catering revenue on a per group Road in my basis. That was up.
7%. So, overall groups when they're coming to the hotels are actually spending and spending well and continue to spend. So that Trend really hasn't changed. And it's certainly um, you know, is it has the same momentum as it did, which we saw in the first quarter and we have that same expectation going into the groups that are going to be coming in in the in the third and fourth quarter as well.
Got it. Thanks so much.
Your next question comes from the line of Daniel Hogan with beard. Please go ahead.
Hi morning. Uh, just quickly on the Cincinnati sale. Um, looking at the rest of the portfolio, how many more assets are in need of that amount of capex or or would be potential non-core sale candidates and how are, uh, both you and the and potential buyers thinking about those that amount of capex needs, uh, differently and is that, um, able to then get a deal across the line.
Uh, you know the Cincinnati uh, I would say probably ranked at the bottom of our portfolio Dan uh, you know, from a a capex perspective, it's in a um, um, you know, it's in a tough Market, uh a very low red par asset. Uh it's subject to a ground lease what we sold was the leasehold interest and we really had an invested in that property uh since 2009. Uh so
You know, I don't know of any other hotel in our portfolio. That is in that, um, uh, dire need of of capex. So we, we like what we own obviously, you know, if you look at the makeup of our portfolio, uh, our top 40 assets, uh, account for over 80% of our ibida. Uh, we have 78 comparable, hotels, plus, um, you know, the elite of Ventana and uh, the dawn, uh, in uh, in non-comp. Uh, but that that should give you a sense of uh, the the magnitude of of ibida that uh, something like a uh, Western Cincinnati contributes to uh the overall uh earnings of hosts.
All right. Thank you.
Chris, darling, with Green Street. Please go ahead.
Hi. Uh, thanks for taking the question. Um, Jim can you comment on the relative strength across sort of the high-end luxury hotel segment relative to what's really been a more sluggish demand backdrop for seemingly most of the rest of the industry. Um to be candid with you. I'm I'm kind of surprised. The dynamic has lasted, as long as it has. And I I wonder what your perspective is on whether it persists, um, and also how your perspective may or may not inform your uh, portfolio position and going forward.
Uh, a roughly a billion dollars uh at at a 17.2 times. Even a multiple, uh, and over the same time frame, um, you know, we acquired uh, 4.9 billion dollars of assets at 13.6 times, uh, ibida
And there was a keen focus on uh luxury uh and and and the focus on luxury. Uh, it was really informed by uh, our opinion, that the long time, long long term, red Park, hagers of luxury properties luxury, resorts, in particular, uh, outperform, um, other, uh, segment segmented hotels in in, in the industry. Uh, and I I think that, you know, has really proved itself out as we see no resistance really to uh, rate, uh, at our, at our Resort portfolio. Uh, today, uh, and we see a, uh, continued uh, increase in out of room spend by, uh, customers, uh, on a preoccupied room basis at the outlets at spa at golf Etc. So, you know, the affluent consumer is, uh,
Uh, clearly in a very good position. Uh, they want to continue to prioritize, uh, experiences, uh, and they're willing to spend money to do that. Uh, if you look at the performance of the various segments, uh, over the uh, second quarter, uh, you know, luxury was followed by upper upscale, which is where the rest of our portfolio is. Uh, you know, we outperformed the industry, uh, across the board, uh, and that has to do with the, the Investments that we made in our assets that I spoke to earlier. And then, as you move further down the chain scale where, uh, our consumers. Uh, the US consumers are stressed, uh, and you look at the economy segment. You see, negative rep power growth. So, you know, I mean the the amount of wealth that in our opinion, the amount of wealth has been created in this country uh through housing and through the stock market um is substantial and uh you know we we like the way the the portfolio is positioned uh for the long term. Uh
Obviously, if you know, if if if if if something were to go Ary uh and uh and and and people didn't feel as good about their balance sheets going forward that that would impact the business. But we're certainly not seeing that at this point in time.
All right, helpful commentary. Thank you.
Please go ahead.
Thank you very much and good morning.
Uh could you provide some detail on how summer Leisure demand from International inbound is performing uh relative to your expectations. A few months ago are there certain markets or property types, performing better or worse. Thanks.
Uh, sure. So when you look at what happened with International outbound and Modern Force quarter, we had talked about, um, our, I would say hope that that would somewhat moderate and, uh, it would effectively be a wash. We were expecting lower inbound, uh, travel, but we were also expecting lower outbound travel. Uh, in a way, that's kind of what happened, not to a very large degree, but net-net, it was effectively a wash. Um, if you may recall that in the fourth quarter, when it peaked in 2024, uh, outbound relative to 2019 was at 125% and inbound was at 94%. Um, that progressed, um, in Q1 2025, outbound became 124%.
The inbound cadence was Q4 of $24, 94% and this is all relative to 19 levels Q1, 25, 89, and then Q2 86. So when you think about the actual change in inbound opportunity. That's about it net net sort of washed out. So overall as we look at international demand I mean, if he specifically.
For our portfolio.
It has been relatively strong.
Overall, I mean, there are certain markets.
So really driving that I mean, new York's driving that.
While Seattle did see Canadian visitors.
Significantly decline, our Westin overall actually did well a lot of these markets, where we've seen declining Canadian travel. It has been made up by other European markets. So thus far it hasn't had.
A meaningful impact one way or the other and kind of what we expected no real change in the international inbound and outbound imbalance that sort of coming to fruition thus far.
Thanks for that helpful. Robert.
Mr. Jim just say, Greg just a data point on New York.
I mean, the portfolio is positioned well over 90% of our revenues.
From domestic U S travel so there is a there.
There is.
Roughly 859%.
That does come from international visitors to the.
The U S, but I just wanted to follow up on what <unk> said.
Key referenced New York as one of those markets.
Just for point of reference so you have a sense of how our assets are performing and the New York Marriott Marquis.
Underwent a transformational renovation beginning in 2019.
As a base year of 2018.
Using 2018 as the base year. This year, our revpar is going to be up 16%.
Our EBITDA at the Marriott Marquis is going to be up 46% over 2019.
So 2000, 2018, I'm, sorry, we did $66 million in EBITDA in 2018 were on budget to do $96 million this year and that's on top of 16%.
Our revpar increase so.
The health of our New York assets.
It's very good and very strong.
Thank you Tim I appreciate it.
Our final question comes from the line of Jack Armstrong with Wells Fargo. Please go ahead.
Hey, good morning, Thanks for taking the question.
Returning to Maui again here briefly we've heard from you and some of your peers. Some of the strength you've been having there is related to promotional activity.
You've seen an uptick in transient demand.
What's the plan for rolling off that promotional activity and kind of replacing that demand which is.
Is that a late 'twenty five event or 2026 and is there a chance you can kind of get stuck in between those two.
Yeah, just to be clear.
Not like a group is not being pushed at these properties. So that we have as Jim mentioned earlier, we are engaging with meeting planners, we're having fab trips. So that is progressing and what's important to know they're very encouraged by how 2026 is is pacing.
And at some point will provide very specific numbers on Maui group pace for 'twenty 'twenty six but overall when you look at sort of now and this is a while as well as the Hyatt regency kind of poly, they're effectively pacing very very close at this point to where they were not only pre fire, but pre pandemic.
Nick levels. So we are very encouraged by that and remember the lead times with these incentive groups as nine to 12 months. So while it is going to take some time to pick up we fully expect to have a much better group year in <unk>.
2026, and just to put into perspective. So you have what the peak was format where like in 2019, we did about 100000 group room nights also in Maui and this year, our expectation is call. It around 81000, and we certainly expect to improve on that into next year.
Great. Thank you.
Well. Thank you all for joining us we appreciate the opportunity to discuss our quarterly results with you enjoy the rest of your summer and we look forward to seeing many of you at conferences. This fall.
Concludes today's presentation you may now disconnect.
Please wait the conference will begin shortly.
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