Company Results

Host Hotels & Resorts, Inc. First Quarter 2014 Total Revenues and Comparable Hotel Revenues Increased 6.9%

The strong growth in operating results were driven by an increase in comparable hotel RevPAR of 6.8%, on a constant US$ basis, and an increase of 9.4% in comparable food and beverage operations.

Host Hotels

Host Hotels & Resorts, Inc. (NYSE: HST), the nation's largest lodging real estate investment trust ("REIT"), today announced results of operations for the first quarter of 2014.

Total revenues and comparable hotel revenues increased 6.9% for the first quarter of 2014. The strong growth in operating results were driven by an increase in comparable hotel RevPAR of 6.8%, on a constant US$ basis, and an increase of 9.4% in comparable food and beverage operations. The growth in RevPAR reflects strong growth in average room rates and an occupancy increase of 1.5 percentage points to 73.9%. The growth in room revenues was primarily driven by a strong increase in group business of 11%, which provided the Company's operators the opportunity to shift to higher-rated transient business and to decrease lower-rated discount business helping to drive profitability. Additionally, the increase in group business helped drive a 13.5% increase in comparable food and beverage banquet revenues. Overall, this resulted in strong margin growth as comparable hotel adjusted operating profit margins increased 120 basis points for the first quarter.

Operating Results

(in millions, except per share and hotel statistics)

                    Quarter ended                   

      March 31,     

      March 31,     

Percent

2014

2013

        Change       

Total revenues

$               1,309

$               1,224

6.9%

Comparable hotel revenues (a)

1,204

1,126

6.9%

Net income

185

60

208.3%

Adjusted EBITDA (a)

308

283

8.8%

Change in comparable hotel RevPAR – Constant US$

6.8%

Change in comparable hotel RevPAR – Nominal US$

6.2%

Diluted earnings per share

$                     .24

$                     .08

200.0%

NAREIT FFO per diluted share (a)

.32

.29

10.3%

Adjusted FFO per diluted share (a)

.33

.28

17.9%

_______________

(a)

NAREIT Funds From Operations ("FFO") per diluted share, Adjusted FFO per diluted share, Adjusted EBITDA and comparable hotel operating results are non-GAAP (U.S. generally accepted accounting principles) financial measures within the meaning of the rules of the Securities and Exchange Commission ("SEC"). See the Notes to Financial Information on why the Company believes these supplemental measures are useful, reconciliations to the most directly comparable GAAP measure, and the limitations on the use of these supplemental measures.

Capital Expenditures

The Company continues to pursue opportunities to enhance asset value through select capital improvements, while ensuring that its high standards for product quality are maintained. For first quarter 2014, the Company has completed renovations of 1,800 guestrooms, over 100,000 square feet of meeting space and approximately 42,000 square feet of public space. 

  • Redevelopment and Return on Investment Expenditures ("ROI") - These projects are designed to increase cash flow and to improve profitability by capitalizing on changing market conditions and the favorable locations of the Company's properties, including projects such as the redevelopment of a hotel, repositioning of a hotel restaurant or the installation of energy efficient systems. The Company invested approximately $11 million in the first quarter 2014 in ROI capital expenditures, of which $5 million was invested in restaurant repositionings and energy projects. Projects completed during the first quarter include the expansion to the new 9,000 square foot spa at The Fairmont Kea Lani, Maui and the renovation of 13,000 square feet of restaurant and public space at The Ritz-Carlton, Marina del Rey. The Company expects that ROI capital expenditures for 2014 will range from $70 million to $80 million.
  • Capital Expenditures for Recent Acquisitions - In conjunction with the acquisition of a property, the Company prepares capital and operational improvement plans designed to maximize profitability and to enhance the guest experience. During the first quarter, the Company invested approximately $3 million on these projects, including the completion of the first phase of the renovation of over 100,000 square feet of meeting space and expansion of the fitness center at the Manchester Grand Hyatt San Diego. The Company expects that acquisition capital expenditures will total $30 million to $35 million for 2014.
  • Renewal and Replacement Expenditures - The Company invested approximately $76 million in renewal and replacement capital expenditures during the first quarter 2014. Major renewal and replacement projects completed include the renovation of all guest rooms at The Westin Indianapolis and the Newport Beach Marriott Hotel & Spa and almost 12,000 square feet of public space at the Sheraton San Diego Hotel & Marina. The Company expects that renewal and replacement expenditures for 2014 will total approximately $320 million to $340 million.

Balance Sheet

During the first quarter of 2014, the Company redeemed the remaining $150 million of 6¾% Series Q senior notes at 101.125%, which reflects a $2 million call premium, and repaid $225 million borrowed under its credit facility. Additionally, the Company repaid the $300 million mortgage note on The Ritz-Carlton, Naples and Newport Beach Marriott Hotel & Spa on February 28, 2014 with available cash.

The Company has approximately $392 million of cash and cash equivalents and $782 million of available capacity under its credit facility. As of March 31, 2014, the Company's total debt was $4.1 billion, with an average maturity of 5.7 years and an average interest rate of 4.9%, including nearly 80% with a fixed rate of interest.

European Joint Venture           

The European joint venture's comparable hotel RevPAR on a constant euro basis increased 2.8% in the first quarter 2014. The comparable RevPAR results were primarily driven by a 220 basis point increase in occupancy as a result of strong group business.  

Dividend

The Company paid a regular quarterly cash dividend of $.14 per share on its common stock on April 15, 2014 to stockholders of record on March 31, 2014. The amount of any future dividend is dependent on the Company's taxable income and will be determined by the Company's Board of Directors.

2014 Outlook

The Company anticipates that its 2014 operating results will increase as follows:   

                Full Year 2014                  

      Low-end     

      High-end    

       of range     

       of range     

Comparable hotel RevPAR for domestic properties

5.0%

6.0%

Comparable hotel RevPAR for international properties - constant US$

7.0%

8.0%

Total comparable hotel RevPAR - constant US$

5.0%

6.0%

Total revenues under GAAP

3.3%

4.3%

Total comparable hotel revenues

4.7%

5.7%

Operating profit margins under GAAP

             180 bps

             240 bps

Comparable hotel adjusted operating profit margins

               70 bps

             120 bps

Based upon these parameters, the Company estimates that its 2014 guidance is as follows (in millions, except per share amounts): 

                   Full Year 2014                  

      Low-end     

      High-end    

       of range     

       of range     

Diluted earnings per share

$                    .64

$                    .69

Net income

497

534

NAREIT FFO per diluted share

1.41

1.45

Adjusted FFO per diluted share

1.41

1.46

Adjusted EBITDA

1,360

1,400

See the 2014 Forecast Schedules and the Notes to Financial Information for other assumptions used in the forecasts and items that may affect forecast results.

About Host Hotels & Resorts

Host Hotels & Resorts, Inc. is an S&P 500 and Fortune 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper-upscale hotels. The Company currently owns 99 properties in the United States and 15 properties internationally totaling approximately 60,000 rooms. The Company also holds non-controlling interests in five joint ventures, including one in Europe that owns 19 hotels with approximately 6,400 rooms and one in Asia that has interests in three hotels in Australia and India. Guided by a disciplined approach to capital allocation and aggressive asset management, the Company partners with premium brands such as Marriott®, Ritz-Carlton®, Westin®, Sheraton®, W®, St. Regis®, Le Meridien®, The Luxury Collection®, Hyatt®, Fairmont®, Four Seasons®, Hilton®, Swissotel®, ibis®, Pullman®, and Novotel® in the operation of properties in over 50 major markets worldwide. 

Host Hotels & Resorts, Inc., herein referred to as "we" or "Host Inc.," is a self-managed and self-administered real estate investment trust ("REIT") that owns hotel properties. We conduct our operations as an umbrella partnership REIT through an operating partnership, Host Hotels & Resorts, L.P. ("Host LP"), of which we are the sole general partner. When distinguishing between Host Inc. and Host LP, the primary difference is approximately 1.3% of the partnership interests in Host LP held by outside partners as of March 31, 2014, which is non-controlling interests in Host LP in our consolidated balance sheets and is included in net income attributable to non-controlling interests in our consolidated statements of operations. Readers are encouraged to find further detail regarding our organizational structure in our annual report on Form 10-K.

HOST HOTELS & RESORTS, INC.

Condensed Consolidated Balance Sheets (a)

(in millions, except shares and per share amounts)

     March 31,    

December 31,

2014

2013

    (unaudited)  

ASSETS

Property and equipment, net

$             10,817

$             10,995

Due from managers

111

52

Advances to and investments in affiliates

412

415

Deferred financing costs, net

39

42

Furniture, fixtures and equipment replacement fund

149

173

Other

256

244

Restricted cash

33

32

Cash and cash equivalents

392

861

            Total assets

$             12,209

$             12,814

LIABILITIES, NON-CONTROLLING INTERESTS AND EQUITY

Debt

    Senior notes, including $375 million and $371 million, respectively, net of

        discount, of Exchangeable Senior Debentures

$               2,872

$               3,018

     Credit facility, including the $500 million term loan                                                

718

946

     Mortgage debt                                                                                                                 

417

709

     Other                                                                                                                                 

86

86

            Total debt

4,093

4,759

Accounts payable and accrued expenses

185

214

Other

386

389

            Total liabilities

4,664

5,362

Non-controlling interests—Host Hotels & Resorts, L.P

196

190

Host Hotels & Resorts, Inc. stockholders' equity:

    Common stock, par value $.01, 1,050 million shares authorized; 755.3 million

        shares and 754.8 million shares issued and outstanding, respectively

8

8

    Additional paid-in capital

8,494

8,492

    Accumulated other comprehensive loss

(2)

(9)

    Deficit

(1,189)

(1,263)

            Total equity of Host Hotels & Resorts, Inc. stockholders

7,311

7,228

Non-controlling interests—other consolidated partnerships

38

34

            Total equity

7,349

7,262

            Total liabilities, non-controlling interests and equity

$             12,209

$             12,814

________________

(a)

Our consolidated balance sheets as of March 31, 2014 have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted.

 

 

HOST HOTELS & RESORTS, INC.

Condensed Consolidated Statements of Operations (a)

(unaudited, in millions, except per share amounts)

          Quarter ended March 31,        

2014

2013

Revenues

    Rooms

$                   808

$                   762

    Food and beverage

405

369

    Other

96

93

        Total revenues

1,309

1,224

Expenses

    Rooms

226

215

    Food and beverage

284

272

    Other departmental and support expenses

315

307

    Management fees

50

47

    Other property-level expenses

97

94

    Depreciation and amortization

172

173

    Corporate and other expenses

34

26

    Gain on insurance settlements

(3)

        Total operating costs and expenses

1,175

1,134

Operating profit

134

90

Interest income

1

1

Interest expense (b)

(58)

(76)

Gain on sale of other assets

12

Gain on foreign currency transactions and derivatives

2

Equity in losses of affiliates

(8)

(2)

Income before income taxes

69

27

Benefit for income taxes

7

7

Income from continuing operations

76

34

Income from discontinued operations, net of tax

26

Income before gain on sale of property (c)

76

60

Gain on sale of property, net of tax

109

Net income

185

60

Less:  Net income attributable to non-controlling interests

(6)

(4)

Net income attributable to Host Inc.

$                   179

$                     56

Basic and diluted earnings per common share:

    Continuing operations (c)

$                    .24

$                    .04

    Discontinued operations

.04

Basic and diluted earnings per common share

$                    .24

$                    .08

______________

(a)

Our consolidated statements of operations presented above have been prepared without audit. Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted.

(b)

Interest expense includes the following items:

            Quarter ended March 31,           

2014

2013

          Non-cash interest for exchangeable debentures                

$                        4

$                        4

          Debt extinguishment costs

2

                      Total

$                        6

$                        4

(c)

Effective January 1, 2014, we adopted a new accounting standard for reporting discontinued operations. Under this standard, the disposal of a hotel, or group of hotels, is required to be reported in discontinued operations only if the disposal represents a strategic shift that has, or will have, a major effect on the company's operations and financial results. However, the gain or loss on the sale of a hotel will be reported separately below income from continuing operations. Under the new standard, we are not permitted to restate prior year results, so the results of operations of hotels sold in 2013 will continue to be reported in discontinued operations. For purposes of the earnings per share calculation, beginning in 2014 gains or losses on property sales will be included in continuing operations, as prescribed under GAAP.

 

 

HOST HOTELS & RESORTS, INC.

Earnings per Common Share

(unaudited, in millions, except per share amounts)

          Quarter ended March 31,        

2014

2013

Net income

$                   185

$                     60

    Less:  Net income attributable to non-controlling interests

(6)

(4)

Net income attributable to Host Inc.

179

56

Assuming conversion of exchangeable senior debentures

7

Diluted income attributable to Host Inc.

$                   186

$                     56

Basic weighted average common shares outstanding

754.9

728.2

Assuming weighted average shares for conversion of exchangeable senior

     debentures

29.9

9.9

Assuming distribution of common shares granted under the comprehensive stock

     plans, less shares assumed purchased at market

.3

.5

Diluted weighted average common shares outstanding (a)

785.1

738.6

Basic and diluted earnings per common share

$                    .24

$                    .08

_____________

(a)

Dilutive securities may include shares granted under comprehensive stock plans, preferred operating partnership units ("OP Units") held by minority partners, exchangeable debt securities and other non-controlling interests that have the option to convert their limited partnership interests to common OP Units. No effect is shown for any securities that were anti-dilutive for the period.

 

HOST HOTELS & RESORTS, INC.

Hotel Operating Data for Consolidated Hotels (a)

Comparable Hotels by Market in Constant US$

   As of March 31, 2014 

       Quarter ended March 31, 2014      

       Quarter ended March 31, 2013      

  Average 

  Average 

   Percent  

     No. of   

No. of   

  Average 

Occupancy

  Average 

Occupancy  

Change in

Market (b)        

Properties

 Rooms   

Room Rate

Percentage

   RevPAR  

Room Rate

Percentage

   RevPAR  

   RevPAR  

Boston

5

3,432

$      172.94

60.9%

$      105.36

$      163.11

66.4%

$      108.30

(2.7)%

New York

9

7,224

246.13

77.6

190.89

232.73

78.7

183.14

4.2

Philadelphia

2

776

192.34

78.6

151.17

198.64

63.0

125.20

20.7

Washington, D.C

12

6,016

205.70

69.6

143.14

210.95

68.0

143.40

(0.2)

Atlanta

6

2,280

171.62

74.8

128.36

162.00

72.2

116.95

9.8

Florida

7

3,230

245.25

85.8

210.43

239.05

84.2

201.27

4.6

Chicago

7

2,857

142.64

59.6

85.01

148.46

58.9

87.47

(2.8)

Denver

3

1,363

145.62

62.0

90.33

136.61

55.4

75.72

19.3

Houston

4

1,706

191.53

79.9

152.98

175.59

82.3

144.53

5.8

Phoenix

4

1,522

245.17

82.6

202.58

235.30

79.1

186.12

8.8

Seattle

3

1,774

163.37

72.1

117.75

150.31

66.1

99.38

18.5

San Francisco

5

3,701

214.98

77.6

166.78

185.71

71.7

133.15

25.3

Los Angeles

8

3,228

171.01

81.2

138.80

159.34

80.3

127.88

8.5

San Diego

5

4,691

196.10

80.4

157.68

185.32

73.4

136.09

15.9

Hawaii

2

1,256

401.96

86.4

347.40

371.82

89.4

332.31

4.5

Other

13

7,929

166.94

68.4

114.17

165.23

68.3

112.79

1.2

      Domestic

95

52,985

203.71

74.0

150.65

195.20

72.4

141.29

6.6

Asia-Pacific

7

1,378

$      158.80

85.5%

$      135.72

$      150.56

83.3%

$      125.49

8.2%

Canada

3

1,219

169.91

62.0

105.37

162.74

64.3

104.64

0.7

Latin America

4

1,075

249.10

69.1

172.04

211.53

67.3

142.38

20.8

      International

14

3,672

186.71

73.0

136.27

170.57

72.4

123.53

10.3

      All Markets –

         Constant US$

109

56,657

202.61

73.9

149.71

193.59

72.4

140.13

6.8

All Owned Hotels in Constant US$ (c)

As of March 31, 2014

       Quarter ended March 31, 2014      

       Quarter ended March 31, 2013      

  Average 

  Average 

   Percent  

No. of

 No. of

  Average 

Occupancy

  Average 

Occupancy

Change in

Properties

 Rooms

Room Rate

Percentage

   RevPAR  

Room Rate

Percentage

   RevPAR  

   RevPAR  

Comparable Hotels

109

56,657

$      202.61

73.9%

$      149.71

$      193.59

72.4%

$      140.13

6.8%

Non-comparable Hotels (Pro Forma)

5

3,172

250.87

80.9

203.03

248.72

75.3

187.39

8.3

      All Hotels

114

59,829

205.40

74.3

152.54

196.48

72.5

142.52

7.0

Comparable Hotels in Nominal US$

   As of March 31, 2014 

       Quarter ended March 31, 2014      

       Quarter ended March 31, 2013      

  Average 

  Average 

   Percent  

International

     No. of   

 No. of   

  Average 

Occupancy

  Average 

Occupancy  

Change in

    Market          

Properties

 Rooms   

Room Rate

Percentage

   RevPAR  

Room Rate

Percentage

   RevPAR  

   RevPAR  

Asia-Pacific

7

1,378

$      158.80

85.5%

$      135.72

$      160.52

83.3%

$      133.79

1.4%

Canada

3

1,219

169.91

62.0

105.37

178.00

64.3

114.45

(7.9)

Latin America

4

1,075

249.10

69.1

172.04

241.89

67.3

162.81

5.7

      International

14

3,672

186.71

73.0

136.27

187.57

72.4

135.85

0.3

      Domestic

95

52,985

203.71

74.0

150.65

195.20

72.4

141.29

6.6

      All Markets

109

56,657

202.61

73.9

149.71

194.70

72.4

140.93

6.2

Comparable Hotels by Type in Nominal US$

As of March 31, 2014

       Quarter ended March 31, 2014      

       Quarter ended March 31, 2013      

  Average 

  Average 

   Percent  

 No. of

No. of   

  Average 

Occupancy 

  Average 

Occupancy 

Change in

Property Type (b)

Properties

 Rooms   

Room Rate

Percentage

   RevPAR  

Room Rate

Percentage 

   RevPAR  

   RevPAR  

Urban

57

35,243

$      208.68

73.6%

$      153.60

$      201.11

72.6%

$      146.08

5.1%

Suburban

29

10,206

165.46

67.2

111.24

156.73

66.2

103.76

7.2

Resort

11

5,570

286.62

82.3

235.89

274.47

80.8

221.88

6.3

Airport

12

5,638

138.32

79.4

109.88

130.43

73.6

96.03

14.4

      All Types

109

56,657

202.61

73.9

149.71

194.70

72.4

140.93

6.2

__________

(a)

See the Notes to Financial Information for a discussion of comparable hotel operating statistics and constant US$ presentation. Nominal US$ results include the effect of currency fluctuations, consistent with our financial statement presentation.

(b)

See the Notes to Financial Information for a description of these markets and property types.

(c)

Operating statistics presented are for all consolidated properties owned as of March 31, 2014 and do not include the results of operations for properties sold in 2014 or 2013. Operations for the two hotels acquired in 2014 and 2013 are presented on a pro forma basis, assuming they were owned as of January 1, 2013. See the Notes to Financial Information for further information on these pro forma statistics and the limitations on their use.    

 

European Joint Venture Hotels

   As of March 31, 2014 

       Quarter ended March 31, 2014      

       Quarter ended March 31, 2013      

  Average 

  Average 

   Percent  

     No. of   

     No. of   

  Average 

Occupancy

  Average 

Occupancy

Change in

Properties

    Rooms   

Room Rate

Percentage

   RevPAR  

Room Rate

Percentage

   RevPAR  

   RevPAR  

Total comparable – in Constant Euros (a)

18

5,962

€      161.56

67.8%

€      109.57

€      162.41

65.6%

€      106.57

2.8%

Total comparable – in Nominal Euros (a)

18

5,962

161.56

67.8

109.57

161.86

65.6

106.21

3.2

All Hotels (Pro Forma) – in Constant Euros (b)

19

6,427

160.92

67.7

108.89

161.63

65.2

105.36

3.4

__________

(a)

Total comparable statistics include the operating performance for the 18 properties in the joint venture with comparable results (determined on the same basis as our consolidated comparable hotel portfolio). The total comparable statistics exclude the Sheraton Stockholm Hotel, which was acquired in 2013 as the joint venture did not own the hotel for the entirety of 2013. See Notes to Financial Information for a discussion of the constant Euro and nominal Euro presentation.

(b)

Operating statistics presented are for all properties owned by the joint venture as of March 31, 2014 and do not include the results of operations for one property sold in 2013. Operations for the Sheraton Stockholm hotel are presented on a pro forma basis, assuming it was owned as of January 1, 2013. See Notes to Financial Information for further information on these pro forma statistics and limitations on their use.   

 

HOST HOTELS & RESORTS, INC.

Comparable Hotel Operating Data

Schedule of Comparable Hotel Results (a)

(unaudited, in millions, except per hotel amounts)

          Quarter ended March 31,        

2014

2013

Number of hotels

109

109

Number of rooms

56,657

56,657

Percent change in comparable hotel RevPAR – Constant US$                                           

6.8%

Percent change in comparable hotel RevPAR – Nominal US$

6.2%

Operating profit margin (b)



Logos, product and company names mentioned are the property of their respective owners.

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