Host Hotels & Resorts, Inc.

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.

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 8-K filed with the SEC, and in the supplemental financial information on our website at hosthotels.com. With me on today's call are Jim Rizzolio, President and Chief Executive Officer, and Saurav Ghosh, Executive Vice President and Chief Financial Officer. With that, I would like to turn the call over to Jim.

Thank you, Jamie, and thanks to everyone for joining us this morning. 2024 was a busy year for Host. We delivered operational improvements driven by continued rate growth and out-of-room spending. We acquired $1.5 billion of iconic and irreplaceable real estate across four properties, three of which are in new markets for Host. We continued to reinvest in our portfolio through capital expenditures and resiliency investments. We made progress on the Hyatt Transformational Capital Program and the condo development at the Four Seasons Resort Orlando at Walt Disney World Resort. We returned significant capital to stockholders in the form of dividends and share repurchases, and we maintained an investment-grade balance sheet and continued to position hosts to take advantage of potential opportunities in the future. Turning to our results, 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. Comparable hotel total rep part grew 2.1%, while comparable hotel rep part grew 90 basis points compared to 2023. 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. During the fourth quarter, we delivered adjusted EBITRE of $373 million and adjusted FFO per share of 44 cents. Comparable hotel total REVPAR improved 3.3% compared to the fourth quarter of 2023, and comparable hotel REVPAR was up 3%. driven by strong transient demand, including improving leisure transient demand in Maui and increased ancillary revenues. Comparable hotel EBITDA margin improved by 30 basis points year-over-year to 28.1%, driven by improvements in rate, increases in ancillary spending, the same productivity improvements in certain one-time items. 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. 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. Turning to business mix, rep part growth in the fourth quarter was better than expected, driven by over 3% rate growth. Transient revenue drove the outperformance in the quarter, growing 8%, which is the highest improvement in the last six quarters. 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. Transient rates at our comparable resorts remained robust at 44% above 2019 levels, even as our Maui resorts strategically offered leisure incentives to drive demand. Excluding Maui, transient rates at our comparable resorts were in line with recent quarters. 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. 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. 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 Maui, the leisure recovery is underway. Total rev par at our three Maui resorts was up 6.4% in the fourth quarter. as leisure guest total spend exceeded recovery and relief group business last year. Transient rooms sold were up approximately 50% year-over-year at our two Wailea resorts, and transient rooms sold at the Hyatt Regency Maui and Kaanapali were up 325%. The leisure guest continues to spend at our F&B outlets, spas, and golf courses, leaving us encouraged by the leisure recovery that is beginning to take shape in Maui. For the full year, we estimate that Maui impacted our comparable hotel total rev par by 110 basis points, rev par by 160 basis points, and even a margin by 20 basis points, including the business interruption proceeds received during the year. Turning to ancillary spend, We continue to see improvements in food and beverage revenues and out-of-room spending. 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. Other revenue grew 8% despite an expected moderation of attrition and cancellation revenue. 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. Taken together, we continue to see the strength of the affluent customer across properties in our portfolio. 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, including elevating critical equipment and systems as we did at the Ritz-Carlton Naples. We expect a phase reopening of the property beginning late in the first quarter. 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. 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. In total, we estimate that Hurricanes Helene and Milton negatively impacted our adjusted EBITRE by $15 million in 2024. Turning to capital allocation, in 2024, we completed $1.5 billion 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. Thus far, our new acquisitions are performing in line with our underwriting expectations. 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. 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. In the fourth quarter, we declared a quarterly cash dividend of 20 cents per share and announced a special dividend of 10 cents per share, bringing the total dividends declared for the year to 90 cents per share. In total, we returned over $844 million of capital to stockholders in 2024. Turning to portfolio reinvestment. In 2024, we invested nearly $550 million in capital expenditures and resiliency investments. 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. In addition, we completed the repositioning renovation at the Singer Oceanfront Resort, as well as made progress on the Hyatt Transformational Capital Program. 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. Dell's efforts for the condos started in November of 2024, and we have deposits and purchase agreements for 14 of the 40 units. 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. Our CapEx guidance also reflects approximately $270 to $315 million of investment for redevelopment, repositioning, and ROI projects. 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. As a reminder, we expect to benefit from approximately $27 million of operating profit guarantees in 2025 related to the Hyatt Transformational Capital Program. which we expect will offset the majority of the EBITDA disruption at those properties. 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. 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. More broadly, we have completed 24 transformational renovations since 2018, which we believe will continue to provide meaningful tailwinds for our portfolio. Of the 16 hotels that have stabilized post-renovation operations to date, The average REBPAR index share gain is over 7.5 points, which is well in excess of our targeted gain of 3 to 5 points. 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. The annual ranking analyzes data from more than 2,000 of the largest public companies in the United States before selecting the most responsible. The final list for 2024 recognizes the top 600 most responsible companies spanning dozens of industries. Host landed at spot number 88 and is ranked number four in the real estate and housing industry. We also continue to make progress on our sustainability goals with four properties achieving LEED certification during the year, bringing the total to 20. Importantly, we achieved a new milestone in our sustainability efforts for renewable energy use and green building certifications, resulting in the maximum pricing benefit under our credit facility, which reduced the interest rate for the outstanding term loans by five basis points. 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. 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. We continue to believe that Host is well-positioned due to our geographically diversified portfolio our continued reinvestment in our assets, and our fortress balance sheet. And we are confident in the opportunities for continued shareholder value creation in 2025. With that, I will now turn the call over to Saurabh.