Host Hotels & Resorts, Inc.

Good morning and welcome to the Host Hotels and Resorts Fourth Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Jamie Marcus, Senior Vice President of Investor Relations.

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. The operational results discussed today refer to our 76 hotel comparable portfolio in 2025, which excludes Alila Ventana Big Sur, the Don Cesar, and St. Regis Houston, which we sold in January. 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. 2025 was another strong year for Host. We delivered operational improvements across our portfolio driven by rate growth and out-of-room spending. And we continue to successfully allocate capital through dispositions, portfolio reinvestment, share repurchases, and dividends. We also maintained an investment-grade balance sheet. while positioning hosts to take advantage of future opportunities. Turning to our results, we finished 2025 meaningfully above our most recent guidance estimates. For the full year, we delivered adjusted EBITDA RE of $1,757,000,000, a 4.6% increase over 2024, an adjusted FFO per share of $2.07, a 3.5% increase year-over-year. Comparable hotel total red par grew 4.2%, and comparable hotel red par grew 3.8% compared to 2024. Comparable hotel EBITDA margin of 28.9% was down 40 basis points year-over-year, driven by $21 million of business interruption proceeds that we received in 2024 for the Maui wildfires. Our full year REVPAR and adjusted EBITDA RE exceeded our initial 2025 guidance by 2.3 percentage points and 8.5% respectively. Notably, our portfolio outperformed the upper tier industry REVPAR growth by approximately 200 basis points for the year. During the fourth quarter, We delivered adjusted EBITDA RE of $428 million and adjusted FFO per share of 51 cents. Comparable hotel total REBPAR improved 5.4% compared to the fourth quarter of 2024, and comparable hotel REBPAR was up 4.6%, driven by strong leisure transient demand, higher room rates, and increased out-of-room spending. Comparable hotel even margin declined by 30 basis points to 28% as these operational improvements were offset by certain one-time benefits in the fourth quarter of 2024. Turning to business mix, rep part growth in the fourth quarter was better than expected, driven by resilient transient demand, particularly at our luxury resorts. Transient revenue grew by 6%. driven almost entirely by rate increases. In terms of markets, we saw particularly strong transit performance in Maui, New York, and San Francisco. In fact, Maui was a standout market, contributing more than one-third of the transit revenue growth in the fourth quarter. Red part grew 15% and tread part grew 13%, driven by strong demand growth. For context, Maui contributed $111 million of EBITDA for the year, which was slightly ahead of our most recent forecast and significantly ahead of our initial $90 million expectation at the start of 2025. Looking forward, we expect Maui to contribute approximately $120 million of EBITDA in 2026. Turning to business transients. Revenue was up 1% in the fourth quarter, as increases in rate offset a decline in room nights. Group revenue for the quarter was up approximately 1% year over year, as rate increases offset group room night declines, which were driven by renovations and citywide softness in several markets. Our property sold 900,000 group rooms in the fourth quarter, bringing our total group room nights sold for 2025 to 4.1 million. Ancillary spending remained strong in the quarter, with continued growth in food and beverage revenues and out-of-room spending. Comparable hotel F&B revenue grew 6%, driven by strong outlet performance and banquet contribution per group room night. We also saw particularly strong growth in other revenues, which was up 10% in the quarter, including growth in golf and spa. Taken together, we continue to benefit from the strength of the affluent consumer across properties in our portfolio. Turning to capital allocation, in 2025, we sold the Western Cincinnati and Washington Marriott and Metro Center for a combined $237 million. We also provided $114 million of seller financing for the Washington Marriott and Metro Center transaction at a 6.5% interest rate. Yesterday, we announced the sale of the Four Seasons Resort Orlando at Walt Disney World Resort and the Four Seasons Resort and Residences Jackson Hole for $1.1 billion, which represents a 14.9 times EBITDA multiple on trailing 12-month EBITDA. The multiple includes approximately $88 million of estimated foregone capital expenditures over the next five years. We purchased the hotels in 2021 and 22, respectively, for a total of $925 million with no significant capital expenditures required under our ownership. The $1.1 billion sale price represents an 11% unlevered IRR and an even a multiple that is more than four turns higher than our company's recent trading multiple. The IRR includes $58 million of capital expenditures, which was funded within the FF&E Reserve, as well as transaction costs. These items negatively impacted the IRR calculation by approximately 170 basis points. We are retaining the ongoing condo development at the Four Seasons Orlando. which is excluded from the sale. In 2025, we recognize $17 million of net adjusted EBITDA RE from the sale of 16 condo units, and we expect to recognize an additional $20 to $25 million when the remaining units are sold. As we assess the best use of capital in the current environment, our investment grade balance sheet provides meaningful financial flexibility to pursue the highest return opportunities. We expect to recognize a taxable gain of approximately $500 million from the sale of the two hotels, subject to final prorations, and we have 45 days to identify a potential like-kind exchange. If we are unable to identify an accretive acquisition within that timeframe, we would intend to return the taxable gain to shareholders through a special dividend. For the remaining sale proceeds, we will evaluate the best path forward based on market conditions, which could include returning additional capital to shareholders through special dividends or share repurchases, reinvesting in our portfolio, or pursuing accretive acquisitions. We also completed the previously announced sale of the St. Regis Houston for $51 million. The sale price represents a 25 times EBITDA multiple on trailing 12-month EBITDA. The multiple includes approximately $49 million of estimated foregone capital expenditures over the next five years. Finally, the Sheraton Parsippany is under contract to sell for $15 million with an expected close in the second quarter. Since 2018, We have disposed of approximately $6.4 billion of hotel assets at a blended 16.7 times EBITDA multiple, including estimated foregone capital expenditures of $1.2 billion. This compares favorably to the $4.9 billion of acquisitions we completed over the same period at a blended 13.6 times EBITDA multiple. In addition to successfully allocating capital through dispositions, we also returned capital to shareholders through share repurchases and dividends. In 2025, we repurchased 13.1 million shares at an average price of $15.68 per share for a total of $205 million. For context, we have repurchased 69.2 million shares AND AN AVERAGE PRICE OF $16.63 PER SHARE FOR A TOTAL OF APPROXIMATELY $1.2 BILLION SINCE 2017. IN THE FOURTH QUARTER, WE DECLARED A QUARTERLY COMMON DIVIDEND OF 20 CENTS PER SHARE AND ANNOUNCED A SPECIAL DIVIDEND OF 15 CENTS PER SHARE, BRINGING THE TOTAL DIVIDENDS DECLARED FOR THE YEAR TO 95 CENTS PER SHARE. IN TOTAL, We returned nearly $860 million of capital to shareholders in 2025, including share repurchases. Turning to portfolio reinvestment. In 2025, we invested approximately $644 million in capital expenditures, resiliency initiatives, and hurricane restoration across our portfolio. As of the end of the fourth quarter, The Hyatt Transformational Capital Program is more than 75% complete and is tracking on time and under budget. Transformational renovations have been completed at the Grand Hyatt Atlanta Buckhead, the Hyatt Regency Capitol Hill, and the Hyatt Regency Austin. We are nearing completion of the Hyatt Regency Reston and Grand Hyatt Washington, D.C., both of which are expected to be finished in the first half of 2026. The Manchester Grand Hyatt San Diego, the final asset in the program, has been phased to mitigate business interruption and is expected to be substantially complete by the end of 2026. Additionally, we started the transformational renovation of the New Orleans Marriott in the third quarter of 2025, which is part of the second Marriott Transformational Capital Program. In the fourth quarter, we received $3 million of operating guarantees related to our transformational capital programs, bringing the total received to $26 million in 2025. We also completed several major ROI projects over the course of 2025, including the oceanfront ballroom expansion at the Don Cesar, villa development at the Venetian Canyon Suites, the Nuovi restaurant at the One Hotel South Beach, and the meeting space expansion and reopening of the View Restaurant at the New York Marriott Marquis. We are nearing completion of the condo development at the Four Seasons Orlando, having completed the 31-unit mid-rise building, and we began closing on unit sales in the fourth quarter. To date, we have deposits and purchase agreements in place for 28 of the 40 units, including eight of the nine villas. which are expected to complete in the first half of this year. In 2026, our capital expenditure guidance range is $525 to $625 million. This includes approximately $250 to $300 million of investment focused on redevelopment, repositioning, and ROI projects. As I just mentioned, we expect to substantially complete the Hyatt Transformational Capital Program renovations by the end of 2026. The second Marriott Transformational Capital Program is also well underway. We expect to start construction at the Ritz-Carlton Naples Tiburon in West St. Kirlin in the second quarter. As a reminder, we expect to benefit from approximately $19 million of operating profit guarantees in 2026 related to our transformational capital programs, which we expect will offset the majority of the EBITDA disruption at these properties. In addition to our capital expenditure investment, we expect to spend $15 million to complete the condo development at the Four Seasons Orlando in 2026. Looking back on our portfolio reinvestments, We completed 23 transformational renovations between 2018 and 2023, which continue to provide meaningful tailwinds for our portfolio. Of the 21 hotels that have stabilized post-renovation operations to date, the average RepPAR index share gain is 8.7 points, which is well in excess of our targeted gain of three to five points. As evidenced by our results, The continued reinvestments we have made in our portfolio yield strong returns and drive value creation for our shareholders. We continue to be recognized as a global leader in corporate responsibility over the course of 2025. As part of our climate risk and resiliency program, we completed the purchase and pre-installation of modular flood barriers that exceed FEMA, 100-year flood elevation for eight high-risk properties. We are also working to formalize the connection between our climate risk program and our property insurance premiums to validate proactive resilience investment opportunities, quantify the impact and return on investment, and scale efforts across our portfolio where we see elevated climate risk. Wrapping up, We are very proud of the continued outperformance we delivered in 2025, which reflects the disciplined capital allocation decisions we have made since 2017. Our recent transactions represent an important step in advancing our capital allocation strategy and underscore our ability to generate meaningful shareholder value by monetizing assets at attractive returns and accreted multiples with an eye towards maximizing total shareholder returns. Looking ahead, we are optimistic about the travel environment, particularly at the upper end of the chain scale, and we are confident that Host is well-positioned to capitalize on future opportunities. With our geographically diversified portfolio, ongoing reinvestment in our properties and fortress balance sheet, we will continue to leverage our competitive advantages to create value for our shareholders in 2026 and beyond. With that, I will now turn the call over to Saurabh.