Host Hotels & Resorts Ends Second Quarter With US$2.5b of Available Liquidity

Main Photo: The Boston Marriott Copley Place, a Host Hotel

Date: August 2020

Location: USA

Name: Host Hotels & Resorts

No. Keys: 46,700

What Did They Say: On its second quarter results call on July 31, Host Hotels & Resorts Inc., the USA’s largest lodging REIT, said it has the ability to acquire $1.5 billion of assets using existing liquidity while maintaining certain minimum liquidity requirements. In addition, it has the ability to issue equity without any requirement to repay debt and has preserved the flexibility to use $750 million of net proceeds from asset sales for reinvestment purposes.

Jim Risoleo, president and CEO, said, “As states and markets began to ease their lockdowns, our portfolio achieved over 100 percent hotel revenue growth from the lows of $24 million in April to $49 million in June. Toward the end of the second quarter, we successfully amended our credit agreement and achieved outstanding terms that preserve our liquidity and retain our flexibility to capitalise on value-enhancing investment opportunities. All in all, we emerged from the most challenging quarter on record for Host and the travel industry with significantly lower operating costs, greater balance sheet flexibility and access to $2.5 billion of liquidity. Starting with operations.

“Our second-quarter expense reductions and revenue growth were driven by exceptionally agile asset management and the swift reaction of our world-class operators. As lodging demand plumbed to record lows in April, we worked with our operators to suspend operations at 35 hotels, reduced hotel fixed costs by approximately 50 percent and reduced overall hotel operating costs by 72 percent year-over-year. Cost savings were primarily driven by steep reductions in wage and benefit expenses and the fixed portion of above-property allocated costs as well as by suspending most brand standards and contributions to hotels FF&E reserve accounts. At operational hotels, our managers significantly scaled down operations by closing guestroom floors and meeting spaces.

“When leisure demand began improving through May and June, we swiftly pivoted to reopen hotels and worked with our operators to drive 380 basis points of average occupancy gains and a 50 percent increase in average room rates across the portfolio from April to June. As of yesterday, 64 of our 80 consolidated hotels, representing 78 percent of our total room count, were operational. We prioritised reopening eight suspended hotels located in drive-to leisure markets including Florida, San Diego, Phoenix, San Antonio and Orange County [,Calif.], as these markets captured leisure demand and delivered higher second-quarter RevPAR than the rest of our portfolio. We currently expect another six hotels to reopen in August with operational rooms representing nearly 90 percent of our total room count by month end.

“As a reminder, we work with our operators to reopen a property when it’s expected to sustain approximately 10 percent to 15 percent occupancy levels.

As of June, its properties have 1.8 million rooms on the books for the full-year 2020, down nearly 62 percent from 4.6 million group rooms same time last year. Its total group revenue pace is down 81 percent in the third quarter and 49 percent in the fourth quarter. And we continue to expect group cancellations in the second half of the year. It has rebooked approximately $120 million of cancelled total group revenues with an additional $96 million in the pipeline that collectively represent nearly 21 percent of the total group revenue that cancelled this year.”

Risoleo added, “We are also working with our operators to find creative ways to fill the demand gap with long-term group blocks from schools, sports associations and corporates. For example, Houston Airport Marriott received a large corporate group booking of 175 rooms per night from July to December in addition to another corporate group booking of 100 rooms per night on a month-to-month basis. The rooms are being used to quarantine COVID-19-negative employees for 14 days prior to international deployment. Looking at next year, we are experiencing a high-single-digit deceleration in our total group revenue booking pace for 2021, as measured by definite revenues on the books, with most of the deficit concentrated in the first half of next year and minimal impact to the second half.”

THPT Comment: Well all round to their place to party! seriously, well-managed and in a good position…

First Seen: Institutional Real Estate Inc

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