Q4 2023 Earnings Summary
- Strong leisure demand among affluent consumers with no slowdown in spend, and revenue pace is up 20% year-over-year for spring break, indicating robust leisure performance.
- Focused on larger transactions and open to acquiring assets needing repositioning, leveraging their in-house capabilities to elevate the EBITDA growth profile, demonstrating strategic growth opportunities.
- Record-setting performance at key properties, such as the San Francisco Marriott Marquis achieving its best month in history in January, with total revenue and EBITDA setting all-time records, showing continued positive trends.
- The company expects an incremental negative EBITDA impact of $25 million to $30 million in 2024 due to the Maui wildfires, resulting in a total impact of close to $50 million, with the recovery timeline on Maui remaining uncertain.
- In-year group booking pick-up is anticipated to be lower than previously due to extended lead times, potentially affecting short-term revenues.
- When asked about the return on investment for the Hyatt transformation projects compared to the Marriott transformations, management was unable to provide specific details, indicating potential uncertainty around these investments.
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M&A Plans
Q: How will you leverage your balance sheet for acquisitions?
A: Host intends to be net acquirers in 2024, leveraging their strong balance sheet with 1.9x leverage and $2.9 billion of liquidity to unlock opportunities others may not have. They are working to find attractive assets, despite few being for sale, by using relationships and their ability to close deals with all cash. They believe this is the year to get the balance sheet to work and hope to be acquirers early in 2024. -
RevPAR Growth Outlook
Q: Why do you expect stronger RevPAR growth in the second half?
A: RevPAR growth is expected to be in the low single digits in the first half due to tough comparisons from strong leisure performance last year. Growth accelerates in the second half to mid-single digits, driven by strong group booking pace and tailwinds from four hotels that were under renovation last year: 1 Hotel South Beach, Fairmont Kea Lani, Biscayne Bay Marriott, and Hilton Singer Island. -
Group Booking Pace
Q: What trends are you seeing in group bookings?
A: Group bookings are strong, with corporate group business performing well. Group pace is ahead 10% year-over-year in total revenue, with ADR up 4% and room nights up 3.4%. Key markets like San Diego, Orlando, D.C., San Francisco, and San Antonio account for over 50% of the 3.1 million group room nights booked for 2024. -
Leisure Transient Trends
Q: How do you expect leisure transient demand to trend in 2024?
A: Leisure transient demand is expected to moderate in the summer due to tough comparisons, but spring break bookings are strong, with revenue pacing up 20% and rate up over 7%, excluding Maui. The affluent leisure traveler continues to spend, with transient ADR for resorts still up 58% over 2019 in Q4. -
Maui Impact and Recovery
Q: What are your expectations for Maui's recovery post-wildfires?
A: Maui's recovery depends on factors like housing for displaced residents and rebuilding Lahaina. Currently, 350 rooms at the Hyatt Regency Maui are contracted with the Red Cross through May. Properties in Wailea, such as Andaz Wailea and Fairmont Kea Lani, are in great shape after renovations. They have assumed a 100 basis point impact on RevPAR due to Maui, resulting in a $25–$30 million incremental EBITDA impact for 2024. -
Acquisition Strategy
Q: What types of assets are you targeting for acquisition?
A: Host focuses on larger, complex transactions with diverse demand drivers—group, business transient, and leisure. They are open to assets needing repositioning and aim to elevate the EBITDA growth profile by improving assets through asset management and analytics. "Bigger is better" for them. -
CapEx and Transformation Programs
Q: How are the Hyatt and Marriott transformation programs performing?
A: The Hyatt Transformation Capital Program (HTCP) is modeled after Marriott's. Host has received enhanced priorities on all invested dollars and expects low double-digit to low-teens cash-on-cash returns. Hyatt is providing $40 million in operating profit guarantees to cover disruption, expecting to collect $9 million this year. Investments have led to meaningful uplift in F&B revenues. -
CMBS Maturities and Distress Opportunities
Q: Are you seeing acquisition opportunities due to CMBS maturities?
A: Host tracks CMBS maturities, with $26 billion of full-service loans maturing this year, but distress hasn't materialized in assets or markets of interest. They continue to monitor but are not counting on distress, focusing instead on leveraging relationships, reputation, and balance sheet to acquire desired assets. -
Expense Outlook
Q: What is your outlook on expenses and cost per occupied room?
A: Total expense growth for 2024 is expected to be 5.8% at the midpoint of guidance, with RevPAR growth at 4%. The increase is evenly split between occupancy and rate. The portfolio's weighting differs from industry forecasts, so comparisons should be made carefully. -
Revenue Management Strategy
Q: How have group and transient rates shifted since 2019?
A: Pricing is determined by building the group base first, considering total revenue including ancillary spend, then layering in transient business at appropriate rates. It's more the group base that drives pricing rather than transient rates. Specific changes in the spread between group and transient ADR since 2019 were not provided.
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