New Host Hotels & Resorts CEO James Risoleo said the company reported better-than-expected fourth-quarter and full-year 2016 performance, which was driven by increases in group and leisure demand.
BETHESDA, Maryland—Host Hotels & Resorts’ new President and CEO James Risoleo reported “better-than-expected” performance in the fourth quarter and full-year 2016. During the company’s earnings call with investors, he also discussed near-term focuses for the real estate investment trust.
“Our results were driven by strong group and leisure demand growth, which led to the highest (full-year revenue per available room) in our history,” said Risoleo, who replaced former Host president and CEO Ed Walter on 1 January.
Group demand increased 9.7% in November, Risoleo said on the call. Corporate group business had a 9% increase in demand for the fourth quarter, and “overall, group demand increased 1.8% with a 1.3% increase in average rate, leading to fourth-quarter group revenues increasing by 3.1%.”
In the company’s third-quarter earnings release, Host executives had “anticipated weakness” in group demand “due to the holiday shift, the November election and Hurricane Matthew,” Risoleo said. “Fortunately, the hurricane did not materially impact our Florida properties, and despite the election, November was our strongest month in the quarter.”
He added that group revenue for the full year was up 4.5%. This was a result of a 2.1% increase in demand and an average rate increase of 2.4%, he said.
“As we anticipated, the strength in group demand was partially offset by a decline in transient demand, which was a theme for most of 2016,” Risoleo said. “The solid group performance in November and early December displaced midweek transient volume. As a result, transient demand declined 1% in the fourth quarter while rate increased 80 basis points.”
Host also saw growth in leisure demand, which was offset by decreases in special corporate demand, Risoleo said. As a result of a 0.5% increase in transient demand and a 0.7% increase in average daily rate, transient business was up 1.2% for the full year.
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Risoleo said Host is focused on two things in the near-term: Being more opportunistic when it comes to acquisitions and being ready for whatever happens with the economy.
“We will be more open to investing outside our historical top 10 to 12 markets, and using our strong balance sheet to pursue (acquisitions) where we can add real value. Of course, we will remain disciplined in our approach to external growth opportunities,” he said.
Host officials said the recent purchase of the Don CeSar and Beach Suites in St. Petersburg Beach, Florida, is indicative of this strategy.
“While the property immediately fits into the top 20 and 10 from a RevPAR and (earnings before interest, tax, depreciation and amortization) per key perspective, we believe there is a substantial upside to our underwriting with the installation of Davidson Hotels & Resorts as the new operator along with a targeted capital plan,” Risoleo said.
The REIT also announced in an earnings news release Wednesday morning that its board of directors approved a $500 million share repurchase program.
“And while I anticipate we’ll be more active on the investment front, should the economy and markets falter, and our stock trade down to some of the levels we witnessed last year, you can also expect us to be prepared to repurchase shares,” Risoleo said.
Q4, full-year performance
On a constant dollar basis, Host’s comparable RevPAR increased 1.7% in the fourth quarter, according to the earnings release. Average daily rate rose 0.6%, and occupancy increased 0.8% to 75%.
For the full year, RevPAR increased 2.7%, average daily rate increased 1%, and occupancy increased 1.3%.
As of press time, Host’s stocks were down 2.34% year to date. The Baird/STR Hotel Stock Index was up 17.1% for the same period.