Host upbeat about groups, open to acquisitions
 
Host upbeat about groups, open to acquisitions
06 NOVEMBER 2020 9:23 AM

Officials with Host Hotels & Resorts said they are seeing group bookings for the second half of 2021 and are open to acquisitions that make sense for the company.

BETHESDA, Maryland—Host Hotels & Resorts executives said the company’s hotels started to book group roomnights during the third quarter of 2020 and are seeing more on the books for the second half of 2021.

Host President and CEO James Risoleo said on a call to discuss Q3 earnings with analysts that the company “booked 127,000 (group) roomnights in the third quarter and delivered 88,000 more (group) roomnights than the second quarter if you exclude New York, which accounted for the majority of group roomnights in the second quarter due to medical and first responder business.”

Nine of Host’s hotels hosted sports-related group room blocks for MLB and NFL teams as well as ESPN and other sports media, he said.

The company also hosted a conference at an Orlando property that consisted of approximately 1,000 in-person attendees and some watching from home, Risoleo said.

Risoleo said the real estate investment trust remains optimistic about group bookings on a medium- and long-term basis “due to encouraging group booking patterns.”

“Rebookings as a percentage of cancellations continue to increase with approximately 16% of group business that was canceled in 2020 now rebooked into future years, up from 11.6% in the second quarter,” he said.

Group cancellations for 2021 remain concentrated through April, but groups that are on the books for the second half of 2021 are “holding fairly steady,” he said.

The industry is waiting for group business to come back, which is being held back by government restrictions driven by public health concerns, Risoleo said.

“We’re not going to see business return to any sense of normalcy until we have an effective vaccine … or therapeutics combined with the vaccine,” he said.

Transactions
More hotels may become available in the first half of next year, and Risoleo said Host would be open to exploring club deals and joint-venture formats if it made sense for the REIT.

“We are in a unique position where under our existing credit facility waiver agreement we can acquire up to $1.5 billion of hotels out of existing liquidity, subject to maintaining $500 million of liquidity in the company,” he said. “We expect assuming that the fourth-quarter trends mirror the third-quarter trends, we're very pleased with how October has played out, that (we will have) $2.4 billion to $2.5 billion of available liquidity at the end of this year.”

The REIT also has the option to issue an operating partnership unit “given the liquidity in our stock,” he said.

“I think we’re trading on average now close to $14 million shares of stock a day. And it gives an owner the opportunity to provide some liquidity but to provide the upside as well going forward … so provide the upside in Host as our EBITDA improves (and) our stock price continues to improve as well.”

As variance periods start to expire at the beginning of next year and some owners are in the unfortunate position where they don’t have liquidity and can’t pay debt service payments and other expenses, “we expect to see a significant number of properties come to market,” Risoleo said.

The company sold the Newport Beach Marriott Hotel & Spa subsequent to the end of the quarter for $216 million, according to an earnings release. Host also sold 29 acres of land adjacent to The Phoenician hotel* for $66 million.

Results
Host improved average monthly occupancy during the quarter, from 12.9% in July to 19.7% in September, according to the earnings release.

The REIT reduced operating costs by 65% during the quarter by scaling back operations and furloughing employees.

“Furloughed employees received healthcare benefits of $31 million in the third quarter and approximately $85 million year to date. In addition, the company’s hotel operators recorded a $23 million credit related to the ERC in the third quarter, which reduced hotel-level operating expenses,” the release states.

As of press time, Host’s stock was trading at $10.93 a share, down 41% year to date. The New York Stock Exchange Composite was down 5.1% for the same period.

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*Correction, 10 November 2020: This story has been updated to clarify that the company sold a plot of land by The Phoenician, not the hotel itself. 

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