Host Hotels & Resorts' Q3 2025: Contradictions Emerge on Group Booking Recovery, Investment Strategy, and Capital Return Priorities

Date of Call: None provided

Financials Results

• EPS: Adjusted FFO per share $0.35, down 2.8% YOY
• Gross Margin: Comparable hotel EBITDA margin 23.9%, down 50 basis points YOY

Guidance:

• Comparable hotel RevPAR growth ~3% and total RevPAR growth ~3.4% for full-year 2025.
• Full-year adjusted EBITDAre guidance increased to $1,730 million (up $25M vs prior midpoint).
• Comparable hotel EBITDA margin expected ~28.8% (50 bps below 2024).
• 2025 CapEx guidance $605–$640 million (includes $75–$80M reconstruction; $280–$295M redevelopment).
• Expect ~$24M HTCP operating profit guarantees and ~$2M Marriott program guarantees; Four Seasons condo spend $80–$85M.

Business Commentary:

• Revenue and Earnings Performance:
• Host Hotels & Resorts delivered adjusted EBITDAre of $319 million for Q3, representing a 3.3% decrease over the previous year, while adjusted FFO per share was $0.35, down 2.8% compared to the same period in 2024.
• For the year-to-date 2025, adjusted EBITDAre and adjusted FFO per share were up 2.2% and 60 basis points, respectively, compared to 2024.

• The decline in Q3 was mainly due to elevated wage and benefit expenses, while the year-to-date increase reflects strong operational results in the first half of 2025.

• Business Mix and Demand Trends:

• Comparable hotel total RevPAR improved by 80 basis points, with transient revenue growing by 2% and RevPAR improving by 20 basis points due to better-than-expected short-term transient demand pickup and higher rates.
• Transient revenue growth of 2% was driven by double-digit growth at resort properties, particularly in Maui, San Francisco, New York, and Miami.

• The demand trends were positively influenced by the recovery in leisure transient demand and higher rates, despite macroeconomic uncertainties.

• Capital Allocation and Asset Sales:

• The company sold the Washington Marriott Metro Center for $177 million, representing a 12.7 times trailing 12-month EBITDA multiple, and has disposed of approximately $5.2 billion of hotels since 2018.
• The sale was executed opportunistically, leveraging Host's strong balance sheet and relationships in the industry.

• The asset sales and strategic capital allocation decisions have contributed to the company's outperformance and value creation for shareholders.

• Transformational Capital Programs:

• The Hyatt Transformational Capital Program is approximately 65% complete, and four new properties were added to the second Marriott Transformational Capital Program.
• These investments aim to reposition and enhance long-term performance, with expected RevPAR index share gains of 3-5 points and a focus on outperformance compared to competitors.
• The capital allocation towards transformational renovations is anticipated to yield strong cash-on-cash returns and drive continued value creation.
  

  Sentiment Analysis:

  Overall Tone: Positive

  • Management repeatedly highlighted outperformance and raised guidance: “we continue to outperform our expectations,” adjusted EBITDAre of $319M (down 3.3% YOY) but guidance raised to $1,730M; “increased our comparable hotel RevPAR and total RevPAR guidance.” Strong balance sheet cited: $2.2B liquidity and investment-grade rating upgrade.

Q&A:

• Question from David Katz (Jefferies): Can we expect more asset trading given your recent dispositions and outperformance; how are you thinking about valuation and capturing differentiated value for Host in the public market?
  Response: Management will be opportunistic on dispositions when they create value; they have a strong liquidity/credit position enabling selective sales and seller-financing, but priority remains reinvesting in assets that generate superior returns.

• Question from Michael Bellisario (Baird): How are you selecting hotels/markets for transformational CapEx and did that drive the decision not to repurchase stock this quarter?
  Response: Capital is focused on transformational renovations (lobby, F&B, rebranding) underwritten for mid‑teens cash-on-cash returns with operator guarantees; they prioritized reinvestment over buybacks this quarter given higher expected IRRs.

• Question from Cooper Clark (Wells Fargo): Thoughts on Maui recovery and the pace of earnings recovery into 2026 relative to the $110M guide uplift in 2025?
  Response: Maui recovery is strong (2026 group pace +13%, 67k group room nights booked); management expects additional positive EBITDA beyond the $110M 2025 assumption but the incremental amount is preliminary.

• Question from Chris Darling (GreenStreet): Can you elaborate on lower-hanging upside across the portfolio (e.g., Maui, Don CeSar, Turtle Bay) and quantify potential impact?
  Response: Multiple markets show meaningful 2026 group upside (San Francisco +20% pace, D.C. +13%, Nashville +26%); portfolio diversification and high-end asset mix underpin broad upside from group and event-driven demand.

• Question from Ari Kline (BMO Capital Markets): Has near-term group booking softened broadly; any change in cancellations/attrition or lead volumes?
  Response: No material cancellations aside from government-related pockets; Q4 group pace is strong (~7–8%); Q3 softness was expected due to Jewish holiday shift and renovations, while per-group-room banquet contribution rose.

• Question from Chris Woronko (Deutsche Bank): What's driving out-of-room spend growth and how durable is it?
  Response: Out-of-room growth is driven by spa, golf, resort fees and renovated outlets (e.g., NY Marquis, 1 Hotel South Beach); management expects continued strength but acknowledges tougher comps in 2026.

• Question from Robin Farley (UBS): On the 2026 group pace up ~5%, how much is room nights vs rate?
  Response: The 5% 2026 group pace is primarily room-night driven (≈3% of the 5%), with only modest rate improvement in the pacing.

• Question from Smedes Rose (Citi): Updated thoughts on wages/benefits for 2026 and any major markets with contracts coming due?
  Response: 2025 wage-rate growth is ~6%; management expects lower wage growth in 2026 but details pending budgets; New York is the only major market with notable contract timing next year.

• Question from Dwayne Finnegan (Evercore ISI): If 2026 sees no major Gulf storms, how material is the upside for Gulf Coast assets?
  Response: Absent storms, Gulf Coast properties (e.g., The Don CeSar, Ritz Naples, Singer Island) provide meaningful tailwinds; some renovation disruption is anticipated but largely mitigated by guarantees and reconstruction planning.

• Question from Jay Kornwasser (Cantor Fitzgerald): Was the $25M EBITDA raise a portfolio-wide lift or driven by specific markets (e.g., Maui), and how are November/December shaping up after October +5.5% RevPAR?
  Response: The $25M increase mainly reflects a $26M comparable-operations lift (Q3 +$21M, Q4 +$5M) plus Don CeSar and interest income, offset by disposals and condo timing; October strength drove much of the upside, while Nov/Dec face tougher comps and are modestly negative on blend but overall Q4 guide improved.

Contradiction Point 1

Group Booking Trends and Recovery

It involves changes in the company's outlook regarding the recovery and growth in group bookings, which are key to their business strategy and financial performance.

Have group booking trends changed, and are there any noted challenges or cancellations? - Ari Kline (BMO Capital Markets)

2025Q3: Group booking pace is strong, up over 7% for Q4. The third quarter softness was due to Jewish holiday shifts and government business decreases. - Saurabh Ghosh(CFO)

Room nights are up 6% sequentially versus the last quarter. Can you discuss the group dynamics in the second half and long term? - Duane Thomas Pfennigwerth (Evercore ISI)

2025Q2: While there's softening in the third quarter, we see strong group booking out into the future, especially for '26 to '28. - Sourav Ghosh(CFO)

Contradiction Point 2

Investment and Acquisition Strategy

It highlights a shift in the company's approach towards asset acquisitions and capital allocation, which could impact future growth and financial performance.

How do you select hotels and markets for investments, and why aren't stock buybacks a priority now? - Michael Bellisario (Baird)

2025Q3: Asset acquisitions are not a priority due to low expected returns compared to other capital allocations. - Saurabh Ghosh(CFO)

What is the current transaction environment like, and are there any buying opportunities? - Robin Margaret Farley (UBS)

2025Q2: Our focus now is on capital returns through stock buybacks and dividends rather than acquisitions. - James F. Risoleo(CEO)

Contradiction Point 3

Market Uncertainty and Acquisition Potential

It involves the company's stance on market uncertainty and acquisition opportunities, which can impact strategic decisions and investor confidence.

Can you address the potential for increased asset trading given your performance and any valuation differentials or other methods to capture value in the public market? - David Katz (Jefferies)

2025Q3: We are opportunistic with capital allocation regarding asset sales and acquisitions. The recent sales at strong multiples suggest value locked in the company. With a strong balance sheet, we are well-positioned for future transactions. - Jaime Marcus(Senior Vice President of Investor Relations)

What is your outlook for the rest of the year regarding RevPAR and profit growth? - Duane Pfennigwerth (Evercore ISI)

2025Q1: We are opportunistic with capital deployment. We believe there is a wait-and-see approach in the market with limited activity due to uncertainty. - James Risoleo(President, CEO & Director)

Contradiction Point 4

Capital Return to Shareholders

It concerns the company's policy on returning capital to shareholders, which is important for investor expectations and shareholder value.

Could you clarify your criteria for selecting hotels and markets for investment, and why stock buybacks aren't a current priority? - Michael Bellisario (Baird)

2025Q3: We believe stock buybacks do not offer the same returns as reinvesting in assets. - Jim Risoleo(President and CEO)

When might you consider returning more capital to shareholders? - David Katz (Jefferies)

2025Q1: We are thoughtful about repurchasing stock and paying dividends. We will let the year play out and continue being opportunistic with capital deployment. - James Risoleo(President, CEO & Director)

Contradiction Point 5

Asset Investment Strategy

It involves the company's strategic approach to asset investment, specifically regarding acquisitions and stock buybacks, which can significantly impact capital allocation and shareholder value.

How do you select hotels and markets for investment, and why aren't stock buybacks a current priority? - Michael Bellisario (Baird)

2025Q3: We believe stock buybacks do not offer the same returns as reinvesting in assets. - Jim Risoleo(CEO)

Why hasn't the company implemented a more systematic stock buyback program given current valuations? - Smedes Rose (Citigroup)

2024Q4: We see the stock as undervalued and will buy back shares opportunistically. We focus on maintaining an investment-grade balance sheet. - Jim Risoleo(CEO)