Host's Q3 2025 Earnings Call: Contradictions Emerge on Group Room Night Recovery, Labor Cost Trajectory, and Asset Trading Strategies

Date of Call: November 6, 2025

Financials Results

• Operating Margin: Comparable hotel EBITDA margin 23.9%, down 50 bps YOY; adjusted EBITDAre $319M, down 3.3% YOY; adjusted FFO per share $0.35, down 2.8% YOY. Year-to-date adjusted EBITDAre and adjusted FFO per share up 2.2% and 60 bps, respectively. FY adjusted EBITDAre guidance increased to $1.730B (up $25M).

Guidance:

• FY25 updated guidance: comparable hotel RevPAR ~3% and total RevPAR ~3.4%; adjusted EBITDAre $1.730B.
• Comparable hotel EBITDA margin ~28.8% (50 bps below 2024); Q4 expected low-single-digit RevPAR growth; October actual +5.5%.
• CapEx guidance $605M–$640M (includes $75M–$80M reconstruction, ~$280M–$295M redevelopment); $80M–$85M Four Seasons condo spend.
• Guidance includes $24M business interruption proceeds; expected FY contributions: $16M Four Seasons condos, $6M Don CeSar, $14M Alila Ventana.
• Assumptions: continued Maui recovery, no international demand improvement, steady trends; prolonged government shutdown could negatively impact RevPAR.

Business Commentary:

* Revenue and Earnings Performance: - Host Hotels & Resorts reported adjusted EBITDAre of $319 million for Q3 2025, a decrease of 3.3% over the previous year, and adjusted FFO per share of $0.35, down 2.8% compared to the third quarter of 2024. - Year-to-date, adjusted EBITDAre and adjusted FFO per share were up 2.2% and 60 basis points respectively compared to 2024. - The decreases were primarily due to elevated expenses in wages and benefits, impacting comparable hotel EBITDA margin.

• Revenue and Demand Trends:
• Comparable hotel total RevPAR improved by 80 basis points year-over-year, with comparable hotel RevPAR up 20 basis points.
• The growth was driven by better-than-expected short-term transient demand pickup and higher rates across the portfolio, particularly in Maui, San Francisco, New York, and Miami.

• This was accompanied by strong out-of-room spending on F&B, golf, and spa services.

• Group Business and Outlook:

• Definite group room nights on the books increased to 4 million for 2025, with total group revenue pace up 1.2% year-to-date.
• For 2026, total group revenue pace is approximately 5% ahead, driven by rate, room nights, and banquet contributions.

• The company raised expectations for the Don CeSar resort's full-year EBITDA to $6 million from $3 million, due to better-than-expected transient pickup and increased group bookings.

• Capital Allocation and Transformational Renovations:

• Host Hotels & Resorts completed the sale of the Washington Marriott Metro Center for $177 million, or 12.7x trailing 12-month EBITDA.
• They reached a second agreement with Marriott to invest $300 million to $350 million over the next four years for transformational renovations at four properties, with guaranteed operating profit returns.
• The company continues to invest in its portfolio, with over $2 billion spent on ROI projects since 2019, achieving RevPAR index gains exceeding expectations.

Sentiment Analysis:

Overall Tone: Positive

• Management: "We continue to outperform our expectations in the third quarter..." and "we are increasing our comparable hotel RevPAR and total RevPAR guidance...increasing our adjusted EBITDAre guidance to $1.730 billion." They highlighted portfolio reinvestment successes (average RevPAR index gains >8.5 points) and raised full‑year guidance.

Q&A:

• Question from David Katz (Jefferies LLC): The asset sale during the quarter, investments and outperformance suggest differentiation versus the group. Should we expect more asset trading? How are you thinking about valuation and other ways to capture differentiated value for Host in the public market?
  Response: Opportunistic on dispositions; strong $2B+ liquidity and 2.8x leverage let Host provide seller financing and extract value (Metro Center sold at 12.7x EBITDA); focus remains on reinvesting in high-return assets rather than pursuing acquisitions now.

• Question from Michael Bellisario (Robert W. Baird & Co.): How are you selecting hotels/markets for transformational CapEx and did that drive the decision not to buy back stock this quarter?
  Response: Invest where renovations are transformational (arrival, lobby, F&B, spa) and supported by operator guarantees; although $200M of buybacks done YTD, management prefers asset reinvestment for superior IRR versus share repurchases today.

• Question from Cooper Clark (Wells Fargo Securities): Maui momentum — how should we think about recovery pacing into 2026 from an earnings perspective within the context of the $110M guide implied in 2025 and strong 2026 group pace?
  Response: Maui recovery is strong (2026 total group revenue pace +13%; 67k group room nights on the books vs 73k in 2019); management expects incremental EBITDA beyond the $110M 2025 expectation and currently sees a wide preliminary range roughly $110M–$160M for potential incremental benefit.

• Question from Chris Darling (Green Street Advisors): Can you elaborate on lower-hanging growth drivers across the portfolio (e.g., Maui, Don, Turtle Bay) and quantify where possible?
  Response: Multiple markets show strong forward momentum (San Francisco 2026 total group revenue pace +20%, Washington D.C. +13%, Nashville +26%); portfolio diversification (no market >8% EBITDA) and affluent consumer spending underpin confidence for 2026 upside.

• Question from Aryeh Klein (BMO Capital Markets): Near-term group bookings looked softer—how broad-based is the weakness across verticals and any change in cancellations/attrition/lead volumes?
  Response: No material cancellations aside from some DC government-related shifts; Q4 group pace is strong (almost +8%); Q3 softness largely due to Jewish holiday timing and planned renovation disruption; banquet spend per group room night actually rose.

• Question from Chris Woronka (Deutsche Bank): What's driving out-of-room spend growth, how visible is it, and how sustainable is that trend?
  Response: Ancillary growth driven by spa, golf, resort fees and outlet repositionings (e.g., View at NY Marquis, Aviv at 1 Hotel South Beach); management expects continued spend but notes tougher comps next year will likely narrow the RevPAR vs total RevPAR gap.

• Question from Robin Farley (UBS): On group booking pace for 2026 (up 5%), is the increase driven by room nights or rate?
  Response: The ~5% 2026 group pace is primarily room-night driven—just over 3% of the 5% is incremental group room nights, with only slight rate improvement in the pace.

• Question from Robin Farley (UBS): Given your priorities and the low stock multiple, what types of asset acquisitions would interest Host today?
  Response: Acquisitions are low priority; management is not seeing accretive opportunities in the market today and prefers investing in existing assets, maintaining dividends, and opportunistic dispositions.

• Question from Bennett Rose (Citigroup Inc.): Thoughts on wages and benefits for 2026 and are there major markets with labor contracts coming due?
  Response: 2025 wage growth expected ~6%; 2026 wage-growth should be lower but budgets are still under review; New York is the primary market with contracts coming up mid‑next year and outcomes depend on operator-union negotiations.

• Question from Duane Pfennigwerth (Evercore ISI): With a quieter hurricane season so far, can you frame tailwinds to 2026 growth on the Gulf Coast from reduced storms?
  Response: If the quiet season holds, Gulf Coast tailwinds include stronger performance at Don CeSar (raised FY expectation to $6M) and other high-end Gulf assets; HTCP completions and major events (Super Bowl, World Cup cities) should add incremental top-line lift for 2026.

• Question from Unknown Analyst (Cantor Fitzgerald): Was the $25M EBITDA guidance increase a portfolio-wide story or concentrated in certain markets (e.g., Maui)? How are November and December shaping up after October +5.5% RevPAR?
  Response: Bridge: ~$26M comparable operations lift, +$3M Don CeSar, +$6M interest income offset by ~$5M disposals and ~$5M Four Seasons timing—guidance rise is broad but includes Maui; implied Q4 RevPAR ~1.5% with November/December blended slightly negative due to tougher comps (holiday timing and 2024 pickup), but management raised Nov/Dec expectations and assumes no prolonged government shutdown.

Contradiction Point 1

Group Room Nights and Demand Recovery

It directly impacts expectations regarding group room night demand recovery, which is crucial for revenue projections and strategic planning.

Can you share early insights on Maui's recovery momentum into '26 and earnings outlook? - Cooper Clark(Wells Fargo Securities, LLC)

2025Q3: The upcoming World Cup and Super Bowl are expected to contribute positively. The geographic diversification, high-end properties, and continued strong RevPAR indicate a positive outlook for 2026. - James Risoleo(CEO)

Can you discuss the group dynamics in the second half and longer term? - Duane Thomas Pfennigwerth(Evercore ISI)

2025Q2: Our expectation for the full year is approximately 4.1 million group room nights. We picked up 215,000 group room nights for the remainder of the year, with about 20% for Q2 and 80% for the rest of the year. Compared to 2024, this was about 311,000 group room nights, showing a softening in the third quarter. - Sourav Ghosh(CFO)

Contradiction Point 2

Labor Cost Trajectory

It involves differing expectations for labor cost growth, which impacts financial planning and operational expenditure.

What are your plans for wage and benefit increases in 2026? - Bennett Rose(Citigroup Inc.)

2025Q3: Expect a lower wage rate growth in 2026 than 2025 due to front-end loaded contracts earlier. New York is the only major market with upcoming labor negotiations, and the outcome is uncertain at this time. - Sourav Ghosh(CFO)

How will wages and benefits evolve next year? - Smedes Rose(Citigroup)

2025Q2: Wage and benefit increases are market-dependent, driven largely by collective bargaining agreements. Next year, we expect the growth to be lower than this year, based on initial indications. However, we have not seen detailed budgets from managers yet, so specifics are still uncertain. - Sourav Ghosh(CFO)

Contradiction Point 3

Asset Trading and Market Positioning

It highlights the company's strategy regarding asset trading and market positioning, which impacts investor perceptions and potential investment decisions.

Will there be more asset trading due to observed differentiation, and how does Host assess valuation and capture differentiated value in public markets? - David Katz(Jefferies LLC)

2025Q3: James Risoleo: Host will continue to be opportunistic with asset allocation for dispositions and acquisitions. Recent transactions, such as selling the Washington Marriott Metro Center at 12.7x trailing 12-month EBITDA, reflect the company's ability to execute and unlock value. - James Risoleo(CEO)

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2025Q1: James Risoleo: Market uncertainty is causing a wait-and-see approach in the transaction market, with no significant asset sales currently. Expectation is that transactions will pick up later this year if macroeconomic uncertainty resolved. - James Risoleo(CEO)

Contradiction Point 4

Capital Allocation and Share Repurchases

It involves decisions regarding capital allocation and share repurchases, which affect shareholder returns and financial strategy.

How does Host select hotels and markets for CapEx investments, and does the decision not to buy back stock indicate better returns on transformational CapEx projects? - Michael Bellisario(Baird)

2025Q3: James Risoleo: Host did not buy back stock in the quarter, opting instead to invest in assets due to a strong line of sight to cash-on-cash returns. The company bought back $200 million of stock this year but continues to prioritize asset investments for better returns. - James Risoleo(CEO)

When will Host consider returning additional capital through share repurchases or other means? - David Katz(Jefferies)

2025Q1: James Risoleo: Host will be thoughtful in capital allocation, with a wait-and-see approach given the current environment. Decisions will consider operations, potential acquisitions, and market conditions, with a focus on stock buybacks and dividends. - James Risoleo(CEO)

Contradiction Point 5

Asset Trading and Valuation Strategy

It involves differences in the company's approach to asset trading and valuations, which have implications for shareholders and strategic decision-making.

Can we expect increased asset trading due to observed differentiation, and how does Host evaluate valuation and capture differentiated value in public markets? - David Katz(Jefferies LLC)

2025Q3: James Risoleo: Host will continue to be opportunistic with asset allocation for dispositions and acquisitions. Recent transactions, such as selling the Washington Marriott Metro Center at 12.7x trailing 12-month EBITDA, reflect the company's ability to execute and unlock value. - James Risoleo(CEO)

What's the status of the potential sale of non-core assets? - David Katz(Jefferies)

2024Q4: There was a rumor of hiring an advisor for asset sales, but no advisor was hired. We are comfortable with our portfolio and will only sell assets if it provides good value for shareholders. The transaction market is somewhat dampened due to the current 10-year treasury rates, affecting the openness of the market. - Jim Risoleo(CEO)