Host Hotels & Resorts, Inc. — 2024 Q1

Sure, Mike. Nashville is a market that we have had our eye on for a number of years. It is a market where I would say we're underrepresented given the dynamic that is occurring in Nashville. Years ago, we did a 50-50 joint venture with White Lodging on a Hyatt Place. We were one of the early ones in Nashville. And that property has continued to outperform all of our expectations. I think we refinanced it 2 or 3 times along the way. So have been scouring the market and actually had reached out to our friends at Starwood Capital and Crescent before the 1 Hotel and Embassy Suites even opened when it was in the construction phase.

Sure, Shaun. Where we started really seeing it as the short-term leisure transient demand. And I want to specify demand because in our prepared remarks, we talked about how rate for leisure has still surprised us to the upside. We are -- effectively for our portfolio Q1, 52% above 2019. And if you recall, that's kind of where we were in prior quarter as well. So the rate is not letting down. It's just the short-term transient demand. Reality is we started seeing that really March is probably when we did. And part of it is -- we suspect is really being driven also by the poor weather that we had in Q1.

Yes. A couple of questions there, Aryeh. Let's talk about the M&A landscape first. So I think there was a fair amount of anticipation among the brokerage community that we would see a pickup in transaction activity as the Fed moved to lower interest rates. We haven't seen that happen yet because of where the Fed is sitting. However, I believe that there are some owners out there who will be sellers now because they just can't afford to wait any longer and for a lot of reasons. I mean, they haven't invested in their assets over the course of the pandemic. They may have loans coming due, and they're going to have refi them into a higher interest rate environment.

Sure thing. I just want to clarify and maybe I'll just quickly walk through the bridge from our prior guidance to this guidance. Because on the comparable hotel operations, it's actually a $13 million decline, which is a result of the change of 1 point to our midpoint of going down from the 4% to the 3%. The $13 million, it's not $22 million, so let's start off with $1.635 billion, which was our previous guidance. You take out $13 million of comparable operations and which is pretty impressive if you think about it because typically a 1 point decline in RevPAR would equate to $30 million of EBITDA decline.

Sure. So if you think about the $1.670 billion that we have guided to for the year, the way to think about long-term run rate, you take out $38 million of BI, right? So it's effectively the $10 million that we already had in the previous guidance, plus the $28 million that we have put into the guidance. You'll take out the $38 million, and then you will add $10 million for Alila Ventana, you would add $13 million for Nashville. So that, as Jim mentioned, we're expecting about $42.2 million this year. We already have $29 million in there. So that's where the $13 million is coming for Nashville.

Bill, it's -- yes, I would say that I don't know if I want to say that it's coming down or cooling a bit. The ADR is likely to be lower this year in Orlando than it was in '23, but it's still meaningfully above where it was in 2019. So we're not seeing a reset really backwards by any means. And one of the other things that will impact us a bit in Orlando this year is some disruption associated with our condo development. So we are steering guests away from a certain side of the building during times of construction. And -- so that is going to be an impact on Orlando as well.

Arizona, Florida and California, and it was meaningful. I mean we lost group business at the [ Fenician ] over the course of the waste management open because of the rains.

I would say it's going to take longer than we anticipated. Yes. We just -- just very difficult to wrap your arms around that. One of the other things that we as an industry are dealing with through U.S. travel and AHLA is working with the state department to see what can be done to shorten Visa wait times. I mean Visa wait times in the U.S. are still running at 400 days. And that is a discouraging factor to many people as they are looking to come to the U.S. A corollary to that is in Canada, you can get it a Visa 40 days out. So there is a program in place to try to break that log jam and to hire more people to do the processing necessary.

Sure, Duane. So yes, your estimate is right. We did about $32 million of EBITDA from operations of the Ritz Naples -- what you will -- when you see the $42 million in the income statement, that really includes the $10 million of BI that was in our previous guidance. So for purely from operations, $32 million, that's about 50%. I would say Q2 is about 25%. Q3 is relatively close to 0, and then Q4 is the remaining 25%. That's sort of how it breaks up for the year. And yes, it is pretty consistent to prior levels in terms of seasonality.

Yes, Robin, clearly, attrition and cancellation revenue is coming in higher, and I wouldn't say that's necessarily a systemic thing. We were expecting -- the attrition cancellation revenues to go back more to norm. We had in our previous forecast for the year, approximately $57 million or so for the year. And now we have closer to $71 million forecasted for the year. It's not across the portfolio. And part of it is our managers are frankly doing a much better job of collecting those revenues and contracts are tighter. So it's just been sort of a trend that we are seeing, and we may actually stabilize at those higher levels, but it's not a systemic issue about the portfolio or anything that was some of these jumps out on a onetime basis in Q1.

Yes, it's difficult to exactly predict what it will be for the following year, but it seems like thus far, attrition cancellation is going to be at that elevated level, at least based on what we're seeing today.

Yes, David, I think the limiting factor is really the cost of debt. It's not so much the availability of debt right now because the CMBS market for those buyers who need to tap CMBS financing is wide open. And there's been a lot of volume occur this year across multiple asset classes in real estate. But the cost of debt is still such that it is precluding private equity firms to underwrite to their hurdle returns and concurrently with their underwriting give the seller the price that they're looking for in the asset.

Yes. I'll start, Chris, and I'll let Sourav jump in and add what additional color he might have on it. But we are obviously very close to the -- to what's happening on Maui and I can't describe it in any more specific terms other than to say that demand continues to evolve on the island. I think that when the wildfires occurred, devastating wildfires occurred, those folks who might have been new to Maui and maybe they were staying down in Wailea in one of our 2 terrific properties [indiscernible] the Andaz or the Fairmont Kea Lani. They just said they listened to the governor and the governor said, "Stay away from Maui."

Well, thank you again for joining us. We appreciate the opportunity to discuss our quarterly results with you, and we look forward to seeing many of you on the road and certainly at NAREIT in New York. Have a good day. Thank you.