Host Hotels Earnings: Revenues Slightly Fall Due to Lower Cancelation Fees and Maui Wildfires

Third-quarter results for no-moat Host Hotels and Resorts were relatively in line with our expectations, leading us to reaffirm our $23 fair value estimate. Occupancy increased 150 basis points to 71.8% in the third quarter, though it is still below the 80.0% level reported in the third quarter of 2019. Meanwhile, the average daily rate fell 0.4% year over year but is up 16.3% over the same period in 2019. As a result, revenue per available room grew 1.8% year over year, in line with our estimate of 2.1% growth, and is up 4.4% over the third quarter of 2019. However, food and beverage revenue fell 3.4% and other hotel revenue fell 7.9% in the quarter, leading to same-store revenues falling 0.5%. Same-store operating expenses still rose 2.7%, leading to hotel EBITDA margins falling 280 basis points to 26.6% and hotel EBITDA falling 10.2% year over year, worse than our estimate of a 6.0% decline. Host did report adjusted funds from operations of $0.41 per share in the quarter, better than our $0.36 estimate. However, that includes $54 million, or $0.08 per share, of business interruption proceeds from lost operations caused by Hurricane Ian in September 2022.