Host Hotels & Resorts, Inc. (NYSE: HST) (the “Company”),
the nation’s largest lodging real estate investment trust (“REIT”),
today announced results for the first quarter of 2020.
James F. Risoleo, President and Chief Executive
Officer, said, “This is an unprecedented time for Host, the travel
industry, the nation, and the world. On behalf of the management
team, I’d like to express our deepest sympathies for those affected
by COVID-19, as well as our gratitude for the incredible work being
done by first responders, healthcare workers, and others on the
front lines. As a company, we continue to prioritize the health and
safety of our employees, guests and partners, while protecting the
long-term strength of our business. In March, as states began
imposing travel restrictions and mandatory stay-at-home orders to
slow the spread of COVID-19, Host responded swiftly to the rapid
decline in lodging demand by significantly reducing expenses and
further strengthening our liquidity position. We believe the
strategic actions we have taken to date will position us for
success as the nation begins to reopen in the coming months.”
Risoleo continued, “We began the first quarter
with the strongest balance sheet in the Company’s history
reflecting our prudent and disciplined capital allocation strategy
that prioritizes maximizing balance sheet capacity and liquidity
toward the end of the cycle. We continue to operate from a position
of financial strength and flexibility, with more than $2.5 billion
of cash on hand, no near-term debt maturities, and a best-in-class
ability to withstand prolonged business disruption. Our enterprise
analytics and asset management platforms, together with our
world-class operators, are navigating this downturn efficiently
while strategically focusing on maximizing operational
profitability during the recovery. Despite the lack of visibility
for near-term lodging demand, we believe that the strength of our
investment-grade balance sheet, the quality of our iconic and
irreplaceable hotels and the geographic and demand diversity of our
revenues will continue to create long-term value for all our
stakeholders.”
COVID-19 Response
The Company and its hotel operators have taken
the following substantial actions to mitigate the operational and
financial impact of the COVID-19 pandemic:
Hotel Operations
- Suspended operations at 35 hotels
as of May 6, 2020, while continuing to operate the remaining 45
hotels at reduced capacity so long as they generate revenue greater
than the incremental costs associated with staying open;
- Hotel operators implemented
portfolio-wide cost reductions, including: --
Furloughing as much as 80% of the hotel’s workforce
-- Reducing shared services fees
-- Suspending food and beverage outlet operations
-- Closing guestroom floors and meeting space
-- Temporary suspension of most brand standards;
- Expect to reduce portfolio-wide
hotel operating costs by approximately 70% to 75% in April,
compared to initial forecasts;
- Accrued approximately $35 million
in the first quarter for benefits that will be provided to hotel
employees furloughed by the Company’s hotel managers through June
1, 2020;
- Rebooked almost 12% of 2020 group
revenue that had been canceled as of May 4, with the majority
rescheduled for the second half of the year; and
- Had average occupancy of 29% in
March and expect April occupancy of approximately 12% despite
mandatory quarantines in many states, due in part to accommodating
alternative sources of demand, including from governmental
authorities and local organizations seeking temporary
accommodations for groups, such as medical personnel, first
responders and military personnel.
Capital Expenditures
- Suspended contributions to hotels’
FF&E escrow accounts; and suspended or deferred non-essential
capital projects, to reduce anticipated full year capital
expenditures spending by approximately $100 to $125 million
compared to initial February 2020 forecast, representing
approximately 50% of the projects not already completed, in
construction or already procured.
CARES Act
- Evaluated the benefit of obtaining
stimulus relief available under the Coronavirus Aid, Relief, and
Economic Security Act (CARES Act) and the Federal Reserve’s Primary
Market Corporate Credit Facility (PMCCF). The Company, which bears
the expense for the wages and benefits of all persons working at
its hotels, understands that its operators are reviewing the
opportunity to file for the Employee Retention Credit to partially
offset the costs for its furloughed hotel employees under Title II
of the CARES Act. The Company has not filed for any relief under
the CARES Act.
Balance Sheet, Capital Allocation and Expense
Management
- Increased liquidity by accessing
$1.5 billion under the revolver portion of Host’s credit facility
in March 2020 as a precautionary measure in order to increase the
Company’s cash position and preserve financial flexibility. The
Company has engaged with its credit facility lenders for
flexibility in covenant requirements;
- Anticipates temporarily suspending
or paying a nominal dividend until further notice. The first
quarter dividend paid in April 2020 totaled approximately $141
million. All future dividends are subject to approval by the
Company’s Board of Directors; and
- Anticipates reducing corporate
expenses by 10-15% compared to initial February 2020 forecast
through reduced travel, compensation and other overhead.
As a result of the above initiatives, the
Company anticipates that it will significantly reduce its monthly
cash expenditures. Even in an extreme downside scenario that
assumes all properties are effectively closed through the end of
2020, management would anticipate cash flow losses, including
corporate expenses and interest payments to average approximately
$120 million to $140 million per month. The only investing and
financing activities assumed in this scenario are the reduced level
of capital expenditures.
The impact of the COVID-19 pandemic on the
Company remains fluid, as does the Company’s corporate and
property-level response, together with the response of its hotel
operators. There remains a great deal of uncertainty surrounding
the trends and duration of the COVID-19 pandemic and the Company is
monitoring developments on an ongoing basis. The Company, as
well as its hotel managers, may take additional actions in response
to future developments to continue meeting the needs of the
Company’s stakeholders.
Balance Sheet
The Company maintains a robust balance sheet
with the following values at March 31, 2020:
- Total assets of $13.4 billion;
- Cash balance of approximately $2.8
billion and FF&E escrow reserves of
$165 million;
- Debt balance of $5.3 billion,
with no significant maturities until 2023 and monthly interest
expense of approximately $13 million;
- Expects to remain in compliance
with its financial covenants through the second quarter of 2020.
Additional detail on the Company’s first quarter covenant levels is
available in the First Quarter 2020 Supplemental Financial
Information available on the Company’s website at
www.hosthotels.com;
- Has an adjusted cash balance of
approximately $2.5 billion following the first quarter dividend
payment in April and other payments.
Operating Performance
The Company’s previous presentation of
comparable hotel performance is no longer relevant given the impact
of COVID-19. Hotel operating results, including RevPAR, are being
reported on an All Owned Hotel pro forma basis, which includes all
consolidated properties owned as of March 31, 2020 and does
not include the results of operations for properties sold in 2019.
Additionally, operating results for acquisitions in the prior year
are reflected for the full 2019 calendar quarter, to include
results for periods prior to the Company’s ownership. See the Notes
to Financial Information – All Owned Hotel Operating Statistics and
Results for further information on these pro forma statistics.
The Company started 2020 with RevPAR growth in
January and February in the low single-digits and did not
experience sharp RevPAR declines until March, when many states and
localities implemented mandatory quarantines and travel
restrictions, most of which are ongoing.
Due to low occupancy levels and/or state
mandates, operations have been suspended at 35 hotels in the
Company’s portfolio as of May 6, 2020. The Company has provided a
complete list of these suspended hotels on page 35 of its First
Quarter 2020 Supplemental Information available on the Company’s
website.
Operating Results(unaudited, in
millions, except per share and hotel statistics)
|
Quarter ended March 31, |
|
|
Percent |
|
|
2020 |
|
|
2019 |
|
|
Change |
|
Revenues |
$ |
1,052 |
|
|
$ |
1,390 |
|
|
|
(24.3 |
)% |
All owned hotel revenues (pro
forma) (1) |
|
1,052 |
|
|
|
1,314 |
|
|
|
(19.9 |
)% |
Net income (loss) |
|
(3 |
) |
|
|
189 |
|
|
N/M |
|
EBITDAre and Adjusted EBITDAre
(1) |
|
164 |
|
|
|
406 |
|
|
|
(59.6 |
)% |
All owned hotel Total RevPAR -
Constant US$ |
|
245.75 |
|
|
|
311.04 |
|
|
|
(21.0 |
)% |
All owned hotel RevPAR -
Constant US$ |
|
147.31 |
|
|
|
192.03 |
|
|
|
(23.3 |
)% |
|
|
|
|
|
|
|
|
|
|
|
|
Diluted earnings per common
share |
|
— |
|
|
|
0.25 |
|
|
|
(100.0 |
)% |
NAREIT FFO and Adjusted FFO
per diluted share (1) |
|
0.23 |
|
|
|
0.48 |
|
|
|
(52.1 |
)% |
____________N/M = Not meaningful.
*Additional detail on the Company’s results,
including data for 22 domestic markets and top 40 hotels by Total
RevPAR, is available in the First Quarter 2020 Supplemental
Financial Information available on the Company’s website at
www.hosthotels.com.
(1) NAREIT Funds From Operations (“FFO”)
per diluted share, Adjusted FFO per diluted share, EBITDAre,
Adjusted EBITDAre and all owned hotel results (pro forma) are
non-GAAP (U.S. generally accepted accounting principles) financial
measures within the meaning of the rules of the Securities and
Exchange Commission (“SEC”). See the Notes to Financial Information
on why the Company believes these supplemental measures are useful,
reconciliations to the most directly comparable GAAP measure, and
the limitations on the use of these supplemental measures.
Transient and group business
update
The Company’s customers fall into three broad
groups: transient business, group business and contract business,
which accounted for approximately 61%, 35%, and 4%, respectively,
of its 2019 room sales.
During the quarter, transient room nights were
down 20% leading to a revenue decline of 22%. Group room nights
were down 25% with a decline in revenues of 25% for the quarter
compared to the prior year.
As of May 4, 2020, 1.5 million net group room
nights for the year have been cancelled. This equates to an
estimated $630 million in total cancelled group revenue of which
approximately 62% is rooms revenue. Approximately 90% of the group
room revenue lost was for the first half of the year. While the low
levels of cancellations for the second half of the year are
encouraging, the Company believes that the near-term pace of group
and transient business remains uncertain until the consumer feels
comfortable travelling again. At this time, there are not material
cancellations for 2021.
Capital Expenditures
For 2020, the Company has reduced its projected
capital expenditures spending, which is now expected to range from
$450 million to $525 million, representing a $100 million to $125
million reduction from its previous range.
|
|
Quarter endedMarch 31, 2020 |
|
|
New 2020 Full Year Forecast |
|
|
|
Actuals |
|
|
Low-end of range |
|
|
High-end of range |
|
ROI - Marriott transformational capital program |
|
$ |
42 |
|
|
$ |
180 |
|
|
$ |
200 |
|
ROI - All other ROI
projects |
|
|
34 |
|
|
|
110 |
|
|
|
140 |
|
Total ROI project spend |
|
|
76 |
|
|
|
290 |
|
|
|
340 |
|
Renewals and Replacements |
|
|
55 |
|
|
|
160 |
|
|
|
185 |
|
Total Capital
Expenditures |
|
$ |
131 |
|
|
$ |
450 |
|
|
$ |
525 |
|
The forecast ROI capital expenditures for 2020
include $180 million to $200 million for the Marriott
transformational capital program, for which Marriott will be
providing operating profit guarantees of approximately $20 million
in 2020, including $2 million that was received in the first
quarter of 2020.
The Company has prioritized major capital
projects in those assets and markets that are expected to recover
faster, such as leisure and drive-to destinations, as well as
previously announced major return on investment projects. Where
restrictions related to essential services permit, the Company is
utilizing the low occupancy environment to accelerate certain
projects and minimize future disruption.
Share Repurchase Program and
Dividends
Early in the quarter, the Company repurchased
8.9 million shares at an average price of $16.49 per share for a
total of $147 million. The Company has suspended repurchases
and anticipates the suspension will remain in effect for the
remainder of 2020.
The Company paid a regular quarterly cash
dividend of $0.20 per share on its common stock on April 15, 2020
to stockholders of record as of March 31, 2020. All future
dividends are subject to approval by the Company’s Board of
Directors.
Credit Ratings
The Company’s debt is rated investment grade by
all of its three rating providers, S&P, Moody’s and Fitch,
which updated their outlooks as follows:
- On March 25, 2020, Moody’s lowered
the Company’s outlook from Stable to Negative but retained its Baa2
credit rating;
- On March 20, 2020, S&P lowered
the Company’s outlook from Stable to CreditWatch Negative but
retained its BBB- credit rating; and
- On April 3, 2020, Fitch downgraded
the Company’s credit rating from BBB to BBB- while maintaining its
stable outlook.
2020 Outlook
Given the global economic uncertainty COVID-19
has created for the travel, airline, lodging and tourism and event
industries, among others, the Company cannot provide full year
guidance for its operations or fully estimate the effect of
COVID-19 on operations because of the uncertainty of the depth and
duration of the pandemic. The Company anticipates the possibility
of further hotel closures and erosion in operations and does not
expect to see a material improvement until government restrictions
have been lifted and business and leisure travelers are comfortable
that the risks associated with traveling and contracting COVID-19
are significantly reduced. The Company does not intend to provide
further updates unless deemed appropriate.
James F. Risoleo, President and Chief Executive
Officer, said, “We have worked diligently with our operators to
implement portfolio-wide cost reductions that are unprecedented in
their magnitude. Although no one knows what the recovery will look
like, we are collaborating with our operators to implement
innovations and standards that we believe will help address
customers’ heightened safety and hygiene concerns and structurally
improve the Company’s long-term operating model. Finally, we remain
confident that the relative strength of Host’s liquidity position
and balance sheet position the Company to endure this crisis and
capitalize on future opportunities to create long-term value.”
About Host Hotels &
Resorts
Host Hotels & Resorts, Inc. is an
S&P 500 company and is the largest lodging real estate
investment trust and one of the largest owners of luxury and
upper-upscale hotels. The Company currently owns 75 properties in
the United States and five properties internationally totaling
approximately 46,500 rooms. The Company also holds non-controlling
interests in six domestic and one international joint ventures.
Guided by a disciplined approach to capital allocation and
aggressive asset management, the Company partners with premium
brands such as Marriott®, Ritz-Carlton®, Westin®, Sheraton®, W®,
St. Regis®, The Luxury Collection®, Hyatt®, Fairmont®, Hilton®,
Swissôtel®, ibis® and Novotel®, as well as independent brands. For
additional information, please visit the Company’s website at
www.hosthotels.com.
Note: This press release contains
forward-looking statements within the meaning of federal securities
regulations. These forward-looking statements include forecast
results and are identified by their use of terms and phrases such
as “anticipate,” “believe,” “could,” “estimate,” “expect,”
“intend,” “may,” “should,” “plan,” “predict,” “project,” “will,”
“continue” and other similar terms and phrases, including
references to assumptions and forecasts of future results.
Forward-looking statements are not guarantees of future performance
and involve known and unknown risks, uncertainties and other
factors which may cause the actual results to differ materially
from those anticipated at the time the forward-looking statements
are made. These risks include, but are not limited to: the duration
and scope of the COVID-19 pandemic and its short and longer-term
impact on the demand for travel, transient and group business, and
levels of consumer confidence; actions governments, businesses and
individuals take in response to the pandemic, including limiting or
banning travel; the impact of the pandemic and actions taken in
response to the pandemic on global and regional economies, travel,
and economic activity, including the duration and magnitude of its
impact on unemployment rates, business investment and consumer
discretionary spending; the pace of recovery when the COVID-19
pandemic subsides; general economic uncertainty in U.S. markets
where we own hotels and a worsening of economic conditions or low
levels of economic growth in these markets; the effects of steps we
and our hotel managers take to reduce operating costs in response
to the COVID-19 pandemic; other changes (apart from the COVID-19
pandemic) in national and local economic and business conditions
and other factors such as natural disasters and weather that will
affect occupancy rates at our hotels and the demand for hotel
products and services; the impact of geopolitical developments
outside the U.S. on lodging demand; volatility in global financial
and credit markets; operating risks associated with the hotel
business; risks and limitations in our operating flexibility
associated with the level of our indebtedness and our ability to
meet covenants in our debt agreements; risks associated with our
relationships with property managers and joint venture partners;
our ability to maintain our properties in a first-class manner,
including meeting capital expenditure requirements; the effects of
hotel renovations on our hotel occupancy and financial results; our
ability to compete effectively in areas such as access, location,
quality of accommodations and room rate structures; risks
associated with our ability to complete acquisitions and
dispositions and develop new properties and the risks that
acquisitions and new developments may not perform in accordance
with our expectations; our ability to continue to satisfy complex
rules in order for us to remain a REIT for federal income tax
purposes; risks associated with our ability to effectuate our
dividend policy, including factors such as operating results and
the economic outlook influencing our board’s decision whether to
pay further dividends at levels previously disclosed or to use
available cash to make special dividends; and other risks and
uncertainties associated with our business described in the
Company’s annual report on Form 10-K, quarterly reports on Form
10-Q and current reports on Form 8-K filed with the SEC. Although
the Company believes the expectations reflected in such
forward-looking statements are based upon reasonable assumptions,
it can give no assurance that the expectations will be attained or
that any deviation will not be material. All information in this
release is as of May 7, 2020 and the Company undertakes no
obligation to update any forward-looking statement to conform the
statement to actual results or changes in the Company’s
expectations.
* This press
release contains registered trademarks that are the exclusive
property of their respective owners. None of the owners of these
trademarks has any responsibility or liability for any information
contained in this press release.
*** Tables to Follow ***
Host Hotels & Resorts, Inc., herein
referred to as “we,” “Host Inc.,” or the “Company,” is a
self-managed and self-administered real estate investment trust
that owns hotel properties. We conduct our operations as an
umbrella partnership REIT through an operating partnership, Host
Hotels & Resorts, L.P. (“Host LP”), of which we are the
sole general partner. When distinguishing between Host Inc. and
Host LP, the primary difference is approximately 1% of the
partnership interests in Host LP held by outside partners as of
March 31, 2020, which is non-controlling interests in Host LP
in our consolidated balance sheets and is included in net income
attributable to non-controlling interests in our consolidated
statements of operations. Readers are encouraged to find further
detail regarding our organizational structure in our annual report
on Form 10-K.
HOST HOTELS & RESORTS,
INC.Condensed Consolidated Balance
Sheets(unaudited, in millions, except shares and per share
amounts)
|
|
March 31, 2020 |
|
|
December 31, 2019 |
|
|
|
|
|
|
|
|
|
|
ASSETS |
|
Property and equipment,
net |
|
$ |
9,628 |
|
|
$ |
9,671 |
|
Right-of-use assets |
|
|
598 |
|
|
|
595 |
|
Due from managers |
|
|
37 |
|
|
|
63 |
|
Advances to and investments in
affiliates |
|
|
61 |
|
|
|
56 |
|
Furniture, fixtures and
equipment replacement fund |
|
|
165 |
|
|
|
176 |
|
Other |
|
|
161 |
|
|
|
171 |
|
Cash and cash equivalents |
|
|
2,796 |
|
|
|
1,573 |
|
Total assets |
|
$ |
13,446 |
|
|
$ |
12,305 |
|
|
|
|
|
|
|
|
|
|
LIABILITIES, NON-CONTROLLING INTERESTS AND
EQUITY |
|
Debt (1)(2) |
|
|
|
|
|
|
|
|
Senior notes |
|
$ |
2,777 |
|
|
$ |
2,776 |
|
Credit facility, including the term loans of $997 |
|
|
2,489 |
|
|
|
989 |
|
Other debt |
|
|
29 |
|
|
|
29 |
|
Total debt |
|
|
5,295 |
|
|
|
3,794 |
|
Lease liabilities |
|
|
609 |
|
|
|
606 |
|
Accounts payable and accrued
expenses |
|
|
222 |
|
|
|
263 |
|
Other |
|
|
166 |
|
|
|
175 |
|
Total liabilities |
|
|
6,292 |
|
|
|
4,838 |
|
|
|
|
|
|
|
|
|
|
Redeemable non-controlling
interests - Host Hotels & Resorts, L.P |
|
|
84 |
|
|
|
142 |
|
|
|
|
|
|
|
|
|
|
Host Hotels & Resorts,
Inc. stockholders’ equity: |
|
|
|
|
|
|
|
|
Common stock, par value $.01, 1,050 million shares
authorized, 704.9 million shares and 713.4 million shares
issued and outstanding, respectively |
|
|
7 |
|
|
|
7 |
|
Additional paid-in capital |
|
|
7,580 |
|
|
|
7,675 |
|
Accumulated other comprehensive loss |
|
|
(72 |
) |
|
|
(56 |
) |
Deficit |
|
|
(451 |
) |
|
|
(307 |
) |
Total equity of Host Hotels & Resorts, Inc. stockholders |
|
|
7,064 |
|
|
|
7,319 |
|
Non-redeemable non-controlling
interests—other consolidated partnerships |
|
|
6 |
|
|
|
6 |
|
Total equity |
|
|
7,070 |
|
|
|
7,325 |
|
Total liabilities, non-controlling interests and equity |
|
$ |
13,446 |
|
|
$ |
12,305 |
|
___________(1) Please see our First
Quarter 2020 Supplemental Financial Information for more detail on
our debt balances and financial covenant ratios under our credit
facility and senior notes indentures.(2) We are currently in
compliance with all our debt covenants and expect to remain so
through the second quarter of 2020. Additionally, absent a breach
of credit facility covenants, described below, we believe we have
sufficient liquidity to fund cash flow shortfalls through the next
twelve months. We also have no significant debt maturities until
2023. However, due to the current level of operations, we believe
that it is probable we would breach certain of our credit facility
covenants based on third quarter of 2020 results. Therefore, we are
currently in discussions with the lenders under our credit facility
to seek a waiver from these covenants. We note that over the past
month several other companies in the lodging industry have already
negotiated waivers under their agreements and have obtained, among
other terms, waiver of their covenants for 12 months. Any covenant
waiver may lead to increased costs, increased interest rates,
additional restrictive covenants and other lender protections. If
we were not able to obtain a waiver and an event of default were to
occur, this could lead to the potential acceleration of amounts due
under the credit facility as well as our senior notes.
Notwithstanding our belief that we will be successful in obtaining
a waiver under the credit facility, we continue to have ample
access to other sources of liquidity including $2.5 billion of
available cash as of April 30, 2020, access to capital markets, or
we could choose to raise cash by selling hotel properties, although
there can be no assurances we would be successful on terms
favorable to us.
Management’s primary mitigation plan to avoid a
default under its credit facility is to obtain a waiver from its
creditors. There can be no assurance that we will be able to obtain
a waiver in a timely manner, or on acceptable terms, if at all. The
failure to obtain a waiver, or otherwise repay the debt, could lead
to an event of default which would have a material adverse effect
on our financial condition, which gives rise to substantial doubt
about our ability to continue as a going concern.
HOST HOTELS & RESORTS,
INC.Condensed Consolidated Statements of
Operations(unaudited, in millions, except per share
amounts)
|
|
Quarter ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
Revenues |
|
|
|
|
|
|
|
|
Rooms |
|
$ |
626 |
|
|
$ |
857 |
|
Food and beverage |
|
|
330 |
|
|
|
433 |
|
Other |
|
|
96 |
|
|
|
100 |
|
Total revenues |
|
|
1,052 |
|
|
|
1,390 |
|
Expenses |
|
|
|
|
|
|
|
|
Rooms |
|
|
187 |
|
|
|
217 |
|
Food and beverage |
|
|
245 |
|
|
|
285 |
|
Other departmental and support expenses |
|
|
319 |
|
|
|
327 |
|
Management fees |
|
|
30 |
|
|
|
54 |
|
Other property-level expenses |
|
|
93 |
|
|
|
92 |
|
Depreciation and amortization |
|
|
164 |
|
|
|
170 |
|
Corporate and other expenses(1) |
|
|
25 |
|
|
|
29 |
|
Total operating costs and expenses |
|
|
1,063 |
|
|
|
1,174 |
|
Operating profit
(loss) |
|
|
(11 |
) |
|
|
216 |
|
Interest income |
|
|
6 |
|
|
|
8 |
|
Interest expense |
|
|
(37 |
) |
|
|
(43 |
) |
Other gains/(losses) |
|
|
(1 |
) |
|
|
5 |
|
Loss on foreign currency
transactions and derivatives |
|
|
(1 |
) |
|
|
— |
|
Equity in earnings of
affiliates |
|
|
4 |
|
|
|
5 |
|
Income (loss) before
income taxes |
|
|
(40 |
) |
|
|
191 |
|
Benefit (provision) for income
taxes |
|
|
37 |
|
|
|
(2 |
) |
Net income
(loss) |
|
|
(3 |
) |
|
|
189 |
|
Less: Net
income attributable to non-controlling interests |
|
|
— |
|
|
|
(3 |
) |
Net income (loss)
attributable to Host Inc. |
|
$ |
(3 |
) |
|
$ |
186 |
|
Basic and diluted
earnings per common share |
|
$ |
— |
|
|
$ |
.25 |
|
___________(1) Corporate and other
expenses include the following items:
|
|
Quarter endedMarch 31, |
|
|
|
2020 |
|
|
2019 |
|
General and administrative costs |
|
$ |
22 |
|
|
$ |
25 |
|
Non-cash stock-based
compensation expense |
|
|
3 |
|
|
|
4 |
|
Total |
|
$ |
25 |
|
|
$ |
29 |
|
|
|
|
|
|
|
|
|
|
HOST HOTELS & RESORTS,
INC.Earnings per Common Share(unaudited,
in millions, except per share amounts)
|
|
Quarter ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
Net income (loss) |
|
$ |
(3 |
) |
|
$ |
189 |
|
Less: Net income attributable to non-controlling interests |
|
|
— |
|
|
|
(3 |
) |
Net income (loss) attributable
to Host Inc. |
|
$ |
(3 |
) |
|
$ |
186 |
|
|
|
|
|
|
|
|
|
|
Basic weighted average shares
outstanding |
|
|
708.1 |
|
|
|
740.6 |
|
Assuming distribution of common shares granted under the
comprehensive stock plans, less shares assumed purchased at
market |
|
|
— |
|
|
|
.2 |
|
Diluted weighted average
shares outstanding (1) |
|
|
708.1 |
|
|
|
740.8 |
|
Basic and diluted earnings per
common share |
|
$ |
— |
|
|
$ |
.25 |
|
___________(1) Dilutive securities may include shares
granted under comprehensive stock plans, preferred operating
partnership units (“OP Units”) held by minority partners and other
non-controlling interests that have the option to convert their
limited partnership interests to common OP Units. No effect is
shown for any securities that were anti-dilutive for the
period.
HOST HOTELS & RESORTS,
INC.Hotel Operating Data for Consolidated Hotels
(1)(2)
All Owned Hotels (pro forma) by Location in Constant
US$
|
|
As of March 31, 2020 |
|
Quarter ended March 31, 2020 |
|
Quarter ended March 31, 2019 |
|
|
|
|
|
|
Location |
|
No. ofProperties |
|
No. ofRooms |
|
AverageRoom Rate |
|
AverageOccupancyPercentage |
|
RevPAR |
|
Total RevPAR |
|
AverageRoom Rate |
|
AverageOccupancyPercentage |
|
RevPAR |
|
Total RevPAR |
|
PercentChange inRevPAR |
|
PercentChange inTotal RevPAR |
Maui/Oahu |
|
4 |
|
1,983 |
|
$ |
469.81 |
|
74.5 |
% |
|
$ |
350.05 |
|
$ |
513.46 |
|
$ |
437.66 |
|
89.0 |
% |
|
$ |
389.36 |
|
$ |
584.39 |
|
(10.1 |
)% |
|
(12.1 |
)% |
Miami |
|
3 |
|
1,276 |
|
|
443.30 |
|
70.9 |
|
|
|
314.11 |
|
|
498.35 |
|
|
408.86 |
|
85.9 |
|
|
|
351.13 |
|
|
522.30 |
|
(10.5 |
) |
|
(4.6 |
) |
Florida Gulf Coast |
|
5 |
|
1,841 |
|
|
430.81 |
|
70.8 |
|
|
|
305.01 |
|
|
619.05 |
|
|
439.30 |
|
83.1 |
|
|
|
364.98 |
|
|
702.94 |
|
(16.4 |
) |
|
(11.9 |
) |
Phoenix |
|
3 |
|
1,654 |
|
|
369.52 |
|
67.1 |
|
|
|
248.11 |
|
|
552.93 |
|
|
373.48 |
|
82.7 |
|
|
|
308.80 |
|
|
644.54 |
|
(19.7 |
) |
|
(14.2 |
) |
Jacksonville |
|
1 |
|
446 |
|
|
363.41 |
|
57.0 |
|
|
|
207.28 |
|
|
466.16 |
|
|
367.78 |
|
78.6 |
|
|
|
289.04 |
|
|
690.11 |
|
(28.3 |
) |
|
(32.5 |
) |
San Francisco/San Jose |
|
7 |
|
4,528 |
|
|
295.37 |
|
59.3 |
|
|
|
175.08 |
|
|
254.37 |
|
|
305.80 |
|
77.3 |
|
|
|
236.51 |
|
|
330.84 |
|
(26.0 |
) |
|
(23.1 |
) |
San Diego |
|
3 |
|
3,288 |
|
|
244.32 |
|
61.2 |
|
|
|
149.44 |
|
|
291.18 |
|
|
252.91 |
|
76.9 |
|
|
|
194.59 |
|
|
349.55 |
|
(23.2 |
) |
|
(16.7 |
) |
Los Angeles |
|
4 |
|
1,726 |
|
|
217.17 |
|
68.7 |
|
|
|
149.12 |
|
|
221.85 |
|
|
223.86 |
|
86.5 |
|
|
|
193.59 |
|
|
289.21 |
|
(23.0 |
) |
|
(23.3 |
) |
New Orleans |
|
1 |
|
1,333 |
|
|
202.36 |
|
65.3 |
|
|
|
132.09 |
|
|
197.80 |
|
|
209.79 |
|
81.6 |
|
|
|
171.18 |
|
|
249.87 |
|
(22.8 |
) |
|
(20.8 |
) |
Washington, D.C. (CBD) |
|
5 |
|
3,238 |
|
|
230.32 |
|
54.0 |
|
|
|
124.28 |
|
|
183.71 |
|
|
247.89 |
|
73.3 |
|
|
|
181.79 |
|
|
257.64 |
|
(31.6 |
) |
|
(28.7 |
) |
New York |
|
3 |
|
4,261 |
|
|
220.61 |
|
56.1 |
|
|
|
123.75 |
|
|
197.15 |
|
|
236.38 |
|
72.0 |
|
|
|
170.27 |
|
|
267.69 |
|
(27.3 |
) |
|
(26.4 |
) |
Orlando |
|
1 |
|
2,004 |
|
|
215.31 |
|
57.1 |
|
|
|
123.02 |
|
|
288.47 |
|
|
208.20 |
|
79.0 |
|
|
|
164.41 |
|
|
385.22 |
|
(25.2 |
) |
|
(25.1 |
) |
Atlanta |
|
4 |
|
1,682 |
|
|
192.55 |
|
63.1 |
|
|
|
121.49 |
|
|
196.11 |
|
|
227.57 |
|
76.7 |
|
|
|
174.60 |
|
|
272.88 |
|
(30.4 |
) |
|
(28.1 |
) |
Orange County |
|
2 |
|
925 |
|
|
197.46 |
|
58.4 |
|
|
|
115.30 |
|
|
202.33 |
|
|
201.08 |
|
79.0 |
|
|
|
158.85 |
|
|
269.03 |
|
(27.4 |
) |
|
(24.8 |
) |
Philadelphia |
|
2 |
|
810 |
|
|
173.70 |
|
62.8 |
|
|
|
109.04 |
|
|
180.62 |
|
|
190.16 |
|
78.1 |
|
|
|
148.48 |
|
|
242.24 |
|
(26.6 |
) |
|
(25.4 |
) |
Northern Virginia |
|
3 |
|
1,252 |
|
|
206.66 |
|
52.7 |
|
|
|
108.90 |
|
|
180.68 |
|
|
210.16 |
|
65.7 |
|
|
|
138.09 |
|
|
239.65 |
|
(21.1 |
) |
|
(24.6 |
) |
Houston |
|
4 |
|
1,716 |
|
|
175.23 |
|
61.3 |
|
|
|
107.38 |
|
|
162.63 |
|
|
182.60 |
|
75.8 |
|
|
|
138.36 |
|
|
201.04 |
|
(22.4 |
) |
|
(19.1 |
) |
Seattle |
|
2 |
|
1,315 |
|
|
193.42 |
|
54.0 |
|
|
|
104.51 |
|
|
149.34 |
|
|
194.12 |
|
77.4 |
|
|
|
150.15 |
|
|
203.91 |
|
(30.4 |
) |
|
(26.8 |
) |
Boston |
|
3 |
|
2,715 |
|
|
177.13 |
|
53.0 |
|
|
|
93.85 |
|
|
141.90 |
|
|
190.33 |
|
69.4 |
|
|
|
132.03 |
|
|
196.44 |
|
(28.9 |
) |
|
(27.8 |
) |
Denver |
|
3 |
|
1,340 |
|
|
161.52 |
|
50.1 |
|
|
|
80.92 |
|
|
125.09 |
|
|
161.82 |
|
64.7 |
|
|
|
104.75 |
|
|
158.27 |
|
(22.7 |
) |
|
(21.0 |
) |
San Antonio |
|
2 |
|
1,512 |
|
|
186.32 |
|
43.0 |
|
|
|
80.16 |
|
|
122.14 |
|
|
196.01 |
|
77.4 |
|
|
|
151.75 |
|
|
229.98 |
|
(47.2 |
) |
|
(46.9 |
) |
Chicago |
|
4 |
|
1,816 |
|
|
142.48 |
|
47.5 |
|
|
|
67.69 |
|
|
95.61 |
|
|
148.27 |
|
60.4 |
|
|
|
89.50 |
|
|
128.94 |
|
(24.4 |
) |
|
(25.8 |
) |
Other |
|
6 |
|
2,509 |
|
|
166.44 |
|
57.3 |
|
|
|
95.36 |
|
|
134.38 |
|
|
168.26 |
|
73.1 |
|
|
|
122.94 |
|
|
175.07 |
|
(22.4 |
) |
|
(23.2 |
) |
Domestic |
|
75 |
|
45,170 |
|
|
253.53 |
|
59.1 |
|
|
|
149.75 |
|
|
250.37 |
|
|
256.56 |
|
76.2 |
|
|
|
195.38 |
|
|
316.95 |
|
(23.4 |
) |
|
(21.0 |
) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
International |
|
5 |
|
1,499 |
|
|
138.21 |
|
53.3 |
|
|
|
73.70 |
|
|
106.43 |
|
|
134.63 |
|
67.6 |
|
|
|
91.07 |
|
|
132.89 |
|
(19.1 |
) |
|
(19.9 |
) |
All Locations - Constant US$ |
|
80 |
|
46,669 |
|
|
250.18 |
|
58.9 |
|
|
|
147.31 |
|
|
245.75 |
|
|
253.07 |
|
75.9 |
|
|
|
192.03 |
|
|
311.04 |
|
(23.3 |
) |
|
(21.0 |
) |
All Owned Hotels (pro forma) in Nominal US$
|
|
As of March 31, 2020 |
|
Quarter ended March 31, 2020 |
|
Quarter ended March 31, 2019 |
|
|
|
|
|
|
|
|
No. ofProperties |
|
No. ofRooms |
|
AverageRoom Rate |
|
AverageOccupancyPercentage |
|
RevPAR |
|
Total RevPAR |
|
AverageRoom Rate |
|
AverageOccupancyPercentage |
|
RevPAR |
|
Total RevPAR |
|
Percent Change inRevPAR |
|
PercentChange inTotal RevPAR |
International |
|
5 |
|
1,499 |
|
$ |
138.21 |
|
53.3 |
% |
|
$ |
73.70 |
|
$ |
106.43 |
|
$ |
143.88 |
|
67.6 |
% |
|
$ |
97.32 |
|
$ |
140.81 |
|
(24.3 |
)% |
|
(24.4 |
)% |
Domestic |
|
75 |
|
45,170 |
|
|
253.53 |
|
59.1 |
|
|
|
149.75 |
|
|
250.37 |
|
|
256.56 |
|
76.2 |
|
|
|
195.38 |
|
|
316.95 |
|
(23.4 |
) |
|
(21.0 |
) |
All Locations |
|
80 |
|
46,669 |
|
|
250.18 |
|
58.9 |
|
|
|
147.31 |
|
|
245.75 |
|
|
253.34 |
|
75.9 |
|
|
|
192.23 |
|
|
311.30 |
|
(23.4 |
) |
|
(21.1 |
) |
___________(1) To facilitate a
quarter-to-quarter comparison of our operations, we typically
present certain operating statistics and operating results for the
periods included in this presentation on a comparable hotel basis.
However, due to the COVID-19 pandemic and its effects on operations
there is little comparability between periods. For this reason we
are revising our presentation to instead present hotel operating
results for all consolidated hotels and, to facilitate comparisons
between periods, we are presenting results on a pro forma basis
including the following adjustments: (1) operating results are
presented for all consolidated properties owned as of March 31,
2020 but do not include the results of operations for properties
sold in 2019; and (2) operating results for acquisitions in the
current and prior year are reflected for full calendar years, to
include results for periods prior to our ownership. For these
hotels, since the year-over-year comparison includes periods prior
to our ownership, the changes will not necessarily correspond to
changes in our actual results. See the Notes to Financial
Information – All Owned Hotel Operating Statistics and Results for
further information on these pro forma statistics and – Constant
US$ and Nominal US$ for a discussion on constant US$ presentation.
Nominal US$ results include the effect of currency fluctuations,
consistent with our financial statement presentation. CBD of a
location refers to the central business
district.(2) Hotel RevPAR is calculated as room revenues
divided by the available room nights. Hotel Total RevPAR is
calculated by dividing the sum of rooms, food and beverage and
other revenues by the available room nights.
HOST HOTELS & RESORTS,
INC. Schedule of All Owned Hotel
Pro Forma Results (1)(unaudited, in millions, except hotel
statistics)
|
|
Quarter ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
Number of hotels |
|
|
80 |
|
|
|
80 |
|
Number of rooms |
|
|
46,669 |
|
|
|
46,669 |
|
Change in hotel Total RevPAR
- |
|
|
|
|
|
|
|
|
Constant US$ |
|
|
(21.0 |
)% |
|
|
— |
|
Nominal US$ |
|
|
(21.1 |
)% |
|
|
— |
|
Change in hotel RevPAR - |
|
|
|
|
|
|
|
|
Constant US$ |
|
|
(23.3 |
)% |
|
|
— |
|
Nominal US$ |
|
|
(23.4 |
)% |
|
|
— |
|
Operating profit (loss) margin
(2) |
|
|
(1.0 |
)% |
|
|
15.5 |
% |
All Owned Hotel Pro Forma
EBITDA margin (2) |
|
|
16.9 |
% |
|
|
30.4 |
% |
Food and beverage profit
margin (2) |
|
|
25.8 |
% |
|
|
34.2 |
% |
All Owned Hotel Pro Forma food
and beverage profit margin (2) |
|
|
25.8 |
% |
|
|
34.4 |
% |
|
|
|
|
|
|
|
|
|
Net income
(loss) |
|
$ |
(3 |
) |
|
$ |
189 |
|
Depreciation and
amortization |
|
|
164 |
|
|
|
170 |
|
Interest expense |
|
|
37 |
|
|
|
43 |
|
Provision (benefit) for income
taxes |
|
|
(37 |
) |
|
|
2 |
|
Gain on sale of property and
corporate level income/expense |
|
|
17 |
|
|
|
11 |
|
Pro forma adjustments (3) |
|
|
— |
|
|
|
(15 |
) |
All Owned Hotel Pro
Forma EBITDA |
|
$ |
178 |
|
|
$ |
400 |
|
|
|
Quarter ended March 31, 2020 |
|
|
Quarter ended March 31, 2019 |
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
|
|
|
Adjustments |
|
|
|
|
|
|
|
GAAP Results |
|
|
Depreciation and corporate level items |
|
|
All Owned Hotel Pro Forma
Results(3) |
|
|
GAAP Results |
|
|
Pro forma adjustments(3) |
|
|
Depreciation and corporate level items |
|
|
All Owned Hotel Pro Forma
Results(3) |
|
Revenues |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room |
|
$ |
626 |
|
|
$ |
— |
|
|
$ |
626 |
|
|
$ |
857 |
|
|
$ |
(49 |
) |
|
$ |
— |
|
|
$ |
808 |
|
Food and beverage |
|
|
330 |
|
|
|
— |
|
|
|
330 |
|
|
|
433 |
|
|
|
(20 |
) |
|
|
— |
|
|
|
413 |
|
Other |
|
|
96 |
|
|
|
— |
|
|
|
96 |
|
|
|
100 |
|
|
|
(7 |
) |
|
|
— |
|
|
|
93 |
|
Total revenues |
|
|
1,052 |
|
|
|
— |
|
|
|
1,052 |
|
|
|
1,390 |
|
|
|
(76 |
) |
|
|
— |
|
|
|
1,314 |
|
Expenses |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Room |
|
|
187 |
|
|
|
— |
|
|
|
187 |
|
|
|
217 |
|
|
|
(14 |
) |
|
|
— |
|
|
|
203 |
|
Food and beverage |
|
|
245 |
|
|
|
— |
|
|
|
245 |
|
|
|
285 |
|
|
|
(14 |
) |
|
|
— |
|
|
|
271 |
|
Other |
|
|
442 |
|
|
|
— |
|
|
|
442 |
|
|
|
473 |
|
|
|
(33 |
) |
|
|
— |
|
|
|
440 |
|
Depreciation and amortization |
|
|
164 |
|
|
|
(164 |
) |
|
|
— |
|
|
|
170 |
|
|
|
— |
|
|
|
(170 |
) |
|
|
— |
|
Corporate and other expenses |
|
|
25 |
|
|
|
(25 |
) |
|
|
— |
|
|
|
29 |
|
|
|
— |
|
|
|
(29 |
) |
|
|
— |
|
Total expenses |
|
|
1,063 |
|
|
|
(189 |
) |
|
|
874 |
|
|
|
1,174 |
|
|
|
(61 |
) |
|
|
(199 |
) |
|
|
914 |
|
Operating Profit
(Loss) – All Owned Hotel Pro
Forma EBITDA |
|
$ |
(11 |
) |
|
$ |
189 |
|
|
$ |
178 |
|
|
$ |
216 |
|
|
$ |
(15 |
) |
|
$ |
199 |
|
|
$ |
400 |
|
___________(1) See the Notes to Financial
Information for a discussion of non-GAAP measures and the
calculation of all owned hotel pro forma results, including the
limitations on their use. For additional information on hotel
EBITDA by location, see the First Quarter 2020 Supplemental
Financial Information posted on our website.(2) Profit
margins are calculated by dividing the applicable operating profit
by the related revenue amount. GAAP profit margins are calculated
using amounts presented in the condensed consolidated statements of
operations. Hotel margins are calculated using amounts presented in
the above tables.(3) Pro forma adjustments represent the
following items: (i) the elimination of results of operations of
our sold hotels, which operations are included in our condensed
consolidated statements of operations as continuing operations and
(ii) the addition of results for periods prior to our ownership for
hotels acquired during the presented periods. For this
presentation, we no longer adjust for certain items such as gains
on insurance settlements, the results of our leased office
buildings and other non-hotel revenue and expense items, and they
are included in the All Owned Hotel Pro Forma results.
HOST HOTELS & RESORTS,
INC.Reconciliation of Net Income (Loss)
toEBITDA, EBITDAre and Adjusted EBITDAre
(1)(unaudited, in millions)
|
|
Quarter ended March 31, |
|
|
|
2020 |
|
|
2019 |
|
Net income (loss) |
|
$ |
(3 |
) |
|
$ |
189 |
|
Interest expense |
|
|
37 |
|
|
|
43 |
|
Depreciation and amortization |
|
|
164 |
|
|
|
170 |
|
Income taxes |
|
|
(37 |
) |
|
|
2 |
|
EBITDA |
|
|
161 |
|
|
|
404 |
|
(Gain) loss on dispositions (2) |
|
|
1 |
|
|
|
(2 |
) |
Equity investment adjustments: |
|
|
|
|
|
|
|
|
Equity in earnings of affiliates |
|
|
(4 |
) |
|
|
(5 |
) |
Pro rata EBITDAre of equity investments |
|
|
6 |
|
|
|
9 |
|
EBITDAre and Adjusted
EBITDAre |
|
$ |
164 |
|
|
$ |
406 |
|
___________(1) See the Notes to Financial
Information for discussion of non-GAAP measures. (2)
Reflects the sale of one hotel in 2019.
HOST HOTELS & RESORTS,
INC.Reconciliation of Diluted Earnings per Common
Share toNAREIT and Adjusted Funds From Operations
per Diluted Share (1)(unaudited, in
millions, except per share amounts)
|
|
Quarter endedMarch 31, |
|
|
|
2020 |
|
|
2019 |
|
Net income (loss) |
|
$ |
(3 |
) |
|
$ |
189 |
|
Less: Net income attributable to non-controlling interests |
|
|
— |
|
|
|
(3 |
) |
Net income (loss)
attributable to Host Inc. |
|
|
(3 |
) |
|
|
186 |
|
Adjustments: |
|
|
|
|
|
|
|
|
(Gain) loss on dispositions (2) |
|
|
1 |
|
|
|
(2 |
) |
Depreciation and amortization |
|
|
164 |
|
|
|
169 |
|
Equity investment adjustments: |
|
|
|
|
|
|
|
|
Equity in earnings of affiliates |
|
|
(4 |
) |
|
|
(5 |
) |
Pro rata FFO of equity investments |
|
|
4 |
|
|
|
9 |
|
Consolidated partnership adjustments: |
|
|
|
|
|
|
|
|
FFO adjustment for non-controlling partnerships |
|
|
— |
|
|
|
1 |
|
FFO adjustments for non-controlling interests of Host L.P. |
|
|
(2 |
) |
|
|
(2 |
) |
NAREIT FFO and
Adjusted FFO |
|
$ |
160 |
|
|
$ |
356 |
|
|
|
|
|
|
|
|
|
|
For calculation on a
per share basis (3): |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Diluted weighted
average shares outstanding - EPS |
|
|
708.1 |
|
|
|
740.8 |
|
Assuming issuance of common shares granted under the
comprehensive stock plans |
|
|
0.4 |
|
|
|
— |
|
Diluted weighted
average shares outstanding - NAREIT FFO and
Adjusted FFO |
|
|
708.5 |
|
|
|
740.8 |
|
Diluted earnings per
common share |
|
$ |
— |
|
|
$ |
.25 |
|
NAREIT FFO and
Adjusted FFO per diluted share |
|
$ |
.23 |
|
|
$ |
.48 |
|
___________(1-2) Refer to the
corresponding footnote on the Reconciliation of Net Income (Loss)
to EBITDA, EBITDAre and Adjusted EBITDAre.(3) Diluted
earnings per common share, NAREIT FFO per diluted share and
Adjusted FFO per diluted share are adjusted for the effects of
dilutive securities. Dilutive securities may include shares granted
under comprehensive stock plans, preferred OP units held by
non-controlling partners and other non-controlling interests that
have the option to convert their limited partnership interests to
common OP units. No effect is shown for securities if they are
anti-dilutive.
HOST HOTELS & RESORTS,
INC.Notes to Financial Information
All Owned Hotel Operating Statistics and
Results
To facilitate a quarter-to-quarter comparison of
our operations, we typically present certain operating statistics
and operating results for the periods included in this presentation
on a comparable hotel basis (discussed in Comparable Hotel
Operating Statistics below). However, due to the COVID-19 pandemic
and its effects on operations there is little comparability between
periods. For this reason we are temporarily suspending our
comparable hotel presentation and instead present hotel operating
results for all consolidated hotels and, to facilitate comparisons
between periods, we are presenting results on a pro forma basis
including the following adjustments: (1) operating results are
presented for all consolidated properties owned as of March 31,
2020 but do not include the results of operations for properties
sold in 2019; and (2) operating results for acquisitions in the
current and prior year are reflected for full calendar years, to
include results for periods prior to our ownership. For these
hotels, since the year-over-year comparison includes periods prior
to our ownership, the changes will not necessarily correspond to
changes in our actual results.
Comparable Hotel Operating
Statistics
The following discusses our typical presentation
of comparable hotels; however, this method is not being used in the
current presentation due to the impact of COVID-19:
To facilitate a quarter-to-quarter comparison of
our operations, we typically present certain operating statistics
(i.e., Total RevPAR, RevPAR, average daily rate and average
occupancy) and operating results (revenues, expenses, hotel EBITDA
and associated margins) for the periods included in this report on
a comparable hotel basis in order to enable our investors to better
evaluate our operating performance.
We define our comparable hotels as
properties:
- that are owned or leased by us at
the end of the reporting periods being compared; and
- that have not sustained substantial
property damage or business interruption, or undergone large-scale
capital projects (as further defined below) during the reporting
periods being compared.
The hotel business is capital-intensive and
renovations are a regular part of the business. Generally, hotels
under renovation remain comparable hotels. A large scale capital
project that would cause a hotel to be excluded from our comparable
hotel set is an extensive renovation of several core aspects of the
hotel, such as rooms, meeting space, lobby, bars, restaurants and
other public spaces. Both quantitative and qualitative factors are
taken into consideration in determining if the renovation would
cause a hotel to be removed from the comparable hotel set,
including unusual or exceptional circumstances such as: a reduction
or increase in room count, rebranding, a significant alteration of
the business operations, or the closing of the hotel during the
renovation.
Historically, we have not included an acquired
hotel in our comparable hotel set until the operating results for
that hotel have been included in our consolidated results for one
full calendar year. For example, we acquired the 1 Hotel South
Beach in February 2019 and therefore it was not included in our
comparable hotels for 2019. We are, however, making a change to
this policy going forward, which is explained below under “2020
Comparable Hotel Definition Change.”
Hotels that we sell are excluded from the
comparable hotel set once the transaction has closed. Similarly,
hotels are excluded from our comparable hotel set from the date
that they sustain substantial property damage or business
interruption or commence a large-scale capital project. In each
case, these hotels are returned to the comparable hotel set when
the operations of the hotel have been included in our consolidated
results for one full calendar year after completion of the repair
of the property damage or cessation of the business interruption,
or the completion of large-scale capital projects, as
applicable.
2020 Comparable Hotel Definition Change
Effective January 1, 2020, the Company adjusted
its definition of comparable hotels to include recent acquisitions
on a pro forma basis assuming they have comparable operating
environments. Operating results for acquisitions in the current and
prior year will be reflected for full calendar years, to include
results for periods prior to Company ownership. Management believes
this will provide investors a better understanding of underlying
growth trends for the Company’s current portfolio. As a result, the
1 Hotel South Beach would be included in the comparable hotel set
for the quarter ended March 31, 2020.
Constant US$ and
Nominal US$
Operating results denominated in foreign
currencies are translated using the prevailing exchange rates on
the date of the transaction, or monthly based on the weighted
average exchange rate for the period. For comparative purposes, we
also present the RevPAR results for the prior year assuming the
results of our foreign operations were translated using the same
exchange rates that were effective for the comparable periods in
the current year, thereby eliminating the effect of currency
fluctuation for the year-over-year comparisons. For the full year
forecast results, we use the applicable forward currency curve (as
published by Bloomberg L.P.) for each monthly period to estimate
forecast foreign operations in U.S. dollars and have restated the
prior year RevPAR results using the same forecast exchange rates to
estimate year-over-year growth in RevPAR in constant US$. We
believe this presentation is useful to investors as it provides
clarity with respect to growth in RevPAR in the local currency of
the hotel consistent with the way we would evaluate our domestic
portfolio. However, the estimated effect of changes in foreign
currency has been reflected in the actual and forecast results of
net income, EBITDA, Adjusted EBITDAre, diluted earnings per common
share and Adjusted FFO per diluted share. Nominal US$ results
include the effect of currency fluctuations, consistent with our
financial statement presentation.
Non-GAAP Financial Measures
Included in this press release are certain
“non-GAAP financial measures,” which are measures of our historical
or future financial performance that are not calculated and
presented in accordance with GAAP, within the meaning of applicable
SEC rules. They are as follows: (i) FFO and FFO per diluted
share (both NAREIT and Adjusted), (ii) EBITDA,
(iii) EBITDAre and Adjusted EBITDAre and (iv) All Owned
Hotel Property Level Operating Results. The following discussion
defines these measures and presents why we believe they are useful
supplemental measures of our performance.
NAREIT FFO and NAREIT FFO per Diluted Share
We present NAREIT FFO and NAREIT FFO per diluted
share as non-GAAP measures of our performance in addition to our
earnings per share (calculated in accordance with GAAP). We
calculate NAREIT FFO per diluted share as our NAREIT FFO (defined
as set forth below) for a given operating period, as adjusted for
the effect of dilutive securities, divided by the number of fully
diluted shares outstanding during such period, in accordance with
NAREIT guidelines. Effective January 1, 2019, we adopted NAREIT’s
definition of FFO included in NAREIT’s Funds From Operations White
Paper – 2018 Restatement. NAREIT defines FFO as net income
(calculated in accordance with GAAP) excluding depreciation and
amortization related to real estate, gains and losses from the sale
of certain real estate assets, gains and losses from change in
control, impairment write-downs of certain real estate assets and
investments and adjustments for consolidated partially-owned
entities and unconsolidated affiliates. Adjustments for
consolidated partially-owned entities and unconsolidated affiliates
are calculated to reflect our pro rata share of the FFO of those
entities on the same basis.
We believe that NAREIT FFO per diluted share is
a useful supplemental measure of our operating performance and that
the presentation of NAREIT FFO per diluted share, when combined
with the primary GAAP presentation of earnings per share, provides
beneficial information to investors. By excluding the effect of
real estate depreciation, amortization, impairment expense and
gains and losses from sales of depreciable real estate, all of
which are based on historical cost accounting and which may be of
lesser significance in evaluating current performance, we believe
that such measures can facilitate comparisons of operating
performance between periods and with other REITs, even though
NAREIT FFO per diluted share does not represent an amount that
accrues directly to holders of our common stock. Historical cost
accounting for real estate assets implicitly assumes that the value
of real estate assets diminishes predictably over time. As noted by
NAREIT in its Funds From Operations White Paper – 2018 Restatement,
the primary purpose for including FFO as a supplemental measure of
operating performance of a REIT is to address the artificial nature
of historical cost depreciation and amortization of real estate and
real estate-related assets mandated by GAAP. For these reasons,
NAREIT adopted the FFO metric in order to promote a uniform
industry-wide measure of REIT operating performance.
Adjusted FFO per Diluted Share
We also present Adjusted FFO per diluted share
when evaluating our performance because management believes that
the exclusion of certain additional items described below provides
useful supplemental information to investors regarding our ongoing
operating performance. Management historically has made the
adjustments detailed below in evaluating our performance, in our
annual budget process and for our compensation programs. We believe
that the presentation of Adjusted FFO per diluted share, when
combined with both the primary GAAP presentation of earnings per
share and FFO per diluted share as defined by NAREIT, provides
useful supplemental information that is beneficial to an investor’s
understanding of our operating performance. We adjust NAREIT FFO
per diluted share for the following items, which may occur in any
period, and refer to this measure as Adjusted FFO per diluted
share:
- Gains and Losses on the
Extinguishment of Debt – We exclude the effect of finance charges
and premiums associated with the extinguishment of debt, including
the acceleration of the write-off of deferred financing costs from
the original issuance of the debt being redeemed or retired and
incremental interest expense incurred during the refinancing
period. We also exclude the gains on debt repurchases and the
original issuance costs associated with the retirement of preferred
stock. We believe that these items are not reflective of our
ongoing finance costs.
- Acquisition Costs – Under GAAP,
costs associated with completed property acquisitions that are
considered business combinations are expensed in the year incurred.
We exclude the effect of these costs because we believe they are
not reflective of the ongoing performance of the Company.
- Litigation Gains and Losses – We
exclude the effect of gains or losses associated with litigation
recorded under GAAP that we consider outside the ordinary course of
business. We believe that including these items is not consistent
with our ongoing operating performance.
In unusual circumstances, we also may adjust
NAREIT FFO for gains or losses that management believes are not
representative of the Company’s current operating performance. For
example, in 2017, as a result of the reduction of corporate income
tax rates from 35% to 21% caused by the Tax Cuts and Jobs Act, we
remeasured our domestic deferred tax assets as of December 31, 2017
and recorded a one-time adjustment to reduce the deferred tax
assets and increase the provision for income taxes by approximately
$11 million. We do not consider this adjustment to be
reflective of our on-going operating performance and therefore
excluded this item from Adjusted FFO.
EBITDA
Earnings before Interest Expense, Income Taxes,
Depreciation and Amortization (“EBITDA”) is a commonly used measure
of performance in many industries. Management believes EBITDA
provides useful information to investors regarding our results of
operations because it helps us and our investors evaluate the
ongoing operating performance of our properties after removing the
impact of the Company’s capital structure (primarily interest
expense) and its asset base (primarily depreciation and
amortization). Management also believes the use of EBITDA
facilitates comparisons between us and other lodging REITs, hotel
owners that are not REITs and other capital-intensive companies.
Management uses EBITDA to evaluate property-level results and as
one measure in determining the value of acquisitions and
dispositions and, like FFO and Adjusted FFO per diluted share, it
is widely used by management in the annual budget process and for
our compensation programs.
EBITDAre and Adjusted EBITDAre
We present EBITDAre in accordance with NAREIT
guidelines, as defined in its September 2017 white paper “Earnings
Before Interest, Taxes, Depreciation and Amortization for Real
Estate,” to provide an additional performance measure to facilitate
the evaluation and comparison of the Company’s results with other
REITs. NAREIT defines EBITDAre as net income (calculated in
accordance with GAAP) excluding interest expense, income tax,
depreciation and amortization, gains or losses on disposition of
depreciated property (including gains or losses on change of
control), impairment write-downs of depreciated property and of
investments in unconsolidated affiliates caused by a decrease in
value of depreciated property in the affiliate, and adjustments to
reflect the entity’s pro rata share of EBITDAre of unconsolidated
affiliates.
We make additional adjustments to EBITDAre when
evaluating our performance because we believe that the exclusion of
certain additional items described below provides useful
supplemental information to investors regarding our ongoing
operating performance. We believe that the presentation of Adjusted
EBITDAre, when combined with the primary GAAP presentation of net
income, is beneficial to an investor’s understanding of our
operating performance. Adjusted EBITDAre also is similar to the
measure used to calculate certain credit ratios for our credit
facility and senior notes. We adjust EBITDAre for the following
items, which may occur in any period, and refer to this measure as
Adjusted EBITDAre:
- Property Insurance Gains – We
exclude the effect of property insurance gains reflected in our
consolidated statements of operations because we believe that
including them in Adjusted EBITDAre is not consistent with
reflecting the ongoing performance of our assets. In addition,
property insurance gains could be less important to investors given
that the depreciated asset book value written off in connection
with the calculation of the property insurance gain often does not
reflect the market value of real estate assets.
- Acquisition Costs – Under GAAP,
costs associated with completed property acquisitions that are
considered business combinations are expensed in the year incurred.
We exclude the effect of these costs because we believe they are
not reflective of the ongoing performance of the Company.
- Litigation Gains and Losses – We
exclude the effect of gains or losses associated with litigation
recorded under GAAP that we consider outside the ordinary course of
business. We believe that including these items is not consistent
with our ongoing operating performance.
In unusual circumstances, we also may adjust
EBITDAre for gains or losses that management believes are not
representative of the Company’s current operating performance. The
last such adjustment was a 2013 exclusion of a gain from an eminent
domain claim.
Limitations on the Use of NAREIT FFO per Diluted
Share, Adjusted FFO per Diluted Share, EBITDA, EBITDAre and
Adjusted EBITDAre
We calculate NAREIT FFO per diluted share in
accordance with standards established by NAREIT, which may not be
comparable to measures calculated by other companies that do not
use the NAREIT definition of FFO or do not calculate FFO per
diluted share in accordance with NAREIT guidance. In addition,
although FFO per diluted share is a useful measure when comparing
our results to other REITs, it may not be helpful to investors when
comparing us to non-REITs. We also calculate Adjusted FFO per
diluted share, which is not in accordance with NAREIT guidance and
may not be comparable to measures calculated by other REITs.
EBITDA, EBITDAre and Adjusted EBITDAre, as presented, may also not
be comparable to measures calculated by other companies. This
information should not be considered as an alternative to net
income, operating profit, cash from operations or any other
operating performance measure calculated in accordance with GAAP.
Cash expenditures for various long-term assets (such as renewal and
replacement capital expenditures), interest expense (for EBITDA,
EBITDAre and Adjusted EBITDAre purposes only) and other items have
been and will be made and are not reflected in the EBITDA,
EBITDAre, Adjusted EBITDAre, NAREIT FFO per diluted share and
Adjusted FFO per diluted share presentations. Management
compensates for these limitations by separately considering the
impact of these excluded items to the extent they are material to
operating decisions or assessments of our operating performance.
Our consolidated statement of operations and cash flows include
interest expense, capital expenditures, and other excluded items,
all of which should be considered when evaluating our performance,
as well as the usefulness of our non-GAAP financial measures.
Additionally, NAREIT FFO per diluted share, Adjusted FFO per
diluted share, EBITDA, EBITDAre and Adjusted EBITDAre should not be
considered as a measure of our liquidity or indicative of funds
available to fund our cash needs, including our ability to make
cash distributions. In addition, NAREIT FFO per diluted share and
Adjusted FFO per diluted share do not measure, and should not be
used as a measure of, amounts that accrue directly to stockholders’
benefit.
Similarly, EBITDAre, Adjusted EBITDAre, NAREIT
FFO and Adjusted FFO per diluted share include adjustments for the
pro rata share of our equity investments and NAREIT FFO and
Adjusted FFO per diluted share include adjustments for the pro rata
share of non-controlling partners in consolidated partnerships. Our
equity investments consist of interests ranging from 11% to 67% in
seven domestic and international partnerships that own a total of
10 properties and a vacation ownership development. Due to the
voting rights of the outside owners, we do not control and,
therefore, do not consolidate these entities. The non-controlling
partners in consolidated partnerships primarily consist of the
approximate 1% interest in Host LP held by outside partners, and a
15% interest held by outside partners in a partnership owning one
hotel for which we do control the entity and, therefore,
consolidate its operations. These pro rata results for NAREIT FFO
and Adjusted FFO per diluted share, EBITDAre and Adjusted EBITDAre
were calculated as set forth in the definitions above. Readers
should be cautioned that the pro rata results presented in these
measures for consolidated partnerships (for NAREIT FFO and Adjusted
FFO per diluted share) and equity investments may not accurately
depict the legal and economic implications of our investments in
these entities.
Hotel Property Level Operating Results
We present certain operating results for our
hotels, such as hotel revenues, expenses, food and beverage profit,
and EBITDA (and the related margins), on a hotel-level pro forma
basis as supplemental information for our investors. Our hotel
results reflect the operating results of our hotels as discussed in
All Owned Hotel Operating Statistics and Results above. We present
all owned hotel pro forma EBITDA to help us and our investors
evaluate the ongoing operating performance of our properties after
removing the impact of the Company’s capital structure (primarily
interest expense) and its asset base (primarily depreciation and
amortization expense). Corporate-level costs and expenses also are
removed to arrive at property-level results. We believe these
property-level results provide investors with supplemental
information about the ongoing operating performance of our hotels.
All owned hotel pro forma results are presented both by location
and for the Company’s properties in the aggregate. We eliminate
depreciation and amortization expense because, even though
depreciation and amortization expense are property-level expenses,
these non-cash expenses, which are based on historical cost
accounting for real estate assets, implicitly assume that the value
of real estate assets diminishes predictably over time. As noted
earlier, because real estate values have historically risen or
fallen with market conditions, many real estate industry investors
have considered presentation of historical cost accounting for
operating results to be insufficient.
Because of the elimination of corporate-level
costs and expenses, gains or losses on disposition and depreciation
and amortization expense, the hotel operating results we present do
not represent our total revenues, expenses, operating profit or net
income and should not be used to evaluate our performance as a
whole. Management compensates for these limitations by separately
considering the impact of these excluded items to the extent they
are material to operating decisions or assessments of our operating
performance. Our consolidated statements of operations include such
amounts, all of which should be considered by investors when
evaluating our performance.
While management believes that presentation of
all owned hotel results is a measure that provides useful
information in evaluating our ongoing performance, this measure is
not used to allocate resources or to assess the operating
performance of each of these hotels, as these decisions are based
on data for individual hotels and are not based on all owned hotel
results in the aggregate. For these reasons, we believe that all
owned hotel operating results, when combined with the presentation
of GAAP operating profit, revenues and expenses, provide useful
information to investors and management.
Tejal Engman, Vice President240.744.5116
A PDF accompanying this announcement is available
at: http://ml.globenewswire.com/Resource/Download/867c1df7-01ed-4c16-be77-5d0c2792a317
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