Continued hotels reopening and encouraging leisure demand have been sprouting RevPAR and occupancy for Host Hotels & Resorts, Inc. (HST - Free Report) in the third quarter.
In fact, as regulations related to the pandemic eased, the company reopened 19 hotels in July and August. With this, 70 of its 80 consolidated hotels (88% of total room count) are now operating. The company has no intension of additional hotels reopening in September.
Moreover, as of July and August, the hotel REIT had 57 and 66 hotels, respectively, which were open for the entirety of the respective months. For these hotels, average occupancy improved to 17.9% and 22% in July and August, as compared with 16.3% as of June when 45 properties were operating. Moreover, over the same time frame, RevPAR for these properties improved to $32.02 and $35.88 from $29.71. These improvements are likely to aid the company’s top-line performance for the September-end quarter.
Additionally, hotel reopenings have boosted Host Hotels’ total portfolio (80 properties) performance. In fact, total portfolio RevPAR grew at a monthly rate of 10.4% and 33.7% in July and August to $22.9 and $30.7, respectively. Similarly, average occupancy advanced 220 basis points (bps) and 600 bps month over month to 12.9% and 18.9%, respectively, in July and August.
These gains are primarily stimulated by an increase in leisure demand. In fact, strategic leisure portfolio attributes like 98% portfolio affiliation with best-in-class brands and decent presence in strong drive-to leisure demand markets have been supportive in such testing times.
Additionally, in early September, the company issued $750 million of 3.5% senior notes due 2030 and redeemed 81% of 4.750% series C senior notes due 2023, with a total principal amount of $450 million. This facilitated the average debt maturity extension and further strengthened its cash position by $335 million. Moreover, the company projects $2.2 billion of total available liquidity at the 2020 end, if the second half of the ongoing year continues witnessing the same as second-quarter operational performance.
Per management, “we are working with our operators to drive occupancy and increase revenues, reduce costs without impacting the guest experience, and generate higher levels of profitability at lower levels of occupancy. We are confident the steps we are taking will drive value for Host and our stakeholders through the recovery and beyond.”
While an improvement in performance is likely to foster optimism, the current levels of operations are still lower than pre-COVID-19 ones. Moreover, business transient and group demand account for a significant portfolio of the company’s revenues for September and the fourth quarter. Since demand for such travel is currently low, it might affect Host Hotels’ revenues during the said period.
Host Hotels carries a Zacks Rank of 4 (Sell) at present. Shares of the company have depreciated 30.3% compared with the industry’s decline of 7.8% over the past year.
Stocks to Consider
Alpine Income Property Trust, Inc.’s (PINE - Free Report) funds from operations (FFO) per share estimates for 2020 have been revised 4.4% upward to $1.18 over the past week. It currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Duke Realty Corporation’s (DRE - Free Report) Zacks Consensus Estimate for 2020 FFO per share has been revised 3.5% upward to $1.49 over the past two months. The company currently carries a Zacks Rank of 2.
Sabra Healthcare REIT, Inc.’s (SBRA - Free Report) FFO per share estimates for the ongoing year have been revised 1.2% upward to $1.74 over the past week. The company currently carries a Zacks Rank of 2.
Note: Anything related to earnings presented in this write-up represent funds from operations (FFO) — a widely used metric to gauge the performance of REITs.
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