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Host Hotels (HST) Q3 Revenues Lag Estimates, RevPAR Down

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Host Hotels & Resorts, Inc. (HST - Free Report) reported third-quarter 2020 adjusted funds from operations (FFO) per share of negative 11 cents. The Zacks Consensus Estimate for the same was negative 21 cents. Notably, the company reported adjusted FFO per share of 35 cents in the prior-year quarter.

It generated total revenues of $198 million, which missed the Zacks Consensus Estimate of 230.6 million. The top line also declined 84.3% year over year.

Results were affected by year-over-year decline in travel amid the coronavirus pandemic. In fact, revenue per available room (RevPAR) witnessed significant decline.

Behind the Headlines

During the third quarter, all owned hotel RevPAR (on a constant-dollar basis) fell 84.1% year over year to $29.36. Third-quarter all owned hotel pro forma EBITDA was negative $91 million. The company reported EBITDA of $310 million in the prior-year quarter.

Demand during the September-end quarter was primarily driven by drive-to and resort destinations. As of the third-quarter end, room revenues from the transient business were $98 million, indicating a year-over-year plunge of 80.9%. Room revenues from group and contract businesses declined 93% and 69.3% year over year, to $17 million and $11 million, respectively.

Moreover, room nights for its transient, group and contract business declined 75.1%, 88.8% and 57.7%, respectively, from the prior-year quarter. Notably, the company’s transient, group and contract businesses accounted for roughly 61%, 35% and 4%, respectively, of its 2019 room sales.

Balance Sheet Position

Host Hotels exited the third quarter with a cash balance of $2.43 billion and FF&E escrow reserves of $1.38 million. It fully drew revolver and term loan parts of its credit facility. As of the same date, its debt balance amounted to $5.6 billion. The company has no maturities until 2023.

Capital Expenditure

During the January-September period, the company invested around $384 million in capital expenditure. Of this, $262 million was return on investment (ROI) capital projects spend, and $122 million was renewal and replacement project expenditure.

Remarkably, for 2020, the company now guided capital expenditure spending of $475-$510 million, compared with $475-$520million mentioned earlier.

Conclusion

Significant declines in room revenues across all three businesses impacted Host Hotel’s results. As of Nov 4, hotel operations remained suspended at four hotels. Moreover, average room rate, occupancy and RevPAR witnessed year-over-year declines in the month of September.

Notably, COVID-19 has created an uncertain environment for the travel, airline, lodging and tourism. This is likely to cast a pall on Host Hotels’ near-term performance.

Host Hotels currently carries a Zacks Rank #4 (Sell).

Host Hotels Resorts, Inc. Price, Consensus and EPS Surprise

Host Hotels  Resorts, Inc. Price, Consensus and EPS Surprise

Host Hotels Resorts, Inc. price-consensus-eps-surprise-chart | Host Hotels Resorts, Inc. Quote

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

We now look forward to the earnings releases of other REITs like Simon Property Group (SPG - Free Report) , Taubmna Centers, Inc. and Ventas, Inc. (VTR - Free Report) . While Simon Property and Taubman Centers are slated to report third-quarter 2020 earnings on Nov 9, Ventas will release September-end results on Nov 6.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO) — a widely used metric to gauge the performance of REITs.

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