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Here's Why You Should Retain Host Hotels (HST) Stock Now

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Host Hotels & Resorts Inc. (HST - Free Report) is witnessing a gradual recovery in leisure demand, which is leading to an improvement in revenue per available room (RevPAR). However, recovery in the demand for core business transient is likely to be choppy due to travel restrictions and delayed return to offices.

With the relaxation of regulations related to the pandemic, hotel reopenings have enabled the company to resume operations on a large scale. In fact, as of Feb 18, 76 of the company’s 80 hotels were open. This along with a recovery in leisure demand in specific drive-to leisure markets and Sunbelt regionshas enabled the hotel REIT to witness gradual improvement in occupancy and RevPAR and is likely to enhance hotel revenues in the upcoming quarters. RevPAR (for all owned hotels) was $58.32 as of Feb 27, 2021, rising from $39.10 as of December 2020.

Host Hotels has a strong Sunbelt exposure and presence in 22 top US markets. Moreover, the company’s large property sizes will enable its hotels to capture the budding demand, while adhering to social-distancing mandates.

The hotel REIT also continues its strategic capital-recycling program to improve portfolio quality and strengthen position in the United States, where it has a greater scale and competitive advantage. In fact, amid the current low-occupancy environment, the company is accelerating certain capital projects and this will minimize future disruption. Also, it has prioritized such projects in assets and markets that are anticipated to recover faster like leisure and drive-to destinations. This will position Host Hotels for growth through the vaccine-driven recovery.

Moreover, currently, Host Hotels is the only lodging REIT that has investment-grade credit rating. The company enjoys BBB-/BBB-/Baa3 credit rating from S&P Global, Fitch, and Moody's. This will enable it to enjoy favorable cost of capital in the future. Also, in February, the company successfully secured a second amendment to its credit agreement, extending financial covenant waivers through first-quarter 2022. This will help it preserve liquidity amid the COVID-19 outbreak-led setbacks.

However, since business travelers account for the majority of transient demand at its hotels, the company’s near-term performance will be relatively more affected by trends in business travel than trends in leisure demand. In fact, recovery in the demand for core business transient is likely to be choppy in the ongoing year due to travel restrictions and delayed return to offices.

Also, its presence in markets that are facing strict government mandates such as San Francisco, Manhattan, Chicago and Boston is likely to drag the company’s performance.Additionally, group room booking pace remains slow.

Also, the majority of Host Hotels’ properties concentrated in the luxury and upper-upscale segments have been most heavily affected by the pandemic-led decline in air travel and slower recovery of corporate and group demand.In fact, the company expects its suspended luxury and upper-upscale hotels to reopen at low occupancies in the second and third quarters.

Lastly, the spike in online short-term rentals, including a flexible option for apartment buildings, has elevated the supply in the lodging industry and has increased competition in certain markets.

Shares of this Zacks Rank #3 (Hold) company have gained 25.8% over the past three months compared with the industry’s growth of 7.2%.

 

 

Stocks to Consider

Alpine Income Property Trust, Inc.’s (PINE - Free Report) funds from operations (FFO) per share estimates for the current year have moved up 3.8% to $1.61 in the past week. The company sports a Zacks Rank of 1 (Strong Buy), currently. You can see the complete list of today’s Zacks #1 Rank stocks here.

Extra Space Storage Inc.’s (EXR - Free Report) Zacks Consensus Estimate for 2021 FFO per share has moved up 2.2% to $5.97 in the past week. The company currently carries a Zacks Rank of 2 (Buy).

Global Net Lease, Inc. (GNL - Free Report) has a Zacks Rank of 2 at present. The Zacks Consensus Estimate for 2021 FFO per share has been revised 4% at $2.10 in a month’s time.

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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