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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 resulting in an improvement in revenue per available room (RevPAR). However, recovery in the demand for core business transient is likely to be dismal due to travel restrictions and delayed return to offices.

With the relaxation of pandemic-related restrictions and acceleration in vaccine distributions, hotel re-openings and favorable holiday travel trends have enabled Host Hotels to resume operations on a considerable basis and see gradual improvement in occupancy and RevPAR. Also, in first-quarter 2021, the company achieved hotel-level profitability for the first time since the onset of the pandemic. Such green shoots of recovery are encouraging and will position the company for growth through the vaccine-driven lodging rebound.

Moreover, the company has a strong Sunbelt exposure and presence in the top 20 U.S. markets. Host Hotels’ large property sizes will enable its hotels to capture the budding demand, while addressing social-distancing needs.

The hotel REIT also continues its strategic capital allocations to enhance portfolio quality and strengthen position in the United States, where it has a greater scale and competitive advantage. Notably, amid the low-occupancy environment, the company is focused on accelerating certain capital projects, which 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 help Host Hotel capture additional revenues during the economic recovery. The company exited the first quarter with cash and cash equivalents of more than $2 billion. With decent balance sheet position, the company is well poised to sail through the current dismal environment triggered by travel disruptions.

Shares of this Zacks Rank #3 (Hold) company have gained 25.6% over the past six months compared with the industry’s growth of 18.5%. In addition, the trend in estimate revisions for 2021 FFO per share indicates a favorable outlook for the company as it moved up significantly to 20 cents from 10 cents over the past month.

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However, since business travelers account for the majority of transient demand at its hotels, constrained business transient and group travel demand amid the pandemic will affect the company’s near-term performance. Group room booking pace also remain slow. In fact, recovery in demand for core business transient is likely to be bleak this year due to travel restrictions and delayed return to offices.

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

Key Industry Picks

OUTFRONT Media Inc.’s (OUT - Free Report) Zacks Consensus Estimate for 2021 funds from operations (FFO) per share moved up 3.6% over the past two months. The company currently carries a Zacks Rank of 2 (Buy). You can see the complete list of today’s Zacks #1 (Strong Buy) Rank stocks here.

Geo Group Inc’s (GEO - Free Report) Zacks Consensus Estimate for the current-year FFO per share moved 10.1% north in two months’ time. The company carries a Zacks Rank of 2 at present.

BRAEMAR HOTELS & RESORTS INC.’s (BHR - Free Report) FFO per share estimate for the ongoing year has been revised upward by 4.5% in the past month. The company carries a Zacks Rank of 2, currently.

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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