Host Hotels & Resorts (NYSE: HST) is the largest hotel real estate investment trust (REIT) in the market, with more than 47,000 hotel rooms in a portfolio of mostly ultra-high-end resorts. Like most hotel REITs, Host has had a difficult time over the past couple of years but could thrive in the economic recovery.
With that in mind, this article takes a closer look at the ins and outs of Host Hotels & Resorts, what recent developments investors should know about, how the company's stock has performed over its 16-year history as a publicly traded REIT, and more.
Host Hotels & Resorts company profile
Formerly a subsidiary of Marriott (NASDAQ: MAR), Host Hotels & Resorts' predecessor business, Host Marriott -- hotel properties combined with a concession business -- was spun off in 1993. The company got rid of its concession business (HMSHost) in the mid-90s and has been a REIT known as Host Hotels & Resorts since 2006.
As of mid-2021, Host Hotels & Resorts owns 82 hotel properties with 47,200 rooms. The company specializes in luxury and upper-upscale hotel properties operated under brand names like Marriott, Grand Hyatt, Hilton (NYSE: HLT), Hyatt Regency, Ritz-Carlton, and Westin.
To name a few of the more iconic properties in the portfolio, Host owns the Fairmont Kea Lani in Maui, the Four Seasons Resort Orlando at Walt Disney World (which the company recently acquired), the Grand Hyatt San Francisco, and the Marriott Marquis San Diego.
It's worth noting that hotel real estate has a unique quality that makes it the most economically sensitive of all major commercial real estate categories. Specifically, while offices, apartments, and retail REITs rent their spaces out in lease lengths measured in years, hotels rent their spaces by the day.
This can be a great feature in a robust economy because it enables hotels to react and raise prices quickly as demand spikes. On the other hand, it can lead to rising vacancies and dramatically decreased pricing power in tough economies. Keep this in mind before investing in Host or any other hotel REIT.
Host Hotels & Resorts news
By far, the biggest recent news topic for investors to be aware of when it comes to Host Hotels & Resorts -- or any hotel REIT, for that matter -- is the COVID-19 pandemic. To put it mildly, the pandemic was devastating for the hotel industry, especially in the early days of lockdowns.
Many hotels, especially in tourist destinations, were operating at single-digit percentages of their capacity. Some were forced to shut down entirely, and others were doing so little business that it was more economical to shut down voluntarily.
Let's put into perspective just how bad the pandemic has been for hotels. In the second quarter of 2020 -- the height of the pandemic's restrictions and lockdowns -- Host Hotels & Resorts' revenue declined by a staggering 93% year over year (YOY).
The revenue per available room (RevPAR) dropped to just $23.16 per night from $327.00 a year before. And 35 hotels in the REIT's portfolio had entirely suspended operations for at least a portion of that time.
Things have improved, but investors need to understand that the hotel business is far from "back to normal" at this point. Most recently, in Q1 2021, Host Hotels' revenue was "only" 62% lower than the same quarter the year before, 81 of its 82 hotels were open for business as of mid-May, and RevPAR had rebounded to $94.98. The hotel REIT is still a long way from normal but much better than it had been -- and Host had rebounded enough that it was profitable for the quarter. Not by much, but a profit is a profit!
To be clear, most industry experts foresee tourism activity surging in Q2 2021 due to loosening restrictions and the ongoing vaccine distribution. In a presentation, Host confirmed that in April and May, occupancy was already dramatically higher than it had been in Q1 2021.
And business travel (many of Host's properties have an abundance of convention and meeting space) is set to make a comeback in the second half of 2021 and surge in 2022 and 2023. But over the next few quarters, it will be important to watch the normalization at work.
In other significant news, Host Hotels & Resorts is getting aggressive when it comes to taking advantage of opportunities, using its size and financial flexibility to make some interesting acquisitions. For instance, in March 2021, Host acquired the Hyatt Regency Austin for $161 million at an estimated 20% to 25% discount to its pre-COVID valuation.
Then, in late April, Host spent $610 million to acquire the iconic Four Seasons Orlando property, which is the only AAA Five Diamond-rated hotel in Central Florida. Moves like these could pay off tremendously if the economy rebounds as strongly as many expect it to in the coming years. And with $1.5 billion in available liquidity, Host could pursue even more deals if the opportunity were to arise.
Host Hotels & Resorts stock price
Since becoming a REIT in late 2005, Host's stock price has increased by about 10%. But that doesn't tell the full story.
For one thing, there have been some pretty breathtaking ups and downs. In the late 2000s, Host's stock peaked at more than $26 per share amid the financial crisis and ended up crashing to as low as about $4 before it started to rebound. And when the COVID-19 pandemic started in March 2020, Host's stock lost nearly half its value at the depths of the market crash before rebounding.
Second, like most REITs, it isn't fair to judge Host on its stock price alone. Although it suspended the payout in response to the COVID-19 pandemic, Host has paid an above-average dividend yield for most of its history. So, it's more appropriate to look at Host's performance in terms of total returns, not just stock price appreciation.
With that in mind, here's how Host's performance compared with that of the S&P 500 (NYSE: SPX) over a few periods.