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Host Hotels & Resorts Inc. HST is expected to witness a stable operating environment due to a continuous improvement in the group business, a gradual recovery in business transient and steady leisure demand. This is likely to support its revenue growth. Also, a strategic capital-recycling program and a healthy balance sheet augur well. However, macroeconomic uncertainty and high interest rates are its concerns.
What’s Supporting Host Hotels?
Host Hotels has a strong Sunbelt exposure and presence in the top 21 U.S. markets. Its properties are advantageously located in central business districts of major cities with proximity to airports and resort/conference destinations, driving demand. The improvement in group travel demand and business transient demand, led by healthy demand from small and medium-sized businesses, has aided occupancy and revenue per available room (RevPAR) growth over the past few quarters. The company expects RevPAR to grow in mid-single digits in the first quarter of 2025.
The company follows an aggressive capital-recycling strategy that entails the non-strategic dispositions of assets that have lower growth potential or properties with significant capital expenditure requirements and redeploying the proceeds for investments in better-yielding assets. It has prioritized projects in assets and markets that are anticipated to recover faster.
Per the company’s February 2025 Investor Presentation, from 2021 through the end of the fourth quarter of 2024, total dispositions amounted to $1.5 billion, which is 17.5 times the EBITDA multiple. Its acquisitions during this period amounted to $3.3 billion, which is 13.3 times the EBITDA multiple. Such efforts highlight its prudent capital-management practices, preserve balance sheet strength and pave the way to capitalize on long-term growth opportunities.
Host Hotels has a healthy balance sheet and has been undertaking steps to strengthen its balance sheet. As of Dec. 31, 2024, the company had $2.3 billion in total available liquidity. As of the same date, the weighted average maturity for its debt was 5.2 years, and the weighted average interest rate was 4.7%. Further, as of the end of the fourth quarter of 2024, the company enjoyed investment-grade ratings of Baa3/Positive from Moody’s, BBB-/Stable from S&P Global and BBB/Stable from Fitch, providing access to the debt market at favorable costs.
Solid dividend payouts are the biggest attraction for REIT investors, and Host Hotels remained committed to that. Encouragingly, the company has increased its dividend eight times in the last five years and has a 41% payout ratio. Hence, with rebounding operating trends, a lower dividend payout ratio compared with the industry and a healthy financial position, we expect the latest dividend hike to be sustainable in the upcoming period.