Title

Presentation

Jaime Marcus: Thank you and good morning. Before we begin, please note that many of the comments made today are considered to be forward-looking statements under federal securities laws as described in our filings with the SEC. These statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed. And we are not obligated to publicly update or revise these forward-looking statements. In addition on today’s call, we will discuss certain non-GAAP financial information such as FFO, adjusted EBITDAre and comparable hotel level results. You can find this information together with reconciliations to the most directly comparable GAAP information in yesterday’s earnings press release, in our 8-K filed with the SEC and the supplemental financial information on our website at hosthotels.com.

With me on today’s call are Jim Risoleo, President and Chief Executive Officer; and Sourav Ghosh, Executive Vice President and Chief Financial Officer. With that, I would like to turn the call over to Jim.

Jim Risoleo: Thank you, Jaime, and thanks to everyone for joining us this morning. Before we turn to the quarter, I want to take a moment to acknowledge the devastating wildfires that occurred on the island of Maui this past August. All of us at Host were deeply saddened by the loss of life and heartbreaking impact on local communities. As the largest hotel real estate owner on Maui for over 20 years, Host has long shared a connection to the island and helping to support the community through this difficult time is important to our company. We are proud to have aided recovery and rebuilding efforts, donating more than $250,000 to emergency response and relief organizations, as well as providing direct financial assistance and relief to our hotels employees.

We also provided food and shelter to these employees, their families and emergency response teams. The strength and resilience of the Maui community inspires us and we are committed to supporting them as the recovery continues. Now let’s move to our results for the quarter. Please note that the results presented on today’s call represent the comparable hotel portfolio, which includes all three Maui resorts and continues to exclude the Ritz-Carlton Naples in Hyatt Regency Coconut Point. When applicable, we will provide estimated impacts from Maui to certain results to provide a more comprehensive view of business trends in the quarter. During the third quarter, we delivered a comparable hotel RevPAR improvement of 1.8% compared to the third quarter of 2022.

Our RevPAR performance for the quarter was driven by an occupancy increase of 150 basis points led by our convention hotels in downtown locations. Overall, Maui had less of an impact on our results than we initially expected as we were able to replace high rated transient business with recovery and relief group business, which impacted our demand mix this quarter. We delivered adjusted EBITDAre of $361 million, which includes $54 million of business interruption proceeds from Hurricane Ian and delivered adjusted FFO per share of $0.41 beating consensus on both metrics. Third quarter comparable hotel EBITDA margin of 26.6% exceeded 2019 by 10 basis points and this marks the sixth consecutive quarter since the onset of the pandemic that we have achieved TRevPAR, RevPAR, comparable hotel EBITDA and margins ahead of 2019 levels.

Comparable hotel RevPAR for October is expected to be approximately $229, a 2.4% improvement over 2022. We estimate that the Maui wildfires impacted third quarter comparable hotel RevPAR by 60 basis points, comparable hotel TRevPAR by 120 basis points, and comparable hotel EBITDA by $4.5 million. Our risk management team is continuing to engage with our insurers about potential business interruption coverage and the timing and amounts of any potential proceeds are not yet known. Despite the wildfires on Maui, which we expect will impact our full year RevPAR guidance by 50 basis points, we maintained the midpoint of our previous full year expected comparable hotel RevPAR growth at 8% and tightened our full year RevPAR growth guidance range to 7.25% to 8.75%.

At the midpoint of our guidance, full year 2023 comparable hotel EBITDA is forecasted to be 8.5% above 2019 with comparable hotel RevPAR growth 5.6% greater than 2019. As we look at the current macro picture, we continue to be optimistic about the state of travel for several reasons. First, group business continues to improve. During the quarter, we booked 245,000 group rooms through 2023 and total group revenue pace is now 6.7% ahead of the same time 2019, up from 4.2% as of the second quarter. Even without the recovery in relief groups on Maui, total group revenue would have been above both 2022 and 2019. The group booking window continues to extend and we are pleased with the base we have on the books for next year. Second, business transient demand continued its gradual improvement during the third quarter.

Business transient revenue was up approximately 9% to 2022 and demand improved 5% compared to the third quarter of 2022. Overall, business transient revenue is down approximately 16% compared to 2019, with room nights down approximately 20%. Room nights have gradually improved throughout the year. In January, we were down nearly 23% to 2019. And in September, we were down just 17% to 2019. We see the continued evolution of business travel, as a tailwind in the future. Third, leisure rates at our resorts remain well above 2019 levels, despite continued moderation in the third quarter as expected. For context, transient rates at our resorts were 56% above 2019 in the third quarter, which is particularly impressive when considering that this excludes the benefits from our two newly renovated noncomparable hotels in Florida and includes the impact from our three resorts on Maui.

Fourth, we expect international demand to be a positive trend going forward. International inbound air traffic increased to 88% of 2019 levels in September, up from 80% in June. At the same time, international outbound air traffic increased to 118% of 2019 levels, after hovering near 108% since January, which indicates that consumers continue to prioritize travel. As evidenced by recent booking volume trends for US airlines, the international imbalance is likely to revert to 2019 levels over time. Most importantly, we are not seeing evidence in weaken consumer at our hotels. Food and beverage outlet revenues remained both above 2022 and 2019, driven by resorts and nonresort alike, which is encouraging, given that occupancy still lags 2019 levels.

Golf and small revenues also remained significantly ahead of pre-pandemic levels. Taken together, we believe this indicates that consumers continue to desire and ability to spend on experiences at our hotels. Moving to our reconstruction efforts following Hurricane Ian. The newly transformed Ritz-Carlton Naples has been very well received since its reopening in July and we are optimistic that the resort is set up to exceed our underwriting expectations. Transient rates were 75% above 2019 for the second half of this year, driven by the increased suite mix in the new Vanderbilt Tower. Looking forward to festive season, club-level room night booking pace is up more than 25% over the same time in 2019 with an ADR premium of almost $900 and suite bookings are pacing up 125% with a more than $1,300 rate increase over 2019.

We are proud of the well-deserved tension that Ritz-Carlton Naples is receiving, including regaining the coveted AAA five-diamond designation and we look forward to seeing the results it delivers in the years to come. In terms of insurance proceeds related to Hurricane Ian, to-date, we have received $208 million of the expected potential insurance recovery of approximately $310 million for covered costs. During the third quarter, we received $54 million of business interruption proceeds, and we expect to receive an additional $26 million of business interruption proceeds in the fourth quarter. Turning to group. Revenue exceeded 2022 by 10% in the third quarter, marking the fifth consecutive quarter group revenue exceeded 2019. Definite group room nights on the books for 2023 increased to 4 million in the third quarter, which represents approximately 110% of comparable full year 2022 actual group room nights, up from 103% as of the second quarter.

For full year 2023, total group revenue pace is up approximately 20% to the same time last year, and up 6.7% to the same time 2019 in part due to recovery and relief groups on Maui. Group rate on the books is up 7% at the same time last year, a 40 basis point increase since the second quarter. Looking ahead to 2024, we have 2.6 million definite group room nights on the books, a 15% increase since the second quarter. Total group revenue pace is up 13% at the same time last year, driven fairly evenly by room nights and rates. We are encouraged by the ongoing strength of group, as evidenced by increasing pace, lengthening booking windows and improving citywide calendars. Moving to portfolio reinvestment. We are excited to announce that we reached an agreement with Hyatt to complete transformational reinvestment capital projects at six properties in our portfolio.

The properties include the Grand Hyatt, Atlanta; the Grand Hyatt, Washington D.C.; the Grand Hyatt, San Diego; the Hyatt Regency, Austin; the Hyatt Regency, Capitol Hill; and the Hyatt Regency, Reston. Building on the success of the Marriott transformational capital program, we believe these portfolio investments will position the targeted hotels to compete better in their respective markets, while enhancing long-term performance. Hyatt has agreed to provide us with priority returns on these investments. Additionally, Hyatt will provide $40 million in operating profit guarantees as protection for the anticipated disruption associated with the incremental investment. Our total investment is expected to be approximately $550 million to $600 million, two-thirds of which we were planning to invest as part of our capital plan over the next few years.

We expect to invest between $125 million and $200 million per year over the next three to four years on this program. We are targeting stabilized annual cash-on-cash returns in the low double digits on our incremental investment through a combination of enhanced owners’ priority returns and RevPAR index share gains. Turning to our capital expenditure guidance for 2023, we tightened the range to $615 million to $695 million, which includes approximately $200 million to $230 million of investment for redevelopment, repositioning and ROI projects and $150 million to $175 million for hurricane restoration work. Major capital expenditure projects included the December completion of a transformational renovation at the Fairmont Kea Lani, as well as the start of construction at the Finishing Canyon Suites Villas and the luxury condominium development at Four Seasons Resort Orlando at Walt Disney World Resort.

Lastly, we are well underway with the repositioning renovation of the Hilton Singer Island, which is expected to be complete in the first quarter of 2024, and we are working with Hilton to top brand the hotel as a Curio Collection Resort. We are targeting a stabilized cash-on-cash return in the mid-teens on our repositioning investment. As we have said many times before, our exceptional balance sheet puts us in a position to execute on multiple fronts, which is what you saw us do during the third quarter. We continue to reinvest in our portfolio, and we believe our comprehensive renovations is while enhancing the EBITDA growth of our portfolio well into the future. We announced an exciting transformational capital program with Hyatt. We purchased approximately $100 million of stock and return capital to shareholders through a 20% increase in our quarterly dividend.

We continue to be optimistic about the state of travel and we believe Host is very well positioned to outperform in the current economic environment. With that, I will turn the call over to Sourav.

Sourav Ghosh: Thank you, Jim, and good morning, everyone. Building on Jim’s comments, I will go into detail on our third quarter operations, our updated 2023 guidance, our balance sheet and our dividend. Starting with business mix, we estimate that Maui impacted overall transient revenue by 450 basis points, which skewed the comparison this quarter, resulting in transient revenue down 330 basis points to the third quarter of 2022. We were encouraged that transient rates at resorts remained 56% higher than 2019 despite the impact from Maui and the renovation at the one Hotel South Beach, which contributed to the decline over last year. As expected during the third quarter, we continued to see a normalization in transient rates at resorts compared to 2022.

Business transient revenue was approximately 9% above the third quarter of 2022. Business transient rooms sold remain approximately 20% below 2019 levels, but it’s worth noting that New York, San Francisco and Denver three of our largest business transient markets were within 10% of 2019 room nights in the third quarter. Looking at top business transient customers, large consulting and audit firms continue to drive the biggest share of business travel room nights but they’re also the largest contributor to room night decline compared to 2019. Encouragingly, during the third quarter large technology companies showed room night growth compared to 2019. Turning to group. Group room revenues were 10% above the third quarter of 2022, driven by a rate increase of 8%.

It is worth noting that these results were skewed higher by the recovery and relief groups at our Maui Resorts, which positively impacted group room revenue. In the quarter for the quarter, group room night bookings were up 49% compared to last year and 85% compared to 2019 with growth driven by New York, Phoenix and San Francisco as our convention hotels continue to focus on building a strong in-house group base. Maui also contributed to the strong in the quarter for the quarter bookings, but results would still have been up meaningfully excluding its contribution. We are encouraged by the continued recovery of international arrivals San Francisco, which stood at 87% of 2019 levels in the third quarter, up from 76% in the first quarter driven by increased airlift from Asia.

With respect to group mix, corporate group room revenue was up 8% in the third quarter, driven by 7% rate growth. Association Group revenue was down 11% in the third quarter compared to last year led by a decline in room nights as the citywide recovery remains uneven. Social, Military, Educational, Religious and Fraternal or SMERF Group revenue was up 39% in the third quarter, driven by recovery and relief room nights on Maui, which are designated in the smart category. Excluding Maui, room night growth in this category would still have been up over 7% led by our hotels in New York and Washington D.C. Looking ahead, our 2024 total group revenue pace is 13% ahead of the same time last year and we continue to be encouraged by the citywide booking pace in markets such as Seattle, New Orleans and San Diego.

All of which have citywide group room nights meaningfully ahead of the same time last year. Shifting gears to margin performance. Our third quarter comparable hotel EBITDA margin came in at 26.6%, which is 10 basis points above the third quarter of 2019. Total comparable expenses grew 5.5% over 2019 while total comparable revenues were up 5.6%. As we have said many times before, we are encouraged that comparable hotel EBITDA margin remains above 2019 despite elevated expense inflation over the past four years and occupancy still 8-points below 2019. As Jim mentioned, despite the impact of the wildfires in Maui, we maintained the midpoint of our previous full year expected comparable hotel RevPAR growth at 8% and tightened our full year RevPAR growth guidance range to 7.25% to 8.75%.

Our guidance range continues to contemplate varying degrees of moderating growth in the fourth quarter. We would expect year-over-year comparable hotel RevPAR percentage changes in the fourth quarter, to be down low single digits at the bottom end to up low single digits at the top end, with the range driven, primarily by the evolving nature of demand on Maui. We expect fourth quarter operational results to roughly follow 2019 quarterly seasonal trends, as provided on page 17 of our supplemental financial information which at the midpoint of our guidance implies slightly positive fourth quarter RevPAR growth. At the midpoint, we would expect full year adjusted EBITAre of $1.620 billion. Please note that our adjusted EBITDAre guidance includes $54 million of business interruption proceeds, which we received in the third quarter and an additional $26 million which we expect to collect in the fourth quarter, all of which is related to Hurricane Ian.

Excluding the impacts of business interruption our revised full year comparable hotel EBITDA midpoint only declined $8 million versus the second quarter, despite a full year estimated impact of $25 million from Maui. It is important to remember that, although business interruption proceeds are one-time in nature we expect the Ritz-Carlton Naples and Hyatt Regency Coconut Point to contribute a full year of EBITDA in 2024. As a reminder, comparable hotel EBITDA and comparable hotel EBITDA margin are not affected by operational results or business interruption proceeds related to these two resorts as they are considered non-comparable at this time. Shifting to margins. As we have discussed over the past few quarters, year-over-year we expect comparable hotel EBITDA margins to be down 210 basis points at the low end of our guidance to down 170 basis points at the high end, due to stable staffing levels at our hotels, higher utility, and insurance expenses, and lower attrition and cancellation fees.

For these reasons, we do not believe 2022 represents a stabilized comparison for margins. Relative to 2019, which we believe is a more representative year for margin comparison, we expect margins this year to be up 20 basis points at the low end of our guidance to up 60 points at the high end. This margin expansion is despite impacts from Maui, occupancy still meaningfully below 2019 levels, moderating attrition and cancellation revenues and expense inflation. Turning to our balance sheet and liquidity position. The $163 million loan to the buyer of the Sheraton Boston was repaid in full during the third quarter. Our weighted average maturity is 4.5 years, at a weighted average interest rate of 4.6%. We have a balanced maturity schedule with our next maturity of $400 million coming due in April 2024.

We ended the third quarter at 2.1 times leverage, and we have $2.6 billion of total available liquidity, which includes $218 million of FF&E reserves and full availability of our $1.5 billion credit facility. In addition, we repurchased 6.3 million shares at an average price of $15.90 per share bringing our total repurchases for the quarter to $100 million. Year-to-date, we have repurchased 9.5 million shares at an average price of $15.82, bringing our total repurchases for the year to $150 million. We have approximately $823 million of remaining capacity under our repurchase program, and we will continue to be opportunistic when executing share repurchases. We paid a quarterly cash dividend of $0.18 per share, an increase of $0.03 or 20% over our second quarter dividend.

Though, we expect to maintain our quarterly dividend at a sustainable level taking into consideration potential macroeconomic factors, all future dividends are subject to approval by the company’s Board of Directors. We remain optimistic on the future of our business and travel overall. We believe our portfolio, our balance sheet, and our team are well positioned to continue outperforming. As we have shown Host can do it all and we will continue to be strategic in the current macroeconomic environment. With that, we would be happy to take your questions. To ensure we have time to address as many questions as possible, please limit yourself to one question.

See also 15 Countries that Have the Best Weather in Africa and 20 Easiest Dental Schools to Get Into Recently.

Operator: Thank you. At this time, we will conducting our question-and-answer session. [Operator Instructions] Thank you. Our first question is coming from Aryeh Klein with BMO. Your line is live.

Aryeh Klein: Thanks, and good morning. Maybe just on the group bookings pace. It’s up 30% for next year. Curious what you’re seeing from the end of the quarter for the quarter bookings and do you think that bookings pace for next year ultimately narrows as maybe booking windows extend? And then if you could just touch on which markets looks strongest and weakest for next year from a group standpoint?

Sourav Ghosh: Sure. So we saw meaningful in the quarter for the quarter bookings for the third quarter. That trend seems to be pretty consistent. We actually picked up 85% more relative to 2019 in Q3 in the quarter for the quarter. When we looked at the 245,000 group room nights that Jim spoke to that we picked up in Q3 for Q3 and Q4 about 46% of that was a pickup for Q3 and about 54% of that was about a pickup for Q4. Going into next year, as the booking window extends, we do expect that to moderate somewhat just because there wouldn’t be any capacity left frankly at the hotels. So to put that into perspective in the fourth quarter booking window extended by about 10 days, which effectively was it was 80 days before and it’s like 90 days now.

And then all future arrivals that extended by 15 days. So we’re definitely seeing that extend for — in the year for the year as well as for future years. So you will see that moderation into next year. As it relates to markets that we expect will do well for next year we’re certainly seeing strength to our portfolio as meaningful as San Diego Orlando and D.C. Overall citywide pace for 2024 is strong in Seattle, Boston, New Orleans and Miami as well. What’s interesting is right now when you look at 2024 the city-wide room night pace is actually 90% of 2019 actuals which is up from 83% which we saw at the end of Q2.

Aryeh Klein: Thanks. Appreciate the color.

Operator: Thank you. Our next question is coming from Michael Bellisario with Baird. Your line is live.

Michael Bellisario: Thanks. Good morning, everyone. Just on the Hyatt Capital program for those six hotels maybe just on average, but when were they all last renovated? What’s the current RevPAR penetration index and then do you expect to get the same 3- to 5-point lift that you had underwrote for the Marriott program? Thank you.

Jim Risoleo: Yes, Mike. We’ll be happy to gather that information specifically and share it with you. But suffice it to say that we and Hyatt both believe that these properties were in need of a transformational comprehensive renovation. We were going to undertake work at all six of these hotels. About two-thirds of the work that we agreed to with Hyatt in return for the enhanced owner priorities and the $40 million guarantee to support disruption. So we see returns in the low-teens as we saw with the Marriott transformational capital program and that will be driven by the enhanced owner priority as well as yield index gains. So I think that we have a very high degree of comfort given the performance of the assets in the Marriott program just to refresh your recollection that was 16 properties.

They’re not all stabilized yet due to where we are but due to certain properties and certain competitive sets like New York, in particular, having been closed for a longer time than our property. But the assets that we have seen have delivered truly outsized yield index gains. We had underwritten three to five points and we’re meaningfully above that. So, we’re excited to be able to partner with Hyatt as their largest owner. And really looking forward to getting on with this program which we will complete over the next three to four years.

Operator: Thank you. Our next question is coming from Bill Crow with Raymond James. Your line is live.

Bill Crow: Thanks. Good morning Jim and Sourav. Point of clarifications Sourav, is it fair to say you still have about $40 million in potential BI recoveries that could occur next year right $250 million through the third quarter plus some in the fourth? And then the GAAP to $310 million, is that the right way to think about it?

Sourav Ghosh: Yes, we still plan to get to the $310 million. We’re working with our insurers right now. There will be an allocation between BI and property. So far what the letter we have got from our insurers is that we will be — they’re okay with the $80 million of BI. That’s why we have $26 million of BI in our forecast. We are still working with the insurers to collect on the balance Don’t know what that number exactly is going to be. It won’t be all of the remaining to get to the 310 but certainly more than the $80 million. So, we do expect some BI next year that amount. We are still working with our insurers as to what that is going to be.

Bill Crow: All right. Thanks. And then my question really is I hear you on the comparison of the margins versus 2019 instead of 2022. In a few months we’re going to be talking about 2024 versus 2023. And I’m thinking the question I’ve been asking is a number of the REITs is what sort of topline growth that we’ll make our own decision about what that is. But how much do you need before you could get flat EBITDA margins next year? Is it a 4% number?

Jim Risoleo: Bill that’s the question. It’s really difficult to answer given where we are with respect to the budgeting process. What I can share with you at this time is we would anticipate wage growth next year in the 4% to 5% range. Where insurance costs are going to come in they’re certainly baked through next June because that the renewal is year-to-year and it renews June one of every year or July 1 of every year I guess through June 30th. So, question mark will be what happens in insurance renewal and there are a lot of variables that can impact that. And as we get granular on each hotel budget, we will look for opportunities to continue to enhance improvements in productivity and utilize technology as we have been doing.

So, we will do everything possible to command and control expenses going forward. But I do think it’s important that we kind of level set the stage as to what is our true base of EBITDA going into next year. And I would like to just share a couple of numbers with you because I don’t want people to think that the $80 million of business interruption that we received this year as a one-time event. It’s really not a onetime event from the perspective that the Ritz-Carlton Naples and the Hyatt Regency Coconut Point are going to be back online full time next year.

Sourav Ghosh: Yes, just to expand on that Bill. I think the way to think about it first the level at the base. So, before we even get into the growth of EBITDA for next year. When you think about the midpoint of our guidance at 16.20 right now that already has a $30 million negative impact from Maui which was made up of $25 million from the hotels and then $5 million from the timeshare. So, let’s assume for a second that we still have about a similar impact into next year as Maui recovers. And then you think about that $80 million of BI that proceeds for this year which Jim mentioned, is that effectively a majority of that we would have received as EBITDA from the Ritz-Carlton Naples, and the Hyatt Coconut Point, if it was not for Hurricane Ian.

So, that is EBITDA we would be receiving for next year. So in other words, if you think about it, the base — before any growth is starting off at $1.6 billion plus, if that makes sense. And then of course as Jim mentioned, in terms of expenses and everything else, we are working through and we have many initiatives that we are working on. So while there will be inflationary expense pressures, we fully anticipate to mitigate those pressures with productivity enhancements and various initiatives that we have going on at the hotels. And we will provide you with next year guidance as we typically do in February — on the February call.

Bill Crow: Great. Thanks, guys.

Operator: Thank you. Our next question is coming from Duane Pfennigwerth with Evercore ISI. Your line is live.

Q – Duane Pfennigwerth: Thanks.. Good morning. I thought that was a good question by Bill, and response by you. So I’ll just ask another Hawaii question. Maybe could you just play back the recovery, why things were a little bit better than you anticipated in the third quarter? And then maybe just since the delta on the fourth quarter guidance, is really about Hawaii. It sounds like what would get you to the high end? What would get you to the low end in terms of what needs to happen?

Jim Risoleo: Sure, Duane. Let me start, by saying that the — were it not for Maui. I think our guidance range for the full year would have been tighter than it is. But we have a wide range at this point in time because of some of the uncertainties surrounding how Hawaii is — how Maui is going to recover. The west side of Maui — kind of Maui just reopened to tourists on November 1 yesterday. So it’s going to take some time to see the cadence of, how people are going to come back to the west side. And I do believe it will take some time as well, for people to get comfortable rebooking their stays down in the [indiscernible] where our other two resorts are. We did see a lot of cancellations in the fourth quarter, due to some pronouncements that were made by the governor and we fully support the reconstruction and relief efforts, because what happened on Maui is just a terrible horrible disaster.

And we fully support the fact that you’ve got to take care of the people first, and that’s what’s happened. So the reason, that our performance in the third quarter was better than we initially anticipated, is as a result of recovery first responders taking rooms at our property as well as providing housing that was subsidized by FEMA for displaced residents. And that really caused a material pick up better than we anticipated. You did see a decline in TRevPAR in the quarter by an amount that was directly attributable to what happened on Maui. I think the out-of-room spend the TRevPAR spend was impacted by 120 basis points. So, we’re optimistic for the long-term future in Maui. It’s a great place and great place to be, and we will do what we can to support the recovery.

Q – Duane Pfennigwerth: Thank you. Maybe just to put a finer point on it. The delta in the fourth quarter the range is that a function of the duration of first responder in housing or the rate of just sort of organic leisure recovery?

Sourav Ghosh: Yes, it’s a little difficult to look at November and December. It really is the disaster recovery business and how that will taper off, as the west side of the island opens up which actually opened up as of yesterday November 1st. So, it’s we’re trying to gauge the properties are trying to gauge what that demand pickup looks like, and how they will replace sort of the regular business with the demand recovery business. So that was driving the delta. What I will say is, if it was not for that Maui impact we put out October numbers at 2.4%. Our fourth quarter numbers would have been slightly higher than the 2.4%, if it wasn’t for the Maui impact.

Jim Risoleo: Yes. And point of fact — just to kind of wrap this up way our anticipated — the anticipated impact on comparable hotel RevPAR and comparable hotel EBITDA from Maui is 50 basis points off the top line and $25 million for the full year at the bottom line. So in that sense had Maui not occurred, we would have been talking about a guidance raise on this call because we were able to keep the midpoint at 8%, we would have been talking about an 8.5% guide for this year.

Q – Duane Pfennigwerth: Understood. Thank you.

Operator: Thank you. Our next question is coming from Jay Kornreich with Wedbush. Your line is live.

Jay Kornreich: Good morning. You made some comments on the urban and business transient demand profile accelerating in September getting back to 17% GAAP to 2019. So I’m wondering if you can just provide some more color on how much you think that GAAP can narrow in 2024? And maybe within that some of your peers have been diminishing their exposure to San Francisco. Maybe if you could provide some color on how you see your assets in that market trending over the next year or two?

Jim Risoleo: Sure. I’ll take the San Francisco piece of it Jay. And then Sourav, can talk a bit about business transient. San Francisco, we think for the long-term is a great place to be particularly, given the assets that we own which we believe are the best located in the market and excellent physical condition. San Francisco, Moscone Marriott has been for quite some time now building a solid base of in-house group business. It’s in terrific condition. It was the first asset that we completed as part of the Marriott’s transformational capital program completed in 2019. And the results are paying off relative to the competitive set it is outpacing I think everyone in the sect today. The Grand Hyatt on Union Square also in great physical condition and in a great location.

So we are seeing a return of business travel in San Francisco in particular, in September. San Francisco it’s one of our top business travel markets. We’re down just about 10% in total room nights relative to where we were in 2019. So it’s slow and steady. And I think 2024 will be a challenged year for San Francisco from a citywide perspective. But as we get beyond 2024, we’re optimistic about how the market is going to evolve.

Sourav Ghosh: Yes. And I’ll add on the San Francisco piece, which is encouraging is our lead volume, as the San Francisco Marriott Marquis is actually up 5.5% to last year. And group room nights there was up almost 8.5% year-over-year as well. So – and in November is I believe when APAC that Asia Pacific economic conferences and that should be really good for San Fran as well. Obviously, 2024 as Jim mentioned, the city-wides are weak but that’s why we are really making inserted effort to get quality in-house group at that hotel. As it relates to your question on BP [ph] it’s been a very, very slow recovery from a room night perspective. Obviously, we had the strength of the special corporate rate this year almost double-digits.

But the room night recoveries across the board for the portfolio is still down around 20% call it, that said, the major markets as we spoke about in our prepared remarks, San Francisco, New York, Denver is down only 10% to 19%, which is pretty impressive. In terms of 2024, we expect more of the same in terms of BP. We expect certain markets to recover – to continue to recover but just at a very slow pace. The reality is if BP will come back in a meaningful way when there is more macroeconomic certainty and there is two economic growth, we believe there’s a pretty close relation with nonresidential fixed investment growth and RevPAR. And once that comes back in a meaningful way and GDP growth comes back in a meaningful way we expect that GAAP to reduce.

Jay Kornreich: Very helpful. Thanks very much.

Operator: Thank you. Our next question is coming from Smedes Rose with Citi. Your line is live.

Smedes Rose: Hi, thanks. I just wanted to ask you – you mentioned 2.6 million group room nights on the books for next year. How does that compare to where you would sort of normally be in terms of group bookings for the full calendar year when you’re in — just late in the year?

Sourav Ghosh: Yeah. When we compare that to 2019 we are about 10% down relative to 2019.

Smedes Rose: Okay. So catching up. And then can you just mentioned the Sheraton Boston you mentioned the Sheraton financing that loan was repaid in full. Any update on the Sheraton Times Square loan?

Jim Risoleo: Yeah. That loan was due to be paid off on October 18. We worked with the borrower and entered into a forbearance agreement and extension to November the next — November 8, next Wednesday. As part of that agreement the interest rate was restated to 13% and there was an upfront paid that brought the effective rate all in to 15%. So they are in the final stages of completed the documentation necessary to have the loan paid off by next Wednesday.

Smedes Rose: Great. Thank you.

Operator: Thank you. Our next question is coming from Dori Kesten with Wells Fargo. Your line is live.

Dori Kesten: Thanks. Good morning. Based on what you’re seeing marketed for sale today and then the shadow pipeline of deals you hear about, would you expect to be a net buyer next year?

Jim Risoleo: Dori, I sure hope so. I really do. I mean, clearly, our balance sheet is a differentiating factor for Host. As we’ve said, we have the ability to allocate capital across many fronts, as you saw us do in the third quarter and sitting here at 2.1x leverage and the ability to do deals all cash and get them done quickly is something that — I don’t think there’s anyone else in this market can do today. What we’re seeing today though is still a fairly significant bid-ask spread in the marketplace. There just isn’t a lot of quality product in the pipeline. We are talking to a lot of people, a lot of hotel owners and we’ll just have to wait and see how pricing trends as we get into 2024. But we clearly have the capability to not only continue to buy back stock, which we believe is very undervalued relative to our assets in the quality of our EBITDA and invest in our assets and pay a sustainable dividend, and also be acquisitive.

So let’s keep our fingers crossed that we have an opportunity next year to do that.

Dori Kesten: Okay. Thank you.

Operator: Thank you. Our next question is coming from Meredith Jensen with HSBC. Your line is live.

Meredith Jensen: Yeah. Thank you. I have two quick questions. First, looking at RevPAR or comparable to TRevPAR, if you could speak a little bit about what you’re seeing on out-of-room spend and how we might think about that in the near and longer term? And then secondly, I recall a couple of minutes ago maybe at the Analyst Meeting, you spoke about some strategic moves you might make over time working with managers to identify some of the brand standards that might be modified, as you sort of collect some sample set to drill down on those. And given where cost pressures are I was curious if there’s anything meaningful there we could think about? Thanks so much.

Sourav Ghosh: Sure. On the food and beverage front, banqueting and catering contribution which is effectively banqueting catering NAV revenue on a per group room night basis, still remains pretty strong. I mean, last quarter we just had a lot of pent-up group demand from groups that are canceled during COVID. So it’s very difficult to compare the Q3 results to Q3 results of this year when it comes to food and beverage. Just because the excess amount of group that we had. So even in our internal forecast, without the impact of Maui we were actually expecting food and beverage revenues to be down. That said, that really has moderated in terms of food and beverage revenue. We are still getting a meaningful amount of banqueting and contribution and outlet revenues for occupied room are significantly higher than they were back in 2019.

The piece that is certainly going to moderate as we get into next year is attrition and cancellation revenue. That has — you saw had an impact in the third quarter. Third quarter with ANC revenue being down literally about half of what it was last year. So that — put into perspective in 2022 we received close to $100 million of attrition cancellation revenue. We think that’s going to moderate somewhere around the $50 million to $55 million range. That’s just one thing to keep look out on, and sorry Meredith your second question was?

Meredith Jensen: Just sort of — it was a strategic question on working with managers on brand standards. Is there any modifications that could be made over time on looking post-COVID?

Sourav Ghosh: We are constantly working with our managers to evaluate brand standards that are relevant. And frankly I would say Marriott and Hyatt both made meaningful changes into the brand — for the brand standards post pandemic really figuring out, which ones we should modify, which ones to eliminate, the ones which truly drive value to the guests. It’s always a continuing conversation and we believe as technologies evolve and we can leverage technologies, which not only help from a productivity standpoint, but also enhance customer experience, we will keep on doing proof of concepts and piloting those technologies to drive incremental value to the bottom line.

Meredith Jensen: That’s all. Thank you.

Operator: Thank you. Our next question is coming from Tyler Batory with Oppenheimer. Your line is live.

Tyler Batory: Thank you. Good morning, everyone. Few questions on the leisure and the resort commentary. Are you seeing any divergence within your portfolio between some of the higher rated resort properties and those that are a little bit lower or at the different price points? And then when you look at the holidays, talk about your book position I know it’s still a little early there. But curious what you’re seeing in terms of demand Thanksgiving and Christmas. And then the third part of this question you talked about transient resort rates still 56% above 2019. What guidepost or what expectations do you have for those rates in Q4 and going forward? Certainly commentary and expectation is that number should slow. But just trying to get a sense of best guess perhaps how much — where growth could end up going in the next couple of quarters here?

Jim Risoleo: Sure. Let me start with the last question that you asked with respect to leisure transient rates. We’re very happy that in the third quarter, our leisure transient rates were 56% above where they were in the third quarter of 2019. For reference that’s down about five percentage points from where we were in the second quarter. Second quarter we were 61% ahead. And the fact that the 56% number takes into account the three comparable resorts on Maui to the negative and it excludes our Ritz-Carlton Naples and our Hyatt Regency Coconut Point does give us a substantial level of comfort that our properties are going to continue to be able to charge a rate that customers are willing to pay just given the nature of the assets that we own.

So we’re not really seeing a divergence across the 16 resorts we have. They’re all very high quality properties. And we’re optimistic that as we get into the fourth quarter and as we get into next year, we’ll continue to be able to drive strong performance at all of these assets. I think the Ritz, Naples what we’re seeing with respect to booking pace across every room category at that property is very, very impressive and we’re very optimistic that we’re going to be able to outperform our underwriting expectations on the expansion of the Vanderbilt Tower. I think we underwrote a 12% cash-on-cash return on that investment and we’re going to do much better going forward. So, we are not seeing any signs of weakness as we move into the holiday season.

I would just caveat that by saying but for the unknown surrounding what’s going to happen in Maui this year.

Sourav Ghosh: And on the question of holidays and how things are pacing. You have to keep in mind Q4 holidays somewhat present a tough comp to last year because the last year was the first time the country was really open for broader travel during the holiday season. But that said, specifically for like a Christmas time right now and this is much more direction of what we have revenue on the books left Maui is effectively flat, which we think is very encouraging. And for Thanksgiving, it’s slightly off but you have to remember it’s that timing was a tough timing when you compare to last year. So, we were off less how Maui down about 6%, 7% in pace. But Christmas is effectively flat right now pacing flat in terms of revenue.

Operator: Thank you. Our next question is coming from Anthony Powell with Barclays. Your line is live.

Anthony Powell: Hi. Good morning. A question on one of your newer markets to Austin, Texas, RevPAR has been down over the past few quarters. Is that all technology business travel being down and just more broadly, I think there’s a Convention Center renovation there starting next year. Would it be disruptive? And how has your experience been in that market relative to kind of the more traditional coastal business urban markets?

Jim Risoleo: Anthony, I think that Austin, we have two properties in Austin. We have the hotel Van Zandt and we have the Hyatt Regency, Austin. Just to remind you the Hyatt Regency was the first asset that we purchased during the pandemic. I think it was the first hotel that was done during the pandemic. And that asset is doing actually quite well. Van Zandt is — and it’s growing quite well given the fact that we’re able to take in-house group given the lease base platform there as well as its location across the lake. Van Zandt is more of a leisure-driven property. And I don’t know if you’ve been to Austin recently but there is an incredible amount of construction around Van Zandt in that particular submarket the Rainy Street district and that has really impacted business at that property.

So for the long-term, I think it’s going to be great. Going forward, because it’s a myriad of new development is occurring there residential as well as office. But in the short-term it’s going to be challenging until we get the cranes out of there and the Street’s open up to business again. So — and tech has had a bit of an impact as well in the near term on that asset. So you’re absolutely right. With respect to plans for the Convention Center, Host as well as other hotel owners who have a presence in Austin have been meeting with the appropriate officials in Austin to talk about whether or not they’re going to go forward with a closure of the Convention Center or a staged renovation and expansion and also talking about ways that we can mitigate any impact that actions taken with the Convention Center can will have on business in the Austin market.

So we’re being proactive and doing everything that we can to mitigate any potential issues surrounding the Convention Center going forward.

Anthony Powell: Okay. Thank you for that.

Operator: Thank you. Our final question today will be coming from Chris Woronka with Deutsche Bank. Your line is live.

Chris Woronka: Hey. Good morning, guys.

Jim Risoleo: Good morning, Chris.

Chris Woronka: Good morning. Thanks for taking the question. Talking about acquisitions Jim, I know you mentioned that there’s a big pipeline out there. We think there’s going to be stuff that might come available next year that’s related to debt refinancing. As you guys look at the potential pipeline, a lot of deals — a lot of the acquisitions you’ve done last couple of years have been one-off assets, bigger EBITDA assets. What’s your willingness to do either a portfolio type of deal or something where there’s a lot of CapEx involved upfront? Are you willing to do different kind of deals and kind of what you’ve done in the last few years?

Jim Risoleo: Chris, the short answer is, it really is transaction dependent. And if we see a portfolio that we believe is accretive to shareholder value. And if assets needed to be repositioned and they have CapEx needs and we can see our way clear to performance in the near term, we would do that. I mean, I think a great example of an asset that has performed extremely well for us, that needed to be repositioned is the Phoenician. And we bought that asset in 2015 and completely reimagined the property and invested, I think $120 million to reposition it including new amenities, a new spa, a new fitness center, a new lobby bar and complete renovation of all the guest rooms and the asset is doing exceptionally well. So, if I could find another Phoenician that is something that we would certainly be interested and excited about doing.

With respect to portfolio deals, we look at everything that’s out there and we look at it with an open mind. And if there is a transaction that we believe is accretive, we would certainly take it down.

Chris Woronka: Okay. Thanks, Jim.

Operator: Thank you. We have reached the end of our question-and-answer session. So I will now turn the call back over to Mr. Risoleo for his closing remarks.

Jim Risoleo: Well, I’d like to thank everyone for joining us on our third quarter call today. We appreciate the opportunity as always to discuss our quarterly results with you and we look forward to seeing many of you in person at NAREIT and other conferences in the coming weeks. Have a great day. Thank you.

Operator: Thank you. This concludes today’s conference and you may disconnect your lines at this time and we thank you for your participation.