Host Hotels & Resorts Q3 2023 Earnings Call Transcript

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Provided by Quartr
November 2, 2023

Key Takeaways

  • Comparable hotel RevPAR improvement: Q3 RevPAR rose 1.8% YoY on a 150 bps occupancy increase, marking the 6th consecutive quarter above 2019 levels and the company maintained full‐year RevPAR guidance at an 8% midpoint.
  • Maui wildfires impact: August wildfires cut Q3 RevPAR by 60 bps, TrevPAR by 120 bps and EBITDA by $4.5 m, and are expected to shave 50 bps off full‐year RevPAR despite over $250k in relief donations.
  • Group booking momentum: Total group revenue for 2023 is 6.7% ahead of 2019 and 20% above 2022, with 2.6 m definite group room nights on the books for 2024—up 15% since Q2 and rates up 7% YoY.
  • Hyatt capex partnership: Agreed to invest $550–600 m across six Hyatt properties, secured $40 m in profit guarantees and priority returns, targeting low-double-digit cash-on-cash yields through RevPAR index gains.
  • Strong balance sheet & capital returns: Ended Q3 at 2.1x leverage with $2.6 bn liquidity, repurchased $150 m of shares YTD and boosted the quarterly dividend 20% to $0.18 per share.
AI Generated. May Contain Errors.
Earnings Conference Call
Host Hotels & Resorts Q3 2023
00:00 / 00:00

There are 13 speakers on the call.

Operator

Morning, and welcome to the Host Hotels and Resorts Third Quarter 2023 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Jamie Marcus, Senior Vice President of Investor Relations.

Speaker 1

Ladies and gentlemen, thank you for standing by. Please hold

Speaker 2

a moment. We are experiencing

Speaker 3

Thank you, and good morning, everyone. Before we begin, please note 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 ks filed with the SEC and in the supplemental financial information on our website at hosthotels.com.

Speaker 3

With me on today's call are Jim Risolia, President and Chief Executive Officer and Saurabh Ghosh, Executive Vice President and Chief Financial Officer. With that, I would like to turn the call over to Jim.

Speaker 4

Thank you, Jamie, 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, Post 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 hotel's employees, we also provided food and shelter to these employees, their families and emergency response teams.

Speaker 4

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 3 Maui Resorts and continues to exclude the Ritz Carlton Naples And 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 Q3, we delivered a comparable hotel RevPAR improvement of 1.8% compared to the Q3 of 2022.

Speaker 4

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 $361,000,000 which includes $54,000,000 of business interruption proceeds Hurricane Ian delivered adjusted FFO per share of $0.41 beating consensus on both metrics. 3rd quarter comparable hotel EBITDA margin of 26.6 percent exceeded 2019 by 10 basis points And this marks the 6th 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 We estimate that the Maui wildfires impacted 3rd quarter comparable hotel RevPAR by 60 basis points, Comparable hotel TrepPAR by 120 basis points and comparable hotel EBITDA by $4,500,000 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.

Speaker 4

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 percent 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 percent greater than 2019. As we look at the current macro picture, We continue to be optimistic about the state of travel for several reasons. 1st, group business continues to improve.

Speaker 4

During the quarter, we booked 245,000 group rooms for 2023 and total group revenue pace It's now 6.7% ahead of the same time 2019, up from 4.2% as of the 2nd quarter. Even without the recovery in relief groups on Maui, total group revenue would have been above both 2022 2019. The group booking window continues to extend and we are pleased with the base we have on the books for next year. 2nd, business transient demand continued its gradual improvement during the Q3. Business transient revenue was up approximately 9% to 2022 and demand improved 5% compared to the Q3 of 20 22.

Speaker 4

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. 3rd, Leisure rates at our resorts remained well above 2019 levels despite continued moderation in the 3rd quarter as expected.

Speaker 4

For context, transient rates at our resorts were 56% above 2019 in the 3rd quarter, Which is particularly impressive when considering that this excludes the benefits from our 2 newly renovated Non comparable hotels in Florida and includes the impact from our 3 resorts on Maui. 4th, 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 U.

Speaker 4

S. Airlines, the international imbalance is likely to revert 2019 levels over time. Most importantly, we are not seeing evidence of a weakened consumer at our hotels. Food and beverage outlet revenues remain both above 2022 and 2019, driven by resorts and non resorts alike, Which is encouraging given that occupancy still lags 2019 levels. Golf and Spa revenues also remain significantly ahead of pre pandemic levels.

Speaker 4

Taken together, we believe this indicates the consumers' continued 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 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 twenty nineteen 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 20% Over the same time in 2019, with an ADR premium of almost $900 and Suite bookings are pacing up 125% With a more than $1300 rate increase over 2019, we are proud of the well deserved attention that Ritz Carlton Naples is receiving, Including regaining the coveted AAA 5 Diamond designation and we look forward to seeing the results it delivers in the years to come.

Speaker 4

In terms of insurance proceeds related to Hurricane Ian, to date we have received $208,000,000 of the expected A potential insurance recovery of approximately $310,000,000 for covered costs. During the Q3, We received $54,000,000 of business interruption proceeds and we expect to receive an additional $26,000,000 Business interruption proceeds in the 4th quarter. Turning to group, revenue exceeded 2022 by 10% in the 3rd Quarter, marking the 5th consecutive quarter group revenue exceeded 2019. Definite group room nights on the books for 20 20 3 increased to $4,000,000 in the 3rd quarter, which represents approximately 110% of comparable full year 2022 Actual group room nights, up from 103% as of the Q2. 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 2, the recovery and relief groups on Maui.

Speaker 4

Group rate on the books is up 7% to the same time last year, A 40 basis point increase since the Q2. Looking ahead to 2024, We have 2,600,000 definite group room nights on the books, a 15% increase since the 2nd quarter. Total group revenue pace is up 13% to 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 6 properties in our portfolio.

Speaker 4

The properties include the Grand Hyatt Atlanta, The Grand Hyatt Washington DC, 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's 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 $40,000,000 in operating profit Our total investment is expected to be approximately $550,000,000 to $600,000,000 2 thirds of which we were planning to invest As part of our capital plan over the next few years. We expect to invest between $125,000,000 $200,000,000 per year Over the next 3 to 4 years on this program, we are targeting stabilized annual cash on cash returns the low double digits on our incremental investment through a combination of enhanced owners priority returns and RevPAR index share gains.

Speaker 4

Turning to our capital expenditure guidance for 2023, we tightened the range to 6 $215,000,000 to $695,000,000 which includes approximately $200,000,000 to $230,000,000 of investment for redevelopment, Repositioning in ROI projects and $150,000,000 to $175,000,000 for hurricane restoration work. Major capital expenditure projects included the December completion of a transformational renovation at the Fairmont Keilani As well as the start of construction at the Phoenician Canyon Suites Villas and a 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's Singer Island, Which is expected to be complete in the Q1 of 2024 and we are working with Hilton to soft 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 Q3. We continue to reinvest in our portfolio and we believe Enhance the EBITDA growth of our portfolio well into the future.

Speaker 4

We announced an exciting transformational capital program with Hyatt, We purchased approximately $100,000,000 of stock and returned 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 Rob.

Speaker 5

Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our Q3 operations, our updated 2023 guidance, our balance sheet and our dividend. Starting with business mix, we estimate that Maui impacted overall transient revenue by 4 50 basis points, which skewed the comparison this quarter, resulting in transient revenue down 3 30 basis points to the Q3 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 1 Hotel South Beach, which contributed to the decline over last year. As expected, during the Q3, We continue to see a normalization in transient rates at resorts compared to 2022.

Speaker 5

Business transient revenue was approximately 9% above the Q3 of 2022. Business transient rooms sold We remain approximately 20% below 2019 levels, but it's worth noting that New York, San Francisco and Denver, 3 of our largest business transient markets were within 10% of 2019 room nights in the 3rd 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 are also the largest contributor to room night decline compared to 2019. Encouragingly, during the Q3, large Technology companies showed room night growth compared to 2019. Turning to group.

Speaker 5

Group room revenues were 10% above the Q3 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 to San Francisco, which stood at 87% of 2019 levels in the 3rd quarter, up from 76% in the Q1, driven by increased airlift from Asia.

Speaker 5

With respect to group mix, corporate group room revenue was up 8% in the 3rd quarter, driven by 7% rate growth. Association Group revenue was down 11% in the 3rd 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 Smurf Group revenue It was up 39% in the 3rd quarter, driven by recovery and relief room nights on Maui, which are designated in the Smurf 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 DC. Looking ahead, our 2024 total group revenue pace It's 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.

Speaker 5

Our 3rd quarter comparable hotel EBITDA margin came in at 26.6%, which is 10 basis points above the Q3 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 4 years And occupancy is 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 4th quarter.

Speaker 5

We would Expect year over year comparable hotel RevPAR percentage changes in the 4th 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 4th quarter operational results to roughly follow 2019 quarterly seasonal trends as provided on Page 17 of At the midpoint, we would expect full year adjusted EBITDAre of $1,620,100,000 Please note that our adjusted EBITDAre guidance includes $54,000,000 of business interruption proceeds, which we received in the 3rd quarter And an additional $26,000,000 which we expect to collect in the 4th quarter, all of which is related to Hurricane Ian. Excluding the impacts of this interruption, our revised full year comparable hotel EBITDA midpoint Only declined $8,000,000 versus the 2nd quarter despite a full year estimated impact of $25,000,000 from Mallory. 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.

Speaker 5

Shifting to margins. As we have discussed over the past few quarters, year over year, we expect comparable hotel EBITDA margins To be down 2 10 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 basis points at the high end. This margin expansion is despite impacts from Maui.

Speaker 5

Occupancy is still meaningfully below 2019 levels, moderating attrition and cancellation revenues and expense inflation. Turning to our balance sheet and liquidity position. The $163,000,000 loan to the buyer of the Sheraton Boston was repaid in full during the Q3. 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 $400,000,000 coming due in April 2024.

Speaker 5

We ended the 3rd quarter at 2.1 times leverage and we have $2,600,000,000 of total available liquidity, which includes $218,000,000 of FF and E reserves and full availability of our $1,500,000,000 credit facility. In addition, we repurchased 6,300,000 shares at an average price of $15.90 per share, Bringing our total repurchases for the quarter to $100,000,000 Year to date, we have repurchased 9,500,000 shares an average price of $15.82 bringing our total repurchases for the year to $150,000,000 We have approximately $823,000,000 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 percent over our 2nd 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.

Speaker 5

We believe our portfolio, our balance sheet and our team 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.

Operator

Thank you. At this time, we will be conducting our question and answer session. Thank you. Our first question is coming from Ari Klein with BMO. Your line is live.

Speaker 6

Thanks and good morning. Maybe just on the group bookings pace, it's up 13% for next year. Curious what you're seeing from the end of quarter, for the quarter bookings. And do you think that bookings pace for next year ultimately narrows as maybe bookings Booking windows extend. And then if you could just touch on which markets look strongest and weakest for next year from a group standpoint?

Speaker 5

Sure, Ari. So we saw meaningful in the quarter for the quarter of bookings for the 3rd 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 pickup for Q4.

Speaker 5

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, our in the for the 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 extends 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.

Speaker 5

As it relates to markets that we expect will do well, for next year, we're certainly seeing Strength for our portfolio where it's meaningful is 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, Citywide room night pace is actually 90% of 2019 actuals, which is up from 83%, which we saw at the end of Q2.

Speaker 6

Thanks. Appreciate the color.

Operator

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

Speaker 7

Thanks. Good morning, everyone. Just on the Hyatt Capital Program for those 6 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 MARAAP program.

Speaker 7

Thank you.

Speaker 4

Yes, Mike. We'll be happy to gather that Shin 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 6 of these hotels. About 2 thirds of the work that we agreed to with Hyatt in return for the enhanced owner priorities And the $40,000,000 guarantee to support disruption.

Speaker 4

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 As I said, in the Marriott program, just to refresh your recollection, that was 16 properties. They're not all Stabilized yet, Dot, 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 3 to 5 points and we're meaningfully above that.

Speaker 4

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 3 to 4 years.

Operator

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

Speaker 8

Thanks. Good morning, Jim. This is Rob. Point of clarifications, Rob, is it fair to say you still have about $40,000,000 in potential BI recoveries that could occur next year, $250,000,000 through the Q3 plus some in the 4th and then the gap to $310,000,000 Is that the right way to think about it?

Speaker 5

Yes, we still plan to get to the 310. 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 are okay with the $80,000,000 of BI, that's why we have $26,000,000 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 $310,000,000 but certainly more than the $80,000,000 So we do expect some BI next year.

Speaker 5

That amount, we are still Working with our insurers as to what that is going to be.

Speaker 8

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 24 23. And I'm thinking the question I've been asking the number of the REITs is what sort of top line growth and we'll make our own Decision about what that is?

Speaker 8

And how much do you need before you could get flat EBITDA margins next year? Is that a 4% number?

Speaker 4

Bill, that's a question that'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 the renewal was that is year to year and it renews June 1 of every year Or July 1 of every year, I guess, through June 30. So, question mark will be what happens at 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.

Speaker 4

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 $80,000,000 of business interruption that we This year is a one time event. It's really not a one time 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. So

Speaker 5

Yes. Just to expand on that, Bill, I think the way to think about it 1st, to level set 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 $30,000,000 negative impact from Maui, which was made up of $25,000,000 from the hotels and then $5,000,000 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 $80,000,000 of BI that The proceeds for this year, which Jim mentioned, that effectively majority of that we would have received as EBITDA From the risk calls in Naples and the Hyatt Coconut Point, if it was not for Hurricane Ian.

Speaker 5

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 $1,600,000,000 plus, if that makes sense. 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 at the February call.

Speaker 1

Okay. Thank you, guys.

Operator

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

Speaker 9

Hey, 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 Q3 and then maybe just since the delta on the 4th quarter guidance It's really about Hawaii, it sounds like.

Speaker 9

What would get you to the high end? What would get you to the low end in terms of what needs to happen?

Speaker 4

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, Kanapali, 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 Westside and I do believe it will take some time as well For people to get comfortable rebooking their stays down in the Wailea area where our other two resorts are.

Speaker 4

We did see a lot of cancellations in the Q4 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 got to take care of the people first and that's what's happened. So the reason that our performance in the Q3 was better than we initially anticipated is the result of Recovery first responders taking rooms at our property as well as providing housing that was Subsidized by DEMA for displaced residents. And that really caused a material pickup, Pickup better than we anticipated. You did see a decline in Trebpar in the quarter by An amount that was directly attributable to what happened on Maui.

Speaker 4

I think the outer 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.

Speaker 10

Thanks, Maybe just to put

Speaker 9

a finer point on it. The delta in the 4th quarter, the range, is that a function of the duration of first responder and housing or The rate of just sort of organic leisure recovery?

Speaker 5

Yes. It's a little difficult to look at November December. It really is the disaster Business and how that will taper off as the west side of the island opens up, which actually opened up as of yesterday, November 1. 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.

Speaker 5

What I will say is if it was not for that, the Maui impact, we put our October numbers at 2.4%. Our 4th quarter numbers would have been slightly higher than the 2.4% if it wasn't for the MAUI impact.

Speaker 4

Yes. Point of fact, just to kind of wrap this up, Duane. Our anticipated The anticipated impact on comparable hotel RevPAR and Comparable hotel EBITDA from Maui is 50 basis points off the top line and $25,000,000 for the full year At the bottom line. So in essence, 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.

Speaker 10

Understood. Thank you.

Operator

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

Speaker 1

Hey, good morning. You made some comments on the urban and business transit demand profile Accelerating in September getting back to 17% cap to 2019. So I'm wondering if you can just provide some more color on how much That gap to 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 2?

Speaker 4

Sure. I'll take the San Francisco piece of it, Jay, And then, Saurabh 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 in 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 said, it is outpacing, I think, everyone in the set today. The Grand Hyatt on Union Square also in great physical condition and a great location.

Speaker 4

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 challenge 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.

Speaker 5

Yes. And I'll add on the San Francisco piece, which is encouraging is our lead volume at the San Francisco Marriott Marquis is actually up 5.5% to last year. And our group room rights there was up almost 8.5% year over year as well. So and in November is, I believe, when APAC at Asia Pacific Economic Conferences and that should be really good for Santen as well. Obviously, 2024, as Jim mentioned, the citywides are weak, but that's why we are really making a Inserted effort to get quality in house group at that hotel.

Speaker 5

As it relates to your question on BT, 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 recovery is across the board for the portfolio 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 2019, Which is pretty impressive. In terms of 2024, we expect more of the same in terms of BT. We expect certain markets To recover to continue to recover, but just at a very slow pace.

Speaker 5

The reality is, BP will come back in a meaningful way When there is more macroeconomic certainty and there is true economic growth, we believe there's a pretty close relation with nonresidential fixed investments growth And RevPAR. And once that comes back in a meaningful way and GDP growth comes back in a meaningful way, we expect that gap to reduce.

Speaker 1

All right. All right. All right. All right. Thank you very much.

Operator

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

Speaker 1

Hi, thanks. I just wanted to ask you, you mentioned 2,600,000 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 looking for the 4th calendar year When you're in just late in the year?

Speaker 5

Yes. When we compare that to 2019, we are about 10% down relative to 2019.

Speaker 1

Okay. So catching up. And then can you just mention The Sheraton Boston, you mentioned the seller finance, that loan was repaid in full. Any update on the Sheraton Times Square loan?

Speaker 4

Yes. That loan was due to be paid off on October 18. We worked with The borrower entered into a forbearance agreement and extension To November 9th November 8th, next Wednesday. As part of that agreement, The interest rate was restated to 13% and there was an upfront prepaid that brought the effective rate All in to 15%. So they are in the final stages of completing the documentation necessary To have the loan paid off by next Wednesday.

Speaker 1

Great. Thank you.

Operator

Thank you. Our next question is coming from Doreen Kestin with Wells Fargo. Your line

Speaker 3

is live. 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?

Speaker 4

Dory, I sure hope so. I really do. I mean, clearly, our balance sheet It's 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 Q3 and sitting here at 2.1 times leverage And the ability to do deals all cash and get them done quickly It's 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.

Speaker 4

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 and 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.

Speaker 3

Okay. Thank you.

Operator

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

Speaker 11

Yes. Thank you. I have two quick questions. First, looking at t RevPAR or comparable t RevPAR, 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 months ago maybe at the Analyst Meeting, you spoke about some strategic moves you might make over time working with managers to Some of the brand standards that might be modified as you sort of collect some sample sets To drill down on those and given where cost pressures are, I was curious if there's Anything meaningful there we could think about?

Speaker 11

Thanks very much.

Speaker 5

Sure. On the food and beverage front, banquet and catering contribution, which is effectively banquet and catering and AV revenue on For 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 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.

Speaker 5

That said, that really has moderated in terms of food and beverage revenue. There We are still getting meaningful amount of banquet and catering contribution and outlet revenues sort of per 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, Right. That had you saw had an impact in the Q3. Q3 with A and C revenue being down Literally about half of what it was last year.

Speaker 5

So that's putting into perspective in 2022, we received close to $100,000,000 Of accretion cancellation revenue, we think that's going to moderate somewhere around the $50,000,000 to $55,000,000 range. That's just one thing to keep a lookout on. I'm sorry, Meredith, your second question was?

Speaker 11

Just sort of it was a sort of strategic And working with managers on brand standards, is there any modifications that could be made over time Looking post COVID?

Speaker 5

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 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 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.

Speaker 3

Super. Thank you.

Operator

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

Speaker 2

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 a 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 kind of what you're seeing in terms of demand Thanksgiving and Christmas. And The third part of this question, you talked about transient resort rates still 56% above 2019.

Speaker 2

What sort of guidepost or what sort of expectations do you have for those rates Q4 and kind of going forward? Certainly, Commentary and the 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?

Speaker 4

Sure. Let me start with your the last question that you asked with respect to leisure transient rates. We're Very happy that in the Q3, our leisure transient rates We're 56% above where they were in the Q3 of 2019. For reference, that's down about 5 percentage points From where we were in the Q2. We were in the Q2, we were 61% ahead.

Speaker 4

And the fact That the 56% number takes into account the 3 comparable resorts on Maui To the negative, and it excludes our Ritz Carlton Naples and our Hi, 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 Q4 and as we get into next year, we'll We 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 It's 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 12% cash on cash return On that investment, 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.

Speaker 5

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 last year was the first time the country was really open for broader travel during the holiday season. But that said, specifically for like Christmas time right now, and this is much more directional, what we have Revenue on the books, West 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 it to last year. So we are off, let's have Maui down about 6%, 7% in pace, but Christmas is effectively flat right now, pacing flat in

Operator

Our next question is coming from Anthony Powell with Barclays. Your line is

Speaker 10

live. Hi, good morning. A question on one of your newer markets, Austin, Texas. RevPAR has been down in 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.

Speaker 10

Will that be disruptive? And how's your experience been in that market relative to kind of the more traditional coastal business urban markets?

Speaker 4

Anthony, I think that Austin, we have 2 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 deal that was done during the pandemic. And that asset is doing actually Quite well. Van Zant is and it's doing quite well given the fact that we're able to take in house group given the media space platform there As well as its location across the lake. VanZant 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 the Van Zandt in that particular submarket, the Rainey Street District.

Speaker 4

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 streets 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.

Speaker 4

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 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 We'll have on business in the Austin market. So we're being proactive and doing everything that we can do To mitigate any potential issues surrounding the convention center going forward.

Speaker 10

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.

Speaker 12

Hey, good morning, guys.

Speaker 4

Good morning.

Speaker 12

Thanks for taking the question. So 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 you 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.

Speaker 12

Are you willing to do different kind of deals and kind of what you've done in the last few years?

Speaker 4

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 Venetian. And we bought that asset in 2015 And completely reimagined the property and invested, I think, $120,000,000 to reposition it, including New amenities and new spa, new fitness center, new lobby bar and complete renovation of all the guest rooms in the asset is doing Exceptionally well.

Speaker 4

So if I could find another Phoenician, that is something that we would certainly be interested and excited about doing. With Back to portfolio deals, we will 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.

Speaker 12

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. Risolio for his closing remarks.

Speaker 4

I'd like to thank everyone for joining us on our Q3 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.

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