Summary
- Host Hotels is a leading hotel REIT with an enviable portfolio of hotels in the United States.
- The company has been hit hard with both revenues and profitability dropping dramatically due to the pandemic.
- Given the uncertainty around the duration and magnitude of the current COVID pandemic, I remain on the sidelines at this time.
Introduction and Investment Thesis
Host Hotels & Resorts (HST) is a hotel REIT with a portfolio of over 80 hotels containing around 46,500 rooms located primarily located in the United States. These hotels fall largely in the luxury and upscale categories and consist of brands such as Westin, Ritz-Carlton, and Hilton. Given that most of these properties contain strong amenities, only 63% of the revenues in 2019 came from room sales. The balance came from a variety of other sources including meetings, restaurants, spas etc. This helps greatly diversify the company's revenue streams and helps the company manage through seasonal softness in various categories.
Unsurprisingly, the company has been hit hard by COVID as seen in the stock's price chart below. This was largely due to stay at home orders and the population's concern around infections reducing both the volume and frequency of travel.
The financial results for Q3 illustrate this difficult situation clearly. On the revenue line, the company reported revenues of $198 million in Q3 2020 compared to $1.2 billion in Q3 2019 or a nearly 84% drop with little intra-quarter improvement. This is despite a number of states loosening stay at home restrictions and overall travel volumes beginning to recover. I believe this demonstrates the significant headwinds the COVID pandemic still bears on this company. From a profitability perspective, it is a similar issue. Due to topline softness, the company swung to a negative EBITDAre loss vs the positive $316 million EBITDAre mark for the same period last year.
