Jaime Marcus:

Thank you, and good morning, everyone. 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 and our 8-K filed with the SEC and in 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.

Sourav Ghosh:

Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our second quarter operations, updated 2024 guidance and our balance sheet. Starting with business mix. Overall transient revenue was down 5% compared to the second quarter of 2023, driven by softer-than-anticipated demand in Maui. We estimate that Maui had a 410 basis point impact to transient revenue in the quarter. Transient rates at our resorts remained resilient at 51% above the second quarter of 2019. Additionally, food and beverage outlet revenue per occupied room grew at both resorts and non-resorts. Outside of Maui, golf and spa revenues continued to grow due in part to our recent ROI investments in our spa and fitness facilities. We believe the rate strength at our resorts and continued growth of out-of-room spending indicates consumers' ongoing willingness to spend on travel and experiences. Looking at recent holidays, excluding Maui, Memorial Day weekend and July 4 outperformed our expectations due to strong last-minute transient bookings in the weeks leading up to the holiday weekends. Looking forward and excluding Maui, Labor Day transient revenue pace is up 9% compared to the third quarter of last year driven by occupancy. Business transient revenue was 4% above the second quarter of 2023, driven fairly evenly by increases in room nights and rate as business transient demand continued its slow and steady recovery. Demand growth was market-specific with certain hotels in Chicago and San Francisco, showing double-digit year-over-year growth in business transient demand. Encouragingly, Boston and New York both exceeded 2019 levels of business transient demand in the second quarter. Turning to Group. Revenue grew 8% in the second quarter, driven by 5% rate growth. Approximately half of the growth came from San Diego, Phoenix and Nashville with the balance coming from our other top markets. For full year 2024, we have approximately 4 million definite group room nights on the books, representing a 9% increase since the first quarter, keeping us ahead of same time last year. Group rate on the book is up 4% and total group revenue pace is up 6% over the same time last year, driven by a particularly strong third quarter and the continued focus on growing banquet and catering contribution. We remain encouraged by the ongoing strength of group business as evidenced by strong revenue pace, banquet and catering growth and double-digit citywide room night pace in key markets such as Nashville, New Orleans, San Antonio, San Diego, Seattle and Washington, D.C. Shifting gears to margins. Second quarter comparable hotel EBITDA margin of 32.6% was 10 basis points below last year, driven by increases in wages, benefits and fixed expenses as well as impacts from Maui. We received $21 million of business interruption proceeds from the Maui wildfires, which provided a 135 basis point benefit to the comparable portfolio. Excluding the business interruption proceeds, operations in Maui had a 60 basis point impact to EBITDA margin. Despite these headwinds, our controllable expenses, which include laundry, linens and guest supplies were flat versus the second quarter of 2023 due to net operational improvements across our portfolio. Turning to our revised outlook for 2024. The midpoint of our guidance contemplates a slower-than-anticipated recovery from the wildfires in Maui and moderating domestic leisure transient demand, primarily driven by the international demand imbalance. At the low end, we have assumed slower group pickup and softer leisure transient demand. And at the high end, we have assumed a faster recovery at our Maui resorts and increased transient pickup. For full year 2024, we anticipate comparable hotel RevPAR growth of between negative 1% and positive 1% over 2023. We expect comparable hotel EBITDA margins to be down 110 basis points year-over-year at the low end of our guidance to down 60 basis points at the high end. At the midpoint of our guidance range, we anticipate comparable hotel total RevPAR growth of 1.2% and flat comparable hotel RevPAR compared to 2023. Looking at the drivers of the RevPAR midpoint decline, approximately 90% of the reduction is related to transient business as group remains strong in the second half of the year, particularly in the third quarter. We estimate the Maui wildfires will impact full year comparable hotel total RevPAR by 120 basis points and RevPAR by 180 basis points. Excluding business interruption proceeds, we expect adjusted EBITDAre to be impacted by $75 million to $80 million relative to our prefire estimate. In terms of RevPAR growth cadence, we expect comparable hotel RevPAR growth to be slightly positive in the second half of the year, driven by low single-digit growth in the fourth quarter. We expect a comparable hotel EBITDA margin midpoint of 29.3%, which is 90 basis points below 2023. We estimate a 30 basis point impact to full year EBITDA margin from Maui relative to our prefire estimate, a 40 basis point impact from insurance and property taxes and a 110 basis point impact from wage and benefit rate increases, which is partially offset by a 90 basis point benefit from operational improvements. Our revised 2024 full year adjusted EBITDAre midpoint is $1.645 billion, a $25 million or a 1.5% decrease over the prior midpoint. This includes an estimated $62 million contribution from operations at the Ritz-Carlton Naples and $11 million from operations at Alila Ventana Big Sur, an increase of $5 million compared to our prior guidance. As a reminder, The Ritz-Carlton Naples and Alila Ventana Big Sur are excluded from our comparable hotel set for the full year 2024 forecast. Our adjusted EBITDA and FFO guidance also includes an estimated $22 million contribution from the 1 Hotel Central Park and The Ritz-Carlton O'ahu Turtle Bay for our ownership period. Turning to our balance sheet and liquidity position. Our weighted average maturity is 4.7 years at a weighted average interest rate of 4.9% after adjusting for investing and financing activities completed subsequent to quarter end. As Jim noted, we currently have $1.4 billion in total available liquidity, which includes $242 million of FF&E reserves. Our quarter end leverage ratio adjusted for post-quarter transactions was 2.7x, and we have $970 million of availability on our credit facility. In July, we paid a quarterly cash dividend of $0.20 per share, demonstrating our commitment to returning capital to stockholders. As always, future dividends are subject to approval by the company's Board of Directors. We will continue to be strategic and opportunistic in managing our balance sheet and liquidity position as we move through the remainder of 2024. To conclude, we remain optimistic about the future of travel as the headwinds facing our portfolio are not indicative of a weakening consumer. As Maui recovers and the international leisure demand imbalance finds equilibrium, our renovated portfolio of geographically diverse properties is well positioned to benefit. 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 1 question.

David Katz:

I appreciate it. Jim, congrats on all of the acquisitions to everybody. Can you just talk about the possibility, the prospects, probability, boundaries around any further acquisitions that we might see this year or even early next from what you can tell today?

David Katz:

Understood. Thanks for the answer. Appreciate it.

Chris Darling:

Jim, maybe following up on that last question actually. I mean, you mentioned acquisitions are unlikely in the near term and pivoting instead to deploying capital through whether ROI projects or as share repurchases. With that in mind, I wonder what role incremental dispositions might play in pursuit of that strategy and whether you're thinking about testing the market in any regard.

Operator:

The next question is from Chris Woronka from Deutsche Bank.

Jim Risoleo:

Well, we are really happy being an owner of 1 Hotels, Barry Sternlicht, Starwood Capital, we’ve always got Barry as an innovator. I mean, he started with the W brand. And I think 1 is really an extension of W. Our performance in Miami has been really quite incredible. We bought that at, I think, roughly a 13x multiple in 2018. And in 2023, we were around 10x, 10x, 10.5x, something like that. In 2022, we actually got down to sub 8x. So we like the performance of the brand. We like – we like where he’s heading with it, where SH Hotels is heading around the globe and elsewhere for distribution. But it’s not anything that we’ve had conversations about co-branding or anything of that nature. So we just said – we think they do a great job, and we have a great relationship with them, and we hope that we can continue to expand that relationship going forward.

Dori Kesten:

As you are putting together guidance this quarter, what were the aspects of the guide that you were more uniformly agreeing upon internally versus which required a more vigorous discussion. We're just trying to get a sense of how derisked the second half of the year is at this point.

Dori Kesten:

Just a quick clarification, Sourav. So Q3 group pace is up high single digits. So what transient, like on the books now for Q3, what is transient and down?

Dori Kesten:

Okay.

Michael Bellisario:

To focus on Maui a little bit. Can you maybe help us understand the guests that are coming to your properties? Are they different customers than a year ago, pre-pandemic? Are they coming through different channels? Also what are the brands doing to help stimulate demand? And then just lastly, can you give us some examples of the planned marketing initiatives that you mentioned?

Operator:

The next question will be from Shaun Kelley from Bank of America.

Sourav Ghosh:

Yes, you did hear that correctly. We effectively took the trends that we saw for leisure transient in the second quarter and applied that for the rest of the year. Obviously, the mix of leisure in Q3 is a little bit different than Q4. But when you actually look at sort of the 300 basis point decline in the midpoint of guidance, what I would say is about 15% is as a result of Q2, the remainder is second half, and that’s effectively evenly split between Q3 and Q4.

Duane Pfennigwerth:

Just on cost programs. I assume your expense budgets at the asset level were based in part on your revenue outlook? And I just have a basic question. Are there cost takeouts that can happen? And do those cost reductions typically have a lag as revenue softens?

Operator:

The next question is coming from Smedes Rhodes from Citi.

Sourav Ghosh:

Sure, Smedes. I think what will be easy is if I just walk through where our midpoint of previous guidance was at $1.670 billion and bridge that to our current guidance of $1.645 billion. So you take the $1.670 billion, you take out $64 million of comp EBITDA, excluding Nashville. Of that $64 million, about 50% of that $64 million is attributable to Maui and San Francisco. The remainder is primarily made up of 4 markets, I would say, it's D.C., Orlando, Phoenix and L.A. And then you add $5 million for improvement of our forecast for Nashville. You would add another $5 million for Alila Ventana, which opened up sooner than we had expected. And then you add $22 million for the 1 Hotel Central Park in Turtle Bay and then another $7 million for higher interest income, because we obviously did the $600 million bond deal, had more cash reserves and higher interest rates that allowed for that. Once you total that up, you get to the $1.645 billion. But what I would say is important to remember that certainly for 2024, the $1.645 billion guidance, but it's important to remember what the run rate really is once you really adjust for all the puts and takes. So if you take, again, the $1.645 billion midpoint guidance that we have and you remove all the business interruption that we got this year, which is equal to $40 million, you would add an additional $49 million for Turtle Bay and 1 Hotel Central Park because obviously, we don't have the full year baked in, in 2024, you would add another $13 million for Nashville. And as we said in our prepared remarks, another $75 million to $80 million for Maui and another $5 million for Ventana. So the true run rate on a stabilized basis, if you will, is $1.750 billion. So hopefully, that answers your question and then some.

Sourav Ghosh:

Sorry, are you asking for the leisure demand increase in Q2?

Sourav Ghosh:

Yes. Our overall – and remember, we used our resorts as a proxy. Our rate still held firm, overall resort revenue or our lease revenue was slightly down as volumes, obviously, as what Jim was referring to, have moderated. But our rates held up, which are still 51% above 2019. I believe in Q1, that number was 52%.

Robin Farley:

I wanted to go back to your comments about how total RevPAR grew more than room RevPAR. And Marriott had called out some ancillary spend being reduced and MGM called out kind of lower restaurant covers and pressure on entertainment ticket prices. And so I'm just wondering, is the increase that you're seeing in ancillary revs, is that -- do you think it's because of your group mix is increasing, and so it's more banquet revenues? But the transient piece is softening on the ancillary side? Or just wondering why your trend looks a little bit different than what some others have talked about.

Robin Farley:

Great. That's helpful. Maybe just one follow-up clarification is can you remind us where your group mix, where you think that will end up this year and where it was in 2019?

Operator:

The next question will be from Stephen Grambling from Morgan Stanley.

Sourav Ghosh:

Not necessarily because both for Memorial Day and July 4, we came in actually better than expectations. So it really sort of -- sort of scattered across the quarter on certain weekends, but there wasn't any discerning trend necessarily while we went through the quarter as it relates to sort of pricing or for that matter of fact, even demand, because the holidays actually did better than what we thought they would do.

Sourav Ghosh:

That’s correct. And effectively, the trend of – particularly from the leisure standpoint, the international outbound that Jim mentioned, we had obviously assumed earlier that we would – it would be actually lower in Q2 of this year versus Q2 of last year. The opposite helps you and we’re assuming for the rest of the year that, that will continue.

Bill Crow:

Jim, in a weakening economic backdrop. And when we see rising job cuts and rising unemployment, what's the first -- what's the first indicator in the lodging space. Is it weaker leisure demand? Is it weaker? Or is it group attrition, lower F&B, what should we be looking out for if the economy starts to slow at a fastening pace?

Bill Crow:

Great. If I could ask Sourav, a follow-up or a second question. Sourav, we've got a lot of flavor negotiations coming up towards the end of this year, and I'm not going to ask you about those. But how do you think about wage and benefit increases as you look into 2025 across the portfolio?

Operator:

That's all the time we have for questions. Today, I would now like to hand the call back to Jim Risoleo for closing remarks.

Operator:

Thank you. This does conclude today's conference. You may disconnect your lines at this time. Have a wonderful day. Thank you for your participation.

Sourav Ghosh:

Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our first quarter operations, updated 2024 guidance and our balance sheet.

Operator:

[Operator Instructions] Our first question is coming from Michael Bellisario with Baird.

James Risoleo:

Sure, Mike. Nashville is a market that we have had our eye on for a number of years. It is a market where I would say we're underrepresented given the dynamic that is occurring in Nashville. Years ago, we did a 50-50 joint venture with White Lodging on a Hyatt Place. We were one of the early ones in Nashville. And that property has continued to outperform all of our expectations. I think we refinanced it 2 or 3 times along the way. So have been scouring the market and actually had reached out to our friends at Starwood Capital and Crescent before the 1 Hotel and Embassy Suites even opened when it was in the construction phase.

Shaun Kelley:

Jim, Sourav, and I apologize going a little bit late. So if there's some piece of prepared remarks, it's a repeat here than my apologies. But hoping you can just dig in on what you're seeing on the leisure transient softness came up a couple of times. -- that I heard. Just some examples you could give when you started to see that behavior shift, is it continuing into April? Just any kind of sense by market or behavior that you can see right now? That would be great.

Aryeh Klein:

Maybe just going back to Nashville, now that, that acquisition has been done, how are you thinking about future M&A? And perhaps which markets are of interest? Are there Nashville types markets that you're not in that you'd still like to get into? And then maybe just on the overall M&A landscape, with rates seemingly higher for longer. Has there been any shift in the market? Have you seen assets pulled or anything like that?

Bennett Rose:

Sourav, I just wanted to circle back. I know you talked about this a little bit in your opening remarks that the -- on a comparable basis, your EBITDA outlook declined by over $20 million. And so you -- that included some business insurance. It turned out, it's going to be a lot more, which is great. But I guess I just wanted to understand, of that about $22 million decline, how much did you think was isolated or sort of realized as it were in the first quarter? And how much is coming through the balance of the year and maybe related to your 1 point reduction in sort of RevPAR forecast?

Operator:

Our next question is coming from Stephen Grambling with Morgan Stanley.

Sourav Ghosh:

Sure. So if you think about the $1.670 billion that we have guided to for the year, the way to think about long-term run rate, you take out $38 million of BI, right? So it's effectively the $10 million that we already had in the previous guidance, plus the $28 million that we have put into the guidance. You'll take out the $38 million, and then you will add $10 million for Alila Ventana, you would add $13 million for Nashville. So that, as Jim mentioned, we're expecting about $42.2 million this year. We already have $29 million in there. So that's where the $13 million is coming for Nashville.

Operator:

Our next question is coming from Bill Crow with Raymond James.

James Risoleo:

Bill, it's -- yes, I would say that I don't know if I want to say that it's coming down or cooling a bit. The ADR is likely to be lower this year in Orlando than it was in '23, but it's still meaningfully above where it was in 2019. So we're not seeing a reset really backwards by any means. And one of the other things that will impact us a bit in Orlando this year is some disruption associated with our condo development. So we are steering guests away from a certain side of the building during times of construction. And -- so that is going to be an impact on Orlando as well.

James Risoleo:

I would say it's going to take longer than we anticipated. Yes. We just -- just very difficult to wrap your arms around that. One of the other things that we as an industry are dealing with through U.S. travel and AHLA is working with the state department to see what can be done to shorten Visa wait times. I mean Visa wait times in the U.S. are still running at 400 days. And that is a discouraging factor to many people as they are looking to come to the U.S. A corollary to that is in Canada, you can get it a Visa 40 days out. So there is a program in place to try to break that log jam and to hire more people to do the processing necessary.

Duane Pfennigwerth:

Most of my questions have been asked. But just on the Naples Ritz, can you remind us what seasonality is for that asset historically? I know your guide implies about 50% of the full year contribution in the March quarter. But does that align with historical seasonality? What did 1Q typically represent historically, if there's such a thing as a "normal year."

Operator:

Our next question is coming from Robin Farley with UBS.

Sourav Ghosh:

Yes, Robin, clearly, attrition and cancellation revenue is coming in higher, and I wouldn't say that's necessarily a systemic thing. We were expecting -- the attrition cancellation revenues to go back more to norm. We had in our previous forecast for the year, approximately $57 million or so for the year. And now we have closer to $71 million forecasted for the year. It's not across the portfolio. And part of it is our managers are frankly doing a much better job of collecting those revenues and contracts are tighter. So it's just been sort of a trend that we are seeing, and we may actually stabilize at those higher levels, but it's not a systemic issue about the portfolio or anything that was some of these jumps out on a onetime basis in Q1.

Sourav Ghosh:

Yes, it's difficult to exactly predict what it will be for the following year, but it seems like thus far, attrition cancellation is going to be at that elevated level, at least based on what we're seeing today.

David Katz:

Can you just talk about the deal market a little bit? Are there assets out there that would be sold but not for the cost of capital? Is there still some sort of sellers posturing with respect to price that needs to adjust itself. What are the gating factors for a more active deal trading market to start to occur, please?

Operator:

Our next question is from Chris Woronka with Deutsche Bank.

James Risoleo:

Yes. I'll start, Chris, and I'll let Sourav jump in and add what additional color he might have on it. But we are obviously very close to the -- to what's happening on Maui and I can't describe it in any more specific terms other than to say that demand continues to evolve on the island. I think that when the wildfires occurred, devastating wildfires occurred, those folks who might have been new to Maui and maybe they were staying down in Wailea in one of our 2 terrific properties [indiscernible] the Andaz or the Fairmont Kea Lani. They just said they listened to the governor and the governor said, "Stay away from Maui."

James Risoleo:

Well, thank you again for joining us. We appreciate the opportunity to discuss our quarterly results with you, and we look forward to seeing many of you on the road and certainly at NAREIT in New York. Have a good day. Thank you.

Jaime Marcus:

Thank you, and good morning, everyone. 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 and our 8-K filed with the SEC and in 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.

Sourav Ghosh:

Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our fourth quarter operations full year 2024 guidance and our balance sheet. Starting with business mix, overall transient revenue was down 5% compared to the fourth quarter of 2022, driven by the evolving nature of demand in Maui. We estimate that Maui had a 590 basis point impact to transient revenue, which was evenly split between demand and rate. We were encouraged that transient rate at our resorts grew 2% above last year's tough comparisons despite the demand impact from Maui and renovation disruption. Looking ahead to spring break, transient revenue pace is up for our portfolio compared to the same time last year, driven by occupancy and rate growth at our resorts. Outside of Maui, resort transient revenue pace for spring breakis up 20%. Business transient revenue was up over 7% to the fourth quarter of 2022, driven by both rate and demand growth at our downtown properties. Business transient demand continued its slow and steady recovery. Room nights at our downtown properties were down 15% in the fourth quarter compared to 2019, which is the smallest gap to the 2019post-pandemic. For the full year, business transient demand grew 12% over 2022. In 2024, we expect further demand growth driven by large corporates alongside rate growth in the mid-single-digits. Turning to group. 2023 was the year of group and convention hotel recovery. For the full year, group room revenues increased 21% over last year and room night volume recovered to 95% of 2019 levels. It is worth noting that our group results were positively skewed by disaster and recovery bookings in Maui. Excluding Maui, group room night volume recovered to 94% of 2019 levels. Group room revenue exceeded 2022 by 13% in the fourth quarter, driven by an increase in both rate and room nights, and we estimate roughly half of that growth can be attributed to recovery and relief groups on Maui. Outside of Maui, hotels in San Francisco, Boston, DC and Seattle contributed to the group room night increase. Notably, November's APAC Conference in San Francisco drove results with an estimated 41,000 citywide group room nights. Looking ahead to 2024, we have 3.1 million definite group room nights on the books, representing a 16% increase since the third quarter, putting us ahead of where we were this time last year. Total group revenue pace is up 10% over the same time last year, driven by rate room nights and banquets. We continue to be encouraged by the ongoing strength of group business as evidenced by strong pace, lengthening booking windows and double digit citywide room night pace in key markets such as New Orleans, San Diego, Seattle and D.C. Shifting gears to margins. As expected, margin declines year-over-year were driven by increases in wages and benefits, fixed expenses as well as moderating attrition and cancellation revenues and impacts from Maui. Despite these headwinds, full year 2023 comparable hotel EBITDA margin was 30.1%, representing a 60 basis point increase over 2019. Our ability to achieve this margin expansion is a result of our efforts to redefine the operating model and is indicative of our strong execution, particularly when considering that total comparable hotel expenses have only grown 7% in the last four years and occupancy is still 8 points below 2019. Turning to our outlook for 2024. The midpoint of our guidance contemplates a stable operating environment with continued improvement in group business, a continued gradual recovery in business transient, steady leisure transient demand and a continued evolution of demand on Maui as the island recovers from the recent wildfires. At the low end, we have assumed slower group pickup and softer leisure transient, and at the high end, we have assumed a faster recovery at our Maui Resort and increased group pickup. For full year 2024, we anticipate comparable hotel RevPAR growth of between 2.5% and 5.5% over 2023. We expect comparable hotel EBITDA margins to be down 120 basis points year-over-year at the low end of our guidance to down 40 basis points at the high end. Notably, we expect margins to be down only 20 basis points at the midpoint versus 2019 despite a 50 basis point margin impact from Maui. In terms of RevPAR growth cadence for the year, we expect comparable hotel RevPAR growth to be in the low single digits in the first half of the year due to tough comparisons to 2023, which saw a surge in recovery of downtown markets driven by improving group business and elevated leisure demand. We expect mid-single digit comparable hotel RevPAR growth in the second half of the year as a result of strong group booking pace, less renovation disruption compared to the second half of 2023 and the diminishing impact of the Maui wildfires. For January, we expect comparable hotel RevPAR to be approximately $187, a 1.4% improvement over 2023. At the midpoint of our guidance range, we anticipate comparable hotel RevPAR growth of 4% compared to 2023 and a comparable hotel EBITDA margin of 29.3%, which is 80 basis points below 2023. As we think about bridging our 2023 results to 2024, we estimate that Maui is impacting comparable hotel RevPAR by 100 basis points and comparable hotel EBITDA margin by 50 basis points. We also expect a 15 basis point impact to margins from moderating attrition and cancellation revenues and a 45 basis point impact from property taxes and insurance. In 2024, we expect wage rates to increase approximately 5%. For context, in 2023, wages and benefits comprised approximately 50% of our total comparable hotel expenses and attrition and cancellation revenues were $75 million, which is approximately 50% higher than 2019. Our 2024 full year adjusted EBITDAre midpoint is $1,635 million, this includes an expected additional $10 million from business interruption proceeds related to Hurricane Ian and an estimated $60 million contribution from operations at the Ritz-Carlton, Naples, which is excluded from our comparable hotel set in 2024. It is important to note that we have not included any assumption for business interruption proceeds from the Maui wildfires in our 2024 guidance. Turning to our balance sheet and liquidity position, our weighted average maturity is 4.2 years at a weighted average interest rate of 4.5%. We have a balanced maturity schedule with our next maturity of $400 million coming due in April 2024. We are closely monitoring the debt capital markets and we believe our balance sheet provides us with optionality and flexibility. As Jim noted, we have $2.9 billion in total available liquidity, which includes $217 million of FF&E reserves and full availability of our $1.5 billion credit facility. We ended 2023 at 1.9x net leverage, and since our last call, Fitch upgraded the company’s issuer rating from BBB- to BBB with a stable outlook, returning Host to its pre-pandemic rating level. Wrapping up. In January we paid a quarterly cash dividend of $0.20 per share and a special dividend of $0.25, returning to our pre-pandemic quarterly payout level. The Board of Directors authorized a quarterly cash dividend of $0.20 on our common stock to be paid on April 15, 2024 to stockholders of record on March 28, 2024. As always, future dividends are subject to approval by the company’s Board of Directors. To conclude, we are proud of our achievements in 2023 and we believe our best-in-class portfolio and balance sheet leave us uniquely positioned to capitalize on opportunities for growth in the future. 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.

Sean Kelly:

Hi. Good morning, everyone. Thanks for taking my question. Jim or Sourav, maybe we could just start off with a little color on the M&A environment. You alluded to it in your prepared remarks a little bit and obviously we know the strength of the balance, but coming out of the ALIS conference, how are conversations going? And maybe you could just lead us a little bit on how you can really tap in using your balance sheet strength to unlock some opportunities that others may not have in front of them at this point in the market.

Sean Kelly:

Thank you very much.

Smedes Rose:

Hi. Thank you. I was wondering if you could just talk a little bit more about on the group booking side. It sounds like part of your improvements you’re seeing are driven by kind of large citywide conventions and the return of maybe sort of association business. But could you talk about maybe just what you’re seeing, just more on the corporate side, larger meetings, smaller meetings, more frequent meetings, just any kind of detail around that would be interesting.

Smedes Rose:

Thank you. Appreciate that.

Robin Farley:

Great. Thanks. Just circling back to your comments on potential acquisitions. I guess, I’m surprised, just given the maturities, CMBS maturities, some of which were pushed back in 2023 into 2024, that maybe there’s not more kind of for sale in the first half of 2024. So I guess what is your sense of kind of what’s happening with those maturities? And then also just curious what your current thoughts are on the type of assets, location, if there’s been any change in terms of what Host would be looking for? Thanks.

Robin Farley:

Great, very helpful. Thank you.

Bill Crow:

Thanks. Good morning. Maybe for Sourav, a question about the kind of the tail of two halfs of the year and RevPAR growth in the low single-digits in the first half and then accelerating up to I guess, what, 5%, 6%, 7% in the second half of the year to hit your numbers. Can you kind of compartmentalize how much tailwind you get from Maui? How much you get from renovation disruption? Perhaps Coconut Point is providing a lift given the challenges in that market last year. What can you tell us to give us kind of confidence in that outsized growth in the second half of the year?

Bill Crow:

Great, thanks for the color.

Michael Bellisario:

Thanks. Good morning, everyone. You want to stick to your outlook. Do you have an industry RevPAR forecast that you're thinking about? And then specific to your outlook, what are you assuming for the mix of rate and occupancy in 2024? And how does that affect your expense outlook and how you're thinking about cost per occupied room? Thanks.

Michael Bellisario:

Got it, thank you.

Duane Pfennigwerth:

Thanks. So on the group pace, I think you said up 13%. How are you thinking about closing group bookings in the quarter for the quarter over the balance of the year? Assume closing group would moderate as the booking curve continues to normalize. And then relatedly, are you leaning on group any differently than you did pre-pandemic given changes in underlying seasonality? So for example, given changes in business trends, is there more of an effort to lean on group to fill in off-peak periods?

Duane Pfennigwerth:

Okay, appreciate the thoughts.

Chris Woronka:

Hey, good morning, guys. Appreciate all the details so far. Just had a question as to how you're thinking about cadence of transient through the year, especially as we get into summer Q3. Remember last year we had a little, I guess, surprise where more international outbound and we didn't get the corresponding numbers inbound. How are you kind of internally modeling summer transient this year? Thanks.

Chris Woronka:

Thanks, guys.

Stephen Grambling:

Obviously, we can kind of look at the total dollar amounts, but there's been some changes in construction costs and otherwise. I'm just curious how you're thinking about the ROI on those projects. And if you can give any other color comparing and contrasting the two. Thanks.

Stephen Grambling:

Just asking to compare and contrast the Hyatt Transformation versus the Marriott transformation programs.

Stephen Grambling:

how you're thinking about the return on investment, how these which – how the hotels might compare and contrast. There's a reason why we should be assuming that these should be kind of the same uplift. Or could there be a difference when we think about looking at the two?

Stephen Grambling:

And just one follow-up on that, was that primarily through RevPAR index premium or was there also a component, any way to break that down with F&B uplift or other revenue uplifts?

Operator:

Thank you. Your next question is coming from Aryeh Klein from BMO. Aryeh, your line is live.

Jim Risoleo:

Sourav, are you back on audio? No, he's not. Sourav, he is having some audio issue.

Jim Risoleo:

There you go. Okay.

Jim Risoleo:

I'll start, Aryeh with respect to what are we seeing from the leisure consumer, our leisure transient traveler is generally the affluent consumer in the country. We are seeing no slowdown in spend. We're really not seeing a backing off in a meaningful way in ADR and out-of-room spend in banquet in outlets is still strong. This goes back to Stephen's question. The investment that we made in a lot of our properties and the transformational properties has resulted in a significant pickup in outlet spend throughout the portfolio. So leisure is from our perspective, it's still trending very strong. And I think that goes back to the commentary around spring break where our revenue pace is up 20% year-over-year for spring break, and we're very pleased with that.

Jim Risoleo:

Well, I'm not certain that we said that there was going to be a recovery in the second half of the year. So we hope that there's a recovery in the second half of the year. But there are a number of things that have to happen on Maui, particularly on the West side, which is where the wildfires were. And the gating issue really is finding shelter for the displaced residents. And March 1 is a pivotal date in our mind. The governor of the state of Hawaii has stated that if the owners of short-term rentals on Maui don't come to terms with allowing their units to be utilized by the displaced residents, then he is considering a ban on short-term rentals. Because I think on the island of Maui, in total, there's about 30,000 short-term rentals. So it's quite significant and we're tracking it very closely. Additionally, cleanup and the plans to rebuild Lahaina town are still in process. So the west side, I think, is going to take some time to come back. In the interim, we have been working with relief agencies, in particular, now the Red Cross, and we have contracted with the Red Cross for 350 rooms at the Hyatt Regency Maui through the end of May. And we're hopeful that that will be extended while the recovery moves forward. The story in Wailea, where we own the Andaz Wailea and the Fairmont Kea Lani is different. Those properties have been, in the case of the Fairmont Kea Lani just completed a transformational renovation. So the asset is in incredible shape, as is the Andaz Wailea, where we completed soft good's rooms redo, as well as the significant bathroom work. So both of those assets are in great shape and we're confident that over time as the consumer begins to understand the differentiation between Wailea, which is a completely different submarket than the west side in Kaanapali, that will see the cadence of business pick up. And I would just say that, as we think about the midpoint of our guidance this year, we've assumed pretty much 100 basis point impact on Maui and that will result in about the same diminution in EBITDA as we experienced last year. But if Maui is better than our anticipation, and it's too soon to really know that, then we think there is some upside and that takes us to the higher end of the EBITDA guide.

Aryeh Klein:

Thank you.

David Katz:

Morning everybody. Thanks for working me in. I appreciate it. Covered a lot of ground already and I really wanted to just maybe triple click on how we think about the boundaries for deals more. Are fixer uppers in or out of bounds versus things that just need a little more strategic direction. And any thoughts on sort of size would be helpful there as well. And that's it for me.

David Katz:

Thank you very much.

Dori Kesten:

Thanks. Good morning. How has the spread between your group and transient ADR shifted from 2019 to today? And I guess, how much do your transient rates drive your in the year, for the year group booking pricing.

Dori Kesten:

The spread between your group rates and your transient rates. I'm wondering how that's changed from 2019 to today. And then the second piece of it was how much do your transient rates inform your in the year for the year group pricing?

Operator:

Certainly, there are no further questions in the queue. I'll now hand the conference back to Jim for closing remarks. Please go ahead.

Operator:

Thank you, everyone. This concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

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.

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.

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.

Operator:

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

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.

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?

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?

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.

Operator:

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

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.

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.

Q – Duane Pfennigwerth:

Understood. Thank you.

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?

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.

Operator:

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

Sourav Ghosh:

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

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.

Operator:

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

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.

Operator:

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

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?

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.

Operator:

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

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.

Operator:

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

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.

Operator:

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

Jim Risoleo:

Good morning, Chris.

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.

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.

Operator:

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

Jaime Marcus :

Thank you, and good afternoon, everyone. 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 and our 8-K filed with the SEC and in 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.

Sourav Ghosh:

Thank you, Jim, and good afternoon, everyone. Building on Jim's comments, I will go into detail on our second quarter operations, our updated 2023 guidance and our balance sheet and dividends. Starting with business mix. Overall transient revenue was up 80 basis points to the second quarter of 2022, driven by rate growth, which offset a slight decrease in demand. Softening transient demand drove the miss to RevPAR guidance driven primarily by underperformance in San Francisco and Seattle and at our resorts to a lesser extent. Results in the second quarter saw transient revenue down 8% over the all-time high of the second quarter of 2022. While transient rate at resorts was down year-over-year, it was still 61% above 2019 after being up 54% compared to 2019. In fact, transient revenue at our resorts increased in the second quarter compared to the first quarter despite the slight decrease in demand. Business transient revenue was 16% above the second quarter of 2022, driven by a 10% rate increase. Demand also increased by nearly 6% above last year, driven by our hotels in New York, Boston and Washington, D.C. Our downtown properties accounted for 65% of the business transient demand, which is in line with pre-pandemic trends. Small and medium-sized businesses continue to drive the recovery, representing the majority of our business transient demand today. Turning to group. Group room revenues were 4% above the second quarter of 2022, fully driven by rate growth. The 1.1 million group room nights sold in the quarter was slightly ahead of both last year and the first quarter, which aligns with 2019 seasonal trends. Washington, D.C., Chicago and Boston drove the group room revenue growth compared to 2022. With respect to group mix, corporate group room revenue was up 9% in the second quarter, driven by nearly 6% rate growth. As anticipated, Association Group's revenue was down almost 3% in the second quarter compared to last year, as the second quarter of 2022 had elevated association group volume driven by rebookings for events that were canceled during the pandemic. Social, military, educational, villages and fraternal or Smart Group revenue was up 3% in the second quarter, driven by 2.5% rate growth. Our 2024 total group revenue pace is above both 2022 and 2019, and we are encouraged by the citywide booking pace in New Orleans, San Diego, Seattle and Washington, D.C. all of which have citywide group room nights meaningfully ahead of the same time last year. Shifting gears to margin performance. Our second quarter comparable hotel EBITDA margin came in at 32.7% which is 40 basis points better than the second quarter of 2019, but below the high watermark of the second quarter of 2022 when staffing at hotels lagged demand. Total comparable expenses grew just 7.5% over 2019, while total comparable revenues were up 7.8%. As expected, attrition and cancellation revenue moderated from 2022 levels during the second quarter. We are encouraged that comparable hotel EBITDA margin remains above 2019 despite elevated inflation over the past four years and occupancy still 8 points below 2019. As Jim noted, we tightened our full year comparable hotel RevPAR growth range to 7% to 9%. The RevPAR midpoint of 8% is 100 basis points less than our prior midpoint. But at the high end of the original guidance range we provided in February. We estimate that approximately 60 basis points of the midpoint decline is attributable to second quarter results and the remaining 40 basis points is attributable to our updated outlook for the second half of the year. While we have not yet seen signs of a macroeconomic-driven slowdown, our guidance range continues to contemplate varying degrees of moderating growth in the second half of the year. As a result, we would expect year-over-year comparable hotel RevPAR percentage changes in the second half of the year to be flat to up low single digits, primarily driven by occupancy. At the midpoint of our guidance, we would expect a comparable hotel EBITDA margin of 29.9%, which is 40 basis points ahead of 2019 and full year adjusted EBITDAre of $1.550 billion. Keep in mind that the midpoint of our revised full year 2023 adjusted EBITDAre guidance is still $100 million above the original guidance we provided in February and down only $25 million from the guidance we provided in May. We expect our operational results to roughly follow 2019 quarterly seasonal trends as provided on Page 17 of our supplemental financial information. As a reminder, the third quarter of the year is historically the weakest of the four quarters in terms of both nominal dollars and margins due to seasonal market and business mix shifts. Our 2023 full year adjusted EBITDAre guidance includes an expected $17 million contribution from Hyatt Regency Coconut Point and the Ritz-Carlton Naples, both of which are excluded from our comparable hotel results due to impacts from Hurricane Ian. As we have discussed previously, the pre-hurricane estimated contribution from these two hotels including the new tower at Ritz-Carlton Naples was expected to be an additional $71 million in 2023. It is also important to note that we have not included any expected business interruption proceeds from Hurricane Ian in our 2023 guidance. 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. We expect the biggest margin differential year-over-year to be in the second quarter with a narrowing margin spread in the second half of the year. For these reasons, we do not believe 2022 will present a stabilized comparison for margins. Relative to 2019, which is 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 despite lagging occupancy and elevated inflation pressures over the past 4 years. Our efforts to transform the portfolio and evolve the hotel operating model are enabling this margin expansion. As we have discussed in the past, it is particularly impressive when you consider that our forecasted total hotel expense CAGR from 2019 to 2023 is only 1.6% versus the forecasted core CPI CAGR of 4% over the same period. Turning to our balance sheet and liquidity position. Our weighted average maturity is 4.7 years at a weighted average interest rate of 4.5%, and we have no significant maturities until April 2024. We ended the second quarter at 2.2 times leverage, and we have $2.5 billion of total available liquidity, which includes of $213 million of FF&E reserves and full availability of our $1.5 billion credit facility. In addition, during the second quarter, we achieved a milestone in our progress towards our renewable energy goal, resulting in a 2.5 basis point reduction in the interest rate on the outstanding term loans under our sustainability-linked credit facility. We paid a quarterly cash dividend of $0.15 per share, an increase of $0.03 or 25% over the prior quarter in July. 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. In any scenario, we believe our portfolio, our balance sheet and our team are well positioned to continue outperforming and we will continue to be strategic in the current macroeconomic environment. With that, we would be happy to take your questions. [Operator Instructions]

Duane Pfennigwerth :

Thank you. I appreciate the macro stats that you shared. But do you have any way to track international inbound as a percent of your own portfolio? Where does that stand now versus pre-pandemic levels as a percentage of the mix?

Duane Pfennigwerth:

And then just for my follow-up on BI on the business interruption. As you think about growth into 2024, you'll have a natural recovery in Naples from the Ritz being back online. My guess is that would begin to contribute year-on-year in the fourth quarter. But from a growth perspective, what would be the ideal timing for BI reimbursement to hit?

Sourav Ghosh:

Yes, Duane, on the timing, honestly, that's why we don't have it in our forecast. It's very difficult to say. We are working with the insurance carriers right now in terms of determining how much that BI amount is. So the collection of it could be certainly some amount in Q3 led into Q4 as well as into the following year. We actually got from Hurricane Ida, if you recall, which impacted New Orleans last year, we just got a $2.7 million BI payment this quarter. So the timing is very difficult to gauge. We fully expect, as we said, that we would be paid out. And it's certainly going to be a meaningful amount. The exact timing is very difficult to predict at this point in time.

Aryeh Klein:

Thanks. Good afternoon. Within the second quarter, was it June where you saw things not really play out as you expected? And then the magnitude of the implied impact to second half RevPAR in guidance is, I guess, less of the impact in Q2. Can you add some color on the underlying assumptions? And is there something in there that may be better than you originally expected?

Aryeh Klein:

Yes. The first part was just on when you started to see the weakness in the second quarter? And the second part is, I think the RevPAR impact was 60 basis points, worse than expected in the second quarter and then another 40 basis points in the second half of the year. So just curious if you can give some more color on the second half and some of the underlying assumptions there -- how you expect that to play out if there's anything better or worse than you originally expected?

Aryeh Klein:

Yes, I appreciate the color. And then just a quick other question. I think you have some seller financing coming up later this year. Any update there on how you expect that to play out?

Aryeh Klein:

Great. Thanks for all the color.

Anthony Powell :

Hi, good afternoon. Just one for me. And I guess on the other side of the refinancing activity, you saw that an owner of a resort in May was able to get a hotel refinance with a cash out refi at a high rate, but good proceeds. So do you think that kind of ability limit kind of the number of deals that come to market in terms of your ability to maybe do some larger acquisitions here?

Anthony Powell :

Thank you.

Smedes Rose :

Hi, thanks. I just wanted to ask you a little more about the weaker-than-expected transient business in San Francisco and Seattle. And I think in San Francisco, maybe it's not all that surprising given kind of continued delays in their recovery and a lot of sort of ugly headline issues around quality of life. But in Seattle, do you do you ascribe the weakness to just kind of more of sort of local economic issues, maybe to do with the tech industry? Or are you also starting to see a pullback in because of sort of issues that, that city might be having as well? And is that going to become a drag longer term on the portfolio?

Smedes Rose :

Okay. And then can I just follow up on that. When you -- as you reintroduce the Ritz-Carlton and you talked about the $71 million, I guess, that you lost through disruption. When -- what sort of time frame would you expect to recoup that? Is that something that will happen all in 2023? Or how are you thinking about that?

Smedes Rose :

Okay. But do you think -- I mean I was asking about the business interruption and more about recouping the EBITDA that was lost and getting back to getting that $71 million back just from operations. Do you think that's a 2024?

Sourav Ghosh :

Smedes, just want to clarify here for you understand, we are actually picking up combined for a non-comparable hotels, which includes Coconut Point and Ritz Naples $17 million in the adjusted EBITDA number. So it's not in our hotel EBITDAre, but it is in our adjusted EBITDAre. That's for 2023. So the 2024, $71 million, which we're saying, that's incremental to that $17 million. None of that $71 million is really in the '23 number, if that makes sense.

Operator:

Thank you. Our next question is coming from David Katz with Jefferies. Your line is live.

Sourav Ghosh :

Sure. I think we had messaged before that our wage rate growth for this year, we expect it to be around 5%. And that we are still holding to that. And thus far, when you look through our expenses, we have actually performed pretty well on our expenses, and you can see that in our margin expansion relative to 2019. For the second quarter as well as what we are expecting for the full year to the midpoint being 40 basis points. So labor-wise, we still expect a 5% rate growth. We are seeing all the productivity improvement improvements we made as a result of redefining our operating model, still holding and certainly something that is sustainable, which is driving the margin expansion to 2019. As far as insurance goes, we had baked into the forecast approximately 50% premium increase. Our renewal was in June 1. We maintained our coverage and the limits that we had previously. So no change to that. The overall rate increase was about 38%, and the premium increase, like I said, was close to 50%. So for the full year, which is already in our forecast and was in our forecast, insurance expense is expected to go up about 40% year-over-year, which equates to approximately $61 million for 2023.

Operator:

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

Sourav Ghosh :

Sure. For specifically for 2024, as Jim mentioned, our total group revenue pace is ahead to 2019 by 1.5%. And just to remind you, when we were looking sort of -- in the end of last year, we were actually down double digits in total revenue pace and that improved to down about 4.4% to '19 in the first quarter, and now it's actually positive. So we're seeing really positive activity and momentum when it comes to 2024 pace. For our specific portfolio, where we are seeing PACE very strong is Atlanta, Chicago, New Orleans, New York, Phoenix, San Diego, as mentioned earlier, Seattle and Washington, D.C. And that wraps with sort of the citywide pace improvement as well, where we're seeing positive city-wise, better than '19 and for New Orleans, San Diego, Seattle and D.C.

Bill Crow :

Thanks, good afternoon. Jim, help me understand this leisure normalization that we're all talking about. Because implicit in your remarks, at least I took it that maybe rate is staying strong, but demand is off. We heard from a peer this morning that said, rate is down 10% in one of their markets, but demand is strong. I guess I'm trying to figure out what you're seeing out there. Is it on the demand side? Is it on the rate side? Is it both on leisure normalization?

Bill Crow :

If I could just pursue that just a little bit more because you talked about this normalization and kind of we call it the travel -- the international travel imbalance. But it's been kind of three years of pent-up demand. So it seems like that could continue for a while longer. And I'm just curious, and you probably don't have an answer, but yours is better than mine. Are we going to be talking about continued normalization next year?

Bill Crow :

Great, thanks. Jim, appreciated.

Operator:

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

Jim Risoleo :

Yeah. I will answer the second part of your question first, and I'll let Sourav talk to the first part regarding urban leisure. That's a tricky question to answer about really looking at the proper yield management strategies. You flow a much greater percentage of ADR to the bottom line than you do a plan occupancy. And I think one of the things that has been really encouraging over the course of the last several years is the fact that, generally, across the board, properties have held rates and rate integrity has remained intact. And there would have to be a real meaningful trade-off, i.e., significant pickup in occupancy before we would consider cutting rate. Because once you cut rate, it's difficult to go back to the other direction. And as I said, we saw a 1% reduction in occupancy in Q2 and rate was still 60% above where it was in the second quarter of 2019. And it really just flows to the bottom line and has a meaningful impact on margin performance.

Tyler Batory :

Okay. I appreciate that detail. Thank you.

Chris Woronka :

Hey, good afternoon, guys. Thanks for all the detail so far. Question is on the tail that you expect to get from the capital transformation program. I think you mentioned eight of the hotels are fully stabilized and you're getting the 9 points. Just how long does that last? What about the other, I guess, eight or nine hotels? And then does that make you want to -- I think you mentioned there were two others that you renovated that weren't in the original program. That make you, Jim, want to look at even more hotels and as other owners are dealing with issues and maybe not fully keeping up on their own capital?

Chris Woronka :

Okay, very helpful. Thanks, Jim.

Robin Farley :

Great. Thanks. I just wanted to understand a little bit better your guidance for second half margin. You have declines kind of moderating from Q2, but RevPAR not necessarily much stronger. So just kind of wondering how you are comfortable because a lot of the factors you mentioned, I would think could still have tough comps in terms of labor costs and cancellations -- fewer cancellation fees. So just any color there you can give us?

Robin Farley :

Okay. Great. Thank you. And I don't know if I heard you guys mention an expectation for corporate negotiated rate for next year?

Robin Farley :

Okay, great. Thank you.

Dori Kesten :

You mentioned a few times washing out the short-term transient pickup in the second half of the year. What would your guidance look like if the pickup was comparable to 2019?

Dori Kesten :

Okay. I guess I'll ask a second one. So you've talked about the healthy out of room spend. And I think year-to-date, the RevPAR to to RevPAR growth spreads about 200 basis points. And so I'm just trying grout -- like what do you see in the second half of the year that leads you to believe by year-end, room and out of them spend growth should converge?

Dori Kesten :

Okay, thanks.

Jim Risoleo :

I'd like to thank everybody for joining us on our second quarter call today. We appreciate the opportunity to discuss our quarterly results with you -- we hope you enjoy the rest of your summer, and we look forward to seeing many of you in person this fall. Thanks again. .

Jaime Marcus:

Thank you, and good morning, everyone. 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 and our 8-K filed with the SEC and in 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.

Sourav Ghosh:

Thank you, Jim, and good morning, everyone. Building on Jim’s comments, I will go into detail on our first quarter operations, our updated 2023 guidance and our balance sheet and dividend. Starting with business mix, overall transient revenue was up 13% to the first quarter of 2022 driven by over 9 points of occupancy growth and continued strength in leisure rates. Our downtown hotels led revenue growth as strong demand fueled significant rate increases. Holiday performance in the first quarter was strong, particularly at our downtown hotels. Downtown hotels saw increased leisure demand over last year, gaining more than 10 points of occupancy for both Martin Luther King Jr. and President’s Day weekends. Downtown properties also drove overall portfolio spring break RevPAR growth of 7%, which is quite impressive when you consider the elevated resort comparisons from the "mother of all spring breaks" last year. Quickly looking forward to holidays in the second quarter, room revenue pace is up low single digits over last year for Memorial Day, Juneteenth and the fourth of July. Resorts in the first quarter saw an overall RevPAR increase of approximately 5% compared to 2022. As expected, the return of Caribbean tourism let consumer hesitancy to travel to downtown markets and lower repeat travel to Florida markets impacted performance at our resorts. However, the impact was not as significant as we expected. And it is notable that Miami, Jacksonville and the Florida Gulf Coast are still significantly outpacing 2019 RevPAR levels by an average of over 30%. Our resorts in Hawaii achieved 11% RevPAR growth over last year, entirely driven by rate. Business transient revenue was down 14% to the first quarter of 2019, which represents a 400 basis point sequential improvement to the fourth quarter. Downtown properties accounted for over 60% of the portfolio’s business travel demand and small and medium-sized businesses continue to drive the recovery, representing approximately 75% of our business transient demand today compared to approximately 60% at the same time in 2019. It is also worth noting that business transient revenue was only down 7% to 2019 in the month of March. Turning to group. This marks the third quarter that group revenue has surpassed 2019 levels. Group room revenues were 4% above the first quarter of 2019, driven by a 14% rate growth. Phoenix, San Diego and Miami, drove group room revenue growth compared to 2019. The short-term booking trend continued with a pickup of 102,000 room nights or 28% of rooms booked in the quarter for the quarter. Near half of the in the quarter for the quarter rooms booked were in San Francisco, Washington, D.C. and New York. Corporate group room revenue was above 2019 for the third consecutive quarter, up 6% in the fourth quarter, driven by 26% rate growth. Association Group revenue has nearly recovered down just 2% in the first quarter compared to 2019, driven by 1% rate growth. Wrapping up on group with social, military, educational, religious and fraternal or SMERF groups, revenue was 12% above 2019, driven by 8% rate growth. Shifting gears to margin performance. Our first quarter comparable hotel EBITDA margin came in at 32.5% which is 175 basis points better than the fourth quarter of 2019 and 220 basis points better than the first quarter of 2022. All departments had margin improvements compared to 2019. Compared to 2022, all departments, except for other revenues had margin improvement as attrition and cancellation revenue was below 2022. Margin expansion can be attributed primarily to rate growth, banquet and AV growth and our efforts to redefine the operating model, and we are encouraged that we were able to maintain last quarter’s margin expansion compared to 2019 in the first quarter. Turning to our updated 2023 guidance. We significantly raised and tightened our full year comparable hotel RevPAR growth range to 7.5% to 10.5%. Our improved outlook is driven by outperformance in the first quarter, better visibility into the second quarter and continued strong group booking activity in the second half of the year. As it relates to the business transient recovery, it is worth noting that we may not see a decrease in demand if a slowdown occurs in other parts of our business as business transient demand is still not fully recovered to 2019 levels. Given the continued macroeconomic uncertainty, our guidance range contemplates a varying degree of a slowdown in the second half of the year, particularly for the Group segment. Further improvement will continue to depend on the broader macroeconomic environment, our ability to maintain high rated business in resort markets and the continued improvement of group, business transient and international inbound travel. In this context, we would expect year-over-year comparable hotel RevPAR percentage changes in the second half of the year to be up low single digits at the midpoint of our guidance. As Jim mentioned, at the midpoint of our guidance, we anticipate comparable hotel RevPAR growth of 9% compared to 2022, comparable hotel EBITDA margin of 30.2% and with a 65 basis points ahead of 2019 and full year adjusted EBITDAre of $1.585 billion. We expect our operational results to roughly follow 2019 quarterly seasonal trends as provided on Page 13 of our supplemental financial information. As a reminder, our 2023 full year adjusted EBITDAre guidance includes an expected $17 million contribution from Hyatt Coconut Point and the Ritz-Carlton, Naples, both of which are excluded from our comparable hotel results due to impacts from Hurricane Ian. The $17 million expected contribution from these two hotels is up from $11 million as of our year-end guidance as a result of better performance at the Hyatt Coconut Point. The pre-hurricane estimated contribution from these two hotels, including the new tower at the Ritz-Carlton, Naples, was expected to be an additional $71 million in 2023. It is also important to note that we have not included any expected business interruption proceeds from Hurricane Ian in our 2023 guidance. In addition, we removed approximately $5 million of adjusted EBITDAre associated with the sale of The Camby from our full year guidance range. As we discussed last quarter, and noted throughout 2022, year-over-year, we expect comparable hotel EBITDA margins to be down 200 basis points at the low end of our guidance to down 130 basis points at the high end due to closer to stable staffing levels at our hotels, higher utility and insurance expenses and lower attrition and cancelation fees. It is important to note that we expect margins in 2023 relative to 2019 to be up 25 basis points at the low end of our guidance to up 95 basis points at the high end. Despite lagging occupancy and 4 years of inflationary pressures, this reflects our efforts to transform the portfolio and evolve the hotel operating model. As we have discussed in the past, it is particularly impressive when you consider that our forecasted total hotel expense CAGR from 2019 to 2023 is only 1.8% versus the forecasted core CPI CAGR of 4% over the same period. Turning to our balance sheet and liquidity position. Our weighted average maturity is 5 years at a weighted average interest rate of 4.5% and we have no significant maturities until April 2024. We ended the fourth quarter at 2.2x net leverage, and we have $2.3 billion of total available liquidity, which includes $203 million of FF&E reserves and full availability of our $1.5 billion credit facility. Wrapping up, in April, we paid a quarterly cash dividend of $0.12 per share. All future dividends are subject to approval by the company’s Board of Directors though we expect to be able to maintain our quarterly dividend at a sustainable level, taking into consideration potential macroeconomic factors. To conclude, we are very pleased with our recent operational performance, particularly relative to 2019 and our outlook for the remainder of the year is cautiously optimistic. In any scenario, we believe our portfolio, our balance sheet and our team are well positioned to continue outperforming, 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.

Aryeh Klein:

Hi, thanks and good morning. Sorry about that. Just maybe relative to the prior outlook what’s been the biggest surprise to the upside that’s giving you the confidence to increase the outlook particularly in the second half of the year?

Sourav Ghosh:

Hey, Aryeh, I think specifically, when you look at the second half, what really gives us confidence is the group booking activity for the second half, we picked up 237,000 room nights. Just to put that into perspective, that’s 35% more than what we picked up in Q1 of ‘19 for the second half of ‘19. So real apart from just in the quarter for the quarter group pickup, it was really encouraging to see meaningful activity not only for Q2. Q2, we picked up about 180,000 room nights, that’s 13% above ‘19 but also for the second half of the year.

Jim Risoleo:

The last thing I would add is that as we thought about Q2 in connection with our fourth quarter call, we were looking at a scenario where we were anticipating flat RevPAR growth for Q2. Now we have given you RevPAR growth of 4% to 6%.

Jim Risoleo:

Yes. The thought behind the condo development adjacent to our Four Seasons Resort was an ROI project that we anticipate is going to generate cash-on-cash returns in the mid- to high teens on the development and sell-out as a stand-alone venture, they are going to be Four Seasons branded units, which is a very, very attractive branding to have whenever you’re building and selling something of this nature. Additionally, what we have been taken into consideration is the uplift that the hotel is going to received from having these 40 additional units adjacent to it in terms of food and beverage spend, spa spend, golf spend, all the ancillary revenues that are going to be driven, which we believe are real and sustainable at the hotel property. So the total cost is going to be somewhere in the area in $150 million to $170 million. And with respect to whether or not we have other opportunities, as you know, we have an ongoing pipeline of ROI projects that Host. And we are constantly working on additional ways to enhance shareholder value through deploying capital in ROI projects. To remind you of some of the ones that we’ve done in the past, we built 19 villas at the Andaz Wailea on Maui. We built the AC Kierland on a parking lot at Westin Kierland Resort in Phoenix. We’re doing the expansion of the Phoenix of the Canyon Suites at the Phoenician. So we have other projects in the pipeline, but we have always been very thoughtful, I think, with respect to our messaging, and we do not message these projects until we’re confident that we have the entitlements and we’re confident that we’re going to move forward with them.

Operator:

Your next question for today is coming from Anthony Powell at Barclays.

Jim Risoleo:

Well, I think, Anthony, that we expect both of the loans on the share – both Sheratons to be repaid in the second half of the year. The loans are in compliance with the loan documents, payments are current. Both of the borrowers fully anticipate that they are going to be in a position to pay us back. So we have no concerns with respect to getting repaid on those loans. With respect to the Camby, it was a unique situation. We had acquired the Four Season Jackson Hole in 2022. And we made a decision that Camby wasn’t an asset that we needed to own or wanted to own for the long-term, given the amount of CapEx that needed to go into the property and our terrific exposure in the Phoenix metropolitan area with the Phoenician and the Westin Kierland we’ve got, I think the two best resorts in the market. There is some new supply coming into the Phoenix area. And we made a decision that at $110 million, it made sense to sell that hotel. We wanted to make certain that we could take advantage of the reverse like-kind exchange opportunity by investing by designating the proceeds from that asset as a reverse like-kind exchange into the Four Season Jackson Hole property because we had a very low basis in the asset. So that was one of the reasons that drove us to provide solid financing. I’ll just – I’ll make a broader comment. First of all, I don’t see us doing this on any broad scale. And it’s for a number of reasons. Number one, we don’t – we’re – the portfolio is in a really terrific position right now. Given the capital allocation decisions that we’ve made over the last 6 years, from 2018 forward, we have sold $5 billion plus of assets and really have called the assets that we dumped, but we didn’t want to own for the long-term out of the portfolio. So I don’t see us doing many more bridge loans, if any more bridge loans today. But the assets that we have sold, not greater than I think 65% to 70% loan to value. So we’ve gotten a nice slug of equity in connection with the sale. And if something were to go south, what we do for a living is on hotels. So I wouldn’t bother us at all if we had to take a property back.

Operator:

Your next question for today is coming from Smedes Rose at Citi.

Sourav Ghosh:

Hi, Smedes. On the group front, it is certainly more so being driven by smaller corporate groups. One thing which came back meaningfully and I talked about this in my prepared remarks, was Association is now down only 2% in terms of group revenue to 2019. Corporate group revenue up 6% to 19% and 26% was driven by rate in the first quarter. So a meaningful pickup in corporate group revenue – the gap right now, I would say, is really on citywides. We are, for 2023, about 83% of where citywide room nights were back in on 2019. So there is still a long way to go in terms of citywide pickup. But overall, what really is picking up, we saw corporate group continuing in last year and multiple quarters, and we saw the same thing happen in Q1, but the big comeback has really been association, which we are seeing meaningful activity not only into Q2, but as well as the second half.

Jim Risoleo:

Not anticipating any disruption, Smedes.

Operator:

Your next question for today is coming from David Katz at Jefferies.

Sourav Ghosh:

David, if you think about sort of where the big citywide come from? And just to put into perspective for Host for our portfolio, we have about 20% to 25% of our overall group room nights that really come from citywide. We have done a really good job across the board, bringing in in-house groups which are self-contained. And with a lot of our hotels where we’ve expanded meeting space, we now have the ability to actually house the groups completely in-house and are less dependent on city-wides. But in general, if you think about a lot of the convention centers that were actually closed during the pandemic just in terms of sales staff gearing up and selling those cities, there is more of a ramp-up time, and we were talking about this last year, how you were expecting that citywides would be sort of the last ones to come back in a meaningful way. It certainly is very, very market specific. As you well know, like when you look at San Francisco, that’s pretty meaningfully relative to pre-pandemic levels. But other places where we are seeing actually group bookings, which are being driven by citywide and have a good citywide pickup into future years are cities like Boston, like San Antonio, like Chicago. So, it is coming back, but it’s just a matter of the entire sales staff getting all geared up and selling those cities. But so we do expect that to further ramp up with time.

Jim Risoleo:

Sure. I will share our broader thoughts, and then Sourav can get into a little more detail on what happened in San Fran in the first quarter and how we are thinking about it for the balance of the year. So, the city clearly has its challenges. There is no question about it. I will tell you, we are not writing San Francisco off. I think we have a Mayor in that city that is committed to fixing the actual problems and then dealing with the perception as well. From our perspective, we feel very good about the assets we own there. Given their location and many of you on the call have recently visited our Moscone, Marriott Marquis in connection with NAREIT. So, you know what type of asset it is. It’s in great shape. It’s been fully renovated and repositioned and it is Main in Main for any business that is going to book through the Moscone Convention Center. And it is an asset that is extremely well set up to go after and bring in in-house group. So, we have that hotel and then we have the Grand Hyatt on Union Square another terrific property. So, as we think about the assets we own in that market generally and then the third material asset is the Marriott Fisherman’s Wharf, which is a leisure hotel as opposed to group and citywide property. We like the assets we have. We like the condition that they are in. So, we are in a pull position to really take market share and be the first to fill as business returns. And we have seen some good results, and I will let Sourav get into that with you in a moment. Now, I don’t want you to think that we don’t have concerns about San Francisco because we do absolutely have concern about how the market is performing relative to 2019 and what happened with the layoffs in the world of tech and the like, and return to office in that market is really lagging the rest of the country. But it is the center of tech and it’s going to be the center of artificial intelligence as the world returns. So with that, I will let Sourav give you some specifics on how our hotels performed in the market.

David Katz:

Really appreciate it. Good quarter. Well done. Thanks.

Michael Bellisario:

Thanks. Good morning. Probably for Sourav here on the expense side of the P&L, are you seeing any easing of the cost pressures or the hiring challenges that you have mentioned previously? And then do you have any updated forecast where you see wages and benefits tracking for the remainder of the year? Thanks.

Michael Bellisario:

Thank you.

Bill Crow:

Hey. Good morning everybody. Jim, or maybe this is more of a Sourav question. When you look at BT travel specifically, and you take out the higher rates that we have seen. Where is occupancy or demand depending on how you want to look at it relative to ‘19? How big is that gap?

Bill Crow:

Thank you for that. And then do you expect that, that gap can be narrowed further this year, or do you think that given the overall cost of travel, the macro headlines and tech layoffs, all that other stuff that we read about. Is that something maybe is it next year or even 2025?

Bill Crow:

Great. Jim, if I could just ask you a quick one. You noted that you are in the hotel ownership business, which I agree, but you are also in the shareholder returns business. I am wondering if the prospects for acquisitions can be appealing enough to use capital in lieu of share repurchases?

Bill Crow:

Very good. Thanks Jim. Look forward to seeing you next week.

Operator:

Your next question for today is coming from Chris Woronka at Deutsche Bank.

Sourav Ghosh:

Yes. We continue working with our managers to make sure that rate is certainly a priority. And those conversations, frankly, in a high inflation environment are much easier to have than otherwise. And if you look at sort of where we were in terms of our group rate, just for 2023 at the end of the fourth quarter, we were around 5% higher year-over-year, and we improved 90 basis points already by the end of the first quarter. So, wherever possible, we keep on pushing those rates, and we feel pretty confident that as their availability starts becoming more challenging as we go out into the future, and we have been seeing lead times really expand. So, once those specific date start getting booked up into the future, that leads to real yield management and be able to drive rates even further. So, all-in-all, a really good trend from a rate perspective, and we are seeing continuously rate strength not only into ‘23, but ‘24 and beyond.

Operator:

Your next question for today is coming from Stephen Grambling at Morgan Stanley.

Jim Risoleo:

Given that Sourav was the father of our relationship with IBM Watson, Stephen as much as I would like the answer to this question, I am going to let him answer it.

Stephen Grambling:

Helpful. Thank you.

Duane Pfennigwerth:

Hey. Thanks. Most of my questions have been asked. Just on BI, and I apologize if you have said this, your guidance does not include any business interruption, insurance or reimbursement there. But what do you anticipate that to be this year?

Duane Pfennigwerth:

Okay. Thanks.

Operator:

We have reached the end of the question-and-answer session, and I will now turn the call over to Jim for closing remarks.

Operator:

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

Jamie Marcus:

Thank you and good morning, everyone. 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 hotel-level results. You can find this information together with reconciliations to the most directly comparable GAAP information in yesterday's earnings press release and our 8-K filed with the SEC, and in 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.

Sourav Ghosh:

Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our fourth quarter operations full year 2023 guidance and our balance sheet. Starting with business mix, overall transient revenue was up 60 basis points to the fourth quarter of 2019, driven by a 22% rate growth. Thanksgiving and the festive season saw RevPAR growth of 5% and 6% over 2019, respectively, driven by rate growth of over 30% for both periods. Despite impacts from flight cancellations and cold weather in Florida during the festive season, occupancy continued to increase sequentially this holiday. Looking ahead, holidays in the first quarter of 2023 are shaping up well. Martin Luther King Junior weekend achieved a revenue that was 22% above last year, driven by occupancy. Peasants' Day and Spring Break both have revenue pace ahead of 2022. Business transient revenue was down 18% to the fourth quarter of 2019, driven by 2% rate growth. This is a meaningful improvement from the start of 2022 when business transient revenue was down 48% to the first quarter of 2019. As we have discussed previously, properties are targeting high single-digit business transient rate growth in 2023. During the fourth quarter, business transient demand was in line with pre-pandemic monthly seasonality and was driven by San Francisco, Washington D.C. and New York, with New York just 5% behind 2019. Turning to group. This marks the second quarter the revenue has surpassed 2019 levels. Group room revenues were 2% above the fourth quarter of 2019 driven by 10% rate growth. While overall group room demand was down 8% to 2019, properties in New York and Phoenix achieved group demand above 2019 levels. The short-term booking trend continued with in the quarter, for the quarter group rooms sold up 21% over the fourth quarter of 2019. The majority of the rooms booked were in Washington D.C., San Diego, San Francisco and New York. Corporate Group revenue was up 6% in the quarter, surpassing 2019 for the second quarter in a row, driven by a 14% rate increase. Our performance was driven by hotels in Orlando, Phoenix, Maui, New York and New Orleans. All 3 months in the quarter had corporate group revenue ahead of 2019 driven by rate and revenue was up substantially at both convention and resort properties. Association Group revenue was down 16% in the fourth quarter compared to 2019 despite rate growth of over 7%. The revenue decline was driven by volume losses in San Francisco, Boston and New Orleans. However, San Diego, New York and Phoenix had association group demand ahead of 2019 levels. While association revenue was down in the fourth quarter, we saw meaningful pickup in booking activity for future years in the month of December. Additionally, rates compared to 2019 improved sequentially each month in the quarter from up 3% in October to up 15% in December. Wrapping up on groups with social, military, educational, religious and fraternal or SMERF groups, revenue was up 29% over 2019 driven equally by a 14% increase in rooms sold and a 13% increase in rate. Sports teams and weddings drove increases in Washington D.C., Los Angeles and New Orleans. Shifting gears to margins and expenses, our fourth quarter all owned hotel EBITDA margin came in at 29.5%, which is 110 basis points better than the fourth quarter of 2019. We attribute the margin expansion to strong rates and increased out-of-room revenues, combined with operating model expense efficiencies despite the fact that Hurricane Ian negatively impacted margins by 40 basis points in the fourth quarter. As expected, the margin gap to 2019 narrowed relative to prior quarters due to continued inflationary pressures and more normalized staffing levels at our hotels. Our efforts to redefine the operating model continue to yield positive results even with occupancy still meaningfully below 2019 levels and elevated pressure on wage rates which ended the year up 5% on a year-over-year basis. As detailed in our earnings release, moving forward, we will cease presentation of all owned hotel results and return to a comparable presentation for our hotel level results. We believe this will provide investors with better understanding of underlying growth trends for our current portfolio without impacts from properties that experienced closures lasting one-month or longer due to renovations or property damage. We have removed Hyatt Regency Coconut Point and the Ritz-Carlton, Naples from our comparable operations in our full year 2023 forecast due to closures caused by Hurricane Ian. Turning to our outlook for 2023. Current macroeconomic headwinds and the potential for an economic slowdown are competing with the margin recovery. That said, we continue to be optimistic about the future of travel. Our performance this year will depend on our ability to maintain high rated business at our resorts and the continued improvement of group, business transient and international inbound travel. Given the significant macroeconomic uncertainty in the second half of 2023, we have provided a wider guidance range than normal, which assumes a slowdown in the second half of the year. The low-end contemplates a severe slowdown, while the high-end assumes a mild one. For the first quarter, we expect RevPAR growth to be between 24% and 27% as a result of easier comparisons due to Omicron, which is expected to bolster full year growth. For the remaining three quarters, we expect year-over-year RevPAR changes to be down low-single digits at the low-end of our guidance range to up low-single digits at the high-end of our range. Looking ahead to recent trends, preliminary January comparable hotel RevPAR is expected to be approximately $184, a 67% increase over January 2022 and a 3.5% increase over January 2019. Taken together, for the full year, we anticipate comparable RevPAR growth of between 2% and 8% over 2022. Additionally, staffing levels are closer to stable and hotel operating costs are expected to increase in comparison to 2022. As a result, we expect comparable EBITDA margins to be down 360 basis points year-over-year at the low-end of our guidance to down 210 basis points at the high-end. Though, we expect comparable hotel EBITDA margins to be down year-over-year, we expect margins in 2023 to be only slightly down to 2019 despite lagging occupancy and four years of inflationary pressures. This reflects our efforts to transform the portfolio and evolve the hotel operating model. It is particularly impressive when you consider that our total expense CAGR since 2019 is only 1.1% versus the core CPI CAGR of 4.1%. The margin decline year-over-year is driven by closer to stable, staffing levels at our hotels, higher utility and insurance expenses, lower attrition and cancellation fees, which totaled approximately $100 million in 2022 and occupancy below 2019 levels. As we noted throughout last year, 2022 margins were not sustainable, particularly when you consider the limited services provided at many of our hotels in the first half of the year, the staffing lag and the elevated inflationary pressures. At the midpoint of our guidance range, we anticipate comparable RevPAR growth of 5% compared to 2022, a comparable hotel EBITDA margin of 29% and full year adjusted EBITDAre of $1.460 billion. Our 2023 full year adjusted EBITDAre includes an expected $11 million contribution from Hyatt Coconut Point and the Ritz-Carlton, Naples which are excluded from our comparable hotel set. The pre-hurricane estimated contribution from these two hotels, including the New Tower at Naples was expected to be an additional $71 million in 2023. It is important to note that we have not included the business interruption proceeds from Hurricane Ian in our 2023 guidance. In 2023, we expect wage rates to increase 5%. In the aggregate, from 2019 through 2023, we expect wage rates and utilities to increase 20% and insurance to increase approximately 100%. In 2023, we also expect attrition and cancellation fees to revert to historical levels. For context, in 2019, region and benefits comprise approximately 50% of our total comparable expenses, utilities and insurance comprised approximately 5%, attrition and cancellation fees were $50 million, and occupancy is still 10 points below 2019 as of the fourth quarter of 2022. Turning to our balance sheet and liquidity position. Our weighted average maturity is 5.2 years at a weighted average interest rate of 4.4%, and we have no significant maturities until April 2024. As of today's call, we have $2.4 billion in total available liquidity, which includes $200 million of FF&E reserves and full availability of our $1.5 billion credit facility. We ended 2022 at 2.4x net leverage. And since our last call, both S&P and Fitch have revised our issuer outlooks to positive from stable. Wrapping up, in January, we paid a quarterly cash dividend of $0.32 per share, which included a $0.20 special dividend. The Board of Directors authorized a regular quarterly cash dividend of $0.12 on our common stock to be paid on April 17, 2023, to stockholders of record as of March 31, 2023. All future dividends are subject to approval by the company's Board of Directors though we expect to be able to maintain our quarterly dividend at a sustainable level, taking into consideration potential macroeconomic factors. To conclude, we believe our portfolio, our balance sheet and our team are well positioned to continue outperforming, 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.

SmedesRose:

I appreciate you guys are providing a range for the year that incorporates a wide range of macroeconomic outlook. And I'm just curious, what are you specifically seeing in your business, if anything, that would suggest a slowdown in the back half of the year, either on the group side or what sort of visibility you have?

Operator:

Our next question is coming from Anthony Powell with Barclays. Please go ahead.

Sourav Ghosh:

Anthony, so let me start off by saying sort of what I said in my prepared remarks is, the second half of the year for us in our guidance assumes some sort of a slowdown, whether it's at the low-end, which would be a severe slowdown over the high-end, which is a mild slowdown. And our midpoint is effectively a moderate slowdown. The way we are thinking about it when you look at our guidance is the second half. I'll sort of go through each segment. From a group perspective, we are assuming that the second half will only see about half the group room nights pick up in the year, for the year compared to 2022. And as you may recall, 2022 had meaningful in the year for the year pickup. And as I said in my prepared remarks, in the fourth quarter alone, we had 21% more pickup in the quarter for the quarter. So in other words, the anticipation is if there is a slowdown, you would have less in the year for the year pickup. That's on the group side. The rates, obviously, in the group sides are locked in, so that's a positive. On the transient side, we expect that second half to be somewhat flattish. So with leisure rates being slightly up driven by our downturn in convention hotels, but our resorts somewhat flat to maybe slightly down depending on the market. So overall, transient rates and occupancy to be about flattish for the second half. And so when you really think about our guidance for the full year, our occupancy ends up being up a couple of points and rate effectively flattish again, all this is tied to the midpoint. When you think about sort of our margin performance quarter-by-quarter, reality is the distribution of EBITDA that we saw in 2019 is going to be very -- but we are expecting very similar in 2023. So in '19, we had, I think, it was about 27% or so of our EBITDA came from Q1, about $29 million from Q2, 20% in Q3 and 24% from Q4. Very similar sort of cadence is what we are expecting from 2023.

David Katz:

Jim, I wanted to go back to something you touched on in your comment and just to make sure we're clear about it. You talked about some of the hotels you bought that are, I think you said currently run rate in about 10x or 12x EBITDA based on sort of what you paid. Could you just go back to those circumstances and talk about if we found ourselves at a 2019 normalized environment were those multiples or cap rates would be.

Operator:

Our next question is coming from Chris Darling with Green Street.

Sourav Ghosh:

Sure. So in terms of group pace some of our larger markets, what's trending really well. And I would say, like effectively what we have on the books for 2023, over 50% are from markets which are San Diego, Orlando, D.C., San Antonio and San Francisco. So whatever we have on the book for 2023, over 50% are from those markets. And when we're looking at sort of citywide data, we are at about 80% of 2019 levels that it relates to citywide and the markets that are above that threshold are Boston, San Antonio, San Diego, Atlanta, Chicago and the ones which are sort of below that threshold are Philadelphia, Seattle and certainly San Francisco and I would say New Orleans.

Chris Woronka:

Jim, it's a bit of a hypothetical question, but obviously, there's a lot of talk about getting back to prior or maybe not peak occupancy levels, but still having a lot of occupancy to recover with group and a little bit of corporate. But that with the mix effect that may come at the expensive rate. So the question would be, I know you don't solve for any one metric is it reasonable to think that some of the more price-sensitive business and opaque business, things like that, you have your operators essentially intentionally keep that out of the business as we go forward and that we are structurally lower arc but higher rate. Is that a decent way to think about it?

Operator:

Our next question is coming from Duane Pfennigwerth with Evercore ISI.

Sourav Ghosh:

Sure. So I'll start with the second half of your question first. In terms of rates, we feel very good about the rates into Q2 and the rest of the year, what we have on the books. And as Jim mentioned, our group rate is up 6%. We expect business transient rates to be up in the high single digits. In terms of actual demand, it is still very short-term booking. And that goes to my remarks of sort of the short-term pickup that we are expecting. We saw in the fourth quarter, meaningful in the quarter for the quarter pickup that seems to continue. So while we do have a meaningful amount of group on the books, we are still expecting a significant amount of pickup in the first quarter for the first quarter and the same thing in the second quarter. So from a visibility standpoint, I wouldn't say it's incremental, maybe slightly more incremental relative to the fourth quarter. As it relates to our operating model changes, what I do want to point out is we have said the $100 million to $150 million of savings relative to 2019. Those expense savings, we have achieved a bulk of those savings. And frankly, the balance of it is really going to be driven by occupancy coming back. We are still, as Jim mentioned, 10 points off of 2019 from an occupancy perspective. And I would say with every point of occupancy gain, that would equate to roughly 30 to 40 bps of margin gain. So that is pretty meaningful when you think about it. So if we get back to sort of '19 occupancy levels, you're looking at anywhere from 300 to 400 basis points of margin improvement. And one of the things I would like to highlight is when you look at our expenses, specifically to $100 million to $150 million and you compare that really to 2019, our F&B revenues are down for 2023 to the midpoint relative to '19, 1.5%, but our expenses are actually down 2%. So it shows that all the operating model changes and a big piece of it was in food and beverage has made a huge difference. Sales and marketing expense relative to '19 for 2023, again, to the midpoint, we'll be down less than 1%. So again, when you're comparing sort of the margin performance to '19, it really tells the story. And like I said, we'll be only slightly down at the midpoint. And of course, at the higher end of the guidance, we'd actually be above 2019.

Ari Klein:

Maybe following up on the margin question. What's the wherewithal to cut expenses if the macro is a little bit more difficult than you anticipate given some of the labor challenges that we've had over the last couple of years.

Ari Klein:

Got it. And then just on the balance sheet. Can you update us on your priority and how you're thinking about acquisitions, dispositions and underwriting and admittedly more uncertain macro?

Operator:

Our next question is coming from Robin Farley with UBS.

Jim Risoleo:

Sure, Robin. I'll take the part of your question related to the investment market. I think as you think about how we have been deploying capital over the last six years or so, everything we've done has been to elevate the EBITDA growth profile of the company. And when I say that we're going to be open-minded and look at other markets, it's really transaction dependent and whether or not we think we can create value and what we can do with the underlying EBITDA growth of that asset going forward. So I said differently, I don't think there's a market in the country that has a red line through it, subject to all of the underwriting criteria that we employ when we evaluate a particular hotel. Sourav, do you want to touch base on the group?

Operator:

[Operator Instructions]. Our next question is coming from Jay Kornreich with SMBC.

Jim Risoleo:

Well, Jay, I think it's important to really highlight that the assets affected by Hurricane Ian were anticipated to generate $82 million in EBITDA in 2023. We have $11 million in our guidance to the midpoint. So there's a $71 million gap that is purely related to hurricane disruption. We have not assumed any business interruption proceeds hitting our guidance. So if we were to get business interruption proceeds over the course of 2023, that is upside going forward. So we think that is likely to occur later in 2023 and into 2024. But I do want to point out that the $71 million is a significant amount of EBITDA that is going to impact one year. It's just this year because we're very excited about the performance of the Ritz-Carlton for full year 2024. The property will be completely transformed. The new tower will be open. We've added 24 rooms [indiscernible] increased the suite count of that asset and made a number of other enhancements. So one year of disruption from Hurricane Ian has cost us a significant amount for 2023.

Jim Risoleo:

I think it's what we expect at this point in time.

Floris van Dijkum:

A little bit of a mixed message here. Obviously, you've got group pace ahead, very strong results the last quarter. If I look RevPAR expectations in the first quarter are up, call it, 24% to 27%, call it, 25%, pretty strong yet. If we were to include your business interruption insurance, which, again, you have that insurance presumably, you're going to get that $71 million of missing EBITDA from Naples. You're looking at flat EBITDA growth based on your consensus. Can you maybe provide any sort of historical context where occupancy in your portfolio is trending higher on a longer-term basis and your rate, and your margins are down, or your EBITDA is going down.

Jim Risoleo:

Yes, Floris. The one thing I would add is, over the course of 2022, for the second and third quarter call, we were very clear that the margin performance we were seeing was not sustainable. And it wasn't sustainable for a lot of reasons. We were not at optimal staffing levels. We had a number of hotels where full services were not being offered to customers. Restaurants were closed, club lounges were closed, and we feel that the proper comparison for margins is 2019. And in 2019 levels, even down 10 basis points we're only down 57 basis points in margin. And just to reiterate, we have seen a 4.1% inflation in CAGR, a CPI CAGR, and our expenses have only gone up 1.1%. So we actually feel that we're positioned very well. And as Sourav pointed out, every point of occupancy that we get is going to equate to 30 to 40 basis points of margin improvement.

Jim Risoleo:

Thank you very much. I would like to thank everyone for joining us on our fourth quarter call today. We appreciate the opportunity to discuss our quarterly results with you, and we look forward to meeting with many of you in the coming weeks and months. Thank you for your continued support and have a great day.

Jaime Marcus:

Thank you, and good morning, everyone. 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 hotel-level results. You can find this information together with reconciliations to the most directly comparable GAAP information in yesterday's earnings press release, and our 8-K filed with the SEC, and in the supplemental financial information on our website at hosthotels.com. With me on today's call will be 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.

Sourav Ghosh:

Thank you, Jim. And good morning, everyone. Building on Jim's comments, I will go into detail on our third quarter operations, full year guidance, and our balance sheet. Starting with topline performance, rate continues to drive the RevPAR upside, especially at our Sunbelt and Hawaii hotels where rate was up more than 25% to the third quarter of 2019. Rates at our urban and downtown hotels surpassed 2019 levels for the first time since the onset of the pandemic with rates 4% above the third quarter of 2019. Turning to business mix. Overall transient revenue was up 2% over the third quarter of 2019, driven by 25% rate growth. Holiday's throughout the quarter and into October continue to recover from an occupancy perspective with Columbus Day achieving the highest holiday occupancy post-pandemic. Urban and downtown holiday occupancy growth outpaced Sunbelt and Hawaiian market with especially strong demand growth in Chicago, New York, and Washington D.C. Business transient revenue was down 22% to the third quarter of 2019 but volume improved 300 basis points over last quarter, driven by our hotels in New York, Washington D.C., Boston, and Seattle. Business transient rooms sold reached a new quarterly high in the recovery and August set the new monthly high water mark with more than a 120,000 rooms sold beating the prior record set in June. In September, the overall business transient rooms sold was slightly ahead of August when comparing to 2019, driven by our urban and downtown hotels and encouragingly business transient rates were up 3.1% to the third quarter of 2019. Looking specifically at recent business transient trends in urban and downtown markets, rooms sold were just 10% below 2019 in September, driven by San Francisco and Denver which exceeded 2019 level while New York was just 3% below 2019. Turning to Group. This quarter marks the first time that revenue had surpassed 2019 levels for group business overall. In addition, corporate and association group revenue surpassed 2019 levels marking 3000 milestones for our portfolio in the recovery. In the quarter, group total revenues including out of rooms spent was 5% above the third quarter of 2019, driven by a 6% increase in rate. In the quarter for the quarter, group room sold were up 20% over the third quarter of 2019. Group room revenue in Sunbelt and Hawaiian markets was up 13% driven by rates and room nights sold were above 2019 levels for the first time post-pandemic. At our newly renovated New York Marriott Marquis, group room nights were up 36% to the third quarter of 2019 as group demand returned and the transform property is being very well received. From New Year's Eve weekend, our hotels in New York already have 62% occupancy on the book at an average rate of $610, an improvement of 219% compared to 2019. Corporate group revenue exceeded the third quarter of 2019 by 70 basis points driven by a 9% improvement in rate. Our hotels and resorts in New York, Maui, Orlando, Phoenix, and Washington D.C. contributed to the revenue outperformance. The Southeastern group revenue was up 20 basis points to the third quarter of 2019, driven by 4% rates growth. San Diego hotels drove most of the improvement benefitting from eleven citywide conferences. The Chicago hotels also benefitted from multiple cities wide group during the third quarter. Wrapping up on group with Social, Military, Educational, Religious, and Fraternal or SMERF groups revenue was up 14% compared to the third quarter of 2019, driven by a 20% increase in rooms sold at our urban and downtown hotels. Shifting gears to expenses, all owned hotel expenses were up 1.2% to the third quarter of 2019. The slight increase to expenses was driven by higher utilities and property insurance despite region and benefit savings which were down 1.4% to the third quarter of 2019. As expected, the starting lag we faced early in the recover began to ease in the third quarter and our managers believe they are near desired staffing level for current business volumes. Wrapping up on expenses, we continue to expect our annual wage and benefit rate inflation for 2021 to 2022 to be in the 4% to 5% range. Taking our strong topline and expense controls together, our fourth quarter all owned hotel EBITDA margin came in at 28.7%, which is 250 basis points better than the third quarter of 2019. But it's important to note that we received the business interruption proceeds from the Falls Pool Project at the Orlando World Center Marriott in the third quarter which benefitted our margin by approximately 60 basis points. For the second quarter in a row, margins were higher than 2019 across all operating departments driven by strong rates and increase out of room revenues on the topline combined with expand sufficiency's. As it relates to our efforts to redefine the operating mode, both wages and benefit expenses and above property cost remained below 2019 levels. To-date, our operators have achieved approximately 70% of the $100 million to $150 million that is expected to come from potential long-term cost savings based on 2019 all owned hotel revenues. Moving on to our outlook for 2022. We have updated our full-year guidance ranges. Taking into account the impacts of Hurricane Ian, we expect full-year 2022 all owned RevPAR for our portfolio to be between $193 to $195 or down 3.75% to down 2.75% to full-year 2019, which implied that our fourth quarter RevPAR will be slightly above the fourth quarter of 2019. Just so the RevPAR implies an adjusted EBITDA ROE of $1,470,000,000 to $1,500,000,000 at an all owned hotel EBITDA margin of 31.6% to 31.9%. It is worth noting that our all owned hotel metrics do not include the Four Seasons Jackson Hole. For reference, we estimate that Hurricane Ian negatively impacted our full-year RevPAR range by 70 basis points, our TrevPAR range by an 80 basis points, our adjusted EBITDA by $20 million and our all owned hotel EBITDA margin by 10 basis points. Despite the impacts of the hurricane, the midpoint of our updated full-year guidance ranges are still slightly above our 2019 all owned hotel results as presented on pages 28 and 29 of our supplemental financial information. These estimated ranges are driven by continued rate strength across our portfolio, a strong success season and a continued recovery in demand. Additional guidance details can be found in the reconciliations of our third quarter 2022 earnings release. Turning to our balance sheet and liquidity position, our weighted average maturity is 4.8 years at a weighted average interest rate of 4.1% and we have no significant maturities until 2024. As of today's call, we have $2.2 billion in total available liquidity which includes $187 million of FF&E reserves and full availability of our $1.5 billion credit facility. Adjusting for the Four Seasons Jackson Hole acquisition and using the midpoint of our full-year 2022 EBITDAre guidance of $1,480,000,000, we would expect our year-end 2022 net leverage to be at 2.4 times looking unchanged from the third quarter. Wrapping up, in October we paid a quarterly cash dividend of $0.12 per share. All future dividends are subject to approval by the Company's Board of Directors, though we expect to be able to maintain a quarterly dividend at a sustainable level taking into consideration potential macroeconomic factors. As we consider future dividends, we intend to revert to a pre-pandemic announcement cadence. As a reminder, our fourth quarter dividend announcement would typically come in mid-December. To conclude, we believe our portfolio, our balance sheet, and our team are well-positioned to continue outperforming 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.

Neil Malkin:

Hi, thank you. Thanks, everyone. Good morning. Jim, my question is related to potential opportunities to put your balance sheet to work over 2023 I guess or the next 12-to-18 months. You cited elevated time-based maturities. Obviously the brands are reinstating PIPs and lot of the debt market dislocation, unattractive terms as well. So, it seems like someone in your position with the balance sheet and you guys having the liquidity would be prime to take advantage of potential distress. Can you just talk about how you see that shaping up, what opportunities could look like next year? Thanks.

Operator:

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

Jim Risoleo:

Sure, Smedes. Let me talk about the process a little bit that brought us the Four Season. They brought three hotels to market. There has been a public announcement regarding the Four Season strain. I don’t believe I'm in a position to really talk about the other asset given that we signed a confidentiality agreement. But suffices to say that we underwrote all three of the properties that were brought to market and we just couldn’t get our arms around pricing for the other two assets. And that’s why we pursue the Four Season Jackson Hole. And with respect to Jackson Hole in particular, this asset typically would trade at a multiple that's 15 times EBITDA or north a bit. And EBITDA is elevated, it's had a really terrific run during the pandemic. It's been discovered by a lot of people and it's a really unique iconic greenery place for hotel, right at the steps away from the gondola at Jackson Hole. Then the metrics that we purchased then onward, 13.6 times and at 6.6 CAP rate on 2022 results. And a couple of things that I think are really relevant when you talk about pricing on this asset are the following. I mentioned that the Jackson Hole airport is undergoing a renovation and expansion, was actually closed for three months this past summer. So, that crimped demand into the resort. Secondly, the property underwent a complete guest room and bathroom renovation which caused significant business disruption. So, as we look at it, we believe that 2022 performance was actually muted. And as that, the hotel renovation and expansion wraps up by the end of this year, we feel that the hotel the resort can get back to historical levels of occupancy. Which is the property is really unique because it is a Four Season resort. It's a Four Seasons property but it's a Four Season's resort that happens to be a ski resort as well with proximity to Grand Teton and Yellowstone National Parks, that's really a unique asset. So, we're delighted to own it. We see some asset management opportunities to create additional value as we typically do when we underwrite a deal. And we'll see where it goes moving forward for us. With respect to the other 12 properties, TBD whether or not or when they bring those assets to market. But again, given our balance sheet and given our relationship and given our performance on this transaction, we think we are really in a strong position to be a buyer of choice to some of these other assets. They got some terrific properties left like the Ritz-Carlton Laguna, Ritz-Carlton Half Moon Bay, they have a number of other Four Season's properties including the Four Season's in Austin, the Four Season's in Palo Alto. And so, I think they're sellers and I think we are given our balance sheet, our strength, our relationship, I think we are the buyer of choice.

Operator:

Thank you. Your next question is coming from Sean Kelly from Bank of America. Your line is live.

Jim Risoleo:

I'll start off by saying like when you look at our fourth quarter guidance, even once you take out the negative impact of Ian, we actually raised the guidance RevPAR by 25 bips and this was to the midpoint, obviously and adjusted EBITDA by $7.5 million. So obviously, when you look at sort of our expectations for fourth quarter, we continue to be optimistic in terms of all segments of demand. From a BT perspective, there has been sequential improvement month-over-month and when you look at specifically September, for urban downtown hotels, BT was down just 10%, which is really encouraging in San Francisco and Denver, as we've been showing on the prepared remarks was actually above ‘19 levels in New York was just shy of 3% to ‘19. So these are rates are holding strong. The holiday season is looking really good. Thanksgiving is pacing really well with total revenue is actually up 5% with rates up close to 40%. The same holds true for Christmas rates are up 40%. The only thing on the group side for Q4 to keep in mind when you think about absolute room nights is a couple of things. A) Is the Jewish holidays, both Jewish holidays, fell in September in '19 whereas that was split for 2022 one fell in September one in October? So that's going to obviously have a negative impact for Q4. And so as the midterm elections, which is also going to have somewhat of a negative impact in terms of absolute room nights, but rate is pacing ahead. We've picked up meaningful amount of group room nights for not only in the quarter for the quarter for Q3 but booked about 129,000 room nights for Q4 which is 10%, above 2019. So all in all, still very positive trajectory, have confidence and hence we raised our overall guidance, despite the impact of Ian.

Jim Risoleo:

Sure. Through the course of the year, actually we have been seeing more uptake off large corporate groups coming in started off with more small medium size, and we saw a decent pickup of large. What we are overall AI in terms of just tailwind for next year. The big piece, which is still remaining is sort of the large associations, and citywide business. And frankly, with the large associations, they all have a governing board, which needs to determine which city they'll hold their events at which hotels they will pick. Though a lot of the decisions are going to be made effectively over the next two months. So we expect booking activity on those large associations do need to pick up in the first quarter of '23. But overall, through the course of the year, we've actually seen an uptick in more larger groups as to what we saw in the beginning of the year, which was more small, medium sized groups. And frankly, the rate is holding, rates for next year. That's up over 6% what we have on the books for our definite group of nights that we have in the box. And on special corporate negotiations, that really is still in progress. And we had said earlier and so at the management companies we expect to end up in sort of the high single digits once it's all said and done.

Operator:

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

Jim Risoleo:

Sure, Duane. We are in a unique position to have the balance sheet that allows us to allocate capital in a number of different areas. If we look at the potential acquisition of an asset, like the Four Seasons, Jackson Hole, property of that nature is not going to come to market on a regular basis. I really feel that if we hadn't acquired that asset, it was likely to be acquired by somebody who would likely never sell that hotel. So capital allocation decisions are made based on elevating the EBITDA gross profile of portfolio, returning capital to shareholders when we think that's appropriate. And at a moment in time. This asset was available now and that's why we elected to make the acquisition. So we are going to continue to be prudent in our capital allocation decisions. We're going to look at what we think is the best use of our funds. As you know, we have been very forthright in investing in our portfolio from 2020 through 2022 we have deployed $1.5 billion of capital in our existing assets. We will have fully reposition 24 properties, 16 in the Marriott transformational capital program plus an additional eight that are really outperforming our expectations and creating long term shareholder value, which is really our overriding objective. As we think about capital allocation, the RevPAR gains that we are seeing are generally approaching double digit if not higher, and that puts us in a position to outperform the competition. And we think that is a really smart use of capital going forward. That's not to say if we don't see opportunities down the road to continue to use our balance sheet that we won't be in the market buying back shares. So as I said, on the second quarter call, we think this is a time to be patient to see what comes down the road. And as we can see today, there's a lot of dislocation occurring, given the Fed meeting yesterday, and what's happening with the Pound versus the U.S. dollar. So we're all in a very good position going forward. We like even a multiple on the Four Seasons, Jackson Hole as well at 13.6 times for a luxury resort that we feel is going to outperform going forward. And we'll bring that into a stabilized EBITDA multiple of 11 to 13 times over the next several years. So that's how we think about it. And there's, it's not, we don't put peanut butter in a piece of toast when we're thinking about how we're going to deploy capital. But we look at all the opportunities that are available for us.

Jim Risoleo:

Well, we actually were in a position to move some business from the Ritz Carlton, Naples, to our Four Seasons Resort Orlando, right after the hurricane hit, we moved a very sizable wedding group to that property. The Ritz Carlton Golf Lodge, which was not affected by Ian, has been running full out. Groups that we had at the beach resort that we moved over there. So that property is really picked up business. Maybe Sourav can perhaps get into a little bit of detail around what we're seeing for the holidays because it's very strong across the board. And the Naples property is going to remain closed through the balance of this year to 2023 and we're looking at various stage reopening options. When we have more information we will certainly share that with everyone. Coconut Point is going to be back in business in the next week or so. And the only part of that property that is still in a state of disrepair is the Waterpark, really, which we hope to have back on by April. So it's very unfortunate that this happens. But it's the business that we're in, and we're very well prepared to manage through the process, and to move business to our other resorts that didn't suffer any damage. With that I will let Sourav talk a little bit about holiday bookings.

Duane Pfennigwerth:

Thank you.

Operator:

Your next question is coming from Chris Woronka from Deutsche Bank. Your line is live.

Sourav Ghosh:

Absolutely. I think let me start off by saying that banquet and catering business has been very strong for the third quarter, we were up 6% in 2019 on absolute basis and when you look at it on a per room night basis, we were up 8.7%. So clearly, the folks that are coming into our hotels, the groups that are coming in are spending significantly more. And what's been great is when you look at the food cost and the beverage costs across our portfolio, it is actually better than what it was in 2019. So certainly our managers along closely work with asset managers as well are adjusting menu pricing on a real time basis to really adjust for any inflationary pressures. So overall, that's how we've been able to, as I mentioned in my prepared remarks, how we've been able to really drive margin performance across all departments. And we feel very confident that the measures that we have in place and the long term initiatives that we have worked through over the past 12 to 18 months are sustainable. And we definitely are looking at margin expansion going into next year relative to '19.

Sourav Ghosh:

It's both. Take rate definitely is higher. Groups are definitely spending more than they did. And pricing has adjusted as well. But I would say it's not just a function of pricing. Certainly we are seeing groups asking for more. And frankly, buying more premium shelf menu items as well as premium sort of shell bar options as well. That's what they're what they're picking. So it's both.

Operator:

Thank you. Your next question is coming from Aryeh Klein from BMO. Your line is live.

Jim Risoleo:

Luxury resorts have consistently outperformed. Our ultra-luxury resorts already have consistently outperformed, luxury and every other property type over time. So as an example, as we looked at the Four Seasons Resort Jackson Hole, looking at the performance of that property from 2014 to 2019, it had a 5.8% RevPAR CAGR. The ultra-luxury resort generally had a RevPAR CAGR during that same timeframe of 4.3%. So clearly, ultra-luxury outperforms and this asset in particular outperforms the ultra-luxury set. So as we evaluated back in 2018, the one hotel [indiscernible] when we first really dug into how ultra-luxury performs and how it’s performed over time and we look back as far as 1992 today at different timeframes to see how these assets hold up during downturns, during recessions. The other thing I would point out, as we sit today is the $1.7 trillion of excess savings that's still in the system, 80% of that are in that savings amount, it's in the upper income brackets. So we're certainly not seeing any pullback on ultra-luxury performance and I expect that going forward, it's going to hold up very well if we were to suffer any sort of slowdown. One of the assets that we acquired last year, which is the Four Seasons Resort Orlando, at Walt Disney World, we bought that asset I think it was a 16.8 times EBITDA multiple on 2019 performance. It's going to finish this year, eight times EBITDA multiple on our purchase price. So I think as this further testament to how ultra-luxury is performing, the same thing has happened with the Alila Ventana that's going to finish the year at eight times EBITDA and not seeing any slowdown in booking trends, zero resistance to ADR growth.

Sourav Ghosh:

Sure. That's sort of still evolving like I'd mentioned on previous calls, a part of it is just evolving brand standards. And we continue to work with our managers to identify brand standards that we can completely eliminate or modify. Some of it just frankly, just takes a little more time. And especially as business comes back to normalcy and you have more of the frequent guests coming back to the hotels, you just have a better sample set to make those determinations as to what brand standards make sense on a stabilized perspective. The other piece, which will take a little more time, we are have a lot of proof of concepts and pilots going on our hotels is just looking at various technology that can drive productivity improvements, just overall efficiencies of the hotel, whether it's incremental revenue or whether it's just reducing expenses, all kinds of different sort of technologies that we can leverage. Frankly, that's sort of your test hardware, there are things to it, and you do multiple pilots and see what works best, and then you sort of roll it up across the portfolio. So I would say you're looking at probably next 12 to 18 months for some of this and in some cases, some technologies are probably 20 months out before we can really roll it out across a portfolio.

Operator:

Thank you. Your next question is coming from Jay Kornreich from SMBC. Your line is live.

Jim Risoleo:

Let me start by saying, Jay that at this point in time, we're not seeing any signs of weakness in any of our segments, Leisure group and business transients and that is not only for the balance of this year, but that's as we look out into 2023. Now, of course, we don't have budgets yet for 2023 and we're not giving guidance for 2023 at this point in time, but we feel that we're really set up quite well to continue to perform, outperform as we move into 2023. If we started to see business transit follow up, if we started to see a real impact in the job market, we started to see corporate groups not booking or canceling. We would become more defensive. Now, that said, I think we're in a terrific position sitting here today, at 2.4 times leverage. We truly have a fortress balance sheet. We don't have any maturity in 2024. And the maturity that we have is a $400 million bond issue in 2024 that being investment grade, we're always going to have access to the debt markets granted, it might be a little more expensive than the current pricing, but we're going to be able to do what we need to do. Our entire portfolio with the exception, I think of two assets is fully unencumbered. So having been through slowdowns and downturns in the past, we keep a keen eye on this demand generators. And if we see things starting to turn us out, then we'll get a little more conservative and defensive.

Jim Risoleo:

Well, we continually look at what actions we can take to elevate the EBITDA growth profile of hosts. And in the context of the Jackson Hole deal that does give us an opportunity to effectuate a reverse like kind exchange, if we can put a portfolio together and get fair value. To do that in this market, it's likely we would have to provide seller financing. And we'd be prepared to do that with the right sponsor, and on the right terms. The assets that we've disposed off, have really gone a long way toward helping us to elevate the EBITDA gross profile of the company, even last year. Just to summarize, between 2018 and 2022, we bought $3.5 billion of assets at a $13.7 times EBITDA multiple. We dispose of $4.9 billion at a 17 times EBITDA multiple and that takes into account close to a billion dollars that avoided CapEx. And it also allowed us to not suffer the attendant business disruption that would occur with that. So that is where we would go -- going forward. If we can get the right pricing, and we have the right sponsor, we are prepared to transact additional asset sales over the next six months to a year and a half or so.

Operator:

Thank you. Your next question is coming from David Katz from Jefferies. Your line is live.

Jim Risoleo:

David, it really comes down to pricing and growth. And if we feel that we can buy an urban asset at the right price and that it's going to perform in a manner that's going to EBITDA gross profile of the company, taking into account capital considerations and renovations and all other items associated with owning a hotel, with buying the hotel, then I would say it in a broad sense, there's really no market that has a red line drawn through it today. We are going to continue to be really thoughtful about geographic diversification and outside of Maui or Oahu and where we have 12% of our EBITDA coming out of both of those markets. There is no one single market in the country where we have more than 10% or even a coming out today in 2022. The two I believe that at 10% are Orlando and San Diego two terrific markets. So as we think about allocating capital, we think it's important that we maintain a very geographically diverse portfolio and that we put capital in places where we're going to be able to generate outsized returns.

Operator:

Thank you. To be respectful of other calls that's all the time we have for today. I will now hand the conference back to Jim Risoleo for closing remarks. Please go ahead.

Operator:

Thank you ladies and gentlemen, this concludes today's event. You may disconnect at this time and have a wonderful day. Thank you for your participation.

Jaime Marcus:

Thank you, and good morning, everyone. 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 hotel-level results. You can find this information together with reconciliations to the most directly comparable GAAP information in yesterday's earnings press release, and our 8-K filed with the SEC, and in the supplemental financial information on our website at hosthotels.com. With me on today's call will be 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.

Sourav Ghosh:

Thank you, Jim and good morning, everyone. Building on Jim's comments I will go into detail on our second quarter operations and full year guidance before wrapping up on our balance sheet our stock repurchase program and our dividend. Starting with top line performance, second quarter all owned hotel RevPAR of $219 exceeded 2019 for the first time since the onset of the pandemic. Even more encouraging is that all three months in the quarter exceeded 2019 levels. Rate continues to drive the RevPAR upside especially at our Sunbelt and Hawaii hotels where rate was up more than 27% to the second quarter of 2019. Our urban and downtown hotels are showing a rapid improvement as well with rates just 2% below the second quarter of 2019. For context this is a 30% improvement over the first quarter paired with a 73% sequential increase in rooms sold in these markets. Turning to transient mix. Overall transient revenue was up 10% over the second quarter of 2019 driven by 22% rate growth. Holidays in the second quarter had steady growth in both transient occupancy and rate over the second quarter of 2019. Memorial Day weekend achieved 76% occupancy the highest holiday occupancy since the start of the pandemic. Our Sunbelt hotels and resorts achieved strong occupancy and rates with six markets exceeding 85% occupancy. Our urban and downtown hotels achieved the highest occupancies within our portfolio over the 4th of July weekend driven by hotels in Chicago, New York and Philadelphia. Business transient revenue was down 24% to the second quarter of 2019, but increased 66% over the first quarter, driven by a 48% increase in rooms sold. Business transient rooms sold grew progressively throughout the quarter and June set a new high watermark with more than 112,000 rooms sold beating the prior record set in May. The mix of business transient has now shifted to urban and downtown markets where rates exceeded Sunbelt markets and rooms sold grew 75% over the first quarter. In the second quarter, top 10 traditional accounts represented 56% of all business transient room nights compared to 60% in 2019. In addition, for the first time since onset of the pandemic weekday occupancy for our total portfolio surpassed weekend occupancy yet another sign of a return to normalcy. Turning to Group. Revenue in the quarter was just 3% below the second quarter of 2019 driven by a 6% increase in rate. More than half of the 64% increase in Group rooms sold over the first quarter came from our urban markets including Washington DC, San Francisco, New York and Chicago. Further illustrating the surge in group demand group revenue in June was up approximately 3% over 2019. Net, in the quarter for the quarter group rooms booked were 77% higher than the second quarter of 2019. This is evidenced of the continued short-term booking nature of group business and the basis for optimistic outlook on group for the remainder of the year. Corporate group revenue was down just 5% compared to the second quarter of 2019, driven by a 10% improvement in rate. Corporate group rooms sold were up 56% over the first quarter and both rate and room nights were driven by growth in New York and San Francisco. Association Group revenue was down 13% for the second quarter of 2019 aided by a 2% improvement in rate. However, association group rooms sold were up 74% to the first quarter of 2022 with most of the growth in Washington D.C., San Francisco and Chicago. Short-term association business is becoming more active as attendance increases and we expect bookings in this segment to overtime. Wrapping up on group with Social, Military, Educational, Religious and Fraternal or SMERF groups revenue was up 25% compared to the second quarter of 2019, driven fairly evenly by rooms sold and rates. Most of the increase in rooms sold over the first quarter occurred in our urban and downtown markets. Shifting gears to expenses, all owned hotel expenses were down 3.8% to second quarter 2019 while all owned hotel revenues were up 3.7%. Expense declines were driven by wages and benefit savings, down 7% to the second quarter of 2019. Our properties have worked to insulate operations from rising costs. And thus far we are not seeing a discernible impact on overall controllable operating costs. At this time any expense growth is concentrated at our resorts where strong demand is driving increased rates and higher out-of-room spend. Turning to staffing and wages staffing at our hotels remains at approximately 94% of desired levels based on business volume compared to 97% historically. While our operators fill several thousand open positions during the quarter, a lag between demand and staffing levels still exists at certain hotels. We expect this lag to gradually diminish through continued hiring and normal seasonal market and mix shift in the second half of the year. Wrapping up on expenses, we continue to expect our annual wage and benefit rate inflation for 2021 to 2022 to be in the 4% to 5% range. Taking our strong top line and expense controls together, our second quarter all owned hotel EBITDA margin came in at 37.1% which is 480 basis points better than the second quarter of 2019 and the highest all owned hotel EBITDA margin in Host's history. Margins improved in both Sunbelt and urban markets across all operating departments driven by strong rates and increased other revenue on the top line, combined with expense efficiencies and hiring challenges in certain markets. To-date, our operators have achieved approximately 70% of the $100 million to $150 million that is expected to come from potential long-term cost savings based on 2019 all owned hotel revenues. As other revenues normalize and hiring continues, we expect margins will moderate while remaining above 2019 levels. Moving on to our outlook for 2022. We are pleased to be able to reinstate full year guidance, as we are now seeing more normal seasonal trends in our portfolio. We expect full year 2022 all owned hotel RevPAR for our portfolio to be between $191 to $195, or down 4.5% to down 2.5% to full year 2019. As you think about the quarterly RevPAR cadence, we expect third and fourth quarter operations to be slightly above 2019. As a reminder, the first quarter of 2022 was severely impacted by Omicron, which drives our full year RevPAR range slightly below 2019. This range implies an adjusted EBITDAre of $1.445 billion to $1.510 billion and all owned hotel EBITDA margin of 31.5% to 32.1%. For reference, the midpoint of these ranges is slightly above our 2019 all owned hotel results as presented on pages 22 and 23 of our supplemental financial information. These estimated ranges are driven by normal seasonality at our Sunbelt hotels and resorts, alongside continued growth at our urban and downtown hotels, as group and business change in demand continues to pick up at a meaningful pace. Additional guidance details can be found in the reconciliations of our second quarter 2022 earnings release. Turning to our balance sheet and liquidity position. Our weighted average maturity is five years at a weighted average interest rate of 3.7% and we have no significant maturities until 2024. As of quarter end, we had $2.4 billion in total available liquidity, comprised of approximately $699 million of cash $179 million of FF&E reserves and full availability of our $1.5 billion credit facility. Subsequent to quarter end, our Board of Directors authorized an increase in our share repurchase program, increasing our total authorization back to $1 billion, which is consistent with our previous authorization. As is the case with our ATM Program, we view our share repurchase program as another capital allocation tool to help us maximize financial flexibility. Wrapping up, I am pleased to share that our Board of Directors authorized a third quarter dividend of $0.12 per share on Host's common stock, a 100% increase over the prior quarter and the second time we have doubled our dividend this year. All future dividends are subject to approval by the company's Board of Directors, but we expect to be able to maintain our quarterly dividend at a sustainable level, taking into consideration potential macroeconomic factors. To conclude, we believe the operating improvements we have seen this year signal a robust lodging cycle ahead. As we have seen quarter-after-quarter during this recovery, our portfolio, our balance sheet and our team are differentiated and well positioned to continue outperforming in any 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 yourselves to one question.

Neil Malkin:

Hi, everyone. Good morning. Fantastic quarter across the board. Well done. A question on MTCP, I mean I think it's clear that it's well ahead of schedule meaningfully outperforming. Can you just talk about kind of what you're seeing as far as the group impact? You mentioned briefly you're getting some new groups. But can you just talk about how you see the strategic renovations at those sort of bigger more complex hotels is going to -- you expect it to drive group seemingly to new levels, given your comments about how far below associations are and being down, just what 8% or 9% from 2019? And if you can help us at all quantify that in terms of run rate or anything like that that obviously be helpful. Thank you.

Neil Malkin:

Thank you.

Aryeh Klein:

Thanks and good morning. On the group side, can you talk a little bit about what you're seeing on rates for new bookings? And then in-quarter group bookings have been well above 2019 for you and the industry. Can you talk a little bit about why that might be sustainable? And is that something that could be disproportionately impacted if the macro were to worsen?

Aryeh Klein:

Thanks. And then just on the sustainability of in quarter for the quarter bookings. Is that something you'd expect to continue?

Jim Risoleo:

Aryeh, one comment on 2023. One of the very encouraging facts that we can point to is that meeting planners have not hit pause. We're still seeing strong booking activity into 2023 with $2.2 million definites on the books for 2023 and the total group revenue pace continues to improve. It's down 9% now to 2019, with strong ADR growth. So hotels booked I think 253,000 group room nights in the quarter for 2023. That activity was about 83% of 2019 levels, which is about on par with where it was in quarter one. So very encouraging as we look out beyond even 2022.

Operator:

Your next question is coming from Chris Woronka with Deutsche Bank. Please pose your question. Your line is live.

Jim Risoleo:

Yes. A lot in that question Chris. With respect to labor, let me touch on that first. And we talked about it's been quarter-over-quarter that we're running at roughly 94% of optimal levels compared to 97% pre-pandemic. I think the 97% number in and of itself is a little inflated because we took the opportunity early in the pandemic to really zero-based budget every hotel. And we've taken a number of positions out of the properties allowing the properties to become more efficient and increase productivity and you're seeing that come through in our margin performance as well. So I think the labor situation is going to stabilize. As we've said before and we look at this on a regular basis, we anticipate wage growth this year 4% to 5% -- probably 4.5% to 5% to be a lower tight in the range. So it's not off the charts. With respect to occupancy the trends are going solidly in the right direction on the group segment and the business transient segment. So we continue to pick up business transient room nights and not seeing any softness there whatsoever. So I think it's just a matter of time, it's going to evolve and it's not going to evolve evenly across the country. Are there going to be some markets that are going to take longer to get back to 2019 levels and others that are going back right now. So the short answer is we fully anticipate that we're going to see a recovery to prior peak occupancy levels both on the BT side and on the group side.

Operator:

Your next question is coming from Duane Pfennigwerth at Evercore ISI. Please pose your question. Your line is live.

Jim Risoleo:

Duane, I think, you were asking about holiday bookings. Looking out into Thanksgiving and Christmas?

Jim Risoleo:

Very strong. Very, very strong. If you look at total Host, I would tell you that we're up into the double digits in terms of total revenue for Thanksgiving. And actually for Christmas, we are seeing a solid pickup as well, obviously, being driven by the Sunbelt markets and Maui. But that stat in and of itself gives us comfort that there's not going to be the pullback in consumer spending at our resort properties that some folks have talked about.

Sourav Ghosh:

The average group size is actually very similar to what we saw back in 2019. It's not necessarily lower. There certainly what's happening is certainly certain groups are contracting for less, but then ending up increasing the minimum and actually spending more. Therefore, you'll see sort of a banquet and catering business pick up meaningfully well as well.

Sourav Ghosh:

And that's not just for Host that's across the board. And just a quick stat on Labor Day and Jim's touched upon Thanksgiving and Christmas, our transient occupancy pace is ahead by 20% and our rate is a -- pace is ahead by 17% relative to 2019 for transient -- rate.

Operator:

Your next question is coming from Bill Crow at Raymond James. Please post your question. Your line is live.

Sourav Ghosh:

We are actually seeing in the second quarter particularly as you saw in May and June things are returning to very similar patterns of what we saw in 2019 in terms of weekday and weekend. And now the weekday occupancy as we talked about has exceeded weekend occupancy for the portfolio it's about a six-point difference when you look at the second quarters', weekday occupancy is at 76% versus weekend at 70%. And when you look at Sunbelt and Hawaii, it's about a five-point difference; and then the urban it's about an eight-point difference. So urban is right now at 76% and weekend at 69%. So as we get back to a more normalized mix of business and as the urban downtown hotels pick up occupancy, we are seeing very, very similar weekday and weekend patterns relative to 2019.

Sourav Ghosh:

That's fair.

Jim Risoleo:

You're talking about 2023 Bill?

Jim Risoleo:

Again, the trends are moving in the right direction on the group pace. Let me talk about that first. The fact that we were able to book 253,000 group room nights in the quarter for 2023 and the activity was about 83% of 2019 levels. I think that we're not seeing anything that would lead us to believe that group is not going to continue to come back. I mean there is a lot of pent-up demand there. And based on conversations that our asset managers and revenue managers are having with our property managers and media planners everyone intends to get back to normal. I mean keep in mind what happened this year in the first quarter with Omicron. It really put a damper on things and we're seeing the business recover and feel pretty good about how 2023 is going to play out. So we're down 9% on the group revenue pace I think we'll see that gap continuing to close. So group revenue is pacing ahead of same time in 2019 for markets like the Florida Gulf Coast, Hawaii, New Orleans and San Antonio. So we are seeing some positives in individual markets and we expect that that will continue going forward. With respect to resort ADRs, we talked about this on the last call. And we do have some seasonality involved here with respect to our properties, but the fact that we drove $1,000 transient ADRs at five resorts in Q2 is very positive. We're not seeing the consumer pullback whatsoever and we intend to continue to ask for rate going forward. We're optimistic that we're going to be able to continue to drive rate maybe not at the same levels as we did in 2021 in this year, but we'll continue to ask for rate going forward as long as the demand is there.

Operator:

Your next question is coming from Floris Van Dijkum with Compass Point. Please post your question. Your line is live.

Jim Risoleo:

We are -- Floris, we are uniquely positioned as a buyer of assets in this marketplace given where the debt capital markets are today, the fact that it is virtually impossible to get meaningful levels of debt on the acquisition front. So we're tracking a lot of transactions and we will balance whether or not the right decision is to invest in an asset, given where our cost of capital is today. And with the underwriting requirements will have to be, versus buying back our stock over the course of the balance of this year and into next year. So there hasn't been a broad repricing of buyer asks or seller asks out there on hotels that are actively in the market. You're right, that a lot haven't traded for. I think that's one reason why. The second reason why this is just very challenging for buyers to access to debt markets today. So with the liquidity we have today, the availability of a $1.5 billion revolver and the incremental cash that we're going to generate over the balance of this year, as business continues to churn along, we will be in the poll position. We will always invest in our assets. We can quantify the ROI. We're seeing it play out. And transformational comprehensive renovations, or ROI projects, we think that's a good place to put our capital and then there'll be a balance between share buybacks and investing in hotels.

Operator:

Your next question is coming from Michael Bilerman with Citi. Please pose your question. Your line is live.

Jim Risoleo:

Well, we took the buyback authorization to where it was pre-pandemic, Michael. We had a $1 billion authorization. We had $371 million remaining on it. So we took it back to $1 billion. And we will continue to watch where our stock trades relative to our view of the business environment and how 2022 is going to play out how we're feeling about 2023, as we get in a little further into this year and start thinking about budgets next year. And if there is a disconnect between the value of our stock price and how we think the company is going to perform, then we'll take advantage of that dislocation and enter the capital markets. We view the share buyback activity as another capital allocation tool.

Jim Risoleo :

Well, we certainly hope that the price doesn't go down from here. But at times Michael it just pays to be patient. And as things were playing out with geopolitical events, the price of oil was going quantitative tightening we just felt that it was more prudent at this point in time to preserve cash to sit back and to see what other opportunities might present themselves. So as I said, it's real time. It's -- there's a famous saying out there, when the facts change your opinion changes. So we'll keep it on how things are playing out.

Jim Risoleo :

Sure. Thanks.

David Katz :

Hi. Good morning everyone, and thanks for taking my question. Just looking at Host as a platform and an enterprise, I know that you've historically been somewhat of a leader in putting forth analytics resources and so forth. You've covered an awful lot of operating ground, but I'd love to hear you talk about some of those and what you've added and how you're utilizing those in the current environment?

David Katz:

I appreciate that. The point being, are you able to prove to yourselves that this is an advantageous asset in the current environment?

David Katz:

Thank you.

Anthony Powell:

Thank you for fitting me in here. A question on development overall. I mean, can you give us an update on the prospects for the golf course development in Maui, maybe more broadly, I know hotel room specifically don't develop, but you guys have a lot of data you have a lot of expertise in construction. You may be one of the better positions to develop and we've seen the premium for newer assets in the market in terms of rate. So this cycle would have made more sense to explore development opportunities as the cycle continues and we recover?

Operator:

Thank you, ladies and gentlemen. The Q&A session has concluded. I would now like to turn the floor back over to Jim Risoleo for any closing remarks.

Operator:

Thank you, ladies and gentlemen. This does conclude today's conference call. You may disconnect your phone lines at this time, and have a wonderful day. Thank you for your participation.

Jaime Marcus:

Thank you, and good morning, everyone. 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 and 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 hotel-level results. You can find this information together with reconciliations to the most directly comparable GAAP information in yesterday's earnings press release and our 8-K filed with the SEC and in the supplemental financial information on our website at hosthotels.com. With me on today's call will be 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.

Sourav Ghosh:

Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our first quarter top line performance, margins and balance sheet before wrapping up with an update on our dividend. Starting with top line performance. First quarter pro forma RevPAR of $167 was the highest it has been since the onset of the pandemic. The quarter was a table of two months, with March RevPAR of $221 more than double that of January. Improvements in the quarter were driven by leisure travel in Sunbelt markets and Hawaii. These markets achieved a first quarter RevPAR of $251, a 26% increase over the fourth quarter. Our urban markets experienced the brunt of the Omicron impact in the first half of the quarter, but swiftly recovered ending March on a high note. For comparison, March RevPAR at our urban hotels was $132, up nearly 25% to the fourth quarter of 2021. Turning to transient mix. Holidays in the first quarter drove steady sequential growth in both occupancy and transient ADR with President's Day achieving the highest holiday occupancy since 2019, which was driven by are Sunbelt market. Our urban hotel achieved 76% occupancy over Easter, which is nearly double that of the MLK holiday weekend. Holiday occupancy in our urban markets outperformed our Sunbelt markets for the second time since the onset of the pandemic with a rate improvement of 26% over the MLK holiday weekend. Business transient revenue was up 2% in the first quarter with a 4% increase in rate. Despite the impact from Omicron and winter storms in January, business transient room night set a recovery record in March, breaking the 100,000 level, and encouragingly, half of those room nights sold were in urban markets. For comparison, that represents a 28% increase over October 2021, which had 78,000 business transient room nights and was the previous high watermark. Providing a little color on a few of our urban markets. In San Francisco, we saw leisure demand starting to pick up in March. Business transient volume was slow for the first two months of the quarter, our hotels saw a significant spike in March from consulting firms and tech clients. In New York, traditionally strong leisure periods have rebounded to levels approaching 2019. While transient demand remains short term in nature, we are starting to see the booking window stretch beyond 30 days. In March, business transient rooms in New York reached a post-COVID high, and as offices continue to reopen, we expect business transient demand to continue to ramp. Early in the first quarter, Washington, D.C. experienced declines related to cancellations, but all of our hotels saw a meaningful improvement in demand in March due to Cherry Blossoms and Spring Break. As government offices reopen, we expect business ranging volume to continue to improve. Turning to group. Revenue increased 33% over the fourth quarter driven by 14% demand growth, combined with a 17% improvement in rate. Most of the room night increase came from our hotels in Orlando, Maui and San Diego, where we saw incentive business from corporate groups come back into the mix. As it relates to overall group business, banquet and catering revenue was up 17% over the fourth quarter and clearly show that groups are willing to spend when they meet in person. Banquet revenue per group room night exceeded 2019 levels in the first quarter for the first time in the recovery, ending 7% higher, with March absolute banquet and catering revenue down just 10% to 2019. Corporate group revenue increased 41% over the fourth quarter driven by 17% demand growth and a 21% increase in rate. Corporate group room nights picked up meaningfully each month in the quarter and ended at 70% of 2019 levels in March. Orlando and San Diego hotels drove most of the demand growth in this subsegment. Association groups also showed steady sequential improvements. First quarter association group room nights increased 26% over the fourth quarter with a 13% increase in rate. Shifting gears to expenses. Total pro forma expenses were down 17% to first quarter 2019, in line with the total revenue decline. Staffing at our hotels remains at 94% of desired levels based on business volumes versus 97% historically. Hotels had paused on hiring during Omicron and were unable to keep up as demand surged back in February and March. While our hotels continue to fill open roles, a lag between demand and staffing levels still exist. This has acted as an offset to wages and benefits expense quarter-over-quarter. Briefly touching on our efforts to redefine the operating model, we have made meaningful progress on evolving brand standards with our operators. Marriott recently announced over 200 brand standard divisions that aim to reduce costs, align standards across brands and segments enable greater operational flexibility and eliminate outdated standards. Some examples include removing alarm clocks, printed compendiums and premium channels from gas rooms. Our operators have also moved to residential style amenities in luxury hotel rooms and revamped the food and beverage options and hours of operation in many hotels to align with customer preferences. We expect brand centers to continue to evolve as we work with our operators to enhance efficiencies. Taken together, a strong top line and expense controls have allowed our margin to continue to meaningfully improve. Our pro forma hotel EBITDA margin in the first quarter was 31.4%, which is just 10 basis points below that of the first quarter 2019. For comparison, this represents a 350 basis point increase to our fourth quarter hotel EBITDA margin, which was 27.9%. First quarter margin improvement was primarily a result of strong ADR and cancellation revenue. As demand and rate quickly recovered from a decline in January, March had the highest monthly hotel EBITDA margin in Host’s history for today's pro forma portfolio at 41%. Turning to our outlook for 2022. We are still unable to provide full year operational guidance given the continued volatility surrounding COVID. That said, we believe sequential quarterly RevPAR improvements will continue as declines to 2019 diminished throughout the year. We expect second quarter RevPAR to be between $195 and $205 or down 8% to down 3% relative to 2019. This RevPAR range implies an adjusted EBITDAre range of $375 million to $410 million for the second quarter. We expect sustained strength in leisure as well as business transient and group demand to continue accelerating in our urban markets as companies get back on the road and groups get back to meeting in person. We have seen a recovery in international travel, particularly from Canada, Germany and the U.K. New York remains the top destination market followed by San Francisco and Seattle, and we expect sequential improvements in international demand over the course of this year. Given the cadence of the lodging recovery, it is difficult to provide an accurate forecast for the year. While we expect sequential RevPAR improvements relative to 2019, seasonality and changing market and business mix are expected to lead to lower RevPAR and margins for the second half of the year relative to the second quarter. For reference, the third quarter has typically been our weakest quarter of the year. And as is historically the case, we would expect third quarter RevPAR and margins to be below that of the second quarter. Turning to our balance sheet and liquidity position. Our weighted average maturity is 5.3 years at a weighted average interest rate of 3.4%, and we have no significant maturities until 2024. After accounting for our two hotel dispositions in April, we now have $2 billion in total available liquidity, comprised of approximately $439 million of cash, $162 million of FF&E reserves and a full availability of our $1.5 billion credit facility. Wrapping up, I am pleased to share that the Board of Directors authorized a second quarter dividend of $0.06 per share on Host’s common stock, a 100% increase over the prior quarter. All future dividends are subject to approval by the company's Board of Directors, but as the operational recovery continues, we expect to be able to grow our dividend to a sustainable level. To conclude, we are optimistic that 2022 will continue to build on the strong momentum of the past few quarters. We remain very well positioned to execute on our goal of increasing the EBITDA growth profile and improving the performance of our portfolio. With that, we would be happy to take your questions. [Operator Instructions]

Chris Woronka:

Thanks for all data points. I guess I'll ask the obvious one, which is the 2Q guidance with what you said about April. And I understand there's normally seasonally a drop in May and June. But I think the basic math is suggesting a bigger-than-normal drop, like a double-digit drop versus '19. Can you just give us a little bit of color on how you're thinking about that?

Operator:

Your next question is coming from Neil Malkin from Capital One Securities. Your line is live.

Jim Risoleo:

Sure. At our 16 resorts in the first quarter, Neil, we had outlet revenue per available room of $180 which is clearly a high watermark for our portfolio. And I would say probably industry-wide, it's a high watermark. As we look at how that revenue in the aggregate, it was just 7% below quarter one of 2019. And that's all driven by resorts at this point in time. I think our resort performance was plus 40% on a pro forma basis to quarter one of 2019. The same -- and Sourav touched on this in his prepared remarks, the same with respect to banquets at our hotels that are driven by group. I mean that bank was for plus $24 million to quarter four, the per group room night, the bank with dollars exceeded 2019 by 7%. So what we're seeing on corporate, and it's mostly driven by corporate group at this point in time. And what we're seeing is the groups that are signing up are being cautious regarding what commitments they're making on a spend basis, both from a rooms perspective and out of room spend. Given what happened with Omicron in January and February and the attendant attrition and cancellation fees. But when they arrive at the hotels, they're spending a lot more money than they contracted for, which makes it a little bit difficult to forecast going forward. That's one of the reasons why we're not comfortable talking about the second half of the year by talking about the second quarter at this point in time. Does that answer your question?

Jim Risoleo:

Absolutely. So I only touched on outlet revenue and banquet revenues. I mean we have seen a very strong upward trajectory on golf revenues and on small revenues, parking is relatively flat and we expect that to pick up as people get back on the road and start traveling again. We see no downturn whatsoever in golf or small revenues. The one area that -- it did have an impact on our first quarter performance were attrition and cancellation fees of $26 million, and that's relative to $13 million that we collected in Q1 of 2019. So I wouldn't expect to see that level of cancellation and attrition fees going forward. But the other out-of-room spend should continue to grow.

Smedes Rose:

I just wanted to ask, Sourav, as you think about, I guess, margin going forward, you noted that margins came very close to pre-pandemic levels and RevPAR is still quite a bit below. As RevPAR continues to improve, even if it's somewhat seasonal and more choppy going forward. How do you think about the flow-through of incremental RevPAR gains. And would it be fair to assume that they might be more occupancy driven at this point versus rate driven? Or how are you thinking about that?

Smedes Rose:

And can I just ask you one quick question. You mentioned 3 million group life on the books for '23 that looks like somewhere between maybe 18 points to 19 points of occupancy at this point. Where would you be now a pre-pandemic going into the following year in terms of sort of points of occupancy on the books.

Smedes Rose:

Okay.

Smedes Rose:

You were talking about for '23. You're talking about for the [Indiscernible] for room nights.

Operator:

Your next question is coming from Bill Crow from Raymond James. Your line is live.

Jim Risoleo:

I think it's a combination of all of the above, though. Clearly, I don't want to give the impression that our 16 resorts in those five properties that had over $1,000 in ADR for the quarter are going to fall off the face of the earth, they're not. I mean the demand is still there. We're still seeing it. But I think as we get past -- we got past April, we're going to get -- as we get into June, we have some seasonality issues associated with the resorts. As an example, the 1 Hotel South Beach in Miami, the Ritz-Carlton in Naples, Four Seasons, Orlando, just natural seasonality, we think, will may temper some of the demand at those properties. And then we are seeing group and business transient come back, which is going to clearly result in a RevPAR that in the aggregate is lower than what we saw in the first quarter and in the month of April. So we're delighted to have the business, make no mistake about it. We're very excited to see group in BT come back as strong as they have been coming brack and having the resort portfolio that we do and having put $1.6 billion to work last year with assets that have really meaningfully outperformed our expectations. In our minds, served as a good bridge to get us to the point where business transient and group recovers. So it's a combination of all of the above.

Jim Risoleo:

Now I'll let Sourav get into it, but the short answer is no. We have looked at redemption numbers, and we don't think that, that is having an impact at all at this point in time. In fact, or as an example, for Alila Ventana, we're delighted that, that hotel is part of the world of Hyatt because that's the redemption numbers at that property really go a long way to allowing us to drive outsized RevPAR just given the small number of rooms that are there. And when we can really revenue managed the last -- down to the last room. That is how our redemption rate is set. So it's been very positive for us. And Sourav, I don't know you want to add a little bit of color on what we're seeing.

Operator:

Your next question is coming from David Katz from Jefferies. Your line is live.

Jim Risoleo:

We are constantly evaluating investment opportunities, David. And I think what has happened, at least through our lens, as we view the world today. As other hotel owners have seen the cadence of the recovery, we're seeing one of two things happening. Pricing expectations for a number of the properties that have been in the market early in this year have been beyond our reach. We just have not been able to pencil the underwriting to make sense. Other assets that we would like to buy, and that's because everyone is expecting a strong recovery, which, obviously, our first quarter results and our April numbers are validating as we move into 2022 and beyond. Other assets that are that we might want to acquire just aren't available for sale right now as owners sit and wait until cash flow recovers. So we are very well positioned. There's no question about it. We have $2 billion of available liquidity today as the year progresses that liquidity position will grow. And it puts us in a very strong position as we get later into this year and opportunities become available to really pivot and again be the buyer of choice as we were last year and take deals on all cash and not have to worry about the state of the debt capital markets today, which have gotten a little bit choppy, less loan to proceed -- less loan-to-value proceeds, higher interest rates, given the commentary and actions that the Fed has taken. And I think that patients is warranted at this point in time. We clearly are going to use the balance sheet -- beyond the light is that we were able to do what we did last year and get ahead of the curve and put $1.6 million of work early in the cycle. So I think everything is on the table, but it's very difficult to speculate on what might become available that meets our underwriting criteria.

Jim Risoleo:

Let me start by saying that we don't have a red line through any market. And it really is dependent upon our view of value and likely performance going forward. So I agree with you that I think the puck is still going to the Sunbelt markets. I don't think that's going to change. And resorts, in particular, for a number of reasons. Number one is most -- very, very low levels of supply in those markets -- in the resort markets in general. But if opportunities present themselves in some of the markets that are at the bottom of the recovery list, and we thought that they were priced fairly and that we could add value and that the investment would serve to elevate the EBITDA growth profile of the portfolio, which is what we're really focused on doing. We would certainly be prepared to transact.

Aryeh Klein:

Just following up on the resort rates. Clearly, it seems like there's some seasonality at play over the next few months. But as you look further ahead and comps begin to get much tougher kind of in the second half of the year and I guess, the beginning of next year. Are you expecting rates to actually decline a bit?

Operator:

[Indiscernible] from Anthony Powell from Barclays. Your line is live.

Jim Risoleo:

Specifically for Memorial Day, and this is, again, going back to sort of still the short-term lead time, we are seeing a key pace of 12% above 2019 levels. So still holding very strong for holidays. Sunbelt markets are pushing rates really nicely with rates on the books, up 44% versus the same time in 2019. But overall, still very strong performance for the upcoming holidays.

Jim Risoleo:

I don't specifically have June themes numbers Andy, but we can certainly get back to you.

Jim Risoleo:

That's fair. We're not seeing any softening.

Jay Kornreich:

It's Jay. But I am a follow-up to a previous question. With the strong recovery in business transient urban demand, it was interesting to see your Boston and New York as dispositions. So kind of just curious how you think about your asset allocation plan and we may shift back to preserving your urban footprint, which is recovering versus maybe disposing in those markets and focusing more on the outperforming Sunbelt and resort assets.

Jay Kornreich:

And if I could just ask 1 follow-up. As we seen a nice recovery in the business trends in all the urban markets, can you just give us a little perspective on how San Francisco is shaping up? And how you expect that market to perform in the second half of the year?

Operator:

Your next question is coming from Floris Van Dijkum from Compass Point. Your line is live.

Jim Risoleo:

I don't think we're really comfortable talking about the second half of the year. It's very difficult at this point in time to forecast how this recovery is going to continue to unfold. So much of the business is being booked short term, although we are starting to see the booking window extend. As I mentioned, a very valid point, we think is on the corporate group business that we're seeing. The contracts that are being signed are for lower levels of food and beverage spend and smaller numbers of attendees that are then that are showing up. Because they just don't want to be dealing with attrition and cancellation fees if they have to cancel or if they -- if there is another event that as we saw in January and February. So at this point in time, I think we're confident and we feel really good about what we're seeing in terms of group bookings for the balance of this year. We had a nice pickup over Q4, where we had 2.7 million definite on the books at the end of Q1. We had 3 million definite room nights on the books. That compares, I think, to $3.9 million in Q1 of 2019 for 2020. So we continue to close the gap going forward and the same with business transient. It's coming back. We think it's going to continue to evolve as offices open. And we feel good about it, but we're just not in a position to give any guidance for the balance of the year.

Operator:

Your next question is coming from Chris Darling from Green Street. Your line is live.

Sourav Ghosh:

So for the major urban markets, the weak day occupancy is still lower than what -- where we would like it to be, but it's trending in the right direction. I think that's the important point. From the last time we spoke on the fourth quarter call, there has been like a 4 point to 5 point improvement in midweek occupancies. So that's where sort of we have been focused. Weekend occupancy has obviously improved meaningfully in those urban markets, but that trend continues.

Jim Risoleo:

We are still down, I would say, about sort of high double digits of 18, 20 percentage points in occupancy in those markets.

Jim Risoleo:

Thank you, and I would like to thank everyone for joining us on our call today. We appreciate the opportunity to discuss our quarterly results with you. And we all look forward to meeting with many of you in person in the coming weeks and months. We really appreciate your continued support. Have a great day

Operator:

00:05 Good morning, and welcome to the Host Hotels & Resorts Fourth Quarter 2021 Earnings Conference Call. Today's conference is being recorded. 00:14 At this time, I would like to turn the call over to Jaime Marcus, Senior Vice President of Investor Relations.

Jim Risoleo:

01:34 Thank you, Jaime and thanks to everyone for joining us this morning. Despite the uncertainty of COVID-19 variant, we significantly outperformed expectations during the fourth quarter and substantially beat consensus metrics for the year. We delivered adjusted EBITDAre of $242 million, which exceeded our interest in capital expenditures by $68 million and achieved adjusted FFO per share of $0.29 during the quarter. 02:06 In addition to delivering positive metrics each quarter, we achieved meaningful sequential increases each quarter throughout 2021. Pro forma total revenues in the fourth quarter grew 20% compared to the third quarter, while pro forma hotel-level operating expenses increased only 15%. RevPAR for the fourth quarter was $148, as volume and rates continued to hold up at our hotels in Sunbelt markets. This is the highest quarterly RevPAR we have seen since the onset of the pandemic, and closes out a year of strong sequential improvements. 02:48 RevPAR improved 13%, compared to the third quarter, despite some softening of demand in late December due to the Omicron variant. Our recent acquisitions, which I will touch on shortly, all contributed to our outperformance during the fourth quarter and are exceeding our underwriting expectations. Preliminary January RevPAR is expected to be approximately $105, a 130% increase over January 2021. Our preliminary February RevPAR forecast is expected to be $150 to $155 and we expect a significant pickup across business segments in March, which is consistent with the recovery we experienced following the Delta variant. 03:38 In addition to delivering significant operational improvements, we continue to be recognized as a global leader in corporate responsibility. Our 2025 emissions target is verified by the Science Based Targets Initiative at the 1.5 degree Celsius ambition level, making Host the first hospitality company and among the first three real estate companies in North America to set emissions reduction targets in line with the Paris agreement's highest level of ambition. 04:11 To complement our environmental targets, we were the first lodging REIT to issue social targets, including two diversity-related targets and one employee engagement target. We also continue to execute on our three strategic objectives, all of which are aimed at elevating the EBITDA growth profile of our portfolio. 04:34 As a reminder, our objectives include redefining the hotel operating model with our operators, gaining market share at renovated hotels and strategically allocating capital. As it relates to the last strategic objective, during the fourth quarter we acquired two hotels and sold six hotels. Subsequent to quarter end, we sold one additional hotel. This brings our total early cycle acquisitions to $1.6 billion at a blended 13 times EBITDA multiple, and our dispositions to approximately $1 billion at a 15.4 times EBITDA multiple, including estimated foregone capital expenditures of $290 million. This is a continuation of our strategy to deploy capital into assets that we believe will elevate the EBITDA growth profile of our portfolio. 05:31 As a refresher, our 2021 acquisitions included the Hyatt Regency Austin, Four Seasons Orlando at Walt Disney World, Baker's Cay Resort in Key Largo, The Laura Hotel in Houston, Alila Ventana Big Sur, The Alida, Savannah, and Hotel Van Zandt in Austin. We also acquired the Royal Ka'anapali and Ka'anapali Golf Courses in Maui. 06:01 All of our recent acquisitions are performing substantially ahead of our underwriting expectations. For the full-year 2021, EBITDA at our new acquisitions was $37 million higher than the full-year 2021 EBITDA that was estimated at underwriting, which represents a 73% increase, and the golf courses were $4 million higher. 06:29 Turning to our fourth quarter acquisitions. In December, we closed on The Alida, Savannah, a 173-key boutique hotel for approximately $103 million. This newly constructed hotel opened in October 2018 and benefits from soft branding in Marriott's Tribute Portfolio. With no expected near-term CapEx, favorable operating costs and multiple demand drivers, stabilization for The Alida is expected in the 2024 to 2025 timeframe at approximately 11 times to 12 times EBITDA. In addition, in December, we acquired our second hotel in Austin, the Hotel Van Zandt, a 319-key luxury lifestyle hotel for approximately $246 million, including its $4 million FF&E reserve. The acquisition price represents a 13.2 times multiple on 2019 EBITDA. We funded the acquisition with approximately $140 million in proceeds from recent dispositions and assumed approximately $102 million of existing secured debt. 07:49 Located adjacent to Austin's popular Rainey Street entertainment district, this recently constructed hotel opened in 2015 and is poised to benefit from continued large-scale development. We expect the hotel to stabilize at approximately 10 times to 12 times EBITDA in the 2025 to 2027 timeframe. 08:12 On the dispositions front, we sold the 305-key W Hollywood in December for $197 million or 25 times 2019 EBITDA. When calculating the EBITDA multiple, we included $33 million of estimated forgone CapEx over the next five years. This is the third ground lease asset we sold in 2021. In addition, subsequent to quarter end, we sold the 1220-key Sheraton Boston for $233 million or 14.2 times 2019 EBITDA. When calculating the EBITDA multiple, we included $135 million of estimated forgone CapEx over the next five years. In connection with the sale, we are providing a $163 million bridge loan to the purchaser, which we expect will be repaid within its first six month term. 09:11 Looking back on our transaction activity since 2018, we have acquired $3.2 billion of assets at a 14 times EBITDA multiple, and disposed of $4.5 billion of assets at a 17 times EBITDA multiple, including $793 million of foregone CapEx over the next five years. With these transactions, we have dramatically improved the quality of our portfolio. 09:40 Comparing pro forma 2019 results for our current portfolio to 2017, we have increased the RevPAR of our assets by 11%, the EBITDA per key by 20%, and the EBITDA margins by 120 basis points. As we continue to evaluate capital allocation opportunities going forward, our efforts will remain focused on assets that further bolster our EBITDA growth profile. 10:10 As part of our capital allocation efforts, in January we acquired a 49% interest in the asset management platform of Noble Investment Group to cultivate innovative hospitality opportunities within Noble's private fund platform. We invested $90.7 million in its fee-based asset management business, comprising $35 million of cash and $55.7 million of equity, or 3 million operating partnership units which are subject to a one-year lockup period. In the future, we also have the ability to acquire an additional 26% to 51% in Noble, which would bring our aggregate interest to between 75% and 100%. 10:58 In addition, we have made a $150 million LP commitment to the next Noble fund. Based on our current ownership interests, we are targeting average net expected earnings of $7 million to $10 million annually over the next three years. Over the past three decades, Noble has invested nearly $5 billion in acquiring and developing approximately 150 assets in the branded upscale select service and extended stay segments across 84 markets in the U.S. Founded in 1993 by Mit Shah, who remains the CEO, the Noble team has a multi-cycle track record and extensive experience sourcing investment opportunities in real estate and capital markets. 11:48 Our investment represents yet another opportunity to elevate the EBITDA growth profile of our portfolio by creating a new income source from recurring management and development fees, and allowing for investment and select service hotels, extended stay hotels, and new development opportunities. The partnership will combine Noble's strong track record, development acumen in the select service and extended stay categories, and fund management experience with our scale, market insights, and data analytics to source differentiated investment opportunities. 12:27 By capitalizing on Noble's deep expertise, we will have the ability to incubate and invest in future lodging-adjacent strategies, thereby creating additional paths for long-term strategic value creation. Those strategies include property technology solutions, development, and alternative lodging. We believe a fund vehicle is one of the best ways to gain chain-scale diversification. As Noble's expertise with select service and extended stay hotels will preserve our focus on investing in upper upscale and luxury hotels and resorts. 13:06 Moving on to fourth quarter operations, we continued to close the gap to 2019. Transient demand in the fourth quarter was 82% of 2019 levels, compared to 77% in the third quarter and 58% in the first half of 2021. And we are encouraged that transient rate in each of the four quarters in 2021 exceeded rates in 2019. Our hotels also saw continued improvement in Group during the fourth quarter compared to the third quarter, driven by demand growth of 15% and a 17% rate improvement. 13:48 Also bolstering our Group results was the continued meaningful improvement in banquets. Banquet and AV revenue was $150 million in the fourth quarter, up 84% over the third quarter after having doubled from the second quarter to the third quarter. Sourav will get into more detail on business mix in the fourth quarter shortly. 14:14 In addition to successfully deploying capital this year, we continue to focus on our 3 strategic objectives. As a reminder, we are targeting a potential $267 million to $342 million of incremental stabilized EBITDA on an annual basis from the initiatives and projects underlying our strategic objectives. Approximately $120 million is expected to come from the seven acquisitions we completed in 2021. $100 million to $150 million is expected to come from potential long-term cost savings over time, based on 2019 revenues from redefining our operating model with our managers. We have taken steps toward 50% to 60% of these savings to-date. 15:08 Another $22 million to $37 million of incremental stabilized EBITDA is related to our goal of gaining 3 to 5 points of weighted index growth at the 16 Marriott Transformational Capital Program hotels, and eight other hotels where major renovations have been recently completed or are underway. In 2021, we completed three Marriott Transformational Capital Program properties, and subsequent to quarter end we completed two more, bringing the number of completed properties in this program to 12 out of 16. 15:45 In August, we completed the final phase of construction at the New York Marriott Marquis, and in October, we completed the final phase at the Orlando World Center Marriott, closing out both of these three year transformational renovation programs. Other properties completed over the past year includes the Houston Marriott Medical Center, the Marina del Rey Marriott and the Ritz-Carlton Amelia Island. We completed approximately 85% of the program as of year-end, and we expect to substantially complete it by the end of 2022. 16:24 The remaining Marriott Transformational Capital Program properties include Boston Copley, the San Diego Marriott Marquis, Marriott Metro Center, and the JW Marriott in Houston. We expect to receive approximately $11 million in operating profit guarantees under the Marriott Transformational Capital Program in 2022. 16:49 Additionally, this year we added 3 hotels to our list of major renovations. The Western Denver Downtown, Miami Marriott Biscayne Bay, and The Westin Georgetown in Washington DC. Finally, the remaining $25 million to $35 million of incremental stabilized EBITDA over time on an annual basis is expected to come from recently completed and ongoing ROI development projects. These projects are at different stages of renovation and development, and stabilization is expected to occur two to three years after completion. 17:28 To-date, our ROI development projects at the Andaz Maui Villas and the 1 Hotel Beach Club have reduced returns significantly greater than our original underwriting. Our 2022 capital expenditure guidance range is $500 million to $600 million, which reflects our continued focus on reinvesting in our properties during the early phase of the recovery to position our portfolio for future demand. The plan includes $245 million for redevelopment and repositioning projects such as the completion of the Ritz-Carlton Naples beach transformation and tower expansion, a transformational renovation of the Fairmont Kea Lani, and completion of the Orlando World Center water park and meeting space expansion. 18:20 It is worth noting that our capital expenditure range at the midpoint is $125 million higher than last year, which is driven by increased investment in ROI development projects, as well as more normalized maintenance CapEx spend. 18:38 To conclude my remarks, we made significant strides towards improving the quality of our portfolio in 2021. Despite the recent volatility, we remain encouraged by the recovery we are seeing across the lodging industry. Our capital allocation efforts over the past few years combined with the geographic diversity of our portfolio and our strong balance sheet leave us very well-positioned to create significant long-term value for our stockholders. 19:09 With that I will now turn the call over to Sourav.

Operator:

31:22 Ladies and gentlemen, the floor is now open for questions. [Operator Instructions] Your first question for today is coming from Smedes Rose. Please announce your affiliation and pose your question.

Jim Risoleo:

32:19 Sure, Smedes, I'll take the first part of it, Sourav can take the second part of it. We added about 1,000 positions in the fourth quarter. And as you may recall, on the Q3 call we stated that the staffing levels were 94% of our managers is our goal. Typically, they run to about 97%, they never get to parity, they're never at 100%. With the increase in business volume in the fourth quarter, even though we added a 1,000 positions, we still remain at about 94%. But I can tell you based on conversations we have had with our managers, there is a degree of confidence that the open positions are going to be able to be filled as things open up, as the variant gets behind us, as children get back to school in person across the country, and as the various forms of stimulus burn off, which many of them already have. 33:29 So with that, I'll let Sourav talk about our point of view around wage -- wage increases and inflation.

Smedes Rose:

34:01 Okay, thank you.

Bill Crow:

34:13 Hey, good morning guys. Raymond James. I do have a follow-up for you, Jim, but let me start with Sourav. In just thinking about the transition from '21 to '22 on a couple of line items, if you could just quantify the total support that you got from Marriott, whether it's the transformational capital program or other performance guarantees in 2021? And what your expectations are for that in 2022? And I think Jim you mentioned $11 million on the transformational side. 34:47 And then the second part of that Sourav is the -- I think you have talked about $40 million of cancellation and attrition fees in the second half of 2021. How much of a drag is that on margins as you try and replace that with actual business?

Bill Crow:

36:37 All right, that is helpful. And Jim, I said I was going to have a follow-up. I am going to play devil's advocate for a second. You suggested that the Noble investment was an efficient way to gain diversification across more chain scale. So I think it was -- I am paraphrasing obviously, but is that something that investors have asked for from Host, because you have done a really good job of just kind of concentrating on these wonderful top 40 or maybe it is top 50 assets now. And I am just wondering what drove you to think about that diversification?

Bill Crow:

40:19 Great. I appreciate the answers.

Floris Van Dycom:

Hi, it is Floris at Compass Point. A question, Jim, and maybe if you can touch on this, and I guess I'll -- it is more regarding to the valuation of hotels. And I saw, number one, you have sold 3 ground leases, you have got some more ground leases. I don't think you are going to sell any of the San Diego ground-leased hotels, but maybe if you can -- which other hotels might be on the block? And also talk about -- maybe if you can touch on, I noticed the 1 Hotel had $68 million of hotel EBITDA this past year. How does that compare to pre-COVID levels? And how sustainable -- the one fear that we hear from some investors is, well, gee, these resort hotels are -- have really strong EBITDA today, but could that fall off? How sustainable is the EBITDA from your top resort hotels and maybe talk about -- a little about the growth prospects for those assets?

Floris Van Dycom:

45:27 Thanks, Jim.

Neil Malkin:

45:39 Hey, everyone. It's Neil Malkin, Capital One Securities. I was hoping you could talk about the kind of operating model that was one of the things that you said are -- is one of the three facets that you are working on to improve the company and grow EBITDA, et cetera. I believe, yesterday Hilton talked about I think 400 basis points and 600 basis points in terms of the model or the margins. I was just hoping maybe you could give some insight as we begin a little bit further past COVID and you have kind of hammered out more of the brand-standard enhancements. Does that 100 to 150 number or whatever that equates to in basis points, does that seem low now? And do you think given the things you have seen with staffing and efficiencies and ADRs and things like that, that may wind up being low and that sort of the previously disseminated margin improvements are going to wind up being light of what is actually going to happen?

Neil Malkin:

49:47 Yeah. Appreciate that. Thank you.

Jay Kornbrekke:

50:01 Hey, it is Jay Kornreich with SMBC Nikko. Great to be on the call. With the return of office inflection point likely now underway, which we expect to lead to a strong recovery in BT demand, and you indicated seeing settlement in February, do you consider getting I guess more aggressive in shifting your acquisition pipeline to focus more on dense urban markets to get ahead of that instead of the resort and Sunbelt strategy over the past year?

Jay Kornbrekke:

50:43 Correct.

Jay Kornbrekke:

52:33 Okay. I appreciate the color. Thanks so much.

Stephen Grambling:

52:46 Hi, it's Stephen with Goldman Sachs. Maybe a follow-up on the urban market question, are you seeing any change in the supply backdrop in these markets given how long some of these assets have effectively stated in a negative EBITDA? And would that potentially be a catalyst for you may be shifting back into those markets -- shifting back but maybe refocusing there?

Stephen Grambling:

55:04 Helpful. Thanks. I will jump back in the queue.

Robin Farley:

55:17 Thanks. Yes, it is Robin Farley with UBS. A lot of my questions have been answered. I guess, just maybe one more follow-up on the transaction environment. Just given you had a great track record of transactions last year, just with kind of a more recovered market out there, interest rates moving up, I guess it's -- how much opportunity -- how would you compare the environment generally in terms of opportunity for transactions compared to where it was in the second half of last year? 55:47 And if you can remind us if there is a certain dollar amount that you have to spend on acquisitions this year, like as a result of 1031 exchanges or anything like that we should keep in mind too? Thanks.

Robin Farley:

58:02 Okay. That’s great. Thanks very much.