HOST HOTELS RESORTS INC

Previous wording

•the effect on lodging demand of (i) changes in national and local economic and business conditions, including concerns about U.S. economic growth and the potential for an economic recession in the United States or globally, the recent high level of inflation, rising interest rates, global economic prospects, consumer confidence and the value of the U.S. dollar, and (ii) factors that may shape public perception of travel to a particular location, including natural disasters, such as the Maui wildfires in 2023, weather events, such as Hurricane Ian in 2022, pandemics and other public health crises, such as the COVID-19 pandemic, and the occurrence or potential occurrence of terrorist attacks, all of which will affect occupancy rates at our hotels and the demand for hotel products and services;

Current wording

•the effect on lodging demand of (i) changes in national and local economic and business conditions, including concerns about U.S. economic growth and the potential for an economic recession in the United States or globally, the recent high level of inflation, rising interest rates, global economic prospects, consumer confidence and the value of the U.S. dollar, and (ii) factors that may shape public perception of travel to a particular location, including natural disasters, such as the Maui wildfires in 2023, weather events, such as Hurricane Ian in 2022 or extreme precipitation, pandemics and other public health crises, such as the COVID-19 pandemic, and the occurrence or potential occurrence of terrorist attacks, all of which will affect occupancy rates at our hotels and the demand for hotel products and services;

Previous wording

•risks that U.S. immigration policies and border closings, travel restrictions or advisories, changes in energy prices or changes in foreign exchange rates will suppress international travel to the United States generally or decrease the labor pool;

Current wording

•risks that U.S. immigration policies and border closings, visa processing times, travel restrictions or advisories, changes in energy prices or changes in foreign exchange rates will suppress international travel to the United States generally or decrease the labor pool;

Previous wording

(1)EBITDAre, Adjusted EBITDAre, NAREIT FFO per diluted share and Adjusted FFO per diluted share and comparable hotel operating results (including hotel revenues and hotel EBITDA and margins) are non-GAAP financial measures within the meaning of the rules of the SEC. See “Non-GAAP Financial Measures” and "Comparable Hotel Operating Statistics and Results" for more information on these measures, including why we believe these supplemental measures are useful, reconciliations to the most directly comparable GAAP measure, and the limitations on the use of these supplemental measures. Additionally, comparable hotel results and statistics are based on 76 comparable hotels as of March 31, 2024 and include adjustments for non-comparable hotels, dispositions and acquisitions. See Comparable Hotel RevPAR Overview for results of the portfolio based on our ownership period, without these adjustments.

Current wording

(1)EBITDAre, Adjusted EBITDAre, NAREIT FFO per diluted share and Adjusted FFO per diluted share and comparable hotel operating results (including hotel revenues and hotel EBITDA and margins) are non-GAAP financial measures within the meaning of the rules of the SEC. See “Non-GAAP Financial Measures” and "Comparable Hotel Operating Statistics and Results" for more information on these measures, including why we believe these supplemental measures are useful, reconciliations to the most directly comparable GAAP measure, and the limitations on the use of these supplemental measures. Additionally, comparable hotel results and statistics are based on 77 comparable hotels as of June 30, 2024 and include adjustments for non-comparable hotels, dispositions and acquisitions. See Comparable Hotel RevPAR Overview for results of the portfolio based on our ownership period, without these adjustments.

Previous wording

Total revenues increased $90 million, or 6.5%, as compared to the first quarter of 2023 driven by strong group business leading to increases in food and beverage revenues, in addition to improvements in other revenues. First quarter also benefited from the results of The Ritz-Carlton, Naples, which was closed in the first half of 2023.

Current wording

Total revenues increased $73 million, or 5.2%, and $163 million, or 5.9%, as compared to the second quarter of 2023 and year-to-date 2023, respectively, as 2024 results benefited from the results of The Ritz-Carlton, Naples, which was closed in the first half of 2023, and from the April acquisition of the 1 Hotel Nashville and Embassy Suites by Hilton Nashville Downtown. In addition, group business continues to drive an increase in food and beverage revenues.

Previous wording

Comparable hotel Total RevPAR in our Denver, Northern Virginia, and Houston markets led the portfolio with increases of 39.1%, 17.8% and 10.4%, respectively, in the first quarter, primarily due to rate and occupancy growth driven by strong group and leisure demand. Hotels in our San Diego market, one of our larger markets by room count, also outperformed our portfolio with a comparable hotel Total RevPAR increase of 7.3%, with rate increases driven by strong group performance, while our San Francisco/San Jose market outperformed with comparable hotel Total RevPAR growth of 4.8%, with a very strong January due to convention events. These strong performances were offset by comparable hotel

Current wording

Comparable hotel Total RevPAR in our Denver and Northern Virginia markets led the portfolio with increases of 22.5% and 10.7%, respectively, in the second quarter, primarily due to rate and occupancy growth driven by strong group and business transient demand. Downtown markets such as Boston, New York and Seattle also outperformed our portfolio with comparable hotel Total RevPAR growth of 8.6%, 7.8%, and 8.7%, respectively. The improvements in our Boston and New York markets were driven by strong leisure demand, while our Seattle market benefited from strong group performance, all of which resulted in rate increases. These strong performances were offset by comparable hotel Total RevPAR declines in our Atlanta, New Orleans and Orlando markets of 10.7%, 7.5% and 4.0%, respectively. The declines were driven primarily by a decline in short-term transient demand. In addition, comparable hotel Total RevPAR at our Maui/Oahu market declined by 21.4% due to the continuing impacts of the August 2023 wildfires.

Previous wording

Net income decreased $19 million for the quarter, primarily due to a decline in gain on asset sales, partially offset by gains on insurance settlements recognized in the first quarter. These changes led to a decrease in diluted earnings per share of $0.02, or 5.0%, for the quarter. Adjusted EBITDAre, which excludes gain on sale of assets, among other items, increased $39 million to $483 million. Adjusted FFO per diluted share increased $0.05 to $0.60 for the first quarter, reflecting the increase in Adjusted EBITDAre, partially offset by an increase in interest expense (excluding debt extinguishment costs) which is included in Adjusted FFO per diluted share but not Adjusted EBITDAre.

Current wording

Net income increased $28 million for the quarter and $9 million year-to-date, primarily due to gains on insurance settlements recognized in the first half of 2024 and benefiting from operations from the recently acquired 1 Hotel Nashville and Embassy Suites by Hilton Nashville Downtown and operations from The Ritz-Carlton, Naples as discussed above, partially offset by an increase in interest expense. These changes led to an increase in diluted earnings per share of $0.05, or 17.2%, for the quarter and $0.02, or 2.9%, year-to-date. Similarly, Adjusted EBITDAre, which excludes gain on property insurance, among other items, increased $30 million for the quarter and $69 million year-to-date. Adjusted FFO per diluted share increased $0.04, or 7.5%, for the second quarter and $0.09, or 8.3%, year-to-date, reflecting the increase in Adjusted EBITDAre, partially offset by an increase in interest expense (excluding debt extinguishment costs) which is included in Adjusted FFO per diluted share but not Adjusted EBITDAre.

Previous wording

While there were portfolio-specific challenges in the first quarter of 2024, we continue to see economic conditions conducive to year-over-year growth for the lodging industry. First quarter headwinds included the evolving nature of demand at our Maui properties, unseasonable weather conditions in several of our markets, and difficult comparisons to a very strong first quarter of 2023. Although inflation has surprised to the upside in the first quarter, it has moderated substantially over the past year, while unemployment remains at very low levels, and consumer spending remains strong. However, the Federal Reserve has maintained its stance of a tight monetary policy, and expectations of rate cuts have been pushed further out. In addition, other risks to economic growth remain, including geopolitical instability throughout the globe, volatile oil prices and the uncertainty surrounding presidential elections both in the U.S. and abroad. As a result, while the overall expectation of a recession has moderated, a slowdown in economic growth is anticipated. Blue Chip Economic Indicators consensus currently estimates an increase in real U.S. GDP of 2.4% for 2024, down slightly from 2.5% growth in 2023, and business investment growth is also anticipated to slow over the coming quarters, expected to average 2.4% for 2024.

Current wording

The first half of the year was impacted by a slower than expected recovery from the wildfires in Maui and moderating domestic leisure transient demand, which is driven primarily by elevated international U.S. outbound travel relative to historic levels without a corresponding increase in international inbound travel. We expect these trends to continue into the second half of the year, leading to anticipated minimal year-over-year RevPAR growth. Inflation has moderated substantially over the past year and the consumer price index saw a month-over-month decline in June, the first time since the onset of the pandemic. However, unemployment remains at low levels, and household balance sheets remain strong for those in the upper end of the income distribution. Other risks to economic growth remain, including tight monetary policy by the Federal Reserve, geopolitical instability throughout the globe, volatile oil prices and the uncertainty surrounding presidential elections both in the U.S. and abroad. As a result, while the overall expectation of a recession has moderated, leading indicators point toward slower economic growth in the coming months. Blue Chip Economic Indicators consensus currently estimates an increase in real U.S. GDP of 2.3% for 2024, down from 2.5% growth in 2023. Business investment growth is also anticipated to slow over the coming quarters, averaging 3.3% for 2024.

Previous wording

Overall, hotel supply growth is anticipated to remain below the long-term historical average in 2024, although we expect to see above-average growth in a few markets where our hotels are located, such as New York and Austin. Supply chain challenges have resulted in project delays across the U.S., and a tight lending environment has created construction financing challenges for future projects. We anticipate that the new project pipeline will remain suppressed until macroeconomic concerns moderate and interest rates decline.

Current wording

Overall, hotel supply growth is anticipated to remain below the long-term historical average in 2024, although we expect to see above-average growth in a few markets where our hotels are located, such as Nashville and Austin. Supply chain challenges have resulted in project delays across the U.S., and a tight lending environment has created construction financing challenges for future projects. We anticipate that the construction pipeline will remain modest until macroeconomic uncertainty moderates and interest rates decline.

Previous wording

At the same time, demand patterns have normalized from the outsized impact of the pandemic on our industry, particularly in luxury and upper upscale hotels in top U.S. markets where our hotels are located. The majority of our urban markets are closing the gap to pre-pandemic levels, reflecting increases in group business and a gradual recovery in business transient and international demand. Further, while average rates have moderated from post-pandemic highs at our resorts, they remain elevated compared to pre-pandemic levels. However, there are signs of softening short term leisure demand and transient demand has recovered more slowly in certain markets, such as San Francisco and Seattle. In addition, the impact from the wildfires on the Maui market, one of our largest markets by revenues, has created challenges for anticipating performance levels in the coming months as the community continues to rebuild.

Current wording

At the same time, demand patterns have normalized from the outsized impact of the pandemic on our industry, particularly in luxury and upper upscale hotels in top U.S. markets where our hotels are located. The majority of our urban markets have closed the gap to pre-pandemic levels, reflecting increases in group business and a gradual recovery in business transient and international demand. Further, while average rates have moderated from post-pandemic highs at our resorts, they remain elevated compared to pre-pandemic levels. However, while travel overall remains strong, elevated travel to international destinations has led to softening leisure demand at our properties, and demand has recovered more slowly in certain markets, such as San Francisco. In addition, the impact from the wildfires on the Maui market, one of our largest markets by revenues, has created challenges for anticipating performance levels in 2024 as the community continues to rebuild.

Previous wording

Based on the trends noted, we expect comparable hotel RevPAR growth for the full year 2024 will be between 2.0% and 4.0%. However, the range of potential outcomes on the economy and the lodging industry specifically remains exceptionally wide, reflecting varying analyst assumptions surrounding the impact of higher interest rates, inflation, ongoing labor shortages in key industries, and escalating geopolitical conflicts. Additionally, following the collapse of a portion of Highway 1 in California in March 2024, Alila Ventana Big Sur is temporarily closed to guests. The hotel will be removed from our comparable hotel set beginning in the second quarter of 2024.

Current wording

Based on the trends noted, we expect the change in comparable hotel RevPAR for the full year 2024 will be between (1.0)% and 1.0%. However, the range of potential outcomes on the economy, and the lodging industry specifically, remains exceptionally wide, reflecting varying analyst assumptions surrounding the impact of higher interest rates, inflation, ongoing labor shortages in key industries, the recovery in Maui and escalating geopolitical conflicts.

Previous wording

Acquisitions. Subsequent to quarter end, we acquired the 215-room 1 Hotel Nashville and 506-room Embassy Suites by Hilton Nashville Downtown for a total purchase price of $530 million. The hotels comprise a two-hotel complex featuring seven food and beverage outlets, a spa, two fitness centers, a yoga studio and 33,000 square feet of shared meeting space.

Current wording

Acquisitions. During the second quarter, we acquired the fee simple interest in the 215-room 1 Hotel Nashville and 506-room Embassy Suites by Hilton Nashville Downtown for a total purchase price of $530 million. The hotels comprise a two-hotel complex featuring seven food and beverage outlets, a spa, two fitness centers, a yoga studio and 33,000 square feet of shared meeting space.

Previous wording

Financing Transactions. During the first quarter, we drew $300 million under the revolver portion of our credit facility. Subsequent to quarter end, we had net repayments of $85 million under the revolver, resulting in remaining available capacity of $1.3 billion under the revolver portion of our credit facility. Additionally, subsequent to quarter end, we repaid the $400 million of 3⅞% Series G senior notes at maturity.

Current wording

Financing Transactions. During the second quarter, we repaid $400 million of 3⅞% Series G senior notes at maturity. Additionally, we issued $600 million of 5.700% Series K senior notes for proceeds of $584 million, net of original issue discount, underwriting fees and expenses. The proceeds from this issuance were used to repay all outstanding amounts under the revolver portion of our credit facility. Subsequent to quarter end, we drew $525 million under the revolver to facilitate the subsequent acquisitions noted above.

Previous wording

Capital Projects. During the first quarter of 2024, we spent approximately $33 million on return on investment ("ROI") capital projects, $58 million on renewal and replacement projects, and $12 million on hurricane restoration work. This included our continuing restoration efforts following Hurricane Ian, for which we estimate the total property reconstruction and remediation costs, including significant enhancements, to be approximately $300 million to $320 million, of which approximately 30% relates to remediation costs. As of May 1, 2024, we have received total insurance proceeds of $263 million out of the expected potential insurance recovery of approximately $310 million related to our Hurricane Ian claims, of which $10 million has been recognized as business interruption proceeds in the first quarter of 2024.

Current wording

Capital Projects. Year-to-date in 2024, we spent approximately $77 million on return on investment ("ROI") capital projects, $117 million on renewal and replacement projects, and $30 million on hurricane and other restoration work. This included completing the final steps of our restoration efforts following Hurricane Ian of bringing the permanent central energy plant online at The Ritz-Carlton, Naples. For all properties impacted by Hurricane Ian, we estimate the total property reconstruction and remediation costs, including significant enhancements, was approximately $315 million, of which approximately 30% related to remediation costs. During the second quarter, we reached a final settlement with our insurance providers to collect total proceeds of $308 million related to our Hurricane Ian claim. As of August 2, 2024, we have received total insurance proceeds of $304 million. In total, $99 million of the insurance receipts were recognized as a gain on business interruption.

Previous wording

In collaboration with Hyatt, we initiated a transformational capital program in 2023 on six properties in our portfolio. These investments are intended to position the targeted hotels to compete better in their respective markets while seeking to enhance long-term performance. During the first quarter of 2024, we spent approximately $11 million on this program, which is included in ROI capital projects. We expect to invest approximately $125 million to $200 million per year over the next three to four years on this program. Hyatt has agreed to provide additional priority returns on the agreed upon investments and operating profit guarantees totaling $40 million to offset expected business disruptions.

Current wording

In collaboration with Hyatt, we initiated a transformational capital program in 2023 on six properties in our portfolio. These investments are intended to position the targeted hotels to compete better in their respective markets while seeking to enhance long-term performance. Through the second quarter of 2024, we spent approximately $33 million on this program, which is included in ROI capital projects. We expect to invest approximately $125 million to $200 million per year over the next three to four years on this program. Hyatt has agreed to provide additional priority returns on the agreed upon investments and operating profit guarantees totaling $40 million to offset expected business disruptions.

Previous wording

For full year 2024, we expect total capital expenditures of $500 million to $605 million, consisting of ROI projects of approximately $225 million to $280 million, renewal and replacement expenditures of $250 million to $300 million, and $25 million for the final restoration work for the damage caused by Hurricane Ian. The ROI projects include approximately $125 million to $150 million for the Hyatt transformational capital program discussed above.

Current wording

For full year 2024, we expect total capital expenditures of $500 million to $600 million, consisting of ROI projects of approximately $220 million to $260 million, renewal and replacement expenditures of $250 million to $300 million, and $30 million to $40 million for reconstruction projects including the final restoration work for the damage caused by Hurricane Ian. The ROI projects include approximately $125 million to $140 million for the Hyatt transformational capital program discussed above.

Previous wording

Total revenues for the first quarter improved 6.5% compared to the first quarter of 2023, primarily due to the resumption of operations at The Ritz-Carlton, Naples, which was closed during the first half of 2023 as a result of Hurricane Ian. In addition, strong group business led to improvements in food and beverage revenues, while other revenues also increased, which offset the decline in RevPAR at our comparable hotels.

Current wording

Total revenues for the second quarter and year-to-date increased 5.2% and 5.9%, respectively, compared to 2023, primarily due to the resumption of operations at The Ritz-Carlton, Naples, which was closed during the first half of 2023 as a result of Hurricane Ian, and the results of 1 Hotel Nashville and Embassy Suites by Hilton Nashville Downtown acquired in April 2024 (the “Nashville Acquisition”). The increase was partially offset by the closure of Alila Ventana Big Sur, which closed at the end of March 2024 and reopened on May 22, 2024. In addition, strong group business led to improvements in food and beverage revenues.

Previous wording

Rooms. Total rooms revenues increased $33 million, or 4.0%, for the first quarter compared to 2023, reflecting the reopening of The Ritz-Carlton, Naples. Rooms revenues at our comparable hotels decreased $1 million, or 0.1%, for the quarter driven by a decrease in average room rate.

Current wording

Rooms. Total rooms revenues increased $35 million, or 4.1%, and $68 million, or 4.1%, for the second quarter and year-to-date, respectively, compared to 2023, reflecting the reopening of The Ritz-Carlton, Naples and the Nashville Acquisition, partially offset by the closure of Alila Ventana Big Sur. Rooms revenues at our comparable hotels increased $1 million, or 0.1%, for the second quarter driven by an increase in occupancy. Year-to-date, comparable hotel rooms revenues remained flat due to an increase in occupancy, offset by a decrease in average room rate.

Previous wording

Food and beverage. Total food and beverage ("F&B") revenues increased $42 million, or 9.7%, for the first quarter compared to 2023 due to the reopening of The Ritz-Carlton, Naples and reflecting an increase in comparable F&B revenues of $15 million, or 3.5%, primarily driven by improvements in banquet and audio-visual revenues at convention hotels as group demand continues to recover.

Current wording

Food and beverage. Total food and beverage ("F&B") revenues increased $32 million, or 7.7%, for the quarter and $74 million, or 8.7%, year-to-date compared to 2023, due to the reopening of The Ritz-Carlton, Naples and the Nashville Acquisition. Comparable F&B revenues increased $6 million, or 1.4%, and $24 million, or 2.8%, for the quarter and year-to-date, respectively, driven by improvements in banquet and audio-visual revenues at convention hotels as group demand continues to recover.

Previous wording

Other revenues. Total other revenues increased $15 million, or 11.5%, for the first quarter compared to 2023 driven by the reopening of The Ritz-Carlton, Naples and reflecting an increase at our comparable hotels in other revenues of $9 million, or 6.9%, primarily due to elevated levels of attrition and cancelation fees and an increase in ancillary revenues.

Current wording

Other revenues. Total other revenues increased $6 million, or 4.7%, and $21 million, or 8.1%, for the quarter and year-to-date, respectively, compared to 2023, driven by the reopening of The Ritz-Carlton, Naples and the Nashville Acquisition. The increase for the quarter was slightly offset by the decrease at our comparable hotels in other revenues of $1 million, or 0.8%, primarily due to the expected normalization of attrition and cancellation revenues. The year-to-date increase reflects the increase in other revenues at our comparable hotels of $9 million, or 3.5%, primarily due to an increase in ancillary revenues, as well as elevated levels of attrition and cancelation fees recorded in the first quarter related to Hyatt Regency Maui Resort and Spa.

Previous wording

Our operating costs and expenses, which consist of both fixed and variable components, are affected by several factors. Rooms expenses are affected mainly by occupancy, which drives costs related to items such as housekeeping, reservation systems, room supplies, laundry services and front desk costs. Food and beverage expenses correlate closely with food and beverage revenues and are affected by occupancy and the mix of business between banquet, audio-visual and outlet sales. However, the most significant expense for the rooms, food and beverage, and other departmental and support expenses is wages and employee benefits, which comprise approximately 58% of these expenses. For the first quarter of 2024, these expenses increased 5% on a per available rooms basis compared to 2023, primarily due to an overall increase in general wage rates and benefits. Wage and benefit rate inflation is expected to be approximately 5% in 2024.

Current wording

Our operating costs and expenses, which consist of both fixed and variable components, are affected by several factors. Rooms expenses are affected mainly by occupancy, which drives costs related to items such as housekeeping, reservation systems, room supplies, laundry services and front desk costs. Food and beverage expenses correlate closely with food and beverage revenues and are affected by occupancy and the mix of business between banquet, audio-visual and outlet sales. However, the most significant expense for the rooms, food and beverage, and other departmental and support expenses is wages and employee benefits, which comprise approximately 57% of these expenses. For both second quarter and year-to-date of 2024, these expenses increased approximately 5% on a per available room basis, respectively, compared to 2023, primarily due to an overall increase in general wage rates and benefits. Wage and benefit rate inflation is expected to be approximately 5% in 2024.

Previous wording

The increase in expenses for the first quarter of 2024 compared to 2023 for rooms, food and beverage, other departmental and support, and management fees was generally due to the corresponding increases in revenues due to the reopening of the Ritz-Carlton, Naples and reflected changes in our comparable hotels results, as described below:

Current wording

The increase in expenses for the second quarter and year-to-date of 2024 compared to 2023 for rooms, food and beverage, other departmental and support, and management fees was generally due to the corresponding increases in revenues due to the reopening of The Ritz-Carlton, Naples, the Nashville Acquisition, and reflected changes in our comparable hotels results, as described below:

Previous wording

Rooms. Rooms expenses increased $9 million, or 4.7%, for the quarter. Our comparable hotels rooms expenses increased $5 million, or 2.6%, for the quarter driven by an overall increase in wage rates.

Current wording

Rooms. Rooms expenses increased $13 million, or 6.5%, and $22 million, or 5.6%, for the quarter and year-to-date, respectively. Our comparable hotels rooms expenses increased $6 million, or 3.0%, and $11 million, or 2.8%, for the quarter and year-to-date, respectively, driven by an overall increase in wage rates.

Previous wording

Food and beverage. F&B expenses increased $26 million, or 9.7%, for the quarter. For our comparable hotels, F&B expenses increased $11 million, or 4.1% for the quarter. Overall, F&B costs as a percentage of revenues remained consistent year over year.

Current wording

Food and beverage. F&B expenses increased $23 million, or 8.7%, and $49 million, or 9.2%, for the quarter and year-to-date, respectively. For our comparable hotels, F&B expenses increased $5 million, or 1.9%, and $19 million, or 3.6%, for the quarter and year-to-date, respectively. Overall, F&B costs as a percentage of revenues increased slightly year over year reflecting an increase in F&B wage and benefit expenses.

Previous wording

Other departmental and support expenses. Other departmental and support expenses increased $19 million, or 6.0%, for the quarter. On a comparable hotel basis, other departmental and support expenses increased $12 million, or 3.8%, for the quarter. These increases were primarily due to higher wage expense.

Current wording

Other departmental and support expenses. Other departmental and support expenses increased $20 million, or 6.2%, and $39 million, or 6.1%, for the quarter and year-to-date, respectively. On a comparable hotel basis, other departmental and support expenses increased $10 million, or 3.0%, and $22 million, or 3.5%, for the quarter and year-to-date, respectively. These increases were primarily due to higher wage expense.

Previous wording

Management fees. Total management fees increased $4 million, or 6.2%, for the quarter. Base management fees, which generally are calculated as a percentage of total revenues, increased $4 million, or 8.4%, for the quarter. At our comparable hotels, base management fees increased $1 million, or 3.5%. Incentive management fees, which generally are based on the amount of operating profit at each hotel after we receive a priority return on our investment, remained flat year over year. At our comparable hotels, incentive management fees decreased $2 million, or 6.3%.

Current wording

Management fees. Total management fees were flat for the quarter and increased $4 million, or 3.0%, year-to-date. Base management fees, which generally are calculated as a percentage of total revenues, increased $3 million, or 7.7%, and $6 million, or 7.8%, for the quarter and year-to-date, respectively. At our comparable hotels, base management fees increased $1 million, or 1.7%, and $2 million, or 2.7%, for the quarter and year-to-date, respectively. Incentive management fees, which generally are based on the amount of operating profit at each hotel after we receive a priority return on our investment, decreased $3 million, or 10.0%, and $2 million, or 3.5%, for the quarter and year-to-date, respectively. At our comparable hotels, incentive management fees decreased $4 million, or 13.7%, and $6 million, or 10.1%, for the quarter and year-to-date, respectively.

Previous wording

Other property-level expenses. These expenses generally do not vary significantly based on occupancy and include expenses such as property taxes and insurance. Other property-level expenses increased $13 million, or 14.3%, for the quarter, due to increases in property insurance premiums, rent on a portion of our ground leases that are based on a percentage of sales, and property taxes. Other property-level expenses at our comparable hotels increased $9 million, or 9.8%, for the quarter. Other property-level expenses were partially offset by the receipt of operating profit guarantees under the transformational capital programs in 2024 and 2023.

Current wording

Other property-level expenses. These expenses generally do not vary significantly based on occupancy and include expenses such as property taxes and insurance. Other property-level expenses increased $8 million, or 8.6%, and $21 million, or 11.4%, for the quarter and year-to-date, respectively, due primarily to increases in property insurance premiums. Other property-level expenses at our comparable hotels increased $6 million, or 7.0%, and $16 million, or 8.5%, for the quarter and year-to-date, respectively.

Previous wording

Gain on insurance settlements. In 2024, we recorded a gain on insurance consisting of $21 million related to property insurance proceeds and $10 million for receipt of business interruption proceeds relating to Hurricane Ian.

Current wording

Gain on insurance settlements. In 2024, we recorded a gain on insurance consisting of $47 million related to property insurance proceeds and $19 million for receipt of business interruption proceeds relating to Hurricane Ian. Additionally, we recorded $21 million for receipt of business interruption proceeds relating to Maui wildfires in final settlement of claims relating to the wildfires.

Previous wording

Interest expense. Interest expense decreased for the quarter due to debt extinguishment costs incurred during the first quarter of 2023, partially offset by an increase in interest rates on our floating rate debt. The following table details our interest expense for the quarter (in millions):

Current wording

Interest expense. Interest expense increased for the quarter and year-to-date due primarily to an increase in interest rates on our floating rate debt, as well as higher outstanding debt balances during 2024. The following table details our interest expense for the quarter (in millions):

Previous wording

(1)Including the change in accrued interest, total cash interest paid was $39 million and $40 million for the quarters ended March 31, 2024 and 2023, respectively.

Current wording

(1)Including the change in accrued interest, total cash interest paid was $52 million and $50 million for the quarters ended June 30, 2024 and 2023, respectively, and $91 million and $90 million year-to-date 2024 and 2023, respectively.

Previous wording

Other gains. Other gains in the first quarter of 2023 reflected the sale of The Camby, Autograph Collection.

Current wording

Other gains. Other gains in 2023 reflected the gain on sale of The Camby, Autograph Collection.

Previous wording

Benefit for income taxes. We lease substantially all our properties to consolidated subsidiaries designated as taxable REIT subsidiaries (“TRS”) for U.S. federal income tax purposes. Taxable income or loss generated/incurred by the TRS primarily represents hotel-level operations and the aggregate rent paid to Host L.P. by the TRS, on which we record an income tax provision or benefit. For the first quarter of 2024, we recorded a net income tax benefit of $2 million due to the recognition of federal income tax credits related to the installation of a co-generation plant at one of our properties.

Current wording

Provision for income taxes. We lease substantially all our properties to consolidated subsidiaries designated as taxable REIT subsidiaries (“TRS”) for U.S. federal income tax purposes. Taxable income or loss generated/incurred by the TRS primarily represents hotel-level operations, net of the aggregate rent paid to Host L.P. by the TRS, on which we record an income tax provision or benefit. For the second quarter and year-to-date of 2024, we recorded a net income tax provision of $16 million and $14 million, respectively, due primarily to the profitability of hotel operations retained by the TRS.

Previous wording

We discuss operating results for our hotels on a comparable hotel basis. Comparable hotels are those properties that we have consolidated for the entirety of the reporting periods being compared. Comparable hotels do not include the results of hotels sold or classified as held-for-sale, hotels that have sustained substantial property damage or business interruption, or hotels that have undergone large-scale capital projects, in each case requiring closures lasting one month or longer during the reporting periods being compared. See “Comparable Hotel Operating Statistics and Results” below for more information on how we determine our comparable hotels.

Current wording

We discuss operating results for our hotels on a comparable hotel basis. Comparable hotels are those properties that are consolidated as of the end of the reporting period. Comparable hotels do not include the results of hotels sold or classified as held-for-sale, hotels that have sustained substantial property damage or business interruption, or hotels that have undergone large-scale capital projects, in each case requiring closures lasting one month or longer during the reporting periods being compared. See “Comparable Hotel Operating Statistics and Results” below for more information on how we determine our comparable hotels.

Previous wording

The following tables set forth performance information for our hotels by geographic location for the quarters ended March 31, 2024 and 2023, respectively, on a comparable hotel and actual basis:

Current wording

The following tables set forth performance information for our hotels by geographic location for the quarters and year-to-date ended June 30, 2024 and 2023, respectively, on a comparable hotel and actual basis:

Previous wording

Our customers fall into three broad categories: transient, group, and contract business, which accounted for approximately 61%, 35%, and 4%, respectively, of our full year 2023 room sales. The information below is derived from business mix results from the 76 comparable hotels owned as of March 31, 2024. For additional detail on our business mix, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10‑K.

Current wording

Our customers fall into three broad categories: transient, group, and contract business, which accounted for approximately 61%, 35%, and 4%, respectively, of our full year 2023 room sales. The information below is derived from business mix results from the 77 comparable hotels owned as of June 30, 2024. For additional detail on our business mix, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our most recent Annual Report on Form 10‑K.

Previous wording

For the first quarter, group revenue increased by 5.3%, driven by a 4.1% increase in room nights sold and a 1.1% increase in average rate, as demand continued to improve at our convention and downtown properties. The growth in group business was offset by a 4.7% decline in transient revenue, reflecting the impacts of the Maui wildfires and unseasonable weather conditions in many of our resort markets that reduced leisure demand.

Current wording

For the second quarter, group revenue increased by 7.7%, compared to 2023, driven by a 2.8% increase in room nights sold and a 4.8% increase in average rate, as demand continued to improve at our convention and downtown properties. The growth in group business was offset by a 5.0% decline in transient revenue, reflecting the impacts of the Maui wildfires and moderating leisure demand.

Previous wording

Cash Requirements. We use cash for acquisitions, capital expenditures, debt payments, operating costs, and corporate and other expenses, as well as for dividends and distributions to stockholders and to OP unitholders, respectively, and stock and OP unit repurchases. As a REIT, Host Inc. is required to distribute to its stockholders at least 90% of its taxable income, excluding net capital gain, on an annual basis. Subsequent to quarter end, we repaid $400 million of Series G senior notes at maturity and purchased the 1 Hotel Nashville and Embassy Suites by Hilton Nashville Downtown for cash consideration of $530 million. Our next significant debt maturity is $500 million of senior notes due in June 2025.

Current wording

Cash Requirements. We use cash for acquisitions, capital expenditures, debt payments, operating costs, and corporate and other expenses, as well as for dividends and distributions to stockholders and to OP unitholders, respectively, and stock and OP unit repurchases. As a REIT, Host Inc. is required to distribute to its stockholders at least 90% of its taxable income, excluding net capital gain, on an annual basis. Subsequent to quarter end, we paid $954 million, which is net of deposits made during the second quarter, to complete the acquisitions of the 1 Hotel Central Park and Turtle Bay Resort. Our next significant debt maturity is $500 million of senior notes due in June 2025.

Previous wording

Capital Resources. As of March 31, 2024, we had $1,349 million of cash and cash equivalents, $231 million in our FF&E escrow reserves and $1.2 billion available under the revolver portion of our credit facility. Subsequent to quarter end, we had net repayments of $85 million under the revolver portion of our credit facility. We depend primarily on external sources of capital to finance future growth, including acquisitions. As a result, the liquidity and debt capacity provided by our credit facility and the ability to issue senior unsecured debt are key components of our capital structure. Our financial flexibility, including our ability to incur debt, pay dividends, make distributions and make investments, is contingent on our ability to maintain compliance with the financial covenants of our credit facility and senior notes indentures, which include, among other things, the allowable amounts of leverage, interest coverage and fixed charges.

Current wording

Capital Resources. As of June 30, 2024, we had $805 million of cash and cash equivalents, $242 million in our FF&E escrow reserves and $1.5 billion available under the revolver portion of our credit facility. Subsequent to quarter end, we drew $525 million under the revolver portion of our credit facility to facilitate the acquisitions of 1 Hotel Central Park and Turtle Bay Resort and now have $970 million of available capacity. We depend primarily on external sources of capital to finance future growth, including acquisitions. As a result, the liquidity and debt capacity provided by our credit facility and the ability to issue senior unsecured debt are key components of our capital structure. Our financial flexibility, including our ability to incur debt, pay dividends, make distributions and make investments, is contingent on our ability to maintain compliance with the financial covenants of our credit facility and senior notes indentures, which include, among other things, the allowable amounts of leverage, interest coverage and fixed charges.

Previous wording

Two programs are currently in place relating to potential purchases or sales of our common stock. Under our common stock repurchase program, common stock may be purchased from time to time depending upon market conditions and may be purchased in the open market or through private transactions or by other means, including principal transactions with various financial institutions, like accelerated share repurchases, forwards, options, and similar transactions and through one or more trading plans designed to comply with Rule 10b5-1 under the Securities Exchange

Current wording

Two programs are currently in place relating to potential purchases or sales of our common stock. Under our common stock repurchase program, common stock may be purchased from time to time depending upon market conditions and may be purchased in the open market or through private transactions or by other means, including principal transactions with various financial institutions, like accelerated share repurchases, forwards, options, and similar transactions and through one or more trading plans designed to comply with Rule 10b5-1 under the Securities Exchange Act of 1934, as amended. The plan does not obligate us to repurchase any specific number or any specific dollar amount of shares and may be suspended at any time at our discretion. During the second quarter of 2024, we repurchased 2.8 million shares of Host Inc. common stock at an average price of $17.81 per share, exclusive of commissions, through our common share repurchase program for a total of $50 million. At June 30, 2024, we had $742 million available for repurchase under our program.

Previous wording

In addition, on May 31, 2023, we entered into a distribution agreement with J.P. Morgan Securities LLC, BofA Securities, Inc., Goldman Sachs & Co. LLC, Jefferies LLC, Morgan Stanley & Co. LLC, Scotia Capital (USA) Inc., Truist Securities, Inc. and Wells Fargo Securities, LLC, as sales agents pursuant to which Host Inc. may offer and sell, from time to time, shares of Host Inc. common stock having an aggregate offering price of up to $600 million. The sales will be made in transactions that are deemed to be “at the market” offerings under the SEC rules. We may sell shares of Host Inc. common stock under this program from time to time based on market conditions, although we are not under an obligation to sell any shares. The agreement also contemplates that, in addition to the offering and sale of shares to or through the sales agents, we may enter into separate forward sale agreements with each of the forward purchasers named in the agreement. No shares were issued during the first quarter of 2024. As of March 31, 2024, there was $600 million of remaining capacity under the agreement.

Current wording

In addition, on May 31, 2023, we entered into a distribution agreement with J.P. Morgan Securities LLC, BofA Securities, Inc., Goldman Sachs & Co. LLC, Jefferies LLC, Morgan Stanley & Co. LLC, Scotia Capital (USA) Inc., Truist Securities, Inc. and Wells Fargo Securities, LLC, as sales agents pursuant to which Host Inc. may offer and sell, from time to time, shares of Host Inc. common stock having an aggregate offering price of up to $600 million. The sales will be made in transactions that are deemed to be “at the market” offerings under the SEC rules. We may sell shares of Host Inc. common stock under this program from time to time based on market conditions, although we are not under an obligation to sell any shares. The agreement also contemplates that, in addition to the offering and sale of shares to or through the sales agents, we may enter into separate forward sale agreements with each of the forward purchasers named in the agreement. No shares were issued during the second quarter of 2024. As of June 30, 2024, there was $600 million of remaining capacity under the agreement.

Previous wording

Cash Used in Investing Activities. Net cash used in investing activities was $100 million during the first quarter of 2024 compared to $105 million for the first quarter of 2023. Cash used in investing activities during the first quarter 2024 and 2023 primarily related to $103 million and $146 million of capital expenditures, respectively, and investments in our joint ventures. Cash provided by investing activities in 2023 included the sale of The Camby, Autograph Collection, with proceeds of $35 million, which is net of a $72 million loan issued to the buyer in connection with the sale.

Current wording

Cash Used in Investing Activities. Net cash used in investing activities was $775 million year-to-date in 2024 compared to $275 million for year-to-date in 2023. Cash used in investing activities year-to-date in 2024 and 2023 primarily related to $224 million and $323 million of capital expenditures, respectively, investments in our joint ventures, and the acquisition of two hotels in second quarter of 2024. Cash provided by investing activities in 2023 included the sale of The Camby, Autograph Collection, with proceeds of $34 million, which is net of a $72 million loan issued to the buyer in connection with the sale.