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 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;

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, elevated 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 and Hurricanes Helene and Milton in 2024, 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, 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;

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, and risks that international U.S. outbound travel may remain elevated relative to historic levels;

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 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.

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 79 comparable hotels as of September 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 $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.

Current wording

Total revenues increased $105 million, or 8.6%, and $268 million, or 6.7%, as compared to the third quarter of 2023 and year-to-date 2023, respectively. 2024 results benefited from the 2024 acquisitions of the 1 Hotel Nashville and Embassy Suites by Hilton Nashville Downtown, 1 Hotel Central Park and The Ritz-Carlton O'ahu, Turtle Bay. Year-to-date 2024 results also benefited from the results of The Ritz-Carlton, Naples, which was closed in the first half of 2023. In addition, group business continues to drive improvements in food and beverage revenues.

Previous 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.

Current wording

Comparable hotel Total RevPAR in our New Orleans and Miami markets led the portfolio with increases of 35.2% and 15.7%, respectively, in the third quarter, driven by occupancy growth as a result of strong group demand. Downtown markets such as Houston, Boston and New York also outperformed our portfolio with comparable hotel Total RevPAR growth of 9.8%, 8.8% and 8.3%, respectively, driven by strong group performance, which resulted in both occupancy improvements and rate increases. These strong performances were offset by comparable hotel Total RevPAR declines in our Atlanta, San Francisco/San Jose and Austin markets of 13.6%, 7.0% and 6.7%, respectively. The declines were driven primarily by a decline in business travel. In addition, comparable hotel Total RevPAR at our Maui market declined by 9.8% due to the continuing impacts of the August 2023 wildfires.

Previous wording

For the second quarter of 2024, operating profit margin under GAAP was 19.9%, an increase of 200 basis points compared to the second quarter of 2023, benefiting from the recognition of insurance gains. Comparable hotel EBITDA margin was 32.6%, a decrease of 10 basis points, due to higher wages and insurance expenses, and a decline in attrition and cancelation revenues compared to second quarter of 2023, partially offset by the recognition of $21 million of business interruption gains related to final settlement of insurance claims from the Maui wildfires. Year-to-date, operating profit margin under GAAP was 19.9%, an increase of 200 bps over 2023, and comparable hotel EBITDA margin was 31.9%, a decrease of 80 basis points compared to the same period in 2023, reflecting similar trends to the quarter results.

Current wording

For the third quarter of 2024, operating profit margin under GAAP was 10.2%, a decline of 270 basis points compared to the third quarter of 2023, resulting from a $25 million decrease in gains on insurance settlements. Comparable hotel EBITDA margin was 25.3%, a decline of 130 basis points, driven by Maui performance and the business interruption proceeds included in 2023, while the revenue growth was offset by higher wages and other inflationary pressures compared to third quarter of 2023. Year-to-date, operating profit margin under GAAP was 16.9%, an increase of 50 bps over 2023, benefiting from a $59 million increase in gains on insurance settlements year-to-date. Comparable hotel EBITDA margin was 29.8%, a decrease of 90 basis points compared to the same period in 2023, reflecting similar trends to the quarter results.

Previous 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.

Current wording

Net income decreased $29 million for the quarter, reflecting the decline in gains on insurance settlements of $25 million, while the year-to-date decrease of $20 million reflects a decline in gains on asset sales of $69 million, partially offset by an increase in gains on insurance settlements of $59 million. These changes led to a decrease in diluted earnings per share of $0.04, or 25.0%, and $0.01, or 1.2%, for the quarter and year-to-date, respectively. Adjusted EBITDAre, which excludes gain on property insurance, among other items, decreased $37 million for the quarter and increased $32 million year-to-date. Third quarter 2023 results benefited from business interruption gains of $54 million, while none were recognized in third quarter 2024. The year-to-date increase was driven by operations from the recent acquisitions and The Ritz-Carlton, Naples, which was closed in the first half of 2023 due to Hurricane Ian. Adjusted FFO per diluted share decreased $0.05, or 12.2%, for the third quarter and increased $0.05, or 3.4%, year-to-date, reflecting the changes in Adjusted EBITDAre. Adjusted FFO per diluted share was also impacted by an increase in interest expense due to 2024 senior notes issuances, which expense is included in Adjusted FFO per diluted share but not Adjusted EBITDAre.

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 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.

Current wording

In the long-term, hotel supply growth continues to remain below the historical average, 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 further.

Previous wording

As noted above, the current outlook for the lodging industry remains uncertain; therefore, there can be no assurances as to the continued recovery in lodging demand for any number of reasons, including, but not limited to, slower than anticipated return of group and business travel or deteriorating macroeconomic conditions.

Current wording

As noted above, the current outlook for the lodging industry remains uncertain 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. Therefore, there can be no assurances as to the continued recovery in lodging demand for any number of reasons, including, but not limited to, slower than anticipated return of group and business travel or deteriorating macroeconomic conditions.

Previous wording

Subsequent to quarter end, we acquired the fee simple interest in the 234-room 1 Hotel Central Park for a purchase price of $265 million. The hotel features 2,000 square feet of contiguous and flexible meeting space, a naturally lit fitness center and business center, and Jams, a three-meal restaurant and bar.

Current wording

Acquisitions. During the third quarter, we acquired the fee simple interest in the 234-room 1 Hotel Central Park for a purchase price of $265 million. The hotel features 2,000 square feet of contiguous and flexible meeting space, a naturally lit fitness center and business center, and Jams, a three-meal restaurant and bar.

Previous wording

Additionally, subsequent to quarter end, we acquired the fee simple interest in the 450-room Turtle Bay Resort, located on the North Shore of Oahu, Hawaii, including a 49-acre land parcel entitled for development, for approximately $680 million, net of key money to be received from Marriott International as part of an agreement to transition management and convert the property to The Ritz-Carlton brand. The property has been renamed The Ritz-Carlton O’ahu, Turtle Bay and features 450 rooms, all with ocean views, including 42 bungalows with direct beach access, a separate check-in, and a private pool. Other amenities include 18,000 square feet of indoor meeting space, a club lounge, six food and beverage outlets, seven retail spaces, a spa, fitness center, two golf courses, seven beaches, four resort pools, tennis and pickle ball courts, an equestrian center, a working farm, and access to 12 miles of oceanfront trails.

Current wording

Additionally, we acquired the fee simple interest in the 450-room, 1,180 acre Turtle Bay Resort, located on the North Shore of Oahu, Hawaii, including a 49-acre land parcel entitled for development, for approximately $680 million, net of key money received from Marriott International as part of an agreement to transition management and convert the property to The Ritz-Carlton brand. The property has been renamed The Ritz-Carlton O’ahu, Turtle Bay and features 450 rooms, all with ocean views, including 42 bungalows with direct beach access, a separate check-in, and a private pool. Other amenities include 18,000 square feet of indoor meeting space, a club lounge, six food and beverage outlets, seven retail spaces, a spa, fitness center, two golf courses, seven beaches, four resort pools, tennis and pickle ball courts, an equestrian center, a working farm, and access to 12 miles of oceanfront trails.

Previous 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.

Current wording

Financing Transactions. During the third quarter, we issued $700 million of 5.500% Series L senior notes for proceeds of $683 million, net of original issue discount, underwriting fees and expenses. The net proceeds from this issuance were used in part to repay all $525 million of borrowings then outstanding under the revolver portion of our credit facility, including amounts borrowed in connection with the acquisitions noted above.

Previous 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.

Current wording

Capital Projects. Year-to-date in 2024, we spent approximately $164 million on return on investment ("ROI") capital projects, $181 million on renewal and replacement projects, and $30 million on hurricane and other restoration work.

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. 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.

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 third quarter of 2024, we spent approximately $94 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. The full year ROI project spend below includes approximately $125 million to $140 million for this Hyatt transformational capital program.

Previous 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.

Current wording

For full year 2024, we expect total capital expenditures of $485 million to $580 million, consisting of ROI projects of approximately $225 million to $255 million, renewal and replacement expenditures of $225 million to $275 million, and $35 million to $50 million for reconstruction projects, including the final restoration work for the damage caused by Hurricane Ian, and estimated restoration spend in 2024 related to Hurricanes Helene and Milton. Many of our hotels in Florida were affected by Hurricanes Helene and Milton, which made landfall in September and October 2024, respectively. Due to evacuation mandates and/or loss of commercial power, four of our properties in Florida were temporarily closed, all of which have reopened except The Don CeSar. The enhanced resilience projects implemented during the reconstruction of The Ritz-Carlton, Naples were successful in minimizing damage to the resort during the two storms. While we are still evaluating the complete property and business interruption impacts of the storm, we have included an estimated forecast of reconstruction spend for 2024 and anticipate additional spend in 2025.

Previous 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.

Current wording

Total revenues for the third quarter and year-to-date increased 8.6% and 6.7%, respectively, compared to 2023, primarily due to the operations of our recent acquisitions, including 1 Hotel Nashville and Embassy Suites by Hilton Nashville Downtown acquired in April 2024, 1 Hotel Central Park acquired in July 2024, and The Ritz-Carlton O'ahu, Turtle Bay acquired in July 2024 (collectively, the "2024 Acquisitions"). In addition, strong group business led to improvements in food and beverage revenues. The year-to-date increase also reflects the resumption of operations at The Ritz-Carlton, Naples, which was closed during the first half of 2023 as a result of Hurricane Ian.

Previous 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.

Current wording

Rooms. Total rooms revenues increased $48 million, or 6.2%, and $116 million, or 4.7%, for the third quarter and year-to-date, respectively, compared to 2023, reflecting the operations of the 2024 Acquisitions and the reopening of The Ritz-Carlton, Naples. Rooms revenues at our comparable hotels increased $8 million, or 1.0%, for the third quarter and $15 million, or 0.6%, year-to-date driven by an increase in average room rate.

Previous 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.

Current wording

Food and beverage. Total food and beverage ("F&B") revenues increased $37 million, or 11.3%, for the quarter and $111 million, or 9.5%, year-to-date compared to 2023, due to results of the 2024 Acquisitions and the reopening of The Ritz-Carlton, Naples. Comparable F&B revenues increased $21 million, or 6.3%, and $46 million, or 3.8%, for the quarter and year-to-date, respectively, driven by improvements in banquet and audio-visual revenues at resort and convention hotels as group demand remains strong.

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 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.

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 the third quarter and year-to-date of 2024, these expenses increased approximately 5% on a per available room 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.

Previous 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:

Current wording

The increase in expenses for the third 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 2024 Acquisitions, the reopening of The Ritz-Carlton, Naples, and also reflected increased expenses at our comparable hotels primarily due to increased wages and benefits, as described below:

Previous 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.

Current wording

Rooms. Rooms expenses increased $20 million, or 10.2%, and $42 million, or 7.1%, for the quarter and year-to-date, respectively. Our comparable hotels rooms expenses increased $11 million, or 5.4%, and $23 million, or 3.7%, 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 $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.

Current wording

Food and beverage. F&B expenses increased $26 million, or 10.8%, and $75 million, or 9.7%, for the quarter and year-to-date, respectively. For our comparable hotels, F&B expenses increased $14 million, or 5.7%, and $34 million, or 4.3%, for the quarter and year-to-date, respectively. Overall, F&B costs as a percentage of revenues remained consistent year over year.

Previous 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.

Current wording

Other departmental and support expenses. Other departmental and support expenses increased $31 million, or 9.9%, and $70 million, or 7.4%, for the quarter and year-to-date, respectively. On a comparable hotel basis, other departmental and support expenses increased $12 million, or 3.6%, and $36 million, or 3.6%, for the quarter and year-to-date, respectively. These increases were primarily due to higher wage expense.

Previous 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.

Current wording

Management fees. Total management fees increased $4 million, or 7.8%, for the quarter and $8 million, or 4.3%, year-to-date. Base management fees, which generally are calculated as a percentage of total revenues, increased $1 million, or 2.8%, and $8 million, or 7.1%, for the quarter and year-to-date, respectively. At our comparable hotels, base management fees increased $2 million, or 5.9%, and $4 million, or 3.9%, 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, increased $3 million, or 20.0%, for the quarter and remained flat year-to-date. At our comparable hotels, incentive management fees increased $3 million, or 18.8% for the quarter, and decreased $3 million, or 4.1%, year-to-date.

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 $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.

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 $2 million, or 1.9%, and $23 million, or 7.9%, for the quarter and year-to-date, respectively, due primarily to increases in property insurance premiums and property taxes. Other property-level expenses at our comparable hotels decreased $1 million, or 1.0% for the quarter, and increased $16 million, or 5.6%, for the year-to-date.

Previous wording

Corporate and other expenses. The following table details our corporate and other expenses for the quarter (in millions):

Current wording

Corporate and other expenses. The following table details our corporate and other expenses for the quarter and year-to-date (in millions):

Previous 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):

Current wording

Interest expense. Interest expense increased for the quarter and year-to-date due primarily to higher outstanding debt balances during 2024 as we issued additional series of senior notes to fund our 2024 Acquisitions. The following table details our interest expense for the quarter and year-to-date (in millions):

Previous 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.

Current wording

(1)Including the change in accrued interest, total cash interest paid was $40 million and $39 million for the quarters ended September 30, 2024 and 2023, respectively, and $131 million and $129 million year-to-date 2024 and 2023, respectively.

Previous 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.

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 third quarter and year-to-date of 2024, we recorded a net income tax provision of $6 million and $20 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 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.

Current wording

We discuss operating results for our hotels on a comparable hotel basis. Comparable hotels are those properties that we consolidate as of the reporting date. 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. Beginning in third quarter of 2024, we have separated the Oahu and Maui markets.

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 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.

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 79 comparable hotels owned as of September 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 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.

Current wording

For the third quarter and year-to-date, group revenue increased by 1.0% and 5.3%, respectively, compared to 2023, driven by a 1.1% and 2.7% increase in average rate, respectively, as our convention and downtown properties continued to benefit from group demand. The minimal 0.2% increase for the third quarter and 2.9% decrease year-to-date in transient revenue reflects the impacts of moderating leisure demand and the slow, yet improving, recovery in Maui.

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 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.

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. Our next significant debt maturity is $500 million of senior notes due in June 2025.

Previous 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.

Current wording

Capital Resources. As of September 30, 2024, we had $564 million of cash and cash equivalents, $240 million in our FF&E escrow reserves and $1.5 billion available 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.

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 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.

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 third quarter of 2024, we repurchased 3.5 million shares of Host Inc. common stock at an average price of $16.33 per share, exclusive of commissions, through our common share repurchase program for a total of $57 million. At September 30, 2024, we had $685 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 second quarter of 2024. As of June 30, 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 third quarter of 2024. As of September 30, 2024, there was $600 million of remaining capacity under the agreement.

Previous wording

Cash Provided by Operating Activities. Year-to-date in 2024, net cash provided by operating activities was $818 million compared to $820 million for year-to-date in 2023.

Current wording

Cash Provided by Operating Activities. Year-to-date in 2024, net cash provided by operating activities was $1,167 million compared to $1,134 million for year-to-date in 2023, an increase reflecting the reopening of The Ritz-Carlton, Naples, which was closed for the first half of 2023, as well as operations from our 2024 Acquisitions.

Previous 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.

Current wording

Cash Used in Investing Activities. Net cash used in investing activities was $1,851 million year-to-date in 2024 compared to $263 million year-to-date in 2023. Cash used in investing activities year-to-date in 2024 and 2023 primarily related to $375 million and $472 million of capital expenditures, respectively, investments in our joint ventures, and the acquisition of four hotels in 2024. Cash provided by investing activities in 2023 included proceeds from the repayment of a note receivable and 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.

Previous wording

(1)Investment amount represents a sales price of $725 million net of key money to be received from Marriott International in connection with the conversion of the property to The Ritz-Carlton brand and includes the acquisition of a 49-acre land parcel entitled for development.

Current wording

(1)Investment amount represents a sales price of $725 million net of key money received from Marriott International in connection with the conversion of the property to The Ritz-Carlton brand and includes the acquisition of a 49-acre land parcel entitled for development. Investment amount also includes the assumption of $15 million of hotel-level liabilities.

Previous wording

Cash Used in Financing Activities. Year-to-date in 2024, net cash used in financing activities was $353 million compared to $396 million for year-to-date in 2023. Cash used in financing activities in both 2024 and 2023 primarily related to the payment of common stock dividends and common stock repurchases, while 2024 also included the repayment of senior notes. Cash provided by financing activities in 2024 included the issuance of $600 million of senior notes.

Current wording

Cash Provided by (Used in) Financing Activities. Year-to-date in 2024, net cash provided by financing activities was $129 million compared to net cash used in financing activities of $606 million for year-to-date in 2023. Cash provided by financing activities in 2024 included proceeds from the issuances of senior notes. Cash used in financing activities in both 2024 and 2023 primarily related to the payment of common stock dividends and common stock repurchases, while 2024 also included the repayment of senior notes.