HOST HOTELS RESORTS INC

Previous wording

Host Inc. is the largest lodging REIT in NAREIT’s composite index and one of the largest owners of luxury and upper upscale hotels. As of February 23, 2024, we own 77 hotels in the United States, Canada and Brazil and have minority ownership interests in an additional 35 hotels through joint ventures in the United States and in India. These hotels are operated primarily under brand names that are among the most respected and widely recognized in the lodging industry. Most of our hotels are located in central business districts of major cities, near airports and in resort/conference destinations.

Current wording

Host Inc. is the largest lodging REIT in NAREIT’s composite index and one of the largest owners of luxury and upper upscale hotels. As of February 21, 2025, we own 81 hotels in the United States, Canada and Brazil and have minority ownership interests in an additional 40 hotels through joint ventures in the United States and in India. These hotels are operated primarily under brand names that are among the most respected and widely recognized in the lodging industry. Most of our hotels are located in central business districts of major cities, near airports and in resort/conference destinations.

Previous wording

Our customers fall into three broad groups: transient business, group business and contract business, which accounted for approximately 61%, 35%, and 4%, respectively, of our 2023 room sales. For a discussion of our customer categories, see “Item 1 Business – Our Customers”.

Current wording

Our customers fall into three broad groups: transient business, group business and contract business, which accounted for approximately 60%, 36%, and 4%, respectively, of our 2024 room sales. For a discussion of our customer categories, see “Item 1 Business – Our Customers”.

Previous wording

Hotel operating expenses represent approximately 99% of our total operating costs and expenses. The following table presents the components of our hotel operating expenses as a percentage of our total operating costs and expenses:

Current wording

Hotel operating expenses represent approximately 99.7% of our total operating costs and expenses. The following table presents the components of our hotel operating expenses as a percentage of our total operating costs and expenses:

Previous wording

•EBITDA, EBITDAre and Adjusted EBITDAre. Earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) is a supplemental measure of our operating performance and facilitates comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital-intensive companies. NAREIT adopted EBITDA for real estate (“EBITDAre”) in order to promote an industry-wide measure of REIT operating performance. We also adjust EBITDAre for property insurance gains, certain acquisition costs, litigation gains or losses outside the ordinary course of business and severance costs outside the ordinary course of business (“Adjusted EBITDAre”).

Current wording

•EBITDA, EBITDAre and Adjusted EBITDAre. Earnings before interest expense, income taxes, depreciation and amortization (“EBITDA”) is a supplemental measure of our operating performance and facilitates comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital-intensive companies. NAREIT adopted EBITDA for real estate (“EBITDAre”) in order to promote an industry-wide measure of REIT operating performance. We also adjust EBITDAre for property insurance gains and property damage losses, certain acquisition costs, litigation gains or losses outside the ordinary course of business and severance costs outside the ordinary course of business (“Adjusted EBITDAre”).

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 75 comparable hotels as of December 31, 2023 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 78 comparable hotels as of December 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.

Previous wording

Comparable hotel Total RevPAR growth was led by our Boston, Washington, D.C., New York, and Houston markets with growth of 42.5%, 21.5%, 19.2%, and 19.2%, respectively, compared to 2022, through a combination of rate and occupancy growth, driven by strong group. Our hotels in Northern Virginia, Seattle, and San Francisco/San Jose also outperformed our portfolio with comparable hotel Total RevPAR increases of 18.4%, 15.9%, and 15.4%, respectively. These strong performances were offset by comparable hotel Total RevPAR declines at our Austin and Miami markets of 4.0% and 1.8%, respectively. The declines in Austin were driven primarily by decreases in rates due to weaker transient demand, while Miami was impacted by the ongoing renovation at the 1 Hotel South Beach. Comparable hotel Total RevPAR at our Maui/Oahu market decreased 5.1% due to the impacts from the Maui wildfires in August.

Current wording

Comparable hotel Total RevPAR increased 2.1% for the year due primarily to improvements in food and beverage revenues driven by the strength in group business, as well as strong spa and other ancillary revenues. The growth was led by our Denver, Nashville and Northern Virginia markets with increases of 13.2%, 12.9% and 10.3%, respectively, compared to 2023, through a combination of rate and occupancy growth, driven by strong group demand. Our hotels in Jacksonville and New Orleans also outperformed our portfolio with comparable hotel Total RevPAR increases of 7.2% and 7.1%, respectively. These strong performances were offset by comparable hotel Total RevPAR declines at our Atlanta and San Francisco/San Jose markets of 9.4% and 5.3%, respectively. The declines were driven primarily by a decrease in business travel and short-term transient demand, with Atlanta also affected by disruption from renovations. In addition, comparable hotel Total RevPAR at our Maui market declined by 11.0% due to the continuing impacts of the August 2023 Maui wildfires (see “Statement of Operations Results and Trends”).

Previous wording

As expected, margins during the year faced downward pressure in comparison to 2022 following the ramp up in operations that year as our managers returned to stable staffing levels at our properties, while occupancy remained 8 percentage points below 2019 levels. In addition, we faced increased insurance and utility expenses, higher wages and a decline in attrition and cancelation revenues compared to 2022. These downward pressures on margins were partially offset by margin improvements achieved through the implementation of portfolio-wide cost reductions with our hotel managers over the past several years. As a result, operating profit margins (calculated based on GAAP operating profit as a percentage of GAAP revenues) decreased 20 basis points to 15.6% in 2023, compared to 15.8% in 2022. Operating profit margins under GAAP are also significantly affected by several items, including acquisitions, dispositions, depreciation expense and corporate expenses, and in 2023 also benefited from business interruption gains of $83 million. Our comparable hotel EBITDA margins, which exclude these items and benefited from only $8 million of business interruption gains, declined 170 basis points to 30.1% for the year, down from 31.8% in 2022 due to the trends discussed above.

Current wording

As expected, we faced higher wages and inflationary pressures compared to 2023. This, coupled with Maui performance, led to an operating profit margin (calculated based on GAAP operating profit as a percentage of GAAP revenues) decline of 20 basis points to 15.4% in 2024, compared to 15.6% in 2023, despite an increase in net gains on insurance settlements. Operating profit margins under GAAP are also significantly affected by several items, including acquisitions, dispositions, depreciation expense and corporate expenses. Our comparable hotel EBITDA margins, which exclude these items, declined 60 basis points to 29.2% for the year, down from 29.8% in 2023 due to the trends discussed above.

Previous wording

Net income for Host Inc. was $752 million, an increase of $109 million, or 17.0%, from the prior year. The improvement was primarily due to improving operations at our hotels and an increase in gain on asset sales and gain on insurance settlements. These results led to an 18.2% increase in diluted earnings per common share for Host Inc. to $1.04. Adjusted EBITDAre, which excludes gain on sale of assets, among other items, increased 8.7% to $1,629 million. Adjusted FFO per diluted share increased 7.3% to $1.92 in 2023, as the increase in Adjusted EBITDAre was partially offset by an increase in interest expense (excluding debt extinguishment costs) and income taxes which are included in Adjusted FFO per diluted share but not Adjusted EBITDAre.

Current wording

Net income for Host Inc. was $707 million, a decrease of $45 million, or 6.0%, from the prior year, reflecting the decrease in gains on asset sales of $71 million and an increase in interest expense of $24 million, partially offset by an increase in net gains on insurance settlements of $24 million. These results led to a 4.8% decrease in diluted earnings per common share for Host Inc. to $0.99. Adjusted EBITDAre, which excludes gain on sale of assets and interest expense, among other items, increased 1.7% to $1,656 million as a result of operations from our acquisitions and the resumption of operations at The Ritz-Carlton, Naples, which was closed during the first half of 2023, despite a $43 million decrease in business interruption gains. Adjusted FFO per diluted share increased 2.6% to $1.97 in 2024, reflecting the increase in Adjusted EBITDAre as well as the impact of share repurchases in 2024 and 2023.

Previous wording

We continued to see positive momentum in the lodging industry throughout 2023, as the U.S. economy remained resilient despite the sharp increase in interest rates. As the year progressed, inflation moderated even as unemployment remained at very low levels and consumer spending remained strong. U.S. lodging demand typically follows the growth of the U.S economy and is correlated to changes in gross domestic product (GDP). Moving into 2024, these results have led to increased optimism that inflation can be contained without leading to a recession. However, many risks to economic growth remain, including the continued effects of tight monetary policy and the Federal Reserve's decisions around interest rates, geopolitical instability throughout the globe, volatile oil prices and the uncertainty surrounding the U.S. presidential election. 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 2.1% for 2024, reflecting a deceleration from 2023 growth of 2.5%. Business investment growth is also anticipated to slow over the coming quarters, averaging 2.1% for 2024, down from 4.4% in 2023.

Current wording

On the macroeconomic front, the U.S. economy remained resilient during 2024 with real U.S. GDP growth of 2.8%, as unemployment remained at low levels and business investment grew at a robust 3.7%. U.S. lodging demand is correlated to changes in gross domestic product (GDP) and business investment, although the recovery of the industry post-pandemic has lagged that of the economy. Inflation moderated substantially during the year but remains a concern for 2025, with fewer rate cuts expected in the coming year. In addition, the new administration has brought heightened uncertainty due to anticipated changes to trade policy, tax policy and government spending. Other risks to economic growth remain, including geopolitical instability throughout the globe, high interest rates and volatile oil prices. As a result, leading indicators point toward slower economic growth in 2025. As of February 2025, Blue Chip Economic Indicators consensus projects real U.S. GDP growth of 2.2%, reflecting a deceleration from 2024. Business investment growth is also anticipated to slow over the coming year, averaging 2.3%, down from 3.7% in 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 abate, and interest rates decline.

Current wording

Hotel supply growth is anticipated 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

Based on the trends noted, we expect comparable hotel RevPAR growth for the full year 2024 will be between 2.5% and 5.5%. In addition, we expect margins to decline in comparison to 2023, driven by higher wages and growth in insurance and real estate taxes. As unemployment remains historically low and the labor market is tight at the lower end of the wage scale, we anticipate another year of wage growth in the 4% to 5% range. 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.

Current wording

Based on the trends noted, we expect comparable hotel RevPAR growth for the full year 2025 will be between 0.5% and 2.5%. In addition, we expect margins to decline in comparison to 2024, driven by higher wages and benefits, including increases driven by new union contracts in certain cities, as well as growth in insurance and real estate taxes.

Previous wording

As noted above, the current outlook for the lodging industry remains highly 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. For more information on the risks that can affect our future results, see Part 1 Item 1A. “Risk Factors.”

Current wording

As discussed above, the current outlook for the lodging industry remains uncertain, reflecting varying analyst assumptions surrounding the impact of higher interest rates, inflation, the recovery in Maui and escalating geopolitical conflicts. Therefore, there can be no assurances as to lodging demand performance for any number of reasons, including, but not limited to, the slow recovery in Maui or deteriorating macroeconomic conditions. For more information on the risks that can affect our future results, see Part I, Item 1A. “Risk Factors.”

Previous wording

In 2023, we completed the Marriott transformational capital program, which began in 2018. We believe this program will position these hotels to be more competitive in their respective markets and will enhance long-term performance through increases in RevPAR and market yield index. We agreed to invest amounts in excess of the FF&E reserves required under our management agreements and, in exchange, Marriott has provided additional priority returns on the agreed upon investments and $83 million in operating profit guarantees, before reductions for incentive management fees, to offset expected business disruption.

Current wording

Acquisitions. During 2024, we completed the following acquisitions:

Previous wording

Capital Projects. We continue to pursue opportunities to enhance asset value through select capital improvements, including projects that are designed to increase the eco-efficiency of our hotels, incorporate elements of sustainable design and replace aging equipment and systems with more efficient technology. During 2023, we spent approximately $646 million on capital expenditures, of which $195 million represented return on investment (“ROI”) capital expenditures, $274 million represented renewal and replacement projects and $177 million was for hurricane restoration work. Major capital projects completed during the year include transformational renovations at Fairmont Kea Lani, Maui, with upgrades to all guestrooms and the addition of a new arrival experience and lobby bar, and The Westin Georgetown, Washington D.C., with guestroom, public space and meeting space renovations. In July 2023, The Ritz-Carlton, Naples reopened, including the guestrooms, suites and amenities, and the new tower expansion. The final phase of reconstruction at Hyatt Regency Coconut Point Resort and Spa, the resort's waterpark, was completed in June 2023.

Current wording

Capital Projects. We continue to pursue opportunities to enhance asset value through select capital improvements, including projects that are designed to increase the eco-efficiency of our hotels, incorporate elements of sustainable design and replace aging equipment and systems with more efficient technology. During 2024, we spent approximately $548 million on capital expenditures, of which $260 million represented return on investment (“ROI”) capital expenditures, $252 million represented renewal and replacement projects and $36 million was for hurricane 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. In 2024, we reached a final settlement with our insurance providers on covered costs related to damage and disruption caused by Hurricane Ian, which totaled $308 million. In total, $99 million of the insurance receipts were recognized as a gain on business interruption. Another major capital project completed during the year was the repositioning renovations at The Singer Oceanfront Resort, Curio Collection by Hilton, including rooms, public space, and food and beverage outlets.

Previous wording

In addition, hotels within certain regions are subject to environmental and weather-related events, including hurricanes, wildfires, floods, rising sea levels, mudslides, earthquakes, and other natural perils. To mitigate some of these physical risks, we execute capital expenditure projects, including replacements and restorations of exterior walls, doors and windows, roofs, grounds, relocated/elevated critical equipment and distributed energy systems to further increase the resilience of our hotels. A portion of our capital expenditures for 2023 include these types of projects, which we expect to continue in future years. While the number of projects and overall cost varies from year to year, on average approximately 7% our capital expenditures have related to these types of projects over the past six years.

Current wording

In addition, hotels within certain regions are subject to environmental and weather-related events, including hurricanes, wildfires, floods, rising sea levels, mudslides, earthquakes, and other natural perils. To mitigate some of these physical risks, we execute capital expenditure projects, including replacements and restorations of exterior walls, doors and windows, roofs, grounds, relocated/elevated critical equipment and distributed energy systems to further increase the resilience of our hotels. A portion of our capital expenditures for 2024 include these types of projects, which we expect to continue in future years. While the number of projects and overall cost varies from year to year, on average approximately 6% our capital expenditures have related to these types of projects over the past six years. The enhanced resilience projects implemented during the reconstruction of The Ritz-Carlton, Naples were successful in minimizing damage to the resort during the two hurricanes that made landfall in 2024; however, no assurances can be made as to whether these enhanced resiliency projects will be successful in mitigating the damage from future environmental and weather-related events, especially as the frequency and severity of these events are expected to increase over time.

Previous wording

Similar to the Marriott transformational capital program, we reached an agreement with Hyatt in 2023 to complete transformational reinvestment capital projects at six properties in our portfolio, the Grand Hyatt Atlanta in Buckhead, Grand Hyatt Washington, Manchester Grand Hyatt San Diego, Hyatt Regency Austin, Hyatt Regency Washington on Capitol Hill, and Hyatt Regency Reston. These investments are intended to position the targeted hotels to compete better in their respective markets while seeking to enhance long-term performance. The total investment is expected to be approximately $550 million to $600 million, two-thirds of which we were planning to invest as part of our capital plan over the next few years. We expect to invest between $125 million and $200 million per year over the next three to four years on this program. 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 at six properties in our portfolio, the Grand Hyatt Atlanta in Buckhead, Grand Hyatt Washington, Manchester Grand Hyatt San Diego, Hyatt Regency Austin, Hyatt Regency Washington on Capitol Hill, and Hyatt Regency Reston. These investments are intended to position the targeted hotels to compete better in their respective markets while seeking to enhance long-term performance. During 2024, we spent approximately $155 million on this program, which is included in ROI capital projects. The total investment is expected to be approximately $550 million to $600 million, two-thirds of which we were planning to invest as part of our capital plan over the next few years. We expect to invest between $125 million and $200 million per year 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. We received approximately $9 million of the operating profit guarantees in 2024 from Hyatt and expect to receive approximately $27 million in 2025.

Previous wording

For 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 from the damage caused by Hurricane Ian. The ROI projects include approximately $125 million to $150 million for the new Hyatt transformational capital program discussed above.

Current wording

For 2025, we expect total capital expenditures of $580 million to $670 million, consisting of ROI projects of approximately $270 million to $315 million, renewal and replacement expenditures of $240 million to $275 million, and $70 million to $80 million for the restoration work from the damage caused by Hurricanes Helene and Milton. The ROI projects include approximately $170 million to $180 million for the Hyatt transformational capital program.

Previous wording

Also in 2023, we announced and broke ground on a project to develop and sell 40 fee-simple condominiums on a five-acre development parcel at Golden Oak in Orlando, adjacent to Four Seasons Resort Orlando at Walt Disney World® Resort. Construction is expected to be completed in the fourth quarter of 2025. In 2023, we spent $15 million in development costs for this project. For 2024, the development costs for this project are expected to be $50 million to $70 million.

Current wording

Also in 2023, we announced and broke ground on a project to develop and sell 40 fee-simple condominiums on a five-acre development parcel to be Four Seasons-branded and managed residences at the Four Seasons Resort Orlando at Walt Disney World® Resort. Construction of the mid-rise building is expected to be completed in the fourth quarter of 2025 and the villas are expected to complete in the first half of 2026. In 2024, we spent $64 million in development costs for this project and began marketing the units, resulting in buyer commitments for nearly one-third of the units. For 2025, the development costs for this project are expected to be $75 million to $85 million.

Previous wording

Financing transactions. We believe that our ability to maintain an investment grade balance sheet and well-laddered maturity schedule is an important factor in our investment strategy. In January 2023, we amended our credit facility, extending the maturity date and adding a sustainability pricing adjustment that can adjust the applicable interest rate. As of December 31, 2023, we have a debt balance of $4.2 billion, our weighted average interest rate is 4.5%, and our weighted average debt maturity is 4.2 years.

Current wording

We believe that our ability to maintain an investment grade balance sheet and well-laddered maturity schedule is an important factor in our investment strategy. As of December 31, 2024, we have a debt balance of $5.1 billion, our weighted average interest rate is 4.7%, and our weighted average debt maturity is 5.2 years.

Previous wording

Share Repurchase and Dividends. In 2023, we repurchased 11.4 million shares at an average price of $15.93 per share, exclusive of commissions, for a total of $181 million, under our share repurchase program. As of December 31, 2023, we have $792 million available for repurchase under the program.

Current wording

Share Repurchase and Dividends. In 2024, we repurchased 6.3 million shares at an average price of $16.99 per share, exclusive of commissions, for a total of $107 million, under our share repurchase program. As of December 31, 2024, we have $685 million available for repurchase under the program.

Previous wording

During 2023, Host Inc.'s Board of Directors declared dividends totaling $0.90 per share on its common stock, including a fourth quarter special dividend of $0.25 per share. Accordingly, Host L.P. made distributions of $0.9193446 per unit with respect to its common OP units for 2023. On February 21, 2024, we announced a regular quarterly cash dividend of $0.20 per share on our common stock. The dividend will be paid on April 15, 2024 to stockholders of record on March 28, 2024. The amount of any future dividends will be based on our policy of distributing, over time, 100% of our taxable income and will be determined by Host Inc.’s Board of Directors.

Current wording

During 2024, Host Inc.'s Board of Directors declared dividends totaling $0.90 per share on its common stock, including a fourth quarter special dividend of $0.10 per share. Accordingly, Host L.P. made distributions of $0.9193446 per unit with respect to its common OP units for 2024. On February 19, 2025, we announced a regular quarterly cash dividend of $0.20 per share on our common stock. The dividend will be paid on April 15, 2025 to stockholders of record on March 31, 2025. The amount of any future dividends will be based on our policy of distributing, over time, 100% of our taxable income and will be determined by Host Inc.’s Board of Directors.

Previous wording

(1)Amounts represent total operating costs and expenses from our audited consolidated statements of operations, less corporate and other expenses and gain on insurance settlements.

Current wording

(1)Amounts represent total operating costs and expenses from our audited consolidated statements of operations, less corporate and other expenses and net gain on insurance settlements.

Previous wording

The following table presents revenues in accordance with GAAP for the two years ended December 31, 2023 (in millions, except percentages):

Current wording

The following table presents revenues in accordance with GAAP and includes all consolidated hotels for the two years ended December 31, 2024 (in millions, except percentages):

Previous wording

Food and beverage. Total food and beverage ("F&B") revenues increased $164 million, or 11.6%, in 2023. The improvement reflects the increase at our comparable hotels of $155 million, or 11.3%, primarily driven by improvements in banquet and audio-visual revenues at convention hotels as group demand continued to recover, partially offset by lost business as a result of the Maui wildfires, which had a larger impact on ancillary spend as compared to room revenues. Total F&B revenues for 2023 benefited from improved operations following the reopening of our non-comparable hotels after Hurricane Ian, and, similar to the changes in rooms revenues, the acquisition of the Four Seasons Resort and Residences Jackson Hole.

Current wording

Food and beverage. Total food and beverage ("F&B") revenues increased $134 million, or 8.5%, in 2024, due to the 2024 Acquisitions and the reopening of The Ritz-Carlton, Naples. Comparable F&B revenues increased $57 million, or 3.6%, driven by improvements in banquet and audio-visual revenues at resort and convention hotels as group demand remained strong throughout the year.

Previous wording

The following table presents consolidated property-level operating expenses in accordance with GAAP for the two years ended December 31, 2023 (in millions, except percentages):

Current wording

The following table presents consolidated property-level operating expenses in accordance with GAAP and includes all consolidated hotels for the two years ended December 31, 2024 (in millions, except percentages):

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 55% of these expenses in any given year. During 2023, these expenses increased 13% compared to 2022, reflecting an increase in hiring as operations have recovered, as well as wage and benefit inflationary pressures. In addition, early in 2022, hiring was temporarily paused in many areas due to the Omicron variant, as well as seasonality in certain markets, followed by an acceleration in demand for which our hotel managers were unable to increase staffing commensurate with the increase in demand. This led to a greater increase in expenses in 2023 on a year-over-year basis then would be expected due to increased demand alone. Hiring pace has since improved, and managers at the majority of our hotels now are operating at desired staffing levels. Wage and benefit rate inflation is expected to be approximately 4% to 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 in any given year. During 2024, these expenses increased approximately 5% 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 6% in 2025.

Previous wording

Other property-level expenses consist of property taxes, which are highly dependent on local jurisdiction taxing authorities, and property and general liability insurance, and do not necessarily change based on changes in revenues at our hotels.

Current wording

Other property-level expenses consist of property taxes, the amounts and structure of which are highly dependent on local jurisdiction taxing authorities, and property and general liability insurance, all of which do not necessarily increase or decrease based on similar changes in revenues at our hotels.

Previous wording

Rooms. Rooms expenses increased $60 million, or 8.3%, in 2023. Our comparable hotels rooms expenses increased $67 million, or 9.5%, in 2023. These increases reflect the increase in occupancy and staffing described above. Total rooms expenses benefited from the net impact of our recent acquisition and dispositions. Wages and benefits represented approximately 67% and 65% of our 2023 and 2022 rooms expenses, respectively.

Current wording

Rooms. Rooms expenses increased $62 million, or 7.9%, in 2024. Our comparable hotels rooms expenses increased $33 million, or 4.1%, in 2024, driven by an overall increase in wage rates. Wages and benefits represented approximately 67% of our 2024 and 2023 rooms expenses.

Previous wording

Food and beverage. F&B expenses increased $114 million, or 12.3%, in 2023. For our comparable hotels, F&B expenses increased $109 million, or 12.3%, in 2023. Overall, F&B costs as a percentage of revenues increased slightly, as staffing levels normalized. Wages and benefits represented approximately 69% and 67% of our 2023 and 2022 F&B expenses, respectively.

Current wording

Food and beverage. F&B expenses increased $95 million, or 9.1%, in 2024. For our comparable hotels, F&B expenses increased $41 million, or 3.9%, in 2024. Overall, F&B costs as a percentage of revenues remained consistent year over year. Wages and benefits represented approximately 69% of our 2024 and 2023 F&B expenses.

Previous wording

Other departmental and support expenses. Other departmental and support expenses increased $99 million, or 8.4%, in 2023. On a comparable hotel basis, other departmental and support expenses increased $102 million, or 8.9%. These increases were primarily due to the increase in staffing. Total other departmental and support expenses benefited from the net impact of our recent acquisition and dispositions. Wages and benefits represented approximately 40% of our 2023 and 2022 other departmental and support expenses.

Current wording

Other departmental and support expenses. Other departmental and support expenses increased $103 million, or 8.0%, in 2024. On a comparable hotel basis, other departmental and support expenses increased $62 million, or 3.2%. These increases were primarily due to higher wage expense. Wages and benefits represented approximately 41% of our 2024 and 2023 other departmental and support expenses.

Previous wording

Management fees. Total management fees increased $32 million, or 14.7%, in 2023. Base management fees, which generally are calculated as a percentage of total revenues, increased $10 million, or 7.1%, compared to 2022. At our comparable hotels, base management fees increased $9 million, or 6.3%, for 2023. 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 $22 million, due primarily to the improved operations at our properties. At our comparable hotels, incentive management fees increased $18 million, or 21.8%, in 2023.

Current wording

Management fees. Total management fees increased $5 million, or 2.0%, in 2024. Base management fees, which generally are calculated as a percentage of total revenues, increased $10 million, or 6.7%, compared to 2023. At our comparable hotels, base management fees increased $6 million, or 3.8%, for 2024. 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 $5 million, primarily due to the closure of The Don CeSar, and the decrease at our comparable hotels of $3 million, or 2.8%, which was due to renovations at certain properties.

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 $58 million, or 17.8%, in 2023, 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 $52 million, or 16.3%, in 2023. Other property-level expenses were partially offset by the receipt of operating profit guarantees from Marriott under the transformational capital program in both 2023 and 2022.

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 $28 million, or 7.3%, in 2024, due to increases in property insurance premiums and property taxes. Other property-level expenses at our comparable hotels increased $12 million, or 3.1%, in 2024. Other property-level expenses were partially offset by the receipt of operating profit guarantees from Marriott and Hyatt under the transformational capital programs in both 2024 and 2023.

Previous wording

General and administrative costs primarily consist of wages and benefits, travel, corporate insurance, legal fees, audit fees, building rent and systems costs. Increases in 2023 primarily reflect growth in compensation and litigation accruals.

Current wording

General and administrative costs primarily consist of wages and benefits, travel, corporate insurance, legal fees, audit fees, building rent and systems costs. The overall decrease in corporate and other expenses for the year ended December 31, 2024 is primarily due to a decrease in litigation accruals, partially offset by an increase in systems costs and other administrative fees.

Previous wording

Interest expense. Interest expense increased $35 million, or 22.4%, in 2023 as compared to 2022, due to an increase in average interest rates on our floating rate debt. The following table presents certain components of interest expense (in millions):

Current wording

Interest expense. Interest expense increased $24 million, or 12.6%, in 2024 as compared to 2023, primarily due to higher outstanding debt balances during 2024 as we issued additional senior notes to fund our 2024 Acquisitions. The following table presents certain components of interest expense (in millions):

Previous wording

(1)Total cash interest expense paid was $183 million and $142 million in 2023 and 2022, respectively, which includes an increase(decrease) due to the change in accrued interest of $2 million and $(4) million for 2023 and 2022, respectively.

Current wording

(1)Total cash interest expense paid was $172 million and $183 million in 2024 and 2023, respectively, which includes an increase (decrease) due to the change in accrued interest of $(33) million and $2 million for 2024 and 2023, respectively.

Previous wording

Provision for income taxes. We lease substantially all our properties to consolidated subsidiaries designated as 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. In 2023 and 2022, we recorded an income tax provision of $36 million and $26 million, respectively, due primarily to the profitability of hotel operations retained by the TRS, including the business interruption insurance gains recorded in 2023 and 2022. As a result of legislation enacted by the CARES Act in 2020, a portion of the 2020 domestic net operating loss was carried back to 2017-2019 in order to procure a refund of U.S. federal corporate income taxes previously paid. The remaining portion of the 2020 net operating loss, as well as the entire 2021 net operating loss incurred by our TRS, may be carried forward indefinitely, subject to an annual limit on the use thereof equal to 80% of annual taxable income. See also Part II Item 8. “Financial Statements and Supplementary Data – Note 7. Income Taxes” for a discussion of our income taxes.

Current wording

Provision for income taxes. We lease substantially all our properties to consolidated subsidiaries designated as 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. In 2024 and 2023, we recorded an income tax provision of $14 million and $36 million, respectively, due primarily to the profitability of hotel operations retained by the TRS, including $40 million and $83 million of business interruption insurance gains recorded in 2024 and 2023, respectively. The 2024 tax provision was partially offset by the recognition of an income tax benefit due to federal income tax credits resulting from the installation of a co-generation plant at one of our properties. As a result of legislation enacted by the CARES Act in 2020, a portion of the 2020 domestic net operating loss was carried back to 2017-2019 in order to procure a refund of U.S. federal corporate income taxes previously paid. The remaining portion of the 2020 net operating loss, as well as the entire 2021 net operating loss incurred by our TRS, may be carried forward indefinitely, subject to an annual limit on the use thereof equal to 80% of annual taxable income. See also Part II Item 8. “Financial Statements and Supplementary Data – Note 7. Income Taxes” for a discussion of our income taxes.

Previous wording

Effective January 1, 2023, we ceased presentation of All Owned Hotel results, and returned to a comparable hotel presentation for our hotel level results. 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. We believe this provides investors with a better understanding of underlying growth trends for our current portfolio, without impact from properties that experienced closures. We have removed Hyatt Regency Coconut Point Resort and Spa and The Ritz-Carlton, Naples from our comparable operations for 2023 due to closures caused by Hurricane Ian. 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 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. We believe this provides investors with a better understanding of underlying growth trends for our current portfolio, without impact from properties that experienced closures. We have removed The Don CeSar, Alila Ventana Big Sur, and The Ritz-Carlton, Naples from our comparable operations for the year ended December 31, 2024 due to closures. 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

The majority of our customers fall into three broad categories: transient, group and contract business. The information below is derived from business mix results from the 75 comparable hotels owned as of December 31, 2023.

Current wording

The majority of our customers fall into three broad categories: transient, group and contract business. The information below is derived from business mix results from the 78 comparable hotels owned as of December 31, 2024.

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 Host L.P. limited partners and stock and OP unit repurchases. Our primary sources of cash include cash from operations, proceeds from the sale of assets, borrowings under our credit facility and debt and equity issuances. In the short term, our cash obligations include $400 million of senior notes due in April of 2024. We believe we have sufficient liquidity to repay them with available cash at maturity, or we can refinance the notes with our access to capital markets. For our long-term senior note and credit facility obligations, we historically have refinanced these amounts prior to their maturity through the issuance of new senior notes or the entry into new credit facility agreements. Whether we will refinance the April 2024 senior notes upon maturity with new senior notes will depend upon market conditions generally, including the interest rate environment, and our cash requirements. As discussed further below, we amended our credit facility effective January 4, 2023, extending the maturity date among other things. Also, in the short term, our cash obligations include the minimum lease payments on our ground leases, which in 2024 are approximately $31 million, and most of our other operating obligations. In the long term, our ground lease payments are the longest time horizon obligations and currently run up to 89 years. For a summary of our obligations under our ground leases, see Exhibit 99.1 to this Annual Report.

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 Host L.P. limited partners and stock and OP unit repurchases. Our primary sources of cash include cash from operations, proceeds from the sale of assets, borrowings under our credit facility and debt and equity issuances. In the short term, our cash obligations include $500 million of senior notes due in June 2025. We believe we have sufficient liquidity to repay them at maturity, or we can refinance the notes with our access to capital markets. For our long-term senior note and credit facility obligations, we historically have refinanced these amounts prior to their maturity through the issuance of new senior notes or the entry into new credit facility agreements. Whether we will refinance the June 2025 senior notes upon maturity with new senior notes will depend upon market conditions generally, including the interest rate environment, and our cash requirements. Also, in the short term, our cash obligations include the minimum lease payments on our ground leases, which in 2025 are approximately $31 million, and most of our other operating obligations. In the long term, our ground lease payments are the longest time horizon obligations and currently run up to 100 years. For a summary of our obligations under our ground leases, see Exhibit 99.1 to this Annual Report.

Previous wording

In addition to the liabilities on our consolidated balance sheet, under our capital expenditures program, we have budgeted to spend $500 million to $605 million in 2024. Commitments for capital expenditures generally run less than two years for the life of the project. In the long term, renewal and replacement ("R&R") capital expenditures are designed to maintain the quality and competitiveness of our hotels and typically occur at intervals of seven to ten years. The projects are primarily funded through the FF&E reserves established at each hotel. Average annual R&R spend over the last five years has been $232 million.

Current wording

In addition to the liabilities on our consolidated balance sheet, under our capital expenditures program, we have budgeted to spend $580 million to $670 million in 2025. Commitments for capital expenditures generally run less than two years for the life of the project. In the long term, renewal and replacement ("R&R") capital expenditures are designed to maintain the quality and competitiveness of our hotels and typically occur at intervals of seven to ten years. The projects are primarily funded through the FF&E reserves established at each hotel. Average annual R&R spend over the last five years has been $245 million.