By Deepa Seetharaman
NEW YORK, Feb 17 (Reuters) - Host Hotels & Resorts projected a 'moderate' recovery for the lodging industry this year and said it was aggressively scouting out properties to buy in the United States and abroad.
Host, which owns more than 100 hotels, said hotel acquisitions made early in the recovery period tend to perform strongly. The company is also considering buying mezzanine or B-notes in a property.
'As the operating environment begins to improve, we should see deal flow accelerate, but that will likely not occur until later this year or into 2011,' Chief Executive Edward Walter said during a conference call with analysts.
Host, a real estate investment trust that owns hotels, projects revenue per available room in 2010 will be flat or slump as much as 5 percent. This is a more conservative outlook than those offered by major hotel operators, such as Marriott International, Starwood Hotels & Resorts.
This is due in part to Host's heavy reliance on business from large groups and association, Walter said. Nearly 40 percent of Host's business comes from groups versus an industry average of about 30 to 31 percent, Walter added.
Bookings from groups so far in 2010 are down between 5 percent and 6 percent compared with last year. Host expects to close much of that gap -- but not all of it -- by year's end.
'We are a little bit concerned about group for this year,' Walter told analysts. 'Group got hit a lot harder in this downturn than it normally does.'
Shares of Host were up about 1 percent, or 12 cents, to $11.74 in afternoon trading on the New York Stock Exchange. The bulk of Host's hotels are operated by Marriott or Starwood.
The U.S. hotel industry has been hammered in the past year as companies cut their travel budgets, forcing room rates and hotel occupancies lower. These trends have improved in recent months, although room rates remain lower than a year ago.
Still many hotel owners, especially those who purchased properties from 2005 to 2007, are expected to be unable to pay off debt coming due over the next three years. Many hotel owners have already buckled under the weight of their debt and have handed their hotels back to banks.
Walter said Host is confident it will acquire hotels from distressed and 'tactical' sellers this year. In some cases, buying hotel debt will pave the way for Host to eventually control the hotel. In other deals, hotel debt alone could yield returns in the mid-teens.
'At this point, we are pursuing several of these types of investments,' Walter told analysts.
FOURTH-QUARTER BEATS ESTIMATES
Host posted better-than-expected fourth-quarter results on Wednesday, helped by improved room rates and occupancy at its hotels. During the quarter, revPAR fell 14.6 percent, surpassed some analysts' expectations.
Host, said funds from operations fell to 18 cents a share in the fourth quarter from 52 cents a year earlier.
Fourth-quarter FFO was hurt by a possible litigation loss. When adjusted for this loss, Host posted FFO of 24 cents per share, compared with the average analyst estimate of 19 cents, according to Thomson Reuters I/B/E/S.
Funds from operations, a widely accepted measure of real estate investment trust performance, remove the profit-reducing effects of depreciation, a noncash accounting item.
Host also posted a net loss of $72 million, or 12 cents per share, compared with year-earlier net income of $111 million, or 18 cents per share.
Revenue fell 16.8 percent to $1.33 billion. Operating costs fell about 6 percent.
Host added it would reinstate paying a cash dividend starting in the first quarter of 2010 of a penny per share.
Host projected FFO for the year between 41 cents and 57 cents per share, while analysts were expecting 57 cents. Host expects a 2010 loss of 32 cents to 49 cents per share.
(Reporting by Deepa Seetharaman; Editing by Lisa Von Ahn, Maureen Bavdek and Gunna Dickson) Keywords: HOSTHOTELS/ (deepa.seetharaman@thomsonreuters.com; +1 646 223-6125; Reuters Messaging: deepa.seetharaman.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Feb 17 (Reuters) - Host Hotels & Resorts projected a 'moderate' recovery for the lodging industry this year and said it was aggressively scouting out properties to buy in the United States and abroad.
Host, which owns more than 100 hotels, said hotel acquisitions made early in the recovery period tend to perform strongly. The company is also considering buying mezzanine or B-notes in a property.
'As the operating environment begins to improve, we should see deal flow accelerate, but that will likely not occur until later this year or into 2011,' Chief Executive Edward Walter said during a conference call with analysts.
Host, a real estate investment trust that owns hotels, projects revenue per available room in 2010 will be flat or slump as much as 5 percent. This is a more conservative outlook than those offered by major hotel operators, such as Marriott International, Starwood Hotels & Resorts.
This is due in part to Host's heavy reliance on business from large groups and association, Walter said. Nearly 40 percent of Host's business comes from groups versus an industry average of about 30 to 31 percent, Walter added.
Bookings from groups so far in 2010 are down between 5 percent and 6 percent compared with last year. Host expects to close much of that gap -- but not all of it -- by year's end.
'We are a little bit concerned about group for this year,' Walter told analysts. 'Group got hit a lot harder in this downturn than it normally does.'
Shares of Host were up about 1 percent, or 12 cents, to $11.74 in afternoon trading on the New York Stock Exchange. The bulk of Host's hotels are operated by Marriott or Starwood.
The U.S. hotel industry has been hammered in the past year as companies cut their travel budgets, forcing room rates and hotel occupancies lower. These trends have improved in recent months, although room rates remain lower than a year ago.
Still many hotel owners, especially those who purchased properties from 2005 to 2007, are expected to be unable to pay off debt coming due over the next three years. Many hotel owners have already buckled under the weight of their debt and have handed their hotels back to banks.
Walter said Host is confident it will acquire hotels from distressed and 'tactical' sellers this year. In some cases, buying hotel debt will pave the way for Host to eventually control the hotel. In other deals, hotel debt alone could yield returns in the mid-teens.
'At this point, we are pursuing several of these types of investments,' Walter told analysts.
FOURTH-QUARTER BEATS ESTIMATES
Host posted better-than-expected fourth-quarter results on Wednesday, helped by improved room rates and occupancy at its hotels. During the quarter, revPAR fell 14.6 percent, surpassed some analysts' expectations.
Host, said funds from operations fell to 18 cents a share in the fourth quarter from 52 cents a year earlier.
Fourth-quarter FFO was hurt by a possible litigation loss. When adjusted for this loss, Host posted FFO of 24 cents per share, compared with the average analyst estimate of 19 cents, according to Thomson Reuters I/B/E/S.
Funds from operations, a widely accepted measure of real estate investment trust performance, remove the profit-reducing effects of depreciation, a noncash accounting item.
Host also posted a net loss of $72 million, or 12 cents per share, compared with year-earlier net income of $111 million, or 18 cents per share.
Revenue fell 16.8 percent to $1.33 billion. Operating costs fell about 6 percent.
Host added it would reinstate paying a cash dividend starting in the first quarter of 2010 of a penny per share.
Host projected FFO for the year between 41 cents and 57 cents per share, while analysts were expecting 57 cents. Host expects a 2010 loss of 32 cents to 49 cents per share.
(Reporting by Deepa Seetharaman; Editing by Lisa Von Ahn, Maureen Bavdek and Gunna Dickson) Keywords: HOSTHOTELS/ (deepa.seetharaman@thomsonreuters.com; +1 646 223-6125; Reuters Messaging: deepa.seetharaman.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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