Host Hotels Earnings: Hotel Operations Decline as Expense Growth Outpaces Revenue Growth

Host Hotels and Resorts reported second-quarter results that were mixed compared with our estimates, though we didn't see anything in the quarter that would materially change our $23 fair value estimate for the no-moat company. Occupancy increased only 20 basis points year over year to 74.2% in the second quarter. Average daily rate improved 2.4%, leading to revenue per available room growth of just 2.7%, which missed our 8.8% estimate. However, while comparable operating expense growth of 11.3% outpaced revenue growth in the quarter, the reported figure was lower than our estimate of 18.5% operating expense growth. As a result, hotel EBITDA declined 8.8% in the second quarter, slightly better than our estimate of a 14.0% decline. Host reported second-quarter adjusted funds from operations of $0.53 per share, which is $0.05 below the $0.58 figure the company reported in the second quarter of 2022 but in line with our $0.52 estimate.