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Host Marriott Reports Net Loss of $31 million for the 1st Qtr 2004 Compared to $34 million for 2003; Acquires the 455-room
Embassy Suites Chicago Downtown-Lakefront
for Approximately $89 million
Hotel Operating Statistics
.
BETHESDA, Md., April 28, 2004 - Host Marriott Corporation (NYSE: HMT), the nation's largest lodging real estate investment trust (REIT), today announced results of operations for the first quarter of 2004. First quarter results include the following:
  • Revenues increased $34 million, or 4%, to $809 million in the first quarter of 2004 compared to $775 million for the first quarter of 2003.
  • Net loss was $31 million and $34 million for the first quarter of 2004 and 2003, respectively.
  • Loss per diluted share was $.12 and $.16 for the first quarter of 2004 and 2003, respectively.
  • Funds from Operations (FFO) per diluted share, were $.13 and $.15 for the first quarter of 2004 and 2003, respectively.
  • Results of operations in the first quarter of 2004 include approximately $12 million of charges for call premiums and the acceleration of deferred financing costs for prepayment of debt.  This represents approximately $.04 per diluted share and approximately $.04 of FFO per diluted share.
  • Adjusted EBITDA, which is Earnings before Interest Expense, Income Taxes, Depreciation, Amortization and other items, was $172 million in both the first quarter of 2004 and 2003.
FFO per diluted share and Adjusted EBITDA are non-GAAP financial measures within the meaning of the rules of the Securities and Exchange Commission (SEC). See the discussion included in this press release for information regarding these non-GAAP financial measures.

Comparable hotel RevPAR for the first quarter increased 3.0%, driven by an increase in occupancy of almost two percentage points and a slight increase in average room rate. Comparable hotel adjusted operating profit margins declined approximately 55 basis points.

Christopher J. Nassetta, president and chief executive officer, stated, "We are pleased with the pace and the strength of the recovery. Demand accelerated throughout the quarter, helping us produce strong sequential improvement in RevPAR. The business mix has begun moving from discount business to higher-rated business and the group booking pace and net reservation volume continue to strengthen. Clearly, the operating environment for the lodging industry has improved considerably over the last few months and we feel the stage has been set for a sustained recovery."

Balance Sheet

As of March 26, 2004, the Company had $526 million in cash and cash equivalents and $250 million of availability under its credit facility. Additionally, the Company had $598 million of restricted cash, including net proceeds of $484 million from the sale of 3.25% senior exchangeable debentures issued on March 16, 2004, which were used, along with available cash, to redeem $494 million of 7 7/8% Series B senior notes on April 15, 2004. During the second quarter, the Company also called an additional $65 million of Series B senior notes, which it will redeem on May 3, 2004. As a result of these redemptions, the Company will record a charge for call premiums and the acceleration of deferred financing costs totaling approximately $30 million in the second quarter of 2004.

On April 27, 2004, the Company acquired the 455-room Embassy Suites Chicago Downtown-Lakefront for approximately $89 million, with a portion of the funds raised from its equity offerings in 2003. This property is the first Embassy Suites and second Hilton-branded property in the portfolio. The property was acquired at an approximate 20% discount to replacement cost. During the first quarter of 2004, the Company also completed the sale of six non-core properties for total proceeds of approximately $100 million, which has been, or will be, used to repay debt.

W. Edward Walter, executive vice president and chief financial officer, stated, "Improved operating performance at our hotels combined with our capital market activities, which reduced our interest expense, has increased our interest coverage ratio and reduced our leverage. As a result, we are currently not restricted under our debt covenants on our ability to pay dividends or incur debt. Given our improved earnings outlook, we expect to be able to pay dividends on our perpetual preferred securities on a going forward basis."

However, the Company does not expect to pay a meaningful dividend on its common shares in 2004.

2004 Outlook

As a result of the improving economic outlook, the Company expects comparable hotel RevPAR for the second quarter of 2004 and full year 2004 to increase approximately 5% to 7% and 4% to 6%, respectively. This reflects an increase from the Company's 2004 RevPAR guidance issued on February 24, 2004. Based upon this guidance, the Company estimates that for 2004 its:

  • diluted loss per common share should be approximately $.08 to $.06 for the second quarter and $.27 to $.17 for the full year;
  • net loss should be approximately $17 million to $9 million for the second quarter and $52 million to $21 million for the full year;
  • FFO per diluted share should be approximately $.17 to $.20 for the second quarter and $.61 to $.71 for the full year (including $30 million, or $.09 per diluted share, for the second quarter and $54 million, or $.16 per diluted share, for the full year related to charges for call premiums and the acceleration of deferred financing costs for debt repaid or expected to be repaid); and
  • Adjusted EBITDA should be approximately $725 million to $755 million for the full year.
Mr. Nassetta noted, "Lodging industry fundamentals have improved significantly over the first half of last year. Improvements in operations thus far in 2004 have been primarily driven by increases in occupancy at our properties. We expect that as lodging industry fundamentals continue to strengthen, we will experience growth in average room rates and margin improvement, which should ultimately result in meaningful growth in RevPAR, earnings and shareholder value."
 
 
HOST MARRIOTT CORPORATION
Introductory Notes to Financial Information

The Company
Host Marriott Corporation, herein referred to as "we" or "Host Marriott," is a self-managed and self-administered real estate investment trust (REIT) that owns primarily hotel properties. We conduct our operations as an umbrella partnership REIT through an operating partnership, Host Marriott, L.P., or Host LP, of which we are the sole general partner. For each share of our common stock, Host LP has issued to us one unit of operating partnership interest, or OP Unit. When distinguishing between Host Marriott and Host LP, the primary difference is the 7% of the partnership interests in Host LP held by outside partners as of April 27, 2004, which is reflected as minority interest in our balance sheets and minority interest expense in our statements of operations. Readers are encouraged to find further detail regarding our organizational structure in our annual report on Form 10-K.
Reporting Periods for Hotel Operating Statistics and Comparable Hotel Results
The results we report are based on results of our hotels reported to us by our hotel managers. Our hotel managers use different reporting periods. Marriott International, Inc., the manager of the majority of our properties, uses a fiscal year ending on the Friday closest to December 31 and reports twelve weeks of operations for the first three quarters and sixteen or seventeen weeks for the fourth quarter of the year for its Marriott-managed hotels. In contrast, other managers of our hotels, such as Hyatt, report results on a monthly basis. Host Marriott, as a REIT, is required by tax laws to report results on a calendar year. As a result, we elected to adopt the reporting periods used by Marriott International modified so that our fiscal year always ends on December 31 to comply with REIT rules. Our first three quarters of operations end on the same day as Marriott International but our fourth quarter ends on December 31.

Two consequences of the reporting cycle we have adopted are: (1) quarterly start dates will usually differ between years, except for the first quarter which always commences on January 1, and (2) our first and fourth quarters of operations and year-to-date operations may not include the same number of days as reflected in prior years. For example, the first quarter of 2004 ended on March 26 and the first quarter of 2003 ended on March 28. As a result, during the first quarter of 2004 we included 86 days of operations, including February 29, 2004, while for first quarter 2003, we included 87 days of operations.

In addition, for results reported by hotel managers using a monthly reporting period (approximately one-fourth of our full-service hotels), the month of operation that ends after our fiscal quarter-end is included in our results of operations in the following fiscal quarter. For these hotels, operations for the entire month of March are reported in our second fiscal quarter. Accordingly, our results of operations include results from hotel managers reporting results on a monthly basis as follows: first quarter (January, February), second quarter (March to May), third quarter (June to August), and fourth quarter (September to December). The first quarter of 2004 includes 60 days of operations for our monthly hotels compared to 59 days of operations for the first quarter of 2003 as February included 29 days in 2004.
In contrast to the reporting periods for our consolidated statements of operations, our hotel operating statistics (i.e., RevPAR, average daily rate and average occupancy) and our comparable hotel results (comparable hotel revenues, expenses and adjusted operating profit) are always reported based on the reporting cycle used by Marriott International for our Marriott-managed hotels. This facilitates year-to-year comparisons, as each reporting period will be comprised of the same number of days of operations as in the prior year (except in the case of certain of our fourth quarters which are comprised of seventeen weeks, such as fiscal year 2002). This means, however, that the reporting periods we use for hotel operating statistics may differ slightly from the reporting periods used for our consolidated statements of operations for the first and fourth quarters and the full year. For the hotel operating statistics and comparable hotel results reported herein:

  • Hotel results for the first quarter of 2004 reflect 12 weeks of operations for the period from January 3, 2004 to March 26, 2004 for our Marriott-managed hotels and results from January 1, 2004 to February 29, 2004 for operations of all other hotels which report results on a monthly basis.
  • Hotel results for the first quarter of 2003 reflect 12 weeks of operations for the period from January 4, 2003 to March 28, 2003 for our Marriott-managed hotels and results from January 1, 2003 to February 28, 2003 for operations of all other hotels which report results on a monthly basis.
Comparable Hotel Operating Statistics

We present certain operating statistics (i.e., RevPAR, average daily rate and average occupancy) and operating results (revenues, expenses and adjusted operating profit) for the periods included in this report on a comparable hotel basis. We define our comparable hotels as full-service properties (i) that are owned or leased by us and the operations of which are included in our consolidated results, whether as continuing operations or discontinued operations, for the entirety of the reporting periods being compared, and (ii) that have not sustained substantial property damage or undergone large-scale capital projects during the reporting periods being compared. For 2004 and 2003, we consider 108 of our portfolio of 111 full-service hotels owned on March 26, 2004 to be comparable hotels. The operating results of the following three hotels that we owned as of March 26, 2004 are excluded from comparable hotel results for these periods:

  • the Hyatt Regency Maui Resort and Spa (acquired in November 2003);
  • the JW Marriott, Washington, D.C. (consolidated in our financial statements beginning in the second quarter of 2003); and
  • the Memphis Marriott (construction of a 200-room expansion started in 2003).
In addition, the operating results of the six hotels we disposed of in the first quarter of 2004 and the eight hotels we disposed of in 2003 are also not included in comparable hotel results for the periods presented herein. Moreover, because these statistics and operating results are for our full- service hotel properties, they exclude results for our non-hotel properties and leased limited-service hotels.

Non-GAAP Financial Measures

Included in this press release are certain "non-GAAP financial measures," which are measures of our historical or future financial performance that are not calculated and presented in accordance with generally accepted accounting principles, or GAAP, within the meaning of applicable SEC rules. They are as follows: (i) Funds From Operations (FFO) per diluted share, (ii) EBITDA, (iii) Adjusted EBITDA and (iv) Comparable Hotel Operating Results. The following discussion defines these terms and presents why we believe they are useful supplemental measures of our performance.

FFO per Diluted Share

We present FFO per diluted share as a non-GAAP measure of our performance in addition to our earnings per share (calculated in accordance with GAAP). We calculate FFO per diluted share for a given operating period as our FFO (defined as set forth below) for such period divided by the number of fully diluted shares outstanding during such period. The National Association of Real Estate Investment Trusts (NAREIT) defines FFO as net income (calculated in accordance with GAAP) excluding gains (or losses) from sales of real estate, the cumulative effect of changes in accounting principles, real estate-related depreciation and amortization and after adjustments for unconsolidated partnerships and joint ventures. We present FFO on a per share basis after making adjustments for the effects of dilutive securities, including the payment of preferred stock dividends, in accordance with NAREIT guidelines.

We believe that FFO per diluted share is a useful supplemental measure of our operating performance and that the presentation of FFO per diluted share, when combined with the primary GAAP presentation of earnings per share, provides beneficial information to investors. By excluding the effect of real estate depreciation, amortization and gains and losses from sales of real estate, all of which are based on historical cost accounting and which may be of limited significance in evaluating current performance, we believe that such measure can facilitate comparisons of operating performance between periods and with other REITs, even though FFO per diluted share does not represent an amount that accrues directly to holders of our common stock. Historical cost accounting for real estate assets implicitly assumes that the value of real estate assets diminishes predictably over time. As noted by NAREIT in its April 2002 "White Paper on Funds From Operations," since real estate values have historically risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves. For these reasons, NAREIT adopted the definition of FFO in order to promote an industry-wide measure of REIT operating performance.

EBITDA

Earnings before Interest Expense, Income Taxes, Depreciation and Amortization (EBITDA) is a commonly used measure of performance in many industries. Management believes EBITDA provides useful information to investors regarding our results of operations because it helps us and our investors evaluate the ongoing operating performance of our properties and facilitates comparisons between us and other lodging REITs, hotel owners who are not REITs and other capital-intensive companies. Management uses EBITDA to evaluate property-level results and as one measure in determining the value of acquisitions and dispositions and, like FFO per diluted share, it is widely used by management in the annual budget process.

Adjusted EBITDA

Management has historically adjusted EBITDA when evaluating our performance because we believe that the exclusion of certain additional recurring and non-recurring items described below provides useful supplemental information to investors regarding our ongoing operating performance and that the presentation of Adjusted EBITDA, when combined with the primary GAAP presentation of net income, is beneficial to an investor's complete understanding of our operating performance. We adjust EBITDA for the following items, which may occur in any period, and refer to this measure as Adjusted EBITDA:

    * Gains and Losses on Dispositions and Related Debt Extinguishments -- We exclude the effect of gains and losses recorded on the disposition of assets in our consolidated statement of operations and the related debt extinguishments because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets. In addition, material gains or losses from the depreciated value of the assets disposed of and the related debt extinguishments could be less important to investors given that the depreciated asset often does not reflect the market value of real estate assets (as noted above for FFO).
    * Consolidated Partnership Adjustments -- We exclude the minority interest in the income or loss of our consolidated partnerships as presented in our consolidated statement of operations because we believe that including these amounts in EBITDA does not reflect the effect of the minority interest position on our performance because these amounts include our minority partners' pro-rata portion of depreciation, amortization and interest expense.  However, we believe that the cash distributions paid to minority partners are a more relevant measure of the effect of our minority partners' interest on our performance, and we have deducted these cash distributions from Adjusted EBITDA.
    * Equity Investment Adjustments -- We exclude the equity in earnings (losses) of unconsolidated investments in partnerships and joint ventures as presented in our consolidated statement of operations because our percentage interest in the earnings (losses) does not reflect the impact of our minority interest position on our performance and these amounts include our pro-rata portion of depreciation, amortization and interest expense.  However, we believe that cash distributions we receive are a more relevant measure of the performance of our investment and, therefore, we include the cash distributed to us from these investments in the calculation of Adjusted EBITDA.
    * Cumulative effect of a change in accounting principle -- Infrequently, the Financial Accounting Standards Board (FASB) promulgates new accounting standards that require the consolidated statement of operations to reflect the cumulative effect of a change in accounting principle.  We exclude these one-time adjustments because they do not reflect actual performance of the company for that period.
    * Impairment Losses -- We exclude the effect of impairment losses recorded because we believe that including them in EBITDA is not consistent with reflecting the ongoing performance of our remaining assets.  In addition, we believe that impairment charges are similar to gains and losses on dispositions and depreciation expense, both of which are also excluded from EBITDA.

Limitations on the Use of FFO per Diluted Share, EBITDA and Adjusted EBITDA
We calculate FFO per diluted share in accordance with standards established by NAREIT, which may not be comparable to measures calculated by other companies who do not use the NAREIT definition of FFO or calculate FFO per diluted share in accordance with NAREIT guidance. In addition, although FFO per diluted share is a useful measure when comparing our results to other REITs, it may not be helpful to investors when comparing us to non-REITs. EBITDA and Adjusted EBITDA, as presented, may also not be comparable to measures calculated by other companies. This information should not be considered as an alternative to net income, operating profit, cash from operations or any other operating performance measure calculated in accordance with GAAP. Cash expenditures for various long-term assets (such as renewal and replacement capital expenditures), interest expense (for EBITDA and Adjusted EBITDA purposes only) and other items have been and will be incurred and are not reflected in the EBITDA, Adjusted EBITDA and FFO per diluted share presentations. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statement of operations and cash flows include interest expense, capital expenditures, and other excluded items, all of which should be considered when evaluating our performance, as well as the usefulness of our non-GAAP financial measures. Additionally, FFO per diluted share, EBITDA and Adjusted EBITDA should not be considered as a measure of our liquidity or indicative of funds available to fund our cash needs, including our ability to make cash distributions. In addition, FFO per diluted share does not measure, and should not be used as a measure of, amounts that accrue directly to shareholders' benefit.

Comparable Hotel Operating Results

We present certain operating results for our full-service hotels, such as hotel revenues, expenses and adjusted operating profit, on a comparable hotel, or "same store," basis as supplemental information for investor's information. Our comparable hotel results present operating results for full-service hotels owned during the entirety of the periods being compared without giving effect to any acquisitions or dispositions, significant property damage or large scale capital improvements incurred during these periods. We present these comparable hotel operating results by eliminating corporate-level costs and expenses related to our capital structure, as well as depreciation and amortization. We eliminate corporate-level costs and expenses to arrive at property-level results because we believe property-level results provide investors with supplemental information into the ongoing operating performance of our hotels and the effectiveness of management in running our business on a property-level basis. We eliminate depreciation and amortization because, even though depreciation and amortization are property-level expenses, these non-cash expenses, which are based on historical cost accounting for real estate assets, implicitly assume that the value of real estate assets diminishes predictably over time. As noted earlier, because real estate values have historically risen or fallen with market conditions, many industry investors have considered presentation of operating results for real estate companies that use historical cost accounting to be insufficient by themselves.

As a result of the elimination of corporate-level costs and expenses and depreciation and amortization, the comparable hotel operating results we present do not represent our total revenues, expenses or operating profit and should not be used to evaluate our performance as a whole. Management compensates for these limitations by separately considering the impact of these excluded items to the extent they are material to operating decisions or assessments of our operating performance. Our consolidated statements of operations include such amounts, all of which should be considered by investors when evaluating our performance.
We present these hotel operating results on a comparable hotel basis because we believe that doing so provides investors and management with useful information for evaluating the period-to-period performance of our hotels and facilitates comparisons with other hotel REITs and hotel owners. In particular, these measures assist management and investors in distinguishing whether increases or decreases in revenues and/or expenses are due to growth or decline of operations at comparable hotels (which represent the vast majority of our portfolio) or from other factors, such as the effect of acquisitions or dispositions. While management believes that presentation of comparable hotel results is a "same store" supplemental measure that provides useful information in evaluating the ongoing performance of the Company, this measure is not used to allocate resources or to assess the operating performance of each of these hotels, as these decisions are based on data for individual hotels and are not based on comparable hotel results. For these reasons, we believe that comparable hotel operating results, when combined with the presentation of GAAP operating profit, revenues and expenses, provide useful information to investors and management.

                          HOST MARRIOTT CORPORATION
                       Consolidated Balance Sheets (a)
                (unaudited, in millions, except share amounts)
                                                      March 26,   December 31,
                                                        2004          2003
                         ASSETS
    Property and equipment, net                      $   7,020     $   7,085
    Assets held for sale                                    --            73
    Notes and other receivables                             54            54
    Due from managers                                       79            62
    Investments in affiliates (c)                           86            74
    Other                                                  383           364
    Restricted cash                                        598           116
    Cash and cash equivalents                              526           764
                Total assets                         $   8,746     $   8,592
 

             LIABILITIES AND SHAREHOLDERS' EQUITY
    Debt
        Senior notes, including $490 million,
         net of discount, of Exchangeable
         Senior Debentures (b)                       $   3,459     $   3,180
        Mortgage debt                                    2,109         2,205
        Exchangeable Subordinated Debentures (c)           492            --
        Other                                              100           101
                Total debt                               6,160         5,486
    Accounts payable and accrued expenses                  121           108
    Liabilities associated with assets
     held for sale                                          -              2
    Other                                                  151           166
                Total liabilities                        6,432         5,762

    Interest of minority partners of
     Host Marriott L.P.                                    124           130
    Interest of minority partners of other
     consolidated partnerships                              94            89
    Company-obligated mandatorily redeemable
     exchangeable preferred securities of a
     subsidiary whose sole assets are exchangeable
     subordinated debentures due 2026
     ("Exchangeable Preferred Securities") (c)              --           475

    Shareholders' equity
        Cumulative redeemable preferred stock
         (liquidation preference $354 million),
         50 million shares authorized; 14.1
         million shares issued and outstanding             339           339
        Common stock, par value $.01, 750 million
         shares authorized; 321.6 million shares
         and 320.3 million shares issued and
         outstanding, respectively                           3             3
        Additional paid-in capital                       2,619         2,617
        Accumulated other comprehensive income              26            28
        Deficit                                           (891)         (851)
                Total shareholders' equity               2,096         2,136
                    Total liabilities and
                     shareholders' equity            $   8,746     $   8,592
 

    (a) Our consolidated balance sheet as of March 26, 2004 has been prepared without audit.  Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted.  The consolidated balance sheets should be read in conjunction with the consolidated financial statements and notes thereto included in the Annual Report on Form 10-K.
    (b) Amount includes $494 million in 7 7/8% Series B senior notes redeemed on April 15, 2004.
    (c) We adopted Financial Interpretation No. 46 "Consolidation of Variable Interest Entities" (FIN 46) in 2003.  Under FIN 46, our limited purpose trust subsidiary that was formed to issue trust-preferred securities (the Exchangeable Preferred Securities Trust) was accounted for on a consolidated basis as of December 31, 2003 since we were the primary beneficiary under FIN 46.

        In December 2003, the FASB issued a revision to FIN 46, which we refer
        to as FIN 46R. Under FIN 46R, we are not the primary beneficiary and
        we are required to deconsolidate the accounts of the Exchangeable
        Preferred Securities Trust.  We adopted the provisions of FIN 46R on
        January 1, 2004.  As a result, we recorded the $492 million in
        debentures (the Exchangeable Subordinated Debentures) issued by the
        Exchangeable Preferred Securities Trust and eliminated the $475
        million of Exchangeable Preferred Securities that were previously
        classified in the mezzanine section of our consolidated balance sheet.
        The difference of $17 million is our investment in the Exchangeable
        Preferred Securities Trust, which is included in "Investments in
        affiliates" on our consolidated balance sheet.  Additionally, we
        classified the related dividend payment of approximately $7 million as
        interest expense.  We elected not to restate prior periods and the
        adoption of FIN 46R had no effect on our net loss, loss per diluted
        share or financial covenants under our senior notes indenture.

                          HOST MARRIOTT CORPORATION
                  Consolidated Statements of Operations (a)
              (unaudited, in millions, except per share amounts)
                                                           Quarter ended
                                                      March 26,     March 28,
                                                        2004          2003
    Revenues
        Rooms                                         $    473      $    452
        Food and beverage                                  257           242
        Other                                               50            52
            Total hotel sales                              780           746
        Rental income (b)                                   29            27
        Other income                                        -              2
            Total revenues                                 809           775

    Expenses
        Rooms                                              119           111
        Food and beverage                                  190           180
        Hotel departmental expenses                        216           206
        Management fees                                     32            32
        Other property-level expenses (b)                   69            70
        Depreciation and amortization                       83            84
        Corporate expenses                                  13            13
            Total expenses                                 722           696

    Operating profit                                        87            79
    Interest income                                          3             3
    Interest expense, including interest expense
     for the Exchangeable Subordinated
     Debentures in 2004 (c)                               (118)         (110)
    Net gains on property transactions                       1             1
    Minority interest income (expense)                      (3)            1
    Equity in losses of affiliates                          (5)           (6)
    Dividends on Exchangeable Preferred
     Securities (c)                                         --            (7)

    Loss before income taxes                               (35)          (39)
    Benefit from income taxes                                3             4

    Loss from continuing operations                        (32)          (35)
    Income from discontinued operations (d)                  1             1

    Net loss                                               (31)          (34)

    Less:  dividends on preferred stock                     (9)           (9)

    Net loss available to common shareholders          $   (40)      $   (43)

    Basic and diluted loss per common share            $  (.12)      $  (.16)
 

    (a) Our consolidated statements of operations for the quarter ended March 26, 2004 and March 28, 2003 have been prepared without audit.  Certain information and footnote disclosures normally included in financial statements presented in accordance with GAAP have been omitted.  The consolidated statements of operations should be read in conjunction with the consolidated financial statements and notes thereto included in our Annual Report on Form 10-K.
    (b) Rental income and expense are as follows:

                                                         Quarter ended
                                                   March 26,        March 28,
                                                     2004             2003

       Rental income
          Full-service                            $     12         $     10
          Limited service and office buildings          17               17
                                                  $     29         $     27
       Rental and other expenses (included
        in other property-level expenses)
          Full-service                            $      2         $      1
          Limited service and office buildings          18               17
                                                  $     20         $     18
 

    (c) See discussion of new accounting standard in footnote (b) to the consolidated balance sheet.  Interest expense for the first quarter of 2004 also includes approximately $12 million for the payment of call premiums and the acceleration of deferred financing costs on debt redemptions and repayments.
    (d) Reflects the results of operations and gain (loss) on sale, net of the related income tax, for six properties sold in the first quarter of 2004 and eight properties sold in 2003.
 
 

                          HOST MARRIOTT CORPORATION
                       Earnings (Loss) per Common Share
              (unaudited, in millions, except per share amounts)
                                           Quarter ended March 26, 2004
                                     Income (loss)     Shares       Per Share
                                      (Numerator)   (Denominator)    Amount

    Net loss                            $   (31)        321.0       $   (.09)
      Dividends on preferred stock           (9)           --           (.03)
    Basic and diluted loss available
     to common shareholders
     per share (a)                      $   (40)        321.0       $   (.12)
 

                                           Quarter ended March 28, 2003
                                     Income (loss)     Shares       Per Share
                                      (Numerator)   (Denominator)    Amount

    Net loss                            $   (34)        264.3       $   (.13)
      Dividends on preferred stock           (9)          --            (.03)
    Basic and diluted loss available
     to common shareholders
     per share (a)                      $   (43)        264.3       $   (.16)
 

    (a) Basic earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders by the weighted average number of shares of common stock outstanding.  Diluted earnings (loss) per common share is computed by dividing net income (loss) available to common shareholders as adjusted for potentially dilutive securities, by the weighted average number of shares of common stock outstanding plus other potentially dilutive securities.  Dilutive securities may include shares granted under comprehensive stock plans, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interests to common OP Units and the Exchangeable Subordinated Debentures.  No effect is shown for any securities that are anti-dilutive.
 
 

HOST MARRIOTT CORPORATION
                       Comparable Hotel Operating Data
                       Comparable Hotels by Region (a)
                                 (unaudited)
                     As of March 26, 2004       Quarter ended March 26, 2004

                                                           Average
                       No. of     No. of     Average      Occupancy
                     Properties   Rooms     Daily Rate   Percentages   RevPAR

    Pacific              21       11,302    $  152.68       72.3%   $  110.44
    Florida              12        7,337       184.38        79.2      145.95
    Atlanta              13        5,940       142.25        69.7       99.15
    Mid-Atlantic         10        6,721       173.34        70.6      122.46
    South Central         8        5,307       137.73        77.9      107.24
    North Central        13        4,923       111.85        60.9       68.13
    DC Metro             11        4,296       152.26        67.3      102.53
    Mountain              8        3,313       117.43        65.5       76.91
    International         5        1,952       115.85        70.1       81.18
    New England           7        3,413       126.08        60.6       76.43
        All Regions     108       54,504       149.41        70.7      105.63
 

                       Comparable Hotels by Region (a)

                                Quarter ended March 28, 2003

                                          Average                    Percent
                            Average      Occupancy                  Change in
                          Daily Rate    Percentages      RevPAR       RevPAR

    Pacific               $  158.47        66.3%      $  105.06        5.1%
    Florida                  182.14        76.8          139.84        4.4
    Atlanta                  143.84        69.0           99.25       (0.1)
    Mid-Atlantic             169.71        69.7          118.27        3.5
    South Central            139.93        79.2          110.85       (3.3)
    North Central            113.44        59.6           67.60        0.8
    DC Metro                 142.84        66.3           94.75        8.2
    Mountain                 115.19        65.1           75.00        2.6
    International            105.45        67.4           71.05       14.3
    New England              129.98        60.6           78.82       (3.0)
      All Regions            149.18        68.8          102.58        3.0
 

    (a) See the introductory notes to financial information for a discussion of reporting periods and comparable hotel results.
 
 

                          HOST MARRIOTT CORPORATION
                            Hotel Operational Data
                   Schedule of Comparable Hotel Results (a)
              (unaudited, in millions, except per share amounts)
                                                          Quarter ended
                                                     March 26,      March 28,
                                                       2004           2003
 

    Number of hotels                                     108            108
    Number of rooms                                   54,504         54,504
    Percent change in Comparable Hotel RevPAR           3.0%             --
    Operating profit margin under GAAP (b)            10.75%         10.19%
    Comparable hotel adjusted operating
     profit margin (c)                                22.59%         23.16%

    Comparable hotel sales
      Room                                          $    458       $    444
      Food and beverage                                  250            238
      Other                                               49             52
        Comparable hotel sales (d)                       757            734

    Comparable hotel expenses
      Room                                               114            108
      Food and beverage                                  182            175
      Other                                               31             30
      Management fees, ground rent and other costs       259            251
        Comparable hotel expenses (e)                    586            564

    Comparable Hotel Adjusted Operating Profit           171            170

      Non-comparable hotel results, net (f)               13              4
      Office building and limited service
       properties, net (g)                                (1)            --
      Other income                                        --              2
      Depreciation and amortization                      (83)           (84)
      Corporate expenses                                 (13)           (13)

    Operating Profit                                $     87       $     79
 

    (a) See the introductory notes to the financial information for discussion of non-GAAP measures, reporting periods and comparable hotel results.
    (b) Operating profit margin under GAAP is calculated as the operating profit divided by the total revenues per the consolidated statements of operations.
    (c) Comparable hotel adjusted operating profit margin is calculated as the comparable hotel adjusted operating profit divided by the comparable hotel sales per the schedule above.
    (d) The reconciliation of total revenues per the consolidated statements
        of operations to the comparable hotel sales is as follows (in
        millions):

                                                          Quarter ended
                                                      March 26,     March 28,
                                                        2004          2003

    Revenues per the consolidated
     statements of operations                        $    809      $    775
    Non-comparable hotel sales                            (35)          (16)
    Hotel sales for the property for which we
     record rental income, net                             11            12
    Rental income for office buildings and
     limited service hotels                               (17)          (17)
    Other income                                           --            (2)
    Adjustment for hotel sales for comparable
     hotels to reflect Marriott's fiscal
     year for Marriott-managed hotels                     (11)          (18)
        Comparable hotel sales                       $    757      $    734
 

    (e) The reconciliation of operating costs per the consolidated statements of operations to the comparable hotel expenses is as follows (in millions):

                                                          Quarter ended
                                                     March 26,     March 28,
                                                       2004          2003

    Operating costs and expenses per the
     consolidated statements of operations          $    722      $    696
    Non-comparable hotel expenses                        (26)          (18)
    Hotel expenses for the property for
     which we record rental income                        14            15
    Rent expense for office buildings and
     limited service hotels                              (18)          (17)
    Adjustment for hotel expenses for comparable
     hotels to reflect Marriott's fiscal year
     for Marriott-managed hotels                         (10)          (15)
    Depreciation and amortization                        (83)          (84)
    Corporate expenses                                   (13)          (13)
        Comparable hotel expenses                   $    586      $    564
 

    (f) Non-comparable hotel results, net includes the following items: (i) the results of operations of our non-comparable hotels whose operations are included in our consolidated statements of operations as continuing operations and (ii) the difference between comparable hotel adjusted operating profit, which reflects 84 days of operations, and the operating results included in the consolidated statements of operations, which reflects 86 days and 87 days, respectively.
    (g) Represents rental income less rental expense for limited service properties and office buildings.  For detail, see footnote (b) to the consolidated statements of operations.
 
 

                          HOST MARRIOTT CORPORATION
                      Other Financial and Operating Data
                  (unaudited, in millions, except per share)
                                                     March 26,    December 31,
                                                       2004          2003
    Equity
      Common shares outstanding                        321.6         320.3
      Common shares and minority held common
       OP Units outstanding                            344.6         343.8
      Preferred OP Units outstanding                     .02           .02
      Class A Preferred shares outstanding               4.1           4.1
      Class B Preferred shares outstanding               4.0           4.0
      Class C Preferred shares outstanding               6.0           6.0
      Class D Preferred shares outstanding               .03           .03

    Security pricing
        Common (a)                                 $   12.26     $   12.32
        Class A Preferred (a)                      $   27.09     $   26.74
        Class B Preferred (a)                      $   26.72     $   27.00
        Class C Preferred (a)                      $   27.99     $   27.26
        Exchangeable Preferred Securities (b)      $   50.69     $   51.00
        Exchangeable Senior Debentures (c)         $  997.50     $      --

    Dividends per share
      Common                                       $      --     $      --
      Class A Preferred                            $    .625     $    2.50
      Class B Preferred                            $    .625     $    2.50
      Class C Preferred                            $    .625     $    2.50
      Class D Preferred                            $    .625     $    1.88

    Debt
      Percentage of fixed rate debt                      86%           85%
      Weighted average interest rate (d)                7.1%          7.7%
      Weighted average debt maturity (d)           6.8 years     5.5 years
      Credit facility, outstanding balance
       (capacity of $250 million)                  $      --     $      --

    Other Financial Data
      Construction in progress                     $      75     $      56
 

                                                        Quarter Ended
                                                   March 26,     March 24,
                                                     2004          2003
    Hotel Operating Statistics for All
     Full-Service Properties
      Average Daily Rate                           $  150.41     $  145.90
      Average Occupancy                                70.8%         68.7%
      RevPAR                                       $  106.42     $  100.20
 

    (a) Share prices are the closing price on the consolidated balance sheet date, as reported by the New York Stock Exchange, for the common and preferred stock.
    (b) Market price as of March 26, 2004 as quoted by Bloomberg L.P. As of March 26, 2004, we have reclassified these securities to debt on our consolidated balance sheet. See footnote (b) to the consolidated balance sheet.
    (c) Market price as of March 26, 2004 as quoted by Bloomberg L.P.  Quoted price reflects the price of a single $1,000 debenture, which is exchangeable for common stock upon the incurrence of certain events.
    (d) Amounts include the Exchangeable Subordinated Debentures in 2004.  See footnote (b) to the consolidated balance sheet.  Excluding the Exchangeable Subordinated Debentures, our weighted average interest rate was 7.1% and our weighted average debt maturity was 5.4 years.
 
 

                          HOST MARRIOTT CORPORATION
     Reconciliation of Net Income (Loss) Available to Common Shareholders
                  to Funds From Operations per Diluted Share
              (unaudited, in millions, except per share amounts)

                               Quarter ended             Quarter ended
                               March 26, 2004            March 28, 2003

                           Income         Per Share  Income          Per Share
                           (loss)  Shares  Amount    (loss)  Shares   Amount

    Net loss available to
     common shareholders  $ (40)    321.0  $ (.12)  $ (43)    264.3   $ (.16)
    Adjustments:
      Gains on
       dispositions, net     (2)       --      --      (1)       --       --
      Depreciation and
       amortization          83        --     .25      88        --      .33
      Partnership
       adjustments            5        --     .02       2        --      .01
      FFO of minority
       partners of Host
       LP (a)                (3)       --    (.01)     (5)       --     (.02)
    Adjustments for
     dilutive securities:
      Assuming distribution
       of common shares
       granted under the
       comprehensive stock
       plan less shares
       assumed purchased
       at average market
       price                 --       3.3    (.01)     --       2.5     (.01)
      Assuming conversion
       of Exchangeable
       Subordinated
       Debentures            --        --      --      --        --       --
      Assuming conversion
       of minority OP
       Units issuable        --        --      --      --        --       --
    FFO per diluted
     share (b)(c)         $  43     324.3  $  .13   $  41     266.8   $  .15
 

    (a) Represents FFO attributable to the minority interest in Host LP.
    (b) FFO per diluted share in accordance with NAREIT is adjusted for the effects of dilutive securities.  Dilutive securities may include shares granted under comprehensive stock plans, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interest to common OP Units and the Exchangeable Subordinated Debentures.  No effect is shown for securities if they are anti-dilutive.
    (c) Amount includes a reduction of approximately $12 million, or $.04 of FFO per diluted share, related to charges for call premiums and the acceleration of deferred financing costs related to the repayment of debt.
 
 

                          HOST MARRIOTT CORPORATION
                Reconciliation of Net Income (Loss) to EBITDA
                             and Adjusted EBITDA
                           (unaudited, in millions)
                                                        Quarter ended
                                                   March 26,       March 28,
                                                     2004            2003

    Net loss                                      $    (31)       $    (34)
      Interest expense (a)                             118             110
      Dividends on Exchangeable Preferred
       Securities (a)                                   --               7
      Depreciation and amortization                     83              84
      Income taxes                                      (3)             (4)
      Discontinued operations (b)                       --               5
    EBITDA (c)                                         167             168
      Gains and losses on dispositions and
       related debt extinguishments                     (2)             (1)
      Consolidated partnership adjustments:
        Minority interest (income) expense               3              (1)
        Distributions to minority interest
         partners of Host LP and other
         minority partners                              (1)             (1)
     Equity investment adjustments:
        Equity in losses of affiliates                   5               6
        Distributions received from equity
         investments                                    --               1
    Adjusted EBITDA(c)                            $    172        $    172
 

    (a) Interest expense in 2004 includes approximately $7 million previously classified as dividends on Exchangeable Preferred Securities.  See footnote (b) to the consolidated balance sheets for further detail.
    (b) Reflects the interest expense, depreciation and amortization and income taxes included in discontinued operations.
    (c) See the introductory notes to the financial information for discussion of non-GAAP measures.
 
 

HOST MARRIOTT CORPORATION
Reconciliation of Net Loss Available to Common Shareholders to Funds From Operations per Diluted Share for Second Quarter 2004 Forecasts (a)
# (unaudited, in millions, except per share amounts)
                                                    Low-end of Range
                                              Second Quarter 2004 Forecast
                                                                     Per Share
                                           Income (Loss)   Shares     Amount
    Forecast net loss available to common shareholders      $    (26)     321.7     $    (.08)
    Adjustments:
      Depreciation and amortization               83         --           .26
      Gain on dispositions, net                   (1)        --            --
      Partnership adjustments                      4         --           .01
      FFO of minority partners of
       Host LP (b)                                (4)        --          (.01)
    Adjustment for dilutive
     securities: (c)
      Assuming distribution of common
       shares granted under the
       comprehensive stock plan less
       shares assumed purchased at
       average market price                       --        3.3          (.01)
    FFO per diluted share (d)               $     56      325.0     $     .17
 

                                                   High-end of Range
                                              Second Quarter 2004 Forecast
                                                                     Per Share
                                           Income (Loss)   Shares     Amount
    Forecast net loss available to common shareholders    $    (18)     321.7      $   (.06)
    Adjustments:
      Depreciation and amortization               83         --           .26
      Gain on dispositions, net                   (1)        --            --
      Partnership adjustments                      5         --           .01
      FFO of minority partners of
       Host LP (b)                                (5)        --          (.01)
    Adjustment for dilutive
     securities: (c)
      Assuming distribution of common
       shares granted under the
       comprehensive stock plan less
       shares assumed purchased at
       average market price                       --        3.3            --
    FFO per diluted share (d)               $     64      325.0       $   .20
 

    See the notes following the table reconciling net loss to EBITDA and
    Adjusted EBITDA for full year 2004 forecasts.
 

                          HOST MARRIOTT CORPORATION
        Reconciliation of Net Loss Available to Common Shareholders to
   Funds From Operations per Diluted Share for Full Year 2004 Forecasts (a)
              (unaudited, in millions, except per share amounts)

                                                    Low-end of Range
                                                Full Year 2004 Forecast
                                                                     Per Share
                                           Income (Loss)   Shares     Amount
    Forecast net loss available to common shareholders  $    (87)     323.3      $   (.27)
    Adjustments:
      Depreciation and amortization              359         --          1.11
      Gain on dispositions, net                  (81)        --          (.25)
      Partnership adjustments                     22         --           .06
      FFO of minority partners of
       Host LP (b)                               (14)        --          (.04)
    Adjustment for dilutive
     securities: (c)
      Assuming distribution of common
       shares granted under the
       comprehensive stock plan less
       shares assumed purchased at
       average market price                       --        3.3            --
    FFO per diluted share (d)               $    199      326.6      $    .61
 

                                                   High-end of Range
                                                Full Year 2004 Forecast
                                                                     Per Share
                                           Income (Loss)   Shares     Amount
    Forecast net loss available to common shareholders    $    (56)     323.3         $(.17)
    Adjustments:
      Depreciation and amortization              359         --          1.11
      Gain on dispositions, net                  (81)        --          (.25)
      Partnership adjustments                     24         --           .07
      FFO of minority partners of
       Host LP (b)                               (16)        --          (.05)
    Adjustment for dilutive
     securities: (c)
      Assuming distribution of common
       shares granted under the
       comprehensive stock plan less
       shares assumed purchased at
           average market price                   --        3.3            --
    FFO per diluted share (d)               $    230      326.6      $    .71
 

    See the notes following the table reconciling net loss to EBITDA and
    Adjusted EBITDA for full year 2004 forecasts.
 

                          HOST MARRIOTT CORPORATION
           Reconciliation of Net Loss to EBITDA and Adjusted EBITDA
                       for Full Year 2004 Forecasts (a)
                           (unaudited, in millions)
                                                           Full Year 2004
                                                       Low-end        High-end
                                                      of Range        of Range

    Net Loss                                         $    (52)        $   (21)
      Interest expense (e)                                480             480
      Depreciation and amortization                       361             361
      Income taxes                                         (6)             (4)
    EBITDA                                                783             816
      Gains (losses) on dispositions                      (81)            (81)
      Consolidated partnership adjustments:
        Minority interest (income) expense                  3               3
        Distributions to minority interest
         partners of Host LP and other minority
         partners                                          (2)             (3)
      Equity investment adjustments:
        Equity in losses of affiliates                     20              18
        Distributions received from
         equity investments                                 2               2
    Adjusted EBITDA                                      $725            $755

    (a) The amounts shown in these reconciliations are based on management's estimate of operations for 2004.  These tables are forward-looking and as such contain assumptions by management based on known and unknown risks, uncertainties and other factors which may cause the actual transactions, results, performance or achievements to be materially different from any future transactions, results, performance or achievements expressed or implied by this table.  General economic conditions, competition and governmental actions will affect future transactions, results, performance and achievements.  Although we believe the expectations reflected in this reconciliation are based upon reasonable assumptions, we can give no assurance that the expectations will be attained or that any deviations will not be material.

        For purposes of preparing the full year and second quarter 2004
        forecasts, we have made the following assumptions:
        * RevPAR will increase between 4% and 6% for the full year and increase between 5% and 7% for the second quarter for the low and high ends of the forecasted ranges, respectively.
        * Comparable hotel adjusted operating profit margins will remain unchanged and increase 50 basis points for the full year and will decrease 10 basis points and increase 30 basis points for the second quarter for the low and high ends of the forecasted ranges, respectively.
        * $450 million of hotels will be sold during 2004.
        * $400 million of acquisitions will be made during 2004.
        * $700 million of debt will be redeemed or repaid for the full year ($300 million of which was redeemed or repaid in the first quarter and $65 million of which was redeemed in the second quarter) with the proceeds from asset sales and the World Trade Center settlement.  In addition, $494 million of debt was repaid with the net proceeds from the issuance of the Exchangeable Senior Debentures, as well as available cash in the second quarter.  Charges totaling $54 million, or $.16 of FFO per diluted share, in call premiums and the acceleration of deferred financing costs associated with the debt repayments will be incurred in the full year and $30 million, or $.09 of FFO per diluted share, in the second quarter.
        * Fully diluted shares will be 326.6 million and 325.0 million for the full year and second quarter, respectively.

    (b) Represents FFO attributable to the minority interests in Host LP.
    (c) These shares are dilutive for purposes of the FFO per diluted share calculation, yet are anti-dilutive for the purposes of the earnings per share calculation.  This is due to the net loss that is forecasted for 2004 compared to net earnings for FFO for the year.
    (d) FFO per diluted share in accordance with NAREIT is adjusted for the effects of dilutive securities.  Dilutive securities may include shares granted under comprehensive stock plans, those preferred OP Units held by minority partners, other minority interests that have the option to convert their limited partnership interest to common OP Units and the Exchangeable Preferred Securities.  No effect is shown for securities if they are anti-dilutive.
    (e) Interest expense in 2004 includes amounts previously classified as dividends on Exchangeable Preferred Securities.  See footnote (b) to the consolidated balance sheets for further detail.

Host Marriott is a Fortune 500 lodging real estate company that currently owns or holds controlling interests in 112 upscale and luxury hotel properties primarily operated under premium brands, such as Marriott, Ritz-Carlton, Hyatt, Four Seasons, Westin and Hilton. 

This press release contains forward-looking statements within the meaning of federal securities regulations. Forward-looking statements are not guarantees of future performance and involve known and unknown risks, uncertainties and other factors which may cause the actual results to differ materially from those anticipated at the time the forward-looking statements are made.

###

Contact:
Host Marriott Corporation
www.hostmarriott.com
Also See Host Marriott Corporation Reports 4th Qtr Net Income of $150 million Compared to a net loss of $3 million in 4th Qtr 2002; Results Significantly Affected by Gain of $212 million from the World Trade Center Hotel Insurance Settlement / Hotel Operating Statistics / February 2004
Host Marriott Reports Loss of $43 million Compared with Loss of $8 million in Year-ago 1st Quarter; Forecasts a Loss for the Full Year / Hotel Operational Data / April 2003
Second Largest Embassy Suites Opens, 455-Suite Property Anchors $1.5 Billion Multi-Use Complex in Chicago / Sept 2001


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