BETHESDA, Md., July 31, 2020 — Host Hotels & Resorts, Inc. (NYSE: HST) (the “Company”), the nation’s largest lodging real estate investment trust (“REIT”), today announced results for the second quarter of 2020.
James F. Risoleo, President and Chief Executive Officer, said, “I am incredibly proud of Host’s swift and decisive response to the challenging operating environment we faced in the second quarter. We significantly reduced our monthly hotel-level loss from April to June by working with our operators to reopen 19 hotels in a socially and financially responsible manner while continuing to carefully control expenses. Our total portfolio grew average occupancy by 380 basis points and improved average room rates by over 50% from April through June. As importantly, we worked with our supportive lending partners to successfully amend our $2.5 billion credit agreement and achieved outstanding terms that preserve the Company’s liquidity while retaining our flexibility to capitalize on value-enhancing investment opportunities during this period of extreme dislocation.”
Risoleo continued, “Although it remains difficult to estimate the timing or magnitude of an economic recovery, we are continuing to take actions to strengthen our business to achieve our key near-term objectives, including improving cash flow and achieving breakeven EBITDA at our hotels. We are working with our operators to drive occupancy and increase revenues while redefining our operating model to generate higher levels of profitability at lower levels of occupancy. As we rise to the unprecedented challenge facing the travel industry today, our hearts and minds remain with all those affected by COVID-19, as well as with the healthcare workers who are making tremendous sacrifices to help save lives and end this crisis.”
- As of July 30, 2020, re-opened 19 of the 35 hotels that had suspended operations as of May 6, 2020.
- Improved average occupancy by 380 basis points, from 6.9% in April to 10.7% in June 2020.
- Improved average room rate by over 50%, from $129 in April to $194 in June 2020.
UPDATE ON COVID-19 RESPONSE
In response to the COVID-19 pandemic, the Company and its hotel operators have prioritized preserving financial liquidity and ensuring that its hotels are well positioned for recovery. Actions by the Company in support of these priorities include:
Preserving financial liquidity:
- Reduced portfolio-wide hotel operating costs by approximately 70% in the second quarter compared to the prior year, by suspending operations at certain hotels, furloughs of hotel employees and scaling back operations.
- Reduced hotel labor costs significantly due to the furlough of up to 80% of hotel employees who received healthcare benefits and special pay of $45 million in the second quarter. The Company accrued $35 million of these second-quarter costs in the first quarter and $32 million of these third-quarter costs in the second quarter.
Balance Sheet, Capital Allocation and Expense Management
- Amended the credit agreement governing the $1.5 billion revolving credit facility and two $500 million term loans in June 2020, while preserving the Company’s flexibility in making acquisitions and raising capital, subject to certain restrictions. Additional detail on the Company’s second quarter covenant levels is available in the Second Quarter 2020 Supplemental Financial Information available on the Company’s website at www.hosthotels.com.
- Suspended the quarterly dividend and stock repurchases.
- Continue to expect reductions in corporate expenses for the full year of 10-15% compared to the prior year. Corporate expenses in the second quarter were unchanged from the prior year due to timing of certain expenses.
Positioning for recovery:
- Continued to take advantage of reduced demand to complete Marriott transformational capital program and other ROI projects. The Company believes the renovations will position these hotels to capture additional revenue during a potential economic recovery.
- Continued to review operating costs at varying levels of occupancy with a focus on modernizing brand standards, streamlining operating departments and accelerating the adoption of cost-saving technology.
The impact of the COVID-19 pandemic on the Company remains fluid and a great deal of uncertainty surrounding the trends and duration of the COVID-19 pandemic remains. The Company, as well as its hotel managers, are monitoring developments on an ongoing basis and may take additional actions in response to future developments to reduce the impact to the Company’s stakeholders.