HST Q3 PREVIEW

HST should handily beat, as everyone knows, but the lack of a big forward guidance raise could disappoint

Host Hotels reports its 3rd quarter results on Oct 13th.  We are projecting $1,019MM of revenue, $159M of EBITDA and FFO of $0.13 - handily beating consensus numbers.  HST should modestly raise guidance for FY2010, which may imply in-line to slightly lower guidance for Q4.  We do think that the 3rd quarter will mark the last big beat and raise quarter. 

We’re below the street for most lodging company results starting in 2Q2011.  Our thesis is that the April-July period of 2010 benefitted from pent up demand and we've seen a sequential slowdown since July.  The seasonally adjusted dollar RevPAR figures for August and September support our thesis.  Q2 2011 RevPAR may actually turn negative.  Up until then, however, analysts' estimates look reasonable but full year 2011 looks high to us.

3Q2010 Detail:

*** Note our numbers aren’t same store

• Property revenue of $949MM
  •   Room revenues of $627MM growing 8.2% YoY
    • RevPAR up 10.8% YoY to $120.09
    • Occupancy at 74.6% and ADR at $161.09
  • Food and beverage revenues growing 6% YoY to $257MM
  • Other revenues up 3% YoY to $66MM
    • We assume lower cancellation and attrition fees negatively impact this quarter’s results by $5MM
  • Rental income of $20MM; $60MM of revenues from leased select service hotels & office buildings and a $10MM charge for hotel sales for property which HST records rental income
  • $741MM of property level expenses, broken out as follows:
    • $179MM of room expenses, amounting to a 6% YoY increase and a CostPAR increase of 2%
    • $213MM of food & beverage expenses, representing a 4% YoY increase
    • $271MM of hotel departmental expenses
    • 2% YoY increase in other property level expenses to $78MM, which equates to a 1.9% CostPAR
  • Management fees of $39MM, increasing 18% YoY
  • $169MM of property EBITDAR
  • Rental expense of $14MM; $61MM of expenses from leased select service hotels & office buildings and a $10MM credit for hotel sales for property which HST records rental income
  • Other stuff:
    • $24MM of corporate expense
    • $138MM of D&A
    • Net interest expense of $82MM
    • $13MM of taxes
    • 675MM share count  for FFO calc