Good morning, and welcome to the Host Hotels & Resorts Third Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Jaime Marcus, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Before we begin, please note that many of the comments made today are considered to be forward-looking statements under federal securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information, such as FFO, adjusted EBITDAre and comparable hotel level results. You can find this information, together with reconciliations to the most directly comparable GAAP information in yesterday's earnings press release, in our 8-K filed with the SEC and in the supplemental financial information on our website at hosthotels.com. With me on today's call are Jim Risoleo, President and Chief Executive Officer; and Sourav Ghosh, Executive Vice President and Chief Financial Officer. With that, I would like to turn the call over to Jim.

Thank you, Jaime, and thanks to everyone for joining us this morning. We continue to outperform our expectations in the third quarter, building on strong operating and financial results in the first half of 2025. In the third quarter, we delivered adjusted EBITDAre of $319 million a decrease of 3.3% over last year, and adjusted FFO per share of $0.35, which is down 2.8% compared to the third quarter of 2024. Year-to-date compared to 2024, adjusted EBITDAre and adjusted FFO per share were up 2.2% and 60 basis points respectively. The operational results discussed today refer to our 76 hotel comparable portfolio in 2025, which excludes the Alila Ventana Big Sur and the Don CeSar. Additionally, we have removed the Washington Marriott and Metro Center, which was sold in the third quarter, and the St. Regis Houston, which was held for sale as of the third quarter and is expected to be sold in the fourth quarter. Comparable hotel total RevPAR improved by 80 basis points compared to the third quarter of 2024, and comparable hotel RevPAR improved by 20 basis points, due to better-than-expected short-term transient demand pickup and higher rates across our portfolio. Comparable hotel EBITDA margin for the quarter declined by 50 basis points year-over-year to 23.9%, driven by expense increases in wages and benefits. Turning to business mix. RevPAR growth in the third quarter exceeded our expectations at our resort properties, driven by short-term leisure transient demand pickup and rate growth despite headwinds from transformational renovations, the Jewish holiday shift and lingering impacts from macroeconomic uncertainty. Transient revenue grew by 2%, driven by double-digit growth at our resorts. We saw particularly strong performance in Maui, San Francisco, New York and Miami. Digging into Maui, the leisure transient demand recovery continued. Maui's 20% RevPAR growth and 19%…

Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our third quarter operations, our updated 2025 guidance and our balance sheet. Starting with total revenue trends, comparable hotel total RevPAR growth continued to outpace RevPAR growth in the third quarter as both group and transient guests maintained elevated levels of out-of-room spend. Comparable hotel food and beverage revenue was flat in the quarter as growth in outlets offset declines in banquet and catering. Outlet revenue grew 6%, driven by resorts, particularly Maui, Phoenix and Orlando as well as the newly renovated View at the New York Marriott Marquis and Aviv at the 1 Hotel South Beach. Overall, outlet revenue per occupied room was up in the high single digits across our portfolio. Banquet revenue was down 4% as decreases in group room night volume outpaced increases in banquet and catering contribution per group room night. Additional headwinds to growth included a tough comparison from record banquet revenue in 2024 and planned renovation disruption this year. However, growth in banquet and catering contribution per group room night was up in the mid-single digits, driven by our hotels in Orlando, New York, Naples, Nashville, Chicago and Houston. Other revenue grew 7% in the third quarter as golf and spa revenues continued to grow. In fact, spa revenue was up double digits, driven by strength across the portfolio and continued tailwinds from recent spa renovations at our Westin Kierland and Ritz-Carlton, Amelia Island, a further indication that affluent consumers are continuing to prioritize spending on premium experiences. Shifting to business mix. Overall transient revenue was up approximately 2% compared to the third quarter of 2024, driven by higher rates and the continued growth of transient room nights at our resorts, led by Maui. During the…

We will now begin the question-and-answer session. [Operator Instructions] Our first question comes from the line of David Katz with Jefferies.

Look, a couple of things, and this is, I hope, the broad question, Jim and team, that you like to answer. But the asset sale during the quarter, the investments in what you've done and sort of the outperformance that we're seeing in the portfolio, it does suggest some differentiation of yourselves versus the group overall. Part one of the question is, can we take this to expect that there might be some more asset trading in the market based on what you're seeing? And second, how are you thinking broadly about valuation and other ways that you can capture a little differentiated value for hosts in the public market? I know there's a lot in there, but I'll take what you got.

I'll start, David, and then Sourav, feel free to jump in along the way. I'll answer your first question regarding the asset sales that we have completed year-to-date and the setup in the market generally for transactions. So on many occasions, both in meetings and on earnings calls, I've said that we will be opportunistic with our capital allocation when it comes to dispositions and acquisitions. And the 2 deals that we've already announced and provided metrics on this year, I think, are really strong indications of our ability to execute to sell the Washington Marriott Metro Center at 12.7x trailing 12 months EBITDA, a 6.5% cap rate, urban hotel is, I think, a solid read-through in many ways with respect to what sort of value is locked in this company. I mean that's not one of our best assets. And we're trading at 9.4x plus EBITDA, plus or minus, and we're able to execute on that deal at 12.7x. Come on, guys, where's the multiple? Let's go. And the same with the disposition of the Westin Kierland as well as when we're in a position to talk about it, I think you'll be pleased with the metrics on the St. Regis in Houston as well. We're not in a position to talk about that today. So we continue to test the market. We don't have to sell anything. I'll make that perfectly clear. We're sitting here with over $2 billion of liquidity today and a leverage ratio of 2.8x, a true differentiator, not only among lodging REITs, the only investment-grade balance sheet, but among REITs in general. It is truly a fortress balance sheet. And that leads to what we've been able to accomplish with the portfolio. We are -- we have a differentiated portfolio. I mean the performance…

Our next question will come from the line of Michael Bellisario with Baird.

Jim, my question is on CapEx. It kind of seems broadly that renovation returns have been coming down, but you've been bucking that trend. So I guess 2 parts. I guess, one, how are you picking the hotels and markets to invest in? And two, is it fair to assume that maybe you didn't buy back stock in the quarter because you see better returns on these transformational CapEx projects?

Sure, Mike. Yes, we obviously screen all of our assets to determine what assets we should be putting capital in and the level of CapEx that should be invested in any particular property. So as an example, the 4 new assets in the Marriott transformational capital program were decided upon after we, as a team, our design and construction group, our asset management group, our enterprise analytics group really looked at what sort of lift we believe that we could get through transformational renovations. And I do want to emphasize the word transformational because it's one thing to just do a rooms redo. That could be deemed to be somewhat defensive. You have to do it. But if we see an opportunity to completely reposition a property, including a new arrival experience, a new lobby, new F&B platform and at Kierland, we redid the spa and now we're doing the rest of the hotel. That is how our decision is made to allocate capital. And obviously, we work very collaboratively with our operators. We work collaboratively with Hyatt on the 6 assets that we selected and the scope of the renovation, and we work collaboratively with Marriott as well. So we're delighted that not only given our size and scale, but our relationships and our ability to perform has allowed us to, again, distinguish ourselves through the MTCP program, HTCP program and now MTCP2, where the operators support our capital investment. And I think that's really important to stay focused on. They support it through providing operating profit guarantees for anticipated disruption and enhanced owner priority returns. which gives us an opportunity to really kind of anchor the underwriting for the capital that we're putting into these assets. So we'll continue to do this going forward. It's the clearest line of sight we have to strong cash-on-cash returns in this environment. And yes, you're absolutely right. We didn't buy back stock in the quarter. We bought back $200 million of stock this year. But capital allocation in our mind is a decision of where are we going to drive the greatest long-term value for our shareholders. And we believe investing in our assets, at least at this point in time with our stock price not disrupted is where we will drive the better returns. We bought back $200 million worth of stock, and there is a methodology to determine what the IRR is on those stock buybacks, it's what you can reissue the stock price at down the road over a period of time. Well, the multiple hasn't moved anything. So we're still where we were, and it's very difficult to see a clear line of sight to underwrite a strong IRR on a stock buyback when we have a clear line of sight to investing in our assets.

Our next question will come from the line of Cooper Clark with Wells Fargo.

Maui continues to have strong momentum and appreciate the early color on occupancy and out-of-room spend. Could you provide any early thoughts and color about how we should be thinking about the pace of a recovery into '26 from an earnings perspective within the context of the $110 million guide implied in '25 guidance and then the strong '26 group pace?

Sure. So Maui continues to recover really well. Our total group revenue pace for 2026 is a positive 13% versus same time last year. Just to put this into perspective in terms of group room nights, we already have 67,000 group room nights on the books for 2026. And last year, at the same time, we had 55,000 on the books. Compare that to back in 2019, at the same time, we had 73,000 group room nights on the books. So in other words, we're effectively 92% of the way already there relative to 2019 at a pretty attractive rate. So we feel pretty confident that Maui is going to continue to recover. In terms of exactly how much incremental EBITDA we expect in addition to the $110 million of EBITDA that we are forecasting for this year. Obviously, we are still very preliminary reviews of the budgets. We don't have an exact number, but we are very hopeful that it's going to be positive. And it's going to be -- right now, I'll just say it's a wide range between the $110 million and the $160 million that we talked about. So hopefully, we will make incremental progress next year, but things are looking really, really good as it relates to group pace for 2026.

Our next question will come from the line of Chris Darling with Green Street.

Jim, you alluded to feeling good about Host setup for 2026. I'm hoping you could elaborate just in an anecdotal fashion. And specifically, I'm thinking about some of the lower-hanging items across your portfolio, whether it be Maui, the Don, Turtle Bay, maybe there's others that you'd call out. So any way you could speak to that and perhaps quantify to some extent as well?

Sure. Happy to, Chris. We have in a number of our key markets, we are seeing really strong total group revenue pace for 2026. Sourav touched on Maui as one example. San Francisco is another one. I mean San Francisco is recovering really well. It's recovering nicely. 2026 total group revenue pace for San Fran is up over 20% for our portfolio. And group rate is pacing up 10%. Group room nights are pacing up 3%. So we feel really good about that. And the 26 citywide group room night pace is up 7% to last year and following 54% increase in 2025. So San Fran has, I think, turned the corner. It really has. The mayor and the President of the San Francisco Travel are really out there taking the lead for positive change for the city. Violent crime is down 22% in the city and property crime is down 25%. So we're optimistic about San Francisco. And we also have Super Bowl in San Francisco as well next year. And the other -- the broad positive for our portfolio, and I'll give you some color on a couple of other major markets. But we have 10 markets where we're going to see benefits from the World Cup as well. And that's going to provide a big positive for us. As an example, I think in New York, World Cup should be very positive for the market, hosting a total of 8 games, including the final. So it's going to bring additional tourism to New York City as well. Washington, D.C. is another bright star for us next year. Total group revenue pace is up 13%. So we feel good about that. Nashville, total group revenue pace is up 26%. So there are a lot of really positive things out there on the group side of the business. And we're about 36% group. So it's meaningful to us, absolutely. Our total group revenue pace for the year at this point is up 5%, mid-single digits. We'll be watching that very closely to see how it evolves over the next couple of months. But with all that said, we do believe that the assets that we have, the fact that we have strong geographic diversification, we have no one market that delivers more than 8% of our EBITDA, and that's been very thoughtful as we've assembled this portfolio and as we run the business and the quality of the assets we have and the -- where customers are staying today and where they're spending money, the fact that the affluent customer continues to prioritize premium experiences, and we see it not only quarter-by-quarter or year-over-year, we see it weekly. We track our properties weekly to see what is happening with RevPAR. And we're not seeing any slowdown, Chris. I'll tell you that. We just continue to see the affluent customer spend money. So that's what gives us confidence that we're set up well for 2026.

Our next question will come from the line of Aryeh Klein with BMO Capital Markets.

On the group side, near-term group bookings sounds like they've been maybe a touch softer. Hoping you can provide a little bit more color on that and maybe how broad-based that might be across the business verticals? And any change in cancellation or attrition or lead volumes more broadly from a forward booking standpoint?

Aryeh, there hasn't really been any sort of meaningful cancellation besides maybe a little bit what we have seen in D.C. tied with government business. But in general, I would say there is not a significant drop in terms of group pace by any means. For Q4, we are set up really well. Our fourth quarter group pace is actually up over 7%. It's almost 8%. So still have a very strong group quarter. The third quarter, we always knew going in that it would be a soft group quarter given the shift in Jewish holidays. And you saw that with the outperformance of October at 5.5%, you kind of have to look at sort of September, October together to see the Jewish holiday shift impact. But that's really why group was down in the third quarter. And some of the softness is really related more to government and government adjacent businesses. Otherwise, overall, even though group volume was down, as you saw in Q3, which was expected, our banquet and catering revenue per group room night was actually up. So which shows that the groups are still willing to spend when they do show up at the properties. So we don't see any specific cracks in terms of driving group volume as we look at our group pace numbers into Q4 and into the future.

Our next question comes from the line of Chris Woronka with Deutsche Bank.

Congratulations on a very good year-to-date. Just wanted to ask on the -- you guys have, I think, over time, seen more success on some of the out-of-room spend growth, especially on the -- I think on the group side. Can you maybe talk a little bit about what's driving that and how much visibility you have into that and what it's comprised of, whether it's just more higher menu prices or more ancillary spend on things like retail and spot and just your level of comfort that, that can continue?

There definitely is just increased spend. And whether that's spa, whether that's golf, obviously, resort destination fee is a component of it as well. As we get into next year, you'll obviously get into tougher comps, just given how much we have moved, particularly on the ancillary revenue and banquet and catering group room night. So if you're looking at next year, we had almost 1 point of delta between RevPAR and total RevPAR for this year, that is probably going to shrink for next year just given the tougher comps. But we -- just given the consumer that we are seeing, they continue to spend more. And the other thing is us also reinventing and repositioning our outlets, which has really benefited this year with the view at the Marriott Marquis and Aviv at the 1 Hotel South Beach, obviously, that's driven meaningful growth. So we're continuing to look at outlet opportunities where we could really drive incremental returns and incremental EBITDA from repositioning these outlets. So while there are other opportunities, I think next year, certainly, you will run into just tougher year-over-year comps just given a ton of the initiatives that came to fruition for 2025.

Our next question will come from the line of Robin Farley with UBS.

I just wanted to get a little more insight into the group booking pace for next year. When you mentioned it's up 5% for 2026, and that's room nights and rate and I think forward banquet revenues. Just wondering if you could give us a little color on the nights increase versus rate increase just since it feels like overall group, not just for host, but across the industry. Just wondering if we're seeing real room night demand recovery there or if it's still sort of mostly rate driven, which has kind of been the case this year.

Robin, so as of where we stand right now, it is more room night driven. It's effectively almost all room night driven. Rate is a very slight improvement year-over-year. And I'm talking about the pace, so the 5% that Jim referred to. We had effectively the same amount of group room nights on the books. It's slightly above relative to last year in terms of percentage of what we are expecting for next year. But we would expect the group room nights to be more just given the current pacing. But right now, as we stand on the 5%, just over 3% is group room nights.

Okay. Great. Super helpful. And maybe just as a quick follow-up. I know you talked about your priorities and seeing your own multiple be so low. When you do think about potential asset acquisitions that host or kind of what could interest you, is there anything -- can you characterize if you feel like there's a market or a type of -- just anything that you feel like would enhance your portfolio, just to give us a sense of where your interest might lie?

I would tell you, Robin, that asset acquisitions today are a very low priority for us. It just -- we don't think today in this environment with what we're seeing in the marketplace that we can generate the types of returns through acquisitions that we can generate through other capital allocation decisions. So that includes continuing to invest in our assets, continue to pay a sustainable dividend to our shareholder, which we have done consistently since we exited COVID. And we'll be thoughtful about dispositions in this environment. I think if we saw a path forward to really doing an accretive acquisition. Of course, we would consider it. But we evaluate everything that's out there in the marketplace, and we're just not seeing anything that we underwrite at this point in time.

Our next question will come from the line of Smedes Rose with Citi.

I was just hoping maybe you could talk a little bit maybe more Sourav, about kind of any updated thoughts you have on kind of wages and benefits increases in 2026? And besides New York, are there any major markets where labor contracts are coming due or have to be renegotiated?

Yes. So for 2025, we are still expecting wage rate growth, which would be a message earlier on in the year at about 6%. Just given that a lot of the contracts were front-end loaded, our expectation is that for next year, the wage rate growth is going to be lower. How much lower? I don't know yet. We are still, as I said, going through budgets. We'll have a better indication, and we'll provide that information on our next call next year. In terms of contracts that are coming up, New York is really the only one that is coming up for next year, mid next year. Obviously, we are not party to those negotiations with the union. It is our operators that negotiate with the union, and we will see where that ends up. It's too early to say at this point in time.

Our next question comes from the line of Duane Pfennigwerth with Evercore ISI.

This feels like the first clean fall in a while on the Gulf Coast without any major storms. I understand there are several puts and takes with operational impacts versus BI. But can you maybe frame the tailwinds to growth potential in 2026 from no storms on the Gulf Coast?

Well, Duane, we have, I think, 24 days left till the end of the -- official end of the hurricane season. So let's keep our fingers crossed that when we talk in February that this will hold true to form and we won't see anything happen on the Gulf Coast this year. The tailwinds for us will be really the Don CeSar is performing extremely well. It's beating our expectations. We raised our assumption for performance this year from $3 million in Q2 to $6 million this year, and we're excited with how the Dawn is set up for 2026. The Ritz Naples continues to really perform quite well. And a lot of you have seen that property. A lot of you have seen [ Tiburon ] as well, which we're going to be under -- [ Tiburon ] is going to be undergoing a completely transformational renovation. So that will -- and we will receive the operating profit guarantees for the anticipated disruption, but that will likely have an impact on RevPAR for the Gulf Coast, but it's fully anticipated and it's fully baked in. And I think that the Gulf Coast of Florida generally, when storms come, it affects everything in Florida. So we're excited with how the 1 Hotel South Beach is performing, with how the Ritz-Carlton, Amelia Island is performing. Singer, the Singer Resort is still ramping after a complete repositioning there as well. And it's all being driven by the type of customer that is continuing to prioritize experiences, premium experiences because these properties are all really high-end assets. And so let's get through November, and we'll see how the assets perform into 2026. We did talk a bit about Festive being up. And a lot of those assets are part of Festive, I think it was at 9% for this year. Festive pace is up 9%, which is very positive. So again, I think that this helps us set up the company very well into 2026.

And Duane, I'll just add there, right? When you think about all the benefit we'll see from HTCP next year, we will still obviously be under renovation at the Grand Hyatt Manchester, but every other HTCP project effectively be done, we should see lift from that. As Jim mentioned earlier, Super Bowls in San Francisco, we should see a lift from that. We have 10 cities where World Cup is going to be played depending on what teams play in which cities we should see lift from that. So we feel really good about our setup for next year to be able to drive incremental top line. So not just organic in the markets, but all the capital investments that we have made in those specific markets.

Our final question will come from the line of Jay [indiscernible] with Cantor Fitzgerald.

Just circling back to the EBITDA guidance raised by $25 million. Was that more of a portfolio-wide story or certain key markets to call out like Maui? And then with the strong October up 5.5% on RevPAR, how is November, December shaping up? If you can give any commentary on that?

Sure thing. I'll provide the bridge on the guidance. So it's just clear in terms of the $1,705 million to how we got to the $1.730 billion. When you take the $1.705 billion, you're going to add $26 million in terms of just comparable operations given that it's -- we have added a ton of room nights, there have been incremental variable costs associated with that. So that guide for Maui at $110 million has effectively remained the same for the balance of the year. So that's $26 million overall comparable operations lift. Another $3 million, as Jim mentioned, we have taken Don CeSar from $3 million to $6 million, so $3 million incremental for Don. Interest income of $6 million. And then those are all the adds. The deducts are $5 million from the dispos. That's about $4 million for Metro Center and $1 million for St. Regis and then about $5 million that we talked about for the Four Seasons condos. So that will get you to the $1,705 million. As it relates to November and December, right, at this point, we provided October numbers. So obviously, the implied Q4 is around 1.5%. So when you look at the blended November, December, it's effectively slightly negative. Now that is fully expected. And I will say that in our increased guide for fourth quarter, it's not all October. 2/3 is October, 1/3 is November, December. So we actually took up our guide for November, December as well. The reason it's slightly negative, it's twofold. One is just last year, we had Christmas week overlap with Hanukkah. So you didn't have Hanukkah in a separate week, which obviously impacts travel. This year, it's a tougher comp. Hanukkah does not overlap with Christmas week. Secondly, last year, right after elections, we had, you may recall, short-term group pickup. And we did quite a bit of group business towards the end of November, beginning of December. So that helped 2024. So it's really tougher comps. But overall, at this point in time, assuming government shutdown gets resolved and we don't have any issues with travel and airports, we are well positioned to be able to achieve our forecast.

And that will conclude our question-and-answer session. I'll turn the call back over to Jim for any closing comments.

Well, everyone, thank you again for joining us today. We really appreciate the time that you spend with us, and we appreciate the opportunity to discuss our quarterly results with you and look forward to see many of you at upcoming conferences. I want to wish everyone a very wonderful Thanksgiving with your family and friends. Take care.

This concludes our call today. Thank you for joining. You may now disconnect.