Morningstar | HST Updated Forecasts and Estimates from 08 May 2019
Despite negative top-line results for Host Hotels, bottom-line results were in line with our expectations for the first quarter, leading us to conclude that we don't plan any changes to our $19.60 fair value estimate or no-moat rating. Even though average room rate grew 1.3% for the comparable portfolio in the first quarter, occupancy fell 180 basis points year over year. This led to comparable revenue per available room falling 1.0% in the first quarter, well below our assumption of 2.4% positive growth in the quarter. However, other hotel revenue grew nearly 15% in the quarter due to a longer cancelation fee window and increased fee collections, which managed to drag up comparable revenue growth to positive territory at 0.2% growth for the quarter. Additionally, comparable expenses fell 60 basis points in the first quarter. As a result, comparable hotel EBITDA rose 2.1% this quarter, which was only slightly below our 3.2% assumption. Despite the slight miss on operations, adjusted funds from operations was in line with our estimates this quarter at $0.48.Although the first-quarter fundamentals were a disappointment to us, they appear to be better than what management had feared and provided enough confidence to raise 2019 guidance. While management did not update its 2019 RevPAR growth range of 0.0% to 2.0%, it did increase the margin growth guidance by 25 basis point at the midpoint to a new range of down 0.25% to up 0.35% for 2019. This moves our assumption of 0.25% margin growth inside of management's guidance range. Adjusted funds from operations were also increased by 3 cents at the midpoint to a new range of $1.76 to $1.84, moving our 2019 estimate of $1.81 from the high end of guidance closer to the midpoint. Despite the miss on hotel operations in the first quarter against our expectations, we are encouraged that management's updated views are more in line with us for the year and give us greater confidence in our outlook for the company.
Host Hotels & Resorts operates as a self-managed and self-administered real estate investment trust. The company owns properties and conducts operations through Host Hotels & Resorts, L.P., of which the company is the sole general partner. The company's consolidated lodging portfolio consists of hotels primarily located in United States, and with several of the hotels located outside of United States in Brazil and Canada. In addition, the company owns non-controlling interests in domestic and international joint venture and a timeshare joint venture in Hawaii.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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