Host Hotels & Resorts, Inc. 2026 Q2 Earnings Call

Thank you. Good morning, everyone. Before we begin, today's call will include forward-looking statements within the meaning of federal securities laws. As described in our filings with the SEC, these statements are subject to 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. On today's call, we will also discuss certain non-GAAP financial information, such as FFO, adjusted EBITDAre, and comparable hotel-level results. For reconciliations to the most directly comparable GAAP information, please see yesterday's earnings press release, our 8-K filed with the SEC, and the supplemental financial information on our website at hosthotels.com. The operational results discussed today refer to our 74-hotel comparable hotel portfolio in 2026, which excludes the Don CeSar and Sheraton Parsippany, which we sold in June.

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, Jamie. Thanks to everyone for joining us this morning. We delivered a strong second quarter, building on the momentum of the first quarter, again exceeding our expectations. We delivered adjusted EBITDAre of $525 million, an increase of 5.8% over last year, an adjusted FFO per share of $0.63, an increase of 8.6% over last year. Comparable hotel RevPAR improved 7% compared to the second quarter of 2025, and comparable hotel total RevPAR improved 5.9%, driven by rate growth and higher food and beverage revenue. Comparable hotel EBITDA margin improved by 60 basis points year-over-year to 31.9%, driven by rate growth alongside lower fixed expenses. RevPAR growth in the second quarter came in significantly better than our expectations with broad-based strength across markets and business mix.

Growth was driven by sustained luxury resort demand, elevated rates associated with the World Cup, and strong group performance. Looking at World Cup performance, we estimate that the event contributed approximately 160 basis points of RevPAR growth in the second quarter. For June alone, RevPAR in our World Cup markets grew 15%, compared to 12% in non-World Cup markets. For the full year, we expect the World Cup to contribute approximately 70 basis points of gross RevPAR growth, a 10 basis point increase over our initial expectation. Turning to business mix. Transient revenue was up 7%, marking the strongest growth in the past seven quarters, driven by higher rates as demand remained relatively stable. Rate growth was supported by major events, citywide compression, and continued leisure strength at our luxury resorts.

Growth was led by Maui, New York, and San Francisco, with improvements in key business transient markets also providing a tailwind to performance. Briefly touching on Maui, RevPAR grew 14% and Total RevPAR grew 11%, reflecting strong demand growth. In fact, occupancy grew more than eight percentage points in the quarter as the market's recovery continues. We continue to expect our Maui properties to contribute approximately $120 million of EBITDA in 2026. Business transient revenue grew 4%, driven by strong rate growth, and we were encouraged to see an increase in business transient room nights in several key markets from a variety of industries. Group room revenue for the quarter was up 7% year-over-year, driven fairly evenly by room night and rate growth.

Our properties sold 1.1 million room nights in the second quarter, and definite group room nights on the books for 2026 now stand at 3.8 million, with total group revenue pace up more than 5% to the same time last year. Turning to ancillary spending. Food and beverage revenue grew 6%, and other revenue was approximately flat as growth in on-property spending was offset by a decrease in attrition and cancellation revenue compared to last year's tough comparisons. The broad-based growth across food and beverage departments, golf, and spa demonstrates the continued strength of the affluent consumer, as well as the benefits of the strategic investments we have made in many of our properties over the last several years. Turning to capital allocation. In June, we completed the sale of the Sheraton Parsippany for approximately $12 million.

This disposition reflects our strategy of selling lower growth assets with near-term elevated capital expenditure requirements. In July, we paid a quarterly common dividend of $0.20 per share and a special dividend of $0.72 per share. The special dividend represented the distribution of the approximately $500 million taxable gain from the sale of the two Four Seasons resorts in the first quarter of this year. This is a great example of our commitment to discipline and opportunistic capital allocation. By returning capital to shareholders through regular quarterly and special dividends, we are enhancing long-term value for our investors. Turning to portfolio reinvestment, during the second quarter, we continued the execution of the Hyatt Transformational Capital Program, which is nearly 90% complete and on track for completion by the end of 2026.

Transformational renovations are now finished at five of six hotels in the program, including the Grand Hyatt Atlanta in Buckhead, the Hyatt Regency Capitol Hill, the Hyatt Regency Austin, the Hyatt Regency Reston, and the Grand Hyatt Washington D.C. The Manchester Grand Hyatt San Diego, the final asset in the program, was phased to mitigate business interruption and is expected to be substantially complete by the end of this year. We also made progress on the second Marriott Transformational Capital Program, which is approximately 37% complete and is tracking on time and under budget. Guest room renovations at the New Orleans Marriott are nearing completion. Renovations at The Ritz-Carlton Naples, Tiburón in Western Carolyn are in progress, and The Ritz-Carlton, Marina del Rey is scheduled to start renovations later this month. In the second quarter, we received $5 million of operating guarantees related to our transformational capital programs.

As a reminder, we expect to benefit from approximately $19 million of operating profit guarantees in 2026 related to our two transformational capital programs, which we expect will offset most of the EBITDA disruption at those properties. Looking at other ROI projects, we completed the final phase of the Four Seasons branded condo development at the Walt Disney World Resort during the second quarter on time and within budget. To date, we have closed on 28 of the 40 units, including 20 of 31 mid-rise units and eight of nine villas. As a result of the expected timing of the remaining closings, we now anticipate 2026 EBITDA of $16 million-$20 million, compared to our prior expectation of $20 million-$25 million, with the difference expected to be recognized in 2027. For 2026, our capital expenditure guidance range is approximately $550 million-$630 million.

This includes approximately $250 million-$285 million of reinvestment focused on redevelopment, repositioning, and ROI projects, as well as $25 million-$30 million of property damage reconstruction associated with the Kona low rainstorm in Hawaii. We also anticipate remediation cost of approximately $2 million, and we expect insurance coverage to substantially cover the losses in excess of our deductible. In addition to our capital expenditure investment, we spent approximately $17 million to close out the condo development at the Four Seasons Orlando. Our continued reinvestment across the portfolio remains a key differentiator and is an important driver of Host's sustained outperformance. Once the second Marriott Transformational Capital Program is completed in 2029, we will have reinvested approximately $2.1 billion into comprehensive renovations across 34 hotels, which are expected to contribute approximately 60% of our hotel EBITDA in 2026.

We have stabilized post-renovation performance at 21 of these properties, where we have seen an average stabilized RevPAR index share gain of nearly nine points. These results underscore how our disciplined capital allocation strategy over the past several years is translating into meaningful value creation for our shareholders. Earlier this week, we released our 2026 corporate responsibility report, which outlines our CR strategy and performance, highlighting continued progress across environmental stewardship, social impact, and governance in support of our long-term responsible investment strategy in 2050 net positive vision. We are proud to again be recognized for our corporate responsibility leadership, including Nareit's 2026 Leader in the Light Award for operations for large cap REITs, inclusion in the 2026 Dow Jones Best-in-Class World and North American indices, revalidation of our emissions reduction target by the Science Based Targets initiative, and an advanced net zero assessment rating from Moody's.

The CR report can be found on the corporate responsibility section of our website at hosthotels.com. Turning to our full year outlook, we continue to expect strong leisure demand, modest improvements to short-term group booking trends, and stable business transient demand. As a result of our second quarter outperformance and improved outlook for the second half of the year, we are raising our 2026 comparable hotel Total RevPAR and RevPAR growth guidance ranges to 4.75%-5.25% over 2025. It is important to note that our RevPAR and Total RevPAR growth guidance ranges are now in line. This reflects the outsized rate growth we achieved in the first half of the year, and our expectation that rate growth will normalize in the second half of the year.

Looking ahead, we are optimistic about the travel environment, which is supported by resilient demand trends and a continued preference among high-end consumers for experiential travel. Industry fundamentals in the second quarter reflected strong RevPAR growth, driven by sustained rate strength, while new supply across our markets and chain scales remains near historic lows. Against this favorable backdrop, Host's investment-grade balance sheet gives us the flexibility to continue reinvesting in our portfolio, pursue opportunistic acquisitions and dispositions, and return capital to shareholders in the form of dividends and share repurchases. As our results over the past several years have shown, Host's competitive advantages uniquely position the company to continue capturing additional upside in the current environment and over the long term. With that, I will now turn the call over to Saroj.