Strategy

"Our goal is to be the preeminent owner of high-quality lodging real estate in growing markets in the U.S. and to generate superior long-term risk adjusted returns for our stockholders throughout all phases of the lodging cycle through a combination of appreciation in asset values, growth in earnings and the payment of dividends."

Host seeks to achieve the above objective and elevate their growth profile through the following pillars:

• "Geographically diverse portfolio of hotels in the U.S. - Own a diversified portfolio of hotels in the U.S. in major urban and resort destinations. Target markets with diverse demand generators, high barriers to entry, favorable supply and demand dynamics and attractive long-term projected RevPAR growth."

• "Strong scale and integrated platform - Utilize our scale to create value through enterprise analytics, asset management and capital investment initiatives, while aiding external growth by leveraging scale as a competitive advantage to acquire assets befitting our strategy. Allocate and recycle capital to seek returns that exceed our cost of capital and actively return capital to stockholders."

• "Investment grade balance sheet - Maintain a strong and flexible capital structure that allows us to execute our strategy throughout all phases of the lodging cycle"

• "Employer of choice and responsible corporate citizen - Align our organizational structure with our business objectives to be an employer of choice and a responsible corporate citizen."

The Competitive Advantage

Other major real estate investment trusts and companies in the industry have both similar and different strategies to Host. For example, Pebblebrook Hotel Trust (PEB) one of Hosts' largest competitors, also focuses on developing their investments in upper-upscale hotels in high barrier-to-entry markets. A difference in Pebblebrooks strategy to Hosts is that they only have an investment portfolio of U.S.-based hotels, while Host has globalized their business in Mexico and Canada. Ryman Hospitality Properties (RHP) another large REIT in the industry has a slightly different strategy than Host. Ryman focuses on investing in and developing "meeting-focused" resorts and convention centers as well as entertainment venues. Some aspects of their long-term strategic plan include expanding the products and services offered by their existing hotels, expanding their asset portfolio through acquisitions, and growing their brand name. Although Rymans strategy is slightly different than Hosts' many of their group-focused assets and entertainment centers are managed by Marriot, a company Host frequently partners with. 

One source of competitive advantage for Host is its geographically diverse portfolio of large luxury brands. With operations outside of the US in Canada and Mexico, Host has the advantage of globalization over most of its competitors. Additionally, the brands that Host partners with drive superior value and advantage to the company since many of them are leaders in the hospitality industry, for example, Marriott, Fairmont, and the Four Seasons to name just a few. Many of these partner companies drive customers to stay at a Host resort simply due to their prestigious and reliable reputation. 

Perhaps the most important factor that sets Host apart from its competitors is its investment-grade balance sheet, which management believes provides “a key competitive advantage to Host." As mentioned above, one key component of Hosts' strategy is to maintain a flexible capital structure. As a real estate investment trust, Host relies mainly on external sources of capital and cash from operations to finance its growth. Having an investment-grade balance sheet allows them to have flexible and consistent access to capital throughout their business cycle and at a cheaper cost compared to their competitors. 

SWOT Analysis

Environmental Scan

I was able to use multiple sources such as FactSet and S&P Capital IQ to conduct an environmental scan on HST. As our society is growing and developing to take into account corporate impact on the environment, ESG ratings are an important factor to many modern investors.  

Host has an overarching strategy known as their "corporate responsibility program" that is centered around the concept of responsible investment. It targets three main areas including environmental stewardship, social responsibility, and governance. 

1. Environmental stewardship: Host invests in solutions that conserve and restore natural capital, and mitigate climate change and biodiversity impacts

2. Social responsibility: The company is committed to advancing the health and well-being of its employees and stakeholders

3. Governance: Host's responsible investment strategies are guided by executive and board level oversights, the company's values and ethical standards, and sustainable value creation

Future of the industry 

Although the pandemic wreaked havoc on the lodging industry during the peak of its years, now in its recovery stage, the industry shows promising opportunities for growth. One of the biggest growth opportunities is the returning demand for business and leisurely services Host and other competitors in the industry offer. As discussed in a later part of the analysis (LINK HERE) Valueline and Fact Set predict a 66% increase in sales in 2022 from the year prior. This growth is unprecedented, but it is important to keep in mind it is due to the major increase in demand post-pandemic and will level off throughout the following years.

Although the increase in demand provides an opportunity for the lodging industry, companies must make adaptive changes and innovations to achieve long-run success. One change we see in the lodging industry is the integration of smart hotel technology. This technology may include mobile app interfaces, contactless payment terminals, temperature sensors, and digital concierges to name just a few. Incorporating these new technologies excites consumers and allows them enjoy their stay in an effortless manner. Additionally, these smart hotel technologies can make a consumer feel more confident about traveling post-pandemic, therefore these new innovations are crucial to the industry's success and recovery. 

Another change in the industry that companies must make to succeed in the long run is making the switch to more sustainable operations. Younger generations are making the switch to support products and services that are environmentally conscientious. These changing attitudes affect the consumer's decision when deciding where to stay. It is important that HST and other competitors in the industry work toward reducing energy consumption, using green construction, and minimizing waste when engaging in their day-to-day operations. Doing so will ensure their success in the future of a changing industry.