Host Hotels & Resorts

Host Hotels & Resorts, Inc. (HST) is one of the largest lodging real estate investment trusts, and one of the largest owners of luxury and upper-scale hotels. The company operates in the REIT sector and its subsector is hotel and lodging REIT's. Host Resorts partners with and manages operations of premium brands such as Marriott, Ritz-Carlton, Four Seasons, Hyatt, and Fairmont to name just a few. It operates as a self-managed and self-administered real estate investment trust. Their mission is to generate superior long-term returns for their shareholders from a combination of appreciation in asset values, growth in earnings, and payment of dividends.

The company has a geographically diverse portfolio. Between the United States, Brazil, & Canada, Host owns and operates 80 hotels consisting of 44,400 rooms. As for development, they seek to target major urban and resort destinations with high barriers to entry, diverse demand generators, favorable supply and demand dynamics, and long-term projected growth. As for customers, their target market is both business travelers and the leisurely traveler. Host generates revenues primarily from room rentals in addition to its food and beverage services at its resorts.

As a REIT, Host must accordingly pay 90 percent of its taxable income back to its shareholders each year. With this being said, the company is then allowed to deduct the dividends paid out each year from its corporate tax obligations. The company prides itself in being one of the only companies in the industry of having an "investment grade balance sheet." This component is said to give HST a primary competitive advantage, allowing the company to have flexible access to capital in comparison to its competitors.

The S&P 500 company was incorporated as a Maryland corporation in 1998 and currently has about 160 employees. Host is headquartered in Bethesda, Maryland, and is traded on the Nasdaq Stock Market under the symbol "HST'.

Host Hotels & Resorts faces two types of competition, one being other real estate investment trusts, and two being other lodging services that are managed by a competitor company.

REITs (real estate investment trusts)

Despite the medium to high barrier of entry, REIT's operate in many different segments of the market, ones that specialize in hotels & hospitality pose the highest threat to HST

• • Areas of competition within REIT's:

    • Geographic diversification of portfolios (Globalization)

    • Strength of partner companies they manage

    • Readiness of capital

    • Pricing; lowering costs & increasing revenues

  • Key competitors:

    • Xenia Hotels & Resorts, Diamond Rock Hospitality, & Ryman Hospitality Properties Inc

These competitors are similar to HST since they invest in and manage properties in the hospitality industry. A difference between HST and these competitors may be the scopes of properties they specialize in, for example, some of these competitors' portfolios consist of casinos, or convention centers, in addition to lodging.

Other Lodging Services

Since HST manages individual premium brands (such as the Four Seasons, Fairmont, etc...), brands that are managed by a different parent company are also competition for HST, since revenues are based by market share.

• • Areas of competition in the hospitality industry:

    • Offering the lowest rates to customers

    • Facilities & amenities

    • Guest satisfaction

    • COVID adaptability

  • Key competitors:

    • Crowne Plaza- owned by IHG

    • Mandarin Oriental- owned by Jardine Matheson Group

    • Wyndham Grand- owned by Wyndham

These competitors are similar to the Brands HST manages since they are luxury hotels for the high-end customer with money to spend, whether for business travels or a vacation.

There are two major areas that are responsible for the industry's performance in the long run and they are as follows:

1. Long-term economic factors:

Host operates in an industry that is highly influenced by the cyclical relationship between supply of and demand for hotel rooms, therefore, the industry outlook is dependent on the overall economy. Traditional economic indicators include gross domestic product ("GDP") growth, business investment, and employment growth. As we know with the COVID-19 pandemic, the economy changed in just a matter of days as COVID cases began spreading across the country, leading to layoffs and shutdowns. This highly impacted the hotel and lodging industry, not only during the active years of the pandemic, but would for years after, too. During the recent economic downturn, consumers had less money to spend in their pocket on non-essential items and services such as the ones Host offered. This being said, if the international economy enters another recession, the outlook for the industry is poor.

2. Changes in international travel patterns:

Another factor driving the industry's long-term outlook is changes in international travel patterns. Although these changes can be dependent on the general economic outlook as mentioned above, they can also be based on current events in the world as we have recently seen with the pandemic. The public perception of travel is dependent on many contributors such as natural disasters, weather, pandemics & outbreaks, and geo-political relations. This outlook not only affects leisure customers of the industry, but business traveling consumers as well. If the outlook on travel is poor, companies will reduce business travel and resort to services such as zoom to carry out these essential functions in an adaptive way.