Good day, everyone, and welcome to the Host Hotels & Resorts Incorporated First Quarter 2012 Earnings Conference Call. Today's conference is being recorded. At this time, I'd like to turn the conference over to Mr. Greg Larson, Executive Vice President. Please go ahead, sir.

Thank you. Welcome to the Host Hotels & Resorts first quarter earnings call. Before we begin, I'd like to remind everyone 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. Additionally, on today's call, we will discuss certain non-GAAP financial information such as FFO, adjusted EBITDA and comparable hotel results. You can find this information together with reconciliation to the most directly comparable GAAP information in today's earnings press release and our 8-K filed with the SEC and on our website at hosthotels.com. With me on the call today is Ed Walter, our President and Chief Executive Officer; Larry Harvey, our Chief Financial Officer; and Jeanne Lindberg, our Vice President of Investor Relations. This morning, Ed Walter will provide a brief overview of our first quarter results and then we'll describe the current operating environment, as well as the company's outlook for 2012. Larry Harvey will then provide greater detail on our first quarter results including regional and market performance. Following their remarks, we will be available to respond to your questions. And now, here is Ed.

Thanks, Greg. Good morning, everyone. 2012 has gotten off to a great start as demand growth has been strong in the higher-rated segments of both our group and transient business leading to a better-than-expected topline and bottom-line growth, which resulted in earnings that exceeded consensus estimates. Our strong first quarter performance combined with the robust group booking page for the remainder of the year gives us confidence to raise our full year guidance. We feel very good about the fundamentals of the business and our outlook for the remainder of the year, which I will discuss in more detail in a few minutes. So first, let's review our results for the quarter. First quarter RevPAR for our comparable hotels increased 6.1% driven by an increase in occupancy of 2.1 percentage points combined with an increase in average room rate of 2.9%. The RevPAR growth when combined with an impressive 5.9% increase in food and beverage revenues, plus the extra day on the calendar in February, generated a comparable revenue increase of 6.3% for the first quarter. Continuing a trend we saw developing in the fourth quarter of last year, our banquet and audiovisual revenue grew faster than our outlet and lounge revenue, as several of our larger hotels experienced meaningful increases in banquet activity. The strong revenue performance in both rooms and F&B operations drove a 100 basis point improvement in our comparable hotel adjusted operating profit margins for the quarter. Adjusted EBITDA was $176 million, an increase of more than 22% over last year. Our first quarter adjusted FFO per diluted share was $0.14, which exceeded consensus estimates and reflected a nearly 17% increase over last year. Overall, we are extremely pleased with our operating results and the progress we are seeing in lodging fundamentals. A key driver of…

Thank you, Ed. Let me start by giving you some detail on our comparable hotel RevPAR results. Our top-performing market for the quarter was Philadelphia, with a RevPAR increase of 30.8%. Occupancy improved 15 percentage points driven by strong group and transient demand, while rate increased more than 3%. Results for the quarter benefited from the 2011 rooms and meeting space renovations at the Downtown Marriott. RevPAR for the hotel improved over 50% for the quarter when compared to the first quarter of 2011. We expect Philadelphia to be a top-performing market in the second quarter due to strong group demand, which should allow us to drive pricing. RevPAR for our Chicago hotels increased by 20.3% driven by an increase in occupancy of more than 8 percentage points and an improvement in average rate of over 3%, as both citywide and overall group demand were excellent. We expect our Chicago hotels to continue to perform very well in the second quarter due to strong group and transient demand. Our Hawaiian hotels continued their outstanding performance with a RevPAR improvement of 15.1%. Occupancy increased over 10 percentage points and average rate was up nearly 2%. The out performance was driven by strong group -- corporate group and transient business, which allowed us to shift the mix of business and benefit from rate compression. We expect our Hawaiian properties to underperform our portfolio in the second quarter but having good second half of the year. Our Houston hotels had an excellent first quarter with RevPAR up 12.8%, ADR increased nearly 6% and occupancy improved 5 percentage points due to strength in group bookings. We expect our Houston hotels to underperform our portfolio in the second quarter due to an unfavorable comparison to the first quarter of 2011 when the city of Houston…

[Operator Instructions] We'll take our first question from Robin Farley with UBS.

Was that 13% versus 7% last year? I think if I got that right. Can you give us some sense of how much is rate versus volume and then also...

Robin, If I could interrupt you for a second, for some reason, the first part of your question didn't come through because -- why don't you -- if you could just start over again, that would probably be -- well at least be helpful for us and probably for everyone.

I was just -- I wanted to get a little more color on -- if I got your opening remarks correctly, you said group bookings up 13% versus 7% at the same time last year. And I was just looking for some color on how much of that is rate versus volume of that 13% increase. And then the other question I was going to ask is on your acquisitions spend, it looks like your budget, your planned spend on acquisition is up for the year. I wonder if you talk about kind of what's driving that? Is it just better capital availability or more compelling assets available? In another words, is that being driven by a specific transaction that you haven't firmed up yet? That kind of thing.

I think if -- let's start with the group booking activity. What we were trying to communicate relative to the booking pace activity is that we were up significantly in the quarter for the quarter. And then if you look at the rest of the year, our room night for the rest of the year -- the number of rooms that we book for the remainder of the year, that was up 13%. So that was a room night number and not a revenue number. As we look overall for the full year, what we're seeing at this point now is that our overall booking pace for the full year is up actually about 8.5% on a revenue basis for the full year, but that is much stronger for the last 3 quarters of the year than it was for the first part. So actually, if you look at the last 3 quarters of the year, we're running and then -- on a revenue basis, we're running in the 9.5% to 10% area. That gets comprised of high 7% increase in room nights, combined with a couple of percent in rate. So hopefully that clarifies that. Now in the acquisitions --

Actually, can I have -- if your number of room nights is up 13% on a revenue basis, up 9.5% to 10%, it seems there maybe rate...

They're slightly different numbers. In other words, what we're saying -- another way to look at this is that our booking pace starting the year on a room night basis was probably below -- was around 5% or so. And so now, at this point, our booking pace through the full year is significantly higher. The reason why the overall booking pace on a room night and a revenue basis is higher than where it was at the beginning of the year is because we booked more rooms in the quarter for the quarter, and we booked more rooms for the remainder of the year than we did last year. The net result of that is the increases that we're seeing in Q2 through Q4 in terms of both room nights and then an improvement in rate, which ultimately leads to the improvement in revenue.

Okay. And then on the acquisitions spend?

On the acquisition side, I don't know that I would necessarily view what we express in my comments as a change. We still feel that we are early in the lodging cycle. We don't see supply increasing for a number of years back to the average level of supply, frankly. And therefore, we don't see supply getting back to the point where it exceeds demand for several more years. So from that, looking at where we sit in the lodging cycle, our sense is that this is still a good time to be a buyer of assets. Now we've also expressed that we also intend over time to continue to recycle assets from our portfolio, a lot of those proceeds would be reinvested in the assets that we would acquire. At this stage, where we stand, we would like to be a net buyer of assets and that would be our goal for this year. We haven't actually put a dollar amount on that externally in part, because it's somewhat contingent on availability and things like that.

Next up, we'll go to Bill Crow with Raymond James. William A. Crow - Raymond James & Associates, Inc., Research Division: A couple of questions for you. Ed, are you surprised at all at the speed of which staffing levels have return to hotel level?

Yes and no. I mean, I guess the first thing I'd say, Bill, is I'm probably a little surprised at how quickly occupancy has recovered in the industry and certainly in our portfolio. So when I look at what's -- we've gone back and we keep comparing in our portfolio, where our staffing levels relative to '07 and '09, both at the associate level and at the manager level. And I think what I would say is that based on the numbers that we've looked at, staffing levels have come back. They've come back slower at the manager level than at the associate level, but they are still lower than where they would be kind of in relationship to the occupancy levels that we saw in '07. And on the manager side, I would say, if we cut about 20% of our managers in the downturn, I don't think we've even recovered half of the decrease. So maybe we're up 10% from where we were in '09 and taking into account a pretty significant occupancy increase from where we were in '09 to where we are right now. But I think our sense generally throughout the portfolio is that the operators have been thoughtful about how they've been adding staff back and part of that is as we look more broadly at productivity levels in our portfolio. Our productivity levels are certainly better now than they were during the prior recovery. William A. Crow - Raymond James & Associates, Inc., Research Division: Discussion that maybe the second half of the year is going to be better for DC on a group basis, but now we get that the whole GSC -- GSA scandal in there. What are you seeing for DC in the second half of the year?

Larry, do you have any thoughts on the second half? I think I know we expect it to be stronger.

Yes, we expect the second quarter to be better across the board and roughly for the full year. We're down 3, 9 in the quarter. We expect it to be -- I'd say flattish. So we do see some pickup. William A. Crow - Raymond James & Associates, Inc., Research Division: All right, that's helpful. And then finally for me, on the acquisition front, I know you're barraged all the time by the brokers. Are you looking at potential portfolios becoming available? CMBS-related assets that may come up in the second half of the year? What do you anticipate in from an acquisition landscape?

It's a great question, Bill. Obviously, if somebody has a larger portfolio whether it's here or outside the U.S., we will tend to get a call on that. We don't have to necessarily focus on those types of deals, because it's more about owning the right assets than necessarily getting bigger. But there are a few portfolios that are in play right now and see whether pricing gets to a point where it make sense for us to play in those. I think if you look beyond that, there seems to be still a little bit of a pricing expectation gap between sellers who would generally be of a mind to sell and where the market is right now. I think some of that is may be expectations that were developed over the course of the first and second quarter of '11 where pricing was starting to accelerate a little bit. And folks are still sort of looking for cap rates and thinking that they apply to this year is then alive when they think about the value of their assets. And that's the explanation I get from the brokerage community who why the recovery in assets being brought to market has been a little bit slower than what might have expected given that the stock market and cost of capital recovered by the beginning of the year. I think that a lot of what -- part of the reason there seems to be a sense of confidence that the second half of the year we'll see more transaction activity is driven by the belief that there are, is debt maturing in or around the second half of the year and so that would likely drive more transaction activity. Because in general, there's always specific exceptions to this. But in general, lenders are not necessarily to pretend -- not willing to pretend and extend at this point. Values have recovered enough that lenders want activity and lenders want to be paid off. So I think there's an expectation that there'll be some acceleration of activity that flows out of that.

[Operator Instructions] Let's move on to Jim Sullivan with Cowen and Company.

I had a question for you on the group business. You talked extensively in your prepared comments about how strong group bookings are. And I'm just curious, outside of the comments about the San Antonio asset and market, in the remainder of your large convention center hotels, have you seen a significant difference in strength between the larger group business and the smaller group business, number one, in the first quarter? And number two, as you think about those 2 businesses, that's kind of sub segments of overall group, do you expect that relative differential to continue over the balance of the year or not?

Jim, that's an interesting question. And I know that -- I think this came up on one of the other calls maybe from a slightly different slant. If you look at how our larger hotels are doing compared to our smaller hotels, if you compare the two based on first quarter operations, broadly speaking relative to just overall revenue performance, I think what you find is that the larger -- they're both in comparison to the prior peak and roughly the same position. But the way they get there is a little bit different. The larger hotels are actually doing better on rate, but are a few point behind in terms of occupancy. And I think the reason for that is -- were the one that you were suggesting, which is that overall, the larger hotels are probably seeing -- are seeing a little bit less of their business coming from group right now than they have in the past. I think they're getting the rate, because they're well located in markets that are recovering quickly, which in part accounts the differential in rate. But they -- because we still don't -- we've not recovered close yet to our prior levels of group activity, you're just not -- you haven't quite seen the same level of group business at those larger hotels. As we look at the beginning of this year, we would see a similar result that Mariott described which is that we're seeing some heavier levels and bigger increases in the smaller hotels than we are seeing in the larger hotels. We're seeing significantly good, strong increases in both. But I think part of that comparison, you need to understand that the smaller hotels tend to book a lot of their business fairly short term. So the fact…

Conclude on this point to make sure I understand it. That would suggest they do a larger assets and you have, of course, a significant chunk of those in your portfolio. It's really a lead lag time kind of issue. Then you should be looking at relatively -- good relative strength as we go forward through this recovery.

That's certainly what we would believe.

And second question for me regard to your appetite for international acquisitions. Obviously, there's been significant amount of uncertainty regarding currency and interest rates in the European market not withstanding your assets have done fairly well there. And I'm just curious how you asses your appetite to do more European acquisitions as opposed to perhaps more acquisitions in the Asian market going forward? How we likely to see more buying in Asia than Europe?

A lot of that will be driven by the opportunities that present themselves. I think that there are attractive -- we would be interested investing in both markets. In Europe, I don't expect though that we will see that many assets come to market unless they're driven by debt maturities. In talking with our office there and with the folks that run that office. The amount of product that's on the market in Europe right now is relatively low, and what's there is there because debt is maturing. I think we need to be cautious investing in Europe for all the obvious reasons. But I also think that we need to remember a couple of points we've talked about before. One is that Europe is a very varied place, and so we would generally feel better about the economies in Northern Europe than the ones in Southern Europe. The major cities of Europe are incredible tourist destinations. I think one of the reasons why Europe has done far better than most of the folks -- most folks would have expected is not because of some surprising pockets of economic strength in Europe itself, but rather because the rest of the world is interested in going to Europe. I think we mentioned on our prior call that we're looking at our portfolio of assets, which is reasonably diversified portfolio of hotels, over 40% of the business that we do at our hotels comes from outside of Europe and the U.K. And I think that's one of the reasons why we've done as well as we've done in the first quarter, because so much of the business is coming to us from outside of Europe. So now that it is, we would be cautious about Europe, but if we felt like -- if we like the market, we like the price, sometimes investing in periods of risk is when you get your best returns. And part of our analysis would be to look for slightly higher returns in Europe right now that we have in the past. As you look more broadly through Asia, it's really just like -- it's a very different situation country by country. As we announced today, we had purchased a property in Perth. We would certainly be interested in acquiring more in Australia. We think that's the market that even with some of the signs of slowing growth in China, that means that a little bit of reduction in China's growth outlook does not change the outlook for Australia in our minds in a meaningful way. There's a tremendous natural resource boom that's going to continue to happen there and that the acquisition of Perth is a great way to play on that.

We'll take the next question from Josh Attie with Citi.

How much of the improvement in your group bookings would you attribute to stronger market demand versus the positive changes in Marriott Sales Force program over the last 12 months?

Josh, I don't know that I can give a realistic answer to that. I think that they have been working through some of the bugs in the structure of Sales Force One. And I know that in talking with them -- we have regular meetings with them on this topic, they have certainly been encouraged by some of the trends that they've seen. I think it is true that if we look at our Marriott hotels, they have certainly had a strong surge in booking activity over the course of the last 6 months. So I think it's probably fair to attribute some of the improvement to them figuring that out at a better level. I also think that at the end of the day, a stronger market makes a big difference for all of us and that's the other -- that clearly is the major driver behind the improvement.

Maybe even when you look at the first quarter, how did the Marriott portion of the portfolio performe relative to the rest of it? Did you see outperformance?

Off the top of my head, I don't know the answer to that. And I think we tend not to try to give operator data on this call. So I probably would stay away from that answer.

Okay. One more question. Can you update us on the European debt investment that you made? I think it's scheduled to mature in October, and do you have any sense for how that will play out?

What I would tell you is that you're right that it matures in October. And I would also tell you that the portfolio is on the market at this point in time. As the owners look to either refinance the debt or to sell it, and we're paying close attention to what's happening with that portfolio.

Next up, we take question from Eli Hackel with Goldman Sachs.

Just 2 questions. Your commentary was very positive about group and transient. And which suggests at least in your commentary that maybe RevPAR will be up more than 5%. I'm just trying to get at what does the 5% take into account, and how much of that maybe would be attributable just to DC being weak throughout the year? And then just a second question on group. I think at one point, Ed, you talked about you used to make sure groups guaranteed a certain out of room spend whether be SNB or maybe audiovisual. Are you starting to make or your managers starting to make them guarantee sort of out of room spend as you continue to get more occupancy on the group side?

I guess when you're talking about the 5%, you're sort of trying to look at the range that we've given and has some sense into how likely is it to be 5% versus some other number. Is that the point you're trying to get out there?

Yes, I'm just trying to -- no, I mean the numbers you gave in terms of group booking pace, were high single digits in terms of transient seemed to be very, very strong. And clearly, the first quarter was strong and it seems like things are looking to get better, obviously, benefited from big Philly comparisons in the first quarter. I'm just trying to get at what would cause the deceleration. Is it DC or something else? Or is it just to take into consideration, it's still a cautious time with Europe and things like that?

I got it now. The answer would be the second half of what you just spoke about. I mean, I think we feel good about the first -- very good about the first quarter. There is nothing that we are looking at right now that would suggest that we should see a deceleration. But we all know that there are -- just watching what's happened over the course of the last couple of years and recognizing that we are not through the sovereign debt crisis in southern Europe at this point in time, I think our sense is that it's important to just remain balance in our perspective over what's going to happen for the rest of the year. But as Larry highlighted, DC is not going to be a great market this year, but it's going -- it should start to improve. We don't expect it to be negative certainly for the rest of the year. And I -- and we're not -- I'd say generally, probably we should take comfort from the fact that if we weren't really comfortable with improving overall outlook, we would not have raised our guidance in the way that we did. Now your second question was relative on the group side?

Yes, on the group side. In terms of making group guarantees.

Yes, yes, yes, okay. I don't know. We've talked about that internally, and I actually asked that question when we were speaking with our asset managers last week to just get a better feel for what was happening on that side. I think in certain markets, we are starting to get the benefit of being able to push pricing a bit around banquets and things like that. But it seems to me that we're still a little ways away from where we can really drive that improved results. Folks are showing up with a budget. The good news is they want to do the event. The bad news, if it's bad news, is that they still are showing up with a pretty defined budget that they need to stick to in order to have the event. And I think we're not quite at the point a lot of markets where we can start to say that, that budget has to go up before we can give you the meeting space. What is interesting though is, which we were not seeing last year, is a number of groups are while they may not have committed to higher spend before they get to the hotel, when the meeting planners and the senior executives or the senior folks responsible for the event get to the hotel, we are seeing some pops in activity on the food and beverage side that get determined at the very last minute. And so that has been a positive in terms of our food and beverage revenues and more often than not, we found that whatever our month out forecast is for food and beverage, we've been beating that more than listing it. And I think it is in part driven by the fact that when groups are showing up, they're comfortable that they can increase their spending.

Next up with Bank of America, we have Andrew Didora.

Two questions here. I guess, the first one is sort of a follow-up on your last commentary. It seems like your total same store revenue guidance implies F&B and other revenues will be more significantly lag room revenues than they have in the past couple of quarters. So anything specific you're seeing here in terms of the groups you have on the books for the rest of the year? And then my second question, with regards to Europe, and on the last call, you mentioned your European properties are forecasting a 3% to 5% RevPAR increase, but your guidance implied closer to flat European RevPAR. Has anything changed in your view since the last call here?

Let me deal with your first, and I'll come back to the issue about revenue. As we had indicated in our February call, we were being fairly cautious in our approach to Europe for all the obvious reasons. We've been very happy with the results that Larry explained in terms of just how the first quarter has played out especially when you look at the calendar quarter where you get the benefit a little bit more insight into what's really going on there by including March. And when you look at those numbers, I mean the reality is that we really are seeing -- we think our overall RevPAR was above 5 and you're seeing strong food and beverage spending there, and so profit is up in a material way. Our revised forecast takes the first quarter, essentially the first quarter success into account, but recognizing that the situation there is still somewhat volatile and uncertain. We've been conservative for the rest of the year and roughly in a level where we're assuming flat performance year-over-year for Europe. I think that clearly is upside there, but we have not tried to pick that up as of yet just again, because it's hard not to have concerns about Europe when you read the paper every day. And going back to the other point, I think at the end of the day, what you should probably take out of our overall revenue numbers, we still feel pretty good about food and beverage revenue. Some of the trends relative to other revenue would probably been a bit more cautious on the other revenue side which is why when you look at the overall mix, you're seeing that revenues are down a bit from the room -- overall revenues are slightly less in where we are on room revenue. But I would tell you that more of that is happening in an area that less of a profit driver, which is the other revenue side. But food and beverage spending, we would probably estimate right now. We'll be slightly less than where room revenues are, but not a lot less.

Next up with Baird, we have David Loeb. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: I had some housekeeping questions. First up, Larry, maybe for you. In the acquisition expenditure, CapEx related to acquisitions, that range went up a bit at the midpoint about $15 million. What's behind that? Are there -- the cost looking higher for the Helmsley conversion to the Westin for example?

We've had -- budget for the Helmsley has snuck up a couple of million dollars. But the real driver behind that, this might arguably be a classification issue internally, is we've identified an opportunity at the Helmsley to change how the first floor works from a standpoint of the lobby, the bar and the restaurant. And what we're looking to do and what that budget anticipates and then getting some final numbers and actually approving it internally, is that we're going to move the whole food and beverage and bar operation into the -- what I would call the front right part of the hotel potentially either. Part of the idea will be to extend the hotel out of it into the sidewalk on 42 Street, which we think will make that a far more visible food and beverage operation. That will allow us to take what's a really nice space what I would describe as the back of the hotel that is currently our restaurant that would allow us to turn that into meeting space, which is one thing that hotel would benefit from having more of. So most of that increase really relates to the fact that, that project which a lot of ways is only happening if it hits on threshold that we're going to add that project into the mix and that's the reason for that change that you see. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: And that on the order of magnitude $10 million or $12 million.

I think it's not -- It's probably not up at that level. I think the other element -- the other part of it is just a little bit more confident. We're going to get some of these projects done this year like some of the activity at the Hyatt. The Hyatt in San Diego is part of that broader number. And some of the work that we were planning on doing there is probably going to be accelerated in terms of a spending perspective. The nature, the work isn't really changing but we think some of that work is going to get done a little bit faster. A push on our guidance to get as much of that hotel done as possible before the NAREIT of that in November this year. So they're reacting to that pressure. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: And just on the group side, and you've touched that from a number of different perspectives, but I guess that one perspective that I don't think I heard. Is there lower rated groups that's burning off and how much of a drag is that? And when do you start -- when do you think you'll start seeing better group rate increases because the mix is shifting towards more recent booking?

I think we're already seeing that now. Just by virtue of the fact that some of the statistics side threw out the fact that our recent bookings are clearly up by -- are up by more than 8% percent compared to where we were last year. It's a good sign but sort of on the current basis, we're doing better. If I try to think back about it, right now, about 80% of our room nights for '12 are on the books. We probably started the year, I think, we said around 70%. We probably -- at the beginning of '11, we probably had about maybe 35% to 40% of the room nights for '12 on the books. So if you go a year further back to the year that would be relevant, at the beginning of '10, which is when the world start to get a little bit better, we probably had 20% of our room nights for '12 on the books. So I would guess that most of that business that was booked before the beginning of '10 was probably cheaper business. So maybe that means 20% of this year's room nights and some portions of the business booked in '10 would also be at lower room rate. But as you sort of think forward to '13, we'll have very little from '08 and '09 that will be on the books for '13. We'll have some obviously from '10. But hopefully gives you some feel that as we get to the end of this year and get into the beginning of next year, we should be less than -- call it 20% percent of our business would actually be still tied to a period of time where the industry were struggling. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: Okay, that's very helpful. And finally for Larry, you went through a number of markets, but you didn't mention Atlanta. Can you just give a little bit of a view of how it might have performed and what the outlook is?

Sure. Atlanta was actually up 4.9%, David. Very good group and citywide demand. We actually expect it even better second quarter. Got really good group and transient pace on the books and then for the rest of the year, it'll basically end up about where it was in the first quarter. So the second quarter, it should be very good. We're hopeful that the second half of the year improves on what our current forecast has, but very nice first quarter and even better second quarter. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: So this sounds like it's group rotation into Atlanta. Second quarter, you're going to lap that big upper mid drop from last year, right? That should help?

Yes. David Loeb - Robert W. Baird & Co. Incorporated, Research Division: But this is not really that -- it's business in Atlanta, the business climate in Atlanta or the transient business is picking up. Particularly, it's much more group driven?

No, no. The second quarter strength is also on the transient side. So group and transient in the second quarter.

Now we'll take a question from Jeffrey Donnelly with Wells Fargo.

Ed, if I could just build off maybe an earlier question on the call, we've seen just more consolidation activity happening at some of your peers, Red Lion, then maybe Gaylord. I'm just curious what's your personal sense? Do you think those could be the canary and the coalmine for more consolidation as the year progresses?

That's an interesting question, Jeff. So if you look at the merger market right now, I guess what I would say is capital is more available. Certainly, if you can access some of the markets that we can access, and that's a critical ingredient for those types of transactions to occur. I don't know whether the capital is available necessarily for the go private alternative similar to what we'd saw happen in 5 and 6 and 7. I don't know if that debt capital is necessarily available for those types of transactions. So the capital I'm saying might more likely be available might be more company to company. And I think the company to company deal is driven so much by factors that are hard to predict. It is both a function of whether one company is not realizing the benefits of their portfolio or their structure, it gets tied into the sort of the motivations of management and what their longer-term game plan is. So you could be right. I mean, I guess what I'd say is every cycle as we work our way passed the halfway point, I think you do start to see that for a variety of reasons, transaction activity begins to increase and as we get -- right on -- we're at the halfway point, yet, in this recovery, I think we probably are not. So my guess is most of the industry would look at their portfolio and their company and be pretty optimistic about the RevPAR and NOI growth prospects for the next several years. It's just hard to really look out, say to yourself, wow, supply's going to start to pick up and things are going to start -- we're going to start to be at a risky point in the cycle. So since that's not visible, I suspect that most folks would look at it the same way that I do in some ways, which is I really feel pretty good about where we're headed and the opportunity that we have to create value. And while we, at host, would always entertain sale the company at an appropriate price for our shareholders, the reality is that I think there's a lot value to create and I'm pretty focused on trying to create that. And I suspect that if you polled all the other folks in our space, they probably would say something similar to that.

If it's a form of company or the company transactions not necessarily out right. If you've seen a change in the attitude of the brands, disposing of their non-core assets particularly as stocks have come back. And I guess I can put you on the spot. Is it fair to say that like the large group assets, like a Gaylord owns, are not of interest to someone like you guys?

Speaking more broadly about the brands, we're in constant conversation with the brands about assets that they may own. I think, they're -- right now, I would describe them as they're all thematically on the same path, which is that they generally would like to be more asset light than they are today. But most of them are in pretty good shape from a capital perspective, and are looking for uses for that capital more than they are looking for reasons to generate more capital. So I think you haven't seen as much activity as you might have anticipated for that reason. I think in terms of larger group assets, without talking specifically about any particular company, our focus if we were to buy larger assets like that would be to acquire assets that show the characteristics of something like the Hyatt in San Diego. It's not just because that's the large group hotel that's attractive to us, it's because it's a great hotel in a great location that can both benefit from group business, but can also benefit from transient business and general business transient business -- I meant leisure business, the business transient. If you look at the hotels that I think of that are core in our portfolio would be the 2 big ones in San Diego. It would be the Marquis in New York and the Marquis in San Francisco. Those are assets that are big hotels. They do a lot of group, but they're just in great locations that benefit from everything the city has to offer. So as we look at other hotels around the country, we're -- the large hotel, we are particularly competitive for those because of our scale. So we would -- and I also think from an asset management perspective, we have unique insight because of what we own into how to improve the operations of those hotels. So if the hotel needs the parameters sizes described, we would be interested in taking a look at it.

That's helpful. And just a last question. I might have 2 parts to it. But more broadly, are you maybe disappointed with the pace of improvement in rate and margins in the business overall? Not necessarily just host, but maybe with more the industry? Because I guess I'm going -- many of the urban centers are running at or above prior peak occupancy group and negotiated rate business volumes seemed to be up nicely. But we don't seem to see the rate driven growth that typically accompanies that compression. And I guess I'm curious why you think that is and maybe do you just feel revenue managers in the hotels need maybe sort of a booster shot of confidence to push rate?

I think part of the -- I mean, certainly at some markets, we've seen very significant rate growth jump. But I think if you look more broadly across the industry, part of the issue is that the level, the decline in terms of occupancy, that was created a low floor on which to grow. And I also think that the reduction in group during the last downturn was -- really played a significant role in the ability to ultimately drive rate. Not when you look at the last downturn as we've described before, at least, in our portfolio, the decline in group and transient was the same. Both of them were down about 9% in room nights. And in this cycle, we were off about -- compared to those '07, about 4% in transient room nights and closer to 18% in group. And not only is that just significant in the absolute level of the recovery, but when it comes to driving pricing, having that group business on the books, as you know, that gives the GM and the revenue manager a sense of confidence about an ability to drive rate. And that's probably one of the reasons why these last few quarters, we've been maybe more focused and more excited about what we've been seeing on the group side. Because when you play this out over the next couple of years in our hotels, when you combine almost back to the prior peak occupancy levels, we started the year a couple of points short of that. It'll be interesting to see if we don't surpass that by the end of the year. As we start to get back to those levels and more in those rooms that are booked in advance which then leads to a better revenue strategy for the individual hotel on the transient side, I think you'll see that pricing that you were expecting but you're disappointed not to have seen. I think because this was a transient-led recovery until just lately, you unfortunately are finding that because so many of those rooms are booked so close to the actual date of use that it's just been difficult for the properties to push rate as aggressively as you would like.

Just last question, and I'll yield the floor. So I'm curious now with group those seemingly, they continue to build in the right direction and transient like you said has been very strong, I'm curious, when you take an early look at like 2013, as long as the economy holds in there, would you hope or expect it might look a little bit like it does right now? So about 4% to 6%, 5% to 7% growth could be sustained?

I want to hesitate to predict '13 at this point. But I would say that at the end of the day, if economic growth is forecasted to be better in '13, I think that it is in '12, and I don't. What we see when we look across our market is that supply should not be increasing in '13. So if this year plays out the way we expect, we continue to see the growth and trends that we're seeing. And you have a good solid economic year next year combined with low supply growth. I suspect that what we'll find is -- I think RevPAR growth next year could be good, and I would be guessing that we'd start to see a lot more of RevPAR being driven by rate and by mix shift as opposed to necessarily by continued improvements and occupancy, but we will still see those because they're really still room for more appropriate on the occupancy side.

It looks like that's all the time we have for questions. I'll turn things back over to Mr. Ed Walter for any concluding or closing comments you may have.

Well thank you, everybody, for joining us on this call today. We appreciated the opportunity to discuss our first quarter results and our outlook with you. We look forward to providing you with more insights into how 2012 was playing out on our second quarter call in mid July. Have a great day and thanks.

Once again, everyone, this will conclude this Host Hotels & Resorts Incorporated First Quarter 2012 Earnings Conference Call. Thank you for joining us. You may now disconnect.