Good day, everyone, and welcome to the Host Hotels & Resorts, Incorporated Third Quarter 2016 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Gee Lingberg. Please go ahead, ma'am. Gee Lingberg - Host Hotels & Resorts, Inc.: Thanks, Tony. Good morning, everyone. Welcome to the Host Hotels & Resorts' third quarter 2016 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. In addition, 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 reconciliations to the most directly comparable GAAP information, in today's earnings press release, in our 8-K filed with the SEC, and the supplemental financial information on our website at hosthotels.com. With me on the call today is Ed Walter, our President and Chief Executive Officer; and Greg Larson, our Chief Financial Officer. This morning, Ed will provide a brief overview of our operations and the company's outlook for 2016. Greg will then provide greater detail on our third quarter performance by markets and our balance sheet. Following their remarks, we will be available to respond to your questions. And now, I'd like to turn the call over to Ed. W. Edward Walter - Host Hotels & Resorts, Inc.: Thanks, Gee. Good morning, everyone. Overall, we had a solid quarter. Our operating results, given the trends the industry is experiencing, were…

Thank you. We'll go first to Anthony Powell with Barclays.

Hi, good morning, everyone. I believe you mentioned the group cancellations a few times in your script. So if you could give us more details on what exactly was going on there and what markets were impacted and if you expect that to continue next year? W. Edward Walter - Host Hotels & Resorts, Inc.: Yes. Overall, we've seen that cancellation and attrition fees, which is what we were talking about, have been higher this year than they have been in the last few years. Now, I would tell you that the level of attrition and cancellations we saw in the first half of this decade was below what I would describe as our long-term average, but the bottom line is they're up about 30% for the year. They were up closer to about 60% this particular quarter. We saw the cancellations in Orlando and at two of our larger convention hotels, one in San Francisco, which I suspect might have been a little bit related to some of the activity out there at the convention center that you're all fully aware of, and also at the Marquis. I would imagine that you'll – that we think that will moderate a bit in the fourth quarter, but it's not abnormal at this part of the cycle to start to see a little bit more in terms of cancellation and attrition activity. So we would expect to see that continue at a slightly elevated level compared to the 2010 to 2015 timeframe. Part of that, I would note, though, is I'd be careful to draw the conclusion that means that people are canceling it or not showing up to a greater degree in the past. I'm sure that's part of what's happening. Some of that, this is also reflective of the fact that we have better contracts from our perspective, which is enabling us to recover more when folks don't show up.

Got it. Thank you. And Greg, I think you mentioned your ability to pay your dividend through the cycle. What did you mean by that? And are you committed to maintaining your current dividend even as taxable income goes down a bit next year? Gregory J. Larson - Host Hotels & Resorts, Inc.: Yes. I mean, obviously, as I noted today, our taxable income actually exceeds the $0.80. And so, yes, I think we – what we've said in the past is that we would like to pay our dividend throughout this next cycle, and if our taxable income were to have a modest drop next year, yes, I think because we have one of the best balance sheets in the entire REIT universe, I think we're in a good position to be able to continue to pay the dividend.

All right. Thank you. Gregory J. Larson - Host Hotels & Resorts, Inc.: Thank you.

And we'll go next to Joseph Greff with JPMorgan.

Good morning, everybody. Greg, can you help us understand how much the Olympics contributed to your Brazil results in terms of revenues and EBITDA in the third quarter? Gregory J. Larson - Host Hotels & Resorts, Inc.: I mean, when we look at our hotels in Latin America, I mean, they had a RevPAR increase in north of 60%, so obviously, a little bit. W. Edward Walter - Host Hotels & Resorts, Inc.: Yes. One way to look at that, Joe, would be that our – I think for the full year, we're probably expecting that our Brazil hotels will generate between, call it, $10 billion to $12 billion worth of EBITDA. So, they're not overly significant to our overall results, but there was – we had an incredibly strong quarter especially at the top line, and that obviously did influence our overall results for the quarter. Having said that, if you look at our domestic results, we would still – we've still had a very solid quarter from a domestic perspective with RevPAR being up 2.8%. So, no doubt that that headline number is better because of Brazil, but we were strong in Mexico and we were strong in Toronto, too. So, all of our international hotels had a good quarter and domestic portfolio did, too.

Great. And then, you talked about this in your earlier prepared remarks about the transaction market, but can you talk about the asset sale transaction market? I guess how frozen is it now, especially when you look at markets with high supply growth, say, a city like New York? Thank you. W. Edward Walter - Host Hotels & Resorts, Inc.: Yeah. I would say that it certainly not – and I think you've heard this from others. The market is not as robust as it was in 2014 and the first half of 2015. Having said that, I would say that there's still activity happening. I just think deals take longer. The number of folks that are chasing a particular transaction is probably a little bit thinner. We're hearing as we talk with the brokerage community, as we look at the experience we're having, we're finding that the international buyers are probably a bit higher percentage of the activity than in past. You're seeing some smaller operators associated with family offices chase after some of the smaller deals that are out there. I've heard that some of the public but non-traded REITs or non-listed REITs have been a bit more active, too. So there's still a market out there. I feel reasonably optimistic that we're – I certainly feel optimistic we'll sell Melbourne. I think that there is a decent chance that we'll complete a few more asset sales. But as I started off in saying the market is not as strong as it had been, and that's why you're not seeing as many sales announced by folks.

Thank you.

We'll go next to Shaun Kelley of Bank of America.

Hey. Good morning, guys. Ed, maybe just to follow-up on that last point. You had laid out a program of I think $500 million to $1 billion. You're at the lower bound of that now, of what you wanted to target. Is there a chance that getting further, reaching too much further closer to the $1 billion, is increasingly off the table just given what you're seeing out there? How are you thinking about that target now? W. Edward Walter - Host Hotels & Resorts, Inc.: Short answer is that I think we can still over the next three quarters get to the $1 billion number. But I would also say that that is totally dependent on us feeling comfortable with the pricing that we get. Greg talked about the strength of our balance sheet, and I think you all recognize that. We're not doing this for liquidity reasons. We're doing this because we're trying to be smart about how to continue to position our portfolio for the future. And the assets that we're selling now are just ones that we generally think will not perform as well as the remainder of our portfolio or may have higher capital needs. The one exception to that would be Melbourne, where we've made the conscious decision to exit the Asia-Pacific market and so we want to sell that property. We won't sell that for a bad price, by any means, but that is one that we are more motivated to sell perhaps than some others. So bottom line is that I think we still have a reasonable shot at getting to the high end of that range, but we'll be thoughtful in terms of evaluating the sale opportunities that we have and making the decisions going forward on those sales.

Great. I appreciate that. And then my follow-up is related to some of your comments on supply. So appreciate that color as we look forward to next year. If I recap, I think you guys said that in Host markets, you're looking for greater than 3% supply in 2017. Can you just give us a sense of where is that number this year in Host markets so we can compare and see how big of an acceleration you're anticipating? W. Edward Walter - Host Hotels & Resorts, Inc.: Well, you mean what is that number this year? Is that what you were asking?

Yeah, correct. W. Edward Walter - Host Hotels & Resorts, Inc.: Yeah, so I think the number that we're quoting, what we're finding today as relevant is to look at upscale and above. So I think you know that the upper upscale segment generally has very light supply. And I think that's still coming in generally across the board in our markets at less than 2%. But it's clear to us that, depending upon the property, we may compete with upscale supply, too. And so if we look at that particular number, this year we would say that across our top 19 or 20 markets, we're looking at supply that's roughly 2.5% in 2016. We think that's going to escalate to slightly more than 3% in 2017. Markets that we are a bit concerned about would be ones that you are, too, Seattle, Denver, Houston, and New York. I think the thing to note for us, though, is that while those markets represent about, call it, 15% of our EBITDA, we also have great representation in some markets like Atlanta, Hawaii, San Diego or San Francisco, that are expected to have much lower supply. And in fact, those last four markets that I just referred to, we have more than 25% of our EBITDA coming from those markets. So hence my point in our prepared remarks that when we see our portfolio compared to others, we think we have a little bit less exposure to supply than some others because of the diversity in the portfolio.

Very clear. Thanks a lot.

We'll go next to Stephen Grambling with Goldman Sachs. Stephen Grambling - Goldman Sachs & Co.: Hey. Good morning. Two questions. First, you added a disclosure on hotel management opportunities in the press release. Can you provide some additional color on how the new economics impacted results and also address how many properties are potentially still governed by above-market management fee agreements? W. Edward Walter - Host Hotels & Resorts, Inc.: Yeah, we had agreed at least for the short-term not to provide specifics about that particular transaction. So, unfortunately, I'm going to have to abide by that agreement. But I would say that we had an opportunity there where a contract was expiring and there was a chance to both lower our management fees. We extended the term a bit, but we retained a fair amount of flexibility in terms of how the hotel would be operated going forward. Stephen Grambling - Goldman Sachs & Co.: Okay. W. Edward Walter - Host Hotels & Resorts, Inc.: I think if you look across our portfolio, we do continue to have a number of opportunities. It probably falls in the realm of a couple of years you space things out over the next five to seven years where there's an opportunity to consider either replacing the existing branded operator with a franchise operator or we may have contracts that terminate that offer us even more flexibility. So I think it's an area that we've been able to have a fair amount of – we view that where we've may done conversions or where we've changed contracts, we're consistently seeing anywhere from a 10% to 20% improvement in EBITDA as a result of the changes that we're making. And it's something that we could build into our business plan for each year…

We'll go next to Thomas Allen with Morgan Stanley. Thomas G. Allen - Morgan Stanley & Co. LLC: Hey, good morning. It seems like one of the bright spots during this earnings season has been leisure trends outperforming. I mean, how long do you think that leisure trends can continue to outperform given the corporate environment? And any other thoughts on leisure trends would be helpful. Thank you. W. Edward Walter - Host Hotels & Resorts, Inc.: Yes. I think as long as employment remains fairly strong then I would say looking back in past history, leisure should probably hold up fairly well. If you go back to the 2001 to 2003 downturn, we generally found throughout that downturn, because it was not from an economic perspective, it was not that severe. Hence, unemployment, if my recollection serves me right, did not increase significantly during that time period. We found that our resort hotels outperformed during that time period, and we generally found that leisure travel was fairly strong. I think, going forward, the other thing that will affect leisure travel will be international leisure. We've had – the last 18 months have been a bit weak, primarily because of currency. But assuming that the currency stabilizes, I think there's an opportunity for some pickup there. We're generally fairly bullish as you look out over the next five years about our resorts profile. We think it benefits from both a combination of the leisure trends that we just discussed, and secondarily, it benefits from the fact that supply in the resorts segment is much lower than the industry as a whole. Thomas G. Allen - Morgan Stanley & Co. LLC: Helpful. Thanks. And then, can you just give us an update on how you think the hotel brand's direct booking push is affecting your business? Thanks. W. Edward Walter - Host Hotels & Resorts, Inc.: We're generally in favor of what they are trying to do there. We know that there is some short-term pain associated with that. The best estimate that I have heard of that is it might have cost us a couple of tenths of RevPAR growth in the last couple of quarters. So we're watching it and well, obviously, to the extent that it doesn't seem to be accomplishing their goals, may urge them to reconsider it. But at this point in time, we're still comfortable with heading down that path. I mean, the bottom line is that the reservation made through an operator website is a heck of a lot cheaper for us than one that might come through an OTA in terms of the costs associated with that booking. And so to the extent that we can drive more traffic to that operator website, we generally think that makes a difference for us from the bottom line and that's what matters most to us. Thomas G. Allen - Morgan Stanley & Co. LLC: Thank you.

We'll go next to Smedes Rose with Citi.

Hi, thanks. I was just wondering if you could maybe talk about, and I'm sure you'll give more detail on your fourth-quarter call, but just your CapEx priorities as you think about 2017 and where you are? You have about $100 million left on your share repurchase program, would you look to continue to buy back shares at these levels or just sort of some general thoughts around that? Gregory J. Larson - Host Hotels & Resorts, Inc.: Sure. Let me answer the second question, first. We will be buying more of our shares back, especially if the price remains at the current level. And we do – we have the balance sheet capability to do that. We have the authorization from the board to do that. So, you should assume that we'll continue to pursue a share buyback. CapEx for next year, I'd say that we've been – had been targeting for a few years now to be spending a bit less, especially on maintenance CapEx in 2016 and I think that will carry over in 2017. So, I would generally expect to see a little bit less capital in 2017. Our thought had generally been that we would prefer to – we would look to increase capital spending a bit later in the cycle under the theory that it costs us a little bit less maybe in terms of lost occupancy. And it costs us a little bit less because oftentimes as you get near the end of the cycle, pricing for construction projects drops, too. So, we're not at the point we're making any decisions about 2018. We are looking hard at our 2017 plan, and I'd say general – the general initial sense, without putting a hard number on it, is it will be lower than what we've spent in 2016.

Okay, that's helpful. You know, you mentioned earlier, too, that all things being equal that Marriott Hotels run, I guess, at a higher relative operating margin versus Starwood. And I was just wondering, I mean just two similar hotels side-by-side, like what is kind of the difference, all things being equal? Is it like 50 basis points or is it a point of margin or just kind of very broadly? W. Edward Walter - Host Hotels & Resorts, Inc.: You know Smedes, I know that it is less, but I'm not confident enough, sitting here right now, to give you a direct answer on that question. So, let's – I don't think it's more than a point. Let's put it that way.

Okay. That's fair enough. I just – that's helpful. Thank you.

We'll go next to David Loeb with Baird. David Loeb - Robert W. Baird & Co., Inc. (Broker): Hi, good morning. I wonder if I could just take you back to capital allocation. I noted the increased ROE spending in the fourth quarter, and I wonder if you could just comment about how you look at ROE spending versus buybacks? And how tightly tied are future asset sales and continued stock buybacks? Thanks. W. Edward Walter - Host Hotels & Resorts, Inc.: I would say that the increase that you saw in the ROI CapEx – or the redevelopment CapEx is a lot more to just do with the timing of when we expect to complete projects, and probably even more so when we expect to close them out, rather than being an indication of any change in philosophy or change in quantity in terms of our projects. There may be a little bit of a couple of projects being a hair more expensive than what we had originally anticipated. But the reality is that overall in talking with our construction group. Our overall budgets – our overall performance compared to budget is coming in pretty consistently with what we expected. And so that mild increase that you see in the numbers compared to the prior quarter really just reflects the fact that we expected to pay for more of the costs this year, and that's likely because we're finishing a little bit sooner for some of those projects. I think as the – looking beyond that or thinking more broadly, we look at all of these different options, whether it's investing in the portfolio, buying stock or other investments on kind of a comparative basis. Opportunities to enhance the portfolio have generally driven higher rate or higher levels of return and will continue to be attractive. Having said that, I don't think we have as many of those opportunities in 2017 as we've had in 2015 and 2016. And so I expect, the volume of activity in there will be lower. David Loeb - Robert W. Baird & Co., Inc. (Broker): Okay. Thank you.

We'll go next to Rich Hightower with Evercore ISI.

Hi. Good morning, guys. W. Edward Walter - Host Hotels & Resorts, Inc.: Good morning.

So just another twist on the Marriott-Starwood question. So I appreciate the color that you guys were able to give on in terms of how you're looking at 2017 at this point. But to the extent that Marriott is able to give an initial look on 2017 RevPAR when it reports next week and also given that I believe that the overlap in terms of concentration within Host portfolio is even higher today now that the deal has closed than it was before, do you think that there would be any material differences in how they view North American RevPAR growth next year versus what you guys might think about your portfolio? W. Edward Walter - Host Hotels & Resorts, Inc.: Rich, that's a great question and I think to some degree we're all sort of chuckling here as we hear that. Here's what I will tell you. Clearly, our hotels, in the position they're in, both physically and locationally. Should generally perform in line with what Marriott would generally be suggesting their broad-based brands would deliver. Now, their optimism about what the numbers might be for next year versus our trying to be realistic could – in other words, it's hard to predict exactly how they're going to look at next year and what message they want to try to convey. So I guess at the end of the day, we've tried to provide you with as clear a view as we can have at this particular time in terms of what's going to happen for 2017. Ultimately, as you're suggesting, I would expect our hotels to generally perform in line with what they would be predicting for domestic performance because our hotels represent a big part of their portfolio. Gregory J. Larson - Host Hotels & Resorts, Inc.: Yeah, I agree with all that. I mean, obviously, there are some geographic differences as well and plus, as you know, Rich, a lot of the supply growth recently has been on the select service side. And they have, obviously, quite a bit of select service. We do not. So that could be another difference as well.

Yeah, that's very helpful color, guys. And then my second question is just on G&A. As you think about the fact that you're exiting certain markets around the country and around the world as well, and I'm assuming that transaction expenses are included in the corporate G&A line item at this point. I didn't see a different number anywhere else in the release. Do you see G&A savings opportunities in some of those categories or other categories as we think about next year and beyond? W. Edward Walter - Host Hotels & Resorts, Inc.: I don't know that I would – the short answer is yes in the standpoint that, as we have phased out of the Asia market, we are certainly cutting expenses in that market and so that there is some benefit that flows from that. I don't know that I would necessarily expect, though, in modeling our G&A expense that you should be thinking that there'd be radical differences from one year to the next, at least in the context of 2016 looking at 2017.

Okay. Thank you.

We'll go next to Robin Farley at UBS.

Great. Thanks. I think in the past you've talked about needing RevPAR to grow in the 2% to 3% range to offset increases in expense. Your comments about next year suggest that maybe you wouldn't expect more than a 2% increase, maybe even lower or just something similar to this year's levels around 2%. How should we think about expense growth without – or I guess impact on profitability if RevPAR is not up above the level to offset those higher expenses? And your comment about maybe savings from the Starwood-Marriott transaction, if I'm understanding that right, it sounded like maybe that's only 100 basis points of expense to be offset. And I guess that would only be in the sort of – I don't know, is that like 20% or 25% of your room base that are Starwood, coming from Starwood. Maybe you could put some color around that. Thanks. W. Edward Walter - Host Hotels & Resorts, Inc.: Sure. So first off, I would say that in terms of thinking about the level of RevPAR and revenue growth that we likely would need from one year to the next in order to maintain the margins that we have, I'd say today our thinking is that needs to be right around or just slightly above 2%. And that's based on nothing more complicated than expecting inflation to generally run at about that level. And so if our costs go up by inflation then we certainly need to match that at the revenue line in order to maintain our margins. Now I will point out that that does mean that EBITDA grows at that same rate of inflation or slightly better. And so that's not suggesting that we'd be at flat EBITDA, but I think that's still a reasonable reference…

Okay. Great. Thanks. And for my follow-up question, do you think the current environment with at least not accelerating RevPAR growth, I don't know if you see it decelerating next year, but this current environment, do you see opportunity in maybe consolidation among just the REITs? In other words, you haven't been a buyer of assets, but would it make sense, could it make sense for you to be involved with consolidation among small or medium-sized REITs? W. Edward Walter - Host Hotels & Resorts, Inc.: That concept of consolidation on the ownership side has certainly gotten more attention since we've seen a bit more consolidation on the operating side. To-date, despite the fact that I think a number of you have offered good reasons why that should occur. We have not seen that occur. So I wouldn't rule out that it could possibly happen, but I would say that it's not a particular objective of ours. We're not concerned about getting larger, we're just concerned about essentially becoming more valuable. That could happen in the context of a larger transaction. But typically that has not proven to be the case.

Okay. Great. Thank you.

We'll go next to Harry Curtis with Nomura. Mr. Curtis, your line is open. You may have us muted at the time.

Yeah.

Thank you. We can hear you now.

What's that? I don't have a – I'm not on the line. W. Edward Walter - Host Hotels & Resorts, Inc.: Well, you are, Harry. We can hear you.

It's not on. W. Edward Walter - Host Hotels & Resorts, Inc.: Well, I guess we'll have to move to the next caller.

Mr. Curtis – are you able to hear us right now, Mr. Curtis?

Can you hear me? Gee Lingberg - Host Hotels & Resorts, Inc.: Yeah.

We can hear you, Mr. Curtis? Can you hear us?

Can you, guys, hear me? W. Edward Walter - Host Hotels & Resorts, Inc.: Yeah.

Mr. Curtis, again, we can hear you.

Okay. Gregory J. Larson - Host Hotels & Resorts, Inc.: Let's move to next question.

Okay. Thank you.

No, no. Greg? Gregory J. Larson - Host Hotels & Resorts, Inc.: Yes. Hi, Harry.

Hey. Sorry about that. We're having Cisco problems. Gregory J. Larson - Host Hotels & Resorts, Inc.: It's okay. It's nice to have you.

Thank you.

Mr. Curtis, do you have a question for the conference today? [Technical Difficulty] (53:12-53:21)

Okay, thank you. We'll move on to Wes Golladay with RBC Capital Markets. Mr. Golladay, your line is open. Please go ahead with your question. W. Edward Walter - Host Hotels & Resorts, Inc.: You know what, I'm guessing that we must – there must be a technical issue here because of the fact that we had two calls in a row. Gregory J. Larson - Host Hotels & Resorts, Inc.: Why don't we try one final question and then we'll end it? W. Edward Walter - Host Hotels & Resorts, Inc.: One more, why don't we move to the next participant?

Thank you. We'll move next to Bill Crow with Raymond James. Bill A. Crow - Raymond James & Associates, Inc.: I'm sorry, everyone.

Mr. Crow, your line is open. Please go ahead with your question. W. Edward Walter - Host Hotels & Resorts, Inc.: I think we should end it. Gregory J. Larson - Host Hotels & Resorts, Inc.: Yes. W. Edward Walter - Host Hotels & Resorts, Inc.: All right. Folks, we apologize for what seems to be a technical difficulty here, but the team will be available to answer any of your questions throughout the rest of the day and tomorrow. Thank you for joining us on this call today. We appreciate the opportunity to talk about our third quarter. We look forward to seeing many of you at the event in Phoenix in a couple of weeks and of course talking to you in February to discuss both our year end 2016 results and provide a lot more insight into 2017. Have a great day. Thank you.

This does conclude today's conference. We do thank you for your participation. You may now disconnect.