Good morning, and welcome to the Host Hotels & Resorts Second Quarter 2025 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Jaime Marcus, Senior Vice President of Investor Relations. Please go ahead.

Thank you, and good morning, everyone. Before we begin, please note 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 EBITDAre and comparable hotel-level results. You can find this information together with reconciliations to the most directly comparable GAAP information in yesterday's earnings press release, in our 8-K filed with the SEC and in the supplemental financial information on our website at hosthotels.com. 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, Jaime, and thanks to everyone for joining us this morning. We are proud to have achieved another strong quarter of operating and financial results, leading to outperformance in the first half of 2025. In the second quarter, we delivered adjusted EBITDAre of $496 million, an increase of 3.1% over last year, and adjusted FFO per share of $0.58, an increase of 1.8% over last year. Second quarter adjusted EBITDAre and adjusted FFO per share benefited from $9 million of business interruption proceeds related to Hurricanes Helene and Milton, while the second quarter of 2024 benefited from $30 million of business interruption proceeds related to Hurricane Ian and the Maui wildfires. Comparable hotel total RevPAR improved 4.2% compared to the second quarter of 2024 and comparable hotel RevPAR improved 3%, driven by stronger transient demand, higher ADR and more ancillary spend. Comparable hotel EBITDA margin declined by 120 basis points year-over-year to 31%, driven by a 120 basis point impact from business interruption proceeds that we received last year for the Maui wildfires. The operational results discussed today refer to our 78 hotel comparable portfolio in 2025, which excludes the Alila Ventana Big Sur, the Don CeSar and the Westin Cincinnati, which we sold in June. Turning to business mix. RevPAR growth in the second quarter was better than expected, driven by leisure transient demand and rate growth despite a continuation of the international demand imbalance. We saw particularly strong performance in Maui, Miami, Orlando, Atlanta, New York, the Florida Gulf Coast and San Francisco. Transient revenue grew by 7%, driven by both the Easter calendar shift and the ongoing recovery in Maui, the latter of which accounted for approximately 40% of the transient revenue growth in the quarter. Digging into Maui, the leisure transient demand recovery continued, driving…

Thank you, Jim, and good morning, everyone. Building on Jim's comments, I will go into detail on our second quarter operations, updated 2025 guidance and our balance sheet. Starting with total revenue trends, comparable hotel total RevPAR growth outpaced RevPAR growth as both group and transient guests maintained elevated levels of out-of-room spend. Comparable hotel food and beverage revenue grew 4% in the quarter, driven by outlets. Outlet revenue grew 9%, driven by transient room night growth in Maui as well as recently repositioned outlets, including The View at the New York Marriott Marquis, AVIV at the 1 Hotel South Beach and outlets at The Singer Oceanfront Resort. Properties in Orlando, Nashville and Naples also contributed to outlet growth. Banquet revenue grew 1% as increases in banquet and catering contribution per group room night outpaced decreases in group room night volume. Banquet and catering contribution was up 7% in the quarter, signaling the continued health of group spending. Growth was driven by our large group hotels in San Diego, San Francisco, New York, Orlando and Naples. Other revenue grew 13% in the second quarter as golf and spa revenues continue to grow. This is further indication that the high-end consumer is prioritizing spending on premium experiences. Shifting to business mix. Overall transient revenue was up 7% compared to the second quarter of 2024, driven by higher rates and the continued growth of transient room night at our resorts, led by Maui. During the second quarter, our resorts saw modest transient rate growth year-over-year alongside 21% transient room night growth, which benefited from the Easter calendar shift and the recovery in Maui. Excluding Maui, transient revenue at our resorts was up in the mid-teens, driven by our resorts in Orlando, Oahu and Miami. Looking at recent holidays, revenue for Memorial Day…

[Operator Instructions] Your first question comes from the line of Duane Pfennigwerth with Evercore ISI.

Room nights on the books up 6% sequentially versus the last quarter and in your 3Q group commentary. I assume this means you're seeing groups further out for '26 and beyond continue to book. But maybe you could just talk a little bit about the group dynamics that you're seeing second half and then longer term?

Duane, it's Jim. Can you state the question over? We didn't catch the first part of it. I think you're on mute. So if you wouldn't mind restating it, we'd appreciate it.

Sorry about that. Yes, just help us match up the commentary of room nights on the books up 6% versus last quarter versus the 3Q commentary that you're making. I assume that means you're seeing group bookings further out into '26 and beyond.

Duane, it's Sourav. So yes, just to put it into perspective, when we started off the year, we had an expectation of achieving about 4.3 million group room nights. And you may recall, last quarter, we took our forecast for overall group room nights down by about 100,000 group room nights. So we had about 4.2 million. Based on what we are seeing in terms of softening sort of short-term group pickup, we looked at the second half, particularly the third quarter and took out about another 75,000 to 77,000 group room nights. So we are 3.8 million group room nights, which we have on the books. And now our expectation for the full year is approximately 4.1 million group room nights. That said, when you look out into the future, as you were saying, our '26 to '28, we had messaged last time that, that group pace was in the higher single digits. That actually improved slightly from the last quarter. So yes, we see groups continuing to book out into the future. It's more the short-term pickup, particularly in the third quarter that we have taken some risk off the table. Just to put some numbers around sort of what we picked up in the second quarter for the remainder of the year, we picked up 215,000 group room nights for the remainder of the year, and about 20%, call it, was for Q2 and 80% of that was for the rest of the year. And if you look at -- compared to 2024, that was about 311,000 group room nights. So definitely somewhat softening in terms of the third quarter. But as we look out, particularly into the future, it's strong. And the only other thing I'd add is the group rate that we booked into the second half is extremely strong as well. So that continues to really show up.

Your next question comes from the line of Chris Woronka with Deutsche Bank.

Jim or Sourav, I was hoping you could dive in a little bit further on Hawaii. And I think more widely, we've been getting messages through the various news sources about what's going on there. Can you maybe shed a little bit of light on what you're seeing within your portfolio and how confident you feel about that for the back half of the year and maybe any early thoughts on '26?

Yes. Chris, I'll start, and Sourav can feel free to jump in if he has additional color he wants to add. But we are of the opinion that Maui's recovery is firmly underway. We had 19% RevPAR growth in the quarter for our Maui resorts. That was matched by 19% out- of-room spend as well, really driven by outlet growth. The recovery is being fueled by leisure transient, and it's somewhat of a new phenomenon for Maui because the booking window is very short term. We had said that we anticipated Maui to contribute $100 million of EBITDA this year for the portfolio. We are now assuming that the Maui resorts will contribute $110 million. So we're seeing very positive momentum. There's no question about it going forward. I think this is fueled in large part by a marketing campaign that a group of hotel owners banded together to undertake marketing individual properties, combined with the state of Hawaii, led by the governor, who endorsed and sponsored, I think, about a $6.3 million marketing campaign as well. So when people see what is happening on the island, and you were there in February, you know that it's open for business. And Wailea is a great place to be. The west side where the Hyatt Regency is, is a great place to visit as well. It's, I think, probably the best group hotel on the island. And that's what we have to see happen to really get back to where we were at pre-fire levels. We have to start seeing the incentive groups come back to Hawaii. And we're getting good traction with meeting planners. They're taking trips called FAM trips, F-A-M, familiarization trips so they can just go see what is happening on the island. There's a long lead time for incentive group bookings to occur. It's at least 6 months, and it can be a year or longer in some instances. So we expect to see the group pace pick up as we get into 2026 and '27 and beyond. But Maui is definitely open for business, and we're really pleased with what we're seeing. The other thing that has to happen, Chris, is we have to see additional airlift made available. It's a bit of a chicken and an egg situation, where the airlines are not going to want to bring additional capacity back online until they have a good feeling about their ability to fill those seats and vice versa. We don't want our customers who want to come to Hawaii and not be able to find a seat on an airplane. So compared to where we were pre-wildfire in terms of airline capacity in Maui, we're down about 20%. So we're hopeful that, that's going to change over time. The recovery is well underway. In addition to the outlet revenue, we saw a meaningful pickup in spa revenue and golf revenue as well. So people are definitely coming and they're spending.

Your next question comes from the line of David Katz with Jefferies.

All right. Just had to get myself unmuted. I wanted to ask about -- more about Hawaii and in particular, as you know, Jim, the Turtle Bay, sort of caught my fancy. Can you just give us an update on how you're doing with that? What's been sort of the best surprise, maybe if there's any negative surprises with it? And I just want to be clear about how we're comping that hotel in the RevPAR, right? That was sort of out for 2Q, I believe, right? And is that sort of done by 3Q and in there? Those are my sort of two questions.

Turtle Bay, the hotel pro forma, the hotel operations, David, are exceeding our pro forma expectations. So it's been well received into the Ritz-Carlton system. Bonvoy is driving a lot of business to the property. I wouldn't say that there are any negative surprises with respect to hotel ops at all. The property is performing well. We've had a change of plans with respect to our repositioning and renovation of the Fazio golf course. You may recall from your visit that there are 2 golf courses on property, the Fazio and the Palmer. We have leased the Palmer course to the developer that is developing some residential units adjacent to the resort itself, Areté Development. And we own -- continue to own the Fazio course. For a number of reasons, we've made the decision that we're not going to reposition and upgrade the Fazio course at this point in time, but we are going to spend the time really preparing the site for potential future development while we have the opportunity to do that. So if you're seeing a shortfall in operating performance for the resort in total, it's as a result of the golf. It's not as a result of the hotel. And I'll let Sourav address your other question regarding comp, non-comp.

Yes, it is actually in our comparable results. We did not own the hotel. However, we do have the actual numbers and performance from that hotel. So it is not comparable numbers. You just have to look at the comp tables.

Got it. Okay. So it's in 2Q...

I think it's on Page 10, I believe.

Your next question comes from Smedes Rose with Citigroup.

I wanted to ask a little more about wages and benefits. You mentioned that they are tracking up 6% for this year. Can you maybe, Sourav, just give some thoughts on -- it'd be interesting to -- what are the components of that, like labor versus benefits to employees and kind of how you're thinking that might pace into next year?

Sure. When you think about sort of overall, it really is obviously market dependent. It is being driven by where there were CBA negotiations finalized and that's driving a big piece of the increase for this year just given the front-loading impact. For next year, all I can tell you that it is going to be overall lower than where it is this year. That's the expectation. But it's too early to tell, frankly, because we haven't seen budgets from our managers yet, and we will not see that until later. So I can't really comment on an exact number, but the expectation is the growth should be slightly lower than this year. What that is, I can't comment right now.

Your next question comes from Aryeh Klein with BMO Capital Markets.

Can you talk a little bit about the cadence for RevPAR growth in the second half of the year? And specifically, what might drive Q4 growth relative to the third quarter? And then just a clarification on the insurance savings. Is the $14 million an annualized number or just what you expect to save this year?

Aryeh, the $14 million is just what we expect to save for this year. So that's what we have effectively, you would take out reduced from our prior guidance of which we had at $1.645 billion. It's a savings of $14 million from that number, so just this year. And to your first question in terms of why we have confidence in the fourth quarter growth and what's driving that. Right at the beginning of the year, we had pretty solid pace for the fourth quarter. A couple of things happening in the third and fourth quarter that you have to remember. One is Rosh Hashanah was in October of last year, that's falling in September. So that's helping the fourth quarter and it's detrimental to the third quarter. Second, our big Hyatt -- our Grand Hyatt Manchester in San Diego is under renovation. That's impacting group pace as well. The other big thing for the fourth quarter that's helping, you might recall that when there were elections, a week before and a week after elections, nobody was really booking. So that's actually uplifting your Q4 pace numbers as well. So the expectation of fourth quarter is better as a result of that. So those are sort of the 3 components.

Your next question comes from the line of Robin Farley with UBS.

Can you talk a little bit about the transaction environment? Just -- you sold an asset, just sort of broadly what the environment is like for that? And also any opportunities to buy? And then I do have one quick follow-up.

Sure, Robin. Let me start by saying that the debt capital markets are wide open. The CMBS market is wide open. It's very active at this point in time. We've seen a notable pickup in transaction activity over the last 90 days or so. It's certainly not -- I wouldn't characterize it as robust. It's certainly not at the levels that it has been in the past. There is still a fairly significant bid-ask spread between buyers and sellers. However, in certain instances, we have seen that bid-ask spread narrow and transactions get done. So we'll see what happens as we get a bit more certainty on the macro picture over the remainder of this year and into 2026. I think that it's still somewhat difficult to underwrite a potential acquisition aggressively, given the macro uncertainty right now, and that may be holding some people back at this point in time. But our belief is that a number of assets have not been invested in since COVID day. So we're talking 5 years now. And the properties are in dire need of capital -- of CapEx. And those -- something is going to have to happen with those assets going forward. So I mean, we were in the really fortunate position, as you know, that we had the balance sheet that allowed us to invest in our assets. And over the last 6 years, we have invested $1.7 billion in ROI CapEx in our properties, completed 24 transformational renovations. Of those 24 properties, 20 have stabilized operations and we picked up close to 9 points in yield index. And that's one of the reasons why we continue to outperform. It's really our capital allocation decisions that have been made from 2017 forward. So to answer the second part of your question, are we interested in buying hotels? I'll never say never, but I will tell you, as we sit here today, it's not at the top of our list. We think that the better use of our capital, certainly in the second quarter and the first half of this year has been investing in our assets so that we can continue to drive the types of returns that we're seeing, paying a sustainable dividend subject to the approval of our Board of Directors and buying back shares. We bought back $205 million worth of stock in the first half of the year, and we think the stock is a screaming bargain today given where it's valued relative to the quality of our portfolio and our fortress balance sheet.

Right. That's super helpful. Just one quick clarification following up and maybe one for Sourav. With the guidance change, you're getting a little more cautious on that sort of close-in Q3 group bookings. And I know that's relative to what you said 3 months ago. Some have sort of pointed to things picking up a little bit in July. Are you seeing at least in the very near term, something maybe a little bit better than the sort of delta you're talking about versus April?

Because it's such a short-term business, I think that's kind of why we have taken some of the risk out of Q3. Is July trending well? I'm not in a position to give a number for July. But yes, it has been certainly trending well relative to our expectations. So could it get better? There is certainly a possibility, but it's really tough because these groups are sometimes literally booking 1 week out or even a couple of days out. So we want to make sure we are appropriately cautious as we were doing our forecast.

Your next question comes from the line of Dan Politzer with JPMorgan.

I just wanted to follow up on the group commentary. Is there any more detail in terms of like lead volumes, corporate versus association? And then are you seeing actual changes in terms of the spending patterns from these groups in terms of some of that ancillary or F&B?

Yes. So it's very similar to what we had talked about on the first quarter in terms of where we are seeing some of the weakness in groups. It certainly is a little more on the association side, particularly as it relates to associations that either rely on government funding or somehow tied to government funding. In terms of the folks that are actually showing up to the hotels, they're spending well. So if you look at our second quarter results, group volume was down, but our banquet and catering revenue was actually up. And we look at the banquet and catering revenue on a per group room night basis, that was up 7%. So overall groups, when they're coming to the hotels, are actually spending and spending well and continue to spend. So that trend really hasn't changed. And it's certainly has the same momentum as it did, which we saw in the first quarter, and we have that same expectation going into the groups that are going to be coming in, in the third and fourth quarter as well.

Your next question comes from the line of Daniel Hogan with Baird.

Just quickly on the Cincinnati sale. Looking at the rest of the portfolio, how many more assets are in need of that amount of CapEx or would be potential noncore sale candidates? And how are both you and potential buyers thinking about that amount of CapEx needs differently? And is that able to then get a deal across the line?

The Cincinnati, I would say, probably ranked at the bottom of our portfolio, Dan, from a CapEx perspective. It's in a tough market, a very low RevPAR asset. It's subject to a ground lease, what we sold was a leasehold interest, and we really hadn't invested in that property since 2009. So I don't know of any other hotel in our portfolio that is in that dire need of CapEx. So we like what we own. Obviously, if you look at the makeup of our portfolio, our top 40 assets account for over 80% of our EBITDA. We have 78 comparable hotels plus the Alila Ventana and the Don in noncomp. But that should give you a sense of the magnitude of EBITDA that something like a Westin Cincinnati contributes to the overall earnings of Host.

Our next question comes from the line of Chris Darling with Green Street.

Jim, can you comment on the relative strength across sort of the high-end luxury hotel segment relative to what's really been a more sluggish demand backdrop for seemingly most of the rest of the industry. To be candid with you, I'm kind of surprised the dynamic has lasted as long as it has. And I wonder what your perspective is on whether it persists, and also how your perspective may or may not inform your portfolio positioning going forward?

Chris, we began the journey to reposition this portfolio in 2017, '18. We sold, and our performance today has to do as much with what we sold as with what we bought. So we disposed of $5.1 billion assets with a purchase price roughly at $5.1 billion, that needed significant CapEx of roughly $1 billion at 17.2x EBITDA multiple. And over the same time frame, we acquired $4.9 billion of assets at 13.6x EBITDA. And there was a keen focus on luxury. And the focus on luxury is really informed by our opinion that the long-term RevPAR CAGRs of luxury properties, luxury resorts in particular, outperform other segmented hotels in the industry. And I think that has really proved itself out as we see no resistance really to rate at our resort portfolio today. And we see a continued increase in out-of-room spend by customers on a per occupied room basis at the outlets, at spa, at golf, et cetera. So the affluent consumer is clearly in a very good position. They want to continue to prioritize experiences, and they're willing to spend money to do that. If you look at the performance of the various segments over the second quarter, luxury was followed by upper upscale, which is where the rest of our portfolio is. We outperformed the industry across the board. And that has to do with the investments that we made in our assets that I spoke to earlier. And then as you move further down the chain scale, where our consumers -- the U.S. consumers are stressed and you look at the economy segment, you see negative RevPAR growth. So I mean, the amount of wealth that -- in our opinion, the amount of wealth that's been created in this country through housing and through the stock market is substantial. And we like the way the portfolio is positioned for the long term. Obviously, if something were to go awry and people didn't feel as good about their balance sheets going forward, that would impact the business. But we're certainly not seeing that at this point in time.

Your next question comes from the line of Gregory Miller with Truist Securities.

Could you provide some detail on how summer leisure demand from international inbound is performing relative to your expectations a few months ago? Are there certain markets or property type's performing better or worse?

Sure. So when you look at what happened with international outbound, inbound, in first quarter, we had talked about our, I would say, hope that, that would somewhat moderate and it would effectively be a wash. We were expecting lower inbound travel, but we were also expecting lower outbound travel. In a way, that's kind of what happened not to a very large degree, but net-net, it was effectively a wash. You may recall that in the fourth quarter when it peaked in 2024, outbound relative to 2019 was at 125% and inbound was at 94%. That progressed. In Q1 2025, outbound became 124%. So came down a little bit. In Q2, it went down to 122%. And actually, in June, it came down a little bit further to 120%. In the same token, your inbound also reduced. So while outbound did go down, the inbound cadence was Q4 of '24, it was 94%, and this is all relative to '19 levels, Q1 '25, 89%, and then Q2, 86%. So when you think about the actual change in inbound and also change in outbound, it's net-net sort of washed out. So overall, as we look at international demand, I mean, at least specifically for our portfolio, it has been relatively strong overall. I mean there are certain markets really driving that. I mean New York is driving that. While Seattle did see Canadian visitors significantly decline, our Westin overall actually did well. A lot of these markets where we've seen decline in Canadian travel, it has been made up by other European markets. So thus far, it hasn't had a meaningful impact one way or the other, and kind of what we expected, no real change in the international inbound, outbound imbalance, that's sort of coming to fruition thus far.

Greg, just a data point on New York. I mean, we -- the portfolio is positioned where over 90% of our revenues come from domestic U.S. travel. So there is a roughly 8.5%, 9% that does come from international visitors to the U.S. But I just want to follow up on what Sourav said. He referenced New York as one of those markets. Just for a point of reference, so you have a sense of how our assets are performing, the New York Marriott Marquis underwent a transformational renovation beginning in 2019. So as base year 2018, using 2018 as a base year, this year, our RevPAR is going to be up 16%. Our EBITDA at the Marriott Marquis is going to be up 46% over 2019 -- 2018, I'm sorry. We did $66 million in EBITDA in 2018. We're on budget to do $96 million this year, and that's on top of the 16% RevPAR increase. So the health of our New York assets is very good and very strong.

Our final question comes from the line of Jack Armstrong with Wells Fargo.

Wells Fargo Securities, LLC, Research Division Just returning to Maui again here briefly. We've heard from you and some of your peers that some of the strength you've been having there is related to promotional activity. And obviously, you've seen an uptick in transient demand. What's the plan for rolling off that promotional activity and then kind of replacing that demand with group? Is that a late '25 event or 2026? And is there a chance you kind of get stuck in between those 2?

Yes. Just to be clear, it's not like a group is not being pushed at these properties. So as Jim mentioned earlier, we are engaging with meeting planners. We are having FAM trips. So that is progressing. And what's important to know, we are very encouraged by how 2026 is pacing. And at some point, we'll provide very specific numbers on Maui group pace for 2026. But overall, when you look at sort of Maui -- and this is at Wailea well as the Hyatt Regency Ka'anapali, they're effectively pacing very, very close at this point to where there were not only pre-fire, but pre-pandemic levels. So we are very encouraged by that. Remember, the lead times with these incentive groups is 9 to 12 months. So while it is going to take some time to pick up, we fully expect to have a much better group year in 2026. And just to put into perspective, so you have what the peak was for Maui, like in 2019, we did about 100,000 group room nights or so in Maui. And this year, our expectation is, call it, around 81,000, and we certainly expect to improve on that into next year.

Well, thank you all for joining us. We appreciate the opportunity to discuss our quarterly results with you. Enjoy the rest of your summer, and we look forward to seeing many of you at conferences this fall.

That concludes today's presentation. You may now disconnect.