Host Hotels & Resorts is sitting tight as it continues to eye acquisition opportunities which it expects to come out of debt maturities and continuing depressed operating results.
The US hotel property investment group is in no hurry to make its move and in fact president and CEO Ed Walter told analysts last week that so far there was little of any interest to tempt it.
However, Walter pointed out that between now and 2014 some $30bn of hotel debt funded by commercial mortgage-backed securities was set to mature, meaning some beleaguered owners were likely to look to sell.
"Given the reductions in cash flow the industry has experienced and the prevalence of higher initial leverage levels on many of these loads, we would expect to see additional assets begin to enter the market over the course of next year and into 2011. We intend to be opportunistic as market conditions evolve and are optimistic about the future prospects in this arena."
In response to analysts' questions on when and where acquisitions might take place, Walter said Europe was likely, as was Asia, where the economy was already recovering faster than in Western Europe. He added that while there was nothing to announce yet, the group was working on a number of transactions and was likely to announce investment in Asia next year.
In the meantime, Host said it has continued to ensure its current portfolio is well maintained and in a good position as the industry picks up. The group expects to see its capital spending for the year to hit $340m.
Host's third quarter results told a similar story to those from Marriott International posted at the beginning of the month – continuing tough trading conditions but with light at the end of the tunnel. Revenue at Host decreased of 19.9% to $912m, with a net loss of $58m compared $47m net income for the same period in 2008. Nevertheless, as with Marriott, the figures were still better than expected and the group pointed to more positive trends emerging.
Walter conceded that demand continues to be weak in comparison to pre-downturn levels but highlighted the fact that transient business, for instance, for the first time in seven quarters, didn't see a significant decline. Meanwhile, demand in corporate and special corporate segments fell just 10% this quarter – the lowest decline in five quarters and increases in demand for the lower rate segments fully offset this reduction which led to flat transient occupancy.
Revpar for the third quarter decreased by 21.3% – a result of a 16.2% decrease in the average rate and a 4.6% decline in occupancy. Split down by property types, revpar fell 19.6% in urban hotels, 23.1% in airport hotels and 24.6% in suburban properties.
The European joint venture revpar didn't fair too badly – dropping 18.3% (on a constant Euro basis) over the quarter. Host's chief financial officer Larry Harvey said: "On a relative basis, the three Italian hotels and the Sheraton Warsaw outperformed the rest of the portfolio, while a major renovation contributed to the poor performance of the Crown Plaza Amsterdam."
Host is confident that next year will bring continued stability to the market, although conditions will remain tough. Walter said he didn't expect to see much improvement in pricing until occupancy rates recovered and that would only happen as corporate customers began to see an upturn in their own businesses.