• Host eyes Europe growth

Host Hotels & Resorts, which has been one of the most prolific acquirers of hotels during the downturn, last week reported a 6.1% increase in revpar in the second quarter despite renovations taking place at two of its hotels.

The group said that it expected to see both growth in revenue and continued acquisitions, including outside its domestic market, with the group's European joint venture making its first purchase with its new fund.

The new fund, which has approximately Eu1bn in investment capacity, recently made its first acquisition in France, the 396-room Pullman Bercy hotel bought for Eu96m. The hotel will be added to the Le Méridien Piccadilly, which it transferred into the fund in June.

Ed Walter, president and CEO, told an analysts' call that the group would "continue to look for acquisitions that meet our investment criteria and believe we are in a great position to take advantage of additional investment opportunities as they arise".

Looking at trading, Walter said: "Rate growth in Q2, driven by exceptional growth in transient demand, was the best we had seen since 2007." That, and the group's position halfway through the financial year meant that it felt able to narrow its forecast for the full year to a revpar increase of 6% to 7.5% with adjusted operating profit margins increasing 90 to 120 basis points.

For the European joint venture revpar for the quarter increased by 10.1%  – ahead of the US – as seven of the 11 hotels had double-digit increases, led by the Crowne Plaza Amsterdam, the Westin Europa & Regina and the Brussels Marriott. Occupancy increased 3.5 percentage points, and ADR over 5%.

Walter said that he was not anticipating a drop-off in performance in Europe amid talk of a sovereign debt crisis in Italy and potential double dip in the region. He said that, with so much of the growth in the southern region driven by tourism, "a better economy in the rest of the world has ultimately contributed to better results in Europe. So I think we may see that trend moderate a little bit for the second half of the year, only as we start to move out of the tourist seasons.

"But the bottom line is that, so far, Europe seems to be holding up relatively well."

While Walter would not be drawn on any imminent acquisitions, he acknowledged that there had been a recent increase in competition for properties, commenting: "There are some transactions that we have looked at where our sense is that private capital has become a more aggressive player. As the debt markets improve, we would expect to see private capital become an increasingly competitive player in the acquisition world."

Walter also forecast that, with debt markets starting to improve alongside trading fundamentals, the group expected to be able to increase its rate of sales, in particular in the secondary and tertiary markets.

 

HA Perspective: With the debt markets starting to loosen up, the Reits are starting to find that they cannot have everything their way in the deals market as competition increases. However, as issues such as sovereign debt increase in Europe and the US, the availability of debt for commercial property deals could dry up again and, although such an environment could hinder trading at the group's hotels, it could also mean Host holding its position as a leading buyer. It seems Host has all bases covered.

Share →