Host Hotels & Resorts has been making waves as a buyer of marquee hotels and resorts in 2024 despite a tight transactions environment.

The Bethesda, Maryland-based hotel real estate investment trust confirmed it acquired the fee simple interest of the 234-room 1 Hotel Central Park in New York City for approximately $265 million in an all-cash deal. According to a Host news release, the acquisition price represents an 11.1-times multiple of earnings before interest, taxes, depreciation and amortization. The deal closed on July 12 — according to New York property records — and previous owner Starwood Capital Group will still operate the property, based on a 25-year management agreement signed by the two companies.

Host President and CEO Jim Risoleo said the luxury hotel segment has seen resilient demand that just isn't guaranteed in other segments, which made the 1 Hotel Central Park an attractive acquisition opportunity.

"Why is Host focused on luxury assets? This is something that we started exploring back in 2017, quite frankly, and if you look at luxury RevPAR [compound annual growth rates], these are assets that have a RevPAR of greater than $500," Risoleo said. "They have meaningfully outperformed upper upscale and other segments in the lodging space over extended periods of time. From 2019 to '23, luxury CAGR was 4.7% versus upper upscale at 1.3%.

"We expect that we're going to continue to be able to drive this type of performance from the acquisitions we made, which will lead to elevated EBITDA growth and elevated free cash flow, which will allow us to continue to to take those proceeds and invest in our portfolio or pivot to other capital allocation decisions and opportunities that might be out there."

The Central Park hotel is the third 1 Hotels property Host has acquired, including its second this year alone. On May 1, Host bought the 215-room 1 Hotel Nashville and 506-room Embassy Suites by Hilton Nashville Downtown for $530 million in an all-cash deal from Starwood Capital Group, Crescent Real Estate and High Street Real Estate Partners. Host also owns the 1 Hotel South Beach in Miami.

Risoleo said Host likes where the 1 Hotels brand is headed, adding that the REIT's Miami property has performed exceptionally well.

"We are really happy being an owner of 1 Hotels. Barry Sternlicht, Starwood Capital, we've always thought of Barry as an innovator — I mean, he started with the W brand. And I think [1 Hotels] is really an extension of W," Risoleo said. "Our performance in Miami has been really quite incredible."

Risoleo added he's confident that Sternlicht, Starwood Capital Group and SH Hotels & Resorts know what's best for the 1 Hotels brand going forward.

"We like where he's heading with it, where SH Hotels is heading around the globe and elsewhere for distribution, but it's not anything that we've had conversations about co-branding or anything of that nature," Risoleo said. "We think they do a great job and we have a great relationship with them. And we hope that we can continue to expand that relationship going forward."

In conjunction with the release of its second-quarter earnings results Wednesday, Host completed its acquisition of the 450-room Turtle Bay Resort on Oahu's North Shore. The resort has been rebranded as The Ritz-Carlton O'ahu, Turtle Bay. Host agreed to acquire the resort and land parcel in late May for approximately $680 million, net of key money, from Blackstone Real Estate Partners.

"We are very, very happy with the three acquisitions that we made this year. You know, real estate is not a short-term business, and we look to acquire assets that are going to grow EBITDA over time," Risoleo said. "These are one-of-a-kind properties in each instance. And we were fortunate enough to have the balance sheet and the relationships to be able to transact when an asset like Turtle Bay comes to market."

Risoleo added the Turtle Bay Resort's conversion to Marriott International's Ritz-Carlton brand went live on Marriott's booking platform Wednesday.

"It's a unique property for a lot of reasons. But one of the things that I think is worthy of pointing out is that there was a half a million dollars per key invested in that asset. And Ritz-Carlton took the hotel without a PIP," he said. "We believe there's going to be a lot of upside over and above the metrics that we quoted, which were based on 2025 pro forma, a 13.5 times EBITDA multiple and a 6.7% cap rate."

Host's buying spree is likely to pause for a while, Risoleo said.

"I don't think that we are contemplating doing additional acquisitions this year or even early next year. You never know," he said. "That one opportunity that might come over the door, where there is a great asset with a great opportunity to buy it because of some distressed situation. But we certainly are more focused today on integrating these three great properties that we acquired into the Host system [and] into our asset management and enterprise analytics platform."

On the flip side, could Host unload some of its assets if the price was right? The transaction market still isn't favorable enough to sellers to promise anything, Risoleo said.

"We have explored disposition pricing recently and made a decision that given that we are under no pressure whatsoever to dispose of assets — and we will only do so if we believe that the pricing is fair relative to our hold value — the market dynamic just isn't there today," he said. "The cost of debt is so prohibitive from a valuation perspective. We've been in the position to be able to transact given our balance sheet and there really aren't any other players out there that are in that position.

"So we'll keep an eye on the market as we always do. And if we think there are opportunities to continue to enhance the overall growth profile of the portfolio by disposing of assets, that's certainly something we will consider going forward."

Nearly a year after wildfires ripped through parts of Maui, the island is still a long way from recovering tourism and hotel demand. In the second quarter, the total estimated impact of Host's Maui hotels and golf courses on the REIT's RevPAR is 340 basis points. For the full year, Host projects comparable hotel RevPAR year-over-year change between a 1% decline and 1% growth, which was revised down from 2% to 4% RevPAR growth in prior guidance.

Risoleo said Maui's hotel demand from relief organizations has pulled back and leisure trips haven't yet filled in the gaps.

"The wildfires were just an incredible, tragic event. And as we saw the residents finding permanent or semi-permanent housing, we are very encouraged that that's happening," Risoleo said. "But what that meant for our hotel on the west side was that we went from well over 200 rooms that were being rented by the Red Cross and FEMA in the first quarter to 13 rooms that were being rented in [the second quarter], and we didn't see a corresponding pickup in visitation."

Host's Maui hotels include the 810-room Hyatt Regency Maui Resort and Spa between Kaanapali and Lahaina, the 320-room Andaz Maui at Wailea Resort and 450-room Fairmont Kea Leani, Maui in Wailea.

Host is collaborating with other hotel owners on Maui, local government officials and marketing organizations to launch a Maui tourism campaign beginning in September. The REIT is even pursuing Maui trip packages with wholesalers such as Costco to grow its distribution channels.

Airlift — or the number of flights into Maui — has also been a major headwind to bring tourists back to the island, Risoleo said.

"I believe that in the quarter we were down about 16% [total airline seats] over the same time frame in 2019. And that's down another 6% over where we were last year," he said. "So it's a bit of a chicken-and-egg situation. ... We're going to be encouraging the airlines to put more capacity into their Maui routes, but we've got to bring the customers back as well."

In the second quarter, Host's revenue was $1.47 billion, up 5.2% over the second quarter of 2023, according to the company's earnings release.

Host's net income during the quarter was $242 million — which was up 13.1% year over year — and adjusted earnings before interest, taxes, depreciation and amortization for real estate was $476 million, up 6.7% from a year ago.

The REIT's portfolio achieved second-quarter revenue per available room of $224.29, which was up just 0.1% year over year. Average daily rate was $301.52, which was flat from the second quarter of 2023. Hotel occupancy was flat at 74.4%.

As of publication time, Host's stock was trading at $16.86 per share, down 13.3% year to date. The Nasdaq Composite Index was up 14.2% for the same period.

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