Host Hotels & Resorts, Inc.HST has revised its guidance for adjusted funds from operations (FFO) per share for full-year 2015 to $1.50-$1.52 from $1.52-$1.55 guided earlier.
The Hotel REIT revealed that August had been a weak month due to a slowdown in the leisure business in the U.S. and lower-than-expected growth at its international assets. Comparable hotel revenue per available room, or RevPar, (on a constant dollar basis) registered mere 0.7% growth in the month, as against 5% growth in July. The company expects this trend to continue into September as well. This declining trend might have an adverse impact on fourth-quarter operations.
In this scenario, Host Hotels revised its expectations for full-year 2015 comparable hotel RevPar (on a constant U.S. dollar basis) growth of 4.0-4.5%, down from the prior outlook of 4.5-5.0%. Nevertheless, the company said that it is "positive about the strength of industry fundamentals and its group booking pace for 2016."
We note that Host Hotels is not the only company revising its estimates. Weak demand for hotels in August also led West Bethesda-based Pebblebrook Hotel Trust PEB to revise its outlook for the third quarter of 2015. Pebblebrook now expects major metrics, particularly RevPar, toward the lower end of its guidance but reiterated its prior outlook for adjusted FFO. (Read: Pebblebrook's Revises Q3 Outlook: Lowers RevPar Estimate )
Host Hotels' outlook revisions were also a result of the impact of future capital market activities like share buybacks, as well as asset sales and hotel management alterations. The company is disposing a number of international assets and has decided to exit the Asia-Pacific market.
Host Hotels expects to reap net proceeds of $200 million following the $94 million of debt repayment. It intends to use these proceeds to buy back shares and fulfill other corporate needs. However, these asset sales is expected to lower the company's previous guidance of 2015 adjusted EBITDA by around $5 million, while full-year 2016 adjusted EBITDA would bear an estimated impact of approximately $22 million.
The company is also expected bear severance and other costs of about $3 million.
In fact, the company has lowered the adjusted EBITDA guidance to $1.385-$1.400 billion from the prior projection of $1.410-$1.425 billion as well.
Bethesda, MD-based Host Hotels currently has a Zacks Rank #3 (Hold).
Note: FFO, a widely used metric to gauge the performance of REITs, are obtained after adding depreciation and amortization and other non-cash expenses to net income.