Host Hotels & Resorts Inc. (HST quick offerHST – Free report) is seeing a gradual recovery in leisure demand, leading to an improvement in RevPAR. However, the recovery in demand for temporary core businesses is likely to be dismal due to travel restrictions and delayed return to offices.
As pandemic restrictions eased and vaccine distribution accelerated, hotel openings and cheap vacation travel trends have allowed host hotels to resume operations at significant levels and see gradual improvements in occupancy and RevPAR. Plus, the company achieved hotel-level profitability for the first time since the pandemic began in the first quarter of 2021. Such green shoots of recovery are encouraging and will position the company for growth through vaccine-driven housing recovery.
In addition, the company has strong Sunbelt exposure and presence in the top 20 US markets. Host Hotels’ large lot sizes will allow its hotels to meet burgeoning demand while addressing social distancing needs.
The hotel REIT is also continuing its strategic capital allocations to improve portfolio quality and strengthen its position in the United States, where it is of larger size and competitive advantage. Particularly in a low-utilization environment, the company is focused on accelerating certain capital projects to minimize future disruptions. Also, it has prioritized projects in assets and markets that are expected to recover faster, such as leisure and road trip destinations. This will help the host hotel generate additional income during the economic recovery. The company ended the first quarter with more than $ 2 billion in cash. With a decent balance sheet position, the company is well equipped to sail through the current dire environment triggered by travel disruptions.
The stocks of this Zacks Rank # 3 (Hold) company are up 25.6% over the past six months compared to the Industrya growth of 18.5%. Additionally, the trend in estimate revisions for FFO 2021 per share points to a favorable outlook for the company, as it has increased significantly from 10 cents last month to 20 cents.
Image source: Zacks Investment Research
However, with business travelers making up the bulk of the temporary demand at its hotels, the limited demand for business and group travel during the pandemic will impact the company’s short-term performance. The booking rate for group rooms also remains slow. Indeed, the recovery in demand for temporary core businesses is likely to be dismal this year due to travel restrictions and delayed return to offices.
That being said, the rise in online short term rentals, including a flexible option for apartment buildings, has increased supply in the lodging industry and increased competition in certain markets.
Important industry recommendations
OUTFRONT Media Inc.‘s (OUT Quick QuoteOUT – Free report) Zack’s Consensus Estimate for 2021 Funds from Operations (FFO) per share rose 3.6% over the past two months. The company currently has a Zacks rank of 2 (Buy). You can see the full list of current Zacks # 1 (Strong Buy) Rank stocks here.
Geo Group Inc‘s (GEO Quick QuoteGEO – Free report) The Zacks consensus estimate for FFO per share for the current year moved 10.1% north in two months. The company currently has a Zacks rank of 2.
BRAEMAR HOTELS & RESORTS INC.’s (BHR Quick QuoteBHR – Free report) The estimate of FFO per share for the current year was revised upwards by 4.5% last month. The company currently has a Zacks rank of 2.
Note: Everything that has to do with income in this summary is funds from operations (FFO) – a widely used metric to measure the performance of REITs
5 shares set to double
Each was selected as the # 1 Most Popular Stock by a Zacks expert to gain + 100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report fly under Wall Street’s radar, which is a great opportunity to get in on the ground floor.
