Experiential Travel Will Reposition Premium Resorts

Key Takeaways

• Focus on experiential travel and premium asset upgrades is driving high revenue growth, with strong customer demand for luxury and urban resort experiences.
  
• Prudent financial management enables ongoing reinvestment and shareholder returns, supporting stable earnings and premium market positioning.
  
• Structural shifts in business travel, climate risks, geographic concentration, rising capital and labor costs, and competition from alternative accommodations threaten revenue growth, margins, and earnings stability.

Catalysts

An S&P 500 company and is the largest lodging real estate investment trust and one of the largest owners of luxury and upper-upscale hotels.

• The ongoing rebound and expansion in leisure and experiential travel is driving outsized transient demand at Host's luxury and upper-upscale resorts, evidenced by double-digit RevPAR and F&B growth at destinations like Maui and Miami; as travel preferences continue tilting toward experiences, this is expected to support above-average revenue and margin growth over the long term.
  
• The company's strategic focus on upgrading and repositioning premium assets in top markets-exemplified by substantial ROI from major renovations and development projects-continues to enhance RevPAR index and property values, signaling a strong runway for RevPAR-led earnings growth as consumer demand for high-end urban and resort experiences rises.
  
• Host's ability to capture increased out-of-room, spa, and ancillary spending (golf, F&B, retail) reflects a shift in consumer spending preference and provides incremental revenue streams with high flow-through, supporting improved net margins and EBITDA beyond base ADR increases.
  
• A sustained increase in group bookings, especially for mega-events and in gateway cities, alongside a growing international and urban customer base, lays the foundation for long-term occupancy and ADR gains, translating into higher topline and strong cash flow visibility.
  
• Prudent balance sheet management, with low leverage and ample liquidity, positions Host to continue capital recycling, share buybacks, and accretive reinvestment, all of which enhance FFO per share, drive long-term earnings, and support premium valuation as institutional demand for high-quality, income-producing real estate assets persists.

Host Hotels & Resorts Future Earnings and Revenue Growth

Assumptions

• Analysts are assuming Host Hotels & Resorts's revenue will grow by 2.0% annually over the next 3 years.
• Analysts assume that profit margins will increase from 11.1% today to 11.2% in 3 years time.
• Analysts expect earnings to reach $703.2 million (and earnings per share of $1.0) by about September 2028, up from $659.0 million today.
• In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 22.3x on those 2028 earnings, up from 18.2x today. This future PE is lower than the current PE for the US Hotel and Resort REITs industry at 29.5x.
• Analysts expect the number of shares outstanding to decline by 1.64% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 8.47%, as per the Simply Wall St company report.

Host Hotels & Resorts Future Earnings Per Share Growth

Risks

• The company is experiencing ongoing structural headwinds in business transient demand, with business travel revenue flat and corporate negotiated room night volumes down, signaling persistent impacts from the shift to remote/hybrid work; this can result in structurally lower occupancy and ADR, depressing future revenue growth and EBITDA.
  
• Host remains exposed to significant risks from climate change and extreme weather events, as evidenced by frequent business interruption insurance proceeds related to hurricanes and wildfires; recurring physical damage and rising insurance premiums or CAPEX requirements could compress net operating income and reduce net margins over the long term.
  
• The company's portfolio is heavily concentrated in premium urban and high-end resort markets, making it particularly vulnerable to local oversupply, economic downturns, or shifts in leisure and group travel preferences; this geographic and segment concentration could lead to revenue and earnings volatility during adverse cycles.
  
• The ongoing need for substantial capital expenditures to renovate, upgrade, and reposition legacy properties-highlighted by multi-year programs like the Hyatt Transformational Capital Program-may constrain free cash flow and pressure net margins, particularly as wage and benefit expenses rise (guided up 6% in 2025 and expected to stay elevated).
  
• Alternative accommodations (e.g., Airbnb, Vrbo) continue to exert competitive pressure on traditional hotels, eroding Host's pricing power and occupancy rates; a long-term shift in consumer preferences toward boutique/lifestyle lodging or short-term rentals could limit RevPAR and earnings growth for legacy branded hotel portfolios.

Valuation

• The analysts have a consensus price target of $18.559 for Host Hotels & Resorts based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $22.0, and the most bearish reporting a price target of just $16.0.
• In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be $6.3 billion, earnings will come to $703.2 million, and it would be trading on a PE ratio of 22.3x, assuming you use a discount rate of 8.5%.
• Given the current share price of $17.44, the analyst price target of $18.56 is 6.0% higher. The relatively low difference between the current share price and the analyst consensus price target indicates that they believe on average, the company is fairly priced.
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.