Global Travel And Wellness Trends Will Fuel Upscale Lodgings

Key Takeaways

• Focus on premium experiences, sustainability, and wellness captures demand from evolving traveler preferences, supporting higher rates, brand loyalty, and favorable margins.
  
• Strategic reinvestment and capital strength enable property upgrades and opportunistic acquisitions, driving outperformance and positioning for long-term growth.
  
• Heavy exposure to traditional business and convention travel, rising labor and insurance costs, and demographic shifts threaten revenue growth, margins, and long-term asset values.

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.

• Host Hotels & Resorts is positioned to benefit from sustained growth in global travel and tourism, especially as rising middle class incomes and increased experiential spending among younger generations drive demand for premium and luxury accommodations; this trend supports a multi-year runway for RevPAR and top-line revenue expansion.
  
• The company’s focus on attracting both leisure and business transient travelers through premium offerings is enhanced by the rise in remote and hybrid work, fueling demand for extended stays and “bleisure” travel in key urban and resort markets—this supports higher occupancy and daily rates, directly driving revenue and EBITDA growth.
  
• Host’s strong emphasis on sustainability and wellness offerings, such as LEED-certified hotels and expanded wellness amenities, positions it to capture the growing segment of environmentally
• and health-conscious travelers, allowing for higher rates and greater brand loyalty, which will support above-market net margin performance.
  
• Strategic reinvestment in property renovations, capital improvements, and repositioning continues to deliver RevPAR outperformance; properties that have completed transformational renovations have seen average index share gains exceeding 7.5 points, translating into accelerated revenue and long-term earnings growth.
  
• The company’s investment-grade balance sheet and liquidity provide optionality to acquire distressed or undervalued assets during periods of volatility and to pursue high-ROI projects, setting the stage for future FFO per share growth and long-term NAV accretion.

Host Hotels & Resorts Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Host Hotels & Resorts compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Host Hotels & Resorts's revenue will grow by 5.8% annually over the next 3 years.
• The bullish analysts assume that profit margins will shrink from 12.2% today to 11.7% in 3 years time.
• The bullish analysts expect earnings to reach $786.0 million (and earnings per share of $1.12) by about April 2028, up from $697.0 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 23.4x on those 2028 earnings, up from 14.1x today. This future PE is greater than the current PE for the US Hotel and Resort REITs industry at 19.1x.
• Analysts expect the number of shares outstanding to decline by 0.84% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 7.55%, as per the Simply Wall St company report.

Host Hotels & Resorts Future Earnings Per Share Growth

Risks

• The company remains heavily exposed to business, group, and convention-driven travel, with management noting that business transient revenue is only gradually recovering and group bookings require long lead times, leaving it vulnerable to the long-term secular decline in business travel caused by the shift to remote and hybrid work, which could put persistent pressure on revenue growth and occupancy rates.
  
• Host Hotels & Resorts continues to face significant labor cost inflation, with management expecting wage and benefit expenses to rise over 6 percent in 2025 and noting that labor costs made up approximately 57 percent of total operating expenses in the prior year, compressing EBITDA margins and pressuring long-term earnings growth as broader sector-wide labor shortages and wage pressures persist.
  
• The portfolio’s high concentration of urban and large convention hotels, combined with secular demographic shifts such as aging populations and declining demand for large-scale event hospitality, creates a risk that these assets will experience structural declines in occupancy and average daily rates, ultimately weighing on both revenue and net margins.
  
• The ongoing need for substantial capital expenditures, with nearly $550 million invested in 2024 and a 2025 CapEx guidance of $580 to $670 million, puts pressure on free cash flow and erodes net margins, particularly as extensive renovations and repositioning are needed to maintain competitiveness in a market threatened by alternative accommodations and intensifying industry competition.
  
• The increasing frequency of disruptive climate events, as evidenced by the significant hurricane and wildfire damage to key properties like Maui and the Don CeSar, is driving up insurance costs and reconstruction expenses, presenting a recurring threat to net margins and asset values as the long-term effects of climate change materialize across the portfolio.

Valuation

• The assumed bullish price target for Host Hotels & Resorts is $21.5, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Host Hotels & Resorts's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of $21.5, and the most bearish reporting a price target of just $14.0.
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be $6.7 billion, earnings will come to $786.0 million, and it would be trading on a PE ratio of 23.4x, assuming you use a discount rate of 7.5%.
• Given the current share price of $14.03, the bullish analyst price target of $21.5 is 34.7% higher.
• 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.