Is it Prudent to Retain Host Hotels Stock in Your Portfolio Now?

Host Hotels & Resorts Inc. HST, which has a portfolio of luxury and upper-upscale hotels in top U.S. markets and the Sunbelt region, is poised to benefit from the strong demand drivers in these markets.
 
A continuous improvement in group demand and business transient demand is expected to increase the occupancy level and RevPAR growth. We project total revenues to rise 6.4% year over year in 2025. Aggressive capital recycling bodes well for long-term growth. A healthy balance sheet position is likely to support its growth endeavors.

Shares of this Zacks Rank #3 (Hold) company have gained 8.2% so far in the quarter against the industry's fall of 1.4%. Analysts seem bullish on this stock, with the Zacks Consensus Estimate for its 2025 funds from operations (FFO) per share being revised marginally upward over the past week to $1.90. 

However, competition from other industry players will likely affect Host Hotels’ growth tempo. It expects the construction pipeline to remain modest until macroeconomic uncertainties moderate and interest rates drop further. Elevated interest expenses remain a concern.

What’s Supporting Host Hotels?

Host Hotels has a strong Sunbelt exposure and presence in the top 21 U.S. markets. Its properties are advantageously located in central business districts of major cities with proximity to airports and resort/conference destinations, driving demand. The improvement in group travel demand and business transient demand, led by healthy demand from small and medium-sized businesses, has aided occupancy and revenue per available room (RevPAR) growth over the past few quarters. In 2025, the company expects comparable hotel RevPAR growth between 0.5% and 2.5%.

The company follows an aggressive capital-recycling strategy that entails the non-strategic dispositions of assets that have lower growth potential or properties with significant capital expenditure requirements and redeploying the proceeds for investments in better-yielding assets. It has prioritized projects in assets and markets that are anticipated to recover faster.

Per the company’s May 2025 Investor Presentation, from 2021 through the end of the fourth quarter of 2024, total dispositions amounted to $1.5 billion, which is 17.5 times the EBITDA multiple. Its acquisitions during this period amounted to $3.3 billion, which is 13.3 times the EBITDA multiple. Such efforts highlight its prudent capital-management practices, preserve balance sheet strength and pave the way to capitalize on long-term growth opportunities.

Host Hotels has a healthy balance sheet and has been undertaking steps to strengthen its balance sheet. As of March 31, 2025, the company had $2.2 billion in total available liquidity. As of the same date, the weighted average maturity was five years and the weighted average interest rate was 4.7%. Further, as of the end of the first quarter of 2025, the company enjoyed investment-grade ratings of Baa3/Positive from Moody’s, BBB-/Stable from S&P Global and BBB/Stable from Fitch, providing access to the debt market at favorable costs.
 
Solid dividend payouts are the biggest attraction for REIT investors, and Host Hotels remained committed to that. Encouragingly, the company Host Hotels has increased its dividend eight times in the last five years and has a 40% payout ratio. Hence, with rebounding operating trends, a lower dividend payout ratio compared with the industry and a healthy financial position, we expect the latest dividend hike to be sustainable in the upcoming period.

What’s Hurting Host Hotels?

On the macroeconomic front, recent heightened uncertainty surrounding trade policy and government spending is expected to weigh on the company’s growth through the remainder of 2025. Historically, economic uncertainty has hindered business investment, which is strongly correlated to business transient and group demand.

Moreover, challenges in the supply chain have led to project delays across the United States, and a restrictive lending environment has made it difficult to obtain construction financing for future projects. The company expects that its construction pipeline will remain modest until macroeconomic uncertainties moderate and interest rates drop further.

Despite the Federal Reserve announcing rate cuts in the second half of 2024, the interest rate is still high and is a concern for Host Hotels. Elevated rates imply high borrowing costs, affecting its ability to purchase or develop real estate. The company has a substantial debt burden and its total consolidated debt as of March 31, 2025, was approximately $5.09 billion. For 2025, we project interest expenses to increase 10.2% year over year.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are VICI Properties VICI and W.P. Carey WPC, each carrying a Zacks Rank #2 (Buy) at present. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

The Zacks Consensus Estimate for VICI’s 2025 FFO per share is pegged at $2.34, suggesting year-over-year growth of 3.5%.

The Zacks Consensus Estimate for WPC’s 2025 FFO per share stands at $4.88, indicating an increase of 3.8% from the year-ago reported figure.

Note: Anything related to earnings presented in this write-up represents funds from operations (FFO), a widely used metric to gauge the performance of REITs.

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This article originally published on Zacks Investment Research (zacks.com).

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