Host Hotels & Resorts reported seeing strong growth in loyalty redemption revenues, crediting the launch of Marriott International’s Bonvoy programme.
The company also reported a boost from its non-rooms revenue, which it said had helped to grow revpar at a time of “modest” ADR growth.
James Risoleo, president & CEO, told analysts that loyalty redemption revenue had supported its leisure demand. He said: “Our redemption revenues have grown well in excess of the revenues outlined in the business case Marriott made for Bonvoy in 2019.
“In the fourth quarter, we grew Marriott Bonvoy redemption revenues by nearly 22% for our comparable hotels and 24% for all our own Marriott hotels, with the Venetian Ritz-Carlton, Naples and Ritz-Carlton, Marina del Rey achieving the highest redemption revenues in the portfolio. Although redemption revenues will also face tough comparisons this year, Host's ability to leverage Marriott's powerful loyalty programme is another key strength for our business.”
The company reported total revpar growth of 1% for the year, with Risoleo commenting that it spoke to Host’s ability to grow revenues through multiple channels, with approximately 35% of revenues earned from food and beverage, conference and meeting space, spa and other amenities.
He said: “In an environment where the industry is near peak occupancy with modest ADR growth, our ability to grow revenues through non-room sources is a key strength of our portfolio.”
Host said that, with supply due to see a 2.3% increase across all scales on a net basis this year, it expected full-year comparable constant dollar revpar growth to range between flat to up 1%. Adjusted Ebitdare at the company was down by 1.8% for the year to $1.5bn. The midpoint of Host’s 2020 total Ebitdare guidance reflected a 10% year-on-year decline, with, the CEO said, approximately 60% of the decline attributable to 2019 asset sales and declines in non comparable hotels due to renovation.
Commenting on what actions Host would take if there was a prolonged environment of flat to negative revpar growth, Risoleo said: “We would be having meaningful conversations with our operators about lasting brand standards. And that can mean everything from taking a look at restaurant offerings and hours of operation to in-room guest amenities, to guest amenities in concierge lounges and club lounges.
“If we're in a slow growth environment, we would consider accelerating investment in our portfolio going forward.”
The Reit has continued to rationalise its estate, selling 14 of its lower total revpar, higher capital expenditure hotels for $1.3bn. It upgraded the quality of its portfolio by acquiring the 1 Hotel South Beach, completing four renovations as part of the Marriott transformational capital programme, and investing in development projects across the portfolio. The group returned $1.1bn to shareholders through dividends and share repurchases.
Risoleo said: “Market conditions over the last couple of years have enabled us to substantially reposition our portfolio at an accelerated pace. We believe that apart from a small number of assets that we would like to eventually monetise, our portfolio is where we want to be at this point in the economic cycle.
“With regard to acquisitions, while the bar remains high, we will continue to evaluate assets that meet our strategic objectives. If we are in this [low revpar] environment for an extended period of time, you're likely to see some distress in the hotel world. We're seeing it already in New York. We like the position we're in with the balance sheet that we have.”
Insight: If you’re about to attend a conference where the very theme is performance and is likely to feature a whole phalanx of CEOs talking about how investors can rely on loyalty programmes to deliver guests, then you could do worse than listen to Host’s call and enjoy the very timeliness of it all. Now just imagine how Marriott International felt. One could almost suspect Host of taking a bung unless you’d seen their balance sheet and realised how very little they need one. Hold onto your hats, failing New York hotels.
Proving the worth of loyalty programmes is the current head scratcher for the hotel CEO. The catchphrase is along the lines of ‘but you’re gaining a customer for life, not one transaction’, highlighting that, yes, there is a cost, but one must play the long game and hope the whole setup continues for another 30 years. Witness groups such as Hilton launching brands at lower price points, which it hopes will act as a lure to the loyalty scheme.
Add into this comments around non-rooms revenue and the cup runneth over. And yes, it has been pointed out that Risoleo means trevpar, but that's to split hairs. This area is one which is more challenging to hotels, unless they can find that perfect consumer who will pay a premium to eat a tepid club sandwich over their laptops in bed. Host may be happy to invest in the structure of a hotel, it’s unlikely to leap at the chance to pay for R&D into new F&B concepts. Hotels will have to look to their own drawing boards for that one.