Host Hotels & Resorts Inc (HST) 2009 Q4 法說會逐字稿

Good day and welcome to the Host Hotels & Resorts, Incorporated fourth quarter 2009 earnings conference call. Today's call is being recorded. At this time for openings remarks and introductions I would like to turn the call over to the Executive Vice President, Mr. Greg Larson. please go ahead.

Thanks you. Welcome to the Host Hotels & Resorts fourth quarter earnings call. Before we begin, I would like to remind everyone that many of the comments made today are considered to be forward-looking statements under Federal Securities laws. As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed. And we are not obligated to publicly update or revise these forward-looking statements. Additionally, on today's call, we will discuss certain non-GAAP financial information such as FFO, adjusted EBITDA and comparable hotel results. You can find this information together with reconciliations to the most directly comparable GAAP information in today's press release, in our 8-K filed with the SEC, and on our website at Host Hotels.com.

This morning, Ed Walter, our President and Chief Executive Officer, will provide a brief overview of our fourth quarter results, then we'll describe the current operating environment as well as the Company's outlook for 2010. Larry Harvey, our Chief Financial Officer, will then provide greater detail on our fourth quarter results, including regional and market performance. Following their remarks we will he be available to respond to questions. And now here's Ed.

Good morning, everyone. We are very happy to conclude 2009, a year in which we faced exceptional challenges in the travel industry. The difficult year was driven by a weakened economic environment of declining GDP and business investments as well as increasing unemployment. Despite the difficult economy, we made considerable progress in strengthening our balance sheet and positioning the Company to take advantage of future opportunities. We issued $790 million in equity, $920 million in debt, and completed $200 million in asset sales for a total capital raised about $1.9 billion. These activities allowed us to repay nearly $900 million in near-term maturities as well as provide additional funds for investment. Overall we believe the actions we took in 2009 materially improved the strength of our balance sheet and positioned us well for 2010.

So let's start by talking the about our fourth quarter and full year results, then I will discuss our outlook for 2010. Fourth quarter RevPAR for our comparable hotels decreased 14.6% driven primarily by a decrease in room rate of 12.8% and a decline in occupancy of 1.3 percentage points. For the full year, comparable RevPAR decreased 19.9% as a result of the 13.5% decrease in average rate combined with the decline in occupancy of 5.4 percentage points compared to where we were in 2008. Our average rate for the year for our comparable hotels was $172 per night and our average occupancy rate was 66%. Food and beverage revenues at our comparable hotels decreased 15.9% for the quarter due to a decline in banquet business resulting from large scale reductions in group business. For the year, food and beverage revenues declined 20.4%.

Comparable hotel adjusted operating profit margins decreased 430 basis points for the fourth quarter and 520 basis for the full year, resulting in adjusted EBITDA for host of $229 million for the quarter and $798 million for the full year. Adjusted EBITDA for the fourth quarter and the full year has been decreased by approximately $41 million due to the unexpected fourth quarter accrual of a potential litigation loss relating to the ground lease for our San Antonio River Center Hotel. Our FFO per diluted share was $0.18 for the fourth quarter and $0.51 for full year. FFO per diluted share was impact by the potential litigation loss as well as noncash impairment charges in the amount of $0.06 for the quarter and $0.28 per share for the full year.

Overall, the favorable trends we experienced in the third quarter accelerated during the fourth quarter as transient occupancy turned positive for the first time this year, driven in part by increased special corporate bookings. While weekday performance improved on a relative basis, transient leisure demand remained surprisingly strong through the fourth quarter. As we saw beginning in the third quarter short-term group bookings continue to improve. On all fronts demand is improving on a relative basis. However, we continue to see those improvements at lower room rates compared to the prior year.

Starting with our transient business, volume was very strong with an increase in room nights in the fourth quarter of nearly 7% compared to the fourth quarter of 2008. And perhaps even more note worthy, up almost 1% compared to 2007. These increases compare favorably to the first half of the year where transient occupancy was down over 7% to 2008. The increase in transient occupancy stemmed primarily from additional demand in both the discount, which was up 14% in room nights, and special corporate segments which were up 6% in room nights, although even our higher rated segments were off by less in that prior quarters. Rate continued to be a challenge as the average transient rate declined by 15% for the quarter which led to an overall transient revenue decline of 9.6%. Overall for the year, transient demand was down roughly 1%, rate was off by almost 18% and revenues were down by 18.6% as we project these trends into 2010, we are expecting ally solid increase in transient occupancy, although this may be offset by a decline in transient rate.

Turning to our group business, group room nights for the fourth quarter decreased 14.3%. However this drop actually reflects a significant recovery from the declines that we had anticipated at that time beginning of the quarter. The improvement over the course of the quarter resulted from robust short-term group bookings as the net group bookings in the quarter for the quarter were about 90% higher than in the fourth quarter of 2008, and almost 50% higher than what we experienced in the fourth quarter of 2007.

Group business trends have begun to turn the corner as the run rate of declines in group occupancy continues to improve and the outside levels of attrition and cancellation activity are reverting back to historical norms. The average group rate declined 9% for the quarter which when combined with the decrease in occupancy resulted in a 22% drop in group revenues.

Looking at 2010, at this point our forward bookings represent more than 70% of the group room nights we achieved in 2009. Adjusting our booking pace numbers for the record level of cancellations that occurred in the first half of 2009, our group room night bookings for this year approximately 5% to 6% behind 2009's pace. Based on the strength of our short-term bookings, we would expect to close much but not all of that gap by year end. However, we believe that rate pressure will persist on the group side in 2010 and that the decline in average rate will be higher for groups than on the transient side of our business. This will likely lead to a reduction in group revenues for the year. Of course, the final results for both our group and transient business will depend on the ultimate strength of the recovery and the economy in 2010.

On the asset sales front, in addition to the $200 million in sales we completed last year we also sold the Sheraton Braintree Hotel earlier this month for $9 million and recorded a gain of approximately $1 million. This continued our plan of selling noncore properties with significant capital requirements. Given the current operating environment, tight capital markets for potential buyers and our strong capital position we have not included any additional dispositions in our guidance for the remainder of the year although we are still expecting to market a few assets this year.

On the investment front, it is interesting to see how the market has developed over the last 12 months. Despite obvious distress in the industry and a growing number of loan defaults, the combination of structural complexity and securitized transactions and little pressure on banks to resolve troubled loan situations has resulted in very few assets actually coming to market. The bulk of the activity today is occurring in slices of securitized loans either because holders have marked their positions down enough to permit a sale and a profit, or because that represents the initial level of default tin transaction. At this point, we are pursuing several of these types of investments. While we continue to expect to see more assets come to market, we are less optimistic that we will see fee opportunities in the near-term. Those opportunities we do see may be initiated by tactical sellers as opposed to distressed sellers. As the operating environment stabilizes and begins to improve we should see deal flow accelerate, but that will likely not occur until later this year or into 2011. Given our successful capital raising efforts, we are well positioned to take advantage of opportunities as they begin to arise. However, while we are fairly confident we will acquire assets, including debt instruments this year, we have not built any acquisition assumptions into our guidance at this point.

Our level of capital spending declined in 2009, although we continued to reinvest in our portfolio to ensure that our assets are well positioned poor the future. This past year we completed new ball rooms in the Chicago Swiss Hotel, the Ritz-Carlton Amelia Island and the Harbor Beach Marriott. These hotels should benefit from the expanded media space in their respected markets as the recovery begins and group business begins to pick up. Our capital expenditures totaled $85 million for the quarter and $300 million for the full year. Return on investment and repositioning projects totaled $35 million for the quarter and $176 million for the full year. We expect that our capital spending will be approximately 270 to $300 million in 2010 as we take advantage of a lower cost environment to complete several larger room renovation projects including the complete repositioning of our San Diego Marina Marriott Convention Hotel. We do intend to revisit our capital plan -- spending plan at mid year to determine if any other projects should be added.

Now let me spend some time on our outlook for 2010. Economic indicators present a very mixed picture with GDP improving, business investment expected to be relatively flat, while employment remains high and job growth is it not expected to accelerate until next year. Even with the recession ending in 2009, we believe that the pace of recovery in 2010 will be somewhat moderate as concerns over unemployment and consumer spending linger. Lodging demand is expected to increase. However this gain will be somewhat offset by a moderate increase in supply. The bigger challenge is on the rate side as we begin this year with average rate running around 10% below last year's levels. While comparisons will become easier as we move into the second quarter, we see pricing power returning only slowly on a market by market basis as the demand begins to improve. Unless we experience a far more robust recovery than is currently anticipated, we would expect to endure a third consecutive year of declining RevPAR and EBITDA.

In a more favorable scenario where significant business investment in job growth which results in flat RevPAR for the full year we would anticipate the comparable adjusted margins would decline 175 basis points, leading to adjusted EBITDA of $750 million and FFO per share of $0.57. Assuming the recovery is more modest, we would anticipate RevPAR could be down 5% which would result in comparable operating margins declining by 350 basis points adjusted EBITDA of $635 million and FFO per share of $0.41. Turning the our dividend, we expect to reinstate our regular cash dividend on our common stock in the amount of a $0.01 per share per quarter, and we will continue to pay our quarterly cash dividend on our preferred stock.

In closing, let me say that we do expect to see an economic recovery, and we know from experience that early stage acquisitions tend to outperform. So we will be aggressively looking for opportunities both domestically and internationally over the next couple of years. We took significant steps last year to improve our balance sheet and position ourselves as opportunities arise. At the property level, we will closely monitor the level of recovery and work closely with our hotels to ensure we are positioned to take advantage of growth opportunities and improved pricing strategies. We will also continue to be diligent in our oversight of property operations to ensure we maximize EBITDA and property cash flow through cost controls.

Thank you. And now let me turn the call over to Larry Harvey, our Chief Financial Officer who will discuss our operating and financial performance in more detail.

Thank you, Ed. Let me start by giving you detail on our comparable hotel RevPAR results. Looking at the portfolio based on property types our urban hotels performed the best during the fourth quarter with a RevPAR decline of 13.2%. RevPAR for our resort conference hotels decreased 16.5% while RevPAR at our suburban and airport hotels fell 16.9% and 18.5% respectively. For the full year, our urban hotels performed the best with a RevPAR decline of 18.5% followed by our suburban hotels which declined 21.4% and our airport hotels which fell 21.7%. RevPAR declined 23.3% for our resort conference hotels.

Our top performing market for the fourth quarter was New Orleans with a RevPAR increase of 13.8%. Strong in-house group and transient business contributed to an occupancy increase of over seven percentage points. In addition, the success of the Saints increased fan and media interest resulting in additional demand for home games. The Tampa market continued its strong performance in 2009 with a RevPAR decline of only 3.1% primarily due to several national sporting events that drove demand, particularly at our Tampa Water Side Marriott, although average daily rates declined 11.8%. The Orlando World Center Marriott outperformed the portfolio with a RevPAR decline of 6.8% as occupancy increased over 370 basis points while rates fell 12.8%. The outperformance was driven by stronger leisure demand, group pickup, and better than expected attrition. As expected, the Washington, DC market continued its strong performance with RevPAR down 8.4% in the fourth quarter. Occupancy was down slightly due to strong government and government related demand while rates fell 8%.

RevPAR for Boston fell 9.2% due to a year-over-year increase in occupancy from strong city wide activity offset by a drop in ADR of 10.1%. Additionally, the hotels were able to draw significant demand in leisure business as well as short-lead group bookings. The San Francisco market RevPAR fell 12.3% which was much better than our expectations for the quarter. Occupancy was up 210 basis points due to strong transient demand while rates fell 14.9%. We were also pleasantly surprised by the outperformance of New York City where RevPAR declined 13% versus a third quarter decline of 29.2%. International and domestic leisure travel, business transient and short-lead group bookings drove demand higher than 2008 levels by 260 basis points. RevPAR for the San Diego market fell 18.9% driven by a decline in occupancy of 390 basis points and a 13.7% decline in rate. Lower group demand led to discounting transient rates in order to increase demand.

Our two worst markets were Phoenix and Houston where RevPAR fell by 25.7% and 27.2% respectively. Phoenix continues to suffer from the impact of new supply, diminished demand and weak economic fundamentals. The Houston market suffered in 2009 in relation to 2008 from a spike in demand generated by Hurricane Ike. For the year, our top three markets were New Orleans with a RevPAR decline of 3.7%, Washington, DC with a RevPAR decline of 5.3%, and Tampa, with a RevPAR decline of 9.6%. The Chicago market where RevPAR declined 25.8%, the Orlando market, with a decrease of 24.2%, and the Phoenix market with a 24% drop in RevPAR were our weakest performers.

As Ed mentioned in his comments we have taken advantage of our liquidity and continue to invest in our portfolio. As we discuss some of our expectations for select market in 2010, you will note that some markets will benefit from our 2009 capital plans and others will be affect by the 2010 capital plan. We expect the Miami Fort Lauderdale market to perform very well. The outperformance will be driven by the late 2009 ballroom addition at that time Harbor Beach Marriott and demand generated by the Super Bowl and Pro Bowl. Boston will also be a top performer, benefiting from the 2009 renovations at that time Sheraton Boston, Boston Marriott Copley Place and the Hyatt Cambridge. In addition, leisure and in-house group demand should help to offset weak city wide activity.

We expect New York City to outperform in 2010. We believe occupancy will continue to strengthen across all transient segments and may allow us to stabilize and eventually increase rates. San Francisco will also perform well. The Ballroom renovation at the San Francisco Marriott Marquis will negatively affect the first quarter but improve fourth quarter comparisons while the city wide pace is down, transient demand is recovering well. Markets that will continue to struggle in 2010 include Phoenix, where substantial decline in group room nights is expected, along with a 2.5% increase in supply. The ball rooms at the Ritz-Carlton Phoenix and the Westin Kierland will be renovated and we are adding a ballroom at Kierland which will be disrupted and further reduce group room nights.

The Hawaii market will continue to be challenged by the lack of airline capacity and airline price increases. Although we have started to see a recent increase in flights they are still well below 2007 levels. In addition, both of our hotels will undergo room renovations. The San Diego market will struggle due to a substantial decline in city wide demand and absorption of the new Hilton that opened in 2009. A room renovation at the San Diego Marina Marriott will also negatively affect our performance.

For our European joint venture. RevPAR calculated in constant euros decreased 13.4% for the quarter. The Westin Palace Milan, Western Europe Regina in Venice and the Sheraton Skyline in London outperformed the rest of the portfolio. For the year, RevPAR calculated in constant euros fell 19.9%. We expect the European joint venture portfolio to have RevPAR of plus 2% to minus 2% for 2010.

For the fourth quarter, adjusted operating profit margins for our comparable hotels declined 430 basis points. In spite of the difficult comparisons to the fourth quarter of 2008, due to the high level of contingency plans implemented at that time, the margin performance was very strong. Our managers continue to actively cut discretionary spending and have been proactive in implementing new cost savings measures. Profit flowed through in the rooms department was higher than anticipated due to reductions and controllable expenses and improvement in productivity. Food and beverage flow-through was also quite good due to reductions in cost and improvements in productivity as well. Even though the revenue decline was driven by the loss of higher margin banquet and audiovisual revenues.

Overall, wages and benefits decreased 10.4% and unallocated costs declined by 7.8% for the quarter as hotels reduced management headcount and significantly lowered other controllable costs. Utility costs decreased 9.7% through a combination of lower usage, lower rates, and the impact of energy saving capital improvements. For the quarter, real estate taxes declined 6.9% while property insurance costs increased by approximately 1.4%. It is worth noting that we achieved this level of margin performance for the quarter despite the significant negative impact from the treatment of the New York Marriott Marquis ground lease of 50 basis points and a 50% year-over-year decline in cancellation and attrition fees in the quarter, which led to an additional 60 basis point drop in margins.

Looking forward to 2010, we expect occupancy to increase, which will lead to growth in wage and benefit costs slightly less than inflation. After taking into consideration the benefit from productivity gains, we expect unallocated costs to increase less than inflation, except for utilities where, we expect higher growth due to increase in rates and volume due to 2010's cold winter compared to the mild winter of 2009. We expect property insurance to increase in inflation and property taxes to rise in excess of inflation. As a result, we expect comparable hotel adjusted operating profit margins to decrease 175 basis points at the better end of the RevPAR range and decrease 350 basis points at the worst end of the range. I previously mentioned the impact of attrition and cancellation fees on the fourth quarter of 2009 results. For all of 2009, attrition and cancellation fees were approximately $40 million higher than a typical year. Adjusting 2009 to a typical year would result in 2010 margins declining by 75 basis points less than the margins detailed above.

With respect to our balance sheet, we finished the year of over $1.6 billion of cash and equivalents. We redeemed $346 million in 7% series M senior notes due in August 2012 and repaid the $124 million mortgage on the Atlanta Marriott Marquis where the interest rate on the loan was set to increase 200 basis points to 9.4%. As a result of these repayments, we reduced our outstanding debt by 470 million to approximately $5.4 billion and we currently have approximately $1.2 billion in cash and cash equivalents and 99 assets unencumbered by mortgage debt.

Lastly, I want to briefly comment on the litigation loss detailed in the press release. Our fourth quarter EBITDA and FFO have been reduced by approximately $41 million for the potential loss related to the attempted sale of the land encumbered by a ground lease for the San Antonio Marriott River Center. We are obviously disappointed by the jury's verdict which is not yet final and is subject to post trial motions. While we certainly appreciate the time the jury put into this case we disagree with the trial Court's interpretation of the ground lease in question and the effects that interpretation and other rulings had on the jury's deliberations and verdict.

This completes our prepared remarks. We are now interested in answering any questions you may have.

Thank you Mr. Harvey. (Operator Instructions). And we'll go first to Chris Woronka with Deutsche Bank.

A quick question on the property tax expectation. What would drive an increase there? Is that -- I'm guessing that's based on either profits or values, which wouldn't seem to be increasing in 2010. Is that just local municipalities cranking up the tax rate?

I think you are right. That's part of it. Part of it that we were able to -- one of the reasons our property tax numbers dropped in the fourth quarter is we were successful in some of the appeals that we had mounted over the course of the last couple of years, and the benefits of those appeals came into the fourth quarter numbers. So that's the reason why the fourth quarter was down. As we look at this year, we're still going to be contesting in a number of jurisdictions, but I think the problem we're running into is that we know that single family values are down throughout a lot of markets. There's a reluctance on the part of most local governments to increase tax rate, he is special as it relates to residential customers, so even though our values should be lower at the end of the day we're assuming that we're going to pay a bit more. It shouldn't be as bad as it was a couple years ago where we really got caught in historically high cash flows in a declining environment, so we should get it to the point where we start to moderate and sea this go the other way but we don't think we're quite there yet.

On the group bookings pace, can you maybe give us a little color on how that's trended throughout the fourth quarter and into the first quarter in terms of the -- really interested in the booking windows and how short are they and is there any sign that they may begin to lengthen?

I don't think we're seeing any sign yet that they're beginning to lengthen. Obviously it depends a lot on the size of the group, but I would say as we look back, as we talk to our asset managers and our properties, and compare this to what we've seen over the course of the last seven to ten years, we're clearly at the short end of the cycle in terms of how closely events are happening compared to when people are booking them. It's not uncommon to see big events booked within a 30-day time frame although in general I think you're seeing the bulk of the business get booked within a 30 to 60-day time frame. At the occupancy levels that we are seeing in the industry right now there's a high level of confidence on the part of most folks that are booking group events. They will be able to find a place to have their hotel. If we continue to see strong performance on the occupancy side where we begin to see occupancy rebuild, there will come a point, and hopefully it won't be in the too distant future, where folks will start to realize they can't wait until the last minute. We just haven't gotten to that point yet.

Okay, great, that's helpful. Thanks.

We'll go next to Josh [Ety] with Citigroup.

What's your position on the ATM project in terms of how would you about using a new program assuming you put one in place this career?

Josh, I guess what I would say is we explained the ATM when we announced it last year as really our primary way of funding investments over the course of the near-term. Now, we've got a fairly good pipeline right now, but having said that, there's nothing -- we're not close to an announcement. There's no deal that is imminent yet. I think we feel pretty good about where the balance sheet sits relative to the level of cash versus the debt maturities that we face. We've raised just a little under 300 million in the program so far, which gives us a good basis or a good base for investing over the course of this year. I think the short answer on the ATM is that we will not -- we don't expect in the next quarter, unless we start to announce the acquisitions. We don't expect to be issuing he can at the same pace that we were last year. I think we'll moderate. As it relates to a new program, I I would say there is, it's a little early to start to contemplate that. At this point what we want to do is find some acquisitions or other investments, get those going. To the extent that's successful we would certainly think of another program as a way to fund future acquisitions. But we're in the at that point yet.

Okay. And you mentioned earlier that you might look at debt investments as a way to get acquisitions. Could you just elaborate on that a little bit what type investment you would look at and how would you pursue those?

I would say that there's a couple of different forms of that type investment that we would look at. I'm sure many of you know already that a typical securitized deal often comes with senior notes that's secured by the real estate. There may be a B note that's also secured by the real estate. Then there may be varying levels of Mez debt that are not secured by the real estate but rather look to security in the form of the borrower's ownership interest for their collateral. What you are finding in a lot of situations right now, it's clear that the borrower is probably going to be out of the picture, just because the decline in value has been significant enough that the borrowers not like toll retain any equity interest because the value is not worth the debt. But what that still means is that there's opportunities to invest either at the Mez debt level or at that time B-note level. Some of those opportunities will be a root to the real estate. An opportunity to bay that note at a significant discount, then ultimately through the foreclosure process or some other process end up with control of the property. In other cases, it may just be that where there's an opportunity to invest in one of those securities and get a mid teens or higher return, which would be attractive from our perspective. Each of these transactions tends to be a little bit different. They're actually fairly interesting but they're also fairly complex. But I think that gives you some flavor for what we're looking at.

It's Michael Bilerman speaking. Just going back, maybe you can give a little more clarity as to the pipeline. I know you had the pipe -- the ATM in place, but to issue another 160 million of stock in the quarter on top of having the billion already and having untapped 600 million revolver, rather than wait for a couple of deals to come in the pipe, wait for the fundamentals to start to turn and perhaps let that benefit accrue to the stock price and then issue more equity, I guess -- doesn't sound like anything is eminent, but maybe you can talk more about why you pulled the trigger on so much capital relative to your base.

I guess what I would say is I'm not certain, when we're talking about a $12 billion company, I necessarily look -- and when you look at the traditional size of an acquisition that we make, which is typically in that $100 to $300 million range that would necessarily look at 300 million of capital being raised as necessarily beg out of whack with the norm. But, I mean, the point I was trying to make, and maybe I wasn't quite so clear about, is that, number one, we do have a pipeline, but there isn't anything eminent that we don't intend to issue equity at that time same rate as we have been over the next couple quarters unless we see that pipeline start to materialize in real deals. So I think it sounds like part of your comment was that it would be prudent to be slower about raising equity capital until we start to see deal flow materialize. I don't think we see the world differently from you.

I guess I was think more so that that probably would have happened at the end of the third quarter that you would have put the brakes on a little bit of the equity prior to maybe announcing a deal or two. But it sounds like at this point we're in the same ballpark. Is there anything under letter of intent that you can comment on?

I don't want to comment on the status of deals, just because over the years I've found that the comment on anything before it's done is usually a mistake. The thing I would point out, too, as you think about the capital, we have been -- part of what we have been doing is trying to make certain we have adequate capacity to deal with the maturities. We're in great shape on that perspective. We only have, assuming our exchangeable is put to us in a couple of months, we only have a little over 300 million that comes due this year, and we don't view our exposure in 2011 as much different than. But remember that part of the drive, and the world is changing, but part of the drive that we had over the course of 2009 was to make certain we were adequately prepared to deal with the different debt maturities that we have, and so some of that money that we have already is really targeted to deal with those maturities.

Right. Okay. Thank you.

And we'll take our next question from Joe Greff with JPMorgan.

Good morning. Just going back to your 2010 RevPAR outlook, maybe you can sort of contrast with it maybe how Marriott and Starwood are looking at things on the domestic side and their 2010 outlook is down 3%. Do you look at 2010 different than they do? Is it more group business for you that kind of weighs on the outlook? Is it conservatism? Is it a different view of the economy? If you can sort of help reconcile your view maybe versus some of your peers, and do you think that you underperform some of the branded guys given your mix or geographic segments?

Joe, I would -- if I were being flip, I would probably answer this that generally I think you're seeing the conservatism of an owner who is basically focused on the bottom line as the somewhat normal optimism of the operator who is a little bit more top line focused. The truth is I don't think there's a huge difference in the way we're looking at 2010 compared to Marriott and Starwood are. They represent together probably 75% to 80% of our portfolio. So to the extent that the way the year plays out is closer to the midpoint of their guidance and necessarily the midpoint of ours, you will see that benefit in our performance. I don't expect that we would really ultimately perform much differently from them.

I don't know the exact composition of Starwood and Marriott's portfolio from a group versus transient perspective. You mentioned the point that we may have a bit more group than them, and I suspect that's right. I think in the case of the Marriott portfolio I'm sure that when you look at all the large group convention hotels that we own, that they also operate I suspect that we have a disproportionate percentage of those. If you look at that in terms of how we compare to the overall market in this area, last year we probably ran 37% to 38% of our mix was group, and I think the industry as a whole averaged 30% to 31%. So we're a little bit higher in group, and we are a little bit concerned about group for this year just from the standpoint that everything we've talked about today tanned past has been that group got hit a lot harder in this downturn than it normally does. Frankly, we would have hoped in the way we've developed our portfolio. I suspect that if we do underperform at all, would it probably be because we have a slightly larger group presence, and it may take a bit longer for that to come back. I think longer-term, though, I see that as a huge benefit. The reality is our normal group typically represents 42% to 43% of our overall business. So that's a 5 plus% jump in share that should ultimately come out of our portfolio or happen to our portfolio. Once that starts to turn the corner and we start to see group, and it will especially be corporate group come back, you will see that reflected in stronger results for Host.

That's helpful. Thank you.

We'll take our next question from Will Marks with JMP Securities.

Good morning. My question just relates to supply. I don't think you mentioned supply on the call, and I'm wondering how that new supply may impact New York. It seems like the year-to-date numbers for the industry in New York are pretty strong, but maybe could you just comment on the supply.

Over all, the supply, based on what most of the market experts have predicted, looks like it is going to end up being in that 1.3% to 1.5% level. A lot of that is weighted toward the first part of the year as projects that were financed back pre-financial meltdown are finally completed. As you look across the spectrum of markets that appear to be a bit more challenging, San Antonio and New York and Denver tend to be some of the markets where we see more supply coming in, kind of looking at that in a 2009 to 2011 time frame. When New York makes that list, though, the supply in New York is not really in Manhattan as much as in some of the surrounding neighborhoods and surrounding boroughs. So ultimately as we look at the New York market we actually feel fairly good about the ability of New York to be able to absorb the downtown market where we are so New York will be able to absorb that supply. The reality is for our portfolio for last year, we ran well above 80% in terms of occupancy. I think it was around 83% for the full year in New York. Was over -- or real close to 90 beers in the fourth quarter. So New York is one of those markets that we actually think, if you could get a little bit of pick up on the corporate transient side, or a little bit of strength on the group side, that's a market that could surprise to the up side over the course of 2010.

Okay, that's very helpful, thanks.

And we'll go next to Michael Salinsky with RBC Capital Markets.

quick question on group bookings for '10. Could you specify what the rate decline is for those on year-over-year basis?

Part of the challenge in looking at group booking pace for 2010 is trying to adjust out the cancellations. But what I would tell sue it looks at this point that we're probably running plus or minus 5% behind where we were this time last year.

Okay. So there's only a 5% decline embedded in there. Second question, in terms of the acquisition pipeline, can you give us a sense of how much you're looking at at this point? Is there a significant amount, or is it really just one-offs at this point?

I would say that on the debt side, I've been fairly encouraged by the number of transactions that we're looking at, is I guess way I would describe it. It's more than a handful. On the fee side, it is not. You're just not seeing deals roll through -- go through the process and come out ready for sale at this point in time. That should change. You can't have the number of defaults that we've been all reading about, and others that we're hearing are imminent. You can't have all that happen and not see those properties ultimately make the market but it hasn't hit yet.

With the $0.01 dividend reinstatement there do you anticipate at this point in the fourth quarter having to pay another special dividend to cover pay-out requirements, or do you think that based upon your current outlook that should -- the $0.01 run rate should be sufficient?

Realistically, the $0.01 level should be all that we pay out this year except for the fact that I commented that we're still going to try to sell some assets this year. We just weren't confident enough about the likelihood of those happening that we didn't think there was any reason to include them in our expectations for the year. To the extent that some of those sales might happen at levels where they would trigger significant capital gains, then that might be the one reason why there would be a need for special dividend because taxable income would have gone up by a meaningful amount, but other than that, there would be -- at this point, I wouldn't expect that we would have a need to distribute more than the $0.01 per quarter.

Finally, I know you're primarily an unsecured borrower, but just curious to if you have seen any kind of strengthening tin secured debt markets.

On the secured debt side, with respect to availability, there's been a lot of progress made. I think you have -- there are some of the banks out there that will principal CMBS debt, depending on maturity, in the 6 to 6.5 range at roughly 50% to 55% loan to value. You still have life companies out there. They're on the higher end, more of a 6.5 to 7.5. But there is availability out there. And those rates are significantly better, as you can imagine, than they were a year ago.

Thank you.

We will go next to Bill Crow with Raymond James.

Two quick questions. Larry, the CapEx guidance for 2010, how much of that is kind of recurring maintenance, and how much is NOI producing?

I think what I would probably say is that -- well, I think the true ROI component of that is probably in the 15% range. I think that if you the bulk of it is primarily targeted at maintenance this year.

Could you guys give us an update on how your Ritz-Carltons are performing? What's the demand like? Has kind of the stigma gone away? What do group bookings look like as you think about not so much 2010 but more 2011 and 2012? If could you just kind of cover that topic.

That's a good question, because luxury is a key part of our portfolio. It has dragged us down in the way those hotels performed last year. It's interesting to watch some of the trends on the luxury side. Luxury did -- I would say it did better that would be an overstatement to say it did better than the rest of the portfolio but it certainly did a lot better than the first three-quarters of the year. As you got towards December and into January, I think some of this is because if you think about the luxury, especially the Ritz-Carlton Hotels that we own, we have a big Florida presence. We have actually seen that that segment has outperformed the rest of the Company in both the months of December and January now I think some of that is timing and some is the fact again reflects back to that last year was fairly ugly on the luxury side because those were the hotels that got hit first by the politics around the Ritz at some other areas, but long and short is that we are actually expecting our whole portfolio this year for luxury to do a bit better than a portfolio as a whole. Our Florida hotels based on their budgets and their performance so far, admittedly we're only six weeks into the year. You don't really get a lot out of that.

So far they are Ritz-Carltons in Florida are expecting to have positive RevPAR for the year. I think what that tells you is that they are doing better on the demand side. They are still down meaningfully in terms of rate, so that's going to be a challenge. It will probably take them awhile to rebuild on that front. There are still some segments of the industry that are scared to go to a luxury hotel, and so I suspect we will fight that for another year. We don't -- at our Ritz and our four seasons, we don't get a lot of bookings that are multiple years out. The typical corporate customer tends to book closer in. So I don't know that you can draw a lot of comfort for what you see in 2011 and 2012.

But the bookings looking out further are in line with what you would expect in a normal year. They don't reflect some of the weakness that we saw in the past.

That's helpful. Thanks, guys.

That is all the time we have for questions. I would like to turn the conference over to Mr. Ed Walter for any closing remarks.

Great. Thank you, everybody, for joining us on this call today. We appreciated the opportunity to talk about our results for 2009. More important, we look forward to talking with you in late April to discuss how 2010 is starting off and how we see the rest of 2010. Thank you and this concludes today's conference call. We thank you for your participation.