Key Points
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Host Hotels & Resorts delivered strong third-quarter results, with total RevPAR growing 7.3% and adjusted FFO per share rising 11.4%.
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The lodging REIT raised its full-year outlook as improving travel demand, higher room rates, and strategic investments continued to drive growth.
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Despite its strong operating performance, the stock’s valuation, cyclical earnings, and substantial capital spending could limit long-term returns.
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The hospitality industry has experienced its share of challenges in recent years. However, Host Hotels & Resorts (NASDAQ:HST) is demonstrating the advantages of owning premium hotels in attractive markets. The lodging REIT reported strong third-quarter results and raised its full-year outlook.
Here’s a closer look at whether its improving performance makes the hospitality REIT worth buying.
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Host Hotels reported solid results across the board. Its total revenue per available room (RevPAR) rose 7.3% to $348.19, with average room rates up 5.6% and occupancy up 2.1%. That helped drive an 11.4% increase in its adjusted funds from operations (FFO) per share to $0.39, which easily covered its current quarterly dividend rate of $0.20 per share.
The company benefited from strong transient demand during the quarter, aided by the World Cup and increased business travel. It also benefited from an increase in group bookings.
The outlook is improving
The continued strength in leisure and group demand gave the REIT the confidence to boost its full-year outlook. The hotel owner now expects total RevPAR at comparable hotels to increase 6% to $392 (up from its prior view of 5% growth). That should boost its margins, supporting its updated expectation of delivering $2.21 per share of adjusted FFO for the full year, a $0.05-per-share increase from its prior guidance.
The company is also investing to expand its portfolio. It recently bought the 195-room 1 Hotel Brooklin Bridge for $202 million and the 308-room Renaissance Dallas at Plano Legacy West for $172 million. These acquisitions expand its luxury and upper-upscale portfolio and continue its active portfolio management program. The REIT previously sold the 44-room Four Seasons Resort Orlando at Walt Disney World Resort and the 125-room Four Seasons Resort and Residences Jackson Hole in February 2026 for $1.1 billion. Additionally, it sold the St. Regis Houston in January 2026 for $51 million. Those sales saved it from needing to invest $137 million in capital expenditures over the next five years to maintain and upgrade the properties.
The company’s strategy positions it to deliver more durable earnings growth from a less capital-intensive portfolio in the future.
Is Host Hotels & Resorts a buy?
Shares of Host Hotels & Resorts have rallied more than 60% over the past year, driven by strong hotel demand and the REIT’s improving portfolio. At its recent price above $26 per share, the hospitality stock trades at less than 12 times FFO and offers a dividend yield of more than 3%.
That valuation looks reasonable. The company’s improving hotel portfolio, strong balance sheet (it’s the only investment-grade-rated lodging REIT), and potential for additional earnings growth support that valuation.
However, there’s a bit more to the story here than that simple valuation multiple suggests. Hotel ownership requires substantial reinvestment. Host expects $550 million–$600 million of capital expenditures in 2026, including $285 million–$305 million for recurring renewals and replacements. That’s worth pointing out because adjusted FFO doesn’t fully capture the recurring capital required to maintain its premium hotels. Host needs to invest capital from its balance sheet to maintain its hotels. That’s different from a triple-net-lease REIT like Realty Income (NYSE:O), which benefits from tenants covering routine maintenance expenses at its properties. As a result, Realty Income can direct up to 100% of its FFO toward dividend payments and new investments, while Host must retain some earnings to fund maintenance projects.
Further, as a lodging REIT, Host Hotel & Resort has more earnings variability than a net lease REIT like Realty Income, which has much more predictable earnings. Here’s a look at the potential growth of $1,000 over the next five years, assuming different earnings growth scenarios:
Image source: The author.
Realty Income would deliver higher returns under all three scenarios, including a base case where both REITs deliver around 4% annual FFO per share growth over the next five years. Under those assumptions, Realty Income would deliver a nearly 9% annualized total return, while Host’s would be closer to 6%. Realty Income’s higher dividend yield and more stable portfolio increase the probability that it will deliver higher total return.
While Host Hotels & Resorts is firing on several cylinders, and its latest earnings report reinforces the strength of its business, owning hotels requires significant ongoing capital investments, and revenue and earnings remain sensitive to economic conditions. Those drawbacks, along with the likely lackluster return profile at the current valuation, are why I wouldn’t buy Host Hotel & Resorts after its third-quarter earnings report. Instead, investors might want to wait for a more compelling valuation before buying shares.
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Matt DiLallo has positions in Host Hotels & Resorts, Realty Income, and Walt Disney and has the following options: short December 2026 $125 calls on Walt Disney. The Motley Fool has positions in and recommends Realty Income and Walt Disney. The Motley Fool has a disclosure policy.
