Host Hotels Stock Soars 10.3% QTD: Whats Driving the Surge and Whats Next?

Host Hotels & Resorts Inc. (HST) has been on a roll in recent quarters, with shares gaining 10.3% in the quarter-to-date (QTD) period, outperforming the industry's decline of 0.6%. The Bethesda, MD-based lodging real estate investment trust (REIT) owns a portfolio of luxury and upper-upscale hotels in the top U.S. markets and the Sunbelt region. The company's well-located properties in markets with strong demand drivers have been instrumental in driving its recent success.

Key Factors Behind the Surge

The surge in HST's stock can be attributed to several key factors. Firstly, the company's strong Sunbelt exposure and presence in the top 21 U.S. markets, where its properties are advantageously located in central business districts of major cities, driving demand. Additionally, the improvement in group travel demand and business transient demand 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%.

Strategic Capital Allocations

Host Hotels undertakes strategic capital allocations to improve its portfolio quality and strengthen its position in the United States. In the first quarter of 2025, the company incurred $146 million in capital expenditure. For 2025, management expects total capital expenditures to be within $580-$670 million. The company disposes of non-strategic assets with lower growth potential or properties with significant capital expenditure requirements through its capital-recycling program, redeploying the proceeds to acquire or invest in premium properties in markets expected to recover faster.

Healthy Balance Sheet and Financial Flexibility

Host Hotels has a healthy balance sheet and has been undertaking steps to fortify its balance sheet. As of March 31, 2025, the company had $2.2 billion in total available liquidity. Moreover, it is the only company with an investment-grade rating among the lodging REITs, having ratings of Baa3/Positive from Moody’s, BBB-/Stable from S&P Global, and BBB/Stable from Fitch. This renders access to the debt market at favorable costs, providing ample financial flexibility for deploying capital for long-term growth opportunities while carrying out redevelopment initiatives.

Dividend Commitment

Solid dividend payouts are a massive enticement for REIT investors, and Host Hotels has remained committed to that. HST has increased its dividend eight times in the last five years and has a 40% payout ratio. Such efforts boost investors' confidence in the stock.

Risks Likely to Affect HST’s Positive Trend

While the outlook for HST looks promising, there are some risks that investors should be aware of. 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.

Stocks to Consider

Some better-ranked stocks from the broader REIT sector are VICI Properties (VICI) and Medical Properties Trust (MPW), each carrying a Zacks Rank #2 (Buy) at present. The Zacks Consensus Estimate for VICI's 2025 FFO per share has moved one cent northward to $2.35 over the past week, while the Zacks Consensus Estimate for MPW's 2025 FFO per share has moved one cent northward to 57 cents over the past month.

In conclusion, with the above-mentioned factors, we believe the rising trend in HST stock is expected to continue in the near term. However, investors should remain cautious about potential risks that could affect its positive trend.