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Host Hotels & Resorts Management Discusses Q2 2012 Results - Earnings Call Transcript

Our adjusted FFO per diluted share was $0.34 in the second quarter, an increase of nearly 10%. On a year-to-date basis, comparable hotel RevPAR increased 6.1%, driven by a 3.3% increase in average rate and a 1.9 percentage-point improvement in occupancy. Total year-to-date comparable revenue growth of 6%, combined with an adjusted operating profit margin setting increased 110 basis points, resulted in year-to-date adjusted EBITDA of $523 million. This represented an increase of more than 14% over the prior year and generated adjusted FFO per diluted share of $0.49.

Overall, we are extremely pleased with our operating results and the progress we are seeing in lodging fundamentals. The key driver of our second quarter results was the strong increase in demand in our group business, especially in the higher-priced segments. The favorable trends that we noted in group demand since Q4 of 2011 continued to accelerate in the second quarter as our overall group occupancy increased more than 5%. The demand improvement was evident in all of our group segments led by a more than 9% increase in our higher-rated association business and a 5.5% increase in our Corporate business.

Overall, combining the demand improvement with the rate increase that exceeded 1.5%, resulted in improved group revenue of nearly 7%, which exceeded our transient revenue growth for the first time in over a year. As we had anticipated, one major benefit of the significant increase in group demand was our managers were able to focus on driving rate in our transient segments, which became the primary factor behind our transient revenue growth in this quarter. Rate growth in each of our major segments exceeded 5%, led by a 6% increase in our Special Corporate rate. On the demand side, as might be expected, our government transient business, which represents about 3% of overall demand, declined by less than 3%. The strong increase in group business we experienced did result in a slight decline in transient room volume as midweek availability was constrained. As a result, overall transient revenue increased slightly less than 5%.

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