Host Hotels

(HST) - Get Report

, the nation's largest lodging REIT, said funds from operations rose more than doubled in the third quarter, but the company cut its RevPAR guidance for the year and said its earnings growth would slow next year.

Host fell 5.2% to $22.75 early Wednesday and dragged down other hotel stocks.

Hilton

(HLT) - Get Report

dropped 2.1%, and

Starwood

(HOT)

fell 1.5%.

Host reported funds from operations of $152 million, up from $74 million a year earlier.

Funds from operations, a common REIT performance metric, adds back depreciation and amortization charges to net income.

On a per-share basis, FFO rose just 47% due to more shares outstanding in the latest quarter. FFO per share rose to 28 cents, matching Thomson First Call's average analyst estimate, from 19 cents last year.

Total revenue increased 40% to $1.1 billion for the third quarter. RevPAR, or revenue per available room, increased 9.1%. RevPAR is a key hotel operating metric.

Looking ahead, Host reduced its 2006 RevPAR guidance to a range of 8% to 8.75% from the previous estimate of 8.5% to 10%.

The company said it expects 6% to 8% RevPAR growth in 2007, but didn't provide FFO or EBITDA guidance for next year.

Host CEO Christopher Nassetta said on the company's earnings conference call that margin growth at comparable hotels will likely be slower next year, and funds from operations growth also will decelerate.

This year, comparable margins are projected to grow 170 to 200 basis points.

"While we have seen some limited weakness ... things are still very good," Nassetta said.

For 2006, the company expects FFO of $1.50 to $1.53 per share. Those numbers include 6 cents a share of one-time expenses associated with refinancing debt and recent acquisition closings.

Analysts expect FFO of $1.60 a share, excluding those items.

Results in the third quarter were hurt by a 1% drop in occupancy, due to weaker transient business, mostly in the discount segment in Florida, Houston and Washington, D.C.

But the transient business, especially on the high end, was strong in New York, San Diego, Chicago and Denver.