Host Marriott 2004 Annual Report - Host Hotels & Resorts, Inc

food and beverage and other services, reducing operating costs and identifying
operating efficiencies, all of which we expect will improve the long-term profitability
of our portfolio.
Results of operations for 2004 demonstrated the return of our most profitable
lodging segment, the corporate group and corporate transient customers. While
this shift in the business mix was primarily in the latter half of 2004, this positive
shift in business, combined with overall rate growth, helped produce the highest
increase in average room rates in the past several years. We expect that this trend
will strengthen in 2005, helped by increased international travel.
Our group business also benefited from the improved economy which has
resulted in higher demand and, thus, increased negotiating leverage for our hotels.
As demand improves, we have focused our managers on strategically directing
additional group business toward slower demand periods, thereby leaving available
capacity for higher-rated transient business.
Controlling operating costs has been a key priority over the past several years.
The quality of our portfolio creates high guest expectations and we are working
closely with our hotel operators to reduce labor costs and generate savings in ways
that do not impact on the perceived quality of our hotels or guest satisfaction. As
RevPAR is increasingly driven by improvement in average room rates, and food and
beverage sales benefit from more corporate and association business, we expect to
see an improvement in operating margins. Overall margin growth will still be limited
due to above inflationary increases in wages, benefits, and utility costs.
LOOKING AHEAD
We are looking at a bright future. We believe our focus on upper-upscale and
luxury hotels has, over the long-term, provided superior returns to our stockholders
through appreciation in net asset value and growth in earnings and dividends. The
operating environment for the lodging industry is much stronger than only a year
ago and is building in strength. We believe accelerating lodging demand growth
will be combined with a low rate of supply growth, providing an ideal environment
for improving financial performance. This should result in meaningful growth in
RevPAR, earnings and dividends at our hotels in 2005 and beyond.
We are even more convinced about the positive intermediate and long-term
prospects for Host Marriott. Our combination of luxury and upper-upscale assets
in prime locations will drive premium pricing and returns as lodging fundamentals
continue to strengthen and demand increases. Our management expertise and
careful allocation of capital should be rewarded with accelerating operating performance
and new opportunities for growth.
As the premier hospitality real estate company, we believe that our combination
of quality assets, the best brands and financial strength represents an unmatched
opportunity for investors and is truly the best-in-class in the lodging industry. We
will build on this best-in-class position to continue to provide superior returns to
our stockholders.
THE RITZ-CARLTON, TYSONS CORNER
THE RITZ-CARLTON, TYSONS CORNER IS LOCATED
IN NORTHERN VIRGINIA’S PREMIER
BUSINESS AND SHOPPING DISTRICT.
THIS 397-ROOM LUXURY HOTEL IS MIDWAY
BETWEEN WASHINGTON, D.C.
AND DULLES INTERNATIONAL AIRPORT,
PROVIDING VISITORS TO OUR NATION’S CAPITOL
WITH AAA FOUR-DIAMOND AND MOBIL
FOUR STAR LUXURY ACCOMMODATIONS
AND SUPERIOR PERSONAL SERVICE.
RICHARD E. MARRIOTT
Chairman of the Board
CHRISTOPHER J. NASSETTA
President and Chief Executive Officer
MARCH 1, 2005
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HOST MARRIOTT 2004