Prepared remarks
Welcome to the Host Hotels and Resorts Second Quarter 2026 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the call over to Jaime N. Marcus, Senior Vice President of Investor Relations.
Thank you, and good morning, everyone. Before we begin, today's call will include forward-looking statements within the meaning of federal securities laws. As described in our filings with the SEC, these statements are subject to risks and uncertainties that could cause future results to differ from those expressed. We are not obligated to publicly update or revise these forward-looking statements. On today's call, we will also discuss certain non-GAAP financial information, such as FFO, adjusted EBITDAre, and comparable hotel-level results. For reconciliations to the most directly comparable GAAP information, please see yesterday's earnings press release, our 8-K filed with the SEC, and the supplemental financial information on our website at hosthotels.com. The operational results discussed today refer to our 74 comparable hotel portfolio in 2026, which excludes the Don CeSar and Sheraton Parsippany, which we sold in June. With me on today's call are Jim Risoleo, President and Chief Executive Officer, and Sourav Ghosh, Executive Vice President and Chief Financial Officer. With that, I would like to turn the call over to Jim.
Thank you, Jaime, and thanks to everyone for joining us this morning. We delivered a strong second quarter, building on the momentum of the first quarter and again exceeding our expectations. We delivered adjusted EBITDAre of $525 million, an increase of 5.8% over last year, and adjusted FFO per share of $0.63, an increase of 8.6% over last year. Comparable hotel RevPAR improved 7% compared to the second quarter of 2025 and comparable hotel total RevPAR improved 5.9%, driven by rate growth and higher food and beverage revenue. Comparable hotel EBITDA margin improved by 60 basis points year over year to 31.9%, driven by rate growth alongside lower fixed expenses. RevPAR growth in the second quarter came in significantly better than our expectations, with broad-based strength across markets and business mix. Growth was driven by sustained luxury resort demand, elevated rates associated with the World Cup, and strong group performance. Looking at World Cup performance, we estimate that the event contributed approximately 160 basis points of RevPAR growth in the second quarter. For June alone, RevPAR in our World Cup markets grew 15% compared to 12% in non-World Cup markets. For the full year, we expect the World Cup to contribute approximately 70 basis points of gross RevPAR growth, a 10 basis point increase over our initial expectation. Turning to business mix: transient revenue was up 7%, marking the strongest growth in the past seven quarters, driven by higher rates as demand remained relatively stable. Rate growth was supported by major events, citywide compression, and continued leisure strength at our luxury resorts. Growth was led by Maui, New York, and San Francisco, with improvements in key business transient markets also providing a tailwind to performance. Briefly touching on Maui: RevPAR grew 14%, and total RevPAR grew 11%, reflecting strong demand growth. In fact, occupancy grew more than eight percentage points in the quarter as the market's recovery continues. We continue to expect our Maui properties to contribute approximately $120 million of EBITDA in 2026. Business transient revenue grew 4%, driven by strong rate growth, and we were encouraged to see an increase in business transient room nights in several key markets from a variety of industries. Group room revenue for the quarter was up 7% year over year, driven fairly evenly by room night and rate growth. Our properties sold 1.1 million room nights in the second quarter. Definite group room nights on the books for 2026 now stand at 3.8 million, with total group revenue pace up more than 5% compared to the same time last year. Turning to ancillary spending: food and beverage revenue grew 6%, and other revenue was approximately flat, as growth in on-property spending was offset by a decrease in attrition and cancellation revenue compared to last year's tough comparisons. The broad-based growth across food and beverage departments, golf, and spa demonstrates the continued strength of the affluent consumer as well as the benefits of the strategic investments we have made at many of our properties over the last several years. Turning to capital allocation: in June, we completed the sale of the Sheraton Parsippany for $12 million. This disposition reflects our strategy of selling lower-growth assets with near-term elevated capital expenditure requirements. In July, we paid a quarterly common dividend of $0.20 per share and a special dividend of $0.72 per share. The special dividend represented the distribution of the approximately $500 million taxable gain from the sale of the 4 Seasons resorts in the first quarter of this year. This is a great example of our commitment to disciplined and opportunistic capital allocation. By returning capital to shareholders through regular quarterly and special dividends, we are enhancing long-term value for our investors. Turning to portfolio reinvestment: during the second quarter, we continued the execution of the Hyatt transformational capital program, which is nearly 90% complete and on track for completion by the end of 2026. Transformational renovations are now finished at five of six hotels in the program, including the Grand Hyatt Atlanta Buckhead, the Hyatt Regency Capitol Hill, the Hyatt Regency Austin, the Hyatt Regency Reston, and the Grand Hyatt Washington DC. The Manchester Grand Hyatt San Diego, the final asset in the program, was phased to mitigate business interruption and is expected to be substantially complete by the end of this year. We also made progress on the second Marriott transformational capital program, which is approximately 37% complete and is tracking on time and under budget. Guest room renovations at the New Orleans Marriott are nearing completion. Renovations at the Ritz-Carlton Naples, Tiburon and Westin Kierland are in progress, and the Ritz-Carlton Marina del Rey is scheduled to start renovations later this month. In the second quarter, we received $5 million of operating guarantees related to our transformational capital programs. As a reminder, we expect to benefit from approximately $19 million of operating profit guarantees in 2026 related to our two transformational capital programs, which we expect will offset most of the EBITDA disruption at those properties. Looking at other ROI projects: we completed the final phase of the 4 Seasons branded condo development at the Walt Disney World Resort during the second quarter on time and within budget. To date, we have closed on 28 of the 40 units, including 20 of 31 mid-rise units and 8 of 9 villas. As a result of the expected timing of the remaining closings, we now anticipate 2026 EBITDA of $16 million to $20 million, compared to our prior expectation of $20 million to $25 million, with the difference expected to be recognized in 2027. For 2026, our capital expenditure guidance range is approximately $550 million to $630 million. This includes approximately $250 million to $285 million of reinvestment focused on redevelopment, repositioning, and ROI projects, as well as $25 million to $30 million of property damage reconstruction associated with the Kona low rainstorm in Hawaii. We also anticipate remediation costs of approximately $2 million and we expect insurance coverage to substantially cover the loss in excess of our deductible. In addition to our capital expenditure investment, we spent approximately $17 million to close out the condo development at the 4 Seasons Orlando. Our continued reinvestment across the portfolio remains a key differentiator and is an important driver of Host's sustained outperformance. Once the second Marriott transformational capital program is completed in 2029, we will have reinvested approximately $2.1 billion into comprehensive renovations across 34 hotels, which are expected to contribute approximately 60% of our hotel EBITDA in 2026. We have stabilized post-renovation performance at 21 of these properties, where we have seen an average stabilized RevPAR index share gain of nearly nine points. These results underscore how our disciplined capital allocation strategy over the past several years is translating into meaningful value creation for our shareholders. Earlier this week, we released our 2026 Corporate Responsibility report, which outlines our CR strategy and performance, highlighting continued progress across environmental stewardship, social impact, and governance in support of our long-term responsible investment strategy and our 2050 net positive vision. We are proud to again be recognized for our corporate responsibility leadership including NAREIT's 2026 Leader in the Light Award for Operations for Large Cap REITs, inclusion in the 2026 Dow Jones Best-in-Class World and North American indices, revalidation of our emissions reduction target by the Science Based Targets initiative, and an advanced net zero assessment rating from Moody's. The CR report can be found on the Corporate Responsibility section of our website at hosthotels.com. Turning to our full-year outlook: we continue to expect strong leisure demand, modest improvements to short-term group booking trends, and stable business transient demand. As a result of our second quarter outperformance and improved outlook for the second half of the year, we are raising our 2026 comparable hotel total RevPAR and RevPAR growth guidance ranges to 4.75% to 5.25% over 2025. It is important to note that our RevPAR and total RevPAR growth guidance ranges are now in line. This reflects the outsized rate growth we achieved in the first half of the year and our expectation that rate growth will normalize in the second half of the year. Looking ahead, we are optimistic about the travel environment, which is supported by resilient demand trends and a continued preference among high-end consumers for experiential travel. Industry fundamentals in the second quarter reflected strong RevPAR growth driven by sustained rate strength, while new supply across our markets and chain scales remains near historic lows. Against this favorable backdrop, a post-investment grade balance sheet gives us the flexibility to continue reinvesting in our portfolio, pursue opportunistic acquisitions and dispositions, and return capital to shareholders in the form of dividends and share repurchases. As our results over the past several years have shown, Host's competitive advantages uniquely position the company to continue capturing additional upside in the current environment and over the long term. With that, I will now turn the call over to Sourav.
Thank you, Jim. Good morning, everyone. Building on Jim's comments, I will go into detail on our second quarter operations, our financial results, our updated 2026 guidance, and our balance sheet. Starting with total revenue trends, RevPAR growth outpaced total RevPAR as outsized rates driven by special events boosted rooms growth beyond ancillary revenue growth. Comparable hotel food and beverage revenue for the quarter grew 6%, led by widespread improvements in banquet and catering revenues. Banquet and catering revenue increased 7%, driven by increases in both group room night volume and contribution per group room night. Approximately half of the growth in the second quarter came from our large convention hotels led by Washington DC, where a 45% increase in banquet and catering revenue reflected a 20% increase in banquet and catering contribution per group room night from our newly renovated Hyatt properties. Outlet revenue increased 4%, driven by growth across resorts, the ongoing ramp of The View at the New York Marriott Marquis, and our newly renovated Hyatt properties. Maui led outlet growth in the quarter with a 14% increase driven by substantial occupancy increases at the Andaz Maui and Hyatt Regency Maui. Other revenues were flat in the quarter, as a decrease in attrition and cancellation revenue from last year's tough comparisons offset strength in golf and spa growth. Spa revenue was up 4%, driven by increased capture at our resorts. Notably, spa capture at the Ritz-Carlton Naples, Ritz-Carlton Amelia Island, Andaz Maui, and Hyatt Regency Coconut Point was up double digits compared to last year. Golf revenue grew 9%, driven by our courses in Maui and Naples. Further underscoring Maui's robust recovery, golf revenue in the second quarter was 9% ahead of pre-fire levels. These increases reflect continued demand from premium leisure travelers as guests prioritize spending on wellness and experiential offerings. Shifting to rooms revenues, overall transient revenue was up 7% compared to the second quarter of 2025, driven by special events, citywide compression, and continued leisure strength at our resorts. Resort RevPAR grew 9% in the quarter with Maui accounting for nearly 40% of the growth. Other standout resorts include 1 Hotel South Beach, which benefited from the F1 Grand Prix, and our Florida Gulf resorts, which benefited from an extended spring break. These results continue to underscore the strength of high-end demand. As Jim mentioned, the World Cup contributed approximately 160 basis points to RevPAR growth in the second quarter. Overall, RevPAR growth in our World Cup markets outperformed our other markets for the month of June. We also saw strength in non-World Cup markets which benefited from travelers avoiding congestion and pricing in host cities. This trend underscores one of the many advantages of our diverse portfolio. Looking at recent holidays, revenue growth for Easter and Memorial Day was driven by resorts, with Easter room revenue up 11% and Memorial Day weekend room revenue up nearly 5%. Transient revenue was up 27% for July 4, with broad-based growth across our markets and property types driven by America250 celebrations and multiple World Cup matches. Looking ahead to upcoming holidays, transient revenue pace for Labor Day weekend, Thanksgiving, and the festive period are all up double digits with strength across property type and markets. Business transient revenue increased 4% compared to the second quarter of 2025, driven by rate growth. Notably, several key markets saw business transient room night growth in the quarter, including New York, Washington DC, Chicago, and San Diego. In fact, the New York Marriott Marquis had 14% business transient room night growth in the quarter, driven by demand from tech, consulting, and finance companies. Turning to group, revenue was up 7% year over year. Growth was driven fairly evenly by rate and room nights, supported by renovated properties and strong event-related demand. Corporate groups were the primary driver of revenue growth, accounting for approximately two-thirds of the increase while associations and other groups also grew in the low- to mid-single digits. For full-year 2026, we have 3.8 million definite group room nights on the books representing an 8% increase since the first quarter. As Jim mentioned, total group revenue pace is up more than 5% over the same time last year. For the second half of the year, we are seeing meaningful total group revenue pace for the Florida Gulf Coast, Miami, Boston, New York, and Maui, and group booking pace remained strongest for the fourth quarter. Shifting gears to margins: comparable hotel EBITDA margin of 31.9% was 60 basis points above the second quarter of 2025, driven by outsized rate growth alongside lower total fixed costs. We continue to expect year-over-year margin comparisons to moderate in the second half of the year, primarily due to lower expected rate growth in the second half. On the insurance front, our June 1 property renewal came in better than expected at down 6% compared to last year, which equates to a $2.5 million expense reduction in 2026 compared to our prior guidance. Those savings are now incorporated in our updated guidance. Turning to our outlook for 2026: as Jim mentioned, we are increasing our comparable hotel total RevPAR and RevPAR growth guidance ranges to 4.75% to 5.25% over last year. The midpoint of our guidance contemplates a stable operating environment with a continuation of the trends seen in the first half of the year. This includes rate-driven leisure transient strength, modest improvements to short-term group booking trends, and stable business transient demand. At the low end, we have assumed weaker short-term booking trends. At the high end, we have assumed better short-term transient booking trends. We expect comparable hotel EBITDA margins to be up 40 basis points year over year at the low end of our guidance to up 50 basis points at the high end, a 20 basis point improvement over our prior guidance at the midpoint. For the remainder of the year, we expect comparable hotel RevPAR growth in the mid-single digits with both quarters above our prior expectations. Comparable hotel RevPAR for July is expected to increase approximately 10% year over year. At the midpoint, our guidance assumes comparable hotel RevPAR growth of 5% versus 2025, representing a 125 basis point improvement from our prior guidance. We estimate that roughly half of the increase reflects our quarter outperformance with the balance driven by a stronger outlook for the second half of the year. Our guidance also assumes a 50 basis point net benefit from special events for the full year, including an estimated 70 basis point lift from the World Cup partially offset by a 20 basis point headwind from the presidential inauguration in the first quarter of 2025. Maui is expected to contribute approximately 45 basis points to full-year RevPAR growth. At the midpoint, we expect a comparable hotel EBITDA margin of 29.7%, which is 50 basis points above 2025. Our margin performance reflects our continued success in partnering with our operators to drive productivity gains across our portfolio as well as the capital allocation decisions we have made over the past few years. For the full year, we continue to expect wage rate increases of approximately 5%, which comprise approximately 50% of our total comparable hotel operating expenses. Our 2026 full-year adjusted EBITDAre midpoint is $1.83 billion. This implies a $20 million, or 1%, improvement over our prior guidance midpoint, driven by outperformance in the first half of the year and a more optimistic view of the second half of the year. Our adjusted EBITDAre midpoint includes $29 million of estimated EBITDA from operations of the Don CeSar, which is excluded from our comparable hotel set in 2026. It also includes approximately $7 million of business interruption proceeds related to Hurricanes Helene and Milton which we received in the first quarter. We expect to receive business interruption proceeds for the recent Kona low rainstorm in Hawaii as well, though it is still too early to estimate the timing or amount of any payments. Lastly, our 2026 full-year adjusted EBITDAre midpoint includes between $16 million and $20 million of estimated net EBITDA from the 4 Seasons condo development which we expect to recognize concurrent with condo sale closings. In the second quarter, we recognized $8 million of EBITDA associated with condo sales, bringing the total EBITDA recognized to $12 million for the first half of the year. Turning to our balance sheet and liquidity position: our weighted average maturity is 4.7 years at a weighted average interest rate of 4.8%. Adjusted for the regular and special dividend paid on July 15, we currently have $3.0 billion in total available liquidity, which includes $156 million of FF&E reserves and $1.5 billion available under the revolver portion of the credit facility. In July, we paid a quarterly cash dividend of $0.20 per share and a special dividend of $0.72 per share to shareholders of record as of June 30. Adjusted for this dividend payment, our leverage ratio is 2.2x. As always, any future dividends are subject to approval by the company's board of directors. In closing, we believe our investment grade balance sheet combined with our scale, diversification, and platform strength position Host to drive outperformance and continue capturing incremental upside in the current environment and over the long term. With that, we would be happy to answer your questions.
Questions and answers
To ensure we have time to address as many questions as possible, please limit yourself to one question. We will now begin the question-and-answer session. If you would like to ask a question, please press *1 to raise your hand. To withdraw your question, press *1 again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. You are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. The first question comes from the line of Aryeh Klein with BMO Capital Markets. Your line is now open.
Thank you, and good morning. On the guide, the flow-through to EBITDA from the RevPAR update looks like it was a little bit less than we saw previously. And then somewhat relatedly, Marriott announced an ITR incentive program, and broadly, the brand seems to be looking at ways to lower costs. From your perspective, can you talk about what the impact has been or will be for your portfolio? Thank you.
Good morning, Aryeh. In terms of the flow-through for the second quarter, I want to point out two pieces on the expense side. One was just higher incentive management fees (IMF) because of the outperformance of certain properties in terms of top line. We did hit IMF thresholds for those assets, and therefore it did impact overall flow-through. But that is only a piece of it. The other piece was, given the short-term pickup in transient demand, particularly related to the World Cup, the travel agent commissions expense that we incurred was a little bit higher than expected, and we do not expect that to continue into the second half. That is really what was impacting flow-through. Otherwise, flow-through would have been even better given the overall total revenue increase. In terms of Marriott, I would start with what we have seen in terms of benefit over the past couple of years: two specific items. Since January 2025, Marriott reduced its loyalty charge-out rate by 20 basis points, which is now at 4%. That annualized is worth about $3 million to $3.5 million for our portfolio. The second item was a reduction over the last several years in account sales and national group sales booking fees, which is approximately $3 million in annual savings for us. Specifically this year, there was a change to the high-occupancy reimbursement policy that was enhanced; that is about a $0.5 million savings to us for our portfolio. Another change underway is that Marriott has shifted procurement in-house, and we expect to get about $7 million of benefit for our portfolio over the next few years. Lastly, regarding the intent-to-recommend reimbursement that Marriott discussed on their call — that is effectively a recommended reduction to the Program Services Fund (PSF), potentially up to 50 basis points back to owners if the intent-to-recommend threshold is met. No further details have been provided yet on the threshold specifics, but it would be a positive impact for our portfolio, particularly given the significant capital we have invested over the years, including through MTCP1 and MTCP2. We also expect benefits from Marriott's rollout of a new PMS system in 2027, which should help our Marriott portfolio.
Appreciate all this color. Thank you.
The next question comes from Chris Woronka with Deutsche Bank. Your line is now open.
Hey. Good morning, guys. Thanks for taking the question. Jim, where do you think we are on group pricing — I don't want to call it a reset, but pricing acceleration — just understanding the lead time that it takes. It seems like you had pretty good rate growth in the quarter on groups. I know there could be a little bit of World Cup noise in that. In the past, you have said as we go through the year and into 2027 and beyond, you expect to see continued momentum on group pricing. Can you give us a data point or two on how that is tracking? Thanks.
Yeah, Chris, we are happy with how group is performing this year. Sourav and I both mentioned that our total group revenue pace is up 5% for the year. While it is too early to give color on how group is going to perform in 2027, what I can tell you is that our total group revenue pace is positive. So we like the way we are set up for the year, and I think group is starting to normalize in terms of lead times and booking windows.
I'll add a couple of stats, particularly for the second half of the year. We expected the third quarter to be our weakest quarter; interestingly, the group booking pace since we reported last has actually improved for the third quarter. It was negative low single digits, largely because of the Jewish holiday shift, and now it is actually positive low single digits. Additionally, our fourth quarter group pace is now close to almost 10%; previously it was about 7%. So we have seen momentum in group bookings for the year and into future years. We'll provide more specifics on our next earnings call.
And a couple of other points: we picked up about 61,000 group room nights in the second quarter for Q2. More interestingly, we picked up about 210,000 room nights in the quarter for the remainder of the year. To put that in perspective, last year we had picked up, for the balance of the year, only 167,000 room nights. So group is strong, particularly corporate group at our properties.
Great. Thanks, guys.
The next question comes from the line of Chris Darling with Green Street. Your line is now open.
Good morning. Jim, hoping you could elaborate on your capital allocation priorities and how they might have changed given the run-up in your share price year to date. Given the significant available dry powder you have, should we expect to see you go on offense sooner than later?
Sure, Chris. Capital allocation is one of Host's most important value-creation levers. Our approach has not changed: we are focused on maximizing long-term shareholder return by looking at every use of capital against the available alternatives, including acquisitions, reinvestment in our existing portfolio, share repurchases, dividends, and asset recycling. We are sitting here with an investment-grade balance sheet and leverage of approximately 2.2x after taking into account the July dividend, and a portfolio that continues to generate strong free cash flow. We have a lot of flexibility to play offense when we see opportunities that meet our return thresholds. We are seeing more activity in the market and have underwritten many transactions, but to date we have not crossed the internal bar we set. There are high-quality assets out there and we will continue to look for assets with multiple demand drivers, attractive market fundamentals, and opportunities where our active management and ownership can create incremental EBITDA. We have advantages: we are an all-cash buyer, can move quickly, have deep relationships, and our platform allows us to underwrite complex assets with confidence. Acquisitions can add to the long-term growth profile of the company and benefit from expense benchmarking, renovation upside, branding, and repositioning opportunities. We will remain disciplined, not pursue acquisitions simply because capital is available, not overpay, and require the math to work on an unlevered IRR basis with a clear path to value creation through market growth, asset management, portfolio fit, and capital investment upside.
Okay. I appreciate the color. That is all for me.
The next question comes from the line of David Katz with Jefferies. Your line is now open.
Morning. Thank you for taking my question. Jim, earlier in your prepared remarks you talked about funneling or directing capital into properties in the portfolio that have the greatest growth prospects. As you look at your portfolio today, and assuming there are some properties that perhaps do not have the best growth prospects, how much of your portfolio, in qualitative terms, would you consider that to be today? Any specificity you can offer would be helpful.
I will start by saying we are very happy with the composition of our portfolio today. The portfolio is working really well for us. If you step back and look at 2025, we did about $1.76 billion of EBITDA and we sold $84 million of EBITDA when we sold the 4 Seasons and the St. Regis in Houston. This year our midpoint is $1.83 billion, which is a $73 million increase despite the sale of $84 million in EBITDA. So the portfolio is performing. We are not under any pressure to sell anything. If we think we can improve overall free cash flow and EBITDA per key, we will consider it over time, but pricing needs to be right. It is the same discipline we apply to acquisitions when we consider dispositions. Every asset is effectively for sale — we are always testing the market — and we proved that by selling the 4 Seasons and returning $500 million to shareholders. That is one way to create shareholder value and we will continue to evaluate opportunities. But there is no compulsion; we are not under pressure, and we have a solid investment-grade balance sheet at about 2.2x leverage.
Understood. I wasn't implying there should be a lot to sell. Thanks very much. Nice quarter.
The next question comes from the line of Smedes Rose with Citi. Your line is now open.
Hi. Thank you. I wanted to ask about the expense side. It sounds like you had some upside surprises around the insurance savings this year. Could you remind us what you think the total pace of property-level expenses will be this year, and how you are thinking about the pace of growth into next year? Anything you are seeing on wages and benefits and overall cost would be helpful.
Sure. At the midpoint of our guidance with a 5% total revenue increase for the year, we are estimating total expense growth of about 4.2% for the year. For wage and benefit rate growth this year, our estimate remains at 5%. Looking into next year, while we do not have budgets finalized, we expect wage and benefit rate growth to be lower, largely because of the front-loading impact of collective bargaining agreements (CBA) that we saw over the past couple of years. If you recall, the prior year was 6%; this year is 5%, so net we should be better off relative to this year. We do not have a precise number yet, but that should be a tailwind from wages and benefits into next year.
Thank you.
The next question comes from the line of Michael Bellisario with Baird. Your line is now open.
Good morning. I want to follow up on David's prior question but focus on hotels you want to keep, not sell. You've done a lot of heavy lifts in ROI work recently. What's left beyond the second Marriott program? Are there more projects in the pipeline? I'm trying to understand where and how your excess capital might be spent beyond potential acquisition opportunities. Thanks.
We have talked about transformational renovations over the past years — roughly 34 hotels that comprise 60% of this year's EBITDA — and that is one reason you continue to see outperformance in RevPAR and total RevPAR going forward. There are always opportunities to deploy capital. I agree the heavy lifting is largely done, but there are other assets in the portfolio where we'll underwrite the deployment of capital to see what IRR we can generate. By no means are we done — we have repositioned assets that provide the highest returns, and our top 40 hotels generate approximately 80% of our EBITDA. Those are the hotels we generally focus on, though that doesn't mean anything is wrong with the other 34 or so. We'll continue to look at ways to reposition assets, outlets, and explore land and value enhancement opportunities like we have done with building an AC Hotel on excess parking lot space, the villas at the Andaz Wailea, and the condos at the 4 Seasons Orlando. We're always looking for embedded value in the portfolio.
The next question comes from the line of Duane Pfennigwerth with Evercore. Your line is now open.
Hey. Thanks for the question. Good morning. Just on the Maui recovery, can you remind us where that market is on group recovery, your views on full stabilization, and if those views have changed at all? Thank you.
For this year, our estimate has not changed — we continue to expect $120 million of EBITDA contribution from Maui that we discussed last quarter. In terms of group pace, it is pacing really strong: for the third quarter our total revenue pace is in the high single digits, and the fourth quarter is meaningfully high double digits. For the full year, total revenue pace is about 7.5%, and our expectation in terms of RevPAR growth for Maui is roughly 10% for the year. We're seeing continued strength driven by the ramp of our Hyatt properties, and the pace for 2027 is also pacing very well. We feel the recovery is ongoing.
Thanks, Sourav. Do you have an estimate for what stabilization EBITDA would look like?
It's difficult to give a precise number because of ongoing expense growth, but we feel we should be able to get another $20 million to $25 million of EBITDA improvement. As to when that will be realized, we'll provide more clarity once budgets for next year are finalized.
The next question comes from the line of Robin Farley. Your line is now open.
I think that is me. Thanks for the question. I wanted to circle back to the comment about incentive management fees and flow-through to EBITDA from RevPAR growth. Can you give us a little color around what kind of EBITDA sensitivity to expect — does RevPAR growth from this point forward have IMF expense in it, and how should we think about flow-through from this level of RevPAR forward? Thanks.
Sure, Robin. It's somewhat of an art because every contract has a different IMF calculation and different thresholds — revenue thresholds or GOP thresholds — when IMF is triggered. In some cases, deferred IMF will be triggered after reaching a certain level of performance for that property. If you recall last year, we talked about one point of RevPAR being roughly $32 million to $37 million of EBITDA. That was for last year and at that time our overall RevPAR and total RevPAR gap was about 40 to 50 basis points. The portfolio makeup has changed since we sold the 4 Seasons, which brought that point-of-RevPAR-to-EBITDA figure down to more like $28 million to $30 million of EBITDA. You also have to consider total RevPAR versus RevPAR — for example, we raised our RevPAR guide by 125 basis points but total RevPAR only by 75 basis points, which affects the EBITDA impact. Once IMF payment thresholds are reached, IMF tends to stabilize — it doesn't keep rising meaningfully for the remainder of the year. What we saw in Q2 was more IMF triggering because properties were outperforming. That is a good thing, and we do not expect as much of a jump into the second half once those IMFs have been triggered.
Great. Thanks very much.
The next question comes from the line of Daniel Politzer with JPMorgan. Your line is now open.
Hey. Good morning, everyone, and thanks for the question. I wanted to zoom in on the RevPAR cadence. I think you mentioned third quarter would be a little softer or maybe the weakest quarter of the year. Can you talk us through the RevPAR cadence and the puts and takes given you are off to such a strong start?
Sure. Last quarter we had talked about Q3 being expected to be the weakest quarter for us, which is typical. With July coming in at 10% year over year, we expect Q3 to be pretty similar to Q4 now, largely driven by July. We expect August to not have meaningful growth, and September can be impacted by the Jewish holiday shift which lowers group pace. That said, group pace for Q3 has improved from negative to positive low single digits. Importantly, of the July 10% number, only about 3% is World Cup-driven — the rest of the portfolio outperformed meaningfully. So Q3 being similar to Q4 is really due to July's outperformance.
Got it. I appreciate all the detail.
The next question comes from the line of Richard Hightower with Barclays. Your line is now open.
Hi. Good morning, guys. Thanks for taking the question. I know transient revenue in the quarter was up strongly along with other segments, but room nights were down slightly. Was that entirely World Cup driven or is there more going on under the hood? Also, on the rate outlook, you said you expect the second half to normalize relative to the first half — is that because you are seeing pushback anywhere, or simply because Q2 was unusually strong due to the World Cup and is not sustainable? Thanks.
Richard, the rate-driven RevPAR growth was intentional — it was a revenue management strategy across the portfolio. We are set up well, especially in the luxury resort market, where we saw very strong growth in revenues. World Cup bookings were as we anticipated: they came in relatively close to the matches and our intent was to drive rate and capture premium rate where possible. Demand was there for that strategy and it worked, and that is the approach we would take going forward.
Richard, on the rate front, the first half was aided by the World Cup and by our resort portfolio which tends to be stronger in the first half. The second half is strong, but it is not being aided by special events the way the first half was. We still feel good about rate growth for Q3 and Q4 based on current business, and holiday pacing is encouraging with double-digit pacing for Labor Day, Thanksgiving, and the festive period. At the midpoint, our full-year RevPAR rate growth is about 4%, with occupancy roughly 60 basis points better than last year.
Alright. Thanks, guys.
The next question comes from Jackson Armstrong with Wells Fargo. Your line is now open.
Hey. Good morning. Thanks for taking the question. On the expense side, the 5% labor expense growth number seems higher than some peers. Can you break that growth down between wage rate and level of FTEs? What might be driving the variance versus peers and how should we expect labor expense growth to develop in the back half of the year?
I'm not sure which peers you refer to, but our commentary has been consistent: the 5% figure refers to wage rate growth, not the absolute wage and benefit dollar increase. Our New York CBA outcome ended up slightly better than forecasted, and our 5% wage-rate guidance has not changed. Because of front-loading in prior CBAs, last year wage-rate growth was 6%, this year 5%, and next year should step down further for certain markets. The absolute wage and benefit dollar growth is lower — we expect overall productivity and efficiencies to offset some of the wage-rate increase, which is why our total expense growth for the year is only about 4.2%. Whenever we talk about wage growth we mean wage-rate growth, not the absolute expense growth net of productivity improvements.
Okay. Thank you.
This concludes today's Q&A session. I will now turn the call back to Jim Risoleo for closing remarks.
Well, thank you again for joining us today. We always appreciate the opportunity to discuss our quarterly results, and we look forward to seeing many of you at conferences this fall. Enjoy the rest of your summer.
This concludes today's call. Thank you for attending. You may now disconnect.