Executives: Gee Lingberg - Host Hotels & Resorts, Inc. James F. Risoleo - Host Hotels & Resorts, Inc. Gregory J. Larson - Host Hotels & Resorts, Inc.

Analysts: Anthony Powell - Barclays Capital, Inc. Smedes Rose - Citigroup Global Markets, Inc. Shaun Clisby Kelley - Bank of America Merrill Lynch Stephen Grambling - Goldman Sachs & Co. Robin M. Farley - UBS Securities LLC Richard Allen Hightower - Evercore Group LLC Thomas G.

Allen - Morgan Stanley & Co. LLC Wes Golladay - RBC Capital Markets LLC Chris J. Woronka - Deutsche Bank Securities, Inc. Michael J. Bellisario - Robert W.

Baird & Co., Inc.

Operator: Good day, and welcome to the Host Hotels & Resorts, Incorporated Fourth Quarter and Full Year 2016 Earnings Conference Call. Today's conference is being recorded. At this time, I would like to turn the conference over to Ms. Gee Lingberg, Vice President.

Please go ahead, ma'am. Gee Lingberg - Host Hotels & Resorts, Inc.: Thanks, Cathy. Good morning, everyone. Welcome to the Host Hotels & Resorts' fourth quarter 2016 earnings call. Before we begin, I'd like to remind everyone that many of the comments made today are considered to be forward-looking statements under federal securities laws.

As described in our filings with the SEC, these statements are subject to numerous risks and uncertainties that could cause future results to differ from those expressed, and we are not obligated to publicly update or revise these forward-looking statements. In addition, on today's call, we will discuss certain non-GAAP financial information such as FFO, adjusted EBITDA, and comparable hotel results. You can find this information, together with reconciliations to the most directly comparable GAAP information, in today's earnings press release, in our 8-K filed with the SEC, and the supplemental financial information on our website at hosthotels.com. This morning, Jim Risoleo, our President and Chief Executive Officer will begin by providing some thoughts on his transition, then will provide an overview of our fourth quarter and full-year results, discuss our recent transaction, and conclude with his outlook for 2017. Greg Larson, our Chief Financial Officer, will then provide greater detail on our fourth quarter performance by markets, margins, balance sheet, and our guidance for 2017.

Following their remarks, will be available to respond to your questions. And now, I'd like to turn the call over to Jim. James F. Risoleo - Host Hotels & Resorts, Inc.: Thanks, Gee. Good morning, everyone, and thank you for joining us to discuss Host's fourth quarter and full-year results.

I'll begin by saying how honored and humble I am to lead this great company. Not only do we have an incredible portfolio of iconic and irreplaceable hotels, but we have some of the brightest, innovative and hardworking professionals in the industry. I am excited to help take Host to the next level alongside them. I would also like to thank Ed Walter for everything he has done for Host over the past decade. Personally, I would like to thank him for his friendship over the past 20 years and wish him all the best.

In my first two months at the helm, I have had the privilege to meet with many of our employees, investors, analysts, and operating partners. Many, if not all of them, have asked the same question. How will Host be different going forward? It's an important question, but before I can answer that, I think it's worth reaffirming what remains the same and why I am so confident in our future. First, we will continue to own the most geographically diverse portfolio of irreplaceable hotel real estate in the industry. Second, we will continue to maintain a strong balance sheet, providing us a flexibility to navigate the inherent volatility of our business over the course of the cycle.

Finally, we will continue to take advantage of our scale, both on the acquisition front where we have a competitive advantage to pursue large complex transactions and in analytics where we can utilize our wealth of property information to mine and create value for our stockholders. We are in the early stages of assessing the organization and its strategic direction. I'm actively reaching out to all stakeholders to gain an understanding of their perspective on Host and what it is they would like to see from the company going forward. I look forward to speaking with many of you over the next several months to receive your input and help shape my perspective as we work to refine and advance our strategy. Having said that, the first item we're looking to strengthen is our culture, which I believe is the cornerstone of any successful organization.

For Host to continue creating long-term value for our stockholders, we believe we need to empower employees by fostering an entrepreneurial environment that is dynamic, nimble and efficient. I have been encouraged by our early efforts and believe these changes are resonating with employees. We have established an enterprise analytics group, which allows us to streamline several critical functions and enhances our ability to leverage information to create benefits for current and future investments throughout the cycle. When I refer to Host as being more nimble, I think of us as being much more opportunistic in acquiring great real estate that will enhance the quality of the portfolio and ultimately, drive the value of the company. To do so, we will be more open to investing outside our historical top 10 to 12 markets and using our strong balance sheet to pursue accretive acquisitions where we can add real value.

Of course, we will remain disciplined in our approach to external growth opportunities. A great example of our acquisition strategy is the transaction we just announced this morning, the Don CeSar in St. Pete Beach. The resort is an iconic Grand Dame Floridian resort on one of the top beaches in the U.S. and was available free and clear of brand and management.

While the property immediately fits into the top 20 and 10 from a RevPAR and EBITDA per key perspective, we believe there is a substantial upside to our underwriting with the installation of Davidson Hotels & Resorts as the new operator along with a targeted capital plan. And while I anticipate we will be more active on the investment front, should the economy and markets falter and our stock trade down to some of the levels we witnessed last year, you can also expect us to be prepared to repurchase shares, which is why we have also announced an additional $500 million share repurchase program this morning. I also note that whether we are evaluating new acquisitions or share buybacks, we fully intend to maintain a strong balance sheet, which we believe to be one of our core strategic tenets. Hopefully that provides you with some color on my near-term focus. With that, let's discuss our fourth quarter and full-year 2016 results.

We are pleased to report a better-than-expected fourth quarter and full-year results for our company. Our results were driven by strong group and leisure demand growth, which led to the highest full RevPAR in our history. We saw outstanding margin improvement in both the fourth quarter and full year, driven by a combination of productivity improvements and lower utility costs. The lower utility costs are partially a result of the energy saving ROI projects we have implemented over the last several years. Adjusted EBITDA was $348 million for the quarter and $1.471 billion for the full year, an increase of 4.4%.

Comparable hotel EBITDA growth was even better, up 5.8%. Our adjusted FFO was $0.41 per share for the fourth quarter and $1.69 year to date, reflecting a 9.7% increase over last year. Both our EBITDA and FFO results for the quarter exceeded consensus estimates. Despite the expected deceleration due to the shift of the Jewish holidays from the third quarter to the fourth quarter, results were better than anticipated. For the quarter, hotel occupancy grew 80 basis points to 75%, and our average rate grew 60 basis points.

As a result, comparable RevPAR growth on a constant dollar basis increased 1.7%. For the full year, comparable hotel occupancy increased 130 basis points, and average room rate increased 1%. On a constant currency basis, full year RevPAR growth increased 2.7% to approximately $177, which as mentioned, was the highest full year RevPAR in our history. The primary driver of our results this quarter was our group business. On our third quarter call, we had anticipated a weakness in this segment due to the holiday shift, the November election, and Hurricane Matthew.

Fortunately, the hurricane did not materially impact our Florida properties, and despite the election, November was our strongest month in the quarter with a 9.7% increase in group demand, and a 2.9% increase in rate. Throughout the fourth quarter, our higher rated corporate group business was our strongest segment with a 9% increase in demand. Overall, group demand increased 1.8% with a 1.3% increase in average rate, leading to fourth quarter group revenues increasing by 3.1%. For the full year, group revenues were up 4.5% as a result of demand increasing 2.1% and an average increase in rate of 2.4%. As we anticipated, the strength in group demand was partially offset by a decline in transient demand, which was a theme for most of 2016.

The solid group performance in November and early December displaced mid-week transient volume. As a result, transient demand declined 1% in the fourth quarter, while rate increased 80 basis points. We continue to see positive demand growth from leisure business, but that was offset by declines in special corporate demand. For the full year, our transient business was up 1.2% as a result of a 50 basis point increase in demand and a 70 basis point increase in average rate. The solid fourth quarter group business led to favorable results in food and beverage.

While fourth quarter F&B revenues increased less than 1%, profit margins increased 140 basis points. For the full year, F&B revenues increased 1.7% and margins increased 90 basis points. The margin increase is mostly related to productivity improvements and somewhat to food and beverage cost reductions. Total comparable hotel revenues increased 1.9% for the quarter. The increased group activity, combined with our continued focus on operational improvements, resulted in strong rooms flow-through.

As a result, comparable EBITDA margin grew 65 basis points in the quarter. For the full year, total comparable hotel revenues increased by 2.8% with comparable EBITDA margin growth up 80 basis points. As I mentioned earlier, we acquired the 277-room Don CeSar resort and its sister property, the 70-unit Beach House Suites in St. Pete Beach for $214 million. The main resort features over 38,000 square feet of indoor and outdoor event space.

The Beach House is an all suites property with rooms averaging over 600 square feet. The resort is distinct in historical architecture combined with its unprecedented location on one of the best beaches in the U.S., making it an ideal hotel for leisure, corporate and social groups. We are acquiring the resort unencumbered by brand and management. We have selected Davidson Hotels & Resorts to operate the property as an independent hotel under the Pivot Hotels collection. After the completion of a strategic renovation, working with Davidson and utilizing proprietary internal benchmarking and cost saving initiatives, we believe we can materially increase existing performance at the resort.

Further, there are several ROI opportunities we did not underwrite that we believe could drive incremental value. As part of a like kind exchange with the Don, we sold the JW Marriott Desert Springs and Palm Desert, California on January 11 for $172 million which deferred a taxable gain of approximately $65 million. The property was encumbered by a long-term management agreement with Marriott and due for an extensive renovation. With a RevPAR of less than $140, materially lower than the average of our portfolio, the hotel is projected to require CapEx spending of nearly 9% of total revenues over the next 10 years, and resides in a historically volatile market where airlift is a challenge. As far as our outlook on the investments front, I think you can expect that we will be a bit more active in 2017 than we were in 2016.

If fact, we are working on several other transactions and while we are not ready to announce any deal at this time, we have included an acquisition in our 2017 guidance. Again, we will be prudent in managing our portfolio and disciplined in allocating capital. You can expect us to only move forward on deals that are accretive to the value of the company. Our focus is on value enhancing growth, not growth for growth sake. We're also continuing to take an opportunistic approach to dispositions.

We're very pleased with the quality and diversification of our portfolio, which we think is the best in the industry. As such, we're comfortable holding our assets unless we can achieve attractive pricing and we will be less likely to engage in a systematic asset sale program. Having said that, we are open to selling any asset, whether it be iconic or one of our prime suburban properties, if we believe it materially increases shareholder value. On the CapEx front, the company invested approximately $39 million in the fourth quarter on redevelopment, return on investment and acquisition capital expenditures. Notably, we completed the final phase of the Denver Marriott Tech Center redevelopment and the first phase of a comprehensive renovation project at The Phoenician.

As I mentioned at our November Investor Day, the second phase, which includes the public and retail areas, will be renovated in the second half of 2017, during the property's low occupancy off season. Now let me briefly touch on our outlook for this year. In many ways, we entered 2017 with (16:09) the same uncertainty that we felt at this time last year. Lodging fundamentals continue to decline in 2017, as supply continue to increase, particularly in the major markets, where we have exposure and group booking pace and RevPAR continue to decelerate. However, the difference this year is that a wave of economic optimism has taken hold in both, the overall stock market and the lodging industry, with promises on material economic policy initiatives from the new administration.

Unfortunately, the turnaround in the stock market and economic sentiment has not yet translated into consistently improved results for our business. Part of this has been the result of continued weakness in corporate business travel, resulting in a negative mix shift with operators, replacing high rated corporate business with lower rated corporate business, such as contract, discount or government. Given historically high occupancy, in order for RevPAR to reaccelerate, corporate business will have to return and reverse this trend. We are very pleased with our November and December results, which led to performance that was stronger than forecasted. However, we believe it is too early to determine if that was simply pent-up demand or the start of a more positive long-term trend.

Our hope is for the latter, if the new administration can follow through on its proposals for lower taxes, reduced regulation and infrastructure spending. In addition, January was a very strong month driven primarily by the inauguration in D.C., but we are still in a wait and see mindset. One potential negative offset of the new administration's pursuit of growth policies is an appreciation of the dollar, which could potentially impact international demand to gateway U.S. destinations. We also could face potential demand shortfalls from the negative sentiment surrounding the administration's proposed travel ban.

Another difference between now and 2016 is in our group booking pace. At this time last year, group revenues on the books were stronger than our current levels of up 2%. This is tempering our 2017 outlook. But I would point out that January bookings for 2017 were extremely strong, which we expect to push 2017 group revenue pace to nearly 3%. We have approximately 75% of 2017 group business on our books which is near record levels.

And although it is still early, 2018 group revenue pace is looking very strong. We also should benefit from the tailwinds from less disruption from capital expenditure projects as spending is expected to be lower by 25% this year. Further, we have noted stronger forecast from economists on GDP, consumption, business investment and corporate profits, all of which bode well for our business. All in all, we are looking forward to getting to work in 2017 and producing another solid year of results. With that, let me turn the call over to Greg Larson, our Chief Financial Officer, who will discuss our performance and 2017 guidance in more detail.

Gregory J. Larson - Host Hotels & Resorts, Inc.: Thank you, Jim. We had a very solid quarter and are especially pleased with RevPAR and EBITDA margin, which exceeded our expectations. Six of our 14 identified markets had impressive RevPAR increases ranging from 6.4% to 12%. A common theme for these markets, which included San Diego, Phoenix, Los Angeles, Washington, D.C., Hawaii, and Chicago was that strong group performance created compression and enabled our managers to increase transient average rate.

San Diego continued to outperform the portfolio and was the top-performing market with RevPAR increasing 12% in the fourth quarter. Occupancy increased 6.5 percentage point and average rate increased 2.8% as a result of strength in both transient and group business. Importantly, our RevPAR results more than doubled the STAR upper upscale market growth of 5.4%. Our hotels in San Diego benefited from city-wides, good in-house group business and market share gains at the Coronado Island Marriott post renovation. In 2017, we expect our hotels in San Diego to outperform the portfolio.

RevPAR at our Phoenix hotels grew 8.3% in the quarter, driven by a 3.1% increase in average rate and a 3.4 percentage point growth in occupancy. Our hotels' RevPAR increase exceeded the STAR upper upscale results by 420 basis points. Strong group room nights, which increased 12.4% in the quarter enabled our operators to improve transient rate by 4.2%. We expect that our hotels will continue to outperform the portfolio, partially driven by The Camby continuing to ramp up as it becomes comparable in 2017 for reporting purposes. Our hotels in Los Angeles continue to outperform the portfolio with an 8.1% RevPAR increase in the fourth quarter which has nearly tripled the STAR upper upscale market result of 2.9%.

The impressive results were driven by a 5.8% growth in average rates and a 1.7 percentage point increase in occupancy. Group room nights were up 26%, creating compression that allowed our managers to drive transient rate. We expect RevPAR growth at our Los Angeles properties to moderate in 2017, as certain hotels in this market will be negatively impacted by renovation, as well as a weaker group booking pace. Our properties in D.C. also exceeded our expectations and outperformed our portfolio this quarter with RevPAR growth of 7.8%.

This was driven by an average rate increase of 3.6% and a 290 basis point increase in occupancy. Strong citywide events contributed to a 13.2% increase in group revenues, which provided compression to drive improvement in transient ADR of 4.4%. As we mentioned in the last quarter, city-wides in 2017 continue to look strong for D.C., which should allow the positive dynamics we witnessed in the fourth quarter to carry over into this year. In fact, January was a fantastic month for D.C., with our hotels' RevPAR increasing approximately 75% from demand generated by the inauguration and the women's march. In addition to the city-wides I mentioned, we see additional demand from ongoing legislative activity and expect our hotels in this market to outperform our portfolio in 2017.

Moving to Hawaii, our assets achieved a RevPAR increase of 7.3% this quarter, significantly beating the STAR upper upscale market growth of 0.4%. These exceptional RevPAR results were driven by robust group business at both our Maui hotels, resulting in a 15.2% increase in group revenue. This created internal compression and drove significant rate increases in both transient and group average rates of 6.7% and 7.9%, respectively. Over the next several years, the Hawaiian market has the lowest expected supply growth out of the top 20 U.S. markets, which bodes well for future performance.

Based on these expectations, as well as strong group revenues on the books for 2017, we expect our Hawaiian hotels to continue to outperform our portfolio. In Chicago, our hotels increased RevPAR by 6.4% in the fourth quarter, with an ADR increase of 3.5% and occupancy gaining 2.1 percentage points. Strong in-house group and citywide room blocks helped the hotels outperform the STAR upper upscale market result by 320 basis points. Based on the lift we expect from the Chicago Marriott Suites renovation and strong city-wides in the first quarter, we expect our hotels in Chicago to outperform the portfolio in 2017. While those markets have been outperformers in the portfolio, we also have some challenged markets, which partially offset RevPAR increases.

Our hotels in Houston continued to struggle in the fourth quarter, due to persisting weakness in the energy sector, increased new supply, and the fact that there were only four city-wides in the fourth quarter as compared to 13 in the same quarter last year. Collectively, these factors contributed to a decline of more than 14% in the STAR upper upscale market RevPAR for Houston. While our hotels' RevPAR outperformed the STAR market by more than 9 percentage point, the challenging conditions resulted in a 4.9% decline in our properties' debt. (25:34) Although the city hosted the Super Bowl in February, the same negative fundamentals are anticipated for 2017. So we expect our hotels in Houston to continue to underperform the portfolio.

However, keep in mind that our hotels in Houston only account for 2% of our total EBITDA. In fact, a wide geographic diversification means that no single market makes up more than 11% of our EBITDA. Our hotels in Florida had a RevPAR decline of 4.7% in the fourth quarter. This market has been negatively impacted by weaker group and leisure activity. Occupancy declined 2.7 percentage points and average rate declined almost 1%.

We expect our hotels in Florida to continue to be challenged in 2017. In New York, RevPAR decreased 2.4% in the fourth quarter with an occupancy increase of 60 basis points and an average rate decline of 3.1%. Supply continues to outpace demand, which when combined with lower European travel and tour business due to the strong U.S. dollar continued to negatively impact our operators' ability to drive rate. Based on our outlook for the market, we expect RevPAR at our hotels in New York to continue to decline in 2017.

RevPAR at our hotels in Boston declined 1.3% in the quarter primarily due to a 1.4 percentage point decline in occupancy, offset slightly by a 0.5% increase in average rate. The business transient market in Boston is softening as demand from financial services and pharmaceutical sectors have weakened. With the possibility of decreased regulations on both sectors from the new administration, we are hoping this trend may reverse moving forward. That, combined with solid group booking and stronger in-house group business, leads us to expect Boston to outperform the portfolio in 2017. Our consolidated international hotels had a challenging fourth quarter with RevPAR down 9.5%.

The decrease was primarily due to the underperformance of our hotels in Brazil. Following the strong third quarter results driven by increased demand around the Olympics, overall demand in Brazil has been weak due to the economic and political issues, as well as increased supply. In constant currency, we anticipate our international property to underperform the overall portfolio in 2017. Shifting to our European joint venture, the portfolio continued to be negatively impacted by two major macro factors, including the effect of the terrorist attacks in Paris and Brussels and the political and economic uncertainty around Brexit. This led to a RevPAR decline of 1.1% this quarter in constant euro.

Understandably, our hotels in Paris significantly underperformed the portfolio, while those in London, Stockholm, and Berlin outperformed. We expect our hotels to improve in 2017 driven by continued growth in Barcelona and Madrid, and an expected recovery and favorable comparisons in Paris and Brussels. An important highlight for the quarter and for the year was our impressive EBITDA margin growth. With a RevPAR increase of 1.7% in the fourth quarter, we had EBITDA margin growth of 65 basis points. On a full-year basis, our RevPAR increased 2.7%, resulting in margin expansion of 80 basis points.

In addition to decreases in insurance and utility costs attributable to a combination of reduced rate and consumption as a result of our energy ROI, our focus on improving productivity at our hotels over the past few years has resulted in our operators establishing tighter labor model standards and improved and expanded forecasting tools. This has allowed our managers to more effectively schedule labor based on demand and to minimize excess staffing, thereby reducing costs. We have completed the time and motion studies at most of our largest assets and reaped the benefits in 2016, as evidenced by our outsized margin growth. The good news is that opportunities to derive benefits from additional studies at our medium and small hotels still exist, albeit at savings rates that will be lower than those achieved at our large hotels. With these productivity savings in mind, we expect RevPAR growth at 2% will result in breakeven margins.

During the fourth quarter, we repurchased 0.7 million shares at an average price of $15.82 for a total purchase price of $11.8 million. Since the inception of our share repurchase program in April of 2015, we have bought back 52.1 million shares of common stock for a total purchase price of approximately $894 million. The share repurchase program ended on December 31, 2016, and the board of directors authorized the new program to repurchase up to $500 million of common stock depending on market conditions. In addition to our share buyback efforts in January, we paid a regular fourth quarter cash dividend of $0.20 per share and a special cash dividend of $0.05 per share bringing our total dividend for 2016 to $0.85, which represents a yield of approximately 4.5% on our current stock price. Over the past 12 months, we have distributed approximately $848 million of capital to our stockholders through cash dividend and stock repurchases.

We continue to operate from a position of financial strength and flexibility and believe we have one of the best balance sheets in the lodging REIT and the overall REIT space. Importantly, we view this as a key competitive and strategic advantage, which enhances our ability to pay our dividend throughout the lodging cycle and allows us to invest as opportunities arise either by buying assets, buying back stock and reinvesting in high yielding redevelopment and ROI projects. We continued to maintain a strong investment grade balance sheet and ended the fourth quarter with approximately $372 million of cash. We improved our leverage ratio to 2.4 times as calculated under our credit facility and as of year end, had $788 million of available capacity under our revolving credit facility. Moving to our 2017 guidance, we're cautiously optimistic about 2017 and are prepared for a number of economic scenarios, which leads us to project our 2017 comparable hotel RevPAR range will be flat to up 2%.

With the high end of our range at near inflation, we anticipate EBITDA margins to be flat at 2% RevPAR and down 80 basis points if RevPAR growth is flat. This translates to full year adjusted EBITDA range of $1.42 billion to $1.49 billion and adjusted FFO per share of $1.60 to $1.70. Keep in mind that the quarterly results will once again be impacted by the Easter and Jewish holiday shift. Easter shifts from the first quarter last year to second quarter this year and the Jewish holidays shift from the fourth quarter in 2016 to the third quarter in 2017. We expect approximately 23.5% of our total EBITDA will be generated in the first quarter.

To help bridge the gap between 2016 adjusted FFO per share of a $1.69 and the 2017 midpoint of $1.65 per share, I think it is worth noting several items. First, assuming a 1% increase in RevPAR and a decline in EBITDA margins of 40 basis points, 2017 adjusted EBITDA will decline by approximately $10 million. Next, our disposition and acquisition activity will lead to a net decline of approximately $10 million. This includes the loss from operations of the 10 assets we sold in 2016, as well as the JW Desert Springs sale and the acquisitions of the Don CeSar and the unidentified hotel Jim mentioned in his remarks. Also, as we referenced on our third quarter call, the BP oil spill proceeds from last year that will not be fully repeated in 2017 reduces FFO by a net amount of $10 million.

Finally, we are anticipating an increase in interest expense from our floating rate debt, as well as increased taxes due to higher leakage which results in a reduction of approximately $25 million. Offsetting these reductions is a $22 million benefit in outsized EBITDA growth from our non-comp hotels that were under major renovation or repositioning. In addition, due to our 2016 share buyback activity, our weighted average share count in 2017 is lower. The combination of these factors decreases our 2016 adjusted FFO per share from 2016 to the midpoint of our 2017 guidance by $0.04 to $1.65. Overall, we are pleased with our results this quarter, particularly with the improving profitability of our assets in what continues to be a competitive market.

This includes our prepared remarks. We are now interested in answering any questions you may have. To ensure we have time to address questions from as many of you as possible, please limit yourself to one question.

Operator: And we'll go first to Anthony Powell from Barclays. Anthony Powell - Barclays Capital, Inc.: First, a clarification on the EBITDA impact of the acquisitions you announced today and the disposition.

If you isolate the Don CeSar, JW Marriott and the unidentified deal, what is the EBITDA total change from those three transactions?
Gregory J. Larson - Host Hotels & Resorts, Inc.: Hey, Anthony, this is Greg. So I think if you remember from prior conversations last year, obviously, we sold 10 hotels last year for approximately $500 million. And as we talked about, those hotels generated $13 million in 2016 and that will not be replicated in 2017. So that's a minus $13 million.

The acquisitions that Jim talked about today, the Don, the unidentified asset and the disposition of Desert Springs, those three things combined results in plus $3 million of EBITDA. So if you take the minus $13 million from the 2016 disposition, combine with the plus $3 million, that gives you the minus $10 million that I talked about in the bridge. Anthony Powell - Barclays Capital, Inc.: Right, that's very helpful. And just going to the overall acquisition and transaction philosophy, Jim, you sold an asset and you're buying two. Are you a net buyer, or seller and how do you approach the leverage at this point in the cycle?
James F.

Risoleo - Host Hotels & Resorts, Inc.: Anthony, I think that's a great question. We are going to be opportunistic and as I mentioned in my prepared remarks, we will look for transactions that create shareholder value. We are not interested in buying assets just for the sake of growth. We underwrite every transaction in a disciplined manner. We underwrite each deal to a 800 basis point increase, plus over our cost of capital and if the right opportunities present themselves, we will pursue them.

That goes on the sales side as well. As I mentioned, we are not implementing a systematic sales program in 2017, but every asset in the portfolio is for sale. If we get an offer that is truly accretive to shareholder value, we're not going to be shy or bashful about pulling the trigger and selling a hotel. So to say today that we're going to be a net buyer or a net seller, I really can't – I can't give you a definitive answer on that, because I just don't know how the year is going to unfold. I will tell you that we are working on a number of opportunities and if they pencil, we would intend to pursue them, but at this point in time, the only thing I can refer to is the guidance we've given.

Anthony Powell - Barclays Capital, Inc.: All right. That's it for me. Thank you. Gregory J. Larson - Host Hotels & Resorts, Inc.: Thanks.

Operator: And our next question goes to Smedes Rose of Citi. Smedes Rose - Citigroup Global Markets, Inc.: Hi. Thanks. Jim, you mentioned in your opening remarks the potential fall-off in international visitation, can you remind us what does international visitation comprise out of Host's overall demand at this point?
James F. Risoleo - Host Hotels & Resorts, Inc.: Sure, Smedes.

It's roughly 10%. And... Smedes Rose - Citigroup Global Markets, Inc.: Portfolio-wide demand?
James F. Risoleo - Host Hotels & Resorts, Inc.: Pardon. Smedes Rose - Citigroup Global Markets, Inc.: I'm sorry.

So portfolio-wide demand, 10% is driven by international visitation?
Gregory J. Larson - Host Hotels & Resorts, Inc.: Correct
James F. Risoleo - Host Hotels & Resorts, Inc.: That is correct. Gregory J. Larson - Host Hotels & Resorts, Inc.: As you realize, Smedes, I mean, certain market – it varies by market, right.

New York certainly would be a market with more demand than 10% and there would be other markets with a lot less than that. Smedes Rose - Citigroup Global Markets, Inc.: Okay. And then can I just slip in one more, your acquisition of the Don CeSar, could you talk about, obviously, we can look at the per key, but what sort of EBITDA multiple or cap rate was that and where do you think its stabilizes when you've managed to exploit some of the opportunities you mentioned?
James F. Risoleo - Host Hotels & Resorts, Inc.: Well, we think that Don is a terrific acquisition. It's just the kind of asset that works for Host for a lot of reasons.

First of all, it is truly iconic, it's on one of the best beaches in America. We were able to buy that asset at a price that puts it in the top 10 on an EBITDA per key basis today within our portfolio as it is. Bringing in Davidson Hotels and implementing a strategic capital plan, as well as using our proprietary internal benchmarking that we have, given our broad resort exposure, we believe is going to allow us to meaningfully increase the net cash-on-cash return and the EBITDA, as if that we're open and operating today. So roughly the going in cap rate is 6.5% to 7%. We think we can meaningfully increase that return over the next several years.

Smedes Rose - Citigroup Global Markets, Inc.: Okay. Thank you.

Operator: Our next question comes from Shaun Kelley from Bank of America. Shaun Clisby Kelley - Bank of America

Merrill Lynch: Hey. Good morning.

Jim, also in the prepared remarks, you mentioned sort of the willingness to kind of move outside of the top, I think you said, 10 to 20 markets. Could you just elaborate a little bit on that? That's not really been where many of the public, full service retail have focused, and does this mean we'd expect to see generally smaller transaction sizes versus some of the big flagship Phoenician style group properties that Host has often specialized in the past?
James F. Risoleo - Host Hotels & Resorts, Inc.: Sure, Shaun. I think it's – we're currently operating in the top 10 to 12 markets. We are prepared to look beyond those 10 to 12 markets and to opportunistically acquire assets where the opportunities are.

I would point out that The Phoenician was not in one of the top 10 to 12 markets when we made a decision to acquire that asset in mid-2015. Similarly, the Don really wasn't in one of our top 10 to 12 markets, but we saw opportunity in both of those deals. Our ideal preference would be to acquire bigger, chunkier assets where we can use our scale and our information to add value. That is the focus that we're going to have going forward. Shaun Clisby Kelley - Bank of America

Merrill Lynch: Thank you very much.

Operator: And our next question goes to Stephen Grambling of Goldman Sachs. Stephen Grambling - Goldman Sachs & Co.: Thanks. Good morning. Just on the guidance, could you just provide a little bit more color on some of the cost savings that you've implemented, I guess, that will occur this year in the back half that they impact next year and some of the offsets that you anticipate? Thanks. Gregory J.

Larson - Host Hotels & Resorts, Inc.: Sure. So I think when I think of business over long periods of time, I think, in the past, I probably would have said that, that breakeven on the margin front would have probably been at 2.5% to 3% RevPAR growth. Obviously, last year was sort of a unique and powerful year with 2.7% RevPAR growth, we are able to achieve 80 basis points in margin growth and some of that is because of the things we talked about, the time, motion studies with some of the bigger hotels, better productivity, some of the benefits we've seen on technology, we've also reduced insurance costs by over 10% and utility costs, because of our energy ROI projects reduced utilities as well. So, all those things came together to produce, really, I think record level margin growth for us with that level of RevPAR. I think, when I think about 2017, some of those things will still benefit us.

We renew our insurance once a year in June and so that double-digit decline in insurance will certainly benefit us for the first six months of 2017. We continue to implement additional energy ROI projects. So even though it's sort of hard today to predict utility cost, I do think we will continue to have benefit from the energy ROI projects that will help us. And as I mentioned in my remarks, we're still implementing, or we will implement this year some of our best practices from the time, motion studies and we'll start looking at some of our medium size and smaller hotels. So again, there'll be benefits on that front, but just maybe not as much as what we achieved last year.

And so again, I guess, when I think about it, when I think about all those statements in general, I think to have flat RevPAR with 2% RevPAR growth is actually a pretty good outcome. The other thing I'd just mention, it's a technicality, but I think it matters, is that this year, we're comparing to last year, which was a leap year. And so, when we say 2% RevPAR growth, it's really (45:24) 1.7% revenue growth. And so, to end up with flat margins that means that the high-end of our guidance, we're only expecting 1.7% total expense growth. I think if you look at the midpoint of our guidance with RevPAR growth of 1%, we're only predicting total expense growth to be 1.25%.

So again, I think it's going to be a great year with keeping costs growth low, but maybe not quite as great as last year. Stephen Grambling - Goldman Sachs & Co.: That's helpful. And then if I could sneak one other follow-up in, maybe I missed this. But maybe if you could provide bit more color on the ROI initiatives that you anticipate at the Don?
James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah.

We have a number of identified ROIs that we haven't underwritten, Stephen. And we don't have hard numbers around them right now. I can generally give you a sense of what we're looking at. As an example, we think that there's an ROI if we were to reposition the food and beverage operations. Likewise in the retail space, we think there's an ROI there.

We have a parking lot at the Don that may very well have a higher and better use than as a block surface parking lot. We've been able to do that in other instances on the acquisition front that we've done over the years. So those are some of the broad things that we're looking at right now. Gregory J. Larson - Host Hotels & Resorts, Inc.: Yeah.

I think I would add, and Jim mentioned that earlier today, obviously, we have some of these ROI projects that Jim just mentioned. But also, I think, because we're bringing in Davidson and because our analytics team has looked at this hotel, I think, even without those ROI projects, I think we've identified $3 million, $4 million, up to $5 million of cost savings. James F. Risoleo - Host Hotels & Resorts, Inc.: Yeah. Stephen Grambling - Goldman Sachs & Co.: That's great.

Thanks so much. Best of luck. James F. Risoleo - Host Hotels & Resorts, Inc.: Thanks.

Operator: And our next question comes from Robin Farley with UBS.

Robin M. Farley - UBS

Securities LLC: Great. Yeah. Just to get a little more color around – it sounds like you are shifting more to being acquirer of assets rather than a seller. Are you leading towards more of single assets you mentioned, some example of single asset acquisitions outside the top 10 to 12 markets or more portfolio, or actually even potentially a smaller cap REIT overall, I guess, just to think about how you think about those different options?
James F.

Risoleo - Host Hotels & Resorts, Inc.: I think we think about all the options in the same way, Robin. If the transactions are accretive to shareholder value, if they're going to drive growth, profit and value for our shareholders, we will opportunistically pursue them. So it's difficult to really go beyond that at this point in time. I think we're very open-minded, and we are going to evaluate the opportunities as we see them and as they are presented to us. Robin M.

Farley - UBS

Securities LLC: So yesterday, there was a little bit of activity from others in the market, and if we think about a REIT that might interest you, maybe before your comments today about looking outside of the top 10 to 12 markets that you're already in, we might have thought there are certain REITs that you wouldn't be interested in. But could it be of interest to you now a REIT that is in maybe some more of those secondary markets than what you've typically looked at?
James F. Risoleo - Host Hotels & Resorts, Inc.: I think it's premature for me to speculate on anything along those lines at this point in time. Robin M. Farley - UBS

Securities LLC: Okay, all righty.

Thank you very much. Gregory J. Larson - Host Hotels & Resorts, Inc.: Thanks. James F. Risoleo - Host Hotels & Resorts, Inc.: Thank you.

Operator: Our next question comes from Rich Hightower from Evercore. Richard Allen Hightower - Evercore

Group LLC: Hi. Good morning, guys. And... Gregory J.

Larson - Host Hotels & Resorts, Inc.: Morning. James F. Risoleo - Host Hotels & Resorts, Inc.: Morning, Rich. Richard Allen Hightower - Evercore

Group LLC: ...sort of along similar line of questioning here. Just with respect to maybe the change in investment strategy and focus, so let's assume that hurdle rates and the spread versus your cost of capital haven't changed over time, can you give us a sense, maybe an example, a post-mortem of sorts of yields that you had looked at in the past, but maybe weren't as attractive under the old regime or the old paradigm that you think maybe would be a good fit under the new paradigm, for instance?
James F.

Risoleo - Host Hotels & Resorts, Inc.: Yeah, Rich, that's a good question. And I just want to reiterate that we have a fantastic company here. We have a truly iconic portfolio of hotels, well diversified across the United States. We have scale and flexibility, which gives us the ability to buy larger complex deals. We have unparalleled information and insight based on the portfolio that we have in the proprietary systems we put in place.

And we have a strong balance sheet, which we intend to exploit going forward within reason. We're not talking about going beyond our investment grade category. I'm looking to the future and that's where I'm focused right now. Gregory J. Larson - Host Hotels & Resorts, Inc.: Yeah.

I think that's right. And obviously, as we mentioned today, and as Jim has already mentioned, right, that Don is a great example of an asset that's outside of the top 10, 12 markets, the Phoenician was too. In fact, both of those hotels are resorts and as you know, Rich, the nice thing about resorts when you look at supply growth over the next three years, supply growth in the resort segment is half a percent or less. So obviously, sort of very compelling to us. Richard Allen Hightower - Evercore

Group LLC: Okay.

Fair enough. Thanks, guys.

Operator: Our next question comes from Thomas Allen with Morgan Stanley. Thomas G. Allen - Morgan Stanley & Co.

LLC: Hi. Yeah. Just two questions on RevPAR. First, just a clarification, you said that January RevPAR growth was very strong. Can you actually quantify it? And then second, just on the fourth quarter transient result, you said there have been some transient weakness, was that just a result of group replacing it, or – so higher-quality business replacing it or was that some corporate demand weakness as well? Thanks.

Gregory J. Larson - Host Hotels & Resorts, Inc.: Hey, Thomas. This is Greg. So obviously, we had a fantastic January for a number of reasons, but primarily because one of our largest markets for us is D.C., and D.C. had really a spectacular January.

And so for us, our January RevPAR was north of 7%. So a great way to start off the year. I mean, that certainly beat our internal expectations and it certainly beat our managers' expectations for our portfolio. So that is a great way to start out the year. I think, when we were talking about some of that weakness in transient, I think what we were talking about, you've seen it – we witnessed this all of last year is, all of the companies including Host, we're really in a sort of record occupancy levels, we know leisure business has been very strong on the transient side, group business has been very strong, but the one customer that has been a little bit weaker is the corporate, the corporate transient customer.

And so, we saw some of that weakness in October, certainly, in fact, in October of last year, we actually missed our forecast because of that. I think the good news from our perspective is after the election, both November and December were very strong for us, primarily, because the group business and some of that group business, as you mentioned, probably did display some of the transient customer, but both of those months were strong. And as Jim mentioned in his comments and as I just mentioned, January was much better than our original forecast as well. Thomas G. Allen - Morgan Stanley & Co.

LLC: Helpful. Gregory J. Larson - Host Hotels & Resorts, Inc.: The other thing that's been interesting for us is just the bookings and we've talked about that a little bit. But again, when we looked at the bookings in November for 2017, they were very strong. Unfortunately, in December, when we looked at group bookings for 2017, they were weaker.

So that was sort of the inconsistency that we were talking about in the comment. But again, if you fast forward to January, the bookings, the group bookings in January for 2017 were extremely strong. And that's one of the reasons why our group revenues started the year up just over 2%. As we sit here today, our group revenues on our books are up closer to 3%. Thomas G.

Allen - Morgan Stanley & Co. LLC: Very helpful. Thank you. Gregory J. Larson - Host Hotels & Resorts, Inc.: Thanks.

Operator: Our next question comes from Wes Golladay with RBC Capital Markets. Wes Golladay - RBC Capital

Markets LLC: Yeah, good morning, everyone. Gregory J. Larson - Host Hotels & Resorts, Inc.: Good morning. Wes Golladay - RBC Capital

Markets LLC: Sticking with that corporate travel, what level of demand do you need to see from that customer in order to get that up-mix at the hotel?
Gregory J.

Larson - Host Hotels & Resorts, Inc.: What's interesting about it, as I mentioned, right, our group business has been good, the leisure segment of transient has been strong. Obviously, in 2016, the weak segment is this corporate business traveler that we're talking about. But what's happened is, if you look at the average rate for that traveler, our highest rated customer and compare that to special corporate discount, there is a big rate delta there, right, between our highest rated customer and special corporate, it's about a $60 delta between our highest rated customer and our discounted segment, it's about – it's approximately a $100 discount. And so, what happened in 2016 is, even though it was very easy for Host and other lodging companies to replace that customer with other forms of business, whether it was government business, contract business, or group business, there was sort of a negative mix shift that was occurring while we were replacing our highest rated customer with the lower rated customer, and so that put pressure on rates. I think what – not to get too optimistic about 2017, but what's interesting is, if we can get that customer back in 2017 and if we can have this, a positive mix shift, I think that could be a pretty, powerful thing for 2017.

Wes Golladay - RBC Capital

Markets LLC: So maybe if that customer grows faster than the supply growth around 3%, should be able to get that mix?
Gregory J. Larson - Host Hotels & Resorts, Inc.: Yeah. No. I think, look at, we already have strong occupancy. So I think if we can get customer back, I think even with the supply growth in 2017, that would look really good.

Wes Golladay - RBC Capital

Markets LLC: Okay. Thanks a lot. Gregory J. Larson - Host Hotels & Resorts, Inc.: And one other thing. Look, we're speculating on that today.

It's hard to know if that customer is coming back. I do think there are a couple of metrics that we always look at that that again if they come true for 2017 will be useful for us, right. One thing we always look at is business investment and if you look at the business investment stat for 2017 compared to 2016, they are up about 350 basis points on a year-over-year basis. Same thing for corporate profits, right, corporate profits declined in 2016 and they are expected to be up over 5% in 2017. So again, on a relative basis, that could be meaningful for 2017.

James F. Risoleo - Host Hotels & Resorts, Inc.: I think the way I would describe it is cautious optimism at this point. The forecasts are looking great, but we haven't seen it borne (57:04) on the numbers just yet. Wes Golladay - RBC Capital

Markets LLC: Okay. And that's something you wait to bake in the guidance at a later point if it does occur.

Did you kind of bake in in the status quo right now?
Gregory J. Larson - Host Hotels & Resorts, Inc.: Yeah. Correct. James F. Risoleo - Host Hotels & Resorts, Inc.: Correct.

Wes Golladay - RBC Capital

Markets LLC: Right. Thank you.

Operator: Our next question is from Chris Woronka with Deutsche Bank. Chris J. Woronka - Deutsche Bank Securities, Inc.: Hey.

Good morning, guys. James F. Risoleo - Host Hotels & Resorts, Inc.: Good morning, Chris. Chris J. Woronka - Deutsche Bank Securities, Inc.: Greg, I guess a question for you.

I want to dig in a little bit on the non-comparable hotels, is that, I think you did a $150 million of EBTIDA in 2016 which is ahead of your initial guidance. I think you're saying, $148 million to $154 million this year. But is there – is that – I guess, how much surprise does there tend to be in the year on those non-comparable hotel results?
Gregory J. Larson - Host Hotels & Resorts, Inc.: So the non-comp – you are referring to, when I mentioned that our non-comp hotels, we're expecting the EBITDA to increase by $22 million in 2017, is that what you are referring to?
Chris J. Woronka - Deutsche Bank Securities, Inc.: Right, right.

Gregory J. Larson - Host Hotels & Resorts, Inc.: Yeah. So, I think that – I think those just like any forecast, sometimes, you can beat it, sometimes, you miss it by a touch, but I think those are good forecasts. I think what's interesting about it, if you look at some of the hotels in the non-comps that, for instance, Denver Tech, and the Hyatt in San Francisco, is both of those hotels are in, what I would consider, sort of weaker markets for us this year. But because there was so much disruption last year, I think both of those hotels, Denver Tech looks fantastic, and sort of the San Francisco Hyatt, I think both of those hotels should have very strong EBITDA growth in 2017.

And then, the other hotel that we're benefiting from in the non-comp set is our San Diego Marriott. The meeting space there looks outstanding, groups love the meeting space. They are booking that hotel in a very aggressive manner right now. And so, when I think about those – the hotels in the non-comp set, I think I feel very confident with that $22 million. Chris J.

Woronka - Deutsche Bank Securities, Inc.: Okay, that's great. And just follow up on the prior, I guess, question about group and tie – tie and group – try to tie the group and transient conversation up. Do you think – do you have enough capacity kind of left in 2017 in terms of – I know there was talk last year of grouping up a little bit. I mean, do you think you have enough space left during peak periods of 2017 or is some of that already consumed by group?
Gregory J. Larson - Host Hotels & Resorts, Inc.: I mean, look, some of it is consumed, right.

I mean, as Jim mentioned, if we look at our group business today for 2017, I mean, we have over 75% of that booked today, but I still think it can be important going forward that the bookings in the year, for the year are strong. I mean, if you look back to our comments about January, right, in one month, we improved our group revenue pace for the full year from up 2%, up 3%. So those group bookings in the quarter sort of in the year, for the year are still important. James F. Risoleo - Host Hotels & Resorts, Inc.: The other thing I would add, Chris, is, while group is strong, we're hopeful that as the special corporate customer comes back, that we can see positive rate shift as opposed to negative, like we saw last year.

Chris J. Woronka - Deutsche Bank Securities, Inc.: Sure. Understood, very good. Thanks, guys. James F.

Risoleo - Host Hotels & Resorts, Inc.: Thanks.

Operator: Our next question comes from Michael Bellisario with Baird. Michael J. Bellisario - Robert W. Baird & Co., Inc.: Good morning, guys.

Just one quick housekeeping question. The $22 million in uplift from the non-comp hotels, is that apples and oranges with what was in the non-comp set in 2016 versus what will be in the non-comp set in 2017, because the $150 million going to $148 million to $154 million doesn't add up?
Gregory J. Larson - Host Hotels & Resorts, Inc.: Yeah, our non-comp set that – two of our hotels that we performed work on in 2015, The Logan and The Camby, are now in our comp set, right. And so, when I think about the non-comp growth of $22 million, it excludes Logan and Camby. However, when I think about those two hotels as we mentioned last year, they're still ramping up, right.

So those two hotels combined are going to produce RevPAR growth of close to $8 million and in EBITDA. Michael J. Bellisario - Robert W. Baird & Co., Inc.: Your customer, especially at resorts, have you seen any change in demand or booking patterns from this customer, given the high levels of consumer confidence, then also maybe due to the brands' initiatives to book direct and book more prepaid rates earlier?
Gregory J. Larson - Host Hotels & Resorts, Inc.: I think you broke out.

We didn't hear the beginning of that question, sorry. Michael J. Bellisario - Robert W. Baird & Co., Inc.: On the leisure customer, have you seen any change in demand or booking patterns given the high levels of consumer confidence today? And then any impact from the brands' booking initiatives trying to get customers to book sooner and maybe some prepaid rates earlier?
Gregory J. Larson - Host Hotels & Resorts, Inc.: We haven't – as Jim mentioned, we really – we have some reasons to be cautiously optimistic for 2017.

But we really – leisure was obviously a strong segment in 2016, so far it's been strong in 2017, but we haven't seen a material increase in that at this point. Michael J. Bellisario - Robert W. Baird & Co., Inc.: And then just lastly circling back to scale and your comments about leveraging the platform, but you said G&A to come down as a percentage of assets, as you potentially acquire more or is there an opportunity to scale that number down ahead of any potential growth opportunities?
James F. Risoleo - Host Hotels & Resorts, Inc.: Michael, I think that we're just a little early in the year to address G&A.

I will tell you that we're focused on how we can take what is a terrific organization and make it better and make it more nimble and more efficient. We've already undertaken a few steps early in the year by – the most prominent one to allow us to become more nimble and more efficient is to form the enterprise analytics group where we moved business intelligence, feasibility, CapEx and our corporate financial model under one individual, who is now reporting to Greg. And as we think about the organization going forward, as I have an opportunity to talk to our various stakeholders, we will just have to wait and see how the year turns out. Gregory J. Larson - Host Hotels & Resorts, Inc.: I agree with that and I also agree with the concept that as we buy hotels, the G&A as a percentage of our hotels and revenues will go lower.

I mean, obviously, if you think about the acquisition of the Don, or this unidentified asset that Jim just mentioned, I mean, obviously, we're not going to have to hire anybody else based on those two acquisitions. James F. Risoleo - Host Hotels & Resorts, Inc.: That's correct, absolutely. Michael J. Bellisario - Robert W.

Baird & Co., Inc.: Makes sense. Thanks for the comments. James F. Risoleo - Host Hotels & Resorts, Inc.: Sure. Gregory J.

Larson - Host Hotels & Resorts, Inc.: Thanks. Operation: That concludes today's question-and-answer session. Mr. Jim Risoleo, at this time, I will turn the conference back to you for any additional or closing remarks. James F.

Risoleo - Host Hotels & Resorts, Inc.: Thank you very much. Thank you for joining us on the call today. We look forward to talking with you in the spring to discuss our first quarter results and provide you with more insight into how 2017 is playing out. Have a great day.

Operator: This concludes today's call.

Thank you for your participation. You may now disconnect.