Analyst predicts opportunities for Host Hotels

Shares of Host Hotels & Resorts Inc. wavered on Tuesday after an analyst predicted that the hotel owner is building a war chest for potential distressed acquisitions despite the likelihood of steep second-quarter revenue declines.

Deutsche Bank analyst Chris Woronka expects the hotel real estate investment trust to report a 22.7 percent drop in revenue per available room in the second quarter. Revenue per available room, or revpar, is a key gauge of a hotelier's performance because it measures both hotel occupancy and average room rate.

Woronka said that cost cuts are likely to beat expectations but that cost savings opportunities will become more difficult in the second half of the year. Despite the gloomy forecast, he noted that the hotel is likely to look for opportunities to buy properties at distressed prices.

"In our view, (Host) will be increasingly well positioned to take advantage of distressed one-off situations, but believe (management) will be patient and highly selective in deploying capital," Woronka wrote. "The best potential buying opportunities are probably at least 9 to 12 months away, so we expect (Host) to continue to build dry powder ahead of that."

For 2010, the analyst now expects a roughly 1 percent revpar decline, as room rates remain under pressure. For 2011, he expects a "modest recovery," with a 2.5 percent revpar increase.

Woronka raised his price target for the stock to $8 from $7, but maintained its "Hold" rating.

Bethesda, Md.-based Host is scheduled to report its second-quarter results on July 22.

Host shares gained 13 cents to $8.35 in late morning trading, after slipping as much as 2 percent earlier in the session. The stock has traded between $3.08 and $17.75 during the past 52 weeks.