James Risoleo
President, Chief Executive Officer & Director at Host Hotels & Resorts
Thank you, Jaime, and thanks to everyone for joining us this morning. Despite the Delta variant, we continued to significantly outperform expectations and meaningfully beat consensus metrics during the third quarter. We delivered adjusted EBITDAre of $177 million, which exceeded our interest and capital expenditures by $21 million and adjusted FFO per share of $0.20 during the quarter. In addition to delivering positive metrics each quarter this year, these metrics continue to see meaningful sequential increases over the prior quarter. Pro forma total revenues in the third quarter increased 25% sequentially over the second quarter, while pro forma hotel level operating expenses grew only 21%.
The increase in revenues was driven by strong leisure demand at resorts and hotels in Sunbelt markets and Hawaii, which led to a $67 million increase in adjusted EBITDAre in the third quarter compared to the second quarter. RevPAR for the third quarter was strong, as volume improvements extended across the portfolio and rates held up in Sunbelt markets. While we saw softer demand in September due to Delta variant concerns, RevPAR for the quarter still improved by 26% compared to the second quarter. Our hotels saw a 49% increase in business transient room nights and a 72% increase in group volume over the second quarter. Our recent acquisitions, all contributed to the outperformance during the third quarter and are exceeding our underwriting expectations. Preliminary October RevPAR is expected to be approximately $143, a $15 increase over September and the highest RevPAR we have seen this year.
We believe RevPAR will dip slightly in November due to seasonality before coming back in December. While much of the recovery was concentrated at resorts in Sunbelt markets during the first half of the year, our urban markets saw significant RevPAR improvements during the third quarter. At the start of the quarter, our urban and downtown markets had a weekly occupancy of 50%. And by the end of the quarter, these markets were running at nearly 56% occupancy. Quarter-over-quarter RevPAR in our urban and downtown markets grew by 89% to almost $96 driven by both ADR and occupancy improvements. In addition to the sequential improvements in operations, we continue to execute on our three strategic objectives, all of which are aimed at elevating the EBITDA growth profile of our portfolio.
Our objectives include redefining the hotel operating model, gaining market share at renovated hotels and strategically allocating capital. As it relates to the last strategic objective, we made another off-market acquisition during the third quarter, Alila Ventana Big Sur in California. This brings our 2021 year-to-date acquisitions total to $1.2 billion at a blended 13.1 times EBITDA multiple. This is a continuation of our strategy to deploy capital into assets that will elevate the EBITDA growth profile of our portfolio. On the dispositions front, subsequent to quarter end, we sold five hotels totaling 2,323 keys for $551 million, including FF&E reserves at a 14.2 times EBITDA multiple, including forgone capex based on 2019 results.
Following this acquisition and our recent dispositions, which I will discuss in a moment, we have $1.7 billion of total available liquidity, including $138 million of FF&E reserves. As a reminder, we have completed five off-market hotel acquisitions this year, including the Hyatt Regency Austin, the Four Seasons Orlando at Walt Disney World, Baker's Cay Resort in Key Largo, the Laura Hotel, which was formerly known as the Hotel Alessandra in Houston and Alila Ventana Big Sur. We also acquired the Royal Ka'anapali and Ka'anapali Kai Golf Courses in Maui. All our recent acquisitions are performing substantially ahead of our underwriting expectations. As of September, the updated 2021 forecasted EBITDA at the Hyatt Regency Austin is $3.4 million higher than the full year 2021 EBITDA that was estimated in underwriting.
The Four Seasons Resort, Orlando is $17.4 million higher. Baker's Cay Resort is $2.9 million higher and the golf courses are $3 million higher. In addition, we acquired the former Hotel Alessandra, a luxury downtown hotel in Houston's Central Business District. At the time of acquisition, the hotel was closed and fully unencumbered by brand and management. The property has been rebranded as The Laura Hotel and it will be operated by HEI Hotels & Resorts as part of the Autograph Collection by Marriott. We have identified a number of opportunities that we believe will increase the EBITDA growth profile of this hotel, including affiliating the property with a major brand reservation system, expanding the F&B outdoor seating capacity, activating the rooftop pool experience and leasing the ground for retail. The hotel is expected to open in the fourth quarter of 2021.
Turning to our most recent transaction. In September, we closed on the off-market acquisition of Alila Ventana Big Sur for $150 million. This ultra-luxury resort is one of the most uniquely located hotels in the United States and benefits from extremely limited supply and high barriers to entry due to strict land-use regulations by the California Coastal Commission. We purchased the property at a 9.3 times EBITDA multiple on 2021 forecast. The RevPAR is expected to be $1,320. the TRevPAR is $1,870, and the EBITDA per key is $273,000 based on 2021 forecast. The performance ranks first in our 2019 pro forma portfolio on RevPAR, TrevPAR and EBITDA per key by a very wide margin.
Alila Ventana Big Sur is located on 160 acres of irreplaceable fee, simple land on the California coast. It benefits from use of both the ocean and the redwood forest and is a drive-to destination for some of the country's most affluent areas. The hotel has 59 keys consisting of both rooms and suites and is operated under an all-inclusive model. It offers a luxury spa, three pools, a high-end fitness center, 12,000 square feet of event space and two restaurants with locally sourced foods and a variety of private dining experience.
In addition, the hotel has a number of unique outdoor amenities, including 63 camp sites with 15 luxury tubs, located within the Big Sur Redwoods, as well as numerous tailored experiences and adventures. I cannot emphasize enough the unique nature of this asset, and we are delighted to add it to our portfolio as the 12th Hyatt branded property, continuing our position as the largest third-party owner of Hyatt Hotels. The hotel is Hyatt managed under the Alila brand and since Hyatt's acquisition of Two Roads Hospitality in 2018, the properties has enjoyed increasing market share and a record year of profitability in 2021. The hotel significantly benefits from its Hyatt affiliation and World of Hyatt redemption bookings, which contributed a substantial amount of total room nights sold in 2020 and 2021.
This demonstrates the growing desire for high-end leisure experiences among World of Hyatt loyalty members. In conjunction with the operator, we have identified additional opportunities to grow EBITDA at the property and we have conservatively modeled this asset to stabilize between eight and 10 times EBITDA in the 2025 to 2027 timeframe. The hotel recently completed a $23 million renovation and repositioning, investing $390,000 per key in the guest rooms, public spaces, pools, camping facilities and back-of-house areas. We are excited to have an ownership presence in Big Sur, and we believe the iconic and irreplaceable nature of Alila Ventana Big Sur will further strengthen the EBITDA growth profile of our portfolio.
As I mentioned, we disposed the five hotels totaling 2,323 keys for $551 million, which includes $11 million of FF&E reserves subsequent to quarter end. We sold the hotels at a 14.2 times EBITDA multiple including foregone capex based on 2019 results. These five assets were sold as a portfolio and included the Westfields Marriott, Washington Dulles, the Westin Buckhead, Atlanta the Whitley, the San Ramon Marriott and the Westin LAX, both on ground leases. The avoided capital expenditures associated with these five properties is approximately $122 million over the next five years. We are pleased to have this capital to further bolster our EBITDA growth profile, as we deploy it into high-growth assets in our existing portfolio or into new acquisitions.
In total, we have invested $1.2 billion in early cycle acquisitions year-to-date. The blended EBITDA multiple on our five hotel acquisitions this year now stands at 13 times, which compares favorably to the $551 million we disposed of at a 14.2 times EBITDA multiple.
Between 2018 and 2021, we acquired $2.8 billion of assets at a 14 times EBITDA multiple and disposed of $4 billion of assets at a 17 times EBITDA multiple, including foregone capex. Since 2017, we have dramatically improved the quality of our portfolio increasing the RevPAR of our assets by 10%, the EBITDA per key by 20%, and the EBITDA margins by 110 basis points based on 2019 pro forma results.
As we evaluate capital allocation opportunities going forward, we will continue to focus our efforts on assets with higher expected growth with the objective of elevating our EBITDA growth profile. Moving on to third quarter operations. We saw significant improvements in transient room nights, which were up 18.5% compared to the second quarter. Our hotels in urban and downtown markets saw strong improvements in transient demand compared to last quarter, as municipalities relaxed COVID restrictions. Occupancy in these markets increased by 17.4 percentage points to approximately 50% in the third quarter along 24% ADR growth. In our Sunbelt and Hawaii markets, transient rates remained resilient, up 26% in the third quarter compared to 2019 despite a modest softening of transient demand over the prior quarter due to seasonality.
Our hotels saw continued strength in leisure demand during the quarter. Encouragingly, we saw a solid pickup in leisure demand in our urban and downtown hotels. For comparison, over Columbus Day weekend, our urban and downtown hotels achieved approximately 70% occupancy with an ADR of $231 versus 55% occupancy with an ADR of $180 over the July four holiday. Special events such as the Boston and Chicago Marathons and the return of Broadway shows in New York helped to drive this demand. Weekend occupancy at our entire portfolio reached 75% in early October with an ADR of $259 compared to a historical level of 87% and $259 in 2019.
Resort revenue increased $43 million over 2019 driven by 39% ADR growth with rates in most of our resorts seeing double-digit percentage increases. We expect strong demand at our resorts to continue through year-end, particularly at our Hawaii hotels after the recent news that the state welcomed nonessential travel back on November 1. Sourav will get into more detail on our business mix during the third quarter shortly. In addition to our successful capital allocation efforts this year, we remain focused on our three strategic objectives. As a reminder, we are targeting a potential $240 million to $315 million of incremental EBITDA over time on a stabilized annual basis as we execute the initiatives and projects underlying our strategic objectives.
This range includes hotel EBITDA of approximately $93 million from our acquisitions year-to-date. First, we expect to generate $100 million to $150 million of potential long-term cost savings over time based on 2019 revenues from redefining our operating model with our managers. We have taken steps toward 50% to 60% of these savings to date. Second, we expect to generate $21 million to $35 million of incremental EBITDA over time on a stabilized annual basis from our goal of gaining three to five points of weighted index growth at the 16 Marriott transformational capital program hotels and five other hotels, where major renovations have been recently completed or are underway. Keep in mind that our expectation of a three- to five-point gain in market share was a pre-pandemic estimate. As we have been in a unique position of deploying significantly greater capital in 2020 and 2021 than our competitors, we are optimistic that our market share gains could be greater as the property competitive set is either an inferior product due to lack of renovation or there will be meaningful business disruption as hotels are renovated.
We expect to complete approximately 85% of the Marriott's transformational capital program by year-end and substantially complete the program by the end of 2022. We expect to invest $1.2 billion in these 21 assets or approximately $73,000 per key. As of the third quarter, we have invested $834 million in renovations at these hotels, and we do not expect to spend significant capital on these assets in future years. During the third quarter, we completed renovations at the New York Marriott Marquis, which included a complete upgrade of the guestrooms, renovations of over 140,000 square feet of meeting space, the expansion of the skybridge line with two high-definition LED screens and a reimagined lobby with new bars and upgraded restaurants.
Subsequent to quarter end, we completed transformational renovations at the Orlando World Center Marriott in Florida, which included the guest rooms and an updated lobby, restaurant and bar. These multiyear comprehensive renovations at the two largest hotels in our portfolio were part of the Marriott transformational capital program and bring the total number of completed projects in this program to 10 of 16 properties. We avoided significant business disruption by completing these projects during the pandemic. And as a result, they are very well positioned to capture market share in the recovery. In addition to the Marriott transformational capital program assets, we recently completed the extensive guestroom renovations at the Hyatt Regency Coconut Point in Florida.
Lastly, we expect to generate $25 million to $35 million of incremental EBITDA over time on a stabilized annual basis from recently completed and ongoing ROI development projects. These projects are at different stages of renovation and development, and stabilization is expected to occur two to three years after completion. Some recent examples of our ROI development projects include the Andaz Maui villas, which are targeting 49% occupancy with an ADR over $1,600 through 2021 versus our underwriting at 34% occupancy with an ADR of $1,400. And the one Hotel Beach Club enhancements, which have led to over $2.5 million in incremental revenues with returns exceeding the underwriting.
To conclude my remarks, we continue to be very encouraged by the operational recovery we are seeing across the lodging industry. As we move further into the recovery, our capital allocation efforts over the past few years, the improved quality of our assets and the elevated EBITDA growth profile of our portfolio should accrue to the benefit of our stockholders. These factors, combined with our strong balance sheet, geographic diversity and size, scale and reputation leave us very well positioned to capitalize on accelerating demand. With that, I will now turn the call over to Sourav.