Some of the most desirable travel destinations are also the most at risk for climate disasters, and hotel owners — such as Host Hotels & Resorts — have to be strategic about how they manage both their portfolios and the increasing amount of climate risk.
Michael Chang, head of sustainability and resilience at Host Hotels & Resorts, said Host is constantly evaluating its assets with comprehensive climate risk screenings and assessments using both internal and third-party data.
"Owning these hotels in highly desirable but climate vulnerable destinations really requires a sophisticated and nuanced approach to risk management," he said on a recent episode of the CoStar News Hotels podcast. "At Host, we don't view these locations as liabilities, but as strategic assets, requiring diligent forward-looking stewardship."
When it comes to risk management, Chang said Host prioritizes diversification, structuring the portfolio so that no more than about 10% of the company's earnings before interest, tax, depreciation and amortization comes from one market. Since 2016, Chang said the company has invested $300 million in projects — about 6% of capital expenditure a year — that increase resilience, such as hurricane-rated doors and windows, facade enhancements and relocating critical infrastructure.
And it's paying off, Chang said. In 2022, Host experienced its largest hurricane-related insurance claim when Hurricane Ian hit the Ritz-Carlton Naples.
"The hotel property closed for nine months for extensive rehabilitation, including floodproofing, dry floodproofing, elevating mechanical systems and installing modular flood panels," Chang said. "Because of these investments, when [hurricanes] Milton and Helene came, which brought similar storm surges and similar impacts, it caused minimal damage to hotel property. Flood waters only penetrated roughly maybe 2 to 4 inches inside, and there were no insurance claims filed due to the damage because it was below our deductibles."
When the two 2024 hurricanes hit, Ritz-Carlton Naples was able to reopen in just nine days. Chang said Host is able to directly compare this elevated resiliency to nearby properties that didn't make the extensive renovations that they did.
"We invested a lot into making the property more resilient. I won't name the resort, but there was a resort nearby who built back and didn't include those resilience investments," he said. "When Helene and Milton came around, that hotel property was severely impacted again in the same way, while we were able to quickly reopen. So, it's really critical to have resilience planning."
Hurricanes Milton and Helene did wreck havoc on another one of Host's properties — The Don CeSar in St. Pete Beach, Florida. Chang said Host implemented similar resilience renovations in the six months it was closed while also facing various obstacles of renovating a historic, 100-year-old property.
For the rest of CoStar News Hotels' conversation with Host's Michael Chang, listen to the podcast above.