Unprecedented Wildfires Ravage Maui

by Warren Seah

The devastating wildfires in Maui have left a trail of destruction in their wake, claiming the lives of at least 55 individuals. As the fires continue to rage across the island, popular tourist areas like Lahaina have been decimated. The historic town, which suffered the loss of over a thousand buildings, may take years to rebuild.

It will undoubtedly take time to fully comprehend the extent of the human and environmental toll caused by this disaster. However, one thing is certain—the tourism industry, which forms the backbone of Maui’s economy, is bound to face significant disruptions. Currently, Hawaii’s state government restricts travel to Maui to essential purposes only. Even after these restrictions are lifted, potential visitors may remain hesitant to visit both the island and the entire state due to the recent fires.

Ari Klein, an analyst at BMO Capital Markets, highlights that it will take time to determine the financial impact of this catastrophe. However, he examines lodging real estate investment trust (REIT) companies that operate in Hawaii.

Host Hotels & Resorts (ticker: HST) stands as one such company with four hotels in the state, three of which are in Maui. With Maui accounting for more than 90% of its largest individual market’s earnings before interest, taxes, depreciation, and amortization (EBITDA), the company faces significant implications. In 2022, Host Hotels & Resorts generated $170.5 million or 11% of EBITDA from Hawaii alone.

Klein notes that Host Hotels & Resorts’ Hyatt Regency in hard-hit Lahaina garnered an impressive $82.7 million in EBITDA last year—the second-highest among all hotels in their portfolio. The hotel’s website currently states that it is closed to new guests until at least August 17. Additionally, they have implemented emergency preparedness procedures in a bid to ensure the safety of guests and staff.

Regarding the company’s other properties in Maui, Klein mentions that The Fairmont Kea Lani and Andaz Maui at Wailea Resort, which respectively generated $39 million and $36.5 million in EBITDA last year, remain open. However, he anticipates significant disruptions in the near term due to visitor restrictions and airline cancellations.

Host Hotels & Resorts Reacts to Broader Market Decline

Host Hotels & Resorts, a leading hospitality company, experienced a 1.8% decrease in stock value, trading at $16.36 during the recent check. This decline in performance aligns with the broader market, as both the S&P 500 and Nasdaq Composite witnessed a decrease of less than 1% in afternoon trading. Despite the current market conditions, analyst Klein maintains an optimistic outlook for Host Hotels & Resorts, maintaining an Outperform rating and setting a price target of $21 for the shares.

Park Hotels & Resorts’ Limited Exposure to Maui Wildfires

Park Hotels & Resorts (PK), a prominent player in the hospitality industry, derives more than a quarter of its Ebitda (earnings before interest, taxes, depreciation, and amortization) from Hawaii. However, the company does not have any exposure to Maui, where wildfires have been a concern. Notably, Park Hotels & Resorts’ Hilton Waikoloa Village, situated on the Big Island, generated $54 million in Ebitda in 2022. Fortunately, the impact of the wildfires on the Big Island is relatively minimal compared to Maui. The company has reported no cancellations or major disruptions thus far. Analyst Klein maintains a Market Perform rating for Park Hotels’ shares and a price target of $15. Despite this positive outlook, Park Hotels’ shares experienced a 2.9% decline to $12.99 on Friday.

Sunstone Hotel Investors and Their Involvement in Maui

Sunstone Hotel Investors (SHO) owns and operates Maui’s prestigious Wailea Beach Resort. Although Klein does not cover this particular company, he highlights that the resort contributed $66 million in Ebitda last year, accounting for 18% of Sunstone Hotel Investors’ total earnings. As of the recent check, Sunstone Hotel Investors’ shares dropped by 1.8%, trading at $9.09.

Other Hawaii-Related Stocks Facing Market Pressure

Apart from the aforementioned companies, several other Hawaii-related stocks experienced price declines in anticipation of market challenges. Hawaiian Holdings (HA), the parent company of Hawaiian Airlines, and the Maui Land & Pineapple Company (MLP) both witnessed decreases of over 3%. Hawaiian Electric Industries (HE), the owner of Maui Electric Company, maintained stability in its share value but faced a significant decrease of nearly 12% throughout the week.

Uncertainties Surrounding the Impact of Wildfires

The full extent of the wildfires’ cost and impact on Hawaii’s economy will not be immediately clear. The key concern for companies on the island, as well as the broader economy, is the potential duration of reduced tourist activities caused by the wildfires.

You may also like

Leave a Comment