UPDATE 4-Host Hotels beats Street, but cuts forecast

* Adjusted FFO of 26 cents vs. 24 cents consensus

* Sees 2009 per share FFO of 43 cents to 50 cents

* Shares fall about 3 percent (Recasts; adds CEO comments from conference call, information on hotel acquisitions, byline)

By Deepa Seetharaman

NEW YORK, July 22 (Reuters) - Host Hotels & Resorts Inc (HST.N), owner of luxury and upscale hotels, reported a better- than-expected result on Wednesday, but cut its 2009 forecast as room rates and business demand dropped sharply.

Host expects funds from operations (FFO) of 43 cents to 50 cents per share in 2009, down from the earlier range of between 68 cents and 76 cents a share.

The Bethesda, Maryland-based company anticipates full-year revenue per available room (RevPAR) to fall between 20 percent and 23 percent.

"Our visibility is limited, especially given the weakness in average rate and the extremely short booking cycle," Chief Executive Edward Walter said on a conference call with analysts.

He added the weakness in rate was likely to persist until the economy recovers, although there were some bright spots during the second quarter that suggested stabilization, including fewer group cancellations.

Corporate and group bookings have been weak this year amid the economic recession and rising unemployment. To compensate for lost business demand, hotels have had to cut costs and rates to lure vacationers, who tend to demand lower prices.

The average daily rate during the quarter fell 14.6 percent. The company also lowered its common dividend to about 23 cents to 25 cents per share, largely due to a recent stock sale.

Host shares dropped 2.3 percent, or 19 cents, to $8.17 on the New York Stock Exchange in afternoon trading.

FUTURE HOTEL ACQUISITIONS POSSIBLE

Host, which owns hotels run by Marriott International Inc (MAR.N) and Starwood Hotels & Resorts Inc (HOT.N), said it would consider buying hotels over the next two years. Its strategy would likely be buying larger hotels and selling small ones.

Host's brand profile could also expand and Walter expressed interest in acquiring assets from private hotelier Hilton Hotels Corp and InterContinental Hotels Group Plc (IHG.N) (IHG.L).

"The time to be a buyer is going to be when operations are weak and when supply is declining," Walter said, adding the company would not be "super-aggressive" in its acquisitions.

In the second quarter, Host sold two hotels run by Marriott and one run by Starwood for a total of $64 million.

The company recorded a $57 million writedown for two hotels, one that went under contract to sell recently and another that was located in an area hard-hit by the recession.

Executives did not name the second property, but said it is in a market that has been challenged over the past few years and there have been substantial changes to the industries in the area and the size of those companies. Host is looking to sell the property in the "short to immediate term."

QUARTERLY RESULTS

Host posted second quarter FFO of 12 cents per share, down from 55 cents per share a year ago. Adjusted for one-time items, Host's FFO was 26 cents per share, a figure that excludes 15 cents in noncash impairment charges and a 1 cent gain from other transactions.

Analysts on average had expected 24 cents per share, according to Reuters Estimates. FFO removes the profit-reducing effect of depreciation, a noncash accounting item.

Revenue slumped to less than $1.1 billion, while revPAR dropped 24.9 percent. Total operating costs and expenses fell 9 percent and management fees sank more than 40 percent.

Cost cutting efforts helped Host beat estimates. Those measures included shutting down floors, and sometimes entire towers, and limiting restaurant hours. (Reporting by Deepa Seetharaman; editing by Maureen Bavdek and Andre Grenon)