Sunstone Hotel Investors (SHO) Q2 2024 earnings summary

Executive summary

• Q2 results met expectations, with strong ancillary revenues and cost controls offsetting softer leisure room revenue growth; net income for Q2 2024 was $26.1 million, down from $43.1 million year-over-year.

• Sunstone Hotel Investors owns 15 upper upscale and luxury hotels in urban and resort destinations, operating as a REIT and focusing on value creation through capital investment, repositioning, and asset management.

• Capital recycling continued with the acquisition of Hyatt Regency San Antonio Riverwalk for $230 million and completion of a value-creating brand conversion.

• Dividend was increased and share repurchases were executed, returning capital to shareholders.

• Retained proceeds from Boston Park Plaza sale for potential acquisitions or stock repurchases.

Financial highlights

• Q2 2024 total revenues were $247.5 million, down 10.4% year-over-year; net income was $26.1 million, a 39.3% decrease year-over-year.

• Adjusted EBITDAre for Q2 was $73.5 million, down 13.6% year-over-year; adjusted FFO per diluted share was $0.28.

• Full-year adjusted EBITDAre is now estimated at $242–$252 million; adjusted FFO per diluted share at $0.85–$0.90.

• Q2 results impacted by $3 million EBITDA displacement from Long Beach renovation and $9.5 million year-over-year decrease at The Confidante (Andaz Miami Beach transformation).

• Q2 2024 EPS was $0.11, compared to $0.19 in Q2 2023.

Outlook and guidance

• 2024 guidance lowered due to Long Beach renovation delays and softer Maui leisure trends, impacting RevPAR by over 200 basis points.

• Full-year 2024 net income guidance revised to $55–$65 million; RevPAR growth now expected at -0.25% to +1.75%, or +2.25% to +4.25% excluding The Confidante Miami Beach.

• Nearly half of RevPAR decline and most EBITDA decline attributed to Long Beach and Maui.

• Management expects continued negative impact from inflation and higher interest rates, particularly on variable rate debt and operating costs.

• 2025 setup is considered highly attractive, with strong group pace, new openings, and favorable citywide calendars.