Sunstone Hotel Investors (SHO) Q3 2024 earnings summary

Executive summary

• Navigated Q3 challenges from labor disruptions, weather events, and softer leisure demand, but delivered on strategic objectives and resumed normal operations at key assets.

• Owned 15 hotels as of September 30, 2024, focusing on upper upscale and luxury properties in urban and resort destinations, with a portfolio average of 484 rooms per hotel.

• Major portfolio changes included the acquisition of Hyatt Regency San Antonio Riverwalk in April 2024 and the sale of Boston Park Plaza in October 2023.

• Major renovations and repositionings, including Westin Washington, D.C. Downtown and Marriott Long Beach, drove significant RevPAR and ADR growth.

• Recent investments and acquisitions, such as The Westin Washington, DC Downtown and Hyatt Regency San Antonio Riverwalk, contributed positively.

Financial highlights

• Q3 2024 total revenues were $226.4 million (down 8.6% year-over-year); net income was $3.2 million (down 79.1%); adjusted EBITDAre was $53.6 million (down 15.9%).

• Adjusted FFO per diluted share for Q3 was $0.18 (down 21.7%); nine-month adjusted FFO was $131.0 million (down 16.9%).

• Comparable RevPAR for Q3 was $207.56 (down 1.3%); occupancy was 68.8%; ADR was $301.69.

• Year-to-date share repurchases totaled over $26 million at an average price of $9.83 per share.

• Q3 comparable hotel adjusted EBITDAre margin was 24.9%; excluding The Confidante Miami Beach: 25.2%.

Outlook and guidance

• Full-year 2024 net income guidance: $31–$41 million; adjusted EBITDAre: $220–$230 million; adjusted FFO per diluted share: $0.75–$0.80.

• Full-year 2024 portfolio RevPAR expected to decline 3.25% to 1.75% versus 2023; excluding The Confidante Miami Beach, RevPAR expected to be flat to up 0.75%.

• Andaz Miami Beach expected to reopen in February 2025, with a total investment of $95 million and anticipated EBITDAre loss of $2–$3 million in 2024.

• 2025 outlook is optimistic, with strong group pace, citywide events, and contributions from recent renovations and acquisitions.

• Interest income expected to decrease in Q4 2024 and into 2025 due to anticipated Federal Reserve rate reductions and lower cash balances.