Sunstone Hotel Investors(SHO) - 2019 Q4 - Earnings Call Transcript

Financial Data and Key Metrics Changes - In Q4 2019, comparable portfolio RevPAR increased by 80 basis points year-over-year, while total revenues rose by 2.1%, leading to full-year RevPAR growth of 1.9% and total revenue growth of 2.9% [13][14] - Full-year adjusted EBITDA and adjusted FFO per diluted share exceeded the high end of guidance, despite ongoing cost pressures [15][30] Business Line Data and Key Metrics Changes - Transient room revenue grew approximately 3% in 2019, while group revenue remained flat [14] - Food and beverage revenues increased by 2.6%, and ancillary property level revenues surged by 14% in Q4 [14] Market Data and Key Metrics Changes - The Wailea market continued to show strong RevPAR index gains, while markets like Chicago, Portland, and New York City experienced general weakness [16][18] - December 2019 saw better-than-expected operating trends, particularly in Wailea, Long Beach, Chicago, and San Francisco [18] Company Strategy and Development Direction - The company plans to focus on long-term relevant real estate and has increased its share repurchase program from $300 million to $500 million, indicating a preference for buying back shares over acquisitions [26][28] - Limited capital expenditures are expected in 2020, with a focus on strategic renovations, such as the Marriott Portland [22][90] Management's Comments on Operating Environment and Future Outlook - The operating environment for 2020 is expected to be similar to 2019, with limited RevPAR growth anticipated across most markets [20] - The company is monitoring the potential impact of the Coronavirus on travel and hotel demand, although current expectations do not include significant negative impacts [23][57] Other Important Information - The company disposed of the leasehold interest in the Courtyard LAX for $50 million, consolidating its portfolio and reducing ground lease exposure [11][12] - A $0.05 per common share dividend has been declared for Q1 2020, with expectations to maintain this throughout the year [32] Q&A Session Summary Question: Impact of hotel values due to weak fundamentals - Management noted that high-quality assets still attract strong bids, while commodity assets face more challenges [36] Question: Wailea Beach Resort's ADR Index - The ADR Index gap has improved from $280 behind the luxury set in 2014 to $180 behind at the end of 2019 [37] Question: Hilton Times Square property tax increases - Management discussed significant property tax pressures and a disputed ground rent increase, which could impact margins [42][43] Question: Transient demand trends - Management observed better transient demand in December, with an uptick in both corporate and leisure bookings [48] Question: Share repurchase strategy - The company emphasized that share repurchases are a capital allocation tool rather than a signaling mechanism [84] Question: CapEx spending trends - Management indicated that lower projected CapEx spending is due to postponed renovations and a well-maintained portfolio [90]