Sunstone Hotel Investors(SHO) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - Adjusted EBITDAre for Q3 2024 was approximately $54 million, and FFO was$0.18 per diluted share [31] - Full year 2024 RevPAR change is expected to range from a decline of 3.25% to a decline of 1.75% compared to 2023 [32] - Full year adjusted EBITDAre is estimated to range from $220 million to$230 million, and adjusted FFO per diluted share is expected to range from $0.75 to$0.80 [33] Business Line Data and Key Metrics Changes - Group segment led by the Westin Washington, DC Downtown, which grew RevPAR by 33% and total RevPAR by 39% [11] - Urban hotel portfolio grew RevPAR by a healthy 9%, excluding Long Beach [16] - Leisure demand moderated, particularly in Key West and Maui, with ongoing normalization in pricing [17][18] Market Data and Key Metrics Changes - Business travel trends improved in Q3, with strong performance in markets like Boston, San Francisco, and Portland [14] - Occupancy in Portland jumped more than 16 points compared to last year, indicating recovery [15] - Maui's leisure demand has been softer than expected, but group bookings for 2025 are showing improvement [62] Company Strategy and Development Direction - The company is focused on three strategic objectives: recycling capital, investing in the portfolio, and returning capital to shareholders [24] - The transformation of Andaz Miami Beach is ongoing, with an updated total renovation investment of approximately $95 million [27] - The company anticipates a strong setup for 2025, driven by group production and improved market conditions [23] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism about earnings potential moving into 2025, despite a muted near-term outlook [10] - The company is encouraged by the long-term growth potential embedded in its portfolio, despite short-term impacts from weather and labor disruptions [22] - Management noted that the leisure environment in Maui is expected to improve with promotional campaigns and increased airlift [63][66] Other Important Information - The company repurchased$23 million of stock in Q3, bringing the year-to-date total to over $26 million [21] - The balance sheet remains strong, with nearly$700 million of total liquidity [35] - A quarterly base common dividend of $0.09 per share has been authorized for Q4 [37] Q&A Session Summary Question: Impact of San Diego and Miami on 2025 - Management indicated that the hotel in San Diego is back to normal operations, with strong pace for 2025, while Miami's EBITDA expectations have been adjusted downwards due to delayed opening [40][42] Question: Stabilized yield expectations for Andaz - Yield expectations for Andaz remain in the 8% to 9% range, despite increased renovation costs [46] Question: Strategic opportunities for NAV assets - Management is focused on stabilizing assets and evaluating the timing for potential monetization [50][53] Question: Wine country asset sale potential - Management believes the sale price for wine country assets may be slightly below purchase price, depending on cash flow realization [55] Question: Maui's performance and recovery trajectory - Management expects Maui to return to a similar performance level as before, with strong group demand and improved airlift [66] Question: Capital allocation priorities for next year - The company will maintain a balanced approach to capital allocation, focusing on investments and potential asset sales [68] Question: Wage inflation expectations - Wage inflation is expected to remain in the 4% to 6% range, with no significant changes anticipated from new administration policies [74][76] Question: Ancillary revenue opportunities - Management sees limited opportunities for ancillary revenue from billboards but is exploring retail and development opportunities within the portfolio [86][89]