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Sunstone Hotel Investors(SHO) - 2024 Q4 - Earnings Call Transcript
SHOSunstone Hotel Investors(SHO)2025-02-22 02:27
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Financial Data and Key Metrics Changes - The portfolio finished 2024 strong with full-year adjusted EBITDA at 230millionandadjustedFFOperdilutedshareat230 million and adjusted FFO per diluted share at 0.80, both at the high end of guidance [33][36] - The company expects total portfolio RevPAR growth to range from 7% to 10% in 2025, with adjusted EBITDAre projected between 245millionto245 million to 270 million and adjusted FFO per diluted share between 0.86to0.86 to 0.98 [36][37] Business Line Data and Key Metrics Changes - Group business performed well, with the Westin Washington D.C. Downtown achieving 30% RevPAR growth driven by an 18% increase in group room nights [16] - The recently acquired Hyatt Regency San Antonio Riverwalk saw group room nights grow nearly 7% in the quarter, with an 18% increase in banquet contribution [17] Market Data and Key Metrics Changes - Urban markets showed strength, with New Orleans hotels experiencing a 23% increase in group room nights, resulting in nearly 20% combined RevPAR growth [18] - Boston hotels reported a 39% increase in group room nights, focusing on filling open patterns and driving occupancy [19] Company Strategy and Development Direction - The company is focused on three strategic objectives: recycling capital, investing in the portfolio, and returning capital to shareholders [8] - In 2024, nearly 100millionwasreturnedtoshareholdersthroughdividendsandsharerepurchases,withadisciplinedapproachtocapitalallocationexpectedtocontinuein2025[14][24]Management′sCommentsonOperatingEnvironmentandFutureOutlook−Managementexpressedoptimismfor2025,citingacompellingsetupfortotalrevenuegrowthandhighermarginscomparedtothepreviousyear[22]−Thecompanyanticipatescontinuedstrengthingroupbusinessandagradualrecoveryinleisuredemand,particularlyinmarketslikeMaui[47][75]OtherImportantInformation−Thecompanyinvested100 million was returned to shareholders through dividends and share repurchases, with a disciplined approach to capital allocation expected to continue in 2025 [14][24] Management's Comments on Operating Environment and Future Outlook - Management expressed optimism for 2025, citing a compelling setup for total revenue growth and higher margins compared to the previous year [22] - The company anticipates continued strength in group business and a gradual recovery in leisure demand, particularly in markets like Maui [47][75] Other Important Information - The company invested 157 million into its portfolio in 2024, with ongoing renovations expected to enhance earnings [27][30] - The company maintains significant liquidity, with nearly $700 million in total liquidity and no debt maturities until 2026 [34][35] Q&A Session Summary Question: Underlying demand segment assumptions within the 7% to 10% RevPAR guide - Management expects solid group performance pacing above 10%, with continued strength in business transient and slight improvement in certain markets [46] Question: Pace of wages and benefits increase in 2024 and expectations for 2025 - Wages and benefits increased in the mid-fours in 2024, with expectations to be closer to the higher end of the 4% to 6% range in 2025 due to collective bargaining agreements [54] Question: Andaz EBITDA ramp expectations for 2026 - The ramp for Andaz is expected to start at around 20% in March, potentially doubling EBITDA in 2026 as occupancy increases [60] Question: Update on Napa assets and operational improvements - Good EBITDA growth was reported at Napa hotels, with a focus on optimizing group mix and cost management [66] Question: Recovery in Maui and guidance range - Solid group demand is expected, with a slight lift in leisure anticipated in the second half of the year [75] Question: Total expense growth baked into guidance - Total expense growth is expected in the range of 4% to 4.5%, with higher increases on the wage side [108]