Sunstone Hotel Investors(US:SHO)2026-02-27 18:02Financial Data and Key Metrics Changes - The fourth quarter operating results exceeded expectations, with total RevPAR growth of 7.4% in the quarter, or 12.5% including contributions from Andaz Miami Beach [5][19] - Rooms RevPAR grew by 9.6% in the quarter, with a 540 basis point benefit from Andaz Miami Beach [19] - Adjusted EBITDAre for the fourth quarter was reported at $57 million, and Adjusted FFO was $0.20 per diluted share [19][24] Business Line Data and Key Metrics Changes - Resorts led the portfolio with a 19% RevPAR growth in Maui, while Andaz Miami Beach outperformed expectations [6][7] - Montage Healdsburg achieved 15% total RevPAR growth in the quarter, and Marriott Long Beach Downtown generated 12% growth [7][8] - Urban hotels showed less robust top-line growth, but margins improved due to cost control measures [8][10] Market Data and Key Metrics Changes - The Portland market showed nearly 13% growth, while Boston and New Orleans faced softer markets [7] - Group revenue production in Orlando increased over 10% last year, indicating a strong start for 2026 [9] - The Washington D.C. market faced challenges due to government spending cuts and a government shutdown, impacting performance [10][12] Company Strategy and Development Direction - The company is focused on three strategic objectives: recycling capital, investing in the portfolio, and returning capital to shareholders [4][14] - The management team is committed to maximizing shareholder value through asset sales and stock repurchases [27] - The company plans to continue executing its capital recycling strategy while remaining disciplined in capital allocation [18][47] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2026, citing strong early performance from Andaz Miami Beach and positive signs in Northern California [11][12] - The company anticipates RevPAR growth of 4% to 7% for rooms and 3.5% to 6.5% for total RevPAR in 2026 [22][23] - Management highlighted potential headwinds from softer transient demand in San Diego and uncertainty in D.C. [12][13] Other Important Information - The company returned over $170 million to shareholders through dividends and share repurchases [5] - The board has reauthorized a $500 million share repurchase program [25] - The company has a strong balance sheet with over $200 million in cash and total liquidity exceeding $700 million [20][21] Q&A Session Questions and Answers Question: Can you walk through the 1.5% midpoint of 2026 RevPAR growth ex-Andaz? - Management noted that Maui is seeing growth, and the transient demand is up about 53%, which will help cover shortfalls [32][33] Question: Can you discuss the expense growth implied in guidance? - Management indicated that total expense growth is around 3%, with labor costs decreasing slightly and energy prices increasing [36][39] Question: Are you expecting to be a net seller of assets? - Management confirmed that they are looking to realize private market values for hotels and resorts, continuing their strategy of recycling assets [44][47] Question: Why is total RevPAR guidance lower than RevPAR outlook? - Management explained that larger assets in D.C. and San Diego are impacting group business and ancillary spend, affecting total RevPAR [51][52] Question: What is the impact of the sale process on operations? - Management stated that the management contracts for hotels remain in place, so day-to-day operations are not impacted [72][73]