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%, or 12.5% including contributions from Andaz Miami Beach [8][31] - Adjusted EBITDAre for the fourth quarter was reported at $57 million, with Adjusted FFO of $0.20 per diluted share [32] - Full-year earnings were ahead of the midpoint of guidance, with comparable portfolio margin growth of 40 basis points on total RevPAR growth of 3.5% [17][32] Business Line Data and Key Metrics Changes - Resorts led the portfolio with a 19% RevPAR growth in Maui, while Andaz Miami Beach outperformed expectations [9][10] - Urban hotels showed mixed results, with Marriott Long Beach Downtown achieving 12% RevPAR growth, but Boston and New Orleans faced challenges [12][13] - Convention hotels reported RevPAR growth of 2.8%, with San Francisco being a standout performer [13] Market Data and Key Metrics Changes - The Wailea Beach Resort saw a significant recovery, with a RevPAR index increase of 17 points sequentially into the fourth quarter [26] - Group revenue production in Orlando increased over 10% last year, indicating a positive trend for future performance [15] - The D.C. market faced headwinds from government spending cuts and a government shutdown, impacting overall performance [16][102] Company Strategy and Development Direction - The company is focused on three strategic objectives: recycling capital, investing in the portfolio, and returning capital to shareholders [5][23] - The management team is committed to maximizing shareholder value through asset sales and stock repurchases [43][65] - The company anticipates continued growth from operations and investment projects, despite a cautious outlook for certain markets [18][20] Management's Comments on Operating Environment and Future Outlook - Management expressed cautious optimism for 2026, expecting rooms RevPAR to increase between 4% and 7% [35] - The company noted potential headwinds from softer transient demand in San Diego and uncertainty in D.C. [20] - Positive signs of market recovery were highlighted, particularly in Northern California and Maui [19][20] Other Important Information - The company has over $200 million in cash and cash equivalents, with total liquidity exceeding $700 million [33][34] - A common dividend of $0.09 per share has been authorized for the first quarter, alongside a repurchase program reauthorized up to $500 million [40][41] Q&A Session Summary Question: Can you discuss the 1.5% midpoint of 2026 RevPAR growth ex-Andaz? - Management noted that Maui is showing growth, with a stabilization in the Kaanapali market, and transient demand is up [47][48] Question: What is the expense growth implied in guidance? - Expense growth is expected around 3%, with labor costs decreasing slightly and energy prices increasing [52][56] Question: Are you expecting to be a net seller of assets? - Management indicated a pickup in transactions and a focus on realizing private market values for assets [62][65] Question: Why is total RevPAR guidance lower than RevPAR outlook? - The impact of renovations and group business limitations in D.C. and San Diego were cited as factors [70][71] Question: What is the outlook for the San Diego market? - Management reported positive signs of recovery in transient demand, particularly from government contractors [75] Question: Can you elaborate on the operating environment's impact on guidance? - Management highlighted potential headwinds from government-related events and positive signs from transient demand recovery [101][102]