Sunstone Hotel Investors (SHO) Q3 2024 earnings summary

Executive summary

• Q3 2024 performance was impacted by weather events, labor disruption at a major asset, and softer leisure demand, but operational execution, cost controls, and strong group and business transient segments helped offset these challenges.

• Net income for Q3 2024 was $3.2 million, down 79.1% year-over-year, with comparable RevPAR decreasing 1.3% to $207.56; adjusted EBITDAre fell 15.9% to $53.6 million.

• Recent acquisitions and repositionings, such as the Westin Washington, D.C. Downtown, Marriott Long Beach, and Hyatt Regency San Antonio Riverwalk, are exceeding expectations and contributing to growth.

• The Andaz Miami Beach renovation is nearing completion, though delayed by weather and permitting, with reopening now expected in February 2025.

• Share repurchases totaled over $26 million year-to-date, reflecting ongoing capital return to shareholders.

Financial highlights

• Q3 2024 total revenues were $226.4 million (down 8.6% year-over-year); adjusted EBITDAre was $53.6 million (down 15.9%); adjusted FFO per diluted share was $0.18.

• Comparable RevPAR for Q3 was $207.56 (down 1.3%); occupancy was 68.8%; ADR was $301.69.

• Full-year 2024 Adjusted EBITDAre is projected at $220–$230 million; adjusted FFO per diluted share at $0.75–$0.80.

• Portfolio RevPAR for 2024 is expected to decline 1.75%–3.25% year-over-year; excluding The Confidante Miami Beach, RevPAR is expected to be flat to up 0.75%.

• Q3 comparable hotel adjusted EBITDAre margin was 24.9%; excluding The Confidante Miami Beach: 25.2%.

Outlook and guidance

• 2024 outlook moderated due to short-term disruptions: weather in Florida, labor issues in San Diego, and muted leisure demand in Maui.

• 2025 is expected to benefit from easier comps, strong group pace, new and repositioned assets, and improved citywide calendars.

• Andaz Miami Beach is expected to contribute ~$9 million EBITDA in 2025, down from prior $12 million estimate due to delayed opening.

• Wage inflation is expected to remain in the 4%–6% range across markets.

• Interest income is expected to decrease in Q4 2024 and into 2025 due to anticipated Federal Reserve rate reductions and lower cash balances.