Sunstone Hotel Investors, Inc. Q3 FY2024 earnings call

• Successfully navigated challenges like weather events, labor disruption, and evolving leisure backdrop. - Operations at Hilton San Diego Bayfront resumed normal after labor issues. - Group activity sustained strength, with Westin Washington, DC Downtown leading, and convention hotels showing robust performance. - Business travel trends improved in markets like Boston, San Francisco, and Portland. - Wine country resorts saw encouraging data points. - Andaz Miami Beach transformation delayed, now expected to open in February 2025 with revised investment of $95 million. - Repurchased $23 million of stock year-to-date, and declared a quarterly base common dividend of $0.09 per share for the fourth quarter.

Group segment: The newly converted Westin Washington, DC Downtown grew RevPAR by 33% and total RevPAR by 39%. The convention hotel portfolio had combined total RevPAR growth of nearly 15% in the quarter. Wine country resorts: Montage Healdsburg grew total RevPAR by 27% in the third quarter, and Four Seasons Napa Valley grew RevPAR by over 5%. Leisure demand moderated, with Key West seeing price sensitivity and Maui facing softer demand. The Andaz Miami Beach transformation was delayed due to weather and permitting issues.

• Full year 2024 total portfolio RevPAR change ranges from a decline of 3.25% to 1.75% compared to 2023. Excluding Andaz Miami Beach, RevPAR is flat to prior year. - Full year adjusted EBITDAre ranges from $220 million to $230 million. - Adjusted FFO per diluted share ranges from $0.75 to $0.80. - Andaz Miami Beach opening delayed to February 2025, with revised investment of $95 million. - Entered into a $100 million delayed draw term loan to refinance JW Marriott New Orleans mortgage, resulting in a fully unencumbered portfolio with flexibility until 2026.

• Weather events impacting Florida projects. - Labor disruptions in San Diego causing lingering earnings headwinds. - Softer leisure demand in Maui and Key West. - Delays in Andaz Miami Beach transformation due to weather and permitting issues.

Q: Quantify transient and group cancellations for early 2025 in San Diego and the impact of delayed Andaz Miami Beach opening on 2025 numbers.

A: Labor impact in San Diego confined to fourth quarter, with 2025 expected to be normal operations. Andaz Miami Beach opening delay leads to reduction in expected EBITDA contribution, moving from ~$12 million to ~$9 million for full year 2025.

Q: Changed yield expectations at Andaz with new $95 million cost and group revenue pace including/excluding Andaz.

A: Yield expectations still in range despite increased cost, group revenue pace for 2025 excludes Andaz, with strong citywide in New Orleans, San Francisco, etc., driving growth.

Q: Strategic opportunity in NAV assets and recycling capital.

A: Focus on stabilizing assets, Montage and Four Seasons showing progress, with plan to monetize assets when right time is determined.

Q: Potential asset sale of wine country assets and San Antonio performance.

A: Wine country assets may sell slightly below purchase basis, San Antonio performing in line with expectations with long-term opportunities tied to Alamo redevelopment.

Q: Maui's performance shift and trajectory.

A: Maui underperformed in Q3/Q4, but saw positive signs like increased airline flights, strong group pace in 2025, and festive season improvement, with optimism for recovery.

Q: Capital allocation priorities for next year and appetite for risk.

A: Balanced approach with focus on investing in portfolio, harvesting opportunities, and redeploying capital based on return expectations.

Q: Four Seasons Maui's margin structure and improvement.

A: Need for higher occupancy, cost structure review, and manager efforts to improve margins through efficient cost management.

Q: Ancillary revenue opportunities in portfolio.

A: San Antonio has retail opportunities, but incremental ancillary revenue in existing portfolio is limited, with focus on mining development opportunities in excess land areas