Sunstone Hotel Investors, Inc. Q4 FY2024 earnings call

Key Highlights of 2024 - Recycled proceeds from Boston Park Plaza sale into Hyatt Regency San Antonio Riverwalk for $222M. - Completed conversions of Westin Washington D.C. Downtown and Marriott Long Beach Downtown; Andaz Miami Beach nearing opening. - Returned nearly $100 million to shareholders in 2024. ### Fourth Quarter Operations - Group business performed well except for San Diego's labor strike. Corporate travel up, leisure demand accelerated in wine country and Maui. - Westin Washington D.C. Downtown had 30% RevPAR growth in group business; Hyatt Regency San Antonio Riverwalk saw strong group growth. - New Orleans and Boston hotels had significant group room night increases. ### Capital Investments - 2024 capital investment of $157 million, with projects like Wailea Beach Resort rooms renovation and Miami Andaz nearing completion. - 2025 capital investment moderating, with San Antonio meeting space renovation starting in Q3 and San Diego Hilton Bayfront meeting space renovation planning.

Sunstone Hotel Investors had key investments in 2024. They recycled $222 million from the Boston Park Plaza sale into the 630-room Hyatt Regency San Antonio Riverwalk, which has an attractive 9% capitalization rate on 2024 earnings. The Westin Washington D.C. Downtown saw 30% RevPAR growth in group business. The recently converted Marriott Long Beach Downtown had solid performance. The Andaz Miami Beach is set to open, contributing to 2025 RevPAR growth. In absolute terms, the Hyatt Regency San Antonio Riverwalk had a net purchase price of $222 million. Revenue contribution: The Westin Washington D.C. Downtown's group business was a significant contributor, and the Hyatt Regency San Antonio Riverwalk's group room nights grew nearly 7% in the quarter.

2025 Guidance - Total portfolio RevPAR growth expected to range from 7% to 10% compared to 2024. - Adjusted EBITDAre expected to range from $245 million to $270 million, adjusted FFO per diluted share from $0.86 to $0.98. - Andaz Miami Beach debut expected to add nearly four points of RevPAR growth; excluding Andaz, remaining portfolio RevPAR projected to grow 3% to 6%. - First quarter RevPAR growth expected to be 3%-5%, then double-digit for the rest of the year.

Risks - Labor strike in San Diego impacted performance. - Permitting and approval challenges in Miami Beach delayed Andaz opening. - Economic uncertainties and potential slower leisure recovery in markets like Maui. - Wage and benefit increases could impact margins if not offset by efficiency measures.

Q: Speak to underlying demand segment assumptions within the 7%-10% RevPAR guide.

A: Group business is expected to be very solid, business transient will continue to be strong with slight improvement in certain markets, and leisure is expected to see roughly what was seen in 2024 with potential pickup in the third and fourth quarter in Maui. Upside could come from additional leisure recovery in markets like Maui and Orlando.

Q: Wages and benefits increase in 2024 and outlook for 2025.

A: 2024 wages and benefits were in the mid-fours. In 2025, they are expected to be closer to the higher end of the 4%-6% range, then moderate back down to 2026-2027.

Q: Andaz EBITDA ramp in 2026.

A: 2026 EBITDA is expected to easily double the 2025 EBITDA, and by 2027, it should reach closer to the high twenties in stabilization.

Q: Napa assets operational improvements and 2025 guide.

A: Napa assets had good EBITDA growth in 2024. Working to get closer to optimal group mix, expecting growth in 2025 with additional EBITDA growth anticipated at these hotels.

Q: Maui recovery impact on guidance.

A: Expect leisure lift in the second half of 2025, with Kaanapali's recovery expected to boost leisure demand and bring more travel to the island.

Q: Renaissance Orlando long-term plans.

A: Rebranding can work depending on the hotel and guests. Orlando has strong group business and a new park opening, with evaluation ongoing for potential rebranding.

Q: Portfolio concentration and recycling.

A: Aim to recycle capital, not afraid of concentration in best markets, with all hotels under evaluation for potential recycling.

Q: Total expense growth in guidance.

A: Total expense growth is expected to be in the 4%-4.5% range, with wage side higher and other expenses mixed.