Sunstone Hotel Investors, Inc. Q3 FY2025 earnings call

• Urban hotels: RevPAR flat, Marriott Long Beach downtown grew, JW Marriott New Orleans faced tough comps but gained market share, and margin growth achieved. - Convention hotels: Better-than-expected performance with 3.5% RevPAR growth, San Francisco a standout with over 15% growth. - Resort portfolio: Maui starting to recover, Wine Country had fire headwinds, Andaz Miami Beach on track. - Capital investments: Completed San Antonio meeting space renovation, starting San Diego Hilton Bayfront meeting space renovation. - Balance sheet: Strong with net leverage 3.5x trailing earnings, $200M cash and cash equivalents, $700M liquidity. - Share repurchases: $101M deployed year-to-date, $0.09 per share dividend declared.

Urban hotels: RevPAR flat during the quarter; Marriott Long Beach downtown had outsized growth post brand conversion, while JW Marriott New Orleans faced tough comps but gained market share. Convention hotels: RevPAR growth 3.5% with group business trends healthy; San Francisco had over 15% RevPAR growth. Resort portfolio: Softer than expected, with Maui starting to turn around (September and October RevPAR positive), Wine Country had fire-related headwinds, Andaz Miami Beach on track with strong booking patterns and group bookings in Q1 2026. Revenue contribution: Details on each segment's financials and their contributions were discussed in the call but specific percentage breakdowns weren't explicitly stated in the provided transcript beyond general performance descriptions.

• Full-year earnings outlook maintained. - Fourth quarter projected as strongest RevPAR quarter with mid-single-digit total portfolio RevPAR growth, Andaz Miami Beach contributing 400-500 basis points. - Expected EBITDA in low $50 million area, midpoint of FFO range. - No assumption of additional share repurchase benefit in projections.

• Operating environment choppy. - Government shutdown introducing uncertainty, potentially impacting travel and hotel demand.

Q: Thoughts on 4Q RevPAR range and breakdown by segments?

A: Q4 expected mid-single-digit total RevPAR growth, Andaz Miami Beach contributing ~450 basis points, strong performance in Wine Country, Orlando, Maui, with some markets like New Orleans and D.C. having headwinds.

Q: Changes in transaction market in 2026 and acquisition opportunities?

A: Transaction market slightly improving, expectation of further improvement in 2026, debt markets supportive, but buyer pool limited for larger assets.

Q: Andaz EBITDA ramp into 2026?

A: Next year outlook achievable within $12M-$16M range, Q4 ramping well, strong bookings into 2026 especially Q1.

Q: Group pace for 2026?

A: Roughly 80% of room nights on the books, strong pace in markets like Orlando, San Francisco, etc., with San Antonio benefiting from meeting space renovation completion.

Q: Stock buyback in quarter?

A: Not restricted, share repurchase varies based on pricing, discount to NAV, and liquidity factors, with 14% of float repurchased over time.

Q: Wailea performance and future plans?

A: Wailea starting to recover, positive signs, long-term potential for future development but still in process.

Q: Orlando Renaissance franchise contract and changes?

A: Subject to long-term Marriott agreement, will evaluate brands/repositioning in future but excited about 2026 pace.

Q: CapEx go-forward?

A: Will tail off from current year, with cyclical room/meeting space renovations, ~$80M standard amount for cyclical renovations.

Q: Viable options to create shareholder value?

A: Board considers options to realize value at or close to NAV, ongoing process of evaluating market and transactions.

Q: Ancillary spending and other income?

A: Out-of-room revenue outpaced room revenue growth, driven by group business, destination fees, spa, parking, etc., with luxury resorts in wine country contributing.

Q: G&A as percent of revenues?

A: G&A guidance $20M-$21M, similar to 2019 levels despite inflationary pressures.