Sunstone Hotel Investors, Inc. Q1 FY2026 earnings call

Brian mentioned the first quarter performance was ahead of expectations with broad-based strength. Rev par grew impressively. There was focus on cost controls. Resorts led with strong growth. Wailea Beach Resort had rebound despite weather. Wine country resorts did well. ONDAs Miami Beach had strong Q1. Urban hotels navigated challenges. Convention hotels had varied performance. Robert talked about progress on capital projects like San Diego meeting space renovation, Miami Bazaar construction, and Ocean's Edge Resort and Marina work. Wailea Beach Resort's storm damage and repair work were discussed.

Resorts again led the portfolio with combined comparable rev part growth of over 18%. Waialea Beach Resort saw revenue grow 14% in the quarter despite weather-related cancellations. Wine country resorts turned in a combined 34% growth in RevPar. ONDAs Miami Beach ran 86% occupancy at a $564 rate and produced $6.5 million of EBITDA in Q1. Urban hotels had RevPAR decline 9.3% but out-of-room spend limited the decline to 2.9%. Convention hotels had rev par growth of 5.2% with varied performance across markets.

Revised full year outlook higher. Rooms rev par expected to increase between 5% and 7.5% to $236 - $242. Total rev par expected to increase between 5% to 7.5% to $390 - $400. Adjusted EBITDA RE expected in range of $238 million to $252 million. FFO per diluted share expected to range from $0.88 to $0.96. First quarter is strongest revenue growth quarter of the year with remaining growth quarters between lower end and midpoint of guidance ranges.

Elongated period of heightened volatility or sustained increases in fuel prices could present headwinds. Recent events reinforce caution in monitoring events that could impact costs and demand for travel.

Q: What are some of the building blocks left to get the 14 hotel portfolio to stabilization?

A: ONDAs is a multi-year story with room to grow rate, opening Bazaar and Beach Club. Maui has room to grow EBITDA. San Francisco and wine country also have growth potential.

Q: Could you expand on acquisition commentary, criteria, and assets seen?

A: See additional equity capital in markets, more luxury assets, looking for assets with good group component, secondary markets, and considering rebranding activity.

Q: Comfortable with mid to low EBITDA contribution for ONDAs this year and World Cup impact?

A: Comfortable with range and inching towards higher side, measured on World Cup impact as it's early and booking window is short.

Q: Comment on larger group markets, JW in New Orleans, Orlando, San Diego?

A: Transient strong across board, group pace picks up in second half, New Orleans has strong second half group pace, Orlando has tough first half comp but good second half, San Diego transient performance better.

Q: Additional color on group attrition and trends?

A: Overall attrition slightly down, some cancellations due to specific events, group pace picks up in second half, 27 pace looks good.

Q: Outlook for RevPAR uplift and World Cup demand trends?

A: Measured approach at start, will see more data closer, some group business on but limited now.

Q: What's driving out-of-room spending?

A: Better spend on group and association, occupancy pickup on transient side.

Q: Outlook for margins and expenses for rest of the year?

A: Expenses growing 3 - 3.5%, first quarter margin expansion, will maintain or increase productivity, margins depend on rev par shakeout.

Q: Operating performance and disposition plans for Wine Country Hotels?

A: First quarter low season but good group and transient demand, outlook strong for rest of year, exploring dispositions to capitalize on private market values.

Q: Outliers in World Cup impact and transient demand in San Diego and D.C.?

A: World Cup could add compression, transient demand picked up in Long Beach, San Diego, DC sees benefit from rebranding.