Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sunstone Hotel Investors Inc (SHO, Financial) successfully navigated challenges from weather events and labor disruptions, maintaining operations and resolving issues at key properties like the Hilton San Diego Bayfront.
- The company's urban hotel portfolio showed strong performance, with RevPAR growth of 9%, driven by robust business transient demand.
- The newly converted Westin Washington, DC downtown exceeded expectations with a 33% RevPAR growth, attracting higher quality groups and transient customers.
- Sunstone Hotel Investors Inc (SHO) repurchased $23 million of stock during the quarter, reflecting confidence in the company's valuation and financial health.
- The company is optimistic about 2025, expecting benefits from recent acquisitions, completed repositionings, and improved group pace across several markets.
Negative Points
- Labor disruptions at the Hilton San Diego Bayfront negatively impacted third and fourth quarter earnings, with lingering effects on bookings.
- Leisure demand moderated in the third quarter, particularly in Key West and Maui, where pricing sensitivity and softer demand were noted.
- The Andaz Miami Beach transformation faced delays due to weather and permitting issues, extending the project timeline and increasing costs by $15 million.
- Sunstone Hotel Investors Inc (SHO) revised its 2024 outlook downward due to short-term impacts from weather disruptions in Florida and a muted leisure backdrop.
- The company's Maui operations underperformed expectations, with ongoing challenges in leisure demand following last year's fires.
Q & A Highlights
Q: Can you quantify the impact of cancellations in San Diego for early 2025 and the delayed opening in Miami on EBITDA?
A: The impact of cancellations in San Diego is confined to the fourth quarter, with no additional cancellations affecting 2025. The Miami opening delay will reduce expected EBITDA from $12 million to about $9 million for 2025.
Q: Has your stabilized yield expectation changed at Andaz with the new $95 million cost? Also, does the group revenue pace for 2025 include Andaz?
A: The yield expectation remains in the 8% to 9% range, though slightly lower due to increased capital costs. The group revenue pace for 2025 excludes Andaz to avoid noise in the data.
Q: What is the strategic opportunity for your Napa assets, and is it better to recycle the capital given the improving performance?
A: The focus is on stabilizing the Napa assets, which are showing improvement. The decision to recycle capital will depend on achieving desired cash flow levels and market conditions.
Q: Can you discuss the potential asset sale of the Wine Country assets and the performance of the San Antonio property?
A: The Wine Country assets are not yet at desired cash flow levels, and a sale price might be slightly below the purchase price. San Antonio is performing well, and expectations for 2025 are in line with current performance.
Q: What has shifted in Maui since the last guidance revision, and is there any relief business in the comparisons?
A: Maui's leisure pickup has been slower, with no relief business affecting current comparisons. Group demand is strong, and increased airline capacity is expected to boost future performance.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
