Sunstone Hotel Investors Q2 Earnings Call Highlights

Sunstone Hotel Investors NYSE: SHO reported second-quarter results that exceeded its expectations, supported by summer leisure travel, special events, and continued strength in group and corporate demand. The company also raised elements of its full-year outlook after the quarter and the July sale of the Hyatt Regency San Francisco. Chief Executive Officer Bryan Giglia said portfolio RevPAR increased 9.3% from a year earlier during the second quarter. Excluding the ramping Andaz Miami Beach property, RevPAR grew 4.3%. Adjusted EBITDAre rose 6% year over year to $77 million, while adjusted funds from operations per diluted share increased 14% to $0.32. Sunstone’s resorts led portfolio performance, with combined RevPAR growth of nearly 27%, including the contribution from Andaz Miami Beach. Wailea Beach Resort posted nearly 15% RevPAR growth, while year-to-date occupancy rose 10 percentage points and EBITDA increased nearly 18% versus the prior year, according to Giglia. The company said group room-night production at Wailea for future periods was up 36% year to date, while 2027 group pace was up more than 10%. Its Wine Country resorts recorded 5% RevPAR growth, driven by improved group business. Andaz Miami Beach generated $2.8 million of EBITDA during the quarter on 72% occupancy and a $470 average rate. The company said it experienced less-than-expected occupancy compression from the World Cup, but expects a stronger fourth quarter as the local W Hotel is temporarily closed and Andaz prepares to open its Bazaar Meat restaurant during the fall high season. Urban hotels recorded combined RevPAR growth of 5.2%, primarily driven by rate growth. JW Marriott New Orleans benefited from group demand and strong out-of-room spending, with second-half group pace up by double digits. Boston Marriott Long Wharf also benefited from demand across group, corporate and leisure segments, including stronger-than-anticipated demand surrounding World Cup events. Among convention-oriented hotels, San Francisco continued to perform well, with RevPAR increasing 16% during the quarter. Giglia said World Cup-related rate compression in June added to an already favorable corporate transient demand environment, although he expects growth in the market to moderate through the remainder of the year.