Sotherly Hotels ((SOHO)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Sotherly Hotels’ recent earnings call painted a mixed picture, with strong performances in certain properties like Hyde Beach House and Hotel Ballast being overshadowed by broader negative trends. The company is grappling with RevPAR declines, significant impacts from reduced government travel, and overall revenue decreases. While there is proactive management of debt and some optimism for the latter half of the year, the challenges in the current economic climate are substantial.
Hyde Beach House Performance
Hyde Beach House emerged as a standout performer in the second quarter, surpassing both budgeted and prior year expectations. The property achieved a 12.7% increase in RevPAR, primarily driven by an impressive 18.5% gain in occupancy. This strong performance highlights the property’s ability to attract guests and maximize revenue despite broader market challenges.
Hotel Ballast in Wilmington
Hotel Ballast in Wilmington also posted solid results in Q2, with a year-over-year RevPAR increase of 1.3%. This growth was driven by a 2.7% gain in average rate, allowing the hotel to maintain a RevPAR index of 119.6% compared to its competitive set. The hotel’s ability to sustain its performance amidst economic uncertainties is noteworthy.
Proactive Debt Management
Sotherly Hotels is taking proactive steps to manage its debt maturities, including engaging a consultant to negotiate loan extensions for The Georgian Terrace Hotel in Atlanta. This strategic move is aimed at ensuring financial stability and flexibility in navigating the current economic landscape.
RevPAR Decline
The company’s composite portfolio experienced a 5.4% decline in RevPAR during Q2, driven by a 3.5% decrease in occupancy and a 1.9% decrease in ADR. This decline reflects the persistent impacts of economic uncertainty on the hospitality sector, posing challenges for revenue growth.
Government Travel Reductions
Government-related travel reductions, particularly due to DOGE program spending cuts, have notably impacted group and business traveler demand at Washington, D.C. MSA properties. This reduction in government travel has been a significant factor in the company’s overall performance decline.
Savannah RevPAR Drop
Savannah experienced a nearly 10% year-over-year decline in RevPAR, affected by reduced government business and softening leisure demand. This drop underscores the challenges faced by the company in maintaining revenue levels in certain markets.
Decreased Hotel EBITDA
Hotel EBITDA for Q2 was approximately $13.9 million, marking an 11.5% decrease from the same quarter in 2024. This decline in profitability highlights the financial pressures the company is facing amidst broader economic challenges.
Total Revenue Decrease
Sotherly Hotels reported a total revenue of approximately $48.8 million for Q2 2025, a decrease of 3.7% compared to the same quarter in 2024. The decline in revenue reflects the broader challenges impacting the company’s financial performance.
Forward-Looking Guidance
In its revised full-year guidance, Sotherly Hotels projects total revenue for 2025 to be in the range of $185.2 million to $188.2 million, representing a 2.6% increase from the prior year. However, Hotel EBITDA is anticipated to decrease by 2.6%, ranging from $45.3 million to $45.8 million. Adjusted Funds from Operations (FFO) is expected to range from $6.9 million to $7.5 million, or $0.34 to $0.37 per share. The guidance reflects the company’s anticipation of challenges such as economic uncertainty and government spending cuts, while also expecting stabilization in group bookings and confidence in managing debt maturities.
In conclusion, Sotherly Hotels’ earnings call reveals a company navigating through a challenging economic environment. While certain properties like Hyde Beach House and Hotel Ballast show strong performances, the overall sentiment is tempered by declines in RevPAR and revenue, alongside significant impacts from reduced government travel. The company’s proactive debt management and revised guidance indicate a strategic approach to addressing these challenges and positioning for future stability.