Sunstone Hotel Investors ((SHO)) has held its Q4 earnings call. Read on for the main highlights of the call.
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Sunstone Hotel Investors demonstrated a resilient and optimistic outlook in their latest earnings call, reflecting on a robust financial performance for 2024. Despite facing some operational challenges, such as delays in renovation projects and labor disruptions, the company has effectively maintained a strong liquidity position and is poised for continued growth in 2025.
Strong Financial Performance
Sunstone Hotel Investors reported a full-year adjusted EBITDA of $230 million and FFO of $0.80 per diluted share, both at the high end of their guidance. These figures underscore the company’s strong financial foundation and ability to deliver on its commitments, reinforcing investor confidence.
Successful Asset Acquisition
The acquisition of the Hyatt Regency San Antonio Riverwalk, a 630-room property, for $222 million was a key highlight. This acquisition, reflecting a 9% capitalization rate on 2024 earnings, is a strategic move to enhance the company’s portfolio and bolster future revenue streams.
Capital Return to Shareholders
In 2024, Sunstone returned nearly $100 million to shareholders through dividends and share repurchases, with a total of $190 million repurchased over three years. This commitment to returning capital underscores the company’s dedication to enhancing shareholder value.
Positive Market Trends
The company benefited from strong group business, with significant RevPAR and group room nights growth in locations such as Westin Washington D.C. and Hyatt Regency San Antonio. These positive trends indicate a healthy demand in key markets, supporting future growth prospects.
Strong Liquidity Position
Sunstone ended the year with nearly $700 million in total liquidity and no debt maturities until 2026. This robust liquidity position provides a solid foundation for the company to navigate uncertainties and capitalize on growth opportunities.
Challenges in Miami Beach
The opening of Andaz Miami Beach faced delays due to permitting and approval processes. While this posed a challenge, the company remains focused on resolving these issues to capitalize on future opportunities in this market.
Labor Strike Impact
San Diego experienced disruptions due to a labor strike, which affected performance. Despite this, the company is working to mitigate the impact and restore normal operations.
Higher Wage and Benefit Costs
Sunstone anticipates higher wage and benefits costs, expected to be at the higher end of 4% to 6% in 2025, due to recent collective bargaining agreements. This reflects an industry-wide trend and necessitates strategic cost management.
Positive Outlook for 2025
The company projects total portfolio RevPAR growth of 7% to 10% and EBITDAre growth of 12% for 2025. Sunstone aims to leverage strong group business demand and a potential leisure rebound in key markets like Maui. With plans to invest $80 million to $100 million in capital projects, the company expects minimal earnings disruption and a balanced distribution of quarterly growth.
Looking forward, Sunstone Hotel Investors is optimistic about its growth trajectory, despite navigating some challenges. The company’s strong financial performance, strategic asset acquisitions, and robust liquidity position set a positive tone for 2025. With a focus on maintaining shareholder value and navigating market trends, Sunstone is well-positioned for continued success.
