• Full Year EBITDA: $230 million.
• Full Year FFO per Share: $0.80 per diluted share.
• Net Purchase Price for Hyatt Regency San Antonio Riverwalk: $222 million.
• RevPAR Growth at Westin Washington DC: 30% driven by an 18% increase in group room nights.
• Group Room Nights Growth at Hyatt Regency San Antonio Riverwalk: Nearly 7% in the quarter.
• RevPAR Growth at New Orleans Hotels: Nearly 20% in the fourth quarter.
• RevPAR Growth at Marriott Long Beach Downtown: 45% compared to the fourth quarter of 2023.
• Capital Investment in 2024: $157 million.
• Net Debt and Preferred Equity to Trailing EBITDA: 4.3 times as of year-end.
• 2025 RevPAR Growth Outlook: 7% to 10% compared to 2024.
• 2025 Adjusted EBITDAre Guidance: $245 million to $270 million.
• 2025 Adjusted FFO per Share Guidance: $0.86 to $0.98.
• Quarterly Common Dividend: $0.09 per share for the first quarter.

• Warning! GuruFocus has detected 7 Warning Sign with SHO.

Release Date: February 21, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sunstone Hotel Investors Inc (NYSE:SHO) achieved full year adjusted EBITDA and FFO per share at the high end of their guidance for 2024.
• The acquisition of the Hyatt Regency San Antonio Riverwalk at a 9% capitalization rate is expected to provide significant growth opportunities.
• The company successfully completed the conversion of the Marriott Long Beach Downtown, which is showing promising early performance.
• $Sunstone Hotel Investors Inc(SHO-I)$ (NYSE:SHO) returned nearly $100 million to shareholders in 2024 through dividends and share repurchases.
• The company maintains a strong liquidity position with nearly $700 million in total liquidity, providing flexibility for future investments.

Negative Points

• The Andaz Miami Beach project faced delays due to a challenging permitting process, impacting its expected contribution to earnings.
• Labor strikes in San Diego caused disruptions, affecting the company's performance in that region.
• Rising costs, including contractual wage rate increases, are expected to impact margins in 2025.
• The transaction market in 2024 was challenging, limiting opportunities for capital recycling and acquisitions.
• The company anticipates less interest income on cash balances in 2025 due to changes in deposit rates.

Q & A Highlights

Q: Can you discuss the underlying demand segment assumptions within the 7% to 10% RevPAR guidance, excluding the Andaz contribution? How are you thinking about leisure growth, group contribution, and business transient (BT) within that range? A: The RevPAR guidance is based on feedback from our hotels. Group demand is solid, pacing above 10% for the year. Business transient shows continued strength with slight improvements in certain markets. Leisure demand is expected to mirror last year, with potential upside in Maui and Orlando. The leisure segment presents the most potential risk or upside in the 2025 guidance.

Q: What was the pace of wage and benefits increases in 2024 at the property level, and what are your expectations for 2025? A: Historically, wages and benefits have increased between 4% and 6%. In 2024, the increase was in the mid-4% range. With several collective bargaining agreements settled, including in San Diego and San Francisco, we expect wage increases to be at the higher end of that range in 2025, before moderating in 2026 and 2027.

Q: You mentioned Andaz Miami Beach's EBITDA would be about $8 million to $9 million this year. How do you anticipate the ramp in 2026 for that asset? A: The ramp will start at around 20% occupancy in March, reaching 50% in Q2 and Q3, and 70% in the high season of Q4. For 2026, we expect to easily double the 2025 EBITDA, with further stabilization in 2027 reaching high 20s in millions.

Q: Can you provide an update on the operational improvements at your Napa assets and what's embedded in the 2025 guidance for these hotels? A: In 2024, we saw over $3 million in EBITDA growth at both hotels due to cost management and optimizing group mix. For 2025, we anticipate continued group base building and expect another couple of million dollars in EBITDA growth at each hotel, with potential upside from leisure demand.

Q: Regarding the recovery in Maui, what's embedded in the low and high end of your guidance range for this year? A: We expect solid group demand with about 35,000 group room nights targeted for this year. Leisure demand is anticipated to lift in the second half, with potential upside if travel to the island increases during spring break and summer.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.