SHO-PH — Sunstone Hotel Investors, Inc.

Summary of Sunstone Hotel Investors, Inc. Q1 2026 Earnings Call

1. Key Financial Results and Metrics

• RevPAR Growth: Increased by 14.6% overall; 5.7% excluding Andaz Miami Beach.
• Adjusted FFO: Rose nearly 29% year-over-year to $0.27 per diluted share.
• Adjusted EBITDAre: Reached $68 million, an 18% increase from the previous year.
• Total RevPAR: Increased by 13.4%, benefiting from Andaz Miami Beach.
• Net Leverage: Stood at 3.5 times trailing earnings, with no debt maturities until 2028.
• Share Repurchase Activity: $35 million of common stock and over $14 million of preferred stock repurchased at a discount.

2. Strategic Updates and Business Highlights

• Performance: Strong group and transient business contributed to revenue growth, with resorts leading the portfolio with over 18% RevPAR growth.
• Andaz Miami Beach: Achieved 86% occupancy at a $564 rate, generating $6.5 million in EBITDA. Expected to continue strong performance with events like the World Cup.
• Capital Projects: Ongoing renovations in San Diego and Miami, including the opening of Bazaar restaurant expected to enhance group business and overall appeal.
• Market Trends: Positive transient demand noted across various markets, particularly in San Francisco and wine country resorts.

3. Forward Guidance and Outlook

• Revised Full-Year Guidance: Rooms RevPAR expected to increase between 5% to 7.5%, with total RevPAR projected between $390 to $400.
• Adjusted EBITDAre Guidance: Anticipated in the range of $238 million to $252 million.
• FFO per Diluted Share: Expected to range from $0.88 to $0.96.
• Cautious Optimism: While the first quarter was strong, the company remains cautious about potential external factors affecting travel demand and costs.

4. Bad News, Challenges, or Points of Concern

• Urban Portfolio Struggles: Urban RevPAR declined by 9.3%, impacted by tough comps from the previous year and weather-related disruptions.
• Weather-Related Headwinds: Severe storms affected operations, particularly in Hawaii, leading to additional repair costs and potential disruptions.
• Market Uncertainty: Concerns about heightened volatility and rising fuel prices could impact future performance.
• Group Cancellations: Some cancellations were noted due to weather events, although overall attrition is slightly improved compared to last year.

5. Notable Q&A Insights

• Growth Drivers: Management highlighted the ongoing ramp-up of Andaz Miami Beach and the potential for further growth in Maui and San Francisco.
• Transaction Market: Increased activity noted, particularly for luxury assets, with management open to capital recycling strategies.
• World Cup Impact: While there is potential for significant demand during the World Cup, management is taking a measured approach due to limited current bookings.
• Out-of-Room Spending: Strong performance in ancillary spending was reported, with both group and transient customers contributing positively.

Overall, Sunstone Hotel Investors demonstrated robust performance in Q1 2026, with positive revenue growth and strategic initiatives in place, although challenges in urban markets and external uncertainties remain points of concern.