SHO — Sunstone Hotel Investors, Inc.

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

1. Key Financial Results and Metrics:

• RevPAR Growth: Overall RevPAR increased by 14.6% in Q1, with a 5.7% increase excluding Andaz Miami Beach. Total RevPAR rose by 13.4%.
• Adjusted FFO: Adjusted FFO per diluted share was $0.27, up nearly 29% year-over-year.
• Adjusted EBITDAre: Reached $68 million, an 18% increase from the previous year.
• Balance Sheet: Net leverage stands at 3.5 times trailing earnings, with no debt maturities until 2028. The company repurchased over $19 million in preferred stock at a 21% discount.

2. Strategic Updates and Business Highlights:

• Performance Across Portfolio: Strong results were driven by solid group and transient business, particularly in resort locations. The Wailea Beach Resort and wine country resorts showed significant RevPAR growth.
• Andaz Miami Beach: Achieved 86% occupancy with a $564 rate, contributing $6.5 million in EBITDA. The hotel is expected to continue its growth trajectory with upcoming events like the World Cup.
• Capital Investments: Ongoing renovations, including the completion of meeting space in San Diego and the opening of the Bazaar restaurant in Miami, are anticipated to enhance revenue generation.
• Share Repurchase Strategy: Continued repurchase activity is planned as the company aims to enhance shareholder value.

3. Forward Guidance and Outlook:

• Revised Guidance: Rooms RevPAR is now expected to increase between 5% to 7.5% for the full year, with total RevPAR projected at $390 to $400.
• Earnings Projections: Adjusted EBITDAre is forecasted between $238 million to $252 million, with 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 the remainder of the year due to external uncertainties.

4. Bad News, Challenges, or Points of Concern:

• Urban Hotel Performance: Urban portfolio RevPAR declined by 9.3%, impacted by tough comps from the previous year and weather-related disruptions.
• Weather-Related Disruptions: Severe storms in March affected operations, particularly at the Wailea Beach Resort, leading to additional repair costs and potential business interruptions.
• Market Uncertainties: Heightened volatility and rising fuel prices could pose risks to travel demand and operational costs.

5. Notable Q&A Insights:

• Growth Drivers: Management highlighted ongoing opportunities for growth at Andaz and other resorts, emphasizing the potential for rate increases as the market stabilizes.
• Transaction Market Activity: Increased equity capital is leading to more luxury assets being marketed, which could present acquisition opportunities for the company.
• Group Business Trends: While group cancellations were noted, the overall group pace is expected to improve in the second half of the year, with strong transient demand supporting recovery.
• World Cup Impact: Management remains measured about the World Cup's potential impact, with expectations for increased transient bookings but no significant changes to guidance at this time.

Overall, Sunstone Hotel Investors reported a strong Q1 performance, driven by robust revenue growth in resorts, while navigating challenges in urban markets and external uncertainties. The company remains focused on strategic investments and shareholder returns amidst a cautiously optimistic outlook for the remainder of 2026.