SHO-PI — Sunstone Hotel Investors, Inc.

Sunstone Hotel Investors (SHO-PI) Q4 2025 Earnings Call Summary

1. Key Financial Results and Metrics

• Total RevPAR Growth: 7.4% in Q4, 12.5% including Andaz Miami Beach.
• Rooms RevPAR: Grew 9.6% in Q4, with a 540 basis point contribution from Andaz.
• Adjusted EBITDAre: $57 million for Q4.
• Adjusted FFO: $0.20 per diluted share.
• Full Year Adjusted EBITDAre: Expected to be between $225 million and $250 million for 2026.
• FFO Guidance: Projected between $0.81 and $0.94 per diluted share for 2026.
• Net Leverage: 3.5x trailing earnings, 4.7x including preferred equity.
• Liquidity: Over $700 million total liquidity, including cash and credit facility.

2. Strategic Updates and Business Highlights

• Strategic Objectives: Focus on recycling capital, investing in the portfolio, and returning capital to shareholders.
• Capital Recycling: Completed the sale of Hilton New Orleans and reinvested proceeds into stock repurchases.
• Portfolio Performance: Strong results from resorts, particularly Wailea Beach Resort (19% RevPAR growth) and Andaz Miami Beach, which is expected to drive future growth.
• Capital Projects: Renovations completed at Wailea Beach Resort and ongoing improvements in San Diego and Orlando.

3. Forward Guidance and Outlook

• 2026 RevPAR Guidance: Expected to increase between 4% and 7%, with total RevPAR growth projected at 3.5% to 6.5%.
• First Quarter Outlook: Anticipated to be the strongest growth quarter due to contributions from Andaz and improved performance in Maui.
• Expense Growth: Expected around 3% for the comparable portfolio, with total expenses projected to grow about 5% when including Andaz.
• Capital Expenditures: Guidance of $95 million to $115 million, with significant spending on meeting space renovations in San Diego.

4. Bad News, Challenges, or Points of Concern

• Market Headwinds: Continued uncertainty in D.C. and softer transient demand in San Diego could impact performance.
• Expense Pressures: Rising costs due to labor and energy prices, along with potential increases in property taxes and insurance.
• Transient Demand Risks: Concerns about the sustainability of transient demand in key markets, particularly in D.C. and San Diego.
• Competitive Pressures: Ongoing competition in urban markets and potential impacts from macroeconomic factors.

5. Notable Q&A Insights

• Market Recovery: Management expressed cautious optimism regarding recovery in Maui and D.C., citing improved transient demand.
• Transaction Activity: Indications of a potential uptick in asset sales, with a focus on luxury and cash-flowing assets.
• Operational Impacts: Management noted that ongoing renovations in San Diego and D.C. could temporarily affect operations but are expected to yield long-term benefits.
• CapEx Allocation: Significant portion of CapEx will be directed towards completing renovations in San Diego, with other projects spread throughout the year.

Overall, Sunstone Hotel Investors demonstrated strong performance in Q4 2025, with positive momentum heading into 2026, despite facing several market challenges and uncertainties. The company remains focused on strategic capital management and operational efficiency to drive future growth.