SOHO — Sotherly Hotels Inc.

Summary of Sotherly Hotels Q2 2025 Earnings Call

1. Key Financial Results and Metrics

• Total Revenue: Approximately $48.8 million, down 3.7% year-over-year.
• Year-to-Date Total Revenue: Approximately $97.1 million, a slight decrease of 0.1%.
• Hotel EBITDA: Approximately $13.9 million for the quarter, down 11.5% year-over-year; year-to-date EBITDA at approximately $26.8 million, down 4.4%.
• Adjusted FFO: Approximately $4.8 million, a decrease of $2.7 million from Q2 2024; year-to-date adjusted FFO at approximately $9.3 million, down $3.4 million.
• RevPAR: Decreased 5.4% for the quarter, with a 3.5% drop in occupancy and a 1.9% decline in ADR. Excluding the impact of Hurricane Helene on Tampa, RevPAR decreased 5% year-over-year.

2. Strategic Updates and Business Highlights

• Operational Challenges: The portfolio faced headwinds from economic uncertainty, reduced government-related travel due to DOGE program spending cuts, and cautious consumer behavior amid inflation.
• Portfolio Performance: Hotel Ballast in Wilmington showed a 1.3% RevPAR increase, while Hyde Beach House outperformed expectations with a 12.7% RevPAR increase, driven by leisure demand.
• Cost Management: The company is focusing on disciplined cost management and targeted revenue strategies to navigate the current environment.
• Debt Management: Engaged a consultant to negotiate loan extensions for The Georgian Terrace Hotel and is actively managing upcoming debt maturities.

3. Forward Guidance and Outlook

• Full Year 2025 Guidance: Total revenue projected between $185.2 million and $188.2 million, indicating a 2.6% increase at the midpoint. Hotel EBITDA expected in the range of $45.3 million to $45.8 million, representing a 2.6% decrease. Adjusted FFO projected between $6.9 million and $7.5 million.
• Market Outlook: Group booking pace remains healthy, with expectations for gradual recovery as market conditions stabilize. Full year RevPAR expected to be flat compared to the previous year.

4. Bad News, Challenges, or Points of Concern

• Declining Metrics: Overall performance impacted by a pullback in government-related travel and cautious consumer behavior, particularly in markets like Savannah and Atlanta.
• Economic Headwinds: Elevated interest rates, inflation, and tariff-related policies continue to create uncertainty and affect demand.
• Operational Disruptions: Ongoing repairs at Hotel Alba due to Hurricane Helene have affected operations and financial performance.
• Mortgage Market Challenges: Difficulty in refinancing and stricter lending conditions persist, affecting the company's ability to manage debt effectively.

5. Notable Q&A Insights

• Savannah's Performance: The market experienced significant RevPAR declines due to reduced transient travel and unexpected government-related impacts on group bookings.
• Government Business Impact: A notable portion of group business is indirectly tied to government funding, leading to hesitancy in bookings.
• Future Expectations: While group bookings are expected to rebound, government-related business is anticipated to remain stable, and leisure demand is assessed on a market-by-market basis.
• Asset Management: The company is exploring asset sales, including the parking garage in Atlanta, to raise liquidity and manage debt effectively.

Overall, Sotherly Hotels is navigating a challenging economic landscape with a focus on strategic cost management and proactive asset management while maintaining a cautious yet optimistic outlook for the remainder of 2025.