Sotherly Hotels Q2 2025 Earnings Call Summary

1Key Financial Results and Metrics

Total Revenue: Approximately $48.8 million, a decrease of 3.7% year-over-year.

Year-to-Date Total Revenue: Approximately $97.1 million, down 0.1% from the same period in 2024.

Hotel EBITDA: Approximately $13.9 million, a decline of 11.5% year-over-year; year-to-date Hotel EBITDA is approximately $26.8 million, down 4.4%.

Adjusted FFO: Approximately $4.8 million, down $2.7 million from Q2 2024; year-to-date adjusted FFO is approximately $9.3 million, down $3.4 million.

RevPAR: Decreased 5.4% for the quarter, with a 3.5% decrease in occupancy and a 1.9% decline in ADR. Year-to-date RevPAR decreased 0.5%.

Debt: Total outstanding debt of approximately $315.8 million at a weighted average interest rate of 5.89%.

2Strategic Updates and Business Highlights

The company is focusing on disciplined cost management and targeted revenue strategies to navigate economic uncertainty.

Hotel Alba in Tampa is undergoing repairs due to Hurricane Helene, with a return to normal operations expected soon.

Notable performances included Hotel Ballast in Wilmington with a 1.3% RevPAR increase and Hyde Beach House with a 12.7% RevPAR increase, driven by strong leisure demand.

The company is actively managing debt maturities, particularly for assets in Atlanta and Hollywood, and is working on loan extensions.

3Forward Guidance and Outlook

Total Revenue Guidance: Projected between $185.2 million and $188.2 million for full year 2025, reflecting a 2.6% increase at the midpoint.

Hotel EBITDA Guidance: Expected to be between $45.3 million and $45.8 million, indicating a 2.6% decrease at the midpoint.

Adjusted FFO Guidance: Projected between $6.9 million and $7.5 million, or $0.34 to $0.37 per share.

The company expects RevPAR for the actual portfolio to be approximately flat compared to last year.

4Bad News, Challenges, or Points of Concern

Overall performance was impacted by economic uncertainty, inflation, and reduced government-related travel due to DOGE program spending cuts.

Savannah and Atlanta markets were notably affected, with Savannah experiencing a nearly 10% decline in RevPAR.

The company faces challenges in the debt market, with elevated interest rates and stricter lending conditions affecting refinancing efforts.

There is a cautious outlook due to macroeconomic headwinds, including inflation and geopolitical uncertainties, which could dampen consumer and corporate sentiment.

5Notable Q&A Insights

Savannah was highlighted as having an outsized negative impact due to a combination of reduced transient travel and significant government-related business.

The company does not expect further declines in government and leisure segments but anticipates a rebound in group bookings for the second half of the year.

There are ongoing discussions about potential asset sales, including parking facilities, to raise liquidity.

The mortgage market remains challenging for hotels, with lenders maintaining higher debt yield requirements compared to pre-pandemic levels, although there are signs of stabilization. Overall, Sotherly Hotels is navigating a complex operating environment with a focus on strategic asset management and cautious optimism for recovery in group bookings, despite facing significant macroeconomic challenges.