SOHOO — Sotherly Hotels Inc.

Sotherly Hotels Q2 2025 Earnings Call Summary

1. Key Financial Results and Metrics:

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

2. Strategic Updates and Business Highlights:

• The company is focusing on disciplined cost management and targeted revenue strategies amid economic uncertainty and softening demand.
• Hotel Alba in Tampa is undergoing repairs due to Hurricane Helene, with a full return to normal operations expected soon.
• Hotel Ballast in Wilmington and Hyde Beach House reported strong performances, with RevPAR increases of 1.3% and 12.7%, respectively.
• The company is actively managing debt maturities and has engaged a consultant for loan negotiations regarding The Georgian Terrace Hotel.

3. Forward Guidance and Outlook:

• Full-year 2025 total revenue is projected between $185.2 million and $188.2 million, reflecting a 2.6% increase at the midpoint.
• Hotel EBITDA is expected to range from $45.3 million to $45.8 million, indicating a 2.6% decrease at the midpoint.
• Adjusted FFO is projected between $6.9 million and $7.5 million, or $0.34 to $0.37 per share.
• Group booking pace remains healthy, with expectations for a gradual recovery in demand as market conditions stabilize.

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

• The portfolio underperformed due to a pullback in government-related travel and cautious consumer behavior amid inflation and economic uncertainty.
• RevPAR declines were particularly pronounced in Savannah, with a nearly 10% drop year-over-year attributed to reduced transient travel and government-related business impacts.
• The overall operating environment is challenging, with ongoing issues related to elevated interest rates and tariff policies affecting demand.
• The mortgage market remains difficult for hotels, with lenders cautious due to high debt yields and tougher covenants compared to pre-pandemic conditions.

5. Notable Q&A Insights:

• Savannah's performance was impacted by both transient travel declines and unexpected government-related business pullbacks.
• Group bookings are expected to rebound in the second half of the year, while government-related demand is anticipated to stabilize at current levels.
• The company is exploring additional asset sales to raise liquidity, including potential sales of parking facilities.
• There is cautious optimism regarding the mortgage market for hotels, with expectations for stabilization and potential improvements in lending conditions.

Overall, while Sotherly Hotels is navigating a challenging environment with declining metrics in certain areas, there are signs of resilience in group bookings and a proactive approach to managing debt and operational challenges.