Executive Summary

Q1 2025 delivered modest top-line growth with stronger margins and non-GAAP profitability: Total revenues rose 7.8% year over year to $234.1M, Total Portfolio RevPAR rose 2.2% to $221.63, and Hotel Adjusted EBITDA re margin expanded 110 bps to 26.0% . Adjusted FFO per diluted share increased 16.7% to $0.21 on cost control and ancillary revenue strength .
Guidance reset lower: FY2025 Net Income, RevPAR growth, Adjusted EBITDA re, and Adjusted FFO ranges were all reduced versus February, reflecting Andaz Miami Beach’s later opening, transient softness in San Diego, and near-term demand headwinds in Wailea (Maui) .
Estimates context: Q1 GAAP EPS materially beat S&P Global consensus; revenue missed. EPS actual ~$0.03 vs est ~$0.01; revenue actual $234.1M vs est $240.2M. EBITDA comparisons are definition-sensitive; company Adjusted EBITDA re was $57.3M, while S&P’s EBITDA framework shows a lower actual figure* *.
Strategic catalysts: Andaz Miami Beach opened May 3 and is expected to contribute $6–$7M of EBITDA in 2025 with the majority in Q4; management is leaning into accretive share repurchases and capital recycling given the NAV discount .

What Went Well and What Went Wrong

What Went Well
- Margin expansion and non-GAAP strength: Hotel Adjusted EBITDA re margin increased to 26.0%, with Adjusted EBITDA re up 5% to $57.3M and Adjusted FFO/share up 16.7% to $0.21 . CEO: “first quarter earnings…slightly ahead of expectations even on softer revenue growth” .
- Urban/convention market momentum: DC RevPAR +24% (inauguration), San Francisco RevPAR +9% on improved citywide calendar; group/business transient demand remained strong .
- Capital allocation and liquidity: $20.8M YTD common share repurchases at $8.90 average; extension of $225M Term Loan 3; ~$650M total liquidity including credit facility capacity .
What Went Wrong
- Guidance cut across key metrics: FY2025 RevPAR growth lowered by ~300 bps (portfolio) and 200 bps ex-Andaz; Adjusted EBITDA re and Adjusted FFO both reduced by ~$10M at midpoints .
- Resort softness in Maui and San Diego transient demand: Wailea ADR/occupancy down, RevPAR -12.4% YoY; San Diego saw “less robust” conditions near term .
- Andaz opening delays and pre-opening costs: Q1 included $3.3M of pre-opening costs; revised Andaz contribution ($6–$7M EBITDA in 2025) reduces earlier expectations by ~$2M .

Financial Results

Metric	Q3 2024	Q4 2024	Q1 2025
Total Revenues ($USD Millions)	$226.4	$214.8	$234.1
Net Income ($USD Millions)	$3.25	$0.84	$5.26
Adjusted EBITDA re ($USD Millions)	$53.57	$48.09	$57.26
Adjusted FFO per Diluted Share ($)	$0.18	$0.16	$0.21
GAAP EPS per Share ($)	—	$(0.02)	$0.01
Hotel Adj EBITDA re Margin (%)	24.9% (Comparable)	23.3% (Comparable)	26.0% (Portfolio)
RevPAR ($)	$207.56 (Comparable)	$199.07 (Comparable)	$221.63 (Portfolio)
ADR ($)	$301.69	$304.85	$316.16
Occupancy (%)	68.8%	65.3%	70.1%

Segment/Property Highlights (Q1 2025) | Property | Revenues ($USD Thousands) | Hotel Adjusted EBITDA re ($USD Thousands) | Margin (%) | |----------|---------------------------|-------------------------------------------|-----------| | Westin Washington DC Downtown | $24,724 | $7,534 | 30.5% | | JW Marriott New Orleans | $14,147 | $7,061 | 49.9% | | Wailea Beach Resort | $35,898 | $11,990 | 33.4% | | Marriott Long Beach Downtown | $8,613 | $1,915 | 22.2% | | Hyatt Regency San Francisco | $24,521 | $2,623 | 10.7% |
Non-GAAP adjustments: Q1 reconciling items included $3.253M pre-opening costs and $1.869M management transition costs; adjustments to EBITDA re totaled $6.946M .

Guidance Changes

Metric	Period	Previous Guidance	Current Guidance	Change
Net Income ($M)	FY2025	$46–$71	$33–$58	Lowered
Total Portfolio RevPAR Growth	FY2025 vs 2024	+7.0% to +10.0%	+4.0% to +7.0%	Lowered (~300 bps mid)
RevPAR Growth ex-Andaz	FY2025 vs 2024	+3.0% to +6.0%	+1.0% to +4.0%	Lowered (~200 bps mid)
Adjusted EBITDA re ($M)	FY2025	$245–$270	$235–$260	Lowered ($10M mid)
Adjusted FFO ($M)	FY2025	$175–$200	$165–$190	Lowered ($10M mid)
Adjusted FFO per Diluted Share ($)	FY2025	$0.86–$0.98	$0.82–$0.94	Lowered ($0.04 mid)
Diluted Weighted Avg Shares (M)	FY2025	203	201	Lowered (buybacks)

Assumptions unchanged: Interest income ($4–$5M), corporate overhead ($20–$21M), interest expense ($51–$54M incl. $1M noncash derivatives), preferred dividends ($16–$17M) .

Earnings Call Themes & Trends

Topic	Previous Mentions (Q3 2024, Q4 2024)	Current Period (Q1 2025)	Trend
Andaz Miami Beach conversion/opening	Timeline pushed (Feb 2025 target); project ~$95M; expected 2025 growth driver	Opened May 3; 2025 EBITDA expected $6–$7M (majority in Q4); luxury positioning with José Andrés concepts; booking window targets Q4/Q1 seasonality	Delayed but now live; ramp through late 2025–2026
Urban/convention recovery	Strong DC, Boston, San Francisco demand; group/business transient improving	DC RevPAR +24%; San Francisco RevPAR +9% on citywide; midweek transient growth indicates corporate travel strength	Improving
Maui (Wailea) dynamics	Slower recovery discussed; broader island recovery needed	Near-term softness as Kaanapali reopens; ADR/occupancy under pressure; expecting recovery later in 2025 with group pace up ~20%	Near-term headwinds; constructive medium-term
San Diego transient	Labor strike impacted Q4 2024	Transient softness Q1; recapture expected in H2 vs strike comps	Weak near term; better H2
Capital recycling/share repurchases	Repurchased ~$27M in 2024; added $100M term loan; hotels unencumbered	$20.8M YTD buybacks at $8.90; evaluate being net seller to fund repurchases given NAV discount	Ongoing; aggressive repurchase stance
Macro/visibility	Moderation in leisure demand	Heightened uncertainty; lower visibility; guidance made more conservative	Cautious stance
Tariffs/capex costs	Not highlighted	Recent tariff announcements could pressure future capex; 2025 projects largely pre-procured	Watch item

Management Commentary

Strategic message: “We are advancing the next chapter…with the debut of Andaz Miami Beach…positioned to deliver on our underwriting and provide earnings growth for the next several years” .
Cost discipline and portfolio quality: “Stronger ancillary revenue, better hotel expense management and savings at the corporate level offset lower rooms revenue growth” .
Capital allocation: “Repurchasing our shares at these levels equates to a highly compelling multiple…we will look to recycle additional capital into share repurchase, potentially through additional asset sales” .
Market color: “We generated RevPAR growth of 9% in San Francisco…encouraging…meaningful opportunity for additional earnings recovery” . “Wailea…near-term choppiness…group production…up nearly 20%…gives us reason to be optimistic” .

Q&A Highlights

Andaz Miami Beach ramp: Management expects $6–$7M EBITDA in 2025 with most in Q4; 60–70% of resort EBITDA typically occurs in Q4/Q1; booking window opening now supports late-year yield .
Guidance drivers: Andaz later opening (-$2M vs Feb), Maui moderation (~~-$4M), San Diego transient (~~-$2M) drove mid-point cuts; approach intentionally conservative given uncertainty .
Portfolio recycling and repurchases: Potential to be a net seller; recycle capital across both small and large assets; current best use of capital is repurchasing stock given NAV discount .
Regional views: Maui to normalize as airlift returns and Kaanapali fills; San Francisco trend positive with strong pace and business transient in Embarcadero/Financial District .

Estimates Context

Consensus vs Actual (Q1 2025) | Metric | S&P Global Consensus | Actual | Surprise | |--------|----------------------|--------|----------| | Primary EPS ($) | 0.01305* | 0.0315* | Beat (material) | | Revenue ($USD) | 240.16M* | 234.07M | Miss (modest) | | Primary EPS – # of Estimates | 3* | — | — | | Revenue – # of Estimates | 7* | — | — |

Values with asterisk were retrieved from S&P Global. Company-reported Adjusted EBITDA re was $57.26M ; note S&P’s EBITDA framework (estimate ~$54.27M, actual ~$48.75M*) may not match company “Adjusted EBITDA re” definitions.

Key Takeaways for Investors

Q1 execution beat internal expectations on margins and AFFO/share despite softer room revenue; mix and cost controls are mitigating macro volatility .
Guidance reset is driven by identifiable, near-term issues (Andaz opening slippage, Maui normalization, San Diego transient softness); H2 setup improves with strike lap and Andaz incremental contribution .
Andaz Miami Beach is a multi-year growth asset; luxury positioning and Q4/Q1 seasonal skew suggest accelerating contribution in late 2025 into 2026 .
Share repurchases remain a core capital allocation lever given NAV discount; management is open to asset sales to fund buybacks, supporting per-share value accretion .
Urban/convention exposure (DC, SF) is an earnings tailwind as group and business transient continue to recover; watch San Diego transient trend for inflection in H2 .
Maui headwinds should ease as Kaanapali completes reopening and airlift recovers; group pace strength underpins medium-term recovery at Wailea .
Trading lens: Near-term sentiment may hinge on H2 visibility and Andaz pacing; any evidence of stronger summer international demand or earlier Maui recovery would be a positive catalyst, while further macro softness could pressure RevPAR and warrant cautious positioning .

Dividends and Balance Sheet Notes

Q2 2025 common dividend $0.09/share; preferred distributions declared; paid July 15, 2025 to holders of record June 30, 2025 .
Liquidity: ~$149M cash (incl. restricted), $845M total debt; extended $225M Term Loan 3 to May 2026; no maturities before 2026 including options .

Additional Press Releases (Q1 2025)

Company scheduled Q1 2025 earnings call for May 6, 2025 . Primary Q1 results press release and supplemental filed May 6, 2025 .

Sunstone Hotel Investors, Inc. (SHO)·Q1 2025 Earnings Summary