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Sunstone Hotel Investors, Inc. (SHO)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 2025 was in-line operationally: Total revenues $229.323M, RevPAR up 2.0% to $216.12, Adjusted EBITDA re $50.052M, and Adjusted FFO/share $0.17; GAAP EPS was $(0.02) given preferred dividends .
  • Versus Wall Street: Revenue modestly beat by ~$2.54M*, EPS beat by $0.002*, while EBITDA missed consensus ($4.36M*) as the company’s “EBITDA re” differs from standard EBITDA; results tracked company expectations amid mixed markets. Values retrieved from S&P Global.
  • FY25 outlook maintained: Net income $14–$28M, RevPAR growth +3–5% (ex-Andaz +1–3%), Adjusted EBITDA re $226–$240M, Adjusted FFO $156–$170M, and dividend of $0.09 declared; interest/other income assumption raised to $8–9M .
  • Balance sheet/recap catalyst: Amended $1.35B credit facilities extended maturities to 2029–2031 and lowered borrowing costs; liquidity ~$700M (nearly $200M cash plus undrawn revolver) supports share repurchases and optionality .

What Went Well and What Went Wrong

What Went Well

  • San Francisco outperformed with >15% RevPAR growth; Marriott Boston Long Wharf delivered a 47% hotel EBITDA margin (+~110 bps YoY), highlighting cost control and urban margin resilience .
  • Liquidity and capital flexibility improved: $1.35B amended credit agreement extended maturities to 2030–31, lowered borrowing costs, and positioned Series A notes repayment via delayed draw in Jan 2026; no maturities until 2028 .
  • Andaz Miami Beach ramp: weekly transient bookings pacing at >1,000 room nights, strong Q1’26 group on the books, positioning for meaningful growth into 2026; management reaffirmed ramp targets .

What Went Wrong

  • Resorts softer: Wailea (Maui) and Florida Keys faced weaker leisure demand; Four Seasons Napa Valley saw cancellations from the Picket Fire, creating a 50 bps RevPAR drag and ~$1M earnings headwind .
  • Government-related demand remained subdued in Washington, D.C.; San Antonio meeting space renovation disrupted Q3 performance, with Hyatt Regency San Antonio Riverwalk RevPAR down and margins compressing .
  • Portfolio margins compressed: Total portfolio hotel Adjusted EBITDA re margin fell 200 bps YoY to 23.0% (ex-Andaz −70 bps to 24.6%) amid mixed demand and ramp costs at Andaz .

Financial Results

Core P&L and Lodging KPIs (chronological order: prior year → current)

MetricQ3 2024Q1 2025Q2 2025Q3 2025
Total Revenues ($USD Millions)$226.392 $234.065 $259.772 $229.323
Diluted EPS ($)$0.00 $0.01 $0.03 $(0.02)
Adjusted EBITDA re ($USD Millions)$53.567 $57.256 $72.682 $50.052
Adjusted FFO per Diluted Share ($)$0.18 $0.21 $0.28 $0.17
RevPAR ($)$211.96 $221.63 $241.22 $216.12
Occupancy (%)69.2% 70.1% 74.6% 70.3%
ADR ($)$306.30 $316.16 $323.35 $307.43

Actual vs Consensus (Q3 2025)

MetricConsensusActualSurprise
Revenue ($USD)$226.782M*$229.323M +$2.541M*
Primary EPS ($)$(0.0198)*$(0.02) +$0.0020*
EBITDA ($USD)$50.178M*$45.819M*−$4.359M*

Values retrieved from S&P Global.

Selected Property-Level Performance (Q3 2025 vs Q3 2024)

HotelRevenues Q3’25 ($M)Hotel Adj. EBITDA re Q3’25 ($M)Margin Q3’25 (%)Margin Δ YoY (bps)
Hilton San Diego Bayfront$49.359 $15.576 31.6% +560
Hyatt Regency San Francisco$25.597 $3.086 12.1% +180
Marriott Boston Long Wharf$19.607 $9.178 46.8% +110
Wailea Beach Resort$28.238 $7.836 27.7% −330
Andaz Miami Beach$5.312 $(2.494) (47.0%) — (ramp)

Balance Sheet and Liquidity KPIs

MetricQ3 2025
Cash and Cash Equivalents ($USD Millions)$197.6 (incl. restricted cash)
Total Debt ($USD Millions)$930.0
Stockholders’ Equity ($USD Billions)~$2.0
Liquidity ($USD Millions)~$700 (cash + undrawn revolver)

Guidance Changes

MetricPeriodPrevious Guidance (Aug 6)Current Guidance (Nov 7)Change
Net Income ($M)FY 2025$14–$28 $14–$28 Maintained
Total Portfolio RevPAR GrowthFY 2025+3% to +5% +3% to +5% Maintained
RevPAR Growth ex-AndazFY 2025+1% to +3% +1% to +3% Maintained
Adjusted EBITDA re ($M)FY 2025$226–$240 $226–$240 Maintained
Adjusted FFO ($M)FY 2025$156–$170 $156–$170 Maintained
Adjusted FFO/Share ($)FY 2025$0.80–$0.87 $0.80–$0.87 Maintained
Diluted Shares (M)FY 2025195 195 Maintained
Interest & Other Income ($M)FY 2025$5–$6 $8–$9 Raised by ~$3M
Common Dividend ($/share)Q4 2025—$0.09 declared (payable Jan 15, 2026) Announced

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1 & Q2 2025)Current Period (Q3 2025)Trend
Andaz Miami Beach rampOpened in May; slower near-term ramp; weekly bookings accelerating; targeting strong 2026 Transient bookings pacing >1,000/week; strong Q1’26 group; profitability tracking expectations Improving trajectory into 2026
Government demand (D.C.)Subdued government volume cited as a headwind Continued subdued government demand affecting D.C. Persistent headwind
San Francisco marketBetter-than-expected performance Standout with >15% RevPAR growth; positive 2026 setup Strengthening
Maui (Wailea Beach Resort)Weaker leisure demand; optimism for recovery Turning positive: Sept/Oct RevPAR up; index improving towards ~110 Recovering
Transaction marketActive capital recycling; NOLA sale; buybacks Market remains depressed; improving pricing rationalization; exploring disposals/acquisitions; openness to alternatives Gradual thaw, still limited for large deals
Capex~$80–$100M FY25; Andaz conversion; Wailea soft goods San Antonio meeting-space renovation completed; Bayfront renovation starting; normalize to ~$80M go-forward Normalizing spend

Management Commentary

  • “Operating results in the third quarter reflected many of the same trends… San Francisco… helped to offset a more price-sensitive leisure traveler and subdued government-related demand… earnings for the quarter were in line with our expectations as stronger ancillary spend and better cost controls offset softer room revenue growth.” — CEO Bryan Giglia .
  • “We completed an amendment and restatement of our bank debt… extended our average maturity by three years and lowered our overall borrowing costs… will not have any debt maturities until 2028.” — CFO Aaron Reyes .
  • “We remain committed to addressing the valuation discount… will continue to explore all avenues to realize the value of our exceptional portfolio.” — CEO Bryan Giglia .

Q&A Highlights

  • Outlook/Q4: Mid-single-digit total RevPAR expected; Andaz contributes ~400–500 bps to Q4 growth; EBITDA near low-$50M midpoint depending on shutdown effects .
  • Transactions: Buyer pool stronger for smaller assets; 2026 outlook needs improved forward expectations/pricing adjustment; continued asset recycling and buybacks at NAV discounts .
  • Andaz ramp: 2026 EBITDA range viewed achievable; occupancy building to high-60s/70% in Q4; strong market events (CFB Championship, FIFA, F1) support 2026 .
  • Group pace: ~80% room nights on the books across year-end; pace up low-to-mid-single digits; strength in Orlando, Boston, Miami Beach, San Francisco, Wine Country .
  • Ancillary revenue: Out-of-room spend (banquet/AV/F&B, fees, spa, parking) outpaced rooms, lifting total RevPAR by 50–75 bps vs rooms RevPAR for FY25 .
  • Capex: Normalizing toward ~$80M annually with strategic meeting-space refreshes; no large cyclical projects at big hotels in 2026 .

Estimates Context

  • Q3 2025 revenue beat consensus by ~$2.54M*, EPS beat by ~$0.002*, while EBITDA missed by ~$4.36M* as S&P’s EBITDA measure is not directly comparable to the company’s Adjusted EBITDA re. Values retrieved from S&P Global.
  • Estimate revisions into Q4 likely bias flat-to-slightly higher on RevPAR and out-of-room spend, while EBITDA/FFO pathways remain tightly tied to Andaz ramp and D.C./Maui recovery commentary .

Key Takeaways for Investors

  • Portfolio resiliency with targeted strength (San Francisco, Boston) and improving resorts (Maui) supports maintained FY25 outlook; near-term comp/mix headwinds persist in D.C./Florida Keys .
  • Liquidity and extended maturities de-risk the balance sheet; delayed draw allocates to 2026 notes repayment, removing maturities until 2028 — supportive of buybacks or selective transactions .
  • Andaz Miami Beach is the swing factor: ramp is tracking, with strong Q1’26 group; watch Q4 occupancy/ADR cadence and 2026 bookings for proof points .
  • Operational focus on ancillary revenue and cost discipline is cushioning margin compression; monitor hotel-level margin performance, especially at Bayfront, Long Wharf, and Wine Country .
  • Capital allocation optionality: Management open to disposals, acquisitions, and broader strategic alternatives; smaller-asset market more liquid — potential near-term recycling could fund accretive buybacks .
  • Near-term trading drivers: Q4 RevPAR delivery (mid-single-digit), Andaz ramp evidence, and any transaction/buyback updates; macro sensitivities include government shutdown impacts on demand .
  • Medium-term thesis: Improving urban/group mix, resort recovery, and Andaz stabilization into 2026–27, supported by extended debt maturities and disciplined capital allocation .

Citations: Q3 2025 8-K and press release ; Supplemental package –; Q3 2025 earnings call –; Q2 2025 press release –; Q1 2025 press release –.