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Sotherly Hotels Inc. (SOHO)·Q2 2025 Earnings Summary

Executive Summary

  • Q2 2025 saw softer demand and rate pressure: total revenue was $48.79M (-3.8% YoY), diluted EPS was -$0.02 (vs $0.13 in Q1), and Hotel EBITDA was $13.89M (-11.5% YoY) .
  • Against S&P Global consensus, revenue missed (Actual $48.79M vs $51.80M consensus*), driven by RevPAR down 5.4% (occupancy -3.5 pts to 70.8%, ADR -1.9% to $183.88) and government-related travel pullbacks; Tampa’s restoration and BI insurance partially mitigated profitability headwinds .
  • Management reduced full-year 2025 guidance: Hotel EBITDA to $45.34–$45.82M (from $48.83–$49.62M), Adjusted FFO/share to $0.34–$0.37 (from $0.57–$0.61), and RevPAR to $115.98–$117.15 (from $119.77–$122.89) .
  • Balance sheet/liquidity actions include addressing a maturity default at Georgian Terrace (~$38M) and a signed agreement to sell the co-located parking garage for $17.75M (target close Q4) to support refinancing and liquidity; quarter-end cash $26.5M and debt principal $315.8M (5.89% WA rate) .
  • Near-term stock reaction catalysts: guidance cut on EBITDA/FFO and visibility commentary around government-related demand, tariffs, and refinancing progress (including the garage sale closing) .

What Went Well and What Went Wrong

  • What Went Well

    • Hyde Beach House posted strong outperformance: RevPAR +12.7% YoY on occupancy +18.5% (ADR -4.9%), supported by spring break leisure and FIFA Club World Cup demand; diversified revenue streams bolstered profitability .
    • Hotel Ballast Wilmington exceeded budget: RevPAR +1.3% YoY driven by ADR +2.7% with only a modest occupancy decline; strong group and banquet/catering revenue .
    • Rate discipline held despite macro headwinds, indicating resilience among higher-income customers; BI insurance proceeds at Hotel Alba partly offset the temporary operational disruption from Hurricane Helene .

  • What Went Wrong

    • Composite portfolio RevPAR fell 5.4% YoY on occupancy -3.5 pts and ADR -1.9%; hotel EBITDA margin declined ~2.5% YoY, reflecting softness in Savannah, Atlanta, and Jacksonville .
    • Government-related spending cuts weighed on group/business demand across DC MSA (Arlington/Laurel) and association-heavy markets (Savannah/Atlanta), with more cautious consumer behavior amid persistent inflation and tariff uncertainty .
    • DoubleTree Philadelphia Airport saw RevPAR -5.3% YoY (ADR -6%), largely due to absence of prior-year one-time events; broader portfolio underperformed expectations given softening demand and macro volatility .

Financial Results

MetricQ4 2024Q1 2025Q2 2025 ActualQ2 2025 Consensus*
Revenue ($USD)$43,951,508 $48,312,344 $48,794,143 $51,800,000*
Diluted EPS ($)-$0.16 $0.13 -$0.02 N/A*
Hotel EBITDA ($USD)$10,667,747 $12,920,801 $13,892,353 N/A*
RevPAR (Composite) ($)$108.99 $129.74 $130.20 N/A*
Occupancy (Composite) (%)64.1% 68.8% 70.8% N/A*
ADR (Composite) ($)$170.10 $188.49 $183.88 N/A*

Values retrieved from S&P Global*

Segment/KPIs

  • Portfolio KPIs (Composite):
    • Occupancy: 70.8% (Q2 2025) vs 73.4% (Q2 2024)
    • ADR: $183.88 (Q2 2025) vs $187.51 (Q2 2024)
    • RevPAR: $130.20 (Q2 2025) vs $137.67 (Q2 2024)

Property Highlights (YoY, Q2 2025)

  • Hyde Beach House: RevPAR +12.7%, occupancy +18.5%, ADR -4.9%
  • Hotel Ballast Wilmington: RevPAR +1.3%, ADR +2.7%, occupancy -1.3%
  • DoubleTree Philadelphia Airport: RevPAR -5.3%, ADR -6%; budget beat despite market ADR softness

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Total Revenues ($M)FY 2025$183.39–$188.17 $185.16–$188.17 Raised low end
Net (Loss) Income ($M)FY 2025-$0.676 to $0.129 -$1.230 to -$0.624 Lowered
Net Loss Attrib. to Common ($M)FY 2025-$8.651 to -$7.846 -$9.205 to -$8.599 Lowered
EBITDA ($M)FY 2025$41.88–$42.70 $42.50–$43.03 Slightly raised
Hotel EBITDA ($M)FY 2025$48.83–$49.62 $45.34–$45.82 Lowered
FFO ($M)FY 2025$10.54–$11.34 $5.90–$6.51 Lowered
Adjusted FFO ($M)FY 2025$11.54–$12.35 $6.92–$7.52 Lowered
Net Loss per Share ($)FY 2025-$0.43 to -$0.39 -$0.46 to -$0.43 Lowered
FFO per Share/Unit ($)FY 2025$0.52–$0.56 $0.29–$0.32 Lowered
Adjusted FFO per Share/Unit ($)FY 2025$0.57–$0.61 $0.34–$0.37 Lowered
RevPAR ($)FY 2025$119.77–$122.89 $115.98–$117.15 Lowered
Hotel EBITDA Margin (%)FY 202526.1%–26.4% 24.1%–24.2% Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4 2024 and Q1 2025)Current Period (Q2 2025)Trend
Government-related demandQ1: Caution; lower volume/cancellations linked to government funding; international leisure softness Pullback in gov-related travel affecting DC MSA (Arlington/Laurel), association-heavy markets (Savannah/Atlanta); reduced banquet/catering spend; “Doge” program cuts impacting group pace Worsened in Q2; management assumes steady state forward
Tariffs/macro uncertaintyQ1: Increasing caution on demand; sentiment volatility Tariff-related policies and inflation weighed on leisure and booking behavior (shorter windows, lower length of stay) Persistent headwind
Tampa (Hotel Alba) hurricane recoveryQ4: Fully operational; BI proceeds ongoing Ongoing restorations; BI insurance mitigated financial impact; full normalization expected later in the month Nearing normalization
Group paceQ4/Q1: Improvement in slow-recovery urban markets; no major pauses Q2 production down 7%; back half bookings healthy; expect YoY improvement in H2 Near-term dip; H2 improving
Debt/refinancing actionsQ4: Refinanced/extended multiple mortgages Addressing maturities; consultants engaged; Georgian Terrace maturity default; parking garage sale to aid refinancing/liquidity Active de-risking
Pricing strategy/rate disciplineQ1: Portfolio lean ops; margin improvement Rate discipline held despite demand softness; higher-end traveler resilience Resilient rates amid softness

Management Commentary

  • CFO: “For the second quarter, total revenue was approximately $48,800,000 (-3.7% YoY)... Hotel EBITDA approximately $13,900,000 (-11.5% YoY)... adjusted FFO approximately $4,800,000” .
  • CFO: “As of 06/30/2025... total cash approximately $26,500,000... principal balances approximately $315,800,000... weighted average interest rate 5.89%... capex plan $7,100,000 for 2025” .
  • CEO: “We witnessed a deceleration in hotel demand... macro headwinds including elevated interest rates and tariff-related policies... business transient steady; group pace intact with only minor reductions... cautious outlook but portfolio well positioned; expect full-year RevPAR approximately flat” .
  • CEO (press release): “We remain cautious... changing interest rate picture and certainty around macro forces may be catalysts; monetizing the Atlanta parking garage expected to add to liquidity” .

Q&A Highlights

  • Government-related exposure: Analysts probed Savannah’s outsized impact; management cited transient softness and surprising breadth of government-linked funding across associations/education groups; hesitant banquet/catering spend and stalled leads contributed .
  • Guidance trajectory: Management re-forecasted the year incorporating current trends; expects group to rebound in H2, government to stay steady until “unlock,” leisure outcomes vary by market .
  • Capital sources/asset sales: Options include parking assets and hotel equity taps; asset sale possible if necessary, though not preferred .
  • Mortgage market conditions: Debt yields and DSCR covenants remain tougher vs pre-pandemic; signs of easing (rates, yields) emerging, which could aid lodging borrowers .

Estimates Context

  • Q2 2025 revenue missed consensus: Actual $48.79M vs $51.80M consensus*; implies approximately a $3.01M shortfall driven by RevPAR -5.4% YoY and macro/government headwinds .
  • EPS consensus not available from S&P Global for Q2 2025; EBITDA consensus estimate not available (S&P reported actual only)*.
  • Likely estimate revisions: Lowered FY revenue/RevPAR and Hotel EBITDA guidance suggest downward revisions to EBITDA/FFO and per-share metrics for FY 2025, particularly given updated ranges in the 8-K .

Values retrieved from S&P Global*

Key Takeaways for Investors

  • Revenue and Hotel EBITDA trends softened in Q2, with a meaningful miss vs revenue consensus; watch for H2 group recovery and whether gov-related demand stabilizes .
  • Full-year guidance reset lower on Hotel EBITDA, FFO, RevPAR, and margin; the magnitude of the cut points to estimate downgrades and a reset in FY expectations .
  • Operational resilience: Rate discipline and high-end traveler demand supported ADR; select assets (Hyde Beach House, Ballast) demonstrate market-specific strength .
  • Balance sheet/liquidity: Parking garage sale (Q4 target) and refinancing actions are near-term catalysts; monitor Georgian Terrace resolution and broader debt market easing .
  • Tampa restoration and BI proceeds mitigated quarter impact; normalization should improve run-rate operations into H2 .
  • Macro drivers (tariffs, inflation, lender caution) remain key variables; any interest rate relief or tariff clarity would be constructive for demand and financing .
  • Preferred dividends remain active; common equity optics hinge on FFO trajectory and execution on refinancing/liquidity events .