Sunstone Hotel Investors (NYSE:SHO) reported fourth-quarter results that exceeded management’s expectations, citing broad-based strength across its portfolio and continued progress on a three-part strategy focused on capital recycling, portfolio investment, and returning capital to shareholders.
Fourth-quarter performance topped expectations
Chief Executive Officer Bryan Giglia said the portfolio “finished the year on a high note” despite industry headwinds in 2025. The company reported total RevPAR growth of 7.4% in the fourth quarter, or 12.5% including the contribution from Andaz Miami Beach. Chief Financial Officer Aaron Reyes added that rooms RevPAR grew 9.6% in the quarter, including a 540 basis point benefit from Andaz Miami Beach, while total RevPAR growth benefited by 510 basis points from Andaz.
Resorts led, with Maui and Miami Beach in focus
Management pointed to resorts as the strongest-performing segment in the quarter and said it expects that leadership to continue into 2026, supported by a full-year contribution from Andaz Miami Beach.
- Wailea Beach Resort (Maui): Giglia said the property delivered 19% RevPAR growth in the fourth quarter as conditions improved following demand normalization earlier in the year. In Q&A, he said the hotel’s occupancy index improved to “over 100%” by year-end and that the company expects stabilization around 110. He also said group pace is down due to a piece of business rotating off-island, but transient pace was up about 53% and helped offset the shortfall.
- Andaz Miami Beach: Giglia said year-end results were ahead of expectations and that early 2026 performance has remained strong. He cited year-to-date occupancy above 80% at a mid-$500 rate, nearly 8,000 group room nights already booked (more than half the budgeted total), and upcoming openings including Bazaar Meat and a membership Beach Club. President and Chief Investment Officer Robert Springer said early 2026 RevPAR was nearly $475, with encouraging booking velocity and progress in attracting group business. In Q&A, management indicated an expectation for Miami to generate “low to mid-teens” EBITDA in 2026.
- Wine Country: Giglia said Montage Healdsburg posted 15% total RevPAR growth in the quarter and “just over” 9% for the year. In Q&A, he said Four Seasons’ results were impacted by a nearby fire in the third quarter that “trickled into the fourth quarter,” estimating roughly $1 million of EBITDA impact. He added that Four Seasons group pace was up about 22% and Montage’s transient pace was up about 25%.
Urban and convention hotels: mixed demand, improving cost discipline
In urban markets, management highlighted strength in Long Beach and Portland, while noting softer conditions in Boston and New Orleans. Giglia said the Marriott Long Beach Downtown delivered 12% total RevPAR growth, while Portland’s Bidwell Marriott grew nearly 13%. He said margins improved at urban hotels as operators focused on cost control.
Convention hotels posted better-than-expected results with 2.8% RevPAR growth, even with renovation-related headwinds in San Antonio and San Diego. Excluding those two properties, convention hotel RevPAR growth was 5.3%. Giglia called San Francisco “once again a standout performer,” contributing to more than 12% total RevPAR growth for the year, and said group pace is up in the “low double-digit range” with a strong start to 2026 that included January group activity and the Super Bowl in February.
He added that the Renaissance Orlando at SeaWorld delivered more than 10% total RevPAR growth on a better business mix, and that group revenue production in Orlando increased over 10% last year. Conversely, management reiterated that Washington, D.C. was impacted by government spending cuts, policy changes, and a government shutdown, while San Diego faced softer transient demand and a less constructive environment for international travel. In Q&A, Giglia said the first two months of 2026 have been “pretty promising” in San Diego, including signs of defense-contractor-related transient demand picking up.
Margins, balance sheet, and capital allocation
Giglia said cost pressures were significant in 2025 due to inflation and contractual escalators, but the company delivered comparable portfolio margin growth of 40 basis points for the year on total RevPAR growth of 3.5%, which he described as better than expected. In Q&A, management discussed expense expectations of roughly 3% for the comparable portfolio, with labor growth moderating into the “3s,” energy prices rising, and uncertainty around insurance renewals (June) and property tax normalization. Reyes said total expense growth including Andaz could be around 5% due to the full-year inclusion in 2026.
On the balance sheet, Reyes said net leverage was 3.5x trailing earnings (or 4.7x including preferred equity). In January, Sunstone drew the remaining $90 million on a previously arranged term loan and used most proceeds to repay its Series A Notes at maturity, leaving no debt maturities through 2028. The company ended the quarter with more than $200 million in cash and cash equivalents (including restricted cash), and total liquidity of over $700 million including revolver capacity.
Sunstone also emphasized shareholder returns. Giglia said the company returned more than $170 million in 2025 via dividends and share repurchases. Reyes said that since the start of 2025 through mid-week, Sunstone repurchased about $108 million of common stock at a blended price of $8.83 per share and bought $3.1 million of preferred stock at a blended price of $20.46 per share, or an 18% discount to liquidation value. The board reauthorized the repurchase program back to $500 million, though the 2026 outlook does not assume additional common buybacks. The board also authorized a $0.09 per share common dividend for the first quarter, alongside routine preferred distributions.
In Q&A, Reyes addressed the company’s Series G preferred (issued in connection with the Montage acquisition), noting the yield is tied to the greater of hotel yields or a fixed rate, currently 6.5%. He said the preferred is callable at the company’s discretion and can be redeemed in pieces, and that management expects to manage overall preferred balances such that preferred dividends in 2026 do not rise versus 2025.
2026 guidance: growth expected, but caution remains
Reyes said the company is optimistic but “remain[s] cautious” early in 2026. Sunstone guided to portfolio rooms RevPAR growth of 4% to 7% (to $234 to $241), including an estimated 400 basis point contribution from Andaz Miami Beach at the midpoint. The company also introduced total RevPAR guidance, projecting growth of 3.5% to 6.5% (to $385 to $396), with a similar 400 basis point midpoint contribution from Andaz.
Adjusted EBITDAre is expected to range from $225 million to $250 million. Reyes said that excluding one-time items and an asset sale that together contributed about $10 million to 2025 results, the midpoint implies about 5% earnings growth. FFO per diluted share is projected at $0.81 to $0.94, which management said implies 8% growth at the midpoint when adjusting for those one-time items, aided by share repurchases.
Management expects the first quarter to be the strongest growth quarter of the year, with first-quarter RevPAR and total RevPAR growth above the high end of the full-year ranges, as Andaz and Maui strength more than offset difficult comparisons in D.C. (inauguration) and New Orleans (Super Bowl) from the prior year. For capital spending, management cited 2026 CapEx guidance of $95 million to $115 million, with the largest component being roughly $25 million related to phased meeting space work in San Diego, and said spending will be front-loaded with about a third occurring in Q1.
About Sunstone Hotel Investors (NYSE:SHO)
Sunstone Hotel Investors, Inc (NYSE:SHO) is a publicly traded real estate investment trust (REIT) focused on acquiring, owning and asset‐managing upper‐upscale extended‐stay and premium‐branded hotel properties in the United States. The company’s business model centers on generating stable, long‐term cash flows through franchise agreements and third‐party management contracts with established hotel operators.
As of the most recent reporting period, Sunstone’s portfolio includes approximately 97 hotels and nearly 25,000 guest rooms across 19 states, with concentrations in major metropolitan and select high‐growth secondary markets.
