Sunstone Hotel Investors, Inc. (NYSE:SHO) Q4 2022 Earnings Call Transcript

Floris Van Dijkum: The — as I look at this, I mean, it looks — you’ve made — a couple of your hotels are really firing on all fronts. I mean if I look at the Wailea and the Hilton San Diego Bayfront, both of them are ahead of ’19 levels of EBITDA. So very encouraging. Obviously, you’ve got some downtime you have to take into consideration for the redevelopment of the new ANDAs. But your RevPAR prognosis for a 30% to 32% in the first quarter and, call it, 10% to 15% for the year, looks pretty attractive. That implies rising potential margins throughout the year as well, which, again, positive EBITDA growth. I’m just curious — the — and I know it’s been touched upon a couple of times already, but the wine country assets, I mean, if I look at the yield on cost, it’s very, very minutes last year in terms of EBITDA. I mean that would imply to get your target returns, EBITDA would have to more than triple. What sort of time frame do you expect that, that could happen?

Bryan Giglia: Yes. I mean that’s going to happen different rates at the 2 different hotels. But to ask — to answer your first question, the expectation this year is that you will see meaningful EBITDA growth at both hotels. Again, the group component is a big piece of it. And if you look at that pace, it’s — look, these were 2 brand-new luxury hotels that opened up into a fantastic leisure compression market and then have to readjust their models to bring in the right mix. And we think we’ve accomplished that or at least we’re very far along the way there. And then there are different components to each hotel, Montage has starting at the end of this year or beginning of next year, the residences that are separate, but can participate in the hotel program open up.

That’s going to be another leg of growth for Montage. And then in Four Seasons, as we continue to establish it, it will continue to grow, too. But our — to your point, our expectation is, is that the 2 hotels are going to grow, call it, 40 to — somewhere 40 and 150% of where they were in the previous year. So that growth is happening. It’s somewhat of a step function. But when we look at where we have the hotels set up from a group perspective, what their group contribution is, the fact that both were awarded 5 diamond status, which is very important in the luxury world. Our confidence in our conviction on these hotels is as strong as it ever was. And when it comes to value and value creation, these hotels are going to serve our shareholders very well.

Operator: We have no further questions. I would like to turn the call back over to Bryan Giglia for closing remarks.

Bryan Giglia: We’d like to thank everyone for their interest in the company and look forward to meeting with many of you over the coming couple of months at the various conferences coming up. Thank you.

Operator: This concludes today’s conference call. Thank you for your participation. You may now disconnect.