Sunstone Hotel Investors (NYSE:SHO) raised its 2026 outlook after stronger-than-expected demand across its hotel portfolio helped lift third-quarter revenue and earnings. The hotel owner also said nearly $200 million in common and preferred stock repurchases this year had boosted per-share results.
Revenue per available room, or RevPAR, rose 11.4% across the portfolio in the third quarter, including a 1.1-percentage-point contribution from Andaz Miami Beach. Total RevPAR, which includes revenue beyond rooms, increased 10.5%. Adjusted EBITDAre rose 9% from a year earlier to $54.5 million, while adjusted funds from operations (FFO) per diluted share increased 18% to $0.20.
Chief Executive Officer Bryan Giglia said resorts led the portfolio for a fourth consecutive quarter, but urban hotels delivered the greatest outperformance relative to the company’s forecast. Total RevPAR at the urban properties grew 12.8%, supported by group events and corporate travel.
Full-year outlook rises
Sunstone now expects 2026 rooms RevPAR growth of 9.5% to 10.5%, a two-percentage-point increase at the midpoint from its prior outlook. The company forecasts rooms RevPAR of $245 to $247 and total RevPAR of $409 to $413.
Adjusted EBITDAre is projected at $254 million to $259 million, while FFO per diluted share is expected to range from $1.00 to $1.03. Chief Financial Officer Aaron Reyes said the forecast incorporates stronger hotel trends, lower corporate expenses and the effects of completed stock repurchases, but does not assume additional buybacks.
The outlook implies mid- to high-single-digit revenue growth in the fourth quarter, with approximately 1.5 percentage points of benefit from Andaz Miami Beach. Reyes said October was expected to be the strongest month for RevPAR growth and that preliminary results showed occupancy generally in line with expectations and rates slightly better.
Group bookings point to a stronger 2027
Giglia said portfolio-wide group pace for 2027 was up by a mid- to high-single-digit percentage. At Hilton San Diego Bayfront, group revenue pace was more than 10% higher than at the same point a year earlier, while Wailea Beach Resort’s group pace was up more than 20%.
Wailea’s third-quarter RevPAR grew nearly 27%, with occupancy rising 19 percentage points. The resort is completing repairs following storm damage earlier this year. President and Chief Investment Officer Robert Springer said nearly all of the several million dollars in incremental capital spending for the work is being reimbursed by insurance.
In Orlando, third-quarter group revenue production for future periods rose more than 40% and set a record for third-quarter booking activity, Giglia said. Reyes clarified that the figure measures quarterly booking production rather than 2027 group pace and can fluctuate from year to year.
Giglia said the company’s large group hotels in San Diego and Washington, D.C., had supplemented weaker event calendars this year with transient guests, who typically generate less profitable ancillary spending. A return to a more typical mix of group business should help margins next year, he said.
Comparable portfolio expenses rose 8.9% in the third quarter, and EBITDA margin expanded 50 basis points. Giglia estimated that, excluding renovation effects at Hilton Key West and several one-time items, margins would have increased nearly 200 basis points.
Buybacks and dividends
Sunstone sold the Hyatt Regency San Francisco in July at nearly 20 times trailing EBITDA, Giglia said. The company has since recycled about 70% of the sale proceeds into common and preferred stock repurchases.
Through the week of the call, Sunstone had repurchased approximately $143 million of common stock at an average price of $10.43 per share and nearly $54 million of preferred stock at an average of $21.03 per share, Reyes said. The preferred repurchases reduced annual dividend obligations by nearly $4 million on a run-rate basis.
Giglia said that, at current prices, future buyback efforts would focus on preferred rather than common shares. Sunstone also continues to assess acquisitions, particularly in the $50 million to $200 million range, while seeking to remain disciplined.
The board authorized a fourth-quarter common dividend of $0.09 per share. Giglia said Sunstone expects its 2027 quarterly distribution requirement to be between $0.11 and $0.12 per share, based on current expectations, and will revisit its dividend approach early next year.
About Sunstone Hotel Investors (NYSE:SHO)
Sunstone Hotel Investors, Inc (NYSE: SHO) is a real estate investment trust that owns and manages hotels in the United States. The company focuses primarily on upscale and upper-upscale properties located in major business, convention, and leisure destinations.
Sunstone’s portfolio includes full-service hotels operated under well-known hospitality brands as well as independent properties. Its hotels provide accommodations, restaurants and bars, meeting and event facilities, fitness amenities, and other services designed for business and leisure travelers.
The company has historically pursued ownership of institutional-quality lodging assets in markets with strong travel demand, including coastal gateway cities and popular resort and urban destinations.
