Sunstone Q3 2026 Earnings: RevPAR Growth Supports Higher Outlook

Sunstone Hotel Investors (NYSE: SHO) reported third-quarter 2026 revenue of $233.7 million, up approximately 1.9% from $229.3 million, while GAAP diluted EPS attributable to common stockholders improved to $0.21 from a loss of $0.02. Portfolio RevPAR increased 11.4% and adjusted FFO per diluted share rose 17.6%, although a $31.5 million asset-sale gain also provided a substantial lift to GAAP earnings. Sunstone raised its full-year 2026 outlook following the quarter.

Core Earnings Data

For the quarter ended September 30, reported revenue grew modestly, but hotel operating metrics and company-defined non-GAAP earnings increased more quickly. Net income attributable to common stockholders reached $38.7 million, compared with a $2.9 million loss a year earlier.

The GAAP profit comparison was affected by the asset-sale gain. Adjusted EBITDAre and adjusted FFO, which exclude specified items and are intended to reflect ongoing operations, increased 8.8% and 17.1%, respectively.

Hotel Portfolio Performance

Revenue per available room, or RevPAR, rose 11.4% to $235.22. Both components contributed: occupancy increased 460 basis points to 72.7%, while average daily rate advanced 4.4% to $323.55. Total RevPAR increased 10.5% to $394.97.

The comparison remained favorable after excluding Andaz Miami Beach, which underwent a major renovation during 2025 and therefore distorts year-over-year comparisons. On that basis, RevPAR increased 10.3%, occupancy rose 410 basis points to 73.8%, and average daily rate increased 4.2%. Total RevPAR excluding Andaz advanced 9.6%.

Profitability, Liquidity, and Capital Allocation

The total portfolio Hotel Adjusted EBITDAre margin increased 80 basis points to 25.1%. Excluding Andaz Miami Beach, the margin expanded 50 basis points to 26.7%. Sunstone said that excluding Hilton Key West Resort & Marina, which was being renovated, and one-time items in both periods, the margin would have increased by approximately 200 basis points.

Interest expense declined to $10.7 million from $13.4 million, while corporate overhead decreased to $6.4 million from $7.0 million. These changes supported earnings alongside the improvement in hotel operations, though the asset-sale gain was a major contributor to the GAAP profit increase.

Sunstone ended September with $317.9 million of cash and cash equivalents, including $81.4 million of restricted cash. Total liquidity was $817.9 million, including full availability under a $500 million revolving credit facility. Gross debt was $955 million at a weighted-average interest rate of 5.22%, including the effect of derivative swaps entered into in October, with no maturities until January 2028.

Capital allocation remained active. Sunstone repurchased $117.8 million of common and preferred stock during the quarter, including 9.37 million common shares for $103 million at an average price of $10.99. Repurchases from the beginning of 2026 through November 5 totaled $196.9 million, leaving $310.6 million under the authorization.

The company invested $76.6 million in its portfolio during the first nine months of 2026. It expects full-year investment of approximately $105 million to $115 million, mainly for projects at Hilton San Diego Bayfront, Hilton Key West Resort & Marina, Wailea Beach Resort, and other hotels.

Asset Sales Muted Revenue Growth and Lifted GAAP Earnings

The gap between reported revenue growth and portfolio operating growth largely reflects hotel dispositions. Revenue from sold hotels declined to $8.6 million from $25.6 million. After removing sold-hotel revenue, total portfolio hotel revenue increased 10.5% to $225.2 million from $203.7 million, far above the approximately 1.9% increase in reported revenue.

The disposals also affected earnings in the opposite direction. Sunstone recorded a $31.5 million gain on asset sales, helping GAAP net income rise much faster than adjusted earnings. The company sold Hyatt Regency San Francisco in July 2026, while the prior-year figures included Hilton New Orleans St. Charles before its June 2025 sale. Investors therefore need to separate changes in the asset base and disposition gains from the underlying performance of the remaining hotels.

Full-Year 2026 Guidance

Sunstone raised every major earnings and hotel-growth range in its full-year outlook. The new guidance incorporates stronger third-quarter performance and management’s revised expectations for near-term operating trends.

Andaz Miami Beach is expected to contribute approximately 450 basis points to both full-year RevPAR and Total RevPAR growth. The lower projected share count also supports the per-share guidance following Sunstone’s repurchase activity.

Management Perspective

Management attributed the quarter’s performance to broad-based demand across customer segments and contributions from recent investments. CEO Bryan Giglia also pointed to a robust group booking pace, further recovery in certain markets, and additional benefits from investment activity as encouraging indicators for 2027.

Management characterized the combination of hotel sales and security repurchases as a way to redeploy capital while preserving the company’s leverage profile. Sunstone stated that common shares were repurchased at a discount to consensus net asset value estimates, while Series H and Series I preferred shares were repurchased at discounts of 13.9% and 17.7%, respectively, to liquidation value.

Recent Insider Transactions

The supplied six-month insider summary showed four purchase transactions totaling 98,936 shares and one sale of 89,631 shares, resulting in net purchases of 9,305 shares, or 0.30%. The only transaction with a reported non-zero amount in the latest records was a sale by President Robert C. Springer.

The other nine latest records supplied were stock awards reported at $0.00 per share—eight director awards dated May 1, 2026, and one award to CEO Bryan Giglia dated February 11, 2026. These compensation awards should not be treated as open-market purchases.

Risks Investors Should Watch

• Dependence on Andaz Miami Beach’s contribution: Approximately 450 basis points of full-year RevPAR and Total RevPAR growth is expected to come from Andaz, making its post-renovation performance important to the raised outlook.
• Renovation and restoration costs: Work at Hilton Key West and storm-related restoration at Wailea Beach Resort require capital and affected the quarter’s underlying margin comparison. Full-year portfolio investment is expected to reach $105 million to $115 million.
• GAAP earnings comparability: The $31.5 million asset-sale gain materially boosted quarterly net income and does not represent recurring hotel operations.
• Debt and interest costs: Sunstone has $955 million of gross debt and projects full-year interest expense of $46 million to $49 million. The absence of maturities until January 2028 reduces near-term refinancing pressure but does not eliminate interest-rate exposure.
• Economic and demand uncertainty: Management said changes in economic policy, geopolitical conditions, business sentiment, or consumer sentiment could require further revisions to the outlook.

Summary

Sunstone’s remaining hotel portfolio delivered higher occupancy, room rates, RevPAR, and adjusted earnings in the third quarter, prompting management to raise its full-year outlook. Reported revenue growth was restrained by hotel sales, while the related disposition gain amplified GAAP profit growth. The main items to monitor are the Andaz Miami Beach contribution, margins during ongoing renovations and restoration work, and how Sunstone balances portfolio investment, repurchases, and its existing debt load.