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Mar 31, 2020
Sunstone Q1 2020 Earnings Report
Sunstone's Q1 2020 earnings were impacted by the COVID-19 pandemic. The company focused on maintaining liquidity, managing expenses, and positioning itself for future opportunities.
Key Takeaways
Sunstone Hotel Investors reported a challenging first quarter due to the COVID-19 pandemic, with significant impacts on hotel operations and revenue. The company suspended operations at 14 of its 20 hotels and implemented cost-saving measures to preserve liquidity. Despite the difficulties, Sunstone is focused on methodically reopening hotels and positioning itself to capitalize on future market opportunities, leveraging its strong balance sheet and relationships with capital partners.
Suspended operations at 14 of 20 hotels to mitigate financial losses due to COVID-19.
Drew down $300 million on the credit facility and seeking covenant relief.
Expects a monthly cash burn rate of $28 to $32 million in the current environment.
Maintained hotel executive teams and sales professionals to preserve relationships and prepare for reopening.
Forward Guidance
Sunstone expects a gradual recovery in travel demand, with drive-to leisure demand likely to recover first, followed by commercial transient business and a delayed recovery in large group business. They anticipate reopening some hotels in June and July, with modified operating standards to address health and safety concerns.
Positive Outlook
- Drive-to leisure demand is expected to recover fairly quickly.
- There is significant pent-up demand to travel and vacation.
- Hotel sales teams grew portfolio room nights on the books for 2021 and 2022.
- New group business was booked for all future years, showing that customers are looking to the future.
- Conservative leverage profile gives the company the safety to weather a no-revenue environment.
Challenges Ahead
- Group cancelations have increased meaningfully due to shelter-in-place orders.
- Approximately 72% of second quarter budgeted group room nights have been canceled.
- Recovery is likely to be gradual, with low occupancies expected for some time.
Historical Earnings Impact
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Avg. Return Before/After Earnings
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