Sotherly Hotels’ Earnings Call: Cautious Optimism for 2025

Sotherly Hotels ((SOHO)) has held its Q4 earnings call. Read on for the main highlights of the call.

Sotherly Hotels’ recent earnings call paints a picture of cautious optimism for the future. The company reported growth in RevPAR and revenue, highlighting strong performances in key hotels and strategic corporate activities. However, challenges such as the impact of Hurricane Helene and increased interest costs due to refinancing tempered some of the positive news. Despite these hurdles, projected growth in revenue and EBITDA for 2025, along with strategic renovations, supports a cautiously optimistic sentiment.

RevPAR Growth

The fourth quarter saw a 2.9% year-over-year increase in RevPAR, driven by a 7% rise in occupancy, although ADR decreased by 3.7%. Excluding the Tampa area, which was affected by a hurricane, RevPAR growth was even more robust at 5.8%.

Strong Performance in Key Hotels

Notable performances were recorded at the DoubleTree Resort in Hollywood, Florida, and The Whitehall in Houston, with RevPAR growth of 13.8% and nearly 50%, respectively. These increases were fueled by improvements in both occupancy and rates.

Corporate Activity and Renovations

Sotherly Hotels executed new ten-year franchise agreements with Hilton for properties in Philadelphia and Jacksonville. These agreements come with significant renovation budgets, indicating a strategic focus on enhancing property value and guest experience.

Revenue Growth

Total revenue for the fourth quarter increased by 4.3% year-over-year, and by 4.6% for the full year 2024. Hotel EBITDA for the quarter also saw a rise of 3.6%, underscoring the company’s solid financial performance.

Impact of Hurricane Helene

Hotel Alba in Tampa faced significant damage due to Hurricane Helene, affecting operations. These impacts are expected to continue through the second quarter of 2025, posing a challenge to the company’s recovery efforts.

Interest Rate Pressures

The refinancing of legacy loans at higher interest rates is anticipated to increase interest costs. This financial pressure is expected to impact FFO, despite operational improvements across the company’s portfolio.

Positive Guidance for 2025

Sotherly Hotels provided positive guidance for 2025, projecting total revenue to increase by 2.1%, with Hotel EBITDA expected to grow by 5.2%. Adjusted FFO is anticipated to rise by 16.4%. These forecasts consider the impact of refinancing activities and the ongoing recovery and growth across their portfolio, particularly in urban hotels.

In summary, Sotherly Hotels’ earnings call reflects a cautiously optimistic outlook, with strong performances in key markets and strategic corporate activities. While challenges such as hurricane impacts and interest rate pressures persist, the company’s forward-looking guidance suggests continued growth and recovery in the coming year.