IRVINE, CA—Sunstone Hotel Investors Inc. reported a 25.7% drop in RevPAR to $131.94 in the first quarter of 2020, compared with $177.62 in the same period last year. Net loss was $162.5 million as compared to net income of $17.9 million in the first quarter of 2019. Excluding the impairment loss recognized during the first quarter of 2020, net loss would have been $47.2 million.
Occupancy for the first quarter of 2020 was 60.1% compared with 78.9% a year ago, while ADR dropped to $219.54 from $225.12 in the same period last year.
As of May 8, 14 of the company’s 20 hotels have temporarily suspended operations. The properties that were in operation for the entire month of April were Boston Park Plaza; Embassy Suites La Jolla, Renaissance Long Beach and Renaissance Los Angeles Airport in California; Hilton Times Square in New York; and Renaissance Harborplace in Baltimore.
“Our strong balance sheet and liquidity position provide us with a long runway to endure this unprecedented operating environment,” said John Arabia, president/CEO, Sunstone Hotel Investors Inc. “After taking the difficult, but necessary, steps to protect the company and to maximize liquidity, we have turned our attention to the future. We are working with our operators to modify hotel operations to adapt to, and best compete in, a new environment and we continue to work with our group customers to rebook or sell new group meetings at most of our hotels.”
He added, “With our financial strength, significant expertise, and strong partnerships with our operators and capital providers, I am confident in our ability to weather this historic storm. I greatly look forward to reopening our hotels, getting the talented and hard-working hotel teams back to work and welcoming our guests to our hotels and resorts as soon as appropriate.”
Recent Developments
Due to the prevailing government-mandated restrictions on travel and public gatherings since the outbreak of COVID-19, Sunstone has experienced a material reduction in all segments of hotel demand. The company estimates that approximately $34.6 million of March 2020 revenue was lost due to group cancellations, with an additional $33.5 million lost in April. As a percentage of budgeted group room nights, cancellations for the second and third quarters of 2020 equate to 72% and 18%, respectively, and the company has not experienced any meaningful group cancellations in the fourth quarter.These figures could increase depending on the duration of travel restrictions and how quickly group customers return. Additionally, both business transient and leisure business have all but ceased in April. Sunstone recognized $10.1 million of additional expenses since the outbreak of COVID-19 during the first quarter, related to wages and benefits for furloughed or laid-off hotel employees.
Impairment Losses
During the first quarter of 2020, Sunstone recorded a total impairment loss of $115.4 million, including $107.9 million on the Hilton Times Square and $5.2 million on the Renaissance Westchester in West Harrison, NY, related to deteriorating profitability exacerbated by the effect of the COVID-19 outbreak. In addition, the company recorded an impairment loss of $2.3 million related to the abandonment of a potential project to expand one of its hotels.
Balance Sheet/Liquidity Update
As of March 31, the company had $900.9 million of cash and cash equivalents, including restricted cash of $53.5 million; total assets of $3.8 billion, including $2.8 billion of net investments in hotel properties; total consolidated debt of $1.3 billion; and stockholders’ equity of $2.3 billion. Excluding the proceeds received from the $300 million draw on its credit facility, Sunstone had $600.9 million of cash and cash equivalents, including restricted cash of $53.5 million.
