Executives for Sunstone Hotel Investors say a strengthening investment market is allowing the company to unlock value while its properties continue to benefit from healthy travel demand.
The Aliso Viejo, California-based lodging real estate investment trust reported second-quarter earnings Thursday that exceeded expectations and prompted management to raise its full-year outlook.
The improved guidance comes as the pricing gap between buyers and sellers gets smaller, creating opportunities for rebounding deal activity after two years of elevated interest rates slowed sales.
In June, Sunstone completed the $279 million sale of the 821-room Hyatt Regency San Francisco to Blackstone Real Estate, a move executives said demonstrates how improving transaction markets are allowing hotel owners to monetize assets at valuations that exceed where many hotel REIT shares trade.
Even so, Sunstone isn't declaring victory. Executives said geopolitical uncertainty, economic policy changes and shifting consumer confidence remain risks heading into the second half of the year. The company also increased its 2026 capital spending budget from $105 million to $115 million after severe storms damaged portions of its Wailea Beach Resort in Hawaii, although management expects insurance to reimburse most of those costs.
Sunstone increased its full-year growth forecast for revenue per available room, or RevPAR, to 7% to 9% from its prior expectation of 5% to 7.5%, citing stronger-than-expected second-quarter results and healthy booking trends even while maintaining what Chief Executive Bryan Giglia called “a degree of caution.”
Capital recycling
Executives also pointed to improving group demand in San Diego following meeting space renovations, continued momentum in Maui and Miami, and the July conversion of Oceans Edge Resort & Marina into the Hilton Key West Resort & Marina.
Sunstone also continued reshaping its portfolio and balance sheet. In addition to selling the Hyatt Regency San Francisco, the REIT repurchased about $70 million of common and preferred stock this year at prices management said represented a meaningful discount to the company's underlying asset value.
Giglia said interest from buyers during the Hyatt Regency San Francisco marketing process reinforced management's belief that private investors are once again willing to pay prices that exceed public market valuations for high-quality hotel properties.
“The interest we saw in our San Francisco sale process was encouraging and reflects continued momentum,” he said. “The environment looks to be more conducive to further executing our capital recycling strategy and continuing to demonstrate the value of our portfolio.”
By the numbers
For the second quarter ended June 30, Sunstone reported net income of $26 million, compared with $10.8 million a year earlier. RevPAR increased 9.3% to $263.61, average daily rates rose 5.1% to $339.71, and occupancy improved to 77.6%.
For the first six months of 2026, net income reached $41.9 million, compared with $8.2 million during the same period last year. RevPAR increased 11.7% to $259.15.