Sunstone Hotel Investors, Inc. Segments Disclosure
14. Segment Information
The Company considers each of its hotels to be an operating segment and allocates resources and assesses the operating performance for each hotel individually. The Company has aggregated its hotels into a single reportable segment, Hotel Ownership, based on the following aggregation criteria:
| ● | All of the Company’s hotels offer similar products and services to their customers in the form of hotel rooms, food and beverage, and ancillary services; |
| ● | The Company utilizes third-party hotel management companies to deliver its products and services to its customers across all of its hotels; |
| ● | The Company’s hotels are designed and operated to appeal to similar individuals, groups, leisure, and business customers that travel to its hotels; and |
| ● | The Company’s third-party hotel managers utilize the same methods (direct hotel sales and various online booking portals) to distribute the Company’s products and services across all of its hotels. |
The Company’s Chief Operating Decision Maker (“CODM”) is its Chief Executive Officer. The CODM reviews and makes decisions on all facets of the Company’s business using all available financial and non-financial data for each hotel individually. Capital allocation decisions to acquire, sell, enhance, redevelop, or perform renewal and replacement expenditures are determined on a hotel-by-hotel basis. Specifically, the CODM reviews the results of each hotel to assess the hotel’s profitability. The CODM does not use aggregated data by brand, property type, or geography to formulate the Company’s operating and investment strategy, to manage its business, or to make decisions about resource allocation. The key measure the CODM uses to allocate resources and assess performance is individual hotel net income (loss) before interest expense, income taxes, depreciation, and amortization for REITs,
adjusted to exclude the following items that are not reflective of its ongoing operating performance or incurred in the normal course of business (“Hotel Adjusted EBITDAre”):
| ● | Business interruption insurance proceeds; |
| ● | Property-level hurricane-related restoration expenses and legal fees; |
| ● | Pre-opening costs associated with extensive renovation projects; |
| ● | Property-level legal settlements, restructuring, severance, and management transition costs; |
| ● | Taxes assessed on commercial rents; and |
| ● | Other nonrecurring identified adjustments. |
The following tables include revenues, significant hotel operating expenses, and Hotel Adjusted EBITDAre for the Company’s hotels, reconciled to the consolidated amounts included in the Company’s consolidated statements of operations, which the CODM uses to manage its business, such as how to allocate capital to its hotels and how to determine the Company’s acquisition and disposition strategies (in thousands):
2025 | 2024 | 2023 | |||||||
Revenues | |||||||||
Hotel revenues | $ | 960,126 | $ | 905,809 | $ | 986,425 | |||
Other revenues (1) | — | — | 55 | ||||||
Total consolidated revenues | $ | 960,126 | $ | 905,809 | $ | 986,480 | |||
Expenses | |||||||||
Room | $ | 156,755 | $ | 145,984 | $ | 157,839 | |||
Food and beverage | 197,819 | 182,423 | 193,713 | ||||||
Other operating | 24,859 | 23,241 | 23,721 | ||||||
Advertising and promotion | 53,118 | 51,407 | 51,958 | ||||||
Repairs and maintenance | 39,412 | 35,908 | 38,281 | ||||||
Utilities | 28,514 | 26,576 | 27,622 | ||||||
Franchise costs | 18,499 | 18,391 | 16,876 | ||||||
Property tax, ground lease and insurance | 77,105 | 77,981 | 79,412 | ||||||
Other property-level expenses (2) | 116,404 | 110,037 | 120,247 | ||||||
$ | 712,485 | $ | 671,948 | $ | 709,669 | ||||
Hotel Adjusted EBITDAre | $ | 247,641 | $ | 233,861 | $ | 276,756 | |||
2025 | 2024 | 2023 | |||||||
Reconciliation of Hotel Adjusted EBITDAre to Net Income | |||||||||
Hotel Adjusted EBITDAre | $ | 247,641 | $ | 233,861 | $ | 276,756 | |||
Other revenues (1) | — | — | 55 | ||||||
Non-hotel operating expenses, net (3) | 103 | 82 | 11 | ||||||
Property-level COVID-19 relief grant (4) | — | 1,343 | — | ||||||
Pre-opening expenses (4) | (6,471) | (2,633) | — | ||||||
Property-level legal settlements (4) | — | (1,182) | — | ||||||
Property-level severance (4) | — | — | (297) | ||||||
Taxes assessed on commercial rents (4) | (617) | (480) | (553) | ||||||
Amortization of right-of use assets and obligations | 1,158 | 1,158 | 1,158 | ||||||
Corporate overhead | (31,590) | (29,050) | (31,412) | ||||||
Depreciation and amortization | (134,508) | (124,507) | (127,062) | ||||||
Interest and other income | 10,964 | 13,179 | 10,535 | ||||||
Interest expense | (52,965) | (50,125) | (51,679) | ||||||
(Loss) gain on sale of assets, net | (8,751) | 457 | 123,820 | ||||||
(Loss) gain on extinguishment of debt | (180) | 59 | 9,938 | ||||||
Income tax (provision) benefit, net | (216) | 1,100 | (4,562) | ||||||
Net income | $ | 24,568 | $ | 43,262 | $ | 206,708 | |||
| (1) | Other revenues include the amortization of any favorable or unfavorable contract intangibles recorded in conjunction with the Company’s hotel acquisitions. The CODM excludes the noncash amortization of contract intangibles because it is based on historical cost accounting and is of lesser significance in evaluating the performance of the Company’s hotels. |
| (2) | Other property-level expenses include property-level general and administrative expenses, such as payroll, benefits, and other employee-related expenses, contract and professional fees, credit and collection expenses, employee recruitment, relocation and training expenses, labor dispute expenses, consulting fees, management fees, and other expenses. |
| (3) | Non-hotel operating expenses, net are included in property tax, ground lease and insurance on the Company’s consolidated statements of operations for 2025, 2024, and 2023, and include corporate-level current year property taxes and insurance, as well as any prior year property taxes assessed on sold hotels, net of any refunds received. |
| (4) | When assessing a hotel’s operating performance, the CODM excludes certain items that are not indicative of the ongoing operating performance of the Company’s hotels, including property-level grants, pre-opening expenses associated with extensive renovation projects such as the work performed at Andaz Miami Beach, property-level legal settlements and severance, and taxes assessed on commercial rents. |
The CODM does not receive asset information by segment. Assets reported to the CODM are consistent with those included on the Company’s consolidated balance sheets, with particular emphasis on the Company’s cash and cash equivalents, restricted cash, and debt.
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Feb 21, 2025 | |
About Segments Disclosures
Segment disclosures break a company into its reportable operating units, revealing revenue, profit, and asset allocation that consolidated financial statements obscure. Under ASC 280, segments must match how the chief operating decision maker views the business, providing a window into internal management structure and resource allocation priorities.
Key signals: compare segment margins to identify which units drive profitability and which destroy value. Watch for changes in the number of reportable segments — segment aggregation or disaggregation often coincides with strategic shifts or attempts to obscure declining performance. Intersegment elimination patterns reveal internal pricing practices. The reconciliation between segment totals and consolidated figures exposes corporate overhead allocation and unallocated items. Geographic revenue concentration highlights regulatory and currency exposure. Compare segment-level capital expenditure against segment revenue to assess where management is investing for future growth versus harvesting existing assets.