Sotherly Hotels Inc.

For Q2 2025, total revenue was approximately $48.8 million, down 3.7% from Q2 2024. Hotel EBITDA was approximately $13.9 million, down 11.5% year over year, and adjusted FFO was approximately $4.8 million, down about $2.7 million from the prior-year quarter. Composite portfolio RevPAR decreased 5.4% year over year, or 5.0% excluding Tampa, with occupancy down 3.5% and ADR down 1.9% on a reported basis. Year to date, total revenue was approximately $97.1 million, down 0.1%; hotel EBITDA was approximately $26.8 million, down 4.4%; and adjusted FFO was approximately $9.3 million, down $3.4 million. As of June 30, the company had approximately $26.5 million of cash, $315.8 million of debt, and a weighted average interest rate of 5.89%; about 84.4% of debt was fixed when including hedges. For full-year 2025, management guided to revenue of $185.2 million to $188.2 million, hotel EBITDA of $45.3 million to $45.8 million, and adjusted FFO of $6.9 million to $7.5 million, or $0.34 to $0.37 per share.

Management said the quarter was hurt by a tougher operating backdrop, but the tone was cautiously constructive on the second half. David Folsom emphasized that group pace remains healthy, with back-half bookings supporting an expectation that group demand should improve versus Q2. He also said the company believes its upscale and upper-upscale portfolio can outperform the broader market in 2025 despite macro uncertainty.

Tony Domalski walked through the quarter’s financial decline and the updated outlook. He cited $48.8 million of revenue, $13.9 million of hotel EBITDA, and $4.8 million of adjusted FFO for Q2, then noted $26.5 million in total cash, $315.8 million in debt, and a 5.89% weighted average interest rate, with 84.4% of debt fixed including hedges. He also flagged 2025 capital spending of about $7.1 million for routine FF&E plus $5.6 million tied to the DoubleTree Philadelphia Airport and DoubleTree Jacksonville Riverfront projects, while saying full-year revenue guidance midpoint implies 2.6% growth and hotel EBITDA midpoint implies a 2.6% decline.

Analysts focused on how much of the weakness came from government-related demand versus leisure and group demand, especially in Savannah. Management said some group business was indirectly tied to government funding, even when not obviously government-related, and that the issue was more a hesitation to book or spend than outright cancellations. They also said back-half group bookings look solid and that they do not expect further meaningful pullback from government or group demand at the current pace.