Hotel stocks rallied again in December and for full-year 2023 were up nearly 40% compared to 2022.
The Baird/STR Hotel Stock Index, comprising 20 of the largest hotel brand companies and real estate investment trusts publicly traded on a U.S. stock exchange by market capitalization, jumped 10.5% in December to a level of 6,760. For 2023, the stock index was up 38.4%.
“Hotel stocks — like the broader market — finished 2023 on a high note as the ‘soft landing’ narrative and lower interest rate outlook continued to boost investor sentiment and valuation multiples,” said Michael Bellisario, senior hotel research analyst and director at Baird. “Both the hotel brands and hotel REITs were up more than 10% in December and outperformed their respective benchmarks. For the year, the hotel REITs’ 19% gain more than doubled the return of real estate stocks broadly, while the hotel brands’ 44% increase nearly doubled the performance of the S&P 500.”
The S&P 500 was up 4.4% in November; the RMZ, or MSCI US REIT Index, which is a gauge of the overall real estate investment market, was up 9%. Year to date, the hotel stock index has fared better than the overall economy, with the S&P 500 up 24.2%.
The hotel brand sub-index increased 10.4% from November to 12,841, while the hotel REIT sub-index jumped 10.6% to 1,236.
The hotel stock index, like the hotel industry itself, had its ups and downs throughout 2023. Its strongest month-to-month increase was 16.4% in January, and it declined in half of the 12 months, but never by more than 3.6%, which it did in August.
The U.S. hotel industry, meanwhile, has been in steady recovery mode since the depths of the COVID-19 pandemic in the spring of 2020. The year 2023 was often referred to as "normalizing."
“The U.S. hotel industry finished the year on solid footing,” said Amanda Hite, president of STR, CoStar's hospitality analytics division. “RevPAR rose 5% from the previous year, with growth driven by the first quarter’s 10.4% increase due to a comparison against omicron-impacted months in 2022. In the remaining quarters, RevPAR growth averaged 3.1%, which is above the long-term quarterly average of 2.9%. Occupancy continued to close the gap to 2019 levels, while absolute ADR and RevPAR remained well above that benchmark on a nominal basis and narrowed the gap on an inflation-adjusted basis. Overall, it was a solid and ‘normal’ year for the industry.”
Hotel REITs took three of the top five spots in month-over-month performance in December, led by Pebblebrook Hotel Trust. Braemar Hotels & Resorts and Park Hotels & Resorts claimed spots two and five, joined by IHG Hotels & Resorts at third and Hyatt Hotels Corp. at fourth.
Year over year in December, the hotel brands posted four of the top five stock index performances, led by better-than-50% increases by IHG and Marriott International. Hyatt, Hilton and Park rounded out that top five.
For more information about the Hotel Stock Index, email hotelstockindex@rwbaird.com.
The Baird/STR Hotel Stock Index and sub-indices are available exclusively on Hotel News Now. The indices are cobranded and were created by Robert W. Baird & Co. (Baird) and STR. The market-cap-weighted, price-only indices comprise 20 of the largest market-capitalization hotel companies publicly traded on a U.S. exchange and attempt to characterize the performance of hotel stocks. The Index and sub-indices are maintained by Baird and hosted on Hotel News Now, are not actively managed, and no direct investment can be made in them. As of 30 June 2021, the companies that comprised the Baird/STR Hotel Stock Index included: Apple Hospitality REIT, Ashford Hospitality Trust, Chatham Lodging Trust, Choice Hotels International, DiamondRock Hospitality Company, Hersha Hospitality Trust, Hilton Inc., Host Hotels & Resorts, Hyatt Hotels, InterContinental Hotels Group, Marriott International, Park Hotels & Resorts, Inc., Pebblebrook Hotel Trust, RLJ Lodging Trust, Ryman Hospitality Properties, Service Properties Trust, Summit Hotel Properties, Sunstone Hotel Investors, Wyndham Hotels & Resorts, and Xenia Hotels & Resorts.