Investor appetite for hotel stocks only heated up this summer as demand for travel showed continued resilience to macroeconomic stress.
The Baird/STR Hotel Stock Index increased in value by 8.2% from June to July, building on a 6.2% gain from May to June. The index comprises 20 of the largest hotel brand companies and real estate investment trusts publicly traded on a U.S. stock exchange by market capitalization.
Year to date, the index is up 24.3%. Its greatest month-to-month gain was 16.4% in January.
The hotel stocks outperformed broader stock market indexes, the S&P 500 and the RMZ, or MSCI US REIT Index, which is a gauge of the overall real estate investment market. For July, the S&P 500 was up 3.1% and the RMZ up 2.7%. Year to date, those indexes also are on a vertical track, with the S&P up 19.5% and the RMZ up 6.1%.
The hotel stock index was led by the brand companies, which recorded a combined 9% increase for the month. The hotel REITs gained 5.3%. The brands have been leading the way for most of the year, up 29.1% year to date compared to an 8.8% gain by the REITs over the same period.
“The hotel REITs face challenging near-term growth comparisons for the remainder of the year, but investor expectations have been reset recently and now better reflect this slower growth outlook,” said Michael Bellisario, senior hotel research analyst and director at Baird.
He added that “for the last few months, broader stock market momentum and investors’ risk-on appetite have bolstered the hotel stocks’ performance; additionally, continued international strength and recovering cross-border travel have benefited the global hotel brands.”
STR President Amanda Hite said demand for hotel rooms this summer has been basically flat compared to last year, but that's not a reflection of lower performance.
“The industry is still in recovery mode, and the lower growth we're seeing this summer is more about a return to normal as opposed to a weakening in performance,” she said. “The top 25 markets continue to see demand strengthen whereas all other markets have fallen back to more traditional levels of performance. [Average daily rate] and [revenue per available room] advanced in July but at the lowest growth rates of the post-pandemic era.”
Month over month in July, all but two of the 20 companies listed on the stock index showed growth. Both were REITs — Braemar Hotels & Resorts, down 8%; and Summit Hotel Properties, down 1.1%. Two REITs also were among the top five performers month to month — Sotherly Hotels leading the index, up 19%; and Pebblebrook Hotel Trust, up 10.8%.
Wyndham Hotels & Resorts led the brands in monthly performance comparisons, up 13.6%, and were joined in the top five by peers Choice Hotels International and Hyatt Hotels Corp.
Compared to July 2022, the top five performers on the index were all brands, led by Hyatt, up 52.7%, and including Marriott International, IHG Hotels & Resorts, Hilton and Wyndham.
At the bottom of the index, five REITs recorded losses year over year, with Ashford Hospitality Trust taking the biggest hit, down 54.1%.
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.