Hotel stock values rose again in March, but at a slower pace compared to growth in the prior month and to the broader economy.
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, gained 2.2% in value in March. In February, the index was up 4.1% compared to January.
Meanwhile, broader economic indexes such as the S&P 500 and RMZ gained 3.6% and 5.9% in March.
“Hotel stocks increased in March but underperformed their benchmarks as stock market volatility eased and geopolitical concerns did not worsen,” said Michael Bellisario, senior hotel research analyst and director at Baird.
Hotel stocks on average are still faring better year to date — up 2.4%, while the S&P 500 and RMZ are both down nearly 5% for the first three months of 2022.
“Underlying hotel fundamentals continued to improve in March, and the outlook appears more favorable today than just one month ago despite all of the background noise in the stock market and with interest rates on the rise," Bellisario said. "Higher gas prices and heightened concerns about a slower growth backdrop have been topical with investors lately, but broader travel momentum and pent-up demand should keep the lodging recovery going over the near term, in our opinion.”
Amanda Hite, president of CoStar hospitality analytics firm STR, said the hotel sector is benefiting from greater demand during the spring travel season, which could signal another rise in investor confidence.
“With a strong spring break, and continued improvement in business travel, all eyes are now on the spring meeting season,” Hite said.
“Midweek flight numbers and hotel occupancies continue to show improvement, hinting at continued return-to-office momentum and healthier corporate demand. Week-to-week volatility in key performance indicators, which was normal pre-pandemic but then totally absent for the last two years, is also returning, hinting at a further normalization in travel patterns. Our research indicates that higher gas prices are not a deterrent to leisure travel, as consumers may make different travel choices but will likely not abandon their trips all together. The latest profitability data also shows ongoing improvement now that the impact of the omicron variant is subsiding, but labor costs and availability continue to be top of mind for operators.”
The hotel REITs that make up the index outperformed the brand companies in March, gaining 1.4% in value compared to 5.1%. Year to date, the hotel REIT sub-index is up 6.4%, and the brand sub-index is up only 1.2%, compared to this time in 2021.
Ashford Hospitality Trust led all of the 20 companies on the index in month-over-month performance, up 18.5% over February, but the REIT is also at the bottom in terms of year-over-year performance, down 65.4% from March 2021.
Sunstone Hotel Investors, Pebblebrook Hotel Trust, Host Hotels & Resorts and DiamondRock Hospitality — all REITs — rounded out the index's top five monthly performers.
Stock values for brand companies IHG Hotels & Resorts, Wyndham Hotels & Resorts, Choice Hotels International and Hyatt Hotels Corp. all lost ground from February to March — down on average 2%.
Compared to March 2021, Choice's stock is up 32.1% — the top year-over-year performer. Hilton and Wyndham stocks also are pacing well ahead of 2021 values, up 25.5% and 21.4% from this time last year.
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.