Hotel stocks underperformed the broader economy for the sixth consecutive month in August, amid wariness from investors about the strength of business travel post-leisure-travel season in the U.S.
The Baird/STR Hotel Stock Index — comprising 20 of the largest hotel companies publicly traded on a U.S. stock exchange by market capitalization — was down 3.4% from July, according to a news release. Meanwhile the S&P 500 gained 2.9% and the RMZ index was up 1.8% for August. STR is CoStar's hospitality analytics firm.
Year to date, the Hotel Stock Index is up 7.4%, after finishing 2020 down 13.2%.
Michael Bellisario, senior hotel research analyst and director at Baird, wrote in his firm's monthly hospitality report that investor sentiment is being driven by lingering uncertainty about the hotel industry's recovery from the COVID-19 pandemic.
The recovery so far has been carried by leisure travel but post-Labor Day will be more dependent on business travel, which continues to lag as many firms delay return-to-office plans amid rising COVID-19 cases linked to the delta variant.
"We remember just 60 to 90 days ago when the broader narrative called for a sooner-than-previously-expected return of the business traveler and continued sequential fundamental improvement throughout the third quarter. Expectations and sentiment toward the recovery have changed quickly," Bellisario wrote in the report.
"While the domestic leisure traveler has been relatively unfazed by the delta variant, especially compared to the rise in coronavirus case counts that occurred in [the fourth quarter of 2020], the trajectory of the business travel recovery has flattened. Return-to-office efforts have been delayed, particularly among larger corporations, and more questions are emerging about how the fundamental recovery will unfold in [the first half of 2022]."
Still, he wrote, Baird remains "cautiously optimistic about the path of the fundamental recovery" as "downside scenarios appear less severe and less likely to materialize."
STR President Amanda Hite said that “August performance, still shaped by continued strong demand from the American leisure traveler, came in lower than the July peak but still at a healthy level overall.”
She acknowledged that amid "major meetings cancellations ... it seems that the industry will have to wait a bit longer for [the corporate travel] segment to return at a significant level."
For August, the Hotel Stock Index's top performers were all real estate investment trusts, led by Ryman Hospitality Properties. The REIT sub-index gained 2.5% from July, and is up 9.5% year to date.
Hotel brand companies made up four of the five bottom performers for the month, along with Ashford Hospitality Trust. The brand sub-index was down 5.4% from July, but is up 6.8% year to date.
Compared to August 2020, REITs are also outperforming the hotel brands, led by CorePoint Lodging.
The only company in the index to lose value year over year is Ashford, down 49.8% from August 2020.
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.