Stock values for the largest publicly traded hotel brands and real estate investment trusts took the largest hit since June, down 9.1% from August to September.
It was second straight drop and largest monthly decline of the year so far — behind only June when stocks were down 19.3% from May — for 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.
The index has gained value in only four of the nine months on record, but year to date is down 20.6%. The largest month-to-month gain was 14.3% in July.
With the stock values of these 20 companies as proxy, the hotel industry is still outperforming the broader economy, as represented by broader stock indexes the S&P 500 and RMZ.
For September, the S&P 500 was down 9.3% and the RMZ was down 12.8%. Year to date, those indexes are down 24.8% and 30.2%, respectively.
The hotel brands, in particular, are outperformers, with that sub-index down only 7.7% in September, while the hotel REIT sub-index underperformed the broader indexes, down 13.5% month to month. Year to date, the difference is slighter, with the brand sub-index down 20.4% and the REIT sub-index down 21%.
Michael Bellisario, senior hotel research analyst and director at Baird, said that the stock index declines reflected a lower tolerance for risk by investors heading into the fall season.
“September was a risk-off month for the broader market, and hotel stocks were down sharply as well,” he said. “Broader macroeconomic concerns continue to dominate investor sentiment and positioning, but underlying hotel fundamentals held steady throughout the month, which relatively helped the hotel stocks during a volatile time for the capital markets. Investors continue to ask about recession scenarios and downside analyses for our coverage list, which suggests a lot of the bad news is being priced into the stocks, particularly the hotel REITs, in our opinion.”
Amanda Hite, president of STR, CoStar's hospitality analytics firm, said hotel bookings by business travelers and groups are picking up, continuing the momentum of the industry's recovery from the COVID-19 pandemic.
“While a recession is now likely on the horizon, current industry conditions have not yet been affected by a downturn in consumer or corporate spending,” she said. “Group demand continues to show strong recovery in our first 'normal' meeting season since 2019. When looking at the leisure segment, weekend room rate growth shows little to no sign of easing, which continues to speak to consumer resilience.”
She added that hotel room supply growth in the U.S. is not expected to be a major headwind for industry performance, “and should only impact select markets such as New York and Nashville.”
Despite these signs of optimism for the industry, stock values declined month to month for all 20 of the companies listed on the hotel stock index in September.
The bottom five performances for the month were all REITs. Ashford Hospitality Trust posted the sharpest decline, down 25.8% from August.
Five major brands were the top performers, led by Choice Hotels International, down only 4.5% month to month.
Compared to September 2021, only Hyatt Hotels Corp. stocks gained in value, up 5%. The REITs again posted the largest year-over-year declines, led by Ashford Hospitality Trust, down 53.7%.
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.