Hotel stocks tumbled in value in June, on average down nearly 20% from May — the largest monthly decline since the start of the COVID-19 pandemic in March 2020.
For the first time this year, the Baird/STR Hotel Stock Index underperformed both the S&P 500 and RMZ indexes, which are representative of the broader economy — indicating that investor sentiment about the resiliency of the hotel sector is slipping as macroeconomic concerns deepen.
"Hotel stocks continued on their downward trajectory in June and were significant relative underperformers as investors began to factor in an increasing likelihood of an impending recession,” said Michael Bellisario, senior hotel research analyst and director at Baird. “While the upcoming summer travel months are expected to be strong, investors are looking beyond the near-term fundamental strength to a period when demand and ADR growth are likely to moderate, which is supported by the many macroeconomic indicators that are flashing signs of broader slowing.”
The 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, was down 19.3% in June, compared to declines of 8.4% and 7.9% for the S&P 500 and RMZ indexes, respectively.
It marked the second consecutive monthly decline for the Hotel Stock Index, which in May was down 5.8%, negating nearly all of the gains experienced over the prior three months. The best month of 2022 for hotel stocks was February, when values were up 4.1% from January.
Year to date, the Hotel Stock Index is down 21.6%, which is in line with the S&P 500 and RMZ indexes — down 20.6% and 21.6%, respectively.
At the same time, hotel industry performance, particularly in the U.S., has been in a steady recovery from the COVID-19 pandemic.
Hotel room demand for the Memorial Day holiday weekend in the U.S. was the highest ever; and at the end of June, the U.S. hotel industry was consistently selling more than 28 million rooms a week, according to data from STR, CoStar's hospitality analytics firm.
“With summer vacation season in full swing, pandemic-era highs in room demand have demonstrated the sustained desire from Americans to travel,” said Amanda Hite, president of STR. “While beach destinations continue to thrive, we have seen downtown locations, which were lacking both corporate group and transient demand, post encouraging results. Room rate growth continues unabated across all chain scales, and it is good to see upper-upscale hotels being able to capitalize on renewed interest.
"At the same time, the macroeconomic sentiment has shifted with a 'hard landing’ expected for the U.S. economy in 2023. Developers and owners are watching the interest rate environment closely, and recent rate hikes will likely have a measurable impact on the construction pipeline going forward.”
The Hotel Stock Index's losses for the month were evenly split between the brand companies, down 19.3%, and the REITs, down 19.5%. Year to date, the REITs are faring slightly better, down 17.3% compared to a 19.3% decline for the brands.
Ashford Hospitality Trust, a REIT, was the only company to gain stock value from May to June, up 6.2%, but compared to this time last year, its stocks are down 86.9%.
In monthly performance, the REITs occupied almost all of the top and bottom five positions. Among the brands, Choice Hotels International lost the least in stock value from May to June, down 12.7%. The worst monthly performance came from Pebblebrook Hotel Trust, down 26.4%, and Braemar Hotels & Resorts, down 26%.
Marriott International stocks led the brands in year-over-year performance, down only 0.4% from June 2021. Among the REITs, Ryman Hospitality Properties and Apple Hospitality REIT made the top five in year-over-year comparisons, followed by brands Hyatt Hotels Corp. and Choice Hotels International.
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.