Hotel company stock values receded in May after being on a growth run since January, as the momentum behind the hotel industry's reopening narrative slowed, according to the latest report from CoStar Group’s hospitality analytics firm STR and financial services company Baird.
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 2.8% from April to May, underperforming both the S&P 500, which grew by 0.5%, and the RMZ, which was up 0.8% for the month.
Year to date as of May 28, the hotel stock index value has grown 12.8%. The Hotel Stock Index gained 3.2% from March to April.
Stocks for hotel real estate investment trusts took the bigger hit in May, dropping 4.5% compared to a 2.2% decrease in hotel brand company stocks. But the REIT stock values are outperforming year to date — up 16.6% versus a 11.2% year-to-date increase for the hotel brands.
In Baird's monthly hospitality report, Senior Hotel Research Analyst and Director Michael Bellisario wrote that the slowed momentum comes as investors' expectations about the industry's recovery play out.
"The two major surges in stock prices have occurred after the November vaccine announcement and the travel demand acceleration that began in February. Investors correctly anticipated these moves, and hotel fundamentals appear to have caught up with stock prices," he wrote.
The next key factor likely to drive stock prices will be the rebound of business travel, expected later this year, according to Baird.
May also marked a switch, for hotel REITs especially, from defense to offense, as capital was activated for acquisitions, Bellisario wrote.
"After about 14 months of capital markets activity that was primarily focused on defense and shoring up balance sheets, May marked a turning point, in our opinion; several hotel REITs tapped the capital markets in an effort to go on offense. Hotel REITs appear to be increasingly focused on acquisition opportunities, and we would not be surprised to see more deals get across the finish line over the next few months," he wrote.
The five lowest-performing stocks on the index belonged to hotel REITs — DiamondRock Hospitality, Hersha Hospitality Trust, Park Hotels & Resorts, Pebblebrook Hotel Trust and Braemar Hotels & Resorts — all of which dropped between 6.1% and 7.1% from May to April.
Three hotel REITs were among the top five performing stocks for the month, led by Ashford Hospitality Trust, which had the index's greatest month-to-month gain of 47.8%. Sotherly Hotels had the second-highest stock value gain for the month at 19.6%, and CorePoint Lodging stocks were up 5%.
Hotel brands in the top five for the month were Choice Hotels International, up 6.2% from May, and Wyndham Hotels & Resorts, up 2.7%.
Compared to May 2020 values, CorePoint Lodging leads with 164.9% — and the rest of the top five for year-over-year growth are also REITs: Ryman Hospitality Properties, Xenia Hotels & Resorts, Hersha Hospitality Trust and Park.
Ashford, while posting the greatest month-to-month gain, is also last in year-over-year comparisons — down 41.3% from May 2020.
