Hotel stock values improved in April as broader economic indexes declined, signaling how investors are weighing the strength of travel and hospitality versus macroeconomic concerns such as inflation or the impact of a war in Europe.
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 0.7% in April and is up 3.1% year to date. Gains are being led by the hotel real estate investment trusts, which on average gained 1.5% in value for the month and are up 8% year to date. Hotel brand company stocks, meanwhile, gained 0.5% in value in April and are up 1.7% year to date.
In comparison, the S&P 500 and RMZ indexes were down 8.8% and 4.6% in April, respectively, and are down 13.3% and 9.1% year to date.
“Hotel stocks increased modestly in April but were significant relative outperformers as the broader travel recovery accelerated, particularly domestically,” said Michael Bellisario, senior hotel research analyst and director at Baird.
“Underlying hotel fundamentals continued their rebound in April, especially in some of the harder-hit urban markets, and better-than-expected intra-quarter updates from companies boosted investor sentiment and stock prices during the month," he added.
He said macroeconomic risks — including higher interest rates and gas prices, the Russian invasion of Ukraine and growing concerns about a recession — remain elevated, but "the broader travel momentum is strong and pent-up demand continues to surprise to the upside.”
STR President Amanda Hite said U.S. hotel profitability has been on the rise this year and reached a 28-month high in March, "meaning that the strong rebound in top-line performance is translating to an improving bottom line." STR is CoStar's hospitality analytics firm.
“April continued the trends of rising demand and inflation-influenced pricing,” Hite said. “Corporate transient and group demand are climbing at a healthy rate, pointing to the continued return of business travel. ... When looking at the pipeline, the number of rooms in construction remains on a downward trajectory, giving the majority of operators another tailwind that should last through this year and 2023.”
After starting the year down nearly 4% from December, the Hotel Stock Index has been on an upswing since January, but the rate of gain has slowed each month — up 4.1% in February and up 2.2% in March. The S&P 500 and RMZ indexes, meanwhile, were up in March — by 3.6% and 5.9%, respectively — after being down in January and February.
The top five Hotel Stock Index performers for the month were all REITs, led by Hersha Hospitality Trust with a 7.7% gain over March.
Compared to April 2021, the top five is dominated by hotel brands, led by Choice Hotels International, Hilton and Wyndham Hotels & Resorts, each with gains of 20% or more, and followed closely behind by Marriott International and REIT Ryman Hospitality Properties.
At the bottom, Ashford Hospitality Trust stocks were down 30.9% from March and down 74.3% year over 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.