On average, hotel stocks this year have tracked closely with an index of the broader U.S. economy, beating that benchmark in only four out of 10 months and closing within a percentage point, up or down, in four of the other six months.
At the end of October, 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 — fell 2.4% compared to the close of September. That was closely in line with the S&P 500, which indexes the stock performance of 500 of the biggest U.S. companies and was down 2.2% over the same period.
It was the third straight month of declines for both indexes. However, year to date, the gains have outweighed the losses. The hotel stock index was up 14.6% as of Oct. 31, compared to where it ended 2022. The S&P 500 was up 9.2% over the same period.
The hotel stock index built most of its year-to-date lead over the S&P 500 in January and July, when it outperformed by larger margins. The index rose 16.4% in January, a 10-percentage-point premium over S&P 500, which was up 6.2%. In July, the hotel stock index was up 8.2% compared to a 3.1% increase in the S&P.
Hotel brands, as a sub-index, have fared even better than the broader economic index — up 20.3% year to date. The hotel REITs on the index have performed weaker on average than the brands. That sub-index is down 4% year to date and down 2.5% in October. The RMZ, or MSCI US REIT Index, which is a gauge of the overall real estate investment market, is down 9.3% year to date and fell by 4.5% in October.
Michael Bellisario, senior hotel research analyst and director at Baird, said “interest rates remained a key driver of performance, and elevated interest rates weighed on real estate stocks.”
Wyndham Hotels & Resorts and Choice Hotels International — two hotel brand companies much talked about in October — were on opposite ends of the monthly performance spectrum. Choice, which went public with its bid to acquire Wyndham on Oct. 17, took a hit on the stock market — down 9.8% from September. Meanwhile, Wyndham led the index, its stock up 4.1% in October.
The biggest change in stock price for both companies occurred on Oct. 17, when Choice issued a news release stating that Wyndham had walked away from negotiations on a $9.8 billion offer, or $90 per share. That day, Choice stock plummeted from a share price of roughly $125 to just over $116 per share, a 7.2% drop. Wyndham's stock went from just over $69 per share to more than $75, an 8.7% difference.
Also among the hotel stock index's top five monthly performers were three REITs, led by Ryman Hospitality Properties, and one other brand, Hilton. REITs also made up most of the bottom five in month-to-month performance, with Pebblebrook Hotel Trust posting at 12.2% loss in stock value.
In year-over-year comparisons, brands were the clear leaders in October performance, taking four of five top spots and led by IHG Hotels & Resorts, up 31.5%. The bottom five performers were all REITs; Ashford Hospitality Trust posted the largest loss compared to October 2022, down 74%.
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.