As the summer travel season heated up in the U.S., so did hotel stocks.
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, recorded a 6.2% overall improvement from May to June.
That was nearly even with S&P 500 index, representing the broader economy, which was up 6.5% month over month. Hotel brands on the index alone outperformed the S&P 500, recording a 7.4% improvement. The hotel REIT sub-index, however, lagged at just a 1.8% gain, compared to a 4.3% improvement by the RMZ, or MSCI US REIT Index, which is a gauge of the overall real estate investment market.
Year to date, the Hotel Stock Index is up 14.9% — nearly back to where it started the year, up 16.4% from the end of December to the end of January. The brand sub-index has led the bulk of that growth, up 18.4% year to date compared to a 3.3% improvement of the REIT sub-index.
In comparison, the S&P 500 and the RMZ are up 15.9% and 3.3% year to date, respectively.
Hotel Stock Index performance month to month in 2023 has been split evenly between gains and losses, though the losses have not added up to the gains. Similarly, since 2017, the index has alternated between gains and losses — up 23.5% in 2017, down 16.8% in 2018, up 29.5% in 2019, down 13.2% in 2020, up 25.6% in 2021, down 15% in 2022.
Michael Bellisario, senior hotel research analyst and director at Baird, attributed the May to June rally to “fading recession fears.”
“Macroeconomic concerns have continued to subside, but recently normalizing leisure travel patterns domestically have weighed on the hotel REITs’ relative performance, particularly compared to the global hotel brands that are still benefiting from recovering international markets and cross-border demand,” he said.
STR President Amanda Hite said recent trends in demand for hotel rooms “signal a return to industry normalcy as the traveler mix, market blend and day-of-week levels stabilize.”
“U.S. hotel room demand fell 0.3% in the second quarter, a result of a calendar shift in April along with flat year-over-year comparisons in May and June,” she said. “Conversely, [revenue per available room] grew 2.5% in [the second quarter], slightly below our expectations, while up 8.7% year to date, which is ahead of our full-year forecast.”
In June, four of the top month-over-month performers on the index were hotel brands, led by a 9.5% improvement by Marriott International and including 6% to 7% gains by Hilton, Hyatt Hotels Corp. and IHG Hotels & Resorts. Xenia Hotels & Resorts was the only REIT in the top five, with a 5.7% gain since the end of May.
Year over year, the same four hotel brands were the leaders in performance, but in a different order, this time led by Hyatt with a 55% improvement. Ryman Hospitality Properties represented the only REIT among the top five year-over-year performers, up 22.2% from June 2022.
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.