U.S. Hotel Stock Index Dips in April

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Hotel consultant STR is reporting this week that their Baird/STR Hotel Stock Index decreased 3.5% in April 2016, to close the month at 3,183. Year to date, the index is up 2.9%.

"While overall industry performance remains somewhat erratic, it is doing so at record levels," said Randy Smith, STR's chairman and co-founder.  "For the month of April, on a seasonally adjusted basis, occupancy was the second-highest we have ever documented and both room rates and RevPAR hit record levels. Continued growth at previous levels will simply not be possible as the industry reaches occupancies not seen since the 1960s. Investors clearly recognize that the growth rates of the past few years are behind us, but seem to not realize just how well the industry is performing overall.  Prices paid for recent acquisitions continue to highlight the difference between the public markets and what inside investors see as the value of the underlying assets."

"Hotel stocks pulled back a bit in April after a big first-quarter rebound as recent industrywide trends have generally disappointed the investment community," said David Loeb, senior hotel research analyst and managing director at Baird. "Hotel stocks are still outperforming the broader market year to date, aided by the higher offer price for Starwood and greater interest in hotel brands. While the credit markets and the velocity of transaction activity appear to be improving, which should provide a nice benefit to the REITs looking to sell assets, overall demand remains choppy, especially on the business transient side, and ADR growth remains constrained and below most management teams' expectations."

The Baird/STR Hotel Stock Index for April lagged behind the performance of the S&P 500 (+0.3%) and the MSCI REIT (RMZ) (-2.5%). 

The Hotel Brand sub-index reported a 2.7% decrease to 4,260 in April. The Hotel REIT sub-index experienced a 5.4% decline to 1,382 during the month.