The hotel stock index declines for the third month in a row

The hotel stock index declines for the third month in a row

On average, hotel stocks this year have closely tracked the broader U.S. economic index, beating that index in just four out of 10 months and closing within 1 percentage point, up or down, in four of the other six months.

At the end of October, the Baird/STR Hotel Stock Index — which includes 20 of the largest publicly traded hotel brands and REITs by market capitalization — was down 2.4% from the September close. That was closely in line with the Standard & Poor’s 500 Index, which refers to the performance of stocks of 500 of the largest US companies, which fell 2.2% over the same period.

This is the third month in a row in which the two indicators witnessed declines. However, year-to-date, gains have outweighed losses. An index of hotel stocks 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 advance on the S&P 500 in January and July, when it outperformed by larger margins. The index rose 16.4% in January, a premium of 10 percentage points over the S&P 500, which rose 6.2%. In July, the hotel stock index rose 8.2% compared to a 3.1% increase in the Standard & Poor’s index.

Hotel brands, as a sub-index, have performed better than the broader economic index, rising 20.3% year-to-date. Hotel REITs on the index performed weaker on average than brands. This sub-index is down 4% year to date, then fell 2.5% in October. The RMZ, or MSCI US REIT Index, a measure of the overall real estate investment market, is down 9.3% year to date, and was down 4.5% in October.

“Interest rates remained a key driver of performance, and higher interest rates weighed on real estate stocks,” said Michael Bellisario, senior hotel research analyst and director at Baird.

Wyndham Hotels & Resorts and Choice Hotels International — two much-talked-about hotel brands in October — were at opposite ends of the monthly performance spectrum. Choice, which announced its bid for Wyndham on October 17, took a hit in the stock market — down 9.8% from September. Meanwhile, Wyndham led the index, with its stock rising 4.1% in October.

The biggest change in stock price for both companies occurred on October 17, when Choice issued a news release stating that Wyndham had withdrawn from negotiations for an offer worth $9.8 billion, or $90 per share. On that day, Choice’s stock price fell from a share price of about $125 to just over $116 per share, a decline of 7.2%. Wyndham’s stock price rose from just over $69 per share to over $75, a difference of 8.7%.

Also among the top five monthly performers for the hotel stock index were three REITs, led by Ryman Hospitality Properties and another brand, Hilton. REITs also made up most of the bottom five in monthly performance, with Pebblebrook Hotel Trust recording a 12.2% loss in share value.

In year-over-year comparisons, brands were the clear leaders in performance in October, claiming four of the top five spots led by IHG Hotels & Resorts, up 31.5%. The bottom five performers were all REITs; Ashford Hospitality Trust posted the biggest 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 co-branded and created by Robert W. Baird & Co. (Baird) and STR. The market cap and price-only indexes include 20 of the largest hotel companies with a market cap publicly traded on a U.S. stock exchange and attempt to quantify 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 June 30, 2021, 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.

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