Hotel stock index drops 36 percent in March

THE BAIRD/STR Hotel Stock Index dropped 36 percent in March, ending at 2,748 points. For the first three months of the year the index was down 47.9 percent, mainly due to COVID-19 demand shock and potential hotel closures.

In March, the index posted greater declines than both the S&P 500, down 12.5 percent, and the MSCI US REIT Index, down 22.2 percent.

In the U.S., occupancy levels have fallen to unprecedented lows, and the STR forecasts a 50.6 per cent drop in RevPAR for 2020.

The hotel brand sub-index decreased 34.5 percent from February to 4,712, while the hotel REIT sub-index declined 40 percent to 702.

Michael Bellisario, senior hotel research analyst and director at Baird, has described the March performance as one of the ‘worst ones on record’.  He said investors were contemplating worst-case liquidity scenarios for hotel companies.

“Overall, the majority of the publicly traded hotel companies are generally well-capitalized, especially relative to private hotel owners, but the ultimate length and depth of the demand shock remain the key wildcards,” he said.

The economic impact will continue for the near future, said Amanda Hite, STR’s president.

“Hotel performance declines have been severe around the world, and decreases will likely continue for most markets until we see significant signs of containment of COVID-19,” Hite said. “The industry will be positioned for recovery once concerns are abated, but there is great uncertainty on when that time will come.”