AUGUST WAS NOT a very good month for hotel investors as the Baird/STR Hotel Stock Index showed no growth from July, remaining flat at 4,872. What the future holds depends on whether occupancy increases enough to match inflation, STR’s expert said.
The index was down 0.3 percent year to date and lagged well behind the S&P 500, which grew 8.5 percent year-to-date, including 3 percent in August. The Hotel Brand sub-index dropped 1.2 percent from July to 7,054, while the Hotel REIT sub-index rose 2 percent to 1,808.
August was the third consecutive month for hotel brands and REITS to underperform their benchmarks, Baird’s Senior Hotel Research Analyst and Vice President Michael Bellisario said, and that took its toll on the market.
“While second-quarter earnings reports were generally positive, forward-looking guidance updates did not signal any further growth reacceleration would be forthcoming in the near term, which we believe left some investors disappointed, particularly as 2019 outlooks are coming into focus,” Bellisario said.
The hotel stock index’s August under performance comes on the heels of July’s record setting levels of demand, indicating the economy overall is healthy, STR President and CEO Amanda Hite said.
“As occupancy continues to increase gradually, all eyes are on the potential for accelerated pricing power,” Hite said. “This becomes even more important as the rate of inflation grows, wiping out most nominal ADR gains and leaving real rate growth stymied. But overall trends continue to be healthy and our latest forecast calls for prolonged RevPAR growth through 2019.”