IN ANOTHER SIGN of slow recovery from the COVID-19 pandemic’s economic impact, the Baird/STR Hotel Stock Index rose 1.7 percent in May over the previous year. Year-to-date, however, the index was still down 38.7 percent.
The index underperformed the S&P 500, which rose 4.5 percent, but outperformed the MSCI US REIT Index which stayed flat. The hotel brand sub-index grew 2.3 percent from April to 5,638, while the hotel REIT sub-index increased 0.1 percent to 784.
“Hotel stocks were relatively flat in May, which reflected underperformance during the first part of the month but a sharp reversal in the back half of May as the broader re-opening trade gained momentum and stock prices recovered,” said Michael Bellisario, senior hotel research analyst and director at Baird. “Industry data continues to be less bad on a sequential weekly basis, and investors’ worst-case zero-occupancy scenarios, which included significant monthly cash burn rate assumptions, have not materialized as initially feared.”
Investors’ confidence seems to have been inspired by the economic upticks seen since travel and social restrictions put in place to fight the virus have loosened, said Amanda Hite, STR’s president.
“As distancing measures have been eased and economies have reopened, we’ve seen a slow but steady improvement in U.S. performance each week since late April,” Hite said. “China is the furthest ahead in the curve, and Europe is just beginning to show the earliest signs of recovery. A sustained global rebound for the industry will likely only be reached once corporate group travel returns, but with a vaccine rollout timeline far off, and online meeting tools quite successful, the timing of new group demand is questionable right now.”