Hotel stocks dipped 7.1 percent in September

U.S. HOTEL STOCKS dropped again in September amid investors’ concerns about the economy slowing and a possible rise in COVID-19 cases, according to the Baird/STR Hotel Stock Index. Those concerns were given some basis as STR’s most recent performance data showed a continuing drop in occupancy.

The Baird/STR index dropped 7.1 percent in September and was down 36.8 percent for the first nine months of the year. This follows a 19 percent increase in August that was driven by medical progress against the COVID-19 pandemic and new interest rate policies, according to STR

The index came in behind the S&P 500, which was down 3.9 percent and the MSCI US REIT Index, which dropped 3.7 percent. The hotel brand sub-index declined 8.1 percent from August to 5,969, while the Hotel REIT sub-index fell 3.3 percent to 739.

“Hotel stocks declined in September, which mirrored the broader market’s pullback,” said Michael Bellisario, senior hotel research analyst and director at Baird. “After significant absolute and relative gains in August, the September declines were modest in comparison. Investors have become more focused on a potentially slower economic growth outlook, an expected rise in coronavirus case counts as colder weather approaches, and the uncertainties associated with additional stimulus and the upcoming election, all of which negatively impacted hotel stocks’ performance during the month.”

The industry has entered a not unexpected slow phase for performance, said Amanda Hite, STR’s president.

“Much of the industry has reached the expected point where summer leisure demand has dried up and occupancy growth has stalled because of the absence of significant corporate travel and events,” Hite said. “There are pockets of the world, such as China, that are pushing closer to normal activity and levels of performance, but we don’t anticipate that trend to extend in the short term to regions like the U.S. and Europe.”

Regarding performance, occupancy dropped to 47.9 percent during the week ending Oct. 3, down 29.6 percent from last year, according to STR. ADR ended at $95.63, a 26.3 percent drop from last year, and RevPAR came in at $45.80, down 48.1 percent year over year.

“Year-over-year declines were less pronounced compared with previous weeks due to the Rosh Hashanah impact on the hotel calendar in 2019,” STR said. “Most of the markets with the highest occupancy levels were once again those in areas with displaced residents from natural disasters. Amid continued wildfires, California South/Central saw the highest occupancy level at 78.4 percent. In the aftermath of Hurricane Sally, Mobile, Alabama, reported the next highest occupancy level, 73.6 percent.”

STR’s top 25 markets had lower than national average occupancy at 42.1 percent but higher ADR, $99.06, than all other markets.

Markets making more than 50 percent occupancy were Norfolk/Virginia Beach, Virginia at 52.5 percent; San Diego at 52.1 percent; and Los Angeles at 51.6 percent. Markets with the lowest occupancy levels for the week included Oahu Island, Hawaii, at 19 percent and Orlando, Florida, at 30.8 percent.