The Baird/STR Hotel Stock Index for October outpaced the performance of the S&P 500 (+8.3%) and the MSCI REIT (RMZ) (+5.6%). The Hotel Brand sub-index reported a 12.1% increase to 4,603. The Hotel REIT sub-index experienced a 5.5% rise to 1,538 during the month.
HENDERSONVILLE, TENNESSEE, and MILWAUKEE – The Baird/STR Hotel Stock Index increased 10.0% in October to close the month at 3,470. “While the rebound in lodging stocks was nice, it brings up the question of why the stocks were oversold in the first place,” said Randy Smith, STR’s chairman and co-founder. “With revenue-per-available-room growth slowing and weak performance in August, investors appeared to believe the industry’s peak performance was in the past. However, we are clearly moving into a more profitable cycle as the bulk of RevPAR gains now come from room rates—a much more profitable scenario than when it comes from occupancy.”
Year to date through October, the Baird/STR Hotel Stock Index decreased 10.3%.
“Hotel stocks rebounded sharply in October as the market’s oversold conditions set up for a recovery in stock prices,” said David Loeb, senior hotel research analyst and managing director at Baird. “Third-quarter earnings results were generally better than feared and topped investors’ extremely low expectations, but fourth-quarter guidance ranges imply growth will remain a bit slower and choppier. Additionally, data suggests the economy will continue to strengthen and most now believe the Fed will raise interest rates in December, which has created a nice tailwind for hotel stocks into year-end as capital flows back into the shorter-lease-duration real estate sectors.”
The Baird/STR Hotel Stock Index for October outpaced the performance of the S&P 500 (+8.3%) and the MSCI REIT (RMZ) (+5.6%).
The Hotel Brand sub-index reported a 12.1% increase to 4,603. The Hotel REIT sub-index experienced a 5.5% rise to 1,538 during the month.
STR and Tourism Economics project continued growth in final forecast of 2015
The U.S. hotel industry is projected to experience continued year-over-year performance increases through 2016, according to STR and Tourism Economics’ final forecast of 2015.
For the remainder of 2015, the U.S. hotel industry is predicted to report a 1.7% increase in occupancy to 65.5%, a 4.8% rise in average daily rate to US$120.46 and a 6.5% increase in revenue per available room to US$78.90. During that same period, demand growth (+2.8%) is expected to outweigh supply growth (+1.1%).
“Continued record-breaking demand across all chain scales and regions continues to drive RevPAR performance above the long-run average,” said Jan Freitag, STR’s senior VP for lodging insights. “That said, continued high occupancy did not seem to translate into very strong pricing power, and we have thus adjusted our ADR forecast slightly downward to reflect the ongoing reality in the U.S. hotel industry. RevPAR growth continues to be driven by ADR growth.”
Among the Chain Scale segments in the U.S., Independent is expected to report the largest increase in occupancy (+2.3%) during 2015; Upscale is projected to see the greatest rise in ADR (+5.3%); and Independent is expected to report the highest increase in RevPAR (+7.0%).
When looking at the Top 25 Markets, 22 are expected to experience RevPAR increases of 5.0% or higher for 2015. Three of those markets are expected to see RevPAR growth in the range of 10.0% to 15.0%: Nashville, Tennessee; Phoenix, Arizona; and Tampa/St. Petersburg, Florida.
For 2016, STR projects the U.S. hotel industry to post a 0.8% increase in occupancy to 66.0%, a 4.8% rise in ADR to US$126.28 and a 5.7% increase in RevPAR to US$83.39.
Also in 2016, demand growth (+2.3%) is once again expected to be higher than supply growth (+1.5%). Demand growth in the U.S. has outpaced supply growth each year dating back to 2010.
“The number of rooms under construction is more than 20% higher than a year ago,” Freitag said. “Those new rooms are driving our supply forecast up to 1.1% in 2015 and 1.5% in 2016. At the same time, we continue to project healthy demand growth and small occupancy increases across the board.”
Ten of the Top 25 Markets are expected to post RevPAR increases between 5.0% and 10.0% in 2016. The other 15 Top 25 Markets are projected to experience RevPAR growth between 0% and 5.0%.
“The Top 25 Markets will continue to be the disproportionate beneficiary of the healthy performance,” Freitag said. “We project each to grow RevPAR in 2016.”
Theodore is the Co-Founder and Managing Editor of TravelDailyNews Media Network; his responsibilities include business development and planning for TravelDailyNews long-term opportunities.
