“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.