CPLG - Hotel REITs: Winter's Coming

• "No vacancy" becomes "no occupancy." Hotel REITs - along with the global leisure and tourism industry - have been decimated by the coronavirus pandemic, plunging more than 50% this year.
• Following a record year for the industry in 2019, hotels REITs reported occupancy rates below 20% in Q2. Occupancy has recovered to roughly 45% by late summer, but winter is coming.
• Every hotel REIT has slashed its dividend in an effort to stay afloat, as 40-50% occupancy is needed to "keep the lights on." Suburban-focused and leisure-oriented properties have outperformed urban hotels.
• Perhaps a more "pure play" on the success of a vaccine than even the pharmaceuticals themselves, a significant "second-wave" of the pandemic would be likely catastrophic for equity holders.
• While leisure demand should bounce back relatively quickly when the pandemic subsides, business and group demand may take up to a half-decade or longer to fully recover.

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