IFGL - Hotel REITs: Winter's Coming

• With vaccines in arms and the economy rebounding, it was poised to be a memorable summer for hotel REITs and the broader tourism industry before the resurgence of COVID variants.
• The "fourth wave" came at an inopportune time for the industry, which was relying on robust demand in the critical late-summer season and the return of business travel this Fall.
• In a twist of fate, after posting dramatic gains during the vaccine development stages, Hotel REITs have been the weakest-performing property sector since vaccines became widely available in late April.
• The return to the office isn't happening as planned this Fall, and neither is business travel. While the "show goes on" for some, many corporate events and conventions scheduled for this Fall have been postponed.
• We reiterate our outlook that the risks remain skewed to the downside for hotel REITs. Valuations aren't attractive enough to accept near-zero dividend yield and assume the risk of subsequent pandemic setbacks.

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