2023-05-24 10:00:00 ET
Summary
- Despite lingering recession concerns, hotel REITs are pacing for a second-straight year of outperformance after punishing early-pandemic declines, buoyed by steady post-pandemic operating improvement and the long-awaited return of dividends.
- The final pandemic-era travel restrictions were lifted last week with the ending of the vaccine mandate for foreign arrivals. International travel demand should provide a healthy tailwind over the coming quarters.
- Domestic travel recovered to 100% of pre-pandemic levels in early 2023 but has plateaued since February. Business and group demand has marginally improved, offsetting some moderation in leisure demand.
- Soaring room rates drove a record year for Revenue Per Available Room ("RevPAR") in 2022, but further upside this year will rely more heavily on occupancy gains, where Sunbelt and limited service segments are far ahead of coastal-focused markets.
- Gas prices are now 30% below the peak last summer, and airfares are 10-20% below their peaks, providing some additional tailwinds that should keep domestic leisure travel buoyant enough to allow hotel REITs to further solidify their post-pandemic balance sheet rehabilitation.
For further details see:
Hotel REITs: Pandemic Is Officially Over