Hotel Stocks Underperform For Fourth Straight Month

Much Hinges on Speed, Trajectory of Business Demand Rebound

9 July 2021

The unleashing of pent-up leisure travel demand in the U.S. this summer so far hasn't been enough to significantly boost stock values for the hotel industry overall, as hotel stocks underperformed the broader economy in June for the fourth straight month.

The Baird-STR Hotel Stock Index — comprising 20 of the largest hotel companies publicly traded on a U.S. stock exchange by market capitalization — declined by 3% in June, underperforming both the S&P 500 and RMZ indexes, which were both up 2.2% for the month.

Michael Bellisario, senior hotel research analyst and director at Baird, and research associate Alex Kubicek wrote in the financial services firm's latest hospitality report that the decline is "despite fundamentals and investor sentiment improving" for the sector.

"Robust leisure demand persists, and we are beginning to see the early signs of a more significant rebound in business travel," they wrote.

"Although many investors have been pulling forward their expectations for the timing of the recovery, hotel stocks continued to underperform their respective benchmarks; leisure travel strength is well understood at this point, in our opinion, and incremental upside needs to come from a faster-than-forecasted business travel recovery."

Despite the month-to-month decline, the hotel stock index is up 8.5% year to date in 2021, after falling 13.2% in 2020. Stocks for hotel real estate investment trusts have fared better overall, outperforming stocks for hotel brands by 350 basis points in June and increasing by 16.1% year to date.

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