Alex Pettee, CFA
Hotel REITs: Poor 2018 Despite Strong Year For Hotel Industry
The hotel industry is booming, but don't tell hotel REITs. Powered by resurgent corporate travel, hotel demand set yet another record in 2018, offsetting increased supply growth.
Just when 2018 looked to be a bright year for hotel REITs, the sector plunged in the final months of 2018 amid economic slowdown fears, delivering a -13% total return.
The 102-month stretch of positive RevPar growth was snapped in September, primarily a result of tough comparisons to last year's hurricane-affected data.
Supply growth continues to hang over the sector and is most acute in the business travel segments and urban markets. REITs hold a disproportionate amount of hotels in this segment.
As the REIT sector is most sensitive to economic growth expectations, 2019 may be another volatile year. The sector trades at discounted valuations relative to the rest of the REIT sector.