U.S. Hotel Stocks Performed Poorly in 2011, Says Baird/STR Stock Index

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STR reported today the Baird/STR Hotel Stock Index ended December 2011 with a 2.7-percent month over month increase to 2,003, but was down 15.3 percent for 2011 overall. The index ended 2010 at 2,364.

The Baird/STR Hotel Stock Index outperformed the S&P 500, which was up 0.9 percent in December. The MSCI REIT (RMZ) was up 4.1 percent for the month. The S&P 500 ended 2011 flat and the RMZ was up 4.7 percent for the year.

"While there continues to be considerable turmoil in the financial markets, the lodging stocks included in the RWB/STR Hotel Stock Index rebounded 2.7 percent for the month of December," said Randy Smith, co-founder and chairman at STR. "With industry fundamentals remaining fairly strong through the end of the year including a healthy increase in room demand, very low growth in overall room supply and modest improvements in room rates, 2011 ended on a positive note. As a result, continued strong growth in 2012 will be difficult because of a variety of factors and this concern was reflected in the 15.3-percent decline in the index for full year 2011. Assuming there will be a limited number of disasters this year--either natural or man-made--the outlook for the industry continues to be positive with a modest increase in revenue per available room forecast for the year."

"Hotel stocks performed quite poorly in 2011 despite strong underlying fundamentals. The Index underperformed nearly every month until early fall when investors finally stepped in as valuations became extremely attractive," said David Loeb, senior hotel research analyst and managing director at Baird. "The Index has gained momentum in the last few months, outperforming the broader market and other real-estate sectors, and we expect this trend to continue in 2012 as investors, who are still relatively under-weight hotels, reallocate their portfolios."

As of 1 January 2012, the composition of the Index is changing, with the addition of RLJ Lodging Trust (RLJ) and the removal of Orient-Express Hotels (OEH). RLJ's implied market capitalization is approximately $1.8 billion while OEH's is about $770 million.

The Baird/STR Hotel Stock Index was set to equal 1,000 on 1 January 2000, as its starting point. The Index reached its peak of 3,178 on 5 July 2007. The Index's lowest point occurred on 6 March 2009, when it dropped to 573.

The Baird/STR Hotel Stock Index is the first widely available U.S. hotel stock index in the hotel industry.