U.S. Hotel Stock Tracking Index Tumbles 12 Percent in January

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Global hotel consultant STR's newly released Baird/STR Hotel Stock Index opened 2016 with a 12.1% decrease to close January at 2,719.
 
"Investors in lodging continue to focus on a number of issues confronting the industry in 2016, but the overall concern seems to revolve around a slowing global economy," said Randy Smith, STR's chairman and co-founder. "In addition, while the signals are mixed, there does seem to be some concern that the U.S. economy is either slowing or is already in the initial stages of a recession. This has led to significant downgrades in most of the lodging stocks over the past year. However, we continue to believe most of the slowdown for the industry will come from the demand side and that room rates should continue to grow well above the inflation rate. As a result, we expect profitability in the industry to improve throughout 2016 even with modest gains in revenue per available room."
 
"Hotel stocks continued their underperformance in January as investors remain fearful of a broader economic slowdown," said David Loeb, senior hotel research analyst and managing director at Baird. "The slower but still positive industry-wide trends that began in November and December carried over into January, and investors and management teams have reset their growth expectations lower for 2016, which has caused the hotel stocks to underperform recently."
 
The Baird/STR Hotel Stock Index for January lagged behind the performance of the MSCI REIT (RMZ) (-3.5%) and the S&P 500 (-5.1%).
 
The Hotel Brand sub-index reported a 13.3% decrease to 3,536 in January. The Hotel REIT sub-index experienced a 9.6% drop to 1,259 during the month.