U.S. Hotel Stock Index Drops 6.4% in September

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The Baird/STR Hotel Stock Index fell 6.4% in September 2016 to close the month at 3,134. Year to date, the index remains up 1.3%.

"As we enter the final months of 2016, the U.S. hotel industry is bracing for a slowdown in demand growth and an acceleration in the number of open hotels," said Amanda Hite, STR's president and CEO. "STR expects nationwide occupancy to flatten or decline, as can already be seen in a number of Top 25 Markets.
 
We expect RevPAR (revenue per available room) to continue to grow and be entirely driven by ADR (average daily rate) growth, but there is uncertainty around pricing power given we are entering a period of declining occupancies. Investors are clearly underwhelmed by the most recent and expected future performance, and the stock prices in September reflected that."

"Hotel stocks significantly underperformed in September as modest RevPAR growth trends continued and investors began to focus on slower expected growth in the fourth quarter," said David Loeb, senior hotel research analyst and managing director at Baird. "Top-line growth remains sluggish, especially in urban markets, and bottom-line results are being pressured due to higher customer acquisition costs and higher labor-related expense items, both of which set up 2017 to be another slow-growth year."

The Baird/STR Hotel Stock Index for September lagged behind the performance of both the S&P 500 (-0.1%) and the MSCI REIT (RMZ) (-2.5%).

The Hotel Brand sub-index reported a 4.6% decrease to 4,166 in September. The Hotel REIT sub-index declined 10.2% to 1,382 during the month.