U.S. Hotel Stock Index Falls 5.3% in May

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May was not a good month for publicly traded hotel stocks, according to STR. The Baird/STR Hotel Stock Index decreased 5.3% in May 2016 to close the month at 3,013. Year to date, the index is down 2.6%.

"Uncertainty surrounding investor sentiment in April and May erased the index gains we saw at the end of the first quarter," said Amanda Hite, STR's president and CEO. "That sentiment surely reflects the industry's decelerating performance, but as we indicated in our revised forecast last week, we are still on track for record RevPAR (revenue per available room) levels through 2017. As the 'where are we in the cycle?' debate continues, we believe that solid summer months will bring the public markets more in line with actual industry performance and the values realized by investors."

"Hotel stocks continued their underperformance in May as industry-wide trends continue to disappoint, especially in the major urban gateway markets," said David Loeb, senior hotel research analyst and managing director at Baird. "The transaction market appears to be thawing, which could provide some much-needed price discovery and help close the valuation gap between public and private market valuations. However, management teams, especially the REITs, remain cautious about the outlook for continued growth and are positioning their companies and balance sheets for the next downturn."

The Baird/STR Hotel Stock Index for May lagged behind the performance of the MSCI REIT (RMZ) (+2.1%) and the S&P 500 (+1.5%).

The Hotel Brand sub-index reported a 6.4% decrease to 3,986 in May. The Hotel REIT sub-index experienced a 2.8% decline to 1,343 during the month.