U.S. Hotel Stock Index Drops 15.4% in August

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The Baird/STR Hotel Stock Index ended August with a 15.4-percent decrease to 1,807 and is down 23.6 percent year-to-date 2011. The index ended 2010 at 2,364.

The Baird/STR Hotel Stock Index underperformed the S&P 500 and the RMZ. The S&P ended August with a 5.7-percent decrease, and the RMZ ended the month with a 5.8-percent decrease.

"The volatile market conditions caused growing concern among investors," said Randy Smith, co-founder and chairman of STR. "Though the hotel industry's performance seems to be holding steady, investors are apprehensive to invest and are left wondering what the rest of 2011 has in store. The global economic uncertainty will remain top of mind for investors and travelers for the remainder of the year. "

"At one point in August, the index was down 25.6%, which would have ranked as the third worst monthly result since inception," said David Loeb, senior hotel research analyst and managing director at Baird. "However, in the two months with bigger declines, September 2001 and October 2008, the nation was in the midst of crisis and hotel demand was falling rapidly. Today, hotel stocks appear to be pricing in flat RevPAR growth for 2012, which we believe is unrealistic given still-strong hotel fundamentals. Stock market volatility, however, could cause businesses and consumers to reign in travel budgets until there is greater economic clarity, a classic example of the tail wagging the dog."

Robert W. Baird & Co. (Baird) and STR partnered to create the Baird/STR Hotel Stock Index--the first widely available U.S. hotel stock index in the hotel industry.

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