U.S. hotel stocks ended the year on a high note, encouraging investors to remain optimistic about the sector's 2018 performance.
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"Investors remain upbeat about the potential for better [revenue per available room] growth in 2018 given the strong macroeconomic backdrop and several additional potential demand-related tailwinds,” Baird Senior Hotel Research Analyst and Vice President Michael Bellisario said in a statement.
This jump in stock performance follows a major slowdown experienced during the first half of last year. Heavy competition due to an onslaught of new supply and home-sharing behemoth Airbnb led to a slowdown in occupancy and hit revenue per available room pretty hard in the beginning of last year. That slowdown, though still down compared to historic standards, corrected itself by Q3.
Despite the market fluctuation experienced last year, demand and occupancy growth have improved and are expected to remain steady, STR reports.
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The Baird/STR Hotel Stock Index showed an increase in the sector of 3.3% in December and 32% year-to-date. STR reports this increase may be attributable to tax reform and peaking supply growth in addition to thriving demand growth in Texas and Florida, which was fueled by hurricanes Harvey and Irma.
These strong numbers are expected to continue into the first quarter.
“[Average daily rates] growth was and will be the main driver for RevPAR and profit growth,” STR President and CEO Amanda Hite said.
In addition, according to a 2018 outlook report conducted by CBRE, market researchers anticipate leisure travel will provide a much-needed boost in demand for the sector as international travel falters in select hotel markets.
“The oversized growth in leisure demand is partially explained by shifts in the hotel guest profile and in the spending habits of U.S. age cohorts," CBRE reports. "In 2015, well-heeled, travel-happy senior citizens contributed the largest share of total spending on lodging. Spending by seniors will likely continue to increase as the last cohort of baby boomers enters the seniors age group.”
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