Investors in the hotel industry had much to celebrate as hotel stocks surged throughout December, capping off a remarkable year with a nearly 40% increase compared to 2022. The Baird/STR Hotel Stock Index, which includes 20 of the largest hotel brand companies and real estate investment trusts (REITs) traded on U.S. stock exchanges, experienced a notable 10.5% jump in December, reaching a level of 6,760. The overall stock index saw an impressive 38.4% gain for the entire year.
According to Michael Bellisario, Senior Hotel Research Analyst at Baird, the positive momentum in hotel stocks mirrored the broader market sentiment. The ‘soft landing’ narrative and a favorable outlook on lower interest rates fueled investor confidence, resulting in increased valuation multiples. Both hotel brands and hotel REITs saw gains exceeding 10% in December, outperforming their respective benchmarks.
The hotel REITs stood out with a remarkable 19% gain for the year, more than doubling the return of real estate stocks broadly. Similarly, hotel brands witnessed a substantial 44% increase, nearly doubling the performance of the S&P 500.
Throughout 2023, the hotel stock index experienced fluctuations, reaching its strongest month-to-month increase of 16.4% in January. Despite some monthly declines, none exceeded 3.6%, as observed in August.
The U.S. hotel industry, on the other hand, has been on a steady path to recovery since the spring of 2020, navigating through the challenges posed by the COVID-19 pandemic. Described as a year of “normalizing,” 2023 saw positive trends in key metrics.
Amanda Hite, President of STR, CoStar’s hospitality analytics division, noted the solid footing of the U.S. hotel industry. Revenue per available room (RevPAR) rose by 5% compared to the previous year, with significant growth in the first quarter due to a favorable comparison against omicron-impacted months in 2022. Overall, it was a robust and ‘normal’ year for the industry, with RevPAR growth averaging 3.1% in the remaining quarters.
In terms of month-over-month performance in December, Hotel REITs claimed three of the top five spots, led by Pebblebrook Hotel Trust. Year over year, hotel brands dominated the top five stock index performances in December, with IHG and Marriott International leading the pack with over 50% increases.
The Baird/STR Hotel Stock Index, along with its sub-indices, offers a comprehensive view of market performance and is available exclusively on Hotel News Now. As we reflect on 2023, it’s evident that the hotel industry has not only weathered the challenges but has emerged stronger, setting a positive tone for the times ahead.