Per their second quarter conference call, the third quarter appears favorable. Most of their hotels are located in the southeast, and they have generated operating results in the upper tier of the hotel real estate companies. Outperformance among these segments particularly benefits Sotherly. The REITs with upscale hotels in the gateway markets have performed worse relative to lower-cost, economy hotels in the sunbelt. Occupancy increased to 58.6%, and average daily rates were $142.79, producing RevPAR of $83.73.ĭemonstrating the hotel market's bifurcation in performance, hotel performance has largely been a function of property type and geography. Results for the second quarter of 2021 compare favorably. For the second quarter 2020, Sotherly's hotels had an aggregate occupancy rate of 11.5% and average daily rate of $117.60, producing RevPAR of just $13.53. They produced hotel EBITDA of $9.6 million for the second quarter, up from a deficit of $5.2 million the previous year. Sotherly's PortfolioĬonsistent with the rest of the hotel industry, Sotherly's portfolio of 14 hotels has bounced back strong. With more employees being able to work from wherever, hotel demand could increase as people can travel more. The rise of remote and hybrid work has made working location much more flexible. Now, projected supply is expected to increase just 9.2% over the next 5 years, reducing future competition. The US hotel stock was projected to increase 13.5% from 2020 to 2025 prior to covid. While covid has no doubt been a net negative for the hotel industry, two effects that could have a positive impact on hotel performance include: Lower cost hotels most dependent on leisure travel are posting superior occupancy and average daily rates relative to 2019 levels.
#Best hotel stocks to buy now update
Occupancy has picked up a bit since, but still lags 2019 levels by more than 20% in the largest markets, demonstrated by a recent operational update by Pebblebrook ( PEB).Ĭontrasting with weak gateway market performance are strong operating numbers for smaller markets, primarily across the southeast region of the United States. Due to reduced group bookings and international tourism remaining low, the largest gateway markets continue to experience hotel occupancy levels more than 35% below 2019 levels as of late May.
Significant bifurcation still exists across hotel performance.
Conditions are much improved relative to last fall. TSA data showed domestic travel at 92% of 2019 levels for Labor Day weekend, up from a low of 5% in April 2020. Hotel occupancy is at 90% of 2019 levels. Rising vaccination rates since the start of the year has propelled hotel demand following the greatest crisis the industry has ever incurred. The recent positive trends in hotel performance and data showing cap rates remain stable are encouraging signs that Sotherly's stock price could more than double over the next year. However, Sotherly's well-located southeastern hotels have experienced increased travel demand.Ĭonsequently, it is reasonable to assume that Sotherly can reach pre-covid operating performance prior to the rest of the hotel industry. The company's extremely high debt load, preferred stock dividend repayments, and uncertainty in the hotel industry are noted concerns. Such makes Sotherly ripe for strong price appreciation. Positive cash flowing hotels and superior operating performance contrast with a depressed stock price. Sotherly Hotels ( NASDAQ: SOHO) represents one of the most high-risk, high-reward real estate investments.
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