The COVID-19 pandemic wasn't exactly a positive catalyst for the hotel industry. Hotels that remained open during the early days of the pandemic were operating at single-digit occupancy percentages in many cases, and in some cases, it was more economical to simply close. And even after the toughest restrictions were lifted last summer, travel is nowhere close to pre-pandemic levels.
However, with the vaccine rollout well underway and COVID-19 cases in decline, it could be a good time for long-term investors to take a closer look at some hotel real estate investment trusts (REITs). Thanks to pent-up demand and a strengthening economy, the hotel business could have some pretty strong years ahead. Here are three hotel REITs in particular that might be worth a look as we head into March.
Apple Hospitality REIT
Apple Hospitality REIT (NYSE: APLE) invests in so-called "select service" hotel properties. These are generally mid-level properties (not luxury resorts), with few food and beverage outlets and without extensive conference spaces. For these reasons, they are also referred to as rooms-focused hotels. Homewood Suites, Residence Inn, and Hampton Inn are three examples of hotel brands you'll find in Apple Hospitality REIT's portfolio.
While the company wasn't exactly immune from the COVID-19 pandemic, Apple Hospitality REIT was affected less than the other two REITs we're about to discuss. And the reason is simple. The hotels in its portfolio have little dependence on group travel, which simply isn't a thing right now. On the other hand, leisure travel has come back more than either group or business travel, and it pushed Apple Hospitality's properties to near-breakeven levels by the end of the year. As the pandemic comes to an end, leisure travel demand should continue to strengthen.
Ryman Hospitality Properties
Unlike Apple Hospitality REIT, Ryman Hospitality Properties (NYSE: RHP) has not been a resilient business during the pandemic. The company's Gaylord hotels are specifically designed for large group travel, such as conferences and conventions. And its live entertainment venues, like the Ryman Auditorium in Nashville, aren't exactly hosting full concerts right now.
Having said that, there is tremendous demand for group events, as evidenced by the fact Ryman Hospitality Properties has rebooked 1.34 million of the room nights that were cancelled at its properties in 2020. And the company's properties are best in class. In fact, Ryman's hotels are five of the six largest non-gaming properties by meeting-space volume in the United States. Although it might take a while, they will be filled with people again.
Xenia Hotels and Resorts
Finally, Xenia Hotels and Resorts (NYSE: XHR) is an operator of some of the most luxurious hotels in the United States. In its portfolio of 35 luxury and upper-upscale hotels, you'll find properties such as the Waldorf Astoria in Atlanta, Ritz-Carlton in Denver, and many other top-tier destination hotels.
By the end of the third quarter, all but one of the company's hotels were open for business, but occupancy has been low. However, Xenia is an investment in Americans' desire to get back to their favorite destinations in a post-pandemic world. Many of the company's properties are located in top vacation destinations, such as Orlando, Napa, Key West, and many others, and could be huge beneficiaries of pent-up demand. And with more than $600 million in liquidity, Xenia has the resources to be opportunistic in the meantime while the industry hasn't quite recovered.
The Millionacres bottom line
To be sure, the hotel industry isn't going to snap back immediately. For the time being, the COVID-19 pandemic is still an ongoing situation, so be prepared to ride out some ups and downs, at least in the near term. All three of these hotel REITs are best suited for long-term investors with at least five years to let their investments play out, so keep this in mind before deciding to invest.