The bean counters in the hotel business are not a particularly optimistic lot about now. For instance, about a third of the membership of the Hospitality Asset Managers Association (HAMA) thinks they'll be forced to surrender the assets to their lenders or sell the properties outright because of the pandemic.
That's from a survey that drew responses from 103 asset managers, representing more than half of HAMA's membership, that the trade group released on Oct. 14. HAMA cited a drastic drop in revenue from the pandemic and the expectation of lender flexibility going away as the pandemic wears on as reasons for their pessimism.
REIT tracker tells the same tough tale
The 17 real estate investment trusts (REITs) in the lodging sector tracked by Nareit have posted a year-to-date total return of -50.33% as of Oct. 31, compared to a 15.65% total return in 2019.
Some well-known names on that list include Ryman Hospitality Properties (NYSE: RHP) -- yes, that Ryman, as in the Grand Ole Opry -- which Millionacres' Matt Frankel picked out back in September as a potential money-doubler, based on the strength of its Gaylord Resorts brand and expectations of a return to conferences, conventions, and other large gatherings.
As of the Nov. 6 market close, Ryman Hospitality was at a total one-year return of -53.07%, but as Matt points out, the company says it's rebooked nearly 800,000 room nights at its five large-scale hotel properties and anticipates strong demand for group events going forward.
Other examples in that sector include specialists in upscale, full-service hotels, such as Pebblebrook Hotel Trust (NYSE: PEB), and investors in premium-brand properties like RLJ Lodging Trust (NYSE: RLJ), whose focus includes compact, full-service hotels like Hilton Garden Inn and Courtyard by Marriott.
Both those REITs are down by around 50% for the year in total return and paying minimum dividends. Search through that sector on the Nareit site here and you'll see they're not alone.
A call for industry 'reinvention' and a time for smart picks
But along with Ryman's bookings, here's another sign of a turnaround: Marriott International (NYSE: MAR) showed a third-quarter profit of $100 million after losing $234 million in the second quarter. The world's largest operator cited spending cuts and improving demand for the turnaround. It's also repositioning itself as potential office space.
HAMA, the trade group cited above, also expressed a bit of optimism in its press release about the survey results. Said HAMA's president Kim Gauthier, senior vice president of Hotel Asset Value Enhancement: "The pandemic has decimated the hospitality and other service-related industries, likely changing the way hotels operate for years to come. The hotel industry has a unique opportunity to 'reinvent' itself as it responds to the crisis, elevating cleaning protocols and embracing technology trends, which ideally will lead to a stronger industry once we find 'the new normal.'"
The Millionacres bottom line
The sector's recovery, of course, depends on a strong return of both business and leisure travel. If you choose the right REIT, you can make a nice yield while waiting for the stock price itself to recover when life returns to some kind of new normal.