We are removing RHP from the Hedgeye Best Ideas list. We still like RHP’s fundamental positioning given the long demand tail endemic in the group segment. However, the strong run in the stock – up 29% since we put RHP on Best Ideas on 09/18/14 versus +9% for the peer group – has narrowed the valuation disparity to the hotel REIT sector. RHP’s EV/EBITDA discount has narrowed from 2.5 turns to approximately 1 turn, which we feel is appropriate given its small size and narrow focus.
Takeaway: No smoking gun but big move in the stock brings valuation closer to peer group.