Editor's Note: Our Gaming, Lodging, and Leisure analyst Todd Jordan is hosting a call on Monday June 22 at 12:30pm ET to discuss key components of the travel complex – Hotel REITs, C-Corps & OTAs. If you are an institutional investor interested in accessing this call or related materials email firstname.lastname@example.org.
“Here we go, on the road again” – Willie Nelson
Willie just couldn’t wait to get back on the road again, but business travelers and their companies may not be so anxious.
We’ll discuss our outlook for the RevPAR and profit cycle, with particular focus on business vs leisure travel and winners and losers, along with many other hotel and OTA related topics next Monday.
RevPAR has apparently bottomed and the hotel stocks have exploded off the lows in anticipation of the 2nd derivative effects of a recovery, but the road from here is loaded with potholes. While the rate of change trade has certainly worked, we think investor focus will transition towards what the next few years might bring vs simply looking at the RoC of the next few weeks.
We see a dynamic and changing environment to create winners and losers within the travel landscape and we’ll do our best to layout the scenarios and make the stock calls.
Already in 2020, we spent considerable time looking at the path forward for the hotel C-Corps (particularly on the risks to unit growth expectations) and also at the OTAs as they aim to accelerate share gains. This time around, we’ll pay closer attention and dive deeper into how the owners (REITs) could perform as the broader hotel ecosystem transitions from reopening to recovery.
Geographic mix, business vs leisure exposure, financial and operating leverage and other factors will be important considerations to underwriting the future for the hotel REITs. In our deck next week, we’ll also address a variety of new topics impacting the full service hotel REITs, as well as update our views for the big C-Corp brands and the dominant OTA players, including stock calls across the spectrum.
Please join us on Monday, June 22nd at 12:30PM ET. Email email@example.com for access.
TOPICS TO BE ADDRESSED ON THE CALL
As always, we will try to deliver our findings through detailed and data driven analysis. Here are some of the key topics we plan to address.
Not Your Father's Hotel Cycle
- Contextualizing the current recovery trends together with macro and health risks
- Real time read on what the more immediate future holds – data tracker updates, modeling near term growth, and flagging potential impediments
- Opportunities amid the wreckage – traditional supply side no longer as big of an issue, Airbnb in retreat, and labor market slack to present margin opportunity. Positives big enough to offset the negatives?
All Travel Is Not Created Equal
- Business vs Leisure argument – diverging paths and tail risk issues
- Business Travel depression or recession? Implications of a faster or slower business travel recovery
US Hotel Ownership – Hedgeye Case Studies and REIT Exposure Scorecard Ranking
- Cash Burn Analysis – what levels begin to really matter for hotel owners?
- Market by Market Work from Home (WFH) Analysis – isolating key travel markets and their leverage to “work from home” industries and what kind of impact that could have on the pending recovery
- Macro Drivers / Recovery Analysis – in depth look at the drivers behind RevPAR and demand performance for the key geographic segments of Full Service Hotel REITs – Urban & Resort
- Hedgeye REIT Scorecard – breaking down key factors into a scoring system to filter potential outperformers / underperformers in the Full Service REIT space
- Sentiment indicators and historical performance analyzed through different economic periods
- Valuation discussion – implications on current valuation and recovery normalized EBITDA tell an interesting story about what is and isn’t ‘priced in’
Macro, Stylistic, Sentiment
- GDP off the lows, but where to from here, and what are the implications for macro sensitive hotel stocks
- US Hotel REIT stocks through the lens of the Hedgeye Quad Roadmap
- OTA and Hotel C-Corp Quad analysis
Hotel Ecosystem Review – Comparing the Owners (REITs), the Brands (C-Corps), and the OTAs
- Catalyst examination – leisure vs business, unit growth exposure, operating leverage, investor expectations, and Hedgeye views vs Street
- Drivers of YTD stock performance and what that could mean for the future
- Holistic take on valuation – what looks cheap might not actually be cheap
Best Idea List shuffle – likely some idea changes as we wrap up our review. More to come