Leisure Travel Is Key Accelerant During Recovery

04/19/21 12:31PM EDT

Below is an excerpt from a complimentary research note by our Gaming, Lodging & Leisure analyst Todd Jordan. Please contact sales@hedgeye.com to read more of our GLL research.

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Another week has passed and it becomes more and more apparent that the leisure traveler is the key accelerant so far during this recovery. 

Recent holiday weeks have muddled some of the weekday vs weekend trends, but with Easter break in the rearview we were able to more accurately see the diverging trends in this past week of data. 

Important to remember that leisure travel ≠ all travel, and therefore we’re not universally bullish across our universe of hotels and travel stocks. 

A large % of the hotel industry has their demand mix geared towards business travel, so one should expect hotel fundamentals – particularly the REITs – should really start to underperform the rest of GLL (OTAs, Timeshare, and Gaming) in the coming months and that could mark a breaking point for the stocks.

We updated our preferred proxy for weekly hotel RevPAR tracking and for the 7 days through February April 17th (corresponding with upcoming STR calendar), TSA throughput data fell 42% (vs ’19 levels) vs -39% YoY for the prior 7 days. 

As such, we’re forecasting total RevPAR to drop ~30% (vs ’19), which would mark a slowdown vs last week’s RevPAR growth (-25% vs ’19) with particular divergence on the weekends vs the weekdays. 

Like we have mentioned more recently, the Covid affected comps are now starting to impact the numbers, so for more context we’ll be comparing data against the ’19 base. 

Led by leisure, there will continue to be acceleration across the industry on a trending basis but the divergences in demand growth leave us decidedly more negative on hotels (ex. the low end). 

Playing the accelerating leisure theme is better expressed through the OTAs (EXPE & BKNG) than through hotel REITs or select C-Corps.

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