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North America

Morgan Stanley Prefers C-Corps Over Hotel REITs for Strong Growth Outlook

Alan Woinski and Kim Woinski
November 7th, 2023 at 4:45 PM EST

Skift Take

  • Morgan Stanley favors C-Corps over hotel REITs for their growth potential and downside protection, while Barclays upgraded Park Hotels and Resorts due to its high dividend yield.
  • Choice Hotels missed estimates, and the potential acquisition by Wyndham remains uncertain, with suggestions for possible negotiation tactics.


  • Various hotels reported earnings and developments, with openings, auctions, and construction plans in different regions, including California, Texas, and North Carolina.

The DJIA rose 57 points while Nasdaq was up 121, the S&P 500 rose 12 points and the 10 year treasury yield was down .09 to 4.57%. Lodging stocks were kind of all over the place. SHCO traded up to a new high with a 6% rise on the day. SOND was the big percentage winner, up 12% while VCSA rose 6%.

Morgan Stanley said they remain more constructive on the C-Corps over the hotel REITs, viewing the C-Corps’ embedded growth and asset light model offering more downside protection should the macro erode. They do see a potential for re-accelerating US RevPAR in lodging into 2024 barring no outright recession. They reiterated their Overweight ratings on Marriott, Hilton, Hyatt and Wyndham with each trading below historical multiples on P/E.

Barclays upgraded their rating on Park Hotels and Resorts to Overweight from Equal Weight. They believe PK has turned the corner with the added bonus of a dividend yield that is one of the highest in all of the REITs, at 10%. Barclays upped their price target to $19 from $16.

Choice Hotels’ earnings report was interesting as they missed estimates, in part on core domestic RevPAR/royalty fees. Remember the comments by the Chairman of Wyndham Hotels saying CHH seems to think WH is the elixir to their problems. While CHH did not really give anything new regarding the attempt to acquire Wyndham, JP Morgan said they don’t think CHH is going away anytime soon, quoting the CEO as saying the top priority is to get re-engaged with WH’s Board so that every issue can be solved. We think it is pretty easy to get WH back to the table. First, change the offer to all cash, second give up 50% of the amount in shares of CHH IF there is an anti-trust issue or if WH’s franchisees walk because they don’t want to be part of the CHH system. We don’t think CHH is going to make that happen and we just don’t see WH going back to the table, particularly now that their stock price is trading higher than it ended the day CHH made their offer public.

Sunstone Hotels beat 3Q estimates but 4Q guidance is quite messy given the Maui impact and the Park Plaza sale. In 3Q, SHO repurchased 1.6 million shares and year to date to November 3rd, they have bought back 4.06 million shares.

Ryman Hospitality Properties reported a modest 3Q earnings beat. With cancellations coming down and forward bookings increasing, RHP seems to be the beneficiary of the rebound in group business, as expected. RHP upped the 2023 full year outlook.

The Renaissance Honolulu Hotel & Spa is set to open in early 2024 as the brand’s first location on the island of Oahu. The brand new, 39-story oasis boasts 299 guestrooms, a private club lounge, heated saltwater pool with cabanas, an array of curated dining spaces, and the Sky Terrace and Renaissance Spa.

Two more Greater Philadelphia hotels have been put up for auction as hospitality properties across the region continue to change hands. The 151-key La Quinta Inn & Suites in Runnemede, New Jersey, and the 217-key DoubleTree by Hilton Hotel Downtown Wilmington – Legal District in Delaware have been listed with starting bids of $950,000 and $3.3 million, respectively. The DoubleTree is currently open. The online auction for the hotel will be held December 11-13 on Ten-X. The 2.3-acre site is currently owned by an entity with a mailing address in care of Solid Rock Group. The La Quinta property is closed. An online auction for the property will be held December 4-6 on RI Marketplace. The 4.5-acre property is currently owned by an entity affiliated with HDDA LLC. 

Extended Stay America announced the opening of the Extended Stay Premier Suites – San Diego – San Marcos, located in San Marcos, California. The four-story, 122-suite property features a fitness room and a guest laundry.

NewcrestImage is looking to build a 16-room, six-story hotel in Legacy business park in Plano, Texas. 

DD Partners, LLC, Peachtree Group, and Woodbine Development Corporation announced the development of Embassy Suites Gulf Shores, in Gulf Shores, Alabama. DD Partners and Woodbine are leading development and asset management efforts, and Peachtree will manage operations for the resort upon completion in summer 2025. The eight-story property will have 257-suites, a lobby bar and restaurant, a rooftop amenity terrace inclusive of a bar and grill, pool deck and an outdoor entertainment venue, and 13,620 square feet of enclosed meeting and pre-function space. The resort will also have a three-story parking garage and lease able retail space that will include a Starbucks.

Groundbreaking on the Hard Rock Hotel & Casino Tejon, in Mettler, California, is expected by the end of the year, but no opening date has been set. The Hard Rock hotel and casino project was approved for construction in 2022. The $600 million project would include 400 hotel rooms, meeting and convention space and an entertainment venue.

Cogswell Realty and Erol Stapleton submitted plans to construct a 143-room boutique hotel in Chicago’s Fulton Market. If approved, the independent hotel has a planned opening in 2026. The hotel will be 14 stories topped by a rooftop lounge. The concept will also include a restaurant, and innovative strategies for sustainability, health and wellness. Twin Bridges Hospitality will manage the hotel. 

Plans for a new $30 million hospitality development are in the works in Brevard, North Carolina, and construction should begin in early 2024. The development is called Brevard Staytion and will include 54 keys, including a 36-room lodge, treehouse rental cabins, an event and entertainment venue, an adventure concierge service and onsite hiking trails.. The contractor for the construction is Pisgah Hospitality. 

The Sather Hotel Berkeley, SureStay Collection by Best Western has opened in Berkeley, California. The hotel has undergone a refresh and features 32 guestrooms. 

The former Dayton Grand Hotel at 11 S. Ludlow Street, in Dayton, Ohio, will be offered in an online auction for at least the second time in nearly three years. RI Marketplace says bidding on the site is scheduled December 4 to December 6. County records show that most recently the hotel sold for $1 million in a Montgomery County sheriff’s sale. HDAA and Revive Living Developments LLC each at one point had a 50% ownership stake in a limited liability company owning the property. 

Paramount Lodging Advisors announced the sale of the 105-room Hampton Inn Cedar Rapids, Iowa. Paramount also announced the sale of the 130-room La Quinta Inn Westminster, Colorado. 

Personnel Move

McNeill Investment Group named Annie Mulvanny as its new Vice President, Investments and Asset Management. With MIG, Mulvanny will contribute to the current expansion of the firm’s multi-faceted investment management platform.

Alan Woinski and Kim Woinski
November 7th, 2023 at 4:45 PM EST

Companies: Best Western Hotels & Resorts, Choice Hotels International, DoubleTree by Hilton, Embassy Suites by Hilton, Extended Stay America, Extended Stay America Premier Suites, Hard Rock International, Hilton Hotels & Resorts, Hyatt Hotels Corporation, La Quinta, Marriott International, NewcrestImage, Park Hotels and Resorts Inc., Renaissance Hotels, Ryman Hospitality Properties, Soho House and Co Inc., Sonder Holdings Inc., Sunstone Hotel Investors, Inc., SureStay, Vacasa, Wyndham Hotels & Resorts

Locations: Alabama, California, Chicago, Delaware, Honolulu, Iowa, New Jersey, Ohio, Philadelphia, Texas

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