U.S. Hotel Construction Reaches 16-Month High

The DJIA ended Friday with a drop of 377 points while Nasdaq was down 144, the S&P 500 fell 40 points and the 10-year treasury yield was up .05 to 4.24%. It didn't take long for lodging stocks to give back some of the gains they had the few weeks before. The biggest mover of note on Friday was AHT, down -7%.

JP Morgan, as part of their US lodging 2Q24 earnings preview, lowered their rating on Choice Hotels to Underweight from Neutral. They kept their price target at $120. JPM views CHH's valuation as full after the recent rally as compared to Wyndham Hotels. They don't believe this makes sense given CHH has less net rooms growth versus WH and their Q2 sequential quarterly planned development pipeline declined. Overall for the sector, JPM thinks their estimates for hotel companies possess limited risk going into earnings season. But they see less attractive valuations generally for the large C-Corps though they still like Hyatt's relative discount, its exposure to Group and international gateway cities and its above peer footprint growth.

Truist said since 1Q24 was reported, they have not observed any significant surprises in RevPAR results or in 2H forward-looking bookings and pricing trends. They expect companies to report mostly in-line results. They do not expect this earnings season to be a catalyst for the lodging sector even though results should reaffirm the compounding earnings drivers of modest RevPAR growth + mid-single digit net rooms growth and share repurchases. They don't see the Hotel REITs going anywhere, describing them as one of "frustrating deep value" though Ryman Hospitality continues to stand out as one they are favorable on.

Baird's Hotel REIT 2Q24 preview included that expectations and sentiment are both low heading into earnings with buy side investors expecting 2H24 guidance/numbers to come down. Baird thinks the near-term setup is in better balance. They expect management teams to at least cut the high end of full year guidance to reflect the sluggish RevPAR backdrop. They favor Sunstone Hotels and Apple Hospitality.

The volume of U.S. hotel rooms under construction reached its highest level in 16 months, according to CoStar's latest June 2024 data. U.S. Hotel Pipeline, June 2024 (percentage change from June 2023): In construction: 157,713 rooms (+5.5%) Final planning: 266,619 rooms (+9.8%) and Planning: 333,827 rooms (+38%). Upscale and upper midscale continue to dominate, accounting for about 50% of all rooms in the final phase of the pipeline. Midscale and economy have show the most growth up 42% and 34% respectively, with newer brands and extended-stay accounting for most of the new construction across the midscale segment. Chain Scale Segments (% of existing supply, in-construction room count): Luxury (4.5%, 6,760 rooms) Upper Upscale (2.7%, 19,023 rooms) Upscale (4.0%, 36,806 rooms) Upper Midscale (3.5%, 40,954 rooms) Midscale (2.9%, 14,900 rooms) and Economy (1.3%, 8,384 rooms).

American Hotel Income Properties REIT LP announced that AHIP and certain of its subsidiaries are in a dispute with hotel manager ONE Lodging Holdings LLC, a subsidiary of Aimbridge Hospitality, and various of its own subsidiaries related to Aimbridge's mismanagement of AHIP's hotel portfolio. According to the Default Notice to Aimbridge, Aimbridge's management failures, arising in part from a lack of leadership consistency and recurring organizational instability, have caused AHIP material economic harm. AHIP also delivered a notice of appointment referring the matters set forth in the Default Notice to an independent expert for a determination that Aimbridge is in default of the Master HM, entitling AHIP to terminate the HMAs and recover damages. AHIP is now in receipt of a notice of civil claim filed by Aimbridge in the Supreme Court of British Columbia. Aimbridge is claiming, amongst other things, that the matters identified in the appointment notice must be resolved by the courts of British Columbia notwithstanding the agreed dispute resolution procedure.

Distress has hit the lodging sector of metro Atlanta's commercial real estate landscape, landing in the form of a foreclosure sale at an upscale hotel brand in the suburban market of Alpharetta. The 119-key Hamilton, which operates as part of Hilton's Curio Collection, went to Peachtree Group in a credit bid at auction recently. Property records indicate a winning bid of $42 million on July 2 by the firm, which had loaned $40 million to hotel developer Mayfair Street Partners.

Rosewood Hotels & Resorts continues to realize accelerated residential growth with the announcement of Rosewood Residences Old Lighthouse in Los Cabos, Mexico. Rosewood's first fully branded stand-alone residential community is in partnership with the Coppel family. Highlights include 144 residences; The Cliff House, a multi-level oceanfront facility housing an array of entertainment and gathering spaces including a restaurant, a bar offering live entertainment and an outdoor events facility; The Beach Club offering multiple pools, cabanas, beachfront dining, and a spa; The Family Athletic Center provides sports fields, courts, and fitness facilities; and a Wellbeing Center. Rosewood Residences Old Lighthouse is scheduled to officially commence the first phase of sales in late 2024.

RIU Hotels & Resorts announced the opening of the Riu Plaza Chicago located in the heart of Chicago's Magnificent Mile shopping district. The 28-story, 390-room hotel offers a gym, restaurant and lobby bar. In September, a rooftop bar will open on the 27th floor.

Hotel Polaris, at the U.S. Air Force Academy in Colorado Springs, will open in November 2024. The hotel offers six food and beverage outlets, an outdoor pool and sun deck, a spa and fitness center, as well as the only-in-hotel flight simulators in the U.S. The property also boasts more than 26,000 square feet of expansive indoor meeting space. Hotel Polaris is owned by Provident Resources Group, managed by CoralTree Hospitality Group and developed by Matthews Southwest Hospitality.

Lake Lawn Resort, in Delavan Lake, Wisconsin, announced the reopening of their upgraded guestroom accommodations after a multi-million dollar renovation throughout the resort's lodges. The resort features include an 18-hole golf course, three onsite restaurants, a 261-slip marina, a 76' tour boat, three pools, a gift shop, fitness center, Calladora Spa, and 32,000 square feet of flexible meeting and event space in 22 meeting rooms with outdoor space, along with 222 newly renovated lake house themed rooms, a separate guestroom building with 48 coastal-inspired rooms, and a selection of onsite luxury home rentals.

The old "Travelers Hotel" in Bluefield, West Virginia, is getting a facelift. Members of The Bluefield Arts & Revitalization Corporation have set their sights on fixing the building, which is the oldest remaining hotel in the town. The building will be home to an apartment complex on the top, with space for retail on the bottom. The timespan for completion is between 3 to 4 years.

Princess Hotels & Resorts announced the September 15th opening date for its latest properties: Princess Senses The Mangrove and Princess Grand Jamaica. Princess Senses The Mangrove is an adults-only, all-inclusive beachfront resort with 401 suites and 14 overwater villas, 14 restaurants, 15 bars and a spa. An all-inclusive, family friendly resort, The Princess Grand Jamaica features an aquatic park, kids club, teens center, nanny services, three pools, eight bars and nine restaurants.

International Highlights

Hilton announced the debut of Yoo2 Rio de Janeiro, Tapestry Collection by Hilton marking the company's 20th hotel in Brazil and Tapestry's first property in Rio de Janeiro. Owned and managed by ICH/Intercity Hoteis, the 135-room hotel offers a rooftop pool terrace, rooftop bar, a gym, spa, bike rentals and four meeting rooms.

Catalonia Hotels & Resorts reached an agreement with HIP Hotel Investment Partners for the acquisition of a hotel in Malaga and one in Barcelona, managed until now by Vincci. The price of the two establishments has not been disclosed. The first establishment will be named Catalonia Malaga, while the second will be Catalonia La Boqueria. In the Andalusian city, the chain plans to open the Catalonia Puerta del Mar at the end of the year. In Barcelona, the company already has 28 hotels and a total of 3,000 rooms.

Criterion Capital purchased the retail block that includes the former Debenhamson Princes Street, Edinburgh's main retail thoroughfare, for redevelopment as its first Zedwell Hotels site in Scotland. The City of Edinburgh Council has approved plans for a £50 million, 210-room hotel development at the site. Zedwell has three hotels in London, with another site set to open in Manchester in 2026.

Preferred Hotels & Resorts announced a new strategic partnership with Virgin Limited Edition. With immediate effect, Mont Rochelle (Franschhoek, South Africa), Necker Island (Necker Island, British Virgin Islands), The Lodge(Verbier, Switzerland), Lusaka (Sabi Sand, South Africa), Mahali Mzuri (Maasai Mara, Kenya), Son Bunyola Hoel & Villas (Mallorca, Spain), The Branson Beach Estate (Moskito Island, British Virgin Islands), Kasbah Tamadot (Asni, Morocco) and Finch Hattons Luxury Safari Camp (Tsavo National Park, Kenya), set to go live on the website soon, are part of Preferred Hotels & Resorts' Legend Collection.