REITs Remain Cautious About Corporate Travel

The DJIA ended Friday with a gain of 199 points while Nasdaq was up a point, the S&P 500 rose 19 points and the 10-year treasury yield was up .04 to 3.82%. Lodging stocks were higher. MCG and INN both were up 6% while SVC and SLNA were up 5% each. SOND fell -5% on the day.

Xenia Hotels & Resorts announced its board of directors authorized the repurchase of up to an additional $100 million of the company’s outstanding common shares. With the additional authorization, XRH has approximately $173 million remaining under its total repurchase authorization.

It was a subdued NAREIT REITworld conference in San Francisco, judging by the analyst reports. Truist said that with it taking place so close to 3Q earnings, there wasn’t much said that was new. Some U.S. lodging REIT management teams did express concerns about cracks in demand forming with technology customers soon after recent layoff announcements. Truist said they found management teams remaining fairly optimistic about continued improvement in top-line fundamentals into 2023 but feel it is still a ways to go for a full recovery. Most teams are resigned to leisure travel softening but more positive and focused on the continued recovery of the laggard demand segments and markets, specifically higher-rated corporate travel, group/convention, and non-leisure urban markets such as San Francisco. Some REITs noted they are trying to evaluate the pent-up group demand in 2022 versus the re-normalization of group trends in 2023+. Truist views Ryman Hospitality most positively coming out of the conference.

Jefferies said its takeaways from NAREIT include that with the era of cheap capital concluding, developments and acquisitions no longer pencil. They found most REITs believe they don’t have much to do other than sit back and wait for everything to settle out. REITs’ main defense is capital preservation and driving organic growth. They believe that urban, business transient, and group travel recove