The top three hotel REITs in 2020 (HPT, INN)

Real estate investment trusts (REITs) that invest in hotels and motels provide investors with a range of income-generating property investment opportunities. Since ordinary retail investors lack the large amount of capital and experience required to purchase a portfolio of accommodation properties, hotel real estate investment trusts provide a unique way to enter this market.

However, even the best hotel REITs in 2020 are struggling, especially when compared to the past performance in 2019, which is a record year for the industry. The overall long-term impact of the global pandemic caused by COVID-19 is unclear. But since the United States fell into recession in February 2020, the retail and hospitality industries must have been hit.

Key points

  • Real estate investment trusts (REITs) that invest in hotels and motels provide investors with a range of income-generating property investment opportunities.
  • Hotel real estate investment trusts are one of the most economically sensitive real estate investment trust industries.
  • Although hotels may now be a risky behavior due to travel restrictions imposed by the government in 2020 to slow the spread of COVID-19, these REITs may be the most likely to recover.

As we all know, shopping malls, hotels and other retail stores will be affected in the long-term economic downturn. In 2020, tenants were forced to close for a long time. At the same time, both business and leisure travel have been severely affected. For example, the occupancy rate of Apple Hospitality REIT on June 30, 2019 was 81.4%, and in April 2020, it had dropped to only 17.7%.

Hotel REITs are one of the most economically sensitive REITs, but if you are a long-term investor and can wait patiently, these three hotel REITs are relatively cheap.

Host Hotels and Resorts

Host Hotels & Resorts is a S&P 500 index company and the largest accommodation real estate investment trust. It has 84 luxury and high-end hotels (79 hotels in the United States and 5 international hotels), with a total of approximately 47,600 rooms. The company is headquartered in Bethesda, Maryland, and is listed on the Nasdaq Stock Exchange. Its brands include Marriott, Ritz-Carlton, Westin, Hilton and Hyatt. As of September 15, 2020, Host has reopened 70 hotels.

The company previously paid a quarterly cash dividend of $0.20 per common share on April 15, 2020 to shareholders of record as of March 31, 2020. However, on June 19, 2020, the board of directors announced that it would temporarily suspend the company’s regular quarterly dividend, starting with the second quarter dividend that should have been paid in July 2020.

It has a price-to-earnings ratio of 35.50 and a market capitalization of $11.9 billion.

Apple Hotel Industry Real Estate Investment Trust

Apple Hospitality REIT has 215 hotels in 35 states in the United States. This is equivalent to approximately 28,100 rooms nationwide. Its hotels include Marriott, Hilton, Hyatt and two independent hotels. The product portfolio is room-centric, which means it is more focused on providing a place to sleep rather than providing a resort-like vacation experience.

Year-to-date, Apple Hospitality’s stock price has fallen -33.32%. The last time Apple Hospitality reported quarterly earnings results was on August 5, 2021. As of the second quarter of 2021, REIT reports earnings per share (EPS) of $0.30 for the quarter.

It has a price-earnings ratio of 19.91 and a market capitalization of US$3.6 billion.

Sunstone Hotel Investors Inc.

Sunstone Hotel Investors Inc. is a lodging REIT that owns the rights and interests of 18 hotels, mainly in the high-end hotel sector. This is equivalent to approximately 9,147 rooms. The company operates well-known national brands such as Marriott, Hilton and Hyatt. The company was founded by Robert A. Alter in 1985 and is headquartered in Aliso Viejo, California.

The company’s properties are located in the US gateway, conference and resort markets, and the company focuses on what it calls long-term related real estate. This means that its investment portfolio focuses on properties that meet specific criteria: ideal location; difficult to replicate; durable demand drivers; stand the test of time; simple general ownership costs; superior economics of capital costs and owner profits. With these standards, Sunstone believes it can generate higher returns from its properties.

After its hotel occupancy rate plummeted to 6.7% in April, the company suspended its dividend. According to reports, in April 2020, the company’s total revenue fell 95.9% year-on-year.

In October 2021, the company’s market value was US$2.7 billion. Its price-to-earnings ratio (price-to-earnings ratio) is 310.

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