The pandemic pounded hospitality properties particularly hard, and investors are eagerly watching their recovery as vaccinations in arms raise hopes for guests in rooms. There are a number of real estate investment trusts (REITs) that specialize in hotels and motels, and it’s reasonable to expect they’ll all see some positivity return to their portfolios and reports this year. But they’re not all the same.
For our purposes in this piece, let’s look at two that have what look like similar portfolios but have had quite different experiences after COVID-19 suddenly shut down business and leisure travel, which colors their prospects going forward.
They are Summit Hotel Properties (NYSE: INN) and Apple Hospitality REIT (NYSE: APLE).
Summit Hotel Properties
Austin, Texas-based Summit Hotel Properties says it focuses on owning premium-branded hotels with efficient operating models primarily in the upscale segment of the lodging industry. As of Feb. 23, its portfolio comprised 11,288 guestrooms at 72 hotels -- 67 of them wholly-owned -- in 23 states. Its major partners are brand names from Marriott International (NASDAQ: MAR), Hilton Worldwide Holdings (NYSE: HLT) and its Hampton brands, Hyatt Hotels (NYSE: H), and Holiday Inn Express & Suites.
As Millionacres’ Matthew DiLallo explains in detail here -- Is Summit Hotel Properties in Trouble? -- it’s been a rough ride for this REIT. The company’s stock price plunged by nearly 50% but has since recovered enough to hit a 52-week high as April ended, its funds from operations (FFO) remains in the red, and it hasn’t paid a common stock dividend in more than a year.
Matt’s piece explains in detail how Summit has the reserves to withstand the cash burn it’s enduring while its hotels and its markets recover, but in the meantime, here’s another hotel REIT that might provide a more immediate return.
Apple Hospitality REIT
Richmond, Virginia-based Apple Hospitality REIT claims one of the largest, most diverse portfolios of upscale, rooms-focused hotels in the United States. Currently, that’s 232 hotels in 88 markets and 35 states. It has more than 29,800 guest rooms located in 104 Marriott-branded hotels, 124 Hilton-branded hotels, three Hyatt-branded hotels, and two independent hotels.
As our Matt Frankel lays out here -- "Apple Hospitality REIT: What You Need to Know" -- this REIT also got rocked during the worst of the pandemic and it, too, suspended common stock dividends while its key profitability measure -- funds from operations (FFO) -- also went into the red.
But FFO recovered sharply in the fourth quarter to near pre-pandemic levels, and ahead of its May 7 financial results announcement, the company has restored its dividend. It’s only $0.01 a share, but it’s a start. After all, a REIT’s raison d’etre is income. So, this is a good sign.
The Millionacres bottom line
Summit Hotel Properties and Apple Hospitality REIT are both well-established hotel property owners with mainstream, brand-name portfolios that stand to recover quickly if the vaccination rollout indeed brings back a semblance of pre-pandemic normality.
Even if it doesn’t, these brand names and resilient portfolios seem poised to be able to adjust to a new reality for these kinds of non-convention center/resort-type properties relatively well, too.
All things being even, Apple gets the nod here. After all, a penny paid is an endorsement earned.
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May 08, 2021 at 06:00PM
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