Hotel Industry Expected to Weather Potential Recession

The DJIA rose 195 points, Nasdaq was down 55 points, the S&P 500 rose 7 points, the 10-year treasury yield was back up .15 to 3.53% and lodging stocks were modestly higher. The volatility is just reaching new levels in treasuries.

Deutsche Bank issued a report, commenting on what they think the trading action in gaming and lodging stocks are telling them. DB said current lodging C-Corp multiples have held up considerably better than the multiples of gaming-related gaming-related entities so they believe in a recessionary environment, lodging stocks likely have more downside risk. The gaming REIT names represent the only only sub-sector within gaming in which current multiples are above both pre and post post pandemic multiples, likely due to the limited risk to negative AFFO revisions revisions, beyond interest rate fluctuations on variable debt. In most instances, post pandemic multiples are lower than pre-pandemic multiples. DB believes this relates relates to recession concerns at present. In some instances the discounted multiples relate to changing business mixes.

Jefferies believes the primary issue affecting stock prices in the group the past week is the banking crisis, notably the pressure on regional banks and its prospective prospective impact on financing of new properties. In terms of C-Corps like Hilton, an important aspect of unit growth is from franchise deals, a majority of which are are financed by regional banks. There is no immediate evidence of impact to deal deal flow or property opens as of yet given the length of the development cycle. cycle. Jefferies will remain acutely focused on pipeline