Why Hotel REITs Like Pebblebrook, DiamondRock, and Park Hotels & Resorts Tanked Today
On May 13, hotel real estate investment trusts (REITs) Pebblebrook Hotel Trust (NYSE: PEB), DiamondRock Hospitality Trust (NYSE: DRH), and Park Hotels & Resorts (NYSE: PK) all fell 10% or more in the first half of trading. Although the declines came amid a broader sell-off on Wall Street, it's not at all surprising that investors would be increasingly worried about these hotel landlords.
Each of these three hotel REITs had a difficult first quarter, as efforts to contain the spread of COVID-19 had a swift and direct impact on the performance of their properties. In reality, the social distancing and non-essential business closures mandated by the government only impacted a part of the first quarter. The real concern here among investors is that hotel REITs basically have lease lengths of one day and occupancy is highly sensitive to economic conditions. So when travel ground to a halt and entertainment venues closed their doors, hotel cancellations quickly followed. With the U.S. economy only just starting to reopen, and the pace expected to be very slow, the second quarter is also likely to be pretty painful for Pebblebrook, DiamondRock, and Park Hotels & Resorts.
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Source Fool.com
