Stars Aligned for Lodging in 2025_ Previewing C-corps & REITs

Industry Overview * Incrementally Positive Outlook: The lodging industry is expected to see incremental growth in 2025, driven by a stable macro environment, balanced fundamentals, and sustainable growth. * Improving Interest Rate Outlook: Three rate cuts in 2024 and two expected in 2025 are expected to ease construction financing and support growth for lodging companies. * Consumer Strength: The US consumer is expected to remain strong in 2025, supporting demand for lodging services. Company Analysis * C-corps: * Revenue Growth: Expected RevPAR growth of 1.5%-2.5% in 2025, with mid-priced segments leading the growth. * Unit and Pipeline Growth: C-corps are expected to continue growing organically through new brands, affiliation partnerships, and additional brand acquisitions. * Non-RevPAR Fees: Non-RevPAR fee growth, particularly credit card fees, is expected to be a significant driver of revenue growth. * Valuations: C-corp stocks are trading at higher valuations compared to REITs, reflecting their growth potential. * REITs: * Renovations and Comparisons: Easier comparisons due to recent renovations and the impact of labor activities and natural disasters. * Capital Investments: REITs are expected to benefit from capital investments in their portfolios, including renovations and new projects. * Valuations: REITs are trading at lower valuations compared to C-corps, reflecting their lower growth expectations. Key Picks * C-corps: Wyndham Hotels & Resorts (WH) is highlighted as a top pick due to its strong execution and solid long-term growth trajectory. * REITs: RHP (Host Hotels & Resorts) and XHR (Xenia Hotels & Resorts) are highlighted as top picks due to their earnings durability, group demand tailwinds, and capital investments in their portfolios. Additional Notes * The report includes detailed financial analysis and valuation models for each company. * The report also includes charts and graphs to visualize key trends and data points.