Analyst Note| Kevin Brown |
We are updating our fair value estimates for Park Hotels & Resorts, to $24 from $19, and Pebblebrook Hotel Trust, to $26 from $20, after updating our models for each company with their fourth-quarter results and after considering recent trends in the hotel industry. While revenue per available room declines are decelerating roughly at the pace we forecast for the upper upscale hotel segment, both companies were able to reduce operating expenses far more than we had expected during the hotel downturn. With the rollout of vaccinations fully underway across the U.S., we now anticipate that most hotels will be able to return to profitability at some point this summer. We have also pushed forward our assumption that the hotel industry returns to 2019 levels by 2024 from our prior expectation of 2026. Finally, we assume that some of the reductions in operating expenses made during the current downturn will become permanent, leading to hotel EBITDA margins that are slightly higher than the 2019 peak.