Market Overview

Barclays Downgrades Lasalle Hotel, RLJ Lodging To Underweight

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  • LaSalle Hotel Properties (NYSE: LHO) shares have lost 35 percent year-to-date, while shares of RLJ Lodging Trust (NYSE: RLJ) are down 32 percent.
  • Barclays’ Felicia R. Hendrix downgraded the ratings on both companies from Equal-Weight to Underweight, while reducing their price targets.
  • Estimates for RevPAR growth have been reduced due to continued uncertainty in the demand growth outlook, Hendrix stated.

Group RevPAR trends have been broadly in-line with expectations so far in 4Q15, analyst Felicia Hendrix said. He added that these trends are supported by October’s strong group RevPAR growth, which was boosted by the positive impact of holiday timing shifts.

Hendrix pointed out, however, that transient RevPAR growth has been disappointing, which would result in lower-than-expected RevPAR growth in 4Q15. Transient RevPAR growth for the Luxury and Upper Upscale classes has been 4.0 percent in October and 3.7 percent in November, falling short of the growth of 6.6 percent, 5.4 percent and 5.3 percent recorded in 1Q15, 2Q15 and 3Q15, respectively.

Although RevPAR growth is expected to be solid in 2016, “the demand growth outlook remains uncertain due to headwinds such as the strong US$, choppy corporate earnings growth and price sensitivity among customers,” Hendrix mentioned. He added that supply growth could accelerate next year, posing a challenge for certain lodging segments and companies.

A review of the 2015 trends and projections for 2016 indicate two companies that appear to be “disproportionately affected by some of the headwinds facing the industry,” the analyst commented, naming LaSalle Hotel and RLJ Lodging.

LaSalle Hotel

Hendrix said that LaSalle Hotel’s gateway market and CBD focused portfolio could continue to be adversely impacted by currency headwinds, Airbnb and supply growth. He reduced the price target for the company from $32 to $29.

RLJ Lodging

The analyst stated that RLJ Lodging has “significant exposure to Houston (lower oil demand, high supply growth) and other high supply growth markets (NYC, Denver, Austin).” The price target has been reduced from $30 to 25.

The Barclays report noted that heading into 2016, “we would rotate out of these stocks” into Sunstone Hotel Investors Inc (NYSE: SHO).

Latest Ratings for LHO

Oct 2016CitigroupMaintainsNeutral
Aug 2016BTIG ResearchInitiates Coverage onNeutral
Jul 2016CitigroupMaintainsNeutral

View More Analyst Ratings for LHO
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Posted-In: Barclays Felicia R. HendrixAnalyst Color Long Ideas Downgrades Price Target Analyst Ratings Trading Ideas


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