Kevin Winter
In early June, Sweden’s Central Financial institution reported the next than forecast 9.7% fee of inflation for the month of Might. In explaining the shock, Danske Financial institution economist Michael Grahn described that the Stockholm kickoff of Beyonce’s Renaissance Tour despatched lodge costs hovering and will have contributed greater than 0.2% to the price index’s climb.
What?
Citing a musical celebrity will in all probability get you extra web page views than saying meals and vitality costs are rising, however that is not inflation. That is a cultural phenomenon. That’s provide and demand. The provision of Beyonce was far outstripped by the demand; when that occurs, I need to purchase Beyonce all day lengthy.
Since Beyonce was nonetheless in Europe, we struck upon the even larger sensation that has been rolling out right here in The States over the previous couple of months: Taylor Swift’s Eras Tour. If lodge charges soared alongside Taylor’s tour schedule, we might determine which lodge REITs may profit. We’re not searching for an inflation hedge, we need to discover and purchase the winners tangential to very large show-business success.
The Train
We didn’t simply take Sweden on their phrase; earlier than we pursued this theme, we seemed for proof that resorts truly revenue from live performance excursions like these. On June seventh, the Cincinnati Enquirer reported that space resorts had offered out at wallet-gouging room charges north of $1,000 in anticipation of Swift’s scheduled July 1st live performance.
Nearer to the realm of our REIT resorts, in responding to my inquiry of how The Georgian Terrace had been affected by Taylor’s 2 Atlanta performances in late April, Mack Simms, Sotherly Accommodations VP of Operations replied, “The Taylor Swift tour supplied an enormous enhance for each occupancy and ADR. We offered out on the lodge versus 81% occupied identical time final 12 months. ADRs had been roughly 30% larger than the identical weekend a 12 months in the past.”
It appears to be like like this theme has legs.
Portfolio Revenue Options maintains a Property Listing that identifies industrial actual property owned by public actual property firms throughout the nation’s prime 50 MSAs. In a thematic funding pursuit corresponding to this, we might use the listing to display for who owned the resorts within the submarket for every of Taylor’s 27 stadium reveals.
Right here is the tour schedule and the display end result:
Portfolio Revenue Options
Supply: Portfolio Revenue Options
Included within the display are the 16 US-based, publicly traded lodge REITs in addition to Canada-based, however US hotel-owning, American Lodge Revenue Properties (AHOTF, HOT.UN). The resorts recognized within the tour cities are color-coded by property sort (Full-Service Lodge, Restricted Service Lodge, Prolonged Keep Lodge, and Unclassified).
The underside line tallies the parameters of the display.
*The tour has twenty-seven reveals in twenty cities.
* The stadiums accommodate seating for nearly two million Taylor Swift followers. Presumably, a few of these 2MM followers will want a spot to remain.
* Every REIT had at the least some “Occasion Evening” publicity throughout the trail of the tour. The underside line tallies the variety of property degree “Occasion Nights” every REIT has for the complete US tour.
The Winners
With 192 Occasion Evening exposures, Service Properties Belief (SVC) is the hands-down winner. SVC can be the one REIT to have properties in each metropolis on the tour.
SVC
SVC owns 220 resorts with greater than 37,000 rooms, so 192 occasion nights do not essentially make the quarter, but when these occasion nights create considerably larger occupancy, room charges, and REVPAR, that enchancment all interprets to margin growth. The purpose is that the live performance publicity is additional.
With 129 Occasion Nights, Apple Hospitality (APLE) was a really robust 2nd on the display. APLE has properties in all however one of many tour cities.
APLE
APLE additionally has 220 resorts with nearly 29,000 rooms. Whereas the mega live shows are a bonus, Apple has a give attention to being in cities which have a busy, year-round occasions calendar, like our personal Madison, Wisconsin, the place APLE will quickly open its second lodge. Madison is the house of the College of Wisconsin soccer, basketball, and hockey, in addition to the State Capitol and world headquarters for Epic Techniques and Actual Sciences (EXAS).
You Do not Should Select Simply One
The aim of this train was to see if given occasions are incremental to property operations and profitability. We now have recognized which REITs had probably the most publicity, however we cannot actually study of the outcomes till the 2nd and third quarter outcomes are reported.
This report isn’t a measure of any REIT’s intrinsic share worth, however relatively an identification of how a lot publicity to enhanced demand every firm could have had. That mentioned, we will disclose that we’re lengthy the display winners SVC and APLE, in addition to the overseas atypical shares of American Lodge Revenue Properties (OTC:AHOTF).
Coming Quickly to a Stadium Close to You
Now that Beyonce’s tour is wending its method via america, we’ll quickly publish the display for her reveals and venues. Many venues overlap with Taylor Swift’s tour, so we’ll see if it creates a layering impact on operations and profitability. Perhaps post-pandemic pent-up demand will make concertgoers a brand new pressure within the hospitality sector.
Editor’s Word: This text discusses a number of securities that don’t commerce on a significant U.S. trade. Please concentrate on the dangers related to these shares.
