Xenia Hotels & Resorts Company collects governing factors of a good investment for the long term. In the stock market, the hotel REIT mid-cap trading is at 21% below its 52-week high and exhibits a 6.3% dividend yield. The company has a superior quality diverse portfolio comprised of luxury and upscale lodging properties, by which new hotel construction have the least adverse effects upon. The stock has displayed a positive trend for the current year and the stock rapidly rebounding, yet the stock seems to fall behind its peers in terms of valuation multiples. How come?
Considering the fact that Houston’s oil industry-based economy is impacted by low oil prices and softened oil markets, and 12% of Xenia’s portfolio lies in the city may be what dulled potential hotel REIT investors’ interest. The RevPAR (revenue per available room) of the said region in Q1 plummeted down, which slightly hurt the overall performance of the company’s portfolio. Xenia’s bright spots particularly on the West Coast have significantly contributed to hold up the performance and offset the situation. The company also has hotels within US major bright markets.
Moreover, Xenia recently began trading in February 2015 when it sprung as a standalone company from its parent company, InvenTrust Properties Corp. The proposed spin-off was marketed as a liquidity event and was thought to provide better conditions for growth for Xenia. Although president and CEO of Xenia Marcel Verbaas has led the company since 2007, when it was only InvenTrust’s lodging arm, the company has a short public history.
Though there is no straightforward answer to the original question, it can be said that Xenia has demonstrated to be a safe investment with an above average dividend yield that’s typically not accessible to the average investor, along with a conservative balance sheet. A close look through the hotel REIT metrics and results do not show signs of major red flags and is enough reason to consider the company as long-term investment in the hotel sector.
The bottom line? Houston might be the biggest problem Xenia is faced with, but not as huge in a way that overshadows the company.
Source: Xenia Hotels & Resorts, Inc.(NYSE:XHR)
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