It’s no surprise that the rise in gas prices and runaway inflation are now affecting summer travel plans. As Americans prepare for their first vacation season since the COVID closures, concerns linger over the high costs associated with travel.

In a new consumer confidence survey by The Conference Board, the number of respondents saying they plan to take a vacation this summer plummeted to its lowest level since last spring when vaccines were just becoming widely accessible. The Consumer Sentiment Index decreased slightly in April, with concerns over inflation ranking high among people’s anxieties.

Summer travel apprehension could have implications across a myriad of market sectors, but for those of us in the REIT world, the hospitality space is of particular concern.

From CNBC:

The question now is if consumers will rethink travel due to economic constraints or the prolonged volatility in the stock market.

The market turmoil could eventually hurt the “wealth effect,” Truist Securities lodging and leisure analyst Patrick Scholes told CNBC. “Basically, if we see a sustained bear market, people feel more conservative about their ability to spend.”

Those invested in hospitality REITs will want to pay very close attention in the coming months. Of course, everything seems to be down in this market so there’s definitely more to consider than recent ticker trajectories alone.

Some of the biggest factors to look at when investing in hospitality REITs are debt-to-capitalization ratios, property diversity, and greater economic circumstances (especially now).

Since luxuries are the first things we cut out during tough times, many hotels may experience decreased occupancy. You definitely want to make sure you’re investing during the right time, in a REIT that features a good mix of lux and business-oriented assets.

Undoubtedly, the smartest way to invest in hospitality REITs is by playing the long game. At the very least, extended holding periods allow you to endure short-term volatility in the form of economic turns and seasonality. More importantly, the longer you can hold onto a blue-chip hospitality REIT, the more you’ll benefit from stock price appreciation and long-term dividends.

While this logic applies to pretty much all REITs, the long-term investment strategy is especially true for hospitality REITs because of their correlation to the economy. Holding long will help you endure signs of economic instability like we’re seeing now.

More Non-REIT News to Know About

IRS Owes Big

You’ll get a kick out of this one. The IRS, notorious for levying penalties and interest for late payments, is now facing $3.3 billion worth of interest owed back to the public.

Yes, Americans can now expect 4% interest for late refunds by the IRS — a pretty significant amount compared to interest on, say, modern money market accounts, traditional savings, etc. 

Usually, the IRS has 45 days to process a return and submit a refund. After that, interest starts accruing in amounts tied to federal short-term interest rates. As of last month, the IRS had nearly 10 million unprocessed 1040s for tax years 2020 and 2021. This translates to $3.3 billion in interest — over a quarter of what it costs to actually run the IRS.

Since the IRS is funded by taxpayers, the irony of this new interest penalty adds a whole other level of humor. 

The World According to REITs

Let’s Look at Some Hospitality REITs

All this talk about travel plans and hospitality REITs has me in the mood to check the status of a few of my favorite ones. I picked out a couple with solid foundations and sound balance sheets that will undoubtedly survive our summer economy.

Apple Hospitality

With household names like Courtyard, Fairfield, and Residence Inn, Apple Hospitality (APLE) holds a diverse set of core hotel brands across the country. The management team has been working to improve efficiencies, lower operating costs, and renovate its entire portfolio of properties. Along with ever-increasing occupancy rates, the REIT’s dedication to efficiency will serve investors well.

Right now, it boasts a $4.21 billion market cap with 219 properties and 28,700 rooms across 36 states. Distributions from May were $0.05 per share based on a $17.97 share price.

Park Hotels & Resorts

Park Hotels & Resorts is a hospitality REIT operating mid-range lodging properties under the Hilton, DoubleTree, and Hyatt Regency brands. Besides maintaining solid portfolio performance in top destinations across the country, the company’s top brass has kept a close eye on the balance sheet. Even in spite of a few closures hindering occupancy and income rates, this REIT has been able to offload assets… pay off hundreds of millions of dollars in debt… and establish substantial liquidity.

This quarter, it saw a 66% year-over-year improvement in FFO and a RevPAR increase of $75.10, or 181.7%. Its dividends aren’t really anything to brag about at around $0.01 per share, but again, this REIT looks good for the long game.