Hotel REITs On the Decline Since Hurricane Milton: Did Wall Street Get It Wrong?

Hurricane Milton struck Florida between October 9-10, causing hundreds of thousands to flee their homes and drive north for safer lodging. The Georgia Department of Transportation reported a 280% spike in northbound traffic ahead of Milton's landfall.

Every hotel around metro Atlanta and southern Georgia sold out fast with Florida evacuees. The same was true for Jacksonville, FL which was spared most of the hurricane's wrath, and Orlando, which got heavy wind and rain but not the severe destruction of other Florida cities further south. Even in Tampa, hotels were still full of displaced homeowners since Hurricane Helene hit Florida two weeks earlier.

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Those fleeing Milton also drove northwest into Dothan, Alabama for safe hotel lodging. However, many motorists learned that hotels across the Southeast were already filled with travelers from Florida who dared not return home because of the impending storm. Some found refuge in RV parks and others slept in their cars.

Strangely, with all this increased business, hotel REITs have hardly budged this week and several have even traded lower since the storms hit. Wall Street must be wary of major hotel damage which will impact earnings. However, there have been no reports of any damage to hotels. Au contraire, Wall Street, when fourth-quarter earnings come out in January, hotel brands such as Hilton, Hyatt, Holiday Inn, Marriot and Wyndham will report huge spikes in occupancy and RevPAR (revenue per available room) for Q4. These are all brands owned by REITs.

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Hotel REITs such as Apple Hospitality REIT Inc APLE, Park Hotels and Resorts Inc PK, and Diamondrock Hospitality Co DRH stand to prosper in Q4 by the various evacuations from several hurricanes this fall. Apple Hospitality has the largest Southern portfolio with 27 hotels between Georgia and Florida and a few more in Dothan.

Furthermore, aside from the temporary high occupancy from the evacuees, where will thousands of people stay while their severely damaged homes are being repaired? Of course, some may stay with family or friends, but not everyone has that opportunity. And what about the thousands of people from Hurricane Helene in the Carolinas, Georgia, and Tennessee who were left homeless? All of these residents could be living in hotels for some time.

Therefore, you can expect a strong fourth-quarter report from several hotel REITs. True, the Q3 earnings aren't even out yet and maybe Wall Street isn't excited about those earnings, and Park Hotels' operating profit has lost share price because of a hotel workers' strike. But looking ahead, investors take note- Florida's terrible misfortune could become the Hotel REITs' Q4 good fortune.

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