Real estate investment trusts (REITs) that invest in hotels and motels provide investors with exposure to a portfolio of income-producing properties. Since the average retail investor lacks the enormous capital and experience needed to purchase a portfolio of lodging properties, hospitality REITs provide unique access to this market. The best hospitality REITs of 2019 could easily outperform both the S&P U.S. REIT Index and the Standard & Poor's 500 Index.
Hospitality Properties Trust
Hospitality Properties Trust (NASDAQ: HPT) buys, owns and leases 323 hotels in 199 travel centers in the United States, Canada and Puerto Rico. The REIT does not operate the hotels but instead leases them to other companies, including Marriott International Inc. (NASDAQ: MAR), Intercontinental Hotels Group plc (NYSE: IHG) and Hyatt Hotels Corporation (NYSE: H).
As of Oct. 7, 2018, shares of Hospitality Properties Trust have fallen 8% year to date, compared to 7.9% for the S&P 500 index. The REIT pays an annual dividend of $2.10, which equates to a yield of 7.45%. Hospitality Properties Trust grew its gross profits by 5.6% in 2017. It has a price-earnings ratio (P/E ratio) of 15.6 and based on the consensus estimates of six analysts, it's rated as a buy.
Summit Hotel Properties, Inc.
Summit Hotel Properties Inc. (NYSE: INN) owns premium-branded hotels in the upscale segment of the U.S. hotel industry. The REIT manages a portfolio of 77 hotels, with occupancy of 11,659 guestrooms in 26 states. Its hotels include Marriott Courtyard, Residence Inn and Fairfield Suites properties along with Hyatt, InterContinental, Hilton Worldwide Holdings Inc. (NYSE: HLT) and Starwood Property Trust Inc. (NYSE: STWD) properties.
Shares of Summit Hotel Properties has fallen 16% year to date as of Oct. 7, 2018. The REIT, which released earnings on Aug. 2, 2018, reported quarter-over-quarter improvement in earnings before interest, taxes, depreciation and amortization (EBITDA) margin improvement by 170 basis points.
The REIT's earnings per share for the quarter of $0.40 beat analysts expectations by $0.01. Summit's annual dividend yield is a respectable 5.62%. The REIT's funds from operations jumped 17% from the same quarter last year to $41.4 million.
Condor Hospitality Trust Inc.
Condor Hospitality Trust Inc. (NASDAQ: CDOR) is a much smaller and more speculative REIT than the average REIT in the S&P U.S. REIT Index, with a $133 million market cap. Condor specializes in owning premium-branded, upscale and upper mid-scale extended-stay and limited service hotels in the largest metropolitan markets in the United States. The company's properties operate as franchises under brands such as Hilton, Marriott and Wyndham Worldwide Corporation (NYSE: WYN).
Shares of Condor had appreciated 13% year-to-date as of Oct. 7, 2018. The REIT's earnings, which it announced on Aug. 7, 2018, show significant progress in its efforts to turn around its operations. The REIT's restructuring effort bolstered its liquidity and enabled it to pay a dividend to shareholders for the first time since 2009, starting in 2016. Its dividend yield is now 6.94%. Investors looking for a turnaround play with significant upside may want to consider Condor Hospitality Trust in the speculative portion of their portfolios.