Lodging REIT Outlook: Near-Term Bad, Long-Term Good

WASHINGTON, DC-Lodging real estate investment trusts will grapple with a slowing economy this year and difficult comparisons to last year’s strong showing, according to an analyst who says the outlook for 2002-2003 is excellent. Jeff Donnelly, vice president at First Union Securities, says lodging REITs are gaining credibility among investors.

Donnelly made the remarks during a recent conference hosted by the National Association of Real Estate Investment Trusts. He predicts 10% to 15% total returns on lodging REITs this year. But he says pockets of regional weakness created by the souring economy will plague lodging REITs during the next six months, when he believes the industry will hit the bottom of its growth trough. He forecasts a rebound for late this year and early next year.

“Despite the near-term weakness we see for lodging, we believe the fundamentals for 2002-2003 could not be better,” he says. “It is our view that supply growth is perhaps the single most important determinant of future revenue growth and operating profit in the hotel business.”