An analyst upgraded shares of several hotel real estate investment trusts on Tuesday on factors including stabilizing occupancy, improving liquidity and strong balance sheets.
Stifel Nicolaus analyst Rod Petrik raised his ratings on DiamondRock Hospitality, Host Hotels & Resorts and LaSalle Hotel Properties to "Buy" from "Hold."
Petrik said DiamondRock has a strong liquidity position, with $52 million in unrestricted cash. He also said demand is stabilizing and supply is limited.
"Although occupancy is still low, we believe the rate of decline has decelerated," Petrik wrote in a client note.
Furthermore, Host Hotels & Resorts is sitting on at least $1.8 billion in liquidity, Petrik said, which includes $1.2 billion in cash.
LaSalle, meanwhile, has a unique portfolio with a significant number of boutique and independent hotels, which Petrik said are holding up better than their branded competitors.
Looking ahead, Petrik said the opportunity to buy distressed hotel assets may be a year away, but that stronger lodging REITS like these companies will have access to capital first.
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