Lodging Stocks Outperformed S&P Last Week

NEW YORK— Goldman Sachs reports lodging stocks were down 0.3% last week, although according to its Goldman Sachs Lodging Index (GSLI), the sector outperformed the S&P 500, which dropped 2.3% in the same period. The Goldman Sachs Gaming Index (GSGI) declined 4.5%, underperforming the S&P 500, which was down 2.3%. Year-to-date, the GSLI and GSGI are up 5.7% and 2.6%, respectively, while the S&P 500 is down 4.5%. According to Goldman Sachs analyst Stephen Kent, the lodging stocks may have held steady as a group in response to positive RevPAR data released by Smith Travel Research. For example, for the week ending Feb. 2, RevPAR decline for the whole industry was only 6.9%— the second lowest RevPAR decline since Sept. 11. It’s anticipated what will drive the stocks over the next few months is a continued improvement in RevPAR data. In particular, if RevPAR can show an improvement over negative 10%, this will be an indication that the terrorist attacks are not having as much of an impact as originally thought. Prior to the terrorist attacks, RevPAR was running at negative 10% to 12%, and thus any improvement will indicate a strengthening in fundamentals from the summer, according to Kent. The GSGI was pulled down by Alliance Gaming (down 11.7%), Ameristar Casinos (down 12.5%), and MGM Mirage (down 9.2%). The only gaming stock in the GSGI to end the week in positive territory was Sun International Hotels, up 3.9%. The overall weakness in the gaming stocks may be more of a reflection of a pause in share price performance, rather than any change in fundamentals. The gaming stocks have been in a virtual tear in the last few months, and they may consolidate here until the fundamentals catch up to the share price increases, according to Kent.