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In today's article, I'll explore a specific niche within the REIT (real estate investment trust) sector and that is hotel and resort REITs, with one such stock being Park Hotels & Resorts Inc (NYSE:PK), a REIT that is publicly traded on the NYSE.
According to the company website, their portfolio "consists of 40* premium-branded hotels and resorts with approximately 25,000* rooms located in prime U.S. markets."
I will present why I think this stock makes a strong bullish case right now to buy it, due to multiple upside factors outweighing the downside risks.
It's key upside factors include a strong profit margin and positive cashflow, a robust portfolio diversification across the US, positive macro-level demand forecasts for the hotel and travel sector, as well as trading in undervalued territory.
As a dividend stock, its high yield could attract yield-focused dividend investors as well.
Key Macro Factors Seem Favorable to the Hotel Segment
According to Statista data, which forecasted hotels revenue in the US through 2029, "the market is expected to exhibit an annual growth rate of 3.83% (CAGR 2025-2029), which would result in a market volume projection of US$133.30bn by 2029."
I believe this should provide a tailwind to this REIT and obviously its hotel operating partners.
Further, despite all the media headlines recently of tariffs and geopolitical conflicts, and talk of possible recession, just yesterday real estate firm CBRE (NYSE:CBRE) published a research report with a relatively positive view on the hotels sector.
In the report, the firm predicts "a 2.0% growth in RevPAR (revenue per available room). Urban locations are expected to outperform other location types driven by improved international inbound travel and increases in business transient and group travel."
Trading Below Average, an Opportunity for Buyers
As of this article writing, this stock is trading below its simple moving average, as you can see in the chart below from Investing.com data:
This is just the type of bearish, dip-buying opportunity I would be looking for as long as there are several upside factors that weigh in favor of this stock's future.
In addition, valuation data shows a trailing price/book value of just 0.67, somewhat below the industry average of 1.02, indicating it is undervalued vs its sector in terms of this metric, another reason value-driven investors might consider this stock.
The Dividend Case: Attractive For High Yield Portfolios
For dividend investors like myself, I look at several factors such as whether this stock has an above-average yield within its sector, a proven dividend growth, and or sustainability of the dividend.
From data on Investing.com, the div yield of 11.66% beats the sector average which is only around 5%, so this is remarkable.
Where it comes up short in the data, however, is that it has not proven itself as a steady dividend grower.
However, it is a profitable company with a positive cashflow/share, and a continuation of such trends should justify support of the dividend further. With an operating margin of 13.37%, this business has proven to be a solid generator of core operating income.
A Look Ahead: A Growth Pipeline Could Drive Future Business
For future-minded investors thinking about what could drive the future value of this REIT, I want to point out a notable item and that is the pipeline growth of new properties in their portfolio, which I expect can drive future revenue growth as they come into service.
For instance, consider the graphic below from the firm's 2025 investor presentation, which shows an expected value of over $1B in planned / under-construction properties including ones in Florida, California, and Hawaii.
The Debt Risk: A Downside Potential To Consider
A key potential downside risk to mention about this REIT is that, according to Investing.com data, its total debt/equity is 133%, exceeding its sector average significantly.
Additionally, I would point out from the chart below taken from the firm's investor presentation that the firm will have a significant debt maturity coming due in 2026, mostly consisting of property mortgages.
Because the real estate sector often depends on debt financing to acquire, build, and grow a property portfolio, I would also point out that interest rates can have an impact on the cost of debt, and so Fed decisions on target policy rates on a macro level certainly can trickle down to the real estate sector.
For this reason, because we remain in an elevated rate environment, this could mean plenty of "future" upside for this sector when interest rates fall back down significantly, reducing the cost of mortgage financing.
Consider that from FRED data, the 30-year fixed average mortgage going into early 2025 still remains quite elevated when comparing to the period of 2020 to early 2022, although 2020 was a global pandemic year when drastic measures had to be taken to save the economy, and some of those were monetary measures:
Conclusion: Hotel/Resort REITS Could Add Value To a Diversified REIT Portfolio
Some other REITs in an investor's portfolio may include those investing in healthcare properties such as outpatient clinics, those investing in residential such as multifamily apartment buildings, or mortgage REITs who don't necessarily acquire properties themselves but rather the mortgages on those properties and or the mortgage-backed securities backed up by those loans.
Within the larger context of REITs, therefore, hotel/resort REITs could add diversification however one should certainly consider some of the metrics I pointed out today, as well as the cyclical nature of tourism and the impacts it could face from future recessions when consumers and businesses might spend less of their discretionary income on unessential travel.