Assessing the historical performance of hospitality stocks: The investor's perspective

This article analyzes the historical performance of hospitality stocks, taking into account the magnitude and timing of investor capital flows in and out of the hospitality sector. Using historical return data on hospitality common stocks, this article shows that there is substantial market timing in the hospitality industry, with firms issuing equity capital near market highs and retiring capital near market lows. For hospitality investors, market timing translates into a shortfall of 1.5 percent per year over the time period 1962-2006. A value-weighted portfolio of both restaurant and hotel firms earns a lower average return over this time period compared to a similar portfolio of either hotel or restaurant stocks only, because of the same timing issue.