Affluent Consumers Drive Luxury Hotel REITs' Strong Buy Ratings
Xenia Hotels & Resorts, Inc. (XHR) and DiamondRock Hospitality Company (DRH), both Real Estate Investment Trusts (REITs) focusing on luxury and upscale hotels, have received strong buy ratings from analysts. This positive outlook coincides with the increasing spending power of affluent consumers, a trend known as the 'wealth effect'.
XHR invests in top markets and leisure destinations, while DRH owns a geographically diversified portfolio of hotels in similar locations. Both REITs have shown promising growth factors, with XHR's strong buy rating supported by all five Factor Grades, led by earnings growth and revisions. DRH's rating benefits from its valuation and growth factors, with a low P/FFO suggesting better value and upside potential.
Host Hotels & Resorts, Inc. (HST), another REIT, is primed for a falling rate environment due to its quality income tilt. Its growth is driven by rate-fed RevPAR, with a notable 19% RevPAR growth at its three Maui resorts. Meanwhile, Howard Hughes Holdings Inc. (HHH), a hotels near me value play, develops and operates master-planned communities in the U.S.
Analysts have identified luxury brands such as LVMH, Tesla, and Apple as potential investment opportunities, leveraging the 'wealth effect' to target wealthy consumers. Affluent consumers, who own 72% of financial assets and 63% of homes, are expected to continue spending through Q4 2025 and beyond, partly due to the 'wealth effect' and other affect vs effect.
The positive outlook for XHR, DRH, and HST reflects the growing spending power of affluent consumers, a trend that is expected to continue. As luxury brands and hotels near me value plays like HHH benefit from this trend, investors are advised to consider these opportunities in their portfolios.
