Performance Comparison of Lodging REITs, Hotel C-Corporations and Resorts and Casinos

Abstract

The purpose of this study is to examine the performance of lodging real estate investment trusts (REITs), hotel C-corporations and resorts and casinos as compared to the overall market, and to compare the relative performance of lodging REITs, lodging C-corporations and resorts and casinos during 1995–2005. Excess returns on three portfolios are regressed against the excess returns on the value-weighted Center for Research in Security Prices (CRSP) portfolio. Lodging REITs provide the highest returns between the two different types of investment portfolios (resorts and casinos and C-corporations), as well as the market benchmark (the overall market portfolio). As an investment vehicle, lodging REITs command respectable returns with relatively low volatility in comparison with stock investments. The excess returns of lodging REITs were not found to be significantly different from zero during the three subperiods of 1995–2005: growth, recession and recovery. Investors who are interested in increasing their share of real estate investments may find lodging REITs a relatively attractive investment vehicle that could be added to their portfolios.