Hey Influence Traders,
I hope that everyone had a good weekend.
I’m getting geared up for the OptionPit Round Robin on Thursday.
Of course, I first want to touch on some DC #PowerMoves.
And I’ve also been getting questions about the hotel sector after my recent commentary on retail businesses ramping up …
Marty Walsh was confirmed on Monday by the Senate to be the next Labor Secretary in 68-29 vote.
The former Mayor of Boston, who is known as the Climate Mayor, will take control of a massive agency that will spearhead the Biden administration’s quest to unionize more of the workforce and implement climate policy.
With Walsh’s confirmation, the Senate has confirmed all 15 of President Joe Biden’s cabinet secretaries.
That qualifies as a #PowerMove for the Prez.
In a sign that the U.S. is opening up, the TSA reported that it screened 1.54 million people on Sunday.
That is the largest number since March 13, 2020.
The TSA also had its 11th-straight day of screening more than 1 million people.
This uptick is due to a combination of spring break travel and more people becoming vaccinated against COVID-19.
Although passenger traffic remains below 2019 levels, airline executives reported an increase in bookings during the last few weeks.
COVID Relief = Market Stimulus
Federal relief checks, known to the Reddit crowd as “stimmies,” are pouring into the stock market.
Many individuals are rerouting their $1,400 government payments from their bank accounts to their Robinhood accounts.
They are making sound decisions like buying AMC Entertainment (Ticker: AMC).
During typical downturns, people stop spending and hold onto their cash, which causes stocks to suffer. For example, it took four years for the S&P 500 to recover after the 2008 financial crisis.
When $3 trillion in government transfer payments poured into bank accounts in April 2020, the S&P 500 surged nearly 12.7% making up the 12.5% drop in March.
Likewise, retail trading exploded in January after more stimulus checks were delivered.
Analysts have estimated that as much as $170 billion from the Covid relief bill could flow into the stock market, leading to another retail surge.
More Money is Coming
But DC is not done!
On Monday the Biden Administration confirmed what we’ve been saying for months … a massive infrastructure plan is on the way.
The ink on the $1.9 trillion economic aid package is barely dry, but it did little to advance the longer-term economic agenda that Mr. Biden campaigned on.
This next effort will.
Biden intends to develop a series of proposals to invest in infrastructure, education, workforce development and fighting climate change.
The word from his advisors is that he plans on spending as much as $3 trillion.
He plans to finance his efforts in part through tax increases on corporations and the rich.
While we still don’t have details on the programs, the administration is telegraphing an aggressive harnessing of the power of the federal government to make #PowerMoves.
Biden says that he wants to narrow economic inequality, reduce the carbon emissions that drive climate change and improve American manufacturing and high-technology industries battling China and other foreign competitors.
In an effort to appeal to Republicans and business leaders, the Biden team will combine investments in manufacturing and advanced industries with aggressive spending to reduce carbon emissions and combat climate change, including:
- Infrastructure improvements
- Clean energy deployment
- Development of “high-growth industries of the future” like 5G telecommunications
- Rural broadband
- Advanced training for millions of workers
- One million affordable and energy-efficient housing units
- $1 trillion on the construction of roads, bridges, rail lines, ports, electric vehicle charging stations and improvements to the electric grid and other parts of the power sector
Great for Retail – What about Hotels?
We have discussed how the pandemic has hurt retail office space and tax revenue.
Since I’m a former lawyer to the hotel and casino industry, I’ve been asked for my thoughts on that market.
The speed of the recovery of the hotel market will be sector specific.
U.S. hotels suffered the greatest loss in occupancy levels in 2020 since the Great Depression.
Occupancy dropped 41.6% and revenue per room fell 55.5%.
Luxury properties fared the worst, with occupancy down 65%.
Value-priced and extended stay properties did better since they served as second homes for many trying to avoid a Covid homelife and catered to the “road trip” crowd.
The increase in TSA traffic and the vaccine rollout is a good sign for higher-end and destination properties.
Many analysts are expecting luxury properties to recover more quickly, particularly in easily accessible leisure destinations like Virginia Beach, Va., Charleston, S.C., Savannah, Ga. and Santa Barbara, Calif.
The key to these areas is that they are driveable.
Likewise, low budget road motels that cater to the driving crowd will see a faster recovery than hotels in big urban centers … which are also suffering from a lack of business travelers.
Despite the dreary outlook, some investment money is making #PowerMoves in the hotel sector, and data suggests a bottom-up recovery.
- Blackstone Real Estate Partners (Ticker: BX) and Starwood Capital Group (Ticker: STWD) recently announced the acquisition of Charlotte-based Extended Stay America (Ticker: STAY).
- The 102-room Killington Mountain Lodge in Vermont was sold to MRC, a Hilton property affiliate (Ticker: HLT), for an undisclosed price.
- The 7,092-room Venetian Resort Las Vegas and Sands Expo and Convention Center (Ticker: LVS) was acquired by a partnership of Vici Properties and Apollo Global Management, for $6.25 billion.
- The 325-room Magnolia Hotel in Dallas sold to NewcrestImage, a hotel management and investment firm, for an undisclosed amount.
- The 245-key Courtyard San Diego Downtown sold to PIMCO Investment Management for $64.5 million.
- Courtyard by Marriott Denver-Aurora was picked up by Legendary Capital (a non-trading REIT) for $27.9 million.
Much of the investment money is bargain hunting, so despite the investment #PowerMoves, analysts admit that it could be 2025 before the hotel sector sees a full recovery.
One final note, I hope to see you all on Thursday for the OptionPit Round Robin. You’ll get unprecedented access to the entire team of Option Pit throughout the day (including me). Make a Power Move and sign up now.
Cutting Through the Noise for You.