Last year turned out to be a day at the beach for full-service upscale resort hotel operators. According to Moody's Investors Service's “Lodging REITs: 2004 Earnings Commentary,” upscale resort hotels have continued to outperform their hotel counterparts. Specifically, hotel REITs with a concentration in full-service upscale resort and convention properties reported an 18 percent growth in RevPAR (revenue per available room) in 2004, reaching $92.90, significantly up from 2003's RevPAR of $78.50.

Full- vs. Limited-Service REITs RevPAR

Source: SNL Financial and Moody's Investors Service

Following the terrorist attacks of Sept. 11, many travelers were less likely to head to resort destinations, choosing instead to vacation closer to home. Part of the resurgence in upscale resorts has been, in Moody's estimation, an increased willingness on the part of consumers to travel to once again travel greater distances for their vacations. Moody's also credits the decline in the U.S. dollar which has attracted foreign tourists; and the return of corporate meetings and convention markets.

Among the full-service hotel REITs, FelCor Lodging Trust Incorporated (NYSE: FCH), MeriStar Hospitality Corporation (NYSE: MHX) and Host Marriott Corporation (NYSE: HMT) noted their resort and convention properties have been the best performing segments of their respective portfolios.