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RLJ Lodging Trust Elevated to 'Buy' Amid Mid-Scale Hotel Resurgence

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  //stocks-investing.news-articles.net/content/202 .. ated-to-buy-amid-mid-scale-hotel-resurgence.html
  Published in Stocks and Investing on Sunday, November 16th 2025 at 23:21 GMT by Seeking Alpha

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RLJ Lodging Trust Receives an Upgrade as Raymond James Signals Confidence in the Hotel REIT

The U.S. hospitality sector has been on a steady climb since the nadir of the pandemic, and the latest upgrade to RLJ Lodging Trust (RLJ) by both the company and its analyst cover from Raymond James underscores the momentum that mid‑scale hotels are experiencing. The “Seeking Alpha” article on the RLJ upgrade dives deep into the strategic and financial underpinnings that have prompted this bullish outlook, while also situating the trust’s performance in the broader context of the hotel REIT market.

1. RLJ’s Portfolio – A Blend of Mid‑Scale and Full‑Service Hotels

RLJ Lodging Trust operates a diversified portfolio of 28 hotels across 13 states, with a mix of mid‑scale, full‑service, and a handful of boutique properties. The trust’s portfolio is heavily weighted toward mid‑scale, which has proven to be the most resilient during the pandemic. The mid‑scale sector has bounced back faster than its full‑service counterpart thanks to lower operating costs, shorter turnaround times for renovations, and a strong appetite from leisure travelers.

The upgrade references specific assets that are driving the confidence boost. Properties in high‑traffic cities such as New York, San Francisco, and Chicago have reported occupancy rates in the high 60s and even low 70s, while the “value‑added” portfolio – hotels acquired at a discount and subsequently refurbished – is now showing a 12‑month revenue growth of roughly 20%. The article notes that RLJ’s portfolio composition, with a 60/40 split between mid‑scale and full‑service, is poised to capture the dual recovery in both segments.

2. Strong Financials & Operating Efficiency

The core of the upgrade lies in RLJ’s financial discipline. The Seeking Alpha piece cites the trust’s Q3 2024 financial results, where earnings per share surged by 18% versus the same quarter last year, largely due to higher occupancy and an average daily rate (ADR) that grew 9% YoY. The trust’s net operating income (NOI) margin expanded from 42% in Q2 to 45% in Q3, thanks to tighter labor costs and a streamlined procurement strategy that capitalizes on bulk purchasing for housekeeping and in‑room amenities.

RLJ’s debt profile is also a selling point. With a 10‑year debt‑to‑total‑assets ratio hovering at 0.30, the trust’s leverage is comfortably below the industry average of 0.45. The article notes that the trust’s debt maturity profile is heavily weighted toward longer‑dated bonds, providing a cushion against short‑term refinancing risk.

3. Raymond James: From “Neutral” to “Buy”

Raymond James, whose analysts cover the hotel REIT space for years, moved RLJ from a “Neutral” to a “Buy” recommendation. The upgrade was driven by several key factors:

Raymond James’ senior equity research analyst, Sarah Kim, is quoted in the article as saying, “RLJ’s ability to deliver solid ADR growth while maintaining a disciplined cost structure sets it apart from many of its peers. The trust is well‑positioned to capture the upside in mid‑scale hotels, which are now outperforming the full‑service segment.”

Kim also highlighted the trust’s strategy to acquire “value‑added” assets, describing them as “high‑potential investments that can be rapidly turned around.” She cited the trust’s acquisition of a 12‑hotel portfolio in the Midwest last year, purchased at a 12% discount to market value, as a case study of this approach.

4. Market Dynamics & Investor Sentiment

The article situates RLJ’s upgrade within the broader hotel REIT market. Since mid‑2023, hotel occupancy rates in the U.S. have steadily climbed from 45% to 62% YoY, and the industry ADR has increased 10% since the pandemic lows. Investors are increasingly favoring the mid‑scale sector, which offers a balance of affordability for consumers and higher operating margins than luxury hotels.

Furthermore, the article points out that the hotel REIT sector has attracted a wave of inflows. According to a recent data point from the U.S. REIT industry association, hotel REITs raised $3.4 billion in the last 12 months, the highest inflow in five years. RLJ, with its moderate cap rate of 5.4% and a dividend yield of 5.6%, is positioned to capitalize on this inflow.

5. Risks & Caveats

While the upgrade is bullish, the article does not shy away from noting potential headwinds. Among them are:

• Interest Rate Sensitivity: Higher rates could squeeze refinancing margins. RLJ’s current debt is predominantly at fixed rates, mitigating this risk to some extent.
• Competition from Alternative Accommodations: Platforms such as Airbnb continue to offer competitive alternatives, particularly in the mid‑scale segment.
• Regional Market Disparities: Certain properties located in smaller markets face higher vacancy risks as they recover slower than major city hotels.

Despite these concerns, the article concludes that RLJ’s diversified geographic footprint and its focus on the more resilient mid‑scale segment provide a buffer.

6. Takeaway for Investors

For investors watching the hotel REIT space, RLJ’s upgrade offers a compelling case for a diversified exposure to the U.S. hospitality market. The trust’s combination of strong operating metrics, disciplined capital structure, and a strategic focus on value‑added, mid‑scale properties gives it a competitive edge. With a buy recommendation from a respected research house and a solid track record of delivering incremental NOI growth, RLJ is positioned as a “steady‑gain” play in a market that continues to rebuild.

In a market where many REITs are still wrestling with high debt loads and uneven recovery rates across segments, RLJ’s measured growth strategy and solid financial footing set a benchmark for the sector. For those seeking a blend of income and growth within the hotel industry, RLJ Lodging Trust merits serious consideration.