Shares of hotel-focused real estate investment trust (REIT) Pebblebrook Hotel Trust (NYSE:PEB) were up as much as 10% at 1 p.m. EDT on Wall Street. Although the shares had pulled back a touch by 2:30 p.m., they were still holding on to a roughly 8% advance. It was a pretty good day for a stock that, even including that gain, is off by nearly 50% for 2020. The reason for the day's advance and the year-to-date tumble are one and the same -- COVID-19.
Over the weekend, AstraZeneca announced that it had resumed the phase three trials on its version of a COVID-19 vaccine. That news has investors excited about the prospects that a successful, safe, and widely available vaccine will help the world to move past the stifling economic impact of the pandemic. As a hotel owner, Pebblebrook has been heavily impacted by the economic shutdowns used to slow the spread of the coronavirus and, perhaps even worse, by the lingering fear people have of group settings and travel. (For reference, the second-quarter adjusted fund from operations loss was a painful $0.58 per share.) As such, it isn't unreasonable that good news on the COVID-19 front would lead investors to bid up Pebblebrook Hotel Trust's shares.
That said, investors need to take positive vaccine news with a grain of salt right now. Even after a vaccine is available, assuming that one is found, it will take time to inoculate broad swaths of the population. Thus, it will probably be awhile before businesses and consumers are ready to start traveling and staying at hotels again...unless they absolutely need to do so. In other words, a vaccine isn't likely to mean a quick return to normal for Pebblebrook Hotel Trust's business.
Wall Street's mood can shift rapidly, and these days COVID-19 is a highly fluid and emotional subject. There's a lot of uncertainty here. Investors need to step back and consider the big picture when animal spirits are running strong. Indeed, the truth is that it probably wouldn't take much bad news on the pandemic front to get investors running in the opposite direction again. Pebblebrook Hotel Trust is not a stock for the faint of heart.