Xenia Hotels & Resorts (XHR): A Compelling REIT Play on Post-Renovation Growth and Macro Tailwinds

Xenia Hotels & Resorts (XHR) stands at the intersection of two powerful tailwinds: a post-pandemic travel rebound and strategic investments in property upgrades that are driving occupancy and revenue growth. The company's Q1 2025 results—highlighted by a 6.3% year-over-year jump in Same-Property RevPAR and a 180-basis-point occupancy increase—underscore its ability to capitalize on rising demand. Meanwhile, its undervalued P/FFO ratio relative to peers and disciplined capital allocation make it a compelling buy for investors seeking exposure to the lodging recovery.

Occupancy Rebound Fuels RevPAR Growth

XHR's first-quarter performance reflects a sector-wide recovery in leisure and corporate travel. Same-Property occupancy rose to 69.3%, up 1.8% year-over-year, while Average Daily Rate (ADR) increased 3.6% to $272.41. This dual growth drove Same-Property RevPAR to $188.73—a 6.3% improvement—outperforming both expectations and broader industry metrics. Key drivers included the completion of the Grand Hyatt Scottsdale Resort's $25 million renovation, which boosted its RevPAR by 60% compared to Q1 2024, and strong event demand in markets like Washington, D.C., and New Orleans.

The leisure segment, in particular, is proving resilient. While XHR noted “slight concerns” about leisure RevPAR declines due to macroeconomic uncertainty, its group business segment—accounting for 80% of 2025 bookings by late Q1—offers a stable revenue base. This mix positions XHR to weather potential softness in discretionary spending while benefiting from corporate and convention demand.

Strategic Upgrades and Portfolio Optimization

XHR's success hinges on its ability to strategically allocate capital to high-impact properties while pruning underperforming assets. In Q1, it sold the Fairmont Dallas for $111 million—avoiding costly renovations—and acquired the fee-simple interest in the land underlying the Hyatt Regency Santa Clara for $25 million. The latter move eliminates future ground-rent obligations, enhancing long-term cash flow predictability.

Renovations, such as the Grand Hyatt Scottsdale's, are proving transformative. By targeting properties with high upside, XHR is creating a portfolio of assets primed to capitalize on rising ADRs and occupancy. This focus on “strategic, non-disruptive” upgrades—avoiding projects that might deter short-term demand—aligns with its cautious approach to capital spending amid potential tariff-related cost pressures.

Valuation: Undervalued Relative to Peers

XHR's stock trades at a P/FFO ratio of 15.2x, well below the sector average of 18.5x and meaningfully cheaper than peers such as Host Hotels & Resorts (HST, 19.8x) and Marriott Vacations Worldwide (VAC, 21.3x). This discount appears unwarranted given XHR's strong fundamentals and balance sheet flexibility.

With $613 million in liquidity and a 17% dividend hike to $0.14 per share in Q1, XHR is also returning capital to shareholders. Its share repurchase program—which reduced outstanding shares by 2.7% in Q1—further supports valuation expansion.

Risks and Mitigants

The company's revised full-year guidance—a 2.5%–6.5% RevPAR growth midpoint of 4.5%—reflects cautious macroeconomic assumptions. Key risks include potential inflation-driven cost pressures, delayed renovations, and a slowdown in leisure travel. However, XHR's conservative capital allocation, high-quality portfolio of luxury and upper-upscale hotels, and $2.7 billion market cap (as of June 2025) provide a buffer against downside.

Investment Thesis: Buy with a 33% Upside Target

XHR's combination of occupancy-driven RevPAR growth, strategic asset management, and undervalued multiples makes it a standout lodging REIT. Assuming a sector-average P/FFO multiple of 18x and a full-year FFO per share of $2.04 (based on Q1's $0.51 run rate), XHR's stock could reach $36.72—33% above its June 2025 price of $27.50.

Investors should monitor Q2 2025 results (due August 1) for signs of sustained RevPAR momentum and cost control. Historical backtest analysis from 2022 to present shows that XHR's stock has delivered a 1.49% return around earnings release dates, with a 78.57% win rate in the three days following earnings releases and 71.43% over ten days, suggesting strong investor sentiment during these periods. Meanwhile, the stock's 4.5% dividend yield offers a cushion against near-term volatility.

In a sector still recovering from pandemic scars, XHR's focus on quality, cost discipline, and shareholder returns positions it to outperform peers over the next 12–18 months. This is a buy for investors willing to ride the post-renovation growth wave.

Disclosure: The author holds no position in XHR at the time of writing.