Xenia Hotels (XHR): A Contrarian Play in a Polarized Lodging REIT Sector

The lodging REIT sector is at a crossroads. With RevPAR growth flat to slightly positive in 2025 and operating expenses outpacing revenue, the industry faces a "fragile optimism" that has left many investors cautious, according to a REIT.com analysis. Yet, within this challenging landscape, Xenia Hotels & Resorts Inc (XHR) emerges as a compelling contrarian opportunity. While peers like Wyndham and Hilton grapple with RevPAR declines and margin pressures, as noted in Wyndham Q3 highlights, XHR's mixed performance-marked by resilience in capital recycling and a bullish analyst price target-suggests a potential inflection point.

Sector-Wide Headwinds and XHR's Resilience

The lodging REIT sector is navigating a dual challenge: sluggish demand and rising operating costs, a theme the REIT.com piece highlights. J.P. Morgan research notes that REIT earnings growth is projected to hover around 3% in 2025, with a modest acceleration to 6% in 2026. For XHR, this backdrop is no different. In Q3 2025, the company reported Adjusted EBITDAre of $42.2 million, a 4.6% decline year-over-year, according to Xenia's Q3 release, while Same-Property RevPAR remained flat at $164.50. These figures align with sector trends but mask a critical nuance: XHR's first nine months of 2025 saw Adjusted EBITDAre rise 9.4% to $194.7 million, outperforming the sector's average.

The contrast with peers is stark. Wyndham Hotels & Resorts, for instance, reported a 5% global RevPAR decline in Q3 2025 (see Wyndham Q3 highlights), while Hilton Q3 results showed system-wide RevPAR dipped 1.1%. XHR's ability to maintain EBITDA growth despite flat RevPAR underscores its operational discipline. This resilience is further amplified by its strategic focus on capital recycling-disposing of non-core assets and reinvesting in high-performing properties like the Grand Hyatt Scottsdale (per Xenia's Q3 release).

Contrarian Case: Analysts vs. Market Sentiment

XHR's stock price has been volatile, reflecting divergent investor sentiment. Following Q2 2025 earnings-where XHR exceeded revenue and EPS estimates by 5.2% and 83.6%, respectively, according to a GuruFocus note-the stock fell 1.81% in one day. This post-earnings sell-off suggests market skepticism, despite the company's strong performance. However, analysts remain bullish. The average one-year price target of $15.00 implies a 16.73% upside from the current price of $12.85, while GuruFocus projects a 27.32% upside to $16.36.

The disconnect between fundamentals and market sentiment creates a contrarian opportunity. XHR's full-year 2025 guidance-$1.08 billion in revenue and $0.36 EPS (per the GuruFocus coverage)-is achievable given its capital recycling momentum and focus on high-demand urban markets like Phoenix and Houston (see Xenia's Q3 release). Moreover, the lodging REIT sector's 25% net asset value (NAV) discount, noted earlier by REIT.com, provides a buffer for undervalued assets, which XHR is actively exploiting.

Risks and Mitigants

The primary risk for XHR is the sector's broader challenges: elevated interest rates, international travel uncertainty, and leisure demand weakness, according to a HotelDive analysis. However, XHR's management has demonstrated agility. For example, its Q2 2025 performance-despite a flat RevPAR-showed that operational efficiency and asset-level optimization can offset macroeconomic headwinds (as reported in Xenia's Q3 release). Additionally, the company's debt profile is manageable, with BBB-rated borrowing costs falling 22 basis points in Q3 2025, easing refinancing pressures, per a NewGenAdv analysis.

Conclusion: Positioning for a Sector Rebound

XHR's performance in 2025 reflects a company navigating a difficult sector while maintaining operational and strategic momentum. While peers like Wyndham and Hilton face RevPAR declines (see Wyndham Q3 highlights and Hilton Q3 results), XHR's capital recycling and EBITDA growth position it to outperform as the sector stabilizes. For investors willing to bet against short-term pessimism, XHR offers a compelling case: a REIT with a strong balance sheet, resilient asset base, and a price target that suggests significant upside.