| Valuation method | Value, $ | Upside, % |
|---|---|---|
| Artificial intelligence (AI) | 15.98 | -12 |
| Intrinsic value (DCF) | 6.70 | -63 |
| Graham-Dodd Method | n/a | |
| Graham Formula | 0.84 | -95 |
Sotherly Hotels Inc. (NASDAQ: SOHOB) is a self-managed real estate investment trust (REIT) specializing in the acquisition, renovation, and repositioning of upscale to upper-upscale full-service hotels primarily in the Southern United States. With a portfolio of 12 hotel properties totaling 3,156 rooms, Sotherly operates under globally recognized brands such as Hilton, Hyatt, and Marriott, alongside independent hotels. Headquartered in Williamsburg, Virginia, the company leverages its regional expertise to enhance property value through strategic upbranding and operational improvements. As a lodging REIT, Sotherly benefits from the resilience of the hospitality sector, particularly in high-demand Southern markets, while offering investors exposure to premium-branded hotel assets. The company’s focus on full-service hotels in key leisure and business destinations positions it to capitalize on post-pandemic travel recovery and long-term tourism growth.
Sotherly Hotels presents a niche opportunity in the hospitality REIT sector, with a concentrated portfolio in the Southern U.S., a region with strong tourism and business travel demand. The company’s strategic renovations and upbranding initiatives could drive revenue growth, but its high leverage (total debt of $340.4M vs. market cap of $31.6M) and negative diluted EPS (-$0.34) raise liquidity concerns. The $2/share dividend offers an attractive yield, but sustainability depends on improving operating cash flow ($25.9M in FY2024) and managing debt. Investors should weigh the potential upside from travel recovery against risks from economic sensitivity and competitive pressures in the lodging sector.
Sotherly Hotels differentiates itself through a hyper-regional focus on the Southern U.S., allowing localized operational efficiencies and relationships with major franchisors like Hilton and Marriott. Its competitive edge lies in repositioning underperforming assets into premium-branded hotels, creating value through capital improvements rather than scale. However, the company’s small portfolio (12 properties) limits economies of scale compared to larger peers, and its high debt load constrains flexibility. Sotherly’s performance is tightly linked to the recovery of business travel and group demand in Southern markets like Texas and Florida, where it faces competition from both REITs and private operators. While its asset-light management structure reduces overhead, the lack of geographic diversification increases exposure to regional economic downturns. The company’s ability to maintain brand partnerships and execute timely renovations will be critical to sustaining competitive room rates.