Research firm Ladenburg downgraded its rating on the hotel REIT sector to Sell in a note to investors today. Following a third guidance reduction by hotel REIT LaSalle (LHO) , the firm expects analysts' estimates for REITs in the sector to decline sharply and warned that the sector's stock prices could also fall significantly.

WHAT'S NEW: After LaSalle cut its 2015 guidance for the third time in six months and decided not to provide 2016 guidance due to a lack of visibility, the recovery in the lodging sector "looks poised to end in the coming months," according to Ladenburg analyst Daniel Donlan. LaSalle's outlook is "highly credible," since it was the first hotel REIT to express concerns about the macro economic situation in July 2015, Donlan stated. Most hotel REITs will probably follow in LaSalle's footsteps, the analyst predicted. Consequently, analysts will sharply lower their earnings and net asset value estimates for the sector going forward, Donlan warned. The analyst expects the revenue per available room of U.S. lodging companies to decline in the second half of 2016 and he believes that hotel fundamentals have deteriorated. Moreover, given historical precedent, the hotel REIT stocks could drop significantly from current levels, despite the fact that they have already tumbled 37% on average from their 2015 peak, Donlon said.

DOWNGRADES: In addition to lowering his sector view, the analyst cut his ratings on LaSalle, Pebblebrook Hotel Trust (PEB) - Get Report , Chesapeake Lodging (CHSP) - Get Report , RLJ Lodging (RLJ) - Get Report and Apple Hospitality (APLE) - Get Report to Sell from Neutral. He downgraded Sotherly Hotels (SOHO) - Get Report to Sell from Buy.

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