Hotel operators face unrelenting turbulence as the supply of hotel rooms approaches demand, a sluggish US economy puts pressure on corporate travel, and Airbnb threatens to eat up profits that have historically been reserved for lodging companies.

The hotel industry, which in the beginning of the year was on par with the rest of the market, has lagged in more recent months, recording a decrease in its stock price when the S&P 500 has been up over the same period.

For the first three months of 2016, the S&P 500 and the S&P 500 Hotels Index were essentially flat. In more recent months however, the S&P 500 has risen 2.74%, while hotel stocks have dropped by 1.85%. A sluggish US economy, combined with tumbling oil prices, has meant reduced corporate travel, which has put downward pressure on hotel stocks, and contributed to the industry’s lackluster performance since June.

sg2016100366528

“We have seen pressure on corporate revenues, and in order to meet your earnings forecast, an easy way to cut costs is to pare back on travel expenses, and we are seeing that,” said Charles Patrick Scholes, a financial advisor for Suntrust Robinson Humphrey Inc.

When companies do allow their employees to travel, they downgrade their accommodations, spending less on hotels overall. “Maybe you can’t stay at a Marriott anymore, instead you stay at a Hampton Inn. Or if you stay at a Hampton Inn, you’ll stay at a Super 8,” said Scholes.

The struggling energy sector, whose plunging oil prices have ravaged the industry, has also reduced corporate travel, and in turn stays in hotels.

Travel to cities and states that rely on the energy markets has dropped off in tandem with the price of crude oil, which has plummeted 47% over the past two years.

“The business demand going in and out of Houston is not as prevalent. You’re not visiting oil companies down there, and when energy companies are cutting back on corporate expenses, that’s going to hurt the industry,” said Jared Shojaian, a senior vice president at Wolfe Research.

All signs point toward hotel stocks continuing to lag behind the S&P 500 through the end of 2016 and beyond, when growth in the supply of available hotel rooms is expected to match the growth in demand. RevPAR, or Revenue Per Available Room, a measure of industry strength obtained by multiplying operators’ occupancy by their average daily room rates, has been positive for the majority of a seven to nine year positive cycle, which analysts expect will soon flatten, before turning negative.

“The number of new rooms being added to the traditional hotel market – the long term average supply growth will match demand growth in the latter stages of the cycle,” said Dan Wasiolek, Senior Equity Analyst at Morningstar.

The current cycle began in 2010, on the heels of The Great Recession, when banks were hesitant to extend credit to build hotels, and investors were also leery of the market, causing supply to come on slower. This cycle could squeak out a tenth year, but regardless, it’s nearing its end.

Airbnb and other home sharing services, which offer rooms at below market rates, have also begun to take business away from hotels, particularly in cities like San Francisco and New York, where locals are eager to offset high rents by renting out their homes while they are away. “They’ll say, ‘why am I going to keep my apartment empty here if I can make a good price?’” said Scholes.

The home sharing service is not, at least for now, in direct competition with upscale hoteliers. But analysts are leery and suspect it could expand its inventory to include higher priced rooms over the next five or ten years. “Where there is a risk at this point to the hotel is if a hotel is focused on economy or midscale hotels in urban markets,” Wasiolek said.

“Airbnb’s shadow inventory is only going to be increasing. I don’t have a lot of reason for optimism,” said Shojaian.

Not all hotel stocks are equal; Marriott International – the leader of the pack when it comes to hotel size and scale – has been outperformed by rivals Hilton and Intercontinental over the past year, particularly in the wake of its recent acquisition of Starwood. Intercontinental was up 19.1% and Hilton 7.57%, while Marriott rose less than a quarter of a percent in the same year-to-date period.

sg2016100367031

When the Starwood deal went through, Marriott’s stock tumbled, due to apprehension around the success of the merger. “There is a little bit of this sort of wait and see with Marriott because it’s going to be a complicated integration. They never go as smoothly as initially intended, especially with different service cultures such as Marriott and Starwood,” said Scholes. Starwood’s acquisition price was also considered pricey by industry analysts; Marriott is now taking on incremental debt to fund its purchase. Further, much restructuring is foreseen, as the merger now makes Marriott the owner of some duplicate, rather than complementary brands.

Hilton’s relatively strong performance can be attributed to its “select service” hotels, which offer fewer amenities and services than “full service” hotels, and don’t add premiums to room rates for use of such facilities. Analysts suggest that Hilton’s management has its finger on the pulse of the industry and is catering to millennial travelers, who increasingly want to go out and explore a city, rather than be contained in a hotel. “Millennial travellers want to experience the lifestyle of a place and not be stuck in a hotel, so they might still like a good quality room but they don’t want to pay up for it, and you are paying for amenities in a full-service hotel,” said Wasiolek.