Like any group of stocks related to travel and tourism, hotel stocks saw a steep drop in share prices in 2020. The leisure and hospitality sector that once had 15 million employees has lost 4 million jobs since February.
Many major cities will be feeling the ripple effects of the Covid-19 pandemic for years. However, there is ample evidence that shows the pandemic may be coming to an end. The number of new cases is dropping. The number of those getting vaccinated is rising. And even in the cities with the most restrictive mitigation measures, the slow process of reopening is beginning.
All of this can’t come fast enough for individuals who rely on the travel and tourism industry for their livelihood. Hotel chains had at least some revenue coming in the door. And when earnings season concludes, the more budget-friendly hotel chains may realize revenue that is 75% of its 2019 numbers. But that is not enough to bring the hotels to anywhere near full employment. Particularly with hotels that have bars and restaurants that have remained closed or open at limited capacity.
Many economists are optimistic that travel may begin to look more normal by the summer of this year. And the global economy may deliver 6.4% GDP growth this year. With that in mind, the hotel chains with the best fundamentals and the broadest footprint will be in the best position as the economy reopens.
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- Hilton
- Hyatt
- Choice Hotels
- InterContinental Hotels
- Wyndham Hotels & Resorts
- Marriott
- MGM Resorts International
#1 - Hilton (NYSE:HLT)
If you were going to invest in hotels right now, many investors would say to look to buy shares of a real estate investment trust that specialized in hotel chains. Or, you could buy Hilton (NYSE:HLT) stock. It’s maybe not the same thing. However, one thing that made Hilton different from many hotel chains was that it lent its name and branding to properties and then operated as a REIT.
This was a profitable model for the company until the pandemic set in and those franchises had difficulty paying the rent. Fortunately, Hilton did have revenue coming in on the properties that it continues to own outright.
Through three quarters, Hilton is reporting just $3.4 billion in earnings which will leave the company well shy of the $9.45 billion it drew in 2019. Still, the company has ample cash and is seeing its stock price close in on its pre-pandemic level. Analysts are also warming up to HLT stock and have it as a consensus buy.
About Hilton Worldwide
Hilton Worldwide Holdings Inc, a hospitality company, engages in managing, franchising, owning, and leasing hotels and resorts. It operates through two segments, Management and Franchise, and Ownership. The company engages in the hotel management and licensing of its brands. It operates luxury hotels under the Waldorf Astoria Hotels & Resorts, LXR Hotels & Resorts, and Conrad Hotels & Resorts brand; lifestyle hotels under the Canopy by Hilton, Curio Collection by Hilton, Tapestry Collection by Hilton, Tempo by Hilton, and Motto by Hilton brand; full service hotels under the Signia by Hilton, Hilton Hotels & Resorts, and DoubleTree by Hilton brand; service hotels under the Hilton Garden Inn, Hampton by Hilton, and Tru by Hilton brand; all-suite hotels under the Embassy Suites by Hilton, Homewood Suites by Hilton, and Home2 Suites by Hilton brand; and economy hotel under the Spark by Hilton brand, as well as Hilton Grand Vacations.
Read More - Current Price
- $250.14
- Consensus Rating
- Hold
- Ratings Breakdown
- 8 Buy Ratings, 11 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $228.71 (8.6% Downside)
#2 - Hyatt (NYSE:H)
As you might expect, luxury hotel chains have been among the most hardest hit in terms of revenue. Through the first three quarters of 2020, Hyatt (NYSE:H) reported $1.6 billion in revenue. That number is less than a third of the $5 billion it recorded in 2019.
That’s the bad news. The good news is that investors who took a chance on Hyatt stock at the onset of the pandemic have been rewarded with a gain of just over 100%. In fact the stock is down less than 20% from its pre-pandemic level.
Analysts are lukewarm on Hyatt giving it a consensus hold. However, the hotel chain is receiving multiple price target increases suggesting a bullish trend.
The easy gains may be gone, but it’s likely that a hotel chain with such a strong brand association and a portfolio that includes 900 properties in over 60 countries will not recover.
About Hyatt Hotels
Hyatt Hotels Corporation operates as a hospitality company in the United States and internationally. It operates through Owned and Leased Hotels, Americas Management and Franchising, ASPAC Management and Franchising, EAME Management and Franchising, and Apple Leisure Group segments. The company manages, franchises, licenses, owns, and leases portfolio of properties, consisting of full-service hotels and resorts, select service hotels, and other properties, including timeshare, fractional, residential, vacation, and condominium units.
Read More - Current Price
- $154.85
- Consensus Rating
- Hold
- Ratings Breakdown
- 7 Buy Ratings, 14 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $151.57 (2.1% Downside)
#3 - Choice Hotels (NYSE:CHH)
Choice Hotels (NYSE:CHH) is one of the hotel chains that is on pace to report a “less bad” revenue shortfalls in 2020. For all of 2019, the company generated just over $1.1 billion in revenue. Through three quarters in 2020, Choice Hotels has reported $580.60 million. If the company’s fourth-quarter revenue comes in similar to the prior quarter, the hotel will come in at somewhere around $800 million or just about 20% lower on a year-over-year.
That’s not great, but it does mean that the hotel chain doesn’t have quite so far to bounce to get back to pre-pandemic revenue levels. Investors seem to agree as shares of CHH stock are now right about at the level they were a year ago.
One of the reasons for this relative strength in revenue comes from the chain’s expansive footprint which covers over 7,000 properties in 41 countries and territories internationally.
About Choice Hotels International
Choice Hotels International, Inc, together with its subsidiaries, operates as a hotel franchisor in the United States and internationally. It operates through Hotel Franchising & Management and Corporate & Other segments. The company franchises lodging properties under the brand names of Comfort Inn, Comfort Suites, Quality, Clarion, Clarion Pointe, Sleep Inn, Ascend Hotel Collection, Econo Lodge, Rodeway Inn, MainStay Suites, Suburban Studios, WoodSpring Suites, Everhome Suites, Cambria Hotels, Radisson Blu, Radisson RED, Radisson, Park Plaza, Country Inn & Suites by Radisson, Radisson Inn & Suites, Park Inn by Radisson, Radisson Individuals, and Radisson Collection.
Read More - Current Price
- $146.53
- Consensus Rating
- Reduce
- Ratings Breakdown
- 1 Buy Ratings, 6 Hold Ratings, 3 Sell Ratings.
- Consensus Price Target
- $130.00 (11.3% Downside)
#4 - InterContinental Hotels (NYSE:IHG)
While many of the hotel chains on this list have an international footprint, InterContinental Hotels (NYSE:IHG) is the first that is headquartered overseas. The company is based in England specifically but has over 5,900 properties across the globe. Some of the recognizable brand names include Holiday Inn and Candlewood Suites.
In its most recent earnings report, the company said that is revenue per available room (RevPAR) fell 53% globally. However that was an improvement from the 75% decline in RevPAR from the prior quarter. The company is also showing strength in the United States and cited two reasons for that. First, its properties fall in the mainstream segment, and second they are primarily located in non-urban locations.
Like many of the hotel chains on this list, IHG stock price is higher than it was prior to the pandemic. That suggests that analysts are projecting the company to have the possibility for strong growth particularly since the diverse nature of its holdings should allow weakness in any one property to be offset by strength in others.
About InterContinental Hotels Group
InterContinental Hotels Group PLC owns, manages, franchises, and leases hotels in the Americas, Europe, Asia, the Middle East, Africa, and Greater China. The company operates hotels under the Six Senses, Regent, InterContinental Hotels & Resorts, Vignette Collection, Kimpton Hotels & Restaurants, Hotel Indigo, voco, HUALUXE, Crowne Plaza, Iberostar Beachfront Resorts, EVEN, Holiday Inn Express, Holiday Inn, Garner, avid hotels, Atwell Suites, Staybridge Suites, Iberostar Beachfront Resorts, Holiday Inn Club Vacations, and Candlewood Suites brand names.
Read More - Current Price
- $122.73
- Consensus Rating
- Hold
- Ratings Breakdown
- 2 Buy Ratings, 2 Hold Ratings, 1 Sell Ratings.
- Consensus Price Target
- N/A
#5 - Wyndham Hotels & Resorts (NYSE:WH)
Being the largest may have its advantages. At least that seems to be the case for Wyndham Hotels & Resorts (NYSE:WH). The company recently posted its fourth-quarter earnings and came in with full-year revenue of $1.3 billion which was about 35% lower than the $2.05 billion it recorded in 2019.
Still that’s a less bad number that investors can work with. And the company recorded a beat on both the top and bottom lines. That made it three out of four quarters in which the company topped analysts’ estimates.
Wyndham has over 9,000 locations worldwide and includes some of the best-known value chains such as Super 8, Ramada, Days Inn, and Howard Johnson.
Wyndham’s stock price has recently made it back to pre-pandemic levels and analysts are giving the stock a consensus rating of buy. The stock remains about 10% shy of when it went public in 2018. But the company has an impressive market cap that currently sits at around $5.6 billion.
About Wyndham Hotels & Resorts
Wyndham Hotels & Resorts, Inc operates as a hotel franchisor in the United States and internationally. It operates through Hotel Franchising and Hotel Management segments. The Hotel Franchising segment licenses its lodging brands and provides related services to third-party hotel owners and others.
Read More - Current Price
- $94.70
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 6 Buy Ratings, 1 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $97.86 (3.3% Upside)
#6 - Marriott (NASDAQ:MAR)
I wrote about Marriott (NASDAQ:MAR) at about this time last year. Perhaps full of cockeyed optimism, I made the association that good stocks do not suddenly become bad. And that regarding the impact of the virus, the known would be worse than the unknown.
Well perhaps Marriott would have liked the known to be not quite as bad. But I still hold a bullish sentiment towards Marriott. Of the stocks on this list, it is still down from pre-pandemic levels. The company’s revenue has also taken a major hit and will likely be about 50% less on a year-over-year basis.
Marriott is also one of the most covered hotel stocks by analysts. And they’re pretty lukewarm to the company as well. The 23 analysts that have rated the stock have a consensus hold.
I still like the stock. Revenue and earnings are trending the right way. And the company has a portfolio of iconic brand names. The company has solid fundamentals and over time, fundamentals will matter as the hotel industry comes out of this pandemic.
About Marriott International
Marriott International, Inc engages in operating, franchising, and licensing hotel, residential, timeshare, and other lodging properties worldwide. It operates its properties under the JW Marriott, The Ritz-Carlton, The Luxury Collection, W Hotels, St. Regis, EDITION, Bvlgari, Marriott Hotels, Sheraton, Westin, Autograph Collection, Renaissance Hotels, Le Méridien, Delta Hotels by Marriott, Tribute Portfolio, Gaylord Hotels, Design Hotels, Marriott Executive Apartments, Apartments by Marriott Bonvoy, Courtyard by Marriott, Fairfield by Marriott, Residence Inn by Marriott, SpringHill Suites by Marriott, Four Points by Sheraton, TownePlace Suites by Marriott, Aloft Hotels, AC Hotels by Marriott, Moxy Hotels, Element Hotels, Protea Hotels by Marriott, City Express by Marriott, and St.
Read More - Current Price
- $280.18
- Consensus Rating
- Hold
- Ratings Breakdown
- 6 Buy Ratings, 13 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $259.00 (7.6% Downside)
#7 - MGM Resorts International (NYSE:MGM)
The last stock on our list is not a pure play hotel stock. However MGM Resorts International (NYSE:MGM) should definitely be on your list of stocks to buy as the economy reopens. MGM properties are a destination for many travelers, particularly those heading to Las Vegas. And an investment in MGM gives you exposure to both the casino and sports betting industries, the latter of which is becoming a closely watched growth opportunity.
Prior to casinos reopening, I wouldn’t have recommended MGM. In fact, the pandemic came at possibly the worst time for the company because it had just launched is BetMGM mobile betting app. It’s true that only about 18 states have legalized sports betting. But more are on the way. There are too many states that are trying to make up for massive losses in their budgets. Sports betting won’t take care of all of it, but it will help.
About MGM Resorts International
MGM Resorts International, through its subsidiaries, owns and operates casino, hotel, and entertainment resorts in the United States and internationally. The company operates through three segments: Las Vegas Strip Resorts, Regional Operations, and MGM China. Its casino resorts offer gaming, hotel, convention, dining, entertainment, retail, and other resort amenities.
Read More - Current Price
- $37.51
- Consensus Rating
- Moderate Buy
- Ratings Breakdown
- 11 Buy Ratings, 3 Hold Ratings, 0 Sell Ratings.
- Consensus Price Target
- $53.15 (41.7% Upside)
According to CareerBuilder CEO Irina Novoselsky, the hotel industry along with other companies in the hospitality industry, are making plans to ramp up hiring in anticipation of strong demand. And when you consider that many hotel chains on this list have credit cards tied to reward program, you have to expect that demand will be real.
However until there is more substantial evidence of a sustained economic recovery, hotel stocks will carry a risk premium. Investors may not see the recovery reflected in corporate earnings until late in 2021. However the hotel industry – particularly those chains that are less reliant on international revenue – should start realizing increased reservations as more Americans feel more comfortable about traveling.
Investors who want to speculate in this market without choosing a particular stock will have to be a bit selective when looking at the exchange-traded funds (ETFs). There is no ETF that is wholly dedicated to the hotel sector, but the Invesco Dynamic Leisure and Entertainment ETF (NYSEARCA:PEJ) has 40.6% of its exposure in the hotels, restaurant, and leisure sectors.
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