Top 3 Hotel Stocks to Watch: A Buy, Hold, and Trade Opportunity

Key Points

• An attractive valuation and a resurgent dividend make Marriott a solid buy-the-dip candidate.  
• Hilton Worldwide has a compelling business model that attracts more affluent consumers, but the stock is slightly overvalued.  
• Hyatt Hotels stock has been trading in a range and looks like a good short-term trade with an attractive valuation that investors may not be considering. 

Hotel stocks have been initial beneficiaries of the Trump pump. In the days following the U.S. presidential election, many hotel stocks are seeing high single-digit gains as investors move off the sidelines and start to pick winners. 

As we head into the holiday season, consumer discretionary stocks are getting attention. And it’s easy to see why the hospitality industry is a good place to hunt in that sector. Although consumers have cut back on other expenses, they still have shown a willingness to travel. That's a trend that’s likely to continue through the holiday season.  

A recent survey said that consumer spending this holiday season will be similar to that of 2023. About 39% of those travelers plan to book brand-name hotels. Interestingly, it's the millennial and Gen Z travelers who have increased their travel budgets.  

But should you chase these stocks higher? As with most stock choices, the answer is maybe. The price-to-earnings ratio of hotel stocks is approximately 38x earnings, and some stocks are trading at a hefty premium. Here is one stock to buy, one stock to hold, and one that may be setting up for a profitable trade.  

Marriott Remains a Comfortable Buy 

The Buy on this list is Marriott International Inc. NASDAQ: MAR. The company recently delivered a mixed earnings report, with earnings that met expectations but earnings per share (EPS) that missed expectations by five cents. However, both numbers were higher by 5.5% and 7% year-over-year, respectively.  

Analysts weren’t that impressed and placed a consensus Hold on MAR stock with a price target of $259, which is about 7.5% lower than its closing price on November 8. It’s also important to note that short interest has increased by about 5% in the last month.  

But the stock is trading around 29x trailing earnings and 30x forward earnings. Plus, the stock pays after suspending its dividend in 2020 and reinstating it at a lower level in 2022; Marriott has been aggressively growing the dividend, which now pays 63 cents per share.  

You can look to buy MAR stock on any dip. And if you’re already invested you can use those dips to dollar-cost-average your position.  

Hilton Worldwide May Be a Little Overvalued 

Hilton Worldwide NYSE: HLT is up 36% for the year, making it one of the best-performing stocks in the sector. In its most recent quarter, the hotel chain beat on the bottom line but had a slight revenue miss. It also lowered its prior guidance for revenue per available room (RevPAR) and lowered its full-year RevPAR expansion outlook. 

Yet despite the report, HLT stock is up nearly 10% since the report. Analyst reaction has been mixed, but the consensus price target is $228.71, nearly a 7% dip from the stock’s closing price on November 8.  

And when you consider that the stock is trading for around 52x trailing earnings and 35x forward earnings, you’re paying a premium for the shares at the current price. The dividend is safe but not that enticing. Nevertheless, the company’s focus on the premium customer makes it a Hold, but not a stock I’d be chasing at this price.  

Hyatt Hotels Looks Ready to Breakout 

Hyatt Hotels Corp. NYSE: H looks like an enticing holiday trade idea among hotel stocks. First, the company has a trailing P/E ratio of around 11x earnings, which is significantly lower than the sector average.  

Then, you should consider the company’s earnings. Revenue of $1.63 billion was a tick below the $1.64 billion analysts expected and a tick above the $1.62 billion from the prior year. We’ll call that flat. But earnings were a different story. It beat analysts’ expectations by four cents, and the 94 cents per share was more than 30% above the 70 cents posted in the same quarter in 2023. 

Plus, analysts are starting to raise their targets for the stock. For example, while Mizuho lowered its price target to $198, that target is still nearly 30% above the current price.  

And finally, H stock has been trading in a range for the last two months. As analyst ratings catch up to the company’s recent earnings, this stock looks ready to break out. I’d look to take a position around the consensus price of $151.