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3 Hotels & Motels Industry Stocks to Watch Amid Industry Woes
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The Zacks Hotels and Motels industry performance in 2024 is likely to be impacted by high costs, heightened geopolitical risks and persistent macroeconomic uncertainty. However, industry participants’ focus on expansion efforts, hotel conversions, strategic partnerships and loyalty programs bode well. The industry has exhibited resilience behind cost-saving initiatives and digital enhancements. Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability and driving guest satisfaction. Industry players, namely H World Group Limited (HTHT - Free Report) , Wyndham Hotels & Resorts, Inc. (WH - Free Report) and Hilton Grand Vacations Inc. (HGV - Free Report) , are likely to benefit from the aforementioned factors.
Industry Description
The Zacks Hotels and Motels industry comprises companies that own, lease, manage, develop and franchise hotels. Some vacation ownership and exchange firms are also a part of the industry. Several participants own, construct and operate resorts. Some companies develop lodges, villages and mobile accommodations, including modular, skid-mounted ones and central amenities that provide long-term and temporary workforce accommodations. Some industry players develop, market, sell and manage vacation ownership and associated products. Few hoteliers also offer studios, one-bedroom suites and accommodations to mid-market business and personal travelers.
3 Trends Shaping the Future of the Hotels & Motels Industry
High Costs & Inflation Remain a Woe: Higher costs remain a concern for industry participants. Rising salaries, wages and benefits have been adding to labor costs. High inflation is likely to curb consumer spending, which will hurt the industry. Heightened geopolitical risks and persistent macroeconomic uncertainty remain a concern for the industry. Although there is an anticipated rise in RevPAR for 2024, the rate of growth is expected to be less than what was witnessed in 2023. At the same time, the outlook for midweek travel is uncertain, as certain companies are indicating potential changes to their business travel policies to manage expenses and adhere to sustainability objectives.
Strong RevPAR & ADR Driving Growth: The industry continues to benefit from robust RevPAR and ADR growth. Amanda Hite, president of STR, highlighted the U.S. hotel industry's robust performance in 2023, with a 5% increase in Revenue per Available Room (RevPAR) compared with the previous year’s levels. Occupancy rates steadily approached 2019 levels. Average Daily Rate (ADR) and RevPAR levels were consistently above the industry benchmark in nominal terms. The metrics demonstrate progress even when adjusted for inflation. Hite described the year as robust and deemed it a ‘normal’ period for the hotel industry.
Digitalization to Drive Growth: Hotel owners are focused on maintaining the balance between maximizing hotel profitability and driving guest satisfaction. To this end, hoteliers have leveraged mobile and web check-in and mobile key technologies. These hoteliers also increased the use of these digital tools to strengthen infrastructure, grow online package sales, enable self-service bookings, make real-time offerings and enhance the overall customer experience. This and an emphasis on pricing optimization and merchandising capabilities will likely help hoteliers capture additional market share.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Hotels and Motels industry is grouped within the broader sector.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #157, which places it in the bottom 37% of the 251Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are gradually losing confidence in this group's earnings growth potential. Since Sep 30, 2023, the industry's earnings estimates for 2023 have declined 6.6%.
Before we present a few stocks you may want to keep an eye on, let's look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms the Sector
In the past year, the Zacks Hotels and Motels industry has outperformed its sector. Over this period, the industry increased by 20.9% compared with the sector's increase of 4.8%. Meanwhile, the Zacks S&P 500 composite has increased 20.6%.
Hotels & Motels Industry's Valuation
On the basis of the forward 12-month EV/EBITDA, which is a commonly used multiple for valuing Hotels and Motels stocks, the industry is currently trading at 13.24X compared with the S&P 500's 11.28X. It is also below the sector's trailing 12-month EV/EBITDA ratio of 8.69X.
Over the last five years, the industry has traded as high as 23.49X and as low as 8.7X, with the median being at 13.46X, as the chart below shows.
3 Hotels & Motels Stocks to Watch Out For
H World Group: The company is persistently fine-tuning its upper-midscale segment expansion efforts to improve its market share and has successfully experienced relatively strong development. You can see the complete list of today’s Zacks #1 Rank stocks here.
HTHT currently sports a Zacks Rank #1. The Zacks Consensus Estimate for H World Group’s 2024 earnings per share (EPS) and sales suggests growth of 9.8% and 7.9%, respectively, from the year-ago period’s levels. HTHT's shares have declined 27.3% in the past year.
Price and Consensus: HTHT
Wyndham Hotels & Resorts: Wyndham Hotels & Resorts continues to benefit from global RevPAR growth. During third-quarter 2023, global RevPAR rose 3% year over year. A strong development pipeline is also aiding the company’s growth.
Wyndham Hotels & Resorts currently carries a Zacks Rank #2 (Buy). In the past seven days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 0.2%. The Zacks Consensus Estimate for Wyndham Hotels & Resorts’ 2024 EPS suggests growth of 7.7% from the year-ago period’s figure. WH's shares have gained 9.6% in the past year.
Price and Consensus: WH
Hilton Grand Vacations: The company is benefiting from rolling out its HGV Max membership program, new properties, and experiential offerings. Momentum in leisure travel is aiding the company.
Hilton Grand Vacations currently carries a Zacks Rank #2. In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 0.5%. The Zacks Consensus Estimate for Hilton Grand Vacations’ 2024 EPS suggests growth of 7.6% from the year-ago period’s levels. HGV's shares have declined 9% over the past year.
Price and Consensus: HGV
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3 Hotels & Motels Industry Stocks to Watch Amid Industry Woes
The Zacks Hotels and Motels industry performance in 2024 is likely to be impacted by high costs, heightened geopolitical risks and persistent macroeconomic uncertainty. However, industry participants’ focus on expansion efforts, hotel conversions, strategic partnerships and loyalty programs bode well. The industry has exhibited resilience behind cost-saving initiatives and digital enhancements. Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability and driving guest satisfaction. Industry players, namely H World Group Limited (HTHT - Free Report) , Wyndham Hotels & Resorts, Inc. (WH - Free Report) and Hilton Grand Vacations Inc. (HGV - Free Report) , are likely to benefit from the aforementioned factors.
Industry Description
The Zacks Hotels and Motels industry comprises companies that own, lease, manage, develop and franchise hotels. Some vacation ownership and exchange firms are also a part of the industry. Several participants own, construct and operate resorts. Some companies develop lodges, villages and mobile accommodations, including modular, skid-mounted ones and central amenities that provide long-term and temporary workforce accommodations. Some industry players develop, market, sell and manage vacation ownership and associated products. Few hoteliers also offer studios, one-bedroom suites and accommodations to mid-market business and personal travelers.
3 Trends Shaping the Future of the Hotels & Motels Industry
High Costs & Inflation Remain a Woe: Higher costs remain a concern for industry participants. Rising salaries, wages and benefits have been adding to labor costs. High inflation is likely to curb consumer spending, which will hurt the industry. Heightened geopolitical risks and persistent macroeconomic uncertainty remain a concern for the industry. Although there is an anticipated rise in RevPAR for 2024, the rate of growth is expected to be less than what was witnessed in 2023. At the same time, the outlook for midweek travel is uncertain, as certain companies are indicating potential changes to their business travel policies to manage expenses and adhere to sustainability objectives.
Strong RevPAR & ADR Driving Growth: The industry continues to benefit from robust RevPAR and ADR growth. Amanda Hite, president of STR, highlighted the U.S. hotel industry's robust performance in 2023, with a 5% increase in Revenue per Available Room (RevPAR) compared with the previous year’s levels. Occupancy rates steadily approached 2019 levels. Average Daily Rate (ADR) and RevPAR levels were consistently above the industry benchmark in nominal terms. The metrics demonstrate progress even when adjusted for inflation. Hite described the year as robust and deemed it a ‘normal’ period for the hotel industry.
Digitalization to Drive Growth: Hotel owners are focused on maintaining the balance between maximizing hotel profitability and driving guest satisfaction. To this end, hoteliers have leveraged mobile and web check-in and mobile key technologies. These hoteliers also increased the use of these digital tools to strengthen infrastructure, grow online package sales, enable self-service bookings, make real-time offerings and enhance the overall customer experience. This and an emphasis on pricing optimization and merchandising capabilities will likely help hoteliers capture additional market share.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Hotels and Motels industry is grouped within the broader sector.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #157, which places it in the bottom 37% of the 251Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are gradually losing confidence in this group's earnings growth potential. Since Sep 30, 2023, the industry's earnings estimates for 2023 have declined 6.6%.
Before we present a few stocks you may want to keep an eye on, let's look at the industry's recent stock-market performance and valuation picture.
Industry Outperforms the Sector
In the past year, the Zacks Hotels and Motels industry has outperformed its sector. Over this period, the industry increased by 20.9% compared with the sector's increase of 4.8%. Meanwhile, the Zacks S&P 500 composite has increased 20.6%.
Hotels & Motels Industry's Valuation
On the basis of the forward 12-month EV/EBITDA, which is a commonly used multiple for valuing Hotels and Motels stocks, the industry is currently trading at 13.24X compared with the S&P 500's 11.28X. It is also below the sector's trailing 12-month EV/EBITDA ratio of 8.69X.
Over the last five years, the industry has traded as high as 23.49X and as low as 8.7X, with the median being at 13.46X, as the chart below shows.
3 Hotels & Motels Stocks to Watch Out For
H World Group: The company is persistently fine-tuning its upper-midscale segment expansion efforts to improve its market share and has successfully experienced relatively strong development. You can see the complete list of today’s Zacks #1 Rank stocks here.
HTHT currently sports a Zacks Rank #1. The Zacks Consensus Estimate for H World Group’s 2024 earnings per share (EPS) and sales suggests growth of 9.8% and 7.9%, respectively, from the year-ago period’s levels. HTHT's shares have declined 27.3% in the past year.
Price and Consensus: HTHT
Wyndham Hotels & Resorts: Wyndham Hotels & Resorts continues to benefit from global RevPAR growth. During third-quarter 2023, global RevPAR rose 3% year over year. A strong development pipeline is also aiding the company’s growth.
Wyndham Hotels & Resorts currently carries a Zacks Rank #2 (Buy). In the past seven days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 0.2%. The Zacks Consensus Estimate for Wyndham Hotels & Resorts’ 2024 EPS suggests growth of 7.7% from the year-ago period’s figure. WH's shares have gained 9.6% in the past year.
Price and Consensus: WH
Hilton Grand Vacations: The company is benefiting from rolling out its HGV Max membership program, new properties, and experiential offerings. Momentum in leisure travel is aiding the company.
Hilton Grand Vacations currently carries a Zacks Rank #2. In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 0.5%. The Zacks Consensus Estimate for Hilton Grand Vacations’ 2024 EPS suggests growth of 7.6% from the year-ago period’s levels. HGV's shares have declined 9% over the past year.
Price and Consensus: HGV