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The Zacks Hotels and Motels industry faces challenges from rising costs, weakening demand, geopolitical tensions and ongoing economic uncertainty. However, industry participants are concentrating on growth strategies, including expanding their portfolios, converting properties, forging strategic partnerships and enhancing loyalty programs. The industry has shown resilience through cost-cutting measures and digital innovations. Hotel operators remain focused on balancing profitability while ensuring guest satisfaction continues to improve. Industry players, namely Marriott International, Inc. (MAR - Free Report) , Hyatt Hotels Corporation (H - Free Report) and Choice Hotels International, Inc. (CHH - Free Report) , are likely to benefit from the factors mentioned above.
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 Remain a Woe: Industry participants are concerned about higher costs. Rising salaries, wages and benefits have been adding to labor costs. The hospitality sector continues to struggle with labor shortages, driving up wages and reducing service quality. Hotels are finding it difficult to hire and retain staff, leading to reduced capacity and operational challenges. Heightened geopolitical risks and persistent macroeconomic uncertainty are a concern for the industry. Increases in food & beverage and non-operating costs and increased renovation costs are also hurting the industry.
RevPAR & ADR Growth Lowered: Although RevPAR and ADR are expected to grow year over year in 2024, the projected growth rate declined compared with the forecast made in January. Per STR, the forecast for revenue per available room now is pegged at a 1.4% year-over-year increase, down from 4.1% projected in January. On the other hand, ADR is now expected to witness growth of 1.5%, a decrease from the 3.1% projected in January. For 2025, occupancy growth projections were reduced by 0.4 percentage points, while the forecasts for ADR and RevPAR growth were revised down to 1.6% and 1.8%, respectively.
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 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 the 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 #193, which places it in the bottom 23% of the 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
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 Sept. 30, 2024, the industry's earnings estimate for 2024 has dropped 1.8%.
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 S&P 500
In the past year, the Zacks Hotels and Motels industry has outpaced the S&P 500 and outperformed the sector. Over this period, the industry appreciated by 35% compared with the sector's increase of 21%. The Zacks S&P 500 composite has increased 34.1%.
Hotels & Motels Industry's Valuation
On the basis of the trailing 12-month EV/EBITDA, which is a commonly used multiple for valuing Hotels and Motels stocks, the industry is currently trading at 18.84X compared with the S&P 500's 18.93X. It is also below the sector's trailing 12-month EV/EBITDA ratio of 10.55X.
Over the last five years, the industry has traded as high as 18.84X and as low as 14.30X, with the median being at 15.87X, as the chart below shows.
3 Hotels & Motels Stocks to Watch Out For
Choice Hotels: The company continues to benefit from accelerated unit growth, and the successful execution of its strategy has enhanced its business model. CHH also increased its international presence and significantly grew the size of the company’s rewards program. Going forward, CHH believes that it is well positioned to deliver bottom-line growth and maintain shareholder value on the back of the aforementioned business strategies supported by the improving demand backdrop.
CHH currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for Choice Hotels’ 2024 EPS suggests growth of 12% from the year-ago period’s levels. CHH's shares have jumped 27.2% in the past year.
Price and Consensus: CHH
Marriott: The company is benefiting from a solid increase in global travel demand, driving growth in international markets and steady performance in the United States and Canada. The company reported a rise in group bookings. Business transient demand increased, and leisure transient revenue per available room remained above pre-pandemic levels. The emphasis on expansion initiatives, digital innovation and the loyalty program bodes well.
Marriott currently carries a Zacks Rank #3 (Hold). The company’s top line in 2024 is likely to witness a growth of 5.9% year over year. MAR's shares have gained 33.6% in the past year.
Price and Consensus: MAR
Hyatt: The company is benefiting from a gradual increase in demand, new hotel openings and acquisition initiatives. Also, organic and inorganic growth initiatives, loyalty programs and asset-light business models bode well. Hyatt anticipates system-wide 2024 RevPAR to increase in the range of 3% and 4% year over year. Much optimism prevails on account of group bookings and confidence in the ongoing recovery of business transient demand.
H currently carries a Zacks Rank #3. In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 1%. The Zacks Consensus Estimate for Hyatt’s 2024 EPS suggests growth of 52% from the year-ago period’s figure. Hyatt's shares have gained 24.6% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: H
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3 Hotels & Motels Stocks to Watch Amid Industry's Uncertain Prospects
The Zacks Hotels and Motels industry faces challenges from rising costs, weakening demand, geopolitical tensions and ongoing economic uncertainty. However, industry participants are concentrating on growth strategies, including expanding their portfolios, converting properties, forging strategic partnerships and enhancing loyalty programs. The industry has shown resilience through cost-cutting measures and digital innovations. Hotel operators remain focused on balancing profitability while ensuring guest satisfaction continues to improve. Industry players, namely Marriott International, Inc. (MAR - Free Report) , Hyatt Hotels Corporation (H - Free Report) and Choice Hotels International, Inc. (CHH - Free Report) , are likely to benefit from the factors mentioned above.
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 Remain a Woe: Industry participants are concerned about higher costs. Rising salaries, wages and benefits have been adding to labor costs. The hospitality sector continues to struggle with labor shortages, driving up wages and reducing service quality. Hotels are finding it difficult to hire and retain staff, leading to reduced capacity and operational challenges. Heightened geopolitical risks and persistent macroeconomic uncertainty are a concern for the industry. Increases in food & beverage and non-operating costs and increased renovation costs are also hurting the industry.
RevPAR & ADR Growth Lowered: Although RevPAR and ADR are expected to grow year over year in 2024, the projected growth rate declined compared with the forecast made in January. Per STR, the forecast for revenue per available room now is pegged at a 1.4% year-over-year increase, down from 4.1% projected in January. On the other hand, ADR is now expected to witness growth of 1.5%, a decrease from the 3.1% projected in January. For 2025, occupancy growth projections were reduced by 0.4 percentage points, while the forecasts for ADR and RevPAR growth were revised down to 1.6% and 1.8%, respectively.
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 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 the 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 #193, which places it in the bottom 23% of the 250 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.
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 Sept. 30, 2024, the industry's earnings estimate for 2024 has dropped 1.8%.
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 S&P 500
In the past year, the Zacks Hotels and Motels industry has outpaced the S&P 500 and outperformed the sector. Over this period, the industry appreciated by 35% compared with the sector's increase of 21%. The Zacks S&P 500 composite has increased 34.1%.
Hotels & Motels Industry's Valuation
On the basis of the trailing 12-month EV/EBITDA, which is a commonly used multiple for valuing Hotels and Motels stocks, the industry is currently trading at 18.84X compared with the S&P 500's 18.93X. It is also below the sector's trailing 12-month EV/EBITDA ratio of 10.55X.
Over the last five years, the industry has traded as high as 18.84X and as low as 14.30X, with the median being at 15.87X, as the chart below shows.
3 Hotels & Motels Stocks to Watch Out For
Choice Hotels: The company continues to benefit from accelerated unit growth, and the successful execution of its strategy has enhanced its business model. CHH also increased its international presence and significantly grew the size of the company’s rewards program. Going forward, CHH believes that it is well positioned to deliver bottom-line growth and maintain shareholder value on the back of the aforementioned business strategies supported by the improving demand backdrop.
CHH currently sports a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for Choice Hotels’ 2024 EPS suggests growth of 12% from the year-ago period’s levels. CHH's shares have jumped 27.2% in the past year.
Price and Consensus: CHH
Marriott: The company is benefiting from a solid increase in global travel demand, driving growth in international markets and steady performance in the United States and Canada. The company reported a rise in group bookings. Business transient demand increased, and leisure transient revenue per available room remained above pre-pandemic levels. The emphasis on expansion initiatives, digital innovation and the loyalty program bodes well.
Marriott currently carries a Zacks Rank #3 (Hold). The company’s top line in 2024 is likely to witness a growth of 5.9% year over year. MAR's shares have gained 33.6% in the past year.
Price and Consensus: MAR
Hyatt: The company is benefiting from a gradual increase in demand, new hotel openings and acquisition initiatives. Also, organic and inorganic growth initiatives, loyalty programs and asset-light business models bode well. Hyatt anticipates system-wide 2024 RevPAR to increase in the range of 3% and 4% year over year. Much optimism prevails on account of group bookings and confidence in the ongoing recovery of business transient demand.
H currently carries a Zacks Rank #3. In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 1%. The Zacks Consensus Estimate for Hyatt’s 2024 EPS suggests growth of 52% from the year-ago period’s figure. Hyatt's shares have gained 24.6% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: H
