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HLT or CHH: Which Hotel Stock is Better Placed at the Moment?
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Although a majority of the hoteliers are progressing toward recovering trajectory, a sequential fall in occupancy and RevPAR is a roadblock.
Per STR, the U.S. hotel industry’s occupancy for the week ended Apr 2, 2022, came in at 64.1% compared with 65.5% for the week ended Mar 26. During this duration, RevPar for U.S. hotels came in at $93.48 compared with $97.92 in the previous week. Industry experts believe that softer group bookings (on a sequential basis) and a rise in flight cancellations have led to the downside. So far this year, the Zacks Hotels and Motels industry has declined 6.8% compared with the S&P 500’s 5.6% fall.
The industry has shown some resilience owing to cost-saving initiatives and digital enhancements. Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability while driving guest satisfaction. To this end, hoteliers have continued evolving their respective contactless experiences and leveraged technologies such as mobile and web check-in as well as mobile key. Also, they have 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 along with an emphasis on pricing optimization and merchandising capabilities are likely to enable hoteliers to capture additional market share.
As we keep a close eye on variant strains, optimism about continued global recovery remains intact on the back of growth in GDP and nonresidential fixed investment along with flexible travel policies across large corporate customers. Focus on consumer trends backed by a rise in extended vacations, household relocations and temporary remote work assignments will likely act as a catalyst.
Meanwhile, leading hotel companies — Hilton Worldwide Holdings Inc. (HLT - Free Report) and Choice Hotels International, Inc. (CHH - Free Report) — are undertaking different initiatives to generate profits. With both the companies carrying a Zacks Rank #3 (Hold), let’s analyze and find out which is poised better with respect to different parameters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance and Valuation
Image Source: Zacks Investment Research
Shares of Hilton have gained 16.1% in the past year, while Choice Hotels has increased 23%. Meanwhile, the industry has fallen 0.3% in the same time frame. Shares of Choice Hotels are benefiting from numerous strategic efforts to revive growth. The company is benefiting from continual expansion strategies through acquisitions and franchise agreements. Also, focus on the loyalty program bodes well. The transition of leisure travel into mainstream business added to the positives. Going forward, the company anticipates business and group travel demand to strengthen and serve as a catalyst for its portfolio.
The P/E ratio is considered for the evaluation of a stock. Typically, stocks with high P/E are overvalued, while those with low P/E are undervalued. However, this metric disregards the company's growth rate. Hence, an investor is likely to pick stocks that are trading at substantially lower PE multiples. On the basis of the forward 12-month P/E ratio, the industry is currently trading at 28.18 compared with the S&P 500’s 19.52. Choice Hotels has an edge with a lower forward 12-month P/E ratio of 27.15 compared with Hilton’s figure of 33.75.
Estimated Earnings & Revenues
Arguably, earnings growth is of utmost importance for determining a stock’s potential as surging profit levels indicate strong prospects (and stock price gains).
For the current year, Hilton’s earnings per share are expected to improve to $3.92 from $2.08 in 2022. Moreover, year-over-year sales growth is expected at 37.8% for the current year. Choice Hotels’ current-year earnings are likely to increase to $4.85 from $4.29, while sales are likely to rise 13% year over year. This provides round goes to Choice Hotels.
Fundamentals
To maintain its position as the fastest-growing global hospitality company, Hilton continues to drive unit growth. During fourth-quarter 2021, Hilton opened 94 new hotels. It achieved net unit growth of nearly 13,100 rooms. During the quarter, the company opened the 400th hotel and its first Home2 Suites in China. It also announced the opening of Motto New York City Chelsea. For 2022, the company expects net unit growth of 5%. Also, the metric is projected to remain in the mid-single-digit range for the upcoming years as well.
Hilton continues to progress in the luxury development strategy. During fourth-quarter 2021, the company made solid progress with respect to the Canopy brands. The company expanded the brand’s presence in Chicago and the U.K. with the openings of Canopy Chicago Central Loop and Canopy London City. Backed by the openings, the company stated that the Canopy portfolio had grown 1/3 on a year-over-year basis. Going forward, the company stated that it has 408,000 rooms in its development pipeline, suggesting an increase of 3% on a year-over-year basis.
Hilton Honors, the company’s loyalty program, created an extremely valuable asset. With membership levels increasing 13% on a year-over-year basis (as of fourth-quarter 2021), the company continues to outline opportunities to engage its Honors members through enhanced partnerships and points redemption offerings. The company initiated several new commercial programs and loyalty extensions. During fourth-quarter 2021, the company announced the launch of Digital Key Share, which allows the room’s digital key access to more than one guest. The company rolled out automatic room upgrades (for elite members) along with the option of selecting upgraded rooms prior to arrival (for Gold and Diamond members). Going forward, the company intends to focus on new opportunities to drive customer engagement to reach pre-pandemic levels.
Meanwhile, Choice Hotels relies heavily on expansion in domestic and international markets. In 2021, the company awarded 528 domestic franchise agreements, reflecting a rise of 24% year over year. During the year, demand for conversion hotels increased 17% year over year. Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 474 domestic hotels as of Dec 31, 2021. This highlighted an increase of 6% on a year-over-year basis. The domestic extended-stay pipeline comprised 340 hotels awaiting conversion, under construction or approved for development. Relatively new to the midscale portfolio, Clarion Pointe — part of the popular Clarion brand — is experiencing great success. Clarion Point brand is resonating well with guests. Currently, the brand has 43 hotels open in the United States and 33 additional hotels awaiting conversion this year.
The company is focused on franchising as it intends to facilitate ROE expansion and earnings growth in the long term. Emphasis on pricing optimization and merchandising capabilities bodes well. As of Dec 31, 2021, the company had 880 hotels, with 75,000 rooms under construction, awaiting approval for development in its domestic system. In fourth-quarter 2021, domestic franchise agreements for new construction hotels rose 60% year over year. As of Dec 31, 2021, the company had 7,030 franchised hotels.
Choice Hotels continues to focus on its loyalty program to drive growth. During the third quarter 2021, the company announced a collaboration with a trusted digital-asset marketplace – Bakkt. The initiative enables Choice Privileges loyalty members to unlock new redemption opportunities by converting their rewards points to cash and purchasing Bitcoin. Also, it allows guests to transfer their points to a friend or even redeem them online or in-store through Apple Pay and Google Pay. Backed by solid revenue contributions along with new customer additions, the company remains optimistic for growth in the upcoming periods.
Our Take
Our comparative analysis shows that Choice Hotels has the edge over Hilton in terms of share price appreciation and projected EPS growth rate. However, the fundamentals of both companies look solid. Taking all the factors into account, we believe Choice Hotels is slightly better positioned than Hilton at the moment.
Stocks to Consider
Some better-ranked stocks in the Consumer Discretionary sector are Marriott International, Inc. (MAR - Free Report) and Bluegreen Vacations Holding Corporation .
Marriott sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 86.6%, on average. Shares of the company have gained 9.7% in the past year.
The Zacks Consensus Estimate for Marriott’s 2022 sales and EPS suggests growth of 40.3% and 73%, respectively, from the year-ago period’s levels.
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 425.1%, on average. The stock has increased 23.4% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the year-ago period’s reported levels.
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HLT or CHH: Which Hotel Stock is Better Placed at the Moment?
Although a majority of the hoteliers are progressing toward recovering trajectory, a sequential fall in occupancy and RevPAR is a roadblock.
Per STR, the U.S. hotel industry’s occupancy for the week ended Apr 2, 2022, came in at 64.1% compared with 65.5% for the week ended Mar 26. During this duration, RevPar for U.S. hotels came in at $93.48 compared with $97.92 in the previous week. Industry experts believe that softer group bookings (on a sequential basis) and a rise in flight cancellations have led to the downside. So far this year, the Zacks Hotels and Motels industry has declined 6.8% compared with the S&P 500’s 5.6% fall.
The industry has shown some resilience owing to cost-saving initiatives and digital enhancements. Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability while driving guest satisfaction. To this end, hoteliers have continued evolving their respective contactless experiences and leveraged technologies such as mobile and web check-in as well as mobile key. Also, they have 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 along with an emphasis on pricing optimization and merchandising capabilities are likely to enable hoteliers to capture additional market share.
As we keep a close eye on variant strains, optimism about continued global recovery remains intact on the back of growth in GDP and nonresidential fixed investment along with flexible travel policies across large corporate customers. Focus on consumer trends backed by a rise in extended vacations, household relocations and temporary remote work assignments will likely act as a catalyst.
Meanwhile, leading hotel companies — Hilton Worldwide Holdings Inc. (HLT - Free Report) and Choice Hotels International, Inc. (CHH - Free Report) — are undertaking different initiatives to generate profits. With both the companies carrying a Zacks Rank #3 (Hold), let’s analyze and find out which is poised better with respect to different parameters. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price Performance and Valuation
Image Source: Zacks Investment Research
Shares of Hilton have gained 16.1% in the past year, while Choice Hotels has increased 23%. Meanwhile, the industry has fallen 0.3% in the same time frame. Shares of Choice Hotels are benefiting from numerous strategic efforts to revive growth. The company is benefiting from continual expansion strategies through acquisitions and franchise agreements. Also, focus on the loyalty program bodes well. The transition of leisure travel into mainstream business added to the positives. Going forward, the company anticipates business and group travel demand to strengthen and serve as a catalyst for its portfolio.
The P/E ratio is considered for the evaluation of a stock. Typically, stocks with high P/E are overvalued, while those with low P/E are undervalued. However, this metric disregards the company's growth rate. Hence, an investor is likely to pick stocks that are trading at substantially lower PE multiples. On the basis of the forward 12-month P/E ratio, the industry is currently trading at 28.18 compared with the S&P 500’s 19.52. Choice Hotels has an edge with a lower forward 12-month P/E ratio of 27.15 compared with Hilton’s figure of 33.75.
Estimated Earnings & Revenues
Arguably, earnings growth is of utmost importance for determining a stock’s potential as surging profit levels indicate strong prospects (and stock price gains).
For the current year, Hilton’s earnings per share are expected to improve to $3.92 from $2.08 in 2022. Moreover, year-over-year sales growth is expected at 37.8% for the current year. Choice Hotels’ current-year earnings are likely to increase to $4.85 from $4.29, while sales are likely to rise 13% year over year. This provides round goes to Choice Hotels.
Fundamentals
To maintain its position as the fastest-growing global hospitality company, Hilton continues to drive unit growth. During fourth-quarter 2021, Hilton opened 94 new hotels. It achieved net unit growth of nearly 13,100 rooms. During the quarter, the company opened the 400th hotel and its first Home2 Suites in China. It also announced the opening of Motto New York City Chelsea. For 2022, the company expects net unit growth of 5%. Also, the metric is projected to remain in the mid-single-digit range for the upcoming years as well.
Hilton continues to progress in the luxury development strategy. During fourth-quarter 2021, the company made solid progress with respect to the Canopy brands. The company expanded the brand’s presence in Chicago and the U.K. with the openings of Canopy Chicago Central Loop and Canopy London City. Backed by the openings, the company stated that the Canopy portfolio had grown 1/3 on a year-over-year basis. Going forward, the company stated that it has 408,000 rooms in its development pipeline, suggesting an increase of 3% on a year-over-year basis.
Hilton Honors, the company’s loyalty program, created an extremely valuable asset. With membership levels increasing 13% on a year-over-year basis (as of fourth-quarter 2021), the company continues to outline opportunities to engage its Honors members through enhanced partnerships and points redemption offerings. The company initiated several new commercial programs and loyalty extensions. During fourth-quarter 2021, the company announced the launch of Digital Key Share, which allows the room’s digital key access to more than one guest. The company rolled out automatic room upgrades (for elite members) along with the option of selecting upgraded rooms prior to arrival (for Gold and Diamond members). Going forward, the company intends to focus on new opportunities to drive customer engagement to reach pre-pandemic levels.
Meanwhile, Choice Hotels relies heavily on expansion in domestic and international markets. In 2021, the company awarded 528 domestic franchise agreements, reflecting a rise of 24% year over year. During the year, demand for conversion hotels increased 17% year over year. Coming to the extended-stay portfolio, the company witnessed rapid expansion, thereby reaching 474 domestic hotels as of Dec 31, 2021. This highlighted an increase of 6% on a year-over-year basis. The domestic extended-stay pipeline comprised 340 hotels awaiting conversion, under construction or approved for development. Relatively new to the midscale portfolio, Clarion Pointe — part of the popular Clarion brand — is experiencing great success. Clarion Point brand is resonating well with guests. Currently, the brand has 43 hotels open in the United States and 33 additional hotels awaiting conversion this year.
The company is focused on franchising as it intends to facilitate ROE expansion and earnings growth in the long term. Emphasis on pricing optimization and merchandising capabilities bodes well. As of Dec 31, 2021, the company had 880 hotels, with 75,000 rooms under construction, awaiting approval for development in its domestic system. In fourth-quarter 2021, domestic franchise agreements for new construction hotels rose 60% year over year. As of Dec 31, 2021, the company had 7,030 franchised hotels.
Choice Hotels continues to focus on its loyalty program to drive growth. During the third quarter 2021, the company announced a collaboration with a trusted digital-asset marketplace – Bakkt. The initiative enables Choice Privileges loyalty members to unlock new redemption opportunities by converting their rewards points to cash and purchasing Bitcoin. Also, it allows guests to transfer their points to a friend or even redeem them online or in-store through Apple Pay and Google Pay. Backed by solid revenue contributions along with new customer additions, the company remains optimistic for growth in the upcoming periods.
Our Take
Our comparative analysis shows that Choice Hotels has the edge over Hilton in terms of share price appreciation and projected EPS growth rate. However, the fundamentals of both companies look solid. Taking all the factors into account, we believe Choice Hotels is slightly better positioned than Hilton at the moment.
Stocks to Consider
Some better-ranked stocks in the Consumer Discretionary sector are Marriott International, Inc. (MAR - Free Report) and Bluegreen Vacations Holding Corporation .
Marriott sports a Zacks Rank #1. The company has a trailing four-quarter earnings surprise of 86.6%, on average. Shares of the company have gained 9.7% in the past year.
The Zacks Consensus Estimate for Marriott’s 2022 sales and EPS suggests growth of 40.3% and 73%, respectively, from the year-ago period’s levels.
Bluegreen Vacations sports a Zacks Rank #1. BVH has a trailing four-quarter earnings surprise of 425.1%, on average. The stock has increased 23.4% in the past year.
The Zacks Consensus Estimate for BVH’s current financial year sales and EPS indicates growth of 8.3% and 20.8%, respectively, from the year-ago period’s reported levels.