Notwithstanding industry-wide headwinds, growth prospects of the U.S. hotel industry appear bright. In fact, solid lodging fundamentals, a steady rise in business and leisure travel on the back of improving economic indicators and positive employment numbers is spreading cheer across the industry.

Strong investor appetite owing to higher transaction volumes is also expected to keep the mood upbeat, thereby making it prudent to invest in some hotel stocks now. One such company is Extended Stay America, Inc. that continues to reflect strength in several areas and should thus make a value addition to your portfolio.

Notably, this Zacks Rank #2 (Buy) company’s shares have rallied 21.3% over the past six months outperforming the Zacks categorized Hotels & Motels industry’s gain of 12.2%. Upward estimate revisions for 2017 and 2018 earnings add to the optimism.

Additionally, Extended Stay has a number of other aspects that makes it an attractive investment option.

Solid RevPar Growth: The transformational initiatives undertaken by Extended Stay are expected to continue aiding RevPAR (Revenue per Available Room) as hotels that have already been renovated are witnessing increase in Average Daily Rate (ADR) and occupancy levels.

It is to be noted that RevPAR grew 2.1% in the first quarter of 2017 and the company expects the same to increase in the band of 1.5% to 3.5% for full-year 2017.

Superior Return on Equity: Extended Stay delivered return on equity (ROE) of 14.1% in the trailing 12 months compared with the industry’s gain of 5.5%. This, in turn, supports its growth potential and indicates that the company reinvests more efficiently compared with its peers.

Favorable VGM Score: Extended Stay has a VGM Score of 'B'. Our VGM Score identifies stocks that have the most attractive value, growth, and momentum characteristics. In fact, our research shows that stocks with VGM Scores of 'A' or 'B' when combined with a Zacks Rank #1 (Strong Buy) or 2 make solid investment choices.

Key Picks

Some other top-ranked stocks in the broader Consumer Discretionary sector include Marriott International, Inc. (MAR Quick QuoteMAR - Free Report) , Choice Hotels International, Inc. (CHH Quick QuoteCHH - Free Report) and Marriott Vacations Worldwide Corporation (VAC Quick QuoteVAC - Free Report) . While Marriott International sports a Zacks Rank #1, Choice Hotels and Marriott Vacations carry the same Zacks Rank as Extended Stay. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Marriott International’s 2017 earnings climbed 3.3%, over the past 60 days. Further, the company’s earnings surpassed the Zacks Consensus Estimate in each of the trailing four quarters, with an average beat of 5.21%.

The Zacks Consensus Estimate for Choice Hotels’ 2017 earnings moved up 1.1%, over the past 60 days. Moreover, for 2017, earnings per share (EPS) are expected to grow a solid 13.9%.

The Zacks Consensus Estimate for Marriott Vacations’ 2017 earnings climbed 2.1%, over the last 60 days. Further, for 2017, EPS is expected to improve 11%.

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