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According to Smith Travel research, revenue per available room advanced by +8.9% industry-wide for the week ending March 12th. Bolstered by improving fundamentals, including the return of the business transient, such optimistic news has practically become the norm of late for the hotels industry. Several analysts believe the space is in the midst of a positive trend, reminiscent of the early 90s, which could signal that 2005 expectations are too conservative. There are several indicators suggesting that this is not wishful thinking by the analysts. The hotels industry currently holds a Zacks Industry Rank of 2.67, according to Nick Raich’s “Weekly Earnings and Sector Update,” placing it 34th out of more than 200 industries.

”After three years of unprecedented challenges, the travel industry is booming, especially in the United States and Asia, as people travel again for business and pleasure,” said Chairman and CEO of Marriott International J.W. Marriott Jr., That statement was made during Marriott’s year-end report on February 8th, when the company announced record diluted earnings per share from continuing operations for 2004.

The industry took 9/11 on the chin, as many potential travelers decided to cancel their trips in response to the uncertain environment. Furthermore, the economic malaise forced companies to cut down on expenses, and business trips were one of the first items to be shelved. But times do change, and a steadier economy has caused a spark for hotels. The above-mentioned study from Smith Travel also showed that revenue per available room growth was above the industry average for some of the largest and most important markets, including New York, Orlando, Washington D.C. and Los Angeles.

”We see continued attractive investment opportunities in the lodging sector given improving industry fundamentals,” according to a February research report from Bear Stearns. “We forecast growing U.S. lodging demand in 2005 given expanding corporate travel budgets and accelerating large-group conference bookings.”

But there’s a lot to consider when investing in the hotels industry, and a favorable environment isn’t enough to ensure success. Factors such as the locations of hotels, the type of clientele and, of course, business models can go a long way in deciding which companies rise to the top. For example, many believe that hotel companies with greater exposure to urban areas and big business centers could have the best chance to capture the growing momentum. Analysts can help you steer toward those specific companies with the ability and wherewithal to attract the most travelers. With the analysts’ help, you may want to fill some vacancies in your portfolio with companies from the hotels industry.

What Do the All Stars Recommend?

Zacks tracks the analysts who cover the hotels industry and ranks them based on the performance of stocks recommended. Some of the top-ranked analysts include: W. Crow of Raymond James; J. Donnelly of First Capital Markets Corporation; M. Falcone of The Bear Stearns Companies, Inc.; and W. Marks of JMP Securities. Get their recommendations and those for all others in the industry by clicking here .

Top Consensus Stocks

Below are the top stocks recommended by the most 5-Star analysts in the hotels industry.

Hilton Hotels Corporation (NYSE: HLT ) is primarily engaged, together with its subsidiaries, in the ownership, management and franchising of hotels. The company operates hotels through the following brands; Hilton, Hilton Garden Inn, Doubletree, Embassy Suites, Homewood Suites by Hilton, and Hampton Inn. Excluding non-comparable items, Hilton Hotels posted fourth quarter diluted earnings of 18 cents per share, marking a solid +64% improvement over the year-ago result of 11 cents. The consensus of analysts was expecting 16 cents. Total revenue grew +7% to $1.05 billion, versus $982 million in the year-ago quarter. Hilton Hotels stated that increased demand in the business transient and group segments, along with improved pricing power in leisure, enabled most of its major owned hotels to report strong results. That strong demand also led to solid fourth quarter revenue per available room gains for each of its brands on a system-wide basis.

”The momentum that was built in our business starting in late 2003 continued throughout 2004 and culminated in a very strong fourth quarter for our company,” said Stephen F. Bollenbach, Co-Chairman and CEO of Hilton Hotels. “Even more exciting, though, are the indications that we are still in the early stages of what we believe will be a period of long-term strength in our industry and for our company.”

More recently, Hilton Hotels’ Board of Directors authorized the company to buy back up to 50 million shares of its common stock should market conditions make such purchases attractive. The company plans to repurchase stock from time to time on an opportunistic basis. During the fourth quarter, Hilton Hotels repurchased 2.3 million shares of its stock at a total cost of $48 million. So far in 2005, the company has bought an additional 5.5 million shares at a cost of $120 million. To further research Hilton Hotels Corporation, click HLT .

Starwood Hotels & Resorts Worldwide, Inc. (NYSE: HOT ) is a fully integrated owner, operator and franchisor of hotels and resorts, including St. Regis ®, The Luxury Collection®, Sheraton®, Westin®, Four Points® by Sheraton, and W® brands, as well as Starwood Vacation Ownership, Inc., one of the premier developers and operators of high quality vacation interval ownership resorts. Revenue per available room at same-store owned hotels worldwide advanced +11.1%, and increased in North America by +11%. Starwood said that its top line was clearly helped in part by its well-located urban concentration of owned assets, but the company also appears to be making significant share gains outside of that location thanks to the resurgence and effectiveness of its brands.

According to a February 3rd research report from Raymond James, “Starwood’s portfolio is heavily weighted towards major urban markets and business travelers, providing tremendous leverage to an economic improvement. The company’s brands continue to tally market share gains. Management is known for value-added, outside-the-box thinking.”

In late February, Starwood announced that it expects to open more than 70 new hotels in 2005 and 2006 around the globe. Half will be outside of the U.S.. Our development momentum continues to be strong and we’ve won more than our share of hotel deals,” stated Steven J. Heyer, CEO of Starwood. To further research Starwood Hotels & Resorts Worldwide, Inc., click HOT .

Marriott International, Inc. (NYSE: MAR ) is a leading lodging company with more than 2,600 lodging properties in the U.S. and 65 other countries and territories. Marriott International operates and franchises hotels under the Marriott, JW Marriott, The Ritz-Carlton, Renaissance, Residence Inn, Courtyard, TownePlace Suites, Fairfield Inn, SpringHill Suites and Bulgari brand names. Marriott International reported all-time record earnings for 2004 of $2.47 per share, marking a +27% improvement from 2003. Revenues advanced +12% to $10 billion during the year, while revenue per available rooms for its 2,116 comparable worldwide system wide properties advanced by +9.6%. The company opened 166 new hotels (27,000 rooms) in 2004. For its fourth quarter, Marriott International earnings per share of 79 cents improved upon the consensus by almost +7%, on revenues that advanced +10% to $3.1 billion.

”Although 2004 was a spectacular year for the company, we are even more optimistic and enthusiastic about the future,” said J.W. Marriott, Jr., Chairman and CEO of Marriott International. “We currently have more than 55,000 rooms in our development pipeline and expect to add 25,000 to 30,000 hotel rooms and timeshare units to our system in 2005.”

Marriott International called 2004 a major turning point for its lodging business, as the strengthening economy increased demand for hotels, driving room rates and property profitability higher. The company estimates North American revenue per available room growth of +7% to +9% for 2005, and +1.5% to +2% improvement in house profit margins. It expects earnings per share of between $2.73 and $2.83 for the year. To further research Marriott International, click MAR .

Read the full analyst report on HOT

Read the full analyst report on MAR