We use cookies to understand how you use our site and to improve your experience. This includes personalizing content and advertising. To learn more, click here. By continuing to use our site, you accept our use of cookies, revised Privacy Policy and Terms of Service.
You are being directed to ZacksTrade, a division of LBMZ Securities and licensed broker-dealer. ZacksTrade and Zacks.com are separate companies. The web link between the two companies is not a solicitation or offer to invest in a particular security or type of security. ZacksTrade does not endorse or adopt any particular investment strategy, any analyst opinion/rating/report or any approach to evaluating individual securities.
If you wish to go to ZacksTrade, click OK. If you do not, click Cancel.
Zacks Industry Outlook Highlights: Expedia, TripAdvisor, Priceline Group, Marriott International and Hilton Worldwide Holdings
Read MoreHide Full Article
For Immediate Release
Chicago, IL – November 1, 2017 – Today, Zacks Equity Research discusses the Industry: Hotels, Part 1, including Expedia Inc. (EXPE - Free Report) , TripAdvisor (TRIP - Free Report) , The Priceline Group Inc. , Marriott International, Inc. (MAR - Free Report) and Hilton Worldwide Holdings Inc. (HLT - Free Report) .
So far, 2017 has been welcoming for the U.S. hotel industry with moderate demand growth supporting increases in both occupancy and average daily rate (ADR). Resultantly, revenue per available room (RevPAR) witnessed a rise of 3.4% and 2.7%, respectively, in the first two quarters.
This is further reflected in the industry’s stock-price performance. Over the past year, the Zacks Hotels and Motels Industry has fared better than the broader S&P 500 index. While the industry has gained 36.1%, the broader index has added only 21%.
Though first-quarter GDP growth remained moderate at 1.2%, the economy picked up pace in the second quarter, expanding at an annual rate of 3.1%, better than initially estimated. We note that rising employment, higher real income, and increased household net worth reinforced consumer confidence and sentiment. This has resulted in a steady rise in business and leisure travel, and higher transaction volumes, which are likely to continue.
Going forward, consumer and business spending are expected to keep the mood upbeat, suggesting that the U.S. economy will remain on solid footing for the balance of 2017. In fact, the Atlanta Federal Reserve’s GDPNow model forecasts gross domestic product (GDP) to grow a healthy 2.7% (annualized rate) in third-quarter 2017.
However, peaking supply growth continues to be a meaningful downside risk and is expected to put pressure on pricing power, thereby tempering the performance somewhat.
What Do the Numbers Say?
Statistics underscore the expectation of moderating but positive performance by the hotel industry. A recent report by PricewaterhouseCoopers (PwC) shows that new supply is likely to rise 1.9% in 2017, slightly below the anticipated demand growth of 2.1%. This is likely to result in a 0.2% rise in occupancy rates in 2017 to 65.6%.Though ADR and RevPAR are projected to climb 2.1% and 2.3%, respectively, in 2017, the rate of increase will be less than the average growth recorded in the past few years.
Meanwhile, the Baird/STR Hotel Stock Index, which comprises 20 of the largest market capitalization hotel companies publicly traded on a U.S. exchange and attempts to characterize the performance of hotel stocks, rose 5.3% in September 2017. In fact, year to date, the index is up 16.6%. Higher interest rates, enhanced prospects for potential tax reform, and anticipated hurricane-related demand tailwinds aided the outperformance.
Additionally, according to Smith Travel Research (STR), a leading information and data provider for the lodging industry and Tourism Economics, U.S. hotels continue to witness robust improvement across all metrics. While overall occupancy at U.S. hotels was up 2.4% year over year for the week ended Oct 14, 2017, ADR rose 5.3%. Resultantly, RevPAR grew 7.8% in the same time frame.
Obstacles Facing Hoteliers
Uncertainty, both international and domestic, may continue to weigh on the performance of the U.S. lodging industry.
On the one hand, negative sentiment related to traveling to and from the United States given the Trump administration’s stringent policies on immigration and tourism visas is bad for hotels. On the other hand, if the U.S. dollar gains strength, this may keep the industry’s growth at check, given its impact on inbound, international travel.
Additionally, higher costs and increased supply along with pockets of geopolitical instability and economic slowdown are likely to continue to pose as headwinds.
Meanwhile, hoteliers have been focusing on renovation and digital and marketing initiatives to boost traffic and capitalize on growing tourism numbers. However, to do so, steep costs incurred by leading hoteliers are taking a toll on profits. Moreover, high labor costs will continue to be a major concern for hoteliers, and as they won’t be able to boost ADRs as much as they would like, their profits may be dented further. In fact, online travel agents like Expedia Inc., TripAdvisor and The Priceline Group Inc. are also limiting the pricing power of these brands.
Another major threat comes from home-sharing companies, like Airbnb, Inc., which offer digital service allowing travelers to book homes at holiday destinations. With lower overhead costs and far less regulations than what hotel companies have to comply with, these firms have made steady inroads into the industry and are grabbing share from giants like Marriott International, Inc. and Hilton Worldwide Holdings Inc. Notably, both the companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What Can Drive Growth?
The hotel industry is particularly vulnerable to the ebbs and flows of economic conditions. So the present solid economic fundamentals that is likely to continue to spur consumer spending in the remaining of 2017, raises optimism for hoteliers. Moreover, hoteliers will be able to counter any economic volatility better, if they keep moving from owning real estate to franchising their brands and services.
Meanwhile, keeping aside the necessary hotel renovation and reconstruction which could be costly and time-consuming, other post-hurricane dynamics could work to the advantage of the lodging industry.
Also, hoteliers must look for ways to sustain their growth as online private accommodation aggregators flood the marketplace with new inventory. In fact, Marriott’s acquisition of Starwood Hotels & Resorts Worldwide Inc. was being viewed as a move to combat the rising threat from online travel agents and home-sharing companies.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.
See More Zacks Research for These Tickers
Normally $25 each - click below to receive one report FREE:
Image: Bigstock
Zacks Industry Outlook Highlights: Expedia, TripAdvisor, Priceline Group, Marriott International and Hilton Worldwide Holdings
For Immediate Release
Chicago, IL – November 1, 2017 – Today, Zacks Equity Research discusses the Industry: Hotels, Part 1, including Expedia Inc. (EXPE - Free Report) , TripAdvisor (TRIP - Free Report) , The Priceline Group Inc. , Marriott International, Inc. (MAR - Free Report) and Hilton Worldwide Holdings Inc. (HLT - Free Report) .
Industry: Hotels, Part 1
Link: https://www.zacks.com/commentary/134717/us-hotel-industry-outlook---november-2017
So far, 2017 has been welcoming for the U.S. hotel industry with moderate demand growth supporting increases in both occupancy and average daily rate (ADR). Resultantly, revenue per available room (RevPAR) witnessed a rise of 3.4% and 2.7%, respectively, in the first two quarters.
This is further reflected in the industry’s stock-price performance. Over the past year, the Zacks Hotels and Motels Industry has fared better than the broader S&P 500 index. While the industry has gained 36.1%, the broader index has added only 21%.
Though first-quarter GDP growth remained moderate at 1.2%, the economy picked up pace in the second quarter, expanding at an annual rate of 3.1%, better than initially estimated. We note that rising employment, higher real income, and increased household net worth reinforced consumer confidence and sentiment. This has resulted in a steady rise in business and leisure travel, and higher transaction volumes, which are likely to continue.
Going forward, consumer and business spending are expected to keep the mood upbeat, suggesting that the U.S. economy will remain on solid footing for the balance of 2017. In fact, the Atlanta Federal Reserve’s GDPNow model forecasts gross domestic product (GDP) to grow a healthy 2.7% (annualized rate) in third-quarter 2017.
However, peaking supply growth continues to be a meaningful downside risk and is expected to put pressure on pricing power, thereby tempering the performance somewhat.
What Do the Numbers Say?
Statistics underscore the expectation of moderating but positive performance by the hotel industry. A recent report by PricewaterhouseCoopers (PwC) shows that new supply is likely to rise 1.9% in 2017, slightly below the anticipated demand growth of 2.1%. This is likely to result in a 0.2% rise in occupancy rates in 2017 to 65.6%.Though ADR and RevPAR are projected to climb 2.1% and 2.3%, respectively, in 2017, the rate of increase will be less than the average growth recorded in the past few years.
Meanwhile, the Baird/STR Hotel Stock Index, which comprises 20 of the largest market capitalization hotel companies publicly traded on a U.S. exchange and attempts to characterize the performance of hotel stocks, rose 5.3% in September 2017. In fact, year to date, the index is up 16.6%. Higher interest rates, enhanced prospects for potential tax reform, and anticipated hurricane-related demand tailwinds aided the outperformance.
Additionally, according to Smith Travel Research (STR), a leading information and data provider for the lodging industry and Tourism Economics, U.S. hotels continue to witness robust improvement across all metrics. While overall occupancy at U.S. hotels was up 2.4% year over year for the week ended Oct 14, 2017, ADR rose 5.3%. Resultantly, RevPAR grew 7.8% in the same time frame.
Obstacles Facing Hoteliers
Uncertainty, both international and domestic, may continue to weigh on the performance of the U.S. lodging industry.
On the one hand, negative sentiment related to traveling to and from the United States given the Trump administration’s stringent policies on immigration and tourism visas is bad for hotels. On the other hand, if the U.S. dollar gains strength, this may keep the industry’s growth at check, given its impact on inbound, international travel.
Additionally, higher costs and increased supply along with pockets of geopolitical instability and economic slowdown are likely to continue to pose as headwinds.
Meanwhile, hoteliers have been focusing on renovation and digital and marketing initiatives to boost traffic and capitalize on growing tourism numbers. However, to do so, steep costs incurred by leading hoteliers are taking a toll on profits. Moreover, high labor costs will continue to be a major concern for hoteliers, and as they won’t be able to boost ADRs as much as they would like, their profits may be dented further. In fact, online travel agents like Expedia Inc., TripAdvisor and The Priceline Group Inc. are also limiting the pricing power of these brands.
Another major threat comes from home-sharing companies, like Airbnb, Inc., which offer digital service allowing travelers to book homes at holiday destinations. With lower overhead costs and far less regulations than what hotel companies have to comply with, these firms have made steady inroads into the industry and are grabbing share from giants like Marriott International, Inc. and Hilton Worldwide Holdings Inc. Notably, both the companies carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
What Can Drive Growth?
The hotel industry is particularly vulnerable to the ebbs and flows of economic conditions. So the present solid economic fundamentals that is likely to continue to spur consumer spending in the remaining of 2017, raises optimism for hoteliers. Moreover, hoteliers will be able to counter any economic volatility better, if they keep moving from owning real estate to franchising their brands and services.
Meanwhile, keeping aside the necessary hotel renovation and reconstruction which could be costly and time-consuming, other post-hurricane dynamics could work to the advantage of the lodging industry.
Also, hoteliers must look for ways to sustain their growth as online private accommodation aggregators flood the marketplace with new inventory. In fact, Marriott’s acquisition of Starwood Hotels & Resorts Worldwide Inc. was being viewed as a move to combat the rising threat from online travel agents and home-sharing companies.
Strong Stocks that Should Be in the News
Many are little publicized and fly under the Wall Street radar. They're virtually unknown to the general public. Yet today's 220 Zacks Rank #1 "Strong Buys" were generated by the stock-picking system that has nearly tripled the market from 1988 through 2015. Its average gain has been a stellar +26% per year.See these high-potential stocks free >>.
Follow us on Twitter: https://twitter.com/zacksresearch
Join us on Facebook: https://www.facebook.com/home.php#/pages/Zacks-Investment-Research/57553657748?ref=ts
Zacks Investment Research is under common control with affiliated entities (including a broker-dealer and an investment adviser), which may engage in transactions involving the foregoing securities for the clients of such affiliates.
Media Contact
Zacks Investment Research
800-767-3771 ext. 9339
support@zacks.com
https://www.zacks.com/
Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performance for information about the performance numbers displayed in this press release.