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2 Stocks to Buy From Promising Hotels & Motels Industry
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The Zacks Hotels and Motels industry is benefiting from improving demand, RevPAR and ADR. People are feeling more optimistic and confident about the prospect of traveling again. To capitalize on the sentiment, hotel operators are focusing on several initiatives to meet their customers’ needs as they return to hotels. The industry has exhibited resilience behind cost-saving initiatives and digital enhancements. Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability and driving guest satisfaction. The industry players, namely InterContinental Hotels Group PLC (IHG - Free Report) and Playa Hotels & Resorts N.V. (PLYA - Free Report) , have been gaining from the prevailing scenario.
Industry Description
The Zacks Hotels and Motels industry comprises companies that own, lease, manage, develop and franchise hotels. Some vacation ownership and exchange companies are also part of the industry. Several industry participants own, develop, and operate resorts. Some companies develop lodges, villages and mobile accommodations, including modular, skid-mounted accommodations 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 provide studios, one-bedroom suites, and accommodations to mid-market business and personal travelers as well.
4 Trends Shaping the Future of Hotels & Motels Industry
Strong RevPAR & ADR Driving Growth: The industry is benefiting from robust ADR and RevPAR. Per STR, ADR and occupancy for the week ended Feb 4 came in at $145.4 and $80.5, up 13.9% and 5.6%, respectively, compared with the same period’s levels in 2019. The uptrend was driven by a solid leisure demand in the United States. Easing COVID-19 restrictions and improving business activity added to the upside. Hotel demands in 2023 are likely to be driven by leisure travelers from Europe and Asia-Pacific.
Digitalization to Drive Growth: Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability and driving guest satisfaction. To this end, hoteliers have leveraged technologies such as mobile and web check-in as well as mobile key. The hoteliers have also 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 and an emphasis on pricing optimization and merchandising capabilities are likely to help hoteliers capture additional market share.
Initiatives to Attract Customers: Firstly, hoteliers are committed to comprehensive processes for cleaning, disinfection and infectious disease prevention. To this end, they have instated a trained hygiene and well-being leader responsible for a clean and safe environment for staff and guests. Secondly, the companies have been making every effort to enhance the contactless experience and leveraging technologies such as mobile and web check-in as well as mobile key. The industry players have resorted to streamlining operations with efficient management levels, the benefits of which are likely to remain even after the pandemic fades out.
High Costs & High Inflation Remain a Woe: Higher costs remain a concern for the industry participants. Worries about a global slowdown and a possible recession loom large over the stock market. A high inflation is likely to curb consumer spending, which in turn will hurt the industry.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Hotels and Motels industry is grouped within the broader sector.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #55, which places it in the top 22% of the 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group's earnings growth potential. Since Dec 31, 2022, the industry's earnings estimates for 2022 have increased 3.3%.
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 S&P 500
The Zacks Hotels and Motels industry has outperformed the Zacks S&P 500 composite and its own sector in the past year.
Over this period, the industry declined 2.6% compared with the sector's decline of 21.3%. Meanwhile, the Zacks S&P 500 composite has decreased 9.2%.
Hotels & Motels Industry's Valuation
On the basis of the forward 12-month EV/EBITDA, which is a commonly used multiple for valuing Hotels and Motels stocks, the industry is currently trading at 13.02X compared with the S&P 500's 10.25X. It is also above the sector's trailing 12-month EV/EBITDA ratio of 8.69X.
Over the last five years, the industry has traded as high as 23.79X and as low as 8.69X, with the median being at 13.45X, as the chart below shows.
2 Hotels & Motels Stocks to Watch Out For
InterContinental Hotels Group: InterContinental Hotels has been gaining from robust leisure travel demand and improvement in RevPAR. Robust group bookings and international trips continue to drive the company’s performance.
InterContinental Hotels Group currently carries a Zacks Rank #2 (Buy). In the past 30 days, the Zacks Consensus Estimate for 2023 earnings has been revised upward by 3.5%. The Zacks Consensus Estimate for InterContinental Hotels 2023 earnings per share suggests growth of 7.5% from the year-ago period. IHG's shares have inched up 0.4% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: IHG
Playa Hotels & Resorts: Playa Hotels & Resorts, together with its subsidiaries, owns, develops and operates resorts in prime beachfront locations in Mexico and the Caribbean. The company is benefiting from an increase in net package RevPAR and witnessing strong demand across its portfolio.
Playa Hotels & Resorts currently carries a Zacks Rank #2. In the past 30 days, the Zacks Consensus Estimate for 2023 earnings has been revised upward by 9.1%. The Zacks Consensus Estimate for Playa Hotels & Resorts 2023 earnings per share suggests growth of 26.3% from the year-ago period. PLYA's shares have declined 6.1% in the past year.
Price and Consensus: PLYA
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2 Stocks to Buy From Promising Hotels & Motels Industry
The Zacks Hotels and Motels industry is benefiting from improving demand, RevPAR and ADR. People are feeling more optimistic and confident about the prospect of traveling again. To capitalize on the sentiment, hotel operators are focusing on several initiatives to meet their customers’ needs as they return to hotels. The industry has exhibited resilience behind cost-saving initiatives and digital enhancements. Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability and driving guest satisfaction. The industry players, namely InterContinental Hotels Group PLC (IHG - Free Report) and Playa Hotels & Resorts N.V. (PLYA - Free Report) , have been gaining from the prevailing scenario.
Industry Description
The Zacks Hotels and Motels industry comprises companies that own, lease, manage, develop and franchise hotels. Some vacation ownership and exchange companies are also part of the industry. Several industry participants own, develop, and operate resorts. Some companies develop lodges, villages and mobile accommodations, including modular, skid-mounted accommodations 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 provide studios, one-bedroom suites, and accommodations to mid-market business and personal travelers as well.
4 Trends Shaping the Future of Hotels & Motels Industry
Strong RevPAR & ADR Driving Growth: The industry is benefiting from robust ADR and RevPAR. Per STR, ADR and occupancy for the week ended Feb 4 came in at $145.4 and $80.5, up 13.9% and 5.6%, respectively, compared with the same period’s levels in 2019. The uptrend was driven by a solid leisure demand in the United States. Easing COVID-19 restrictions and improving business activity added to the upside. Hotel demands in 2023 are likely to be driven by leisure travelers from Europe and Asia-Pacific.
Digitalization to Drive Growth: Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability and driving guest satisfaction. To this end, hoteliers have leveraged technologies such as mobile and web check-in as well as mobile key. The hoteliers have also 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 and an emphasis on pricing optimization and merchandising capabilities are likely to help hoteliers capture additional market share.
Initiatives to Attract Customers: Firstly, hoteliers are committed to comprehensive processes for cleaning, disinfection and infectious disease prevention. To this end, they have instated a trained hygiene and well-being leader responsible for a clean and safe environment for staff and guests. Secondly, the companies have been making every effort to enhance the contactless experience and leveraging technologies such as mobile and web check-in as well as mobile key. The industry players have resorted to streamlining operations with efficient management levels, the benefits of which are likely to remain even after the pandemic fades out.
High Costs & High Inflation Remain a Woe: Higher costs remain a concern for the industry participants. Worries about a global slowdown and a possible recession loom large over the stock market. A high inflation is likely to curb consumer spending, which in turn will hurt the industry.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Hotels and Motels industry is grouped within the broader sector.
The group's Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates bright near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #55, which places it in the top 22% of the 251 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.
The industry's position in the top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group's earnings growth potential. Since Dec 31, 2022, the industry's earnings estimates for 2022 have increased 3.3%.
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 S&P 500
The Zacks Hotels and Motels industry has outperformed the Zacks S&P 500 composite and its own sector in the past year.
Over this period, the industry declined 2.6% compared with the sector's decline of 21.3%. Meanwhile, the Zacks S&P 500 composite has decreased 9.2%.
Hotels & Motels Industry's Valuation
On the basis of the forward 12-month EV/EBITDA, which is a commonly used multiple for valuing Hotels and Motels stocks, the industry is currently trading at 13.02X compared with the S&P 500's 10.25X. It is also above the sector's trailing 12-month EV/EBITDA ratio of 8.69X.
Over the last five years, the industry has traded as high as 23.79X and as low as 8.69X, with the median being at 13.45X, as the chart below shows.
2 Hotels & Motels Stocks to Watch Out For
InterContinental Hotels Group: InterContinental Hotels has been gaining from robust leisure travel demand and improvement in RevPAR. Robust group bookings and international trips continue to drive the company’s performance.
InterContinental Hotels Group currently carries a Zacks Rank #2 (Buy). In the past 30 days, the Zacks Consensus Estimate for 2023 earnings has been revised upward by 3.5%. The Zacks Consensus Estimate for InterContinental Hotels 2023 earnings per share suggests growth of 7.5% from the year-ago period. IHG's shares have inched up 0.4% in the past year. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: IHG
Playa Hotels & Resorts: Playa Hotels & Resorts, together with its subsidiaries, owns, develops and operates resorts in prime beachfront locations in Mexico and the Caribbean. The company is benefiting from an increase in net package RevPAR and witnessing strong demand across its portfolio.
Playa Hotels & Resorts currently carries a Zacks Rank #2. In the past 30 days, the Zacks Consensus Estimate for 2023 earnings has been revised upward by 9.1%. The Zacks Consensus Estimate for Playa Hotels & Resorts 2023 earnings per share suggests growth of 26.3% from the year-ago period. PLYA's shares have declined 6.1% in the past year.
Price and Consensus: PLYA