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The Zacks Hotels and Motels industry is gradually coming out of the woods, courtesy of rising demand. Although occupancy is improving, it remains below the pre-pandemic level. However, people are feeling more optimistic and confident about the prospect of traveling again.
To capitalize on this bullish sentiment, hotel operators are increasingly focusing on a number of initiatives to meet the needs of their customers as they return to hotels. The industry exhibited resilience on the back of 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 is benefiting from an increase in ADR and RevPAR. The industry players, namely Marriott International, Inc., Hyatt Hotels Corp. and Marriott Vacations Worldwide Corp., have been gaining from the prevailing scenario so far.
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 this industry. Several industry participants own, develop and operate resorts.
Some companies develop lodges, villages and mobile accommodations, which include modular, skid-mounted accommodation and central amenities that provide long-term and temporary workforce accommodations. Some industry players develop, market, sell, and manage vacation ownership and associated products. A few hoteliers provide studios, one-bedroom suites and accommodations to mid-market business and personal travelers.
4 Trends Shaping the Future of Hotels & Motels Industry
Strong RevPAR & ADR Driving Growth: Although occupancy is improving, it is below the pre-pandemic level. The industry is benefiting from robust ADR and RevPAR. Per STR, occupancy for the month ended July, came in at 69.6%, down 5.4% from the July 2019 level. However, ADR and RevPAR increased 17.5% and 11.2% to $159.08 and $110.73, respectively.
The uptrend was driven by solid leisure demand in the United States. Easing COVID-19 restrictions, the rise in vaccination rates and an improving business activity added to the upside. Hotel demands in 2022 are likely to be driven by leisure travelers from Europe and the Asia-Pacific.
Digitalization to Aid Growth: Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability and boosting guest satisfaction. To this end, hoteliers leveraged technologies like mobile and web check-in as well as the mobile key.
The hoteliers 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 apart, an emphasis on pricing optimization and merchandising capabilities will likely enable the hoteliers to capture an 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 instated a trained hygiene and well-being leader responsible for a clean and safe environment for staff and guests.
Secondly, the companies are making concerted efforts to enhance the contactless experience and leveraging technologies, such as mobile and web check-in as well as the mobile key. The industry players resorted to streamlining operations with efficient management levels, benefits of which are likely to stay even after the pandemic dies down.
High Costs Remain a Woe: Steep costs remain a concern for the industry participants. Since the coronavirus pandemic continues to impact the global travel industry, hoteliers are constantly focusing on cost-saving measures to counter the crisis. Some of the industry players discontinued share repurchases and suspended dividends in a bid to improve liquidity.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Hotels and Motels industry is grouped within the broader sector.
The group's Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates sunny near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #44, which places it in the top 17% of the 252 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 Mar 31, 2022, the industry's earnings estimates for 2022 have increased 16.3%.
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 the valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Hotels and Motels industry has outperformed both the Zacks S&P 500 composite and its own sector in the past year.
Over this period, the industry has gained 3.1% against the sector's decline of 35.1% and the Zacks S&P 500 composite’s fall of 6.9%.
Hotels & Motels Industry's Valuation
On the basis of the forward 12-month EV/EBITDA, a commonly used multiple for valuing Hotels and Motels stocks, the industry is currently trading at 19.69X compared with the S&P 500's 20.08X. Meanwhile, it is also above the sector's trailing 12-month EV/EBITDA ratio of 12.94X.
Over the last five years, the industry has traded as high as 23.74X and as low as 9.77X, with the median being at 13.68X.
3 Hotels & Motels Stocks to Watch
Marriott: Marriott is a leading worldwide hospitality company focused on lodging management and franchising. MAR is consistently trying to expand its presence worldwide and capitalize on demand for hotels in the international markets. Moving ahead, MAR plans to significantly expand its global portfolio of luxury and lifestyle brands.
At the end of second-quarter 2022, its development pipeline totaled nearly 2,942 hotels, with approximately 495,000 rooms. Nearly 203,300 rooms were under construction. During the quarter, MAR added 97 properties (16,917 rooms) to its worldwide lodging portfolio. In 2022, it anticipates net room growth in the 3-3.5% range.
Marriott currently carries a Zacks Rank #2 (Buy). In the past 60 days, the Zacks Consensus Estimate for 2022 earnings has been revised 6.8% upward. The Zacks Consensus Estimate for MAR's 2022 sales and earnings per share suggests growth of 46.1% and 101.3%, respectively, from the corresponding year-ago period’s figures. The stock has rallied 15.4% over the past year. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Hyatt: H has been benefiting from solid leisure transient demand, easing travel restrictions and ramping up airline capacity. Also, a focus on hotel openings and acquisition initiatives bodes well. Hyatt is consistently trying to expand its presence worldwide and has expansion plans in the Asia-Pacific region, Europe, Africa, the Middle East and Latin America.
Hyatt currently carries a Zacks Rank of 2. In the past seven days, the Zacks Consensus Estimate for 2022 earnings has been revised 50% upward. The Zacks Consensus Estimate for H’s 2022 sales and earnings per share suggests growth of 89.1% and 110.9%, respectively, from the comparable year-ago period’s tallies. The stock has rallied 20.5% over the past year.
Marriott Vacations Worldwide: VAC has been witnessing improvement in occupancy rates, highlighting people’s willingness to go on vacations. During the second quarter of 2022, Marriott Vacations reported solid occupancies with respect to its Aqua-Aston business. VAC reported year-over-year growth in occupancies and RevPAR.
Marriott Vacations currently sports a Zacks Rank #1. In the past seven days, the Zacks Consensus Estimate for 2022 earnings has been revised 1.1% upward. The Zacks Consensus Estimate for VAC’s 2022 sales and earnings per share suggests growth of 19.7% and 131.4%, respectively, from the corresponding year-ago period’s actuals. The stock has declined 5.1% over the past year.
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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/performancefor information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights Marriott International, Hyatt Hotels and Marriott Vacations Worldwide
For Immediate Release
Chicago, IL – August 24, 2022 – Today, Zacks Equity Research discusses Marriott International, Inc. (MAR - Free Report) , Hyatt Hotels Corp. (H - Free Report) and Marriott Vacations Worldwide Corp. (VAC - Free Report) .
Industry: Hotels & Motels
Link: https://www.zacks.com/commentary/1971134/3-hotels-motels-stocks-to-buy-in-a-prospering-industry
The Zacks Hotels and Motels industry is gradually coming out of the woods, courtesy of rising demand. Although occupancy is improving, it remains below the pre-pandemic level. However, people are feeling more optimistic and confident about the prospect of traveling again.
To capitalize on this bullish sentiment, hotel operators are increasingly focusing on a number of initiatives to meet the needs of their customers as they return to hotels. The industry exhibited resilience on the back of 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 is benefiting from an increase in ADR and RevPAR. The industry players, namely Marriott International, Inc., Hyatt Hotels Corp. and Marriott Vacations Worldwide Corp., have been gaining from the prevailing scenario so far.
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 this industry. Several industry participants own, develop and operate resorts.
Some companies develop lodges, villages and mobile accommodations, which include modular, skid-mounted accommodation and central amenities that provide long-term and temporary workforce accommodations. Some industry players develop, market, sell, and manage vacation ownership and associated products. A few hoteliers provide studios, one-bedroom suites and accommodations to mid-market business and personal travelers.
4 Trends Shaping the Future of Hotels & Motels Industry
Strong RevPAR & ADR Driving Growth: Although occupancy is improving, it is below the pre-pandemic level. The industry is benefiting from robust ADR and RevPAR. Per STR, occupancy for the month ended July, came in at 69.6%, down 5.4% from the July 2019 level. However, ADR and RevPAR increased 17.5% and 11.2% to $159.08 and $110.73, respectively.
The uptrend was driven by solid leisure demand in the United States. Easing COVID-19 restrictions, the rise in vaccination rates and an improving business activity added to the upside. Hotel demands in 2022 are likely to be driven by leisure travelers from Europe and the Asia-Pacific.
Digitalization to Aid Growth: Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability and boosting guest satisfaction. To this end, hoteliers leveraged technologies like mobile and web check-in as well as the mobile key.
The hoteliers 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 apart, an emphasis on pricing optimization and merchandising capabilities will likely enable the hoteliers to capture an 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 instated a trained hygiene and well-being leader responsible for a clean and safe environment for staff and guests.
Secondly, the companies are making concerted efforts to enhance the contactless experience and leveraging technologies, such as mobile and web check-in as well as the mobile key. The industry players resorted to streamlining operations with efficient management levels, benefits of which are likely to stay even after the pandemic dies down.
High Costs Remain a Woe: Steep costs remain a concern for the industry participants. Since the coronavirus pandemic continues to impact the global travel industry, hoteliers are constantly focusing on cost-saving measures to counter the crisis. Some of the industry players discontinued share repurchases and suspended dividends in a bid to improve liquidity.
Zacks Industry Rank Indicates Bright Prospects
The Zacks Hotels and Motels industry is grouped within the broader sector.
The group's Zacks Industry Rank, basically the average of the Zacks Rank of all the member stocks, indicates sunny near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #44, which places it in the top 17% of the 252 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 Mar 31, 2022, the industry's earnings estimates for 2022 have increased 16.3%.
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 the valuation picture.
Industry Outperforms S&P 500 & Sector
The Zacks Hotels and Motels industry has outperformed both the Zacks S&P 500 composite and its own sector in the past year.
Over this period, the industry has gained 3.1% against the sector's decline of 35.1% and the Zacks S&P 500 composite’s fall of 6.9%.
Hotels & Motels Industry's Valuation
On the basis of the forward 12-month EV/EBITDA, a commonly used multiple for valuing Hotels and Motels stocks, the industry is currently trading at 19.69X compared with the S&P 500's 20.08X. Meanwhile, it is also above the sector's trailing 12-month EV/EBITDA ratio of 12.94X.
Over the last five years, the industry has traded as high as 23.74X and as low as 9.77X, with the median being at 13.68X.
3 Hotels & Motels Stocks to Watch
Marriott: Marriott is a leading worldwide hospitality company focused on lodging management and franchising. MAR is consistently trying to expand its presence worldwide and capitalize on demand for hotels in the international markets. Moving ahead, MAR plans to significantly expand its global portfolio of luxury and lifestyle brands.
At the end of second-quarter 2022, its development pipeline totaled nearly 2,942 hotels, with approximately 495,000 rooms. Nearly 203,300 rooms were under construction. During the quarter, MAR added 97 properties (16,917 rooms) to its worldwide lodging portfolio. In 2022, it anticipates net room growth in the 3-3.5% range.
Marriott currently carries a Zacks Rank #2 (Buy). In the past 60 days, the Zacks Consensus Estimate for 2022 earnings has been revised 6.8% upward. The Zacks Consensus Estimate for MAR's 2022 sales and earnings per share suggests growth of 46.1% and 101.3%, respectively, from the corresponding year-ago period’s figures. The stock has rallied 15.4% over the past year. You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.
Hyatt: H has been benefiting from solid leisure transient demand, easing travel restrictions and ramping up airline capacity. Also, a focus on hotel openings and acquisition initiatives bodes well. Hyatt is consistently trying to expand its presence worldwide and has expansion plans in the Asia-Pacific region, Europe, Africa, the Middle East and Latin America.
Hyatt currently carries a Zacks Rank of 2. In the past seven days, the Zacks Consensus Estimate for 2022 earnings has been revised 50% upward. The Zacks Consensus Estimate for H’s 2022 sales and earnings per share suggests growth of 89.1% and 110.9%, respectively, from the comparable year-ago period’s tallies. The stock has rallied 20.5% over the past year.
Marriott Vacations Worldwide: VAC has been witnessing improvement in occupancy rates, highlighting people’s willingness to go on vacations. During the second quarter of 2022, Marriott Vacations reported solid occupancies with respect to its Aqua-Aston business. VAC reported year-over-year growth in occupancies and RevPAR.
Marriott Vacations currently sports a Zacks Rank #1. In the past seven days, the Zacks Consensus Estimate for 2022 earnings has been revised 1.1% upward. The Zacks Consensus Estimate for VAC’s 2022 sales and earnings per share suggests growth of 19.7% and 131.4%, respectively, from the corresponding year-ago period’s actuals. The stock has declined 5.1% over the past year.
Why Haven’t You Looked at Zacks' Top Stocks?
Our 5 best-performing strategies have blown away the S&P's impressive +28.8% gain in 2021. Amazingly, they soared +40.3%, +48.2%, +67.6%, +94.4%, and +95.3%. Today you can access their live picks without cost or obligation.
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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/performancefor information about the performance numbers displayed in this press release.