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4 Hotel Stocks to Buy Ahead of the Holiday Season

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The Labor Day weekend was one of the best in terms of hotel bookings and air travel and now the travel and leisure sector is looking forward to the upcoming holiday season. Rising fuel costs have already made air travel expensive. Also, hotel rooms are a lot expensive now.

However, even then, people are planning vacations, which indicates that they are still willing to spend. This is a good sign for the travel and leisure sector that heavily depends on the holiday season to rake in maximum revenues. Given this scenario, stocks like Marriott Vacations Worldwide Corporation (VAC - Free Report) , Hyatt Hotels Corporation (H - Free Report) , Choice Hotels International, Inc. (CHH - Free Report) and InterContinental Hotels Group PLC (IHG - Free Report) are likely to benefit in the near term.

Holiday Season to Help Hotel Industry

The recently concluded Labor Day weekend was one of the best periods for the airline and hotel industry in recent times. The U.S. hotel industry sold more room nights than ever, even breaking the record set in 2021.

In fact, over the 15-week summer travel season, weekly demand for hotel rooms across the United States was the third best since 2000. Hotel room occupancy during summer averaged 68.3%, which was slightly lower than the 72.3% achieved in 2019.

The robust bookings this summer indicate that the industry is bouncing back from the lows and is on track to surpass the pre-pandemic levels. The high occupancy also bodes well for the upcoming holiday season, given that an increasing number of people are willing to go on vacations this year.

According to data from the Transportation Security Administration (“TSA”), Americans are flying more frequently in 2022 and are expected to surpass the pre-pandemic level soon. The TSA screened 8.76 million passengers between Sep 2 and Sep 5, the Labor Day weekend. This is 102% higher than the pre-pandemic levels, indicating that the travel and leisure sector is fast bouncing back.

As more people go on vacations this year, a higher volume of hotel rooms will be booked. Holidaying had almost come to a standstill in 2020 following the COVID-19 outbreak as people felt safer indoors.

Even when the economy started reopening and traveling resumed, COVID-induced restrictions barred many from taking the risk of vacationing. Traveling and vacationing faced another roadblock last year due to the emergence of the Delta and Omicron variants of the coronavirus.

Things look a lot normal this year, with restrictions almost lifted. This has given people the courage to travel freely once again. Moreover, people are also desperate to go on vacations after having remained indoors in 2020 and 2021.

This comes despite the sharp rise in flight tickets and hotel tariffs over the past few months. However, even then people are willing to spend.

Another indication that hotels are expecting higher bookings is the steady job additions in the industry. The U.S. economy added 315,000 jobs in August. Of these, 31,000 jobs were added in the leisure and hospitality industry. The leisure and hospitality industry averaged 90,000 job additions in the previous seven months of the year.

Moreover, according to the Q4 ManpowerGroup Employment Outlook Survey, hotel restaurants and hotel owners plan to grow their staff strength by 29% over the next three months. This indicates that more people are likely to go on holiday, which is prompting employers to hire more.

Our Choices

Given this situation, it would be wise to invest in these four hotel stocks. Each of the stocks carries a Zacks Rank #1 (Strong Buy) or #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Marriott Vacations Worldwide offers vacation ownership, exchange, rental, resort and property management services. As of 2021-end, VAC had more than 120 resorts and 700,000 owners and members in a diverse portfolio of seven vacation ownership brands. Marriott Vacations Worldwide also has exchange networks and membership programs in more than 3,200 resorts in 90 countries.

Marriott Vacations Worldwide’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 1.1% over the past 60 days. VAC sports a Zacks Rank #1.

Hyatt Hotels is a leading global hospitality company engaged in the development, ownership, operation, management, franchising and licensing of a portfolio of properties, including hotels, resorts and residential and vacation ownership properties around the world. As of Mar 31 2022, H’s portfolio included more than 1,150 properties in 71 countries across six continents.

Hyatt Hotels Corporation’s expected earnings growth rate for the current year is more than 100%. The Zacks Consensus Estimate for current-year earnings has improved 78.9% over the past 30 days. H has a Zacks Rank #2.

Choice Hotels is one of the largest hotel franchisors globally. As of Mar 31, 2022, CHH had 6,996 hotels open, representing nearly 577,714 rooms. Choice Hotels International is spread across 40 countries and territories internationally and is present in 50 states domestically and the District of Columbia.

Choice Hotels International’s expected earnings growth rate for the current year is 21.7%. The Zacks Consensus Estimate for current-year earnings has improved 4.8% over the past 60 days. CHH has a Zacks Rank #2.

InterContinental Hotels Group offers information and reservations capability on the Internet for InterContinental Hotels & Resorts, Crowne Plaza Hotels & Resorts, Holiday Inn hotels, Holiday Inn Express hotels, and Staybridge Suites by Holiday Inn hotels. IHG owns, manages, franchises, and leases hotels across all continents.

InterContinental Hotels Group’s expected earnings growth rate for the current year is 88.4%. The Zacks Consensus Estimate for current-year earnings has improved 9.5% over the past 60 days. IHG has a Zacks Rank #2.

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