The Zacks Hotels and Motels industry performance in 2024 is likely to be impacted by high costs, heightened geopolitical risks and persistent macroeconomic uncertainty. However, industry participants’ focus on expansion efforts, hotel conversions, strategic partnerships and loyalty programs bode well.
The industry 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. Industry players, namely Hilton Worldwide Holdings Inc., Hyatt Hotels Corp. and Hilton Grand Vacations Inc., are likely to benefit from the factors mentioned above.
Industry Description
The Zacks Hotels and Motels industry comprises companies that own, lease, manage, develop and franchise hotels. Some vacation ownership and exchange firms are also a part of the industry. Several participants own, construct and operate resorts. Some companies develop lodges, villages and mobile accommodations, including modular, skid-mounted ones 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 offer studios, one-bedroom suites and accommodations to mid-market business and personal travelers.
3 Trends Shaping the Future of the Hotels & Motels Industry
High Costs & Inflation Remain a Woe: Higher costs are a concern for industry participants. Rising salaries, wages and benefits have been adding to labor costs. High inflation is likely to curb consumer spending, which will hurt the industry. Heightened geopolitical risks and persistent macroeconomic uncertainty remain a concern for the industry. The outlook for midweek travel is uncertain, as certain companies are indicating potential changes to their business travel policies to manage expenses and adhere to sustainability objectives.
Strong RevPAR & ADR Driving Growth: The industry continues to benefit from robust RevPAR and ADR growth. Amanda Hite, president of STR, highlighted the U.S. hotel industry's robust performance in 2023, with a 4.9% increase in Revenue per Available Room (RevPAR) compared with the previous year’s levels. Occupancy rates steadily approached 2019 levels.
Average Daily Rate (ADR) and RevPAR levels were consistently above the industry benchmark in nominal terms. The metrics demonstrate progress even when adjusted for inflation. Hite described the year as robust and deemed it a ‘normal’ period for the hotel industry. Per STR, RevPAR and ADR in 2024 are likely to increase by 4.1% and 3.1%, year over year, respectively.
Digitalization to Drive Growth: Hotel owners are focused on maintaining the balance between maximizing hotel profitability and driving guest satisfaction. To this end, hoteliers have leveraged mobile and web check-in and mobile key technologies. These 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 and an emphasis on pricing optimization and merchandising capabilities will likely help hoteliers capture additional market share.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Hotels and Motels industry is grouped within the broader sector.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #150, which places it in the bottom 40% 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 bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are gradually losing confidence in this group's earnings growth potential. Since Dec 31, 2023, the industry's earnings estimates for 2024 have declined 2.9%.
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 the Sector
In the past year, the Zacks Hotels and Motels industry has outperformed its sector. Over this period, the industry increased by 37.9% compared with the sector's increase of 10.2%. The Zacks S&P 500 composite has increased 28.3%.
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 14.07X compared with the S&P 500's 12.55X. It is also below the sector's trailing 12-month EV/EBITDA ratio of 9.32X.
Over the last five years, the industry has traded as high as 23.49X and as low as 8.7X, with the median being at 13.6X.
3 Hotels & Motels Stocks to Watch Out For
Hyatt Hotels: The company is benefiting from solid leisure transient demand, recovery in business travel demand, increased system-wide group travel and a loyalty program. Also, the focus on new hotel openings and acquisition efforts bodes well. In 2024, Hyatt anticipates system-wide 2024 RevPAR to increase in the range of 3% and 5% year over year.
H currently carries a Zacks Rank #2 (Buy). In the past seven days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 0.9%. The Zacks Consensus Estimate for Hyatt 2024 EPS suggests growth of 27% from the year-ago period’s figure. Hyatt's shares have gained 41.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here. .
Hilton: The company is benefiting from a solid improvement in RevPAR on the back of increased occupancy rates and ADR. Also, its focus on unit expansion, hotel conversions, strategic partnerships, loyalty programs and asset-light business model bodes well. In 2023, Hilton opened 395 new hotels, with room additions totaling nearly 63,000, marking an 8.6% year-over-year increase. Owing to the improving trend, for first-quarter 2024, management anticipates system-wide RevPAR to increase in the 2-4% band on a year-over-year basis.
Hilton currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for Hilton 2024 EPS suggests growth of 13.5% from the year-ago period’s levels. HLT's shares have declined 51.3% in the past year.
Hilton Grand Vacations: The company is benefiting from rolling out its HGV Max membership program, new properties, and experiential offerings. Momentum in leisure travel is aiding the company.
Hilton Grand Vacations currently carries a Zacks Rank #3. In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 7.4%. The Zacks Consensus Estimate for Hilton Grand Vacations’ 2024 EPS suggests growth of 12.1% from the year-ago period’s levels. HGV's shares have increased 5.7% in the past year.
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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/performance for information about the performance numbers displayed in this press release.
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Zacks Industry Outlook Highlights Hilton Worldwide, Hyatt Hotels and Hilton Grand Vacations
For Immediate Release
Chicago, IL – April 4, 2024 – Today, Zacks Equity Research discusses Hilton Worldwide Holdings Inc. (HLT - Free Report) , Hyatt Hotels Corp. (H - Free Report) and Hilton Grand Vacations Inc. (HGV - Free Report) .
Industry: Hotels & Motels
Link: https://www.zacks.com/commentary/2249565/3-hotels-motels-stocks-to-look-at-despite-industry-woes
The Zacks Hotels and Motels industry performance in 2024 is likely to be impacted by high costs, heightened geopolitical risks and persistent macroeconomic uncertainty. However, industry participants’ focus on expansion efforts, hotel conversions, strategic partnerships and loyalty programs bode well.
The industry 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. Industry players, namely Hilton Worldwide Holdings Inc., Hyatt Hotels Corp. and Hilton Grand Vacations Inc., are likely to benefit from the factors mentioned above.
Industry Description
The Zacks Hotels and Motels industry comprises companies that own, lease, manage, develop and franchise hotels. Some vacation ownership and exchange firms are also a part of the industry. Several participants own, construct and operate resorts. Some companies develop lodges, villages and mobile accommodations, including modular, skid-mounted ones 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 offer studios, one-bedroom suites and accommodations to mid-market business and personal travelers.
3 Trends Shaping the Future of the Hotels & Motels Industry
High Costs & Inflation Remain a Woe: Higher costs are a concern for industry participants. Rising salaries, wages and benefits have been adding to labor costs. High inflation is likely to curb consumer spending, which will hurt the industry. Heightened geopolitical risks and persistent macroeconomic uncertainty remain a concern for the industry. The outlook for midweek travel is uncertain, as certain companies are indicating potential changes to their business travel policies to manage expenses and adhere to sustainability objectives.
Strong RevPAR & ADR Driving Growth: The industry continues to benefit from robust RevPAR and ADR growth. Amanda Hite, president of STR, highlighted the U.S. hotel industry's robust performance in 2023, with a 4.9% increase in Revenue per Available Room (RevPAR) compared with the previous year’s levels. Occupancy rates steadily approached 2019 levels.
Average Daily Rate (ADR) and RevPAR levels were consistently above the industry benchmark in nominal terms. The metrics demonstrate progress even when adjusted for inflation. Hite described the year as robust and deemed it a ‘normal’ period for the hotel industry. Per STR, RevPAR and ADR in 2024 are likely to increase by 4.1% and 3.1%, year over year, respectively.
Digitalization to Drive Growth: Hotel owners are focused on maintaining the balance between maximizing hotel profitability and driving guest satisfaction. To this end, hoteliers have leveraged mobile and web check-in and mobile key technologies. These 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 and an emphasis on pricing optimization and merchandising capabilities will likely help hoteliers capture additional market share.
Zacks Industry Rank Indicates Dismal Prospects
The Zacks Hotels and Motels industry is grouped within the broader sector.
The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #150, which places it in the bottom 40% 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 bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are gradually losing confidence in this group's earnings growth potential. Since Dec 31, 2023, the industry's earnings estimates for 2024 have declined 2.9%.
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 the Sector
In the past year, the Zacks Hotels and Motels industry has outperformed its sector. Over this period, the industry increased by 37.9% compared with the sector's increase of 10.2%. The Zacks S&P 500 composite has increased 28.3%.
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 14.07X compared with the S&P 500's 12.55X. It is also below the sector's trailing 12-month EV/EBITDA ratio of 9.32X.
Over the last five years, the industry has traded as high as 23.49X and as low as 8.7X, with the median being at 13.6X.
3 Hotels & Motels Stocks to Watch Out For
Hyatt Hotels: The company is benefiting from solid leisure transient demand, recovery in business travel demand, increased system-wide group travel and a loyalty program. Also, the focus on new hotel openings and acquisition efforts bodes well. In 2024, Hyatt anticipates system-wide 2024 RevPAR to increase in the range of 3% and 5% year over year.
H currently carries a Zacks Rank #2 (Buy). In the past seven days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 0.9%. The Zacks Consensus Estimate for Hyatt 2024 EPS suggests growth of 27% from the year-ago period’s figure. Hyatt's shares have gained 41.3% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here. .
Hilton: The company is benefiting from a solid improvement in RevPAR on the back of increased occupancy rates and ADR. Also, its focus on unit expansion, hotel conversions, strategic partnerships, loyalty programs and asset-light business model bodes well. In 2023, Hilton opened 395 new hotels, with room additions totaling nearly 63,000, marking an 8.6% year-over-year increase. Owing to the improving trend, for first-quarter 2024, management anticipates system-wide RevPAR to increase in the 2-4% band on a year-over-year basis.
Hilton currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for Hilton 2024 EPS suggests growth of 13.5% from the year-ago period’s levels. HLT's shares have declined 51.3% in the past year.
Hilton Grand Vacations: The company is benefiting from rolling out its HGV Max membership program, new properties, and experiential offerings. Momentum in leisure travel is aiding the company.
Hilton Grand Vacations currently carries a Zacks Rank #3. In the past 30 days, the Zacks Consensus Estimate for 2024 earnings has been revised upward by 7.4%. The Zacks Consensus Estimate for Hilton Grand Vacations’ 2024 EPS suggests growth of 12.1% from the year-ago period’s levels. HGV's shares have increased 5.7% in the past year.
Why Haven’t You Looked at Zacks' Top Stocks?
Since 2000, our top stock-picking strategies have blown away the S&P's +7.0 average gain per year. Amazingly, they soared with average gains of +44.9%, +48.4% and +55.2% per year.
Today you can access their live picks without cost or obligation.
See Stocks Free >>
Join us on Facebook: https://www.facebook.com/ZacksInvestmentResearch/ 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.