Back to top

Zacks Industry Outlook Highlights: Loews, Red Lion Hotels, China Lodging Group and Wyndham Destinations

Read MoreHide Full Article

For Immediate Release

Chicago, IL – June 14, 2018 – Today, Zacks Equity Research discusses the Industry: Hotels, Part 3, including Loews (L - Free Report) , Red Lion Hotels Corp. (RLH - Free Report) , China Lodging Group, Ltd. (HTHT - Free Report) and Wyndham Destinations, Inc. (WYND - Free Report) .

Industry: Hotels, Part 3

Link: https://www.zacks.com/commentary/167413/will-slump-in-us-tourism-decelerating-revpar-hurt-hotels

Though the hotel industry performed well in 2017 and the first quarter of 2018, there are a number of threats that remain. Unfavorable government policies, uncertainty in certain markets and RevPAR pressure pose challenges for industry players. These issues could potentially offset the group’s positive growth prospects in the near-to-mid-term.

Decline in U.S. Tourism a Major Concern

Travel and tourism has witnessed a decline in the past few years. At the recent annual NYU International Hospitality Industry Investment Conference, Jonathan Tisch, Chairman and CEO of Loews and Chairman Emeritus of the U.S. Travel Association, said travel and tourism is an $8 trillion market and represents approximately 10% of global GDP. He further said that that the sector is likely to grow by $3.5 trillion over the next decade.

Despite the growth in the global tourism, the U.S. share of the market has declined roughly 13% over the past few years. International visitors have declined 7.4 million over that time period.

The Trump administration’s restrictive policies on immigration and tourist visas appear to have played a role. The slowdown in U.S.-bound air travel bookings ever since the Trump administration came into office also point in that direction. Also, online searches by prospective travelers to the United States have declined.

Continuous efforts to impose a travel ban targeting predominantly Muslim nations, along with the ban on a broad range of electronic devices in the cabins of U.S.-bound aircraft from certain countries and talks of expanding the same threaten travel demand to and from the United States.

While the U.S. tourism industry remains very strong, the change at the margin is less robust than could potentially have been without these restrictive policies, which is a net negative for many industry players.

Decelerating RevPar Growth & Rising Costs

Though, per the recent estimates by PricewaterhouseCoopers (PwC), RevPar in 2018 is estimated to increase to 3% from 2.9% in 2017, the rate of growth has declined sharply over the past few years. Most of the hotel companies in the United States have been witnessing slowing revenue per available room (RevPAR) trends of late because of continued muted international visitation. Moreover, continued increase in supply of hotels in the domestic market is limiting room rents, thereby hurting RevPAR.

With an improvement in the economy and drop in unemployment levels, industry players will struggle to control their largest operating expense — labor costs. Rising salaries, wages and benefits, as well as increased staffing levels will add to their labor costs.

Uncertainty in a Few International Markets

In spite of immense growth potential, industry players are still apprehensive of several macroeconomic issues like the social/political impact of Brexit and decelerating growth in certain parts of Asia. Though Trump’s stringent policies might make travelers opt for Europe and Asia, instead of the United States, these regions have their own share of concerns.

Notably, a sluggish economy and oversupply in Brazil are weighing on demand in the Latin American region and limiting overall sales. In fact, a weak Latin American economy, aggravated by political turmoil resulted in softer tourism numbers in 2015, 2016 and 2017. This is not expected to change much in 2018. Continued uncertainty in Africa and macroeconomic factors in Venezuela are likely to limit revenues of hotel industry players.

In Europe, economic/political conditions are expected to be challenging after U.K.’s exit from the 28-member economic bloc. Business in Europe is clouded by economic uncertainties in the Northern region and deflation in the Eurozone.

Terror assaults in key European cities like London, Paris, Zurich and Brussels have also affected tourism. Challenging market dynamics in France is a potent headwind. Additionally, concerns of further terror attacks and violence against foreign tourists are increasingly hurting trade in many African countries such as Kenya and Nigeria.

Meanwhile, in the Middle East, political unrest, lower government spending, new hotel supply and a tough oil market continue to hurt tourism and RevPAR trends. Any respite from these headwinds in the region is not expected in the near term.

Most of the leading hotel companies have considerable presence in the above-mentioned markets and are thus vulnerable to adverse economic conditions in these regions.

Stocks to Avoid

Players in the space that induce our cautious-to-bearish outlook are Red Lion Hotels Corp, China Lodging Group, Ltd. and Wyndham Destinations, Inc. Red Lion Hotels carries a Zacks Rank #4 (Sell), whereas China Lodging Group and Wyndham Destinations have a Zacks Rank #5 (Strong Sell).

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

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.



More from Zacks Press Releases

You May Like