Best Hotel Stocks to Buy: When you think of stocks that do well when the economy is doing well, you typically think of consumer goods stocks. However, consumer goods stocks aren't the only ones that do well in a bull market. Stocks in other industries are also doing nicely, and hotel stocks are one of the leading businesses that have seen a bump.
Purchasing Hotel Stocks
Hotel stocks might be a good investment. Tourism contributes for 10% of worldwide GDP, according to the World Tourism Organization, and hotel stays tend to rise when the economy is strong.
People often take longer vacations, taking advantage of increased money to travel or see friends and relatives. Businesses may deploy employees to multiple areas simultaneously, following after leads, attending conferences, or investigating new sites.
When the travel sector as a whole benefit from a robust market, everyone benefits. One method to profit from this trend is to invest in hotel stocks. Furthermore, many younger people, particularly Millennials and Gen Xers, like to travel and experience new things rather than purchase things, and they don't all stay in AirBnBs. Hotel stays may also arise as a result of the increased population.
However, any hotel stock will not suffice. Pay attention to a company's demographics and the variety of its property portfolio and its attempts to interact with passengers.
The issue is that hotels are generally the same if location and price range are considered. Budget hotels give certain conveniences, whereas luxury hotels provide an experience, and middle-of-the-road chains are just that. To entice tourists, a hotel company must provide something unique.
Sunstone Hotel Investors (SHO)
Sunstone Hotel Investors is a tiny corporation with few resources. It has investments in 21 hotels in nine states and the District of Columbia.
Most of these hotels are huge names like Hilton, Hyatt, and Mariott. Sunstone has two unbranded hotels, Boston Park Plaza and Oceans Edge Resort & Marina; however, they are both quite high-end.
In reality, Sunstone's hotels are all categorized as premium or upmarket. On the other hand, Sunstone is not a part of their business, and third parties handle everything.
Sunstone concentrates its commercial operations on what it refers to as Long-Term Relevant Real Estate, or LTRR. This word refers to qualities that the organization feels have a distinct value proposition that is difficult to duplicate.
Furthermore, the Sunstone portfolio includes properties in classic cities such as New York, New Orleans, Boston, Chicago, San Francisco, Portland, and Orlando and perfect locations inside those cities.
This mix allows the organization to take advantage of drivers that a bigger, more varied chain would not match. Sunstone also has a prudent financial profile, with a good cash position, regulated debt, and minimal leverage, making it worth investigating further.
The hotel sector is primarily concerned with providing short-term accommodations, such as hotels and motels and associated services. It's a subset of the larger hospitality (or leisure) sector. C-corporation hotels, such as Marriott International Inc. and Hilton Worldwide Holdings Inc., and hotel real estate investment trusts (REITs), such as DiamondRock Hospitality Co. and Park Hotels & Resorts Inc., are the two primary types of hotels in the sector.
The COVID-19 epidemic, travel and eating limitations, and other social distancing measures have significantly impacted the hotel business, which has just started to ease.
Hotel management, branding and marketing, and franchise licensing are common activities for C-corporation hotels. They often possess minimal real estate and must pay corporation taxes on profits due to their legal structure. 1 The S&P Composite 1500 Hotels Restaurants & Leisure Industry Index, which had a total return of -0.3 percent over the previous year as of March 31, 2022, is the finest representation of these hotel companies. 2
On the other hand, Hotel REITs are businesses that specialize in the purchase, ownership, and management of hotel properties. Some REITs even operate their hotels. They are legally organized to avoid paying taxes on issued dividends, but to qualify as a REIT, it must distribute 90% of its taxable revenue to shareholders. 1 The S&P 1500 Hotel & Resort REITs Sub-Industry Index, which had a total return of 2.8 percent over the last year, is the finest representation of these hotel REITs.
Both hotel equities and REITs have lagged the larger equity market, as measured by the Russell 1000 Index, which has returned 13.3 percent in the last year as of March 31, 2022.
The data in the tables below is current as of March 31, 2022.
Despite introducing the Delta variation of COVID-19, several hotel firms reported a strong increase in revenue and an improvement in their profit position starting in the third quarter (Q3) of 2021. The sector began to rebound as the economy improved and vaccination rates climbed. As a result, several analysts predicted a near-full recovery of the hotel business in 2022 in November 2021. 3 However, in the same month, the fast-spreading Omicron version emerged, disrupting and slowing the speed of the US economy's recovery in the early months of 2022. 4
We examine the top three hotel companies with the greatest value, quickest growth, and most momentum in the first half of this article. The top three hotel REITs with the greatest value, the quickest growth, and the most momentum are examined in the second half. To discover the best value stocks and REITs, we utilize the price-to-sales (P/S) ratio, sales growth to determine the fastest-growing companies and REITs, and total return to determine the stocks and REITs with the greatest momentum.
The hotel stocks with the lowest 12-month trailing P/S ratio are listed below. The P/S ratio may be used to indicate a company's worth for enterprises in early phases of development or sectors that have seen big shocks. When a company with larger sales reaches (or returns to) profitability, it may be able to earn more profit. The P/S ratio tells you how much you're paying for a stock for every dollar of revenue it generates.
Membership Collective Group, Inc.: Membership Collective Group, Inc., Membership Collective Group, Inc. Collective Group is a holding company that operates via subsidiaries and owns hundreds of properties across the world, including 30 Soho Houses and nine Soho Works. 5 Soho House Holdings Ltd. has sites all over the globe and offers worldwide membership platforms of real and digital places. Due to unidentified external causes, the corporation stated that on March 16, 2022, Chief Financial Officer (CFO) Humera Afzal would leave her job in June 2022. Afzal will hold this position till June 14, 2022. Her replacement has yet to be chosen.
Hyatt Hotels Corp. is an international hospitality corporation that builds and maintains branded hotels, resorts, and residential and vacation ownership properties. The corporation released its results for the fourth quarter of 2021, which concluded on December 31, 2021, on February 16, 2022. Hyatt reported a year-over-year decrease in net losses (YOY). Compared to Q4 2019, just before the pandemic spread internationally, comparable systemwide revenue per available room (RevPAR) fell by 26.1 percent. Increases in base and franchise fees drove a significant rise in YOY total management and franchise fee income. The business's results press release did not give any further total sales information. 7 Huazhu Group Ltd.: Huazhu Group is a hotel management firm established in China that offers hotel leasing, hotel operating, and co-development services. The 8 Stocks with the Fastest Growth Rates in the Hotel Industry
The hotel stocks with the strongest year-over-year revenue increase in the most recent quarter are listed below. Rising sales may assist investors in identifying firms that can expand revenue organically or in novel ways and identify companies that are growing but have not yet attained profitability.
Furthermore, accounting considerations that may or may not represent the company's overall performance may substantially impact profits per share. However, sales growth may be deceiving about a firm's soundness. Raising sales in a loss-making business can be destructive if the company doesn't have a strategy to return to profitability.
Pebblebrook Hotel Trust
Pebblebrook Hotel Trust (NYSE: PEB) is an internally managed hotel investment company that buys and sells hotels in major U.S. cities, with a focus on coastal properties. Pebblebrook Hotel Trust (NYSE: PEB) is known for focusing on wealthy consumers and investing in resorts that are conveniently located in urban areas and unique tourist destinations. One of the most promising hotel firms is Pebblebrook Hotel Trust (NYSE: PEB).
At the end of June, 17 hedge funds were positive on Pebblebrook Hotel Trust (NYSE: PEB), up from 10 at the end of the first quarter, according to Insider Monkey's proprietary database. Citadel Investment Group, led by Ken Griffin, is the largest shareholder in Pebblebrook Hotel Trust, with 70.63 million shares valued at $80.37 million (NYSE: PEB).
Sunstone Hotel Investors
Sunstone Hotel Investors, Inc. (NYSE: SHO) is a lodging REIT with 18 hotel assets totaling 9417 rooms operated by well-known hotel brands.
Sunstone Hotel Investors, Inc. (NYSE: SHO) was owned by 18 hedge funds at the end of the second quarter, up from 17 the previous quarter. By the conclusion of the second quarter, these interests were valued at $73.6 million. Ken Heebner's Capital Growth Management is Sunstone Hotel Investors, Inc.'s biggest stakeholder, with 1.77 million shares worth $21.98 million (NYSE: SHO).
Sunstone Hotel Investors, Inc. (NYSE: SHO) released its second-quarter results on August 3. The EPS of -$0.01 was $0.03 more than expected. The company's sales were $117.21 million, which was $12.29 million more than the expected EPS.
Ryman Hospitality Properties
Ryman Hospitality Properties, Inc. (NYSE: RHP), a hotel and resort REIT, is one of the finest hotel stocks. Ryman Hospitality Properties, Inc. (NYSE: RHP) is a company that specializes in the acquisition and management of upmarket conference facilities and resorts. The REIT owns five of the country's biggest non-gaming convention center assets, managed by Marriott International, Inc. and operate under the Gaylord Hotels brand (NASDAQ: MAR). Ryman Hospitality Properties, Inc. (NYSE: RHP) owns 2.8 million square feet of indoor and outdoor space at prestigious convention centers and leisure destinations around the United States.
Ryman Hospitality Properties, Inc. was long by 22 hedge funds monitored by Insider Monkey at the end of Q2 (NYSE: RHP). This is a considerable rise when compared to the same number of hedge funds in Q1. Mario Gabelli's GAMCO Investors is Ryman Hospitality Properties, Inc.'s biggest stakeholder, with 1.45 million shares valued at $114.76 million (NYSE: RHP).
In their Q4 2020 investor letter, Bireme Capital has the following to say about Ryman Hospitality Properties, Inc. (NYSE: RHP):
"We bought shares in Ryman Hospitality Properties (RHP) in the third quarter, another firm whose operations and stock price were briefly shattered by the epidemic. Ryman owns the "Gaylord" chain of huge conference hotels. Before 2020, the firm has increased EBITDA every year since 2012, and it has a track record of economically developing new hotels from the ground up, having constructed five since 2000. These hotels have greater meeting room square footage than virtually all of their rivals, allowing them to dominate their niche in the conference and convention market.
The Ryman Auditorium, the Grand Ole Opry, and the "Ole Red" network of bars and concert venues are part of Ryman's fast-growing music venue industry. RHP's "entertainment" sector raised EBITDA from $14.5 million in 2011 to $58 million in 2019, at 18% CAGR.
In 2022, we believe the business will generate more than $300 million in free cash flow. RHP had a market valuation of $2.0 billion when we bought it at the end of Q3, just a 6x multiple of FCF. Even though the market capitalization has just climbed to $3.7 billion, we still believe the value is relatively favorable for a firm with their track record."
Hyatt Hotels Corporation
Hyatt Hotels Corporation (NYSE: H) is a company that owns and operates premium hotels, resorts, and vacation properties. The mega-corporation in the luxury hospitality business is traded as a Russell 1000 Component.
Similar to Q1, 23 hedge funds out of 873 monitored by Insider Monkey reported interest in Hyatt Hotels Corporation (NYSE: H).
In its Q2 2021 investor letter, Baron Funds cited Hyatt Hotels Corporation (NYSE: H). Here's what they had to say:
"Shares of Hyatt Hotels Corp., a worldwide hotelier, fell in the third quarter on investor fears about a new, more infectious version of COVID-19 and a slower-than-expected reopening of Asia and Europe.
While the delayed reopening is disappointing, Hyatt's domestic business and group bookings are improving, and we believe things will return to normal by 2022, at least in the United States. The firm is sticking to its asset-sale plan as the hotel transaction market recovers to pre-pandemic levels, making Hyatt a more attractive fee-based company."
Host Hotels & Resorts, Inc.
Lodging REIT and an S&P 500 firm. Host Properties & Resorts, Inc. (NASDAQ: HST) is a self-managed and self-administered REIT that owns and maintains luxury and upper-upscale hotels. Host Hotels & Resorts, Inc. (NASDAQ: HST) invests in a wide range of properties, including 84 hotels in 20 of the country's top areas.
After the second quarter, 24 hedge funds monitored by Insider Monkey were positive on Host Hotels & Resorts, Inc. (NASDAQ: HST).
Dori Kesten of Wells Fargo raised Host Hotels & Resorts, Inc. (NASDAQ: HST) from Underweight to Equal Weight on October 18, with an $18 price objective. Host Hotels & Resorts, Inc. (NASDAQ: HST) is well-positioned to gain from gradually expanding hotel demand, according to the analyst, but its increasingly extensive operations, as opposed to budget hotels, will make revenue management crucial.
Host Hotels & Resorts
International (NYSE: MGM), Marriott International, Inc. (NASDAQ: MAR), Hilton Worldwide Holdings Inc. (NYSE: HLT), and Hyatt Hotels Corporation (NYSE: H) are one of the top hotel stocks to invest in.
In its Q3 2021 investor letter, White Brook Capital referenced Host Hotels & Resorts, Inc. (NASDAQ: HST). Here's what they had to say:
"Shares of Host Hotels (HST) were also sold in the third quarter for identical reasons as Cogent, with the possibility of a comeback in group leisure and business travel deteriorating. Similarly, the money was repositioned."
On our list of the 11 best hotel stocks to buy, Wyndham Hotels & Resorts, Inc. (NYSE: WH) is ranked sixth. Wyndham Hotels & Resorts, Inc. (NYSE: WH), based in New Jersey, is one of the world's largest franchisors, having hotels in 9280 sites across the globe. The properties of Wyndham Hotels & Resorts, Inc. (NYSE: WH) comprises 20 hotels, including Baymont, Days Inn, Howard Johnson, La Quinta, Ramada, Super 8, Travelodge, and Wyndham Grand. Wyndham Hotels & Resorts, Inc. (NYSE: WH) is a stock that is part of the S&P 400 Index.
Twenty-four hedge funds were positive on Wyndham Hotels & Resorts, Inc. after the second quarter (NYSE: WH). Compared to the same number of hedge funds in Q1, this is a significant increase.
JPMorgan analyst Joseph Greff maintained an Overweight rating on Wyndham Hotels & Resorts, Inc. (NYSE: WH) shares, boosting the price target to $86 from $83 on October 18, noting a rebound in US lodging in Q3.
Wyndham Hotels & Resorts, Inc. (NYSE: WH) is a significant hotel stock to invest in, similar to MGM Resorts International (NYSE: MGM), Marriott International, Inc. (NASDAQ: MAR), Hilton Worldwide Holdings Inc. (NYSE: HLT), and Hyatt Hotels Corporation (NYSE: H).
Hilton Worldwide
Hilton is one of the world's biggest hotel corporations, with over 6,500 hotels worldwide. Several midscale and premium hotels, as well as its luxury Waldorf Astoria and Conrad Hotels brands, make up the company's broad portfolio. Hilton Honors, the company's loyalty program, has over 115 million members.
Hilton, like other major travel and tourism firms, has achieved solid results as a result of increased travel demand. Revenue per available room increased 234 percent year over year in the second quarter of 2021. In the same quarter, the hotel company, which has always emphasized expansion, added 119 new hotels and roughly 20,000 rooms.
Hilton's occupancy rates and income per available room have yet to recover from the epidemic. Restrictions from overseas, as well as the delta variation, are affecting its recuperation. However, the firm is well-positioned for future development because of its well-known brands and loyalty program.
Texas Roadhouse
Texas Roadhouse, which opened in 1993, is popular among families for casual eating. More than 640 outlets are operated by the restaurant corporation and its franchisees. The majority of the company's restaurants are in the United States, but it has also grown worldwide.
Texas Roadhouse has done an outstanding job of adapting to the pandemic's developments. Despite its historical concentration on sit-down eating, it has shifted its attention to carrying out orders and begun providing meal packages. These changes helped the restaurant business remained viable in 2020, and they've continued to pay off as the number of dining guests has recovered to pre-pandemic levels.
The results of the reopening have been outstanding. In the second quarter of 2021, total sales were $899 million, an increase of 88.7% over 2020 and 30.3 percent over 2019. The average number of guests is similar to that of 2019, and the number of to-go orders is almost two-and-a-half times greater than that of 2019.
Casinos of the Century
Century Casinos is a gaming firm that owns and runs mid-sized casinos around the United States. The majority of its casinos are in the United States and Canada, but it also has a controlling interest in a number of casinos in Poland.
Century Casinos set new records in the second quarter of 2021, bringing in $92.2 million in revenue and $25.2 million in adjusted EBITDA. When you consider that its casinos in Canada and Poland were closed for most of the quarter, the figures are even more spectacular.
The COVID-19 epidemic might potentially cause issues for leisure businesses. In the instance of Century Casino, depending on infection rates in the region, some of its facilities may be forced to shut down again. Even if that occurs, this gaming firm has done an excellent job of decreasing expenses and being profitable.
Choice Hotels
Choice Hotels' stock price increased somewhat in 2020, despite the fact that several hotel companies were hammered badly. It also didn't suffer as large of a decline in occupancy or revenue as the industry average.
Choice Hotels' business approach is a significant benefit. Choice Hotels, as a hotel franchisor, is not responsible for the repair or management of its hotels. The franchisees, who pay a license fee and a portion of sales to utilizing the hotel chain's trademarks and systems, are responsible for this.
Choice Hotels' revenue per average room increased by 5% and 15% in June and July 2021, compared to the same months in 2019. It may encounter competition from companies with more luxurious and urban residences in the future. The majority of the company's portfolio is made up of midscale properties located outside of major cities. This was advantageous during the epidemic, but it might be counterproductive if consumer travel habits alter.
Monarch Casino & Resort
Monarch Casino & Resort is located in two locations: one in Reno, Nevada, and another in Blackhawk, Colorado. Despite the fact that this hotel corporation does not run many properties, the two that it does operate generated significant income during their reopening.
Monarch generated sales of $97.72 million in the second quarter of 2021, up 544.8 percent from the same period in 2020. It was also 55.7 percent greater than revenue in the second quarter of 2019.
Monarch has been aggressive in extending its casinos and gaming options, both of which might help the firm attract more customers and boost revenues even more.
Monarch's primary concern is that COVID-19 limits in any of its sites might result in a revenue drop. Even if that occurs, this casino and resort corporation is still a solid long-term investment, particularly given the population expansion in Nevada and Colorado.
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