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Late last week, data provided by STR showed mixed results from the U.S. hotel industry for the three key performance metrics in Apr 2017. According to STR, occupancy rates in the industry declined 0.7% year-over-year in Apr 2017 to 67.5% while average daily rate (ADR) went up 2.4% to $126.26 and revenue per available room (RevPAR) increased 1.7% to $85.19. Group occupancy declined 12.5% with meeting planners avoiding the time around the Easter holiday. However, STR noted that despite the decline and supply growth of about 2%, absolute occupancy level was the second-highest for any April on record. Moreover, the industry continued to witness consecutive months (86 months) of year-over-year RevPAR growth.
The Zacks-categorized Hotel and Motels industry is currently among the top 29% of the 256 Zacks-ranked industries. Renewed consumer confidence and spending, rising wages, a strengthening labor market, a shift in household expenditure towards leisure spending, innovation and an evolving travel market are some of the factors that should support the performance of this sector. However, challenges do remain in the form of geopolitical turmoil, terrorism, the impact of Brexit and pandemics (like the Zika virus), high labor costs and competitive threat from accommodation platforms like Airbnb. Moreover, the Middle East region will continue to be affected by geopolitical unrest, low oil prices, and lower government spending.
While the Hotel and Motels industry has lagged the S&P 500 year-to-date (YTD) with the industry growing 2.5% compared to the overall market growth of 7.3%, there are a few companies that have performed better than the industry and the overall market and look well-positioned. Here is a look at 3 such stocks.
Marriott International, Inc. (MAR – Free Report) : Bethesda, MD-based Marriott is the world’s largest hotel company with more than 6,100 properties in 124 countries and territories. The company operates and franchises hotels and licenses vacation ownership resorts. Marriott has a pretty strong earnings track record with the company surpassing expectations in each of the last four quarters with an average surprise of 5.21%. The company also topped revenue estimates in the first quarter of 2017 and raised its outlook for the year. 2017 earnings estimates are up 3.3% over the last 30 days. While the Middle East region will remain challenging, improving demand in Europe and the Asia-Pacific region should support growth. The Starwood acquisition also bodes well for growth. The company is also returning value to shareholders with more than $2 billion expected to be returned in 2017 alone in the form of share buybacks and dividends. Estimated earnings growth for the current year is 6.1%. Marriott, a Zacks Rank #2 (Buy) stock, has outperformed the Zacks-categorized Hotel and Motels industry YTD with shares soaring 26%.
Marriott Vacations Worldwide Corporation (VAC – Free Report) : Orlando, FL-based Marriott Vacations is a leading global pure-play vacation ownership company. Its brands include Marriott Vacation Club, The Ritz-Carlton Destination Club and Grand Residences by Marriott. Marriott Vacations topped earnings estimates in 3 of the last four quarters and is witnessing upward estimate revisions for 2017 over the last 30 days.
Marriott Vacations, a Zacks Rank #2 stock, has outperformed the Zacks-categorized Hotel and Motels industry YTD with shares soaring 32.8%. Marriott Vacations has a VGM Score of “B”. Our research shows that stocks with a VGM Score of “A” or “B” when combined with a Zacks Rank #1 or #2 offer the best upside potential. Estimated earnings growth for the current year is 10.4%. As per a recent report from the ARDA International Foundation (AIF), the timeshare industry remains healthy. According to the report, about 9.2 million households in America own a timeshare with the average length of ownership being nine years.
China Lodging Group, Limited (HTHT – Free Report) : China Lodging Group is a leading and fast-growing multi-brand hotel group in China with leased and owned, manachised (franchised-and-managed) and franchised models. As of Mar 31, 2017, the company had a total of 3,336 hotels or 335,900 hotel rooms in operation. The company’s main focus is on the economy and midscale hotel segments.
China Lodging Group has a pretty good earnings track record with the company surpassing expectations in each of the last four quarters with an average surprise of 36.43%. 2017 earnings estimates are up 5.4% over the last 30 days. The company witnessed strong RevPAR growth in the first quarter driven by market conditions, consumption upgrade as well as the economy’s stronger performance and the company’s direct sales effort. Estimated earnings growth for the current year is 30.5%. China Lodging Group, a Zacks Rank #1 (Strong Buy) stock, has outperformed the Zacks-categorized Hotel and Motels industry YTD with shares soaring 46%.