Although not back to pre-pandemic levels, occupancy rates at many hotel chains are recovering. That’s the conclusion of Smith Travel Accommodations Research (STR). In the same survey, the research firm concluded that RevPAR (revenue per available room) and ADR (average daily rate) are also on the rise.
That’s positive news for shares of hotel stocks. And the news is even better based on research from LikeFolio. When it comes to overall customer happiness, some leading hotel chains are slightly outperforming Airbnb (NASDAQ: ABNB). As many investors know, ABNB stock soared during the pandemic as travelers looked for limited interaction and spaces where they could do remote work over a long-term stay.
But with some consumers now being hit with added fees, they are finding that hotels are the more cost-effective option. In this article, we’ll look at three hotel stocks that investors may want to consider checking into in the second half of the year.
Growth on the Premium End
Marriott International (NYSE: MAR) - reported earnings on August 2 and confirmed the sentiment that occupancy levels are increasing. In fact, the company reported that its global RevPAR for the month of June was 1% higher than in 2019.
The company reported a beat on adjusted earnings as well as revenue. The latter number came in at $5.37 billion, which was the highest number since Q4 2019, the last quarter before the global pandemic.
With a price-to-earnings (P/E) ratio that sits at approximately 30, MAR stock is not inexpensive. However, the outlook for both revenue and earnings should support a higher valuation particularly because the company is the home to some of the most iconid premium hotel chains.
Betting on Travelers on a Budget
If you believe that the economy may continue to slow down, then Choice Hotels International (NYSE:CHH) becomes an attractive option. While not ignoring the premium segment, the hotel chain has a variety of brands that allow consumers to find a brand that fits their income situation.
This business model is reflected in the company’s earnings. The company had a slight miss on earnings but beat on revenue by over 14%. The company cites one reason for its revenue growth comes from travelers continuing to combine business and leisure. This is serving as a tailwind to the company’s extended stay business.
However, at $367.97, the company’s revenue is far below what Marriott brought in during the same period. Nevertheless, investors who are considering CHH stock can look at the hotel chain’s profit margin which, at nearly 25%, is among the highest in the sector.
Will Time Shares Make a Comeback?
It can be easy to overstate the changes that continue to ripple through the travel sector in an increasingly post-pandemic world. However, one thing that seems certain is that, like Airbnb, time shares provide travelers with a level of privacy and the ability to blend work and leisure.
If you’re willing to make that bullish bet, you should consider investing in Bluegreen Vacation Holdings (NYSE: BVH). Analysts give the stock a potential upside of over 150%. The company does business in some of the most popular vacation destinations in the United States. Bluegreen Vacation Holdings delivered split results in their most recent earnings report with a beat on revenue being offset by a slight miss on earnings.
However, unlike the first two stocks on this list, BVH stock is objectively undervalued. It has a price-to-earnings (P/E) ratio of 7x earnings with expectations for over 20% average earnings growth over the next five years.
Companies Mentioned in This Article
Compare These Stocks
Add These Stocks to My Watchlist
When inflation rises, it's not difficult to notice higher prices. But you don't have to be very old to understand the expression that a dollar doesn't buy as much as it used to. The Happy Meal was introduced in 1979 for a price of $1.10. Today, that same meal costs $2.99. Yet, it remains one of the restaurant chain's most popular items. It's also a barometer for the economy because of its convenience for parents.
And consider the iPhone which costs 81% more in 2022 than the initial model that launched in 2007. Yet despite the increase in price, consumers are willing to pay whatever is required.
The key to both of these examples, and others like them, is pricing power. A company that has the ability to raise its prices can maintain its profit margins. That means it delivers consistent results regardless of what's happening in the broader economy. In good times, this may be taken for granted. But when the economy slows down, that consistency stands out.
In this special presentation, we're looking at seven companies with significant pricing power at all times, particularly with inflation currently running at 40-year highs.
View the "7 Stocks with the Pricing Power to Push Through High Inflation".