Hotel Industry Outpaces Major Indices YTD: 4 Top Gainers

The first-half 2019 chapter is about to conclude, and it reads as an eventful year for the Hotel industry. Year to date, the industry has witnessed a sharp gain of 24.2%, compared with the S&P 500 and Dow Jones Industrial Average rally of 14.9% and 15%, respectively.

The industry participants have been benefiting from several factors such as strong domestic economy, higher income, increased consumer confidence and strong labor market.

RevPAR & ADR Growth Continues

During first-quarter 2019, the Hotel industry reported growth in RevPAR and ADR. Per a STR (formerly known as Smith Travel Research) report, in first-quarter 2019, the U.S. hotel industry reported revenue per available room (RevPAR) and ADR growth of 1.5% and 1.1%, respectively. Moreover, occupancy rate in the first quarter increased 0.4% to 61.8%. The industry witnessed rise in occupancy rate across all sectors, from luxury to economy.

The supply-demand environment in the United States has been favorable since 2010 with growth in demand outpacing supply growth. Though, the gap between demand and supply growth has narrowed considerably of late. Demand in first-quarter 2019 increased 2.4%, outpacing supply growth of 2%.

International Expansion: A Key Catalyst

Most of the hotel companies are exploring international expansion, especially in untapped emerging markets and the outlying areas surrounding major cities. Unsaturated markets in the Asia Pacific, the Middle East, Brazil, Russia and Africa are being targeted by hospitality companies. China, which is the largest source market for outbound travel, is the most significant market for the Hotel industry. In less than two decades, China has transformed from travel minnows to the world’s most powerful outbound market.

Per GlobalData, luxury hotels in the United States are likely to increase to 1,067 by the end of 2019. By 2022, the figure is likely to increase to 1,123. The Hotel industry will benefit from increase in Chinese tourists to the United States. Chinese tourists to the United States witnessed a CAGR of 8.7% between 2014 and 2018.

The aforementioned factors have propelled the Hotel stocks so far this year. We have mentioned four stocks from the industry, which have witnessed a sharp gain so far this year.

Top 4 Gainers

Marriott Vacations Worldwide Corporation (NYSE:VAC) : The company develops, markets, sells, and manages vacation ownership and related products. The Zacks Rank #3 (Hold) company’s shares have surged 36.8% on a year-to-date basis. Earnings for current year is likely to witness growth of 31.3%. Moreover, its long-term earnings are estimated to witness growth of 9%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hilton Worldwide Holdings Inc. (NYSE:HLT) : The company owns, leases, manages, develops, and franchises hotels and resorts. Shares of this Zacks Rank #3 company have gained 34.4% year to date. The company beat the consensus estimate for earnings in three of the trailing four quarters, with the average being 5.6%. it anticipates earnings for 2019 to improve by 39.1%.

Marriott International, Inc. (NASDAQ:MAR) : The company operates, franchises, and licenses hotel, residential, and timeshare properties worldwide. The company shares have surged 27.4% year to date. Moreover, the company’s earnings have surpassed the consensus estimate in all of the trailing four quarters, with an average positive surprise of 16.3%.

Wyndham Hotels & Resorts, Inc. (NYSE:WH) : The company operates as a hotel franchisor internationally. The stock has gained 23.2% year to date. The Zacks Rank #3 company’s earnings have surpassed the Zacks Consensus Estimate in three of the trailing four quarters, with the average being 3%. The company’s earnings for current year is likely to witness growth of 17.3%.

Can the Bull Run Continue?

RevPAR and ADR improvement is likely to persist in the second half of 2019 as well albeit at a slower rate. STR and Tourism Economic have trimmed growth forecast for the Hotel industry. Per STR and the latest Tourism Economic forecast, the Hotel industry is likely to witness growth of 2%, down from the prior estimate of 2.3%. We believe the industry’s bull run in the second half of 2019 is likely to be impacted by slower growth forecast.

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