On Monday, Truist Securities provided an analysis on the performance of U.S. and international hotels, indicating a modest upside for fourth-quarter hotel revenue per available room (RevPAR) compared to company and consensus expectations. U.S. RevPAR increased by 14.3% year-over-year for the week ending December 21, 2024, according to data from STR/CoStar.
This rate of growth was above the trailing 10-week average of 7.1% year-over-year, but below the prior week's growth of 18.2% year-over-year. The shift in timing of Christmas and Hanukkah this year allowed for an extra week of Group and Business travel, benefiting the sector.
Despite the positive trend in Group and Business travel, Leisure travel, particularly at resorts, faced challenging year-over-year comparisons due to the different timing of the holidays this year. Christmas occurred on a Wednesday in 2024, as opposed to a Monday in the previous year, and Hanukkah began on December 25th this year, compared to December 8th last year. These shifts influenced the weekly performance comparisons.
The analyst at Truist highlighted that while RevPAR growth is not seen as a catalyst for the lodging sector, the combination of modest RevPAR growth, mid-single digit net rooms growth, share repurchases, and margin growth could reaffirm the compounding earnings drivers for hotel companies. Specifically, companies like Wyndham Hotels (NYSE:WH), which holds a 'Buy' rating from Truist, are viewed favorably due to their multiple drivers of earnings growth.
Internationally, hotel RevPAR in China showed a slight decline of 1.2% year-over-year for the same week, an improvement from the 3.2% year-over-year decline seen in the previous week. In contrast, Europe experienced a robust increase in RevPAR, with a 21.5% year-over-year growth, surpassing the prior week's growth of 13.2%. This performance was measured against a 7.8% year-over-year growth in 2023.
Truist also noted the exposure of various lodging corporations to the European and Asian markets. Companies such as Hyatt (NYSE:H), InterContinental (NYSE:IHG), and Marriott (NASDAQ:MAR) have significant stakes in these regions, with varying percentages of EBITDA generated from Europe and Asia. Hyatt, in particular, has increased its exposure to the Americas excluding the U.S. and Canada to approximately 25% following the acquisition of Apple (NASDAQ:AAPL) Leisure Group.
In summary, Truist's latest lodging notes suggest that hotel stocks may see modest gains in fourth-quarter RevPAR, and companies with diversified sources of earnings growth, such as Wyndham Hotels, could stand out in the sector.
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