Zacks Industry Outlook Highlights Hyatt Hotels, Wyndham Hotels & Resorts and Hilton Grand Vacations

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Chicago, IL – November 22, 2022 – Today, Zacks Equity Research discusses Hyatt Hotels Corp. H, Wyndham Hotels & Resorts, Inc. WH and Hilton Grand Vacations Inc. HGV.

Industry: Hotels & Motels


wThe Zacks Hotels and Motels industry is gradually coming out of the woods courtesy of improving demand. Although occupancy is improving, it is still below the pre-pandemic level. However, people are feeling more optimistic and confident about the prospect of traveling again. To capitalize on the sentiment, hotel operators are increasingly focusing on a number of initiatives to meet the needs of their customers as they return to hotels.

The industry has exhibited resilience on the back of cost-saving initiatives and digital enhancements. Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability, while driving guest satisfaction. The industry is benefiting from an increase in ADR and RevPAR. The industry players, namely Hyatt Hotels Corp., Wyndham Hotels & Resorts, Inc. and Hilton Grand Vacations Inc. have been gaining from the prevailing scenario.

Industry description

The Zacks Hotels and Motels industry comprises companies that own, lease, manage, develop and franchise hotels. Some vacation ownership and exchange companies are also part of the industry. Several industry participants own, develop, and operate resorts. Some companies develop lodges and villages, and mobile accommodations, which include modular, skid-mounted accommodation as well as central amenities that provide long-term and temporary workforce accommodations.

Some industry players develop, market, sell, and manage vacation ownership and associated products. A few hoteliers provide studios, one-bedroom suites and accommodations to mid-market business and personal travelers as well.

4 Trends Shaping the Future of Hotels & Motels Industry

Strong RevPAR & ADR Driving Growth: Although occupancy is still below the pre-pandemic level, it is improving and the industry is benefiting from robust ADR and RevPAR. Per STR, occupancy for the month ended October came in at 67.2%, down 2.4% from July 2019. However, ADR and RevPAR increased 16.8% and 14% to $155.63 and $104.59, respectively. The uptrend was driven by solid leisure demand in the United States. Easing COVID-19 restrictions and improving business activity added to the upside. Hotel demand in 2022 is likely to be driven by leisure travelers from Europe and the Asia-Pacific.

Digitization to Drive Growth: Hotel owners continue to focus on maintaining a balance between maximizing hotel profitability while driving guest satisfaction. To this end, hoteliers have leveraged technologies such as mobile and web check-in, and mobile key. Hoteliers have also increased the use of these digital tools to strengthen infrastructure, improve online package sales, enable self-service bookings, make real-time offerings and enhance the overall customer experience. This, along with an emphasis on pricing optimization and merchandising capabilities, is likely to enable hoteliers to capture additional market share.

Initiatives to Attract Customers: First, hoteliers are committed to comprehensive processes for cleaning, disinfection and infectious disease prevention. To this end, they have installed a trained hygiene and well-being leader responsible for a clean and safe environment for staff and guests. Second, the companies have been making every effort to enhance the contactless experience and leverage technologies such as mobile and web check-in, and mobile key. The industry players have resorted to streamlining operations with efficient management levels, the benefits of which are likely to remain even after the pandemic fades out.

High Costs & High Inflation Remain Woes: Higher costs remain a concern for the industry participants. As COVID-19 continues to impact the global travel industry, hoteliers have been focusing on cost-saving measures to counter the crisis. Some of the industry players have discontinued share repurchases and suspended dividends to improve liquidity. A slowdown in the economy is likely to hurt the industry. Worries about a global slowdown and a possible recession loom large over the stock market. A high inflation level is likely to curb consumer spending, which in turn may affect the industry.

Zacks Industry Rank Indicates Bright Prospects

The Zacks Hotels and Motels industry is grouped within the broader sector.

The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates upbeat near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #73, which places it in the top 29% of the 252 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the top 50% of the Zacks-ranked industries is the result of a positive earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, it appears that analysts are gradually gaining confidence in this group’s earnings growth potential. Since Mar 31, 2022, the industry’s earnings estimates for 2022 have increased 16.3%.

Before we present a few stocks you may want to keep an eye on, let’s take a look at the industry’s recent stock-market performance and valuation picture.

Industry Outperforms S&P 500

The Zacks Hotels and Motels industry has outperformed both the Zacks S&P 500 composite and its own sector in the past year.

Over this period, the industry has declined 8.3% compared with the sector’s decline of 38.7%. Meanwhile, the Zacks S&P 500 composite has decreased 16.8%.

Hotels & Motels Industry’s Valuation

On the basis of the forward 12-month EV/EBITDA, which is a commonly used multiple for valuing hotels and motels stocks, the industry is currently trading at 13.37X compared with the S&P 500’s 10.75X. It is also above the sector’s trailing 12-month EV/EBITDA ratio of 8.73X.

Over the last five years, the industry has traded as high as 22.17X and as low as 8.56X, with the median being at 12.82X.

3 Hotels & Motels Stocks to Watch Out For

Hyatt: The company has been benefiting from solid leisure transient demand, easing travel restrictions and increased airline capacity. Also, focus on new hotel openings and acquisition initiatives bode well.

Hyatt currently sports a Zacks Rank #1 (Strong Buy). In the past 30 days, the Zacks Consensus Estimate for 2022 earnings has been revised upwards by 70.1%. The Zacks Consensus Estimate for Hyatt’s 2022 sales and earnings per share suggests growth of 92.6% and 121.8%, respectively, from the year-ago period. H’s shares have surged 14% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wyndham Hotels & Resorts: The company continues to benefit from global and US RevPAR. During third-quarter 2022, global and US RevPAR rose 12% and 2% year over year. Strong development pipeline is also helping the company’s growth.

WH currently carries a Zacks Rank #2 (Buy). In the past 30 days, the Zacks Consensus Estimate for 2022 earnings has been revised upwards by 5.8%. The Zacks Consensus Estimate for Wyndham Hotels & Resorts’ 2022 earnings per share suggests growth of 21.5% from the year-ago period. WH’s shares have declined 15% over the past year.

Hilton Grand Vacations: The company is benefiting from the roll out of its HGV Max membership program, new properties, and experiential offerings. Momentum in leisure travel is helping HGV.

Hilton Grand Vacations currently carries a Zacks Rank #2. In the past 30 days, the Zacks Consensus Estimate for 2022 earnings has been revised upwards by 19.3%. The Zacks Consensus Estimate for Hilton Grand Vacations’ 2022 earnings per share suggests growth of 60.9% from the year-ago period. HGV’s shares have declined 20% over the past year.

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