In this article, we will take a look at the 10 best hotel stocks to buy now. You can skip our detailed analysis of these stocks and the hotel industry and go directly to the 5 Best Hotel Stocks to Buy Now.
The hotel industry has been hit the hardest of all the industries affected by COVID-19, resulting in historically low occupancy, significant job losses, and hotel closures across the globe. According to the American Hotel and Lodging Association, the effect of the pandemic has been nine times that of 9/11 after leisure and travel activities were forcefully halted in early 2020.
Hotel sales in the United States dropped by nearly half in 2020, to $84.6 billion, from $168 billion prior to the pandemic. Room revenue is expected to start recovering in 2022, projected to reach $144 billion. Demand will not return to pre-COVID-19 levels until 2023, according to data intelligence firm STR, with average daily rates (ADR) and revenue per available room (RevPAR) not expected to hit 2019 levels until at least 2024.
Recovery of the Travel and Hotel Industries
According to the outlook of AHLA, the recovery of business and leisure travel has three phases. The initial recovery of the industry started in May 2020, noting an increase in hotel occupancy during weekends. During the second phase of recovery, business travel is projected to accelerate slightly in the second quarter of 2021 as companies begin to book hotels for important meetings, small-scale events and workshops. Group travel is anticipated to continue in the third quarter of 2021, with demand for the fourth quarter expected to be 23% lower than in the fourth quarter of 2019.
Technology will play a great role in reviving the hotel and hospitality industry during the digitalization era. Among the most efficient tech innovations that are helping the industry are the use of QR codes for contactless check-ins, in-app booking of appointments, digital payment transactions, and mobile key rooms. Taiwan-based CyberLink developed the world’s leading AI face recognition engine “FaceMe” which hotels use for compliance monitoring. On the other hand, contactless communication systems “Grace” and “NevoTouchless,” developed by California-based software developer Nevotek, protect both visitors and hospitality workers as they work together to reduce the amount of time spent in face-to-face encounters, such as hotel check-in and check-out.
Budget Hotels Vs Luxury Hotels
According to a McKinsey report, budget and economy hotels in the United States have outperformed luxury hotels due to longer accommodation options and the fact that they are relatively secure despite travel restrictions. Multinational hotel chain Wyndham Hotels & Resorts Inc. (NYSE: WH) is one of the best hotels that delivered a strong performance during the pandemic. Wyndham owns a few of the highest-rated budget hotel brands in North America, including Microtel Inn & Suites, Days Inn, Travelodge, and Super 8. Since the low point in mid-April 2020, Wyndham’s ADR for the domestic, economy, and midscale brands has gradually climbed, from down 21% in mid-April 2020 to just 10% in January 2021.
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Best Hotel Stocks to Buy Now
Many hotel stocks have soared in value over the last few weeks as investors become more confident about the economy’s recovery as over 195 million COVID-19 vaccine doses have been given so far in the United States. As of April 15, Hilton Worldwide Holdings Inc. is up 13.72% YTD, Marriott International Inc. has gained 13.39%, and MGM Resorts International surged 30.94%.
The coronavirus crisis didn’t just hammer the hotels industry. The hedge fund industry famous for its stock-picking skills is also wavering. The entire hedge fund industry is feeling the reverberations of the changing financial landscape. Its reputation has been tarnished in the last decade, during which its hedged returns couldn’t keep up with the unhedged returns of the market indices. On the other hand, Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 124 percentage points since March 2017. Between March 2017 and February 26th 2021 our monthly newsletter’s stock picks returned 197.2%, vs. 72.4% for the SPY. Our stock picks outperformed the market by more than 124 percentage points (see the details here). We were also able to identify in advance a select group of hedge fund holdings that significantly underperformed the market. We have been tracking and sharing the list of these stocks since February 2017 and they lost 13% through November 16th. That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.
Photo by KEEM IBARRA on Unsplash
With this context in mind, here are the 10 best hotel stocks to buy now.
10. Choice Hotels International, Inc. (NYSE: CHH)
Number of Hedge Fund Holders: 15
We start our list of the 10 best hotel stocks to buy now with Maryland-based hotel franchising company Choice Hotels International, Inc. Choice Hotels is a world-renowned hotel franchisor with over 7,100 locations and 590,000 rooms in the United States and over 40 other countries. The company has a market cap of $6.18 billion and recorded a revenue of $774.1 million for the full year of 2020. Shares of CHH increased 57.7% over the past twelve months.
The hedge fund run by Peter Rathjens, Bruce Clarke, and John Campbell is one of the top hedge funds having positions in CHH, with 385,909 shares, worth $41.2 million at the end of the fourth quarter.
9. Pebblebrook Hotel Trust (NYSE: PEB)
Number of Hedge Fund Holders: 16
Ranking 9th in our list of the best hotel stocks to buy now is Pebblebrook Hotel Trust (NYSE: PEB). Pebblebrook Hotel Trust is a real estate investment trust based in Maryland specializing in hotel acquisitions and investments. Also, the REIT invests in resort properties near urban target markets and specific destination markets with a portfolio of 52 hotels across the US.
The company has a market cap of $3.2 billion. The company’s revenue in 2020 slumped to $442.8 million from $1.6 billion in 2019. Shares of PEB jumped 122.9% over the past twelve months.
Ken Griffin’s Citadel Investment Group is one of the top hedge funds with PEB positions, with 27 million shares, worth $28.7 million at the end of the fourth quarter.
8. Service Properties Trust (NASDAQ: SVC)
Number of Hedge Fund Holders: 20
Ranking 8th on the 10 best hotel stocks list to buy now is Service Properties Trust (NASDAQ: SVC). With 149 distinct brands spanning 23 sectors, the Massachusetts-based REIT owns a vast portfolio of hotels and net lease service and necessity-based retail assets across the United States, Canada, and Puerto Rico. As of December 31, 2020, the company owns a net lease portfolio of 799 properties.
The company has a market cap of $2.03 billion. The company’s revenue in 2020 came in at $1.26 billion, down from $2.32 billion in 2019. The stock has gained 134% in the last twelve months.
Out of the hedge funds being tracked by Insider Monkey, Jonathan Kolatch’s Redwood Capital Management held the most SVC shares with 7 million shares worth $87.3 million. The total value of the shares held by 20 hedge funds in Q4 2020 was over $139 million.
7. Host Hotels & Resorts, Inc. (NASDAQ: HST)
Number of Hedge Fund Holders: 22
Ranking 7th on the 10 best hotel stocks to buy now is Host Hotels & Resorts, Inc. Headquartered in Maryland, Host Hotels is among the biggest luxurious REITs in the US owning brands, including Marriott, Fairmont, and Novotel. The S&P 500 company owns a portfolio of 81 hotels and 46,800 rooms worldwide.
The company has a market cap of $12.3 billion and full-year revenue of $267 million in 2020, down from $1.3 billion in 2019. Shares of HST jumped 58.5% over the past twelve months.
Jeffrey Furber’s AEW Capital Management held the most HST shares with more than 4 million shares worth $68.7 million at the end of the fourth quarter.
6. Extended Stay America, Inc. (NASDAQ: STAY)
Number of Hedge Fund Holders: 23
North Carolina-based hotel operator Extended Stay America, Inc. (NASDAQ: STAY) ranks 6th on the list of the 10 best hotel stocks to buy now. The company operates a total number of 646 mid-priced hotels in North America. In March 2021, Extended Stay America announced that The Blackstone Group Inc. (NYSE: BX) and Starwood Capital Group would the company for $6 billion.
The company has a market cap of $3.5 billion. Extended Stay America, Inc.’s total revenues in 2020 fell 14.4% to $1.04 billion from $1.2 billion in 2019. The stock has gained 121.4% in the last twelve months.
Stuart J. Zimmer’s Zimmer Partners held the most shares of STAY, with more than 4 million shares worth $70 million at the end of the fourth quarter.
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Disclosure: None. 10 Best Hotel Stocks to Buy Now is originally published at Insider Monkey.
