We recently compiled a list of the 10 Most Undervalued Hotel Stocks To Invest In Now. In this article, we are going to take a look at where Park Hotels & Resorts Inc. (NYSE:PK) stands against the other hotel stocks.
Exploring the Hotel Market: Trends and Highlights
The hotel market is experiencing a significant transformation as it rebounds from the impacts of the COVID-19 pandemic. According to a report by Zion Market Research, the global hotel market was valued at $1.37 trillion in 2023. The market is expected to expand at a compound annual growth rate (CAGR) of 9.14% during 2024-2032 to reach a value of $2.99 trillion by the end of the forecast period. This growth is driven by increased travel demand, higher disposable incomes, and a resurgence in both leisure and business travel.
SiteMinder’s Hotel Booking Trends 2023 report reveals significant changes in the hospitality industry as it rebounds from the pandemic. The report analyzes bookings from travelers in 20 of the world’s most established destinations. According to the report, in 2023, international check-ins increased in all but one market compared to the previous year. Malaysia, New Zealand, and Taiwan experienced the biggest jumps due to their border reopenings in 2022.
In 2023, hotels raised their prices while still achieving record check-ins. The average daily rate (ADR) globally reached $192, reflecting an 11% increase from 2022 and a 38% rise compared to 2019. Italy saw the largest increase, with its ADR rising by $42 or 20% year-on-year. This indicates that hotels are responding to strong pent-up demand by adjusting their pricing strategies.
Despite the increase in prices, travelers are booking shorter stays. According to the report, 81% of hotel stays globally were for just one or two nights. Only a small fraction of stays were longer than three nights, highlighting a shift in traveler preferences.
Investor Sentiment in 2024
Overall, hotel investors are feeling positive about the market for 2024. In the US, many investors are eager to increase their investments in hotels.
CBRE Hotels Research conducted a Global Hotel Investor Intentions Survey in early 2024 to evaluate the hotel investment landscape. The results show that investor sentiment in the US is strong, with 50% of respondents planning to increase their allocation to hotel acquisitions this year. About 35% expect their acquisition activities to stay the same as in 2023, while less than 16% anticipate a decrease.
Despite high interest rates, many investors are looking to buy hotels. Over 70% of those surveyed said they are focusing on value-added and opportunistic investments. These types of acquisitions allow investors to improve properties by adding rooms, redesigning spaces, or enhancing amenities to boost returns and long-term value.
Our Methodology
To compile our list of the 10 most undervalued hotel stocks to invest in now, we used the Finviz and Yahoo stock screeners to find the largest hotel companies. We also reviewed our own rankings and consulted various online resources to compile a list of the largest publicly traded hotel companies, the most popular hotel stocks, and REITs.
From an initial pool of over 30 hotel stocks, we focused on those trading at under 20 times their forward earnings as of November 11. Then, we selected the stocks that analysts believe possess the greatest potential for growth. Finally, we ranked the 10 most undervalued hotel stocks to invest in now based on their average price target upside potential according to analysts as of November 11, 2024.
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A high-end hotel suite with trendy contemporary décor and luxurious amenities.
Park Hotels & Resorts Inc. (NYSE:PK)
Forward P/E: 12.58
Analysts’ Upside Potential: 8.70%
Park Hotels & Resorts Inc. (NYSE:PK) is a lodging real estate investment trust (REIT) with a diverse portfolio of hotels and resorts. The company operates 41 premium-branded hotels and resorts with more than 25,000 rooms across the United States. Approximately 86% of its portfolio is in the luxury or upper upscale segment, with properties situated in major markets and central business districts.
In July 2024, Park Hotels & Resorts Inc. (NYSE:PK) announced that the unconsolidated joint venture that owns and operates the Hilton La Jolla Torrey Pines sold the hotel for about $165 million, resulting in a pro-rata share of $41 million for the company. Additionally, in August, Park Hotels & Resorts Inc. (NYSE:PK) permanently closed the 360-room Hilton Oakland Airport.
The company also repurchased 2.5 million shares for $35 million in August. With liquidity exceeding $1.4 billion, Park Hotels & Resorts Inc. (NYSE:PK) is focused on enhancing shareholder value through strategic asset sales and investments into its core portfolio.
In Q3 2024, the company began over $200 million of guest room renovations at several key properties, including the Rainbow Tower at the Hilton Hawaiian Village Waikiki Beach Resort, the Palace Tower at the Hilton Waikoloa Village, and the Main Tower at the Hilton New Orleans Riverside. These renovations are expected to improve guest experiences and the company’s financial performance.
In the third quarter of 2024, Park Hotels & Resorts Inc. (NYSE:PK) reported a 3.3% increase in Comparable RevPAR (Revenue per Available Room) compared to Q3 2023, driven by strong demand in cities like Chicago, New Orleans, and Boston.
Overall, PK ranks 7th on our list of the most undervalued hotel stocks to invest in now. While we acknowledge the potential of PK as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns, and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than PK but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.