TripAdvisor recently published a bi-annual survey showing that travel spending and hotel profitability should increase in 2013. The report states that 42% of U.S. travelers are planning to increase their travel spending in 2013. Globally, 68% of hoteliers are optimistic that profits will increase in 2013. Additionally, 40% of global accommodations were planning to increase their room rates within three months of the report, which was published March 6.
The Global Business Travel Association also released a report showing that global business travel should increase 5.1% in 2013 to $268.5 billion. This is well above 2012’s growth of 1.8% and represents an upward revision from 2013’s originally projected growth of 4.6%. The rise is being driven by increasing stock prices as well as the recovery of businesses that require heavy travel.
The growth in personal and business travel indicate that hotel stocks could do very well this year. We look at three major hotel chains that stand to benefit from the upward trend in travel.
Marriott International Inc (NYSE:MAR) operates, franchises, and licenses hotels and timeshare properties worldwide. Marriott currently operates 3,800 properties in 74 countries.
The company posted strong results in its most recent quarterly release. EPS was up 43% from the same quarter in the prior year as operating income increased by $51 million. Worldwide comparable sales were up 4.6%. Marriott also raised its dividend 30% to $0.17 for the quarter. The company currently trades at a P/E of 23.35 versus an industry average of 31.08.
Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) operates as a hotel and leisure company worldwide. Starwood operates 1,134 properties in approximately 100 countries.
The most recent quarterly earnings release handily beat analyst expectations. The company reported earnings that were up 66% from the same quarter in the prior year. Revenue per available room was up 4.6% from the same quarter in the prior year. The company currently trades at a P/E of 26.81.
InterContinental Hotels Group PLC (ADR) (NYSE:IHG) owns, manages, franchises, and leases hotels and resorts worldwide. InterContinental operates approximately 4,600 hotels in 100 countries.
InterContinental is a U.K.-based company and made the odd move recently of not reporting quarterly financial results. However, on their quarterly call, they did report that revenue per available room was up 3.1% from the same quarter in the prior year. The company trades at a reasonable P/E of 15.02, below its five-year average P/E of 22.37 and well below the industry average.
Looking ahead
InterContinental Hotels Group PLC (ADR) (NYSE:IHG) has the largest portfolio of hotels and offers a range of price points, including the most affordable lodging offerings of the hotels discussed. If travel spending should slow in the future, InterContinental could still continue to fill rooms. The company also started a new loyalty program where all of its brands will be included under one program. This could help drive new customers and help attract repeat business.
Marriott International Inc (NYSE:MAR) has started a massive expansion program to boost its offerings. At the end of the most recent quarter, Marriott’s worldwide pipeline of hotels under construction, awaiting conversion, or approved for development increased to over 135,000 rooms, including more than 64,000 rooms outside of North America. Marriott also added over 16,000 rooms during the most recent quarter. The company’s aggressive expansion could be beneficial to shareholders if vacation and business spending continue to increase.
Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) has its own expansion plans and recently announced that the plan to increase its footprint in Latin America by 50% over the next five years. The company believes that macroeconomic trends will continue to reshape the Latin American travel and business landscape, creating strong growth and lodging demand. The company plans to open an average of seven hotels per year over the next five years. Starwood is currently the largest high end hotel operator in the region.
Wrap up
All three stocks look like good opportunities to take advantage of the upswing in travel. As the stock markets continues to go up, these companies stand to benefit immensely. Out of the three, InterContinental Hotels Group PLC (ADR) (NYSE:IHG) appears to be the strongest investment opportunity. The company trades at a very reasonable P/E, especially given the lofty P/E’s you see in the current market. Additionally, it has the strongest dividend yield at 2.22%. InterContinental also appears to be the best value when looking forward, trading at 17.44 times 2014 earnings estimates. Marriott International Inc (NYSE:MAR) currently trades at 18.22 times 2014 earnings estimates and Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) is currently at 23.7x.
John Timmes has no position in any stocks mentioned. The Motley Fool has no position in any of the stocks mentioned.
The article These 3 Stocks Should Benefit From a Growing Travel Market originally appeared on Fool.com.
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