We recently published a list of 10 Best Hotel Stocks To Buy Now. In this article, we are going to take a look at where VICI Properties Inc. (NYSE:VICI) stands against other best hotel stocks.
According to Cognitive Market Research, the size of the global hotel market was $784.82 billion in 2023 and is projected to grow to $1,126.04 billion by 2030. From 2023 to 2030, the hotel industry’s compound annual growth rate is anticipated to be 5.29%. Regionally, North America holds a substantial 30.66% market share, mostly because of the region’s abundance of hotels and resorts.
Recently, in Q2 2024, demand for hotels rose 1.3% year over year, above a 0.6% increase in supply and leading to a 0.7% increase in occupancy in the US. Secondly, a 2.2% year-over-year rise in Q2 2024 revenue per available room (RevPAR) was driven by higher occupancy combined with a 1.5% increase in average daily rate (ADR) YoY. The benefits were mostly due to two factors: the early Easter this year, which came in late Q1 2024 and contributed to higher business travel in the second quarter of this year compared to the previous year, and the complete solar eclipse, which encouraged more leisure travel throughout a significant portion of the US. Although the demand for hotels increased in the second quarter of 2024, short-term rentals and cruise lines maintained their market share gains. Additionally, the average hotel hourly wage was still more than $10 less than the average hourly wage in the country.
As per Frederic Dominioni, the Chief Revenue Officer of Solonis and a leading provider of modern property management solutions, there are five important trends driving the recovery in the hotel industry post-pandemic. Firstly, guests’ expectations are rising because of rising room rates, which increased by 54% from January 2022 to 2023. Secondly, the rise in “workcation” travels brought about by hybrid work has raised the need for flexible locations and services. Third, there is still a high desire for self-service choices and mobile technology, which helps to ease the staff shortage. Fourth, with 88% of travelers looking for local adventures, travel experiences have taken center stage. Lastly, given that 65% of travelers give priority to eco-friendly lodging, sustainability is essential. Hotels will prosper if they adjust to these developments through improving amenities and customizing visitor experiences.
Looking ahead, CBRE’s 2024 Global Hotels Outlook reveals that 2024 will be another year of progress for the US economy after 2023 saw RevPAR reach a record high. The continuous improvement in inbound foreign travel, the meetings and group events segment’s solid performance, and rising interest from leisure visitors are all expected to contribute to RevPAR growth, which is predicted to reach almost 3% year over year. Urban areas that are more appealing to leisure travelers and have more expensive hotels should do well, but competition from other sources, such as cruise lines, short-term rentals, and camping, is projected to restrict demand as well as pricing for traditional hotels. Hotel salary growth slowed to 4.6% in Q2 2024 from 5.5% in Q1, but it was still higher than the 4.0% hourly wage rise for all employees due to a decrease in job opportunities in the hotel industry. In Q2 2024, occupancy rates for all types of locations stayed below 2019 levels. Interstate and town sites were the most similar to their 2019 levels, at 99%, while urban and resort destinations were 94% and 96%, respectively.
On the other hand, Warren Marr, US Hospitality & Leisure Industry Advisor stated:
“Continued economic uncertainty, an upcoming election, and continued geopolitical tensions are expected to impact hotel performance in the US through 2025. Since our last issue of Hospitality Directions US in November, we’ve seen two additional quarters of decline in hotel occupancies, for a total of four, but expect to see a gradual rebound the balance of this year and into next, off of easier comps. That said, we expect average daily rate growth to trail PCE inflation through the rest of this year and 2025.”
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A business executive in a sharp suit shaking hands on a real estate deal.
VICI Properties Inc. (NYSE:VICI)
Number of Hedge Fund Holders: 33
American-based VICI Properties Inc. (NYSE:VICI) is a real estate investment trust. It had been in the business of owning and acquiring casino, hospitality, and entertainment properties under long-term triple net leases.
The main segments that the company operates in are the real estate and golf course businesses. While there are multiple golf courses in the golf course business section, leased real property makes up the real property business segment.
In the second quarter of 2024, VICI Properties Inc. (NYSE:VICI) posted impressive financial results. With $957 million in revenue for the quarter, its revenue grew by 6.5% YoY. It also exceeded Wall Street projections by $3.32 million. At $741.3 million, net income attributable to common shareholders likewise increased by 7.3% year over year. Cash and cash equivalents available to the company at the end of the quarter totaled $347.2 million.
Strong cash flow is provided by solid, long-term contracts with significant casino operators like Caesars and MGM, which helps the company. Acknowledging the financial state of the casino industry, the firm gave Great Wolf Lodge a $250 million loan. This action fortifies its current alliance with the operator of a chain of hotels and indoor water parks. Furthermore, the VICI is growing its real estate holdings and financing alliances with well-known operators in a range of industries, such as Homefield, Bowlero, Cabot, Canyon Ranch, Chelsea Piers, and Kalahari Resorts. In addition, VICI Properties Inc. (NYSE:VICI) has 33 acres of undeveloped land close to the Las Vegas Strip and four championship golf courses.
Ken Griffin’s Citadel Investment Group is the largest shareholder in the company, with 10,447,154 shares worth $299.20 million.
Overall, VICI ranks 4th on our list of Best Hotel Stocks To Buy Now. While we acknowledge the potential of VICI as an investment, our conviction lies in the belief that some 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 VICI 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.