Sector Snap: Analyst initiates lodging coverage

Analyst starts lodging coverage, says sector geared for recovery once demand picks up

• On 12:31 pm EDT, Wednesday September 16, 2009

NEW YORK (AP) -- A Citi Investment Research analyst began coverage on several lodging companies Wednesday, saying the sector is gearing up for a recovery once demand picks up.

Analyst Michael Bilerman said that slowing supply growth will likely position the group for a period of sustained earnings growth.

"The previous two instances in which the industry emerged from a recession and into an extended period of low supply growth (1992 and 2004), lodging stocks outperformed over four to six years," he wrote in a note to clients.

Bilerman's comments come on the heels of an analysis by Goldman Sachs' Steven Kent that said hotel shares could be volatile in the next few weeks during the seasonal shift from summer to business travelers.

In a Tuesday client note, Kent suggested any weakness in the shares could provide a good buying opportunity. Like Bilerman, Kent said waning supply growth and rebounding demand was setting up the group for better operating results and improved stock performance.

Bilerman started Marriott International Inc., Starwood Hotels & Resorts Worldwide Inc., Choice Hotels International Inc. and LaSalle Hotel Properties with "Buy" ratings. He gave Host Hotels & Resorts Inc., DiamondRock Hospitality Co., Sunstone Hotel Investors Inc., Orient-Express Hotels Ltd. and Gaylord Entertainment Co. all "Hold" ratings. Bilerman initiated FelCor Lodging Trust Inc. with a "Sell" rating.

Shares of Marriott gained $1.16, or 4.5 percent, to $26.76 in afternoon trading. Starwood's stock added $1.25, or 3.8 percent, to $33.85, while shares of Choice Hotels surged $1.28, or 4.2 percent, to $31.77. Host Hotels' stock rose 24 cents, or 2.2 percent, to $11.30 and Gaylord shares added $1.16, or 5.2 percent, to $23.34.

Buzz up!