Sector Snap: Lodging

Shares of hotel cos. get a slight boost from investor optimism that demand for rooms will rise

Associated Press

NEW YORK (AP) -- Shares of hotel companies got a slight boost Monday from analyst and investor optimism that demand for lodging will increase this year.

Janney Capital Markets analyst Brian McGill said the mood was very upbeat at an industry conference last week. He noted that industry fundamentals haven't changed much and hotel operators should benefit from higher demand for rooms coupled with a limited new supply coming on line.

McGill said that should lead to strong revenue per available room, or revpar, growth. He added that most forecasts have U.S. revpar growth in the 5 to 6 percent range.

"We believe the higher end properties should see higher growth than this and should come in closer to the high-single digits. If this is the case, it would be a positive for Starwood Hotels & Resorts Worldwide Inc. and Hyatt Hotels Corp. in our coverage universe."

But he warned that the international outlook faces slightly tougher conditions as a result of continued economic weakness in Europe and the potential for too many new rooms to come on the market in places like China, which will offset growth in the U.S.

McGill raised his rating for Starwood to "Buy" from "Neutral" and backed his "Neutral" rating for Hyatt.

In afternoon trading, Starwood shares rose $1.12 to $62.01, while Hyatt shares rose 5 cents to $40.54.

Elsewhere in the Sector, Wyndham Worldwide Corp. fell 2 cents to $57.11. Marriott International Inc. rose 49 cents to $40.05 and InterContinental Hotels Group PLC's U.S. shares fell 40 cents to $29.34.

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