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Zacks Industry Outlook Highlights: Marriott, InterContinental, Hyatt, Hilton and Wyndham

RLI Corp. (RLI) reported earnings 30 days ago. What's next for the stock? We take a look at earnings estimates for some clues.

For Immediate Release

Chicago, IL – February 22, 2018 – Today, Zacks Equity Research discusses the Ecommerce, including Marriott International MAR, InterContinental Hotels Group IHG, Hyatt Hotels Corp. H, Hilton Worldwide HLT and Wyndham Worldwide WYN.

Industry: Hotels, Part 2

Link:  https://www.zacks.com/commentary/150145/us-hotel-industry-to-sustain-modest-growth-in-2018

Despite the prevailing challenges such as unfavorable governmental policies, uncertainty in specific markets and RevPAR pressure, economic fundamentals appear strong enough to support modest growth in the hotel space in the short-to-medium term, and without any additional stimulus.

GDP grew at a seasonally adjusted annual rate of 2.6% in the fourth quarter of 2017, following gains of more than 3% in the previous two quarters, per the “advance” estimate released by the Bureau of Economic Analysis. This marked the economy’s strongest stretch of growth since the expansion started in mid-2009.

Consumer spending grew 3.8% in the fourth quarter after a 2.2% gain in the third. The trend is expected to continue through 2018, raising optimism for companies in the leisure and recreation space.

Again, there was a marked improvement in the Consumer Confidence Index in January, after a setback in December. Consumer Confidence rose 2.3 points to 125.4 in January. The momentum is expected to continue through 2018. Confident consumers bode well for hotels in spite of the surge in new inventory.

Thus, we see no reason why the U.S. hotel industry should not continue to enjoy gains on both the top and the bottom line.

In fact, there are a number of reasons why the broader hotel space should continue doing well over both short and medium terms.

A Favorable Demand-Supply Gap

A strong economy, higher income and stepped-up consumer confidence has raised demand for both leisure and business travel. The supply-demand environment in the United States has been favorable since 2010, with growth in demand outpacing supply growth. Though, of late, the gap between demand and supply growth has narrowed considerably and occupancy growth has slowed, higher average daily rates (ADRs) are expected to keep driving revenue per available room (RevPAR).

Given the positive economic outlook for the remainder of the year, which could result in the ninth successive year of occupancy growth for the U.S. lodging industry, PricewaterhouseCoopers (PwC) is projecting demand (2.1% rise) to outpace supply (increase of 1.9%) in 2018.

Attempts to Differentiate

With the market becoming increasingly saturated, especially in the luxury space, hotels are firing on all cylinders to differentiate themselves. According to players in the hospitality sector, eco-awareness, wellness and brand distinctiveness are important themes that customers are currently looking for.

Moreover, U.S. hospitality companies are increasingly targeting millennials, who form a significant part of the population. Millennials are generally more concerned about health, convenience, service and ethical sourcing of food.

This is probably the reason why big hotel brands are launching more lifestyle hotels, which are mainly boutique brands benefiting from the parent companies’ infrastructure. These include brands like Marriott International’s Element, Aloft and Edition; InterContinental Hotels Group’s Hotel Indigo and Andaz by Hyatt Hotels Corp.

Efforts to Expand Globally

Major hoteliers are exploring growth opportunities abroad, especially in relatively untapped emerging markets and the outlying areas surrounding major cities.

A number of U.S.-based hoteliers are targeting the unsaturated markets in Asia-Pacific, the Middle East, Brazil, Russia and Africa. Within Asia, China promises significant growth, despite an economic slowdown, with visits expected to increase substantially ahead. Notably, China is the largest source market for outbound travel now. In fact, Chinese outbound travel, according to Chinese authorities in the sector, is set to boom further with 700 million trips projected over the next five years.

Interestingly, the country is a major revenue contributor for Marriott, where it entered into a joint venture with Alibaba with an aim to improve market share, expand membership of its loyalty programs and reduce distribution costs. India is also becoming a hot spot for U.S.-based hoteliers with its emergence as a global business hub. Although economic growth rates are slightly lower than China, the country has great long-term growth potential as a tourism market.

In fact, Hyatt’s major target markets include India and China. Apart from these, the company has also announced further expansion plans into diverse international markets including Australia, Brazil, Germany, United Kingdom, Indonesia, Japan, Mexico, Saudi Arabia, Singapore, Thailand and the Netherlands, among others.

Meanwhile, Europe remains an attractive market for hoteliers despite repeated terror attacks and Brexit-induced uncertainties. Major players like Marriott, Hilton Worldwide and Wyndham Worldwide have a strong foothold in this region.

Many of the hoteliers are also looking to leverage from Latin America’s upsurge in accommodation demand. In this respect, Wyndham Hotel Group acquired Latin America's leading Fen Hotels. Meanwhile, with an increasing number of managed and franchised limited service hotels in Mexico, Colombia and Brazil, Marriott expects its distribution in the Caribbean and Latin American region to increase 75% by 2018.

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Past performance is no guarantee of future results. Inherent in any investment is the potential for loss. This material is being provided for informational purposes only and nothing herein constitutes investment, legal, accounting or tax advice, or a recommendation to buy, sell or hold a security. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. It should not be assumed that any investments in securities, companies, sectors or markets identified and described were or will be profitable. All information is current as of the date of herein and is subject to change without notice. Any views or opinions expressed may not reflect those of the firm as a whole. Zacks Investment Research does not engage in investment banking, market making or asset management activities of any securities. These returns are from hypothetical portfolios consisting of stocks with Zacks Rank = 1 that were rebalanced monthly with zero transaction costs. These are not the returns of actual portfolios of stocks. The S&P 500 is an unmanaged index. Visit https://www.zacks.com/performancefor information about the performance numbers displayed in this press release.


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Wyndham Worldwide Corp (WYN) : Free Stock Analysis Report
 
Marriott International (MAR) : Free Stock Analysis Report
 
Intercontinental Hotels Group (IHG) : Free Stock Analysis Report
 
Hyatt Hotels Corporation (H) : Free Stock Analysis Report
 
Hilton Worldwide Holdings Inc. (HLT) : Free Stock Analysis Report
 
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