Hotel stocks: Top 3 bullish indicators in 2024
The travel sector experienced a boom in 2023, though there may be "new wrinkles" to investing in hotel stocks in 2024. Booking sites like Expedia (EXPE) have issued cautious commentary, explaining the "post-COVID acceleration" is slowing down.
In the latest edition of Travel Guide 2024: Industry Insights, Yahoo Finance Executive Editor Brian Sozzi breaks down bullish, company-specific attributes for hotel stock investors to keep in mind.
For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.
Editor's note: This article was written by Nicholas Jacobino
Video Transcript
BRAD SMITH: Do you even RevPAR? How can we play the hospitality trade? Joining us now as part of Yahoo Finance's Travel Guide 2024, Industry Insights, we've got our very own executive editor Brian Sozzi.
BRIAN SOZZI: All right, when it comes to making money in the biggest hotel names in 2023, it was a relatively easy endeavor. Ride most all of the stocks because revenue per available room was rocking as hotel operators pushed through higher prices with traveling roaring back. However, in recent weeks, we have gotten new wrinkles to investing in hotel stocks mostly due to cautious commentary from booking sites, Expedia and Booking Holdings. Take a listen to what Expedia CEO, who is outgoing, told us about current demand trends.
PETER KERN: The markets are slowing a bit, the travel market. It's still growing, but the post-COVID thing is slowing down a bit. So the acceleration is lower. Really Asia and Latin America have been driving this past year more than anything and that's all slowing down. You know, it's really just a decel of the whole globe back to sort of more normal post-COVID levels.
BRIAN SOZZI: All right, so what does this all mean to investors in the hotel space? It means investors have to move beyond the outsized focus on revenue per available room and look for bullish company-specific attributes. And we, of course, have your guide for that one. I think the other way of looking at this is you actually have to do some work this year, guys, to find a good hotel stock. Luckily for you, I'm going to tee this up and it's all free.
So three bullish indicators. First up, hotels that are buying back a ton of stock and paying dividends. Usually, I think in this environment where things are slowing down, these are the shareholder-friendly actions you would like to see.
I look at Hilton. I look at Marriott. Hilton last year, $2 and a half billion given back in terms of capital to shareholders, eyeing $3 billion this year.
Marriott, real whopping number here, guys. $4 billion in capital returned to shareholders last year. That's dividend and stock buybacks. Looking at about $4.1 to $4.3 billion this year. So lots of good things there from both of those companies.
Bullish indicator number two, hotels that are aggressively building pipelines. Not pipelines to underground stations, it is pipelines to opening more rooms. Hilton added more than 130,000 rooms to its pipeline in 2023, looking to add even more rooms this year.
You have Marriott added 164,000 rooms to its development pipeline in 2023. Right now that company's pipeline stands at a record 573,000 rooms. That's just a massive number, guys.
And the last bullish indicator number three, hotel leadership teams staying hungry for more. I love execs that are just going for it all. They're not hungry with prior success.
That's just my thing and I love seeing this. And I see it really in three names, Marriott like I've mentioned here. I look at that company's executive team pushing into Las Vegas finally with a new MGM loyalty deal that will probably boost the loyalty program for Marriott, which is already industry leading.
Choice Hotels, I love that this company has gone hostile for Wyndham and Wyndham is saying, no, no, we don't want you. Well, they may not have a choice because that deal might actually get done. And then lastly Hilton, they recently signed an interesting deal with small luxury hotels of the world to push deeper into the luxury market, a new arena for them, luxurious vacation. So again, some three indicators here you want to be looking for if you want to pick some hotel stocks.
