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 Hyatt Hotels Corporation (NYSE:H) 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.”
With that said, here are the 10 Best Hotel Stocks To Buy Now.
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Hyatt Hotels Corporation (NYSE:H)
Number of Hedge Fund Holders: 24
Hyatt Hotels Corporation (NYSE:H) operates owned (4% of total rooms) and managed and franchised (96%) properties under approximately 20 upscale luxury brands, including vacation brands (Apple Leisure Group, Hyatt Ziva, and Hyatt Zilara), the recently launched full-service lifestyle brand Hyatt Centric, the soft lifestyle brand Unbound, the wellness brand Miraval, and the midscale extended-stay brand Studios. In 2018 and 2021, respectively, Hyatt purchased Two Roads Hospitality and Apple Leisure Group. The Americas account for 54% of total rooms, followed by the rest of the globe (22%), and Asia-Pacific (23%).
While a slowing economy may have an impact on near-term industry demand, analysts believe Hyatt’s brand intangible asset, which is the major driver of its narrow moat, will grow over time. According to STR data, the company’s managed and franchised unit growth has averaged more than 10% annually over the past ten years (2014-23), much above the long-term supply rise of 2% for the US industry. This growth reveals its rising brand advantage.
Over the next ten years, Morningstar analysts anticipate the firm to increase its room and revenue share in the hotel industry, spurred along by more recent brands like House, Place, Apple Leisure Group, and Studios, which will bolster its intangible brand advantage.
Over the next ten years, Morningstar analysts project the company’s room growth to average between 4% and 5% yearly, which is higher than the 1% to 2% supply increase they predict for the US market during this time. Their assessment of Hyatt’s long-term competitive advantages is positive, and they believe that the company’s global exposure to luxury, upper upscale, and upscale travel will enable it to surpass industry demand in 2024 as resilient leisure travel is enhanced by better international and group travel.
Baron Focused Growth Fund stated the following regarding Hyatt Hotels Corporation (NYSE:H) in its Q2 2024 investor letter:
“Global hotelier Hyatt Hotels Corporation (NYSE:H) declined 4.7% in the quarter and hurt performance by 29 bps. The disappointing share price performance was due to a deceleration in growth in revenue per available room as a result of modestly slower leisure bookings. However, the company continues to increase its business transient and group bookings, which are now pacing 7% ahead of 2023 levels. These bookings are half of its business today. Robust mid-single-digit growth in units and modest margin expansion should lead to double-digit growth in EBITDA this year. In addition, Hyatt continues to sell assets in its bid to become a more asset-light business. It also has one of the strongest balance sheets in its industry today. All of the above should generate significant free cash flow that Hyatt can use to accelerate share buybacks. Hyatt has repurchased more than 80 million shares since its IPO in 2009! It now has just 100 million shares outstanding. Yet, despite 85% of Hyatt’s cash flow generated by fees, its stock still trades at a discount to peers.”
Robert Joseph Caruso’s Select Equity Group is the largest shareholder in the company, with 1,006,653 shares worth $152.93 million.
Overall, H ranks 8th on our list of Best Hotel Stocks To Buy Now. While we acknowledge the potential of H 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 H 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.