We recently compiled a list of the 10 Most Undervalued Hotel Stocks To Invest In Now. In this article, we are going to take a look at where Apple Hospitality REIT Inc. (NYSE:APLE) stands against the other hotel stocks.
Exploring the Hotel Market: Trends and Highlights
The hotel market is experiencing a significant transformation as it rebounds from the impacts of the COVID-19 pandemic. According to a report by Zion Market Research, the global hotel market was valued at $1.37 trillion in 2023. The market is expected to expand at a compound annual growth rate (CAGR) of 9.14% during 2024-2032 to reach a value of $2.99 trillion by the end of the forecast period. This growth is driven by increased travel demand, higher disposable incomes, and a resurgence in both leisure and business travel.
SiteMinder’s Hotel Booking Trends 2023 report reveals significant changes in the hospitality industry as it rebounds from the pandemic. The report analyzes bookings from travelers in 20 of the world’s most established destinations. According to the report, in 2023, international check-ins increased in all but one market compared to the previous year. Malaysia, New Zealand, and Taiwan experienced the biggest jumps due to their border reopenings in 2022.
In 2023, hotels raised their prices while still achieving record check-ins. The average daily rate (ADR) globally reached $192, reflecting an 11% increase from 2022 and a 38% rise compared to 2019. Italy saw the largest increase, with its ADR rising by $42 or 20% year-on-year. This indicates that hotels are responding to strong pent-up demand by adjusting their pricing strategies.
Despite the increase in prices, travelers are booking shorter stays. According to the report, 81% of hotel stays globally were for just one or two nights. Only a small fraction of stays were longer than three nights, highlighting a shift in traveler preferences.
Investor Sentiment in 2024
Overall, hotel investors are feeling positive about the market for 2024. In the US, many investors are eager to increase their investments in hotels.
CBRE Hotels Research conducted a Global Hotel Investor Intentions Survey in early 2024 to evaluate the hotel investment landscape. The results show that investor sentiment in the US is strong, with 50% of respondents planning to increase their allocation to hotel acquisitions this year. About 35% expect their acquisition activities to stay the same as in 2023, while less than 16% anticipate a decrease.
Despite high interest rates, many investors are looking to buy hotels. Over 70% of those surveyed said they are focusing on value-added and opportunistic investments. These types of acquisitions allow investors to improve properties by adding rooms, redesigning spaces, or enhancing amenities to boost returns and long-term value.
Our Methodology
To compile our list of the 10 most undervalued hotel stocks to invest in now, we used the Finviz and Yahoo stock screeners to find the largest hotel companies. We also reviewed our own rankings and consulted various online resources to compile a list of the largest publicly traded hotel companies, the most popular hotel stocks, and REITs.
From an initial pool of over 30 hotel stocks, we focused on those trading at under 20 times their forward earnings as of November 11. Then, we selected the stocks that analysts believe possess the greatest potential for growth. Finally, we ranked the 10 most undervalued hotel stocks to invest in now based on their average price target upside potential according to analysts as of November 11, 2024.
At Insider Monkey we are obsessed with the stocks that hedge funds pile into. The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
Long exposure of a busy city skyline featuring tall roof tops of different hotel brands.
Apple Hospitality REIT Inc. (NYSE:APLE)
Forward P/E: 18.73
Analysts’ Upside Potential: 5.99%
Apple Hospitality REIT Inc. (NYSE:APLE) is a real estate investment trust (REIT) that owns one of the largest and most diverse portfolios of upscale, rooms-focused hotels in the US. The company’s portfolio consists of 223 hotels with around 30,000 guest rooms located throughout 37 states and the District of Columbia. APLE is one of the most undervalued stocks in the hotel industry.
In 2024, the company demonstrated a strategic approach to capital allocation and portfolio management. From January to October, Apple Hospitality REIT Inc. (NYSE:APLE) strategically acquired two hotels for $196 million, sold three hotels for $41 million, and repurchased 2.4 million shares for $35 million. Additionally, contracts have been signed for the sale of four more hotels for about $31 million. This activity showcases the company’s ability to effectively manage capital.
For the third quarter of 2024, Apple Hospitality REIT Inc. (NYSE:APLE) reported a Comparable Hotels Average Daily Rate (ADR) of $163, which is a 1% increase from the previous year. The Comparable Hotels Occupancy rate remained essentially flat at 77%, while Comparable Hotels Revenue per Available Room (RevPAR) rose to $125, also reflecting a 1% increase year-over-year.
Apple Hospitality REIT Inc. (NYSE:APLE) has invested around $48 million in capital expenditures during the first nine months of 2024 and plans to spend between $75 million and $85 million throughout the year on major renovations at about 20 of its hotels. The company believes these reinvestments are crucial for maintaining competitiveness and driving EBITDA growth.
Over the past ten years, Apple Hospitality REIT Inc. (NYSE:APLE) has grown its revenue at a compound annual growth rate (CAGR) of 7%, while its net income has increased at a CAGR of 17% during the same period.
With its strong portfolio, strategic capital allocation, and ongoing renovations, Apple Hospitality REIT Inc. (NYSE:APLE) is well-positioned for future growth.
Overall, APLE ranks 10th on our list of the most undervalued hotel stocks to invest in now. While we acknowledge the potential of APLE as an investment, our conviction lies in the belief that 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 APLE 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.