Hotel owners and operators will be celebrating the new year, thankful that 2009 is finally over. It was a miserable year for the industry, as revenues per available room (RevPAR) dropped approximately 17%, with expectations for it to decline another 3-5% in 2010. Only in 2011 should the hotel business see any growth. Therefore, investors should be careful placing bets in 2010. However, the end of 2009 did bring some hope.
IN PICTURES: 20 Tools For Building Up Your Portfolio

Marriott Reorganization
In November, Marriott International (NYSE:MAR) announced a reorganization plan that, when completed in 2011, will see the hotel chain become a truly global company. Currently, it has four divisions: Ritz-Carlton, timeshare, international lodging and North American operations. In its new arrangement, the company divides into four regions: the Americas, Europe, the Middle East and Asia. Each region will have its own president and operate independently. The idea is to deliver greater operating efficiencies by combining hands-on local management with the cost savings and marketing power available to a global company. Ed Watkins, a blogger for Front Desk, the online website for Lodging Hospitality magazine, believes the announcement, while welcome, should have come sooner. Investors will want to keep their eyes on the reorganization, especially the integration of its Ritz-Carlton luxury chain, which has been operating independently since its acquisition in 2000. Coming from that history, Ritz-Carlton may not appreciate the Marriott approach to hotel management, but only time will tell. (For related reading, check out Travel Tips For Keeping You And Your Money Safe.)

Hyatt Rising High
The hotel business got a much needed boost in the fourth quarter when Hyatt Hotels (NYSE:H) sold 38 million shares at $25 each in its initial public offering. In its first day of trading, the stock was up 12%, as investor appetite for anything new took hold. On the surface, the deal, which valued the entire company at $4 billion, might have looked cheap. Marriott, its major competitor, has an enterprise value of $6 billion, which is 12 times EBITDA. Since Hyatt has no debt, an equivalent multiple would mean the IPO factored in a 25% discount for the stock. Unfortunately, none of the proceeds went to the company. Instead, the funds went to the controlling Pritzker family for walking around money. Eventually, the family's squabbles will rock this stock. It's only a matter of time.

Bottom Line
2010 will be better for the hotel industry than 2009. If I were to bet on the hotel industry in 2010, I would be inclined to go with a value-priced chain like Choice Hotels (NYSE:CHH) or Home Inns & Hotels (Nasdaq:HMIN), rather than larger operators like Hyatt, Marriott or Starwood (NYSE:HOT), as consumers will remain frugal until at least 2011. (For related reading, check out Top-Down Analysis: Finding The Right Stocks And Sectors.)

Related Articles
  1. Personal Finance

    Is An Ivy League Degree Worth It?

    In 600 B.C. Aesop determined that a bird in the hand was worth two in the bush. Warren Buffett claims that this axiom can be used to determine the most valuable uses of capital. In this article ...
  2. Investing

    Time to Bring Active Back into a Portfolio?

    While stocks have rallied since the economic recovery in 2009, many active portfolio managers have struggled to deliver investor returns in excess.
  3. Chart Advisor

    ChartAdvisor for November 27 2015

    Weekly technical summary of the major U.S. indexes.
  4. Mutual Funds & ETFs

    The Democratization of the Hedge Fund Industry

    The coveted compensations of hedge fund managers are protected by barriers of entry to the industry, but one recent startup is working to break those barriers.
  5. Investing

    What a Family Tradition Taught Me About Investing

    We share some lessons from friends and family on saving money and planning for retirement.
  6. Retirement

    Two Heads Are Better Than One With Your Finances

    We discuss the advantages of seeking professional help when it comes to managing our retirement account.
  7. Retirement

    5 Secrets You Didn’t Know About Traditional IRAs

    A traditional IRA gives you complete control over your contributions, and offers a nice complement to an employer-provided savings plan.
  8. Economics

    Investing Opportunities as Central Banks Diverge

    After the Paris attacks investors are focusing on central bank policy and its potential for divergence: tightened by the Fed while the ECB pursues easing.
  9. Retirement

    Using Your IRA to Invest in Property

    Explain how to use an IRA account to buy investment property.
  10. Retirement

    How a 401(k) Works After Retirement

    Find out how your 401(k) works after you retire, including when you are required to begin taking distributions and the tax impact of your withdrawals.
  1. Can a 401(k) be taken in bankruptcy?

    The two most common types of bankruptcy available to consumers are Chapter 7 and Chapter 13. Whether you file a Chapter 7 ... Read Full Answer >>
  2. When can catch-up contributions start?

    Most qualified retirement plans such as 401(k), 403(b) and SIMPLE 401(k) plans, as well as individual retirement accounts ... Read Full Answer >>
  3. Who can make catch-up contributions?

    Most common retirement plans such as 401(k) and 403(b) plans, as well as individual retirement accounts (IRAs) allow you ... Read Full Answer >>
  4. Can you have both a 401(k) and an IRA?

    Investors can have both a 401(k) and an individual retirement account (IRA) at the same time, and it is quite common to have ... Read Full Answer >>
  5. Are 401(k) contributions tax deductible?

    All contributions to qualified retirement plans such as 401(k)s reduce taxable income, which lowers the total taxes owed. ... Read Full Answer >>
  6. Are 401(k) rollovers taxable?

    401(k) rollovers are generally not taxable as long as the money goes into another qualifying plan, an individual retirement ... Read Full Answer >>

You May Also Like

Trading Center