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. Retirement

    5 Reasons to Leave Retirement Planning to Your Wife

    Wives live longer than their husbands, so their retirement stakes are higher. Luckily, certain qualities make women especially good at long-term planning
  2. Investing

    5 Companies Benefiting From Germany's Record Surplus

    A weaker euro is boosting German exports, which have led to a record trade surplus. Here are five German companies reaping the benefits.
  3. Investing

    10 Surprising Companies That Began as Underdogs

    From fast food to electronics, these success stories give hope to leaders who, despite lacking funds, possess unshakable passion for their underdog brands.
  4. Fundamental Analysis

    Calculating Valuation

    Valuation is the process of determining what an asset is worth.
  5. Economics

    Ukraine-Russian Sanctions: The Gift That Keeps On Giving

    The repercussions of Russia's 2014 invasion of Crimea are nowhere near over. The Ukraine says Russian aircraft are no longer welcome to take off or land in Ukraine's airports.
  6. Budgeting

    Your Worst Financial Mistakes And Why You Made Them

    No one intends to make a financial mistake, but an unexpected disaster or poor planning could leave you in financial distress.
  7. Mutual Funds & ETFs

    Top 3 Latin America Stock Mutual Funds

    Discover information about some of the most popular mutual funds that offer investors exposure to equities of companies in Latin America.
  8. Mutual Funds & ETFs

    Top 3 Inflation Protected Bond Mutual Funds

    Learn about the characteristics and suitability of the top inflation-protected bond mutual funds, and how investors can use these funds to their advantage.
  9. Mutual Funds & ETFs

    Top 3 High Yield Bond Mutual Funds

    Read about three high-yield bond mutual funds and why they are currently popular, and learn the advantages and disadvantages of investing in high-yield bonds.
  10. Professionals

    Hedge Funds and the Law

    Learn how hedge funds have gotten in trouble for illegal insider trading. Read about questionable high-frequency trading (HFT) strategies.
  1. Why are mutual funds subject to market risk?

    Like all securities, mutual funds are subject to market, or systematic, risk. This is because there is no way to predict ... Read Full Answer >>
  2. Does Fidelity have mutual funds?

    Fidelity offers clients all asset classes of mutual funds, ranging from domestic equity to specialized sectors. The offering ... Read Full Answer >>
  3. How often are mutual fund prices updated?

    A mutual fund's price, or its net asset value (NAV), is determined once a day after the markets close at 4 p.m. Eastern time ... Read Full Answer >>
  4. Can minors invest in mutual funds?

    A mutual fund can be opened under the name of a minor through a custodial account overseen by a guardian. The custodian holds ... Read Full Answer >>
  5. Can a company's working capital turnover ratio be negative?

    A company's working capital turnover ratio can be negative when a company's current liabilities exceed its current assets. ... Read Full Answer >>
  6. Does working capital measure liquidity?

    Working capital is a commonly used metric, not only for a company’s liquidity but also for its operational efficiency and ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!