The hotel industry is focused on the provision of short-term lodging, including hotels and motels, as well as accommodation-related services. It's one segment within the broader hospitality, or leisure, industry. The hotel industry is split into two main categories of companies: C-corporation hotels, such as Marriott International Inc. (MAR) and Hilton Worldwide Holdings Inc. (HLT); and hotel real estate investment trusts (REITs), like DiamondRock Hospitality Co. (DRH) and Park Hotels & Resorts Inc. (PK).
The hotel industry has been severely affected by the COVID-19 pandemic and its resulting travel and dining restrictions, and other social-distancing rules.
C-corp hotels generally are engaged in hotel management, branding and marketing, and sometimes franchise licensing. They often own little real estate and their legal structure requires them to pay corporate taxes on dividends. These hotel stocks are best represented by the Dow Jones U.S. Hotels Index, which had a total return over the past year of 0.1%.
Hotel REITs, on the other hand, are companies that focus more on the acquisition, ownership, and operation of hotel real estate. Some REITs even manage the hotels they own. They are legally structured in a way that exempts them from paying taxes on distributed dividends, but they must distribute 90% of their taxable income to shareholders in order to be eligible as a REIT. These hotel REITs are best represented by the Dow Jones U.S. Hotel and Lodging REITs Index, which had a total return of -28.0% over the past year.
Both hotel stocks and hotel REITs, represented by their respective indexes, have dramatically underperformed the broader market over the past year with total returns well below the Russell 1000's total return of 22.0%, as of December 3, 2020. All statistics in the tables below are as of December 3.
In the first half of this story we look at the top 3 hotel stocks with: the best value, the fastest growth, and the most momentum. In the second half, we examine the top 3 hotel REITs with: the best value, the fastest growth, and the best performance. Because the hotel industry has suffered severely from the impacts of the COVID-19 pandemic this year, many companies have not been profitable. Thus, we use the price-to-sales ratio to determine the best value stocks and sales growth to determine the fastest growth stocks.
Best Value Hotel Stocks
These are the hotel stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For young companies that have not reached profitability, this can provide an idea of how much business you’re getting for each dollar invested.
|Best Value Hotel Stocks|
|Price ($)||Market Cap ($B)||12-Month Trailing P/S Ratio|
|Wyndham Destinations Inc. (WYND)||44.84||3.9||1.6|
|Extended Stay America Inc. (STAY)||14.04||2.5||2.4|
|Hyatt Hotels Corp. (H)||73.64||7.5||2.6|
- Wyndham Destinations Inc.: Wyndham Destinations is a vacation timeshare company that provides vacation property ownership, exchange, and rental services.
- Extended Stay America Inc.: Extended Stay America is an economy apartment hotel chain and also operates motels. Its accommodations offer guest rooms, dining services, on-site laundry, pools, fitness centers, and more. The company's hotel operating margin fell to 47.3% compared to 53.8% in the same period in 2019 in Q3 2020, which ended September 30, 2020. Extended stay also reported a 40.8% decline in net income on a 14.1% decline in revenue. Extended Stay America attributed the declines to the pandemic.
- Hyatt Hotels Corp.: Hyatt Hotels is a multinational hospitality company that develops and manages branded hotels, resorts, and residential and vacation ownership properties.
Hotel Stocks With the Most Sales Growth or Least Sales Decline
These are the hotel stocks with the highest year-over-year (YOY) sales growth or lowest sales decline for the most recent quarter. A company’s ability to maintain sales in a difficult business environment can be a sign of good management and/or a strong business model.
|Hotel Stocks With the Most Sales Growth or Least Sales Decline|
|Price ($)||Market Value ($B)||Revenue Growth (%)|
|Accor SA (ACCYY)||7.20||9.4||0.6|
|Extended Stay America Inc. (STAY)||14.04||2.5||-14.1|
|Choice Hotels International Inc. (CHH)||102.16||5.7||-32.2|
- Accor SA: Accor is a France-based hospitality company that owns, manages, and franchises hotels, resorts, and vacation facilities. The company announced in late November that it agreed to acquire full ownership of several sbe Entertainment Group hotel brands and food & beverage brands. The hotel brands include Delano, Mondrian, SLS, and Hyde, while the food & beverage brands include Cleo, Fili'a or Carna by Dario Cecchini. The deal includes a $300 million cash investment by Accor almost entirely through the redemption of sbe’s debt.
- Extended Stay America Inc.: See above for company description.
- Choice Hotels International Inc.: Choice Hotels International franchises lodging properties under brand names such as Comfort Inn, Comfort Suites, Quality, and Econo Lodge. It also offers vacation rental properties, travel tips, and other services. The company reported an 81.0% decline in net income as revenue fell 32.2% in Q3 2020, which ended September 30, 2020. In its Q3 report, the company said its domestic systemwide occupancy rate had improved from a low of 28% in early April to an average weekly occupancy consistently exceeding 50% since the week of June 21, 2020 through October 24. The company, nonetheless, noted that the pandemic continued to negatively impact its business and the outlook remains uncertain.
Hotel Stocks with the Most Momentum
These are the hotel stocks that had the highest total return over the last 12 months.
|Hotel Stocks with the Most Momentum|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Huazhu Group Ltd. (HTHT)||50.30||16.1||50.0|
|Choice Hotels International Inc. (CHH)||102.16||5.7||5.8|
|Wyndham Hotels & Resorts Inc. (WH)||58.10||5.4||2.4|
|Dow Jones U.S. Hotels Index||N/A||N/A||0.1|
- Huazhu Group Ltd.: Huazhu Group is a China-based hotel management company that provides hotel leasing, hotel operation, and co-development services.
- Choice Hotels International Inc.: See above for company description.
- Wyndham Hotels & Resorts Inc.: Wyndham Hotels & Resorts owns and operates a hotel and resort chain. It offers amenities, resorts, meetings and events spaces, wedding venues, and more. The company reported a 40.0% decline in net income as net revenue fell 39.8% in Q3 2020, which ended September 30, 2020. Despite the pandemic's adverse impact on global travel and hotel revenue, the company said its economy and midscale brands in the U.S. continued to gain market share.
Best Value Hotel REITs
These are the hotel REITs with the lowest 12-month trailing price-to-sales (P/S) ratio. For young companies that have not reached profitability, this can provide an idea of how much business you’re getting for each dollar invested.
|Best Value Hotel REITs|
|Price ($)||Market Cap ($M)||12-Month Trailing P/S Ratio|
|CorePoint Lodging Inc. (CPLG)||7.02||408.3||0.8|
|Hersha Hospitality Trust (HT)||8.28||321.6||1.2|
|Service Properties Trust (SVC)||12.82||2,112||1.3|
- CorePoint Lodging Inc.: CorePoint Lodging is a REIT focused on midscale and upper-midscale select service hotels. Its portfolio includes hotels located near employment centers, airports, and major travel thoroughfares. The company reported a net loss of $8 million as revenue fell 50.2% in Q3 2020, which ended September 30, 2020. CorePoint sold 20 non-core hotels for a combined gross sales price of approximately $97 million during the quarter.
- Hersha Hospitality Trust: Hersha Hospitality is a REIT that owns and operates upscale and mid-scale limited service and extended-stay hotels located in established metropolitan markets.
- Service Properties Trust: Service Properties is a REIT that focuses on hotels and travel centers. The company also provides leasing and management services. Service Properties announced in the latter half of November that it had completed its previously announced sale of eight hotels for $45.3 million. The company said the proceeds of the sale would be used for debt repayment.
Hotel REITs With the Most Sales Growth or Least Sales Decline
These are the hotel REITs with the highest year-over-year (YOY) sales growth or lowest sales decline for the most recent quarter. A company’s ability to maintain sales in a difficult business environment can be a sign of good management and/or a strong business model.
|Hotel REITs With the Most Sales Growth or Least Sales Decline|
|Price ($)||Market Cap ($B)||Revenue Growth (%)|
|Four Corners Property Trust Inc. (FCPT)||28.55||2.1||6.9|
|CorePoint Lodging Inc. (CPLG)||7.02||0.4||-50.2|
|Services Properties Trust (SVC)||12.82||2.1||-50.6|
- Four Corners Property Trust Inc.: Four Corners Property is a REIT that owns and leases properties for use by restaurants, food services, and related industries. The company posted net income growth of 5.4% as revenue rose 6.9% in Q3 2020, which ended September 30, 2020.
- CorePoint Lodging Inc.: See above for company description.
- Services Properties Trust: See above for company description.
Hotel REITs with the Best Performance
These are the hotel REITs that had the best returns or smallest declines in total return over the past 12 months out of the companies we looked at.
|Hotel REITs with the Best Performance|
|Price ($)||Market Cap ($B)||12-Month Trailing Total Return (%)|
|Four Corners Property Trust Inc. (FCPT)||28.55||2.1||7.6|
|Host Hotels & Resorts Inc. (HST)||14.90||10.5||-12.2|
|Sunstone Hotel Investors Inc. (SHO)||11.06||2.4||-16.5|
|Dow Jones U.S. Hotel and Lodging REITs Index||N/A||N/A||-28.0|
- Four Corners Property Trust Inc.: See above for company description.
- Host Hotels & Resorts Inc.: Host Hotels & Resorts operates as a REIT engaged in the management of luxury and upper-upscale hotels. The company reported a net loss of $316 million as revenue sank 84.3% in Q3 2020, which ended September 30, 2020. The net loss was a significant change from net income of $372 million posted in the year-ago quarter. Host Hotels & Resorts said that it reopened 20 hotels during the quarter, but that operations remain suspended at four hotels due to pandemic-related low occupancy or state-mandated restrictions, as of November 4, 2020.
- Sunstone Hotel Investors Inc.: Sunstone Hotel Investors is a REIT focused on hospitality and lodging. It owns primarily upper scale hotels throughout the U.S. and operates under various brand names.
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YCharts. "Financial Data." Accessed Dec. 3, 2020.
Extended Stay America Inc. "EXTENDED STAY AMERICA ANNOUNCES THIRD QUARTER 2020 RESULTS." Accessed Dec. 5, 2020.
Accor SA. "Accor takes full ownership of sbe hotel brands." Accessed Dec. 5, 2020.
Choice Hotels International Inc. "Choice Hotels International Reports 2020 Third Quarter Results." Accessed Dec. 5, 2020.
Wyndham Hotels & Resorts Inc. "Wyndham Hotels & Resorts Reports Third Quarter 2020 Results." Accessed Dec. 5, 2020.
CorePoint Lodging Inc. "CorePoint Lodging Reports Third Quarter 2020 Results." Accessed Dec. 6, 2020.
Service Properties Trust. "Service Properties Trust Completes the Sale of Eight Hotels for $45.3 Million." Accessed Dec. 6, 2020.
Four Corners Property Trust Inc. "FCPT ANNOUNCES THIRD QUARTER 2020 FINANCIAL AND OPERATING RESULTS." Accessed Dec. 6, 2020.
Host Hotels & Resorts Inc. "HOST HOTELS & RESORTS, INC. REPORTS RESULTS FOR THIRD QUARTER 2020." Accessed Dec. 6, 2020.