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 -15.1%.

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 -47.8% 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 13.3%, as of September 18, 2020. All statistics in the tables below are as of September 21.

In the first half of this story we look at the top 3 hotel stocks with: the best value, the least sales decline, and the most momentum. In the second half, we examine the top 3 hotel REITs with: the best value, the most sales growth or least sales decline, and the best performance.

Best Value Hotel Stocks

These are the hotel stocks with the lowest 12-month trailing price-to-sales (P/S) ratio. For companies in early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business's value. A business with higher sales could eventually produce more profit when it achieves, or returns to, profitability. The price-to-sales ratio shows how much you're paying for the stock for each dollar of sales generated.

Best Value Hotel Stocks

 

Price ($) Market Cap ($B) 12-Month Trailing P/S Ratio
Wyndham Destinations Inc. (WYND) 32.28 2.8 1.0
Hyatt Hotels Corp. (H) 57.02 5.8 1.6
Marriott International Inc. (MAR) 99.88 32.4 2.0

Source: YCharts

  • Wyndham Destinations Inc.: Wyndham Destinations is a vacation timeshare company that provides vacation property ownership, exchange, and rental services.
  • Hyatt Hotels Corp.: Hyatt Hotels is a multinational hospitality company that develops and manages branded hotels, resorts, and residential and vacation ownership properties. The company reported a net loss of $236 million in Q2 2020, which ended June 30, 2020. It was a significant reversal from net income of $86 million in the year-ago quarter. Hyatt said that the COVID-19 pandemic has had a major impact on its business.
  • Marriott International Inc.: Marriott International owns and operates hotels, motels, and timeshare properties in various destinations worldwide. The company reported a net loss of $234 million in Q2 2020, which ended June 30, 2020. It posted net income of $232 million in the same quarter a year earlier. Revenue for the quarter was down 72.4%. Marriott said that its second quarter results were "dramatically impacted" by the pandemic as well as efforts to limit the virus' spread.

Hotel Stocks with the Least Sales Decline

These are the hotel stocks with the least year-over-year (YOY) 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 Least Sales Decline

 

Price ($) Market Cap ($B) Sales Growth (%)
GreenTree Hospitality Group Ltd. (GHG) 13.00 1.3 -24.4
Extended Stay America Inc. (STAY) 12.38 2.2 -28.7
Huazhu Group Ltd. (HTHT) 42.02 12.5 -34.3

Source: YCharts

  • GreenTree Hospitality Group Ltd.: GreenTree Hospitality is a China-based holding company engaged in the hospitality business. It specializes in the management and operation of franchised hotels in China. It also provides guest houses, board rooms, banquet halls, wedding venues, and more. The company posted a 26.3% decline in net income in Q2 2020, which ended June 30, 2020. The company noted that the occupancy rate for all of its hotels in operation in Q2 fell to 63.4% compared to 81.1% in the year-ago quarter. The declines were largely driven by the pandemic.
  • Extended Stay America Inc.: Extended Stay America owns and operates hotels and motels. Its accommodations offer guest rooms, dining services, on-site laundry, pools, fitness centers, and more. The company announced earlier this month the appointment of David Clarkson to the role of Chief Financial Officer (CFO). He succeeds Brian Nicholson who will continue with the company in a consulting role until February 26, 2021.
  • Huazhu Group Ltd.: Huazhu Group is a China-based hotel management company that provides hotel leasing, hotel operation, and co-development services.

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 (%)
GreenTree Hospitality Group Ltd. (GHG) 13.00 1.3 18.8
Huazhu Group Ltd. (HTHT) 42.02 12.5 18.7
Choice Hotels International Inc. (CHH) 94.91 5.3 2.9
Russell 1000 N/A N/A 13.3
Dow Jones U.S. Hotels Index N/A N/A -15.1

Source: YCharts

  • GreenTree Hospitality Group Ltd.: See above for company description.
  • Huazhu Group Ltd.: 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 a net loss of $2.4 million in Q2 2020, which ended June 30, 2020, after posting a profit a year earlier. Revenue for the quarter was down 52.2% and the company's occupancy rate plunged compared to the same three-month period a year ago. Choice Hotels noted that it expects the impact of COVID-19 to be less significant for the quarter ending September 30, 2020.

Hotel REITs with the Best Value

These are the hotel REITs with the lowest 12-month trailing P/S ratio. For companies in early stages of development or industries suffering from major shocks, this can be substituted as a rough measure of a business's value. A business with higher sales could eventually produce more profit when it achieves, or returns to, profitability. The P/S ratio shows how much you're paying for the stock for each dollar of sales generated.

Hotel REITs with the Best Value

 

Price ($) Market Cap ($B) 12-Month Trailing P/S Ratio
CorePoint Lodging Inc. (CPLG) 5.63 0.3 0.5
Service Properties Trust (SVC) 8.01 1.3 0.7
Park Hotels & Resorts Inc. (PK) 10.76 2.5 1.2

Source: YCharts

  • CorePoint Lodging Inc.: CorePoint Lodging is focused on midscale and upper-midscale select service hotels. Its portfolio includes hotels located near employment centers, airports, and major travel thoroughfares. CorePoint Lodging reported a net loss of $107 million in Q2 2020, which ended June 30, 2020. The loss was more than five times bigger than the net loss it reported in the same quarter a year earlier. Revenue for the quarter fell 67.1%. The company's comparable occupancy rate for its hotels fell to 36.4% compared to 70.9% in the same quarter a year ago. The decline was largely driven by the pandemic.
  • Service Properties Trust: Service Properties focuses on hotels and travel centers. The company also provides leasing and management services. Service Properties reported a net loss of $37.3 million in Q2 2020, which ended June 30, 2020. Revenue for the quarter dropped 64.8% while the company's occupancy rate fell 46 percentage points, largely driven by the pandemic.
  • Park Hotels & Resorts Inc.: Park Hotels & Resorts owns and operates hotels and resorts. Its properties offer a variety of services and amenities, including accommodation, dining, meeting and wedding rooms, spas, and fitness centers. The company said in mid-September that it has reopened 14 hotels since June with about three-quarters of its 60 hotels now open. Its occupancy rate improved to 32.3% in July and to 38.8% in August.

Hotel REITs with the Most Sales Growth or Least Sales Decline

These are the hotel REITs with the highest 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) 25.50 1.8 3.4
Service Properties Trust (SVC) 8.01 1.3 -64.8
CorePoint Lodging Inc. (CPLG) 5.63 0.3 -67.1

Source: YCharts

  • Four Corners Property Trust Inc.: Four Corners Property owns and leases properties for use by restaurants, food services, and related industries. The company posted net income growth of 3.3% on revenue growth of 3.4% in Q2 2020, which ended June 30, 2020. Four Corners noted that in response to the pandemic it has been "primarily focused on acquiring credit worthy tenants in attractive locations with durable concepts."
  • Service Properties Trust: See above for company description.
  • CorePoint Lodging Inc.: See above for company description.

Hotel REITs with the Best Performance

These are the hotel REITs that had the 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) 25.50 1.8 -5.8
Host Hotels & Resorts Inc. (HST) 11.15 7.9 -32.8
Apple Hospitality REIT Inc. (APLE) 10.25 2.3 -34.6
Russell 1000 N/A N/A 13.3
Dow Jones U.S. Hotel and Lodging REITs Index N/A N/A -47.8

Source: YCharts

  • Four Corners Property Trust Inc.: See above for company description.
  • Host Hotels & Resorts Inc.: Host Hotels & Resorts owns a portfolio of luxury and upper-upscale hotels. The company announced at the end of August the appointment of Sourav Ghosh to the roles of executive vice president, CFO, and treasurer. 
  • Apple Hospitality REIT Inc.: Apple Hospitality owns hotels located in urban, high-end suburban, and developing markets throughout the U.S. Its portfolio is comprised of a number of well-known brands including Marriott, Hilton, and Hyatt.