Travel has been one of the hardest hit industries amid the pandemic. Since March 2020, businesses across the hospitality and leisure segments have endured months of closures, followed by a cycle of limited re-openings and more closures. However, the roll out of the effective vaccines has provided the broader markets with a reason for some optimism.  Following the relaxing of social distancing and other travel related restrictions, hotel occupancy rates have started recovering.

Leading hotels are deploying a range of health and hygiene measures for the  safety of their patrons. Some leading chains have also added contactless elements to the customer experience, including contactless checkouts via app or email, and robots to deliver food and  beverages. Following almost a year of social distancing and limited travelling, the sector is expected to bounce back following the mass vaccination of entire populations. President Biden’s plan to vaccinate 100 million people within 100 days has resuscitated  investor optimism regarding this industry.

This backdrop has helped hotel stocks Choice Hotels International, Inc. (CHH), Bluegreen Vacations Corporation (BXG) and Red Lion Hotels Corporation (RLH) outperform the overall industry during the recovery phase. We expect these companies, with strong balance sheets, disciplined capital allocation strategies, proven brands and compelling franchisee value propositions, to deliver decent returns this year.

Choice Hotels International, Inc. (CHH)

CHH is a hotel franchisor operating through Hotel Franchising, SkyTouch Technology and Corporate & Other segments. The company’s family of hotel brands provide business and leisure travelers with a range of lodging options from limited service to full-service hotels in the upscale, midscale, extended-stay and economy segments.

Earlier this month CHH awarded franchise agreements to Gulf Coast Hotel Management, Inc. to convert 15 MainStay Suites hotels in major markets across the U.S., adding nearly 1,700 rooms to the company’s portfolio. This strategic investment is expected to significantly increase the brand’s foothold in the midscale extended stay segment.

During the same period, Cambria Hotels, an upscale brand franchised by CHH, opened the Cambria Hotel Detroit-Shelby Township. This expansion is expected to increase the brand’s footprint across the country, even while facing a challenging travel and construction environment.

On January 13, CHH entered into a strategic agreement with Penn National Gaming, Inc. (PENN), adding nearly 7,000 upscale rooms to CHH’s network as part of its Ascend Hotel Collection. This agreement will provide guests  more upscale travel experiences and a wider variety of fun and entertainment on the road.

CHH’s revenues have increased 38.9% sequentially to $210.77 million in the third quarter ended September 30, 2020. Income from operating activities has risen 549.7% from the prior quarter to $51.07 million over the same period, while its EPS has improved 750% sequentially to $0.26.

Analysts expect CHH’s revenues to rise 28.7% to $1.02 billion for the fiscal 2021 ending December 31. The consensus EPS estimate of $3.23 for the current year represents a 50.9% improvement from the year-ago value. CHH has gained 17.4% over the past six months.

How does CHH stack up for the POWR Ratings?

A for Trade Grade

A for Buy & Hold Grade

B for Peer Grade

A for Overall POWR Rating

The stock is also ranked #2 of 24 stocks in the Travel – Hotels/Resorts Industry.

Bluegreen Vacations Corporation (BXG)

BXG is a sales, marketing and management company, primarily focused on the vacation ownership industry. The company operates through two segments, sales of vacation ownership interests (VOIs) and financing, and resort operations and club management. In addition, it offers traveler plus programs, food and beverage, and retail services, rental services to third parties, and the management of construction activities.

BXG had filed a lawsuit against American Resort Management Group (ARMG). . In December, BXG emerged victorious through a court-approved settlement, which allowed 100% of BXG’s claims against ARMG in an amount in excess of $1 million.

On January 20, BXG announced that it will sponsor the 2021 NASCAR Cup Series Duel Races at Daytona. As the official vacation ownership provider of NASCAR, BXG would introducing its r unique resorts and iconic destinations to NASCAR fans.

BXG’s revenues have increased 110% sequentially to $144.57 million in the third quarter ended September 30, 2020. Its adjusted EBITDA has risen 546.6% from the prior quarter to $22.36 million over the same period, while its EPS has improved 216.67% sequentially to $0.14.

Analysts expect BXG’s revenues to rise 29.4% to $668.20 million for the fiscal 2021 ending December 31. The consensus EPS estimate of $0.58 for the current year represents a 262.5% improvement from the year-ago value. The stock has gained 45.1% over the past six months.

BXG’s POWR Ratings reflect this promising outlook. It is rated a “Buy” in our POWR Ratings system. It has an “A” for Trade Grade, and a “B” Buy & Hold Grade. In 24 stocks of the same industry, it is ranked #11.

Red Lion Hotels Corporation (RLH)

RLH is a hospitality and leisure company engaged in the franchising, management and ownership of hotels under the brands, including Hotel RL, Red Lion Hotel, Red Lion Inn & Suites, GuestHouse and Settle Inn & Suites. The RLHC brands focus on the franchising of midscale and economy hotels. It operates in two segments, company operated hotels and franchised hotels.

In December, RLH announced that it will be acquired by Sonesta International Hotels Corporation in an all-cash transaction valued at approximately $90 million. This transaction represents a 30% premium over that day’s closing price prior to the transaction being announced. The merger agreement, conducted after a thorough review of strategic alternatives, is expected to significantly boost the share price once the transaction closes. RLH’s total revenues have increased 29.9% sequentially to $13.28 million in the third quarter ended September 30, 2020. Its adjusted EBITDA has risen 491.5% from the prior quarter to $1.54 million over the same period.

Analysts expect RLH’s EPS to grow at a rate of 4.9% per annum over the next five years. The consensus EPS estimate for the about-to-be reported quarter (ended December 2020) represents  a 37.5% improvement year-over-year. The stock has gained 45.8% over the past six months.

It is no surprise that RLH is rated “Strong Buy” with an “A” for Trade Grade, and Buy & Hold Grade, and a “B” for Peer Grade. It is currently ranked #7 of 24 stocks in the same Industry.

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CHH shares were unchanged in after-hours trading Monday. Year-to-date, CHH has declined -4.08%, versus a 2.81% rise in the benchmark S&P 500 index during the same period.

About the Author: Rishab Dugar

Rishab is a financial journalist and investment analyst. His investment approach is to focus on quality stocks, trading at low prices, with business models that he readily understands. More...

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