The hotel sector has been one of the worst-performing industries over the past 20 months. Vaccinations and gradual relaxations of travel restrictions fueled a modest recovery in the U.S. by the third quarter of 2021. While the initial spread of the omicron coronavirus variant caused countries to close their borders to international travelers, recent findings suggest that the variant is mild. WHO recently reported additional evidence suggesting that omicron is milder than the previous variants.

The global hospitality market is expected to grow 15.1% year-over-year to reach $4.55 trillion in 2022 and at a 10.2% CAGR over the next four years to reach $6.72 trillion by 2026.

Given the backdrop, here are the top hotel stocks that are well-positioned to capitalize on the growing demand: Choice Hotels International, Inc. (CHH), Wyndham Hotels & Resorts Inc. (WH), and Travel + Leisure Co. (TNL).

Choice Hotels International, Inc. (CHH)

CHH is a global hotel franchisor that operates in two segments: Hotel Franchising; and Corporate & Other. The company franchises lodging properties and markets cloud-based property management software to non-franchised hoteliers.

This month, CHH’s loyalty program, Choice Privileges, launched the “Fuel up for winter fun” promotion. Choice Privileges members could earn up to $50 gift cards after two stays. The company expects to incentivize travel through these loyalty programs, thereby boosting profits.

In December 2021, Cambria Hotels, an upscale brand franchised by CHH, expanded Golden State Footprint with the opening of the Cambria Hotel Calabasas and Cambria Hotel Louisville Downtown-Whiskey Row. The company also began constructing Cambria Hotel Niagara Falls. CHH is expected to boost revenues and build the company’s recognition by expanding in major markets across the country.

CHH’s total revenues increased 53% year-over-year to $323.37 million in the fiscal third quarter ended September 30, 2021. Its net income improved 705% year-over-year to $116.66 million. The company’s EPS increased 700% from the year-ago value to $2.08.

The consensus revenue estimate of $274.85 million for the quarter ended December 31, 2021, represents a 42.1% growth year-over-year. The consensus EPS estimate of $0.83 for the to-be-reported fourth quarter indicates a 63.3% growth year-over-year.

Over the past year, the stock has gained 32.5% to close yesterday’s trading session at $139.89.

CHH’s POWR Ratings reflect this promising outlook. The company has an overall rating of B, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

CHH has a grade of A for Quality and a B for Growth. Within the Travel – Hotels/Resorts industry, it is ranked #3 of 20 stocks. To see additional POWR Ratings (Value, Momentum, Stability, and Sentiment) for CHH, click here.

Wyndham Hotels & Resorts Inc. (WH)

WH is the world’s largest hotel franchising company, with around 9,000 hotels across 95 countries. It operates in two segments: Hotel Management; and Hotel Franchising. The Hotel Management segment offers management services for full and limited-service hotels. The Hotel Franchising segment licenses its lodging brands and provides related services to third-party hotel owners.

This month, WH expanded its global footprint by entering Poland with Upscale Wyndham Wroclaw Old Town. WH’s portfolio in Europe comprises over 350 operational hotels across 30 countries. WH’s growth strategy of expanding its business in Europe expects to boost its revenues and market share.

Last month, WH announced a multi-hotel agreement with Ceres Development to rebrand three hotels. These new Wyndham hotels, two in Indiana and one in Ohio continue WH’s steady conversion growth.

Last month, WH added Bristol Panama, a Registry Collection Hotel, to its growing portfolio. WH announced the launch of La Quinta by Wyndham brand’s first hotel in the Cultural Shandong Province of China. This is expected to expand WH’s global reach and marks the latest stage of its global development strategy in addition to its Asia Pacific portfolio.

In the fiscal 2021 third quarter ended September 30, WH’s net revenue increased 37.4% from the same period last year to $463 million. Adjusted EBITDA rose 88.3% from the same period last year to $194 million. Adjusted net income increased 220.6% from the year-ago value to $109 million. The company’s adjusted EPS increased 222.2% from the year-ago value to $1.16.

Analysts expect WH’s revenue for the quarter ended December 31, 2021, to come in at $383.83 million, representing 29.7% year-over-year growth. The company’s EPS is expected to stand at $0.53 for the to-be-reported quarter, indicating a 662% rise from the same period last year.

Shares of WH gained 32% over the past year and closed yesterday’s trading session at $81.04.

WH has an overall rating of B, which translates to Buy in our proprietary rating system. The stock has a B grade for Growth, Sentiment, and Quality. It is ranked #4 of 20 stocks in the Travel – Hotels/Resorts industry. Click here to see WH ratings for Value, Stability, and Momentum.

Travel + Leisure Co. (TNL)

TNL provides hospitality services and products in the U.S. and internationally. It operates in two segments: Vacation ownership; and Leisure Travel and Membership. The company has a portfolio of hotels, resorts, lifestyle, and travel brands, including Wyndham Destinations, Panorama, and Travel + Leisure Group.

In November 2021, TNL priced senior secured notes due 2029. TNL is expected to raise $650 million in gross proceeds through this note offering. The company intends to utilize the funds to redeem its existing notes due March 2022 and pay related expenses. As the interest rates are expected to rise soon, this senior notes offering should allow TNL to keep its interest burden at bay over the long term.

In October 2021, TNL completed $350 million term securitization by issuing $350 million of asset-backed notes. “The strong investor demand allowed us to tighten spread levels across the capital structure. The compression in credit spreads partially offset the recent volatility in benchmark rates and is further evidence of continued investor confidence in the Sierra platform,” said TNL CEO Mike Hug.

In the fiscal 2021 third quarter ended September 30, 2021, TNL’s net revenues increased 36.6% year-over-year to $839 million. Net income from continuing operations came in at $101 million, up 152.5% from the same period last year. TNL’s income before income taxes rose 636.8% from the prior-year quarter to $140 million. The company’s total adjusted EBITDA rose 64% from the year-ago value to $228 million. In addition, the company’s adjusted earnings per share increased 43.4% from the year-ago value to $1.19.

TNL’s revenues are expected to improve 22.2% year-over-year to $788.19 million for the to-be-reported quarter ended December 31, 2021. Analysts expect TNL’s EPS for the fiscal fourth quarter to come in at $0.95, representing a 198.4% rise year-over-year. The company has an impressive earnings surprise history, as it surpassed the consensus EPS estimates in three of the four trailing quarters.

Over the past year, the stock has gained 11.3% to close yesterday’s trading session at $53.61.

TNL’s strong fundamentals are reflected in its POWR Ratings. The company has an overall rating of B, which translates to Buy in our proprietary rating system. TNL has a B grade for Quality, Growth, Value, and Sentiment. Among the 20 stocks in the Travel -Hotels/Resorts industry, it is ranked #2. Click here to see the additional POWR Ratings for Momentum and Stability for TNL.

CHH shares fell $0.06 (-0.04%) in after-hours trading Thursday. Year-to-date, CHH has declined -9.75%, versus a -5.94% rise in the benchmark S&P 500 index during the same period.

About the Author: Aditi Ganguly

Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...

More Resources for the Stocks in this Article