Most hotels around the globe had to close their doors last year due to restrictions imposed to curb the spread of the deadly COVID-19 virus. While the industry began recovering earlier this year, the resurgence of COVID-19 cases due to the rapid spread of the Delta variant has fostered concerns related to the pace of the sector’s recovery.
However, increasing vaccinations could lead to more leisure travel and, in turn, increase the hotels’ occupancy rate. According to the U.S. Lodging Industry and Market Outlook from Lodging Analytics Research & Consulting (LARC), the U.S. RevPAR is expected to increase by 30.6% in 2021 and at a 16% CAGR from 2020 through 2025.
Given this backdrop, we think prominent hotel stocks InterContinental Hotels Group PLC (IHG), Choice Hotels International, Inc. (CHH), and Wyndham Hotels & Resorts, Inc. (WH), which are currently trading significantly below their 52-week price highs, could be solid bets.
InterContinental Hotels Group PLC (IHG)
Headquartered in Denham, in the U.K., IHG owns, manages, franchises, and leases hotels across the United States, Europe, Asia, and internationally. The company operates roughly 5,994 hotels and 884,484 rooms in more than 100 countries.
On September 8, IHG introduced artificial intelligence (AI)-focused voice-controlled smart rooms at the Kimpton Rowan Hotel in Palm Springs, Calif., in partnership with Josh.ai. As the first global hotel company to deploy Josh.ai, the move is expected to give it an edge over its peers.
IHG’s total revenue increased 15.8% year-over-year to $565 million for the six months ended June 30, 2021. The company’s operating profit came in at $138 million, versus a $233 million loss in the year-ago period. Its adjusted EBITDA increased 117.8% year-over-year to $233 million. Also, its EPS was $0.40, up 724.5% year-over-year.
For its fiscal year 2021, analysts expect IHG’s revenue to be $1.40 billion, representing a 40.9% year-over-year rise. In addition, its EPS is expected to increase 280% year-over-year to $1.19 in its fiscal 2021. Over the past year, the stock has gained 9% in price to close yesterday’s trading session at $62.72. Also, the stock is currently trading 16.6% below its 52-week high of $75.20, which it hit on February 22, 2021.
IHG’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
The stock has an A grade for Sentiment, and a B grade for Growth and Quality. Within the Travel – Hotels/Resorts industry, it is ranked #3 of 19 stocks. Click here to see the additional POWR Ratings for Stability, Value, and Momentum for IHG.
Choice Hotels International, Inc. (CHH)
CHH is a global hotel franchisor worldwide. The Rockville, Md.-based company operates in two segments: Hotel Franchising and Corporate & Other. It franchises lodging properties under the brand names of Comfort Inn, Comfort Suites, Quality, and Clarion. The company also develops and markets cloud-based property management software to non-franchised hoteliers.
Cambria Hotels, an upscale brand franchised by CHH, announced the opening of the Cambria Hotel Napa Valley Silverado Trail on August 30, 2021, consistent with its U.S. expansion policy. This is expected to boost CHH’s revenues.
CHH’s total revenues increased 83.4% year-over-year to $278.34 million in its fiscal second quarter, ended June 30, 2021. Its operating income came in at $119.02 million, representing a 1408.7% year-over-year rise. Its net income increased to $85.88 million, versus a $2.44 net loss in the prior-year period, while its EPS was $1.53 compared to a $0.04 loss per share in the year-ago period.
Analysts expect CHH’s revenue to grow 37.7% year-over-year to $1.07 billion in its fiscal year2021. In addition, the company’s EPS is expected to increase 75.2% year-over-year to $3.89 in the current year. Also, it surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 13.6% in price to close yesterday’s trading session at $118.96. Also, the stock is currently trading 3.9% below its 52-week high of $123.77, which it hit on June 14, 2021.
CHH’s strong fundamentals are reflected in its POWR ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system.
In addition, it has an A grade for Growth and Quality, and a B grade for Sentiment. It is ranked #2 in the Travel – Hotels/Resorts industry. Click here to see the additional POWR Ratings for CHH (Value, Stability, and Momentum).
Wyndham Hotels & Resorts, Inc. (WH)
Worldwide hotel franchisor WH operates through its Hotel Franchising and Hotel Management segments. The Parsippany, N.J.-based concern is also involved in the loyalty program business. The company operates 21 hotel brands with approximately 8,900 hotels with about 796,000 rooms in approximately 95 countries.
On September 2, 2021, WH launched its Registry Collection Hotels in the Country of Georgia. Dimitris Manikis, President for Europe, Middle East, Eurasia and Africa (EMEA) at WH, said, “Our newest brand is the perfect option for independent luxury hotel owners who want to maintain their independent spirit while tapping into the global scale, capability and loyalty of Wyndham Hotels & Resorts, which is even more relevant as the industry recovers from the challenges of the global pandemic.”
For its fiscal second quarter, ended June 30, 2021, WH’s net revenue increased 57.4% year-over-year to $406 million. Its operating income came in at $133 million, versus a $194 million operating loss in the prior-year period. Also, its net income was $68 million compared to a $174 million net loss in the year-ago period. Its EPS for the quarter came in $0.73, compared to a $1.86 loss in the previous year.
WH’s revenue is expected to come in at $1.53 billion in its fiscal 2021, representing a 17.7% year-over-year rise. In addition, the company’s EPS is expected to increase 157.3% year-over-year to $2.65 in the current year. Also, it surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 22.4% in price to close yesterday’s trading session at $70.54. Also, the stock is currently trading 9.7% below its 52-week high of $78.13, which it hit on June 8, 2021.
WH’s POWR Ratings reflect this promising outlook. WH has a B grade for Growth, Sentiment, and Quality in our proprietary rating system.
Want More Great Investing Ideas?
IHG shares were unchanged in after-hours trading Thursday. Year-to-date, IHG has declined -3.13%, versus a 20.87% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries. More...
More Resources for the Stocks in this Article
|Ticker||POWR Rating||Industry Rank||Rank in Industry|
|IHG||Get Rating||Get Rating||Get Rating|
|CHH||Get Rating||Get Rating||Get Rating|
|WH||Get Rating||Get Rating||Get Rating|