The hotel industry was severely impacted by COVID-19 pandemic-induced travel restrictions and social distancing rules. However, because solid progress on the vaccination front has helped contain the spread of the virus in several parts of the world this year, the industry seems set for a solid rebound.
On November 8, the Biden administration announced the lifting of the U.S.’ international travel ban for vaccinated tourists after nearly 18 months. This should be a catalyst for the travel and tourism industry. According to AAA, travel volume is expected to rise to within 5% of 2019 levels this Thanksgiving, with some 53.40 million people taking to the air, roads, and rails.
Therefore, we think it could be wise to bet on quality hotel stocks InterContinental Hotels Group PLC (IHG), Choice Hotels International, Inc. (CHH), and Wyndham Hotels & Resorts, Inc. (WH). They are expected to perform well this quarter and beyond as travel picks up.
InterContinental Hotels Group PLC (IHG)
IHG owns, manages, franchises, and leases hotels in various countries worldwide. The U.K.-based company has approximately 5,964 hotels and 886,036 rooms in approximately 100 countries.
On October 22, 2021, Keith Barr, the CEO of IHG Hotels & Resorts, said, “We continue to grow rapidly, opening 79 hotels in the quarter and signing another 91 into our pipeline of 1,800 properties, and we expect development activity to pick up further over the remainder of the year. The rapid progress we are making with the review of the Holiday Inn and Crowne Plaza portfolios is also ensuring that we are well positioned for future growth.”
IHG’s occupancy came in at 66% in the Americas segment for the third quarter, ended September 30, 2021, up from 60% in the prior quarter. In the same segment, the company’s gross system grew 3.3% year-over-year, with 2.9k rooms (30 hotels) opened in the quarter. Also, in the EMEAA segment, its occupancy came in at 49%, compared to 34% in the second quarter.
For its fiscal 2021, analysts expect IHG’s revenue to be $1.40 billion, representing a 41.4% year-over-year rise. The company’s EPS is expected to increase 308.5% year-over-year to $1.28 this year. Over the past year, the stock has gained 10.4% in price to close yesterday’s trading session at $67.93.
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 distinct factors, each with its own weighting.
Also, the stock has a B grade for Growth, Sentiment, and Quality. Within the Travel – Hotels/Resorts industry, it is ranked #4 of 19 stocks. Click here to see the additional POWR Ratings for Value, Momentum, and Stability for IHG.
Choice Hotels International, Inc. (CHH)
Rockville, Md.-based CHH is a global hotel franchiser. Currently, it operates approximately 7,147 hotels with 597,977 rooms located in 50 states, the District of Columbia, and approximately 40 countries and territories.
CHH announced on November 15 that Choice Privileges is once again offering its famous annual “Members Only Madness” promotion. Through November 20, Choice Privileges members will have exclusive access to daily deals, and Choice Hotels mobile app users will be able to receive an additional special offer. So, the demand for its services could increase significantly during this period.
CHH’s total revenues increased 53.4% year-over-year to $323.37 million for its fiscal third quarter, ended September 30, 2021. Its operating income came in at $159.11 million, representing a 213.8% year-over-year rise. Its net income was $116.66 million, up 704.5% year-over-year. Furthermore, its EPS increased 700% year-over-year to $2.08.
Analysts expect CHH’s revenue to grow 38.1% year-over-year to $1.07 billion in its fiscal year 2021. In addition, the company’s EPS is expected to increase 82% year-over-year to $4.04 in the current year. Over the past nine months, the stock has gained 42.5% to close yesterday’s trading session at $149.91.
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 Quality, and a B grade for Growth. It is ranked #3 in the Travel – Hotels/Resorts industry. Click here to see the additional POWR Ratings for CHH (Sentiment, Value, Stability, and Momentum).
Note that CHH is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
Wyndham Hotels & Resorts, Inc. (WH)
WHH operates through its Hotel Franchising and Hotel Management segments. The Parsippany, N.J.-headquartered company’s hotel brand portfolios include Super 8, La Quinta, Hawthorn, Wyndham Grand, Dolce, and Wyndham.
On October 5, 2021, WH and Playa Hotels & Resorts announced the launch of a new all-inclusive resort brand, Wyndham Alltra. Geoffrey A. Ballotti, WH’s president and CEO, said, “Partnering with a leading owner, operator and developer of all-inclusive resorts in prime beachfront locations will create immediate access for our customers and our over 80 million Wyndham Rewards members to a fabulous, all-inclusive guest experience—members will be able to redeem their Wyndham Rewards points for a new all-inclusive vacation experience at Wyndham Alltra resorts, and earn points for their stays.”
For its fiscal third quarter, ended September 30, 2021, WH’s adjusted net income came in at $109 million compared to $34 million in the previous quarter. Its adjusted EPS was $1.16 compared to $0.36 in the year-ago period. Furthermore, its adjusted EBITDA increased 88.3% year-over-year to $194 million.
WH’s revenue and EPS are expected to increase 19.5% and 189.3%, respectively, year-over-year to $1.55 billion and $2.98 in its fiscal 2021. Also, it surpassed the Street’s EPS estimates in each of the trailing four quarters. Over the past nine months, the stock has gained 44.2% in price to close yesterday’s trading session at $86.30.
WH has an overall B rating, which represents Buy in our proprietary rating system. Also, it has a B grade for Growth, Sentiment, and Quality. WH is ranked #2 in the Travel – Hotels/Resorts industry. Click here to see WH’s ratings for Value, Stability, and Momentum.
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IHG shares were trading at $68.17 per share on Thursday afternoon, up $0.24 (+0.35%). Year-to-date, IHG has gained 4.68%, versus a 26.81% 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...
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