Hilton Worldwide, Hilton Grand Vacations and InterContinental Hotels

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Chicago, IL – December 17, 2021 – Today Zacks Equity Research discusses hotels and motels including Hilton Worldwide Holdings Inc. HLT, Hilton Grand Vacations Inc. HGV and InterContinental Hotels Group PLC IHG.


Zacks hotels and motels are gradually coming out of the woods, due to the reopening of the economy and the intensification of vaccinations. Although the occupancy rate is improving, it is still below the level before the pandemic. Meanwhile, the spread of the highly contagious Omicron variant has sounded alarm bells for the industry.

However, people are feeling more optimistic and confident about the prospect of traveling again, thanks to the rapid pace of vaccinations. To capitalize on this sentiment, hoteliers are increasingly focusing on a number of initiatives to meet the needs of their guests upon their return to hotels. Industry players including Hilton around the world, Hilton Grand Vacations and InterContinental Hotels benefited from the prevailing scenario.

Industry Description

Zacks’ hotel and motel industry includes companies that own, lease, manage, develop and franchise hotels. Some vacation ownership and exchange companies are also part of the industry. Some industry participants own, develop and operate resorts.

Some companies are developing lodges and villages, as well as mobile housing, which includes modular skid-mounted housing, as well as central amenities that provide long-term and temporary housing for the workforce. Some of the players in the industry develop, market, sell and manage vacation property and related products. Few hoteliers also offer studios, one-bedroom suites, and accommodations to business and personal travelers in the middle market.

4 trends shaping the future of the hotel and motel industry

Occupancy and RevPAR still below pre-pandemic level: Although the occupancy rate is improving, it is still below the level before the pandemic. By STR, the occupancy rate for the week ended December 4 reached 54.8%, which contrasts sharply with the industry’s all-time low of 22% in mid-April 2020. However, the occupancy rate is still below the level before the pandemic.

According to the same report, the Average Daily Rate (ADR) and RevPAR were down 0.5% and 9.2%, respectively, from 2019 for the week ending December 4. According to STR’s monthly P&L data release, US hotel profitability weakened in October.

The high costs remain a pity: Higher costs remain a concern for industry participants. As the coronavirus pandemic continues to impact the global travel industry, hoteliers have focused on cost-saving measures to counter the crisis.

Employees in the industry are struggling with pay cuts, reduced hours and time off. Industry players halted share buybacks and suspended dividends in an attempt to improve liquidity.

The Omicron variant poses a threat: The Omicron variant, which was first found in South Africa, quickly spread to other parts of the world, increasing the risk of infections as a result. The variant has now been found in 77 countries, including the United States.

The World Health Organization has warned that the Omicron variant is spreading at an unprecedented rate. Thus, the Omicron variant remains a cause for concern as the increase in infections may again trigger disruption, which could harm the industry.

Initiatives to attract customers: First, hoteliers engage in comprehensive cleaning, disinfection and infectious disease prevention processes. To this end, they have put in place a qualified Hygiene and Welfare Manager who is responsible for a clean and safe environment for staff and guests.

Second, companies have been doing everything possible to improve the contactless experience and take advantage of technologies such as mobile and online check-in as well as the mobile dongle. Industry players have resorted to streamlining operations with efficient management levels, the benefits of which are expected to remain even after the pandemic has subsided.

Zacks’ ranking in the industry indicates bleak outlook

Zacks’ hotel and motel industry is clustered into the larger sector.

The group’s Zacks Industry Rank, which is essentially the average of the Zacks Rank of all member stocks, indicates a bleak outlook for the near term. Zacks ‘hotel and motel industry currently carries a Zacks industry ranking of # 161, which places it in the lowest 37% of Zacks’ 253 industries. Our research shows that the top 50% of industries ranked by Zacks outperform the bottom 50% by a factor of more than 2 to 1.

The industry’s position in the top 50% of industries ranked by Zacks is the result of positive earnings prospects for all of the constituent companies. Looking at the revisions to the overall earnings estimates, it appears that analysts are gradually losing confidence in the earnings growth potential of this group. Since November 30, 2021, industry profit estimates for 2022 have fallen 2.8%.

Before we feature a few stocks you might want to watch, let’s take a look at recent stock market performance and industry valuation.

Industry underperforms the S&P 500

Zacks’ hotel and motel industry has underperformed the Zacks S&P 500 composite over the past year, but has outperformed its own sector.

During this period, the industry gained 9.8% against a drop of 11.7% of the sector. Meanwhile, the Zacks S&P 500 composite rose 26.9%.

Hotel and Motel Industry Assessment

Based on the 12-month forward EV / EBITDA, which is a multiple commonly used to value hotel and motel stocks, the sector is currently trading at 34.37X versus 15.59X for the S&P 500. It is also above the industry’s 12-month EV / EBITDA ratio of 12.94X.

Over the past five years, the industry has traded as low as 85.46X and as low as 9.3X with the median being 15.53X.

3 actions of hotels and motels to watch out for

Hilton: Hilton is a hotel company that owns, leases, manages, develops and franchises hotels and resorts. In an effort to maintain its position as the fastest growing global hotel company, it continues to drive unit growth. As of September 30, 2021, Hilton’s development pipeline comprised nearly 2,620 hotels, with nearly 404,000 rooms in 114 countries and territories, including 27 countries and territories where there are currently no hotels in operation. In addition, 249,000 rooms in development were located outside the United States and 204,000 rooms were under construction.

Hilton currently holds a Zacks Rank # 3 (Hold). In the past 60 days, Zacks’ consensus estimate for 2022 earnings has been revised up 0.2%. Zacks’ consensus estimate for sales and earnings per share of Hilton Grand Vacations in 2022 suggests growth of 41.7% and 92.2%, respectively, from the period last year. HLT shares have jumped 34% in the past year.

Hilton Grand Vacations: The company develops, markets, sells and manages owned vacation resorts. The company benefited from strong sales of Legacy-HGV contracts and the acquisition of Dakota Holdings. The company sports a Rank 1 of Zacks (strong buy). The company has a surprise earnings for the last four quarters of 411.1% on average. You can see The full list of today’s Zacks # 1 Rank stocks here.

Zacks’ consensus estimate for sales and earnings per share of Hilton Grand Vacations in 2022 suggests growth of 27.7% and 154.4%, respectively, from the previous year. Over the past 30 days, Zacks’ consensus estimate for 2022 earnings has been revised up 24.7%. Heavyweight stocks have jumped 14% in the past three months.

InterContinental Hotels: The company operates, franchises and leases hotels in the Americas, Europe, Asia, the Middle East, Africa and Greater China. The company benefited from strong demand for leisure travel and improved RevPAR. Robust group bookings and international travel continue to drive the business performance. InterContinental Hotels holds a Zacks Rank # 2 (Buy).

Zacks’ consensus estimate for InterContinental Hotels sales and earnings per share in 2022 suggests growth of 36% and 94.7%, respectively, from the previous year. Over the past 30 days, Zacks’ consensus estimate for 2022 earnings has been revised up by a dime.

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Intercontinental Hotels Group (IHG): Free inventory analysis report

Hilton Worldwide Holdings Inc. (HLT): Free Stock Analysis Report

Hilton Grand Vacations Inc. (HGV): Free Inventory Analysis Report

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