The hotel industry is focused on the provision of short-term lodging, including hotels and motels, as well as accommodation-related services. It’s one segment within the broader hospitality (or leisure) industry. The hotel industry is split into two main categories of companies: C-corporation hotels such as Marriott International Inc. and Hilton Worldwide Holdings Inc.; and hotel real estate investment trusts (REITs) such as DiamondRock Hospitality Co. and Park Hotels & Resorts Inc.
The hotel industry has been severely affected by the COVID-19 pandemic, travel and dining restrictions, and other social distancing rules, which have begun to loosen.
C-corporation hotels are generally engaged in hotel management, branding and marketing, and sometimes franchise licensing. They often own little real estate, and their legal structure requires them to pay corporate taxes on dividends. These hotel stocks are best represented by the S&P 1500 Hotels, Resorts, and Cruise Lines Sub-Industry Index, which had a total return over the past year of -21.8%, as of June 13, 2022.
Hotel REITs, on the other hand, are companies that focus more on the acquisition, ownership, and operation of hotel real estate. Some REITs even manage the hotels that they own. They are legally structured in a way that exempts them from paying taxes on distributed dividends, but they must distribute 90% of their taxable income to shareholders to be eligible as a REIT. These hotel REITs are best represented by the S&P 1500 Hotel & Resort REITs Sub-Industry Index, which had a total return of -17.4% over the past year.
Both hotel stocks and hotel REITs have underperformed compared to the broader equity market, as represented by the Russell 1000 Index, which provided a total return of -12.9% over the past 12 months, as of June 13, 2022. All statistics in the tables below are as of June 13, 2022.
The hotel industry suffered from a severe reduction in travel during the COVID-19 pandemic. But the rollout of vaccines and easing of restrictions is sparking rising demand from leisure travelers. By contrast, a study published in April estimated that business travel revenue for the U.S. hotel industry will fall about $20.7 billion short of pre-pandemic levels in 2022. The study indicated that leisure travel, however, would likely return to pre-pandemic levels.
In the first half of this story, we look at the top three hotel stocks with the best value, the fastest growth, and the best performance. In the second half, we examine the top three hotel REITs with the best value, the fastest growth, and the best performance. We use the price-to-sales (P/S) ratio to determine the best value stocks and REITs, sales growth to determine the fastest growth stocks and REITs, and total return to determine the stocks and REITs with the best performance.
These are the hotel stocks with the lowest 12-month trailing P/S ratio. For companies in early stages of development or industries suffering from major shocks, the P/S ratio can be substituted as a rough measure of a business’s value. A business with higher sales eventually could produce more profit when it achieves (or returns to) profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.
| Best Value Hotel Stocks | |||
|---|---|---|---|
| Price ($) | Market Capitalization (Market Cap) ($B) | 12-Month Trailing P/S Ratio | |
| Membership Collective Group Inc. (MCG) | 6.95 | 1.4 | 2.0 |
| Hyatt Hotels Corp. (H) | 78.76 | 8.7 | 2.2 |
| Marriott International Inc. (MAR) | 152.10 | 49.8 | 3.2 |
Source: YCharts
- Membership Collective Group Inc.: Membership Collective Group is a global membership platform consisting of physical and digital spaces. It connects a diverse group of members, who use the platform to work, socialize, and connect. The company announced in late May the appointment of Thomas Allen as chief financial officer (CFO), effective June 23, 2022. Allen previously was a managing director of equity research at Morgan Stanley, where he led U.S. gaming, lodging, and leisure sector research for nearly a decade.
- Hyatt Hotels Corp.: Hyatt Hotels is a multinational hospitality company that develops and manages branded hotels, resorts, and residential and vacation ownership properties. The company announced in May financial results for Q1 of its 2022 fiscal year (FY), the three-month period ended March 31, 2022. Hyatt’s net loss narrowed to $73 million from $304 million in the year-ago quarter as revenue expanded 192.0%. The company said it experienced record levels of leisure demand during the quarter.
- Marriott International Inc.: Marriott International is a global operator, franchisor, and licensor of of hotels under brand names including Westin, W Hotels, Sheraton, and Marriott. It also licenses vacation ownership resorts.
These are the hotel stocks with the highest YOY sales growth for the most recent quarter. Rising sales can help investors to both identify companies that are able to grow revenue through organic or new ways and find growing companies that have not yet reached profitability. In addition, accounting factors that may not reflect the overall strength of the business can significantly influence earnings per share. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.
| Fastest Growing Hotel Stocks | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | Revenue Growth (%) | |
| Hyatt Hotels Corp. (H) | 78.76 | 8.7 | 192.0 |
| Membership Collective Group Inc. (MCG) | 6.95 | 1.4 | 165.2 |
| Hilton Worldwide Holdings Inc. (HLT) | 120.85 | 33.6 | 96.9 |
Source: YCharts
- Hyatt Hotels Corp.: See above for company description.
- Membership Collective Group Inc.: See above for company description.
- Hilton Worldwide Holdings Inc.: Hilton Worldwide Holdings is a global hospitality company. It owns and manages hotels, resorts, and timeshare properties throughout the world. The company announced in early May financial results for Q1 FY 2022, which ended March 31, 2022. Hilton reported net income of $211 million, a significant turnaround from a net loss of $109 million in the year-ago quarter. Revenue nearly doubled compared to the year-ago quarter.
These are the hotel stocks that had the best returns or smallest declines in total return over the past 12 months out of the companies we looked at.
| Hotel Stocks with the Best Performance | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| Marriott International Inc. (MAR) | 152.10 | 49.8 | 6.2 |
| Choice Hotels International Inc. (CHH) | 120.17 | 6.7 | -1.7 |
| Hyatt Hotels Corp. (H) | 78.76 | 8.7 | -3.8 |
| Russell 1000 | N/A | N/A | -12.9 |
| S&P 1500 Hotels, Resorts, and Cruise Lines Sub-Industry Index | N/A | N/A | -21.8 |
Source: YCharts
- Marriott International Inc.: See above for company description.
- Choice Hotels International Inc.: Choice Hotels International is a hotel franchising company. Its properties range from limited-service to full-service hotels within the upscale, midscale, extended-stay, and economy segments. The company recently announced that it has agreed to acquire the franchise business, operations, and intellectual property of Radisson Hotel Group Americas for approximately $675 million. The transaction is expected to close in the second half of the year.
- Hyatt Hotels Corp.: See above for company description.
These are the hotel REITs with the lowest 12-month trailing P/S ratio. For companies in early stages of development or industries suffering from major shocks, the P/S ratio can be substituted as a rough measure of a business’s value. A business with higher sales eventually could produce more profit when it achieves (or returns to) profitability. The P/S ratio shows how much you’re paying for the stock for each dollar of sales generated.
| Best Value Hotel REITs | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing P/S Ratio | |
| Service Properties Trust (SVC) | 5.65 | 0.9 | 0.6 |
| Braemar Hotels & Resorts Inc. (BHR) | 5.11 | 0.4 | 0.7 |
| Hersha Hospitality Trust (HT) | 9.92 | 0.4 | 1.2 |
Source: YCharts
- Service Properties Trust: Service Properties is a REIT that focuses on hotels and service-focused retail net lease properties. The majority of its hotels are extended stay and select service.
- Braemar Hotels & Resorts Inc.: Braemar Hotels & Resorts is a REIT focused on investing in luxury hotels and resorts.
- Hersha Hospitality Trust: Hersha Hospitality Trust is a hospitality REIT. It owns and operates upscale, luxury, and lifestyle transient hotels in urban gateway markets and coastal destinations. The company announced in late April that it has agreed to sell seven of its non-core Urban Select Service properties outside of New York for gross proceeds of $505 million. The sale aligns with the company’s commitment to focus on its luxury and lifestyle and New York portfolios.
These are the hotel REITs with the highest YOY sales growth for the most recent quarter. Rising sales can help investors to both identify companies that are able to grow revenue through organic or new ways and find growing companies that have not yet reached profitability. In addition, accounting factors that may not reflect the overall strength of the business can significantly influence earnings per share. However, sales growth can also be potentially misleading about the strength of a business, because growing sales on money-losing businesses can be harmful if the company has no plan to reach profitability.
| Fastest Growing Hotel REITs | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | Revenue Growth (%) | |
| Ryman Hospitality Properties Inc. (RHP) | 78.46 | 4.3 | 255.4 |
| Sunstone Hotel Investors Inc. (SHO) | 10.29 | 2.2 | 240.3 |
| Pebblebrook Hotel Trust (PEB) | 19.48 | 2.6 | 208.5 |
Source: YCharts
- Ryman Hospitality Properties Inc.: Ryman Hospitality Properties is a lodging and hospitality REIT specializing in upscale convention center resorts as well as country music entertainment experiences. The company announced in early June that it completed its acquisition of Block 21, a mixed-use complex in downtown Austin, Texas from Stratus Properties Inc. for approximately $260 million.
- Sunstone Hotel Investors Inc.: Sunstone Hotel Investors is a lodging REIT that owns primarily upscale hotels. Its hotels operate under various nationally recognized brand names. The company announced in early June that it has completed its previously announced acquisition of The Confidante Miami Beach, a 339-room hotel, for $232 million.
- Pebblebrook Hotel Trust: Pebblebrook Hotel Trust is a REIT focused on acquiring and investing in upper upscale, full-service hotel and resort properties. The company announced in mid-May that it has acquired the Inn on Fifth, a 119-room luxury resort property in Naples, Fla. for $156.0 million.
These are the hotel REITs that had the smallest declines in total return over the past 12 months out of the companies we looked at.
| Hotel REITs with the Best Performance | |||
|---|---|---|---|
| Price ($) | Market Cap ($B) | 12-Month Trailing Total Return (%) | |
| Ryman Hospitality Properties Inc. (RHP) | 78.46 | 4.3 | -3.0 |
| Host Hotels & Resorts Inc. (HST) | 17.13 | 12.2 | -4.2 |
| Apple Hospitality REIT Inc. (APLE) | 14.78 | 3.4 | -8.5 |
| Russell 1000 | N/A | N/A | -12.9 |
| S&P 1500 Hotel & Resort REITs Sub-Industry Index | N/A | N/A | -17.4 |
Source: YCharts
- Ryman Hospitality Properties Inc.: See above for company description.
- Host Hotels & Resorts Inc.: Host Hotels & Resorts is a lodging REIT. It is focused on acquiring and developing luxury and upper upscale hotels, which are primarily located in the U.S.
- Apple Hospitality REIT Inc.: Apple Hospitality REIT owns a large, diversified portfolio of upscale hotels in the U.S., focusing on leading brands such as Marriott, Hilton, and Hyatt.
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