Neither CashBlog nor its writers are financial advisors. Nothing published on our website is financial advice. Our articles are strictly educational.
The COVID pandemic brought the hospitality sector down to its knees, leaving many hotel brands in disarray. But as the world recovers and new travel trends develop the industry could be ripe for success.
So let’s take a look at some of the best hotel stocks to buy in the industry.
What Are Hotel Stocks?
When you purchase hotel stock, you are investing in companies that operate short-term lodging and accommodation services. Hotels and resorts are part of this category as they generate revenue by providing hospitality services to travelers and tourists.
The industry is led by giants like Las Vegas Sands Corp (NYSE: LVS) and MGM Resorts International (NYSE: MGM). But it’s also composed of tech companies like Airbnb (NASDAQ: ABNB).
Are Hotel Stocks a Good Investment?
Hotel stocks could be a compelling long-term investment, particularly as the sector recovers from the COVID pandemic. It’s also possible that the hotel industry could gain momentum from novel travel trends like remote work.
The pandemic helped fuel location-independent labor trends that have driven millions of people out of the office and into their favorite travel destinations.
In fact, a study by McKinsey & Co shows that 90% of businesses plan to offer remote or hybrid work opportunities to their employees. Demonstrating just how prevalent the location-independent labor trend is going to be.
Hotel companies that pivot to capture the hybrid-workforce market segment could reap higher rewards and deliver generous returns for investors.
Another study by Skift estimates that digital nomads could represent close to $1 billion in revenue for the working stay-cation market segment.
Hyatt Hotels Corporation (NYSE: H) was among the first companies in the industry to promote the working stay-cation idea.
The concept was so popular that Hyatt expanded its extended-stay leisure portfolio to meet the expansive needs of remote workers.
Overall, the hotel industry is projected to offer attractive returns over the next few years. Hotel stocks represent one of the largest segments of the hospitality sector, which is estimated to grow at a CAGR of 10.24% through 2028.
How to Pick the Best Hotel Stocks?
If you are compelled to invest in hotel stocks, then you’ll want to make sure you choose the right names.
But what makes a hotel stock a good pick?
Each industry has its own unique metric for judging success, and the best hotel stocks are no exception.
Sound financials and positive cash flow are always positive signs to look out for when considering an investment. A sound business is a sound business, and there is usually no better way to judge a company’s health than by looking at its balance sheet.
RevPAR is another key metric to consider in any hospitality investment and one that’s almost unique to the industry. This metric helps assess how quickly hotels are able to fill their rooms.
When RevPAR increases, so do occupancy rates, which is good for revenue and investors.
But future success is not always preceded by exemplary financials. Investors must also consider the future potential of their hotel stock if they are hoping to grow their portfolios.
Does the stock have strong brand recognition? Are they investing in innovation? Are their guest satisfaction ratings high? Is the hotel geographically diversified?
These are all valuable questions to ask when considering the growth potential of a hotel brand.
The hospitality industry thrives on guest satisfaction. Reviewing a hotel on sites like TripAdvisor could also tell you a lot about its future potential.
Finally, you’ll want to take a look at the valuation of the company. Having a Price-to-Earnings ratio that’s below the industry average could be an indication that there is room for growth. Dividends are also a huge plus.
Now that you know more about what to consider when picking the best hotel stocks you might be ready to do your own research and add them to your portfolio.
But if you were wondering, we’ve done the heavy lifting for you and compiled a list of the hotel industry’s cream of the crop.
Best Hotel Stocks
Here are our picks for the best hotel stocks to consider right now:
Hilton Hotels Stock (NYSE: HLT)
Are you looking for a key to unlocking a suite of investment success? Then you might want to check out this holiday gem. Hilton is a century-old global brand of full-service hotels and resorts with a history of delivering luxurious guest experiences. The flagship brand of American hospitality owns, operates, and leases over 7,000 properties in 122 countries and territories. Its portfolio boasts pristine brands like Waldorf Astoria Hotels and the DoubleTree by Hilton.
Marriott International Stock (NASDAQ: MAR)
With 1,423,044 rooms, 8,000+ properties, 139 countries and territories, and 30 brands, Marriott boasts one of the most robust portfolios in the hospitality industry. Its legendary hospitality brands include JW Marriott, Sheraton, and St. Regis. The hospitality giant has been welcoming guests since 1927, offering investors what could be a solid check-in to the stock market.
