3 Hotels & Motels Stocks to Keep an Eye on Despite Industry Woes

Core Viewpoint - The Zacks Hotels and Motels industry is facing challenges such as rising costs, reduced travel from lower-income consumers, geopolitical tensions, and ongoing economic uncertainty, but is focusing on growth strategies like portfolio expansion and digital innovations [1][3]. Industry Overview - The Zacks Hotels and Motels industry includes companies that own, lease, manage, develop, and franchise hotels, as well as vacation ownership and exchange firms [2]. Current Trends - High costs are a significant concern, with rising labor costs due to shortages affecting service quality and operational capacity [3]. - Revenue per available room (RevPAR) is projected to grow by 1.8% in 2025, while average daily rate (ADR) is expected to increase by 1.6% [4]. - Digitalization is driving growth, with hotel owners leveraging technology to enhance guest experiences and optimize pricing [5]. Industry Performance - The Zacks Hotels and Motels industry currently holds a Zacks Industry Rank of 184, placing it in the bottom 25% of the 246 Zacks industries, indicating dull near-term prospects [7][8]. - Over the past year, the industry has outperformed the S&P 500, appreciating 17.5% compared to the sector's 11.5% rise [10]. Valuation Metrics - The industry is trading at a trailing 12-month EV/EBITDA of 18.43X, higher than the S&P 500's 17.59X [11]. Company Highlights - Marriott: Experienced a 5% increase in global RevPAR in Q4 2024, with expectations of 2-4% growth in 2025 [12][13]. - Hilton: Strong demand in leisure and business travel is expected to drive RevPAR growth of 2-3% in 2025 [15][16]. - Hyatt: Benefits from increasing demand and growth initiatives, with a projected 4.9% growth in 2025 [18][20].