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Zacks Industry Outlook Highlights: Marriott International, Hyatt Hotels, Wyndham Worldwide, Hilton Worldwide Holdings and Choice Hotels International

For Immediate Release

Chicago, IL – July 18, 2017 – Today, Zacks Equity Research discusses the Industry: Hotels, Part 2, including Marriott International, Inc. (NASDAQ: MAR Free Report ), Hyatt Hotels Corporation (NYSE: H Free Report ), Wyndham Worldwide Corporation (NYSE: WYN Free Report ), Hilton Worldwide Holdings Inc. (NYSE: HLT Free Report ) and Choice Hotels International Inc. (NYSE: CHH Free Report ).

Industry: Hotels, Part 2


Despite economic and political uncertainty in parts of the world, overall demand for travel and hospitality services continues to rise. Consumers are looking for unique experiences at all price points and hoteliers believe that their diverse portfolio of travel offerings can continue to deliver on that growing demand. The improving outlook for the U.S. and global economies is helping push the business travel segment as well.

Confident consumers bode well for hotels despite the surge of new inventory in the marketplace. Thus, we see no reason why the U.S. hotel industry should not continue to enjoy gains on both the top and the bottom lines, in the near term, albeit at a more modest pace compared with the past two or three years.

As such, we see plenty of reasons to be optimistic about the broader hotel industry over both the short and the long terms. Below, we discuss what investors can look forward to:

Demand-Supply Gap Favorable : Improving economic indicators is a boon for the hotel industry as it has perked up leisure and business travel demand. The supply-demand environment in the U.S. has been favorable since 2010, with growth in demand outpacing supply growth. Though, of late, the gap between demand growth and supply growth has narrowed considerably and occupancy growth has slowed, higher average daily rates (ADRs) are expected to keep driving revenue per available room (RevPAR).

We realize that favorable prior-year comparisons contributed to strong demand growth in first-quarter 2017, and that pace cannot be sustained through the rest of 2017, with demand expected to moderate. Nevertheless, in spite of the large pipeline of hotels, both CBRE Hotels' Americas Research and PricewaterhouseCoopers (PwC) are projecting demand (2.1% rise) to outpace supply (increase of 2%) once again in 2017, given the positive economic outlook for the remainder of the year, thereby resulting in the eighth successive year of occupancy growth for the U.S. lodging industry.

International Expansion : Major hoteliers are exploring growth opportunities abroad, especially in the emerging markets and the outlying areas surrounding major cities. Hoteliers are forging ahead with expansion plans in emerging markets with great long-term potential despite looming macroeconomic concerns.

A number of U.S.-based hoteliers are targeting the unsaturated markets in Asia-Pacific, the Middle East, Brazil, Russia and Africa. Within Asia, China promises significant growth, despite an economic slowdown, with visits expected to increase substantially ahead. In fact, China is the fastest growing lodging market in the world. Interestingly, the country is a major revenue contributor forMarriott International, Inc. (NASDAQ: MAR Free Report ).

Apart from China, India is becoming a hot spot for U.S.-based hoteliers with its emergence as a global business hub. Although economic growth rates are slightly lower than China, the country has great long-term growth potential as a tourism market. Notably,Hyatt Hotels Corporation (NYSE: H Free Report ) is also continuously looking to expand its brand presence and enter under-penetrated markets such as India and China. Among others, Japan, Indonesia, Australia, Singapore and Thailand continue to attract travelers.

The key players in the industry are also targeting the high-potential Middle East countries such as Turkey and United Arab Emirates (UAE) that offer strong infrastructure.

Many of the hoteliers are also looking to leverage from Latin America’s upsurge in accommodation demand. In this regard,Wyndham Worldwide Corporation’s (NYSE: WYN Free Report ) Hotel Group announced the acquisition of Latin America's leading Fen Hotels in Dec 2016. Meanwhile, with an increasing number of managed and franchised limited service hotels in Mexico, Colombia and Brazil, Marriott expects its distribution in the Caribbean and Latin American region to increase 75% by 2018.

Meanwhile, Europe remains an attractive market for hoteliers despite repeated terror attacks and Brexit-induced uncertainties. Major players like Marriott, Hilton Worldwide Holdings Inc. (NYSE: HLT Free Report ), Choice Hotels International Inc. (NYSE: CHH Free Report ) and Wyndham have a strong foothold in this region.

In fact, Marriott has increased its full-year 2017 RevPAR expectations following stronger-than-expected RevPAR performance in North America in the first quarter and improving demand trends in the Europe and Asia-Pacific regions.

Expansion in these lucrative markets would help the companies gain market share in the hospitality industry, thereby boosting their business. Also, with global travel estimated to increase at a 7% compounded rate over the next 10 years and international trips expected to top 1.8 billion by 2030, such rapid expansion plans by hoteliers’ bodes well.

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