Zacks Industry Outlook Highlights: Starwood Hotels, Wyndham Worldwide, and Marriott International
CHICAGO, Nov. 21, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Hotels, including Starwood Hotels (NYSE:HOT-Free Report), Wyndham Worldwide (NYSE:WYN-Free Report) and Marriott International (Nasdaq:MAR-Free Report).
Industry: Hotels
Link: http://www.zacks.com/commentary/35468/better-times-ahead-for-hotels-tourism
The year-to-date period has been promising for hoteliers with the U.S. economy gradually returning to growth. Despite some economic and political uncertainty around the world, the outlook for global tourism remains favorable, with the momentum expected to carry into the remainder of the year and into next year.
Although the improving economic backdrop has the potential to invigorate the hotel sector, certain challenges will persist. Hoteliers are striving to achieve profitable growth while trying to capitalize on the improved tourism numbers. However, higher cost and expenses incurred for renovation and other digital and marketing initiatives undertaken by the leading hoteliers to improve traffic are hurting profits.
Despite these headwinds, the sector's performance indicators have been showing year-over-year improvement. According to Smith Travel Research (STR) -- a leading information and data provider for the lodging industry -- the average daily rate (ADR) at U.S. hotels was up 5.4% year over year for the week ended Nov 8. Overall occupancy was up 3.5% year over year and revenue per available room (RevPAR) for the week went up 9.1%.
Notwithstanding the common macroeconomic hurdles, the lodging sector is expected to deliver promising growth in the coming year, thanks to the improving U.S. business as well as strong international travel and tourism volumes.
During the first nine months of the year, both transient and group demand exhibited solid momentum, with the year-over-year pace of recovery in group demand outpacing the transient segment. Increased momentum of group demand is expected to continue in the fourth quarter as well as the next year. Furthermore, mega sporting events like the Olympics in South America -- scheduled to take place in 2016 -- are expected to boost tourism.
Statistics bear out this relatively favorable environment. A recent report by PricewaterhouseCoopers (PwC) shows that the lodging sector will continue to outperform in 2014 and 2015 on the back of robust booking trend and a solid travel and tourism market. PwC expects healthy RevPAR growth of 8.2% in 2014 and 7.4% in 2015, driven by increased ADR of 4.7%, better than 3.9% recorded in 2013.
Further in 2015, RevPAR growth is expected to be 7.4% driven by increased ADR of 6.2%. This healthy RevPAR growth is fueled by expectations for strong group demand, coupled with continued strong transient travel activity and positive macroeconomic outlook.
As hoteliers strive to enhance value and competitiveness, industry-best practices, like sustainability and brand refreshment, will remain the priorities.
Positive Zacks Industry Rank
Within the Zacks Industry classification, we rank all the 260 plus industries in the 16 Zacks sectors based on the earnings outlook and fundamental strength of the constituent companies in each industry. To learn more visit: About Zacks Industry Rank.
As a guideline, the outlook for industries in the top 1/3rd of all Industry Ranks or a Zacks Industry Rank of #88 and lower is 'Positive'; the middle 1/3rd or industries with Zacks Industry Rank between #89 and #176 is 'Neutral' and the bottom 1/3rd or Zacks Industry Rank of #177 and higher is 'Negative.'
The Zacks Industry Rank for the hotels/motels industry is currently #54, or in the top 20% of all Zacks industries. The group's positive Zacks Rank placement is primarily a function of industry's favorable earnings outlook, primarily due to increased tourism numbers.
Earnings Trends
The third-quarter earnings season so far has shown a mixed trend in the hotel and motel industry.
While Starwood Hotels (NYSE:HOT-Free Report) beat the Zacks Consensus Estimate for earnings, it missed for revenues. Similarly, Wyndham Worldwide (NYSE:WYN-Free Report) also beat the consensus mark for earnings and missed the same for revenues. Marriott International (Nasdaq:MAR-Free Report), on the other hand, posted results beating the Zacks Consensus Estimate for both earnings and revenues.
The hotel industry falls under the broader Consumer Discretionary sector.
The earnings "beat ratio" for the Consumer Discretionary sector was 83.9%, while the revenue "beat ratio" was 54.8% in the third quarter so far. Total earnings for this sector increased 10.1% in the reported quarter, compared with 10.9% in the second quarter. Total revenue grew 5.4% versus a 4.2% increase in the previous quarter.
Third-quarter 2014 earnings are expected to rise 10.1%, thereby pegging the full-year 2014 growth outlook at 10.9%. For 2015, the sector's earnings are poised to expand around 15.5%.
Revenues are expected to grow 4% in the second quarter of 2014, pegging the full-year 2014 growth outlook at 5.3%. For 2015, the sector's revenues are poised to expand around 15.8%.
For more details about earnings for this sector and others, please read our 'Earnings Trends' report.
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