We recently published a list of the 10 best hotel stocks to buy right now, and in this article we’ll take a look at how Wyndham Hotels & Resorts, Inc. (NYSE:WH) stands up against the other best hotel stocks.
According to Cognitive Market Research, the global hotel market size was valued at $784.82 billion in 2023 and is projected to grow to $1126.04 billion by 2030. The hotel industry is expected to experience a compound annual growth rate of 5.29% from 2023 to 2030. Region-wise, North America holds a significant market share of 30.66%, mainly due to the abundance of hotels and resorts in the region.
Recently, hotel demand in Q2 2024 increased 1.3% year-over-year, outpacing a 0.6% increase in supply, and U.S. occupancy increased 0.7%. Secondly, revenue per available room (RevPAR) in Q2 2024 increased 2.2% year-over-year due to higher occupancy and a 1.5% year-over-year increase in average daily rate (ADR). This benefit was primarily due to two factors: Easter arrived early this year and later in Q1 2024, increasing business travel in Q2 compared to last year, and the total solar eclipse increased leisure travel across much of the U.S. Although hotel demand increased in Q2 2024, short-term rentals and cruise lines maintained their market share gains. Additionally, average hotel hourly wages remained more than $10 lower than the national average hourly wage.
According to Frederic Dominioni, Chief Revenue Officer at Solonis, a leading provider of modern property management solutions, there are five key trends driving the hotel industry’s recovery after the pandemic. First, rising room rates are driving higher guest expectations, which increased by 54% from January 2022 to 2023. Second, the rise in hybrid work “workcation” travel is driving the need for flexible locations and services. Third, the demand for self-service options and mobile technology remains high, helping to alleviate staff shortages. Fourth, travel experiences take center stage, with 88% of travelers seeking local adventures. Finally, sustainability is essential, given that 65% of travelers prioritize eco-friendly accommodations. Hotels will thrive if they adapt to these trends through improved amenities and customization of visitor experiences.
According to CBRE’s 2024 Global Hotel Outlook, after a record-high RevPAR in 2023, 2024 is expected to be another year of progress for the U.S. economy. Continued improvement in international travelers, a strong performance in the meetings and group events sector, and increased interest from leisure travelers are all expected to contribute to RevPAR growth, which is projected to reach about 3% year-over-year. Urban locations with more attractive and pricier hotels for leisure travelers should fare better, but competition from other sources, such as cruise lines, short-term rentals, and camping, is expected to limit demand and pricing for traditional hotels. Hotel salary growth slowed to 4.6% in Q2 2024 from 5.5% in Q1, but was outpaced by a 4.0% increase in hourly wages for all employees due to reduced employment opportunities in the hotel industry. Occupancy rates for all types of locations were below 2019 levels in Q2 2024. Interstate and downtown sites were most similar to 2019 levels at 99%, while urban and resort sites were at 94% and 96%, respectively.
The story continues
Meanwhile, Warren Ma, a US hospitality and leisure industry advisor, said:
“Continued economic uncertainty, a looming election and ongoing geopolitical tensions are expected to impact U.S. hotel performance through 2025. Since the last issue of Hospitality Directions US was published in November, hotel occupancy has declined two additional quarters for a total of four quarters, but is expected to gradually recover later this year and next as comparative bases ease. That said, average daily rate growth is expected to be below PCE inflation rates through the second half of this year and into 2025.”
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A spacious hotel room where you can feel luxury and hospitality in every corner.
Wyndham Hotels & Resorts (NYSE:WH)
Number of hedge fund holders: 26
Revenue Growth (YoY): 2.22%
By the end of 2023, Wyndham Hotels & Resorts (NYSE:WH) will operate 872,000 rooms across more than 20 brands, the majority of which are economy and midscale hotels. Its largest brand is Super 8, accounting for about 19% of all rooms, followed by Days Inn (13%) and Ramada (14%).
The company has been growing its extended-stay and lifestyle brands in recent years, appealing to tourists looking to immerse themselves in the local lifestyle of a specific location. In the second quarter of 2018, the company completed the acquisition of La Quinta, adding approximately 90,000 rooms at the time of closing. In spring 2022, the company introduced ECHO, a new idea in the extended-stay economy-scale segment. The United States also accounts for 57% of its total room capacity.
Despite near-term macroeconomic concerns for consumers, such as continued high inflation and declining consumer savings, analysts expect Wyndham Hotels & Resorts to gradually expand its hotel room share while maintaining its brand’s intangible assets and switching cost advantages.
Additionally, Wyndham Hotels & Resorts (NYSE:WH) has the industry’s fourth-largest loyalty program by membership (110 million as of June 30, 2024) and is encouraging independent hotel owners to sign up for the platform. Additionally, Wyndham owns approximately 10% and 5% of current hotel rooms in the U.S. and globally, respectively, with a pipeline that represents approximately 28% of the current unit base.
Robert W. Baird analyst Michael Bellisario has given the company a buy rating. Bellisario maintained his target price at $88, noting strong operating and financial performance for the second quarter of 2024 despite lowering his full-year RevPAR forecast. Wyndham has demonstrated its commitment to shareholder returns and growth potential through an aggressive share repurchase program and solid net unit growth. This favorable outlook is supported by the stock’s moderately discounted price relative to the market.
Jeffrey Gates’ Gates Capital Management is the company’s largest shareholder, with 1,470,558 shares valued at $108.82 million.
Overall, WH ranks #7 on our list of “Best Hotel Stocks to Buy Now.” While we acknowledge WH’s potential as an investment, we believe some AI stocks have the potential to deliver higher returns in a shorter time frame. If you’re looking for AI stocks with more promise than WH but trading at less than 5x stock price, check out our report on the cheapest AI stocks.
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Disclosures: None. This article was originally published on Insider Monkey.
