Another Candidate: Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT)
Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) is another hotel company worthy of consideration, and is very similar in size to Marriott, with more of a luxury orientation. Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) operates such brands as Sheraton, Westin, W, St. Regis, Luxury Collection, and Four Points. Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT)’s revenues have grown even faster than Marriott’s lately, as luxury spending was down tremendously in the crisis years and has come back with a vengeance lately.
Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) trades for a similar valuation of 21 times earnings, which are projected to grow at a more modest rate than Marriott at around 10% annually over the next three years. Worthy of consideration, however, is that Starwood Hotels & Resorts Worldwide, Inc (NYSE:HOT) has about half of the debt load of Marriott, and the added financial flexibility that goes with it.
Alternative to Hotels: Priceline.com Inc (NASDAQ:PCLN)
For those who want exposure to the travel business, but don’t necessarily want to invest in a hotel company, check out Priceline.com Inc (NASDAQ:PCLN) as an alternative way to play the space. Most Americans know that Priceline.com Inc (NASDAQ:PCLN) is the leader in online travel services, but what they generally don’t realize is that most of Priceline’s operating income (over 90%!) comes from its European business. Priceline now seems ready to aggressively pursue the Asian travel market, which could prove to be the company’s most lucrative, eventually.
Don’t let Priceline’s P/E of 28.2 times earnings scare you off. Priceline is projecting earnings of $38.41 per share for the current fiscal year, increasing to $45.96 and $54.80 in 2014 and 2015, respectively. This corresponds to a 3-year forward earnings growth rate of 20.6%, which more than justifies the valuation. Priceline also has about $4.3 billion in net cash (cash minus debt) on its balance sheet, which is a great indicator of a company’s financial health.
Conclusion
Whichever investment you ultimately decide on, it’s hard to go wrong in the travel sector at a time when the economy is improving and expected to continue to do so. Priceline is a bit too risky for my long-term portfolio, but which one is right for you depends on your personal level of risk tolerance.
The article The Travel Business Should Thrive In This Economy originally appeared on Fool.com.
Matthew Frankel has no position in any stocks mentioned. The Motley Fool recommends Priceline.com. The Motley Fool owns shares of Priceline.com. Matthew is a member of The Motley Fool Blog Network — entries represent the personal opinion of the blogger and are not formally edited.
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