In this article, we will take a look at the 12 most undervalued hotel stocks to buy according to hedge funds.
Last year was full of surprises for investors. Rising inflation, Russia’s invasion of Ukraine and the Federal Reserve rate-hike spree didn’t give investors any sigh of relief. But despite the widespread complaining about high inflation, one of the sectors that continued to show resilience was travel and tourism. Several reports show that consumers are continuing to spend on travel and entertainment despite inflation worries.
Luxury and wealth research firm Altiant in a report mentions a detailed survey which shows that wealthy Americans prefer to spend more on experiences instead of things.
Altiant conducted a survey of 1,200 of affluent travels across Asia, Europe and the Americas during the second half of 2022. The survey’s results show that about 60% of the individuals in question planned to spend more on travel in 2023.
“People are Prioritizing Travel Over Just About Everything”
The increase in travel demand is not just driven by the rich. Expedia’s management, after revealing weak Q4 results, said that the company is continuing to see that “people are prioritizing travel over just about everything.” Expedia’s CFO said in the company’s Q4 earnings call that so far the demand is “quite robust” and the company is “pleased” to see the upbeat start to 2023.
In this backdrop, it would be interesting to see which hotel stocks are undervalued and how the smart money is piling into them for future returns. Some of the notable hotel stocks popular among hedge funds include Marriott International, Inc. (NYSE:MAR), Wyndham Hotels & Resorts, Inc. (NYSE:WH) and Hyatt Hotels Corporation (NYSE:H).
Photo by Jared Rice on Unsplash
Our Methodology
For this article we scanned Insider Monkey database of 943 hedge funds and their holdings and picked top 12 hotel stocks which have PE (trailing or forward) ratios of under 30, much lower than the hotel/entertainment industry average PE ratio of 67. The list is ranked in ascending order of the number of hedge fund investors.
Most Undervalued Hotel Stocks To Buy According To Hedge Funds
12. InnSuites Hospitality Trust (NYSE:IHT)
Number of Hedge Fund Holders: 1
Arizona-based REIT InnSuites Hospitality Trust (NYSE:IHT) invests in and manages hotels. InnSuites Hospitality Trust (NYSE:IHT) is a penny stock in our list, trading at around $1.6 as of the market close of February 24. Still, InnSuites Hospitality Trust (NYSE:IHT) pays dividends. In January, InnSuites Hospitality Trust (NYSE:IHT) declared a semi-annual dividend of $0.01 per share, in-line with the previous dividend. Forward dividend yield at the time came in at 1.14%.
At the end of the fourth quarter of 2022, the only hedge fund in Insider Monkey database that had stakes in InnSuites Hospitality Trust (NYSE:IHT) was Jim Simons’ Renaissance Technologies. The hedge fund reported owning 117,000 shares of InnSuites Hospitality Trust (NYSE:IHT) at the end of December. The total worth of these shares was $195,000.
11. Sotherly Hotels Inc. (NASDAQ:SOHO)
Number of Hedge Fund Holders: 2
Sotherly Hotels Inc. (NASDAQ:SOHO) is a Virginia-based REIT that acquires, renovates, and manages upper-upscale full-service hotels in the Southern United States. Sotherly Hotels Inc. (NASDAQ:SOHO) ranks 11th in our list of the most undervalued hotel stocks to buy according to hedge funds. Unlike Marriott International, Inc. (NYSE:MAR), Wyndham Hotels & Resorts, Inc. (NYSE:WH) and Hyatt Hotels Corporation (NYSE:H), which are highly popular among hedge funds, SOHO has just two hedge fund stakeholders.
In January, Sotherly Hotels Inc. (NASDAQ:SOHO) posted Q4 preliminary same-store portfolio metrics. The results were upbeat due to improved return-to-office rate and expanded group business travel. However, the results were negatively affected by Hurricane Nicole and weakening demand in South Florida during November. According to the results, RevPAR in the period came in at $101.52, which shows a 19.8% YoY growth.
As of the end of the fourth quarter of 2022, 2 hedge funds tracked by Insider Monkey reported having stakes in Sotherly Hotels Inc. (NASDAQ:SOHO). The total worth of these hedge funds’ stakes was 296,000.
10. Sonder Holdings Inc. (NASDAQ:SOND)
Number of Hedge Fund Holders: 15
Sonder Holdings Inc. (NASDAQ:SOND) operates and manages vacation and hotel properties. In November, Sonder Holdings Inc. (NASDAQ:SOND) posted its third quarter results.
GAAP EPS in the period came in at -$0.35, missing estimates by $0.18. Revenue in the quarter jumped a whopping 85% on a YoY basis to reach $124.53 million.
As of the end of the fourth quarter of 2022, 15 hedge funds tracked by Insider Monkey reported having stakes in Sonder Holdings Inc. (NASDAQ:SOND). The total worth of these stakes was $42.2 million. Like Marriott International, Inc. (NYSE:MAR), Wyndham Hotels & Resorts, Inc. (NYSE:WH) and Hyatt Hotels Corporation (NYSE:H), SOND is a hotel stock with decent upside potential.
9. Hersha Hospitality Trust (NYSE:HT)
Number of Hedge Fund Holders: 18
Hersha Hospitality Trust (NYSE:HT) is a Pennsylvania-based REIT that invests in hotels. Hersha Hospitality Trust (NYSE:HT) ranks 9th in our list of the most undervalued hotel stocks to buy according to hedge funds.
For the fourth quarter, Hersha Hospitality Trust (NYSE:HT)’s FFO came in at $0.34, missing estimates by $0.02. Revenue in the quarter jumped about 3.2% on a YoY basis to reach $96.47 million, meeting estimates.
For the first quarter of 2023, Hersha Hospitality Trust (NYSE:HT) expects its FFO to come between $0.04 – $0.08, versus the consensus of $0.10. Adjusted EBITDA is expected to total between $14.30 million to $17.30 million.
Insider Monkey’s proprietary database of 943 hedge funds’ holdings shows that 18 hedge funds had stakes in Hersha Hospitality Trust (NYSE:HT) as of the end of the last quarter of 2022. The net worth of these stakes was $41 million. The biggest stakeholder of Hersha Hospitality Trust (NYSE:HT) during this period was Thomas Soviero’s Soviero Asset Management which owns a $5.6 million stake in the company.
8. DiamondRock Hospitality Company (NYSE:DRH)
Number of Hedge Fund Holders: 20
DiamondRock Hospitality Company (NYSE:DRH) is a Maryland-based REIT that owns a portfolio of premium hotels and resorts. DiamondRock Hospitality Company (NYSE:DRH)’s hedge fund sentiment and PE ratio shows that it is one of the most undervalued hotel stocks to buy according to hedge funds. Earlier this month, DiamondRock Hospitality Company (NYSE:DRH) posted its fourth quarter results. FFO in the quarter came in at $0.23, beating estimates by $0.02. Net income in the quarter totaled $18.4 million. Earnings per diluted share came in at $0.07. DiamondRock Hospitality Company (NYSE:DRH)’s revenue in the quarter jumped about 34.3% on a YoY basis to reach $255.1 million, beating estimates by $3.56 million.
Comparable RevPAR in the quarter came in at $195.99, which shows an 18.4% increase over 2021.
As of the end of the fourth quarter of 2022, 20 hedge funds reported having stakes in DiamondRock Hospitality Company (NYSE:DRH). The total value of these stakes was about $143 million. Other hotel stocks highly popular among hedge funds include Marriott International, Inc. (NYSE:MAR), Wyndham Hotels & Resorts, Inc. (NYSE:WH) and Hyatt Hotels Corporation (NYSE:H).
7. Apple Hospitality REIT, Inc. (NYSE:APLE)
Number of Hedge Fund Holders: 20
Apple Hospitality REIT, Inc. (NYSE:APLE) is a Virginia-based REIT that focuses on hospitality properties and hotels. Apple Hospitality REIT, Inc. (NYSE:APLE) ranks 7th in our list of the most undervalued hotel stocks to buy according to hedge funds. Earlier this month, Apple Hospitality REIT, Inc. (NYSE:APLE) posted its fourth quarter results. FFO in the period came in at $0.33, meeting estimates. Revenue in the period jumped about 19.4% on a YoY basis to reach $299.12 million, beating estimates by $6.22 million. For fiscal 2023, Apple Hospitality REIT, Inc. (NYSE:APLE) expects net income of $165 million to $209 million.
As of the end of the fourth quarter of 2022, 20 hedge funds tracked by Insider Monkey reported having stakes in Apple Hospitality REIT, Inc. (NYSE:APLE). The total value of these stakes was over $152 million. The biggest stakeholder of Apple Hospitality REIT, Inc. (NYSE:APLE) during this period among these hedge funds was Ken Griffin’s Citadel Investment Group which owns a $35.6 million stake in the company.
6. Choice Hotels International, Inc. (NYSE:CHH)
Number of Hedge Fund Holders: 20
At the end of 2022, 20 hedge funds reported owning stakes in Choice Hotels International, Inc. (NYSE:CHH). The net value of these stakes was $192.2 million. The biggest hedge fund stakeholder of Choice Hotels International, Inc. (NYSE:CHH) was Greg Poole’s Echo Street Capital Management which has a $96 million stake in the company.
During the fourth quarter, Choice Hotels International, Inc. (NYSE:CHH) adjusted EPS came in at $1.26, surpassing estimates by $0.20. Revenue in the quarter increased by 27.2% on a YoY basis to total $361.98 million.
5. Host Hotels & Resorts, Inc. (NYSE:HST)
Number of Hedge Fund Holders: 25
Host Hotels & Resorts, Inc. (NYSE:HST) is yet another hotel-focused REIT in our list of the most undervalued hotel stocks to buy according to hedge funds.
Recently, Host Hotels & Resorts, Inc. (NYSE:HST) posted strong Q4 results. FFO in the quarter came in at $0.44, beating estimates by $0.02. Revenue in the period jumped about 26.3% on a YoY basis to reach $1.26 billion, beating estimates by $10 million.
Out of the 943 hedge funds tracked by Insider Monkey, 25 hedge funds reported owning stakes in Host Hotels & Resorts, Inc. (NYSE:HST). The total value of these stakes was $411 million. The biggest hedge fund stakeholder of Host Hotels & Resorts, Inc. (NYSE:HST) during this period was Noam Gottesman’s GLG Partners which owns a $161 million stake in the firm.
4. Hyatt Hotels Corporation (NYSE:H)
Number of Hedge Fund Holders: 27
Hotels and vacation properties giant Hyatt Hotels Corporation (NYSE:H) ranks 4th in our list of the most undervalued hotel stocks to buy according to hedge funds. Earlier this month, Hyatt Hotels Corporation (NYSE:H) posted Q4 results. Adjusted EPS in the quarter came in at $2.55, beating estimates by $2.22. Adjusted EBITDA in the quarter totaled $232 million. Comparable system-wide RevPAR increased 34.8% in the fourth quarter and 60.2% for the full year of 2022 from the comparable period of 2021.
As of the end of the fourth quarter of 2022, 27 hedge funds tracked by Insider Monkey had stakes in Hyatt Hotels Corporation (NYSE:H).
Baron Funds made the following comment about Hyatt Hotels Corporation (NYSE:H) in its Q3 2022 investor letter:
“Shares of global hotelier Hyatt Hotels Corporation (NYSE:H) increased in the quarter on strong revenue-per-available-room results as business travel continued to recover from pandemic lows. While leisure rates dropped a little in the seasonally slower back-to-school period, this decline was expected and was more than offset by increases in business transient and group bookings. Robust rates across the industry are leading to higher margins, including for Hyatt. Hyatt is using the increased cash flow to buy-in its shares, indicating that it sees value in the stock.”
3. Park Hotels & Resorts Inc. (NYSE:PK)
Number of Hedge Fund Holders: 29
Park Hotels & Resorts Inc. (NYSE:PK) has been gaining attention in 2023. Park Hotels & Resorts Inc. (NYSE:PK) is up about 21% year to date through February 26.
Earlier this month Park Hotels & Resorts Inc. (NYSE:PK) posted upbeat Q4 results.
FFO in the quarter came in at $0.40, in-line with estimates. Revenue in the quarter jumped about 48% on a YoY basis to reach $665 million, beating estimates by $12.68 million. For the first quarter of 2023, Park Hotels & Resorts Inc. (NYSE:PK) expects adjusted FFO to come in between $0.30 to $0.37.
For full-year 2023, Park Hotels & Resorts Inc. (NYSE:PK) expects adjusted FFO in the range of $1.60 to $1.99.
As of the end of the fourth quarter of 2022, 29 hedge funds reported having stakes in Park Hotels & Resorts Inc. (NYSE:PK). The total value of these stakes was about $226 million. The biggest stakeholder of Park Hotels & Resorts Inc. (NYSE:PK) was Ken Griffin’s Citadel Investment Group which owns a $69 million stake in the company.
Vulcan Value Partners made the following comment about Park Hotels & Resorts Inc. (NYSE:PK) in its Q3 2022 investor letter:
“We also purchased Park Hotels & Resorts Inc. (NYSE:PK) during the quarter. Park Hotels and Resorts is a real estate investment trust (REIT) that owns a number of Hilton’s flagship properties including the Hilton Hawaiian Village and the New York Hilton. In 2017 Hilton completed the spinoff of Park Hotels and Resorts, leaving Hilton primarily as a pure franchise and management company. Despite the possibility of short-term fluctuations in global travel from economic or geopolitical concerns, we believe that Park is trading at a significant discount to our estimate of intrinsic value and an even larger discount to replacement value.”
2. Wyndham Hotels & Resorts, Inc. (NYSE:WH)
Number of Hedge Fund Holders: 34
Hotels giant Wyndham Hotels & Resorts, Inc. (NYSE:WH) recently posted strong Q4 results. Adjusted EPS in the quarter totaled $0.72, beating estimates by $0.10. Revenue in the period fell about 15% on a YoY basis to $334 million, beating estimates by $9.6 million.
34 hedge funds in Insider Monkey database of 943 hedge funds had stakes in Wyndham Hotels & Resorts, Inc. (NYSE:WH) as of the end of the fourth quarter of 2022. The net worth of these stakes was $763 million. The biggest hedge fund stakeholder of Wyndham Hotels & Resorts, Inc. (NYSE:WH) during this period was Ken Griffin’s Citadel Investment Group which owns a stake worth over $170 million.
1. Marriott International, Inc. (NYSE:MAR)
Number of Hedge Fund Holders: 47
Marriott International, Inc. (NYSE:MAR) is perhaps the most famous name in our list of the most undervalued hotel stocks to buy according to hedge funds. Out of the 943 hedge funds tracked by Insider Monkey, 47 hedge funds reported owning stakes Marriott International, Inc. (NYSE:MAR). The biggest hedge fund stakeholders of the hotel at the end of 2022 included Boykin Curry’s Eagle Capital Management ($696 million stake) and Robert Rodriguez And Steven Romick’s First Pacific Advisors LLC ($116.4 million stake).
Marriott International, Inc. (NYSE:MAR) shares have gained about 15% year to date through February 26. Marriott International, Inc. (NYSE:MAR) recently posted strong Q4 results. Adjusted EPS in the fourth quarter came in at $1.96, beating estimates by $0.14. Revenue in the period jumped about 33% on a YoY basis to reach $5.92 billion, beating estimates by $540 million.
LRT Capital made the following comment about Marriott International, Inc. (NASDAQ:MAR) in its October investor letter:
“Marriott International, Inc. (NASDAQ:MAR) is the world’s largest hotel company followed closely by Hilton (HLT) and Intercontinental Hotels Group plc (IHG). The company owns a portfolio of brands from the low end (Courtyard, SpringHill Suites, Aloft), through the mid-tier (Marriott, Sheraton, Westin, Renaissance Hotels), to the luxury high end (JW Marriot, Ritz-Carlton, St. Regis). In total the company had 7,642 properties with over 1.4 million rooms as of the end of Q1 2021.
The majority (85%) of Marriott’s revenue comes from hotels in the United States, with the rest almost evenly split between Asia Pacific and Europe. Like it’s smaller peer, Hilton, the company today is almost exclusively a manager and franchisor of hotels, not a hotel owner. The company owns 66 hotels, manages 2,083 and franchises 5,493. Like all franchise-based businesses Marriott requires very little capital to grow as it utilizes the investment capital of its hotel-owners/partners to expand. Marriott currently faces a difficult operating environment due to the Covid-19 pandemic and uncertainty about the future of business travel. However, the company is an excellent operator with a somewhat leveraged capital structure (the company acquired Starwood Properties in late 2016) – if pent-up demand for travel materializes post-Covid, as we expect it will, the company will quickly go from losing money to raking in profits.”
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Disclosure: None. 12 Most Undervalued Hotel Stocks To Buy According To Hedge Funds is originally published on Insider Monkey.
