11 Best Hotel Stocks To Invest In

Published on October 24, 2021 at 5:40 am by Hamna Asim in Hedge Funds, News

In this article, we will discuss the 11 best hotel stocks to invest in.

The hotel industry has suffered terribly due to the COVID-19 pandemic, and the adverse effects of government mandated lockdowns, travel restrictions, and unvaccinated visitors legally being banned from certain establishments have caused serious financial damage to the entire travel and hospitality industry. According to McKinsey, the hotel industry is one of the hardest hit sectors by the global COVID-19 pandemic, and the recovery to the 2019 level of revenue and visitors is expected in 2023 or even later.

The hotel industry, however, is expected to make a comeback, once the vaccine rollout is completed for a majority of countries. The hotel industry is still a lucrative investment, especially as travel restrictions are being gradually lifted, and pent-up vacation plans will be carried out sooner or later. The smart money is certainly invested in the hospitality industry, and companies like MGM Resorts International (NYSE:MGM), Marriott International, Inc. (NASDAQ:MAR), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Hyatt Hotels Corporation (NYSE:H) are very popular among hedge funds.

Our Methodology

Let’s dive into the 11 best hotel stocks to invest in. We took into account hedge fund sentiment, analysts’ ratings, long-term growth potential, and fundamentals while choosing these stocks. The stocks are ranked based on their popularity amongst the hedge funds.

Why should we pay attention to hedge fund sentiment while choosing stocks?

Insider Monkey’s research was able to identify in advance a select group of hedge fund holdings that outperformed the S&P 500 ETFs by more than 86 percentage points since March 2017. Between March 2017 and July 2021, our monthly newsletter’s stock picks returned 186.1%, vs. 100.1% for the S&P 500 ETF (SPY). Our stock picks outperformed the market by more than 86 percentage points (see the details here). That’s why we believe hedge fund sentiment is an extremely useful indicator that investors should pay attention to. You can subscribe to our free newsletter on our homepage to receive our stories in your inbox.

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Best Hotel Stocks to Invest In

11. Pebblebrook Hotel Trust (NYSE:PEB)

Number of Hedge Fund Holders: 17

Pebblebrook Hotel Trust (NYSE:PEB) is a hotel investment company that is internally managed, and acquires and invests in hotels located in metropolitan United States cities, focusing mainly on coastal properties. Pebblebrook Hotel Trust (NYSE:PEB) is known to invest particularly in resorts that are located suitably near urban areas, and unique destination markets, focusing on the elite clientele. Pebblebrook Hotel Trust (NYSE:PEB) is one of the best hotel stocks to invest in currently.

At the end of June, 17 hedge funds were bullish on Pebblebrook Hotel Trust (NYSE:PEB) according to Insider Monkey’s exclusive database, up from 10 in Q1. Ken Griffin’s Citadel Investment Group is the leading stakeholder in Pebblebrook Hotel Trust (NYSE:PEB), with 70.63 million shares worth $80.37 million.

10. Sunstone Hotel Investors, Inc. (NYSE:SHO)

Number of Hedge Fund Holders: 18

Sunstone Hotel Investors, Inc. (NYSE:SHO) is a lodging REIT that currently owns 18 hotel properties comprising 9417 rooms, which are operating under popular hotel chains.

At the end of the second quarter, 18 hedge funds held stakes in Sunstone Hotel Investors, Inc. (NYSE:SHO), up from 17 in the previous quarter. These stakes were worth over $73.6 million by the end of Q2. Ken Heebner’s Capital Growth Management is the leading stakeholder in Sunstone Hotel Investors, Inc. (NYSE:SHO), with 1.77 million shares worth $21.98 million.

On August 3, Sunstone Hotel Investors, Inc. (NYSE:SHO) announced earnings for Q2. The EPS beat estimates by $0.03 at -$0.01. The company’s revenue was $117.21 million, exceeding estimated EPS by $12.29 million.

9. Ryman Hospitality Properties, Inc. (NYSE:RHP)

Number of Hedge Fund Holders: 22

A hotel and resort REIT, Ryman Hospitality Properties, Inc. (NYSE:RHP) is one of the best hotel stocks to invest in. Ryman Hospitality Properties, Inc. (NYSE:RHP) focuses on acquiring and managing upscale convention centers and resorts. The REIT owns five of the largest non-gaming convention center properties in the US that operate under the Gaylord Hotels brand name, and are managed by Marriott International, Inc. (NASDAQ:MAR). In total, Ryman Hospitality Properties, Inc. (NYSE:RHP) has ownership of 2.8 million square feet of indoor and outdoor space in top-notch convention centers and leisure establishments across the United States.

At the end of Q2, 22 hedge funds tracked by Insider Monkey were long Ryman Hospitality Properties, Inc. (NYSE:RHP). This is compared to the same number of hedge funds in Q1. Mario Gabelli’s GAMCO Investors is the biggest stakeholder in Ryman Hospitality Properties, Inc. (NYSE:RHP), with 1.45 million shares valued at $114.76 million.

Here is what Bireme Capital has to say about Ryman Hospitality Properties, Inc. (NYSE:RHP) in their Q4 2020 investor letter:

“In Q3, we purchased shares of Ryman Hospitality Properties (RHP), another company whose business and stock price were temporarily crushed by the pandemic. Ryman is an owner of large, convention-focused hotels under the “Gaylord” banner. Prior to 2020, the company had grown EBITDA every year since 2012, and has a demonstrated ability to profitably develop new hotels from scratch, having opened 5 since the year 2000. These hotels dominate their niche in the conference and convention segment: they have more meeting space square footage than almost all of their competitors.

Ryman also operates a fast-growing music venue business, which includes the Ryman Auditorium, the Grand Ole Opry, and a chain of bar and concert venues called “Ole Red.” These comprise RHP’s “entertainment” segment, which grew EBITDA from $14.5m in 2011 to $58m in 2019, an 18% CAGR.

We think the company will do more than $300m of free cash flow in 2022. When we were buying RHP at the end of Q3, it had a market cap of $2.0b, a mere 6x multiple of FCF. While the market cap has recently increased to $3.7b, we still find the valuation very attractive for a company with their track record.”

8. Hyatt Hotels Corporation (NYSE:H)

Number of Hedge Fund Holders: 23

Hyatt Hotels Corporation (NYSE:H) owns and franchises luxury hotels, resorts, vacation establishments. The luxury hospitality industry mega-corporation is traded as a Russell 1000 Component.

Out of the 873 hedge funds tracked by Insider Monkey, 23 funds reported owning stakes in Hyatt Hotels Corporation (NYSE:H), similar to Q1.

Baron Funds mentioned Hyatt Hotels Corporation (NYSE:H) in its Q2 2021 investor letter. Here is what they said:

“Shares of Hyatt Hotels Corp., a global hotelier, declined in the quarter due to investor concerns around a new, more contagious variant of COVID-19 and a reopening of Asia and Europe that was slower than market forecasts. While the slowed reopening is a disappointment, Hyatt’s domestic business and group bookings are starting to return, and we think conditions will normalize by 2022, at least domestically. The company remains on track with its asset sale program as the hotel transaction market returns to pre-pandemic valuations, which should make Hyatt a more valuable, fee-based business.”

7. Host Hotels & Resorts, Inc. (NASDAQ:HST)

Number of Hedge Fund Holders: 24

Host Hotels & Resorts, Inc. (NASDAQ:HST) is a S&P 500 company and the largest American lodging REIT. Host Hotels & Resorts, Inc. (NASDAQ:HST) owns and manages luxury and upper-upscale hotels, being a self-managed and self-administered REIT. Host Hotels & Resorts, Inc. (NASDAQ:HST) invests in geographically diverse assets, including 84 hotels across 20 top US markets.

Out of the hedge funds tracked by Insider Monkey, 24 funds were bullish on Host Hotels & Resorts, Inc. (NASDAQ:HST) at the end of the second quarter.

On October 18, Wells Fargo analyst Dori Kesten upgraded Host Hotels & Resorts, Inc. (NASDAQ:HST) from Underweight to Equal Weight, with an $18 price target. The analyst believes that Host Hotels & Resorts, Inc. (NASDAQ:HST) is well-positioned to benefit from steadily increasing hotel demand, but its increasingly large operations will make revenue management critical, as opposed to economy hotels.

Like MGM Resorts International (NYSE:MGM), Marriott International, Inc. (NASDAQ:MAR), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Hyatt Hotels Corporation (NYSE:H), Host Hotels & Resorts, Inc. (NASDAQ:HST) is one of the best hotel stocks to invest in.

White Brook Capital mentioned Host Hotels & Resorts, Inc. (NASDAQ:HST) in its Q3 2021 investor letter. Here is what they said:

“Shares of Host Hotels (HST) were also sold during the 3rd quarter for similar reasons as Cogent given a degradation in the prospect of a return in group leisure and business travel. The capital was similarly redeployed.”

6. Wyndham Hotels & Resorts, Inc. (NYSE:WH)

Number of Hedge Fund Holders: 24

Wyndham Hotels & Resorts, Inc. (NYSE:WH) ranks sixth on our list of the 11 best hotel stocks to invest in. Headquartered in New Jersey, Wyndham Hotels & Resorts, Inc. (NYSE:WH) is one of the leading franchisors globally, with its hotels spread across 9280 locations worldwide. Wyndham Hotels & Resorts, Inc. (NYSE:WH)’s portfolio of assets includes 20 hotels, such as Baymont, Days Inn, Howard Johnson, La Quinta, Ramada, Super 8, Travelodge, and Wyndham Grand. Wyndham Hotels & Resorts, Inc. (NYSE:WH) is traded as a S&P 400 Component.

At the end of Q2, 24 hedge funds were bullish on Wyndham Hotels & Resorts, Inc. (NYSE:WH). This is compared to the same number of hedge funds in Q1.

JPMorgan analyst Joseph Greff kept an Overweight rating on Wyndham Hotels & Resorts, Inc. (NYSE:WH)’s shares, raising the price target to $86 from $83 on October 18, citing the US lodging recovery in Q3 as the reason for the rating.

Like MGM Resorts International (NYSE:MGM), Marriott International, Inc. (NASDAQ:MAR), Hilton Worldwide Holdings Inc. (NYSE:HLT), and Hyatt Hotels Corporation (NYSE:H), Wyndham Hotels & Resorts, Inc. (NYSE:WH) is a notable hotel stock to invest in.

5. Travel + Leisure Co. (NYSE:TNL)

Number of Hedge Fund Holders: 30

Travel + Leisure Co. (NYSE:TNL) is an American timeshare company that develops, manages, and sells timeshare properties under various vacation ownership clubs, like Club Wyndham and WorldMark by Wyndham. Travel + Leisure Co. (NYSE:TNL)’s three core businesses include Wyndham Destinations, which is the largest global vacation ownership business; Panorama, a travel technology and vacation exchange operation; and Travel + Leisure Group, offering online travel subscription services and product licensing. Travel + Leisure Co. (NYSE:TNL) is one of the best hotel stocks to invest in.

At June end, 30 hedge funds in Insider Monkey’s database were stakeholders in Travel + Leisure Co. (NYSE:TNL), similar to Q1.

4. Wynn Resorts, Limited (NASDAQ:WYNN)

Number of Hedge Fund Holders: 37

Wynn Resorts, Limited (NASDAQ:WYNN) is a Nevada-based company developing and operating luxury high-end hotels and casinos. Wynn Resorts, Limited (NASDAQ:WYNN)’s core income generating properties are located on the Las Vegas Strip, namely Wynn Las Vegas and Encore Las Vegas. Other properties are situated in Everett, Massachusetts, and Macau, China.

Morgan Stanley analyst Thomas Allen kept an Overweight rating on Wynn Resorts, Limited (NASDAQ:WYNN), but lowered the price target from $113 to $107 on October 20. He believes that the Q3 estimates for Wynn Resorts, Limited (NASDAQ:WYNN)’s Vegas properties will be good, but since travel restrictions are still in place, the Macau estimates will be lower than expected.

Out of the 873 hedge funds monitored by Insider Monkey, 37 funds were long Wynn Resorts, Limited (NASDAQ:WYNN) at the end of Q2.

3. Hilton Worldwide Holdings Inc. (NYSE:HLT)

Number of Hedge Fund Holders: 45

Hilton Worldwide Holdings Inc. (NYSE:HLT) is a multinational American hospitality company, managing a huge portfolio of hotels and leisure establishments, as well as franchising extensively. Hilton Worldwide Holdings Inc. (NYSE:HLT) owns 18 brands that are spread over different market sectors, including: Conrad Hotels & Resorts, Hilton Hotels & Resorts, DoubleTree by Hilton, Waldorf Astoria Hotels & Resorts, and Hilton Grand Vacations, among others. Its self-owned properties and franchised outlets are located across 118 countries as of 2020. Hilton Worldwide Holdings Inc. (NYSE:HLT) is one of the top hotel stocks to purchase.

At the end of Q2, 45 hedge funds were bullish on Hilton Worldwide Holdings Inc. (NYSE:HLT).

On October 5, Hilton Worldwide Holdings Inc. (NYSE:HLT) was assigned a Hold rating with a $135 price target by Loop Capital analyst Alton Stump. He has a mixed outlook about Hilton Worldwide Holdings Inc. (NYSE:HLT)’s growth profile over the next 18 months.

Here is what Pershing Square Holdings has to say about Hilton Worldwide Holdings Inc. in its Q2 2021 investor letter:

“While the hotel industry has been extremely negatively impacted by the COVID-19 pandemic, Hilton has done an excellent job navigating industry volatility, a testament to the company’s high-quality, asset light, high-margin business model and superb management team. From the moment the pandemic began, Hilton’s management team took decisive actions to ensure the company not only managed through what it knew would be a challenging period, but also positioned the company to generate improved margins, cash flows and investment returns once the business recovers to pre-COVID-19 demand levels.

Industry RevPAR (the industry metric for same-store sales at a given hotel) bottomed in April 2020 and has shown sequential improvement every quarter as travel and mobility have recovered along with COVID-19 vaccine rollouts and a resumption in travel. In recent months, there is increasing evidence that a robust recovery scenario is underway, led by domestic leisure travel occasions which is currently trending above 2019 demand levels. For the first three weeks of July, the most recent data the company provided, RevPAR has already recovered to 85% of 2019 levels – a significant improvement over prior months driven by increased hotel occupancy and a rapid recovery in rate.

While management anticipates a moderation in leisure demand as we exit the summer, it expects the moderation in leisure travel to be offset by a more pronounced recovery in business transient travel occasions as offices reopen this fall. Although there remains near-term uncertainty in domestic travel given the increase in COVID-19 case numbers following the arrival of the Delta variant in the U.S., we believe that the medium-term outlook continues to point to a robust recovery scenario. Throughout the pandemic, Hilton took actions to reduce corporate expenses by about 20% compared to 2019 levels.

Simultaneously, the company provided resources and support to the Hilton owner community which further solidified Hilton as the preferred franchise partner, thereby expanding Hilton’s pipeline of units around the world.

In the most recent quarter Hilton affirmed its near-to-medium term outlook of mid-single-digit net unit growth, and a resumption of its historical 6-7% net unit growth beginning in 2023-2024, higher growth than competitors, and further evidence of Hilton’s unique business model.

We believe that Hilton will continue to grow its market share over time given independent hotels’ increased interest in seeking an affiliation with global brands, particularly in the wake of the pandemic. While the recovery may continue to be uneven, Hilton has made tremendous progress which will help it become an even more profitable and stronger business going forward.”

2. Marriott International, Inc. (NASDAQ:MAR)

Number of Hedge Fund Holders: 49

An American multinational engaged in operating, managing, and franchising hotels, residential, and timeshare properties, Marriott International, Inc. (NASDAQ:MAR) is a Maryland-based corporation with 30 brands and over 7600 properties, located across 131 countries. Marriott International, Inc. (NASDAQ:MAR) is traded as a NASDAQ 100 Component and a S&P 500 Component, and is currently one of the best hotel stocks to invest in.

Of the hedge funds monitored by Insider Monkey, 49 funds reported owning stakes in Marriott International, Inc. (NASDAQ:MAR) at the end of the second quarter.

Evercore ISI analyst Rich Hightower downgraded Marriott International, Inc. (NASDAQ:MAR) to In Line from Outperform, with a price target of $160, up from $145. He explained that Marriott International, Inc. (NASDAQ:MAR) has outperformed estimates in the last 60 days, so this rating is simply a valuation call. He also raised performance estimates for Q3.

Here is what Artisan Partners has to say about Marriott International, Inc. in its Q2 2021 investor letter:

“Hotel operator Marriott had performed well in the pandemic reopening trade. Their subsequent weakness reflects that trade’s slowing momentum in Q2 as virus variants surged globally and rising uncertainty weighed on economic growth expectations. Still, we remain confident in this business. Each are leaders in their respective industries with wide moats and superior business economics. Each is led by a battle-tested management team we believe is executing well on an appropriately set strategy to deliver shareholder value. They are carefully and wisely financed, and they have undemanding valuations based on normalized earnings power.”

1. MGM Resorts International (NYSE:MGM)

Number of Hedge Fund Holders: 59

MGM Resorts International (NYSE:MGM) is the best hotel stock to invest in, ranked based on its popularity among the elite hedge funds. An American global hospitality and entertainment mega corporation, MGM Resorts International (NYSE:MGM) owns and operates hotels like the Bellagio, Mandalay Bay, MGM Grand, and Park MGM. MGM Resorts International (NYSE:MGM) operates destination resorts across Las Vegas, Massachusetts, Detroit, Mississippi, and New Jersey. The company has major stakes in MGM China Holdings Ltd and MGM Growth Properties, which is a sought-after REIT.

At the end of June, 59 hedge funds were bullish on MGM Resorts International (NYSE:MGM), up from 57 in Q1.

Here is what Longleaf Partners Global Fund has to say about MGM Resorts International in its Q2 2021 investor letter:

“The investments in the preceding paragraph have been long-term holdings, but what about our newer purchases? We have heard from long-time Southeastern/Longleaf observers who look at these stock charts and ask, “How can that still be cheap?” We continue to focus on the importance of value growth and dynamically updating our appraisals. MGM for example has seen very strong value growth since our purchase last year as the company’s properties in the US have rebounded much stronger than even the biggest optimists predicted. Management and the board have reduced risk by monetizing more of MGM’s holdings in MGM Growth Properties, its real estate subsidiary. There is still plenty of value to be added in the online division as well. All this leads to a value per share that was in the $30s last year now approaching $50. The company remains attractively discounted, even after price appreciated 101% since we first bought the stock 9 months ago.

MGM (12%, 0.43%), the casino and online gaming company, was a top contributor as it reported a solid first quarter with Vegas EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring or rent costs) doubling sequentially and Regional EBITDAR actually growing strongly YOY due to exceptional cost control. The second quarter saw clear signs of even more growth with a strong rebound in travel to the company’s US properties. MGM also continued to de-risk its value and balance sheet by selling over $1 billion of fully valued shares of its real estate subsidiary MGM Growth Properties in the quarter. On the first day of July, the company announced a transaction to consolidate and sell the real estate of its CityCenter project at a price that was accretive to our value per share. “

You can also take a look at 12 Best Long-Term Dividend Stocks To Buy Now and 9 Best Hydrogen Fuel Cell Stocks To Buy.

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11 Best Hotel Stocks To Invest In

Published on October 24, 2021 at 5:40 am by Hamna Asim in Hedge Funds, News