Zacks Industry Outlook Highlights: Expedia, TripAdvisor, Priceline Group, Starwood Hotels & Resorts And Steel Marriott International

For Immediate Release

Chicago, IL – July 21, 2016 – Today, Zacks Equity Research discusses the Hotels, including like Expedia Inc (NASDAQ:EXPE). (EXPE), TripAdvisor (TRIP), Priceline Group Inc. (PCLN), Starwood Hotels & Resorts Worldwide (NYSE:HOT) Inc. (HOT) and Marriott International, Inc. ( MAR).

Industry: Hotels

Link: https://www.zacks.com/commentary/86420/us-hotel-industry-stock-outlook---july-2016

The U.S. hotel industry slowed down in the first half of 2016 compared to 2015 levels. Apart from a decline in occupancy levels in the first half, negative currency translation and pockets of geopolitical instability and economic slowdown raised concerns.

However, business and leisure travel increased on the back of an improving economy and positive employment numbers. Moreover, hoteliers have realized that franchising their brand and services is better than owning real estate to counter economic volatility.

The Positives

Notwithstanding the macroeconomic hurdles, the lodging sector is expected to grow in the second half of 2016, thanks to strong investor appetite, increasing travel demand and higher transaction volumes.

As per the summer forecast from Smith Travel Research (STR), a leading information and data provider for the lodging industry, the U.S. hotel industry is expected to experience record-high room demand during the Jun to Aug 2016 phase. STR stated that the number of rooms sold during the summer months is estimated to inch up roughly 2.1% on a year-over-year basis, banking on the current trend in the U.S.

However, a healthy supply pipeline is anticipated to lead to a 1.7% increase in the number of rooms available and is likely to keep occupancy growth subdued at 0.4%. Moreover, hoteliers are not likely to raise prices to match 2015 levels.

Nonetheless, as per STR, the average daily rate (ADR) at U.S. hotels is expected to go up 4% in 2016. Further, mega sporting events like the Olympics in Brazil in August should boost tourism in the second half.

Thus, as hoteliers strive to enhance value and competitiveness, industry-best practices such as sustainability, brand refreshment and increased visibility through technological innovation and social networking – especially among millennials – will remain their priorities.

What’s Hurting the Hoteliers?

Hoteliers have been focusing on renovation and digital and marketing initiatives to boost traffic and capitalize on the growing tourism numbers. However, to do that, steep costs incurred by leading hoteliers are taking a toll on profits. Further, online travel agents like Expedia Inc. (EXPE) , TripAdvisor (TRIP) and The Priceline Group Inc. ( PCLN) are limiting the pricing power of these brands.

Statistics further underscore the slowing down in the hotel industry. A recent report by PricewaterhouseCoopers (“PwC”) shows that occupancy levels at U.S. hotels have begun to stabilize after reaching peak levels in 2015. PwC also lowered the 2016 and 2017 revenue per available room (RevPAR) growth outlook for hotels to 4.6% and 3.7%, respectively. Notably, RevPAR growth in 2015 was 6.2%.

The slowdown in China, lingering uncertainty in various international markets, and increased supply growth are expected to pose headwinds. Moreover, in Europe, economic/political conditions are expected to be challenging post Brexit.

Another major threat comes from home sharing companies like Airbnb, which offer a digital service allowing travelers to book homes at holiday destinations. With lower overhead costs and far less regulations than what hotel companies have to comply with, these firms have made steady inroads into the industry and are grabbing shares from giants like Starwood Hotels & Resorts Worldwide Inc. (HOT) and Marriott International, Inc. ( MAR).

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