Investing.com --Goldman Sachs has a dour outlook on U.S. lodging companies, citing weakening consumer demand, geopolitical uncertainty, and a negative read-across from U.S. airlines.
In turn, Goldman is shifting its stock preferences, favoring asset-light operators with global diversity and less exposure to U.S. resort markets and incentive management fees.
The firm upgraded Choice Hotels (NYSE:CHH) from Sell to Buy, while Hyatt was downgraded from Neutral to Sell. Marriott and Hilton were both cut to Neutral, while Wyndham remains a Buy.
Lodging stocks have underperformed in recent months, with Hyatt down 32%, Marriott off 27%, and Hilton falling 21%, compared to a 13% decline in the S&P 500.
Airline warnings on domestic demand, alongside weaker foreign arrivals after new tariff announcements, add to pressure on the sector.
Despite resilient TSA throughput, Goldman highlights softness in corporate travel and notes a sharp year-on-year drop in Canadian trips to the U.S.
Goldman Sachs believes hotel trends are likely to follow airline weakness, particularly in RevPAR and IMF-related revenue.
Franchise-heavy, globally diversified, asset-light operators are best positioned in this environment, as per the analysts at Goldman Sachs.
The bank cut its 2025 U.S. RevPAR (revenue per available room) forecast by about 125 basis points and expects RevPAR trends to deteriorate throughout the year.
Analysts now see increased downside risk to travel trends, driven in part by a slowdown in Canadian tourism to the U.S., lower government travel, and signs of a broader softening in corporate and leisure segments.
Analysts were not incorporating a full recession into their forecast, but note a 45% probability of a U.S. recession, according to the Goldman Sachs note.