The hotel and hospitality industry took a serious beating during the Covid-19 pandemic. U.S. hotel market valuations dropped from $222.26 billion in 2019 to a measly $127 and $171.1 billion. Hotel rooms worldwide struggled to occupy even half of their rooms, and hospitality job demands were at an all-time low. Thankfully, that’s mostly behind us now. The sector has clawed its way back to pre-pandemic levels, riding on people’s pent-up travel demands. So, does this mean that it’s too late to look for a hotel stock to buy?
Not quite. Early numbers indicate the hotel industry will end at $243.5 billion this year, while CAGR is projected at 4.20% until 2027. This leaves plenty of room for capital growth for interested investors. So, let’s take a look at some promising hotel stocks.
Hilton Worldwide Holdings Inc. (HLT)
Hilton Worldwide Holdings Inc. (NYSE:HLT) is a hospitality brand recognized practically everywhere. The company operates through property ownership, contracted hotel and resort management, and franchising brands and IPs to numerous clients worldwide. Properties include luxury and full-service hotels, resorts, spas, and ancillary services like parking. HLT is renowned for its diverse brand offerings, high-quality services, and capital-efficient operations. That last attribute, in particular, helped the company survive the pandemic—and is one of the reasons why we think it’s an excellent hotel stock to buy.
Q3 results came in recently and reported strong numbers. Total revenue for the quarter was $2.67 billion, topping the same quarter last year by 12.88%. This is particularly impressive considering that Q3 2022 was around the time of hotel industry highs as people started to make up for lost vacation and travel time. Earnings from managed and franchised properties accounted for 56.34% of its total quarterly revenue.
Expenses came in 13.6% higher YoY on more operational costs for property and equipment, but that’s to be expected. HLT continues to expand its business, with 457,300 rooms in its development pipeline. Meanwhile, EPS came in flat with expectations, but analysts are still optimistic about Hilton Worldwide’s growth. And if the stock’s recent uptrend and new 52-week high are indications, then HLT is well and truly on the way up to its $191 high price estimates.
Monarch Casino & Resort Inc. (MCRI)
Monarch Casino & Resort Inc. (NASDAQ:MCRI) is a modest hotel stock with a $1.22B market cap and two notable properties. The first one is the Atlantis Casino Resort Spa in Reno, Nevada, one of the most recognized casinos in Reno. It has over 800 guest rooms and over 64,000 square footage of casino space. The other is the Monarch Casino Resort Spa in Black Hawk, Colorado. This one has 500-plus rooms and about 60,000 square feet of gaming space.
You might be wondering why we’d recommend others buy a small hotel stock right after HLT. Well, that’s because MCRI is one of those companies that is ripe for growth. Its Reno and Black Hawk locations are massively profitable, and the company is spending a lot on improving its current offerings. Speaking of price, MCRI recently hit a 52-week low after third-quarter numbers missed expectations and revenue fell YoY. Now, this might look like a big red flag to some investors. Given Monarch’s growth prospects, though, this recent low might be a good opportunity to buy this hotel stock at a discount.
OneSpaWorld Holdings (OSW)
While not strictly a hotel company, OneSpaWorld Holdings (NASDAQ:OSW) is a noteworthy player within the industry. The company offers extensive beauty and wellness products and services in hotels, resorts, cruise lines, and other hospitality venues. Its extensive health, beauty, and fitness services include skincare, beauty treatments, spa and detox programs, and personal fitness programs.
OSW operates onboard 189 ships across multiple lines, including Royal Caribbean International (NYSE:RCL), Carnival (NYSE:CCL), Norwegian Cruise Line (NYSE:NCLH), Princess Cruises, Celebrity Cruises, Holland America, Costa, Silver Sea, and others. The company has been partnering with these cruises for more than 20+ years and has a 100% presence on all of their ships. OneSpaWorld has a 90% share in outsourced cruise ship spas. Its land-based spas in New York include Mandara, Chavna, and Bliss. OSW also works with brands like California Sun Glow, ELEMIS, Keratase, and Nuface.
OneSpaWorld recently posted an excellent third quarter, with revenue coming in 33% higher YoY. Revenue guidance was bumped from between $770 and $790 million to $792 million and $797 million to reflect the increased income. EPS, however, missed estimates by 14.29%. Despite that, analysts remain positive about OSW’s prospects, with firms giving the hotel stock a strong buy recommendation.
On the date of publication, Rick Orford did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
