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Zacks Industry Outlook Highlights: Expedia, Marriott International, Hilton Worldwide Holdings, Hyatt Hotels and Wyndham Worldwide

For Immediate Release

Chicago, IL - March 30, 2016 - Today, Zacks Equity Research discusses the Hotels (Part 1), including Expedia Inc. ( EXPE ), Marriott International, Inc. ( MAR ), Hilton Worldwide Holdings Inc. ( HLT ), Hyatt Hotels Corporation ( H ) and Wyndham Worldwide Corporation ( WYN ).

Industry: Hotels, part 1

Link: http://www.zacks.com/commentary/76266/hotel-industry-stock-outlook---march-2016

The U.S. hotel industry has been strong so far in 2016, driven by the rise in business and leisure travel in the wake of an improving economy and increasingly positive employment numbers. Favorable supply and demand balances, strong investor appetite, thanks to higher transaction volumes, and solid lodging fundamentals spread cheer across the industry.

Moreover, hoteliers moved from owning real estate to franchising their brands and services to counter economic volatility better. Further, the rapid adoption of technology in the last few years has improved operating efficiencies and enhanced guest services.

Does this mean that all's well for the hotel industry? Not really.

What Are the Concerns?

Hoteliers are capitalizing on growing tourism numbers, but higher costs for renovation as well as digital and marketing initiatives to boost traffic are taking a toll on profits. Further, online travel agents like Expedia Inc. ( EXPE ) are limiting the pricing power of these brands.

Another major threat is posed by home-sharing operators like Airbnb, Inc., which offer a digital service allowing travelers to book homes at holiday destinations. With lower overhead costs and less strict regulations than hotel companies, these firms have made steady inroads into the industry and are grabbing shares from giants like Marriott International, Inc. ( MAR ) and Hilton Worldwide Holdings Inc. ( HLT ).

What's Being Done?

Marriott's recent deal to acquire Starwood Hotels is being viewed as a move to combat the rising threat from online travel agents and home sharing companies. Other hoteliers like Hyatt Hotels Corporation ( H ) and Wyndham Worldwide Corporation ( WYN ) are also investing in home sharing start-ups, to combat the Airbnb threat.

Statistics underscore the intense competition in the hotel industry. A recent report by PricewaterhouseCoopers ("PwC") shows that the lodging sector did not witness significant average daily rate (ADR) growth in the past few months, despite the increase in occupancy.

As a result of persistent pricing challenges, PwC slightly lowered the 2016 outlook for hotels to 5.5% for revenue per available room (RevPAR) growth. The RevPAR growth in 2015 was 6.3%.The slowdown in China, stronger-than-expected U.S. dollar, increasing political conflict in the Middle East, and a lull in the pace of recovery in the U.S. housing market are expected to pose headwinds.

Notwithstanding common macroeconomic hurdles, the lodging sector is expected to grow in 2016, thanks to the improving U.S. business and solid international travel and tourism volumes.

In the beginning of 2016, both transient and group demand exhibited solid momentum, with the year-over-year pace of recovery in group demand outpacing that of the transient segment. While this momentum in group demand is expected to continue, mega sporting events like the Olympics in South America should boost tourism this year.

The lodging performance indicators also showed year-over-year improvement. According to Smith Travel Research (STR), the leading information and data provider for the lodging industry, the ADR at U.S. hotels was up 4.2% year over year for the week ended Mar 19, 2016. Overall occupancy went up 1.9% year over year and RevPAR grew 6.2% for the same time frame.

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 the millennial - will remain the priorities.

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EXPEDIA INC (EXPE): Free Stock Analysis Report

MARRIOTT INTL-A (MAR): Free Stock Analysis Report

HILTON WW HLDG (HLT): Free Stock Analysis Report

HYATT HOTELS CP (H): Free Stock Analysis Report

WYNDHAM WORLDWD (WYN): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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