Hotel stocks rise faster than S&P
By Jeannine DeFoe
Bloomberg News
New York — Hotel stocks have risen to their highest level since September's terrorist attacks, now that room demand apparently has bottomed and should improve next year along with travel.
The S&P Hotel/Motel Index, which includes Starwood Hotels & Resorts Worldwide Inc., the owner of the Westin and Sheraton chains, and Marriott International Inc., is up 47 percent since reaching a low Sept. 20. By comparison, the Standard & Poor's 500 Index is up 15 percent over that time.
The United Kingdom's Six Continents Plc, the No. 2 hotel company, said last week that sales at its U.S. hotels, including Holiday Inn, are improving. Host Marriott Corp., an owner of 124 hotels such as Hyatts and Ritz-Carltons, said revenue per room, an industry measure of demand, has improved every month since September.
"What the market is saying is the ultimate impact of the attacks was not significant to the hotel business," said Steven Bollenbach, chief executive of Hilton Hotels Corp. "At some point next year we're going to see a very strong upturn in the business."
Shares of Beverly Hills, Calif.-based Hilton have risen 61 percent since Sept. 20, while White Plains, N.Y.-based Starwood is up 57 percent and shares of Bethesda, Md.-based Marriott have risen 37 percent.
Investors "are afraid they won't get in on an opportunity" and are buying now, said David Shapiro, manager of the Phoenix-Seneca Real Estate Securities Fund.
Revenue per available room fell 37 percent for the week ending Sept. 22 as consumers curtailed their travel plans for fear of more terrorist attacks. In the week ending Dec. 1, the most recent week for which data are available, this figure was down 14 percent, according to Smith Travel Research, a lodging research firm.
"The next test is going to be the business traveler in February and March," said Steve Burton, portfolio manager for Clarion CRA Securities, which owns shares of Starwood and Meristar Hospitality Corp. "If evidence comes in that demand is firm, I think the stocks will move higher."
Hotels that cater to business travelers — Hyatts and Hiltons, for example — are lagging behind the rest of the industry. Revenue per room for these hotels fell 22 percent for the week of Dec. 1, Smith Travel said, a sign that business travel hasn't yet recovered.
Even before Sept. 11, the industry was suffering from cuts in business travel spending and hotels had begun waging rate wars to win guests. Midscale hotels including Hampton Inns and Comfort Inn have suffered the least as business travelers gravitate to less expensive hotels, according to analysts.
Overall demand won't fully recover until the second half of 2002, according to consulting firm PricewaterhouseCoopers. That means the recent stock gains may be too much too soon, said Shapiro.
Hotel stocks "are more likely to go down than up," he said. "The price of the stocks are way ahead of the fundamentals."
