3 best hotel stocks to buy in 2021
Like most of us, 2020 has been a year when hotel stocks have taken a hit. But the hospitality industry is eager to move forward. While the COVID-19 pandemic has been difficult for most industries, the American Hotel & Lodging Association (AHLA) has described it as “devastating” for the hospitality industry. He also said the impact of the pandemic was nine times worse than the impact of September 11.
Even though the worst of the pandemic seems to be over, the AHLA still does not expect travel to return to 2019 levels until at least 2024. In fact, due to the growing popularity of remote working, some aspects of business travel might never come back. at normal levels.
That being said, tough times can create great buying opportunities. If you are looking to increase your portfolio with some of the best hotel stocks, I have selected a few that you should consider buying.
Here are some of the best hotel stocks to buy …
NOTE: I am not a financial advisor and am simply providing information and commentary. Please do due diligence before making any decisions.
The different types of hotel companies
Before investing, it should be noted that there are two main structures under which hotel companies operate.
C-corporation hotels are companies that engage in hotel management, branding and marketing. These types of businesses typically operate the hotel franchise, but do not own much of the real estate.
Hotel real estate investment funds (REIT) usually do the opposite. REITs focus on buying, owning and operating real estate where other companies operate. Sometimes they run the hotels they own, but it usually depends on the company. REITs are also generally required to pay 90% of their income to shareholders.
Now, let’s take a look at some good options for hotel stocks to buy …
Best hotel stocks to buy
- Marriott (Nasdaq: MAR)
- Playa Hotel & Resorts (Nasdaq: PLYA)
- MGM Resorts (NYSE: MGM)
Marriott is the world’s largest hotel operator with 7,000 hotels in 130 countries. This might seem like an obvious choice in an article titled “Best Hotel Stocks to Buy”. However, despite being a major hotel operator, he has proven himself capable of change at the speed of a small, agile startup. He showed this in November 2020 when he shocked investors by posting a profit of $ 100 million as other operators were bleeding money.
When he reported the news, he revealed that profits had fallen 57% from the previous year. However, thanks to cost-cutting measures at its sites, it was able to reduce its expenses by 57% during the same period. This allowed him to make a 0.2% profit to the tune of $ 100 million.
Additionally, one of the biggest threats to traditional hotel stocks is the rise of companies like Airbnb. These new businesses can offer customers a unique experience for a generally cheaper price. Marriott is already getting into this game with its own Airbnb-style service called Marriott Homes & Villas. This service allows clients to choose from over 2,000 properties in the United States, Canada, Europe, the Caribbean and Latin America. Since Marriott has the power of a rewards program on Airbnb, this could actually give it a long-term advantage.
Marriott stock has risen nearly 40% in the past year. It also posted revenue of $ 811 million for the second quarter of 2021. During the same period, it posted net income of $ 422 million, an increase of 280% year over year. other.
Marriott’s brand portfolio offers a range of luxury, upscale and budget hotels. Brands include: The Ritz Carlton, Sheraton, Gaylord Hotels, Aloft, Four Points and many more.
Playa Hotel & Resorts
NOTE: I have a very small position in Playa.
According to the AHLA, there is a good chance that the United States will be haunted by variants of Covid until 2024. If this is true, then all hotel operators in the United States are likely to be affected by the same way by future blockages. So for the next one of the best stocks of hotels to buy, we’re traveling south of the border.
Playa Hotels & Resorts is a REIT that owns a chain of all-inclusive luxury beachfront resorts in Mexico and the Caribbean. In total, it owns 20 properties in Mexico, Jamaica and the Dominican Republic. Its portfolio includes several Hilton and Hyatt properties.
It’s no secret that people are eager to travel and make up for lost time. This is starting to materialize for Playa. In his latest earnings report, CEO Bruce Wardinski mentioned that his revenues for the third and fourth quarters of 2021 are already surpassing those of 2019.
Bruce also said the company has maintained “price discipline in an environment of increasing demand.”By that, he understands that they must capitalize on the rush of tourism by charging full price for the rooms.
Playa’s share price is currently fairly comparable to what it was before the pandemic.
MGM Resorts is one of the world’s largest hospitality and entertainment companies. It has resorts in Las Vegas, Massachusetts, Detroit, Mississippi, Maryland and New Jersey. A few of their flagship properties include the Bellagio, Mandalay Bay, MGM Grand, and Park MGM.
This is another company that has shown it is able to move quickly to cut expenses during the COVID shutdown. In 2020, it was able to cut spending by $ 450 million and expects to realize those savings once demand returns to 2019 levels. When travel returns to normal, this could add another $ 450 million to their bottom line. .
Already, this hotel stock has jumped by 85% last year. He is currently where he was before the pandemic. Its revenue has also been growing steadily since June 2020 as Covid restrictions continue to be lifted. Before the 2019 pandemic, it also had its highest net income in several years, at $ 2.05 billion.
Another interesting stock to watch is MGM Growth Properties (NYSE: MGP), which was spun off from MGM Resorts (although MGM Resorts still owns a controlling stake). MGM Growth is the company that owns most of the MGM properties, including seven resorts on the Strip. It owns MGM Grand Las Vegas, Mandalay Bay, The Mirage, Park MGM, Luxor, Excalibur and New York-New York.
Given that Las Vegas is one of the least Covid-aware places in the United States, these two companies just might do whatever happens with the delta variants.
The best stocks of hotels and beyond
These hotel stocks can give you excellent exposure to the hospitality industry. However, this is just one of the many industries that might be worth buying. Here are some other sectors and stocks that could generate big returns …
If you are looking for more investment research, consider signing up for Trade of the day. This is a free email newsletter full of investment tips and tricks. Whether you are a beginner or an advanced trader, there is something for everyone.
About Teddy Stavetski
A graduate of the University of Miami, Teddy studied marketing and finance while playing for four years on the soccer team. He has always had a passion for business and used his experience from a few personal projects to become one of the top rated business copywriters on Fiverr.com. When he’s not hammering out words on paper, you may find him hammering notes on the piano or walking to a random place.