Hotel Winners & Losers: Choice Hotels

NEW YORK -- Shares of hotel companies traded widely mixed on Monday after a UBS Investment Research analyst issued a downbeat forecast for the industry, but upgraded two hotel stocks to buy ratings.

UBS Investment Research analyst William Truelove predicted that hotel demand will be bleak in 2009 and remain negative in 2010. He said sharp declines in business and leisure travel are reducing hotel demand at the same time that hotels under construction are opening for business.

He expects U.S. revenue per available room, or revpar, to drop about 9% in 2009 and decline as much as 7.5% in 2010. Revpar is a key gauge of a hotelier's performance. Truelove said he previously expected a modest recovery in 2010.

"The magnitude of the decline was almost unthinkable six months ago," he said.

At the same time, Truelove upgraded Choice Hotels' (CHH Quote) rating to buy from neutral arguing that the company's pure franchise model makes it his top pick in the sector.

Truelove said hotel companies that collect franchise and management fees are likely to be more resilient during a downturn than hotel owners, which depend on filling rooms.

Choice Hotels' shares jumped 55 cents, or 2.2%, to close at $25.19. The stock has traded between $18.25 and $37.24 during the past 52 weeks.

He upgraded Gaylord Entertainment(GET Quote) shares to buy, as well, citing both the stock's sharp drop in value and agitation by the company's largest stockholder. TRT Holdings is pushing to boost its stake in the Nashville, Tenn.-based company and replace three members of its board. TRT is led by Texas billionaire and Omni Hotel owner Robert Rowling.