NEW YORK ( TheStreet) -- Hotel stocks suffered along with the rest of the economy during the recession, but they are now showing signs of recovery.
Consulting firm Colliers PKF Hospitality Research (PKF-HR) is forecasting that the average U.S. hotel will achieve a 2.3 percent increase in net operating income (NOI) during 2010. In fact, 2010 is looking so strong that PKF is trimming its 2011 forecast.
But lower prices are behind the sharp rise in demand, so the publicly traded hotel companies may still have their work cut out for them.
"We have identified several factors that are a cause for concern: persistent high levels of unemployment, continued weakness in housing, airline capacity constraints, the November elections and the tax policies that expire on January 1, 2011," says John Corgel, a Cornell professor who works as a senior advisor to PKF-HR. He believes that September results may disappoint.However, some 432,000 new rooms have been added in the past year as companies complete long planned expansions. Some chains like Starwood Hotels & Resorts Worldwide (HOT - Get Report) are expanding into high growth countries like China and trying to take advantage of opportunities created by the recession. However Starwood CEO Vasant Prabhu stressed in recent comments that financing is hard to come by right now and it is not easy to build hotels in this environment. Several hotel stocks have delivered strong returns over the past quarter and year. Any weakness in the group may provide an entry point if investors believe that business travel is back and recreational travelers will continue to bite on bargains. Here are five of the top-performing hotel stocks, according to stock screening Web site Financial Visualizations.