3 Hotel Stocks to Buy Now

NEW YORK (TheStreet) -- Stocks in the hotel sector were mostly in positive territory Friday, with Orient-Express Hotels (OEH) and Starwood Hotels & Resorts Worldwide (HOT) leading the pack in terms of share price gains among hotel companies with a market cap larger than $100 million.

The sector certainly benefited from a 2% gain in the major indexes as investors sifted for bargains ahead of the closing bell, but the hotel industry has also seen marked improvements in demand and traffic as of late, helping to push key metrics like revenue per available room, or revPAR, higher industry-wide.

"Industry fundamentals continue to strengthen and demand is getting better every day," Hudson Securities analyst Robert A. LaFleur told TheStreet earlier this month, especially as business travel continues to pick up momentum.

The typical recovery cycle in the hotel industry begins with a return in demand, he said. Higher demand then re-inflates occupancy rates to a point where hoteliers can comfortably raise rates. That provides a compounding effect to revPAR recovery, or what LaFleur calls "the double whammy," of increasing occupancy and room rates concurrently.

"Despite concerns in the broader market about economic recovery, its sustainability and the possibility of a double dip, we're not seeing evidence in hotels that the recovery is running out of gas," he said. "In many ways it's accelerating."

Of LaFleur's buy-rated stocks, his top pick is Wyndham Worldwide (WYN), citing its strong cash flow generation and attractive valuation.

His second pick is Starwood, followed by Marriott (MAR). LaFleur is neutral on shares of Hyatt Hotels (H) and Host Hotels (HST), a lodging real estate investment trust.

"I have no specific criticism for Hyatt and Host, but think their valuations are fair at this point," LaFleur said. "For investors, there's better upside potential with Wyndham and Starwood at this point in the cycle."

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