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."
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV