NEW YORK (
) -- Stocks in the hotel sector were mostly in negative territory Tuesday as the
major indexes tumbled more than 1%
Red Lion Hotels
Morgans Hotel Group
leading the sector lower among hotel companies with a market cap larger than $100 million.
Hotel operators are emerging from one of the biggest downturns the sector has ever faced. Some big-name hoteliers recently reporting marked improvements in demand and traffic as of late, helping to push key metrics like revenue per available room, or revPAR, occupancy and average room rates higher industry-wide, though
not all hoteliers are out of hot water
"Industry fundamentals continue to strengthen and demand is getting better every day," Hudson Securities analyst Robert A. LaFleur told
last 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
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
, citing its strong cash flow generation and attractive valuation.
His second pick is
Starwood Hotels & Resorts Worldwide
, followed by
. LaFleur is neutral on shares of Hyatt and
, 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."