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Hotel Stocks: Would Hospitality be the Same Without a Room Key?

James Dennin, Kapitall: Could a push toward efficiency undermine the profitability of some hotel stocks?

Brandon Ambrosino of Quartz is very concerned about room keys. As he points out in a recent article, the upscale chain Starwood Hotels & Resorts Worldwide (HOT) is considering phasing out room keys altogether, even keycards.

Starwood wants to replace keycards with bluetooth enabled digital "smart keys" that customers can download to their mobile phones. This innovation will give customers the option of bypassing the front desk entirely.   

Read more from Kapitall: Is It Too Soon to Call 2014 a Year of Mergers and Acquisitions?

Ambrosino's concern about room keys isn't just aesthetic. Besides the retro-appeal of having a real live metal key to open your door, he cites studies and articles from Forbes and Fast Company that argue "human interaction" will be one of the top consumer trends of 2014. In an increasingly automated world, consumers are getting more and more likely to pay a premium for some face-to-face, honest-to-god human contact. 

Trends in automation raise a prickly paradox for hotels. On one hand, efficiency keeps costs down and is undoubtedly good for margins. On the other hand, hotels run the risk of losing the human touch that makes travelling fun. It is the hospitality industry after all. Would customers really want a hotel experience without bellhops, doormen, and a concierge?

Who would you call to make a complaint? Who would give you directions to the pool? Who would you discretely slip a $5 bill to make sure the maid doesn't come till after 11? 

Considering all this, we decided to build a list of the 5 most profitable stocks working in the hotel industry by profit margin. Notice that Starwood Hotels makes the list, but just barely, at number 5. 

Click on the interactive chart to view data over time. 

1.Choice Hotels International Inc. (CHH):operates as a hotel franchisor worldwide.. Market cap at $2.77B, most recent closing price at $48.08.

Profit Margin: 15%
 

 

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