Staying in Hotels for the Summer

A powerful cyclical recovery is lifting hotel earnings, prompting a near-daily parade of upward estimate revisions by analysts. The rally will face its first big test this summer, however, when year-over-year comparisons get tougher.

For much of 2004, hotel stocks have been red-hot as company executives have turned bullish on the prospects of a recovery. Occupancy rates have started to tick up, allowing operators to raise room rates. With year-ago results weak due to the war in Iraq, companies have posted double-digit percentage gains to revenue per available room, or "revpar," a key metric.

Indeed, in the week ending June 19, revpar at all U.S. hotels rose 5.4% with upper upscale revpar growth coming in at 7.3%, according to Smith Travel Research. In the same week a year earlier, revpar actually fell 1%, but next week, during the first full week of the summer travel season, these easy comparisons come to an end. ...