Updated from 11:27 a.m. EDTJudging from better-than-expected second-quarter results, the lodging recovery is gaining momentum, but given a recent dip in shares, Raymond James upgraded Hilton Hotels ( HLT) and Starwood Hotels ( HOT) to strong buy, citing an investment opportunity.
"We believe Hilton is primed to outperform peers in 2005, largely because the company's comparisons will not be as difficult," said the analyst. "Hilton is also likely to see a springboard effect on 2005 revenue per available room growth as a favorable convention schedule should propel very strong performance in Chicago." Just two quarters ago, management at some of the largest hotel companies was conservative when it came to talking up the industry recovery, but after the release of second-quarter earnings, it has become clear that profits are surging. Earlier this week, Host Marriott ( HMT) raised earnings guidance for the rest of the year and
posted a net profit in the second quarter, a reversal from the year-ago loss, on a 12% jump in revenue. During the quarter, fundamentals were strong, with occupancy at the nation's largest real estate investment trust climbing 5.5 percentage points while the average daily room rate rose 1.1%. Two weeks ago, Marriott International ( MAR) kicked off the second-quarter earnings season by blowing away Wall Street estimates by six cents a share, while guiding higher for the rest of the year. "After three difficult years, strong demand returned to the markets most impacted by the downturn," said J.W. Marriott Jr., chairman and CEO.