NEW YORK ( TheStreet) -- Hotel stocks suffered along with the rest of the economy during the recession, but they are now showing signs of recovery.

Consulting firm Colliers PKF Hospitality Research (PKF-HR) is forecasting that the average U.S. hotel will achieve a 2.3 percent increase in net operating income (NOI) during 2010. In fact, 2010 is looking so strong that PKF is trimming its 2011 forecast.

But lower prices are behind the sharp rise in demand, so the publicly traded hotel companies may still have their work cut out for them.

"We have identified several factors that are a cause for concern: persistent high levels of unemployment, continued weakness in housing, airline capacity constraints, the November elections and the tax policies that expire on January 1, 2011," says John Corgel, a Cornell professor who works as a senior advisor to PKF-HR. He believes that September results may disappoint.

However, some 432,000 new rooms have been added in the past year as companies complete long planned expansions. Some chains like Starwood Hotels & Resorts Worldwide ( HOT) are expanding into high growth countries like China and trying to take advantage of opportunities created by the recession.

However Starwood CEO Vasant Prabhu stressed in recent comments that financing is hard to come by right now and it is not easy to build hotels in this environment.

Several hotel stocks have delivered strong returns over the past quarter and year. Any weakness in the group may provide an entry point if investors believe that business travel is back and recreational travelers will continue to bite on bargains.

Here are five of the top-performing hotel stocks, according to stock screening Web site Financial Visualizations.

5. Gaylord Entertainment

Famous for owning the Opryland Hotel, Gaylord Entertainment ( GET) recently reopened the resort after closing due to massive flood damage. The stock delivered 6% appreciation in the second quarter and is up 34% for the past year.

BGB Securities analyst Sam Yake raised his target price on the stock to $32 from $30 in early August. At that time, he wrote: "We do not think that GET shares are considerably undervalued at current levels, but we do believe that the company has a bright long-term outlook."

4. Marriot International

Marriot International ( MAR) reported significant earnings improvement last quarter and the stock has also risen 34% in the past 52 weeks.

Argus Research has a buy rating on the shares with a $43 target price. Analyst John Staszak wrote in a recent research note: "We expect Marriot to continue to benefit from improving lodging industry conditions. During the first and second quarters, MAR reported an increase in business travel at many locations."

Staszak says he expects business and leisure travel to gain momentum in 2011 and that increased occupancy will lead to room rate increases. Marriot also pays an annual dividend of 16 cents a share for a yield of 0.50%.

3. Morgans Hotel Group

Shares of Morgans Hotel Group ( MHGC) have advanced 35% over the past year. The company's main issue is its debt load, which stood at more than $700 million as of June 30.

On the positive side, it's got a presence in markets with high barriers to entry like New York and London, and it's been renovating key hotels like the Royalton in New York while refinancing debt in London. Another attractive characteristic of the company is its focus is on the luxury market, which could show resilience if the recovery continues.

2. Wyndham Worldwide

Shares of Wyndham Worldwide ( WYN) have appreciated 49% over the last year, and Standard & Poor's thinks the stock has gotten over its head and is overvalued.

TheStreet Ratings is also cautious about the sharp run-up and has a hold rating on the stock, while Zack's Investment Research believes the stock has pulled back enough lately to make it attractively priced.

1. Starwood Hotels

Starwood Hotels ( HOT) tops the list of hottest hotels as its stock has risen 54% in the past 52 weeks.

Argus Research analyst John Staszak has a buy rating on the shares with a $66 price target. He writes: "We believe that HOT shares remain undervalued given the company's prospects for positive earnings surprises and profitable sales of owned hotels." Staszak expects Starwood to manage expenses better than its peers and achieve strong free cash flow to boost its balance sheet.

The company recently raised its outlook and plans to boost its portfolio of New York hotels by 50% over the next year. An annual dividend of 20 cents a share also sweetens the deal for investors.

-- Written by Debra Borchardt in New York.

Disclosure: TheStreet's editorial policy prohibits staff editors, reporters and analysts from holding positions in any individual stocks.

More from Opinion

These 5 Tech Giants Still Aren't That Expensive

These 5 Tech Giants Still Aren't That Expensive

Intel CEO Brian Krzanich's Ouster Proves CEOs Aren't Above the Rules

Intel CEO Brian Krzanich's Ouster Proves CEOs Aren't Above the Rules

Red Hat CFO Tells TheStreet: Tech Trends Are Still in Our Favor

Red Hat CFO Tells TheStreet: Tech Trends Are Still in Our Favor

Throwback Thursday: Intel Edition

Throwback Thursday: Intel Edition

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others

Intel's Next CEO Should Try Harder to Protect Its Flanks Against AMD and Others