3 Hospitality Stocks Poised For Growth In 2019

The hospitality sector downturns are often stimulated by external catalysts. The sector faced softer demand owing to the US-China trade spat last year. Also, President Trump’s stringent policies made the United States a somewhat less popular tourist destination, leaving the hotel, cruise and hospitality businesses slightly dry.

However, since the beginning of 2019, both the U.S. lodging and leisure industries have experienced an upside and the trend is likely to continue in the quarters to come. The appreciation can be attributed to strong GDP growth, healthy labor market, rising wages and growing disposable income.

A Favorable 2019 for Hoteliers Despite Near-Term Risks

Per the U.S. Travel Association, international and domestic travel in the first few months of 2019 is expected to grow in a decelerating rate. This is because softening global growth and the increase in the value of the dollar against other currencies throughout 2018 may dampen international inbound travel in the near term. This, in turn, will impede the United States’ efforts to increase its share in the global international travel market.

Then again, PwC forecasts the industry’s revenue per available room (RevPAR) growth for 2019 at 2.3% as compared with 2.9% recorded in 2019. RevPAR growth is likely to be largely driven by a 2.7% increase in average daily rate. Occupancy, in the meanwhile, is expected to slip to 65.9% this year.

However, it should be noted that for the first time since 2007, a higher daily rate may solely drive RevPAR. Major hoteliers like Hyatt (H - Free Report), Marriott (MARFree Report) and Hilton Worldwide Holdings Inc. (HLT - Free Report) are focusing on boosting revenues through unit expansion. Embracing digital innovation and adopting loyalty programs, these hotel bigwigs are relentlessly expanding their customer base and market share. Many hoteliers are also setting up analytics tools to understand consumer preferences and deliver a differentiated experience, which could eventually entice customers to visit frequently, stay longer and spend more.

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