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2 Hotel Stocks to Buy With Summer Travel Bookings at Record Levels

While the resurgence of COVID-19 cases is a significant concern, the hotel industry enjoys substantial investor attention because of increasing consumer spending and pent-up leisure travel demand with the upcoming summer vacations. So, it could be wise to scoop up the shares of fundamentally strong hotel stocks Travel + Leisure Co. (TNL) and InterContinental Hotels (IHG).

Even though several parts of the world are still witnessing a resurgence of COVID-19 cases, travel bookings are at record levels due to solid leisure travel demand with the upcoming summer vacations. Moreover, hotels were one of the driving forces of U.S. inflation that hit a 41-year high in March due to high occupancy levels.

Investors’ interest in the hotel stocks is evident from the Defiance Hotel Airline and Cruise ETF’s (CRUZ) 5.5% gains over the past three months compared to the SPDR S&P 500 Trust ETF’s (SPY) 3.2% loss.

The increasing social media penetration, rising expenditure capacities, and changing lifestyle patterns propel the hotel market's growth. According to a Statista report, the hotel market is expected to grow at a CAGR of 11.3% from 2022 to 2026.

So, it could be wise to bet on quality hotel stocks Travel + Leisure Co. (TNL) and InterContinental Hotels Group PLC (IHG) that are well-positioned to capitalize on the industry tailwinds.

Travel + Leisure Co. (TNL)

TNL provides hospitality services and products internationally. The company operates in two segments, Vacation Ownership; and Travel and Membership. It has approximately 245 vacation ownership resorts and offers private-label travel booking technology solutions.

In April 2022, the Board of Directors approved an increase to the authorized capacity of the company's share repurchase program by $500 million. In addition, management will recommend a second-quarter dividend of $0.40 per share for approval by the company’s Board of Directors in May 2022.

TNL’s net revenue surged 29% year-over-year to $809 million for the first quarter ended March 31, 2022. The company’s adjusted EBITDA grew 32% year-over-year to $170 million, while its adjusted net income came in at $60 million, representing a 76% year-over-year increase. Also, its adjusted EPS came in at $0.69, up 77% year-over-year.

For the quarter ending June 30, 2022, analysts expect TNL’s EPS and revenue to increase 29.5% and 26.5% year-over-year to $1.14 and $913.50 million, respectively. In addition, it surpassed the consensus EPS estimates in three of the trailing four quarters. Over the past nine months, the stock has gained 4.3% to close yesterday’s trading session at $55.62.

TNL’s POWR Ratings reflect solid prospects. The company has an overall rating of B, which translates to a Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

In addition, it has a B grade for Value, Sentiment, and Quality. Click here to see the additional POWR Ratings for TNL (Stability, Growth, and Momentum). TNL is ranked #3 out of 22 stocks in the Travel - Hotels/Resorts industry.

InterContinental Hotels Group PLC (IHG)

IHG owns, manages, franchises, and leases hotels. It operates 5,991 hotels and 880,327 rooms in approximately 100 countries. The company operates hotels under the Six Senses, Regent, InterContinental Hotels & Resorts, and Vignette Collection. It also provides an IHG Rewards loyalty program.

On April 13, 2022, IHG debuted a new global loyalty program: IHG One Rewards. Claire Bennett, Global Chief Customer Officer, IHG, said, "This is one of the largest and most comprehensive investments that IHG Hotels & Resorts has made in recent years. It's also the biggest development we've made in the loyalty space since introducing the industry's first loyalty program.”

IHG’s net revenue surged 40% year-over-year to $1.39 billion for the fiscal year ended December 31, 2022. The company’s operating profit grew 144% year-over-year to $534 million. Also, its adjusted EPS came in at $1.47, up 370% year-over-year.

IHG’s EPS and revenue are expected to increase 73.1% and 32.4% year-over-year to $2.55 and $1.84 billion, respectively, in fiscal 2022. Over the past three months, the stock has gained 2.7% to close yesterday’s trading session at $66.64.

IHG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has a B grade for Growth, Quality, and Sentiment.

Click here to access IHG’s ratings for Stability, Value, and Momentum. In addition, IHG is ranked #2 in the same industry.

TNL shares were trading at $55.87 per share on Friday afternoon, up $0.25 (+0.45%). Year-to-date, TNL has gained 1.84%, versus a -12.47% rise in the benchmark S&P 500 index during the same period.

About the Author: Nimesh Jaiswal

Nimesh Jaiswal's fervent interest in analyzing and interpreting financial data led him to a career as a financial analyst and journalist. The importance of financial statements in driving a stock’s price is the key approach that he follows while advising investors in his articles.


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