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Key Takeaways
- As travel demand continues to go up, hotel stocks provide a great way for investors to diversify their investment portfolios.
- Some of the best hotel stocks to buy as an investor include: Choice Hotels International Inc. (NYSE: CHH), Hilton Worldwide Holdings Inc. (NYSE: HLT), Hyatt Hotels Corporation (NYSE: H), Marriott International (NASDAQ: MAR) and MGM Resorts International (NYSE: MGM).
- If you're an investor looking to invest in a hotel fund that is focused on building and managing hotels in Portugal and the Bahamas, consider investing in our Alt Path hotel fund. To get more information on the fund, you can schedule a call with us here. By making qualifying investments, our team can also provide guidance on how you can achieve citizenship through investment.
Disclaimer
The contents of this article are for educational purposes only. They are not intended to be a source of professional investing advice. You will find experts on investing here.
Invest With Bay Street
Are you an investor looking to diversify your investment portfolio? Here is a great hotel investment opportunity for you in Portugal and the Bahamas through our Alt Path hotel fund.
The Alt Path hotel fund has been set up to enable investors to participate in pre-approved hotel development projects in Portugal, which are eligible for 45% to 55% cash incentives from the Portuguese government. The goal is to build and manage these new boutique hotels in Portugal and The Bahamas. With this approach, investors are able to diversify their investment portfolios and manage overall risk.
For investors interested in citizenship by investment, our team is well equipped to provide support and guide you through the process of applying for a second citizenship by making qualified investments. To speak to our team about the available investment opportunities through the Alt Path hotel fund, schedule a meeting with us here.
For detailed information on the Portugal golden visa program, read our latest blog here.
Best Hotel Stocks to Buy
Choice Hotels
Choice Hotels International (NYSE: CHH) is one of the largest lodging franchisors in the world. The brand currently franchises 7000+ hotels in 40+ countries and manages hotels ranging from budget to upscale hotels. The different properties provide business and leisure travelers in the US and beyond with high quality accommodation options.
A great advantage that the brand has is that, as a hotel franchisor, Choice Hotels doesn't have to cater for management or upkeep costs of its properties; that lies on the franchise owners. In addition, the franchise owners are also required to pay a percentage for the use of the brand name and systems, as well as licensing fee.
As of February 2024, the company has a market cap of $5.56 billion.
Hilton Worldwide Holdings Inc.
Hilton Worldwide Holdings Inc. is one of the largest hotel companies in the global hospitality market, operating over 6,500 properties globally. The brand has both budget and luxury properties within its portfolio and boasts of a loyalty program with 115+ million members.
Thanks to an increase in travel post pandemic, the hotel chain has experienced a growth in numbers and is set to add 24 new properties in their portfolio in 2024. With a strong presence in different parts of the world and a reputation for quality and excellent service, Hilton is well positioned to capitalize on the growing travel demand.
As of February 2024, the company has a market cap of $51.34 billion.
Hyatt Hotels Corporation
Hyatt Hotels Corporation is a global hospitality company with a portfolio of 1,300+ hotels and all-inclusive properties, in 76 countries across 6 continents. The brand has carved out its niche in the luxury and upscale sector, catering to travelers who seek luxurious travel experiences.
As a luxury brand offering its clients premium and personalized service, Hyatt has earned a loyal customer base, driving repeat business and revenue growth. The company has also been expanding into the lifestyle and wellness space with an aim to adapt to the changing consumer preferences, further solidifying its position in the market.
As of February 2024, the company has a market share of $15.59 billion.
Marriott International
Marriott International is among the top brands within the hospitality sector with 8,600+ properties across 139+ countries and territories globally. With brands that range from budget to luxury, Marriott caters to a broad range of travelers, from business to leisure travelers. With this approach, the brand is able to withstand the different economic cycles as travel demand continues to go up post pandemic.
Marriott has one of the most sought after loyalty programs, and has been investing heavily in digital innovation thus enhancing the overall guest experience and driving customer retention.
As of February 2024, the company has a market cap of $72.09 billion.
MGM Resorts International
MGM Resorts International is a global gaming and entertainment company that operates hotels, casinos, state of the art conference facilities and live entertainment experiences. With 31 unique hotel and gaming destinations globally, the company is committed to creating a sustainable future and making a difference in the communities where it operates.
With presence in the US and Europe, the company is also looking to expand to different parts of Asia.
As of February 2024, the company has a market cap of $13.43 billion.
Pros of Investing in Hotel Stocks
Some advantages of investing in hotel stocks include:
Hotel stocks can provide stability when investments are spread across different market segments. Despite the fluctuations in travel patterns due to economic cycles, people still need accommodation during business trips and vacations.
Hotel stocks are great for investors looking to earn stable passive income as many hotel companies distribute a portion of their income to shareholders in the form of dividends.
Some hotel companies, particularly franchisors and operators, employ asset-light business models. That means that they focus on branding, marketing and managing hotel operations, while individual property owners bear the ownership and development costs. This model allows hotel companies to quickly scale their businesses with lower capital investment, leading to higher margins and returns on investment on the investors' side.
With changing consumer preferences, many hotels are implementing strategic initiatives such as loyalty programs, sustainability practices and expansion into new markets or segments in order to enhance guest experiences. These initiatives help hotels position themselves for long-term success by staying competitive in order to create value for shareholders.
Many hotel companies operate on a global scale, and own properties in different regions in the world. This global exposure allows investors to benefit from diverse revenue streams and participate in the growth of international travel markets. In addition it can provide a hedge against inflation by spreading risk across different markets.
Cons of Investing in Hotel Stocks
Some disadvantages of investing in hotels include:
The hotel industry is highly sensitive to changes in the economy, and negative changes in the broader economy often result in less demand for travel and lower occupancy rates in hotels. During such periods, hotel stocks can experience high volatility, leading to fluctuations in share prices and this may in turn affect investor returns.
With new hotels continuously coming up, the competition in the hotel industry is very high. Intense competition can cause pressure on pricing that can lead to hotels engaging in discounting or promotional activities to attract guests. In addition, the rise of vacation rentals continues to create more competition within the industry.
Hotel performance is heavily influenced by external factors such as geopolitical events, natural disasters and public health crises. These external factors can disrupt travel patterns and impact hotel revenues. This is something that hotel investors need to always be prepared for.
Hotels typically have high fixed costs, due to things like property maintenance, staffing and marketing expenses. When the occupancy is low, the revenue margins decrease and this may affect the dividends that investors receive.
Developing and maintaining hotel properties is a capital intensive venture that may require access to financing through debt. High levels of debt can lead to higher interest being charged, thus potentially affecting profitability of the hotel.
Hotel Stocks to Watch Out for
As an investor, here are some other great hotel stock options to keep an eye on.
InterContinental Hotels Group PLC
InterContinental Hotels Group PLC is one of the leading hotel companies in the world with 6000+ hotels in their portfolio, across 100+ countries. The company mainly caters to the upscale and luxury customer segment and their targeted portfolio of brands is tailored to meet the needs of this client base.
With the changing consumer preferences, IHG has positioned itself for growth by incorporating sustainability practices and technology in their operations in order to become one of the world’s leading luxury and lifestyle hotel brands.
As of February 2024, IHG has a market cap of $18.19 billion.
Host Hotels & Resorts, Inc
Host Hotels is among the world's largest publicly traded lodging REIT, with 75+ hotels in its portfolio and presence in 20 top markets in the US. The company focuses on operating upper scale hotels in the US, and its diversified portfolio and strong capital structure enables the company to efficiently run its operations.
As of February 2024, IHG has a market cap of $14.27 billion.
Airbnb, Inc.
Airbnb is not necessarily a hotel company, but is a leading provider of alternative and unique accommodation options for travelers around the world. With 7.7+ million active listings around the world and active presence in 220+ countries and regions, Airbnb continues to scale across different regions due to its business model that caters for both leisure and business travel. As such, the company is able to have a diversified investment portfolio and revenue streams.
As of February 2024, IHG has a market cap of $98.39 billion.
Indian Hotels Company Limited
With 300+ hotels in their portfolio, IHCL is one of the biggest hospitality companies in India that has managed to merge warm Indian hospitality with world-class service. Catering to a diverse group of travelers, IHCL has positioned itself for growth over the next few years with a focus on incorporating digital and sustainability practices that align with the changing needs of consumers in the travel sector.
Invest in Hotel REITs
As an investor looking to invest in hotels, a great way to add hotel stocks to your investment portfolio is through hospitality real estate investment trusts (REITs). A hotel REIT is a type of real estate investment trust that primarily owns, operates or finances hotels and lodging properties.
Through hotel real estate investment trusts (REITs) investors are able to gain exposure to hotel investments like business class hotels, motels and resorts without necessarily having to own the property themselves.
Similar to traditional REITs, hotel REITs:
Operate with the main goal of generating rental income and then distributing returns among shareholders in the form of dividends.
Mainly generate their income through booking fees paid by guests for short term stays at hotels. They also generate income from other hotel facilities such as conference rooms and event spaces.
Are required by law to distribute at least 90% of their net revenue to shareholders in the form of dividends.
Before you get started investing in hotel REITs, it is important that you're aware of the fact that income generated by these REITs is heavily influenced by travel demand, occupancy rates and average daily room rates. To access the latest insights on hospitality REITs, read more here.
Bay Street Capital Holdings
Founded by William Huston who has been recognized as a top financial advisor by Investopedia, Bay Street Capital Holdings is an independent investment advisory, wealth management and financial planning firm. The firm operates with a focus on managing and growing client portfolios while managing overall risk.
In 2023, Bay Street was recognized at the Wealthmanagement.com 2023 Industry Awards in the Asset Managers: Diversity, Equity and Inclusion category, for its collaboration with Resthaven Properties in the real estate sector.
