After the devastation of 9/11, airlines, hotels, and the travel industry struggled for a few years as travelers stayed at home. But, since early 2004, there has been some resurgence in optimism for travel-related sectors. And while the airline industry continues to suffer because of price competition from discounters, high debt loads, and high fuel costs, we have seen a strong comeback in the hotel sector.
In the period from March, 2004 to the present time, the Dow Jones US Hotels Index has steadily climbed from a low of 233.75 to the current 546.47, a gain of about 134% in just under two years. The long-term trend is positive with the index trading above its 40-day moving average. The index is seeing some selling happening after trading recently at 569.25 and breaking below its 50-day moving average at 549.05. The 200-day moving average is at 524.91. After such a rise, it is normal to see some profit-taking set in.
The hotel industry is reporting improved results. On Thursday, hotel industry bellwether Marriott International Inc. (NYSE/MAR) reported some excellent fourth quarter profits, which helped to confirm the rise in stock to just below its 52-week high of $70.78.
Fourth quarter profits surged 25% year-over-year to a healthy $237 million or $1.07 per share, while quarterly revenues increased 16% year-over-year to $3.64 billion. Earnings and revenues beat consensus Wall Street estimates by 9.18 percent and 6.43 percent, respectively. The company also guided its earnings higher for the first quarter, a positive sign of continued strength.
The results from Marriott clearly reflect the revival in an industry that saw many glum faces after the 9/11 attacks. Things are looking up going forward.
The Dow Jones US Hotels Index chart shows this. The trend is positive and this bodes well for investors looking at the travel sector and, particularly, the hotel sector.
Other than Marriott, other hotel stocks to look at include InterContinental Hotels Group PLC (NYSE/IHG) and Hilton
Hotels Corporation (NYSE/HLT).