Jefferies Adjusts Price Targets for Hotel Stocks Amid Changing Interest Rate Outlook
Jefferies analysts have made adjustments to the price targets of various hotel stocks in a note released on Tuesday. As part of their analysis, the analysts downgraded shares of Choice Hotels to Underperform from Hold, while upgrading Park Hotels & Resorts to Buy from Hold. The price target for PK has been raised to $21 from $14, Marriott’s target has been set at $227 from $205, Hilton’s is now $183 from $157, and Hyatt Hotels’ target has been increased to $127 from $104 per share. On the other hand, the price target for CHH has been cut to $96 from $119.
Choice Hotels Downgraded, Park Hotels & Resorts Upgraded in Jefferies’ Note
In their note, Jefferies analysts downgraded Choice Hotels to Underperform from Hold, while upgrading Park Hotels & Resorts to Buy from Hold. This change in recommendation reflects the analysts’ assessment of the current market conditions and their expectations for the future performance of these companies. Investors should take note of these changes and consider them in their investment decisions.
Higher Valuations Supported by Recent Change in Interest Rate Outlook, Jefferies Analysts Say
According to Jefferies analysts, the recent change in the interest rate outlook has led to higher valuations for hotel stocks. They believe that the market’s concerns about a potential recession in the second half of 2023 have now been pushed forward to a potentially mild recession in 2024. As a result, the analysts have revised their estimates for these hotel stocks, with their projections progressing from a decline in 2024 to flat growth and, more recently, to modestly higher growth. These revised estimates reflect improving demand, mixed business transient, and mixed comps in leisure travel.
Mixed Outlook for Lodging Industry Despite Improving Demand, Jefferies Analysts Warn
Although there is improving demand in the lodging industry, Jefferies analysts caution that the fundamental outlook remains somewhat mixed. They highlight that group demand will continue to be the primary driver of growth in 2024. However, the outlook for leisure transient demand is complicated by softness in demand and the imbalance in international outbound/inbound travel, which is dependent on the market. Furthermore, the recovery in business transient demand is slower than expected, with large corporations lagging behind 2019 levels and limited visibility.
Business Transient Demand Remains Uncertain, Recovery Slower Than Expected, Analysts Note
Jefferies analysts emphasize that business transient demand in the hotel industry remains uncertain, with a recovery that is slower than initially anticipated. They point out that large corporations are still lagging behind 2019 levels, and there is limited visibility regarding future demand. While the overall outlook for the lodging industry is improving, this particular segment is still facing challenges. Investors should consider this uncertainty when evaluating the potential performance of hotel stocks.
Analyst comment
Positive: Jefferies analysts have adjusted price targets for hotel stocks, upgrading Park Hotels & Resorts and raising price targets for Marriott, Hilton, and Hyatt Hotels. The analysts believe higher valuations are supported by the recent change in the interest rate outlook.
Neutral: Jefferies analysts warn of a mixed outlook for the lodging industry, despite improving demand. Group demand is expected to drive growth, but leisure transient demand is complicated by softness and imbalances in international travel. The recovery in business transient demand is slower than expected.
Neutral: Jefferies analysts note that business transient demand in the hotel industry remains uncertain and is recovering slower than anticipated. Large corporations are still lagging behind pre-pandemic levels, and there is limited visibility regarding future demand.
As an analyst, the market for hotel stocks is expected to be influenced by the mixed outlook for the lodging industry, with uncertainties in business transient demand and potential challenges in leisure transient demand due to softness and imbalances in international travel. The adjustments in price targets reflect varying expectations for the future performance of individual hotel stocks.
