French hotel magnate ACCOR offers hotels that range from economy to upscale under such brands as Pullman and Sofitel. The $6.13 billion company has 4,200 hotels worldwide, and it continues its attempt to expand, as evidenced by its recent attempt to acquire the Groupe du Louvre hotels franchise. The stock is currently trading around the middle of its 52-week range.
After recording a 27% drop in share price over the previous 12 months, ACCOR is looking like a very good deal. The company has a price to earnings ratio of 1.68, and its price to book is a reasonable 1.74. It reported a 19% increase in operating profit, beating analyst expectations, while bringing in $703 million for the quarter. ACCOR raised its dividend to $1.52, besting the expected dividend of $0.83. Anyone looking to add a foreign holding to their portfolio should consider this thriving company.
Intercontinental Hotels Group
International Hotels is another large player in the field, with 4,400 hotels worldwide and brands that include Holiday Inn, Crowne Plaza and its flagship Intercontinental Hotels. The UK-based company has a capitalization of $6.4 billion, and its shares are currently trading for around $22 each. The company pays a $0.31 dividend, offering a yield of 1.4% and a 32% payout ratio.
Intercontinental is currently a very solid investment. Coming off a strong 2011 where it recorded quarterly revenue growth of 3.7% and an impressive earnings increase of 250%, the company offers an attractive 111% return on equity. Plans to grow are rolling out, as displayed by its recent acquisition of two famous resorts in Oregon and its expansion efforts in the UK that are creating nearly 3,000 jobs. Combining growth, dividends and expansion, this is a very strong buy with great potential.
LaSalle Hotel Properties
Bethesda, MD-based LaSalle Hotel Properties is a regional real estate investment trust that owns and operates of 34 upscale hotels in 11 states. The $2.2 billion company pays an annual dividend of $0.44 per share for a yield of 1.6%. Although the company had a solid year in 2011, it was recently downgraded from “outperform” to “neutral” by Robert W. Baird.
Making acquisitions like the Park Central Hotel in New York City, the company managed to increase its quarterly revenues by 21% and its earnings by 33%, although it did decrease its dividend yield by 0.1%. Although its price to earnings is a reasonable 13, and its price to book ratio is only 1.25 (suggesting the stock is undervalued), the competition in this sector is too fierce. I am currently rating LaSalle as a short-term hold, although I will continue to follow its progress.
One of the most recognized hotel brands in the world, Marriot International operates nearly 3,800 hotels and resort destination under such brands as Bulgari Hotels, Ritz-Carlton and its flagship, Marriott Hotels & Resorts. The $11.5 billion company pays a dividend of $0.40 for a yield of 1.1%. Marriott did not find 2011 to be an especially kind year, as the company missed its numbers for the 4th quarter.
The company’s share price dropped more than 10% over the trailing twelve months, and while its quarterly revenue inched up by 1.4%, its earnings tumbled 18.5% over the same period. Investors appear to be getting edgy, with nearly 9% of the company’s float being held short. Although it is showing both potential growth and dividends for 2012, I am concerned about the company’s financial strength. For this reason, I have rated it as a sell at this time.
Finally, we’ll take a look at Wyndham Worldwide Corp. The $6.4 billion company is headquartered in Parsippany, NJ, and features brands such as Wyndham, Ramada, Days Inn, Super 8, Howard Johnson and more. The company enjoyed revenue growth of 6.8% as it expanded its operations in countries like China, yet its quarterly earnings fell off by a hefty 29%. The stock, which rose nearly 44% in the past 12 months while its one-year target is flat at $48.25. The company pays a dividend of $0.60 for a yield of 1.4%.
Wyndham is captured the attention of the hedge fund Partner Fund Management, which has the hotel chain as its second largest holding with over 3 million shares, valued at more than $117 million. The attraction is based largely on the company’s growth potential; one possible source of additional growth is from the Internet. Online travel agencies accounted for around 10% of the market in 2010; experts look for that number to continue growing as big players like Google join the fight. Wyndham is using travel ratings from the popular website TripAdvisor to promote its units, a move that will allow the company to better market the excellent ratings of its hotels.
For me, those positive numbers are offset by its price to book ratio of 2.9 and its debt to equity ratio of 180; these numbers leave me skeptical that the company has turned the corner. I think Wyndham will struggle in 2012, and I have it rated as a hold.
Finding a Comfy Place for Your Money
The lodging industry should see an increase in 2012, due largely to the potential of expanding businesses and growing levels of disposable income, especially in countries like China. I view ACCOR and Intercontinental Hotels Group as buys at the current time, while I put LaSalle Hotel Properties and Wyndham Worldwide Corp as holds. I view Marriot International as a sell; the competition is too intense and the market too fragile to be missing revenue and earnings.
About the author:I am primarily an investor interested in creating passive income streams through dividends. I focus on finding and analyzing dividend paying stocks, MLPs and REITs that are a good fit for income investors.
I practice Judaism and my faith is very important to me. I visit family in Israel once a year, but I am educated and work in the United States where I hold an MBA and a bachelor’s in English. I am a patient man, enjoy wine but am not a connoisseur, and I listen more than I speak.