Check Into These 6 Hotel and Travel Stocks

Investors seeking to sleep well with relatively conservative, long-term portfolio holdings might consider hotel, resort and hospitality stocks, according to a variety of leading financial advisors and contributors to MoneyShow.com . Here are six favorites to check out. Richard Moroney, Dow Theory Forecasts Hilton Worldwide Holdings Inc. has built its company around selling its founder's name and other brands that have come under its control, such as Hampton, DoubleTree, Embassy Suites, and Waldorf Astoria. Under an umbrella of about 15 brands, Hilton now operates roughly 5,700 hotels and resorts in 113 countries. Hilton owns about 1% of these properties and manages about 12% of them; the rest are franchised hotels. Hilton focuses on the midscale, upscale, and luxury travel markets. The U.S. is Hilton's biggest geographic market, accounting for 77% of sales last year, up from 65% in 2014. Hilton's strength is its brands--which are gaining momentum and fueling market-share gains. In 2018, Hilton grew per-share profits 55%, sales 10%, and operating cash flow 36%. Free cash flow jumped 49% to $1 billion. Seeking to press its advantage, Hilton's pace of expansion ranks among the fastest in the hotel industry. Hilton opened more than 450 hotels last year and has another 2,400 in its development pipeline. More than half of those forthcoming hotels will be outside the U.S., with about one-fifth in Europe, the Middle East, or Africa. The company has a 20% global market share of rooms under construction. Bears will note that Hilton operates in a cyclical industry known for high fixed costs. Despite this risk, and the late stage of the current economic upswing, we like the stock. Hilton generates most of its business from licensing its name to franchises, which requires a low asset base and capital investment. Additionally, long-term contracts with costly termination fees give Hilton some protection from downturns. Hilton Worldwide grew March-quarter earnings per share 16%. Revenue advanced 6% to $2.2 billion. Looking ahead to the June quarter, Hilton forecast profits climbing 40% to 47%, bracketing analysts' growth target of 44%. Management also raised its full-year profit guidance. Hilton shares aren't cheap. However, the stock looks timely, given its scores above 85 (out of 100) for momentum, earnings estimates, and performance. The stock is a long-term buy. Brit Ryle, The Wealth Advisory Peak Resorts,Inc. operates 14 ski resorts that are located in Wildwood and Weston, Mo.; Bellefontaine and Cleveland, Ohio; Paoli, Ind.; Blakeslee and Lake Harmony, Penn.; and Bartlett, Bennington, and Pinkham Notch, N.H. It also has an 18-hole golf course in West Dover, Vt. The company has beat expectations in two of the past four quarters. Peak Resorts surprised analysts with earnings and revenue coming in above target estimates. It gave us a nice little pop. Oppenheimer has the stock at outperform. It sees increased U.S. discretionary spending driving skiing profits higher. And it likes that the projects at Mount Snow and Hunter are already bearing fruit. We just collected another dividend as well. That's at a juicy 6.18% yield right now, by the way. We're not selling yet. Stay under the limit if you add shares. Peak Resorts is still a buy under $5. The 12-month target is $10. MGM Growth Properties LLC is a REIT that engages in the acquisition, ownership, and leasing of large-scale destination resorts with amenities such as casino gaming, hotel, convention, dining, entertainment, and retail offerings. MGP Growth Properties currently owns a portfolio of properties, consisting of 11 premier destination resorts in Las Vegas and elsewhere across the United States. MGP is a REIT, so it'll be paying us hefty dividends as long as we're owners, and it'll be hiking them every time earnings grow. That's going to happen with every casino it acquires from MGM. Plus, we've got sports betting making a legal comeback in the U.S. Predictions are for Vegas to have a record year in 2019. Add it all up, and we've got a lot of profit still to make from this one. I rate MGM Growth Properties a buy under $35. The 12-month price target is now $45. Ned Piplovic, DividendInvestor Summit Hotel Properties, Inc. started paying dividends in the second-quarter 2011, and has missed an annual dividend boost only once in 2013. Since resuming dividend hikes in 2014, the company has enhanced its total annual dividend payout 60%, which corresponds to an average annual growth rate of more than 8% per year. The current 18 cents a share quarterly payout is equivalent to a 72 cents annualized distribution and a 5.86% dividend yield. This current yield is nearly 40% higher than the company's own 4.24% average yield over the past five years. While a share price decline helped the dividend increase, Summit's current yield outperformed the 3.09% average yield of the entire financials sector by nearly 90%. Additionally, Summit's 5.86% yield is also 74% higher than the 33.4% average yield of the company's peers in the real estate development industry. Furthermore, the current yield even outperformed the 4.6% average yield of the segment's only dividend-paying companies by more than 26%. John Staszak, Argus Research Las Vegas Sands Corp. owns and operates the Venetian Casino Resort, the Sands Expo and Convention Center and the Palazzo Casino Resort in Las Vegas. The company also owns and operates The Sands Casino Resort in Bethlehem, the Sands Macau Casino, the Venetian Macao, and the Four Seasons Hotel in China, as well as the Marina Bay Sands in Singapore. It is also pursuing a range of other gaming opportunities in Asia, Europe and the U.S. On April 17 after the close, Las Vegas Sands reported 1Q19 operating earnings of 91 cents per share, down from $1.04 in the prior-year period and a nickel above consensus. EBITDA in Macau rose approximately 9% year-over-year to $858 million, above the consensus estimate of $796 million. Impressively, Las Vegas Sands' share of gross gaming revenue (GGR) in Macau was approximately 25%, it's highest level since the second quarter of 2015. The Marina Bay Sands in Singapore contributed $423 million to adjusted EBITDA, down 22% from the prior-year period and $7 million above consensus. The company is also focused on its convention business in Las Vegas, where RevPAR was up 2% in 1Q19 and management believes bookings remain solid. In addition, we expect investors to benefit from the company's highly profitable Singapore operations, $2 billion share buyback program, and history of dividend increases. Management said that it expects a continued recovery in the Macau market to result in market share gains. The company plans to spend $2.2 billion in Macau over the next three years. And in Las Vegas, management is seeing solid bookings. We are maintaining our buy rating on Las Vegas Sands. We are maintaining our 2019 estimate of $3.70. For 2020, we are keeping our estimate at $4.00 per share. Our long-term earnings growth rate estimate is 14%. Las Vegas Sands is trading at 18.4x our 2019 EPS estimate, which we believe inadequately reflects prospects for a gradual recovery in Las Vegas and solid results in Macau. With revenue and EBITDA poised to recover, our rating on the stock remains a buy. Our revised target price of $80 implies a multiple of 21.6x our 2019 EPS estimate, which we view as reasonable, and a potential total return, including the dividend, of 22% from current levels. John Freund, The Bull Market Report Hospitality Properties Trust is up 13% year-to-date, which is fabulous given the high, 8.3% dividend that comes along with ownership. That said, the stock has gone nowhere since March, so let's take a look under the hood here. Hospitality is a REIT that owns and operates 327 hotels and 179 travel centers (or truck stops, if you're not in the Travel industry). The portfolio is spread across 45 states, as well as Puerto Rico and Canada. The hotels are mostly brand names that are operated by the REIT, including Marriott, Sonesta, Wyndham, Hyatt and Regency. Hospitality's 1Q19 funds from operations (FFO) was $145 million, a 6% decrease from the previous year. At first glance, this sounds bad, but on further inspection the company sold 20 travel centers in January for $310 million, which is a one-time event that doesn't impact FFO. Hospitality did bank $160 million in earnings from the sale, and used a hefty chunk of that to accelerate deferred payment of rent-- meaning the company is getting ahead of its annual costs, which is a very good sign. Hospitality also recorded a 3% year-over-year decline in revenue per available room (RevPAR). Again, this looks bad. But the reason RevPAR lagged this quarter is because the company is initiating some major renovations across its properties. Twenty-eight hotels were under renovation during 1Q19, including 11 full-service hotels. The company planned it this way as the first quarter is generally the slowest quarter in terms of occupancy. So management is looking to reduce the negative impact of renovation during the more seasonably strong quarters, which we give them credit for. Of the 16 hotels which completed renovation during 1Q19, RevPAR increased 9%. That's a terrific sign of things to come. As more and more hotels complete renovation and come online, we expect RevPAR to increase as room rates rise. So what looks bad at first glance, isn't quite as bad when you take a deeper look. The company is undergoing a bit of a transformative period, and investors are in wait-and-see mode with the stock as to whether RevPAR and FFO pick up during the next few quarters, as is expected. As the economy continues to strengthen, businesses will continue to send employees on sales trips and to conferences across the country. That is Hospitality's bread and butter, and we expect 2019 to be a strong year for the company. There's more to the story here than the 1Q19 numbers lead us to believe. We're confident management's renovation and growth strategy will pay dividends down the road, and we're expecting a nice boost to the stock over the coming months.

Check Into These 6 Hotel and Travel Stocks

Hotel, resort and casino stocks can be great additions to a portfolio and help investors sleep well.

Columnist Conversation

Closing Some Positions

MRK

Adding Some Puts

COLUMNIST TWEETS

Please Join or Log In to manage and receive alerts.