3 Hotel Stocks That Will Get a Donald Trump Bump

Advertisement

hotel stocks - 3 Hotel Stocks That Will Get a Donald Trump Bump

Source: Shutterstock

Given the status of President Donald Trump as a hotel owner, it may not be surprising that his economic policies will provide a windfall for hotel stocks. By significantly lowering the tax burden on wealthy individuals and corporations, the president will greatly increase the disposable income of both groups.

3 Hotel Stocks That Will Get a Donald Trump Bump LQ MTN STAY

Furthermore, the stock market is responding very favorably to his policies, and wealthy Americans benefit a great deal financially from stock market rallies. As the income of wealthy individuals and corporations increases due to the policies of Donald Trump, their demand for hotel rooms will naturally rise, and hotel stocks will rally.

Meanwhile, the infrastructure plan advanced by Donald Trump, along with his efforts to bring factories back to the U.S., will create more working-class and middle-class jobs, increasing demand for lower-tier hotels. And his administration could also create special tax breaks for hotels and ease their regulatory burden, further inflating hotels’ profits and providing another catalyst for hotel stocks.

And yet, despite this situation, hotel stocks haven’t risen as much as many other equities that look poised to benefit from Trump’s policies. As a result, investors have a great opportunity to buy hotel stocks before they begin to really take off.

Of course, to maximize their benefit from the upcoming Donald Trump hotel rally, investors should choose the stocks of hotel owners that obtain most of their revenue from the U.S. The following hotel stocks fit the bill: La Quinta Holdings Inc (NYSE:LQ), Extended Stay America Inc (NYSE:STAY) and Vail Resorts, Inc. (NYSE:MTN).

The tax plans proposed by Donald Trump would give the wealthiest 1% of Americans tax breaks averaging about $215,000, the Urban-Brookings Tax Policy Center found, according to NBC. Moreover, Trump has pledged to slash the corporate tax rate to just 15% from the current 35% level. Those initiatives, if enacted, would put much more money in the pockets of rich Americans and corporations, respectively.

Donald Trump is also looking to implement a $1 trillion infrastructure plan that “could create more than 11 million jobs,” Georgetown estimated, according to Bloomberg. “More than half those jobs would go to workers with a high school education or less,” the news service quoted Georgetown as saying.

Finally, Donald Trump and/or his allies in Congress can ease some of the federal regulations that have been imposed on hotels and implement special tax breaks for hotels. Such steps would raise hotels’ profits and boost hotel stocks.

Here is some information about three of the hotel stocks that should get a Donald Trump bump over the next year.

Hotel Stocks for a Donald Trump Bump: La Quinta (LQ)

Hotel Stocks for a Donald Trump Bump: La Quinta (LQ)The vast majority of La Quinta’s hotels are in the U.S., and research indicates that the hotels of LQ would be suitable for high-end middle-class travelers or low-end wealthy/business class travelers.

La Quinta’s revenue per available room, or RevPAR, at comparable locations increased 1.8% last quarter, and its net income, excluding some items, was only $900,000. However, the cash flow of LQ was much more impressive, as its Q4 EBITDA, excluding certain items, came in at nearly $70 million.

LQ stock has risen about 36% since Election Day, but it’s only up about 19% over the last year and it’s down about 33% since February 2015.

Hotel Stocks for a Donald Trump Bump: Extended Stay (STAY)

Hotel Stocks for a Donald Trump Bump: Extended Stay (STAY)Like La Quinta, a very high percentage of Extended Stay’s hotels are located in the U.S. Also like La Quinta, the rooms of STAY are suitable for high-end middle-class travelers or low-end corporate and wealthy travelers.

However, STAY’s results are more impressive than those of La Quinta. Specifically, Extended Stay’s RevPAR at comparable hotels rose 4.1% last quarter, and the EBITDA of STAY at comparable hotels, excluding certain items, surged 16.5% to $142.5 million.

Larry Ramer has conducted research and written articles on U.S. stocks for 15 years. He has been employed by The Fly and Israel’s largest business newspaper, Globes. Larry began writing columns for InvestorPlace in 2015. Among his highly successful, contrarian picks have been SMCI, INTC, and MGM. You can reach him on Stocktwits at @larryramer.

STAY stock is up about 21% since Election Day.

Hotel Stocks for a Donald Trump Bump: Vail Mountain Resorts (MTN)

Hotel Stocks for a Donald Trump Bump: Vail Mountain Resorts (MTN)Vail specializes in owning and operating ski resorts and luxury hotels in close proximity to ski reports. All of its properties appear to be located within the U.S.

Of course, ski reports and luxury hotels cater to the wealthy individuals who are set to receive quite a windfall from the tax policies of Donald Trump. Although Vail’s first quarter results reported in December were not wonderful due to seasonal issues (its first quarter ends in October), the company’s EBITDA guidance was quite impressive. Specifically, MTN predicted that its fiscal 2017 EBITDA would come in at $567 million to $597 million. Additionally, MTN said that its season pass sales through Dec. 4, excluding certain items, had jumped 16% versus the same period a year earlier.

It sounds like MTN is already clicking on all cylinders. The Donald Trump tax cuts and stock market rally should make its already-impressive outlook even more superb. The stock is up around 15% since Election Day.

As of this writing, Larry Ramer did not hold a position in any of the aforementioned securities.


Article printed from InvestorPlace Media, https://investorplace.com/2017/03/hotel-stocks-donald-trump-mtn-stay-lq/.

©2024 InvestorPlace Media, LLC