It’s that time of the year again when Americans get in their cars and hit the road for a week or two of family fun.
Allianz Travel Insurance reviewed its customers’ trips planned between May 28 and Sept. 3 and found that Americans staying within the U.S. this summer plan to visit Orlando, New York City and Las Vegas in that order of popularity, with Los Angeles and Honolulu rounding out the top five.
Of course, if you’re not staying with friends or family, you’ve got to book a place to crash, whether it’s a hotel, vacation rental, RV park or one of the other exciting accommodations available these days.
I am someone who believes in the investment idea of paying yourself first — which I define as a profitable investment that lowers your cost of buying a consumer product or service by owning the stock of the company that makes that product or service — so your vacation isn’t quite as big a hit to your pocketbook.
With that in mind, here are the seven hotel stocks to buy now, ranked from best to worst.
Hotel Stocks to Buy: Hilton Hotels (HLT)
Back in August 2014, I wrote about all of the hotel stocks hitting their stride, suggesting that you could have bought Hilton Hotels Corporation (NYSE:HLT) or any of the other major hotel operators including Marriott over the next 12 months and made money.
Two years later, I called HLT too cheap to pass up, recommending investors stay away from Marriott — I was merely pointing out MAR wasn’t as cheap — and instead go for HLT.
“In late January, Hilton launched a midscale brand, Tru by Hilton, that’s expected to appeal to millennials. It’s an effort to woo travelers other than its typical customer in the luxury and upscale markets. Some see it as a move to fight Airbnb, which managed to capture 5.4% of the U.S. room supply in 2015,” I wrote on Feb. 17, 2016. “Hey, you’ve got to fight fire with fire. Hilton will be just fine. At less than $20, HLT stock is worth owning.”
Hilton shareholders still holding today are sitting on a 134% gain in a little over two years which includes the spinoff of its two other divisions: Park Hotels and Resorts Inc (NYSE:PK) and Hilton Grand Vacations Inc (NYSE:HGV) in January 2017.
I like the move to separate hotel ownership and timeshare from the hotel operations. I expect good things from Hilton in the future.
Hotel Stocks to Buy: Royal Caribbean Cruises (RCL)
To say I’m a fan of Royal Caribbean Cruises Ltd (NYSE:RCL) and its stock is an understatement. My wife and I got married on the Majesty of the Seas in 2005, and although we haven’t been on a cruise since, the company knows how to run its business.
Richard Fain, CEO of RCL for the last 29 years — a lengthy tenure for an S&P 500 CEO these days but well deserved — has managed to take the cruise operator to unbelievable heights.
“When Fain took the helm of the second-largest cruise operator in the world in 1988, RCL had revenue of $520 million. Since then its revenues have grown almost 9% per year over a 27-year period to $8.1 billion,” I wrote March 18, 2015. “It might not sound like much, but over such a long period it’s really quite significant.”
RCL stock is up 45% since being promoted to the S&P 500 in December 2014. With the recent launch of the Oasis of the Seas, the cruise line’s most exciting and energy-efficient boat yet, I see strong growth in the next three to five years as more people try cruising.
Hotel Stocks to Buy: Las Vegas Sands (LVS)
Although Las Vegas Sands Corp. (NYSE:LVS) has put its expansion in the U.S. on hold while it explores international opportunities, it still has a couple of nice hotels to welcome you — The Venetian and The Palazzo — should you be going to Vegas this summer.
However, Macao is where LVS generates the lion’s share of its adjusted property EBITDA — 53% of $1.5 billion in Q1 2018 — with Singapore adding another 26% and the U.S. the remaining 11%.
The company’s future developments in Macao, Singapore, Japan and South Korea, which include two of more than $10 billion, will be financed with up to 35% of the cost with LVS stock and the remainder with debt. The goal is to produce at least a 20% return on invested capital on these developments.
Now that Steve Wynn’s out of the game, it seems Sheldon Adelson’s Las Vegas Sands will have the last laugh.
Hotel Stocks to Buy: Ryman Hospitality Properties (RHP)
If you’re a fan of country music, you’re sure to be familiar with Ryman Hospitality Properties Inc (NYSE:RHP) or at least some of its assets. They include the Grand Ole Opry in Nashville as well as the Ryman Auditorium, home to the Opry for more than 30 years until moving to its current location in 1974.
Ryman Hospitality Properties owns a nicely diversified portfolio of hotel and entertainment assets — which generate approximately $357 million in adjusted EBITDA annually, almost one-third of it from its Gaylord Opryland Resort, which delivers 600,000 square feet of meeting space, making it a favorite of meeting planners everywhere.
Over the past five years, Roman’s grown revenue and adjusted EBITDA by 11% and 20% compounded annually generating some of the best RevPAR in the U.S. hotel industry.
The entertainment assets might not deliver significant revenue but they do bring people to Nashville, and those people need a place to stay. I think this part of the business will surprise a lot of people in the years ahead.
Plus, it’s hard not to like RHP’s 4.1% yield.
Hotel Stocks to Buy: Marriott International (MAR)
I’m not a big traveler but my wife is, and whenever she’s on the road for work she stays at a Marriott International Inc (NYSE:MAR), usually at a Courtyard Marriott when in the U.S. and Delta when in Canada.
She’s excited about the upcoming merger of Marriott Rewards with Starwood’s loyalty program which gives her a greater option of places to stay for work. Traveling as much as she does, it’s essential to have an excellent hotel to return to at night.
Marriott is continuously opening new hotels. Its pipeline is massive. As of the end of the first quarter, it had 465,000 rooms either under construction or soon to be with 49% in North America, 30% in Asia, and the rest in other parts of the world with 82% of them, upscale or above.
Back in 2013, I wrote about its new Moxy brand. It now has ten Moxy Hotels open in the U.S. with another 14 on the way — and that’s just one of its many brands.
Long-term, this is a hotel stock you want to own.
Hotel Stocks to Buy: Vail Resorts (MTN)
You might think it odd that I’m recommending Vail Resorts, Inc. (NYSE:MTN), a company primarily known as an operator of ski resorts, but the truth is, MTN does a lot of business in the summer and hopes to do more.
In the company’s first quarter ended Oct. 31, 2017, the quarter that best reflects its summer business, it lost $103.7 million on $220.9 million in revenue. It’s normal for Vail Resorts to lose money in the first quarter.
However, management was happy with its summer results.
“Perisher performed very well in the first quarter with outstanding conditions in September that led to strong visitation and revenue growth across the business,” stated its Q1 2018 press release. “Whistler Blackcomb’s robust summer business also performed well with strong performance in its world-class mountain biking operations, summer activities and sightseeing.”
As the premier ski resort operator in North America, anything it does in the summer months is gravy. Delivering revenue per available room (RevPAR) growth in double digits at both the hotels it owns and condos it manages, the summer business is more than holding its own.
Hotel Stocks to Buy: MGM Growth Properties (MGP)
The move over the last decade to see hotel and casino operators separate their real estate assets from their general operations happened to MGM Resorts International (NYSE:MGM) in late 2015.
Activist real estate investor Land & Buildings pushed for MGM to both spin off its real estate assets as well as its business in China to lower its debt burden. It did that by creating MGM Growth Properties LLC (NYSE:MGP), which it took public in April 2016 at $21 a share.
Included in the REIT IPO were 10 MGM properties including the Mandalay Bay and The Mirage in Las Vegas.
If you’ve got any reluctance about investing in a casino company like MGM that’s heavily reliant on the U.S., the triple-net leases of MGP give you good income without the ups and downs of the casino business.
On May 9, 50,000 casino workers in Las Vegas said they would vote May 22 whether to go on strike anytime after June 1. A strike would cripple the casino industry in Las Vegas. The last job interruption was in 1984 and lasted more than two months.
Buying the REIT makes a lot of sense given the current situation.
As of this writing Will Ashworth did not hold a position in any of the aforementioned securities.