Investing in Hotel Stocks and REITs
After suffering enormously at the hands of the Covid-19 pandemic, demand for travel has rebounded strongly. There are many different ways in which investors can gain exposure to the travel industry, one of which is by investing in stocks in the hotel industry.
In this article, we will take a look at some of the largest hotels in the world and consider what the best hotel stocks to watch are in 2024.
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Investing in Hotels
Despite rising prices and higher interest rates, demand for travel has recovered strongly from the Covid-19 pandemic. With inflation cooling and interest rates starting to come down, we could see increased demand for both travel and hotels in the near future.
However, there are risks to bear in mind. With high interest rates seeming to take their toll, economic growth has slowed in many countries and, although central banks are hoping to engineer a “soft landing”, we cannot rule out the prospect of an economic downturn.
If it materialises, a downturn would almost certainly negatively impact demand for travel as consumers become more cautious and prioritise spending on essentials.
Furthermore, in recent years, hotel stocks have found themselves facing growing competition from short-term rentals, popularised by companies such as Airbnb. The increasing popularity of these type of short-term rentals is something to bear in mind for those considering investing in hotels.
The Best Hotel Stocks to Watch
So, what are the best hotel stocks to watch? There are many different companies to choose from in the hotel industry. In the following sections, we will take a closer look at three hotel chains, two of which are hotel stocks that pay dividends.
| Hilton |
| Marriot |
| MGM Resorts |
Hilton
Hilton Worldwide is one of the largest hotels in the world in terms of market capitalisation, which operates 22 brands across a number of different market segments
It has a portfolio of around 7,500 properties with more than 1.2 million rooms in 126 countries around the world. Of these properties, Hilton owns or leases 51 properties and manages 800 others.
The remaining properties, approximately 6,650, are franchised, with Hilton collecting franchise and licensing fees. Consequently, Hilton generates revenue from these properties without incurring any of the costs or other headaches associated with operating the properties themselves.
In the year ended 31 December 2023, Hilton generated $10.2 billion in revenue and $2.2 billion operating profit, increases of 17% and 6% year on year respectively.
Hilton pays a very modest dividend to its shareholders, with the stock yielding less than 0.3% at the time of writing. However, its share buyback programme is more generous. In 2023, the hotel repurchased 15.6 million shares of its common stock for a total of $2.3 billion (versus a total of $158 million in dividends) and, in November, earmarked a further $3 billion for share repurchases.
Marriot
Marriot International is the largest hotel company in the world by market cap. It has a portfolio of approximately 8,800 properties across more than 36 brands in 139 countries and territories in the world.
Its business model is similar to that of Hiltons in that the vast majority of its properties are franchised. Marriot owns or leases 50 properties, manages 2,046 and has around 6,600 franchised properties.
Again, as with Hilton, this model allows Marriot to collect fees from its large portfolio of franchised properties without incurring any costs from operating the thousands of properties.
In the year ended 31 December 2023, Marriot generated $23.7 billion revenue and $3.9 billion operating income, increases of 14% and 12% year on year respectively.
Marriot pays a dividend - at the time of writing, its dividend yield is around 1% - and also returns capital to shareholders via a share buyback programme. In 2023, Marriot repurchased 21.5 million shares for a total of $3.9 billion.
MGM Resorts
A different prospect from the previous two hotel stocks examined, MGM Resorts is a US hospitality and entertainment company which operates a number of resorts in the US and China.
Although its resorts are hotels, they are more known for also being casinos and, indeed, it is the casino operations from which MGM derives the majority of its revenue. In 2023, just over 50% of MGM’s total revenue was generated from its casino operations. The remainder was generated from its rooms, entertainment, and food and beverage.
Its total revenue in 2023 was $16.2 billion, with operating income coming in at $1.9 billion, increases of 23% and 31% from the previous year respectively.
MGM Resorts used to pay dividends, but suspended payouts in 2020 and has yet to resume them. However, it continues to return capital to shareholders through share buybacks. In 2023, MGM repurchased 54 million shares for a total of $2.3 billion. Since 2021, it has spent a total of $7.1 billion repurchasing its shares.
Hotel REITs
Instead of picking hotel stocks, investors who want to gain exposure to the hotel industry can also consider investing in hotel REITs.
REITs, short for Real Estate Investment Trusts, are a type of company which own, and usually operate, income generating properties. Some REITs hold a diversified portfolio of properties; however, many choose to focus on a specific type of property, such as hotels.
In exchange for favourable tax treatment, amongst other things, REITs are required to pay at least 90% of their taxable profit to investors as a dividend. Consequently, hotel REITs might be a good option for those who want to invest in hotels and also receive dividend payments.
There are a number of REITs which specialise in hotels, an example of which is the Apple Hospitality REIT. Apple Hospitality REIT has a portfolio of more than 220 hotels, including brands such as Hilton Garden Inn, Courtyard, Hyatt Place and Marriot. At the time of writing, its dividend yield is 6.4%.
How to Buy Hotel Stocks
With an investing account from Admirals, you can buy shares in the all the hotel stocks and hotel REITs examined in this article as well as thousands of other companies! In order to get started, follow these steps:
- Register for an Invest.MT5 account and log in to your Dashboard.
- Open the web trading platform.
- Search for the hotel stock or hotel REIT of your choice.
- Create a new order, enter the number of shares and click Buy.
Investing with Admirals
With an Invest.MT5 account from Admirals, you can buy shares in all the hotel stocks highlighted in this article, as well as more than 4,500 other stocks from around the world!
FAQ
What is the world's largest hotel?
At the time of writing, the Marriot International is the world’s largest hotel company in terms of market capitalisation.
Are there any hotel REITs?
Yes, there are a number of REITs which focus on hotels. A few examples of hotel REITs include: Park Hotels & Resorts, Host Hotels & Resorts, Ryman Hospitality Properties and Apple Hospitality REIT.
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