A hotel is a business that offers lodging, meals, and other services in exchange for money. Hotels mainly serve travellers or tourists, but locals also use them. Hotels provide private rooms, which almost always have en-suite bathrooms.
Hotels make money by charging for their services, so the quality of services and the number of guests that regularly use their services are key to their income. Hence, events that reduce traveling and tourism, such as terrorist attacks (September 11, 2001) and the coronavirus pandemic in 2020 can affect the performance of hotel stocks.
In this guide, we explain the hotel industry and how you can invest in hotel stocks. We also offer our top 10 best hotel stocks to buy.
Where Can I Buy Hotel Shares?
Hotel stocks that are publicly traded are accessible to all potential traders and investors through online stockbrokers or trading platforms. It can be difficult for a new trader to find the best brokers because there are so many brokers in the market. Therefore, we have compiled a list of some of the best brokers based on fees, regulatory status, and other unique features.
Overview of the Hotel Industry
The hotel industry is the part of the hospitality industry that focuses on guest accommodation or lodgings. This includes hotels and other businesses that offer some forms of overnight accommodation, such as motels, inns, guesthouses, and resorts.
Inns are smaller than hotels and provide temporary accommodation, usually along with food and drinks. A motel provides overnight accommodation for motorists, offering rooms that usually have direct access to an open parking area. It is typically located by the roadside.
Guesthouses are typically private houses that are converted to provide guest lodgings. Oftentimes, the guest area is kept completely separate from where the owner lives and is operated on a self-service basis.
A resort is a big commercial establishment that usually consists of a hotel and a variety of additional services and amenities on site. It provides lodgings, restaurants, bars, entertainment options, recreational activities, and shops, which guests can access without leaving the premises.
Even for pure hotel businesses, the exact features and services provided to guests can vary so much from one hotel to another. Generally, hotels try to attract a particular type of customer through their pricing model, marketing strategy, and the range of services they offer. Most hotel companies whose stocks are publicly traded have a chain operation, with multiple hotels in different cities around the world.
The rise of Airbnb has seriously affected the hotel industry, just the same way Uber disrupted the taxi business. As hoteliers were struggling to adapt to the impact of Airbnb, the coronavirus pandemic disrupted the entire traveling, tourism, and hospitality industry.
What Are the Trading Hours for Hotel Shares?
Just like other stocks, hotel stocks are traded on major stock exchanges around the world, so the trading hours depend on the exchange. In the UK market, stocks are usually traded between 8 am and 4.30 pm when the London Stock Exchange is open. The US equity market (NYSE and Nasdaq exchange), is open between 9.30 am and 4 pm ET. However, trading can also extend into the after-hours (the period after the market has closed for the day) and the pre-market (before the market opens) due to the availability of electronic communication networks (ECN).
Some private hotel stocks trade over the counter through a dealer network rather than through a centralised exchange. The trading hours depend on the OTC marketplace.
How to Trade and Invest in Hotel Shares?
Open a trading account
Various online and offline brokers are available, and you can easily open an account with any of them. To open a boker account, you will need to provide your email address, postal address, and full name. Most regulated brokers have a “know your customer” (KYC) policy, so you will need to provide some form of identification (e.g., a driving license) and proof of residence (e.g., a utility bill that is not more than 3 months old).
Choose Hotel Shares
The broker’s platform will list hotel stocks you can trade. If you wish to invest for the long-term, then you would want to pay attention to the company’s fundamentals. If you are trading in the short term, you should make use of technical analysis. Whatever method you choose, always carry out your due diligence before picking a hotel stock to trade. Compare the share with its peers and check the historical stock price before buying the share.
Place Your Trade
Once you have chosen the hotel stock you would like to buy, click the buy button. Remember to manage risk by setting stop-loss and take-profit levels. Monitor your shareholding, and follow news that could potentially affect the share’s price.
Top 10 Hotel Shares to Buy
Based on several parameters, such as the prevailing and anticipated economic conditions, management plans, strategies, and market capitalisation, we have compiled a list of the top 10 hotel stocks in 2021:
- Choice Hotels (NYSE: CHH)
- Hyatt Hotels (NYSE: H)
- Hilton Hotels (NYSE: HLT)
- Marriott International (NASDAQ: MAR)
- Wyndham Hotels & Resorts (NYSE: WH)
- Trivago NV (NASDAQ:TRVG)
- Extended Stay America Inc.: (NYSE: STAY)
- MGM Hotels & Resorts (NYSE: MGM)
- Las Vegas Sands Corp. (NYSE: LVS)
- InterContinental Hotels Group (NYSE: IHG)
1. Choice Hotels (NYSE: CHH)
Choice Hotels International is one of the world’s largest franchisors with a market capitalisation of $5.5bn as of February 2021. The hotel chain has more than 7,100 hotels located in over 40 countries. Unlike its peers, the stock has recovered considerably well from the impact of the coronavirus pandemic due to growing investor interest following the news of a vaccine. Shares of CHH returned 12.31% in the three months to February 2021.
2. Hyatt Hotels (NYSE: H)
Hyatt Hotels Corporation is a hospitality company that develops, owns, manages, and franchises hotels, resorts, and other properties. The company has a market capitalisation of $7bn as of February 2021. The company is already positioning for the full reopening of the economy. It recently announced an expansion of its luxury lifestyle brand, Alila, in the United States following Alila Napa Valley's acquisition in California. Shares of Hyatt returned 29% in the three months to February 2021.
3. Hilton Hotels (NYSE: HLT)
Hilton Worldwide Holdings inc. is a hospitality company that owns several hotels under various brands. As of February 2021, the global hotel brand had a $30.7bn market capitalisation. With 56% of Americans expecting to travel for leisure in 2021, most veteran investors agree that Hilton should recover soon. Hilton shares have rallied by 17% between November 2020 and February 2021.
4. Marriott International (NASDAQ: MAR)
Marriott operates as hotel franchisors and managers. The company has a market capitalisation of $41.5bn as of February 2021. Most investors agree that Marriott is not only a great play on the recovery trade but also the company’s business model makes it a long-term hold. This explains why the stock received an upgrade from analysts at Jefferies. Marriott shares surged by 29.2% in the three months to February 2021.
5. Wyndham Hotels & Resorts (NYSE: WH)
Wyndham is a global hotel franchisor that operates a portfolio of 20 hotel brands. The company is operating in over 90 countries and had a market capitalisation of $5bn in February 2021. The company’s budget-driven model makes it worth consideration. WH shares returned 19% between November 2020 and February 2021.
Expert Tip on Investing in Hotel Shares“ Be sure to do your research using fundamental analysis so you can choose hotel stocks with the most profitable business models. However, don’t neglect technical analysis. It could be better to buy after a price correction, but you can also trade breakouts. Don’t forget to implement your risk management rules: allocating no more than 2% of your capital to each trade, and making use of stop-losses and profit targets. ”- Emmanuel Ekwomadu
Why invest in Hotel Shares?
The dramatic drop in global travel and tourism triggered by the Covid-19 pandemic put a substantial financial strain on the hotel industry. Despite this huge impact, there will always be a need for hotels.
Hotel stocks will benefit from the reopening of the economy as people will want to make up for the time lost to the pandemic. Entertainment and leisure companies are reporting a surge in bookings for the 2021 summer season, which is making hotel stocks popular among investors and traders (given their current low prices).
Frequently Asked Questions
Yes. Most reputable platforms will insist on identity verification to comply with “know your customer” (KYC) procedures. These regulations help to provide a secure environment to the users.
You can secure your account by using two-factor authentication (2FA) and other measures. Only use regulated brokers/platforms to reduce the risk of fraud and never share your account password with anybody.
Trade with an amount you can afford to lose, and don’t risk more than 2% of your capital in each trade. Make use of stop-loss and take-profit orders to ensure you do not lose more than you want to risk. It is also a good idea to practise with a demo account first, so you get used to trading before going live.
It will depend on the broker. Most brokers allow you to trade only during market hours but check with the platform to see if an after-hours service is provided. Most platforms provide a narrow buy/sell window before market opening hours and aftermarket closing sessions.
Yes. Most countries consider profit generated from trading as a taxable event. Check your local tax regulations before trading.
Yes. Most brokers have a minimum deposit requirement, but it varies by platform, so check with your broker before trading.