Time to Check Out of Hotel Stocks?; Some Analysts Expect Boom to End, but Others See Room for Growth
These last few years, investors in hotel stocks have been as happy as an economy traveler bumped up to the penthouse suite. Profits margins have soared, stock returns have beaten the standard indexes and a flurry of merger deals have kept up excitement.</br></br>But these investors are a wary group. They know the lodging industry, as its practitioners call it, has had a boom-and-bust rhythm that would suggest this is the time to get out. Coming out of the recession of the early 1990s, hotel managers filled empty rooms without any need to spend money on new buildings, but construction now is on the upsurge and may cut into profits.</br></br>Timothy R. Stives, a managing director at CoreStates Investment Advisors Inc. in Philadelphia, shed his hotel stocks some time ago. "I don't want to buy when the supply of rooms is growing faster than the demand," he said.</br></br>John J. Rohs and Steven M. Pinsk of Schroder Wertheim & Co. also advised caution. "Our investment viewpoint is that the `easy money' has been made in this group overall," they said.</br></br>But one lesson of the latest merger activity, such as Hilton Hotel Corp.'s $6.5 billion bid for Sheraton owner ITT Corp. or Marriott International Inc.'s effort to buy the Renaissance Hotel Group for $947 million, is that the higher end of the industry still appears to have growth potential, even if the middle and lower ends have lost steam.