3 Hotel Stocks Worth Keeping an Eye On as Industry Challenges Continue

Overview of the Hotels and Motels Sector

The hotels and motels industry is currently navigating a challenging environment marked by rising costs, fluctuating demand, and intense competition. Persistent inflation has led to increased spending on labor, utilities, and property maintenance, putting pressure on profit margins as the ability to raise prices diminishes. Despite these headwinds, many companies are pursuing growth by expanding their property portfolios, converting existing assets, forming strategic alliances, and strengthening loyalty programs. Major players such as Marriott International, Inc. (MAR), Hilton Worldwide Holdings Inc. (HLT), and Hyatt Hotels Corporation (H) are positioned to benefit from these initiatives.

Industry Profile

This sector includes businesses that own, lease, manage, develop, and franchise hotels, as well as some vacation ownership and exchange companies. Many participants also operate resorts, develop modular and mobile accommodations for workforce housing, and offer a variety of lodging options, including studios and suites for both business and leisure travelers. Some companies focus on marketing and managing vacation ownership products.

Key Trends Influencing the Industry

• Margin Squeeze from Higher Costs: Operating expenses remain a significant challenge, with labor shortages driving up wages, overtime, and reliance on third-party staffing. These factors increase fixed costs and reduce operational flexibility. Additional pressures come from higher costs for property maintenance, insurance, and energy. As demand stabilizes, the ability to raise room rates is limited, especially impacting smaller and mid-tier properties.
• Economic Headwinds and Slower Growth: Broader economic uncertainty in the U.S.—including inflation, elevated interest rates, and cautious consumer sentiment—has dampened discretionary spending. Leisure travel has softened from its post-pandemic surge, and corporate travel budgets remain tight, resulting in weaker bookings, particularly in urban and convention-focused markets.
• Gradual Recovery Expected from 2026: According to CoStar and Tourism Economics, the U.S. hotel market is anticipated to stabilize and see gradual improvement beginning in 2026. Average daily rates are projected to rise by about 1%, while occupancy may dip slightly to 62.1%. Despite this, revenue per available room (RevPAR) is expected to edge up by 0.6%. After a difficult 2025, with declines in both occupancy and RevPAR, a more robust recovery is forecast for 2027 as travel demand and consumer spending strengthen.
• Digital Transformation as a Growth Driver: Hotel operators are increasingly leveraging technology to enhance profitability and guest satisfaction. Innovations such as mobile check-in, digital keys, and self-service booking platforms are being adopted to streamline operations and improve the guest experience. Enhanced digital infrastructure, pricing optimization, and merchandising capabilities are expected to help hotels capture greater market share.

Industry Outlook and Performance

The Zacks Industry Rank for hotels and motels currently stands at #179 out of 243 industries, placing it in the lowest 26%. Historically, industries in the top half of the Zacks ranking outperform those in the bottom half by more than two to one. The sector’s current position reflects a generally pessimistic earnings outlook, with analysts revising estimates downward and showing less confidence in near-term growth. Before highlighting notable stocks, let’s review recent performance and valuation metrics.

Recent Market Performance

Over the past year, the hotels and motels industry has lagged behind the S&P 500. While the industry posted a modest gain of 1.9%, the broader sector declined by 6.9%, and the S&P 500 composite surged by 18.5%.

Valuation Snapshot

On a trailing 12-month EV/EBITDA basis—a common valuation metric for the sector—the industry is trading at 16.81x, compared to 17.58x for the S&P 500 and 10.55x for the broader sector. Over the past five years, the industry’s EV/EBITDA has ranged from 13.38x to 89.66x, with a median of 16.56x.

Three Hotel Stocks to Monitor

• Marriott International (MAR): Marriott is seeing benefits from rising RevPAR, robust room growth, and ongoing development. International markets have driven a 1.9% year-over-year increase in global RevPAR, with luxury properties performing particularly well. The company’s strategy centers on conversions, new openings, and a growing development pipeline. MAR holds a Zacks Rank #3 (Hold), with 2026 earnings projected to climb 16.4% over the previous year. Shares have advanced 25.4% in the past year.
  
• Hilton Worldwide Holdings (HLT): Hilton is benefiting from strong net unit growth, steady demand, and consistent RevPAR gains. The company expects continued momentum, especially in international markets, with low single-digit RevPAR growth anticipated in the EMEA region. Hilton’s asset-light approach and disciplined capital return policy are additional strengths. HLT is rated Zacks Rank #3, with 2026 EPS expected to rise 12.5% year-over-year. Shares have increased 21% over the past year.
  
• Hyatt Hotels Corporation (H): Hyatt is capitalizing on strong leisure travel demand and RevPAR growth in luxury and all-inclusive segments. The company’s focus on expanding its portfolio, strategic acquisitions, and an asset-light model is driving performance. Hyatt is also investing in AI-driven operations and expanding its World of Hyatt loyalty program, enhancing its competitive edge. H carries a Zacks Rank #3, with 2026 earnings expected to jump 47.5% year-over-year. Shares have gained 20.8% in the past year.
  

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Additional Resources

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