Pent-up travel demand fueled the post-COVID recovery of hotels last year. However, the COVID situation in China and a potential recession could impact business this year even as travel demand seems resilient currently. With an uncertain demand backdrop in mind, we used TipRanks’ Stock Comparison Tool to place Hilton (NYSE:HLT), Wyndham (NYSE:WH), and MGM Resorts (NYSE:MGM) against each other to pick the most attractive hotel stock as per Wall Street analysts.
Leading hospitality company Hilton has 19 top brands, over 7,100 properties, and more than 1.1 million rooms in 123 countries.
Hilton impressed investors with upbeat Q4 2022 earnings. System-wide comparable RevPAR (a key metric used in the hospitality industry that indicates revenue per available room) increased 24.8% compared to the prior-year quarter on a currency-neutral basis. RevPAR also increased 7.5% from Q4 2019.
Hilton expects its 2023 RevPar to grow between 4% and 8%, driven by continued growth in all segments and easy comparisons with Q1 2022 that was impacted by Omicron. It also anticipates “meaningful recovery across Asia” and strong growth in the U.S. urban markets due to continued improvement in group travel business.
Nonetheless, the company cautioned “We do expect like all the segments that you will see some plateauing as a result of a slower macro environment in the second half of the year. But we still feel very good about it.”
Overall, Hilton is optimistic about the road ahead and claims to have more rooms under construction than its major rivals. Its pipeline comprises over 416,000 rooms, half of which are under construction.
Is HLT Stock a Good Buy?
Wall Street is sidelined about Hilton, with a Hold consensus rating based on three Buys and nine Holds. The average HLT stock price target of $150.73 indicates 2.4% upside potential, following a 16.5% rise in the stock so far this year.
Wyndham Hotels & Resorts (NYSE:WH)
Wyndham is one of the world’s leading hotel franchisor, with about 9,100 hotels under 23 brands in 95 countries. The company has emerged as a strong player in the economy and mid-scale segments of the lodging industry.
Following the easing of restrictions, Wyndham recovered faster from the COVID-induced slump than many of its peers as 70% of its business is from leisure travel and 30% is dependent on business travel. Moreover, within business travel, the company has 70% exposure to bookings related to blue collar workers, which helps in driving demand for the economy mid-scale lodging.
In Q3 2022, Wyndham’s global RevPAR grew 12% (constant currency) on a year-over-year basis and was 11% above 2019 levels. Wyndham is scheduled to announce its Q4 2022 earnings on February 15. Analysts expect the company’s adjusted EPS to decline 10% to $0.62.
Last month, Jeffries analyst David Katz downgraded hospitality industry bellwether stocks Marriott (NASDAQ:MAR) and Hilton to a Hold from Buy, citing “limited” upside to earnings and valuation. The analyst expects a deceleration in economic activity later this year to put pressure on the balance sheet of these two companies despite the continued strength in post-COVID recovery.
However Katz remains optimistic about Wyndham due to its capital-light, franchising model. Katz maintained a Buy rating for Wyndham and a price target of $82.
Is Wyndham Stock a Buy, Sell, or Hold?
Wyndham earns Wall Street’s Strong Buy consensus rating based on four Buys and one Hold. The average WH stock price target of $88 suggests about 15% upside potential. Shares have advanced over 7% since the start of this year.
MGM Resorts (NYSE:MGM)
MGM Resorts operates 32 hotel and gaming destinations globally. Its portfolio also includes BetMGM (a 50-50 joint venture with Entain Plc (GB:ENT)), which offers sports betting and online gaming in North America, and LeoVegas AB, a betting and online gaming subsidiary.
Earlier this week, MGM posted market-beating Q4 2022 revenue due to the robust performance of its Las Vegas Strip resorts. It reported a higher-than-anticipated loss per share due to the impact of COVID restrictions on MGM China.
Looking ahead, MGM is expected to benefit from continued strength in Las Vegas, recovery in Macao business, and robust growth potential for BetMGM.
Following the Q4 print, David Katz slightly increased the price target for MGM stock to $59 from $57 and reiterated a Buy rating. Katz said, “The upside in the quarter coupled with the tightened focus on capital allocation endeavors should both be positive for the shares.”
The analyst continues to believe that the Las Vegas market would accelerate and Macau business will recover. Katz also believes that the company’s confirmation that it is no longer pursuing the takeover of Entain removes a “prospective overhang from another ENT bid” and this could further drive shares higher.
What is the Target Price for MGM Stock?
Wall Street’s Strong Buy consensus for MGM is based on nine Buys and two Holds. At $54.68, the average MGM price target implies nearly 25% upside from current levels. Shares have rallied 31% year-to-date.
While travel demand is not currently showing any significant impact of macro headwinds, there are concerns that hotels might face some pressure in the second half of the year. Currently, analysts are more bullish about MGM Resorts and see higher upside potential in the stock compared to Hilton and Wyndham.