Businesses and families that cut back during the recession are starting to travel again.
The reversal comes as a housing market recovery has helped lift the economy this year and is finally restoring some of the wealth lost during the Great Recession. Demand for hotel rooms is on the rise, particularly in Miami, New York, San Francisco, Los Angeles and other cities that serve as gateways for international travelers.
Although the European economy has been slowing and travel to the U.S. from many destinations has been weak or even flat, that has been offset by sharp growth in travelers from Asia and Latin America, says Cowen and Co. financial analyst James Sullivan.
Real estate investment trusts, or REITs, are among the biggest owners and operators of hotels. As a result, they stand to benefit from what Sullivan says will be above-average growth for the hotel sector as the economy continues to strengthen. Among Sullivan's favorites are Host Hotels & Resorts, LaSalle Hotel Properties and Pebblebrook Hotel Trust.
He forecasts that each company will generate growth in revenue per available room, or revpar, of 6.5 percent or more this year, and at least 5.9 percent in 2014. Revpar is a key gauge of a hotel operator's performance.
Sullivan says hotel REITs are attractively valued and they're likely to have the highest growth rate in the hotel industry over the next two years.Associated Press