Hotels & Leisure Look ‘Stable’ for 2017

Following its Starwood Hotels acquisition, Marriott has been given a “positive” outlook by Fitch Ratings, among the few companies in the lodging/leisure sector that garnered more than a “stable” outlook.

NEW YORK CITY—Investment sales in the hotel sector have been comparatively soft thus far in 2016: a single portfolio sale salvaged what otherwise would have been a 38% year-over-year decline for October, Real Capital Analytics said earlier this month. That being the case, Fitch Ratings on Monday called the sector’s fundamentals “marginally positive” for 2017 and gave the broader US lodging and leisure segment a “stable” outlook for the coming year. That’s also the case with individual companies rated or followed by Fitch; although just one is on ratings watch with a “negative” outlook, only a handful achieved a “positive” outlook in Fitch’s latest report on the hotel/leisure universe.

The ratings agency predicts that US lodging RevPAR will grow by 1% to 2% next year, with solid leisure travel and healthy group demand offsetting weak corporate transient demand. Lodging C-Corps will deliver mid-single-digit cash flow growth, with the help of new supply, while REITs will struggle to hold EBITDA constant, according to Fitch.