Lodging Sector, Despite Hits, Faces Bull Times Ahead

Jason Ader isn’t worried about interest rate hikes. Despite the persisting consensus toward pessimism and undue caution as we swing into the second half, the Bear Stearns gaming, lodging and leisure analyst maintains Starwood Hotels, Hilton, Marriott International, Extended Stay America and MeriStar at a Buy rating. He rates Prime Hospitality, Inkeeper USA Trust, Hospitality Properties Trust and Host Marriott Corp. as Attractive.

“Our lodging picks are up 35% year-to-date and have surpassed most target prices,” explains Ader. He predicts that interest-rate hikes will become increasingly unlikely and that oil prices will retreat, resulting in a “bullish” economic outlook, with a 4.5% GDP growth in 2001. Current lodging industry estimates seem based on 2.5%-3.0% GDP expectations, “which leaves much room for upside growth,” he says.