The sentiment among publicly traded hotel companies heading into the second-quarter earnings season is mixed, but the worst-case scenario of the impact of U.S.-enforced tariffs has been avoided so far, analysts say.
While growth has slowed, public hotel companies have performed better than the low end of their forecasts after making shifts due to the uncertain tariff environment in the first quarter, said Michael Bellisario, senior hotel research analyst and managing director at Baird.
"Broadly speaking, trends, performance, expectations have not gotten incrementally worse over the last 90 days, so I think I'd call it a less bad trade has unfolded," he said. "Stock prices are up, estimates are rationing higher — mainly because the low ends of the guidance ranges that a lot of these companies sensitized for, it's just not going to play out."
C. Patrick Scholes, managing director of lodging and equity research at Truist Securities, said hotel brands and C-corps have remained bullish, while hotel real estate investment trusts, privately owned companies, bankers, lenders and asset managers are more pessimistic about the state of the hospitality industry.
There's been a bifurcation in stock performances among hotel companies, with Hilton, Marriott International and Hyatt Hotels Corp. performing at the top of the hotel industry while companies such as Wyndham Hotels & Resorts and Choice Hotels International — as well as most hotel REITs — lag behind pre-Liberation Day highs.
On the REIT side, most companies either just sold hotels or are trying to sell hotels, Bellisario said.
"Basically, the capital allocation playbook is these companies are selling hotels and, for the most part, recycling a lot of those proceeds into buybacks," he said.
Bellisario expects a few companies to raise the low end of their guidance a bit, but it's unlikely that any REIT would raise the high end of their guidance.
"There's really no reason for these companies to stick their necks out and raise even if they could," he said. "Sentiment is negative, the stocks are down, relatively speaking, and expectations are low."
Companies to watch
Scholes said investor sentiment is high for Hilton, which has particularly performed well because of its ability to take a big-picture view on the health of the hotel industry.
"Hilton has done the best job of laying out a strong, long-term picture, and investors have liked what they've heard," he said.
While Choice and Wyndham are underperforming in relation to other hotel brands, Bellisario said he expects a "less-bad-than-feared update" from the two.
"What we've heard is developers still find a way to develop, shovels are going in the ground and the tariff impacts so far haven't really slowed things down too much," he said. "So, I expect relative optimism, especially from Hilton, Hyatt and Marriott."
Hyatt is a company of particular interest this earnings season. In June, Hyatt finalized its $2.6 billion acquisition of Playa Hotels & Resorts before selling $2 billion in owned real estate from the deal to Tortuga Resorts two weeks later.
"Their guidance is going to have a lot of moving pieces in there. The model has a lot of moving pieces. I think for them, it's about executing," Bellisario said.
Scholes said Host Hotels & Resorts will be a bellwether for the rest of the hospitality REITs when it reports its earnings on July 31.
Other hotel REITs of note are those with market-specific drivers, such as Park Hotels & Resorts, Sunstone Hotel Investors and Host with Hawaii.