Hotel stocks trade mixed after bearish forecast and sector downgrade by Barclays analyst

Hotel stocks trade mixed after sector downgrade

NEW YORK — Hotel companies’ shares were mixed on Wednesday afternoon after a Barclays Capital analyst, calling herself “extremely bearish,” downgraded the lodging sector and said an industry recovery is likely to lag far behind an economic recovery.

Barclays analyst Felicia Hendrix lowered the sector to a “Negative” rating from “Neutral.” She also cut her ratings to “Underweight” from “Equal Weight” for three major hotel companies: Starwood Hotels & Resorts Worldwide Inc., Marriott International Inc. and Choice Hotels International Inc.

Hendrix said the fundamentals of the hotel industry have been “so weakened by the economic downturn” that a recovery will likely “significantly lag” an economic resurgence by far more than 6 months.

“While the industry declines should be less negative next year, we do not expect to see positive growth until at least 2011,” she said.

Among the problems facing the industry, Hendrix cited margin pressure and ongoing weakness in room rates.

She also noted that declining supply may help occupancy, but it will hurt hotel managers and franchisers who rely on unit growth to drive revenue. Hendrix said hotel property foreclosures and potential bankruptcies are another risk.

Hendrix said Starwood, Marriott and Choice Hotels are most vulnerable to these factors.

Marriott shares fell 89 cents, or 4 percent, to $21.18 in afternoon trading. The stock has traded between $11.83 and $30.12 during the past 52 weeks.

Starwood’s stock dropped 79 cents, or 3.6 percent, to $21.41. It has traded between $8.99 and $43.29 for the past year.

Choice Hotels’ shares slipped 40 cents to $26.21.

For long-term investors, however, Hendrix said they may be “significant potential upside from current levels.”

Hendrix maintained an “Equal Weight” rating on Host Hotels & Resorts Inc., arguing that its stock already trades at a significant discount.

Host Hotels’ stock dipped 15 cents to $8.24.

Elsewhere in the sector, shares of InterContinental Hotels Group PLC gained 19 cents to $10.50 and Wyndham Worldwide Corp.’s stock rose 28 cents, or 2.3 percent, to $12.40.