Hotel stocks tend to perform well in bull markets, but the recent COVID-19 pandemic put a major strain on the hotel industry and hospitality sector. As vaccines continue to roll out, investors have the opportunity to get in on hotel stocks as they begin their slow climb to recovery.
What are hotel stocks?
The hotel industry includes motels, hotels and other short-term lodging facilities that span the globe. Hotel investments typically fall into two categories. You can invest in C-corporation hotels. These companies focus on the management and marketing of hotels rather than the real estate or physical structure.
On the other hand, you have hotel real estate investment trusts (REITs). These are companies that own the real estate that houses hotels. Hotel REITs generally focus on the management of real estate and the acquisition of more.
Hotel stocks and hotel REITs are listed on major exchanges. You can purchase individual shares of either. Both are part of the wider hospitality industry.
Why invest in hotel stocks?
Whether you’re traveling for business or pleasure, you’ll probably need a hotel. These can range from simple motels to high-end hotels and resorts. Politicians and diplomats must travel the world. The biggest performers need to entertain their fans across the globe. And they need a place to sleep — and they’re probably not doing this cheaply. So investors can see hotel stocks as lucrative investments over the longer term.
The movement of people and services is essential to any strong economy, which is why hotels tend to perform well in bull markets.
The COVID-19 pandemic had a negative impact on the hospitality sector, but many stocks in this category — including Hilton Worldwide, Marriot International and MGM Resorts International — have already begun their recovery: a promising indicator for the industry.
- Access to international stock exchanges
- Low margin rates
- Powerful research tools
- 6% cash rebate plus $2,200 in trading perks
- Low transaction fees
- Easy-to-use app
Risks of investing in hotels
The hotel industry is susceptible to changes in travel patterns and the performance of surrounding attractions. Changes here can lead to major volatility. We saw this in action during the COVID-19 pandemic and its economic fallout.
As social distancing rules and travel restrictions were put into place to quell the virus, many people stopped traveling. Attractions that supported the hospitality sector and its influx of people came to a halt. And the industry suffered. The hotel occupancy rate in Europe in May 2020 was 13.3%, which was 82.3% lower than the previous year. In Canada, the 2020 hotel occupancy rate was 33%, a 49% drop from 2019.
The coronavirus pandemic demonstrated that hotel stocks are not immune to risk. As the vaccine rollout continues to ramp up around the globe, the forecast is bright for hotel stocks — but there’s no guaranteed timeline of how long this sector will take to fully recover.
Hotel stocks
If you’re interested in hotel stocks, you have plenty of options.
- Marriott International, Inc. (NasdaqGS: MAR)
- Hilton Worldwide Holdings Inc. (NYSE: HLT)
- Hyatt Hotels Corporation (NYSE: H)
- InterContinental Hotels Group PLC (NYSE: IHG)
- Wyndham Hotels & Resorts, Inc. (NYSE: WH)
- Choice Hotels International, Inc. (NYSE: CHH)
- Park Hotels & Resorts Inc. (NYSE: PK)
- Starwood Property Trust, Inc. (NYSE: STWD)
- Allied Hotel Properties Inc. (TSXV: AHP)
- Lakeview Hotel Investment Corp. (TSXV: LHR)
What ETFs track the hotel category?
You can also invest in a bundle of stocks by purchasing exchange-traded funds (ETFs). ETFs are diversified baskets of stocks that typically track a specific index. The ones that invest in hotel stocks are also built with stocks from companies in the wider travel and leisure industry. This includes airline stocks and cruise line stocks. Here are some examples of ETFs that invest in this sector:
- U.S. Global Jets ETF (NYSEArca: JETS)
- ETFMG Travel Tech ETF (NYSEArca: AWAY)
- Harvest Travel & Leisure Index ETF Class A units (TSX: TRVL)
- VanEck Vectors Gaming ETF (NasdaqGS: BJK)
- Invesco Dynamic Leisure and Entertainment ETF (NYSEArca: PEJ)
A beginner’s guide to exchange traded funds (ETFs)
Compare trading platforms
Before you begin buying hotel stocks, you’ll need a brokerage account. These can vary across platforms based on fees, investment minimums, types of securities and more. Compare your options.
Bottom line
The hotel industry faced major challenges during the COVID-19 pandemic and for many months, the state of the industry looked bleak. But as vaccine rollout continues to gain momentum, the future looks promising for this sector. Investing now could result in profitability down the road. If you’re ready to invest, compare your trading platforms.
Frequently asked questions
More on investing
How do ETFs work?
Your guide to how ETFs work and whether this type of investment is right for you.
Read more…How to read stock charts
Learning how to read stock charts and recognize chart patterns can unlock your success as a trader.
Read more…What are stocks?
Owning a stock means you own part of a company and can potentially grow your wealth. But there is a risk of loss.
Read more…More guides on Finder
-
How to buy Yoshitsu Co. stock in Canada
Steps to owning and managing Yoshitsu Co. stocks, with 24-hour and historical pricing before you buy.
-
How to buy Cerberus Cyber Sentinel stock in Canada
Steps to owning and managing Cerberus Cyber Sentinel stocks, with 24-hour and historical pricing before you buy.
-
How to buy Fresh Grapes LLC stock in Canada
Steps to owning and managing Fresh Vine Wine, Inc stocks, with 24-hour and historical pricing before you buy.
-
How to buy Quest Diagnostics Incorporated stock in Canada
Steps to owning and managing DGX with 24-hour and historical pricing before you buy.
-
How to buy Nuvectis Pharma (NVCT) stock in Canada when it goes public
Everything we know about the Nuvectis Pharma IPO plus information on how to buy in.
-
How to buy BuzzFeed stock in Canada
Steps to owning and managing BuzzFeed, Inc stocks, with 24-hour and historical pricing before you buy.
-
Best renewable energy stocks
These are the best renewable energy stocks to buy now in Canada.
-
Best stocks to buy right now in Canada
Finder’s unique algorithm found the 20 best TSX stocks to buy right now.
-
Can I buy AeroFarms stock?
A failed SPAC deal pulled the plug on this vertical farming company’s plans to go public. But you can buy stock in other sustainable farming companies.
-
How to buy Reddit stock in Canada when it goes public
Everything we know about the Reddit IPO plus information on how to buy in.