3 Hotel Stocks to Watch for Now as Industry Headwinds Persist

The Zacks Hotels and Motels industry is facing pressure from a mix of cost, demand and competitive challenges. Sticky inflation has pushed up labor, utilities and maintenance expenses, squeezing margins just as pricing power begins to cool. However, industry participants are focusing on growth strategies, including expanding their portfolios, converting properties, forming partnerships and enhancing loyalty programs. Industry players, such as Marriott International, Inc. MAR, Hilton Worldwide Holdings Inc. HLT and Hyatt Hotels Corporation H are likely to benefit from the factors mentioned above.

Industry Description

The Zacks Hotels and Motels industry comprises companies that own, lease, manage, develop and franchise hotels. Some vacation ownership and exchange firms are also part of the industry. Several participants own, construct and operate resorts. Some companies develop lodges and mobile accommodations, including modular, skid-mounted ones and central amenities that provide long-term and temporary workforce accommodations. Some industry players develop, market, sell and manage vacation ownership and associated products. A few hoteliers also offer studios, one-bedroom suites and accommodations to mid-market business and personal travelers.

4 Trends Shaping the Future of the Hotels & Motels Industry

Margin Pressure From Elevated Cost Structures: Operating costs continue to weigh heavily on hotel and motel profitability. Labor remains the largest challenge, with staffing gaps forcing operators to pay higher wages, rely on overtime or use third-party staffing services. These measures raise fixed costs and reduce operating leverage.

Beyond labor, hotels are facing higher expenses for property upkeep, insurance premiums and energy costs. With demand normalizing, pricing power has weakened, restricting the industry’s ability to offset rising costs through higher room rates. As a result, margins are under pressure, especially for smaller and mid-scale properties.

Economic Uncertainty & Slowing Growth: The broader U.S. economy remains a headwind for hotels, with inflation, high interest rates and softening consumer confidence curbing discretionary spending. Leisure demand has cooled from its post-pandemic highs, while corporate travel budgets remain cautious. Many companies are trimming travel-related expenses, leading to weaker bookings in both urban and convention-heavy markets.

Gradual Improvement Expected From 2026 Onward: CoStar and Tourism Economics expect U.S. hotel performance to stabilize and slowly improve starting in 2026. Average daily rates are forecasted to rise about 1% from the prior year, while occupancy is projected to slip slightly to 62.1%. Even with marginally lower occupancy, revenue per available room is still expected to post a modest 0.6% increase in 2026.

This outlook follows a challenging 2025, when both occupancy and RevPAR declined year over year for the first time since 2020. Looking ahead, the firms anticipate stronger and more broad-based growth in 2027, driven by a steadier travel backdrop and healthier consumer spending patterns.

Digitalization to Drive Growth: Hotel owners are focused on maintaining the balance between maximizing hotel profitability and driving guest satisfaction. To this end, hoteliers have leveraged mobile and web check-in and mobile key technologies. These hoteliers also increased the use of digital tools to strengthen infrastructure, grow online package sales, enable self-service bookings, make real-time offerings and enhance the overall customer experience. This, along with the emphasis on pricing optimization and merchandising capabilities, is likely to help hoteliers capture additional market share.

Zacks Industry Rank Indicates Dull Prospects

The Zacks Hotels and Motels industry is grouped within the broader sector.

The group's Zacks Industry Rank, which is the average of the Zacks Rank of all the member stocks, indicates dull near-term prospects. The Zacks Hotels and Motels industry currently carries a Zacks Industry Rank #179, which places it in the bottom 26% of the 243 Zacks industries. Our research shows that the top 50% of the Zacks-ranked industries outperform the bottom 50% by a factor of more than two to one.

The industry's position in the bottom 50% of the Zacks-ranked industries results from a negative earnings outlook for the constituent companies in aggregate. Looking at the aggregate earnings estimate revisions, analysts are gradually losing confidence in this group's earnings growth potential. 

Before we present a few stocks that you may want to keep an eye on, let us look at the industry's recent stock-market performance and valuation picture.

Industry Underperforms the S&P 500

In the past year, the Zacks Hotels and Motels industry has underperformed the S&P 500. However, over this period, the industry has gained 1.9% against the sector's decrease of 6.9%. Meanwhile, the Zacks S&P 500 composite has rallied 18.5%.

Price Performance 

Hotels & Motels Industry's Valuation

Based on the trailing 12-month EV/EBITDA, which is a commonly used multiple for valuing Hotels and Motels stocks, the industry is currently trading at 16.81X compared with the S&P 500's 17.58X. The sector's trailing 12-month EV/EBITDA ratio stands at 10.55X.

Over the past five years, the industry has traded as high as 89.66X and as low as 13.38X, the median being 16.56X, as the chart shows.
 

3 Hotels & Motels Stocks to Watch

Marriott: The company is benefiting from higher RevPAR, solid rooms growth and continued development momentum. Global revenue per available room improved 1.9% year over year, led by strength in international markets. Also, luxury properties continued to outperform on the back of healthy demand and favorable rates. Strategic growth through conversions, new unit openings and an expanding development pipeline remains central to its long-term plan. 

MAR currently carries a Zacks Rank #3 (Hold). The Zacks Consensus Estimate for Marriott’s 2026 bottom line indicates a surge of 16.4% from the year-ago period’s actual. MAR’s shares have risen 25.4% in the past year. 

You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Price & Consensus: MAR

Hilton: The company is benefiting from strong net unit growth, steady demand trends, year-over-year RevPAR growth and continued expansion of its global footprint. Management expects continued momentum across key international markets, forecasting low single-digit RevPAR growth in the EMEA region. Also, its focus on a capital-light model and disciplined capital return strategy bodes well. 

HLT presently has a Zacks Rank #3. The Zacks Consensus Estimate for Hilton’s 2026 EPS implies growth of 12.5% from the year-ago period’s actual. HLT’s shares have gained 21% in the past year.

Price & Consensus: HLT

Hyatt: The company is benefiting from strong leisure travel demand and RevPAR gains in luxury and all-inclusive segments. A focus on unit expansion, strategic acquisitions and asset-light models bodes well. Additionally, emphasis on AI-Enabled operating Model and the ongoing expansion of the World of Hyatt loyalty program enhance the company’s competitive positioning.

H currently carries a Zacks Rank #3. The company’s 2026 bottom line is likely to witness year-over-year growth of 47.5%. H’s shares have gained 20.8% in the past year.

Price & Consensus: H

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Marriott International, Inc. (MAR): Free Stock Analysis Report
 
Hyatt Hotels Corporation (H): Free Stock Analysis Report
 
Hilton Worldwide Holdings Inc. (HLT): Free Stock Analysis Report

This article originally published on Zacks Investment Research (zacks.com).

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