Ahead of the Bell: Lodging industry

Date: September 25 2008
Source: Boston.com
Website: http://www.boston.com/ae/tv/articles/2008/09/25/ahead_of_the_bell_lodging_industry/

A JPMorgan analyst on Thursday said the lodging industry will be hurt by declining corporate travel business, growing room cancellations and tough rate negotiations with corporate clients, as well as softening international revenue.

Analyst Joseph Greff lowered earnings estimates for all lodging companies his firm covers, as well as lodging-related real estate investment trusts.

Greff downgraded Starwood Hotels & Resorts Worldwide Inc. and Marriott International to "Neutral" from "Overweight."

He also lowered ratings for six other firms to "Underweight" from "Neutral": lodging firms Choice Hotels International Inc., Orient-Express Hotels Ltd. and Gaylord Entertainment Co., and the REITs Host Hotels & Resorts Inc., FelCor Lodging Trust Inc., and Sunstone Hotel Investors Inc.

Greff said in a research note that when the lodging firms begin reporting third-quarter earnings early next month, "they will be cautious on their preliminary outlook for 2009 given limited visibility."

He expects revenue per available room -- an industry performance benchmark -- to decline 5 percent to 6 percent in the fourth quarter compared with the year-ago period, with declines of 3 percent to 6.5 percent next year.

Greff expects industry results for this year's fourth quarter and next year's first quarter "will be very weak from an operational standpoint."