Hotels, Casinos Climb On Strong Earnings, Industry Data

22nd Jul 2010 17:23

By Shara Tibken Of DOW JONES NEWSWIRES NEW YORK (Dow Jones)--Hotels and casinos posted strong gains Thursday as a host of strong earnings in the sector gave investors more confidence in the recovery and as industry data showed improving conditions during the first half of the year. The hotel industry has seen demand strengthen in recent quarters, with results boosted by a return of corporate travel and overseas demand. STR Global, an independent research company that tracks the lodging industry, on Thursday reported "marked improvement" in first-half and second-quarter U.S. hotel industry performance, particularly for demand, as measured by the numbers of rooms sold. Among the hotel operators reporting better-than-expected results for the recently ended quarter were Starwood Hotels & Resorts Worldwide Inc. (HOT) and LaSalle Hotel Properties (LHO), which both said revenue per available room increased and average daily rates are back in positive territory as occupancy levels continue rising. "The combination of continued strong demand and the recent improvement in average rate give us confidence that we are in the beginning phase of what we expect to be a strong and long recovery," LaSalle President and Chief Executive Michael D. Barnello said in a press release. In recent trading, Starwood shares climbed 3.3% to $45.24, and LaSalle, a real-estate investment trust, rose 6.2% to $23.01. Both stocks have posted sharp gains over the past 12 months, but have slipped in the past three on broader economic worries. Also gaining amid Thursday's broad market rally were Marriott International Inc. (MAR), up 3.5% to $31.84, and Host Hotels & Resorts Inc. (HST), up 2.4% to $13.90. Marriott last week reported sharply higher second-quarter earnings, and Host Hotels on Wednesday also reported stronger demand, leading it to raise its 2010 guidance. Wyndham Worldwide Corp. (WYN) climbed 4.4% to $21.95 and Orient Express Hotels Ltd. (OEH) increased 3.6% to $8.08. Choice Hotels International Inc. (CHH) grew 2.4% to $32.07, Intercontinental Hotels Group PLC (IHG) rose 3.2% to $17.68 and Hyatt Hotels Corp. (H) gained 1.9% to $35.66. Casino operators also traded higher, including MGM Resorts International (MGM), up 3.8% to $10.06, and Las Vegas Sands Corp. (LVS), up 2.2% to $24.87. Boyd Gaming Corp. (BYD)grew 5.2% to $8.01, and Wynn Resorts Ltd. (WYNN) increased 3% to $84.42 as Fitch upgraded its rating on the company a notch, citing improved performance at its Macau business and its planned refinancing of $1.32 billion in mortgage notes. Penn National Gaming Inc. (PENN) jumped 8.6% to $26.17 as its second-quarter results beat estimates. Early Thursday, Starwood reported earnings and revenue that topped Street expectations and also boosted its 2010 forecast again. Hudson Securities analyst Robert A. LaFleur noted that revpar and margins were strong across the board, and Starwood's performance "was demonstrably stronger" than the results of Marriott and Host Hotels. Starwood beat earnings expectations by a wider margin than the other two hotel operators. And LaSalle late Wednesday posted revenue and funds from operations, a key measure for REITs, much better than analysts were expecting, and boosted its year view. The results led Standard & Poor's Equity analyst Royal Shepard to boost his rating on LaSalle shares to hold from sell, saying he's looking for improved pricing flexibility in coming quarters. Meanwhile, STR Global reported occupancy at U.S. hotels in the first half of the year was up 4.4%, while revenue per available room increased 2.3%. But average daily rate slipped 2%. Still, the results show an improvement from 2009, and STR Senior Vice President Bobby Bowers said second-quarter room demand increased 8.7%--the industry's largest quarterly demand increase since STR began tracking performance in 1987. He added that average daily rate growth is slowly improving and should continue gradually improving through the second half of the year, and 2010 revpar is expected to grow just over 5%, driven almost entirely by occupancy gains. FBR Capital Markets analyst C. Patrick Scholes said that while revpar is posting strong gains on easy comparison, the industry has been seeing demand return. "Business travel is still coming back very strongly," Scholes said, adding the corporate travels are key to many hotel operators' results. -By Shara Tibken, Dow Jones Newswires; 212-416-2189; [email protected] (END) Dow Jones Newswires July 22, 2010 12:23 ET (16:23 GMT)