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Zacks Industry Outlook Highlights: Hyatt Hotels, Hilton Worldwide Holdings, Starwood Hotels & Resorts Worldwide and Marriott International

CHICAGO, April 1, 2014 /PRNewswire/ -- Today, Zacks Equity Research discusses the Hotels & Lodging, including Hyatt Hotels Corporation (NYSE:H-Free Report), Hilton Worldwide Holdings Inc. (NYSE:HLT-Free Report), Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT-Free Report) and Marriott International, Inc. (Nasdaq:MAR-Free Report).

Zacks Investment Research, Inc., www.zacks.com

Industry: Hotels & Lodging

Link: http://www.zacks.com/commentary/31953/

Demand Exceeds Supply: A gradual recovery in the broader economy has boosted the hotel industry as demand picks up for both leisure and transient business travel. With limited supply and strong demand, the room rates are seeing a northward movement.

Smith Travel Research expects the sector's demand growth to be 2.4% in 2014 in the U.S. with only a 0.1% increase in supply.

According to Hyatt Hotels Corporation (NYSE:H-Free Report) and Hilton Worldwide Holdings Inc. (NYSE:HLT-Free Report), the supply-demand environment in the business is favorable with healthy demand growth outpacing levels of supply growth that are still well below long-term averages. This would lead to incremental rate increases, thereby driving RevPar higher.

The North American Recovery: System-wide occupancies in North America appear to be pretty steady and above the prior peak level achieved in 2006 following the gradual improvement in the economy.

With the boost in the economic sector and an improving travel and tourism industry, hotel companies are well poised for growth. North America is still the largest market for Starwood Hotels & Resorts Worldwide Inc. (NYSE:HOT-Free Report). In 2014, the company expects another year of robust growth in North America and plans to open about one-third of its new hotels in the region.

International Expansion: Owing to the saturation in the U.S market, major hoteliers are exploring growth opportunities abroad. Some international markets offer greater potential based on the higher pace of economic growth. The demand for hotels in the international market is greater than in the U.S. and the pace of recovery is particularly faster. The positive fundamentals in foreign markets have spurred hoteliers to grab a larger piece of the overseas pie.

A number of U.S.-based hoteliers are targeting the unsaturated markets of Asia-Pacific, Brazil, Russia and Africa. Within Asia, China promises lucrative growth opportunities with visits expected to increase substantially in 2014. China is in fact a major contributor to both Starwood Hotels and Marriott International, Inc. (Nasdaq:MAR-Free Report) revenues.

Apart from China, India is now becoming a hot spot for western hoteliers, as the country is emerging as a global business hub. Major players in the industry are also eyeing the Latin American countries, particularly Brazil and Mexico. Brazil primarily attracts affluent domestic tourists in the flush of an economic resurgence.

Moreover, with major events like the FIFA World Cup in 2014 and the Summer Olympics in 2016, the Brazilian government has turned its focus on improving the country's infrastructure. The events will significantly increase tourism in the country and the demand for hotel rooms will shoot up.

In Europe, too, the scenario is improving. In fact, select markets in Southern Europe, which were hard hit during the recession, have begun to report growth. The bullish trend can be validated by Starwood's system-wide occupancy data in the fourth quarter, which was an impressive 68.0% in Europe.

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