BofA/Merrill Lynch analysts are downgrading multiple public hotel companies, citing threats such as soft corporate demand, increasing supply and disruptors such as Airbnb, Bloomberg reported on Thursday.
BofAML analysts, led by Shaun Kelley, downgraded Hilton Worldwide, Hyatt Hotels Corp. and Hersha Hospitality Trust from “buy” to “neutral” and cut RLJ Lodging Trust from “buy” to “underperform.” The analysts estimate that the sector could see shares fall as much as 40% if valuations move back toward their historical average.
“We have been noting for some time that all demand indicators are at peak while hotel supply is rising, Internet pricing is dragging on rates, and alternative accommodations—including Airbnb—are a threat,” the BofAML analysts write. “Given this backdrop, it’s increasingly clear that the lodging cycle that began in March 2009 is over.”
However, other Wall Street analysts speaking earlier this month at the Sohn Investment Conference don’t think the hotel business is going to be hurt as much by the likes of Airbnb, especially those operating toward the higher end of the market. In fact, Bloomberg cited John Khoury of Long Pond Capital as bullish on the higher-end hotel companies, adding he is bullish on Hyatt Hotels Corp.