Deutsche Bank Says Other Shoe Has Dropped In Lodging; Downgrades Marriott (MAR) and Wyndham (WYN)
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Deutsche Bank is out with a negative piece on the U.S. lodging industry, saying the "other shoe" has dropped - pricing power. As part of the call, the firm downgraded Marriott (NYSE: MAR) and Wyndham (NYSE: WYN) from Buy to Hold. The firm is cutting Q4 and FY09 estimates and price targets for the group and believe that consensus remains too high across the board.
The firm noted that they previously indicated that the difference between RevPAR being down 5% or being down 10% next year lies in room rate integrity. They said, "There is now ample evidence to suggest that pricing power is buckling, and quickly."
Will the firm is focusing on their 2009 forecast or the group, they said they no longer anticipate a measurable consumer discretionary recovery in 2010. They note, "Unlike airlines, hotels cannot adjust capacity to better align supply and demand. We think the cumulative effect of this supply absorption is likely to constrain pricing power in 2010, even if room demand shows nascent signs of recovery by late next year or early 2010."
The firm lowered estimates and price targets across the board:
Marriott International, Inc. (NYSE: MAR) from $32 to $20
Starwood Hotels & Resorts Worldwide Inc. (NYSE: HOT) from $27 to $21
Wyndham Worldwide Corporation (NYSE: WYN) from $15 to $8.50
Orient-Express Hotels Ltd. (NYSE: OEH) from $14 to $10
Gaylord Entertainment Co. (NYSE: GET) from $30 to $28
Host Hotels & Resorts Inc. (NYSE: HST) from $15 to $9.50
Diamondrock Hospitality Co. (NYSE: DRH) from $9 to $6.50
Strategic Hotels & Resorts, Inc. (NYSE: BEE) from $5.50 to $3.50
Sunstone Hotel Investors Inc. (NYSE: SHO) from $8 to $7.50
FelCor Lodging Trust Inc. (NYSE: FCH) from $5 to $3.50
LaSalle Hotel Properties (NYSE: LHO) from $17 to $13
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