Wachovia Cuts Lodging Sector Rating to Market Weight (DRH, MAR, MTN, HPT)

Wachovia lowers its sector rating on Lodging from Overweight to Market Weight.

After attending the NYU Hospitality Investment Conference and NAREIT last week, the firm sees a lack of catalysts within the industry in the near-term due to concerns related to "leisure demand decelerating, increased concern over discretionary spending, and difficult YOY comps from mid-July through August" and "headlines on high/volatile oil prices, high retail gas prices and reduced airline capacity..." Wachovia said an overweight rating is not justifiable until revenue/margin growth visibility improves.

Wachovia's research report cites Smith Travel Research as expecting 3% revenue per available room (RevPAR) growth in '08 and 2.8% in '09. At the same time, Smith Travel sees more downside risk than upside risk, suggesting that slowing RevPAR growth seems logical, save an early economic recovery.

Wachovia has Outperform ratings on several stocks in the sector:

• Diamondrock Hospitality (NYSE: DRH)
  
• Gaylord Entertainment (NYSE: GET)
  
• Host Hotels & Resorts (NYSE: HST)
  
• Marriott International (NYSE: MAR)
  
• Vail Resorts (NYSE: MTN)

Notably, out of 14 stocks in its Lodging universe, the firm only has one stock at Underperform: Hospitality Properties Trust (NYSE: HPT).

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