Barclays sees opportunity in Compass amid travel sector stocks pullback

Investing.com-- Hotels have faced a sharp correction following warnings from U.S. airlines, as investor concerns about a potential slowdown in travel demand.

InterContinental Hotels Group and Accor (EPA: ACCP) were hit hard after negative commentary from U.S. carriers such as Delta Air Lines (NYSE: DAL) and American Airlines (NASDAQ: AAL), which pointed to weakening domestic business and leisure travel demand.

While IHG’s significant exposure to the U.S. market (around 60% of sales) makes it vulnerable, Accor, despite only 10% of its sales coming from the United States, is also affected due to broader macroeconomic fears and its high operating leverage.

Investors are increasingly risk-averse amid mounting U.S. recession concerns, with fears that the slowdown signaled by airlines could soon reflect in hotel revenue per available room (RevPAR), the bank said.

Barclays acknowledged investor caution, noting the cyclical nature of the hotel industry, but said it remains uncertain whether the pullback will be a temporary softening or the start of a deeper downturn. A modest decline in RevPAR could present a buying opportunity, but a prolonged recession would likely pressure hotel stocks further, the bank added.

Among leisure stocks, Barclays highlighted Compass Group (LON: CPG) as a "clearer buy on weakness," citing the catering firm’s defensive qualities and continued positive business trends.

“We sympathise with investors’ risk-off approach to the sector in light of these concerns in the short-term given the highly cyclical nature of hotel RevPAR,” analyst at Barclays said.

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