School's Out: Macquarie Updates The Lodging Industry

Heading into summer, Macquarie gave an update on the lodging sector.

Macquarie likes the hotel industry, citing strong revenue per available room growth -- four straight months of at least seven percent. Other bullish fundamental factors are 75 percent of Americans planning a summer trip versus 69 percent one year ago and 59 percent two years ago.

Analyst Chad Beynon has strong expectations for the industry, expecting 5.8 percent and 5.5 percent revenue per available room growth in 2014 and 2015.

Extended Stay America (NYSE: STAY) is Macquarie’s top pick in the industry, with a $31 price target (30.7 percent upside). Beynon commented on recent announcements, “mgmt reiterated 2014 guidance and announced issuance of 24.5m shares, which will increase float from 18% to 30%, a much needed and expected event.”

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Another top pick is Starwood Hotels (NYSE: HOT); the price target was boosted Wednesday by $4 to $91 (12.3 percent upside). Macquarie expects earnings notably higher than the analyst consensus, based on strong revenue per room and more share repurchased than expected.

Shares of Marriott (NASDAQ: MAR) are off 1.2 percent after the company was downgraded to Neutral, despite a $5 price target boost. Macquarie was sure to note that the downgrade was based strictly on valuation.

Hyatt Hotels (NYSE: H) is not a favorite for Macquarie right now. The company is rated Neutral, but the price target was boosted to $65 (6.4 percent upside). The price target increased is based on an increase in EBITDA estimates.