Following a sell-off of London-listed hotels and leisure stocks, including British Airways owner International Consolidated Airlines Group SA (LSE:IAG), analysts at Barclays said they remain cautious on the sector.
The sector has come under pressure after US airlines, including Delta and American Airlines, warned of a slowdown in domestic travel.
Barclays said it is "simply too early to tell" whether the downturn will be temporary or the start of a more prolonged slowdown.
"Concerns about a US recession are mounting", they added, and this is "inevitably" hurting Intercontinental Hotels Group PLC (LSE:IHG), which has roughly 4,300 hotels in the US out of 6,300 around the world under brands like Holiday Inn, Crown Plaza and Kimpton.
The Barclays team noted that IHG, with around 60% of its revenue coming from the US, is particularly exposed to concerns over a potential recession.
Accor was also noted, but has only 10% of its sales from the US, though remains vulnerable due to macroeconomic risks and investor sentiment.
If the possible upcoming pullback in revenue per available room is minor and short-lived, the analysts see a potential buying opportunity. However, if a deeper recession develops, hotel stocks could face further downside.
In the leisure sector, Barclays identified catering giant Compass Group PLC (LSE:CPG) as a "buying opportunity", reiterating its 'overweight' rating and 3,000p target price.
Compass is "the clearest defensive and where we feel very good about current trends".