A potential rebound in growth in the USA following Donald Trump's election win is one reason Barclays gives for its upgrade to Holiday Inns owner InterContinental Hotels Group PLC (LON:IHG) today.
Analyst Vicki Stern lifts her rating to 'overweight' from 'equalweight' on the stock, while the target price is shunted up to 4,000p from 3,060p.
During much of 2016, US hotel stocks de-rated as investors feared the cycle was nearing an end with real RevPAR (revenue per available room) 5% ahead of the previous peak, year-on-year growth rates decelerating and supply growth set to increase to 2.1% in 2017, compared to a 0.9% average over the last five years.
"However, following Trump’s election and with a recent re-acceleration of RevPAR trends (driven by occupancy growth), the sector has re-rated," said Stern.
She reckons Intercontinental to be the best play in the sector on the possible rebound in US growth as well as potential tax cuts.
Barclays expects full-year results on February 21 to be a positive catalyst, while the bank has also lifted its 2018 earnings per share estimate by 7%.
IHG is not, however, the bank's preferred hotel pick.
Costa Coffee and Premier Inn owner Whitbread plc (LON:WTB) is its least preferred stock, which it rates 'underweight', with a price target of 3,440p (current price: 3,797p).