Goldman Sachs analyst Lizzie Dove downgraded the outlook for U.S. Lodging C-Corps and Timeshares due to weaker consumer demand, geopolitical uncertainty, and negative impacts from U.S. airlines.

As a result, 2025 RevPAR forecasts are being lowered by approximately 125 basis points. Key challenges include a decline in Canadian tourism and reduced government travel, which are expected to impact U.S. RevPAR negatively.

Although a recession scenario isn't fully factored in, a 45% probability of a U.S. recession is assumed. The focus is on asset-light companies with global exposure and less reliance on U.S. resorts, as the decline in IMF and non-RevPAR fees has yet to be priced in, said the analyst.

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In a choppier macro environment, the preference is for stocks with more global diversity, lower U.S. resort exposure, asset-light business models, and stronger prospects for non-RevPAR and ancillary revenues.

Historical context shows that lodging revenue growth has been cyclical, with significant downturns during previous recessions, where business demand impacts leisure travel first, and premium chains see larger RevPAR declines than economy chains, the analyst opined.

Hotel C-Corps have shifted to asset-light, fee-based business models in the past decade, which have shown resilience during downturns, as franchise revenues tend to fare better than owned/leased or timeshare revenues.

Incentive management fees (IMFs) are highly volatile, with U.S. IMF contracts more binary, impacting US properties more than international ones.

While consumer pressures in a downturn could impact credit card fees, supply growth for 2025 is unlikely to be threatened. However, the outlook for 2026 and beyond could face risks due to rising construction costs and economic uncertainty.

The analyst upgraded the shares of Choice Hotels International Inc ( CHH ) from Sell to Buy and lowered the price forecast from $141 to $138.

The upgrade was done due to its defensive position, primarily driven by its franchise revenue structure and strong balance sheet, which makes it more resilient amid economic uncertainty.

CHH is less affected by the current macroeconomic challenges compared to other US lodging companies, with most of its customers originating from the US, and minimal exposure to international tourism, particularly from Canada.

Recent data shows improving trends for CHH, with steady consumer purchase intent and better performance, especially among lower-income customer segments, despite broader concerns about consumer confidence.

The analyst downgraded the shares of Hyatt Hotels Corporation ( H ) from Neutral to Sell and lowered the price forecast from $150.00 to $110.00.

Hyatt displays higher macro sensitivity, driven by factors such as a larger share of management contracts, significant exposure to China, and a more limited pipeline for in-construction growth.

Despite Hyatt's shift to a more asset-light model, it remains more exposed to macro-sensitive segments compared to peers, including a higher percentage of managed footprint, IMF fees, and exposure to the Chinese market, said the analyst.

The analyst downgraded Hilton Worldwide Holdings ( HLT ) stock from Buy to Neutral and lowered the price forecast from $296 to $235.

The analyst also downgraded the shares of Marriott International Inc ( MAR ) from Buy to Neutral and lowered the price forecast from $313.00 to $245.00.

Hilton Worldwide and Marriott International ( MAR ) are downgraded due to macro volatility and consumer pressures, which are expected to negatively impact macro-sensitive segments like IMF, credit card revenues, and owned & leased properties.

Both companies have strong business models with resilient balance sheets, but their valuations remain high compared to historical cycles (2016-2019), and consensus estimates, especially for IMF and non-RevPAR fees, are considered too optimistic.

Since their inclusion in the Buy list in September 2024, both MAR and HLT stocks have underperformed, with recent negative signals about consumer health and travel impacting their performance relative to the S&P 500.

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