NEW YORK Even in the face of a slowing economy and subsequent slowdown in hotel demand, Goldman Sachs is maintaining a positive stance on lodging stocks.
One factor to the analysis is the potential for better than expected fourth quarter earnings because, despite surpassing Q2 and Q3 projections, estimates for Q4 have remained conservative. Given supply dynamics and the forecast for an economic slowdown rather than a full recession, analysts expect estimates will continue to go higher in 2001.
Another factor is that hotel chains have slowed supply to offset the negative effects of slowing demand, and that this demand does not appear to face dilution as there are no significant new entrants to erode market share.
The Goldman Sachs analysis reveals the continuation of favorable supply/demand dynamics into 2001 and 2002. Demand is expected to slow more dramatically than previous forecasts had predicted, but this is expected to be offset by lower than expected supply growth. The net result for the overall industry is higher RevPAR growth (3.9%) in 2001 than analysts had predicted in May. (11/28/00)
Source: Goldman Sachs