Marriott, Hilton downgraded at Citi despite being 'well-positioned'

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By Sam Boughedda 

Citi analysts cut hotel stocks Marriott (NASDAQ:MAR) and Hilton (NYSE:HLT) from Buy to Neutral in a note to clients on Wednesday.

The analysts increased the firm's price target on Marriott to $175 from $170 and lowered Hilton's price target from $150 to $148.

They told investors that Hilton shares have put up "relative outperformance year to date, supported by ongoing demand recovery across all segments as well as the reboot of the company's capital return program, seen at $1.5-$1.9B for the year."

"We believe the company is well-positioned to weather expected economic weakness in 2023, and we note several positives. These include an ongoing recovery in RevPAR, albeit at a softer pace, driven by continued normalization of occupancy, which remains below pre-pandemic levels. Likewise, we believe net unit growth can accelerate modestly given over 200K rooms currently under construction in addition to accelerating conversion opportunities, which supports our 5% growth forecast," the analysts wrote.

On Marriott, the analysts were relatively positive, saying the company is also well-positioned. They stated the positives for the company "include an ongoing recovery in RevPAR, albeit at a softer pace, driven by continued normalization of occupancy, which remains below pre-pandemic levels."

"Likewise, net unit growth should accelerate next year given a relatively easy 3% year-over-year comp. The company has over 200,000 rooms under construction, which supports our forecasts for over 50,000 net room additions," the analysts added.