When you think travel industry, airline and cruise line stocks are usually top of mind. A lesser-known category in the industry is hotel stocks, which saw massive upside moves on Thursday.
Hilton Worldwide Holdings (HLT) reported strong Q4 earnings, and in sympathy, other hotel stocks also rose. Hotel stocks have had a rough time since Covid hit and it now looks like that may be in the rearview mirrort.
Here’s a synopsis of how some hotel stocks performed on Thursday, many of which have yet to report quarterly earnings:
- Hilton Worldwide Holdings, Inc. (HLT): +4.86%
- Marriott International, Inc. (MAR): +3.61%
- Hyatt Hotels Corp. (H): +4.91%
- InterContinental Hotels Group (IHG): +1.92%
- Wyndham Hotels & Resorts (WH): +1.43%
Other travel-related stocks such as Booking Holdings, Inc. (BKNG) and Expedia, Inc. (EXPE) also rose. Expedia’s quarterly earnings, reported after Thursday’s close, beat analyst estimates and the stock climbed sharply in after-hours trading.
Although the Consumer Discretionary Select Sector SPDR (XLY) didn’t reflect the sharp rise in hotel stocks, the Dow Jones US Hotels Index ($DJUSLG) had the highest StockCharts Technical Rank (SCTR) score in the US Industries, Top Up category in the SCTR Reports. Its closing value is at an all-time high.
FIGURE 1. US INDUSTRIES TOP UP SCTR REPORT. The Dow Jones US Hotels Index had the highest SCTR score and the Dow Jones US Travel & Tourism Index had the greater value increase. Image source: StockCharts.com. For educational purposes.
The New Highs Dashboard data panel showed that HLT and MAR closed at all-time highs.
So, there’s a lot to cheer for hotel stocks. Business demand has picked up, leading to higher hotel occupancy rates. This is a strong catalyst for the hospitality industry and, if the trend continues in this direction, future growth prospects are promising. Travel and tourism are also on the uptick. On Thursday, the Dow Jones US Travel & Tourism Index ($DJUSTT) saw a +25 change in its SCTR score.
A Room to Rest
With such big moves in these industries, it’s worth considering adding hotel stocks to your portfolio. With most hotel stocks already hitting all-time highs, the concern may be that they are toppy. Let’s dive into the daily chart of HLT (see chart below).
FIGURE 2. DAILY CHART OF HILTON STOCK PRICE. The stock price moved above the upper Bollinger Band with the CCI in overbought territory. The uptrend has momentum and could take the stock price higher. Chart source: StockCharts.com. For educational purposes.
The stock price has moved above the upper Bollinger Band®, which is generally an indication of strength. HLT has a SCTR score of 80.4, another sign of strength. When a stock or ETF hits an all-time high, strong momentum is needed to push the price even higher. Adding a momentum indicator such as the Commodity Channel Index (CCI) to the chart helps identify bullish momentum in the stock.
The CCI is showing strong bullish momentum and indicates overbought conditions. If Hilton’s stock price continues to rise higher and walks the upper Bollinger Band, along with a CCI that remains above the 100 level for an extended period, the stock price could keep rising. Remember, other hotels report earnings later this month and, if their earnings are as strong as Hilton’s, investors could continue to pile into them.
If you’re the type of investor who likes to enter a position during a pullback, wait for the stock price to move toward the middle band or 20-day simple moving average. Then look for a reversal accompanied by a rise in the CCI. This would confirm an uptrend in the stock’s price.
Closing Position
As always, be diligent in managing your positions. No stock price goes up forever, so be prepared to exit your position on any signs of weakening momentum. If you wait for a pullback to enter, make sure there’s enough follow-through in the reversal. If the stock price of Hilton or any other stock, like Marriott or Hyatt, is cost-prohibitive, consider trading options on these stocks. The OptionsPlay Explorer available in StockCharts can display optimal options strategies you can apply to these stocks.
Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.