Why Marriott shares were trading down 4.7% on Friday

What happened

Marriott International (TUE -4.67%) ended the week on a negative note, with its stock price falling 4.7% on Friday to $155 per share. The hotel giant’s stock had fallen 5.9% shortly after 2 p.m. ET before recovering slightly before the closing bell.

All major indexes were down, with the Dow Jones Industrial Average by 139 points (0.5%), the S&P500 drop of 28 points (0.7%) and the Nasdaq down 104 points (0.9%).

So what

On Friday, some less than positive industry news managed to sink Marriott, along with other hospitality industry stocks. To start, South West Airlines reported on Thursday that business travel demand had weakened somewhat. Southwest said it expects business travel revenue to be 26% to 28% lower this quarter compared to the third quarter of 2019, using pre-pandemic numbers as a benchmark. This is worse than previous expectations.

Additionally, Smith Travel Research, the leading source for hotel industry news, reported on Sept. 15 that occupancy rates fell 11.2% during the Labor Day holiday week, while revenue per available room (revPAR) was down 1.8% from the same week in 2019. Additionally, the Baird/STR Hotel Stock Index, which tracks the performance of hotel stocks, released its August figures, posting a decline of 2.7%.

That beat the S&P 500 for the month, but Baird/STR analysts say despite a strong summer for hotels, negative August reflects investor skepticism of robust travel after Labor Day , given macroeconomic conditions. As a result, Baird analyst Michael Bellisario removed Marriott from his bullish “new pick” list.

Now what

However, it wasn’t all bad news this week for Marriott. Berenberg upgraded Marriott shares to buy pending on Thursday and raised the price target to $185 from $165 previously.

Berenberg analyst Stuart Gordon doesn’t think the hotel industry’s recovery has yet been reflected in stock prices, not just at Marriott but among many large hotel chains. Even if there is a recession or economic downturn in 2023, he expects revPAR to increase next year for Marriott and others.

Marriott expects stable revPAR growth of 3% in the third quarter compared to the same period in 2019 globally, and growth of 1% to 4% year-over-year in North America . For the full year, it expects revPAR to be down 3% to 6% from 2019 globally, and down 3% flat in North America.

Dave Kovaleski has no position in the stocks mentioned. The Motley Fool recommends Marriott International and Southwest Airlines and recommends the following options: Long January 2023 $115 calls on Marriott International. The Motley Fool has a disclosure policy.

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