Why It's Actually a Good Time to Explore Hotel and Restaurant Stocks

Is now the time for investors to create a basket of hotel and restaurant stocks? Here's why investors can be optimistic despite a high inflationary environment. In this clip from "Ask Us Anything" on Motley Fool Live, recorded on June 21, Motley Fool contributor Rick Munarriz discusses the increasing demand for hospitality and why he's more bullish on the restaurant industry.

Rick Munarriz: The hotel industry, obviously, is going to be a slow recovery for convention business and all these things. But there's so much pent-up demand for just hospitality. Obviously, higher gas prices are going to get into the way of people wanting to take leisure trips. As far as business goes, even though a lot of people want to get back together into spaces and expos and meet each other, Zoom (ZM 0.83%) is doing just fine for getting companies together. That segment is going to hurt the hotel industry.

I don't think that hotel is going to suffer as much in the long term as it is just a general trend to like the Airbnb (ABNB -1.52%) of the world where people can say, maybe I don't want to stay in a hotel room for the same price. I can stay in like a two or three bedroom, a little cottage or condo somewhere, and get a little more local color, and rather than just have to be at the mercy of whatever the hotel tells me. Some people like the fact that they're not going to have the little shampoo bottles and hotel clean towels. People want to get out there and explore things and make every experience a little unique. I think that could hurt the hotel industry. On the restaurant side, I'm actually quite bullish right now in the restaurant industry because a lot of people are complaining about rising food prices, and that is definitely happening without a doubt. But again, restaurants have other levels. If you're going to shop at the supermarket, and let's say the price of chicken wings is up maybe 30% over the past year. I'm making this up. I don't know, maybe it's close to the mark. You're not necessarily going to pay 30% more if you go to a Buffalo Wild Wings or a Wingstop (WING -0.21%)to get your wing fix because food cost is a small part of their business. It's an important part, but there's also a labor occupancy. Labor costs have also gone up, but not at the same level as the commodity food and occupancy costs are pretty well set, fixed unless they're on adjustable rate thing. I do think that the restaurant industry, and especially the quality destination restaurants will do well, which is why you saw Chipotle (CMG -0.66%) do really well in the early days of the pandemic. Because when people wanted comfort food and they opened up their app, and there are a bunch of ghost kitchens that they've never heard of or small little operators, they say, "Oh, Chipotle is here. Let's just have Chipotle delivered tonight." I think companies that stand out in the restaurant industry like a Chipotle, will do well or like a Wingstop, since I mentioned Wingstop, that they actually had positive comps in the pandemic. Definitely, I'm more optimistic on the restaurant industry making it through this than the hotel industry. But obviously, I think with hotels, the largest chains will survive. Just occupancy levels will be harder to come by unless just heavy discounting to fill up the rooms. But yeah, definitely an interesting time for them.