Choice Hotels falls following analyst downgrade

Shares of Choice Hotels International Inc. sagged Wednesday as an analyst downgraded the hotel franchiser and cut its price target because of continued softness in the lodging sector.

Hotel companies, along with many other industries, have been squeezed as consumers curb spending because of the ongoing housing slowdown, diminishing credit, rising food and gas costs and recession worries.

David Katz of Oppenheimer & Co. said he was taking a more neutral view on Choice Hotels, Marriott International Inc. and Intercontinental Hotels Group PLC because of economic pressures.

"We believe the cost of gasoline, air travel and the overall economy has begun to impact leisure travel," the analyst wrote in a client note, adding that the companies' exposure to the midscale and economy segments makes them particularly vulnerable.

The likelihood that business travel will slow may also weigh on Choice Hotels, according to Katz.

The analyst cut Choice's rating to "Perform" from "Outperform" and lowered its price target to $37 from $39.

The move by Katz follows similar moves by other analysts earlier in the week. On Tuesday a Goldman Sachs analyst reduced his price target for hotel management company Interstate Hotels & Resorts Inc. on similar concerns.

On Monday stocks of hotel operators slipped after Marriott said it expects second-quarter North American revenue-per-available-room growth below its prior forecast.

Revenue per available room, also known as revpar, is a key gauge of a lodging company's performance.

Shares of Choice Hotels slipped 52 cents, or 1.6 percent, to $32.10. Over the past year, the stock has traded between $29.17 to $43.95.