Analyst predicts longer lodging industry slump

A Goldman Sachs analyst said late Monday that the lodging industry may remain under pressure for up to 17 months before the market improves, pointing to a gloomier outlook for 2009.

Steven Kent said recent guidance cuts by Starwood Hotels & Resorts Worldwide Inc., Marriott International Inc. and Host Hotels & Resorts Inc. suggests that revenue per available room, or revpar, will remain under pressure for some time. Revpar is considered a key gauge of a hospitality company's performance.

"History suggests we could be in a negative revpar environment for 15 to 17 months, which is worse than most current forecasts, and would ultimately lead to more substantial estimate revisions for 2009," Kent wrote in a note to investors.

Kent expects third-quarter earnings will add to the gloomy industry sentiment.

The analyst recommended shares of hotel franchisor Choice Hotels International Inc., which he said is benefiting from unit growth and less negative operating leverage in the slowing environment.

Late Monday, Choice reported second-quarter profit above analysts' expectations, but reduced its full-year earnings guidance on a lower forecast for revenue per available room.

Kent said Starwood remains on his conviction sell list due to a slowdown in the upscale segment, which is likely to suffer further from corporate travel cuts.