Shares of hotel companies dropped with the broader market on Tuesday after a Goldman Sachs analyst predicted more "staycations" and an owner of meetings-focused resorts slashed its 2009 guidance.
In a note to investors on Tuesday, Goldman Sachs analyst Steven Kent said U.S. consumers are choosing less-expensive leisure options closer to home over lavish vacations.
"We suspect that vacation spending could retreat and look more like it did in the 1980s rather than just a year ago when 'regular Joes' were trying to travel like Paris Hilton, or at least stay in a Hilton," Kent said.
The analyst said regional casinos are likely to benefit from this trend, while cruise lines are likely to suffer.
Shares of Royal Caribbean Cruises Ltd. lost 56 cents, or 7.6 percent, to $6.81, while Carnival Corp.'s stock fell 36 cents to $21.09.
He said more value-oriented hotel chains, like Choice Hotels International Inc., could also benefit. Choice shares fell $1.06, or 4.1 percent, to $24.75.
Also Tuesday, Gaylord Entertainment Co., which owns a network of meetings-focused resorts and country music's Grand Ole Opry, slashed its 2009 outlook, citing a drop in bookings and a jump in cancellations.
Gaylord shares fell $2.41, or 20.9 percent, to $9.11 in afternoon trading. The stock has traded between $5.27 and $66.96 during the past 52 weeks.
The Nashville-Tenn.-based company Gaylord reported that its fiscal fourth-quarter profit more than doubled, but said greater numbers of companies are delaying bookings to reduce travel and event spending. Cancelations and attrition have also increased as businesses have backed out of previously scheduled events or brought fewer attendees than they had initially planned.
"The corporate customer seems to be going into, for lack of a better word, a 'nuclear winter' here," said Gaylord Chairman and Chief Executive Colin V. Reed in a conference call with investors.
Also on Tuesday, Deutsche Bank analyst Chris Woronka lowered his projections for Vail Resorts Inc., which operates a chain of ski mountain resorts.
The analyst now expects skier visits to drop 8.5 percent in fiscal 2009 and for revenue per available room to drop at least 20 percent. Revenue per available room, or revpar, is a key gauge of a hotelier's performance.
Vail Resorts' shares dropped $2.45, or 9.4 percent, to $23.59 in afternoon trading. The stock has traded between $14.79 and $52 during the past 52 weeks.
"Anecdotal evidence of very weak destination volumes and significantly lower spend on high-margin ancillary items such as ski school and high-end dining continues to mount," Woronka said.
The analyst said the company's businesses, which had been bolstered by rising trends in discretionary income and consumer debt, are not likely to bounce back soon.
"If economic headlines regarding unemployment, disposable income, and consumer financing continue to worsen (our position is that they will), it's difficult for us to envision that destination visitation levels will rebound meaningfully in the next year," Woronka said.
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