Although the COVID-19 pandemic is an ongoing situation, there's light at the end of the tunnel as omicron numbers start to roll over. As the world gradually returns to normal, we could see travel pick up. In this Fool Live video clip, recorded on Jan. 14, Fool.com contributors Matt Frankel and Jason Hall each give their picks for the best hotel stocks to play the travel rebound.
10 stocks we like better than Ryman Hospitality Properties
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Matt Frankel: Hospitality generally means hotels when you're talking about real estate. My pick is Ryman Hospitality Properties (RHP -0.32%). Jason, is that yours as well? No. OK, good. Ryman is focused on these large-scale hotels, mostly under the Gaylord brand. They focus on group business, conferences, conventions. I just came back from CES in Las Vegas and I can tell you people want to get together. It may not be the safest time to do so right now. When I went it was 25% capacity and N95 masks everywhere.
But people want to be together. Ryman is in a great position to do it. They also had a lot of entertainment assets. If you've ever been to Nashville, they own the Grand Ole Opry. They have a restaurant chain that they're building up. They're actually building a giant flagship location in Las Vegas for their Ole Red restaurant brand that they opened with Blake Shelton. All around, great company focused on group and entertainment business. I think conventions and conferences, will come back in a big way in 2022. That's why I think Ryman could still have a lot of upside ahead of it.
Jason Hall: I think so too, even though the stock price has largely recovered. I've been of the belief that the convention business is going to be even more important in the future than it was in the past because of hybrid work, because more remote work and that thing. I really think that's going to be the case. I'm taking a different approach though. I love Ryman. I was tempted to go with it, but I'm like, "Matt's going to do it so I am going to go with a different one." That is, I'm thinking about this as a turnaround play and this is one I know that you know that you used to own under a different name, Service [Hospitality] Properties Trust (SVC -1.09%). This is one that's still really down. I'm going to change tabs. Tell me, can you see this tab here, the portfolio highlights?
Frankel: Yes.
Hall: You see on the right this chart over here, 58% of its portfolio is hotels, 28% of it is travel centers. I can't think of many worse businesses to have been in since March 2020 through early this year than those two industries. That is like 90% of its business. Why am I interested in this? I think there's some interesting potential as a turnaround. You think about the hotel business. The hotel business on an EBITDA basis, turned back positive April of 2021.
So that's a real positive sign. You see the numbers here about occupancy. Those occupancy rates are ticking back up. We really need to see those like back in the seventies is where we need to see them but there's some positive signs there. I won't show it because of trying to be brief with this, but leverage is an issue. This company has heavily indebted. It's working on managing its balance sheet as its cash-flows recover. But I think it's a really interesting turnaround opportunity with that risk, can it manage through the debt? What's it going to look like on the other side of this in terms of being able to continue to pay out cash flows and still service its debt.
Frankel: I like that one. What was their name before they changed it?
Hall: I can't remember. I know this is one of that you used to own.
Frankel: It is and I'm just completely drawing a blank here. Because I have like 50 different REITs on my paper right now.
Hall: I'll have to look it up.
Frankel: But yeah, I love their travel center model. I remember I used to like that a lot back in the day and I'm glad I didn't invest in it before the pandemic.
Hall: Hospitality Properties Trust, is that it?
Frankel: That's it. HPT. That's right. But I really like that pick. Thanks for bringing that back to my attention.
