NEW YORK (Associated Press) - A Goldman Sachs analyst lowered his 2009 and 2010 estimates for the hotel sector late Monday, citing broad economic uncertainty, projected supply growth and weakening business travel trends.
There were more than 650,000 hotel rooms in development, planning or construction in the U.S. in August 2008, a 16.9 percent increase over August 2007, according to a report produced by Torto Wheaton Research, Dodge Construction and Smith Travel Research.
While analysts predict that the credit crisis will lead to some cancellations, most developments already under construction are likely to be completed.
"Simply put, the majority of supply will hit the U.S. market just as demand is weakening," said Goldman Sachs analyst Steven Kent.
Kent expects hotels to generally meet third-quarter projections but provide a dim outlook for 2009 due to the uncertain economy and concerns about business travel. "Business travel is one of the first expenses to be cut in a downturn and one of the last to recover," he said.
Kent predicted that revenue per available room will drop 4 percent in the U.S. market during 2009 and dip 1 percent in 2010. Revenue per available room, or revpar, is considered a key gauge of a hotelier's performance.
The analyst cut his 2009 earnings-per-share estimates for the sector by 30 percent on average _ well below the consensus forecast. For 2010, he lowered his estimates by 40 percent on average.
Shares of major hotel companies fluctuated with the broader market on Monday morning. Investors got some early encouragement from a new Federal Reserve plan to buy massive amounts of corporate debt, but continued to grapple with fears about the clogged credit markets.
In morning trading, shares of Marriott International Inc. fell $1.01, or 4.7 percent, to $20.63. The stock has traded between $20.27 and $43.13 during the past 52 weeks.
Shares of Intercontinental Hotels Group PLC jumped 37 cents, or 3.5 percent, to $11.02. The stock has traded between $10.30 and $23.42 during the past year.
Starwood Hotels & Resorts Worldwide Inc.'s stock fell 87 cents, or 3.6 percent, to $23.01.
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