Hotel stocks drop as 2009 travel outlook worsens

Early Monday, Goldman Sachs analyst Steven Kent said he expects U.S. revenue per available room to remain negative "well into 2009" as troubles in the financial sector exacerbate declines in corporate travel spending.

Kent said he expects more bad news ahead. "We think shares will continue to grind lower in the coming months, but we acknowledge that given the past 12 months underperformance it will be more of a slow drip rather than a sharp, rapid decline," he said.

After the market closed on Friday, Citi Investment Research analyst Joshua Attie also said next year's outlook appears worse than his earlier expectations and lowered his 2009 estimates for 12 lodging companies. "Our sense is tighter credit could result in a more difficult economic environment than we previously anticipated," he said.

Attie said a sector recovery in the second-half of 2009 appears "less likely."

Starwood Hotels & Resorts Worldwide Inc., Morgans Hotel Group Co. and Orient-Express Hotels Ltd. were among those with the steepest declines following the House vote.

Starwood shares dropped $3.39, or 11.2 percent, to $26.88 in afternoon trading, after touching a 5-year low of $25.95 earlier in the session. Morgans Hotel shares lost $1.61, or 12.9 percent, to $10.83. Orient-Express fell $3.58, or 12.8 percent, to $24.42. Earlier in the day, Orient-Express shares hit $24.42, the lowest point since 2005.

Attie also cut his ratings for several hotel real estate investment trusts. He lowered Strategic Hotels & Resorts Inc. to "Sell" and reduced both Host Hotels & Resorts Inc. and Sunstone Hotel Investors Inc. to "Hold."

Strategic Hotels' shares plunged $1.33, or 14.8 percent, to $7.67 in afternoon trading.