Wells Fargo Securities cut Starwood Hotels & Resorts IncGaylord Entertainment Co and Host Hotels & Resorts Inc to underperform from market perform on valuation.
Unless there is an exceptionally sharp recovery in Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA), we believe shares are at best fairly valued and could trade as much as 20 percent below current levels, the brokerage wrote in a note.
Wells Fargo said their concerns were further emphasized by the results of its recent meeting planner survey, in which a 7 percent decline in group revenue was expected in 2010.
Revenue per available room and operating profits at large group houses typically lag in a recovery, it said.
Wells Fargo upgraded Marriott International Inc and Sunshine Hotel Investors Inc to outperform from market perform.
Marriott's risk to 2010 and 2011 EBITDA is minimized by its negligible real estate ownership and the hotelier's shares are well-positioned to move 25 percent higher in the next two years, the brokerage said.
We feel Marriott's capital position is superlative and management is proactively exploring ways to go on the offense to take market share, Wells Fargo added. (Reporting by Renju Jose in Bangalore; Editing by Anne Pallivathuckal)