The U.S. hotel industry cycle appears to be moderating to historical norms, coming off years of accelerated growth that started in 2010 following the recession.

Apart from softening occupancy levels, negative currency translation and macroeconomic concerns in several emerging economies raise concerns. However, a steady rise in business and leisure travel on the back of an improving economy and positive employment numbers along with strong investor appetite thanks to higher transaction volumes are spreading cheer across the industry.

On the whole, though pockets of geopolitical instability and economic slowdown continue to weigh on sentiment, hoteliers are cautiously optimistic as the Q4 earnings season unwinds.

Q4 so Far

The Zacks categorized Hotels and Motels industry belongs to the broader Consumer Discretionary sector. Per the latest Earnings Trends,  as of Feb 1, 37.1% of the Consumer Discretionary companies in the S&P 500 index have reported their results. Earnings and revenues for these companies have recorded year-over-year growth of 10% and 8.1%, respectively.The beat ratio of 61.5% for both earnings and revenues is also noteworthy.

In fact, overall earnings for the sector in fourth-quarter 2016 are expected to be up 3.8% year over year and revenues are likely to surge 12%.

Thus, with the broader Consumer Discretionary sector poised to come up with flying colors this earnings season, the hotel industry within the sector is also set to gain from the buoyancy.

So, let’s take a look at some companies in the Hotels and Motels space that have the potential to beat earnings in their upcoming Q4 releases. Notwithstanding the headwinds, these stocks are well positioned in today’s market environment, and could see considerable upside riding on the positive trends across the industry. Further, an earnings beat should help these stocks gain investor confidence and pave the way for stock price appreciation.

Making the Right Choice
Picking the right stock for your portfolio could appear to be a daunting task given the wide range of companies in the hotel space. One way to confine the list of choices this earnings season is by looking at stocks that have a solid Zacks Rank accompanied by a favorable Earnings ESP.

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