The hotel industry is panicking – and for a good reason.
Yesterday, we talked about a subgroup of retail stores that had benefitted from the pandemic. But the same can’t be said for the industry we’re looking at today.
In fact, when it comes to the hotel industry, the future is bleak. In a recent desperate plea for help to Congress, the industry explained that it faces a “default disaster,” in which 25% of hotels are at risk of foreclosure. The report revealed that 23.4% of hotel loans are 30 or more days’ delinquent as of last month. That’s the highest percentage on record.
And to put it into perspective, just last year, at the end of 2019 – the rate of delinquent hotel loans was a cool 1.3%. Doesn’t paint a pretty picture, huh?
Where’s the money?
The picture gets even bleaker when you realize that at its current pace, one in four hotels currently can’t pay their mortgage.
And there’s no relief in sight seeing that the record low travel demands we’re currently seeing don’t seem to be going anywhere anytime soon. And this may lead to many hotels having to close their doors permanently. But this isn’t just impacting the hotels. We’re also seeing tens of thousands of hotel employees and other jobs in the industry at risk.
So, it’s clear that the only answer is federal aid….
That’s where the plea to Congress comes in. The letter, which was sent to Congress, was signed by more than 4,000 hotel owners and several trade groups. In it was a request for support for the Helping Open Properties Endeavor Act. The HOPE Act provides financial assistance to small businesses that operate in the commercial real estate market and would shift funds from the CARES Act Economic Stabilization Fund.
And it’s not just small hotels echoing this sentiment – even the world’s largest hotel chain. Marriott International expressed that the financial hit it has taken due to the pandemic has impacted them more than 9/11 and the 2008 financial crisis combined.
How can I get some?
There are just specific industries I knew wouldn’t bode well from the pandemic – from airlines to hotels, to most brick and mortar retailers – it was expected to see low numbers. But really, no one could have predicted the real impact Coronavirus would have – or how long it would stick around.
With that said, many traders see hotel industry stocks as cheap opportunities to turn some fast cash. But truthfully, I wouldn’t be looking to touch these stocks for some time. And even if we see federal relief coming into the hotel industry, it still doesn’t change my outlook for the foreseeable future; these stocks are a dead-end investment.
With that said, as the days’ pass, my watch list of stocks remains the same. I’ll be keeping a close eye on stocks like Home Depot or Amazon to buy on a pullback because I believe that the current market front runners will stay there until we see a shift in the coronavirus narrative.
In the spotlight: What could be the best earnings report of the season…
It’s been a week of interesting earnings reports. But the latest report dominating the headlines is an impressive one.
On Wednesday, Target destroyed every forecast Wall Street had predicted. The big-box store attracted millions of new customers in their online space. In fact, Target saw such an influx of customers, it set a record for same-store sales, driving profits up by an unheard of 80.3% – sitting at $1.7 billion.
Sales online and at stores open for at least a year climbed by 24.3% during the second quarter – rising to an all-time high. Same-store sales climbed by 10.9% while the company’s digital sales nearly tripled from a year earlier.
Here’s a closer look at the numbers:
- Adjusted Earnings Per Share: Target delivered a whopping $3.38, vs. the $1.62 that was expected
- Revenue: $23 billion, vs. $20.09 billion that was expected
- Same-store sales growth: 24.3%, vs. 7.6% that was expected
One More Thing…
In the aftermath of Covid-19, some companies have adapted to maintain their market share, while others are still suffering with no signs of growth.
Every day, it seems as though new variables are brought into the fold, leaving individual investors lost…
But regardless of this uncertainty, my S.C.A.N. trading system is still able to analyze millions of data points to find the best profit opportunities.
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