While we agree, what does that say about valuations 2 months and 30% ago when Goldman had a Buy rating on the sector?



Goldman is passing itself off as a contrarian on Lodging because he is bullish.  We’re bullish too but only as of very recently.  GS has been bullish all the way through the recent carnage.  This reminds me of the market perma-bulls in March of 2009 who patted themselves on the back because they called the March low – after calling the Feb low, the Jan low, the December low, well you get the picture.  Even a broken clock is right twice a day.


GS lowered their 2012 RevPAR forecast to +4-5% due to economic concerns which begs a couple of questions.  One, what were you doing at 5-7% in the first place?  Second, what is the value add to make a change after the stocks have corrected 30%? The stock market is a discounting mechanism after all.  We’re projecting 3-4% RevPAR growth but that is splitting hairs.  The reality will likely be that if our target is reached, these stocks are going higher.


We certainly agree with Goldman’s assertion that valuations are reasonable now.  However, if they are only reasonable now, how did they characterize them when the stocks were 30% higher?  Looks like the term was “attractive”.  Not sure I would characterize that as shrewd analysis.


We would characterize the current valuations as more than reasonable or even attractive.  MAR, for instance, is trading right at its March 2009 trough.  HOT is trading at 7.5x 2012 EV/EBITDA.  This isn’t just a valuation call either.  We actually think YoY RevPAR growth will accelerate the rest of the year from the July/August lows which will allay fears of massive earnings reductions.  See our recent positive lodging posts "LODGING: REVPAR REVS UP (9/9/11)" and “IT’S NOT THE ECONOMY STUPID! (8/25/11)."

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