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The math suggests that January and February could actually accelerate from a strong November, and that’s without a macro recovery.

The early 2012 set up looks favorable for hotel stocks.  We are very encouraged by November’s strong growth and while December won’t quite look as good, January and February are likely to accelerate.  When the hotel companies report in late January/early February, not only should Q4 earnings look solid, but the outlooks could be favorable with about a month of 2012 already in the bank.

November US REVPAR for Upper Upscale properties came in at 8.2% growth, in-line with our sequential model projection of 8.0%.  November generated the highest YoY growth rate since May 2011, overcoming the relatively weak 4.8% rise in October.  We track REVPAR on a sequential dollar basis, seasonally adjusted.  Our model successfully predicted the summer swoon and the fall resurgence, both coinciding with the performance of hotel stocks.

With two more weeks left, December Upper Upscale REVPAR is tracking +6%, also above our projection, which means Q4 REVPAR may expand 6-7% YoY.  That’s pretty solid growth in the face of a difficult macro environment.  In addition, there are surveys of a strong holiday season to close out 2011 which could increase hotel bookings.

And the YoY trend may get even better.  According to our seasonality model, REVPAR may reach double-digit growth in January and February.  If that happens, the bears will be severely disappointed.  There are expectations out there for flat REVPAR growth for 2012.  We’re only predicting 2-3% growth in REVPAR for CY 2012 and we are bullish on the sector.

Healthy US REVPAR performance would restore investor confidence in the lodging sector.  We think lodging outperforms consumer discretionary in any environment.  Counter intuitively, MAR could be the biggest winner.  Obviously, MAR doesn’t have the same leverage to increasing RevPAR as the hotel owners but the sentiment is much worse surrounding the name.  With the completion of its timeshare spin-off, MAR is almost a hotel pure play with a business model that generates 95% of its revenues through fees.  This business model should command a huge premium valuation multiple in our opinion and an environment of improving investor sentiment could get us there.  At only 9x EV/EBITDA, we’re left with plenty of upside.