Sector Quick Take: Hotels & Travel - Dec 17, 2025
Dec 16, 2025
Investment, Stocks, Sector Cycle Read
Editor's Notes:
US listed hotels are either too expensive or face challenges (e.g. declining RevPAR), and I'd stay away given cycle phase.
Cruise line are getting too much positive attention than they deserve. See the newsletter from yesterday (incl. Jim Cramer's bullish call). Staying away given near-peak position and saturation.
China values and cycle phase deserve more attention. Atour is doing well, but I'd discount its retail business heavily (selling pillows). I like H World more - 21x P/E, 6% FCF yield, definitely justifiable given growth in high teens amid China early stage recovery. H World has an aggressive expansion plan targeting 15% China market share, and is a good proxy already for China's overall hospitality industry recovery.
Tongcheng at 12x P/E 8% FCF yield is somewhat interesting given (1) healthy financial profile - 10% topline, ~18% net margin with expansion history, (2) lower-tier city customer / domestic focus and room for growth (recently expanded hotel management + overseas travel), and (3) likely manageable competitive risk at the moment (Meituan tied up in another war, Ctrip thriving and constantly subject to anti-monopoly media / gov scrutiny).
What is the current state of the travel sector and its implied market narrative?
The travel sector is currently experiencing a Late Recovery / Early Expansion phase, marked by robust post-pandemic rebounds yet significant divergence across its sub-segments and geographies. Capital is predominantly channeled into "recovery complete" cruise and hotel operators, along with large global Online Travel Agencies (OTAs), while also exploring new growth narratives from China-exposed travel and specialized asset-light models. This reflects an implicit market bet on sustained strong global travel demand, driven by continued post-COVID normalization and new growth vectors, although this optimism faces tension from early signs of demand normalization and rising cost pressures.
Understanding the current dynamics reveals several key aspects:
The sector broadly is in a Late Recovery / Early Expansion phase, defined by strong post-pandemic rebounds. However, increasing divergence is notable across sub-segments and geographies.
Capital is increasingly positioned in "recovery complete" cruise and hotel operators and large global OTAs. It also selectively targets new growth narratives from China-exposed travel and specialized asset-light models.
The market implicitly bets on sustained strong global travel demand, relying on continued post-COVID normalization and emerging growth vectors to fuel earnings.
A growing tension exists between this optimistic bet and early signs of demand normalization, such as domestic pricing pressure and decelerating Revenue Per Available Room (RevPAR) in mature markets, coupled with intensifying cost pressures across parts of the sector.
Which companies are poised as second-order beneficiaries or vulnerable within the travel sector?
Table A – Second-Order Beneficiaries (Analytical View Only)
Company | Why is this a Second-Order Beneficiary? | Key Drivers and Cycle Phase | Valuation vs. 3-Year Context | Market Reaction vs. Fundamentals |
|---|---|---|---|---|
Hilton Worldwide (HLT) | The market is anchoring on current RevPAR deceleration, but HLT's asset-light model and robust pipeline position it for asymmetric upside when the broader travel cycle eventually re-accelerates. Its focus on strong loyalty and high-end segments provides resilience. | Cycle phase: 2nd-half decline (near trough) for RevPAR but strong leading indicators (record development pipeline +5% YoY, strong group bookings). Management views an impending "super cycle." | Latest P/E (31.0) is near 3y max (33.2), suggesting a premium for its perceived quality, but potentially also future growth. | Price moves mostly positive (e.g., +3.84%, +3.79%), driven by analyst upgrades, loyalty program enhancements, and luxury expansion despite RevPAR softness. This indicates market buying the long-term narrative. |
Atour Lifestyle (ATHM) | While China OTA/hotel peers see moderating growth post-recovery, Atour's hyper-growth retail segment offers a distinct, less cyclical revenue stream that insulates it from hotel RevPAR fluctuations and drives margin expansion. | Cycle phase: Early 1st-half recovery with profitability focus. Retail GMV +75.5% YoY, product mix optimization, aggressive but quality-focused hotel expansion. Easing RevPAR decline rate helps core. | Latest P/E (20.2) is above 3y mean (18.9) but far from max (39.7), implying potential for further multiple expansion as its unique growth story solidifies. | Consistently positive price moves (e.g., +5.59%, +5.37%), driven by analyst upgrades, strong Q3 results, and raised guidance, confirming the market is increasingly recognizing its differentiated growth. |
Tongcheng Travel (TCFL) | Positioned as a China domestic travel leader, its core recovery is robust, but its diversification into higher-margin outbound travel and hotel management segments offers longer growth runways compared to pure domestic plays. | Cycle phase: Early Expansion Phase. Outbound travel (higher margin) recovery, rapid hotel management expansion (2700 ops, 1500 pipeline), AI integration for efficiency, and focus on lower-tier cities still provide greenfield opportunities. | Latest P/E (11.9) is below 3y mean (14.1) and near min (8.9), suggesting an undervalued growth story relative to peers if new growth vectors are not fully appreciated. | Price moves mostly positive (e.g., +5.93%, +3.29%) driven by global expansion plans, partnerships, and seasonal tourism boosts, indicating positive short-term catalysts are aligning with its cycle. |
Choice Hotels (CHH) | Despite headline U.S. RevPAR showing early signs of decline, Choice's diversified strategy into international markets, extended stay segments, and its asset-light model provide resilience and alternative growth vectors. | Cycle phase: Late 2nd-half recovery (overall) with domestic RevPAR in early 1st-half decline. Accelerating international EBITDA, strong pipeline (98% high-value segments), and rising effective royalty rates. | Latest P/E (12.8) is significantly below 3y mean (18.4) and near min (12.0), suggesting the market is overly focused on domestic headwinds, potentially creating a value opportunity. | Price moves are mixed: some positive on expansion news (+4.35%, +3.24%) but also negative on analyst downgrades/institutional selling (-3.12%, -3.41%, -4.15%), highlighting market skepticism and lack of conviction in its diversified strategy. |
Table B – Second-Order Exposed / Vulnerable Names (Analytical View Only)
Company | What is the Hidden Vulnerability? | Key Drivers and Cycle Phase | Valuation vs. 3-Year Context | Market Reaction vs. Fundamentals |
|---|---|---|---|---|
Seibu Holdings (S) | Operational profitability is declining due to rising costs, but this is masked by strong revenue recovery and non-recurring asset monetization gains. The market might be overvaluing headline growth without adjusting for underlying pressures. | Cycle phase: Late 2nd-half revenue recovery / Early 1st-half operational profit decline. Decelerating revenue growth, OM compression, and management explicitly flags rising personnel/depreciation costs. FY26 guidance implies a drop from asset sales. | Latest P/E (34.5) is significantly above 3y mean (20.6) and near max (45.1), suggesting the market is currently overpaying for growth that is not translating to operational profitability. | Price moves generally negative or flat when no clear company driver is reported (-3.15%, -5.13%), which aligns with the hypothesis of underlying operational weakness being overlooked. |
Norwegian Cruise Line (NCLH) | Despite strong demand, oversupply in key regions like the Caribbean could lead to pricing pressure, eroding yield growth. High debt levels and aggressive capacity expansion could become a significant burden if pricing power diminishes. | Cycle phase: 2nd-half recovery (near peak). Multiple analyst downgrades due to concerns about Caribbean market saturation and potential oversupply by 2026. High debt ($14.5B) with negative free cash flow. | Latest P/E (8.1) is near 3y min (7.0) and well below mean (12.0), suggesting some market skepticism is already factored in, but potential downside exists if pricing deteriorates more rapidly. | Price moves are mixed (e.g., +6.81% on JPMorgan upgrade but also multiple downgrades on supply concerns, -4.16% on revenue miss/Q4 profit forecast). This highlights the tension in market sentiment regarding supply/demand dynamics. |
Carnival Corporation (CCL) | The "near peak" cycle position with expectations already very high could lead to asymmetric downside. Any deceleration in demand or intensification of pricing competition could trigger significant downward revisions from an elevated baseline. | Cycle phase: Late 2nd-half recovery / moving into "near peak." Management's cautious outlook on near-term demand (U.S. macro uncertainty, Caribbean overcapacity) and mixed analyst sentiment on sustainability. | Latest P/E (11.4) is significantly below 3y mean (25.3) and near min (8.4), potentially reflecting conservative analyst estimates or concerns about sustainability of peak earnings. | Price moves are volatile, with strong positive days (+5.94%, +3.55%) on broad sentiment (interest rate cuts) but also sharp negative reactions (-3.88%, -6.78%) on management caution or competitive concerns, reflecting high sensitivity to incremental news. |
Marriott International (MAR) | Segmented weakness in U.S. RevPAR (business transient, select-service) is being masked by international strength and non-RevPAR fee contributions. If U.S. deceleration spreads or deepens, the asset-light model's operating leverage could reverse quickly. | Cycle phase: Peak (with segmented weakness). Global RevPAR at +0.5% (Q3 2025) but U.S. & Canada RevPAR declined -0.4%. Business transient flat, group RevPAR declined -2%. Developer concerns about new construction financing. | Latest P/E (26.7) is near 3y max (28.3) and above mean (23.6), suggesting the market is pricing in continued strong overall growth despite localized weaknesses. | Price moves show mixed reactions: positive on shareholder returns/luxury growth (+3.31%, +3.27%) but also negative on operational missteps or PR crises (-3.47%), indicating vulnerability to sentiment shifts. |
Wyndham Hotels (WH) | Despite its asset-light model, decelerating RevPAR and worsening working capital are direct indicators of fundamental deterioration. Its defensive positioning might not be enough to prevent further multiple contraction if the downturn persists. | Cycle phase: Early 1st-half decline. Net revenues and RevPAR are declining (Global RevPAR -5% in Q3 2025). Worsening Days of Sales Outstanding (DSO from 110 to 172.59 days) indicates increasing working capital pressure. | Latest P/E (15.4) is near 3y min (14.5) and below mean (17.6), suggesting the market is already pricing in some of the downside, but a deeper cycle could lead to further compression. | Price moves are mixed, with positive reactions on strategic acquisitions/outlook (+3.21%), but the underlying cycle data and worsening WC metrics suggest these are counter-cyclical tactical boosts rather than fundamental inflections. |
What are the potential capital rotation trends in the travel sector?
The following are hypotheses regarding capital rotation, not financial advice:
From "Peak Priced" Global Hotel Franchisers → To Undervalued China/Asia-Focused Growth: Capital might rotate out of highly-valued global hotel brands (e.g., Marriott, Hyatt, Hilton, trading near 3-year P/E highs) that show signs of U.S. RevPAR saturation, into China and Asia-focused travel platforms (e.g., Tongcheng Travel, Atour Lifestyle, MakeMyTrip) where domestic consumption has more runway and international outbound/inbound travel is still in an earlier growth stage. The starting point appears crowded in the former, while the latter are relatively under-owned or trading below historical averages.
From Headline-Driven Cruise Operators → To Diversified Asset-Light Models with Structural Growth: Funds may shift away from cruise lines (NCLH, CCL) that have fully discounted their recovery and are now facing supply/demand equilibrium challenges and analyst skepticism, towards asset-light hotel franchisers (e.g., Choice Hotels) or vertically integrated travel platforms (e.g., Atour's retail segment) that possess diversified revenue streams and less capital-intensive growth engines. Cruise stocks currently appear to be a crowded momentum play despite underlying concerns.
From High-Multiple OTAs (U.S./Europe) → To Early-Stage Investment/Innovation Stories (Global/China): Capital could flow from OTAs already trading at the high end of their valuation ranges (e.g., Expedia) or with conservative growth guidance (Booking Holdings) towards platforms making significant, visible investments in new technologies (e.g., Airbnb's AI and new service ventures) or expanding into underpenetrated markets, even if near-term profitability is sacrificed for long-term scale. Expedia is crowded; Airbnb's investment phase might be seen as deserted by short-term traders.
From Cyclical Momentum Plays → To Deep Cyclicals Showing Early Trough Signals for Long-Term Value: If macro headwinds persist and current "peak" players start decelerating more sharply, patient capital might begin accumulating names showing early trough signals (e.g., H World Group's domestic business struggling but stabilizing relative to earlier declines) that are trading significantly below historical averages. These names (H World, potentially Wyndham) currently appear deserted by growth-focused investors.
Analyzing the current market sentiment:
Crowded Starting Point: Large-cap cruise lines and highly-valued U.S./global hotel brands and OTAs (MAR, HLT, EXPE, RCL, NCLH) due to robust recovery narratives.
Deserted Starting Point: China-focused names (TCFL, ATHM) are relatively less crowded despite strong growth, and value-oriented hotel franchisers (CHH, WH) could be seen as deserted due to current market pessimism.
What is a non-consensus perspective on the travel sector's current cycle?
"The market is oversimplifying the post-pandemic travel cycle, prematurely consolidating diverse company fortunes into a singular 'late-recovery' narrative, while underestimating both the structural tailwinds in nascent sub-markets and the creeping operational headwinds for mature players."
Key areas where this non-consensus view provides deeper insight:
Cycle Phase Dispersion Underappreciated: While many companies are broadly tagged as "late-recovery," significant nuance exists. China-focused players (TCFL, ATHM, MMYT) are clearly in earlier expansion phases, benefiting from fresh domestic and outbound tailwinds. Conversely, some legacy players (S, MAR in U.S. segments) face very real early-stage declines in operational profit or specific RevPAR metrics, yet their overall cycle assessment doesn't always reflect this granularity.
Misaligned Price Reactions to Underlying Trends: Price action often seems to react to macro headlines (e.g., interest rate cuts boosting cruise stocks) or short-term beats, even when deeper fundamental concerns (e.g., NCLH's Caribbean oversupply, CHH's domestic RevPAR declines) are evident. Conversely, some growth stories (ATHM, TCFL) show sustained positive momentum but their P/E ratios remain modest compared to historical peaks.
Valuation Extremes Masking Nuance:
"Quality" Premium Overstated?: Hyatt (46.8 PE) and Marriott (26.7 PE) trading near their 3-year P/E max might imply sustained high-quality growth, but Marriott's segmented weakness in U.S. RevPAR suggests this premium may be fragile against broader macro shifts. Expedia (15.3 PE at max) suggests market confidence in continued high growth, ignoring anticipated normalization.
"Value Trap" or "Hidden Gem"?: Choice Hotels (12.8 PE) and Wyndham (15.4 PE) trading near their 3-year P/E min are discounted, perhaps too heavily, if their diversified strategies and international growth (CHH) or resilience during a downturn (WH) provide more fundamental protection than recognized.
Growth Undervalued?: Tongcheng Travel (11.9 PE, near min) and Atour Lifestyle (20.2 PE, below mean) seem to be getting an insufficient premium for their distinct growth drivers and earlier cycle positions in a consolidating industry. This suggests the market may still be viewing them through a generic "China tech" lens rather than appreciating their specific market dynamics.
Lagged Recognition of Cost & Supply Dynamics: The market appears slow to fully price in the long-term impact of rising costs (Seibu) or potential oversupply (NCLH, CCL in Caribbean) despite clear management warnings and analyst downgrades. Asset sales are masking operational profit compression in some cases (Seibu).
Short-termism vs. Long-term Investment Cycles: For companies like Airbnb, sacrificing short-term margin for long-term growth investments (AI, new services) is leading to price pressure, indicating a market preference for immediate profitability over strategic build-out, potentially creating a long-term entry point for patient investors.
What are the key implications and critical questions for investors in the travel sector?
What are the key implications for investors?
Premium for Differentiated Growth: As the broad recovery normalizes, investors will increasingly pay a premium for companies that can demonstrate truly differentiated growth vectors (e.g., unique product/market segments, successful international expansion) rather than just broad market recovery.
Operating Leverage is a Double-Edged Sword: While operating leverage amplified gains during the recovery, it can sharply magnify downside during decelerating demand or rising costs. Companies with more flexible cost structures or diverse revenue streams will prove more resilient.
The "China Story" is Multi-faceted: The Chinese travel market is not monolithic. Domestic travel (TCFL, ATHM) is entering new phases, and outbound/inbound is a critical future driver. Direct beneficiaries will capture this long-term growth, rather than assuming a uniform "China recovery."
What concrete questions or indicators should investors monitor?
Sustainable Pricing Power: For cruise lines, how are net yields evolving against occupancy and capacity additions in key itineraries? For hotels, beyond headline RevPAR, what are the trends in Average Daily Rate (ADR) for premium vs. economy segments?
Cost Management & Efficiency Gains: Are companies demonstrating meaningful improvements in Selling, General & Administrative (SG&A) as a % of revenue, or declining operating expenses per unit/passenger? (e.g., NCLH's Non-Commissionable Cruise Costs (NCC) ex-fuel control, TCFL's Sales & Marketing (S&M) efficiency).
Diversification Success: How quickly are "new" revenue streams (e.g., Atour's retail, Tongcheng's outbound/hotel management) growing as a percentage of total revenue and contributing to overall margin expansion?
AI Implementation ROI: What tangible, quantifiable benefits (e.g., higher conversion rates, lower customer acquisition costs, improved operational efficiency) are companies reporting from their AI investments, beyond general commentary?
Capital Allocation Discipline: Are share repurchase programs opportunistic or defensive? Is Capital Expenditure (CapEx) focused on high-return, strategic growth, or maintaining existing infrastructure in a deteriorating environment?
Leading Booking Indicators: Are forward booking curves for hotels and cruises showing sustained strength beyond the immediate 12 months, or are there signs of softening demand further out? What are customer deposit trends?
Disclaimer: This content is generated using AI, synthesizing public data (filings, reports, news) and social media (Reddit, X). It may contain errors, inaccuracies, or hallucinations. Nothing herein constitutes financial advice. This newsletter is for informational purposes only; please consult a qualified professional and conduct your own due diligence before making any investment decisions.