Jefferies urged investors to ‘buy’ InterContinental Hotels as the broker chose hotels as its top subsector in the leisure industry.
After a lacklustre 2021, European hotel shares are likely to perform well in 2022, Jefferies said. It based its recommendation on a recovery in US hotel footfall and higher internet searches and web traffic.
Operators with US exposure will outperform and the market may consolidate in 2022 as well, the broker said. Jefferies upgraded IHG two notches from ‘underperform’ based on the company having 60% of its rooms in the Americas and increased its price target for IHG shares to £57.50 from £37.50.
Jefferies kept its ‘buy’ rating on Whitbread but cut its price target to £36 from £40. The broker upgraded Spanish hotelier Melia to ‘buy’ from ‘hold and nudged up its target price to €7.50 from €7.40. Scandic shares were upgraded to ‘hold’ from ‘underperform’ and the Swedish group’s price target was increased to SEK35 from SEK27.80.
In a note to clients, Jefferies analyst James Wheatcroft said: “We expect operators with US, domestic and/or leisure exposure to continue to outperform in 2022. We push market consolidation expectations into 2022 too. Asset owners may attract more investor interest in an inflationary backdrop. For better positioned operators, we expect debate around shareholder returns to reemerge.”
The broker left On The Beach as an ‘underperform’-rated stock and cut its price target to 220p from 300p.