Hotel shares jump on analyst upgrade, better trend

NEW YORK (Reuters) - Shares of hotel companies jumped on Thursday, bolstered by an analyst upgrade of the sector and early signs that the rate of decline in revenue per available room (RevPAR) was slowing.

FBR Capital Markets upgraded the sector to "overweight" from "market weight," citing signs of improving demand in some business segments and a bottoming of the decline in RevPAR, a key gauge of financial health in the industry.

"We have observed that forward bookings, especially for the transient/leisure segment, have strengthened every month since March," said FBR analyst Patrick Scholes in a research note.

The Dow Jones U.S. Hotels index rose more than 4 percent in trading on the New York Stock Exchange, led by shares of Starwood Hotels & Resorts Worldwide Inc (HOT.N), Marriott International Inc (MAR.N) and Wyndham Worldwide Corp (WYN.N).

Shares were also bolstered by weekly lodging data from Smith Travel Research released Wednesday, which suggested that the pace of RevPAR declines was slowing.

"The summer leisure season is certainly off to a better start than we would have thought," said Chris Woronka, analyst with Deutsche Bank.

But Woronka added that the stocks' surge could be a bit premature, because many hotel companies are still charging markedly lower rates for their rooms, buoying occupancy rates but eating into hotel profits.

Starwood rose 7.2 percent, or $1.37, to $20.29 and Marriott added 3.9 percent, or 75 cents, to $20.04. Wyndham gained 4.7 percent or 49 cents to $11.00.

(Reporting by Deepa Seetharaman, editing by Gerald E. McCormick)