Is it too risky to buy Intercontinental Hotels Group plc and Rightmove plc right now?

RevPAR – revenue per available room –is the key metric used to assess the hotel industry, even though it fails to take into account revenue streams from other hotel services such as spas, restaurants and casinos. So what was InterContinental Hotels Group’s (LSE: IHG) most recent quarterly global RevPAR figure? Released this month, it showed a 1.5% increase.

Usually an increase in RevPAR is met with positivity but the most recent figure failed to tell the whole story about InterContinental. Growth in America and continental Europe was offset by falling sales in the Middle East as lower oil prices began to take a toll on the region. Why does that matter so much? The Middle East is key for the hotelier as it has a high concentration of rooms in the region.

However, income investors have been rewarded handsomely over last decade as the company increased its dividend by more than 300% from around 15p in 2005 to 58p in 2015. 

This hasn’t stopped the City from taking a somewhat gloomy near-term outlook as a cocktail of uncertainty looms, largely fuelled by a combination of terrorism concerns, the forthcoming Brexit vote, China’s economic situation and the US elections.

A summer of growth beckons

While these concerns do warrant consideration, we’re entering what is typically a strong period for hotel operators. Additionally, major sporting events such as the Olympics in Rio and the European championships, should drive occupancy rates.

The numbers seem to support this view as the shares currently trade on an earnings multiple of around 5 times and with 20% earnings growth forecast for 2017, investors have reason to consider this opportunity over the short-to-medium term.

Making the ‘right’ moves

Rightmove (LSE: RMV), the online property portal, has been steadily cashing in on the nation’s love affair with home ownership by connecting people to properties. This trend doesn’t show any sign of abating as the company recently enjoyed its busiest-ever first quarter for enquiries to estate agents. Apparently, the rush to beat the stamp duty surcharged introduced on 1 April helped to boost activity in the sector.

Rightmove is the current UK property portal market leader and it’s not difficult to see why – it not only has the UK’s largest and most engaged property audience but also has the largest inventory of properties. This creates that all-important network effects as the increasing demand from homebuyers creates the need for an ever-increasing inventory of properties.

A big fish in a big pond

It helps too that Rightmove operates in what’s arguably a duopoly as Zoopla is the only other strong competitor in the UK property portal market. However, there are concerns that new entrants such as OnTheMarket, launched in 2015, could steal share away from Rightmove. Yet there appears to be very little incentive for estate agents to leave the clear market leader as Rightmove attracts more than 85m visits per month, which dwarfs the 3m monthly visitors for OnTheMarket. The yield of 1.2% isn’t the most attractive but the City is bullish on Rightmove and has set a target of around 4,400p, representing an expected gain of 10%.

Rightmove and Intercontinental hotels may be high beta stocks and more volatile than the underlying market, but this doesn't necessarily equate to risky stocks if management have a stellar track record of steering the company through clear and achievable milestones.  

A clear path to growth combined with strong management are just a few of the things make for a good opportunity, be it in large caps like InterContinental or under the radar mid caps like the one included in our Top Growth Stock of 2016 report. Make sure you don't miss out, just click here.

Yasin Ebrahim has no position in any shares mentioned. The Motley Fool UK has recommended Rightmove. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.