Public lodging stocks should outperform the market over the next few years due to an increasingly favorable supply/demand balance and improving investor psychology, according to NationsBanc Montgomery's senior lodging analyst, Michael Mueller.

Mueller made his remarks during a luncheon presentation at NationsBanc Montgomery's 16th Annual Hospitality Conference that has attracted 59 companies from across the nation and more than 175 attendees from the investment community. The Conference, featuring presentations and panel discussions geared around the premier growth companies in the lodging, lodging REIT, timeshare, cruise line, ski resort, gaming, auto rental and restaurant industries, started Monday, January 25th and will run through Friday, January 29th at the Pierre Hotel.

"Lodging industry fundamentals remain favorable on an overall basis," said Mueller. "The publicly traded lodging companies, which have the industry's strongest brands and best-positioned assets, are well positioned to outperform the overall industry in both strong and weak economic environments."

Mueller noted that the lodging industry outlook looks positive for a number of reasons, including: a favorable supply/demand balance in many industry segments; a slowing of industry supply growth over the next few years; revenue per available room (RevPAR) growth exceeding inflation; and continued favorable profit growth.

Supply growth continues to be constrained by the lack of capital availability throughout the industry, especially in the full-service lodging segment where the cost to acquire facilities remains well below the cost to replace them, said Mueller. This reduction in supply growth will become more evident in 2000 and 2001, which should allow the already-existing facilities to raise room rates and therefore increase earnings.

Additionally, Mueller explained that earnings trends were favorable in 1998 and should continue through 1999. Given the significant decline in stock prices and increase in earnings, valuations for these companies are quite attractive, said Mueller.

In his remarks, Mueller highlighted five attractive investment areas in the lodging sector:
 

Mueller recommends the following lodging REITs: Patriot American Hospitality, Inc., MeriStar Hospitality Corporation, RFS Hotel Investors, Inc., FelCor Lodging Trust Incorporated, LaSalle Hotel Properties, Innkeepers USA Trust, Host Marriott Corporation, Sunstone Hotel Investors, Inc., and Equity Inns, Inc. In 1998, NationsBanc Montgomery completed 13 transactions, raising a total of $1.4 billion for clients in the hospitality sector.

NationsBanc Montgomery Securities LLC, a subsidiary of BankAmerica Corp., is a full-service investment bank and brokerage firm with approximately $2.7 billion of regulatory capital. The company provides research, trading and issuance in the equity and fixed-income markets (high yield, emerging markets, high grade and mortgage-backed markets). Other services include MA advisory, financial buyer coverage, loan syndications, global investment banking, real estate finance, mortgage finance, money markets and a primary dealer. NationsBanc Montgomery Securities is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers and the New York Stock Exchange.

* NationsBanc Montgomery Securities LLC currently maintains a market in this security. NationsBanc Montgomery Securities LLC was manager or co- manager of a public offering and/or has performed investment banking or other services for this company in the last three years.