There are bubbles, and then there are bubbles; some associate the recent hype in Airbnb (NASDAQ: ABNB) with a significant mispricing opportunity, shining a light on traditional hotel platforms and long-standing brand names.

Sure, Airbnb offers a unique experience and flexibility, but that only goes as far as the 'wild West' model, allowing hosts to charge outrageous prices. This spurs a complete and utter conflict of interest between benefitting shareholders and keeping customers coming back.

The business must find a way to allow hosts to keep running their monopolies on price while at the same time looking out for the customer's best interest. Unlike this zero-sum model, traditional hotel giants are aligned with customers and shareholders. Also, available economies of scale allow them to create value.

A Distinguished Winner

In the universe of hotel stocks, one clear outlier calls for all the market's - and analysts' - love. With a clear upside potential gap over Airbnb, Hyatt Hotels (NYSE: H) comes to you at a 21.0% discount to where analysts believe it should be trading, a price target of $129.2 a share.

It is hard to believe that analysts at Morgan Stanley (NYSE: MS) would look to increase their price targets on the stock by as much as 29.4% to $138.0 a share if they had any doubt that this business model would be threatened by the rise of Airbnb. 

Perhaps in the short to medium term, though in the long term, this is where Wall Street believes the money is. Though this thesis may make sense to you, you should not go out and buy the stock immediately; there are other things you need to check off the due diligence list.

Compared to major competitors like Hilton Worldwide (NYSE: HLT) and Marriot International (NASDAQ: MAR), Hyatt is again the clear winner justifying all the market's attention.

With Hilton representing a net upside of 2.5% from today's prices and an expected earnings per share jump of 11.4% for the next twelve months, this one falls short of Hyatt by a financial mile.

How is Marriot doing in this department? Analysts are not too excited, hence their 7.9% upside targets. EPS for the next twelve months is nothing to write about, with an expected advance of only 10.8%.

Where does the darling stand here? Next to Hyatt's 21.0% upside, analysts are placing an industry-leading EPS growth expectation of, drum-roll please... 27.9%! And by the way, it has outperformed peers by as much as 64.1% over the past five years.

Momentum Buildup 

Inflation has played a significant role in the American consumer's selection for vacations, which is why a value proposition is more important than ever, one way to curve the effects of today's economy.

Diving into Hyatt's second quarter 2023 earnings press release can help you answer whether the business is navigating this environment successfully. For starters, how is an EPS increase of 86.7% over the past twelve months?

Typically, if all else is equal, EPS growth drives stock valuations. In this case, the stock only rallied by 24.8% during the same period when EPS nearly doubled, creating the initial evidence supporting a value gap.

Boosting the bottom line is the 15.0% rise in comparable system revenues, and there is more behind it coming in the near-term future. The executed management/franchise contracts pipeline stood at 119 thousand rooms, which will be immediately accretive to earnings.

They say that past performance does not indicate future performance. However, Hyatt's financials will give this slogan a run for its money. With a consistent (ex. COVID) gross margin of 35% and above, pricing power and brand moat are still present.

Net income margins (again, ex. COVID) come in at above 12%, which is impressive for any industry. The real test comes when investors look to find out what management is doing with this retained capital, and they pass with flying colors.  

Understanding today's upside and the company's future potential, management has decided to allocate up to $108 million to share buybacks. This amount represents nearly one percent of the company's market capitalization; considering the recent price declines, it would not be surprising to see additional buybacks at these levels.

With this in mind, there is a cherry to put on top of it all. BlackRock (NYSE: BLK), the company's largest shareholder, upped its stake by as much as 14.6% during the past quarter. When BlackRock moves, you better take notes.