Travel Stocks: Best Time To Invest And Profit

The COVID-19 pandemic saw revenues in the travel industry fall by 75% in 2020. However, travel is now roaring back, with two-thirds of 5,000 people surveyed expressing a greater interest in travelling now than before the pandemic. This article will explore the best travel stocks to buy now and in the future.

Travel stocks to buy after COVID

The travel industry is in growth mode again, and travel stocks are likely to benefit from this trend. While the industry was hard-hit by the COVID-19 pandemic, it is now rebounding, with US travel for leisure reaching new all-time highs.

Marriott International (MAR): Marriott is the largest hotel stock by market capitalization. It has a strong growth profile, with a projected 11% annual increase in earnings over the next five years. The company has a wide global presence, with 1.48 million rooms across almost 8,000 properties in 139 countries. It also has a strong focus on luxury travel, which provides higher fees.

Airbnb (ABNB): Airbnb has experienced significant growth, with gross booking volumes nearly doubling between 2020 and 2021. It has a large amount of cash on hand and is well-positioned to benefit from the rise of remote work and the "Live Anywhere" trend.

Royal Caribbean Cruises (RCL): While cruise operators were among the hardest-hit travel stocks during the pandemic, Royal Caribbean is expected to recover strongly. The company is optimistic about its future, and analysts predict a big recovery in revenue over the next two years.

Hertz Global Holdings (HTZ): Hertz is an industry leader in the rental vehicle market, with a strong balance sheet and partnerships with companies like Uber and Tesla. It has benefited from the ongoing vehicle shortages and higher pricing environment.

Ryman Hospitality Properties (RHP): Ryman is a Nashville-based real estate investment trust (REIT) that owns and operates hotels and hospitality businesses. It has famous assets like the Grand Ole Opry and Ryman Auditorium, as well as resorts and entertainment venues. The company has strong revenue growth projections for 2022.

Delta Air Lines (DAL): Delta has had a tough couple of years due to the pandemic and the omicron variant. However, it has positive cash flow and is expected to swing to a profit in 2022, making it an attractive investment option.

Booking Holdings (BKNG): Booking Holdings owns popular online reservation services such as Booking.com, Priceline, OpenTable, and Kayak. It is well-positioned to benefit from the increasing demand for travel and has seen brisk earnings growth.

MakeMyTrip (MMYT): MakeMyTrip is an India-based online travel services provider that covers various aspects of the travel experience, including flights, hotels, and holiday packages. The company has been growing rapidly, with a 138% year-to-date gain, and has a strong Composite Rating of 98.

Defiance Hotel, Airline, and Cruise ETF (CRUZ): This ETF offers exposure to hotels, air travel, and cruises. It includes stocks such as Marriott International, Delta Airlines, and Carnival.

AdvisorShares Hotel ETF (BEDZ): This ETF focuses on accommodations, casinos, and travel real estate. It holds stocks like Target Hospitality, Bluegreen Vacations Holding, and Marriott.

Best travel stocks in 2024

The travel industry is a large space that spans multiple sectors of the economy, from transportation and accommodation to entertainment. After taking a hit during the COVID-19 pandemic, the industry is now in growth mode again, making it an attractive sector for investors.

Top Picks

• Booking Holdings (BKNG): One of the largest online travel portals, with popular brands like Booking.com, Priceline, and Kayak. It has strong brand recognition and a loyal customer base.
• Marriott International (MAR): One of the world's largest hotel companies with a vast global presence and a unique, asset-light business model.
• Airbnb (ABNB): Airbnb has revolutionized the travel industry, offering unique accommodations and extended-stay bookings for remote workers. It has a vast number of listings worldwide.
• The Walt Disney Company (DIS): Disney's theme parks, hotels, and cruise ships are premier vacation destinations. The company also has diverse revenue streams from television, movies, streaming, and merchandise sales.
• MakeMyTrip (MMYT): An online travel services provider in India, covering flights, hotels, holiday packages, and more. It has been a pioneer in the Indian market and has strong growth potential.
• Trip.com Group (TCOM): A Singapore-based comprehensive travel company offering reservations, tours, insurance, and more. With a focus on the Chinese market, it has seen significant growth and recovery post-COVID.
• Royal Caribbean Cruises (RCL): A leading cruise line company that has rebounded strongly from the pandemic. It recently launched the world's largest cruise ship, capable of carrying 10,000 passengers and crew.

ETFs

For those who want to invest in the travel industry but prefer diversification, exchange-traded funds (ETFs) focused on travel and tourism can be a good option. Here are some top travel ETFs to consider:

• U.S. Global Jets ETF (JETS): Focused on airline operators, with holdings in major U.S. and international carriers.
• PowerShares Dynamic Leisure and Entertainment ETF (PEJ): A well-diversified ETF with holdings in travel, accommodations, and entertainment companies, including Marriott and Booking Holdings.
• ETFMG Travel Tech ETF (AWAY): Focused on travel and accommodation technology, with holdings in companies like Airbnb and Booking Holdings.
• Defiance Hotel, Airline, and Cruise ETF (CRUZ): Offers exposure to hotels, air travel, and cruises, including brands like Marriott, Delta Airlines, and Carnival.

Outlook

While the travel industry is sensitive to market forces and economic downturns, the long-term outlook for travel stocks is positive. As disposable income increases globally, people are expected to spend more on travel and experiences. Additionally, the continued recovery from the pandemic and the rise in remote work are also driving growth in the travel sector.

Travel stocks with solid fundamentals

The travel industry is a large and diverse sector, encompassing various industries such as airlines, hotels, cruise lines, and online booking platforms. While the industry was hit hard by the COVID-19 pandemic, it has been rebounding in recent years, and travel stocks have been on the rise. Here are some travel stocks with solid fundamentals that investors may want to consider:

Royal Caribbean Cruises Ltd. (RCL)

Royal Caribbean is one of the "Big Three" cruise operators, with more than 65 ships offering itineraries to nearly 1,000 destinations worldwide. The company has strong fundamentals, with impressive growth and profitability metrics. It has a market capitalisation of $38.98 billion and is rated as a "Strong Buy" by Seeking Alpha's Quant Team. RCL is targeting capacity growth of 8.1% in 2024, with two new ships expected to be delivered, and projects net yield growth of 9-10%. Its EBITDA margin is an impressive 32%, and it has a return on equity (ROE) of 52%.

United Airlines Holdings, Inc. (UAL)

United Airlines is a major airline with a market capitalisation of $16.30 billion. It has strong valuation metrics, trading at a significant discount to the sector, and strong profitability, with an ROE of 33%. UAL has seen positive revenue and earnings growth, with a 21% EBITDA growth rate and a 34% EBIT growth rate. It also has a high number of upward revisions to its estimates, with Wall Street analysts predicting an average upside of 40% for the stock.

MGM Resorts International (MGM)

MGM Resorts owns and operates casinos, hotels, and entertainment resorts in the US and internationally. It has a market capitalisation of $12.71 billion and is rated as a "Buy" by Seeking Alpha's Quant Team. MGM has strong profitability, with an ROE of 21.5% and an EBITDA margin of 14%, outperforming the sector. It has seen significant revenue growth, with a 17% increase year-over-year (YoY) and a projected 9% revenue growth for the forward year. MGM also has a solid outlook, with analysts predicting a 35% upside for the stock.

Wyndham Hotels & Resorts (WH)

Wyndham Hotels & Resorts is the largest pure-play hotel franchisor, operating under 24 global brands in 95 countries. It has a unique asset-light franchise model that allows it to maintain high margins, with EBITDA margins averaging over 80% and a 100% free cash flow conversion. The company has achieved 11 consecutive quarters of net room growth and expects to continue this growth through various initiatives, including opening more than 450 hotels annually. Analysts see further upside in the stock amid takeover interest.

Expedia Group (EXPE)

Expedia Group is an online travel company that operates booking platforms such as Expedia.com, Hotels.com, Vrbo, and Travelocity. It has strong fundamentals, with record quarterly revenue of $3.93 billion in the third quarter, an 8.6% increase YoY. The company also announced a $5 billion share buyback program. EXPE stock has 13 "buy" ratings from Wall Street analysts, and Evercore ISI recently increased its rating to "outperform" with a $200 price target, representing a 40% upside.

MakeMyTrip (MMYT)

MakeMyTrip is an online travel services provider based in India. It covers various aspects of the travel experience, including flights, hotels, holiday packages, and transportation. The company has been a pioneer in the Indian market and has been barreling higher since August 2023. It has strong fundamentals, with a 98 Composite Rating and a 95 Relative Strength Rating from Investor's Business Daily. MakeMyTrip has also been beating earnings expectations, with quarterly earnings of 36 cents per share, a 44% increase YoY, and revenue of $211 million, a 25% increase.

Travel stocks with strong cash flow

When considering travel stocks to invest in, it's important to look at the bigger picture. The travel industry is a resilient one, having rebounded from the severe impact of the COVID-19 pandemic. As people's disposable income increases, they tend to spend more on travel, and this is a trend that is expected to continue.

With that in mind, here are some travel stocks with strong cash flow to consider:

Air Canada (AC)

Air Canada is Canada's largest airline and a founding member of Star Alliance. Despite a minimal profit in the first quarter of 2023, the company's financial performance has been impressive, with a net profit margin up more than 100% year-over-year. Air Canada's passenger revenues have more than doubled compared to the same quarter last year, and it plans to increase passenger capacity by 22% in the next quarter.

Ryanair (RYAAY)

Ryanair is a well-established, low-cost Irish airline and the largest airline group in Europe. While its financials show a mixed picture, with a negative net profit margin and earnings per share in the first quarter of 2023, its cash flow per share is very high compared to its competitors. Ryanair has also announced increased passenger capacity for the winter of 2023, with fares starting at competitive rates.

Darden Restaurants (DRI)

Darden Restaurants operates popular restaurant brands such as LongHorn Steakhouse and Olive Garden. The company reported a 6.4% increase in sales in the fourth quarter of fiscal 2023, with a 15.2% increase in diluted net earnings per share. Darden Restaurants has strong cash flow per share and offers a dividend yield of more than 3%.

Trip.com Group (TCOM)

Trip.com is a Singapore-based travel booking site offering a wide range of services. The company posted strong results in its recent earnings release, with a significant increase in hotel bookings and a 105% year-over-year increase in revenue. While Trip.com's net income is down compared to the previous year, its cash flow per share is competitive, and it continues to expand its operations.

Expedia Group (EXPE)

Expedia Group is an American travel company that operates travel fare aggregators and owns multiple well-known brands. While its most recent quarterly report showed a mix of positive and negative results, with an operating loss, Expedia has seen strong growth in total gross bookings and lodging bookings, as well as an 18% increase in first-quarter revenue in 2023 compared to 2022. The company also has a strong earnings yield and cash flow per share.

Other Considerations

While the above-mentioned stocks have strong cash flow, it's important to note that the travel industry is highly sensitive to market forces and can be volatile. When considering travel stocks, look for companies with solid fundamentals, strong analyst recommendations, and expanding operations. Additionally, ensure that any potential investment aligns with your risk tolerance and investment strategy.

Travel stocks with high market capitalisation

The travel industry is vast, spanning multiple sectors of the economy, from airlines to hotels and cruise lines. Here is a look at some travel stocks with high market capitalisation:

Booking Holdings (BKNG)

With a market capitalisation of over $55 billion, Booking Holdings is the largest travel company by market cap. It owns popular online reservation services such as Booking.com, Priceline, OpenTable, and Kayak. The company's stock has been performing well, with earnings rising briskly.

The Travelers Companies, Inc. (TRV)

The Travelers Companies, Inc. is an insurance provider with a market capitalisation of around $57-59 billion. It provides a range of commercial and personal property and casualty insurance products and services to businesses and individuals in the US and internationally. The company has been performing well financially, reporting quarterly earnings that beat expectations.

Marriott International (MAR)

Marriott International is the largest hotel stock by market capitalisation. It has 9,000 properties and 1.6 million rooms under brands such as Sheraton, Westin, and Ritz-Carlton. Marriott has a strong financial performance history, with shares returning an annual average of 19.6% over the past three years.

Royal Caribbean (RCL)

Royal Caribbean is a cruise line operator with a market capitalisation of over $13 billion. The company owns the Royal Caribbean, Celebrity, and Silversea brands. It has been performing well, with a massive gain in revenues, and a forward P/E (price-to-earnings ratio) of 13 for 2025.

Carnival (CCL)

Carnival is the largest cruise line company, with a market capitalisation of over $11 billion. It owns brands such as Princess and Cunard. While the company's stock has barely recovered from an 80% drop during COVID, it has strong growth potential as it pays off its loans and bookings for 2025 have set a record.

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