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Leisure Stocks Regain Strength as Travel Gathers Momentum
Despite rising prices, the travel sector is experiencing a rebound in customer demand. As the summer season begins and COVID-19 anxiety fades, people are getting set to travel again.
After one of the worst years for the travel business in 2020, some travel did return in 2021, although it was mostly by road. However, individuals appear to be eager to travel (both domestically and internationally) this year, and demand appears to be more of the normal kind, which is expected to surpass pre-pandemic levels.
The Travel Industry is Booming Once Again
Various studies demonstrate that the travel and tourism business is returning to pre-pandemic levels.
According to the World Travel and Tourism Council (WTTC), the travel and tourism industry could contribute $8.6 trillion to the global economy this year, which is just 6.4% down from pre-pandemic levels. However, it would be a huge improvement over the data from 2020, when the pandemic caused a 49.1% reduction in the industry.
Furthermore, we can see from the earnings report data that the airline corporations did quite well in the first quarter. When American Airlines (AAL) and Delta Air Lines (DAL) presented their quarterly earnings reports last month, both companies reported substantial year-over-year revenue growth. Furthermore, both airlines anticipate a positive second quarter, signaling continued strong growth in the future.
Given the foregoing and the fact that the economy is still strong, it’s likely not a bad idea to invest in consumer-facing stocks such as leisure and hospitality.
So, let’s take a look at two such leisure companies that have performed well in the first quarter and are anticipated to continue their winning streak in 2022.
Hyatt Hotels (H)
Hyatt is a hotel chain based in the United States. The firm is in the business of developing and managing resort and hotel chains.
The company’s growth is driven by its differentiated brand portfolio, robust expansion ambitions, and acquisition tactics.
Given a significant comeback in travel and spending, Hyatt posted an outstanding Q1. The quarterly revenues increased dramatically to $1.28 billion, up from $438 million in the last year. It also exceeded the consensus projection of $947.7 million. Meanwhile, the adjusted loss per share for the quarter was $0.33, better than the estimated loss of $0.43 per share.
In addition, CEO Mark Hoplamazian expressed confidence in Hyatt’s future prospects. He said, “We expect the rate of recovery to broaden and strengthen in the months ahead as evidenced by the strong pace of actualized and future bookings for business and group travel. Our outlook remains very optimistic for the remainder of the year with system-wide RevPAR in April accelerating further from March.”
Despite upbeat management comments, many investors are wary about the long-term viability of the recovery in light of rising U.S. interest rates, slowing Chinese GDP, and an uncertain macro environment.
Following the first quarter’s results, Deutsche Bank analyst Carlo Santarelli prefers to remain on the sidelines for the time being. At current levels, he believes the shares are reasonably valued. The analyst maintained a Hold rating on Hyatt and lowered the price target to $94 from $95.
On TipRanks, Hyatt Hotels has received a Hold consensus recommendation from Wall Street analysts. This is based on three Buys, five Holds, and one Sell rating assigned in the past three months. The stock is currently trading at $83.34, with the average Hyatt Hotels price target being $97.33, representing a gain of 19.4% from current levels.
Investors remain positive about Hyatt’s stock. According to TipRanks’ Stock Investors tool, 2% of the investors holding portfolios on TipRanks have increased their stake in H stock in the last 30 days.
Hilton Grand Vacations (HGV)
Hilton Grand Vacations engages in the marketing and sale of vacation ownership intervals in select vacation destinations.
With a market capitalization of $5.1 billion, the stock price has fallen over 18% year-to-date.
The company recently announced excellent first-quarter top-line growth. Revenues more than tripled year-over-year to $779 million, exceeding the $763.9 million forecast. However, earnings of $0.42 per share fell short of analysts’ expectations of $0.64 per share but were better than the $0.08 loss in Q1 2020.
Following the earnings announcement, Credit Suisse analyst Benjamin Chalken maintained a Buy rating on the stock and increased the price target to $84.00 from $83.00.
Apart from Chalken, other analysts also remain positive on Hilton Grand. On TipRanks, HGV has received a Strong Buy consensus recommendation from Wall Street analysts based on three unanimous Buys. The stock is currently trading at $42.29, with an average Hilton Grand Vacations price target of $72, representing a gain of 69.6% from current levels.
Furthermore, TipRanks’ Insider Trading tool shows that insider confidence in Hilton Grand is currently Positive, as corporate insiders bought $249.7k worth of shares in the last three months.
Wrapping It Together
People are eager to travel and vacation after two years of closures and international travel restrictions. As a result, travel and leisure stocks should experience a rapid return in the coming years, despite rising prices, China’s slowdown, and other macro uncertainties.
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Gap between business and leisure travel recovery narrows
Leisure travel demand has spearheaded the global recovery of travel but business travel, which has consistently lagged behind, is now closing the gap, according to global distribution system Sabre.
Speaking on a Q1 earnings call this week, Sabre CEO Sean Menke noted that corporate and international travel had rebounded sharply during the opening months of the year.
“The recovery which has historically been driven by domestic, leisure travel is being supported by strong improvements in both international and corporate travel. Accelerating activity in each of these sectors made April our best month compared to 2019 in terms of bookings recovery since the onset of the Covid-19 pandemic,” he said.
The difference in recovery between Sabre’s ‘domestic TMC’ and ‘non-TMC’ bookings stood at 37 per cent a year ago in April 2021 but has now closed to just 7 per cent.
“The overall improvement in each global geographic region has been particularly positive, supported by a significant return of more profitable international and corporate travel,” said Menke.
“Although still below the total recovery of most other sectors, the financial, consulting and IT sectors, which are historically heavy travellers, ended Q1 accelerating rapidly, faster than at any point since the pandemic started. These sectors also ended the quarter at their highest levels of overall recovery since the pandemic began.”
Sabre’s distribution revenue increased 126 per cent year over year to $343 million in Q1, with total net bookings growing to 65 million – 42 per cent of the first-quarter 2019 total.
Speaking on a webinar later in the week for the launch of a new report, Mapping travel’s new normal, Sabre’s Andy Finkelstein, senior VP of global agency sales and corporate solutions said: “We’ve been waiting for this rebound to kick in. It’s going to be a competitive business environment and we’ll see a necessity for people to get back on the road conducting business. Showing up in person really counts.”
He continued: “Some companies are doubling down on having large corporate headquarters and on the other extreme you have the Airbnbs of the world and I think there’s a lot in the middle that are taking hybrid approaches to workplace settings.
“What’s true in all those circumstances is that there’s still the need and desire to connect and to drive company culture and the initiatives where collaboration is key. Companies are going to have to re-think internal travel policies both for what makes sense for the organisation but also for maintaining the right controls from a cost perspective.”
He added: “I think policy generally in a corporate environment is going to have to be a lot more dynamic than it has been in the past.”
The organisation’s survey of more than 500 travel leaders found two-thirds of respondents believe travel will fully return to pre-pandemic levels by the end of 2024, while one-third said it will happen in 2025 or beyond.
Meanwhile, 82 per cent of airline executives surveyed believe the combination of business and leisure trips to be even more prominent post-recovery.
UK Covid travel rules were arbitrary and disproportionate, say MPs | Travel & leisure
International travel should be protected in future pandemics, MPs have urged, describing the Covid restrictions imposed by the UK government as confusing, arbitrary and disproportionate.
The Commons transport select committee said the government should learn lessons from the coronavirus pandemic to create a predictable and transparent system for future public health crises, to support travellers and the aviation industry.
In a critical report, it said the curbs on foreign travel during the pandemic were “disproportionate to the risks to public health”.
The cross-party committee said restrictions should be comparable to those applied domestically, and international travel should not be “singled out”.
The report concludes that the “decision-making process was not transparent or consistent, nor based on scientific consensus”, resulting in rules that caused “a severe financial shock to the sector”.
The committee also criticised ministers for abdicating all responsibility for the queues, cancellations and delays seen this Easter as airlines and airports struggled to recruit staff in time for a resurgence in passenger demand, after the sudden lifting of all Covid isolation and testing requirements.
It said the government was attempting to “lay the blame on an aviation sector decimated by restrictions and a lack of certainty offered by ministers”, but should review its own recruitment and training processes. Airlines and airports have complained of delays in government security checks for job applicants.
The committee’s chair, Huw Merriman, said: “Government action was inconsistent. It left industry and passengers confused and unable to plan ahead. This resulted in a severe economic deficit for the aviation sector.
“Ministers must get on with protecting the sector against future economic shocks and reassuring passengers that future restrictions will only be implemented in extreme circumstances. Legislation is urgently needed to give the industry more flexibility to recruit new staff for the summer, to give the regulator more teeth to intervene on behalf of consumers and to provide protection from airline insolvencies.”
He added: “Above all, we want ministers to be transparent with industry and passengers. Over Easter we witnessed a sector in the early stages of recovery and vulnerable to disruption. The increase in demand is encouraging but a sustained and supportive approach from government is vital to nurse the sector back to recovery.”
The report calls for measures including publishing a promised aviation recovery plan; introducing an airline insolvency bill to protect consumers, employees and taxpayers; and giving the regulator more powers to fine airlines for not refunding customers when required.
The Airport Operators Association said the report was “welcome recognition of the devastating impact the pandemic had on aviation”. Its chief executive, Karen Dee, said: “We join the committee in calling for a comprehensive recovery package that allows our sector to recover sustainably and prevents the UK from falling behind our international competitors.”
The latest indictment of the UK’s Covid travel policies follows a critical National Audit Office report last week that found central government lost track of spending and made up rules on the hoof – as well as leaving the taxpayer on the hook for around £400m for quarantine hotels that ministers thought would be paid for by travellers.
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A Department for Transport spokesperson said: “Our priority was protecting public health, and these measures bought vital time for the rollout of our successful booster programme as we responded to new and concerning variants. But we also ensured they were in place for no longer than absolutely necessary, and the UK was the first country in the G7 to remove all travel restrictions.
“In future the government’s default approach will be to use the least stringent measures, to minimise the impact on travel as far as possible, and these will only be implemented in extreme circumstances.”
Jim Cramer Says He Likes These 6 Travel and Leisure GARP Stocks – NBC 5 Dallas-Fort Worth
- CNBC’s Jim Cramer on Monday highlighted six stocks in the travel and leisure space that he believes are investable due to their affordable price and growth potential.
- “With the [Federal Reserve] tightening [interest rates], the market prefers something called growth at a reasonable price, or GARP. … In other words, you want companies with better-than-average growth rates as long as their stocks have relatively cheap valuations,” the “Mad Money” host said.
CNBC’s Jim Cramer on Monday highlighted six stocks in the travel and leisure space that he believes are investable due to their affordable price and growth potential.
“With the [Federal Reserve] tightening [interest rates], the market prefers something called growth at a reasonable price, or GARP. … In other words, you want companies with better-than-average growth rates as long as their stocks have relatively cheap valuations,” the “Mad Money” host said.
“Get used to the world according to GARP, okay? It’s the old, new way to invest,” he later added.
The Fed approved a 25 basis point interest rate hike in March, which is expected to be the first of several increases this year to tamp down soaring inflation. The minutes for the Fed’s March meeting, released April 6, signals that the Fed could raise interest rates by 50 basis points in upcoming meetings. Fed officials also plan to shrink the balance sheet by around $95 billion a month.
To come up with the list of investable travel and leisure stocks, Cramer first ran a screen for companies in the S&P 500 that can put up double-digit earnings growth this year and next year. Then, Cramer examined the companies’ price to earnings growth multiple, or PEG ratio. “This is a metric that tells you how much we’re willing to pay for a company’s growth rate. … When we’re talking about a reasonable valuation, anything at 1 or less would generally be considered cheap,” he said.
Using the two metrics to whittle down the list of companies, Cramer was left with 51 names.
“We’ll be going through our favorites over the course of the week,” Cramer said. He added that he believes the travel and leisure stocks he picked will benefit from “the great reopening, even if the Fed really hits the brakes on the economy.”
Here are Cramer’s picks for the six “GARP-iest” travel and leisure companies:
Disclosure: Cramer’s Charitable Trust owns shares of Disney.
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Leisure travel roars back — at a cost to consumers
Travelers are finally taking to the skies again, but the surge in demand is coinciding with high oil prices, driven by Russia’s war on Ukraine.
As a result, airlines are having to pay more for jet fuel, and they are passing some of those increased costs along to consumers.
Gina Kramer and her daughter Frankie recently flew to Southern California to visit family they haven’t seen in three years, in part because they didn’t feel safe traveling during the pandemic.
“So it’s going to be a family reunion of sorts,” Frankie told CBS News’ Danya Bacchus.
The trip is coming at a cost to the Kramers and other families that are prioritizing travel again.
Airline ticket prices are soaring, according to data from Hopper, an analytics company that tracks changes in airfare.
Prices continue to climb
The average cost of domestic roundtrip ticket was $330 in March, up 40% from the beginning of this year. Airfare is expected to continue rising 10% through May, when a round trip ticket will cost, on average, $360, according to Hopper.
Gina Kramer experienced this first hand while browsing ticket prices online, noting that the longer she delayed booking, the more prices went up.
“And if you missed a window, two days later, prices were like, $100 more,” she said.
Higher prices aren’t expected to deter travelers, though. An American Express Travel survey found that 72% of Americans plan to travel more this year than last.
This rise in demand is pushing up prices for nearly all-things travel-related, including hotel rooms.
“Domestic bookings are surging, hotels rates are going up nearing 2019 levels,” said CBS News travel advisor Peter Greenberg. “People are now valuing travel as an experience they want to keep.”
Airlines are also responding to the rebound in travel. JetBlue recently cut 27 routes, many of which it added during the pandemic to hotspots in Florida and Mexico, when Americans were more limited in where they could go.
With higher fuel prices and trips to Europe back in play, some of the routes no longer make financial sense for the airline.
“Demand to these places is waning as people feel more comfortable going to cities,” said Willis Orlando, a flights specialist at Scott’s Cheap Flights, an airfare deals website. “If I were in the pricing department of an airline deciding what routes are profitable, I would say maybe we don’t need to double down quite so hard on South Florida.”
Travel + Leisure Co. Completes $275 Million Term Securitization | News
ORLANDO, Fla.–(BUSINESS WIRE)–Mar 23, 2022–
Travel + Leisure Co. (NYSE:TNL) announced today that it has completed a term securitization transaction involving the issuance of $275 million of asset-backed notes. Sierra Timeshare 2022-1 Receivables Funding LLC issued approximately $88 million of Class A Notes, approximately $81 million of Class B Notes, approximately $65 million of Class C Notes, and approximately $41 million of Class D Notes. The Class A Notes have a coupon of 3.05%, the Class B Notes have a coupon of 3.55%, the Class C Notes have a coupon of 3.94%, and the Class D Notes have a coupon of 6.00% for an overall weighted average coupon of 3.84%. The advance rate for this transaction was 98%.
“Our first term offering of 2022 demonstrates the strength of our business model, even during a time of market volatility,” said Mike Hug, chief financial officer of Travel + Leisure Co. “Despite a very busy securitization market and continued rate variability, we are pleased with the terms of this transaction and we remain excited about the enhancement it provides to our liquidity position.”
Sierra Timeshare 2022-1 Receivables Funding LLC is an indirect subsidiary of Travel + Leisure Co. The transaction was completed in reliance upon Rule 144A and Regulation S as a placement of securities not registered under the Securities Act of 1933, as amended, or any state securities law. All of such securities having been sold, this announcement of their sale appears as a matter of record only.
About Travel + Leisure Co.
Travel + Leisure Co. (NYSE:TNL) is the world’s leading membership and leisure travel company, with nearly 20 travel brands across its resort, travel club, and lifestyle portfolio. The company provides outstanding vacation experiences and travel inspiration to millions of owners, members, and subscribers every year through its products and services: Wyndham Destinations, the largest vacation ownership company with more than 245 vacation club resort locations across the globe; Panorama, the world’s foremost membership travel business that includes the largest vacation exchange company and subscription travel brands; and Travel + Leisure Group, featuring top travel content and travel services including the brand’s eponymous travel club. At Travel + Leisure Co., our global team of associates brings hospitality to millions each year, turning vacation inspiration into exceptional travel experiences. We put the world on vacation. Learn more at travelandleisureco.com.
View source version on businesswire.com:https://www.businesswire.com/news/home/20220323005794/en/
CONTACT: Investor Contact:
Christopher Agnew
Senior Vice President, FP&A and Investor Relations
(407) 626-4050
Christopher.Agnew@travelandleisure.comMedia Contact:
Steven Goldsmith
Public Relations
(407) 626-5882
Steven.Goldsmith@travelandleisure.com
KEYWORD: UNITED STATES NORTH AMERICA FLORIDA
INDUSTRY KEYWORD: VACATION OTHER TRAVEL LODGING DESTINATIONS TRAVEL
SOURCE: Travel + Leisure Co.
Copyright Business Wire 2022.
PUB: 03/23/2022 04:30 PM/DISC: 03/23/2022 04:32 PM
Copyright Business Wire 2022.
Leisure Travel Rebounds Again, Business Travel Lags
Leisure travel is rebounding quickly once again, but business travel isn’t coming back in the same way.
Research from Morning Consult, which surveyed 11,000 travelers from the Americas, Europe and the Asia-Pacific region, revealed that consumers are looking to travel this spring, many plan on flying and that they are very interested in pricing and flexibility.
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Forty-one percent of consumers with travel plans in the next three months expect to fly, and 49 percent expect to stay at a chain hotel.
Price is a top consideration, and the research found that consumers are willing to pay a premium for flexibility. The ability to cancel for free was at the top of the list of things travelers would pay a premium for. Travelers are also willing to pay more to companies that have enhanced pandemic safety measures.
Morning Consult pointed out that brands should keep an eye on where customers stand on safety measures. These protocols were a top priority for travelers booking transportation. However, the number has leveled off as the pandemic begins to wane.
The research on the future of business travel worldwide was not as rosy. Morning Consult found that, contrary to predictions that business travel would return, albeit slower than leisure, the expectations of business travelers globally have largely remained unchanged since the fall.
Of concern for those that rely on business travel is that this trend may stick around. According to Morning Consult’s data, the number of pre-pandemic business travelers who say they will never take a business trip again has grown in multiple markets, suggesting that the extended downturn in becoming ingrained in permanent behavior.
One of the ways to tackle this issue is to blend leisure and business travel. Morning Consult suggested that encouraging travelers, many of whom now have more flexible work schedules, with Wi-Fi access and tech-forward amenities such as well as fitness centers and laundry could draw bleisure travelers.
US Travel Association Asks White House for Help With Leisure and Hospitality Jobs
The U.S. Travel Association on Friday called on the Biden Administration and Congress to bolster international and business travel to help with the recovery of leisure and hospitality (L&H) jobs, the hardest-hit sector of the travel industry.
The request stemmed from a generally good jobs report also released on Friday, but noting that nearly three-quarters of all jobs lost due to the pandemic are in L&H.
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“The sector’s uneven recovery is due to the lack of available workers, and revenues are down due to a lack of inbound international travelers and the deep reduction in business travel and professional events,” the U.S. Travel Association said in a statement. “While overall U.S. employment is just 1.4 percent below 2019 levels, L&H is down a disproportionate 9 percent. Urgent action is needed by both the administration and Congress to bolster inbound international travel, restore business travel and ensure an even recovery across all sectors.”
U.S. Travel is asking for the following:
— Removing the pre-departure testing requirement for all fully vaccinated inbound international arrivals.
— Providing emergency support for Brand USA through the passage of the Restoring Brand USA Act.
— Raising the cap on H-2B visas to ease the absence of labor for the more than one million job openings in the Leisure & Hospitality industry.
— And providing targeted, temporary tax credits and deductions to stimulate spending on business travel, live entertainment and in-person events.
“Today’s job numbers reflect the great need to accelerate the return of business and international inbound travel and the recovery of these L&H positions,” the group said.