Travel-related stocks in light of reopening economies
Travel came to a virtual standstill when the Covid-19 pandemic broke out, which saw the closure of borders and flight cancellations worldwide. It has been two years since this unprecedented disruption to air travel. Now, with stricter measures in place and higher vaccination rates across many countries, more and more economies are opening up and easing travel restrictions.
With significant pent-up demand from people who are eager to travel again, whether, for business or leisure, we can certainly expect to see more air travel taking place in the next few months. Apart from the flight, other various travel-related industries will also likely experience a promising recovery from being one of the hardest-hit sectors during the global pandemic.
If you’re planning to invest some money in travel-related companies, now would be a good time to get on board. Here are some U.S. based travel-related stocks that you can consider:
Airbnb (NASDAQ: ABNB) is a website and app that encourages hosts to list their properties for rent, from traditional rooms and homes to even unique garage spaces and treehouses. Allowing homeowners to directly list properties on the online platform has garnered a vast number of listings across the globe over the years.
The appeal of Airbnb lies in the fact that many of these listings are in less-travelled neighbourhoods and unique locations that are simply unmatched by major hotel chains. Many travellers very much prefer Airbnb over staying at a hotel as it offers more selection in more places, and is often also more affordable compared to hotels.
With the rise of remote working, both long-term rentals and short-term stay will be more common as more people seek to stay in places that are further out from cities. As recreational travel also picks up, Airbnb should see a demand surge and could also see a long-run profit potential for the expansion of remote work.
Airbnb is certainly in a position to thrive in the aftermath of the pandemic. It is evident in its shares that have been moving bullishly since July. Despite experiencing a 41% decline in bookings and a 30% reduction in revenue in 2020 due to the pandemic, it saw an increase of its revenue by 6% over 2019 in the first quarter of this year.
Prior to the pandemic, Airbnb enjoyed years of rapid growth, and it is now likely to enjoy a strong rebound. If you are considering a stock to invest in the long term, Airbnb is a compelling growth stock to consider.
Trip.com Group (TCOM:NASDAQ GS) is a leading one-stop travel service provider currently operating under a portfolio of brands, including Ctrip, Qunar, Trip.com and Skyscanner. The Chinese multinational online travel company provides services such as accommodation reservation, transportation ticketing, packaged tours and corporate travel management. It is one of the largest online travel portals being used worldwide.
The Trip.com Group’s mission to be the leading international travel brand in Asia by 2022 and the leading international travel brand in the world by 2025 has not been derailed by the pandemic. Trip.com said in early August that it was encouraged by the sequential growth it saw for booking trends in both the U.S. and Europe.
It also saw a significant share price rise of over 20% in the past couple of months on the NASDAQGS. Trip.com Group posted revenue across the business of $912 million in the second quarter of 2021. Its domestic hotel and air ticket revenue, gross merchandise volume is now running at about 150% higher than in Q2 2020.
Having recently signed a strategic global agreement with Wyndham Hotels & Resorts, the world’s largest hotel franchising company, Trip.com secures its footing in the travel industry with a promising and significant move that marks the commitment and continued collaboration of the two industry-leading companies to drive the success of the industry.
Few companies have the ability Trip.com does to make bold partnership moves and rake in revenue during the pandemic. This travel company’s global reach should also serve it well in the years to come, making it worthy of consideration.
American Airlines Group Inc.
Airline stocks were among those hit hardest by coronavirus-related restrictions. American Airlines Group (NASDAQ: AAL) is an American publicly traded airline holding company headquartered in Fort Worth, Texas. American is a classic brand under new management since its 2015 merger with AMR Corporation, the parent company of American Airlines and US Airways Group.
The Fort Worth-based airline operates an extensive network and enjoys strong ties with significant European partners. However, as the airline with a route network that is optimized for international travel, it is more difficult for it to shake off pandemic-related issues compared to domestic-heavy airline companies.
That said, the airline has been actively looking to forge new partnerships to stay ahead of the game. Domestically, American Airlines have forged partnerships with Alaska Air Group and JetBlue Airways to strengthen its services on the US West and East Coasts. They have also announced plans to invest $200 million in Brazilian carrier GOL and will also expand their three-year codeshare with an exclusive partnership and the rollout of enhanced loyalty benefits.
American Airlines has long been the largest U.S. carrier in South America and is committing to maintaining that position despite increasing competition. Its strength in domestic and international operations gives it a solid reputation and could be the one to add to your investment portfolio.
United Airlines Holdings, Inc.
Despite being devastated by the pandemic, United Airlines Holdings (NASDAQ: UAL) is another airline company that is in a position to benefit from the recent economic reopening.
Over the past year, many have stayed home a lot more than they would have liked, and are now ready to get out and travel. United Airlines is one of the four major U.S. airlines (the others being Delta Air Lines, American Airlines and Southwest) that reported third-quarter results that beat estimates.
United has large operations catering to Silicon Valley and the U.S. energy sector, as well as a massive network throughout Asia. This also means that United’s results can ebb and flow with tech or energy. The Chicago-based airline has historically been the envy of the industry due to its ability to offer unrivalled connections to corporate travellers and its large presence in key business markets both domestically and internationally. This advantage may have waned slightly during the pandemic, however, the network is still a key united advantage.
Anticipating strong holiday travel during the festive season and the New Year, United Airlines has recently announced that it will offer 3,500 daily flights (91 per cent of its 2019 domestic flights) within the United States in December 2021, most in any month since the pandemic began.
The airline may still struggle to recover to how it once was pre-Covid-19, but surviving the pandemic proved that it is strong enough to withstand tough operating conditions without going into bankruptcy. If you’re an investor bullish on long-term demand for travel, buying into a well-run airline, such as United Airlines is a good option for your investment money to jump on for the ride.
The Boeing Company
Aviation manufacturer Boeing (NYSE:BA) is a key supplier in the aviation space. The Boeing Company is an American multinational corporation that designs, manufactures, and sells airplanes, rotorcraft, rockets, satellites, telecommunications equipment, and missiles worldwide. The company also provides leasing and product support services.
Boeing was a hot favourite in the stock market when it traded at more than $400 per share in 2019. The stock has fallen significantly since the pandemic and due to the 737 MAX airliner being grounded between March 2019 and December 2020 over safety concerns.
Boeing and Airbus are the only two companies in the world that build commercial passenger aircraft, hence effectively forming a duopoly in the airline industry. As one of two airplanes suppliers, despite Covd-19 taking a massive hit on the air travel industry, Boeing is pretty much guaranteed to see demand for its products and is left only battling one rival for market share.
Air travel is a vital industry to supply and with travel and tourism expected to increase in the upcoming months, the company will likely also soon resume deliveries of its ultra-modern 787 Dreamliner airplane to customers.
The aircraft maker’s two main problems (Covid 19 and 737 MAX) are temporary and it will likely see a boost in revenue once it’s able to overcome these two massive hurdles. Boeing has a lot of room for improvement, which means that there is also a high potential for much greater long-term growth.
MGM Resorts International
MGM Resorts International (NYSE: MGM) is an American global entertainment company with properties featuring hotels and casinos, conference spaces, restaurants, shops and live entertainment. The MGM portfolio includes properties in the U.S. and Macau, including MGM Grand, Aria, Bellagio and Park MGM.
Considering current tourism conditions, the world-class casino operator might not be appealing at first glance. However, it derives most of its revenue and profit from the U.S. market, which is more robust than China’s. The bulk of MGM’s revenue also still comes from its physical properties. While MGM has casinos in Macau, most of its revenue is derived from U.S. operations of destination resorts in Las Vegas, Massachusetts, Detroit, Mississippi, Maryland, and New Jersey, including Bellagio, Mandalay Bay, MGM Grand, and Park MGM. Compared to Las Vegas Sands or Wynn Resorts, which depend on Macau for most of their money, MGM doesn’t carry the same risk profile.
Beyond the physical casinos that MGM runs, it also owns one of the fastest-growing sportsbooks in the U.S. Known as BetMGM, it is now a leading online casino gaming app with a 30% market share, double the amount of any other platform.
MGM’s investments in the online gaming platform prove its commitment to growing that segment. It has its sights set on overtaking rival DraftKings and has plans to expand its operations in more states across the country by the end of 2021.
As we expect its Vegas properties to reopen to full capacity and its online sports betting app gaining market share, investors should certainly keep MGM Resorts stock on their radar. The gambling and entertainment giant will likely see a return to strong rebound and profitability once more restrictions loosen up.
Since travel and tourism companies vary in terms of their offerings, it may be difficult to nail down a single key metric to watch. For example, some companies are essentially tech companies while others are asset-heavy businesses, while others. Nonetheless, there are plenty of travel-related options to research on and choose from.
As the year draws to a close and the pandemic wanes, it’s a good time to maximise your trading opportunities by setting your sights on the travel and tourism economy. These US-based stocks are some good suggestions to consider.
If you are looking into expanding your portfolio and buying travel-related stocks, get started today by opening an account with Phillip Futures at https://www.phillipfutures.com.sg/open-an-account/