This year, the travel industry is poised to make a stellar comeback, erasing its pandemic-fueled losses completely. According to the World Travel & Tourism Council (WTTC), U.S. travel and tourism is expected to return to pre-pandemic levels in 2022, accounting for almost $2 trillion in U.S. GDP. Strong vaccination rates and diminished social distancing protocols and mask mandates are motivating global travel once again. In short, pent-up travel demand is expected to accelerate the global travel and tourism industry this year.
Summer 2022 is expected to be the busiest travel season with falling restrictions, easing entry rules, declining mask mandates, and people being more informed and cautious about combating the pandemic. European Council data indicates that summer bookings have surpassed 2021 levels by 80%.
Popular travel and tourism companies Expedia Group, Inc. (EXPE), InterContinental Hotels Group PLC (IHG), and Target Hospitality Corp. (TH) are expected to benefit from the industry tailwinds in the coming months.
Expedia Group, Inc. (EXPE)
EXPE in Seattle, Wash., is an online travel company that operates through three segments: Retail; B2B; and Trivago. The company offers travel products and services, a loyalty program, hotel accommodation, advertising, and media services under five brands: Brand Expedia, Hotels.com, Vrbo, Expedia Partner Solutions, and Egencia.
On February 28, EXPE entered a partnership with InterContinental Hotels Group PLC (IHG) to maximize its optimized distribution. With this partnership, IHG should leverage EXPE’s optimized distribution program for consolidating and simplifying its wholesale distribution to fuel growth prospects.
EXPE expects approximately two-thirds of Canada’s population to plan their trips this year, dubbing it the "GOAT" (Greatest of All Trips) mindset. As pent-up demand fuels travel and tourism in the coming months, the demand for EXPE's services is expected to rise.
EXPE’s revenue increased 148% year-over-year to $2.28 billion in the fourth quarter (ended Dec. 31, 2021). Its gross bookings rose 131% from its year-ago value to $17.46 billion. Its net income grew 167% from the same period last year to $276 million, while its adjusted EBITDA increased 399.4% year-over-year to $479 million. The company’s EPS came in at $1.70, representing a 158.8% increase year-over-year.
For the fiscal first quarter (ended March 31, 2022), EXPE’s revenue is expected to increase 80.9% year-over-year to $2.25 billion. Its EPS is expected to grow 77% year-over-year in the about-to-be-reported quarter. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
The stock has gained 16.7% in price over the past six months to close Friday’s trading session at $198.20.
According to the POWR Ratings, EXPE has a B grade for Quality and Growth. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting. The stock is ranked #6 of 71 stocks in the Internet industry.
Click here to see the other ratings of EXPE for Value, Sentiment, Momentum, and Stability.
Note that EXPE is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
InterContinental Hotels Group PLC (IHG)
IHG is a global hospitality company that owns, manages, leases, and franchises hotels. It operates through three segments: The Americas; Europe, Middle East, Asia, and Africa (EMEAA); and Greater China. As of Dec.31, 2021, the company operated 5,991 hotels and 880,327 rooms in approximately 100 countries. IHG is headquartered in Denham, U.K.
On March 30, IHG partnered with Sunview Companies to open the first Atwell Suites property with 90 rooms in Miami. This launch should enable IHG to meet growing demand and boost its revenues in the coming years.
Also last month, IHG opened its first Holiday Inn in Bangladesh under the brand name Holiday Inn Dhaka City Centre. This marks the company’s expansion in the South Asian country. Located in the heart of the city, this property should generate significant revenues in the coming years.
IHG’s total revenue increased 21.4% year-over-year to $2.91 billion in its fiscal year 2021 (ended Dec. 31, 2022). Its operating profit grew 422.9% from its year-ago value to $494 million, while its net profit improved 201.9% year-over-year to $265 million over the period. The company’s EPS has increased 201.2% from its year-ago value to $1.45.
Analysts expect IHG’s EPS and revenue to increase 73.1% and 32.6%, respectively, year-over-year to $2.55 and $1.84 billion in its fiscal 2022 (ending Dec. 31, 2022).
IHG has gained 5.9%in price over the past month.
IHG’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our POWR Ratings system. IHG also has an A grade for Sentiment and a B grade for Growth and Quality. The stock is ranked #2 of 22 in the Travel - Hotels/Resorts industry.
Click here to see the other ratings of IHG for Value, Stability, and Momentum.
Target Hospitality Corp. (TH)
TH is a specialty rental and hospitality services company operating through four segments: Hospitality & Facilities Services-South; Hospitality & Facilities Services–Midwest; Government; and TCPL Keystone. It owns a network of rental accommodation units with approximately 15,528 beds across 27 communities providing catering and food, housekeeping, security, and grounds-keeping services. TH is based in The Woodlands, Tex.
TH’s net revenue increased 58.3% year-over-year to $81.69 million in the fourth quarter, ended Dec. 31, 2021. The company’s adjusted EBITDA increased 113% from its year-ago value to $33.74 million, while its net income came at $2.80 million, representing a 130% improvement year-over-year. TH’s EPS rose 130% from the prior-year quarter to $0.03.
Analysts expect TH’s revenue for the fiscal first quarter (ended March 31, 2022) to come in at $79.77 million, representing 75.3% year-over-year growth. The Street expects the company’s EPS to increase 107.1% year-over-year to $0.01 in the last quarter. It has surpassed the consensus EPS estimates in three of the trailing four quarters, which is impressive.
Over the past year, the stock has gained 175.6% in price to close Friday’s trading session at $5.98.
TH’s POWR Ratings reflect this promising outlook. The company has an overall B rating, which translates to Buy in our proprietary rating system. It also has an A grade for Growth, and Sentiment and a B grade for Momentum and Quality. Also, it is ranked #3 of 22 stocks in the Travel - Hotels/Resorts industry.
In addition to the POWR Ratings grades I have just highlighted, one can see the TH’s value and stability ratings here.
Note that TH is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
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EXPE shares were trading at $196.61 per share on Monday afternoon, down $1.59 (-0.80%). Year-to-date, EXPE has gained 8.79%, versus a -3.76% rise in the benchmark S&P 500 index during the same period.
About the Author: Shweta Kumari
Shweta's profound interest in financial research and quantitative analysis led her to pursue a career as an investment analyst. She uses her knowledge to help retail investors make educated investment decisions.
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