The travel industry was hit hard by the pandemic, but as the world reopened, there is potential for a strong recovery. While travel spending has somewhat plateaued, it remains in positive territory and was 4% above 2019 levels in March.
In the current market scenario, it could be wise to invest in promising travel stocks Marriott International, Inc. (MAR), InterContinental Hotels Group PLC (IHG), and Playa Hotels & Resorts N.V. (PLYA) and examine their fundamentals to see if they are worth a shot.
So far this year, the data shows that travelers are unfazed by inflation and the drumbeats of a recession. According to NerdWallet's Travel Price Index, the overall cost of travel is up 18% compared with April 2019 and 2% year-over-year.
On top of it, revenue in the travel & tourism market is projected to reach $854.80 billion in 2023. Furthermore, it is expected to reach $1.02 trillion by 2027, growing at a 4.4% CAGR. The market's largest segment is hotels, with a projected market volume of $408.80 billion in 2023.
As more people feel comfortable traveling again, demand for travel-related services such as flights, hotels, and rental cars may increase, potentially driving up the prospects of related stocks.
Given this bullish backdrop, let’s dive into the above-mentioned stocks in detail.
Marriott International, Inc. (MAR)
MAR operates, franchises, and licenses hotel, residential, timeshare, and other lodging properties worldwide. It operates its properties under JW Marriott, The Ritz-Carlton, Ritz-Carlton Reserve, W Hotels, The Luxury Collection, St. Regis, EDITION, Bvlgari, Renaissance, Le Méridien, Marriott, Sheraton, and Westin, etc.
On May 1, MAR announced the completion of its acquisition of the City Express brand portfolio from Hoteles City Express, S.A.B. de C.V. This move marks MAR's foray into the affordable mid-scale segment and the launch of its 31st brand, City Express by MAR.
On April 19, MAR signed new agreements with Vinpearl, Vietnam's largest hospitality and leisure chain. In combination with the eight hotels announced in 2022, these agreements include seven additional hotels and resorts that offer more than 2,500 rooms.
This underscores a strong development pipeline and significant expansion of MAR’s footprint in Vietnam with 15 hotels and resorts.
MAR’s total revenues increased 33.7% year-over-year to $5.62 billion in the first quarter (ended March 31, 2023), while its adjusted operating income rose 55.5% from the year-ago value to $941 million.
The company’s adjusted net income grew 56.9% and 67.2% from the prior-year quarter to $648 million and $2.09 per share, respectively. Also, its adjusted EBITDA increased 44.7% from the year-ago value to $1.09 billion.
Street expects MAR’s revenue and EPS for the second quarter (ending June 2023) to increase 11% and 20.3% year-over-year to be $5.92 billion and $2.16, respectively. Moreover, it surpassed the EPS estimates in each of its trailing four quarters, which is excellent.
MAR’s shares have gained 6.5% over the past six months and 17.2% year-to-date to close the last trading session at $174.49.
MAR’s POWR Ratings reflect this promising outlook. The stock has an overall B rating, which translates to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Momentum, Sentiment, and Quality. In the 21-stock A-rated Travel - Hotels/Resorts industry, it is ranked #7. To see additional POWR Ratings of MAR for Growth, Value, and Stability, click here.
InterContinental Hotels Group PLC (IHG)
Headquartered in Windsor, the United Kingdom, IHG is a global hospitality company that owns, manages, franchises, and leases hotels. The company operates hotels under Six Senses, Regent, InterContinental Hotels & Resorts, Vignette Collection, Kimpton Hotels & Restaurants, Hotel Indigo, Voco, etc.
On May 5, IHG made an exciting announcement regarding the signing of a new agreement that will bring its flagship Crowne Plaza brand to Fiji. This development marks a significant victory for the group.
On May 2, IHG signed a Memorandum of Understanding (MOU) with the Saudi Tourism Authority (STA). The MOU establishes a framework for both entities to collaborate and enhance inbound tourism to Saudi Arabia from key markets in the Middle East and Africa region.
As part of this effort, IHG would grow the footprint of its existing brands, introduce new brands from its global portfolio, and conduct joint marketing campaigns to showcase Saudi Arabia as a thrilling destination to an international audience.
In the fiscal year that ended December 31, 2022, IHG’s total revenue increased 33.9% year-over-year to $3.89 billion. Its operating profit grew 27.1% from the year-ago value to $628 million.
The company’s adjusted earnings amounted to $511 million and 282.3 cents per share, representing an increase of 89.9% and 92% from the prior-year period, respectively. Also, its adjusted EBITDA rose 41.8% from the year-ago value to $896 million.
The consensus EPS estimate of $3.41 for the fiscal year ending December 2023 represents a 20.9% improvement year-over-year. The consensus revenue estimate of $2.06 billion for the current year represents a 12% increase from the same period last year.
Over the past six months, the stock has gained 17.3% to close the last trading session at $67.51.
IHG’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Momentum, Stability, Sentiment, and Quality. Within the same A-rated industry, it is ranked #5. Click here to see the other ratings of IHG for Growth and Value.
Playa Hotels & Resorts N.V. (PLYA)
PLYA owns, develops, and operates resorts in prime beachfront locations in Mexico and the Caribbean. It also organizes weddings, lodging, dining, entertainment, meetings, events, and other hospitality services in its hotels.
On March 13, PLYA announced that it would manage a new Wyndham Alltra resort in the Dominican Republic. Under the agreement, PLYA will manage a 404-room resort in Samaná, Dominican Republic, which will be renovated and rebranded as Wyndham Alltra Samaná, with a focus on serving guests of all ages. The resort is expected to open in the third quarter of 2023 and generate a new stream of revenues for the company.
For the first quarter that ended March 31, 2023, PLYA’s revenue increased 24.7% year-over-year to $273.80 billion. Its operating income grew 42.4% from the year-ago value to $76.97 million.
The company’s adjusted net income amounted to $49.02 million and $0.31 per share, representing an increase of 54.1% and 63.2% from the prior-year period, respectively. Also, its adjusted EBITDA increased 28% from the year-ago value to $98.49 million.
Analysts expect PLYA’s revenue to increase 5.7% year-over-year to $233.78 million for the second quarter (ending June 30, 2023), while its EPS is expected to be $0.13 in the same period. Also, it surpassed the consensus revenue estimates in each of the trailing four quarters.
The stock has gained 42.3% over the past six months to close the last trading session at $8.88.
It’s no surprise that PLYA has an overall rating of B, which equates to Buy in our proprietary rating system. It has a B grade for Momentum and Quality. Out of 21 stocks in the same industry, it is ranked #6.
In addition to the POWR Ratings we stated above, we also have PLYA’s ratings for Growth, Value, Stability, and Sentiment. Get all PLYA ratings here.
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MAR shares were trading at $173.29 per share on Friday afternoon, down $1.20 (-0.69%). Year-to-date, MAR has gained 16.66%, versus a 7.46% 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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