With the summer travel season upon us, some investors may wonder if now’s a good time to check in with the many travel and leisure plays, some of which may be overdue to heat up. Indeed, the summer travel season could provide a much-needed boost, but any increase in travel demand will not magically cause various consumer-facing headwinds to disappear. Inflation, while slowing, is still a tad too high. And the impact of last year’s inflation could hurt for a long time.
In any case, look for the following three travel stocks to do their best to make the most of a period of seasonal strength. As they invest wisely in technologies while cutting back on various expenses, I see a higher path for the firms, some of which look far too cheap as we officially pass the midpoint of the second quarter 2024.
Airbnb (ABNB)
In my opinion, Airbnb (NASDAQ:ABNB) stock has been under pressure after management delivered some pretty lackluster guidance following what would have been a rally-worthy quarter.
Though summer travel could fuel hot travel demand that helps set the stage for a bigger beat than expected, Airbnb has reportedly heard feedback from customers getting fed up with added costs. Undoubtedly, it can be a frustrating experience to book lodging and have the hefty number of fees add up. Specifically, customers are tired of the extra cleaning fees.
With all such fees, booking an Airbnb stay over a hotel or motel room may not be markedly cheaper. In any case, I still think the novelty and uniqueness of some of the Airbnb stays continue to work in its favor.
Further, it can use technology to help it deliver cost savings to customers without affecting its operating margin. Using AI to help deal with guest-host disputes represents just one corner where tech can help Airbnb deliver higher satisfaction at a lower price. AI-powered concierges represent another pathway toward growth and improved profitability.
Booking Holdings (BKNG)
Booking Holdings (NASDAQ:BKNG) stock has surged, with shares now up over 43% in the past year. The travel agency is fresh off an impressive first-quarter sales and earnings beat. More travelers are part of the reason shares are starting to heat up well ahead of the summer travel season. As summer hits, my guess is recent momentum could extend.
Though consumers are feeling the pinch, it certainly seems like many are more than willing to continue spending on leisurely expenses. Indeed, the emphasis on the experiential factor (especially among younger consumers) could be why Booking has been incredibly resilient. Either way, Booking’s strategic bets (think AI personalization) also add to the long-term bull-case narrative.
Even at close to all-time highs, I still like the stock while it’s going for 28.6 times trailing price-to-earnings (P/E).
Hilton Worldwide Holdings (HLT)
Hilton Worldwide Holdings (NYSE:HLT) stock is a leading hotel chain that also stands to benefit from a hotter travel season. The stock has risen steadily, around 44% over the past year. Like Booking, Hilton delivered quite an impressive first quarter that beat analyst expectations on earnings. Additionally, the firm raised its full-year guidance, helping spark a sharp rally in shares.
With an impressive loyalty program in Hilton Honors that’s helping fuel impressive booking numbers, HLT stock seems to be one of the premier stay plays for investors seeking to play a summer travel boom.
At writing, HLT shares go for 44.5 times trailing P/E. It’s not a cheap stock. However, given its strong loyalty program and luxurious hotel pipeline, I see numerous catalysts that justify the premier price tag.
On the date of publication, Joey Frenette did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
