With the world increasingly embracing travel in the post-pandemic era, the industry is set for continued growth throughout the remainder of 2024. June is already upon us. Thus, investors might worry that the industry’s upside has already been priced in. Yet, many of the best travel stocks to buy seem to remain attractively priced, powered by the enduring “revenge travel” trend that emerged after the pandemic and is still going strong.
Despite volatile exchange rates and inconsistent levels of affordability, the desire to travel remains stronger than ever. According to fresh data from Mastercard (NYSE:MA), nine out of the last 10 record-setting spending days in the global cruise and airline industry have already occurred this year. Travelers are also extending their trips by an extra day compared to pre-pandemic times, indicating longer holiday periods.
Further, the payments network behemoth noted a record high of 15.9 million Americans traveling internationally in the first quarter of 2024, while Japan witnessed over 3 million passenger arrivals in March 2024 alone. This travel activity surge seems to be powered by a robust labor market and a rising desire to travel, providing a splendid tailwind for the best travel stocks to buy. Let’s take a look at three of the best industry players to buy this month.
Airbnb (ABNB)
Airbnb (NASDAQ:ABNB) is benefiting from the current travel boom like few others. As the leading player in peer-to-peer accommodation rentals and experience booking space, Airbnb continues to take the industry by storm despite some regulatory issues from time to time. Precisely because of its unique growth story and impressive financials, I bought ABNB stock a few years ago and have not sold a single share since.
To highlight Airbnb’s sustained momentum post-pandemic, the company’s revenues grew by 17.8% year over year in the first quarter of 2024, reaching $2.14 billion. This impressive figure came in on top of last year’s (Q1 2023) top-line growth of 20.5%, which, in turn, was after the prior year’s (Q1 2022) growth of 57.6%. Demand for unique accommodations and local experiences is skyrocketing among travelers, and Airbnb seems like the only guy in town to serve this trend despite efforts by competitors to penetrate the space.
Moving forward, Airbnb’s prospects appear robust. I am especially impressed by Airbnb’s creative approach to innovation. Its introduction of “Icons” last month is a great example that will likely see the company hit some positive global headlines. Simultaneously, Airbnb is a free cash flow powerhouse with significant prospects to build balance sheet equity and return cash to shareholders. Its free cash flow margin hit 89% in Q1, a figure few to no companies can match.
Hilton (HLT)
Hilton (NYSE:HLT) is another top travel stock to take advantage of the ongoing industry boom. While Airbnb attracts travelers with its unique accommodations, many still prefer the comfort and luxury of traditional hotels. As a leading hotel industry player, Hilton is exceptionally well-positioned to cater to this market segment. It offers a blend of comfort and upscale locations that appeal to amenities-seeking travelers.
Hilton’s revenues increased by 12.2% in the first quarter, reaching $2.57 billion. During the quarter, the company made substantial progress in its “franchise and licensing fees” segment, driven by an increase in the number of hotels operating under its brands and higher occupancy rates. Its double-digit growth after several quarters of post-pandemic recovery momentum reflects the travel industry’s continued surge.
The key to Hilton’s success lies in management’s dedication to streamlining the business model for maximum efficiency. Most of its 7,626 properties, containing about 1.2 million rooms, are franchised. Accordingly, the double-digit revenue growth in Q1 translated into even stronger earnings growth. Adjusted earnings per share (EPS) rose by 23.4% in Q1 to $1.53. The current state of the industry indicates that Hilton will see equally strong growth throughout the rest of the year.
Despegar.com (DESP)
And finally, let’s not overlook Despegar.com (NYSE:DESP), which can be a top choice for leveraging the thriving travel sector. Despegar is smaller than its counterparts in the industry, and focuses predominantly in Latin America. There, it provides a wide range of services, including flight bookings, hotel reservations, car rentals and other services.
Given the company’s exposure to the Latin American market, there are major risks to consider. One such risk is the possibility of unfavorable foreign exchange headwinds. However, this region offers significant growth prospects as well. With Latin America increasingly embracing travel, Despegar is set to capture the benefits of this growing market trend.
Despegar posted record revenues of $706.0 million last year, up a significant 31% from the previous year’s $538.0 million. This was notably higher than its pre-pandemic revenues of $525.0 million in 2019. Additionally, in line with the continued resurgence of the travel industry, Wall Street anticipates yet another record-breaking fiscal year in 2024, with consensus estimates projecting revenues to reach $822.0 million.
On the date of publication, Nikolaos Sismanis held a long position in ABNB. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
