The global rollout of vaccines against the novel coronavirus has pushed many of the best tourism stocks upward on hopes of resuming travel.
With mandatory lockdowns across the globe for months on end, the pandemic ripped a massive hole in this $9 billion dollar industry. However, travel stocks rallied on news of the vaccine as people began planning trips for 2021. The journey to a new normal may be slow, but investors’ hopes remain high.
After a slow travel year, investors are hoping that the vaccine adds some fuel to the tank. Here are 7 tourism stocks investors should reserve now:
- Booking Holdings (NASDAQ:BKNG)
- Disney (NYSE:DIS)
- Wyndham Hotels and Resorts (NYSE:WH)
- American Express (NYSE:AXP)
- Airbnb (NASDAQ:ABNB)
- Wynn Resorts (NASDAQ:WYNN)
- Alaska Air (NYSE:ALK)
For investors, this is the perfect time to make some plays in the sector before prices take off. Travel and tourism is nowhere near its peak but the belief that it will make a comeback sometime in the next year is worth betting on. Adding to this is the pent up demand that will be unleashed when travel is back to its pre-pandemic levels.
Tourism Stocks To Buy: Booking Holdings (BKNG)
Booking Holdings is the parent company of various travel websites including Booking.com and Kayak. This go-to trip planner naturally took a major hit with the onset of the pandemic. In the previous quarter, revenue was down 48% to $2.6 billion and had sank more than 50% in the first nine months.
But things are looking up for Booking Holdings in light of the holiday season and news of the vaccine rollout. The company also announced discounts to recoup losses and fuel demand. And as we kick off 2021, Booking Holdings is likely to see increased activity on its platforms.
This tourism stock isn’t picture perfect right now but it does show a lot of hope. Investors who believe in the future of travel will find it to be one of the best tourism stocks on the market.
Disney is a huge player in the travel and tourism industry, with businesses in cruise lines and theme parks. Prior to the pandemic, revenues from these sectors were at an all-time high, but quickly came to a standstill.
It’s been a tough loss for Disney, to say the least. Revenue from its parks business dropped by 37% in its previous quarter. This decline in demand is unlikely to pick up until parks are able to operate at full capacity once again.
However, I think Disney stock remains one of the best tourism stocks in the market for its streaming business. With sales down, the company found a diamond in the rough with Disney+. The company was able to reach its audience in a virtual environment via the online streaming platform. And Disney says that it will continue to focus on this segment even after the pandemic.
In addition to streaming revenue, Disney stock will also be bolstered by the eventual reopening of theme parks and cruises.
Wyndham Hotels and Resorts (WH)
Like most major hotel chains, Wyndham Hotels and Resorts sustained losses during the start of the pandemic. Revenue continued to decline in the third quarter over low travel numbers. Yet the company does have a number of positives that have earned it a spot on this best tourism stocks list and investors are still betting on WH stock despite a slow year.
For one, shares are trading at 15.3 times the company’s enterprise value, lower than competitors like Hilton (NYSE:HLT) and Marriott (NASDAQ:MAR) which trade at 16. Adding to this is the company’s diverse product portfolio, which helped alleviate losses this year.
In addition to its leisure properties, the company has a brand conversion program. As reported by Seeking Alpha, this is when independent hotels are converted to Wyndham brand hotels. These conversions increased during the pandemic.
Wyndham is also one of the few companies in the tourism sector that continues to pay out dividends, at 30 cents a share. This value is expected to increase in the coming year.
American Express (AXP)
Many investors consider American Express a “buy and keep forever” stock due to its safe returns. The company dipped to $69 in March but recouped all its losses, and is now trending at $124. This surge is attributed to the government fiscal stimulus which helped in the recovery of the broader markets. As consumer demand picks up in the coming months, American Express sees a swift path to recovery.
The rise of contactless payments during the pandemic has accelerated the rise of fintech payment solutions. Although American Express is a major player in the credit card space, the company offers digital payment tools as well. In an effort to expand this offering, it acquired Kabbage, a digital business lender. American Express also received approval to operate in China, where it can form valuable connections with digital payment companies in the region.
American Express is one of the best tourism stocks in the sector and recently announced a dividend increase from 39 cents to 43 cents per share.
Fresh off its IPO, Airbnb is one of the best tourism stocks on the market right now. While some will argue the stock is priced too high, the future prospects for the company are undeniably bright.
This is because Airbnb’s business model has a unique advantage over its peers in the hospitality industry. Unlike traditional hotels, Airbnb offers guests the option of long-term rentals, which have become increasingly popular during the pandemic. The company was able to capitalize on this revenue stream during a slow travel year.
This flexible model also means that when travel does return, Airbnb will be able to recover from the pandemic at a quicker pace. People will be looking to travel to rural destinations rather than tourist hot spots and are likely to book Airbnb’s during their stay. Adding to this is the remote work trend that many companies have made permanent. The ability to work from anywhere will result in a solid tailwind for the company as people move from place to place.
Airbnb stock is priced at a premium right now but shows potential for growth. Investors who are looking for a tourism play should see this as a great buy.
Wynn Resorts (WYNN)
After a slow year, Wynn Resorts stock is up 41.6% following a bull rally in November. While prices are still nowhere near pre-pandemic levels, investors are betting on the hotel chain’s imminent comeback.
The confidence stems from its casino operations in Macau, China, where betting is still legal. Many believe it’s just a matter of time before Wynn Resorts sees its gaming revenue surge once again.
On the numbers front, Wynn implemented a stringent cost-cutting strategy and suspended dividends in Q2. This resulted in a liquidity position of $3.5 billion in Q3. According to the company, that money will sustain operating losses for more than a year.
Given this time-frame, Wynn stock can recover to pre-pandemic levels once the vaccine rollout and inoculation is complete. Morgan Stanley analyst Thomas Allen believes in the future of this company, giving the stock a price target of $120.
Alaska Air (ALK)
It was a tough year for travel stocks across the board and Alaska Airlines is no exception. After a 71% decline in revenue in Q3, the airline sees no path to a full recovery anytime soon. The inoculation of the masses and the subsequent return of travel will be its only saving grace.
While the situation seems dire in theory, the reality is not as bad as it seems. Alaska Airlines has an enviable cash position in comparison to its airline peers. With one of the lowest cash reserve to cash burn ratios, it is in a great position to come out of the pandemic unscathed. The company has $3.7 billion in cash and total liquidity of $5.5 billion.
Moreover, Alaska is expected to generate $1 billion each year when it resumes operations. This balance sheet position will be a huge tailwind for the company during its recovery. At its current price and the promise of a swift comeback in the future, Alaska Airlines remains one of the best tourism stocks to buy.
On the date of publication, Divya Premkumar did not have (either directly or indirectly) any positions in any of the securities mentioned in this article.
Divya Premkumar has a finance degree from the University of Houston, Texas. She is a financial writer and analyst who has written stories on various financial topics from investing to personal finance. Divya has been writing for InvestorPlace since 2020.