As we discussed last week, for the last Smart Moneys of 2022, we’re looking back to the articles you found most helpful.
Today, we’re harkening back to a trend that has encountered severe turbulence over the past few years.
But every dog has its day, and the day for this particular megatrend might finally be on its way…
Before Jan. 1, 2023, Stocks Will…
Louis Navellier, Eric Fry, and Luke Lango just dropped a bombshell on their readers. They say 99% of the population is clueless about the major events about to rock the markets in early 2023. This is the No. 1 thing they believe you MUST do before Jan. 1, 2023.
The Backbone of a Titanic Industry
In 1953, an encounter occurred on an airplane.
Two men sitting next to each other on a flight started to chat, but they weren’t just any Joe Schmoes from down the street.
One man was C.R. Smith, the CEO of American Airlines Group Inc. (AAL), which was the airline they were flying, and the other man was Blair Smith (no relation), who was a sales executive with International Business Machines (IBM).
Their conversation made its way to the frustrations of the day. Blair was having difficulty making a sale, and C.R. was irritated with the slow pace of the airline reservations process that relied on manual systems and old-fashioned phone calls. (Making a single reservation could take an hour!)
The two didn’t stop talking when the flight landed. In fact, C.R. took Blair to the reservation center at the airport – and as they say, the rest is history. American Airlines and IBM soon partnered on what would become the beginning of reservation automation.
With Americans eager to travel and numbers on the rise, a booming investment opportunity has emerged in what is now the backbone of the modern online reservation system.
And this backbone is controlled by only a mere handful of companies…
Americans Are on the Go
After grinding to a halt in 2020 amid COVID-19 lockdowns, the travel industry has made a sharp recovery.
According to the passenger throughput data on the TSA.gov website, the checkpoint travel numbers for the last 90 days (mid-September to mid-December) average 2.15 million per day in 2022 – compared to 2.28 million per day in 2019.
For perspective, the average per day in 2021 was 1.86 million – and only 811,397 per day in 2020.
Higher prices don’t seem to be slowing things either. Average gas prices across the U.S. hit an all-time high of $4.99 in mid-June but petered off to a less-stressful average of $3.25 as of Dec. 15 (according to Finder.com).
This travel rebound trend is something I’ve watched closely for over a year. More travelers means increased related bookings, like hotels, rental homes, and rental cars. And with that comes the potential to make money.
All of those bookings, whether made by consumer Carl at his computer or Travel Agent Anna at her office, are done online. Here’s a “who’s who” of travel industry websites…
- Booking Holdings Inc. (BKNG): Kayak, Agoda, Priceline, CheapFlights, Momondo, OpenTable, RentalCars
- Expedia Group Inc. (EXPE): Orbitz, Travelocity, Hotels.com, TripAdvisor.com, SeatGuru.com, Cheaptickets.com
- Alphabet Inc. (GOOGL)
- Hilton Worldwide Holdings Inc. (HLT)
- Marriott International Inc. (MAR)
- Hyatt Hotels Corp. (H)
And on and on.
Those websites are the facing pages we see, but for the reservations to be made and the systems to talk to each other, they all must pass through a global distribution system, or GDS for short.
The Gateway to Reservations… and Profits, Too
Travel is chaotic enough, but without a GDS, it would be unbearable. The GDS allows customers to find availabilities, make reservations, and pay for them.
Here’s a good definition from siteminder.com…
A GDS is a worldwide conduit between travel bookers and suppliers, such as hotels and other accommodation providers. It communicates live product, price and availability data to travel agents and online booking engines and allows for automated transactions.
Only three companies dominate the travel industry’s global distributions systems…
- Spain-based Amadeus IT Group SA (AMADY)is the largest of the three. It processes about 40% of travel bookings worldwide…
- Dallas area-based Sabre Corp. (SABR) is No. 2, with a 35% market share…
- And privately held Travelport is No. 3, with a 22% market share.
Together, these three make up 97% of all travel bookings worldwide.
Because more than 400 airlines and one million hotels use the Sabre system to process travel bookings, Sabre’s system processes 2.5 million bookings every minute.
The company generates its revenues from the volume of transactions it processes, not the dollar value of those transactions.
So, when travel activity increases, Sabre’s revenues also increase. The connection between the two is very close… and predictable.
As I’ve pointed out, Sabre, the U.S.-based GDS, recently reported its first profitable quarter in more than two years, while also reporting the highest sales and profit margins since the pandemic struck.
I also the company’s commitment to the future…
The company has not been simply sitting on its hands during the last year, waiting for the inevitable recovery.
Instead, it has taken decisive steps to fortify its competitive moat by expanding its client roster and beefing up its industry-leading IT capabilities.
For example, Sabre has collaborated with Google to migrate its IT infrastructure to Google Cloud. Sabre followed up that initiative by partnering with Google last fall to develop an artificial intelligence (AI)-driven technology platform that is an industry first.
And yet, despite the upbeat results and remarks, the stock has tumbled since the earnings announcement.
I admit that the pandemic and its effects have dragged on far longer than I initially anticipated. And then, just at the moment the clouds finally seemed to be parting, Russia invaded Ukraine and China imposed new COVID lockdowns.
But I do expect Sabre to flourish anew – and I believe we’re well on our way to seeing it unfold.
End-of-Year Thoughts: This travel-recovery is something I’ve been pounding the table about since the stirrings thereof emerged in mid-2021, but now, it seems to have the potential to truly take off.
And if you’re interested to learn exactly how I recommend pulling the trigger to take advantage of this burgeoning megatrend, click here.
Regards,
Eric
P.S. I just dropped a bombshell on my readers: 99% of the population is clueless about the big events about to rock the markets in 2023. And if you’re not prepared, your money could suffer greatly. Details here.
On the date of publication, Eric Fry did not have (either directly or indirectly) any positions in the securities mentioned in this article.
