If you’ve tried to book a flight or lodging recently, you’ve probably noticed that prices are significantly higher than they were a few years or even a few months ago. That’s because prices are rising along with surging travel demand, both due to pent-up demand following the pandemic and seasonal trends as we head into the prime summer travel season. This makes now an interesting time to consider the best travel stocks to buy.
With demand showing no signs of cooling off and travelers seemingly willing to pay increasingly higher prices, travel companies stand to reap the benefits following a tough couple of years. Indeed, many travel stocks are rebounding along with key industry metrics such as bookings and occupancy rates.
For investors looking for the best travel stocks to buy in 2023, check out the three names below.
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I must admit, I haven’t rented that many vacation properties through Airbnb (NASDAQ:ABNB) over the past decade. However, when a friend’s construction company started building a house on the ocean outside Halifax, Nova Scotia, to rent out through Airbnb, I got a lot more interested in the company and its stock.
I understand there are a number of objections to short-term rental properties — everything from party houses in generally quiet neighborhoods to reducing the availability of long-term housing — but the reality is that people have to stay somewhere when they travel. So, why not in a place that’s home-like, comfortable, and often cheaper than a local hotel or motel?
The fact is Airbnb provides a service. Most of the time, that service goes off without a hitch.
I can remember when I was a teenager, my family rented a motorhome in Calgary and drove it to Vancouver and back. The experience was so horrendous, my older brother started walking back to the Calgary airport to fly home to Toronto. Someday, somebody will come up with the motorhome and trailer version of Airbnb or a car share program. They probably already have.
In October, Center for Housing Economics Director Roger Valdez wrote in Forbes that short-term rentals aren’t the problem with expensive housing; the lack of supply is. He uses Steamboat Springs, Colorado, as his example. It’s a recommended read.
The one thing I’ve found about Airbnb Chief Executive Officer (CEO) Brian Chesky is that he’s not afraid to listen to his guests and hosts. So, it’s not surprising that the company did a deep dive into complaints from its guests and came up with 50 improvements to the Airbnb platform.
Airbnb is very profitable. Now it intends to be the best-liked short-term rental platform anywhere. That’s money in the bank.
Booking Holdings (BKNG)
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I recently recommended Booking Holdings (NASDAQ:BKNG) as one of the three most innovative companies disrupting their industries. In the online travel world, Booking has used artificial intelligence (AI) for more than a decade to improve the customer experience, according to CEO Glenn Fogel.
Booking Holdings’ business, which includes popular sites like Booking.com, Kayak and OpenTable, is booming. In 2022, revenue jumped 56% to $17.1 billion, while operating income surged 165% to $3.1 billion. Even more impressive was that its free cash flow margin was 36.2%, 13.2 percentage points higher than a year earlier.
This week, the company reported better-than-expected first-quarter results. Revenue increased 40% year over year to $3.78 billion, coming in slightly ahead of estimates, while adjusted earnings of $11.60 per share easily beat the $10.61 per share analysts were expecting.
Shares are up 29% year to date and more than 60% from their 52-week low, yet from a valuation perspective, they’ve rarely been cheaper. BKNG is trading at 6.1 times sales and 15.9 times cash flow.
Of the 31 analysts that cover its stock, 17 rate it “overweight” or a “buy,” with a median target price of $2,850, which is 9.5% higher than where it’s currently trading. I think BKNG has a little more left in the tank for the second half of 2023.
Marriott International (MAR)
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I am not a fan of hotels, but boy was I surprised at how much my wife and I enjoyed our four-day stay over Easter at St. Regis — a Marriott International (NASDAQ:MAR) brand — in the heart of downtown Toronto.
The staff was friendly, yet professional. There was an E-Butler app that allows guests to contact the staff during their stay. When the plug in our bathtub didn’t work, my wife texted the staff through the app while we were out to lunch and it was fixed long before we got back to the room.
I’m sure if you travel a lot this is no big deal. However, this was our second stay since 2019 at St. Regis, and it was our second great experience. That’s not a coincidence. And it’s evidence that the changes in the hotel industry over the past decade, with many hotel operators like Marriott going asset-light by ditching the real estate to focus on guests, was a smart move.
MAR stock is up more than 20% over the past two years compared to a less than 4% gain for the S&P 500. In fact, shares hit a new all-time high this week after the company reported better-than-expected Q1 earnings and delivered an upbeat forecast. Yet, even though shares are within spitting distance of their record high, they are trading for just 2.6 times sales, which is roughly half what they were at in 2021.
Marriott is an excellent travel stock to buy for the long haul. If it could survive the pandemic, it can survive anything.
On the date of publication, Will Ashworth did not have (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.
Will Ashworth has written about investments full-time since 2008. Publications where he’s appeared include InvestorPlace, The Motley Fool Canada, Investopedia, Kiplinger, and several others in both the U.S. and Canada. He particularly enjoys creating model portfolios that stand the test of time. He lives in Halifax, Nova Scotia.