As the world continues to embrace travel with renewed vigor in the post-pandemic era, the industry is poised for significant growth throughout the remainder of 2024. With August already here, some investors may worry that the best opportunities have already been seized. However, many of the top travel stocks remain attractively priced, buoyed by the persistent “revenge travel” phenomenon that took off after the pandemic and shows no signs of slowing down.
Despite challenges such as unstable exchange rates and varying affordability trends, the appetite for travel appears stronger than ever. According to recent data from Mastercard (NYSE:MA), shared in July, the travel industry in 2024 is breaking records. In fact, nine of the past 10 record-breaking spending days in the global cruise and airline industry have happened this year alone. A robust labor market and a rising desire for longer vacations fuel surging travel activity and create a favorable environment for travel stocks.
As the travel boom continues, we’ll explore three travel stocks that are poised to benefit from this enduring trend. These names offer strong investment cases, displaying robust growth prospects and rather attractive valuations.
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As a premier global online travel and reservation service provider, Booking Holdings (NASDAQ:BKNG) stands at a perfect position to capitalize on the current travel surge. With its top-tier portfolio of leading online outlets such as Booking.com, Kayak, Agoda, OpenTable, Rentalcars.com and Priceline.com, the company has seen impressive growth in both revenues and profits in recent quarters.
Moreover, Booking’s business model, which relies on collecting high-margin booking fees, allows for highly scalable profitability. This is evident in the company’s adjusted earnings per share, which surged by 76% in Q1 and by 11% in Q2, both figures exceeding revenue growth by a wide margin. Finally, following its recent dip, Booking stock now hovers at a forward P/E below 20, which I find to be an extremely attractive multiple given its underlying growth prospects.
For context, last year, Booking’s revenues soared by 25%, reaching a record $21.4 billion. This strong performance has continued into 2024. In Q1, Booking reported a 17% revenue growth, amounting to $4.4 billion, and in Q2, a 7% increase to $5.9 billion—both setting records for their respective quarters. Such solid results clearly highlight Booking’s ability to thrive on the back of a flourishing travel industry and make it one of the travel stocks to buy.
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Much like Booking, Airbnb (NASDAQ:ABNB) surfs the wave of the current travel boom like few others. As the leading player in peer-to-peer accommodation rentals and experience bookings, Airbnb has consistently impressed with its growing results despite facing occasional regulatory challenges. The company’s unique position in the space and continuous innovation within its platform make Airbnb a must-have stock for those seeking exposure in the travel industry.
To illustrate its ongoing momentum, consider Airbnb’s performance post-pandemic: the company’s revenues grew by 18% year-over-year in Q1 of this year, reaching $2.14 billion. This follows last year’s 20% Q1 growth, which, in turn, followed an impressive 70% growth in Q1 2022. Demand for unique accommodations and local experiences has soared among travelers, and Airbnb seems to be the unrivaled leader in this space despite competitors’ attempts to break in.
Looking forward, Airbnb’s prospects seem bright. Consensus estimates see revenue growth of about 10.2%, which I find to be a rather conservative figure. In any case, Airbnb should see considerably stronger free cash flow growth, which is what should ultimately drive its bullish case. For context, Airbnb’s free cash flow margin hit 89% in Q1. Such a high free cash flow conversation should not only build equity value but also enable substantial cash returns to shareholders. Thus, I see Airbnb as one of the most compelling travel stocks to buy these days.
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Hilton Worldwide Holdings (NYSE:HLT) stands out as another top travel stock that has taken a perfect position to capitalize on the ongoing industry boom. While I mentioned that Airbnb does great when it comes to attracting travelers with its unique accommodations, a significant market remains for those who prefer the comfort and luxury of traditional hotels. Booking’s recent results, as mentioned earlier, partially illustrate this.
As a leading player in the hotel industry, Hilton caters exceptionally well to the premium market segment by offering a blend of comfort and upscale locations that appeals to travelers seeking top-notch amenities. The company’s most recent Q1 results showcased the fact that demand in the market category is as strong as ever. Revenues increased 12.2% to $2.57 billion, driven by growth in its franchise and licensing fees division, thanks to an increase in the number of hotels under its brands and improved occupancy rates.
But I really love Hilton stock because of the company’s efficient business model. With most of its 7,626 properties—housing about 1.2 million rooms—being franchised, Hilton has streamlined operations for maximum efficiency. These benefits were somewhat visible in Q1, with adjusted EPS growing by 23.4% to $1.53, significantly outperforming the top-line growth. From the look of current trends in the travel industry, it’s likely Hilton will keep experiencing strong growth throughout the rest of the year, making it a compelling travel stock to consider today.
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.
On the date of publication, the responsible editor did not have (either directly or indirectly) any positions in the securities mentioned in this article.
