With travel restrictions starting to ease up, vaccination rates on the rise, and the economy starting to heat up it's easy to see why vacation stocks are hot again. Cabin fever is turning into holiday booking fever, and the travel industry can't wait to make up for lost time.
Royal Caribbean Cruises (RCL 0.04%), Airbnb (ABNB 1.17%), and Walt Disney (DIS 0.18%) are some of my favorite travel stocks right now. I'm avoiding the obvious airline and hotel choices because I think corporate travel will take a lot longer to come around than leisure getaways. Let's see why I'm a fan of these three plays serving entirely different markets.
Image source: Royal Caribbean.
Royal Caribbean
Cruise lines still have months to go before returning to normal operations, making this the last of the leisure industries to get back on track. You're probably smart to avoid cruise line operators in general, but you might want to make an exception and board shares of Royal Caribbean.
Royal Caribbean is the class act of cruise lines. It's not the largest, but it has routinely cranked out the highest margins. In other words, it's going to be the first one to return to profitability -- and return to paying dividends -- in its niche. Royal Caribbean is universally admired, and we saw that play out last year when it was reporting the lowest cash refund request rate on canceled sailings. Displaced customers were choosing enhanced credit on future cruises over an immediate return of their money at a better clip than the competition, and that gives it a cash flow advantage at a time when staying afloat financially is everything.
Airbnb
One of last year's hottest IPO stocks is a next-gen lodging darling that had the nerve to hit the market in the middle of a travel-icing pandemic. You won't see investors complaining. Airbnb went public at $68 five months ago, and it has gone on to nearly triple in this challenging climate.
The hospitality industry disruptor isn't at its best right now. It grew its revenue by 43% in 2018 and 32% in 2019, only to see its top line plummet by nearly 30% last year when the travel industry got upended. However, there's a silver lining to that revenue swoon. All of the leading hotel operators experienced a 50% to 70% plunge in revenue last year. The reasons for Airbnb holding up better than conventional hotel and motel operators is also the key to why it will recover first.
Folks are hesitant to return to cramped hotel rooms with so many strangers around in the hallways and other common areas. Airbnb has always been the most creative way to book a stay somewhere, but it's also the safest in the new normal. Wall Street still doesn't get it. Airbnb generated $859 million in revenue back in February for its first quarterly report as a public company. Analysts were only holding out for less than $748 million.
Walt Disney
If you want a travel industry stock with a sweet contingency play it's hard to pick any company other than Disney. The media mogul owns the world's most visited theme parks. It has more than two dozen on-site lodging options at its Disney World resort in Florida. It operates four cruise ships, and that fleet will nearly double in the coming years.
Disney is struggling on all of those fronts. Like Royal Caribbean we know that its ships won't be entertaining revenue-generating guests until much later this year. The original Disneyland theme park in California isn't even open right now, and the gated attractions worldwide that are taking in visitors have tight capacity constraints to achieve social distancing norms.
However, shares of the House of Mouse have still raced higher on the runaway success of Disney+. The premium streaming service now has more than 100 million subscribers worldwide, not too shabby for a service that wasn't even around 17 months ago. It has a wide array of entertainment assets that were put to good use during the shelter-in-place phase of the COVID-19 crisis, and it's also going to be a major beneficiary of the reawakening of the travel industry.
