The pandemic pummeled the travel and tourism industry last year, but as economies and borders reopen, numerous companies are well positioned to benefit. In this Backstage Pass video, which was recorded on Oct. 20, 2021, Motley Fool contributors Jason Hall, Rachel Warren, and Trevor Jennewine discuss why Booking Holdings (NASDAQ:BKNG), Airbnb (NASDAQ:ABNB), and Ryman Hospitality Properties (NYSE:RHP), look like smart investments right now.
Jason Hall: It's official. On November 8th, the U.S. is going to begin allowing vaccinated international travelers to enter the US. I think it's going to be a real boon for a lot of hospitality and travel companies that really rely on international travelers. We have the reopening trade. We could call this the reentry trade, I guess. But let's think not just about what can be great in the next couple of months, but what could be great for the long term. Who's going to first?
Rachel Warren: I'll go first. I was actually very excited to read this, and being a frequent traveler, I find these stories very interesting. Obviously, the travel sector as a whole has been hit incredibly hard by the pandemic. I think that this is a sector that by all of estimates is going to take several years to reach recovery to pre-pandemic levels.
But even so, I was thinking about this, and one stock that I think is really interesting to consider within this space, as the travel industry recovers, is Booking Holdings. You may know it as Booking.com. You can go and book apartments, short stays, usually hotels. I actually use Booking.com all the time, personally, especially when I'm traveling abroad as I am now. I like the interface from the website, it's easy to use.
Not surprisingly is this company was hit incredibly hard in the early days of the pandemic. But it has made a really impressive recovery, particularly over the last few quarters. Shares are actually trading up about 40% from where the stock was one year ago. I think investors have a lot of optimism regarding this company.
It's interesting. I took a look at the company's most recent quarterly report for it's second quarter and gross travel bookings, the total dollar value of all bookings on its platform, was up 852% year-over-year. Definitely signaling a tremendous recovery from the lows at the height of the pandemic.
In addition to that, room nights booked in the second quarter were up 458% year-over-year, and its total second quarter revenue was up 243% year-over-year. I think it's an interesting company to look at. Travel stocks have a long way to go. I don't think the rebound for these companies is going to be something that happens overnight. The industry is recovering very slowly but surely. But I do think patient long-term investors that invest in high-quality businesses in this industry could definitely see some nice gains in the years ahead as the industry continues to recover. What do you think, Trevor?
Trevor Jennewine: I agree. I think that's a great pick. The travel industry was absolutely hit hard last year. I think in 2019, travel and tourism accounted for about 10% of global GDP, the economic output around the globe. Then I think that figure got cut in half in 2020. Still a massive industry, but really got hit hard by business closures and social distancing. Booking Holdings is a great way to play that.
I think I'm going to go with Airbnb. It's probably not a big surprise to anybody. I think this company has a much better business model than traditional hotel chains. The range of the inventory that they have is better both in terms of location -- Airbnb has places that are in the middle of the woods, rural areas, the coasts, downtown, anywhere you want to go, Airbnb probably has properties there and then they also-
Jason Hall: Castles.
Trevor Jennewine: Exactly.
Jason Hall: Treehouse, everything [inaudible 04:42:58] .
Trevor Jennewine: [laughs] Yeah. The type of lodgings that they can offer. Like you said, castles, treehouses, adobes, airstreams, there's boat houses, anything you can imagine. There are caves that have been renovated, too, that are actually very comfortable. There's one I think in Idaho where it's a remodeled version of Bilbo's Hobbit-Hole from The Lord of the Rings. Just anything you can imagine. I think they have that unique experience thing working for them that you can't really get at a traditional hotel chain.
Then it's also much easier for them to acquire new inventory. It takes a couple of minutes to onboard a new host; and it doesn't cost very much money. But it takes months or years to build a new hotel and it costs millions of dollars.
I think to tie some other current events into this, there's labor shortage right now. I think it's really hitting the industry pretty hard. I think Hilton's CEO has said that it's the worst problem that they're facing right now. Marriott has 10,000 staffing vacancies across 600 locations. Then I read an article in The Wall Street Journal today talking about how a lot of customers or guests are going to these hotels and they see advertising on websites for various amenities like breakfast or whatever it might be, and then they get there and those things have been canceled. Staffing is now translating into a poor customer experience. I think that might push people toward Airbnb faster than otherwise. What do you think, Jason?
Jason Hall: It's funny. Anecdotally, I can tell you. I just spent three weeks at an extended stay hotel while we were in the middle of our move and closing on our house and doing some remodeling before we could move in, and experienced exactly what you were talking about. I think our room was cleaned twice in three weeks. Nicest people in the world, the ones that were there, but it was clear they were so incredibly understaffed. All of the other resources were an issue. It's just a challenge.
The flip side of it, Trevor, is I think that the thing that is detrimental to the traditional hotel business is very appealing about Airbnb. A way for people to earn income without having to have a job, like sitting at a hotel desk. It's really interesting how the same dynamic has resulted in a terrible experience and problem for one industry and then its biggest disrupter in its competitor, it's a tailwind for it. I think it's really interesting to see how it plays out. I think you're probably going to be proven right about it.
This is a really interesting one for me that I thought about. I'm going to come back to a hotel company. [laughs] That's the biggest irony there, and it's Ryman Hospitality Partners. The ticker is RHP. I think Ryman is a little bit unique in this space.
For those who don't know, if you've ever heard of the Ryman Auditorium, the Grand Ole Opry, that's where the name comes from because this is one of their premier properties that they own. But they also own all of the Gaylord Hotels and events centers. I think there's six of them. These are the largest, most valuable convention destinations outside of Vegas in the US. They are enormously valuable.
What we've seen, obviously, it was tough for a year-and-a-half because conventions we're no longer a thing. But they've essentially seen booking activity pretty much return to normal. That's incredible. When the pandemic lockdowns happened, the company acted quickly. It's a real estate investment trust, so they very quickly halted their dividend. They knew they were going to take big losses so they wouldn't have earnings to pay out. They halted the dividend and they tapped every single bit of revolving credit they had and get as much cash in the bank as they possibly could, and built a fortress of cash to get them through the downturn.
The business has actually reached the point now where it's actually back to being cash flow positive. That's just happened in the past month or two. And that's a big step forward. This is now a cash flow positive business.
And I'm of the opinion -- this is the big one for me -- I think that whatever the work world looks like in two, three or five years, whether it's more remote work, whether it's hybrid, whether it's still a lot of people going into offices, whatever it's going to look like, I think conventions are going to be really big and maybe even more important. If people are working more remotely and less in the office, less interaction, I think there is a massive opportunity that businesses are going to take to get their stuff together. A company like Ryman that has the facilities that are built to handle that sort of thing, I think there's going to be a big tailwind for that industry for the next five or 10 years. I think it's a big winning industry no matter what the work environment looks like. RHP, Ryman Hospitality Properties, that's my pick.