Airbnb is an amazing growth story, but it isn't the only way to play the surge in travel and leisure demand as COVID-19 restrictions have eased and the busy summer travel season begins. While Airbnb is a real estate-focused stock, it isn't a real estate investment trust, or REIT, doesn't pay a dividend, and doesn't actually own real estate assets.
With that in mind, here are three excellent real estate stocks that could benefit tremendously from high travel demand in the coming years.
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People have missed experiences, and this company could be a winner
EPR Properties (EPR 0.10%) is a REIT that focuses on experiential properties. It owns movie theaters, eat and play locations (TopGolf is a major tenant), ski resorts, and experiential lodging. As an example of the latter, it owns the new Margaritaville Hotel in Nashville. Its tenants generally sign long-term leases with gradual rent increases built in.
EPR wisely took a break from growth spending during the worst of the COVID-19 pandemic closures but is now ready to get back to growth mode. The company sees a $100 billion addressable opportunity and has specifically called out gaming properties, cultural attractions, and more as exciting expansion routes.
With more than $1.3 billion in liquidity and an excellent balance sheet, this $3.8 billion REIT is in a great position to capitalize on opportunities as it sees fit. And to make it even better, the company pays a generous 6.5% dividend yield in monthly installments.
An incredible rebound and lots of growth potential
Ryman Hospitality Properties (RHP -0.32%) was severely disrupted by the onset of the pandemic. The company owns five large-scale hotel properties under the Gaylord brand name that focuses on group events. It also has an entertainment division that owns several live performance venues and other related assets.
So far in 2022, Ryman's hotel business has come back faster than management had expected. Occupancy at the Gaylord hotels reached 71% in April, the highest since the start of the pandemic, and the average daily room rate is now 17% higher than pre-pandemic levels. Impressively, group travel at the properties has rebounded to 88% of comparable 2019 levels.
The entertainment division (formally known as Opry Entertainment Group) is a particularly interesting growth opportunity. NBCUniversal and Atairos recently agreed to buy 30% of the entertainment business, and Ryman just closed on the acquisition of Block 21 in Austin. The company's Ole Red dining and entertainment chain is making impressive progress, and there could be much more growth in store.
Americans are splurging on travel, and this hotel stock could be a winner
Airbnb has been disrupting travel, but that doesn't mean that nobody wants to stay in high-end luxury hotels anymore. In fact, recent numbers show that people are ready to splurge.
Xenia Hotels & Resorts (XHR -0.07%) owns and operates a portfolio of luxury hotels under brand names such as Marriott, Kimpton, Fairmont, and more. It owns 34 hotels altogether, with more than 9,800 guest rooms.
Similar to Ryman, Xenia's occupancy has rebounded sharply this year, with 72% of rooms full in April and average daily rates 18% higher than comparable pre-COVID levels. With the Summer travel season just getting underway, it could be the start of an impressive rebound for Xenia and the luxury resort industry, in general.
One word of caution
While all three of these stand to benefit from travel demand, it's important to point out that these companies (especially the two hotel REITs) are likely to be somewhat cyclical. If a recession hits and consumer spending slows down, hotel occupancy is likely to suffer in the short term.
To be perfectly clear, all three are excellent, well-run businesses that should do just fine over the long run. However, it's wise to expect some volatility in tough economic times.
