After two years of travel restrictions and concern over the spread of COVID-19, Americans are ready to travel again. Vacation rental bookings were up 25% in April 2022 and summer bookings have already exceeded 2021 levels by 15%. The Transportation Security Administration (TSA) is expecting air travel this summer to reach 2019 levels, which would be the first time since the start of the pandemic.
With summer shaping up to be red hot for the travel industry, here are three real estate stocks you should consider buying to cash in on the travel boom.
Image source: Getty Images.
Airbnb
Vacation rentals were already growing in popularity before the pandemic, but consumer preference for more space, privacy, and unique destinations as people travel in light of COVID-19 has propelled vacation rental demand. That's great news for Airbnb (ABNB 1.19%), the largest vacation rental vacation platform, with over 4 million hosts across the world.
The first quarter of 2022 showed tremendous momentum for the company, being its first Q1 of positive earnings before taxes, interest, depreciation, and amortization (EBITDA). Revenue grew 70% year over year and its nightly bookings exceeded 100 million, surpassing pre-pandemic levels. A recent report from AirDNA, the largest data source for vacation rentals, found that as of mid-May rental occupancy for Airbnb was up 25% while the average daily rate (ADR) for the rentals climbed 7%. Higher rates and occupancy levels translate into more money for the company and the property owners.
NASDAQ: ABNB
Key Data Points
Expedia Group
Expedia Group (EXPE 4.08%) may not seem like a real estate stock, but after its acquisition of Vacation Rentals By Owner (VRBO), in 2015 through its parent company HomeAway, Expedia is in the vacation real estate business -- in a big way. Unlike Airbnb, VRBO only rents whole homes, not individual rooms or shared spaces, and it currently has over 2 million listings across the globe.
According to VRBO, summer bookings are up, with renters booking earlier in the year than usual. Hot spots for summer vacation rentals along the East Coast have less than 30% of properties available to book on the platform, a positive sign the summer will be a hot one for the company. Expedia Group also offers investors exposure to several other niches within the travel and tourism industry as well through its subsidiary companies like Hotels.com, Cars.com, Orbitz, and Hotwire, among several others, which, like VRBO, should benefit from the return of international and domestic travel.
The company's latest earnings were positive with sales and bookings up 81% and 58% respectively year over year. However, it's still operating at a net loss. Its revenue is trending in the right direction, but total bookings still aren't at pre-pandemic levels. With restrictions easing and more countries opening their borders, 2022 could be the year Expedia finally crosses the pre-pandemic curve and returns to more profitable earnings.
NASDAQ: EXPE
Key Data Points
Park Hotels & Resorts
Urban cities are among the top destinations for travel in 2022. Places like New York City, Orlando, Boston, and Washington, D.C., are seeing the highest year-over-year increases in occupancy for vacation rentals as of April 2022. Given major metro cities like these is where the majority of Park Hotels & Resorts (PK 0.05%) owns its hotel and resorts, this is tremendous news. Park Hotels & Resorts is a real estate investment trust (REIT) that leases its properties to well-known hotel brands Hilton Hotels, Marriott International, and Hyatt Hotels.
Like most other companies in the travel and tourism industry, Park Hotels & Resorts and its tenants have had a tough few years. Its properties serving both leisure travelers and business or group travel, however, are showing a comeback. Occupancy is 14.2% below pre-pandemic levels, the highest it's been for the last four trailing quarters. Revenue per available room (RevPAR), an important metric for hotel operators, was only 10% lower in April 2022 than 2019 levels while the ADR is over 7% higher.
Some investors aren't convinced the travel boom is here to stay, which has been made apparent in both Airbnb and Expedia's share prices as of late. The companies are down over 26% this year while Park Hotels & Resorts is down less than 2%. There's definitely a valid concern. Rising fuel costs are making people question traveling, whether it be by car or plane. However, there's growing evidence that higher costs won't stop people from traveling. Today's bargain prices for these three stocks could pay off if travel does boom as expected.
