Summer is almost upon us. For investors with families, that means the kids will soon be home and itching to go on vacation.
Last year, a Visa survey of travelers found that 45% were willing to spend just over $1,000 on a family vacation. Money magazine and the Automobile Association of America, or AAA, found the average family spends about $1,600 for summer vacation. http://visualeconomics.creditloan.com/the-business-of-american-vacations/
Wealthier families appear ready to spend more. According to a recent article in MediaPost, 63% of consumers identified as affluent (i.e., those with $100,000 or more in annual household income) and 72% of "ultra affluent" (i.e., those with $250,000 or more in annual household income) plan on getting away this summer.
Vacations in the green
Where they go and what they do is sure to vary by taste. Regardless, the odds favor at least one of these three businesses getting a piece of the action.
Disney (NYSE:DIS). The House of Mouse set a new high with over $15 billion in revenue from its domestic and international theme parks in fiscal 2014.https://www.capitaliq.com/CIQDotNet/Financial/Segments.aspx?CompanyId=191564 More importantly, operating profit in the segment soared nearly 20% year over yearMath=((2663/2220)-1)*100 as vacationers willingly paid higher ticket prices. And that's for those that could get in. Over the Christmas holiday, Disney actually had to turn away tourists at Disneyland in California and the Magic Kingdom in Florida due to overcrowding. Can you imagine? Disney already generates six times the resort revenue primary competitor Comcast does with its Universal Studios parks. Adding new attractions based on Avatar and Star Wars should only widen the gap.
- Spirit Airlines (NYSE:SAVE). The discount flier is in the early stages of a fleet expansion, and is experiencing some growing pains as a result. The stock is down nearly 20% year to date, an opportunity for patient investors willing to wait for spending on new routes and aircraft to pay off. And it should: Spirit has a history of producing excellent returns on allocated capital and is generating exceptional cash flow despite the cost of expansion. The more spacious and modern fleet that emerges over the next three years should push revenue and profit much higher.
HomeAway (UNKNOWN:AWAY.DL). The vacation rentals specialist hasn't had it easy, either, but there's no disputing its utility to professional landlords. HomeAway ended last quarter with 1.086 million paid listings, and revenue per subscription listing rose 15.7% over the same period. A larger inventory is funding the business, which threw off 26.7% more cash year over year?from operations in the first quarter. In short, signs point to HomeAway as one among a handful of enduring suppliers of vacation rental inventory.
Booking your way to riches -- make sure to purchase the roundotrip fare
Admittedly, the business of family fun is not only seasonal but also cyclical. Buying any of these stocks -- or others like them -- could be dangerous in the short term. If you buy, do so with the intent of holding for several years at least, and for a decade or more if you can.
Fifteen years after the birth of his eldest son, Tim Beyers is still a family man. He's also a member of the Motley Fool Rule Breakers stock-picking team and the Motley Fool Supernova Odyssey I mission and owned shares of Apple and Disney at the time of publication. Check out Tim's web home and portfolio holdings or connect with him on Google+, Tumblr, or Twitter, where he goes by @milehighfool.
The Motley Fool recommends Apple, HomeAway, Spirit Airlines, Visa, and Walt Disney. The Motley Fool owns shares of Apple, Visa, and Walt Disney. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.