The world's population is getting richer. As people gain wealth, an increasing percentage of us have more free time on our hands.
That's good news for companies that specialize in leisure and recreation. It’s a broad category with diverse amusement and entertainment options. Whether your idea of fun is skiing, hitting the golf course, or relaxing at a resort, there are a lot of public companies generating profits by offering different ways to enjoy leisure time.
Five leisure stocks to watch
Here are some of the top leisure stocks poised for growth:
1. Vail Resorts
Vail Resorts (NYSE:MTN) is the biggest name in North American skiing. It owns and operates 37 ski resorts in three countries, with some of its premier destinations including:
- Whistler Blackcomb, the largest ski resort in North America
- Vail Ski Resort
- Park City Mountain Resort
- Breckenridge Ski Resort
The company's large portfolio helps it stand out from smaller ski resort operators. It also has enabled Vail to build a strong loyalty program since skiing enthusiasts get special deals at a large number of locations.
Like many destination companies, Vail has been severely impacted by the pandemic. But its year-over-year visitation in 2020 declined by only about 5%. The company also reduced pass prices by 20%, prompting an enthusiastic response from guests and a significant increase in pass sales.
2. The Walt Disney Company
The Walt Disney Company (NYSE:DIS) can amuse you whether you want to head to one of its resorts or just sit on your couch. It's perhaps best known for its vacation destinations, with theme parks and hotels on three continents, plus its own cruise line. The company also has television, movie, streaming, and merchandising operations.
That diversification helped the company to cope during the pandemic. Even when its theme parks were closed, Disney was still able to generate massive amounts of revenue. The Disney+ streaming service has been a huge success, surpassing 100 million subscribers in just 16 months. Now, Disney's theme parks have all reopened, and its revenue is higher than it was before COVID-19.
3. Marriott International
Marriott International (NASDAQ:MAR) is among the world's largest hotel companies, and its portfolio has more than 7,000 properties across 131 countries. Popular Marriott brands include:
- JW Marriott
- The Ritz-Carlton
- Residence Inn
- Courtyard Hotels
Marriott doesn't take on the expense and complexity of owning most of its properties. Instead, it operates an asset-light business that generates fees from brand licensing and property management. Marriott's massive loyalty program, with 150 million members, keeps visitors coming back.
Occupancy and revenue numbers have been climbing for Marriott as more people get vaccinated and start traveling again. With its reach and scale, Marriott International is an excellent choice for long-term value.
4. MGM Resorts International
MGM Resorts International (NYSE:MGM) is a giant in the gaming industry, with state-of-the-art resorts in Las Vegas, across the U.S., and in China. The MGM portfolio boasts many well-known brands, including:
- MGM Grand
- Park MGM
Although MGM had to shut down operations and lay off 25% of its workforce during the pandemic, all of its resorts have now reopened. Pent-up travel demand and the successful rollout of COVID-19 vaccinations should help to bolster MGM's casino business.
The increasing popularity of online gambling is another reason that MGM stock is a good long-term investment. The company's betting app, BetMGM, is expected to produce $1 billion in revenue in 2022.
5. Callaway Golf
Callaway Golf (NYSE:ELY), one of the premier names in golfing, can drive growth for your portfolio. Founded in the 1980s, Callaway Golf has grown into a $1 billion-plus maker of a full range of golf equipment, including clubs, balls, bags, and apparel.
The company also deserves recognition for proactively evolving along with the game. It spent $2 billion in 2020 to acquire Topgolf Entertainment, a company that offers virtual golf, along with music, food, and drinks.
You can also gain portfolio exposure to leisure companies by investing in leisure-focused exchange traded funds (ETFs), which hold baskets of leisure stocks. ETFs are ideal for investors who would rather not choose among the stocks of individual companies.
The largest leisure and recreation-focused ETF is Invesco Dynamic Leisure and Entertainment (NYSEMKT:PEJ). Its holdings are a diverse mix that includes entertainment companies, casinos, restaurants, and hotels.
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Should you buy leisure industry stocks?
Travel and leisure stocks endured a period of turbulence during the COVID-19 pandemic, and many leisure companies had to temporarily or permanently shut down. The prices of leisure stocks might not quickly recover from the pandemic, but if you're seeking value stocks, then these are exciting times to buy into top performers in the leisure sector. On a longer-term basis, U.S. leisure spending is expected to nearly double by 2030, which is a boon for the top leisure companies and their investors.