The healthy consumer in 2023 has surprised everyone, including experienced economists. One major beneficiary has been the travel and leisure sector. Indeed, travel stocks have soared as pent-up demand for travel has carried on recently.
As we head into 2024, the United States economy is chugging along, with unemployment at 3.7%. With most consumers employed, household balance sheets are robust. This means consumers can maintain discretionary spending. Currently, demand for travel and experiences is insatiable among consumers, which bodes well for top travel and leisure stocks.
According to Euromonitor, travel and tourism growth will continue outperforming global economic growth. They expect spending to hit a record $2 trillion, exceeding the pre-pandemic peak. Despite the slowing of the revenge travel trend, they expect 2024 growth to hit 16%.
Ultimately, the resilient growth will benefit these three travel stocks. All have reasonable price-to-earnings multiples. Also, they are returning capital to shareholders, increasing their attractiveness.
Booking Holdings (BKNG)
Booking Holdings (NASDAQ:BKNG) is the largest online booking platform highly leveraged for travel and experiences. It offers access to hotels, lodgings and restaurants through its platforms.
The company is one of the best travel stocks benefiting from the strong leisure travel demand environment. Although the company saw a slight negative impact from Israel in the third quarter, overall results were impressive. It achieved record quarterly room nights and gross bookings. Gross bookings increased 24% year-over-year to $40 billion.
The strong booking trends led to a 21% revenue growth. Profits were more impressive, with EBITDA increasing 24% YOY to $3.3 billion. Non-GAAP earnings per share increased 36% YOY. The company also executed its capital return program, reducing share count by 10% compared to the prior-year quarter.
Also, the firm is pursuing more growth opportunities. It is expanding its Connected Trip vision and integrating AI into its offerings. It continues to develop new revenue streams. For example, it recently launched a cruise platform that allows customers to search for sailing. Customers can choose from more than 10,000 sailings across 30 cruise lines through the Cruises offering.
Overall, Booking continues to enhance its mobile app experience. More than 50% of room nights booked in the third quarter were through mobile apps. As the company improves the experience, it expects more frequent visits, loyalty and spending, which will drive growth.
Expedia (EXPE)
Expedia (NASDAQ:EXPE) is another online travel booking platform that is seeing the benefits of travel spending. Unlike Booking, it has limited Middle East exposure, which is a bonus given the ongoing conflict in the region.
The company delivered impressive Q3 2023 earnings. Gross bookings hit a record of $18.5 billion and grew 8% YOY. Adjusted EBITDA was also a record $1.2 billion, leading to margins expanding by 110 basis points to a 31% margin.
In the quarter, its best-in-class B2B business experienced solid demand, delivering 26% YOY growth. The segment is increasing wallet share, signing new deals, and launching extra features supporting growth.
In terms of growth, Expedia is just coming to an end of a multiyear transformation. It has completed the migration of Vrbo to its single front-end stack. Additionally, the firm launched One Key, its new loyalty program that has already garnered over 82 million members.
Expedia is one of the best travel stocks to buy due to the growth trajectory from the initiatives mentioned above. Management expects the revenue momentum to continue. Given this view, they think the stock is undervalued and have been buying back shares.
At the end of Q3, they had repurchased 7 million shares during the year for $1.8 billion. Moreover, the board has authorized a new $5 billion share repurchase plan. These buybacks will offer a substantial return for shareholders.
Marriott International (MAR)
Marriott International (NASDAQ:MAR) is the world’s largest hotel chain, operating in more than 138 countries. It offers a compelling range across luxury, premium and select properties with brands like JW Marriott, The Ritz-Carlton, Marriott Hotels, Sheraton, Courtyard and Residence Inn. Through its 31 hotel brands across different geographies, it has more than 1.5 million rooms.
One would expect the scale of Marriott to limit its growth rate. However, the company continues to defy all odds and has put up impressive growth rates. For instance, in Q3 fiscal year 2023, comparable systemwide revenue per available room increased 8.8% YOY. The International segment sailed past expectations, delivering a robust 21.8% growth.
Today, Marriott stands out due to its diverse portfolio across quality tiers and asset-light business model. Indeed, most of its hotels are franchised, with 76% of revenues from franchising and management fees. The franchising model allows Marriott to generate high returns on capital and strong cash flows. Notably, the firm earns about 90% EBITDA margins on gross revenues.
Considering the substantial growth opportunity, Marriott International is one of the best travel stocks. Still, there is a massive opportunity in the international market. Today, it has a 4% market share outside the U.S. So, there is a substantial growth runway in the global market.
Management is pursuing these growth opportunities. For instance, it solidified its leadership in the Caribbean and Latin America region by acquiring City Express. Now, it’s the largest hotel player in the region.
Business adjacencies like the Ritz‐Carlton Yacht Collection and travel insurance also provide growth opportunities. Finally, the stock has a robust shareholder program with $3.7 billion spent on dividends and buybacks YTD. Buy MAR stock to benefit from travel spending resilience.
On the date of publication, Charles Munyi did not hold (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
