Thanks to the pent-up travel demand, the travel industry is again in the spotlight. Therefore, it could be an opportune time to scoop up the shares of three fundamentally sound travel companies Travel + Leisure Co. (TNL), Playa Hotels & Resorts N.V. (PLYA), and Bluegreen Vacations Holding Corporation (BVH) that are well-positioned to capitalize on the industry tailwinds.
Before delving into the fundamentals of the featured stocks, let us take a look at how the travel industry has been faring so far.
According to World Travel & Tourism Council (WTTC), despite economic and geopolitical challenges last year, the travel and tourism sector showed significant resilience, with a remarkable 22% year-on-year growth, reaching a total value of $7.70 trillion. This recovery accounted for 7.6% of the global economy, marking the highest sector contribution since 2019.
Moreover, the travel and tourism sector is rapidly approaching its pre-pandemic peak of 2019, with a remarkable recovery rate of over 95%. Projections indicate that in 2023, the sector is expected to hit a value of $9.50 trillion, representing a mere 5% shortfall compared to the levels achieved in 2019, which was the peak period for travel.
Further, the hotel industry is benefiting from strong and resilient summer travel demand, bringing positive prospects. Estell Weingrod, Head of European Leisure Research at J.P. Morgan, highlighted that amidst rising overhead costs caused by inflation, hotels have managed to successfully pass on the increased expenses to consumers, leading to higher RevPAR (Revenue Per Available Room).
On top of it, the increasing popularity of social media among millennials has elevated leisure travel to a symbol of social status, leading to greater investments in leisure travel activities. In 2022, the global leisure travel market reached a substantial value of $804.40 billion.
Looking ahead, the market is projected to expand significantly and reach $1.33 trillion by 2028, exhibiting a CAGR of 8.8% during the period from 2022 to 2028.
Given such a bullish backdrop, the travel industry will most likely remain in a bright spot. Thus, owning the shares of fundamentally strong travel companies TNL, PLYA, and BVH could be a wise choice. To that end, let us now dig deeper into the fundamentals of the featured stocks:
Travel + Leisure Co. (TNL)
TNL provides hospitality services and products in the United States and worldwide. The company operates in two segments: Vacation Ownership; and Travel and Membership. Its offerings include developing, marketing, and selling Vacation Ownership Interests (VOIs) to individual consumers and property management services at resorts.
On June 30, TNL paid its shareholders a dividend of $0.45 per share. The company’s annual dividend of $1.80 translates to a 4.36% yield on the prevailing prices, while its four-year average dividend yield is 3.83%. Its dividend payouts have grown at a CAGR of 6.7% over the past five years.
On April 25, TNL partnered with Caravan Wellness, a prominent provider of wellness video content worldwide. Through this partnership, club members of TNL gain exclusive access to a thoughtfully curated collection of health and wellness video content, enabling them to prepare comprehensively for their upcoming dream vacations by nurturing their minds, body, and soul.
Commenting on this, Fiona Downing, Chief Membership Officer at TNL, said, “Partnering with Caravan Wellness helps us further differentiate Travel + Leisure GO as the best leisure travel club on the market, with an exciting list of benefits tailored specifically to the diverse needs of today’s busy traveler.”
For the second quarter, which ended June 30, 2023, TNL’s net revenues increased 2.9% year-over-year to $949 million, while its operating income and adjusted net income amounted to $183 million and $100 million, respectively.
The company’s adjusted EPS rose 4.7% from the year-ago value to $1.33. In addition, its adjusted EBITDA improved by 2.6% from the prior-year quarter to $236 million.
Street expects TNL’s revenue and EPS for the third fiscal quarter (ending September 30, 2023) to increase 6.2% and 19.1% year-over-year to $995.47 million and $1.52, respectively. Moreover, the company surpassed the EPS estimates in three of its trailing four quarters, which is promising.
The stock has gained 7.3% year-to-date to close the last trading session at $39.07.
TNL’s POWR Ratings reflect this robust outlook. The stock has an overall B rating, translating to Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has a B grade for Value, Momentum, and Quality. In the 22-stock B-rated Travel - Hotels/Resorts industry, it is ranked #5. Click here to see TNL’s ratings for Growth, Stability, and Sentiment.
Playa Hotels & Resorts N.V. (PLYA)
PLYA owns, develops, and operates resorts in prime beachfront locations in Mexico and the Caribbean. It also organizes weddings, lodging, dining, entertainment, meetings, events, and other hospitality services in its hotels.
On March 13, PLYA announced it would manage a new Wyndham Alltra resort in the Dominican Republic. Under the agreement, PLYA will manage a 404-room resort in Samaná, Dominican Republic, which will be renovated and rebranded as Wyndham Alltra Samaná, focusing on serving guests of all ages.
The resort is expected to open in the third quarter of 2023 and generate a new stream of revenues for the company.
In the first quarter that ended March 31, 2023, PLYA’s revenue increased 24.7% year-over-year to $273.80 billion. Its operating income grew 42.4% from the year-ago value to $76.97 million.
The company’s adjusted net income amounted to $49.02 million and $0.31 per share, representing an increase of 54.1% and 63.2% from the prior-year quarter, respectively. Also, its adjusted EBITDA increased 28% from the year-ago value to $98.49 million.
Analysts expect PLYA’s revenue to increase 7.5% year-over-year to $237.75 million for the second quarter (ended June 30, 2023), while its EPS is expected to be $0.14 in the same period. Additionally, the company surpassed the revenue estimates in each of the trailing four quarters and EPS estimates in three of the trailing four quarters.
PLYA’s shares have gained 32.1% over the past nine months and 22.4% year-to-date to close the last trading session at $7.99.
PLYA’s strong fundamentals are reflected in its POWR Ratings. It has an overall rating of B, which equates to Buy in our proprietary rating system.
It has a B grade for Value, Momentum, and Quality. Within the same B-rated industry, it is ranked #3. Click here to see PLYA’s ratings for Growth, Stability, and Sentiment.
Bluegreen Vacations Holding Corporation (BVH)
BVH operates as a vacation ownership company. The company markets and sells VOI and manages resorts in leisure and urban destinations. In addition, it provides resort management, mortgage, title, reservation, construction design, and development services.
On June 26, BVH paid its shareholders a quarterly dividend of $0.20 per share on its Class A and Class B common stock.
The company’s annual dividend translates to a 2.19% yield on the prevailing prices, while its four-year average dividend yield is 0.90%. Its dividend payouts have grown at CAGRs of 66.5% and 39.7% over the past three and five years, respectively.
On May 15, BVH acquired two properties in the historic Printers Alley district to expand its presence in the Nashville, Tennessee market. The first property, a former 15-story hotel featuring 86 rooms and two penthouse suites, will be offered as vacation ownership interests to interested parties.
Meanwhile, the second property, an adjacent two-story building formerly known as the Nashville Trust Company, will undergo conversion into a sales preview center. This acquisition aligns with the company's overarching strategy of providing its owners with a wide array of vacation experiences in highly sought-after and appealing locations across the country.
BVH’s total revenues for the first quarter (ended March 31, 2023) increased 12.3% year-over-year to $219.07 million. During the same period, the company’s net income and EPS came in at $15.41 million and $0.71, respectively. While its adjusted EBITDA amounted to $34.05 million.
The consensus EPS estimate of $1.11 for the second quarter (ended June 30, 2023) represents a 26.7% increase year-over-year. The consensus revenue estimate of $250.12 million for the same quarter reflects a 6.2% improvement year-over-year. Moreover, the company topped the EPS estimates in three of the trailing four quarters and revenue estimates in each of the trailing four quarters.
Over the past nine months, the stock has gained 122.8% to close the last trading session at $37.31.
It’s no surprise that BVH has an overall rating of B, which equates to Buy in our proprietary rating system. It has an A grade for Sentiment and a B for Value, Momentum, and Quality. Out of 22-stocks in the same industry, it is ranked #2.
In addition to the POWR Ratings we’ve stated above, we also have BVH’s ratings for Growth and Stability. Get all BVH ratings here.
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TNL shares were trading at $40.42 per share on Thursday afternoon, up $1.35 (+3.46%). Year-to-date, TNL has gained 13.62%, versus a 20.75% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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