In this article, we will discuss the 7 Cheap Travel Stocks to Buy According to Analysts.
Travel continues to roar back after the COVID-19 pandemic devasted the industry. An increase in regional trips, newly emerging travelers, and new destinations continue to power steady spending. McKinsey believes that domestic travel should grow by 3% annually and touch 19 billion lodging nights per year by 2030. Over a similar time frame, international travel is expected to ramp up to the historical average of 9 billion nights. Travel spending should follow a similar trajectory, with an expected $8.6 trillion in traveler outlays in 2024. This represents ~9% of this year’s global GDP.
Thanks to economic stability, pent-up demand, and recovery momentum, the spending should outpace $2 trillion by 2028 according to the GBTA Business Travel Index Report.
Trends in the Business Travel Industry
As per GBTA, the business travel industry remains resilient as the sector left the global pandemic behind and continues to move to a new era of post-pandemic stabilization. For 2024, the global business travel spending is expected to touch $1.48 trillion by year-end, an increase on 2019 spending which was a previous record at $1.43 trillion. Many top and well-established business travel markets globally have returned to or are close to pre-pandemic levels. This should reinforce the momentum of the recovery and boost spending.
Recovery in business travel varies by region. Asia Pacific was tagged as the fastest-growing region in 2023 (at 36%), followed by Western Europe (coming at 33%) and North America (at 25%). The bounce back in recovery in 2023 was led by the US, Middle East and Africa, and Latin America. They all achieved 100% or more as compared to the 2019 spending numbers. For 2024, China and the US should continue to lead as the top 2 markets, respectively, when it comes to business travel spending.
Notably, the potential upside impacts for the broader business travel industry are economic stability, technological advancements, mainly in AI, and better-than-expected economic growth in critical markets such as the US and India. TravelTech Show stated that a total of 100 travel and travel technology company representatives participated in the survey, carried out in April this year. Upon asking how they plan to invest over the upcoming year, ~56% pointed to AI as compared with ~32% of representatives planning to spend on booking and reservation systems. However, ~20% of representatives are expecting to invest in mobile and apps.
How Artificial Intelligence Redefines the Travel Industry
As per Oracle, the travel and tourism sector is expected to reach $8.6 trillion by 2025. This growth has a strong contribution from technology, with AI playing a critical role in this trend. AI continues to revolutionize the hotel experience by providing tailored services keeping in view the guest’s interests. Predictive analytics powered by AI remains essential in decision-making for a hotel. AI is expected to predict demand and calculate prices after considering mountains of data.
Apart from focusing on innovation to enhance the patent portfolios, travel & tourism companies continue to make strategic investments in AI. These investments are targeted to secure lucrative deals with partners, which will help position themselves as the frontrunner in industry advancements.
In Q2 2024, the number of AI-related deals in this industry went up by 75% as compared with Q2 2023, reported Hotelmanagement-network.com. On a quarterly basis, there was a ~600% rise in the number of deals in Q2 2024 as compared with the previous quarter. The US continues to top the list in AI adoption in the travel & tourism industry, possessing the highest number of AI-related patents, jobs, and deals. However, China, the UK, the Netherlands, and Mexico all have maintained significant positions in AI adoption in the travel & tourism industry.
As per Precedence Research, the global generative AI in travel market size has been pegged at US$632.18 million in 2022, which should touch around US$3.58 billion by 2032. This exhibits a CAGR of ~18.94% between 2023 and 2032. Generative AI is expected to provide the best options for travel mediums like air travel, rail travel, or several other sources of travel together with accommodation services after considering consumers’ requirements.
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Our methodology
To list the 7 Cheap Travel Stocks to Buy According to Analysts, we conducted extensive research and used the Finviz screener and online rankings. After getting an initial list of 20 stocks, we narrowed down on the stocks that were trading lower than the forward earnings multiple of ~23.65x (since the broader market trades at a forward multiple of ~23.65, as per WSJ). Finally, we ranked the stocks according to their potential upside, as of September 27. We have also added the hedge fund sentiment around each stock, as of Q2 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points (see more details here).
7 Cheap Travel Stocks to Buy According to Analysts
7) Royal Caribbean Cruises Ltd. (NYSE:RCL)
Average Upside Potential: 5.33%
Forward P/E as of September 27: 13.46x
Number of Hedge Fund Holdings: 48
Royal Caribbean Cruises Ltd. (NYSE:RCL) operates as a cruise company worldwide.
Royal Caribbean Cruises Ltd. (NYSE:RCL)’s stock is expected to be aided by improved investor confidence and a strong rebound in leisure travel demand. The company announced that it has completed its private offering of $1.5 billion aggregate principal amount of 5.625% Senior Notes due 2031. It focuses on using the proceeds from the sale of the notes to redeem and/or repay some of its indebtedness.
In Q2 2024, Royal Caribbean Cruises Ltd. (NYSE:RCL) saw healthy demand in the North American market, with strong bookings for 2025. The new ship offerings and private destinations, like Perfect Day at CocoCay, have been driving growth.
Royal Caribbean Cruises Ltd. (NYSE:RCL) continues to target a diverse customer base with new experiences throughout multiple brands, which should help the company achieve revenue and earnings growth. The company expects a double-digit yield growth and solid earnings increase for 2024. It sees a multiyear margin opportunity, with EBITDA margins expected to be 200 bps – 300 bps above 2019 levels by year-end. It raised its full-year guidance, with net yield growth expected at 10.4% – 10.9%.
The company has been experiencing healthy repeat rates and continues to attract new customers, which provides revenue growth visibility. Royal Caribbean Cruises Ltd. (NYSE:RCL), through disciplined growth and moderate yield growth, targets to take a greater share of the rapidly growing $1.9 trillion global vacation market.
Tigress Financial upped its price objective on the company’s shares from $155.00 to $210.00, giving a “Buy” rating on 2nd August. Ariel Investments, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:
“Global cruise vacation company, Royal Caribbean Cruises Ltd. (NYSE:RCL), advanced on another quarterly earnings beat and subsequent raise in full-year guidance. Stronger than anticipated consumer demand, healthy onboard spend, robust pricing and solid cost containment lifted recent results. Additionally, RCL is benefitting from several new megaships, more island destinations and re-entry into the China market. The resiliency of the core cruise consumer, in combination with management’s superior operational expertise and revised earnings outlook, lays the foundation for RCL to exceed its three-year strategic imperative, the Trifecta Program, a year earlier than expected.”
6) Trip.com Group Limited (NASDAQ:TCOM)
Average Upside Potential: 8.24%
Forward P/E as of September 27: 16.37x
Number of Hedge Fund Holdings: 52
Trip.com Group Limited (NASDAQ:TCOM) operates as a travel service provider for accommodation reservations, transportation ticketing, corporate travel management, and other travel-related services.
Trip.com Group Limited (NASDAQ:TCOM)’s market share is expected to be improved by effective execution, supply chain improvements, enriched content offerings, and strong service quality. The company should also benefit from increased demand for higher-margin outbound travel. While the company’s growth trajectory is expected to be aided by healthy strategic partnerships and digital initiatives, its revenue growth should stem from a stable labor market, healthy consumer spending, and increased disposable income.
Market experts opine that China’s consumers have been pivoting their spending toward services instead of products and goods. Notably, Trip.com Group Limited (NASDAQ:TCOM) has been tagged as the best-in-class company in China providing travel services. While Trip.com Group Limited (NASDAQ:TCOM) focuses on leveraging the potential of AI to revolutionize the broader travel industry, the upcoming quarters are expected to be aided by strong travel demand, primarily for cross-border travel.
China’s proactive visa-free policies for the citizens of multiple countries, which includes prominent European nations, should continue to act as critical tailwinds for Trip.com Group Limited (NASDAQ:TCOM)’s growth. In Q2 2024, the company saw a net revenue of RMB12.8 billion (US$1.8 billion), reflecting a 14% increase from the same period in 2023. Its net revenue for Q2 2024 went up by 7% as compared to the previous quarter, mainly because of stronger travel demand, primarily during holiday periods.
Benchmark reaffirmed a “Buy” rating on the shares of Trip.com Group Limited (NASDAQ:TCOM), setting a price target of $72.00 on 27th August.
5) Wyndham Hotels & Resorts, Inc. (NYSE:WH)
Average Upside Potential: 10.78%
Forward P/E as of September 27: 17.21x
Number of Hedge Fund Holdings: 26
Wyndham Hotels & Resorts, Inc. (NYSE:WH) operates as a hotel franchisor in the US and internationally.
The company’s long-term growth trajectory is expected to be aided by its focus on expanding room share in the hotel industry, brand intangible assets, and switching cost advantage. Wyndham Hotels & Resorts, Inc. (NYSE:WH)’s growth strategy revolves around focusing on the economy and mid-scale segments. Its successful expansion strategy and ability to adapt to market demands should continue to act as tailwinds. Wall Street remains optimistic about the resilient and highly cash-generative nature of the company’s business model.
Market experts opine that room growth rates of Wyndham Hotels & Resorts, Inc. (NYSE:WH) are expected to improve. This improvement should stem from factors like ECHO developments, enhanced franchisee retention, and expansion in international markets. Wyndham Hotels & Resorts, Inc. (NYSE:WH) appears to be well-placed to benefit from incremental EBITDA growth drivers, which include the ECHO development program and additional fee streams. In addition, its development team was able to sign 33% more deals than the previous year, resulting in a record global development pipeline.
In Q2 2024, Wyndham Hotels & Resorts, Inc. (NYSE:WH) generated a net income of $86 million as compared to $70 million in Q2 2023. This reflects the company’s higher adjusted EBITDA, a benefit in connection with the reversal of a spin-off-related matter, and a lower effective tax rate. For FY 2024, it expects adjusted EBITDA in the range of $690 million – $700 million.
The Goldman Sachs Group assumed coverage on the shares of Wyndham Hotels & Resorts, Inc. (NYSE:WH) on 18th September. They gave a “Buy” rating and a price target of $96.00. As per Insider Monkey’s Q2 2024 data, 26 hedge funds were long Wyndham Hotels & Resorts, Inc. (NYSE:WH).
4) GreenTree Hospitality Group Ltd. (NYSE:GHG)
Average Upside Potential: 11.46%
Forward P/E as of September 27: 6.53x
Number of Hedge Fund Holdings: 2
GreenTree Hospitality Group Ltd. (NYSE:GHG) develops leased-and-operated, and franchised-and-managed hotels and restaurants in the People’s Republic of China.
GreenTree Hospitality Group Ltd. (NYSE:GHG) continues to enjoy a broad portfolio of diverse brands, that span from the economy to mid-scale, up-scale, and luxury segments of the hospitality industry primarily in China. Moving forward, its strong membership base, expansive booking network, and superior system management with moderate charges should act as principal growth enablers. Also, the company has been targeting closer relationships with all of its clients and partners through offering a diverse brand portfolio.
GreenTree Hospitality Group Ltd. (NYSE:GHG) continues to focus on maintaining its growth trajectory, primarily in Tier 3 and lower cities in South China. The leisure travel demand continues to increase, mainly in third-tier cities, which should act as a tailwind over the near term. In Q2 2024, GreenTree Hospitality Group Ltd. (NYSE:GHG) saw its total revenue coming at RMB 329.7 million (US$45.4 million), which implies a decline of 20.5% on a YoY basis. The company witnessed challenges as China’s economy continued to recover. Notably, consumers and businesses were cautious in discretionary spending, impacting its overall performance.
However, GreenTree Hospitality Group Ltd. (NYSE:GHG) continued to execute its strategy to return its restaurant business to profitability by moving away from leased-and-operated restaurants in supermarkets and regional shopping centers towards franchised street stores. Therefore, its net income turned positive in Q2 2024 after breaking even last quarter as compared to losses in both corresponding quarters a year ago.
The company’s growth is expected to be driven by its focus on growing the number of franchised street stores and stores with stable consumer traffic.
Insider Monkey’s Q2 2024 data revealed that 2 hedge funds (out of 912 hedge funds tracked by Insider Monkey) held stakes in GreenTree Hospitality Group Ltd. (NYSE:GHG).
3) Marriott Vacations Worldwide Corporation (NYSE:VAC)
Average Upside Potential: 14.38%
Forward P/E as of September 27: 10.75x
Number of Hedge Fund Holdings: 26
Marriott Vacations Worldwide Corporation (NYSE:VAC) is engaged in the business of operating hotels. It provides vacation ownership, exchange, rental and resort, property management, management of other resorts, and lodging properties.
Marriott Vacations Worldwide Corporation (NYSE:VAC) focuses on reducing leverage to 3 times by 2025 end and returning cash to shareholders. It recognizes the need to adjust promotions and strategies to improve VPG (volume per guest), mainly among first-time buyers. The company anticipates tour growth to increase by 2 – 3 points from the packaged pipeline and plans to open new resorts in locations such as Waikiki, Savannah, Charleston, Thailand, and Bali over the upcoming few years.
In Q2 2024, the company has seen its product costs coming in lower than anticipated, which should be beneficial for Marriott Vacations Worldwide Corporation (NYSE:VAC)’s margins. Its commitment to expanding the resort portfolio and improving the sales performance, while at the same time managing financial risks, exhibits a balanced approach to growth and stability.
Recently, Marriott Vacations Worldwide Corporation (NYSE:VAC) announced a 20-year license agreement with Sonder. This should add ~9,000 rooms to the former’s portfolio by the year’s end. Therefore, Wall Street believes that this can help its net unit growth. As per Insider Monkey’s Q2 2024 data of 912 hedge funds, the company was in the portfolios of 26 hedge funds.
Baron Funds, an investment management firm, released its fourth quarter 2023 investor letter. Here is what the fund said:
“Shares of timeshare company Marriott Vacations Worldwide Corporation (NYSE:VAC) fell in the quarter, driven by soft sales of timeshare units due to higher interest rates and the slow ramp of a new product offering. A default rate that was higher than the company had anticipated forced it to take a charge to increase its reserves, pressuring earnings and cash flow. We opted to exit our position due to the increased stress on its consumer base and a resulting increase in financial leverage, which we found inappropriate for a focused fund.”
2) Despegar.com, Corp. (NYSE:DESP)
Average Upside Potential: 33.75%
Forward P/E as of September 27: 12.44x
Number of Hedge Fund Holdings: 24
Despegar.com, Corp. (NYSE:DESP) is an online travel company, offering a range of travel and travel-related products to leisure and corporate travelers.
Despegar.com, Corp. (NYSE:DESP)’s strategic focus on high-margin package sales and non-air revenues should continue to drive growth in the upcoming quarters. While the expansion of loyalty programs and mobile app usage should as growth drivers, Despegar.com, Corp. (NYSE:DESP) is expected to be aided by strong demand in Brazil and Mexico. The cost efficiencies in various business areas might help in the EBITDA growth.
As a result of cost reductions and AI utilization, Despegar.com, Corp. (NYSE:DESP) expects that gross margin expansion will continue. The H2 2024 should generate stronger cash flow, with Q4 2024 being a significant quarter. The company plans to capitalize on technological advancements and strategic partnerships. The recent divestiture of its destination management company, BDExperience, to World2Meet, demonstrates a strategic shift. It enables Despegar.com, Corp. (NYSE:DESP) to focus on its core online travel operations and expand its reach in the Latin American market.
The company maintains its focus on investing in B2B and white-label offerings, entering partnerships with global ride-hailing apps, retailers such as Elektra, and financial institutions like Scotiabank. Market experts believe that these alliances should drive additional growth and market penetration. Despegar.com, Corp. (NYSE:DESP)’s focus on non-air revenue, like travel packages and hotel bookings, is resulting in higher take rates and margins.
Cantor Fitzgerald reaffirmed an “Overweight” rating, setting a $17.00 price objective on 16th August.
1) MGM Resorts International (NYSE:MGM)
Average Upside Potential: 41.34%
Forward P/E as of September 27: 13.16x
Number of Hedge Fund Holdings: 44
MGM Resorts International (NYSE:MGM) owns and operates casino, hotel, and entertainment resorts in the US and internationally.
Wall Street analysts continue to be optimistic about MGM Resorts International (NYSE:MGM)’s growth prospects after China’s stimulus to boost its economy. The initiatives announced are anticipated to improve the business of casinos, which means there will be increased demand for travel-related services.
The company’s online platform, BetMGM, turned a profit, mainly due to its iGaming business. Additionally, MGM Resorts International (NYSE:MGM) announced plans for significant investments in luxury resorts on the Las Vegas strip and digital businesses, targeting mid-teens FCF per share growth through 2028. BetMGM expects a rise in revenue for the latter half of this year and continuing into 2025. The company has been successful in surpassing targets in both customer acquisition and retention, which should translate into increased YoY revenue.
Wall Street analysts expect upward revisions of estimates for MGM Resorts International (NYSE:MGM) as a result of performance in Las Vegas and China and they anticipate healthy capital returns.
In Q2 2024, the company’s consolidated net revenues came in at $4.3 billion, reflecting an increase of 10% compared to the prior-year quarter. This growth was mainly because of an improvement in revenue at MGM China as a result of the continued ramp-up of operations post the removal of COVID-19-related entry restrictions in Macau in Q1 2023.
Analysts at Susquehanna upped their target price on the shares of MGM Resorts International (NYSE:MGM) from $54.00 to $55.00, giving a “Positive” rating on 1st August.
Longleaf Partners, managed by Southeastern Asset Management, released its fourth quarter 2023 investor letter. Here is what the fund said:
“MGM Resorts International (NYSE:MGM) & Hyatt – Hospitality companies MGM Resorts and Hyatt were both strong performers in the fourth quarter and for the year, outperforming expectations that the post-COVID travel rebound would ease in 2023. Casino and online gaming company MGM saw double-digit revenue growth and strong 2023 bookings in Las Vegas in the first half, which moderated in the second half but remained solid. A cybersecurity attack negatively impacted 3Q results, but MGM does not expect the $100 million hit to have a material effect on its financial condition and operational results for the year. MGM bought back discounted shares at a 15% annualized rate and authorized another $2 billion buyback in 4Q, which represents another 15% of the company.”
While we acknowledge the potential of MGM as an investment, our conviction lies in the belief that some deeply undervalued AI stocks hold greater promise for delivering higher returns, and doing so within a shorter timeframe. If you are looking for a deeply undervalued AI stock that is more promising than MGM but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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