We recently compiled a list of the 10 Best Travel and Leisure Stocks to Buy Now. In this article, we are going to take a look at where Expedia Group, Inc. (NASDAQ:EXPE) stands against the other travel and leisure stocks.
Prior to COVID-19 pandemic, travel and tourism sector was one of the most important sectors in the world economy. The sector made up ~10% of global GDP and was responsible for 320 million jobs worldwide, as reported by the IMF. After first case was identified in Wuhan, China, COVID-19 was declared a pandemic outbreak. Due to lockdowns and ban on international travel, global hospitality and tourism sector saw significant losses.
Recovery Phase of The Industry
As per first UNWTO World Tourism Barometer of the year, international tourism closed 2023 at ~88% of pre-pandemic levels, with estimated ~1.3 billion international arrivals. UNWTO World Tourism Barometer gives a brief overview of the sector’s performance in 2023, assessing recovery by global region, sub-region and destination. The Middle East led this recovery in relative terms. It was the only region to overcome pre-pandemic levels as the region saw arrivals 22% above 2019. Europe touched 94% of 2019 levels, aided by intra-regional demand along with travel from the US.
Experts believe that stage is all set for resilience and rapid recovery of travel and tourism sector, with pre-pandemic numbers anticipated by 2024 end. Rebound is having a solid impact on several economies, jobs, growth and opportunities for communities.
Despite a range of economic uncertainties and geopolitical tensions, the travel & tourism sector continues to thrive. International tourism flows bounced back at a strong pace and should fully recover by 2024 end. That being said, recovery remained uneven, and challenges still remain.
After declining ~68.3% in 2020 – which was marginally below the drop of ~72.3% globally – by 2022-end, international tourist arrivals to OECD countries recovered to ~77.3% of 2019 levels. This was ahead of ~66.6% globally. OECD countries made up ~65% of international tourism arrivals in 2022, exhibiting a rise from ~56% in 2019. This highlighted stronger performance as compared to non-OECD countries since the COVID-19 pandemic.
2023 built the momentum, and evidenced that there is still an unwavering passion for travel. This paves the way for a strong year in 2024.
Future Prospects of Travel and Tourism Industry
The World Travel & Tourism Council expects record-breaking year for travel & tourism sector in 2024. Data suggests that the sector’s global economic contribution is expected to touch all-time high of $11.1 trillion. Travel & Tourism should be able to make additional contribution of $770 billion over the previous record. This will help the industry regain its stature of global economic powerhouse. By 2034, travel and tourism is expected to account for ~11.4% of the entire economic landscape, with the contribution as high as $16 trillion to broader global economy.
Tourism and hospitality is on the cusp of disruption. Shift in source markets and destinations, higher demand for luxury traveling, and innovative business strategies are expected to improve the industry landscape.
As per McKinsey & Company, China’s $744 billion domestic travel market has been categorized as the world’s 2nd largest. Even after the opening up of borders, Chinese travellers prefer staying close to home. Resultantly, domestic destinations continue to benefit. Changchun (known for Changchun Ice and Snow Festival) saw 160% year over year growth in visitors in 2023. In 2024, domestic travel during Lunar New Year surpassed pre-pandemic levels by ~19%. As a result of this, some Chinese travel and tourism stocks saw their share prices move northwards.
China’s domestic travel market should grow by ~12% annually and surpass the United States’ to be counted as the world’s largest by the year 2030.
One of the signs of increased demand in the travel industry is growth in aircraft orders in the aerospace industry. We covered this back in July in 10 Best Aerospace and Defense Stocks to Buy Now, here’s a short excerpt from that article:
“While sharing his insights on commercial aviation at the Morningstar Investment Conference in Chicago on June 26, Tony Bancroft from Gabelli Funds said that he had noticed a significant growth in aircraft orders lately, with both Airbus and Boeing having a 12-year backlog of orders. He believes there are three reasons driving it. The first catalyst, according to him, is China which accounts for 20% of the growth in orders to cater to the growing middle class in both China and India who want to travel more. Another critical factor he cited during his talk was that business travel has finally returned to the 2019 pre-pandemic level. Lastly, Tony highlighted the rising middle class in the United States, and the world, which is increasing air travel and contributing to the economic growth in the industry.”
Our Methodology:
For this list, we sifted through 2 ETFs i.e., Defiance Hotel, Airline, and Cruise ETF and Amplify Travel Tech ETF. Then, we chose the companies with most hedge fund investors holding stakes in them, by using Insider Monkey’s Q1 2024 database. These stocks are in ascending order of hedge fund investors having positions in them.
“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).”
People interacting with a travel website, searching for the perfect destination.
Expedia Group, Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders: 62
Expedia Group, Inc. (NASDAQ:EXPE) is an online travel company, which carries out operations through segments such as B2C, B2B, and trivago.
While releasing its financial results for 1Q 2024, it reported total gross bookings of $30.2 billion, exhibiting a rise of 3% as compared to 2023. Its revenue of $2.9 billion went up by 8% as compared to 2023. B2B revenue came in at $833 million, reflecting an increase of 25% as compared to 2023.
Piper Sandler covered the shares of Expedia Group, Inc. (NASDAQ:EXPE), and downgraded its rating from “Overweight” to “Neutral.” The company also decided to cut its target price from $175.00 to $145.00 on 3rd May. This can be because of not-so-strong 1Q 2024 results. The company saw less robust gross bookings. Vrbo’s recovery after re-platforming was slower than anticipated, which impacted its gross bookings.
However, some experts believe that it is all set to soar from the current levels. The company transitioned to unified platform over previous few years. Expedia Group, Inc. (NASDAQ:EXPE) continues to grow its presence internationally too. The company plans to make use of vast spending data which it collects to build out new media network. Given momentum in the ad spending in the last year, the company might see supplemental revenue streams. As a result, the company might see growth in emerging markets such as China and in vacation rental market.
The average price target for the company is $142.29. This is based on 25 Wall Street analysts’ 12-month price objectives, which were issued in previous 3 months.
62 hedge funds made investments in this company, as per Insider Monkey’s Q1 database.
Brown Capital Management released its first quarter 2024 investor letter. The company mentioned about Expedia Group, Inc. (NASDAQ:EXPE). Here is what it said:
“Expedia Group, Inc. (NASDAQ:EXPE) is the largest online travel agency (OTA) in the U.S., offering a wide range of travel products, including flights, hotels, car rentals, cruises and vacation packages. Our original thesis was that increasing online travel penetration would provide solid growth and that significant margin expansion could be achievable. Since we first invested in Expedia eight years ago, there has indeed been a significant shift in travel spending toward online platforms, with penetration rates expanding considerably. While this aligns with our early expectations, the market for online travel is now much more penetrated, providing less opportunity for future growth. In addition, Expedia has been unable to meaningfully narrow the margin gap with its closest competitor, Booking Holdings, due to inconsistent execution and an unwieldy proliferation of brands within the company’s portfolio. Given the company’s more mature market position and its lagging margin performance, we decided to sell Expedia out of the Fund.”
Overall EXPE ranks 3rd on our list of the best travel and leisure stocks to buy. You can visit 10 Best Travel and Leisure Stocks to Buy Now to see the other travel and leisure stocks that are on hedge funds’ radar. While we acknowledge the potential of EXPE as an investment, our conviction lies in the belief that AI stocks hold greater promise for delivering higher returns and doing so within a shorter timeframe. If you are looking for an AI stock that is more promising than EXPE but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
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Disclosure: None. This article is originally published at Insider Monkey.
