We recently published a list of 7 Cheap Travel Stocks to Buy According to Analysts. In this article, we are going to take a look at where GreenTree Hospitality Group Ltd. (NYSE:GHG) stands against the other 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.
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).
A luxury hotel in a busy city center, showcasing the quality of the hospitality group.
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).
Overall GHG ranks 5th on our list of cheap travel stocks to buy according to analysts. While we acknowledge the potential of GHG 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 GHG 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.
