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Kritika Sarmah

Top 3 Travel Stocks for Smart Investors

The global hotels, resorts, and cruise industry is rebounding post-pandemic, driven by a resurgence in travel demand, focusing on high-quality experiences, digitalization, and strategic partnerships. So, smart investors could consider investing in top travel stocks Bluegreen Vacations Holding Corporation (BVH), Travel + Leisure Co. (TNL), and Atour Lifestyle Holdings Limited (ATAT).

As we approach the holiday season, a surge in travel is expected, with an estimated 160 million Americans planning trips, with a preference for hotels and a focus on family gatherings. Despite past disruptions, travelers express confidence in a smoother travel experience, signaling a rebound in the travel industry.

With personal income rising by $57.1 billion (0.2% monthly) and disposable personal income increasing by $63.4 billion (0.3%) in October, individuals have more funds for discretionary spending, including travel. This surge in spending power is likely to drive increased demand for travel-related services such as accommodation, transportation, dining, and entertainment.

The worldwide travel and tourism market is predicted to grow at a 4.4% CAGR to $1.02 trillion by 2027.

Moreover, the thriving expansion of the travel and tourism sector intricately influences the trajectory of hotels and resorts. With the escalation of disposable incomes and the enhanced accessibility of international travel, there is a palpable surge in the demand for accommodations.

The U.S. hotels, resorts, and cruise lines market is expected to grow at a CAGR of 9.3% from 2022 to 2030, and the global market is expected to grow at a CAGR of 17.4% from 2022 to 2030.

Considering these conducive trends, let’s look at the fundamentals of the three best Travel - Hotels/ Resorts stocks, starting with number 3.

Stock #3: Bluegreen Vacations Holding Corporation (BVH)

BVH is a vacation ownership company that sells vacation ownership interests, manages resorts in popular destinations, and offers various related services, including financing and management for homeowners' associations.

On November 15, BVH, in partnership with Bass Pro Shops, acquired Stonewater Cove Resort and Club in Missouri, expanding its presence in the Ozark Mountains. The picturesque wilderness retreat spans 470 acres, featuring lakeside cottages, a clubhouse, pool, hot tub, boat dock, and various outdoor amenities.

This acquisition aligns with BVH's strategy to offer diverse vacation experiences, meeting the rising demand for leisure travel. Stonewater Cove Resort is the second addition to BVH in 2023, following the earlier acquisition of Branson Cedars Resort.

For the third quarter ended September 30, 2023, BVH reported total revenues of $267.94 million, up 6.8% year-over-year. The company's EPS and adjusted EBITDA attributable to shareholders grew 5% and 1.7% from the prior-year quarter to $1.25 and $42.56 million, respectively.

As of September 30, 2023, its total assets amounted to $1.54 billion, compared to total assets of $1.40 billion as of December 31, 2022.

Street expects BVH's revenue and EPS to grow 1.7% and 12.5% year-over-year to $222.86 million and $0.80 for the first quarter ending March 2024, respectively. The company surpassed the revenue estimates in each of the trailing four quarters, which is impressive.

BVH’s shares have gained 236.1% over the past year and 197.2% year-to-date to close the last trading session at $74.17.

BVH’s POWR Ratings reflect its positive prospects. The stock has an overall rating of B, equating to a Buy in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.

BVH has a B grade for Growth and Sentiment. Within the B-rated Travel - Hotels/ Resorts industry, it is ranked #5 out of 21 stocks.

In addition to the POWR Ratings stated above, one can access BVH’s additional Value, Momentum, Stability, and Quality ratings here.

Stock #2: Travel + Leisure Co. (TNL)

TNL provides global hospitality services through two segments: Vacation Ownership (selling vacation ownership interests and property management) and Travel and Membership (managing various travel businesses, memberships, and direct-to-consumer rentals, including private-label travel booking technology solutions).

On November 8, TNL declared a regular cash dividend on its common stock of $0.45 per share, payable on December 29. The company pays an annual dividend of $1.80, which translates to a yield of 4.64% on the current market price.

On September 20, TNL and Sports Hospitality Ventures launched Sports Illustrated Resorts, a network of sports-themed resorts and lifestyle complexes. The first destination, planned for Tuscaloosa near the University of Alabama, will include a full-service hotel, vacation club, and residential condominiums.

The collaboration leverages TNL's expertise to develop the new Sports Illustrated vacation club product, offering flexible points for repeat reservations. The Tuscaloosa resort is expected to open in late 2025, contributing to incremental growth from the second half of 2025 onward.

For the third quarter, which ended September 30, 2023, TNL's net revenues amounted to $986 million, up 5.2% from the previous-year quarter. The company generated operating income of $207 million, up 9.5% from the prior year's quarter. Its EPS and adjusted EBITDA increased 8% and 6% year-over-year to $1.49 and $248 million, respectively.

The company anticipates an adjusted EBITDA in the range of $233 million to $248 million and projects an adjusted EPS of approximately $1.32 to $1.46 for the fourth quarter of 2023.

TNL’s revenue and EPS are expected to grow 4.9% and 6.4% year-over-year to $942.99 million and $1.38 for the fourth quarter ending December 2023, respectively. The company surpassed the EPS estimates in each of the trailing four quarters.

TNL’s shares increased 9.4% over the past month and 6.6% year-to-date to close the last trading session at $38.81.

TNL’s POWR Ratings reflect this sound outlook. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

The stock has a B grade for Value and Quality. Within the same industry, it is ranked #4.

Click here for TNL’s additional Growth, Momentum, Stability, and Sentiment ratings.

Stock #1: Atour Lifestyle Holdings Limited (ATAT)

Headquartered in Shanghai, China, ATAT offers themed hotels, including music, basketball, and literary hotels, catering to diverse lifestyles. The company provides hotel management services and sells related products.

On December 6, ATAT announced an upsized secondary offering of 9,600,000 American depositary shares (ADSs) at $15.80 per ADS by Legend Capital affiliates, with a 30-day option for underwriters to purchase up to 1,440,000 additional ADSs. Legend Capital is expected to receive approximately $151.70 million in gross proceeds.

In the third quarter ended September 30, 2023, ATAT’s net revenues grew 93.1% year-over-year to RMB1.29 billion ($177.37 million). The company's income from operations increased 130% from the prior-year quarter to RMB341.34 million ($46.78 million).

It reported adjusted net income and EBITDA of RMB271.99 million ($37.28 million) and RMB380.08 million ($52.09 million), up 144.7% and 122.4% from the previous-year quarter, respectively.

Analysts expect ATAT’s revenue and EPS to grow 88.1% and 134.8% year-over-year to $171.40 million and $0.21 for the fourth quarter ending December 2023. The company surpassed the revenue estimates in each of the trailing four quarters.

The stock has gained 8.9% over the past six months and 1.8% intraday to close the last trading session at $16.81.

ATAT’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall rating of B, equating to a Buy in our proprietary rating system.

It has an A grade for Growth and a B for Sentiment and Quality. Within the same industry, it is ranked second.

To see ATAT’s additional POWR Ratings for Value, Momentum, and Stability, click here.

What To Do Next? 

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.  

2024 Stock Market Outlook >

TNL shares were trading at $39.24 per share on Monday morning, up $0.43 (+1.11%). Year-to-date, TNL has gained 11.62%, versus a 21.67% rise in the benchmark S&P 500 index during the same period.

About the Author: Kritika Sarmah

Her interest in risky instruments and passion for writing made Kritika an analyst and financial journalist. She earned her bachelor's degree in commerce and is currently pursuing the CFA program. With her fundamental approach, she aims to help investors identify untapped investment opportunities.


Top 3 Travel Stocks for Smart Investors
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