After two years of travel restrictions and concern over the spread of COVID-19, Americans are ready to travel again. Vacation rental bookings increased by 25% in April 2022 and summer bookings have already exceeded 2021 levels by 15%. The Transportation Security Administration (TSA) predicts that air travel this summer will reach 2019 levels, which would be the first time since the pandemic began.
As the summer is shaping up to be hot for the travel industry, here are three real estate stocks you should consider buying to take advantage of the travel boom.
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Airbnb
Vacation rentals were already growing in popularity before the pandemic, but consumer preference for more space, privacy and unique destinations as people travel in light of COVID-19 has propelled demand for vacation rentals . This is great news for Airbnb (ABNB 0.72%)the largest vacation rental platform, with over 4 million guests worldwide.
The first quarter of 2022 showed tremendous momentum for the company, being its first quarter of earnings before tax, interest, depreciation and amortization (EBITDA). Revenue grew 70% year-over-year and its nightly bookings topped 100 million, surpassing pre-pandemic levels. A recent report from AirDNA, the largest source of vacation rental data, found that as of mid-May, rental occupancy for Airbnb increased by 25% while the average daily rate (ADR) rentals increased by 7%. Higher occupancy rates and levels translate to more money for the business and owners.
Expedia Group
Expedia Group (EXPE -1.65%) may not seem like a real estate stock, but following its acquisition of Vacation Rentals By Owner (VRBO), in 2015 through its parent company HomeAway, Expedia is in the vacation real estate business — in a big way. Unlike Airbnb, VRBO only rents out entire homes, not individual rooms or shared spaces, and it currently has over 2 million listings worldwide.
According to VRBO, summer bookings are on the rise, with renters booking earlier in the year than usual. Hotspots for summer vacation rentals along the East Coast have less than 30% of properties available to book on the platform, a positive sign that the summer will be hot for the business. Expedia Group also offers investors exposure to several other travel and tourism industry niches as well as through its subsidiaries such as Hotels.com, Cars.com, Orbitz and Hotwire, among several others, which, like VRBO, should benefit from the return of international and domestic travel.
The company’s latest results were positive with sales and bookings up 81% and 58% respectively year-over-year. However, it still operates at a net loss. Its revenue is moving in the right direction, but total bookings still fall short of pre-pandemic levels. With restrictions easing and more countries opening their borders, 2022 could be the year Expedia finally breaks the pre-pandemic curve and returns to more profitable revenue.
Park Hotels and Resorts
Urban cities are among the top travel destinations in 2022. Places like New York, Orlando, Boston and Washington, D.C. are seeing the largest year-over-year increases in vacation rental occupancy rates in April 2022. Cities like these are where the majority of Park Hotels and Resorts (PACK 2.58%) owns its hotel and resorts, that’s great news. Park Hotels & Resorts is a real estate investment trust (REIT) that leases its properties to renowned hotel brands Hilton Hotels, Marriott Internationaland Hyatt Hotels.
Like most other businesses in the travel and tourism industry, Park Hotels & Resorts and its tenants have had a tough few years. However, its establishments serving both leisure travelers and business or group trips are experiencing a strong comeback. Occupancy is 14.2% below pre-pandemic levels, the highest in the past four quarters. Revenue per available room (RevPAR), an important metric for hotel operators, was only 10% lower in April 2022 than 2019 levels, while ADR is more than 7% higher.
Some investors are unconvinced that the travel boom is here to stay, which has been evident in the stock prices of Airbnb and Expedia of late. Business is down more than 26% this year while Park Hotels & Resorts is down less than 2%. There is certainly a valid concern. Rising fuel prices have people wondering about travel, whether by car or plane. However, there is growing evidence that higher costs will not stop people from travelling. Today’s bargain prices for these three stocks could pay off if travel booms as expected.
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