May 17, 2021
After the tumultuous events of 2020, most Americans are in dire need of a getaway. A study commissioned by the American Hotel & Lodging Association (AHLA), a trade association for the U.S. lodging industry, shows consumers are optimistic about traveling again in 2021, with 56% reporting they are likely to travel for vacation this year.
While the survey’s results represent a significant decline from pre-pandemic levels, when approximately 70% of Americans took a vacation in any given year, it marks the beginnings of a recovery – albeit a slow one. The AHLA predicts a full recovery won’t happen until 2024. Here are a few public companies looking for consumer travel dollars and recovering alongside the travel and tourism industry.
As the largest online travel agency in the U.S., Expedia Group (Tii:EXPE) was hammered in 2020. For the first quarter of 2021, demand remains depressed but improved from last year’s record lows. Total gross bookings for the quarter decreased 14%, though trends for Expedia lodging, air and other travel products all improved sequentially from the fourth quarter, with lodging bookings experiencing year-over-year growth. In a move to streamline its operations, Expedia recently agreed to sell Egencia, its corporate travel arm, to American Express Global Business Travel (GBT). Upon completion, Expedia will acquire an approximate 14% stake in GBT.
Expedia competitor, TripAdvisor, Inc. (Tii:TRIP) is similarly looking forward to a recovery. Total revenues for the online travel company’s first-quarter dropped 56%. However, Chief Executive Officer Steve Kaufer stated that leisure travel is poised for a potential inflection later this year as the recovery broadens. Booking Holdings Inc. (Tii:BKNG), the parent of Booking.com and Priceline.com, reported that total revenues for the first quarter of 2021 were $1.1 billion, a 50% decrease from the prior year. Though there was substantial damage done over the last year, the company saw encouraging signs of improving booking trends in the first quarter that continued into April with notable strength in the U.S.
Despite revenue declining 22% for the first quarter compared to the prior year and a net loss of $170 million, Avis Budget Group, Inc. (Tii:CAR) experienced its best first-quarter Adjusted EBITDA since 2015 and third consecutive quarter of positive Adjusted EBITDA since the start of the pandemic. The industry is further challenged by a shortage of new vehicles resulting from a COVID-triggered lack of semiconductors used for everything from gaming consoles to cars. The drought has lowered vehicle production to the point that auto-rental companies can’t get the new vehicles they need to keep their fleet fresh. Competitor Hertz Global Holdings, Inc. (Tii:HTZGQ), which filed for bankruptcy last year due to the pandemic’s impact, is expected to be auctioned off to private equity bidders by a federal bankruptcy court.
Until recently, cruises were the fastest growing sector of the travel industry. According to the Cruise Lines International Association (CLIA), the world’s largest cruise industry trade association, the industry served 29.7 million passengers in 2019. Despite the massive hit in 2020, cruisers are loyal. CLIA reported in December 2020 that two out of three cruisers are willing to hop on a ship again within a year. Customer loyalty combined with the CDC easing restrictions should mean a stronger 2021 for industry leaders Carnival Corp. (Tii:CCL), Norwegian Cruise Line Holdings Ltd. (Tii:NCLH) and Royal Caribbean Group (Tii:RCL).
It’s no surprise that The Walt Disney Company (Tii:DIS) is a major theme park operator. Nearly 21 million people visited its Magic Kingdom Park alone in 2019, making it the most visited theme park globally. In fact, the House of Mouse operates four of the top five most visited theme parks in the world (the remaining three being Disneyland Park in Anaheim, Tokyo Disneyland and Tokyo DisneySea). Last year was a very challenging one – to put it mildly – for Disney. Parks, resorts, stores and experiences operated at diminished capacity or closed for much of 2020 due to the pandemic. Wells Fargo report predicted it could take 24 months for attendance to normalize given crowding limitations. That said, Disney’s other revenue streams (which include media and entertainment distribution, content sales/licensing, direct-to-consumer sales) remain strong.
Of course, there are still caveats when it comes to predicting a return to normal, particularly when it comes to further COVID-19 outbreaks. But 2020 proved that strong balance sheets, pent-up consumer demand and diversified businesses are keys to weathering once-in-a-lifetime business disruptions.
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