Proprietary Data Insights
Financial Pros Top Travel Services Searches This Month
Air Travel Is Coming Back, Sort Of
The International Air Travel Association (IATA) released data Wednesday morning showing that while air travel continues to rebound, the pace slowed in March.
Total March 2022 traffic was up 76% verus March 2021, but lower than February’s 115.9% year-over-year increase. International travel led the way, up 285.3% from March of last year. This topped the 259.2% annual increase in February.
The best news – it has been at least a month since we’ve seen a story of a passenger getting into a fight on a flight. That is, if we don’t count Mike Tyson.
Business Travel Is Barely Back
The American Hotel & Lodging Association (AHLA) expects leisure travel to return to pre-pandemic levels this year. It’s not so optimistic about business travel.
The organization predicts hotel business travel revenue will still be 23% below pre-pandemic levels by the end of 2022. That’s a loss of $20 billion in sales compared to 2019.
All the major business travel markets. They’re just getting crushed.
Source: The AHLA
Nice numbers to know, however we also know hotels don’t tell the entirety of the travel story. Definitely not as much as air travel and probably not as much as Airbnb.
In fact, I can’t remember the last time I stayed in a hotel. For business or pleasure, I always hit up Airbnb first. I don’t think I’m alone.
Let Airbnb Teach Us An Important Investing Lesson
On Tuesday, I saw a financial media headline that made me think twice:
Hilton (HLT) missed revenue estimates for its quarter and guided revenue and profits down for the full year. So the stock tanked after the company reported earnings before Tuesday’s open.
Of course, other travel stocks, including Expedia (EXPE) and Airbnb (ABNB) dropped meaningfully on the news.
One stock in a sector reports bad news. It tanks and takes related names down with it.
This happens all of the time. Some of the time, it creates opportunities for investors.
Here’s What The Market Missed
When the Hilton news hit, I thought why is Airbnb dropping as well?
Technically speaking, the two companies run in the same space. However, they don’t look alike at all.
On one hand, you have Hilton, a legacy travel company, doing things the old school way. Having a mobile app doesn’t make you less old and stodgy these days. It takes a fundamentally different business model.
This is because companies such as Airbnb came in and disrupted the living hell out of travel.
The market missed this modern day reality when it punished Airbnb for Hilton’s setback.
It also failed to realize that Airbnb was about to report earnings Tuesday after the bell.
And Airbnb Crushed It – Again
Airbnb grew revenue by 70% year-over-year and 80% compared to 2019. The company’s net loss decreased significantly.
For the first time ever, the number of nights and experiences consumers booked with Airbnb eclipsed 100 million, hitting 102.1 million, a 59% year-over-year increase. This number is 26% higher than the same period in 2019.
Looking ahead, Airbnb expects Q2, 2022 revenue to fall between $2.03 and $2.13 billion, ahead of the $1.97 billion (prior to the earnings report) consensus estimate. For the record, prior to Tuesday, Airbnb had beaten EPS estimates 75% of the time and revenue projections 100% of the time over the last year.
Use Airbnb, Not Hilton To Get A Read On Travel
If you’re hyper-focused on business travel, maybe you pay more attention to a hotel chain. However, if you prefer a more general gauge of what to expect going forward, start with Airbnb.
To that end, consider how Airbnb colored its outlook in Tuesday’s report:
Heading into peak travel season in Q3 2022, we are seeing substantial demand for summer travel months in EMEA and North America. We are also seeing higher than historical demand for Q4, which indicates that consumer confidence to travel remains strong beyond the summer months.
… U.S. domestic demand this year has so far outpaced our internal expectations and we are encouraged by U.S. international bookings exceeding 2019 levels.
Should you buy Hilton on Airbnb’s news? Probably not.
Should sell Airbnb because of what’s happening at Hilton? Obviously not.
The Bottom Line: We live in a new world. While investing has evolved – when’s the last time you paid a commission to trade? – it still lags in certain areas.
One of the most glaring – investors taking down shares of a company because of what happens to another simply because they operate in the same broad space. While they’re all technically lodging companies, that’s where the comparisons between Hilton, other legacy travel companies and modern day disruptors such as Airbnb ought to end.
If you were paying attention when Hilton dropped a bad report, you could have scooped up shares of Airbnb before it reported impressive earnings. Even with Airbnb’s post-earnings pop, be on the lookout for a dip and any further weakness. If you’re a long-term investor looking to take advantage of travel creeping back to pre-pandemic levels, ABNB might be a nice place to start.
News & Insights
Want to get content like this directly to your inbox? Then we urge you to sign up for our newsletter here