We recently compiled a list of the 13 Best Vacation Stocks to Buy Now. In this article, we are going to take a look at where Marriott Vacations Worldwide Corporation (NYSE:VAC) stands against the other vacation stocks.
In early 2024, The World Travel & Tourism Council projected a strong year for travel & tourism, with the sector’s global economic contribution expected to touch an all-time high of $11.1 trillion. As per the global tourism body’s 2024 Economic Impact Research (EIR), travel & tourism should be able to contribute an additional $770 billion over its previous record. WTTC anticipates that ~142 countries, of the 185 analysed, are expected to outperform previous national records.
WTTC forecasts a strong future for the next decade, characterized by healthy growth and unmatched career opportunities. By 2034, the sector is expected to supercharge the global economy with a staggering $16 trillion, accounting for ~11.4% of the entire economic landscape.
Travel and Vacationing in 2024 and Beyond
In 2024, the travel sector continues to break boundaries. Mastercard Economics Institute expects that this momentum will continue, with consumers prioritizing meaningful experiences and earmarking more of their budgets to travel.
Apart from air travel, cruise vacationing saw extraordinary growth, outpacing 2019 records. Through 1Q 2024, the US travel story was characterized by contrasting outbound and inbound dynamics. By November 2022, the US travelers vacationing overseas (excluding Canada and Mexico) outpaced 2019 levels. As of March 2024, the US travel overseas stood at ~20% above that level.
In comparison, the visitor traffic arrivals in the US from abroad were ~6% below 2019 levels as of March 2024. At this pace, the Economics Institute estimated that foreign passenger traffic in the US is expected to surpass 2019 levels later in 2024.
As per the Conference Board survey of consumer attitudes and buying plans in the US, the data as of April 2024 demonstrates that around 1 in 5 of the survey respondents expect to travel internationally in the upcoming 6 months. This was the record high since the survey began in February 1967. During this similar time in 2020, only 1 in every 20 Americans wanted to travel.
Recent Trends in Vacations
A big trend for 2024 remains the preference for experiential traveling over traditional celebrations for achieving some milestones. A recent survey demonstrated that ~40% of respondents continue to plan vacations for celebrating milestone occasions in 2024. One major shift in travel trends is the concept of a journey as the final destination. While travelers are seeking rail journeys along with epic boat trips, some travelers are opting for extended stopovers in certain destinations. This helps in turning layovers into small vacations.
The Cruise Lines International Association expects that ~82% of those who have cruised are expected to cruise again. The vacation rental market has been pegged at US$99.6 billion in 2023 and should be able to compound at more than 3% between 2024 and 2032 (as per Global Market Insights). This is expected on the back of elevated demand from the younger generation as they seek unique and authentic travel experiences. Notably, millennials and Gen Z are prioritizing experiences rather than material possessions, resulting in an increased demand for engaging and authentic travel.
Therefore, growth in the vacation rental market should stem from the increased use of online booking platforms, advancements in AI-driven property management technology, and the adoption of remote working.
Our methodology
To list the 13 Best Vacation Stocks to Buy Now, we used the Finviz screener to compile a list of 20 stocks catering to relevant industries. We then ranked the stocks in ascending order of their hedge fund sentiment, as of Q2 2024, and chose the following 13 companies.
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 happy vacationer taking a selfie with their family in front of a grand pool provided by the company.
Marriott Vacations Worldwide Corporation (NYSE:VAC)
Number of Hedge Fund Holders: 26
Marriott Vacations Worldwide Corporation (NYSE:VAC) operates hotels. It provides vacation ownership, exchange, rental and resort, and property management.
Marriott Vacations Worldwide Corporation (NYSE:VAC) is expected to see an increase in global share over the upcoming few years, mainly because of the strong intangible asset, which is strengthened by both hotel owners and travelers. The company’s recent 2023 launches of the Spark and StudioRes brands should extend its reach into the midscale and extended-stay segments. Also, these launches can add several hundred hotels each over the upcoming years.
Marriott Vacations Worldwide Corporation (NYSE:VAC) was able to cement its long-term brand advantage with its acquisition of Starwood and partnership with MGM’s Vegas portfolio. Starwood’s luxury portfolio and MGM’s strong presence in gaming continue to complement Marriott Vacations Worldwide Corporation (NYSE:VAC)’s dominant upper-scale position in North America.
The company plans to reduce leverage to 3x by 2025 end and return cash to its shareholders. With the reduction in product costs, the company’s margins should be improved. Recently, Marriott Vacations Worldwide Corporation (NYSE:VAC) announced a 20-year license agreement with Sonder, which should add ~9,000 rooms to the former’s portfolio by the year’s end. As a result, the market estimates that this might help its net unit growth.
In its 2Q 2024 results, Marriott Vacations Worldwide Corporation (NYSE:VAC) highlighted that travel demand remained strong, with resorts running at 90% occupancy. For 2024, the company expects contract sales in the range of $1,790 million – $1,825 million and adjusted EBITDA of between $685 million – $715 million. We saw 26 hedge funds long Marriott Vacations Worldwide Corporation (NYSE:VAC) in the second quarter.
As per Wall Street, the shares of Marriott Vacations Worldwide Corporation (NYSE:VAC) have an average price objective of $122.00. Baron Funds, an investment management firm, released its fourth quarter 2023 investor letter. Here is what the fund said:
“Shares of timeshare company Marriott Vacations Worldwide Corporation (NYSE:VAC) fell in the quarter, driven by soft sales of timeshare units due to higher interest rates and the slow ramp of a new product offering. A default rate that was higher than the company had anticipated forced it to take a charge to increase its reserves, pressuring earnings and cash flow. We opted to exit our position due to the increased stress on its consumer base and a resulting increase in financial leverage, which we found inappropriate for a focused fund.”
Overall VAC ranks 8th on our list of the best vacation stocks to buy. While we acknowledge the potential of VAC 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 VAC 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.