2 Resort Stocks We’re Hot On This Holiday Season
The holiday season is about to kick off, which means days off, shopping deals, and of course: vacations! So we look at 2 resort stocks that we’re backing going into the new year.
The Holiday season is just around the corner and people are planning out their trips and breaks. Though usually associated with summer, resorts also make a lot of money on winter getaways, so we are taking a look at the 2 luxury resorts that should interest investors right now.
Huazhu Hotels Group
This stock might not be one that you’re too familiar with, but Huazhu Hotels Group (NASDAQ: HTHT) has been making all the right moves on the stock market for many years now, up more than 500% over the past half-decade alone.
From humble beginnings in 2005, Chinese entrepreneur Qi Ji has built an impressive business empire that dominates the hotel and travel space. The hospitality giant has a total of 5,151 hotels or 504,414 hotel rooms in operation as of September 2019, and at the start of the year, averaged a net of two new hotel openings per day.
Much of Huazhu’s success is due to the fact that it is a Chinese company, with a visionary Chinese founder who built the chain up in a country notorious for limiting the influence of foreign companies. By building up a hotel empire in the Chinese space, Qi Ji’s business was perfectly positioned to capitalize on a mega-trend that's mostly invisible to those of us living life in the Western world.
Another reason for the company’s continued success is China’s booming economy, despite some slowing in growth due to the trade war with the U.S., disposable income in China has also been on the rise, growing at a compound annual growth rate of 9.1% from 2013 to 2018. The country has also experienced massive growth in middle-class earners.
Smart leadership and clever acquisitions have brought Huazhu to the top of the pile in the leisure market, even as it expands into Europe. At the beginning of November, it was reported that it would be purchasing one of Germany’s most popular hotel chains, Steigenberger Hotels, for $800 million, as it looks to form a solid base in central Europe.
Currently the 5th largest hotel group in the world, Huazhu represents a strong investment of steady growth, even at a time of uncertainty in the market.
Over the past decade, few stocks have been more successful than Vail Resorts (NYSE: MTN). Up almost 550% in the last 10 years, the Colorado-headquartered company welcomes millions of annual visitors to its U.S., Canadian, and Australian resorts.
Most of the company’s money is earned in its 14 ski resorts, which includes revenue from lifts, ski schools, retail, hiking, tours and much more. During the 2017/18 ski season alone, 16% of 72.5 million total ski visits in North America went to Vail Resorts properties.
One of the key metrics Vail uses to evaluate its business performance is effective ticket price, which compares lift revenue to the total number of skier visits, and has increased by 22.5% between 2014-2018. Visitor growth has remained steady during this time, meaning the company is still squeezing the most revenue it can out of customers. One of the main reasons for increased revenue has been an increase in vacationers to the resorts, who make up 61% of skiers, rather than locals, who tend to spend less money at the resorts.
Even when the snows have melted, Vail manages to produce income through its summer attractions. The ‘off-piste’ season this year saw Vail bring in total revenue of $958 million, up 13% on the year before. One of the most impressive ways it has tackled the issue of ‘off-season’ is by expanding into Australia, where it successfully completed its first purchase in 2015. This move allows the company to take advantage of southern hemisphere winters while it is summer in the northern hemisphere, where the majority of its operations take place.
Of course, it has not all been easy-going, as the stock is down 6% year-to-date through October, as it suffers from a slow-down in consumer spending due to unrest in the market. Changing climate could also play its part, but Vail appears to have planned ahead, beefing up its summer-time activities as well as investing in snow-generating machinery and land.
Based on Vail’s proven ability to raise prices as well as retain customers, as well as a continued strategy of global acquisition, the stock does not look to be slowing down. This year’s slowdown is just a blip for the company, whose dominance in the resort market should see it continue to grow over time.
MyWallSt operates a full disclosure policy. MyWallSt currently holds long positions in Huazhu Hotels Group and Vail Resorts. Read our full disclosure policy here.