Why betting on the travel sector paid off big time this year

As hospitality and airline stocks still basked in the travel rebound that followed the COVID-19 pandemic, an industry-wide rally unfolded during the year. Cruise operators such as Carnival and travel booking and aggregator sites such as Expedia scooped most of the gains.

International travel is relatively cheap compared with last year. A large number of deals on packages and added extras have contributed greatly to this phenomenon, as travel companies are eager to offer incentives to make up for lost profit in the pandemic years.

What is behind the hotel sector’s great performance?

Share prices of some of the biggest hotel chains are sitting at record-high levels after moving up into double digit territory in 2023.

The key to Marriott International’s success this year

US hotel chain Marriott International’s stocks jumped 40.4% throughout the year. Promising strong future growth and boosting the value of the business, Marriott increased hotel conversions by renovating and rebranding properties mainly across the Latin American and Caribbean markets. The company has made significant strides in the luxury safari market in Africa, focusing on Kenya and Tanzania.

The hotel chain has made the most of an increased demand for health, rest, and wellness retreats, putting forward the brand’s own creations, including a recent range of sleep-enhancing food products. The company has also put high bets on revamping its loyalty programmes, and it paid off as Marriott remained highly competitive among other brands that slashed rewards following the pandemic.

What Hilton Worldwide Holdings did better than its competitors

US-based Hilton Worldwide Holdings surged approximately 36.7% this year, rewarding the group’s efforts to tap into the more affordable hospitality market. One major step has been the company announcing the creation of a long-stay apartment hotel brand called Project H3.

“It’s almost a hybrid,” said Hilton President and CEO Chris Nassetta in a call with analysts, in April 2023. “It’s like an apartment efficiency meets hotel. So you’re talking about an average length of stay of probably 20-30 days versus most of the core extended-stay brands, which are like the 5-10 day range.”

This move also comes in the wake of several other rivals, such as Hyatt and Wyndham, launching their own extended-stay brands as well. 

Hilton is likely to take advantage of its track record of successfully launching brands as well as its low attrition rate to make this brand, which will be its 20th, a success.

How InterContinental Hotels scraped through the year

InterContinental Hotels Group rallied about 52.8% this year, mainly because of its tiered business model. The hotel chiefly operates on a franchise basis, which involves renting out hotel rooms to other brands and collecting royalties from them.

Another business model InterContinental Hotels Group has adopted is diverting the actual running of the hotel to an external management company. Thus, InterContinental Hotels has very few assets but still maintains regular streams of income.

Earlier this year, the Holiday Inn owner group also announced a $750m (€679m) share buyback, which helped buoy stock prices. However, shareholders also faced a moment of uncertainty when the group’s CEO, Keith Barr stepped down at the end of June and was replaced by Elie Maalouf.

Airline shares flying high

Airlines in Europe still had an outstanding year behind them despite high fuel prices and darkening economic prices, with passengers returning after the COVID-19 pandemic.

Ryanair

Share prices at Ryanair have climbed about 54.6% over the past 12 months, mainly due to the hiking up of ticket fares as summer travel demand boomed. However, this did not deter passenger numbers, which were still up about 11%, in the second and third quarters of the year, clocking in at about 105.4 million.

This led to the company reporting a profit of about €2.18bn for the first half of their fiscal year. However, increasing fuel costs and the geopolitical uncertainty caused by the Israel-Hamas war remain a concern for the airline.

Wizz Air

The rise in share prices of Hungarian ultra-low-cost carrier Wizz Air is probably the least impressive on this list, standing at 18.8% at the end of the year.

Investors’ interest has been mostly propped up by robust earnings in the first half of the year, due to higher ticket prices and increased passenger numbers. However, the second half of the year told a different story for the company.

Wizz Air is facing a murky outlook as jet fuel prices, supply chain issues, and a lack of economic clarity weigh down its prospects.

The low-cost brand is also likely to have to ground 45 aircraft by the end of March 2024, due to engine problems.

All in all, Wizz Air’s new full-year net income estimate is now somewhere between €350m  and €400m.

EasyJet

Low-cost carrier EasyJet’s shares mounted 57.3% year-to-date, not least due to the record profits this year.

Yields rose by 15% in the 12 months to 30 September 2023, while revenue per seat increased by about 21% in the same period.

The number of passengers travelling also grew significantly in the last year, clocking in at about 82.8 million as at the end of September.

EasyJet has also announced it is bringing back its dividend of 4.5p per share.

Aggregators with skyrocketing share prices

This year’s winners are clearly the aggregator websites, offering price comparison, among travel services, some of them doubling their values in 2023.

Expedia Group

Online travel company Expedia Group has seen its share price shoot up close to 62.5% this year, mainly due to the company revamping itself by bringing three of its main travel metasearch engines, Vrbo, Expedia, and Hotels.com onto a common tech platform.

The group has also recently introduced a new loyalty and travel rewards program, dubbed One Key.

Also, in the third quarter, adjusted net income rose to a record high of $778m (€704.5m), with revenues also jumping 9% to $3.9bn (€3.5bn). The company was also very optimistic about the coming year.

“Our high-level strategy is not going to change — best products, best loyalty program, best marketplace, and best service,” said CEO Peter Kern. “But instead of spending most of the year doing surgery on our own business, we’ll be focused on growth, innovation, and efficiency.” 

Carnival

The share price of US international cruise line Carnival has rocketed more than 129% so far this year, following the company clocking in record revenues as well as being highly optimistic about the coming year. Full-year revenue was $21.6bn (€19.5bn), while 2023 turned out to be the first profitable year for the company since 2019.

The cruise line was also pretty upbeat about the coming year, as the company reportedly experiences strong bookings. During the most recent earnings release, CEO Josh Weinstein said: “Our European brands are showing remarkable strength during the quarter, with booking volumes running up well into the double digits at considerably higher prices.”

Booking Holdings

The share prices of US-based Booking Holdings leapt by around 68.3% throughout the year, mainly driven by the travel company’s strong earnings. The company, which owns rentalcars.com among others, reported gross travel bookings reaching an all-time high of $39.8bn (€35.8bn) in the third quarter of the year. That was a surge of about 24% from the same quarter last year.

Total revenue came in at about $7.3bn (€6.6bn) for Q3 2023, clocking in a rise of about 21% from the last year. This was mostly in line with CEO Glenn Fogel’s earlier prediction of a “record summer travel season.” For the upcoming year, the company is planning to focus mainly on how artificial intelligence could complement its current services.

Airbnb

Airbnb shares rose by about 57.7% this year. The company reported hefty revenue in the last quarter, surpassing €3bn (€2.7bn), a jump of 18% from the same quarter last year. Gross bookings also stood at about $18.3bn (€16.5bn), inching up 17% from last year.

Airbnb has also recently acquired Gameplanner AI, an artificial intelligence startup, which is expected to further streamline how customers find stays. This will mainly be done by using conversational chatbots, instead of filters, thus personalising recommendations further.

However, the company has also been hit by a string of complaints about higher cleaning fees and increased number of chores demanded by hosts. Airbnb is also facing regulatory issues with short-term rentals in places like New York.