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 Hilton Grand Vacations Inc. (NYSE:HGV) 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).
Aerial view of luxury beachfront vacation resorts that are owned by timeshare company.
Hilton Grand Vacations Inc. (NYSE:HGV) is a timeshare company, which markets and sells vacation ownership intervals (VOI) and manages resorts in leisure and urban destinations.
Wall Street analysts believe that the company’s revenues and earnings should be aided by strong distribution network growth and lead source diversification with the help of acquisitions. Hilton Grand Vacations Inc. (NYSE:HGV) continues to focus on integrating acquisitions and optimizing its sales and marketing structure. Additionally, the Street remains optimistic about its recently completed acquisition of Bluegreen Vacations.
Apart from the strategic benefits which are expected to come from scale and expanded lead generation, the transaction is expected to be adjusted free cash flow accretive and should generate ~$100 million in run-rate cost synergies in the initial 24 months following close. On a related note, on 17th January 2024, the company announced the completion of this acquisition. The deal also supports its higher FCF conversion and enhances Hilton Grand Vacations Inc. (NYSE:HGV)’s base of recurring EBITDA.
Also, the integration of Diamond Resorts further broadens Hilton Grand Vacations Inc. (NYSE:HGV)’s addressable market via an expanded regional network in the US and a wider range of products and price points.
As per Wall Street, the shares of Hilton Grand Vacations Inc. (NYSE:HGV) have an average price target of $45.20. Insider Monkey’s 2Q 2024 data revealed that the company was held by 27 hedge funds.
Laughing Water Capital, an investment management company, released its second-quarter 2024 investor letter. Here is what the fund said:
“Hilton Grand Vacations Inc. (NYSE:HGV) – I estimate that HGV, our time share business, is trading at a ~25% free cash flow yield and buying back ~10% of its market cap annually. This is a formula that will eventually work very well, unless people decide to stop going on vacation.”
Overall HGV ranks 6th on our list of the best vacation stocks to buy. While we acknowledge the potential of HGV 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 HGV but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
