Everybody is getting ready to travel again as the summer season gets underway and we move from the pandemic to the endemic stage of COVID 19. Travel companies have been some of the last to recover because that’s where you’re most exposed to the virus.
The National Travel and Tourism Office (NTTO) estimates that the total economic output generated by travel and tourism fell $50.1% from 2019 to 2020. Although some travel did return in 2021, this was mostly to destinations you could drive to. This year however, demand appears to be more of the regular kind, and likely to eclipse pre-pandemic levels.
While the entire sector will benefit from the resurgent demand, the players that are likely to do better than the market are the ones that have invested in the business during the weak period, while also focusing on premium offerings and on cutting down debt. Financial and operational measures are likely to pay off as demand returns to normal.
One limiting factor remains the availability of labor, especially in the face of steadily increasing demand.
Boca Raton, Florida-based Bluegreen Vacations Holding Corporation sellsvacation ownership interests (VOI) in resorts and destinations that it maintains and manages for leisure travelers. These properties are located across a number of regions in the U.S. including Orlando, Las Vegas, Myrtle Beach, Charleston, New Orleans and others.
Bluegreen also provides resort management, mortgage, title, reservation, and construction design and development services; financing for qualified VOI purchasers; and management services for vacation club and homeowners’ associations. Its resort network includes 45 club resorts and 23 club associate resorts, as well as 128 Bass Pro Shops and Cabela’s stores.
Bluegreen is one of those companies that can be said to operate a subscription model for travel (that’s what time-sharing models essentially are). The time-sharers pay upfront for the property and then keep paying for maintenance. So you make money when new vacation packages are sold and then again, every year, when the maintenance money comes in. And then there are renewals, which ensure that the revenue base keeps expanding, as new customers are brought in. So these are the three numbers to watch.
Since Bluegreen’s results are tied to the consumer’s propensity to travel and 2020 was impacted by the pandemic, there were high hopes for 2021. But that didn’t quite materialize either, as fresh waves of the pandemic served as a dampener. Consequently, the all-important VOI package sales volumes and prices both declined in 2021 although they were up in the fourth quarter. With travel returning in a big way this summer and Bluegreen being well positioned with accommodation that can be driven to, there should be further gains.
Analysts seem as optimistic as management. They’ve taken the 2022 and 2023 estimates up a respective 56 cents (19.9%) and 68 cents (21.9%). And revenues and earnings are expected to grow both this year and in the next.
The shares are also undervalued at 7.68X forward earnings and 0.70X sales.
The shares carry a Zacks Rank #1 (Strong Buy).
The Woodlands, Texas-based Target Hospitality is the holding company of Target Lodging, Signor Lodging and their respective subsidiaries. The company, through Target Lodging and Signor Lodging, builds, owns and operates customized housing communities for hospitality purposes including catering and food, maintenance, housekeeping, grounds-keeping, security, health and recreation, workforce community management, concierge, and laundry services.
Its network of specialty rental accommodation units has approximately 15,528 beds across 27 communities, of which 26 are owned and one leased, as well as one community not owned or leased by it. Its four segments are Hospitality & Facilities Services – South, Hospitality & Facilities Services – Midwest, Government, and TCPL Keystone. Its customers are mainly in the U.S. government, government contractors, investment grade natural resource development companies and energy infrastructure companies.
Target Hospitality has been working on a turnaround plan. Management has executed on several of its initiatives, including a continued focus on diversifying into the government (humanitarian aid) segment, it has focused on more profitable business and on paying down debt. With demand continuing to improve through 2021 and in the first few months of 2022, utilization rates have also been on the rise, which has been positive for profitability.
Analysts have taken their estimates up 3 cents (50%) and 2 cents (22%) in the last 60 days. Revenues and earnings are expected to grow strongly in 2022 and slower in 2023.
At 1.83X sales, the shares are trading well above their median value over the past year but well below the S&P 500’s 4.50X.
The shares carry a Zacks Rank #1.
Sandusky, Ohio-based Cedar Fair and its affiliated companies own and operate a number of amusement and water parks in the U.S. and Canada: Cedar Point on Lake Erie, Knott’s Berry Farm near Los Angeles, Dorney Park in Pennsylvania, Valleyfair near Minneapolis, and Worlds of Fun/Oceans of Fun in Kansas City to name a few.
The parks are family-oriented, with recreational facilities for people of all ages, and provide clean and attractive environments with exciting rides and entertainment. The company also owns and operates complementary resort facilities including the Cedar Point Marina, one of the largest full-service marinas on the Great Lakes.
The company also owns and operates the Castaway Bay Indoor Waterpark Resort, Hotel Breakers, Cedar Point’s Express Hotel and Sawmill Creek Resort. As of December 31, 2021, the company operated 13 amusement parks.
Cedar Fair was significantly impacted by the pandemic in 2020, which forced it to close down its parks for most of the year. 2021 proved significantly better, as travel demand returned and especially because management was also broadening and enhancing the guest experience. This helped it surpass the 2019 revenue level by a wide margin. Management expects its intelligent pricing and labor rate management strategies to support strengthening demand as we move through the year.
Analysts are also optimistic. They’ve taken the 2022 consensus up 44 cents (15.4%) in the last 60 days. The 2023 estimate is now up 48 cents (14.6%). This represents 623% earnings growth this year and another 14% next year. Operating leverage will definitely play a part as well since revenue growth is expected to be 34% and 4% in the two years, respectively.
Since P/E is not meaningful for this company, valuation should be on a P/S basis. And on a forward sales basis it appears that Cedar Fair shares, trading at 1.74X sales is trading close to its low point over the past year and also significantly lags the S&P 500.
The shares carry a Zacks Rank #1.
Orlando, Florida-based SeaWorld Entertainment is a theme park and entertainment company operating primarily in the United States. The company owns and operates twelve theme parks under the SeaWorld, Busch Gardens, Aquatica, Discovery Cove, Water Country USA, Adventure Island and Sesame Place brands.
Like the others, SeaWorld also saw demand returning in 2021 and it continues to return in a big way this year. The company has prepared for this with completed significant transformation of its in-park venues, many of which were redesigned, refreshed or added in 2021 It also launched new iOS and Android mobile apps for all its parks in 2021. Fiscal discipline as well as record financial performance in 2021 has also put it on a strong financial footing despite the fact that there was limited international guest attendance and reduced group-related attendance due to the pandemic.
At 3.22X forward sales, the shares are trading close to their median value over the past year. Its P/E of 17.43X is below the median level over the past year and the S&P 500’s 19.05X.
The shares carry a Zacks Rank #1.
3-Month Price Movement
Image Source: Zacks Investment Research
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