Value investing

Where to Invest in the Growing Travel Industry

The travel industry is robust and growing with no signs of slowing down. With more than 1.5 billion trips and $2.5 trillion in spending projected by 2020, investors may want to take a closer look at companies that are innovating in the space. Most investors are already aware of companies like Priceline.com Inc. (NASDAQ: PCLN) and Airbnb, but there are plenty of other smaller companies that could see even greater growth rates.

Global Travel Is on the Rise

Global demand for trips has grown consistently over the past 20 years with no signs of a slowdown, according to Euromonitor International, which estimates that 1.5 billion international trips will be taken each year by 2020. Despite the refugee crisis in Europe and the Zika pandemic in the tropics, the travel industry has continued to see strong growth over the past two decades, which suggests resilience in the face of “fear factors”.

 

Euromonitor International estimates that travel product sales amounted to $2.1 trillion in 2015 and expects the market to reach $2.5 trillion by 2020, which represents a 3% to 4% compound annual growth rate over that timeframe. Not surprisingly, lodging and airlines represent the two largest segments of the market, while transportation, car rentals, cruises, medical tourism, and health and wellness tourism round out the market.

The two most significant trends in the travel industry have been short-term rentals - made possible with websites like Airbnb - and the rise of online travel agents - or OTAs. While both of these segments have witnessed tremendous growth rates, the lodging market remains dominated by hotels and online travel will still only account for 45% of all bookings by 2020, according to Euromonitor International estimates.

 

Where to Invest in Global Travel

Traditional hotels and travel agencies may still account for most of the market, but alternative lodging (e.g. short-term rentals) and online travel agents provide better investment opportunities. After all, investors are often more interested in growth than size, since a fast-growing company will appreciate in value the most over time. Fortunately, there are many opportunities for investors in both of these industries.

Expedia Inc. (NASDAQ: EXPE) and Priceline.com Inc. (NASDAQ: PCLN) are the two largest online travel agencies, with market capitalizations well into the billions of dollars, but Tripadvisor Inc. (NASDAQ: TRIP) and Google Inc. (NASDAQ: GOOGL) are the two stealthiest opportunities. TripAdvisor has quietly introduced instant booking functionality while Google’s travel planning services could instantly become a major player.

Airbnb may be the most well-known company in the alternative lodging space, but Monaker Group Inc. (OTCQB: MKGI) is a unique opportunity in the space. Its business-to-business platform is the first real-time ALR product with mainstream travel products and services in a single platform. In essence, it provides real-time booking functionality to OTAs for short-term rentals and other alternative lodging products.


Monaker

Airbnb

HomeAway

Properties

1,000,000 + 1,000,000 Pending

2,500,000

1,200,000

Countries

150+

190

190

Real-Time Booking

Yes

Limited

Limited

Air, Car, Tour, Activities

Yes

Limited (“Airbnb Experiences”)

No

Valuation

$40 Million

$31 Billion

$3.9 Billion (Expedia Acquisition in 2015)

For more information about Monaker Group, visit the company’s website or download their investor presentation.

Looking Ahead

The travel industry is robust and growing with no sign of slowing down. With more than $2.5 trillion in spending projected by 2020, investors may want to take a closer look at the most innovative and fast-growing companies in the space. Companies like TripAdvisor Inc. (NASDAQ: TRIP) and Monaker Group (OTCQB: MKGI) may provide excellent growth opportunities apart from the major players in the OTA and ALR industries.