Despite European Ban, Value in These Travel Stocks
With travel between U.S. and Europe a small percentage of global traffic, we are maintaining our fair value estimates for Expedia, Wyndham, and Sabre.
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We plan to maintain our 2020 forecast of around a midteens decline in global travel demand for our hotel and online travel coverage after President Donald Trump announced a 30-day restriction of travel from Europe to the United States. While this announcement is another headwind to global travel demand this year, and we acknowledge that our 2020 forecasts could change, given the dynamic nature of the near-term situation, we see long-term value in narrow-moat Expedia (EXPE), Wyndham Hotels & Resorts (WH), Sabre (SABR), and most of the rest of our travel universe. We maintain our $165 fair value estimate for Expedia, our $68 fair value estimate for Wyndham, and our $27 fair value estimate for Sabre.
In 2018, 77% of all U.S. air passengers were domestic flights (according to the Bureau of Transportation Statistics), which currently remain open for travel. U.S. air traffic exposure to Europe is 7% of total traffic (according to the U.S. Department of Transportation). A full month's suspension of this traffic implies roughly a 0.6% hit to annual air traffic demand in the U.S. and even less of an impact to global traffic (the U.S. is 20%-25% of total global air traffic). Europe saw 17.7 million U.S. visits in 2018 (according to the U.S. Commerce Department’s National Travel and Tourism Office), which was nearly 2% of the total air passenger traffic the continent had that year and an even smaller portion of global air traffic (Europe’s global air passenger traffic is also 20%-25% of the total).
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Dan Wasiolek does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.