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It's no secret that the travel industry is in for a massive bounce-back this year. Investors are buying travel stocks left and right hoping to profit from the rebound.
As vaccination becomes more widespread and new cases, hospitalizations, and deaths from COVID-19 continue to decline, travel will increase at a rapid pace. Travel-related stocks should continue to rebound and offer very high returns for several years.
But not all travel stocks are going to benefit. Some of them may be permanently hurt by the pandemic.
That's why we want to talk to you about Park Hotels & Resorts Inc. (NYSE: PK).
It's at the top of the list for our best travel stocks today.
Travel Is Bouncing Back, but Not for Everyone
It's hard for travel to go anywhere but up.
The U.S. travel industry collapsed in 2020. Total travel-related revenue fell by over $500 billion to just $679 billion, a stunning decline of 42% year over year. Business travel was the hardest hit, with a 70% decline during the year.
Business tried to get better from April into the late fall as revenue rose from $17 billion in April to a pandemic high of $62 billion in August. Then we had another wave of COVID-19 infections, with much of the spread blamed on travel, so revenue dropped off sharply once again.
From March 1 until the end of the year, the travel industry lost $1.6 billion a day.
The hotel industry was among the hardest hit as hotel occupancy declined 33% to just 44% in 2020, and revenue per available room was 48% lower at only $45. Both of those numbers are all-time lows for the industry.
Luxury hotels were the hardest hit with only 21% occupancy in December 2020 compared to 68% in December 2019, according to the U.S. Travel Association.
These bleak numbers are changing in a hurry.
Last weekend, more than 1.3 million people passed through the TSA screeners to board a plane. That's the highest number of air travelers since the pandemic arrived in the United States.
Since we know that hotels were hit hard and luxury hotels were hit the hardest, it makes sense that owning a portfolio of hotels with an emphasis on luxury hotels make has the highest rebound potential.
And we can get exposure here with just one stock.
The Case for Park Hotels Stock as a Top Travel Play
Park Hotels is one of the largest hotel REITs and owns some of the United States' premier properties. In all, Park owns 60 premium-branded hotels and resorts with over 33,000 rooms. Eighty-five percent of the hotels fall into the luxury or upscale segment of the marketplace.
Park has done pretty much whatever it took to keep dollars flowing in the doors during the pandemic. It cut deals with sports leagues to provide housing for athletic events. It housed students for a fee. It cut deals with hospital systems to provide room for staff who didn't want to go home and risk infecting their families.
In some locations, Park has rented rooms as workspace.
As travel returns for both higher-end business travel and leisure trips, business and the stock price of Park Hotels should soar in the second half of 2021.
There are billions of dollars of pent-up demand for travel sitting in bank accounts all over the United States. Those who were able to work from home or were essential workers have never missed a beat financially. All the cash usually spent on vacation and weekend travel has just piled up in the bank.
We are very close to an all-clear. Hotels are reopening all over the country. Even California is making noises about easing lockdowns. Disneyland will be opening back up to in-state visitors in April for the first time in over a year.
By mid-summer, there is a good chance that pretty much everything will be open for business. All that pent-up cash for travel will explode into the travel industry, and Park Hotels and Resorts is going to capture a lot of it.
If it is someplace you want to go, Park has a hotel there.
Headed to Disney World or Universal in Orlando, Fla.? Park has several locations in the area.
Off to Key West for the revival of Fantasy Fest this fall? Park Hotels and Resorts own three of the nicest hotels in Key West.
If you are headed to Southern California later this year, all of Park's hotels and beach resorts are open and waiting for you.
If you take the kids to tour the nation's capital once the coast is clear, all of the Park locations are open.
Both of Park's luxury New Orleans hotels are also open and waiting for you. So are the REIT's Hawaii hotels.
Park has rebounded off the lows but is still well below post-pandemic levels.
Park suspended its dividend last year to preserve cash, but when the full payout is reinstated as travel resumes, this stock is going to explode higher.
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