Airbnb (ABNB) vs. Travel + Leisure (TNL): Which Travel Stock is the Better Pick?

Travel demand is booming despite the challenging macroeconomic environment. Which stock should you buy now, if the major players in the travel industry (ABNB and Travel + Leisure) are expected to benefit from the tailwinds? Find out more.

This article compares two travel stocks, Airbnb, Inc., (ABNB), and Travel + Leisure Co., (TNL) to see which one has the best upside potential. On the basis of a fundamental comparison, TNL is a better choice for reasons that are explained in this article.

According to the U.S. travel forecast, there are signs that the travel industry will recover. Domestic leisure travel is expected to return to its pre-pandemic level in 2023, and to reach full normalcy in 2024.

According to Deloitte’s summer travel survey conducted in the past year, more than 50% of Americans are planning leisure vacations that include paid lodging. This is an increase over last year. Travelers are adding international flights to their itinerary and showing a passion for traveling.

The global travel and tourism market will report revenue of $854.80 Billion this year, with a CAGR 4.4% through 2027. By 2027, online sales are expected to account for 74% of the total revenue on the travel and tourism market.

TNL's price performance has seen a 9% increase in the last month while ABNB's has increased by 16.4%. TNL gained 4.3% in the last three months while ABNB gained 5.6%.

The following are some reasons why I believe TNL can perform better in near-term:

Recent Developments

On May 8, 2023 ABNB approved a program to repurchase up to $2.5 Billion of its Class A Common Stock at the discretion of management.

TNL and Caravan Wellness also announced on April 25 their partnership for exclusive health and wellness videos to be provided exclusively for TNL club members. This initiative will attract more members, increase subscription revenue, and improve customer satisfaction among busy travelers.

Recent Financial Results

ABNB's first-quarter revenue ended March 31, 2023 increased by 20.5% over the previous year to $1.86 Billion. However, the company's total operating costs increased by 20.4% over the past year to $1.51 Billion. The company reported an operating loss of $5 million. Net income and earnings per share were $117 million and $.18 respectively.

TNL's net revenue for the first fiscal quarter ending March 31, 2023 increased 8.7% over the previous year to $879 millions. The adjusted EBITDA increased by 8.2% to $184m from $184m in the previous year. The company's adjusted net profit and adjusted EPS both increased by 16.6% and 29.0% year-over-year, to $70 millions and $0.89 respectively.

Dividends

TNL's $1.80 annual dividend is equivalent to a dividend rate of 4.54% at the current price. The average yield of the company over a four-year period is 3.82%. The company has paid dividends continuously for 15 years. Dividends paid by TNL have increased at a CAGR of 6.7% over the last five years.

ABNB, however, does not pay dividends.

Previous and expected financial performance

ABNB has seen its revenue grow at a CAGR 20.5% in the last three years. The company's EPS will rise by 37.3% during the current quarter, 10.1% the following quarter and 23.6% this year. Revenue is expected to increase by 14.6% this quarter, 11.2% next quarter and 13.4% for the current year.

TNL, on the other hand grew its EPS at a CAGR (Compound Annual Growth Rate) of 11.6% in the last three years. The company's EPS will increase by 9.5% this quarter, 29.7% the following, and 21.9% for the current year. Revenue is expected to increase by 3.5% this quarter, 8.3% the following quarter, and then 6.5% for the current year.

Profitability

TNL's EBITDA Margin of 22.24 % is higher than ABNB 22.15%. ABNB has a lower asset turnover ratio (0.47x) than TNL (0.56x). TNL's CAPEX/Sales ratio of 1.48% was higher than ABNB’s 0.29%.

Valuation

ABNB's forward P/S is 8.47x, higher than TNL’s 0.80x. TNL's non-GAAP forward P/E multiple is 7.19, which is lower than ABNB 34.80. ABNB's 8.47 forward EV/S multiplication is higher than TNL's 22.2.

TNL is available at a reasonable price.

ABNB's overall rating is C, which is equivalent to a Neutral according to our proprietary system. TNL, on the other hand has a rating of B which is equivalent to a Buy. They are calculated by weighing 118 factors to the optimal level.

We also use our proprietary rating system to evaluate each stock on the basis of eight categories. TNL is rated B in Value. The company's non-GAAP P/E multiples are 7.10 and 0.34, respectively. These are 49.5% lower and 74.9% less than the industry average of 14.24 and 135.

ABNB, on the other hand has a D grade for Value. The company's non-GAAP P/E multiples are 34.80 (and 2.42 for PEG) which is 144.4% more than the average industry P/E multiple of 14.24 (and 1.35).

ABNB ranks 16th among the 22 stocks that make up the Travel - Hotels/Resorts sector. TNL, on the other hand, is ranked at #6.

In addition to the above ratings, we also have rated each stock for Growth, Momentum Stability, Quality and Sentiment. To view all ABNB ratings, click here. You can also access the TNL ratings by clicking here.

Travel experiences are still a priority for Americans despite macro-uncertainties. The travel industry will experience a strong rebound this year.

Both ABNB as well as TNL should benefit from the current market conditions, but TNL's dividend history and discounted valuation multiples make it a better choice.

Our research has shown that investing in stocks with an overall rating of Buy or Strong Buy increases the chances of success. Here are all the top-rated stocks within the Travel-Hotels/Resorts Industry.

TNL shares were unchanged during premarket trading on Friday. TNL shares have gained 11.40% year-to-date compared to the benchmark S&P 500 index which has risen 15.00% during the same time period.

About the Author: Kritika Saarmah

Kritika's passion for writing and interest in risky financial instruments made her an analyst and journalist. She has a bachelor's in commerce, and is currently studying for the CFA. She hopes to identify investment opportunities that are not being explored by investors using her fundamental approach.