In this article, we will discuss: 10 Best Leisure and Recreation Services Stocks to Buy Now.
Leisure travel is booming and setting new records. According to AAA, 119 million Americans will travel 50 miles or more between December 21 and January 1, breaking the 2019 record by 64,000. Holiday travel has reached all-time highs. Over 3 million passengers were screened by TSA on December 1st, and 18.3 million passengers were screened during Thanksgiving week, both of which set new records. Despite a 4% yearly rise in ticket prices, demand has been fueled by a 9% drop in airfare this season. Spending has been driven by continued stimulus savings, low unemployment, and wage hikes. Despite continuing consumer concerns about economic instability, Lee McPheters, a research professor and director of the JPMorgan Chase Economic Outlook Center in Arizona State University’s W. P. Carey School of Business, points out that the industry’s resurgence is being driven by pent-up demand and strategic pricing, with travel being prioritized for experiences.
The leisure market has grown remarkably in the last few years. The global leisure market was valued at $1.46 trillion in 2023, and Market Research Intellect projects that it will rise at a compound annual growth rate of 21.8% between 2024 and 2031, reaching $8.6 trillion.
According to Deloitte’s report, in Q3 2024, the leisure industry continued to rebound, as total net expenditure increased from -10.3% in Q2 to -8.5%, the highest level since Q1 2022. Short holidays (+4.7 percentage points) and eating out (+5.5 percentage points) topped the increase in spending across nine of the eleven leisure categories. Casual dining sites rose by 1.7% year on year, with three new locations opening each week.
While spending on long vacations dropped because of rising expenses and economic uncertainties, short vacations gained popularity as consumers prioritized affordability. Live sports, concerts, and festivals drove a 4.1 percentage point increase in net spending on culture and entertainment. Spending at pubs and bars and leisure activities at home both climbed by 1.7 and 1 percentage point, respectively.
Nonetheless, it is anticipated, as per the Deloitte Consumer Tracker, that spending will decrease in nine out of eleven categories in Q4 2024, with the biggest declines occurring in eating out (-5.9 points) and longer holidays (-8.1 points). The hospitality industry will face challenges from growing expenses and cautious consumers, necessitating flexibility and value-driven tactics.
According to Lodging Analytics Research & Consulting (LARC), leisure demand growth will resume in 2025, providing a possible recovery for the industry as it adjusts to changing market conditions. As per the report, a 2.7% increase in ADR and flat occupancy would propel a 2.7% RevPAR growth in 2025. This comes after a 1.4% RevPAR growth in 2024, which was bolstered by a 1.6% increase in ADR and a 0.3% decline in occupancy. Key reasons cited by LARC include “growing inbound foreign arrivals” and the moderating strength of the US dollar. Corporate transitory demand is projected to remain strong in the first half of 2025, while convention activity, which increased by 4% in 2024, is expected to grow by 5% in 2025. Moody’s predicts a 2.2% GDP growth rate in 2025 along with further rate cuts from the Fed, providing a “short-term tailwind.”
Meanwhile, according to KPMG’s Global Leisure Perspectives 2024 report, the future of the hotel industry is being shaped by seven key trends. Automation and artificial intelligence (AI) are simplifying processes and improving visitor experiences with dynamic pricing and tailored advertising. A growing amount of personalization is data-driven, adjusting visitor experiences according to behavioral findings. Alternative lodging choices, such as rentals and glamping, are becoming increasingly popular, encouraging hotels to provide unique, authentic experiences. New revenue streams are being investigated, such as creating flexible work arrangements in underutilized locations. Unbundling services enable visitors to customize their stay, and creative collaborations are increasing market share and reach. Embracing these developments will be critical for remaining competitive in the changing landscape.
Commenting on technological developments in the leisure sector, Paul Fultz, Partner and US Segment Leader, Restaurants at KPMG in the US, remarked:
“As labor, supplychain and recession pressures abate, it is encouraging to see restaurant operators actively transform their operational capabilities and experiential strategies with digital technologies like automation and AI. It’s that kind of innovative thinking that will impact customer loyalty, near-term value and long-term growth”.
With that said, here are the 10 Best Leisure and Recreation Services Stocks to Buy Now.
A family happily enjoying a theme park ride, showing the joy of experiential leisure travel.
Our Methodology
We sifted through holdings of leisure ETFs and online rankings to form an initial list of 20 leisure stocks. From the resultant dataset, we chose 10 stocks with the highest number of hedge fund investors, using Insider Monkey’s database of 900 hedge funds in Q3 2024 to gauge hedge fund sentiment for stocks. We have used the stock’s Revenue Growth Rate (year-over-year) as a tie-breaker in case two or more stocks have the same number of hedge funds invested.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here).
10. Warner Bros. Discovery Inc. (NASDAQ:WBD)
Number of Hedge Fund Holders: 49
One of the Best Leisure Stocks, Warner Bros. Discovery, Inc. (NASDAQ:WBD), was founded in 2022 from the merger of WarnerMedia and Discovery Communications. It functions in three international business segments: direct-to-consumer, networks, and studios. The studio’s jewel is Warner Bros. Pictures, which produces, distributes, and licenses motion pictures and television series. Basic cable networks like CNN, TNT, TBS, Discovery, HGTV, and the Food Network make up the networks industry. HBO and the company’s streaming services, which have since been combined into Max and Discovery+, are examples of direct-to-consumer. The company’s other two business groups produce a large portion of the DTC content. Each component has a global presence, with Max available in over 60 countries.
Warner Bros. Discovery, Inc. (NASDAQ:WBD)’s strategic restructuring and collaborations position the company for a higher valuation by separating its cash-generating heritage TV business from its growth-oriented Streaming & Studios division, which is expected to generate $23 billion by 2025. While Max’s international development and password-sharing policies increase competitiveness with Netflix, the enlarged Comcast partnership guarantees steady cash streams and settles significant legal disputes. Together with its skilled management, these actions position WBD as a powerful rival in the digital media market, with strong upside potential for long-term investors.
In Q3 of 2024, Warner Bros. Discovery, Inc. (NASDAQ:WBD) reported a 30% YoY growth in TV revenue, driven by higher initial telecast revenue and rising demand for television content as a result of the previous year’s WGA and SAG-AFTRA strikes. Strong box office successes from movies like Barbie helped the studios’ revenue rise 6% year over year to $3.8 billion. Furthermore, Direct-to-Consumer (DTC) revenue increased by 12% YoY, driven by increased subscriber growth on platforms such as Max and higher average revenue per user (ARPU).
Chuck Royce’s Royce & Associates was the largest stakeholder in the company from among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 95.45 million shares worth $787.47 million as of Q3.
9. Expedia Group Inc. (NASDAQ:EXPE)
Number of Hedge Fund Holders: 52
Revenue Growth Rate (year-over-year): 10.05%
Expedia Group, Inc. (NASDAQ:EXPE) is among the Best Leisure Stocks and the world’s second-largest online travel agency by bookings. It offers lodging (80% of total sales in 2023), airline tickets (3%), rental cars, cruises, in-destination, and other (11%), and advertising revenue (6%). Although Expedia operates numerous branded travel booking websites, its three primary brands are Vrbo, Hotels.com, and Expedia. Additionally, it owns the Trivago metasearch brand. Online booking transaction fees account for the majority of sales and earnings.
Expedia (NASDAQ:EXPE) stock is up more than 27% year to date due to strong travel demand and development in its B2B and B2C segments. The third quarter of 2024 saw a 3% YoY increase in revenue to $4.06 billion, a 7% YoY increase in gross bookings to $27.5 billion, a solid B2B performance, and a mid-teens increase in room nights for Brand Expedia. Net income increased by 61%, while EPS increased by 76% year over year to $5.04.
Expedia has also increased shareholder value through share repurchases and the “One Key” loyalty program, which promotes consumer loyalty and repeat bookings.
In light of generally positive travel trends and Thanksgiving-related positive tourism data, Bank of America has increased its recommendation on Expedia stock from Neutral to Buy, raising its price objective on the shares from $187 to $221.
Snehal Amin’s Windacre Partnership was the largest stakeholder in the company from among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 4.32 million shares worth $639.99 million as of Q3.
Carillon Chartwell Mid Cap Value Fund stated the following regarding Expedia Group, Inc. (NASDAQ:EXPE) in its Q3 2024 investor letter:
“Expedia Group, Inc. (NASDAQ:EXPE) is an online travel services provider with several leading brands including Expedia, Hotels.com, and Vrbo. The company saw accelerating bookings growth at Expedia and a return to growth at vacation rental platform Vrbo.”
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