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Written by: Carly Rothbort
I would like to share some of my thoughts for the Consumer Discretionary Sector for the upcoming year. 2025 is expected to be a big year for consumer travel. According to the International Trade Administration, total international arrivals to the United States will increase 9.7% to 85.2 million. Over the next two years, we can expect international arrivals to finally surprise pre-pandemic numbers.
Love her or hate her, Taylor Swift’s Era’s Tour in recent years changed how tourists operate and view travel.
Over the past few years, since COVID has come and gone, people from all around the world have been traveling to places specifically for events. Whether it is a Taylor Swift concert, the Olympics, or the World Cup, consumers are dishing out money to attend the world’s most sought-out events. In the process, they will be boosting local economies and the hospitality industry.
This is why, in 2025 we have taken a closer look at the travel industry for our consumer discretionary strategy, in which we remain bullish. As previously mentioned, we maintain our avoidance of the airline and automobile industry. However, with a new United States Presidential administration sworn in, we will keep our eyes on gasoline prices, interest rates and the related economic effects.
We remain bullish on travel service stocks like Booking Holdings Inc. (BKNG), Royal Caribbean Cruises (RCL), and Hilton (HLT), as consumers are turning more to these services to find the best deals and rates for their vacations.
Booking Holdings Inc. (BKNG)
BKNG has been a long-term holding for us, dating back a few years. As the world’s leading provider of online travel related services, the company is an amalgamation of Booking.com (previously Priceline.com), OpenTable, Rocketmiles, and Cheapflights among others. It has experienced superlative earnings growth in the past and we expect that to continue in the future. Our biggest gripe with the stock is its absolute price (now over $4,700/share), hence its high barrier to entry, making it difficult for the average investor to purchase. Our hope is, in the near future we will see a stock split, allowing us more flexibility in purchasing power.
Hilton Worldwide Holdings Inc. (HLT)
The family of Hilton brands offers a wide array of hotel options from luxury to affordability, making this company attractive during an expected busy time of travel. 2024 was a record year for HLT, adding almost 1,000 hotels and nearly 100,000 rooms, welcoming a total of about 224 million guests, surpassing any year in it's history. According to the President and CEO of HLT during the January 27th press release, “Given the strength of our commercial engines, family of brands, and global network, we continue to feel good about our growth this year. Our development pipeline and construction starts are strengthening around the world, and demand for travel remains strong, leading to increased confidence in our expectations for net unit growth of 6-7% in 2025.”
Royal Caribbean Cruises (RCL)
January 28th delivered a great earnings report for 4q24 and a positive outlook for 2025. With that, the company also announced their ‘Celebrity River Cruises’ to continue to add additional value to their family of cruise offerings. The company expects continued growth this year with expected adjusted earnings growth of 23%. With consumers looking for all-inclusive experiences, we believe RCL is a leader in the industry, and we remain bullish on the stock.
As you can see, there are a great number of opportunities in the Consumer Discretionary space for 2025, specifically travel related companies. That is not to say that some retail stocks are not attractive, but we will save that for another time. Our Consumer Discretionary strategy holds a myriad of consumer offerings, making this travel sector only a portion; an important one, nonetheless.
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