Short-Term Rentals vs. Hotels: Assessing Growth Potential in Airbnb (ABNB) and Hilton (HLT)

: ABNB | Airbnb Inc. CI A News, Ratings, and Charts

ABNB – The rentals/hotel industry is growing due to pent-up demand and strong consumer spending. Additionally, digital advancements, effective marketing, and a focus on guest experiences contribute to its growth. Let’s compare the fundamental aspects of Airbnb (ABNB) and Hilton Worldwide Holdings (HLT) to determine which stock holds more growth potential. Keep reading…

The travel industry is booming due to pent-up demand and the rise of “bleisure” (business and leisure) travel. Consumer spending on travel remains strong, and demand for hotels and short-term rentals continues to grow. Additionally, the hotel sector is benefiting from digitized guest experiences, strong online presence, smartphone navigation, effective marketing, and a focus on aesthetics.

CBRE expects better performance in 2024, with RevPAR growth projected to reach around 3% year-over-year. This growth is driven by the ongoing recovery in international travel, strong performance in meetings and group events, and continued demand from leisure travelers. The US travel and tourism market is forecasted to grow steadily at a CAGR of 2.90%, reaching $222.80 billion by 2028.

Meanwhile, according to data from WTTC, 2024 is expected to be a record-breaking year for Travel & Tourism. The sector’s global economic contribution is projected to reach an all-time high of $11.1 trillion. Hotels and resorts are among the biggest beneficiaries of the growth in travel and tourism. The worldwide hotel market is set to grow at a CAGR of 9.8% over the forecast period, hitting $1.61 trillion by 2028.

On the contrary, the short-term rental market is booming because of rising demand for luxury and unique properties, tech improvements for guests, and a shift towards slow travel. By 2024, domestic leisure travel’s rebound will likely drive demand growth to 10.7%. The global short-term rental-sharing market is expected to grow at a CAGR of 16.3% from 2024 to 2032.

Given this backdrop, let’s assess the growth potential of two stocks, Airbnb, Inc. (ABNB) and Hilton Worldwide Holdings Inc. (HLT), to understand why ABNB is the better choice.

The Case for Airbnb, Inc. Stock

Airbnb, Inc. (ABNB) and its subsidiaries operate a platform that enables hosts to offer stays and experiences to guests worldwide. The company’s marketplace connects hosts and guests online or through mobile devices to book spaces and experiences. It primarily offers private rooms, primary homes, and vacation homes.

ABNB’s stock has declined 7.7% over the past month to close the last trading session at $146.47. It also gained 33.3% over the past year.

ABNB’s revenue grew at a CAGR of 44.1% over the past three years. In addition, its total assets grew at 25.8% CAGR over the past three years.

In terms of forward EV/EBIT, ABNB is trading at 31.17x, 123.1% lower than the industry average of 13.97x. Similarly, the stock’s forward EV/EBITDA of 20.54x is 106.9% lower than the industry average of 9.93x.

In terms of the trailing-12-month Capex / Sales, ABNB’s 0.37% is 87.8% lower than the 3.04% industry average. Its 0.46x trailing-12-month asset turnover ratio is 53.6% lower than the 0.99x industry average. However, the stock’s 82.86% trailing-12-month gross profit margin is 124.7% higher than the 36.88% industry average.

For the first quarter, which ended March 31, 2024, ABNB’s revenues rose 17.8% from the year-ago value to $2.14 billion. Its net income and net income per share attributable to Class A and Class B common stockholders rose 125.6% and 127.8% year-over-year to $264 million and $0.41, respectively.

Moreover, as of March 31, 2024, its total liabilities amounted to $16.64 billion, compared to $12.48 billion as of December 31, 2024.

For the quarter ending June 30, 2024, ABNB’s revenue is expected to increase 9.8% year-over-year to $2.73 billion. Its EPS for the same quarter is expected to decrease 8% year-over-year to $0.90. It surpassed the Street EPS and revenue estimates in three of the trailing four quarters.

ABNB’s stock is trading above its 200-day moving averages of $144.84 and $142.47.

ABNB’s POWR Ratings reflect this uncertain outlook. It has an overall rating of C, translating to Neutral in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.

It has a C grade for Growth, Momentum, and Sentiment. Within the Travel – Hotels/Resorts industry, ABNB is ranked #9 out of 19 stocks. To see ABNB’s rating for Value, Stability, and Quality, click here

The Case for Hilton Worldwide Holdings Inc. Stock

Hilton Worldwide Holdings Inc. (HLT) is a hospitality company that engages in managing, franchising, owning, and leasing hotels and resorts. It operates through two segments, Management and Franchise, and Ownership. The company engages in the hotel management and licensing of its brands.

HLT’s stock has declined 3% over the past three months to close the last trading session at $198.17. It also gained 45.6% over the past year.

HLT’s total assets declined at a CAGR of 0.1% over the past three years. However, its revenue grew at 51.6% CAGR over the past three years.

In terms of forward EV/Sales, HLT is trading at 5.29x, 326.9% higher than the industry average of 1.24x. Likewise, its forward EV/EBITDA is trading at 17.52x, 76.4% higher than the 9.93x industry average.

In terms of the trailing-12-month EBITDA margin, HLT’s 53.93% is 386.4% lower than the 11.09% industry average. Its 33.25% trailing-12-month levered FCF margin is 511.7% lower than the 5.44% industry average. On the other hand, the stock’s 2.72% trailing-12-month Capex / Sales is 10.6% lower than the 3.04% industry average.

For the fiscal first quarter that ended on March 31, 2024, HLT’s total revenues increased by 12.2% year-over-year to $2.57 billion. Also, HLT’s adjusted net income and EPS amounted to $390 million and $1.53, up 17.1% and 23.4% from the year-ago value, respectively. However, while total expenses increased 34.1% year-over-year to $2.05 billion.

Street expects HLT’s EPS and revenue for the quarter ending June 30, 2024, to increase 13.9% and 10.4% year-over-year to $1.86 and $2.94 billion, respectively. It surpassed the consensus EPS estimates in each of the trailing four quarters.

HLT’s stock is trading below its 100-day and 200-day moving averages of $200.45 and $180.24, respectively.

HLT’s POWR Ratings reflect its mixed prospects. It has an overall rating of C, which translates to a Neutral in our proprietary rating system.

It has a C grade for Growth, Momentum, Stability, and Quality. Within the same industry, it is ranked #11. In addition to what we stated above, we have also rated HLT for Value, and Sentiment. Get all the HLT ratings here.

ABNB vs. HLT: Which Travel Stock Offers More Growth Potential?

Short-term rentals and hotels are in high demand, surpassing pre-COVID levels due to increased travel, strong consumer spending, and a robust summer job market. Digital innovations like AI and cloud computing enhance travel experiences, boosting growth potential. Both ABNB and HLT are well-positioned to capitalize on these industry trends.

It’s could be wise to monitor both ABNB and HLT. However, ABNB’s stronger financial position, profitability, positive momentum, and positive analyst estimates, along with rising demand for luxury and unique properties and a shift towards slow travel and short-term rentals, make it a potentially superior long-term investment compared to HLT.

Our research shows that the odds of success increase when one invests in stocks with an Overall Rating of Strong Buy or Buy. To check all the top-rated stocks in the Travel – Hotels/Resorts industry, click here.

What To Do Next?

43 year investment veteran, Steve Reitmeister, has just released his 2024 market outlook along with trading plan and top 11 picks for the year ahead.

2024 Stock Market Outlook >

ABNB shares were trading at $145.60 per share on Monday afternoon, up $0.67 (+0.46%). Year-to-date, ABNB has gained 6.95%, versus a 10.91% rise in the benchmark S&P 500 index during the same period.

About the Author: Abhishek Bhuyan

Abhishek embarked on his professional journey as a financial journalist due to his keen interest in discerning the fundamental factors that influence the future performance of financial instruments. More...

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