A wave of optimism is sweeping through the travel industry, propelled by pent-up demand. Hotels are witnessing a resurgence in the aftermath of the pandemic as a revived interest in travel takes center stage. In such a scenario, this article compares the fundamentals of Airbnb, Inc. (ABNB) and Atour Lifestyle Holdings Limited (ATAT) to determine which one could yield superior returns.
The era of pandemic-related caution surrounding holiday travel has, for the most part, come to an end. With concerns about health and safety now largely behind them, Americans are increasingly embarking on holiday journeys in larger numbers.
According to Deloitte, approximately 48% of Americans are planning to travel this holiday season. Across all age and income brackets, there is an increased intention to travel from Thanksgiving to mid-January, with an average holiday budget of $2,725.
Moreover, there’s a notable change in lodging preferences, with over half (56%) of holiday travelers intending to stay in hotels, a substantial increase from the 35% recorded in 2022.
Meanwhile, the hotel industry has been leveraging Artificial Intelligence (AI) technologies to enhance user experiences, streamline operations, improve efficiency, and tailor services to individual preferences. AI in the hospitality industry is projected to hit $8.12 billion by 2033, exhibiting a robust CAGR of 60% from 2023 to 2033.
In the midst of such a promising industry landscape, the global revenue for the travel and tourism market is anticipated to achieve $856.10 billion by 2023, demonstrating a CAGR of 4.4% from 2023 to 2028. Additionally, the hotel market, the largest segment within the travel and tourism industry, is projected to generate $411 billion in revenue in 2023 and a whopping 1.40 billion users by 2028.
Considering the promising industry prospects, both ABNB and ATAT should benefit. In terms of price performance, ABNB’s shares have gained 7.3% over the past six months to close the last trading session at $137. Meanwhile, ATAT’s shares surged 3.4% during the same period to close the last trading session at $17.12.
However, to find out which Travel - Hotels/Resorts stock is the better pick, let’s dive deeper into their fundamentals:
Recent Developments
On December 18, ABNB introduced restrictions on certain bookings over New Year's Eve as communities worldwide gear up to usher in 2024. By leveraging AI-powered technology to enforce these measures, ABNB aims to minimize the risk of unauthorized and disruptive parties in local neighborhoods.
Commenting on this, Naba Banerjee, Head of Trust and Safety at ABNB, said, “When it comes to how we use technology like AI, we’re focused on taking a thoughtful approach that aims to benefit Hosts, guests and neighborhoods. We’re optimistic these measures will help have a positive impact for the communities we serve.”
Conversely, On September 28, ATAT paid its shareholders a quarterly dividend of $0.05 per share. The company’s annual dividend translates to a 0.88% yield on the prevailing prices, while its four-year average dividend yield is 0.23%.
Recent Financial Results
ABNB’s total revenues for the fiscal third quarter (ended September 30, 2023) amounted to $3.39 billion. Meanwhile, its net income and net income per share amounted to $4.37 billion and $6.63, up 260.3% and 270.4% from the prior-year quarter, respectively.
However, during the same period, the company’s total cost and expenses rose 13.1% from the year-ago value to $1.90 billion. Moreover, its total current liabilities stood at $9.82 billion, increasing 23.1% compared to $7.98 billion as of December 31, 2022.
For the fiscal third quarter, which ended on September 30, 2023, ATAT’s net revenues increased 93.1% year-over-year to $177.37 million, while its income from operations grew 129.9% from the year-ago value to $46.78 million.
Additionally, the company’s net income and net income per ordinary share came in at $35.92 million and $0.09, up 135.8% and 110% from the prior-year quarter, respectively.
Past and Expected Financial Performance
ABNB’s revenue has grown at a CAGR of 38.4% over the past three years. Street expects ABNB’s revenue and EPS for the fiscal fourth quarter (ending December 2023) to increase 13.4% and 21.8% year-over-year to $2.16 billion and $0.58, respectively.
Conversely, ATAT’s revenue has improved at a CAGR of 13% over the past three years. Analysts predict ATAT’s revenue and EPS for the fourth quarter (ending December 2023) to increase 88.1% and 134.8% year-over-year to $117.40 million and $0.21, respectively.
Profitability
ATAT’s trailing-12-month asset turnover ratio of 0.63x is higher than ABNB’s 0.51x. Likewise, ATAT’s trailing-12-month CAPEX/Sales of 1.18% is higher than ABNB’s 0.40%.
Thus, ATAT is more profitable.
Valuation
In terms of the forward EV/Sales ratio, ABNB’s 8.00x is 122.8% higher than ATAT’s 3.59x. Likewise, ABNB’s forward Price/Sales ratio of 8.88x is 133.1% higher than ATAT’s 3.81x. Furthermore, ABNB’s forward EV/EBITDA multiple of 22.19 is 73.5% higher than ATAT’s 12.79.
Thus, ATAT is more affordable.
POWR Ratings
ABNB has an overall rating of C, which equates to Neutral in our proprietary POWR Ratings system. Conversely, ATAT has an overall rating of B, translating to a Buy. The POWR Ratings are calculated considering 118 different factors, with each factor weighted to an optimal degree.
Our proprietary rating system also evaluates each stock based on eight distinct categories. ABNB has a C grade for Growth, justified by its mixed financial results in its last reported quarter. ATAT’s A grade for Growth is in sync with the robust third-quarter results.
Among the 20 stocks in the Travel - Hotels/Resorts industry, ABNB is ranked #10, while ATAT is ranked #2.
Beyond what we’ve stated above, we have also rated both stocks for Value, Momentum, Stability, Sentiment, and Quality. Click here to view ABNB’s ratings. Get all ATAT ratings here.
The Winner
As 2023 concludes, the travel industry’s prospects are shining, fueled by holiday optimism, technological advancements, and waning pandemic-related caution. While ABNB and ATAT both should benefit from such a scenario, ATAT’s better financial standing, higher profitability, and cheaper valuation could make it a superior buy compared to ABNB.
Our research shows that the odds of success increase when one invests in stocks with an overall rating of Strong Buy. View all the top-rated stocks in the Travel - Hotels/Resorts industry here.
What To Do Next?
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ABNB shares were trading at $135.56 per share on Friday afternoon, down $1.44 (-1.05%). Year-to-date, ABNB has gained 58.55%, versus a 25.72% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Mukherjee
Anushka's ultimate aim is to equip investors with essential knowledge that empowers them to make well-informed investment choices and attain sustained financial prosperity in the long run.
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