Tell us what you think about the new Article Page. Send us feedback
The "Best on The Street" Airlines Analyst Sees A Rebound In Travel Stocks
67 WALL STREET, New York - November 25, 2009 - The Wall Street Transcript has just published its Travel and Leisure--Airlines, Hotels, Resorts, Cruise Lines, and Restaurants Report offering a timely review of the sector to serious investors and industry executives. This 37 page feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available via The Wall Street Transcript Online.
Topics covered: Consumer Traveler Spending - U-Shaped Recovery in Restaurant Sector - Low-Cost and Network Airlines - Airline Carriers and Online Travel Agencies - Hotel Occupancy Rates - Improvement in Transportation Sector - Upscale Casual and Fast Casual Restaurants - Near-Term Risk in Hotel Space - Fuel Prices a Universal Concern - Restaurant Industry Stability - Increased Consolidation in Airline Industry - Firming of Traffic Trends in Restaurant Space
Companies include: Vail Resorts, Inc. (MTN); Air France-KLM (AFLYY); AirTrans (AAI); Alaska Air Group (ALK); Allegiant Travel Group (ALGT); American Airlines (AMR); Applebee's (APPB); Ashford (AHT); BJ's Restaurants (BJRI); Boeing (BA); Brinker (EAT); British Airways (BAY); Buffalo Wild Wings (BWLD); Burger King Corp (BKC); California Pizza Kitchen (CPKI); Carnival (CCL); Cheesecake Factories (CAKE); Chipotle Mexican Grill (CMG); Choice (CHH); Continental Airlines (CAL); Darden (DRI); Delta Airlines (DAL); Denny's (DENN); DiamondRock (DRH); Domino's Pizza (DPZ); Expedia (EXPE); Famous Dave's (DAVE); FelCor (FCH); Gaylord Entertainment (GET); Great Wolf Resorts (WOLF); Green Mountain (GMCR); Hawaiian Holdings (HA); Home Inns & Hotels (HMIN); Hospitality Properties Trust (HPT); JetBlue Airlines (JBLU); LaSalle Hotel Properties (LHO); Lufthansa (LHA); MHI Hospitality Corporation (MDH); Marriott (MAR); McDonalds (MCD); Mesa (MESA); Morton's Steakhouse (MRT); National Business Travel Association (NBTA); National Mediation Board (NMB); Orbitz (OWW); P.F. Chang's (PFCB); Panera Bread (PNRA); Peet's (PEET); Priceline (PCLN); Republic Airlines (RJET); Royal Caribbean Cruise Lines (RCL); Royal Caribbean International (HST); Ruby Tuesday (RT); Ruth's Chris Steakhouse (RUTH); Sonesta (SNSTA); Sonic (SONC); Southwest Airlines (LUV); Spicy Pickle (SPKL.OB); Starbucks (SBUX); Starwood Hotels (HOT); Strategic (BEE); Sunstone (SHO); Texas Roadhouse (TXRH); UFood (UFFC.OB); US Air (LCC); United Airlines (UAUA); Wyndham (WYN)
In the following brief excerpt from just one of the 25 interviews in the 137 page Special Report, the Wall Street Journal's "Best on the Street" airline equity analyst discusses the outlook for the sector and for investors.
Kevin Crissey is a Director in UBS Investment Research's transportation group, specializing in U.S. airlines. In 2008 Mr. Crissey was named number one stock picker for U.S. airlines in The Wall Street Journal "Best on the Street" report. Mr. Crissey joined UBS as an Associate Analyst in February 2003, following airfreight, railroad, trucking, logistics and shipping stocks. Prior to joining UBS, Mr. Crissey served as a Consultant to UBS and other financial services companies for five years. He also worked in the real estate group for Smith Barney for four years. Mr. Crissey holds an MBA in finance from New York University, and a B.S. in finance and international business from Pennsylvania State University.
TWST: Let's start with the big picture and your outlook for travel-related companies - you cover both airlines and some of the online travel sites. What is your outlook? Is the worst behind us?
Mr. Crissey: I sure hope so, and the data seems to suggest that that's the case. It's clearly still a discounters' market, which is playing well for the online travel guys, where basically you have been able to lower your prices and stimulate leisure traffic. Not so much on the business side, which is typical of the demand elasticities, the differences between those two types of passengers. The planes are pretty full right now, and so what we expect going forward is that you are going to see it be more about pricing than about volume. And we think that travel demand is getting better. I'm not sure how fast it's going to get better, that's a function of the economy.
But we're hopeful that it gets better, and we think it'll get meaningfully better starting in January from the corporate side, as new travel budgets are set with hopefully a brighter outlook. When that happens, you may be replacing a backpacker with a briefcase guy or gal. And so that would be good for the pricing of the airlines, and I think a similar read-through for what it would mean for hotels. The online travel agencies probably have seen or are seeing the peak of their volume growth. And now the question becomes: Are they better off in a trade where they get a higher price point and a little bit less volume? Because I think the hotels and airlines are about as desperate as they're going to be in terms of the interest in selling through online travel agencies right now. So we're optimistic on the outlook for things improving; the question is how fast is that improvement.
TWST: You said the online sites are seeing the peak of volume growth. Has business held up well for them due to consumer price sensitivity? Has that resulted in increased traffic for the sites?
Mr. Crissey: Yes, there are a couple of reasons going on. The hotels and the airlines are basically giving them as much inventory as they can sell, and the consumer is certainly looking for a bargain; they'll travel but only at discounted prices. So that lends itself well to the online travel market. And then additionally, they cut booking fees both for hotels but more meaningfully for airline tickets, and that's giving less reason for a customer to switch from the Expedia (EXPE), Priceline (PCLN), Orbitz (OWW), Travelocity sites to the supplier-direct channels.
It used to be you'd shop on one and go book on the other because why pay the fee? There's no such incentive or at least there is a reduced incentive to do that now, and that seems to be helping their volumes as well. It's a little bit hard to distinguish between the effects, but clearly the volume - I mean, Expedia's ticket volume is 27%; clearly that is going to be well above what's happening for the overall market for air tickets. So they're definitely taking share. I think a decent chunk of the share is coming from other brick-and-mortar-type travel agencies, and probably some is from supplier-direct channels as well.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. The remainder of this interview and the 24 other interviews in this Travel and Leisure Report are available for purchase via The Wall Street Transcript Online .
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
For Information on subscribing to The Wall Street Transcript, please call 800/246-7673
Add Alert