The hotel industry is flourishing thanks to limited supply and high demand, but one analyst thinks online travel is an even better buy because sales are rising at two or three times that of hotels.
According to Jake Fuller, a gaming, lodging, and travel analyst at Lazard Capital Markets, travel is growing at a 5 percent to 7 percent clip, with only a third of travel sales being done online. However, online travel is quickly becoming a bigger part of the travel industry as a whole, especially with room rates continuing to rise, he said.
“You see online travel growing two to three times the pace of the hotel industry,” Fuller told CNBC on Monday. “But the valuations are the same.”
As a result, he mentioned Priceline as his preferred travel stock.
“Priceline has become very interesting because market cap-wise it’s as big as the hotel chains combined,” he said. “But you are trading at a discount, it’s a higher-multiple business and has a very strong secular backdrop.”
Fuller added that despite Priceline’s high price and potential overexposure in Europe, he’s not too concerned about the company’s overall outlook, saying “penetration is still rising.”
In addition, he mentioned Starwood Hotels & Resorts Worldwide and Marriott International as good plays, in large part because companies that own the hotels have more of a operating leverage compared to companies that mortgage or franchise them.
In terms of gaming companies, Fuller said he is buying Las Vegas Sands , stressing that in gaming you buy the companies that are building assets. Las Vegas Sands is set to open up a new resort in Macau later this month.
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Lazard Capital Markets makes a market in each of the stocks mentioned. Jake Fuller does not own any stock in the companies mentioned.