In 2024, it will be obvious who wins and loses in travel and leisure shares. what to purchase

Analysts see potential rifts among travel stocks as the post-pandemic boom gives way to clearer winners and losers. This past year brought a continuation of “revenge” travel trends and a recovery in business trips. Looking ahead to 2024, analysts see a potential divergence between and within sub-sectors of the leisure industry as conditions become more normal after the pandemic’s bust-to-boom cycle. Those expectations come with the caveat that a recession would likely hurt all the corners of travel. “We expect travel and leisure demand to prove relatively resilient overall, but with pockets of varying weakness as consumers become more discerning with their budgets,” said Barclays analyst Brandt Montour. In this environment, CNBC Pro scoured Wall Street research for analysts’ top stock picks across the travel and leisure group heading into 2024. Hotels and gaming Montour, who covers gaming, leisure and lodging stocks, favors areas within travel that offer value propositions to the consumer. When looking at specific companies, he likes to see unique growth catalysts or self-help stories. Among hotel and casino chains, Caesars Entertainment and Hilton Grand Vacations are his top picks. Both have underperformed the broader market this year, rising 13% and 8% respectively, despite boasting buy ratings from the majority of Wall Street analysts, according to LSEG. .SPX HGV,CZR YTD mountain Caesars and Hilton Grand Vacations vs. the S & P 500 this year Caesars’ free cash flow has proven resilient, and it’s an underappreciated deleveraging story at the same time, Montour said. He added that the company’s three main business, Las Vegas, regional and digital, can all grow. The resort-and-casino company’s shares could climb nearly 30% over the next year, according to the consensus analyst price target compiled by LSEG. Meanwhile, Hilton Grand Vacations is a good play given its current valuation and because it has helped itself with the pending Bluegreen acquisition . Montour was initially pessimistic on the deal, but changed tack after seeing that Bluegreen will be bought at a discount. Bluegreen checks many strategic boxes and will help make Hilton Grand Vacations an even bigger player in the timeshare market, he added. The average analyst price target forecasts Hilton Grand stock can rise by more than 16% over the coming year, per LSEG. Morgan Stanley’s Jamie Rollo said the key investor debate in the hotel industry is how much revenue per available room can grow — if at all. But he said to expect at least some growth in 2024 unless there is an economic downturn or unforeseen shock to demand. Absent that, Rollo remains positive on the hotel sector. In the U.S., he recommended Hilton , Marriott , Hyatt and Wyndham . Wyndham is the only stock of the four that’s lagged the broader market this year. But it’s also the only one that Wall Street sees rising over the next 12 months, according to LSEG. Among all gaming, leisure and lodging stocks, Montour has the highest conviction on Penn Entertainment . That’s based on what he sees as the overlooked potential in its sportsbook partnership with Disney ‘s ESPN, announced earlier this year. “Our favorite gaming name for 2024 is PENN, based on the under-appreciated early success of ESPN BET, and asymmetric risk/reward to PENN equity if even moderate success comes to pass,” the Barclays analyst said. Investors have sold PENN this year, with the stock down more than 16% in 2023. But Wall Street sees a turnaround ahead, as the typical analyst polled by LSEG holds a buy rating and a price target implying shares can rally more than 21%. Even that average price target, however, is still around just a third of where Penn closed out 2020. A pandemic-fueled bubble drove Penn above $130 a share in early 2021. Montour has moved to the sidelines on Boyd Gaming , citing weak expectations for the first half of the year in its regional business. He also shifted to equal weight on Marriott Vacations Worldwide , noting the worsening fundamentals for its timeshare business. Planes and ships Analysts also see potential in stocks tied to cruise ship and airline travel. Barclays’ Montour said cruise lines Royal Caribbean and Carnival offer value propositions to the consumer. That will prove increasingly crucial if pocketbooks are pinched and customers look for cheaper ways to travel. Both stocks have more than doubled this year, far outperforming the S & P 500, after a disastrous 2022, when Carnival crashed 60% and Royal Caribbean by 36%. RCL CCL YTD mountain Royal Caribbean vs. Carnival shares in 2023 Analysts see divergence in the year ahead despite the majority holding buy ratings on both cruise lines. The average Street price target shows Royal Caribbean will only tread water over the coming year, while Carnival would fall 5% if the targets proved accurate. Goldman Sachs analyst Catherine O’Brien said 2024 should bring more differentiation among airline performances compared with the last two years. She advised studying which regions airlines are most exposed to, expected growth rates and cost outlooks. She highlighted Delta , noting it has accelerating growth in its maintenance and loyalty businesses. Both are high-margin and less cyclical, and Delta’s balance sheet is strong, she said. The Atlanta-based carrier is also benefiting from markets that are still recovering and offer more upside, especially Asia-Pacific and business travel. O’Brien said United Airlines is also expanding its premium travel business and seeing improved revenue in the still-recovering Pacific market. The two airlines have seen divergent fortunes in 2023, with Delta shares climbing 25%, more than double United 12% gain. By comparison, the U.S. Global Jets ETF (JETS) has gained less than 11% this year. DAL UAL mountain 2022-01-01 Delta vs. United since 2022 began United may be able to make up lost ground: The mean price target shows Delta could climb almost 30% over the next year, while United can pop more than 40%. Both stocks have buy ratings from the majority of Wall Street, according to LSEG. E-booking platforms There’s less optimism around the digital platforms that consumers use to book travel. “We think online travel growth slows from here as eventually the ‘pent-up’ travel demand will get exhausted — particularly as consumers’ wallets are increasingly under pressure,” Barclays online travel analyst Trevor Young told clients. Within the group, Young has a buy rating only on Booking Holdings , the parent of and Priceline. The company can benefit from its own alternative accommodations, as well as from a more diverse offering and a product mix that covers most aspects of travelers’ needs, he said. “Stick with the scale leader even if the travel market softens,” he advised. Young has an equal-weight rating on Expedia , while giving both Airbnb and Tripadvisor underweight recomendations. BTIG analyst Jake Fuller disagrees: Expedia is his e-booking platform stock of choice heading into 2024. In Fuller’s view, EBITDA multiples and regulatory developments in Europe will be closely watched in the industry. As the sector has matured, these stocks can start to make big stock buybacks to push the earnings growth rate higher than bookings. “Despite a recent rally, EXPE remains our [online travel agency] of choice given a combo of healthy growth, improved margin profile, aggressive buybacks and still-low multiple,” Fuller said. “We also note that EXPE is on the right side of the convergence theme with comparable topline growth and the lowest multiple in the group.” Airbnb is Fuller’s least favorite stock in the sector, saying Booking was “in the middle” due to its reasonable multiple and healthy profit growth. Despite the European regulatory overhang affecting Booking, he said there likely won’t be any large impact from changes to hotel contracts. Tripadvisor has fallen behind the pack this year. The average analyst has a hold rating on Airbnb and Tripadvisor, while listing Expedia and Booking as buys. — CNBC’s Michael Bloom contributed to this report