Hospitality and travel — two industries that got devastated during the pandemic and are still having a difficult time recovering. One major problem with the hospitality industry is that it tends to be relatively cyclical in nature, and since the pandemic hit and stayed for what was the peak of the holiday season, many of the businesses couldn’t make up for the losses when things settled down a bit.
Even now, the hospitality and travel businesses are suffering. But as the lingering fear of the pandemic evaporates and more and more people get vaccinated, a few hospitality stocks are likely to make a comeback.
A real estate company
Morguard (TSX:MRC) is a Mississauga-based real estate company with a market capitalization of $1.5 billion. It has a portfolio worth $10.1 billion and is composed of 203 residential, office, retail, industrial, and hotel properties. Even though its exposure to hospitality is not extensive, the company is still tied relatively tightly to the industry and has suffered from the consequences.
Its share price is still 34% from its pre-pandemic valuation. And even though residential properties make up about 18% of the company’s portfolio (over 5,500 hotel rooms), it only accounted for 2% of the company’s total NOI in 2020.
The company’s revenues took a serious hit in 2020 and are still going downward. In the first quarter of 2021, the company reported a revenue decline of almost 20%. But once the hospitality business starts recovering, Morguard’s revenue and the stock might start growing at a decent pace, and if you buy now, you might be able to benefit from that eventual recovery.
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A gaming stock
Even though digital forms of entertainment have dominated the industry, many physical locations like casinos and race tracks still hold their value. The $2.5 billion Great Canadian Gaming (TSX:GC) owns 17 different facilities that cover a decent range of hospitality offerings, including casinos, hotels, etc. The stock took quite a beating during the pandemic, but it has recovered to its pre-pandemic valuation.
2021 has been relatively slow for the stock so far, and it has only gained about 1.7% since the beginning of the year. It recently announced its first-quarter results in which it reported a revenue loss of over 80% — i.e., $52 million for the first quarter of 2021 compared to $274 million in the first quarter last year.
The situation might take some time to improve, and the gaming facilities are expected to see better footfall this and next year. However, it might still take about half a decade before the company sees visitor count rising to the pre-pandemic levels. And if the stock follows the lead, you might be able to ride the recovery wave to some decent capital growth.
Even with vaccination underway and the ebbing wave of the pandemic, the fear is still there, and it will remain for quite some time. But as people begin to live their lives normally again and start making up for the lost time, hospitality industries might see a surge in revenues.
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This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.
Fool contributor Adam Othman has no position in any of the stocks mentioned.