On the road again
Goin’ places that I’ve never been
Seein’ things that I may never see again
And I can’t wait to get on the road again.
– Willie Nelson
When recently asked what I miss most during the COVID-19 lockdown, without having to think about it, I immediately answered “traveling.”
It’s one of my favorite things. I love to explore new places and meet new people. I always feel smarter and like my horizons have been broadened after I return from visiting somewhere for the first time.
I had a jam-packed spring planned. I was scheduled to speak at a conference in Tokyo, join The Oxford Club’s Chairman’s Circle cruise, speak at The Oxford Club’s 22nd Annual Investment U Conference in Carlsbad, California, and visit New York to see my newborn cousin for the first time.
I didn’t do any of those things. I’m especially disappointed about not getting to meet baby Clara. At this point, it feels like she’ll be driving by the time I meet her.
I don’t even mind air travel.
While getting delayed and then sitting next to someone who takes their shoes off and clips their nails during the flight (both have happened to me) isn’t my favorite thing, I still get excited going to the airport before my next voyage – especially if I’m going somewhere new.
When society reopens, I suspect travel will come back slowly as people will cautiously emerge from their homes. But once it’s perceived as safe, I expect all this cabin fever to result in a boom for the travel industry.
Nine million jobs are directly supported by travelers, and another 6.8 million jobs are supported by travel indirectly. In fact, 1 in 10 American jobs is linked to the travel industry.
Not surprisingly, the federal government has taken steps to help the sector with loans to ensure it is able to continue operating. Travel not only is a job creator, but also is essential to the country’s infrastructure.
As a result, I expect travel-related companies to come out of this okay – and in some cases, even better than okay…
That’s why I’ve been keeping my eye on the bonds of some of the top airlines. With an infusion of cash from the government, these companies should be able to outlast the pandemic. And if they start to struggle, I expect Uncle Sam to bail them out.
I prefer their bonds over their stocks, however, because the government loans come with warrants, which will dilute shares. And until very recently, airlines were notorious money losers.
Additionally, neither I nor anyone else has insight into airlines’ future profitability. However, with government assistance if necessary, I am confident in the companies’ ability to pay bondholders interest and principal.
Many companies – especially those in the travel industry – have withdrawn their earnings guidance for the year, as it is impossible to know when customers will return.
But customers will return. It may take a while, but I expect people will want to get out and about, see others, and do things. They may not book the first flight to Paris, but they may hop in the car to see Aunt Rose in Cincinnati (or baby Clara in New York) or visit a national park.
Business travelers, tired of Zoom meetings, will fly to meet with customers in person. And conferences, where people can network, will return.
All of that should be positive for Tripadvisor (Nasdaq: TRIP). It’s the go-to resource for reviews of hotels, restaurants, and things to see and do. Travelers can also book hotel rooms and other travel plans directly through the site.
The company’s balance sheet is rock solid. It has no debt. As of December 31, it had $319 million in cash, though that number is certain to go lower this quarter.
But having no debt gives the company plenty of flexibility to borrow money if necessary and to ensure it doesn’t run into trouble during the lean times. If I’m going to look at any stock right now, it has to have a healthy balance sheet.
Considering that the company’s revenue comes mostly from advertising, I expect Tripadvisor to be one of the companies that rebound quickly. Travel-related companies will be eager to get their message and promotions in front of travelers who will be jonesing for their next adventure.
I can’t wait to get back on the road and in the air. And as soon as it’s safe, I know there will be a lot of people joining me.
As a result, the travel industry should rebound in time, and the right investments in the sector should do very well.