Interview
Measuring the Reopening of Lodging, Leisure and Gaming
- Pent-up demand and forward bookings are expected to solidify for leisure travel in late 2021 and 2022, supported by an estimated $1.3 trillion in consumer savings generated in 2020.
- Widespread vaccine distribution and declining case numbers are projected to reach a sustainable run rate by mid-April and May, prompting policy changes that will facilitate significant demand improvements during the summer.
- A structural shift toward normalized but still depressed levels of declines in lodging, gaming, and leisure is anticipated to begin around July 4th, with the sector expected to experience outsized growth relative to other consumer discretionary areas.
- The distinction between business and leisure travel is blurring as remote work, which accelerated to 62% adoption during lockdowns, drives blended trips, extended stays, and team visitation.
- Digital gaming, online gambling, and sports betting are seeing accelerating adoption and legislative progress in the US, outpacing growth rates seen in mature markets like the UK and Australia.
- Companies are transitioning to direct booking channels, digital advertising, and cashless transaction models, which are expected to improve margin structures and profitability post-pandemic.
- Business travel-related stocks have outperformed contrary to initial expectations, and China's recovery, where leisure hotel demand exceeds 2019 levels, suggests a positive trajectory for the US market once restrictions lift.
- The current recovery in gaming, lodging, and leisure stocks is not fully reflected in valuations, whereas the S&P 500 is over 30% higher than pre-pandemic valuation levels, and 24 of 28 portfolio stocks have outperformed the index since the recovery framework introduction.
- While structural impacts may hinder specific companies, the broader market favors industries with rebound potential or long-term growth arising from pandemic-induced behavioral changes.