Travel industry takes flight: the growing sentiment of a global transition to a post-pandemic market

Planes, trains, and automobiles are pushing travel-related enterprises to new record levels dealing with the foot traffic from overseas and countryfolk eager to reconnect with their backyards.

In the first quarter of this year, the number of travellers almost tripled to 114 million, but we still have a way to go before reaching pre-pandemic levels.

As normality returns, companies like Hello World Travel (ASX:HLO) are enjoying a return to the good times. The Australian-based personalised travel provider is benefiting from an influx of pleasure travellers and growth in executive travel executives moving from Zoom to face-to-face meetings.

Industry Trends

Related industries are tipped to grow by up to 8.5 per cent over the next five years, led by solo travellers marking a notable change in tourist culture. This younger generation of explorers is boosting the technology sector, particularly in Europe, by relying on online services for most of their travel needs.

Bright Future

Hello World’s revenues are going beyond pre-pandemic levels, with sales climbing by a whopping 140 per cent with a total transaction value of over $1 billion.

The result reflects a travel industry resurgence in Australia, with an increase of over 60 per cent in 2022, from 2021. The travel industry market is expected to increase from AUD 87 billion in 2022 to AUD 160 billion over the next few years, growing at an annual rate of 20 per cent.

The surge in travel to Australia indicates an abundance of growth opportunities for the mid-tiered Australian travel company. Easing restrictions has brought gains across many divisions, including Hello World Business, Magellan Travel, Travel Brokers NZ, and Mobile Travel agents.

Asian tourism is also expected to increase and is projected to become the primary source of tourism to Australia over the coming decade, with Chinese tourists predicted to be the biggest source of revenue. The total spending of Chinese tourists currently stands at an estimated $250 billion globally.

Hello World is Back Baby!

Despite the longwinded hangover coming to an end, the Company still lost $10 million during the current fiscal year. But this is a situation likely to change dramatically in 2023!

Growth is expected to increase at a rapid pace next year as more countries’ borders open and both inbound and outbound travel approaches levels seen in the past. Profitability is expected to follow soon.

The Company currently trades at a cheap valuation, with price-to-earnings at three times earnings. A contributing factor to that valuation is the result of the Company selling several assets, which led to a surge in net income.

Next year, as revenue increases, the net profit margin is estimated at 7-8 per cent, which projects a forward P/E of 15 times earnings. Considering the organisation’s growth expectation of 30-40 per cent over the next few years, the stock should be even higher.

The travel industry is competitive, with several online services vying for their customers. However, Hello World competes on a different business model than most competitors.

While competing for similar customers to companies such as Booking.com, which primarily operate online, the biggest differentiation for Hello World is their ability to provide a more end-to-end ‘white glove service for clients seeking an all-inclusive experience.

The travel industry is an increasingly exciting space, particularly as the sentiment of a global transition to a post-pandemic climate grows. As we navigate further past the pandemic and into global normality, the travel industry will likely continue going from strength to strength.

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