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These two stocks could benefit from Southwest Airlines flight cancellations

on Dec 28, 2022
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  • Southwest Airlines Co cancelled 60% of its flight schedule on Wednesday.
  • Truist analyst says hotel stocks historically benefit from such disruptions.
  • He reveals two names that stand to benefit from the said cancellations.

Hotel stocks stand to benefit this quarter from the recent flight cancellations at Southwest Airlines Co, says Patrick Scholes. He’s an Equity Research Analyst at Truist Securities.

Vail Resorts Inc could be a beneficiary

Southwest continued to cancel flights on Wednesday even though operations at peers improved further on easing weather conditions.

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It cancelled 60% of its schedule today that, Scholes expects, could benefit the likes of Vail Resorts Inc (NYSE: MTN).

You may be staying at a hotel, Southwest is paying. Or if you’re at a resort, the skiing is fantastic. People might want to add a few more days onto their trip. So, historically, we’ve seen these types of issues to be a net benefit for the hotels.

Scholes has a price objective of $292 a share on Vail Resorts, which suggests about a 25% upside from here.

Scholes is also bullish on Hyatt Hotels

Another name he says could benefit from the Southwest disruptions is Hyatt Hotels Corporation (NYSE: H) that’s currently down nearly 20% from its year-to-date high.

According to Scholes, the multinational is an even better pick now that China seems to be reopening. On CNBC’s “The Exchange”, he noted:

China is still down about 50% in RevPAR. So, there could be some real upside for companies such as Hyatt Hotels, which historically has gotten about 10% of their EBITDA directly from China.

Scholes’ buy rating on Hyatt Hotels Corporation is also related to its financial results for the third quarter that last month came in ahead of Street estimates.