6 Travel Stocks to Watch in Light of European, U.S. Economic Ills

As Europe continues to try to get its debt ducks in a row, and a double-dip
recession still threatens the U.S., cyclical industries like travel are starting
to brace for impact. That could translate into serious jet lag for airline,
hotel and travel booking stocks if it keeps business travelers off the road.
Even without another full-blown recession, the travel market has begun to
struggle. The Air Transport Association this week predicted a 2% drop from last
year in the number of passengers traveling for the 12-day period around
Thanksgiving the busiest travel days of the year. Airlines alone have seen
their income evaporate in 2011 down 66% in the first nine months of the year
compared to 2010. Despite these latest concerns, there's a little good news:
U.S. unemployment was down a hair in October, falling to 9% from 9.1%. And many
hospitality and travel stocks are doing well, proving that there's still
optimism, particularly among business travelers, according to the Global
Business Travel Association. Indeed, the business travel market is leading a
recovery in the sector, growing by more than 6% in September, according to
electronic booking data from Pegasus Solutions. The biggest winners have been
strong conference hotels that have pricing power the sector hasn't seen in
years. But a stagnant U.S. economy is prompting corporate uncertainty about
business travel spending next year. "Uncertain economic conditions around the
world continue to impact companies, which in turn impacts business travel plans
and can lead to hesitation in spending," said Michael McCormick, GBTA's
executive director and COO. "However, business travel spending growth remains
vibrant, and the current environment does not portend a dramatic travel
slowdown." Here are six bellwether travel stocks to watch in case Europe's
woes and other economic headwinds threaten to ground business travelers: Orbitz
Worldwide What European-travel slowdown? Better than expected third-quarter
earnings and a 31% jump in international bookings drove Orbitz (NYSE: OWW )
stock up nearly 55% last week. Still, the online travel agency's domestic
bookings slipped 4% largely on a jump in airline ticket prices. At $2.98, OWW
is starting to bounce back from its 52-week low of $1.57 on Oct. 4. With a
market cap of $308 million, the stock has a price/earnings-to-growth ratio of
1.46, indicating that it is overvalued. Expedia Expedia (NASDAQ: EXPE ), which
missed third-quarter revenue expectations last week, also reported weaker growth
in domestic bookings (a theme that likely will be repeated after the bell Monday
when Priceline (NASDAQ: PLCN ) releases its quarterly earnings). EXPE's
international bookings rose 21%, while domestic bookings grew only 4%. Company
executives voiced concerns about weakness in southern Europe and a cautionary
note about the economy. At $28.37, EXPE has battled back from its 52-week low of
$19.61 in March. With a market cap of about $7.8 billion, EXPE has a PEG ratio
of 1, which means it's fairly valued. It pays a 1% current dividend yield.